UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31,
2009
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number:
000-50744
NUVASIVE, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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33-0768598
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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7475 Lusk Boulevard,
San Diego, California
(Address of principal
executive offices)
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92121
(Zip Code)
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Registrants telephone number, including area code:
(858) 909-1800
Securities registered pursuant to Section 12(b) of the
Act
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Title of Each Class:
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Name of Each Exchange on which Registered:
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Common Stock, par value $0.001 per share
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The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act of 1933, as
amended. YES
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NO
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as
amended. YES
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NO
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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 than the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. YES
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NO
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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(Section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files). YES
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NO
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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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):
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Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller reporting
company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). YES
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NO
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The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant was
approximately $1.7 billion as of the last business day of
the registrants most recently completed second fiscal
quarter (i.e. June 30, 2009), based upon the closing sale
price for the registrants common stock on that day as
reported by the NASDAQ Global Select Market. Shares of common
stock held by each officer and director have been excluded in
that such persons may be deemed to be affiliates.
As of February 19, 2010, there were 38,829,879 shares
of the registrants common stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Part III of this
Form 10-K
incorporates information by reference to the registrants
definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 25, 2010.
NuVasive,
Inc.
Form 10-K
for the Fiscal Year ended December 31, 2009
PART I
This Annual Report on
Form 10-K,
particularly in Item 1. Business and
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations, and the
documents incorporated by reference, include forward-looking
statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements, other than statements
of historical fact, are statements that could be deemed
forward-looking statements, including, but not limited to,
statements regarding our future financial position, business
strategy and plans and objectives of management for future
operations. When used in this Annual Report, the words
believe, may, could,
will, estimate, continue,
anticipate, intend, expect,
and similar expressions are intended to identify forward-looking
statements.
We have based these forward-looking statements largely on our
current expectations and projections about future events and
financial trends that we believe may affect our financial
condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial
needs. These forward-looking statements are subject to certain
risks and uncertainties that could cause our actual results to
differ materially from those reflected in the forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in
this report, and in particular, the risks discussed under the
heading Risk Factors and those discussed in other
documents we file with the Securities and Exchange Commission.
Except as required by law, we do not intend to update these
forward-looking statements publicly or to update the reasons
actual results could differ materially from those anticipated in
these forward-looking statements, even if new information
becomes available in the future.
In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this
report and in the documents incorporated in this report may not
occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking
statements. Accordingly, readers are cautioned not to place
undue reliance on such forward-looking statements.
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 $5.1 billion in the United States in
2010. Our principal product offering includes a minimally
disruptive surgical platform called Maximum Access Surgery, or
MAS
®
,
as well as a growing offering of cervical, biologics and motion
preservation products. In the spine surgery market, our
currently-marketed products are primarily used to enable access
to the spine and to perform restorative and fusion procedures.
We focus significant research and development efforts to expand
our MAS product platform, advance the applications of our unique
technology to additional procedures, and develop motion
preserving products such as our total disc replacement products.
We dedicate significant resources toward training spine surgeons
on our unique technology and products. Currently, we are
training approximately 400 to 500 surgeons annually, which
includes surgeons new to our MAS product platform as well as
surgeons previously trained on our MAS product platform who are
attending advanced training programs.
Our MAS platform combines four categories of our product
offerings:
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NeuroVision
®
a proprietary software-driven nerve avoidance system;
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MaXcess
®
a unique split-blade design retraction system providing enhanced
surgical access to the spine;
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Biologics includes our
FormaGraft
®
and
Osteocel
®
line of products; and
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Specialized implants includes our
SpheRx
®
and
Armada
tm
pedicle screw systems,
CoRoent
®
suite of implants, and several fixation systems.
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We believe our MAS platform provides a unique and comprehensive
solution for safe and reproducible minimally disruptive surgical
treatment of spine disorders by enabling surgeons to access the
spine in a manner that affords direct visibility and avoidance
of critical nerves. The fundamental difference between our MAS
platform
1
and what has been previously named MIS, or minimally invasive
surgery, is the ability to customize safe and reproducible
access to the spine while allowing surgeons to continue to use
instruments that are familiar to them. Simply stated, the MAS
platform does not force surgeons to reinvent approaches that add
complexity and undermine safety, ease and efficacy. An important
ongoing objective has been to maintain a leading position in
access and nerve avoidance, as well as being the leader and
pioneer in lateral surgery. Our MAS platform, with the unique
advantages provided by NeuroVision, enables an 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 patients body, rather than from the front
or back. Our MaXcess instruments provide access to the spine in
a manner that affords direct visibility and our NeuroVision
system allows surgeons to avoid critical nerves. We believe that
the procedures facilitated by our MAS platform reduce operating
times, decrease trauma and blood loss, and lead to faster
overall patient recovery times compared to open spine surgery.
In recent years, we have significantly expanded our product
offering relating to procedures in the cervical spine as well as
in the area of biologics. Our cervical product offering now
provides a full set of solutions for cervical fusion surgery,
including both allograft and CoRoent implants, as well as
cervical plating and posterior fixation products. In 2009, we
acquired Cervitech, Inc., a company focused on clinical approval
of the
PCM
®
cervical disc system, a motion preserving total disc replacement
device. This strategic acquisition allows us the potential to
accelerate our entry into the growing mechanical cervical disc
replacement market. Currently, the PCM investigational device
has reached the two-year
follow-up
end point in its U.S. Food and Drug Administration (FDA)
approved clinical trial in the United States. Approval, if
obtained, will further strengthen our cervical product offering
and will enable us to continue our trend of increasing our
market share. Our biologic offering includes FormaGraft, a
collagen synthetic product used to aid the fusion process, and
Osteocel, an allograft cellular matrix containing viable
mesenchymal stem cells, or MSCs, to aid in spinal fusion. In
2009, we invested in Progentix Orthobiology, B.V., a company
organized under the laws of the Netherlands involved in the
development of osteoinductive bone graft material technology. As
part of the investment transaction, we became the exclusive
distributor for certain Progentix biologic products.
Our corporate headquarters are located in San Diego,
California. We lease approximately 202,000 square feet in
San Diego. Our headquarters has a six-suite
state-of-the-art
cadaver operating theatre designed to accommodate the training
of spine surgeons. Our primary distribution and warehousing
operations are located in our facility in Memphis, Tennessee.
Our business requires overnight delivery of products and
surgical instruments for almost all surgeries involving our
products. Because of its location and proximity to overnight
third-party transporters, our Memphis facility has greatly
enhanced our ability to meet demanding delivery schedules and
provide a greater level of customer service.
Recent
Product Introductions
In the last few years, we have introduced numerous new products
and product enhancements that have significantly expanded our
MAS platform, enhanced the applications of the XLIF procedure,
expanded our offering of cervical products and marked our
entrance into the growing motion preservation market. We have
also acquired complementary and strategic assets and technology,
particularly in the area of biologics. Our newly-launched and
acquired products are highlighted by the following products:
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Implants
our implant products, which include
among other implants the CoRoent Family of Products and our
SpheRx and Armada pedicle screw systems, have historically
focused on the lumbar spine; with our recent and planned product
introductions, such as
VuePoint
®
OCT and Thoracic XLIF, we will increasingly address the cervical
and thoracic spine as well.
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NeuroVision
M5
tm
is, along with its predecessors, the enabling
technology for the XLIF procedure, and utilizes proprietary
technology and hunting algorithms to locate and avoid critical
nerves during spine surgery. NeuroVision M5s name refers
to five monitoring modalities, covering the entire spine,
available in this enhanced version of our technology, which
include: (i) stimulated electromyography (EMG);
(ii) free run EMG; (iii) motor evoked potentials
(MEPs); (iv) somatosensory evoked potentials (SSEPs); and
(v) navigated guidance.
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Biologics
In 2008 we expanded our biologics
offering by acquiring Osteocel, an allograft cellular matrix
containing viable MSCs to aid in fusion. Additionally, in early
2009 we made an investment in Progentix Orthobiology, B.V., a
private company working to develop a novel synthetic
osteoinductive bone graft material. This investment includes
options and obligations to buy Progentix Orthobiology, B.V. over
time as development milestones are achieved.
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Our
Strategy
Our objective is to become a leading provider of creative
medical products that provide comprehensive solutions for the
surgical treatment of spine disorders. We are pursuing the
following business strategies in order to achieve this objective:
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Establish our MAS Platform as a Standard of
Care.
We believe our MAS platform has the
potential to become the standard of care for spine surgery as
spine surgeons continue to adopt our products and recognize
their benefits. We also believe that our MAS platform has the
potential to dramatically improve the clinical results of spine
surgery. We dedicate significant resources to educating spine
surgeons on the clinical benefits of our products, and we intend
to capitalize on patient demand for minimally disruptive
surgical alternatives.
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Continue to Develop and Introduce New Creative
Products.
One of our core competencies is our
ability to develop and commercialize creative spine surgery
products. In the past three years, we have introduced more than
40 new products and product enhancements. We have several
additional products currently under development that should
expand our presence in fusion surgery as well as provide an
entry into the motion preservation market segment. We intend to
accomplish this with an unwavering commitment to our MAS
platform and building on our core technology. We believe that
these additional products will allow us to generate, on average,
greater revenues per spine surgery procedure while improving
patient care.
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Expand the Reach of Our Exclusive Sales
Force.
We believe that having a sales force
dedicated to selling only our spine surgery products is critical
to achieve continued growth across product lines, greater market
penetration and increased sales. In 2006, we completed our
transition to an exclusive sales force, and we have seen the
benefits of that effort. Our U.S. sales force is achieving
deeper penetration in our accounts and further establishing
NuVasive as a technology leader in the spine industry. In the
United States, our exclusive sales force is managed by an
Executive Vice President and four Area Vice Presidents, each of
whom is responsible for a geographic region of the country. Each
Area Vice President is responsible for Sales Directors, who in
turn are responsible for Area Business Managers, or ABMs, who
are NuVasive shareowners (our employees) responsible for a
defined territory. The remainder of the U.S. sales force
are both direct (our shareowners) and exclusive independent
sales representatives or exclusive distributor agents, each
acting as our sole representative and selling only NuVasive
spine products in a given territory.
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Provide Tailored Solutions in Response to Surgeon Needs.
Responding quickly to the needs of spine
surgeons, which we refer to as Absolute
Responsiveness
®
,
is central to our corporate culture, critical to our success
and, we believe, differentiates us from our competition. We
solicit information and feedback from our surgeon customers and
clinical advisors regarding the utility of, and potential
improvements, to our products. For example, we have an
on-site
machine shop to allow us to rapidly manufacture product
prototypes and a
state-of-the-art
cadaver operating theatre to provide clinical training and
validate new ideas through prototype testing.
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Selectively License or Acquire Complementary Spine Products
and Technologies.
In addition to building our
company through internal product development efforts, we intend
to selectively license or acquire complementary products and
technologies that we believe will keep us on the forefront of
innovation. By acquiring complementary products, we believe we
can leverage our expertise at bringing new products to market
that are intended to improve patient outcomes, simplify
techniques, shorten procedures, reduce hospitalization and
rehabilitation times and, as a result, reduce costs.
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Industry
Background and Market
The spine is the core of the human skeleton, and provides a
crucial balance between structural support and flexibility. It
consists of 29 separate bones called vertebrae that are
connected together by connective tissue to permit a normal range
of motion. The spinal cord, the bodys central nerve
conduit, is enclosed within the spinal column. Vertebrae are
paired into what are called motion segments that move by means
of three joints: two facet joints and one spine disc. The four
major categories of spine disorders are degenerative conditions,
deformities, trauma and tumors. The largest market, and the
focus of our business historically, is degenerative conditions
of the facet joints and disc space. These conditions can result
in instability and pressure on the nerve roots as they exit the
spinal column, causing back pain or radiating pain in the arms
or legs.
In the U.S., over 5 million people suffer from some type of
chronic back pain. The prescribed treatment depends on the
severity and duration of the disorder. Initially, physicians
will prescribe non-operative, conservative procedures including
bed rest, medication, lifestyle modification, exercise, physical
therapy, chiropractic care and steroid injections. In most
cases, non-operative treatment options are effective; however,
some patients require spine fusion surgery. It is estimated that
over 600,000 spine fusion procedures are performed annually, and
the vast majority are done using traditional open surgical
techniques from either an anterior or posterior approach. These
traditional open surgical approaches require a large incision in
the patients abdomen or back in order to enable the
surgeon to see the spine and surrounding area. Most open
procedures are invasive, lengthy and complex, and may result in
significant blood loss, extensive dissection of tissue and
lengthy hospitalization and rehabilitation.
Back pain is one of the leading causes of healthcare
expenditures in the United States, with a direct cost of more
than $50 billion annually for diagnosis, treatment and
rehabilitation. The U.S. market for lumbar and cervical
spine fusion, the focus of our business, was estimated to be
over $4.6 billion in 2009 and is estimated to grow to over
$5.1 billion in 2010.
We believe that the implant market for spine surgery procedures
will continue to grow because of the following market dynamics:
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Increased Use of Implants.
The use of implants
has evolved into the standard of care in spine surgery. Over the
past five years, there has been a significant increase in the
percentage of spine fusion surgeries using implants and we
estimate that over 85% of all spine fusion surgeries now involve
implants.
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Demand for Surgical Alternatives with Less Tissue
Disruption.
As with other surgical markets, we
anticipate that the broader acceptance of surgical treatments
with less tissue disruption will result in increased demand for
these types of surgical procedures.
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Increasing Demand for Motion-preserving
Treatments.
Motion-preserving treatments
potentially offer earlier intervention in the degenerative
disease process for many patients.
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Favorable Demographics.
The population segment
most likely to experience back pain is expected to increase as a
result of aging baby boomers, people born between 1946 and 1965.
We believe this population segment will demand a quicker return
to activities of daily living following surgery than prior
generations.
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Surgical
Alternatives with Less Tissue Disruption
The benefits of minimally invasive surgery procedures in other
areas of orthopedics have significantly contributed to the
strong and growing demand for surgical alternatives with less
tissue disruption of the spine. Surgeons and hospitals seek
spine procedures that result in fewer operative complications,
shorter surgery times and decreased hospitalization. At the same
time, patients seek procedures that cause less trauma and allow
for faster recovery times. Despite these benefits, the rate of
adoption of surgical alternatives with less tissue disruption
procedures has been relatively slow with respect to the spine.
We believe the two principal factors contributing to spine
surgeons slow adoption of traditional minimally
invasive spine alternatives are: (i) the limited or
lack of direct access to and visibility of the surgical anatomy;
and (ii) the associated complex instruments that have been
required to perform these procedures. Most traditional
minimally invasive spine systems do not allow the
surgeon to directly view the spine and provide only restrictive
visualization through a camera system or endoscope, while also
requiring the use of complex surgical techniques. In
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addition, most traditional minimally invasive spine
systems use complex or highly customized surgical instruments
that require special training and the completion of a large
number of trial cases before the surgeon becomes proficient
using the system.
The
NuVasive Solution Maximum Access Surgery
(MAS)
Our MAS platform allows surgeons to perform a wide range of
minimally disruptive procedures, while overcoming the
shortcomings of traditional minimally invasive spine
surgical techniques. We believe our products improve clinical
results and have both the potential to expand the number of
minimally disruptive procedures performed and become a standard
of care in spine fusion and non-fusion surgery.
Our MAS platform combines four product categories: NeuroVision,
MaXcess, biologics and specialized implants. NeuroVision enables
surgeons to navigate around nerves while MaXcess affords direct
customized access to the spine for implant delivery. MaXcess
also allows surgeons to use well-established traditional
instruments in a minimally disruptive and less traumatic manner
while our biologics offering compliments our MAS platform by
facilitating fusion. We also offer a variety of specialized
implants that enable sufficient structural support while
conforming to the anatomical requirements of the patient.
Our products facilitate minimally disruptive applications of the
following spine surgery procedures, among others:
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Lumbar fusion procedures in which the surgeon approaches the
spine through the patients back or abdomen;
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Decompression, which is removal of a portion of bone over the
nerve root or disc from under the nerve root to relieve pinching
of the nerve; and
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Procedures designed to correct
and/or
stabilize the spine while simultaneously maintaining motion.
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Importantly, our products also enable innovative procedures such
as the XLIF. The XLIF procedure, which we developed with leading
spine surgeons, allows surgeons to access the spine from the
side of the patients body rather than from the front or
back, which results in less operating time and reduced patient
trauma and blood loss.
MAS
NeuroVision
NeuroVision utilizes electromyography, or EMG, proprietary
algorithms and graphical user interfaces to provide surgeons
with an enhanced nerve avoidance system. Our system functions by
monitoring changes in electrical signals across muscle groups,
which allows us to detect underlying changes in nerve activity.
We connect the instruments that surgeons use to a computer
system that provides real time feedback during surgery. Our
system analyzes and then translates complex neurophysiologic
data into simple, useful information to assist the
surgeons clinical decision-making process. For example,
during a pedicle screw test, in which the integrity of the bone
where the implant is placed is tested, if the insertion of a
screw results in a breach of the bone, a red light and
corresponding numeric value will result so that the surgeon may
reposition the implant to avoid potential nerve impingement or
irritation. If no breach of the bone occurs, a green light and
corresponding numeric value will result.
Surgeons can dynamically link familiar surgical instruments to
NeuroVision, thus creating an interactive set of instruments
that enable the safe navigation of neural anatomy. The
connection is accomplished using a clip that is attached to the
instrument, effectively providing the benefits of NeuroVision
through an instrument already familiar to the surgeon. The
systems proprietary software and easy to use graphical
user interface enables the surgeon to make critical decisions in
real time resulting in safer and faster procedures with the
potential for improved patient outcomes. With recent additions,
the health and integrity of the spinal cord can also be assessed
using motor evoked potentials (MEPs) and somatosensory evoked
potentials (SSEPs). Both methods of intraoperative monitoring
involve applying stimulation and recording the response that
must travel along the motor or sensory aspect of the spinal
cord. The data developed using NeuroVision can now be sent to
health care professionals for additional interpretation of
intraoperative information via networking capabilities and
software that allows real-time assessment from remote locations.
5
MAS
MaXcess
Our MaXcess system consists of instrumentation and specialized
implants that provide maximum access to the spine with minimal
soft tissue disruption. MaXcess has a split blade design
consisting of three blades that can be positioned to build the
surgical exposure in the shape and size specific to the surgical
requirements rather than the fixed tube design of traditional
minimally invasive spine surgical systems.
MaXcess split blade design also provides expanded access
to the spine, which allows surgeons to perform surgical
procedures using instruments that are similar to those used in
open procedures but with a significantly smaller incision. The
ability to use familiar instruments reduces the learning curve
and facilitates the adoption of our products. Our systems
illumination of the operative corridor aids in providing
surgeons with direct visualization of the patients
anatomy, without the need for additional technology or other
special equipment.
Over the years, several improvements to our MaXcess systems have
been made, including incorporating nerve avoidance technology
with the use of NeuroVision, superior and inferior blades that
kick-out at an angle to spread the tissue closest to
the pathology point further than prior versions, and a removable
fourth blade, which provides greater posterior surgical options
and incorporates an improved tilted blade-locking mechanism.
Further, our MaXcess products are used in the cervical spine for
posterior application, the lumbar spine for decompression,
transforaminal interbody fusion, or TLIF, fusion and have been
used in the thoracic region as the lateral approach has
broadened from the lumbar to the thoracic region as well as into
adult degenerative scoliosis procedures.
MAS
Specialized Implants
We have a number of implants designed to be used with our MAS
platform. These implants are used for interbody disc height
restoration for fusion and stabilization of the spine. Our
implants are available in a variety of shapes and sizes to
accommodate the anatomical requirements of the patient and the
particular fusion procedure. Our implants are designed for
insertion into the smallest possible space while maximizing
surface area contact for fusion. Our fixation systems have been
uniquely designed to be delivered through our MaXcess system to
provide stabilization of the spine. These systems enable
minimally disruptive placement of implants and are intended to
reduce operating time and patient morbidity, often through a
single approach.
We also made significant progress in the last few years on our
research and development initiatives related to motion
preservation. The PCM clinical trial is complete and the trial
protocol requires a two-year
follow-up
period, which was completed in the fourth quarter of 2009, on
all patients before submitting to the FDA for potential
approval. We anticipate submitting for FDA approval in the first
quarter of 2010. The clinical trial for
NeoDisc
®
,
a nucleus-like total disc replacement device, is a prospective,
randomized, controlled, multi-center clinical trial to evaluate
the safety and efficacy of NeoDisc by comparing the outcomes of
patients to traditional anterior cervical discectomy and fusion.
Enrollment began in the third quarter of 2006 and is now
complete.
Our motion preservation product development efforts also include
our mechanical lateral total disc replacement (XL
TDR
tm
).
We filed with the FDA for Investigational Device Exemptions, or
IDEs, on the XL TDR in late 2007 and were granted an IDE in 2008.
MAS
Biologics
As part of our MAS offering, we have expanded our product
offerings in the last few years to include products in the
biologics market. The biologics market in spine surgery has
grown to approximately $1.7 billion and consists of
autograft (autologous human tissue), allograft (donated human
tissue), a varied offering of synthetic products, stem
cell-based products, and growth factors. We made our initial
entry into this market in 2007 by acquiring rights to
FormaGraft, a collagen-based synthetic product. We expanded this
offering in 2008 by acquiring Osteocel, an allograft cellular
matrix containing viable MSCs to aid in fusion. Additionally, in
early 2009, we made an investment in Progentix Orthobiology,
B.V., a private company working to develop a novel synthetic
osteoinductive bone graft material.
6
Development
Projects
We are developing proprietary total disc replacement devices for
lateral lumbar spine applications and separately for cervical
spine applications. These devices are intended to allow surgeons
to address a patients pain and dysfunction while
maintaining normal range of motion and avoiding future adjacent
level degeneration that can occur after spine fusion.
Commercialization of these devices, including PCM,
NeoDisc
®
,
and XL
TDR
®
,
will require premarket approval rather than 510(k) clearance. In
the cervical spine, the PCM investigational device, a total disc
replacement device designed to preserve motion, has reached the
two-year
follow-up
end point in its FDA-approved clinical trial in the United
States. We anticipate submitting for FDA approval in the first
quarter of 2010. Approval, if obtained, of PCM will further
strengthen our cervical product offering and will enable us to
continue our trend of increasing our market share. Also in the
cervical spine, patient enrollment in the FDA-approved clinical
trial of the NeoDisc nucleus-like total disc replacement device
in the United States is complete. The NeoDisc studys
two-year
follow-up
period is scheduled for completion in late 2010.
Our lumbar motion preservation development efforts include XL
TDR, a mechanical total disc replacement implanted through the
XLIF approach. Enrollment in an FDA-approved XL TDR clinical
trial in the United States was initiated in 2009 and will
continue throughout 2010.
In addition to the motion preservation platforms previously
mentioned, we continue development on a wide variety of projects
intended to broaden surgical applications such as with tumor,
trauma, and deformity, and increase fixation options for greater
vertical integration of our MAS techniques. We also continue
expanding our cervical product portfolio to provide for a
comprehensive cervical offering that will include segmentation
of both the fixation and motion preservation markets.
Research
and Development
Our research and development efforts are primarily focused on
developing further enhancements to our existing products,
launching new product categories, as well as developing our
total disc products. As of December 31, 2009, our research
staff consists of 23 shareowners (employees), including six
who hold Ph.D. degrees and three who hold other advanced
degrees. Our research and development group has extensive
experience in developing products to treat spine pathology and
this group continues to work closely with our clinical advisors
and spine surgeon customers to design products that are intended
to improve patient outcomes, simplify techniques, shorten
procedures, reduce hospitalization and rehabilitation times and,
as a result, reduce costs.
Sales and
Marketing
In the United States, we currently sell our products through a
combination of exclusive independent sales agencies and direct
sales representatives employed by us. Importantly, both our
direct sales representatives as well as our independent sales
agencies are exclusive and sell only NuVasive spine surgery
products. Each member of our U.S. sales force is
responsible for a defined territory, with our independent sales
representatives acting as our sole representative in their
respective territories. The determination of whether to engage a
directly-employed shareowner or exclusive distributor is made on
a territory by territory basis, with a focus on the candidate
who brings the best skills and experience. Currently, the split
between directly-employed and independent sales agents in our
sales force is roughly equal. Outside the United States, we
currently sell our products through a combination of exclusive
distributors and direct sales representatives employed by us.
The transition to an exclusive sales force has been a very
positive contributor to our growth in sales. There are many
reasons that we believe strongly in an exclusive sales force,
none more important than having a sales force that is properly
trained and incentivized to sell and represent only our
portfolio of products.
Our global sales force is managed by three Executive Vice
Presidents managing the following territories: Asia Pacific,
EMEA (Europe, Middle East and Africa) and the Americas. The
Executive Vice President of the Americas manages four Area Vice
Presidents. Each Area Vice President is responsible for a
portion of the United States and manages the directly-employed
and independent sales agents engaged in that territory. Outside
of the United States, the Executive Vice Presidents manage
directly-employed sales agents and independent distributors in
that territory.
7
Surgeon
Training and Education
NuVasive devotes significant resources to training and educating
surgeons regarding the safety and reproducibility of our
surgical techniques and our complimentary instruments and
implants. We maintain a
state-of-the-art
cadaver operating theatre and training facility at our corporate
headquarters to help promote adoption of our products.
Currently, we are training approximately 400 to 500 surgeons
annually in the XLIF technique and our other MAS platform
products including: NeuroVision, MaXcess and specialized
implants. NuVasive has also helped to establish
SOLAS
®
,
the Society of Lateral Access Surgery, a group of spine surgeons
dedicated to the development and expanded application of lateral
spine surgery techniques that offer significant patient benefits
and improved clinical outcome through
peer-to-peer
communication, clinical education efforts, and research. The
number of surgeons trained annually includes first-time surgeons
new to our MAS product platform as well as surgeons previously
trained on our MAS product platform who are attending advanced
training programs.
Manufacturing
and Supply
We rely on third parties for the manufacture of our products,
their components and servicing. We currently maintain
alternative manufacturing sources for some components of
NeuroVision, MaXcess, and SpheRx, as well as some of our other
finished goods products. We have and are in the process of
identifying and qualifying additional suppliers for our highest
volume products to maintain consistent supply to our customers.
Our outsourcing strategy is targeted at companies that meet FDA,
International Organization for Standardization, or ISO, and
quality standards supported by internal policies and procedures.
Supplier performance is maintained and managed through a
supplier qualification and corrective action program intended to
ensure that all product requirements are met or exceeded. We
believe these manufacturing relationships minimize our capital
investment, help control costs, and allow us to compete with
larger volume manufacturers of spine surgery products.
Following the receipt of products or product components from our
third-party manufacturers, we conduct inspection, packaging and
labeling, as needed, at either our headquarters facility or our
distribution facility. Under our existing contracts, we reserve
the exclusive right to inspect and assure conformance of each
product and product component to our specifications. In the
future, we may consider manufacturing certain products or
product components internally, if and when demand or quality
requirements make it appropriate to do so.
We currently rely on Tissue Banks International, Inc. and
AlloSource, Inc. as our only suppliers of allograft tissue
implants. AlloSource is also our exclusive supplier of Osteocel,
which is processed from allograft and was acquired from Osiris
Therapeutics, Inc. Like our relationships with our device
manufacturing suppliers, we subject our tissue processing
suppliers to the same quality criteria in terms of selection,
qualification, and verification of processed tissue quality upon
receipt of goods, as well as hold them accountable to compliance
with FDA regulation, state requirements, as well as voluntary
industry standards such as the American Association of Tissue
Banks, or AATB.
We acquired NeoDisc, an investigational cervical disc
replacement device, from Pearsalls Limited. NeoDisc is currently
the subject of a clinical trial, and our supply of the product
comes solely from Pearsalls Limited.
We acquired rights to FormaGraft, a ceramic/collagen bone graft
matrix used to promote spinal fusion, from Radius Medical, LLC.
Our supply of the product comes solely from Maxigen Biotech.
We acquired PCM, a motion preserving total disc replacement
device, through our acquisition of Cervitech, Inc. Our supply of
the product comes solely from Waldemar Link GmbH & Co.
KG, a company that was affiliated with Cervitech prior to the
acquisition. We are in the process of establishing alternate
suppliers.
We, and our third-party manufacturers, are subject to the
FDAs quality system regulations, state regulations, such
as the regulations promulgated by the California Department of
Health Services, and regulations promulgated by the European
Union. For tissue products, we are FDA registered and licensed
in the States of California, New York, Florida, Maryland and
Oregon. For our device implants and instruments, we are FDA
registered, California licensed, CE marked and ISO certified. CE
is an abbreviation for European Compliance. Our facility and the
facilities of our third-party manufacturers are subject to
periodic unannounced inspections by regulatory authorities, and
may undergo compliance inspections conducted by the FDA and
corresponding state agencies. The FDA may impose enforcement,
inspections or audits at any time.
8
Loaned
Instrument Sets
We seek to deliver surgical instrument sets, including our
NeuroVision systems, just in time to fulfill our customer
obligations to meet surgery schedules. We do not receive
separate economic value specific to the loaned instrument sets
from the surgeons or hospitals that utilize them. In most cases,
once the surgery is finished, the instrument sets are returned
to us and we prepare them for shipment to meet future surgeries.
This strategy minimizes backlogs, while increasing asset turns
and maximizing cash flow. Our pool of surgical equipment that we
loan to or place with hospitals continues to increase as we
expand our distribution channels and increase market penetration
of our products. These loaned instrument sets are important to
the growth of our business and we anticipate additional
investments in our loaner assets.
Intellectual
Property
We rely on a combination of patent, trademark, copyright, trade
secret and other intellectual property laws, nondisclosure
agreements and other measures to protect our intellectual
property rights. We believe that in order to have a competitive
advantage, we must develop and maintain the proprietary aspects
of our technologies. We require our shareowners, consultants and
advisors to execute confidentiality agreements in connection
with their employment, consulting or advisory relationships with
us. We also require our shareowners, consultants and advisors
who we expect to work on our products to agree to disclose and
assign to us all inventions conceived during the work day, using
our property or which relate to our business. Despite any
measures taken to protect our intellectual property,
unauthorized parties may attempt to copy aspects of our products
or to obtain and use information that we regard as proprietary.
Patents
As of December 31, 2009, we had 66 issued
U.S. patents, 45 foreign national patents, and 272 pending
patent applications, including 210 U.S. applications, 8
international (PCT) applications and 54 foreign national
applications. Our issued and pending patents cover, among other
things:
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MAS surgical access and spine systems;
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Neurophysiology enabled instrumentation and methodology,
including pedicle screw test systems, navigated guidance, and
surgical access systems;
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Implants and related instrumentation and targeting systems;
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Biologics, including Osteocel and Formagraft; and
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Motion preservation products.
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Our issued patents begin to expire in 2018. We do not believe
that the expiration of any single patent is likely to
significantly affect our intellectual property position.
We have undertaken to protect our neurophysiology platform,
including the NeuroVision nerve monitoring system, through a
comprehensive strategy covering various important aspects of our
neurophysiology-enabled instrumentation, including, screw test,
navigated guidance, surgical access and related methodology. Our
NeuroVision patent portfolio includes 15 issued
U.S. patents, 48 U.S. patent applications (including
45 U.S. utility patent applications, 2
U.S. provisional applications, and 1 U.S. design
application), 12 issued foreign national patents, 2
international (PCT) patent applications, and 25 foreign national
applications on this system and related instrumentation.
We have also undertaken to protect our XLIF surgical technique
franchise, including methodology, implants, and systems used
during XLIF procedures. Our XLIF patent portfolio includes 56
U.S. utility patent applications, 7 U.S. provisional
patent applications, 1 international (PCT) patent application,
and 17 foreign national patent applications covering various
additional aspects of XLIF methodology, implants, and systems.
Our biologics IP portfolio includes 4 U.S. patent
applications, 2 foreign applications, and 1 International
Application (PCT) owned outright by NuVasive. It also includes 4
U.S. patents and 4 foreign patents exclusively licensed
from Osiris Therapeutics.
9
We acquired a substantial intellectual property portfolio as
part of our purchase of Cervitech, Inc. This portfolio includes
9 issued U.S. patents, 18 U.S. applications, 167
issued foreign national patents, 1 international (PCT)
application, and 182 foreign national applications, directed at
the PCM cervical arthroplasty system and related technologies.
The medical device industry is characterized by the existence of
a large number of patents and frequent litigation based on
allegations of patent infringement. Patent litigation can
involve complex factual and legal questions and its outcome is
uncertain. Our success will depend in part on our not infringing
patents issued to others, including our competitors and
potential competitors. As the number of entrants into our market
increases, the possibility of future patent infringement claim
against us grows. While we take extensive efforts to ensure that
our products do not infringe other parties patents and
proprietary rights, our products and methods may be covered by
patents held by our competitors. There are numerous risks
associated with our intellectual property. For a complete
discussion of these risks, please see the Risk
Factors section of this Annual Report.
Trademarks
As of December 31, 2009, we had 84 trademark registrations,
both domestic and foreign, including the following
U.S. trademarks: NuVasive, NeuroVision, MAS, MaXcess, XLIF,
SpheRx, DBR, CoRoent, SmartPlate, Creative Spine Technology,
Triad, InStim, NeoDisc, ExtenSure, FormaGraft, Osteocel, Nerve
Avoidance Leader, Absolute Responsiveness, Affix, Gradient Plus,
Halo, SOLAS, VuePoint, XL TDR and XLP. We also had 46 trademark
applications pending, both domestic and foreign, including the
following trademarks: ExtenSure, Embrace, Embody, ILIF,
Magnitude, M5, NVM5, Acuity, Armada, Attrax, The Better Way
Back, and Leverage.
Competition
We are aware of a number of major medical device companies that
have developed or plan to develop products for use in surgical
alternatives with less tissue disruption in each of our current
and future product categories.
Our currently marketed products are, and any future products we
commercialize will be, subject to intense competition. Many of
our current and potential competitors have substantially greater
financial, technical and marketing resources than we do, and
they may succeed in developing products that would render our
products obsolete or noncompetitive. In addition, many of these
competitors have significantly greater operating history and
reputations than we do in their respective fields. Our ability
to compete successfully will depend on our ability to develop
proprietary products that reach the market in a timely manner,
receive adequate reimbursement and are safer, less invasive and
less expensive than alternatives available for the same purpose.
Because of the size of the potential market, we anticipate that
companies will dedicate significant resources to developing
competing products. Below are our primary competitors grouped by
our product categories.
Our NeuroVision system competes with the conventional nerve
monitoring systems offered by Medtronic Sofamor Danek
(Medtronic), Cadwell, and Nicolet Biomedical. We believe our
system competes favorably with these systems on ease of use for
the spine surgeon, with the added advantage that our NeuroVision
System was designed to support surgeon directed applications
with automated, real-time information. Medtronics
NIM-Eclipse neuromonitoring system, acquired from Axon, while
surgeon directed, requires manual interpretation for
neuromonitoring. Several companies offer products that compete
with our MaXcess system, SpheRx pedicle screw system and
implants, including competitive offerings by DePuy Spine, Inc.
(Depuy), a Johnson & Johnson company, Medtronic and
Stryker Spine.
Competition is intense in the fusion product market. We believe
that our most significant competitors are Medtronic, DePuy,
Stryker Spine and Synthes, Inc., each of which has substantially
greater sales and financial resources than we do. Medtronic, in
particular, has a broad classic fusion product line. We believe
our differentiation in the market is an innovative portfolio of
products elegantly delivered through our MaXcess system, as well
as through our XLIF approach, complemented by additional
innovative and pull-though products along the entirety of the
spine. However, with the introduction of competing lateral
techniques, such as Medtronics DLIF, we face more
competition in the market.
10
Competition in the motion preservation segment is increasing,
with Medtronic, DePuy, Stryker Spine and Synthes, Inc. all
investing in this rapidly growing market. In the cervical total
disc replacement (TDR) segment, our PCM and NeoDisc, currently
in clinical trials, if approved, will face competition from
several products that received FDA approval in 2007 including
Medtronics Prestige and Bryan TDRs as well as Synthes,
Inc.s ProDisc TDR.
While our acquisition of Osteocel and our investment in
Progentix Orthobiology, B.V. provide us with additional products
to compete in the biologics market, competition is increasing.
In addition to our larger competitors, which are investing in
their biologics platforms, we face competition from smaller
orthobiologics companies such as Orthovita and Osteotech.
We also face competition from a significant number of smaller
companies with more limited product offerings and geographic
reach than our larger competitors. These companies, who
represent intense competition in specified markets, include
Globus Medical, Inc., Zimmer Spine, Orthofix International N.V.
(Blackstone Medical, Inc.), Biomet EBI/Spine, Alphatec Spine,
Inc., and others.
Government
Regulation
Our products are medical devices and tissues subject to
extensive regulation by the FDA and other regulatory bodies. FDA
regulations govern, among other things, the following activities
that we or our partners perform and will continue to perform:
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product design and development;
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product testing;
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product manufacturing;
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product labeling;
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product storage;
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premarket clearance or approval;
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advertising and promotion; and
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product sales and distribution.
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FDAs
Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical device we wish to
commercially distribute in the United States will require either
prior 510(k) clearance or prior premarket approval from the FDA.
The FDA classifies medical devices into one of three classes.
Devices deemed to pose lower risk are placed in either
class I or II, which requires the manufacturer to submit to
the FDA a premarket notification requesting permission for
commercial distribution. This process is known as 510(k)
clearance. Some low risk devices are exempt from this
requirement. Devices deemed by the FDA to pose the greatest
risk, such as life-sustaining, life-supporting or implantable
devices, or devices deemed not substantially equivalent to a
previously cleared 510(k) device are placed in class III,
requiring premarket approval.
510(k)
Clearance Pathway
To obtain 510(k) clearance, a premarket notification must be
submitted demonstrating that the proposed device is
substantially equivalent to a previously cleared 510(k) device
or a device that was in commercial distribution before
May 28, 1976 for which the FDA has not yet called for the
submission of premarket approval applications. The FDAs
510(k) clearance pathway usually takes from three to twelve
months from the date the application is completed, but it can
take significantly longer.
After a device receives 510(k) clearance, any modification that
could significantly affect its safety or effectiveness, or that
would constitute a major change in its intended use, will
require a new 510(k) clearance or could require premarket
approval. The FDA requires each manufacturer to make this
determination initially, but the FDA can review any such
decision and can disagree with a manufacturers
determination. If the FDA disagrees
11
with a manufacturers determination, the FDA can require
the manufacturer to cease marketing
and/or
recall the modified device until 510(k) clearance or premarket
approval is obtained. If the FDA requires us to seek 510(k)
clearance or premarket approval for any modifications to a
previously cleared product, we may be required to cease
marketing or recall the modified device until we obtain this
clearance or approval. Also, in these circumstances, we may be
subject to significant regulatory fines or penalties. We have
made and plan to continue to make additional product
enhancements that we believe do not require new 510(k)
clearances.
Premarket
Approval Pathway
A premarket approval (PMA) application must be submitted if the
device cannot be cleared through the 510(k) process. A premarket
approval application must be supported by extensive data
including, but not limited to, technical information,
preclinical data, clinical trial data, manufacturing data and
labeling to demonstrate, to the FDAs satisfaction, the
safety and efficacy of the device for its intended use. Once a
complete PMA application is submitted, the FDA begins an
in-depth review which generally takes between one and three
years, but may take significantly longer. During this review
period, the FDA may request additional information or
clarification of information already provided. Also, during the
review period, an advisory panel of experts from outside the FDA
may be convened to review and evaluate the application and
provide recommendations to the FDA as to the approvability of
the device. In addition, the FDA will conduct a preapproval
inspection of the manufacturing facility to ensure compliance
with quality system regulations. New PMAs or PMA supplements are
required for significant modifications to the manufacturing
process, labeling or design of a device that is approved through
the PMA process. A PMA supplement often require submission of
the same type of information as an original PMA application,
except that a supplement is limited to information needed to
support any changes from the device covered by the original PMA
application, and may not require as extensive clinical data or
the convening of an advisory panel.
Human
Cell, Tissue, and Cellular and Tissue Based
Products
Our allograft implant products and our Osteocel products are
regulated by FDA as Human Cell, Tissue, and Cellular and Tissue
Based Products. FDA regulations do not currently require
products regulated as minimally manipulated human tissue-based
products to be 510(k) cleared or PMA approved before they are
marketed. We are, however, required to register our
establishment, list these products with the FDA and comply with
Current Good Tissue Practices for Human Cell, Tissue, and
Cellular and Tissue Based Product Establishments. The FDA
periodically inspects tissue processors to determine compliance
with these requirements. Violations of applicable regulations
noted by the FDA during facility inspections could adversely
affect the continued marketing of our products. We believe we
comply with all aspects of the Current Good Tissue Practices,
although there can be no assurance that we will comply, or will
comply on a timely basis, in the future. Entities that provide
us with allograft bone tissue are responsible for performing
donor recovery, donor screening and donor testing and our
compliance with those aspects of the Current Good Tissue
Practices regulations that regulate those functions are
dependent upon the actions of these independent entities.
The procurement and transplantation of allograft bone tissue is
subject to U.S. federal law pursuant to the National Organ
Transplant Act, or NOTA, a criminal statute which prohibits the
purchase and sale of human organs used in human transplantation,
including bone and related tissue, for valuable
consideration. NOTA permits reasonable payments associated
with the removal, transportation, processing, preservation,
quality control, implantation and storage of human bone tissue.
With the exception of removal and implantation, we provide
services in all of these areas. We make payments to vendors in
consideration for the services they provide in connection with
the recovery and screening of donors. Failure to comply with the
requirements of NOTA could result in enforcement action against
us.
The procurement of human tissue is also subject to state
anatomical gift acts and some states have statutes similar to
NOTA. In addition, some states require that tissue processors be
licensed by that state. Failure to comply with state laws could
also result in enforcement action against us.
12
Clinical
Trials
A clinical trial is almost always required to support a PMA
application and is sometimes required for a 510(k) premarket
notification. These trials generally require approval of a
submitted application for an IDE to the FDA. The IDE application
must be supported by appropriate data, such as animal and
laboratory testing results, showing that it is safe to evaluate
the device in humans and that the testing protocol is
scientifically sound. The IDE application must be approved in
advance by the FDA for a specified number of subjects, unless
the product is deemed a non-significant risk device and eligible
for more abbreviated IDE requirements. Clinical trials for a
significant risk device may begin once the IDE application is
approved by the FDA and the responsible institutional review
boards. Future clinical trials of our motion preservation
designs will likely require that we obtain IDEs from the FDA
prior to commencing clinical trials. We have gained IDE approval
from the FDA to begin a clinical trial relating to NeoDisc, our
embroidery cervical disc replacement device, and have completed
patient enrollment for this trial. We filed with the FDA for
IDEs on the mechanical lateral TDR (XL TDR), and were granted an
IDE in 2008. Currently, the PCM investigational device is in an
FDA-approved clinical trial in the United States with two-year
follow-up
completed in the fourth quarter of 2009. We anticipate
submitting for FDA approval in the first quarter of 2010. Our
clinical trials must be conducted in accordance with FDA
regulations and other federal regulations concerning human
subject protection and privacy and must be publicly registered.
The results of our clinical trials may not be sufficient to
obtain approval of our product. There are numerous risks
associated with conducting such a clinical trial, including the
high costs and uncertain outcomes. For a complete discussion of
these risks, please see the Risk Factors section of
this Annual Report.
Pervasive
and Continuing FDA Regulation
After a device is placed on the market, numerous regulatory
requirements apply. These include, but are not limited to:
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quality system regulation, which requires manufacturers to
follow design, testing, process control, and other quality
assurance procedures;
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labeling regulations, which prohibit the promotion of products
for unapproved or off-label uses and impose other
restrictions on labeling; and
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medical device reporting regulations, which require that
manufacturers report to the FDA if their device may have caused
or contributed to a death or serious injury or malfunctioned in
a way that would likely cause or contribute to a death or
serious injury if it were to recur.
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Failure to comply with applicable regulatory requirements can
result in enforcement action by the FDA, which may include any
of the following sanctions:
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fines, injunctions, and civil penalties;
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recall or seizure of our products;
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operating restrictions, partial suspension or total shutdown of
production;
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refusing our request for 510(k) clearance or premarket approval
of new products;
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withdrawing 510(k) clearance or premarket approvals that are
already granted; and
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criminal prosecution.
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We are subject to unannounced device inspections by the FDA and
the California Food and Drug Branch, as well as other regulatory
agencies overseeing the implementation and adherence of
applicable state and federal tissue licensing regulations. These
inspections may include our subcontractors facilities.
13
Sales
and Marketing Commercial Compliance
Federal anti-kickback laws and regulations prohibit any knowing
and willful offer, payment, solicitation or receipt of any form
of remuneration by an individual or entity in return for, or to
induce:
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the referral of an individual for a service or product for which
payment may be made by Medicare, Medicaid or other
government-sponsored healthcare program; or
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purchasing, leasing, ordering or arranging for any service or
product for which payment may be made by a government-sponsored
healthcare program.
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Possible sanctions for violation of these anti-kickback laws
include monetary fines, civil and criminal penalties, exclusion
from Medicare and Medicaid programs and forfeiture of amounts
collected in violation of such prohibitions.
In addition to the anti-kickback law, federal false claims laws
prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government,
or knowingly making, or causing to be made, a false statement to
get a false claim paid. Off-label promotion has been pursued as
a violation of the federal false claims laws. Pursuant to FDA
regulations, we can only market our products for cleared or
approved uses. Although surgeons are permitted to use medical
devices for indications other than those cleared or approved by
the FDA based on their medical judgment, we are prohibited from
promoting products for such off-label uses. Additionally, the
majority of states in which we market our products have similar
anti-kickback, false claims, anti-fee splitting and
self-referral laws, imposing substantial penalties for
violations.
To enforce compliance with the federal laws, the
U.S. Department of Justice (DOJ) has increased its scrutiny
of interactions between healthcare companies and healthcare
providers which has led to an unprecedented level of
investigations, prosecutions, convictions and settlements in the
healthcare industry. Dealing with investigations can be time-
and resource-consuming. Additionally, if a healthcare company
settles an investigation with the DOJ or other law enforcement
agencies, the company may be forced to agree to additional
onerous compliance and reporting requirements as part of a
consent decree or corporate integrity agreement.
Additionally, the commercial compliance environment is
continually evolving in the healthcare industry as some states,
including California, Massachusetts and Vermont, mandate
implementation of commercial compliance programs, along with the
tracking and reporting of gifts, compensation, and other
remuneration to physicians. Federal legislation, pursuant to the
Physician Payments Sunshine Act of 2009 (Sunshine Act), has been
proposed and is moving forward in Congress under the Healthcare
Reform Act of 2009. The Sunshine Act would require public
disclosure to the federal government of payments to physicians,
including in-kind transfers of value such as free gifts or
meals. These requirements all provide for penalties for
non-compliance. The shifting commercial compliance environment
and the need to build and maintain robust and expandable systems
to comply with multiple jurisdictions with different compliance
and/or
reporting requirements increases the possibility that a
healthcare company may run afoul of one or more of the
requirements.
International
International sales of medical devices are subject to foreign
government regulations, which vary substantially from country to
country. The time required to obtain approval by a foreign
country may be longer or shorter than that required for FDA
approval, and the requirements may differ.
The European Union, which consists of 27 countries in Europe,
has adopted numerous directives and standards regulating the
design, manufacture, clinical trials, labeling, and adverse
event reporting for medical devices. Other countries, such as
Switzerland, have voluntarily adopted laws and regulations that
mirror those of the European Union with respect to medical
devices. Devices that comply with the requirements of a relevant
directive will be entitled to bear CE conformity marking and,
accordingly, can be commercially distributed throughout Europe.
The method of assessing conformity varies depending on the class
of the product, but normally involves a combination of
self-assessment by the manufacturer and a third-party assessment
by a Notified Body. This third-party assessment
consists of an audit of the manufacturers quality system
and technical review of the manufacturers product. We have
now successfully passed several Notified Body audits since our
original certification in 2001,
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granting us ISO registration and allowing the CE conformity
marking to be applied to certain of our devices under the
European Union Medical Device Directive. We have expanded our
certification scope and are now working with two different
Notified Bodies overseeing our currently released, as well as
forthcoming, product development projects.
The Japanese government in recent years made revisions to the
Pharmaceutical Affairs Law (PAL) that made significant changes
to the preapproval regulatory systems. These changes have in
part, stipulated that in addition to obtaining a manufacturing
or import approval from the Ministry of Health, Labor and
Welfare (MHLW) certain low-risk medical devices can now be
evaluated by third-party organizations. Based on the risk-based
classification, manufacturers are provided three procedures for
satisfying the PAL requirements prior to placing products on the
market, Pre-market Submission (Todokede), Pre-market
Certification (Ninsho) and Pre-market Approval (Shonin).
NuVasive intends to market devices in Japan that will be
assessed by both government entities and third party
organizations using all three procedures in place for
manufacturers. The level of review and time line for medical
device approval will depend on the risk-based classification and
subsequent regulatory procedure that the medical device is
aligned based on assessment against the Pharmaceutical Affairs
Law. Manufacturers must also obtain a manufacturing or import
license from the prefectural government prior to importing
medical devices. We will also be pursuing authorizations
required by the prefectural government.
Third-Party
Reimbursement
We expect that sales volumes and prices of our products will
continue to be largely dependent on the availability of
reimbursement from third-party payers, such as governmental
programs, for example, Medicare and Medicaid, private insurance
plans and managed care programs. Reimbursement is contingent on
established coding for a given procedure, coverage of the codes
by the third-party payers, and adequate payment for the
resources used.
Physician coding for procedures is established by the American
Medical Association (AMA). For coding related to spine surgery,
the North American Spine Society (NASS) is the primary liaison
to AMA. In July of 2006 NASS established the proper physician
coding for the XLIF procedure by declaring it to be encompassed
in existing codes that describe an anterolateral approach to the
spine. This position was confirmed in a formal statement in
January 2010. Hospital coding is established by the Centers for
Medicare and Medicaid Services (CMS). XLIF is not currently
included in the nomenclature for hospital codes but has been
proposed as an additional descriptor of existing codes.
CMS proposal is slated for review and ratification in
2010. All physician and hospital coding is subject to change
which could impact reimbursement and physician practice behavior.
Independent of the coding status, third-party payers may deny
coverage based on their own criteria, such as if they feel that
a device or procedure is not well established clinically, is not
the most cost-effective treatment available, or is used for an
unapproved indication. In December 2007, a certain third-party
payer, Cigna Healthcare, established a national policy that
labels XLIF as experimental or investigational and states that
they do not provide reimbursement for the XLIF procedure. Since
December 2007, other third-party payers also established similar
non-coverage policies, which are both national and local in
scope. Such policies are not customarily intended to dictate the
practice of medicine or override the judgment of the regional
medical directors of a given third-party payer and these
policies have not materially impacted our operating results.
NuVasive will continue to provide the appropriate resources to
patients, physicians, hospitals, and insurers in order to ensure
the best in patient care and clarity regarding XLIF
reimbursement and work to remove the non-coverage policies.
National and regional coverage policy decisions are subject to
unforeseeable change and have the potential to impact physician
behavior. For a complete discussion of these risks, please see
the Risk Factors section of this Annual Report.
Payment amounts are established by government and private payer
programs and are subject to fluctuations which could impact
physician practice behavior. Third-party payers are increasingly
challenging the prices charged for medical products and services.
In international markets, reimbursement and healthcare payment
systems vary significantly by country and many countries have
instituted price ceilings on specific product lines. There can
be no assurance that our products will be accepted by
third-party payers, that reimbursement will be available or, if
available, that the third-party payers reimbursement
policies will not adversely affect our ability to sell our
products profitably.
15
Particularly in the United States, third-party payers carefully
review, and increasingly challenge, the prices charged for
procedures and medical products as well as any technology that
they, in their own judgment, consider experimental or
investigational. In addition, an increasing percentage of
insured individuals are receiving their medical care through
managed care programs, which monitor and often require
pre-approval of the services that a member will receive. Many
managed care programs are paying their providers on a capitated
basis, which puts the providers at financial risk for the
services provided to their patients by paying them a
predetermined payment per member per month. The percentage of
individuals covered by managed care programs is expected to grow
in the United States over the next decade.
We believe that the overall escalating cost of medical products
and services has led to, and will continue to lead to, increased
pressures on the healthcare industry to reduce the costs of
products and services. There can be no assurance that
third-party reimbursement and coverage will be available or
adequate, or that future legislation, regulation, or
reimbursement policies of third-party payers will not adversely
affect the demand for our products or our ability to sell these
products on a profitable basis. The unavailability or inadequacy
of third-party payer coverage or reimbursement could have a
material adverse effect on our business, operating results and
financial condition.
Healthcare
Fraud and Abuse
Healthcare fraud and abuse laws apply to our business when a
customer submits a claim for an item or service that is
reimbursed under Medicare, Medicaid or most other
federally-funded health care programs. The federal Anti-Kickback
Law prohibits unlawful inducements for the referral of business
reimbursable under federally-funded health care programs, such
as remuneration provided to physicians to induce them to use
certain tissue products or medical devices reimbursable by
Medicare or Medicaid. The Anti-Kickback Law is subject to
evolving interpretations. For example, the government has
enforced the Anti-Kickback Law to reach large settlements with
healthcare companies based on sham consultant arrangements with
physicians. The majority of states also have anti-kickback laws
which establish similar prohibitions. If a governmental
authority were to conclude that we are not in compliance with
applicable laws and regulations, we and our officers and
employees could be subject to severe criminal and civil
penalties including, for example, exclusion from participation
as a supplier of product to beneficiaries covered by Medicare or
Medicaid.
Additionally, the civil False Claims Act prohibits knowingly
presenting or causing the presentation of a false, fictitious or
fraudulent claim for payment to the U.S. government.
Actions under the False Claims Act may be brought by the
Attorney General or as a qui tam action by a private individual
in the name of the government. Violations of the False Claims
Act can result in very significant monetary penalties and treble
damages. The federal government is using the False Claims Act,
and the accompanying threat of significant liability, in its
investigations of health care providers, suppliers and
manufacturers throughout the country for a wide variety of
Medicare billing practices, and has obtained multi-million and
multi-billion dollar settlements in addition to individual
criminal convictions. Given the significant size of actual and
potential settlements, it is expected that the government will
continue to devote substantial resources to investigating health
care providers, suppliers, and manufacturers
compliance with the health care billing, coverage and
reimbursement rules and fraud and abuse laws.
Shareowners
(our employees)
We refer to our employees as shareowners. As of
December 31, 2009, we had 665 shareowners, of which
118 were employed in research and development, 21 in regulatory
and quality assurance, 236 in general and administrative and
operations and 290 in sales and marketing (including 37
international shareowners). In addition to our shareowners, we
partner with exclusive independent sales agencies and
independent distributors who sell our products in the United
States and internationally, respectively. None of our
shareowners are represented by a labor union and we believe our
shareowner relations are good.
NuVasive
Cheetah Gives Back Foundation
NuVasive Cheetah Gives Back
Foundation
tm
is a non-profit organization that has common management with the
Company. NuVasive Cheetah Gives Back Foundation is committed to
providing innovative medical devices,
16
surgical support, and necessary funds to those in need of
life-saving spine surgery around the world and encouraging
creativity through the support of the San Diego performing
arts community. We are not required to make contributions to
NuVasive Cheetah Gives Back Foundation, except for amounts
pledged. No amounts were pledged as of December 31, 2009.
Corporate
Information
Our business was incorporated in Delaware in July 1997. Our
principal executive offices are located at 7475 Lusk Boulevard,
San Diego, California 92121, and our telephone number is
(858) 909-1800.
Our website is located at
www.nuvasive.com.
We file our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
and any amendments to those reports, electronically with the
Securities and Exchange Commission (the Commission).
We make these reports available free of charge on our website
under the investor relations page as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the Commission. All such reports were made
available in this fashion during 2009.
This report may refer to brand names, trademarks, service marks
or trade names of other companies and organizations, and these
brand names, trademarks, service marks and trade names are the
property of their respective holders.
Risk factors which could cause actual results to differ from
our expectations and which could negatively impact our financial
condition and results of operations are discussed below and
elsewhere in this report. If any of the following risks actually
occurs, our business, financial condition, results of 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. Further, additional risks not currently
known to us or that we currently believe are immaterial also may
impair our business, operations, liquidity and stock price
materially and adversely.
Risks
Related to Our Business and Industry
Certain
third-party payers have stated non-coverage decisions concerning
our XLIF technology, additional third-party payers may adopt
similar policies and such medical reimbursement decisions may
negatively impact our ability to sell our complete product
portfolio and expand our operations and increase
profitability.
Sales of our products will depend on the availability of
adequate reimbursement from third-party payers. Healthcare
providers, such as hospitals that purchase medical devices for
treatment of their patients, generally rely on third-party
payers to reimburse all or part of the costs and fees associated
with the procedures performed with these devices. Likewise,
spine surgeons rely primarily on third-party reimbursement for
the surgical fees they earn. Spine surgeons are unlikely to use
our products if they do not receive reimbursement adequate to
cover the cost of their involvement in the surgical procedures.
Certain third-party payers have stated non-coverage decisions
concerning our XLIF technology and implementation of such
policies could significantly alter our ability to sell any
products that the payers categorize under XLIF.
Additional payers may also state that our XLIF technology is not
covered. The inability to successfully market XLIF due to lack
of reimbursement coverage may adversely impact our ability to
acquire new physician clients, increase market penetration with
existing clients, or retain existing clients across NuVasive
product lines.
The XLIF procedure is a significant feature of our Maximum
Access Surgery, or MAS, product platform, which is our principal
product offering. Lack of XLIF reimbursement coverage may deter
physician interest in XLIF, and in turn MAS and the entirety of
our product offering. Any such decisions could adversely impact
our ability to sell our products.
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We also believe that future reimbursement may be subject to
increased restrictions both in the United States and in
international markets. Future legislation, regulation or
reimbursement policies of third-party payers may adversely
affect the demand for our existing products or our products
currently under development and limit our ability to sell our
products on a profitable basis.
To the extent we sell our products internationally, market
acceptance may depend, in part, upon the availability of
reimbursement within prevailing healthcare payment systems.
Reimbursement and healthcare payment systems in international
markets vary significantly by country, and include both
government sponsored healthcare and private insurance.
Pricing
pressure from our competitors may impact our ability to sell our
products at prices necessary to expand our operations and
increase profitability.
The market for spine surgery products is large and growing at a
significant rate. This has attracted numerous new companies and
technologies, and encouraged more established companies to
intensify competitive pressure. New entrants to our markets
include numerous niche companies with singular product focus, as
well as companies owned partially by spine surgeons, who have
significant market knowledge and access to the surgeons who use
our products. As a result of this increased competition, we
believe there will be growing pricing pressure in the near
future. If competitive forces drive down the price we are able
to charge for our products, our profit margins will shrink,
which will hamper our ability to invest in and grow our business
and increase profitability.
We are
in a highly competitive market segment and face competition from
large, well-established medical device manufacturers as well as
new market entrants.
The market for spine surgery products and procedures is
intensely competitive, subject to rapid change and significantly
affected by new product introductions and other market
activities of industry participants. With respect to
NeuroVision, our nerve avoidance system, we compete with
Medtronic Sofamor Danek, Inc., a wholly owned subsidiary of
Medtronic, Inc., and Nicolet Biomedical, a VIASYS Healthcare
company, both of which have significantly greater resources than
we do, as well as numerous regional nerve monitoring companies.
With respect to MaXcess, our minimally disruptive surgical
system, our largest competitors are Medtronic Sofamor Danek,
Inc., DePuy Spine, Inc., a Johnson & Johnson company,
and Synthes-Stratec, Inc. We compete with many of the same
companies with respect to our other products. We also compete
with numerous smaller companies with respect to our implant
products, many of whom have a significant regional market
presence. At any time, these companies may develop alternative
treatments, products or procedures for the treatment of spine
disorders that compete directly or indirectly with our products.
Many of our larger competitors are either publicly traded or
divisions or subsidiaries of publicly traded companies, and
enjoy several competitive advantages over us, including:
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significantly greater name recognition;
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established relations with a greater number of spine surgeons,
hospitals, other healthcare providers and third-party payers;
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larger and more well established distribution networks with
significant international presence;
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products supported by long-term clinical data;
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greater experience in obtaining and maintaining U.S. Food
and Drug Administration, or FDA, and other regulatory approvals
or clearances for products and product enhancements;
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more expansive portfolios of intellectual property
rights; and
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greater financial and other resources for product research and
development, sales and marketing and litigation.
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In addition, the spine industry is becoming increasingly crowded
with new market entrants, including companies owned at least
partially by spine surgeons. Many of these new competitors focus
on a specific product or market segment, making it more
difficult for us to expand our overall market position. If these
companies become
18
successful, we expect that competition will become even more
intense, leading to greater pricing pressure and making it more
difficult for us to expand.
Our
future success depends on our strategy of obsoleting our own
products and our ability to timely acquire, develop and
introduce new products or product enhancements that will be
accepted by the market.
We have the objective of staying ahead of the spine market by
obsoleting our own products with new products and enhancements.
It is important to our business that we continue to build upon
our product offering to surgeons and hospitals, and enhance the
products we currently offer. As such, our success will depend in
part on our ability to acquire, develop and introduce new
products and enhancements to our existing products to keep pace
with the rapidly changing spine market. We cannot assure you
that we will be able to successfully acquire, develop, obtain
regulatory approval for or market new products or that any of
our future products or enhancements will be accepted by the
surgeons who use our products or the payers who financially
support many of the procedures performed with our products.
Additionally, in our quest to obsolete our products, we must
effectively manage our inventory, the demand for new and current
product and the regulatory process for new products in order to
avoid unintended financial and accounting consequences.
If we do not effectively manage our strategy of obsoleting our
products by acquiring or developing new products or product
enhancements that we can introduce in time to meet market demand
or if there is insufficient demand for these products or
enhancements, our results of operations may suffer.
If
clinical trials of our current or future product candidates do
not produce results necessary to support regulatory approval in
the United States, we will be unable to commercialize these
products.
Several investigational devices in our development pipeline,
including our NeoDisc cervical disc replacement device, PCM,
and, and lateral TDR (XL TDR), will require premarket approval,
or PMA, from the FDA. A PMA application must be submitted if the
device cannot be cleared through the less rigorous 510(k)
process. A PMA application must be supported by extensive data
including, but not limited to, technical, preclinical, clinical
trials, manufacturing and labeling to demonstrate to the
FDAs satisfaction the safety and effectiveness of the
device for its intended use.
As a result, to receive regulatory approval for NeoDisc, PCM,
XLTDR or other devices requiring PMA approval, we must conduct,
at our own expense, adequate and well controlled clinical trials
to demonstrate efficacy and safety in humans. Clinical testing
is expensive, takes many years and has an uncertain outcome.
Clinical failure can occur at any stage of the testing. Our
clinical trials may produce negative or inconclusive results,
and we may decide, or regulators may require us, to conduct
additional clinical
and/or
non-clinical testing. Our failure to adequately demonstrate the
efficacy and safety of any of our devices would prevent receipt
of regulatory approval and, ultimately, the commercialization of
that device.
Our NeoDisc, PCM, and XLTDR devices are currently the subject of
an Investigational Device Exemption clinical study. There is no
assurance that these devices will be approved for sale in the
United States by the FDA. The clinical study may prove that the
device does not provide the intended benefit or that there are
unintended negative side effects of the device that make it
unsafe or not effective. In addition, the NeoDisc device
includes embroidery technology, which has not been thoroughly
studied for use as permanent implants in the spine. Any failure
or delay in obtaining regulatory approval for these devices will
hamper our ability to commercialize the device in the United
States.
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:
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the possibility that we will pay more than the value we derive
from the acquisition, which could result in future non-cash
impairment charges;
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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;
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the assumption of certain known and unknown liabilities of the
acquired companies; and
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difficulties in retaining key relationships with shareowners
(employees), customers, partners and suppliers of the acquired
company.
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Any of these factors could have a negative impact on our
business, results of operations or financing position.
Specifically, our Osteocel acquisition is the largest
acquisition we have ever completed, with a 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. Additionally, our investment in Progentix Orthobiology
B.V., a private company working to develop a novel synthetic
biologic, includes options and obligations to buy Progentix
Orthobiology B.V. over time as development milestones are
achieved. If the Progentix products are not commercially
successful or unable to meet expected commercial success, but
certain development milestones are achieved, we may be obligated
to purchase Progentix Orthobiology B.V. at a price greater than
the value of the company.
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
companys operations, technologies, products and services,
information systems and personnel into our business.
Acquisitions may also further strain our existing financial and
managerial controls, and divert managements attention away
from our other business concerns.
Our
reliance on single source suppliers could limit our ability to
meet demand for our products in a timely manner or within our
budget.
We rely on third-party suppliers and manufacturers to supply and
manufacture our products. To be successful, our contract
manufacturers must be able to provide us with products and
components in substantial quantities, in compliance with
regulatory requirements, in accordance with agreed upon
specifications, at acceptable cost and on a timely basis. Our
anticipated growth could strain the ability of suppliers to
deliver an increasingly large supply of products, materials and
components. If we are unable to obtain sufficient quantities of
high quality components to meet customer demand on a timely
basis, we could lose customers, our reputation may be harmed and
our business could suffer.
We currently use one or two manufacturers for each of our
devices or components. Our dependence on one or two
manufacturers involves several risks, including limited control
over pricing, availability, quality and delivery schedules. If
any one or more of our manufacturers cease to provide us with
sufficient quantities of our components in a timely manner or on
terms acceptable to us, or cease to manufacture components of
acceptable quality, we would have to seek alternative sources of
manufacturing. We could incur delays while we locate and engage
alternative qualified suppliers and we might be unable to engage
alternative suppliers on favorable terms. Any such disruption or
increased expenses could harm our commercialization efforts and
adversely affect our ability to generate revenue.
Invibio, Inc. is our exclusive supplier of polyetheretherketone,
which comprises our PEEK partial vertebral body product called
CoRoent
®
.
We have a supply agreement with Invibio, pursuant to which we
have agreed to purchase our entire supply of
polyetheretherketone for our current product lines from Invibio.
We also have an exclusive supply arrangement with Delphi
Corporation (Delphi) pursuant to which Delphi is our exclusive
supplier of
NeuroVision
®
systems. In the event we experience delays, shortages, or
stoppages of supply with either supplier, we would be forced to
locate a suitable alternative supplier which could take
significant time and result in significant expense. Any
inability to meet our customers demands for these products
could lead to decreased sales and harm our reputation and result
in the loss of customers to our competitors, which could cause
the market price of our common stock to decline.
20
Maxigen Biotech, Inc., or MBI, is our exclusive supplier of our
FormaGraft
®
product. We are party to a supply agreement with MBI, pursuant
to which we have agreed to purchase our entire supply of
FormaGraft from MBI. We may require that MBI significantly
expand its manufacturing capacity to meet our potential
forecasted needs, and no assurance can be given that MBI will be
able to meet our requirements. If we experience difficulties in
dealing with MBI we may not be able to secure an adequate source
of supply of FormaGraft, which could adversely affect our
operational results.
We acquired PCM, a motion preserving total disc replacement
device, through our acquisition of Cervitech, Inc. Our supply of
the product comes solely from Waldemar Link GmbH & Co.
KG, a company that was affiliated with Cervitech prior to the
acquisition. We are in the process of determining whether to
establish alternate suppliers and there is no assurance that we
will be able to establish a new supplier which could adversely
affect our operational results.
Further, Tissue Banks International, Inc. and AlloSource, Inc.
collectively supply us with all of our allograft implants, and
will continue to be our only sources for the foreseeable future.
The processing of human tissue into allograft implants is very
labor intensive and it is therefore difficult to maintain a
steady supply stream. AlloSource is also our exclusive supplier
of Osteocel, which is processed from allograft and was acquired
from Osiris Therapeutics, Inc. Allograft, which is donated human
tissue, is a supply-constrained material and there is ongoing
risk that there will be insufficient supply to produce the
necessary quantity of Osteocel and our other allograft products.
In addition, due to seasonal changes in mortality rates, some
scarce tissues used for our allograft products are at times in
particularly short supply. Allograft also carries with it the
possibility of disease transmission, which could result in
negative patient outcomes and negative publicity for us. We
cannot be certain that our supply of allograft from Tissue Banks
International and AlloSource, Inc. will be available at current
levels or will be sufficient to meet our needs. If we are no
longer able to obtain allograft from these sources in amounts
sufficient to meet our needs, we may not be able to locate and
engage replacement sources of allograft on commercially
reasonable terms, if at all. Any interruption of our business
caused by the need to locate additional sources of allograft
could reduce our revenues.
We are
dependent on the services of Alexis V. Lukianov and Keith
Valentine, and the loss of either of them could harm our
business.
Our continued success depends in part upon the continued service
of Alexis V. Lukianov, our Chairman and Chief Executive Officer,
and Keith Valentine, our President and Chief Operating Officer,
who are critical to the overall management of NuVasive as well
as to the development of our technology, our culture and our
strategic direction. We have entered into employment agreements
with Messrs. Lukianov and Valentine, but neither of these
agreements guarantees the service of the individual for a
specified period of time. The loss of either Messr. Lukianov or
Valentine could have a material adverse effect on our business,
results of operations and financial condition. We have not
obtained and do not expect to obtain any key-person life
insurance policies.
If we
fail to properly manage our anticipated growth, our business
could suffer.
The rapid growth of our business has placed a significant strain
on our managerial, operational and financial resources and
systems. To execute our anticipated growth successfully, we must:
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generate higher revenues to cover a higher level of operating
expenses, and our ability to do so may depend on factors that we
do not control;
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attract and retain highly qualified management, scientific,
manufacturing and sales and marketing personnel;
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assimilate new staff members and manage the complexities
associated with a larger, faster growing and more geographically
diverse organization;
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expand our clinical development resources to manage and execute
increasingly global, larger and more complex clinical trials;
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expand our sales and marketing resources for international
expansion and to launch an increasing number of new products
from our product pipeline;
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accurately anticipate demand for the products we manufacture and
maintain adequate manufacturing capacity for both commercial and
clinical supply while maintaining quality standards; and
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upgrade our internal business processes and capabilities (e.g.,
information technology platform and systems, product
distribution and tracking) to create the scalability that a
growing business demands.
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Further, our anticipated growth, both internationally and
domestically, will place additional strain on our suppliers and
manufacturers, resulting in increased need for us to carefully
monitor quality assurance. Any failure by us to manage our
growth effectively could have an adverse effect on our ability
to achieve our development and commercialization goals.
If we
fail to obtain, or experience significant delays in obtaining,
FDA clearances or approvals for our future products or product
enhancements, our ability to commercially distribute and market
our products could suffer.
Our medical devices are subject to rigorous regulation by the
FDA and numerous other federal, state and foreign governmental
authorities. The process of obtaining regulatory clearances or
approvals to market a medical device, particularly from the FDA,
can be costly and time consuming, and there can be no assurance
that such clearances or approvals will be granted on a timely
basis, if at all. In particular, the FDA permits commercial
distribution of a new medical device only after the device has
received clearance under Section 510(k) of the Federal
Food, Drug and Cosmetic Act, or is the subject of an approved
premarket approval application, or PMA. The FDA will clear
marketing of a medical device through the 510(k) process if it
is demonstrated that the new product is substantially equivalent
to other 510(k)-cleared products. The PMA process is more
costly, lengthy and uncertain than the 510(k) clearance process.
Additionally, any modification to a 510(k)-cleared device that
could significantly affect its safety or efficacy, or that would
constitute a major change in its intended use, requires a new
510(k) clearance or, possibly, premarket approval. The FDA may
not agree with any of our decisions regarding whether new
clearances or approvals are necessary.
Our failure to comply with such regulations could lead to the
imposition of injunctions, suspensions or loss of regulatory
approvals, product recalls, termination of distribution, or
product seizures. In the most egregious cases, criminal
sanctions or closure of our manufacturing facilities are
possible.
Pursuant to FDA regulations, we can only market our products for
cleared or approved uses. If the FDA determines that our
promotional materials or training constitutes promotion of an
unapproved use, it could request that we modify our training or
promotional materials or subject us to regulatory enforcement
actions, including the issuance of a warning letter, injunction,
seizure, civil fine and criminal penalties. It is also possible
that other federal, state or foreign enforcement authorities
might take action if they consider promotional or training
materials to constitute promotion of an unapproved use, which
could result in significant fines or penalties under other
statutory authorities. Additionally, surgeons use several of our
products for unapproved uses. While surgeons are permitted by
the FDA to use our products for unapproved uses, there is a
heightened risk of an enforcement action by a governmental
enforcement authority when surgeons engage in that practice.
Foreign governmental authorities that regulate the manufacture
and sale of medical devices have become increasingly stringent
and, to the extent we market and sell our products in foreign
countries, we may be subject to rigorous regulation in the
future. In such circumstances, we would rely significantly on
our foreign independent sales agencies to comply with the
varying regulations, and any failures on their part could result
in restrictions on the sale of our products in foreign countries.
The
safety of our products is not yet supported by long-term
clinical data and our products may therefore prove to be less
safe and effective than initially thought.
We obtained clearance to offer almost all of our products that
require FDA clearance or approval through the FDAs 510(k)
clearance process. The FDAs 510(k) clearance process is
less rigorous than the PMA process and requires less supporting
clinical data. As a result, we currently lack the breadth of
published long-term clinical data
22
supporting the safety of our products and the benefits they
offer that might have been generated in connection with the PMA
process. For these reasons, spine surgeons may be slow to adopt
our products; we may not have comparative data that our
competitors have or are generating and we may be subject to
greater regulatory and product liability risks. Further, future
patient studies or clinical experience may indicate that
treatment with our products does not improve patient outcomes.
Such results would reduce demand for our products, affect our
ability to have sustainable reimbursement for our products from
third-party payers, significantly reduce our ability to achieve
expected revenues and could prevent us from sustaining or
increasing profitability. Moreover, if future results and
experience indicate that our products cause unexpected or
serious complications or other unforeseen negative effects, we
could be subject to significant legal liability and harm to our
business reputation. The spine medical device market has been
particularly prone to costly product liability litigation.
If we
or our suppliers fail to comply with the FDAs quality
system regulations, the manufacture of our products could be
delayed and we may be subject to an enforcement action by the
FDA.
We and our suppliers are required to comply with the FDAs
quality system regulations, which cover the methods and
documentation of the design, testing, production, control,
quality assurance, labeling, packaging, storage and shipping of
our products. The FDA enforces the quality system regulation
through inspections. If we or one of our suppliers fail a
quality system regulations inspection or if any corrective
action plan is not sufficient, the manufacture of our products
could be delayed. We underwent an FDA inspection in April 2005
regarding our allograft implant business and another FDA
inspection in June 2007 regarding our medical device activities.
In connection with these inspections as well as prior
inspections, the FDA requested minor corrective actions, which
we have taken to satisfy the corrective actions. There can be no
assurance the FDA will not subject us to further enforcement
action and the FDA may impose additional inspections at any time.
Additionally, we are the legal manufacturer of record for the
products that are distributed and labeled by NuVasive,
regardless of whether the products are manufactured by us or our
suppliers. Thus, a failure by us or our suppliers to comply with
applicable regulatory requirements can result in enforcement
action by the FDA, which may include any of the following
sanctions:
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fines, injunctions, and civil penalties;
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recall or seizure of our products;
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operating restrictions, partial suspension or total shutdown of
production;
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refusing our request for 510(k) clearance or premarket approval
of new products;
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withdrawing 510(k) clearance or premarket approvals that are
already granted; and
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criminal prosecution.
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Risks
Related to Our Financial Results and Need for
Financing
We may
be unable to grow our revenue or earnings as anticipated, which
may have a material adverse effect on our future operating
results.
We have experienced rapid growth since our inception, and have
increased our revenues from $38.4 million in 2004, the year
of our initial public offering, to $370.3 million in 2009.
We anticipate continued growth and have provided guidance
related to such growth for 2010. Our ability to achieve the
anticipated growth will depend upon, among other things, the
success of our growth strategies, which we cannot assure you
will be successful. In addition, we may have more difficulty
maintaining our prior rate of growth of revenues or recent
earnings. Our future success will depend upon various factors,
including the strength of our brand image, the market success of
our current and future products, competitive conditions and our
ability to manage increased revenues, if any, or implement our
growth strategy. In addition, we anticipate significantly
expanding our infrastructure and adding personnel in connection
with our anticipated growth, which we expect will cause our
selling, general and administrative expenses to increase in
absolute dollars and which may cause our selling, general and
administrative expenses to increase as a percentage of revenue.
Because these expenses are generally fixed, particularly in the
short-term, operating results may be adversely impacted if we do
not achieve our anticipated growth.
23
The
financial crisis and general slowdown of the economy may
adversely affect our liquidity and the liquidity of our
customers.
At December 31, 2009, we had $65.4 million in cash and
cash equivalents and $139.2 million in investments in
marketable securities. We have historically invested these
amounts in U.S. treasuries and government agencies,
corporate debt, money market funds, commercial paper and
municipal bonds meeting certain criteria. Certain of these
investments are subject to general credit, liquidity and other
market risks. The general condition of the financial markets and
the economy has exacerbated those risks and may affect the value
of our current investments and restrict our ability to access
the capital markets.
The liquidity of our customers and suppliers may also be
affected by the current financial crisis. If our suppliers
experience credit or liquidity problems important sources of raw
materials or manufactured goods may be affected. If our
customers liquidity and creditworthiness is negatively
impacted by the current financial crisis and the condition of
the economy, our ability to collect on our outstanding invoices
and our collection cycles may be adversely affected.
Our
quarterly financial results are likely to fluctuate
significantly because our sales prospects are
uncertain.
Our quarterly operating results are difficult to predict and may
fluctuate significantly from period to period, particularly
because our sales prospects are uncertain. These fluctuations
may also affect our annual operating results and may cause those
results to fluctuate unexpectedly from year to year. The level
of our revenues and results of operations at any given time will
be based primarily on the following factors:
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our ability to increase sales of our products to hospitals and
surgeons;
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the efficiency of our distribution network to maximize our
inventory of products and instruments in order to meet the
demands of our customers;
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our ability to expand and maintain an effective and dedicated
sales force;
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pricing pressure applicable to our products, including adverse
third-party reimbursement outcomes;
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results of clinical research and trials on our existing products
and products in development and our ability to obtain FDA
approval or clearance;
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the mix of our products sold and the geographic markets in which
our products are sold (i.e., profit margins differ between our
products and between different geographic markets, both
domestically and internationally);
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timing of new product launches, acquisitions, licenses or other
significant events by us or our competitors;
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the ability of our suppliers to timely provide us with an
adequate supply of materials and components and meet our quality
requirements;
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the evolving product offerings of our competitors and the
potential introduction of new and competing
technologies; and
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regulatory approvals and legislative and reimbursement policy
changes affecting the products we may offer or those of our
competitors.
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Many of the products we may seek to develop and introduce in the
future will require FDA approval or clearance, without which we
cannot begin to commercialize them in the United States, and
commercialization of them outside of the United States would
likely require other regulatory approvals and import licenses.
As a result, it will be difficult for us to forecast demand for
these products with any degree of certainty. In addition, we
will be increasing our operating expenses as we build our
commercial capabilities. Accordingly, we may experience
significant, unanticipated quarterly losses. Because of these
factors, our operating results in one or more future quarters
may fail to meet the expectations of securities analysts or
investors.
24
Upon
the achievement of certain milestones related to our
acquisitions, we may be required to make payments which may
affect our liquidity and our financial results.
In connection with our recent acquisitions, we may be obligated
to make payments in the future upon the achievement of certain
milestones. We currently have $33.0 million in outstanding
potential milestone obligations under our agreement with the
shareholders of Cervitech and may be required to make milestone
payments upon the completion of certain milestones and purchase
the remaining sixty (60) percent of Progentix Orthobiology
B.V. for an aggregate amount up to $69 million. The
likelihood of those milestones being achieved and the timing of
such payments are uncertain and are subject to change over time.
If we are required to make those payments, particularly at a
time when we are experiencing financial difficulty, our
liquidity, financial results and financial condition may be
adversely affected.
We
expect our operating expenses to continue to increase as we
attempt to expand into international markets, which could
disrupt our U.S. business operations, present risks not
originally contemplated and harm our operating
results.
We have invested, and expect to increase our investment for the
foreseeable future, in our expansion into international markets.
We currently expect that our operating expenses will continue to
increase as we expand into international markets. We have only
limited experience in expanding into international markets as
well as marketing and operating our products and services in
such markets. Certain international markets take a lot of time
and resources to receive product approvals and clearances to
sell and promote products. After we receive the appropriate
approvals and clearances, international markets may be slower
than domestic markets in adopting our products and are expected
to yield lower profit margins when compared to our domestic
operations.
Additionally, our international endeavors may involve
significant risks and uncertainties, including distraction of
management from current operations, insufficient revenue to
offset expenses associated with our international strategy, and
unidentified issues not discovered in our due diligence. Because
expansion into international markets is inherently risky, no
assurance can be given that such strategies and initiatives will
be successful and will not materially adversely affect our
financial condition and operating results. Even if our
international expansion is successful, our expenses may increase
at a greater pace than our revenues and our operating results
could be harmed.
Risks
Related to Our Intellectual Property and Potential
Litigation
We are
currently involved in a patent litigation action involving
Medtronic and, if we do not prevail in this action, we could be
liable for past damages and might be prevented from making,
using, selling, offering to sell, importing or exporting certain
of our products.
On August 18, 2008, Medtronic Sofamor Danek USA, Inc. and
its related entities (Medtronic) filed suit against NuVasive in
the United States District Court for the Southern District of
California, alleging that certain of our products infringe, or
contribute to the infringement of, U.S. patents owned by
Medtronic. Medtronic is a large, publicly-traded corporation
with significantly greater financial resources than us.
Intellectual property litigation is expensive, complex and
lengthy and its outcome is difficult to predict. We may also be
subject to negative publicity due to the litigation. Pending or
future patent litigation against us or any strategic partners or
licensees may force us or any strategic partners or licensees to
stop or delay developing, manufacturing or selling potential
products that are claimed to infringe a third partys
intellectual property, unless that party grants us or any
strategic partners or licensees rights to use its intellectual
property, and may significantly divert the attention of our
technical and management personnel. In the event that our right
to market any of our products is successfully challenged, and if
we fail to obtain a required license or are unable to design
around a patent, our business, financial condition or results of
operations could be materially adversely affected. In such
cases, we may be required to obtain licenses to patents or
proprietary rights of others in order to continue to
commercialize our products. However, we may not be able to
obtain any licenses required under any patents or proprietary
rights of third parties on acceptable terms, or at all, and any
licenses may require substantial royalties or other payments by
us. Even if any strategic partners, licensees or we were able to
obtain rights to the third partys intellectual property,
these rights may be non-exclusive, thereby giving our
competitors access to the same intellectual property.
Furthermore, if we are found to infringe patent claims of a
third party, we may, among other
25
things, be required to pay damages, including up to treble
damages and attorneys fees and costs, which may be
substantial.
An unfavorable outcome for us in this patent litigation could
significantly harm our business if such outcome makes us unable
to commercialize some of our current or potential products or
cease some of our business operations. In addition, costs of
defense and any damages resulting from the litigation may
materially adversely affect our business and financial results.
The litigation may also harm our relationships with existing
customers and subject us to negative publicity, each of which
could harm our business and financial results.
Our
ability to protect our intellectual property and proprietary
technology through patents and other means is
uncertain.
Our success depends significantly on our ability to protect our
proprietary rights to the technologies used in our products. We
rely on patent protection, as well as a combination of
copyright, trade secret and trademark laws, and nondisclosure,
confidentiality and other contractual restrictions to protect
our proprietary technology. However, these legal means afford
only limited protection and may not adequately protect our
rights or permit us to gain or keep any competitive advantage.
For example, our pending U.S. and foreign patent
applications may not issue as patents in a form that will be
advantageous to us or may issue and be subsequently successfully
challenged by others and invalidated. In addition, our pending
patent applications include claims to material aspects of our
products and procedures that are not currently protected by
issued patents. Both the patent application process and the
process of managing patent disputes can be time consuming and
expensive. Competitors may be able to design around our patents
or develop products which provide outcomes which are comparable
to ours. Moreover, competitors may challenge our issued patents
through the reexamination process (in the U.S.)
and/or
opposition proceedings (outside the U.S.), such as was done by
Medtronic on two of our U.S. patents related to aspects of
our XLIF surgical technique. We asserted these patents against
Medtronic as part of our ongoing patent litigation. Patent
reexamination was granted by the U.S. Patent Office in each
case. If the U.S. Patent Office cancels or narrows the
claims in these patents, it could prevent or hinder us from
being able to enforce them against competitors.
Although we have taken steps to protect our intellectual
property and proprietary technology, including entering into
confidentiality agreements and intellectual property assignment
agreements with our officers, shareowners, consultants and
advisors, such agreements may not be enforceable or may not
provide meaningful protection for our trade secrets or other
proprietary information in the event of unauthorized use or
disclosure or other breaches of the agreements. Furthermore, the
laws of some foreign countries may not protect our intellectual
property rights to the same extent as do the laws of the United
States.
In addition, there are numerous proposed changes to the patent
laws and rules of the U.S. Patent and Trademark Office
which, if enacted, may have a significant impact on our ability
to protect our technology and enforce our intellectual property
rights. Moreover, Congress is considering several significant
changes to the U.S. patent laws, including (among other
things) changing from a first to invent to a
first inventor to file system, limiting where a
patentee may file a patent suit, requiring the apportionment of
patent damages, and creating a post-grant opposition process to
challenge patents after they have issued.
In the event a competitor infringes upon our patent or other
intellectual property rights, enforcing those rights may be
costly, difficult and time consuming. We may not have sufficient
resources to enforce our intellectual property rights or to
defend our patents against a challenge.
In addition, certain product categories, including pedicle
screws, have been the subject of significant patent litigation
in recent years. Since we sell pedicle screws and recently
introduced our SpheRx and Armada pedicle screw systems, any
related litigation could harm our business.
The medical device industry is characterized by the existence of
a large number of patents and frequent litigation based on
allegations of patent infringement. It is not unusual for
parties to exchange letters surrounding allegations of
intellectual property infringement and licensing arrangements.
Patent litigation can involve complex factual and legal
questions and its outcome is uncertain. Any claim relating to
infringement of patents that is successfully asserted against us
may require us to pay substantial damages, including treble
damages in some cases. Even if we were to prevail, any
litigation could be costly and time-consuming and would divert
the attention of our
26
management and key personnel from our business operations. Our
success will also depend in part on our not infringing patents
issued to others, including our competitors and potential
competitors. If our products are found to infringe the patents
of others, our development, manufacture and sale of such
potential products could be severely restricted or prohibited.
In addition, our competitors may independently develop
technologies similar to ours. Because of the importance of our
patent portfolio to our business, we may lose market share to
our competitors if we fail to adequately protect our
intellectual property rights.
As the number of entrants into our market increases, the
possibility of a patent infringement claim against us grows.
While we make an effort to ensure that our products do not
infringe other parties patents and proprietary rights, our
products and methods may be covered by patents held by our
competitors. In addition, our competitors may assert that future
products we may market infringe their patents.
A patent infringement suit brought against us or any of our
strategic partners or licensees may force us or such strategic
partners or licensees to stop or delay developing, manufacturing
or selling potential products that are claimed to infringe a
third partys intellectual property, unless that party
grants us or our strategic partners or licensees rights to use
its intellectual property. In such cases, we may be required to
obtain licenses to patents or proprietary rights of others in
order to continue to commercialize our products. However, we may
not be able to obtain any licenses required under any patents or
proprietary rights of third parties on acceptable terms, or at
all and any licenses may require substantial royalties or other
payments by us. Even if our strategic partners, licensees or we
were able to obtain rights to the third partys
intellectual property, these rights may be non-exclusive,
thereby giving our competitors access to the same intellectual
property. Ultimately, we may be unable to commercialize some of
our potential products or may have to cease some of our business
operations as a result of patent infringement claims, which
could severely harm our business.
If we
become subject to product liability claims, we may be required
to pay damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims
that are inherent in the testing, manufacture and sale of
medical devices for spine surgery procedures. Spine surgery
involves significant risk of serious complications, including
bleeding, nerve injury, paralysis and even death. In addition,
we sell allograft products, derived from cadaver bones, which
pose the potential risk of biological contamination. If any such
contamination is found to exist, sales of allograft products
could decline and our reputation would be harmed.
Currently, we maintain product liability insurance in the amount
of $10 million. Any product liability claim brought against
us, with or without merit, could result in the increase of our
product liability insurance rates or the inability to secure
coverage in the future. In addition, if our product liability
insurance proves to be inadequate to pay a damage award, we may
have to pay the excess out of our cash reserves which may harm
our financial condition. If longer-term patient results and
experience indicate that our products or any component cause
tissue damage, motor impairment or other adverse effects, we
could be subject to significant liability. Finally, even a
meritless or unsuccessful product liability claim could harm our
reputation in the industry, lead to significant legal fees and
could result in the diversion of managements attention
from managing our business.
Any
claims relating to us making improper payments to physicians for
consulting services, or other potential violations of laws or
regulations governing interactions between us and healthcare
providers, could be time consuming and costly.
Our relationship with surgeons, hospitals and the marketers of
our products are subject to scrutiny under various state and
federal anti-kickback, self-referral, false claims and similar
laws, often referred to collectively as healthcare fraud and
abuse laws. Healthcare fraud and abuse laws are complex, and
even minor, inadvertent violations can potentially give rise to
claims that the relevant law has been violated. Any violations
of these laws could result in a material adverse effect on the
market price of our common stock, as well as our business,
financial condition and results of operations. We cannot assure
you that any of the healthcare fraud and abuse laws will not
change or be interpreted in the future in a manner which
restricts or adversely affects our business activities or
relationships with surgeons, hospitals and marketers of our
products.
27
Federal anti-kickback laws and regulations prohibit any knowing
and willful offer, payment, solicitation or receipt of any form
of remuneration by an individual or entity in return for, or to
induce:
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the referral of an individual for a service or product for which
payment may be made by Medicare, Medicaid or other
government-sponsored healthcare program; or
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purchasing, leasing, ordering or arranging for any service or
product for which payment may be made by a government-sponsored
healthcare program.
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Possible sanctions for violation of these anti-kickback laws
include monetary fines, civil and criminal penalties, exclusion
from Medicare and Medicaid programs and forfeiture of amounts
collected in violation of such prohibitions. From 2007 through
2009, numerous medical device manufacturers have entered into
deferred prosecution agreements and corporate integrity
agreements with the federal government and paid hundreds of
millions of dollars, in aggregate, to the government over
allegations that the companies had paid kickbacks to surgeons to
reward and incentivize use of their surgical implant products.
In addition, the government has indicted and prosecuted
employees of companies for their alleged involvement in kickback
arrangements. Furthermore, the majority of states in which we
market our products have similar anti-kickback laws, imposing
substantial penalties for violations. To enforce compliance with
federal laws, the U.S. Department of Justice, or DOJ, has
increased its scrutiny of the interactions between healthcare
companies and healthcare providers, which has led to an
unprecedented level of investigations and settlements in the
healthcare industry. Dealing with DOJ investigations can be
time- and resource-consuming. Additionally, if a healthcare
company settles an investigation with the DOJ, or other law
enforcement agencies, it may be forced to agree to additional
onerous compliance and reporting requirements as part of a
consent decree or corporate integrity agreement. Further, the
commercial compliance environment is continually evolving in the
healthcare industry with certain states mandating implementation
of commercial compliance programs and disclosure requirements
while similar legislation has been proposed and is proceeding on
the federal level in the form of the Physician Payment Sunshine
Act.
In addition to the anti-kickback law, federal false claims laws
prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government,
or knowingly making, or causing to be made, a false statement to
get a false claim paid. Examples of enforcement under this law
include the prosecution of several pharmaceutical and device
companies for allegedly providing free product to customers with
the expectation that the customers would bill federal programs
for the product. Other companies have been prosecuted for
causing false claims to be submitted because of the
companys marketing of the product for unapproved, and thus
non-reimbursable, uses. Pursuant to FDA regulations, we can only
market our products for cleared or approved uses. Although
surgeons are permitted to use medical devices for indications
other than those cleared or approved by the FDA based on their
medical judgment, we are prohibited from promoting products for
such off-label uses. We market our products and provide
promotional materials and training programs to surgeons
regarding the use of our products. Although we believe our
marketing, promotional materials and training programs for
surgeons do not constitute promotion of unapproved uses of our
products, if it is determined that our marketing, promotional
materials or training programs constitute promotion of
unapproved uses, we could be subject to significant fines in
addition to regulatory enforcement actions, including the
issuance of a warning letter, injunction, seizure and criminal
penalty.
We must comply with a variety of other laws, such as the
Healthcare Insurance Portability and Accountability Act of 1996,
which protects the privacy of individually identifiable
healthcare information, and the Federal Trade Commission Act and
similar laws regulating advertisement and consumer protections.
The scope and enforcement of these laws is uncertain and subject
to rapid change, especially in light of the lack of applicable
precedent and regulations. There can be no assurance that
federal or state regulatory authorities will not challenge or
investigate our current or future activities under these laws.
Any such challenge or investigation could have a material
adverse effect on our business, financial condition and results
of operations. Any state or federal regulatory review of us,
regardless of the outcome, would be costly and time consuming.
Additionally, we cannot predict the impact of any changes in
these laws, whether or not retroactive.
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We or
our suppliers may be the subject of claims for non-compliance
with FDA regulations in connection with the processing or
distribution of allograft products.
It is possible that allegations may be made against us or
against donor recovery groups or tissue banks, including those
with which we have a contractual relationship, claiming that the
acquisition or processing of tissue for allograft products does
not comply with applicable FDA regulations or other relevant
statutes and regulations. Allegations like these could cause
regulators or other authorities to take investigative or other
action against us, or could cause negative publicity for us or
our industry generally. These actions or any negative publicity
could cause us to incur substantial costs, divert the attention
of our management from our business, harm our reputation and
cause the market price of our shares to decline.
Risks
Related to the Securities Markets and Ownership of Our Common
Stock
We
expect that the price of our common stock will fluctuate
substantially, potentially adversely affecting the ability of
investors to sell their shares.
The market price of our common stock is likely to be volatile
and may fluctuate substantially. For example, the closing price
for our stock on the last day of the past four quarters was:
$31.38 on March 31, 2009; $44.60 on June 30, 2009;
$41.76 on September 30, 2009; and $31.98 on
December 31, 2009. Fluctuation in the stock price may occur
due to many factors, including:
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general market conditions and other factors (such as the effect
the financial crisis is having on stock markets as a whole),
including factors unrelated to our operating performance or the
operating performance of our competitors;
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volume and timing of orders for our products;
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the introduction of new products or product enhancements by us
or our competitors;
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changes in the availability of third-party reimbursement in the
United States or other countries;
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disputes or other developments with respect to intellectual
property rights or other potential legal actions;
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our ability to develop, obtain regulatory clearance or approval
for, and market new and enhanced products on a timely basis;
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quarterly variations in our or our competitors results of
operations;
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sales of large blocks of our common stock, including sales by
our executive officers and directors;
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announcements of technological or medical innovations for the
treatment of spine pathology;
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changes in governmental regulations or in the status of our
regulatory approvals, clearances or applications;
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the acquisition or divestiture of businesses, products, assets
or technology;
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litigation, including intellectual property litigation;
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announcements of actions by the FDA or other regulatory
agencies; and
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changes in earnings estimates or recommendations by securities
analysts.
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Market price fluctuations may negatively affect the ability of
investors to sell our shares at consistent prices.
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Anti-takeover
provisions in our organizational documents and Delaware law may
discourage or prevent a change of control, even if an
acquisition would be beneficial to our stockholders, which could
affect our stock price adversely and prevent attempts by our
stockholders to replace or remove our current
management.
Our certificate of incorporation and bylaws contain provisions
that could delay or prevent a change of control of our company
or changes in our board of directors that our stockholders might
consider favorable. Some of these provisions:
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authorize the issuance of preferred stock which can be created
and issued by the board of directors without prior stockholder
approval, with rights senior to those of the common stock;
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provide for a classified board of directors, with each director
serving a staggered three-year term;
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prohibit our stockholders from filling board vacancies, calling
special stockholder meetings, or taking action by written
consent;
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prohibit our stockholders from making certain changes to our
certificate of incorporation or bylaws except with
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2
/
3
%
stockholder approval; and
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require advance written notice of stockholder proposals and
director nominations.
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In addition, we are subject to the provisions of
Section 203 of the Delaware General Corporation Law, which
may prohibit certain business combinations with stockholders
owning 15% or more of our outstanding voting stock. These and
other provisions in our certificate of incorporation, our bylaws
and Delaware law could make it more difficult for stockholders
or potential acquirers to obtain control of our board of
directors or initiate actions that are opposed by our
then-current board of directors, including delay or impede a
merger, tender offer, or proxy contest involving our company.
Any delay or prevention of a change of control transaction or
changes in our board of directors could cause the market price
of our common stock to decline.
We do
not intend to pay cash dividends.
We have never declared or paid cash dividends on our capital
stock. We currently intend to retain all available funds and any
future earnings for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the
foreseeable future. In addition, the terms of any future debt or
credit facility may preclude us from paying any dividends. As a
result, capital appreciation, if any, of our common stock will
be our stockholders source of potential gain for the
foreseeable future.
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Item 1B.
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Unresolved
Staff Comments
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None.
Our current corporate headquarters are located in
San Diego, California. We lease approximately
202,000 square feet in San Diego, with approximately
62,000 square feet leased through August 2012 and an
additional 140,000 square feet leased to us until August
2023. Under a master lease agreement relating to the
140,000 square foot facility, through options to acquire
additional space in the project and to require the construction
of an additional building on the campus, we have facility
expansion rights to an aggregate of more than 300,000 leased
square feet. In 2006, we purchased an approximately
100,000 square foot building in Memphis, Tennessee that we
use as our primary distribution and warehouse facility.
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Item 3.
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Legal
Proceedings.
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We have been involved in a series of related lawsuits involving
families of decedents who donated their bodies through
UCLAs willed body program. The complaint alleges that the
head of UCLAs 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 allege the following causes of action:
(i) breach of fiduciary duty; (ii) negligence;
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(iii) fraud; (iv) negligent misrepresentation;
(v) negligent infliction of emotional distress;
(vi) intentional infliction of emotional distress;
(vii) intentional interference with human remains;
(viii) negligent interference with human remains;
(ix) violation of California Business and Professions Code
Section 17200; and (x) injunctive and declaratory
relief. We had been dismissed from these lawsuits by the trial
court but the decision was appealed and in July 2008, the
appellate court reversed the trial courts decision to
dismiss us from these lawsuits. We have appealed this decision,
the appellate court has heard our appeal and we are currently
awaiting the decision of the Court.
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.
As reported by us previously, Medtronic Sofamor Danek USA, Inc.
and its related entities (Medtronic), on August 18, 2008,
filed a patent infringement lawsuit against NuVasive in the
United States District Court for the Southern District of
California, alleging that certain of NuVasives products or
methods, including the XLIF procedure, infringe, or contribute
to the infringement of, twelve U.S. patents: Nos.
5,860,973; 5,772,661; 6,936,051; 6,936,050; 6,916,320;
6,945,933; 6,969,390; 6,428,542; 6,592,586 assigned or licensed
to Medtronic (Medtronic Patents). Medtronic is seeking
unspecified monetary damages and a court injunction against
future infringement by NuVasive. NuVasive has answered the
complaint denying the allegations, and filed counterclaims
seeking dismissal of Medtronics complaint and a
declaration that NuVasive has not infringed and currently does
not infringe any valid claim of the Medtronic Patents.
Additionally, NuVasive has made counterclaims against Medtronic
seeking the following relief: (i) Medtronic being
permanently enjoined from charging that NuVasive has infringed
or is infringing the Medtronic Patents; (ii) a declaration
that the Medtronic Patents are invalid; (iii) a declaration
that the 5,860,973 and 5,772,661 patents are unenforceable due
to inequitable conduct; and (iv) costs and reasonable
attorneys fees.
NuVasive filed an amended counterclaim on September 4,
2009, alleging that NuVasives U.S. Patent Nos.
7,207,949; 7,582,058; and 7,470,236 are being infringed by
Medtronics NIM-Eclipse System and accessories and Quadrant
products, and DLIF (Direct Lateral Interbody Fusion) surgical
technique. Medtronic, on June 23, 2009, filed a request for
inter partes reexamination with the Patent Office on
NuVasives U.S. Patent No. 7,207,949. On
October 14, 2009, Medtronic filed a request for inter
partes reexamination on NuVasives U.S. Patent
No. 7,582,058. The Patent Office granted both requests and
issued rejections of the claims. Both reexaminations are pending.
Given the number of patents asserted in the litigation, the
parties agreed to proceed on a limited number of patents. The
court determined to proceed only with patents that are not the
subject of active reexamination proceedings. As a result, the
initial phase of the case includes three Medtronic patents and
one NuVasive patent. This initial phase of the case is in a
discovery phase. A full schedule for the initial phase of the
lawsuit, including a trial date for the patents included in the
initial phase of the lawsuit, has not yet been set by the Court.
On September 25, 2009, Neurovision Medical Products, Inc.
(NMP) filed suit against NuVasive in the U.S. District
Court for the Central District of California (Case
No. 2:09-cv-06988-R-JEM)
alleging trademark infringement and unfair competition. NMP is
seeking cancellation of NuVasives NeuroVision
trademark registrations, injunctive relief and damages based on
NMPs valuation of the NeuroVision mark.
NuVasive intends to vigorously pursue defense of the claims, and
on November 23, 2009, denied the allegations in the
NMPs complaint and filed a counterclaim against NMP for
unfair competition and declaratory relief. The case is pending
in the United States District Court and is in the early stages
of the proceedings. An order establishing a schedule for the
case is expected in the middle of 2010.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
No matter was submitted to a vote of our security holders during
the quarter ended December 31, 2009.
31
PART II
|
|
Item 5.
|
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
Common
Stock Market Price
Our common stock is traded on the NASDAQ Global Select Market
under the symbol NUVA. The following table presents,
for the periods indicated, the high and low sale prices per
share of our common stock during the periods indicated, as
reported on NASDAQ.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
2008:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
43.85
|
|
|
$
|
31.17
|
|
Second Quarter
|
|
|
46.06
|
|
|
|
34.48
|
|
Third Quarter
|
|
|
58.88
|
|
|
|
42.88
|
|
Fourth Quarter
|
|
|
51.17
|
|
|
|
29.27
|
|
2009:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
39.95
|
|
|
$
|
24.17
|
|
Second Quarter
|
|
|
45.06
|
|
|
|
28.39
|
|
Third Quarter
|
|
|
45.01
|
|
|
|
38.25
|
|
Fourth Quarter
|
|
|
44.08
|
|
|
|
27.45
|
|
We had approximately 146 stockholders of record as of
January 31, 2010. We believe that the number of beneficial
owners is substantially greater than the number of record
holders because a large portion of our common stock is held of
record through brokerage firms in street name.
Recent
Sales of Unregistered Securities
During the fiscal year ended December 31, 2009, we did not
issue any securities that were not registered under the
Securities Act of 1933, except as disclosed in previous filings
with the Commission.
Dividend
Policy
We have never declared or paid any cash dividends on our capital
stock. We currently intend to retain future earnings, if any,
for development of our business and do not anticipate that we
will declare or pay cash dividends on our capital stock in the
foreseeable future.
32
PERFORMANCE
GRAPH
The following graph compares the cumulative total stockholder
return data (through December 31, 2009) for the
Companys common stock since May 13, 2004 (the date on
which the Companys common stock was first registered under
Section 12 of the Exchange Act) to the cumulative return
over such period of (i) The NASDAQ Stock Market Composite
Index, and (ii) NASDAQ Medical Equipment Index. The graph
assumes that $100 was invested on the date on which the Company
completed the initial public offering of its common stock, in
the common stock and in each of the comparative indices. The
graph further assumes that such amount was initially invested in
the Common Stock of the Company at the price to which such stock
was first offered to the public by the Company on the date of
its initial public offering. The stock price performance on the
following graph is not necessarily indicative of future stock
price performance.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG NUVASIVE, INC.,
THE NASDAQ COMPOSITE INDEX
AND THE NASDAQ MEDICAL EQUIPMENT INDEX
* $100 invested on 12/31/04 in stock or index, including
reinvestment of dividends.
Fiscal year ending December 31.
33
|
|
Item 6.
|
Selected
Financial Data.
|
The selected consolidated financial data set forth in the table
below has been derived from our audited financial statements.
The data set forth below should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our audited
financial statements and notes thereto appearing elsewhere in
this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
370,340
|
|
|
$
|
250,082
|
|
|
$
|
154,290
|
|
|
$
|
98,091
|
|
|
$
|
62,606
|
|
Gross profit (1)(2)
|
|
|
309,230
|
|
|
|
211,074
|
|
|
|
130,522
|
|
|
|
81,954
|
|
|
|
52,053
|
|
Total operating expenses (1)(2)
|
|
|
297,913
|
|
|
|
238,934
|
|
|
|
147,774
|
|
|
|
136,180
|
|
|
|
83,547
|
|
Consolidated net income (loss) (3)
|
|
|
4,437
|
|
|
|
(27,528
|
)
|
|
|
(11,265
|
)
|
|
|
(47,910
|
)
|
|
|
(30,339
|
)
|
Net income (loss) attributable to NuVasive, Inc.
|
|
|
5,808
|
|
|
|
(27,528
|
)
|
|
|
(11,265
|
)
|
|
|
(47,910
|
)
|
|
|
(30,339
|
)
|
Net income (loss) per share attributable to NuVasive, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(1.24
|
)
|
Diluted
|
|
$
|
0.15
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(1.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
204,660
|
|
|
$
|
223,361
|
|
|
$
|
89,698
|
|
|
$
|
117,402
|
|
|
$
|
19,490
|
|
Working capital
|
|
|
262,355
|
|
|
|
256,491
|
|
|
|
118,188
|
|
|
|
136,236
|
|
|
|
32,829
|
|
Total assets
|
|
|
653,764
|
|
|
|
487,406
|
|
|
|
225,687
|
|
|
|
196,184
|
|
|
|
71,490
|
|
Convertible senior notes
|
|
|
230,000
|
|
|
|
230,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
59,166
|
|
|
|
24,288
|
|
|
|
1,119
|
|
|
|
1,399
|
|
|
|
1,665
|
|
Noncontrolling interests
|
|
|
13,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
296,222
|
|
|
|
187,631
|
|
|
|
196,578
|
|
|
|
176,303
|
|
|
|
58,136
|
|
|
|
|
(1)
|
|
Expenses incurred for royalties have been reclassified from
sales, marketing and administrative expense to cost of goods
sold. Royalty expense was $8.7 million, $6.5 million,
$5.2 million, $3.0 million and $1.2 million for
the years ended December 31, 2009, 2008, 2007, 2006 and
2005, respectively.
|
|
(2)
|
|
Expenses incurred for depreciation of loaned instrument sets
have been reclassified from cost of goods sold to sales,
marketing and administrative expense. Depreciation expense for
loaned instrument sets was $18.2 million,
$11.8 million, $8.8 million, $5.9 million and
$3.0 million for the years ended December 31, 2009,
2008, 2007, 2006 and 2005, respectively.
|
|
(3)
|
|
Consolidated net income (loss) for the year ended
December 31, 2009 includes the results of Progentix
Orthobiology, B.V., a variable interest entity which is
consolidated pursuant to existing guidance issued by the
Financial Accounting Standards Board (FASB).
|
34
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Forward-Looking
Statements May Prove Inaccurate
You should read the following discussion and analysis of our
financial condition and results of operations in conjunction
with the consolidated financial statements and the notes to
those statements included in this report. This discussion and
analysis 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.
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 $5.1 billion in the United States in
2010. Our principal product offering includes a minimally
disruptive surgical platform called Maximum Access Surgery, or
MAS
®
,
as well as a growing offering of biologics, cervical and motion
preservation products. In the spine surgery market, our
currently-marketed products are primarily used to enable access
to the spine and to perform restorative and fusion procedures.
We focus significant research and development efforts to expand
our MAS product platform, advance the applications of our unique
technology to additional procedures and develop motion
preserving products such as our total disc replacement products.
We dedicate significant resources to our sales and marketing
efforts, including training spine surgeons on our unique
technology and products. Currently, we are training
approximately 400 to 500 surgeons annually, which includes
surgeons new to our MAS product platform as well as surgeons
previously trained on our MAS product platform who are attending
advanced training programs.
Our MAS platform combines four 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;
|
|
|
|
Biologics includes our
FormaGraft
®
and
Osteocel
®
line of products; and
|
|
|
|
Specialized implants includes our
SpheRx
®
and
Armada
tm
pedicle screw systems,
CoRoent
®
suite of implants, and several fixation systems.
|
Our MAS platform, with the unique advantages provided by
NeuroVision, enables an 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 patients body, rather than from the front
or back. Our MaXcess instruments provide access to the spine in
a manner that affords direct visibility and our NeuroVision
system allows surgeons to avoid critical nerves. Certain
insurance providers have stated a policy of not providing
reimbursement for the XLIF procedure. NuVasive cannot offer
definitive time frames nor final outcomes regarding reversal of
the non-coverage policies, as the process is dictated by
third-party insurance providers. To date, these policies have
not materially impacted our operating results.
In recent years, we have significantly expanded our product
offering relating to procedures in the cervical spine as well as
in the area of biologics. Our cervical product offering now
provides a full set of solutions for cervical fusion surgery,
including both allograft and CoRoent implants, as well as
cervical plating and posterior fixation products. In 2009, we
acquired
Cervitech
®
Inc. (Cervitech), a company focused on clinical approval of the
PCM cervical disc system, a motion preserving total disc
replacement device. This strategic acquisition allows us the
potential to accelerate our entry into the growing mechanical
cervical disc replacement market. Currently, the PCM
investigational device has reached the two-year
follow-up
end point in its FDA-approved clinical trial in the United
States. Approval, if obtained, will further strengthen our
cervical product offering and will enable us to continue our
trend of increasing our market share. Our biologic offering
includes FormaGraft, a collagen synthetic product used to aid
the fusion process, and Osteocel, an allograft cellular matrix
containing viable mesenchymal stem cells, or MSCs, to aid in
spinal fusion.
35
In 2009 we purchased forty percent (40%) of the capital stock of
Progentix Orthobiology, B.V. (Progentix), a company organized
under the laws of the Netherlands, from existing shareholders
for $10 million in cash (the Initial Investment). Progentix
has as its objective the development and exploitation of
knowledge and products in the field of bone defects and the
recovery of bone tissue in general. Progentix wishes to further
extend the existing knowledge and patent position in the field
of Osteoinductive Bone Graft Material Technology.
We have an active product development pipeline focused on
expanding our current fusion product platform as well as
products designed to preserve spinal motion.
At December 31, 2009, we had an accumulated deficit of
$189.7 million.
Revenues.
The majority of our revenues are
derived from the sale of disposables and implants and we expect
this trend to continue in the near term. We loan our NeuroVision
systems and 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. Our implants and disposables are currently sold
and shipped from our primary distribution and warehousing
operations facility located in Memphis, Tennessee. We recognize
revenue for disposables or implants used upon receiving
acknowledgement of a purchase order from the hospital indicating
product use or implantation. In addition, we sell an immaterial
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 2009,
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 sell our products in the
United States through a sales force comprised of exclusive
independent sales agents and our own directly employed sales
professionals; both selling only NuVasive spine surgery
products. 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.
Beginning late in 2007 and continuing today, we are continuing
our expansion of international sales efforts with the focus on
both European and Asian markets. Our international sales force
is made up of a combination of independent distributors and
direct sales personnel.
Critical
Accounting Policies
Our discussion and analysis of our financial condition and
results of operations is based upon our audited 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, valuation of goodwill,
intangibles and other long-term assets, income taxes, and stock
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 acknowledgement of a purchase
order from the hospital indicating product use or implantation
or upon shipment to third
36
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 and Sales Return
Reserve.
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 and in the economy in general. As
a result of this review, the allowance is adjusted on a specific
identification basis. An increase to the allowance for doubtful
accounts results in a corresponding charge to sales, marketing
and administrative expense. We maintain a relatively large
customer base that mitigates the risk of concentration with any
one particular 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 accurately reflect our
customers future failure to pay outstanding receivables,
significant additional allowances could be required.
In addition, we establish a reserve for estimated sales returns
that is recorded as a reduction to revenue. This reserve is
maintained to account for future return of products sold in the
current period. This reserve is reviewed quarterly and is
estimated based on an analysis of our historical experience
related to product returns.
Excess and Obsolete Inventory.
We provide 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 products have shelf lives ranging from two to four
years and are subject to demand fluctuations based on the
availability and demand for alternative products. Our 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 charge to cost of goods sold.
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 sale or to the end of their anticipated useful
lives. If we introduce new products or next-generation products,
we may be required to dispose of existing inventory prior to the
end of their estimated useful life
and/or
write
off the value or accelerate the depreciation of the capital
instruments.
Accounting for Income Taxes.
Significant
management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and the
valuation allowance recorded against our net deferred tax
assets. Deferred tax assets and liabilities are determined using
the enacted tax rates in effect for the years in which those tax
assets are expected to be realized. A valuation allowance is
established when it is more likely than not the future
realization of all or some of the deferred tax assets will not
be achieved. The evaluation of the need for a valuation
allowance is performed on a
jurisdiction-by-jurisdiction
basis, and includes a review of all available positive and
negative evidence. Factors reviewed include projections of
pre-tax book income for the foreseeable future, determination of
cumulative pre-tax book income after permanent differences,
history of earnings, and reliability of forecasting. At
December 31, 2009, we have maintained a valuation allowance
equal to substantially all of the U.S. deferred tax assets
as we concluded we are not able to meet the more likely
than not future realization threshold required.
At December 31, 2009, we have federal and state net
operating loss carryforwards of approximately
$115.0 million and $74.0 million, respectively. The
federal and state loss carryforwards begin to expire in 2017 and
in the year prescribed by state statute, respectively, unless
previously utilized. At December 31, 2009, we have federal
and state research and development tax credit carryforwards of
$2.2 million and $2.1 million, respectively. The
federal research and development tax credits begin to expire in
2017 unless previously utilized and the state tax credits carry
forward indefinitely.
Valuation of Stock-Based Compensation.
The
estimated fair value of share-based awards exchanged for
shareowner (employee) and non-employee director services are
expensed over the requisite service period. Option
37
awards issued to non-employees (excluding non-employee
directors) are recorded at their fair value as determined in
accordance with authoritative guidance
,
and are
periodically revalued as the options vest and are recognized as
expense over the related service period.
For purposes of calculating stock-based compensation, we
estimate the fair value of stock options and shares issued under
the Employee Stock Purchase Plan using a Black-Scholes
option-pricing model. The determination of the fair value of
share-based payment awards utilizing the Black-Scholes model is
affected by our stock price and a number of assumptions,
including expected volatility, expected life, risk-free interest
rate and expected dividends. The expected volatility is based on
the historical volatility of our common stock over the most
recent period commensurate with the estimated expected term of
the stock options. The expected life of the stock options is
based on historical and other economic data trended into the
future. The risk-free interest rate assumption is based on
observed interest rates appropriate for the expected terms of
our stock options. The dividend yield assumption is based on our
history and expectation of no dividend payouts.
If factors change and we employ different assumptions,
stock-based compensation expense may differ significantly from
what we have recorded in the past. If there is a difference
between the assumptions used in determining stock-based
compensation expense 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 for future grants. These changes, if any, may
materially impact our results of operations in the period such
changes are made.
Valuation of Goodwill and Intangible
Assets.
Our goodwill represents the excess of the
cost over the fair value of net assets acquired from our
business combinations. Our intangible assets are comprised
primarily of acquired technology, in-process research and
development, manufacturing know-how, licensed technology, supply
agreements and trade names and trademarks. We make significant
judgments in relation to the valuation of goodwill and
intangible assets resulting from business combinations and asset
acquisitions.
The determination of the value of goodwill and intangible assets
arising from business combinations and asset acquisitions
requires extensive use of accounting estimates and judgments to
allocate the purchase price to the fair value of the net
tangible and intangible assets acquired, including in-process
research and development (IPR&D). Goodwill and IPR&D
are not amortized. The value and useful lives assigned to other
acquired intangible assets impact future amortization.
Authoritative guidance requires that goodwill and intangible
assets with indefinite lives be assessed for impairment using
fair value measurement techniques on an annual basis or more
frequently if facts and circumstance warrant such a review. For
purposes of assessing the impairment of goodwill and intangible
assets with indefinite lives, the Company estimates the value of
the reporting unit using its market capitalization as the best
evidence of fair value. If the carrying amount of a reporting
unit exceeds its fair value, then a goodwill impairment test is
performed to measure the amount of the impairment loss, if any.
We performed our annual test of goodwill during the fourth
quarter of 2009, and have determined there has been no
impairment of goodwill or intangible assets with indefinite
lives through December 31, 2009.
We evaluate our intangible assets with finite lives for
indications of impairment whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Intangible assets consist of purchased technology,
trademarks and trade names, customer relationships and
agreements, manufacturing know-how and other intangibles and are
amortized on a straight-line basis over their estimated useful
lives of two to 20 years. Factors that could trigger an
impairment review include significant under-performance relative
to expected historical or projected future operating results,
significant changes in the manner of our use of the acquired
assets or the strategy for our overall business or significant
negative industry or economic trends. If this evaluation
indicates that the value of the intangible 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 intangible asset is not
recoverable, based on the estimated undiscounted future cash
flows of the technology over the remaining amortization period,
we reduce the net carrying value of the related intangible asset
to fair value and may adjust the remaining amortization period.
Any such impairment charge could be significant and could have a
material adverse effect on our reported financial results. We
have not recognized any impairment charges on our intangible
assets through December 31, 2009.
38
Property and Equipment.
Property and equipment
is carried at cost less accumulated depreciation. Depreciation
is computed using the straight-line method based on estimated
useful lives. We depreciate the instrument sets that we loan to
or place with hospitals over an estimated useful life of three
years. If we introduce new products or next-generation products,
we may be required to dispose of loaned instrument sets prior to
the end of their estimated useful life
and/or
write
off the value or accelerate the depreciation of the these
assets. Maintenance and repairs on all property and equipment
are expensed as incurred.
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 GAAP. See our consolidated financial statements and notes
thereto included in this report, which contain accounting
policies and other disclosures required by GAAP.
Results
of Operations
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Revenue
|
|
$
|
370,340
|
|
|
$
|
250,082
|
|
|
$
|
154,290
|
|
|
$
|
120,258
|
|
|
|
48
|
%
|
|
$
|
95,792
|
|
|
|
62
|
%
|
Revenues have increased over time due primarily to continued
market acceptance of our products within our MAS platform,
including NeuroVision and MaXcess disposables, and our
specialized implants such as our
XLP
tm
lateral plate,
SpheRx
®
pedicle screw systems, and
CoRoent
®
suite of products. The continued adoption of minimally invasive
procedures for spine has 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 patients 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 has contributed to revenue growth in each year. We
expect revenue to continue to increase, which can be 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, including
Osteocel, acquired in July 2008, other strategic business and
asset acquisitions and new product introductions are expected to
lead to continued revenue growth.
Cost
of Goods Sold, excludes amortization of purchased
technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Cost of Goods Sold
|
|
$
|
61,110
|
|
|
$
|
39,008
|
|
|
$
|
23,768
|
|
|
$
|
22,102
|
|
|
|
57
|
%
|
|
$
|
15,240
|
|
|
|
64
|
%
|
% of total revenue
|
|
|
17
|
%
|
|
|
16
|
%
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold consists of costs of purchased goods and
royalty expense.
Cost of goods sold as a percentage of revenue increased slightly
in 2009 over 2008, primarily driven by the mix shift in total
revenues represented by our biologic product line that have a
lower margin relative to other product lines. The increase in
cost of goods sold in total dollars in 2009 compared to 2008 and
in 2008 compared to 2007 resulted primarily from increased
material costs of $19.9 million and $13.9 million,
respectively, associated with higher revenues in each year. We
expect cost of goods sold, as a percentage of revenue, to remain
relatively consistent for the foreseeable future.
Consistent with our philosophy of continual product innovation
and obsoleting our own products, we have launched several new
products and enhancements over the last few years. In connection
with the product launches, certain implants were rendered
obsolete. As a result, we incurred additional expenses of
$873,000, $119,000 and $461,000 in 2009, 2008 and 2007,
respectively, related to inventory rendered obsolete. This
expense is included in cost of goods sold in the accompanying
consolidated statement of operations for the respective years.
39
Operating
Expenses
Sales,
Marketing and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Sales, Marketing and Administrative
|
|
$
|
254,997
|
|
|
$
|
189,126
|
|
|
$
|
121,676
|
|
|
$
|
65,871
|
|
|
|
35
|
%
|
|
$
|
67,450
|
|
|
|
55
|
%
|
% of total revenue
|
|
|
69
|
%
|
|
|
76
|
%
|
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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; depreciation expense for loaned
instrument sets used in surgeries; shipping costs; surgeon
training costs; shareowner (employee) related expenses for our
administrative functions; and third-party professional service
fees.
The increases in sales, marketing and administrative expenses
principally result from growth in our revenue and the overall
growth of 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 other direct costs related to the sales force,
and shipping costs were $31.2 million, $17.1 million,
and $10.5 million in 2009, 2008 and 2007, respectively,
compared to the prior years. The increases are consistent with
our increased revenue growth of approximately 48% in 2009 as
compared to 2008 and 62% percent in 2008 as compared to 2007;
and an overall increase in sales force headcount of
approximately 42% in 2009 compared to 2008 and 26% in 2008 as
compared to 2007. Total costs related to our sales force, as a
percent of revenue, were 30.0%, 31.3%, and 33.4% in 2009, 2008,
and 2007, respectively.
We also experienced increased costs as a result of overall
company growth and headcount additions in our marketing and
administrative support functions. Our marketing and
administrative headcount increased over 35% during 2009.
Marketing and administrative compensation and personnel costs
increased $17.5 million and $19.6 million in 2009 and
2008, respectively, compared to the prior years. Depreciation
expense related to our loaned instrument sets increased
$6.4 million and $3.0 million in 2009 and 2008,
respectively, as compared to previous years, due to higher
capital levels of instrument sets used in surgeries. Equipment
and computer expenses increased by $3.1 million and
$2.1 million in 2009 and 2008, respectively, compared to
the same periods in prior years, primarily as a result of
headcount growth and increased costs to support the increasing
number of shareowners (employees). Stock-based compensation
increased $1.7 million and $6.4 million in 2009 and
2008, respectively, compared to the prior years. The increase in
2009 as compared to 2008 and 2008 as compared to 2007 is
primarily related to an increase in the number of option grants
due to increased headcount year over year for all years
presented and valuation-related changes for all options granted,
most significantly, the market value of our common stock.
During the first quarter of 2009, we adopted the Financial
Accounting Standard Boards (FASB) revised authoritative
guidance for business combinations, which requires that
acquisition related costs be expensed in the period in which the
costs are incurred. This differs from previous accounting
treatment in that the acquisition related expenses were included
as part of the purchase price of the acquired company. We
incurred approximately $2.4 million in acquisition related
costs in connection with our investment in Progentix and
acquisition of Cervitech in 2009 with no comparable expense
during the same periods in 2008 or 2007.
As previously disclosed, in 2008, Medtronic Sofamor Danek USA,
Inc. and its related entities (Medtronic) filed an intellectual
property suit against us. As a result of the litigation, our
sales, marketing and administrative expenses increased
$3.1 million and $1.5 million during 2009 and 2008,
respectively.
The increases in costs discussed above were offset by decreases
in costs for 2009 compared to the same period in 2008, related
to charges totaling $7.4 million for vacating the
Companys previous corporate headquarters and incremental
transition costs related to our ERP system which were recorded
in 2008. In August 2008, we relocated our corporate headquarters
to a two-building campus style complex in San Diego. In
connection with vacating our former corporate headquarters, we
recorded a charge of approximately $4.8 million to sales,
marketing, and
40
administrative expenses for lease termination costs and other
related items. In addition, during 2008, we incurred
non-capitalizable expenses totaling $2.6 million related to
the implementation of our new ERP system which was completed in
the third quarter of 2008. During the third quarter of 2009, due
to continued growth, we decided to reoccupy the former corporate
headquarters facility. Accordingly, in 2009, the remaining
liability related to lease termination costs of
$2.0 million was reversed and is recorded as a reduction of
sales, marketing, and administrative expenses for the year ended
December 31, 2009.
On a long-term basis, as a percentage of revenue, we expect
total sales, marketing and administrative costs to continue to
decrease over time.
Research
and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Research and Development
|
|
$
|
37,581
|
|
|
$
|
25,943
|
|
|
$
|
24,581
|
|
|
$
|
11,638
|
|
|
|
45
|
%
|
|
$
|
1,362
|
|
|
|
6
|
%
|
% of total revenue
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expense consists primarily of product
research and development, clinical trial and study costs,
regulatory and clinical functions, and shareowner (employee)
related expenses.
In the last several years, we have introduced numerous new
products and product enhancements that have significantly
expanded our MAS platform, enhanced the applications of the XLIF
procedure, expanded our offering of cervical products, and
marked our entrance into the growing motion preservation market.
We have also acquired complementary and strategic assets and
technology, particularly in the area of biologics. We are
developing proprietary total disc replacement devices for
lateral lumbar spine applications and separately for cervical
spine applications, which are currently in different phases of
clinical trials and related studies. We anticipate continuing to
incur costs related to such clinical trials and studies through
at least 2011.
The increases in research and development costs in 2009 compared
to 2008 and in 2008 compared to 2007 are primarily due to
increases in compensation and other shareowner related expenses
of $5.3 million and $3.1 million in 2009 and 2008,
respectively, primarily due to increased headcount to support
our product development and enhancement efforts, including an
increase in stock based compensation of $1.1 million in
2009 as compared to 2008, and increased expenses related to
ongoing clinical trial and other research activities of
$4.0 million in 2009 as compared to 2008, including
$2.4 million in research expenses related to our investment
in Progentix Orthobiology. These increases are offset by
decreased clinical trial and related study costs of
$0.6 million in 2008 compared to 2007 due in part to the
NeoDisc
®
trial becoming fully enrolled during August 2008, with no
comparable costs for NeoDisc in 2009.
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.
Amortization
of Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Amortization of intangible assets
|
|
$
|
5,335
|
|
|
$
|
2,989
|
|
|
$
|
1,517
|
|
|
$
|
2,346
|
|
|
|
79
|
%
|
|
$
|
1,472
|
|
|
|
97
|
%
|
% of total revenue
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets relates to amortization of
finite-lived intangible assets acquired. The increase in
amortization expense in 2009 compared to 2008 and in 2008
compared to 2007 is due to the increased acquisition activity
undertaken in 2008 and 2009.
We expect expenses recorded in connection with the amortization
of intangible assets to continue to increase in absolute dollars
for the foreseeable future as amortization of acquired
in-process research and development commences upon it reaching
technological feasibility.
41
In-Process
Research and Development
During 2008, we recorded in-process research and development
(IPR&D) charges of $20.9 million related to the
acquisitions of pedicle screw technology and Osteocel. As of the
date of the acquisitions, the projects associated with the
IPR&D 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 dates in accordance with the authoritative
guidance in effect on the dates of acquisition.
During the first quarter of 2009, we adopted the FASBs
revised authoritative guidance for business combinations, which
is applied prospectively for all new business acquisitions
entered into after January 1, 2009 and provides that
IPR&D acquired is no longer charged to expense on the
acquisition date, but rather recorded as an asset on the balance
sheet. Amounts recorded as IPR&D beginning after
January 1, 2009, will begin being amortized upon first
sales of the product over the estimated useful life of the
technology. As of December 31, 2009, we have recorded
approximately $46.0 million on our balance sheet related to
IPR&D in conjunction with our investment in Progentix and
acquisition of Cervitech as further development is required and
regulatory approval has not been obtained. In accordance with
authoritative guidance, as the technology has not yet been
proven, the amortization of the acquired IPR&D has not
begun. Currently, the PCM investigational device acquired from
Cervitech, which represents approximately $34.8 million of
the $46.0 million total capitalized IPR&D, has reached
the two-year
follow-up
end point in its FDA approved clinical trial in the United
States. We anticipate submitting for FDA approval in the first
quarter of 2010.
Interest
and Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Interest income
|
|
$
|
1,507
|
|
|
$
|
5,599
|
|
|
$
|
5,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(7,116
|
)
|
|
|
(5,571
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
461
|
|
|
|
304
|
|
|
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income (expense), net
|
|
$
|
(5,148
|
)
|
|
$
|
332
|
|
|
$
|
5,987
|
|
|
$
|
(5,480
|
)
|
|
|
(1651
|
)%
|
|
$
|
(5,655
|
)
|
|
|
(94
|
)%
|
% of total revenue
|
|
|
(1
|
)%
|
|
|
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income (expense), net, consists primarily of
interest income earned on marketable securities offset by
interest expense incurred related to the Companys
convertible debt financing signed in March 2008. The net change
in these amounts in the years presented is principally due to
(i) an increase in interest expense of $1.3 million
and $5.4 million in 2009 and 2008, respectively, related to
the convertible debt offering due to having a full year of
interest expense in the 2009 period as compared to only a
partial year during the same 2008 period; and (ii) lower
average balances in marketable securities in 2009, coupled with
lower interest rates, resulting in a decrease of
$4.1 million in interest income in 2009 as compared to 2008.
Stock-Based
Compensation
The compensation expense that has been included in the statement
of operations for all share-based compensation arrangements was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008 to 2009
|
|
|
2007 to 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(Dollars in thousands)
|
|
|
Stock-Based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, Marketing & Administrative
|
|
$
|
19,549
|
|
|
$
|
17,837
|
|
|
$
|
11,404
|
|
|
$
|
1,712
|
|
|
|
10
|
%
|
|
$
|
6,433
|
|
|
|
56
|
%
|
Research & Development
|
|
|
4,244
|
|
|
|
3,110
|
|
|
|
2,217
|
|
|
|
1,134
|
|
|
|
37
|
%
|
|
|
893
|
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stock-Based Compensation
|
|
$
|
23,793
|
|
|
$
|
20,947
|
|
|
$
|
13,621
|
|
|
$
|
2,846
|
|
|
|
14
|
%
|
|
$
|
7,326
|
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of total revenue
|
|
|
6
|
%
|
|
|
8
|
%
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Stock-based compensation related to stock options is recognized
and amortized on an accelerated basis in accordance with
authoritative guidance. The increase in stock-based compensation
in 2009 of approximately $2.8 million as compared to 2008
and $7.3 million in 2008 as compared 2007, can be
attributed to an increase in number of option grants due to
increased headcount year over year for all years presented and
changes in valuation assumptions utilized in the Black-Scholes
option pricing model, most significantly, the market value of
our common stock. In addition, during 2009, we began granting
restricted stock units (RSUs) which tend to have higher
associated stock-based compensation expense as they are valued
at the full market price on the day of grant.
As of December 31, 2009, there was $13.5 million and
$6.1 million of unrecognized compensation expense for stock
options and RSUs, respectively, which is expected to be
recognized over a weighted-average period of approximately
1.1 years and 3.3 years, respectively. In addition, as
of December 31, 2009, there was $2.4 million of
unrecognized compensation expense for shares expected to be
issued under the Employee Stock Purchase Plan which is expected
to be recognized through October 2011.
Business
Combinations and Asset Acquisitions
Investment in Progentix Orthobiology, B.V.
On
January 13, 2009, we completed the purchase of forty
percent (40%) of the capital stock of Progentix Orthobiology,
B.V., a company organized under the laws of the Netherlands
(Progentix), from existing shareholders (the Progentix
Shareholders) pursuant to a Preferred Stock Purchase Agreement.
NuVasive, Progentix and the Progentix Shareholders also entered
into an Option Purchase Agreement dated January 13, 2009
(the Option Agreement), whereby (i) the Progentix
Shareholders have two separate rights, upon the achievement of
pre-defined development milestones by Progentix or sales
milestones by us, to cause us to purchase the remaining sixty
percent (60%) of capital stock of Progentix (Remaining Shares)
at pre-defined prices (the Put Options), and (ii)we have the
right, upon the occurrence of pre-defined events, to purchase
the remaining sixty percent (60%) of capital stock of Progentix
(the Call Option). We also entered into a Distribution Agreement
with Progentix dated January 13, 2009, whereby Progentix
appointed us as its exclusive distributor for certain Progentix
products.
In accordance with authoritative guidance issued by the FASB, we
determined that Progentix is a variable interest entity (VIE)
and that we are the primary beneficiary. Accordingly, the
financial position and results of operations of Progentix have
been included in the consolidated financial statements from the
date of the initial investment. The equity interests in
Progentix not owned by us are reported as noncontrolling
interests on our consolidated balance sheet. Losses incurred by
Progentix are charged to us and to the noncontrolling interest
holders based on their ownership percentage. The Remaining
Shares and the Option Agreement that was entered into between
us, Progentix and the Progentix Shareholders are not considered
to be freestanding financial instruments as defined by
authoritative guidance. Therefore the Remaining Shares and the
Option Agreement are accounted for as a combined unit in the
consolidated financial statements as a redeemable noncontrolling
interest that was initially recorded at fair value and
classified as mezzanine equity.
On December 30, 2009, we entered into an amendment (the
Amendment) to the Option Agreement and the Distribution
Agreement with Progentix and the Progentix Shareholders in
connection with the execution of an exclusive supply agreement
between us and Ceremed, Inc. The Amendment, among other things,
extends by five months the period of time allotted for the
achievement of each of the milestones required to trigger the
Put Options, reduces the transfer price paid to Progentix by us
for the supply of product, and also reduces by up to
$14 million the purchase price to be paid by us upon
execution of either of the Put Options or the Call Option. As
the Remaining Shares and the Option Agreement are accounted for
as a combined unit in the consolidated financial statements, the
Amendment resulted in the retirement of the noncontrolling
equity interests originally recorded in January 2009, and in
accordance with authoritative guidance, the noncontrolling
equity interests were recorded at fair value as of
December 30, 2009, the date of the Amendment. The fair
value of the equity interests issued on December 30, 2009
approximated the carrying value of the noncontrolling equity
interests on that date.
Acquisition of
Cervitech
®
Inc.
In May 2009, we purchased
Cervitech
®
Inc., (Cervitech), a New Jersey based company focused on
clinical approval of the
PCM
®
cervical disc system, a motion preserving total disc replacement
device, for an estimated purchase price of approximately
$79 million, consisting of cash totaling approximately
$25 million and the issuance of 638,261 shares of
NuVasive common stock to certain stockholders of Cervitech and
43
$29.7 million of contingent consideration due upon FDA
approval of the PCM device. Of the estimated total purchase
price of $79 million, $34.8 million and
$55.8 million was allocated to in-process research and
development and goodwill, respectively, based on
managements valuation of the fair value of the assets
acquired and liabilities assumed on the date of acquisition.
This strategic acquisition allows us the potential to accelerate
our entry into the growing mechanical cervical disc replacement
market. Currently, the PCM investigational device has reached
the two-year
follow-up
end point in its FDA approved clinical trial in the United
States. We anticipate submitting for FDA approval in the first
quarter of 2010. Approval, if obtained, will further strengthen
our cervical product offering and will enable us to continue our
trend of increasing our market share.
Acquisition of
Osteocel
®
Biologics Business.
In July 2008, we completed
the acquisition of certain assets of Osiris Therapeutics, Inc.
(the Osteocel Biologics Business Acquisition). The transaction
provides us with a comprehensive stem cell biologic platform
with benefits similar to autograft, as well as rights to acquire
the next generation cultured version of the product. Osteocel is
a unique bone matrix product that provides the three beneficial
properties similar to autograft: osteoconduction (provides a
scaffold for bone growth), osteoinduction (bone formation
stimulation) and osteogenesis (bone production). Osteocel allows
surgeons to offer the benefits of these properties to patients
without the discomfort and potential complications of autograft
harvesting, in addition to eliminating the time spent on a
secondary surgical procedure. Osteocel is produced for use in
spinal applications through a proprietary processing method that
preserves the native stem cell population that resides in marrow
rich bone. The acquisition is consistent with our objective of
developing or acquiring innovative technologies. Of the total
purchase price of $85 million, $35 million was paid to
Osiris at closing (the Initial Purchase Price) and additional
payments of $45 million were made in 2009. Of the total
purchase price, $16.7 million was allocated to in-process
research and development, and recorded in expense in 2008, as
the associated projects had not yet reached technological
feasibility and had no alternative future uses.
Acquisition of Pedicle Screw Technology.
In
March 2008, we 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, and recorded as expense
in 2008, as the associated projects had not yet reached
technological feasibility and had no alternative future uses.
Radius Medical LLC.
In January 2007, we
acquired assets used by Radius Medical LLC, or 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
connection with the transaction, we made net cash payments
totaling $7.0 million and issued 451,677 unregistered
shares of our common stock, which were subsequently registered.
As part of the acquisition, we also acquired certain rights and
obligations under a supply agreement with Maxigen Biotech, Inc.
(MBI) with respect to product manufacturing and distributor
rights. MBI is a Taiwanese company that manufactures FormaGraft
and owns a portion of the core technology.
In connection with the acquisition of Radius, we made a separate
$2.0 million equity investment in MBI. In May 2007, the
equity investment in MBI was completed resulting in NuVasive
ownership of approximately 9% of MBI. We account for this
investment at cost and is included in other assets on the
consolidated balance sheets.
These transactions and their impact to our consolidated
statement of position and results of operations are fully
described in Notes 2 and 3 to the consolidated financial
statements included in this report.
Liquidity
and Capital Resources
Since our inception in 1997, we have incurred significant losses
and as of December 31, 2009, we had an accumulated deficit
of approximately $189.7 million. To date, our operations
have been funded primarily with proceeds from the sale of our
equity securities which total $297.1 million since
inception, including $210.1 million sold in the public
markets.
44
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 and can be settled only in shares of
our common stock.
Cash, cash equivalents and marketable securities was
$204.7 million at December 31, 2009 and
$223.4 million at December 31, 2008. The decrease was
due primarily to the payments of $78.9 million in
connection with purchases of property and equipment and business
acquisitions, offset by an increase in cash flows provided by
operations.
Net cash provided by operating activities was $46.4 million
in 2009 compared to cash used in operating activities of
$5.0 million in 2008. The increase in cash provided from
operating activities is from our improved operating results in
2009 as compared to 2008, as well as improved collections from
accounts receivable representing a net increase in cash of
$16.6 million in 2009 as compared to 2008. We spent an
incremental $14.4 million during 2008 as compared to 2007
for inventory to support our increased operations and growing
business and in preparation for the introduction of NeuroVision
M5, representing a significant upgrade to our core MAS platform,
which was introduced at the beginning of the fourth quarter of
2008.
Net cash used by investing activities was $127.9 million in
2009 compared to net cash used by investing activities of
$144.6 million in 2008. The decrease in net cash used by
investing activities of $16.7 million is primarily due to
the net change of $14.3 million in the activity in our
investment portfolio, the net change of $4.8 million in
cash used to fund the acquisition and investments and a
$6.9 million decrease in capital asset purchases. Included
in the $15.4 million net increase of capital expenditures
in 2008 as compared to 2007, is approximately $9.5 million
and $10.9 million of expenditures related to the new
San Diego facility and for the implementation of our new
ERP system, respectively.
Net cash provided by financing activities was $14.5 million
in 2009 compared to $220.0 million in 2008. The decrease in
cash provided by financing activities of $205.6 million is
primarily due to the receipt of net proceeds of
$208.4 million from the issuance of the Notes in March
2008, which financing was not replicated or needed in 2009.
We expect that our cash, cash equivalents and marketable
securities balance 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 instrument sets, our operating results, and
cash used in any future acquisitions. We have sufficient cash
and investments on hand to finance our operations for the
foreseeable future.
Contractual
Obligations and Commitments
Contractual obligations and commitments represent future cash
commitments and liabilities under agreements with third parties,
including our Convertible Senior Notes, operating leases and
other contractual obligations. The following summarizes our
long-term contractual obligations and commitments as of
December 31, 2009
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1 to 3 Years
|
|
|
4 to 5 Years
|
|
|
After 5 Years
|
|
|
|
|
|
|
|
|
Convertible Senior Notes(1)
|
|
$
|
18,113
|
|
|
$
|
5,175
|
|
|
$
|
12,938
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
82,214
|
|
|
|
7,214
|
|
|
|
14,316
|
|
|
|
11,000
|
|
|
|
49,684
|
|
|
|
|
|
|
|
|
|
Royalty obligations
|
|
|
1,110
|
|
|
|
180
|
|
|
|
360
|
|
|
|
360
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
Clinical advisory agreements
|
|
|
1,498
|
|
|
|
308
|
|
|
|
480
|
|
|
|
480
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
102,935
|
|
|
$
|
12,877
|
|
|
$
|
28,094
|
|
|
$
|
11,840
|
|
|
$
|
50,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Convertible Senior Notes in the above table include only the
interest payments totaling 2.25% per annum as the Convertible
Senior Notes are only convertible into the Companys common
stock and not settled using cash. See Note 7 to the
consolidated financial statements for further discussion of the
terms of the Convertible Senior Notes.
|
45
The following obligations and commitments are not included in
the table above:
In connection with the 2005 acquisition of RSB Spine LLC, we are
contingently obligated to make additional consideration payments
over a period of 12 years based upon sales of the products
derived from Smart
Plate
®
Gradient
CLP
tm
and related technology.
As a result of our acquisition of Radius Medical LLC in January
2007, we are obligated to purchase, on an annual basis, a
minimum number of units of
FormaGraft
®
from Maxigen Biotech, Inc. at an annual cost of approximately
$900,000.
In connection with the investment in Progentix, we are
contingently obligated to make additional payments of up to
$69 million based upon the achievement of specified
milestones. In addition, we are obligated to advance an
additional $2 million to Progentix in accordance with the
terms of a loan agreement entered into in conjunction with the
investment.
In connection with the acquisition of Cervitech, we are
contingently obligated to make additional payments up to
$33 million upon FDA approval of the PCM device. The
milestone payment may be made in cash or a combination of cash
and up to half in NuVasive common stock, at the Companys
discretion.
We have not included an amount related to uncertain tax benefits
or liabilities in the table above because we cannot make a
reasonably reliable estimate regarding the timing of settlements
with taxing authorities, if any. As of
December 31, 2009, the liability included in the
consolidated balance sheets related to tax uncertainties is
immaterial.
The expected timing of payments of the obligations discussed
above is estimated based on current information. Timing of
payment and actual amounts paid may be different depending on
the time of receipt of services or changes to
agreed-upon
amounts for some obligations. Amounts disclosed as contingent or
milestone-based obligations depend on the achievement of the
milestones or the occurrence of the contingent events and can
vary significantly.
Off-Balance
Sheet Arrangements
We have not engaged in any off-balance sheet activities.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
Interest Rate Sensitivity and Risk.
Our
exposure to interest rate risk at December 31, 2009 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 December 31, 2009, we do not hold any
material asset-backed investment securities and in 2009, we did
not realize any losses related to asset-backed investment
securities. Based upon our overall interest rate exposure as of
December 31, 2009, a change of 10 percent in interest
rates, assuming the amount of our investment portfolio remains
constant, would not have a material effect on interest expense.
Further, this analysis does not consider the effect of the
change in the level of the overall economic activity that could
exist in such an environment.
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. Accordingly, we have assessed that we do not
have any material exposure to foreign currency rate fluctuations.
Our exposure to market risk for changes in interest rates
relates primarily to our investment portfolio. The primary
objective of our investment activities is to preserve the
principal while at the same time maximizing yields without
significantly increasing the risk. To achieve this objective, we
maintain our portfolio of cash equivalents and investments in
instruments that meet high credit quality standards, as
specified in our investment policy. None of our investments are
held for trading purposes. Our policy also limits the amount of
credit exposure to any one issue, issuer and type of instrument.
46
The following table presents the carrying value and related
weighted-average rate of return for our investment portfolio as
of December 31, 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Carrying Value
|
|
|
Rate of Return
|
|
|
Money market funds
|
|
$
|
41,423
|
|
|
|
0.5
|
%
|
Certificates of deposit
|
|
|
1,973
|
|
|
|
1.1
|
%
|
Corporate notes
|
|
|
4,959
|
|
|
|
1.1
|
%
|
U.S. government treasury securities
|
|
|
27,983
|
|
|
|
0.2
|
%
|
Securities of government-sponsored entities
|
|
|
104,332
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
Total interest bearing instruments
|
|
$
|
180,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the stated maturities of our
investments are $99.3 million within one year and
$40.0 million from one to three years. These investments
are recorded on the balance sheet at fair market value with
unrealized gains or losses reported as a separate component of
accumulated other comprehensive income.
Market Price Sensitive Instruments.
In order
to reduce the potential equity dilution, we entered into
convertible note hedge transactions (the Hedge) entitling us to
purchase up to 5.1 million shares of our common stock at an
initial stock price of $44.74 per share, each of which is
subject to adjustment. Upon conversion of our Convertible Senior
Notes, the Hedge is expected to reduce the equity dilution if
the daily volume-weighted average price per share of our common
stock exceeds the strike price of the Hedge. We also entered
into warrant transactions with the counterparties of the Hedge
entitling them to acquire up to 5.1 million shares of our
common stock, subject to adjustment, at an initial strike price
of $49.13 per share, subject to adjustment. The warrant
transactions could have a dilutive effect on our earnings per
share to the extent that the price of our common stock during a
given measurement period (the quarter or year to date period) at
maturity of the warrants exceeds the strike price of the
warrants.
|
|
Item 8.
|
Financial
Statements and Supplementary Data.
|
The consolidated financial statements and supplementary data
required by this item are set forth at the pages indicated in
Item 15.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None
|
|
Item 9A.
|
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 SECs 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 recognized 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 was 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 Companys disclosure controls and
procedures (as such term is defined in SEC
Rules 13a 15(e) and 15d 15(e)) as
of December 31, 2009. Based on such evaluation, our
management has concluded as of December 31, 2009, the
Companys disclosure controls and procedures are effective.
47
Managements Report on Internal Control over Financial
Reporting.
Internal control over financial
reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial
Officer, and effected by our board of directors, management and
other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States.
Management has used the framework set forth in the report
entitled
Internal Control Integrated Framework
published by the Committee of Sponsoring Organizations
(COSO) of the Treadway Commission to evaluate the effectiveness
of the Companys internal control over financial reporting.
Management has concluded that the Companys internal
control over financial reporting was effective as of
December 31, 2009. Ernst & Young LLP, the
Companys independent registered public accounting firm,
has issued an attestation report on the Companys internal
control over financial reporting which is included herein.
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-K,
our Chief Executive Officer and Chief Financial Officer, with
the assistance of other members of our management, performed an
evaluation of any change in internal control over financial
reporting that occurred during our last fiscal quarter that has
materially affected, or is likely to materially affect, our
internal controls over financial reporting. There has been no
change to our internal control over financial reporting during
our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control
over financial reporting.
48
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
NuVasive, Inc.
We have audited NuVasive, Inc.s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). NuVasive,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed 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. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, NuVasive, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of NuVasive, Inc. as of
December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders equity and cash
flows for each of the three years in the period ended
December 31, 2009 of NuVasive, Inc. and our report
dated February 26, 2010 expressed an unqualified opinion
thereon.
San Diego, California
February 26, 2010
49
|
|
Item 9B.
|
Other
Information.
|
Compensatory
Arrangements with Certain Officers
Fiscal
2009 Bonus Awards
The Committee awarded the following performance bonuses, in
accordance with the metrics previously adopted by the Committee,
to the Companys named executive officers with respect to
fiscal 2009:
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
Name
|
|
Position
|
|
2009 Bonus
|
|
|
Alexis V. Lukianov
|
|
Chairman & Chief Executive Officer
|
|
$
|
900,000
|
|
Keith C. Valentine
|
|
President & Chief Operating Officer
|
|
|
550,000
|
|
Michael J. Lambert
|
|
Executive Vice President & Chief Financial Officer
|
|
|
125,000
|
|
Patrick Miles
|
|
President, Americas
|
|
|
425,000
|
|
Jeffrey Rydin
|
|
Executive Vice President, Americas Sales
|
|
|
425,000
|
|
Compensation
Agreement
On February 24, 2010, the Company entered into a
compensatory letter agreement (Compensatory Letter Agreement)
with its principal financial officer, Michael Lambert. The
agreement with Mr. Lambert supersedes all prior agreements
with him relating to compensation.
The base salary is consistent with the base salary disclosed in
the Companys
8-K
dated
January 8, 2010. The Compensatory Letter Agreement also
sets forth the target bonus and the severance benefits for
Mr. Lambert if 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
|
|
Involuntary Termination within
|
Position
|
|
More After Change of Control
|
|
12 Months of a Change of Control
|
|
Michael Lambert
Executive Vice President & CFO
|
|
100% of Compensation
|
|
150% of Compensation
|
The terms Change of Control,
Compensation, and Involuntary
Termination are defined in the Compensatory Letter
Agreement. A copy of the Compensatory Letter Agreement is
furnished as Exhibit 10.30 and is hereby incorporated
herein by reference.
Other
Events
On November 4, 2009, Alex Lukianov, our CEO and Chairman,
adopted a stock trading plan for trading in NuVasives
common stock, currently held or issuable upon the exercise of
stock options, in accordance with the guidelines specified by
the Securities and Exchange Commissions
Rule 10b5-1
under the Securities Exchange Act of 1934. Mr. Lukianov
will file Forms 4 evidencing sales under their stock
trading plan as required under Section 16 of the Securities
Exchange Act of 1934. This type of trading plan allows a
corporate insider to gradually diversify holdings of company
stock while minimizing any market effects of such trades by
spreading them out over an extended period of time and
eliminating any market concern that such trades were made by a
person while in possession of material nonpublic information.
Consistent with
Rule 10b5-1,
NuVasives insider trading policy permits personnel to
implement
Rule 10b5-1
trading plans provided that, among other things, such personnel
are not in possession of any material nonpublic information at
the time they adopt such plans. Pursuant to the stock trading
plan adopted by Mr. Lukianov, commencing in February 2010,
will sell up to 5,000 shares each month if the stock is
above a prearranged minimum price, and may sell up to 10,000
additional shares each month based on increasing price levels.
Under Mr. Lukianovs plan, the plans agent will
undertake to sell specified numbers of shares each month if the
stock trades above the prearranged minimum prices.
Mr. Lukianov will have no control over the timing of any
sales under the plan and there is no assurance that any shares
will be sold. Sales under Mr. Lukianovs plan took
effect in February 2010 and will expire in November 2010.
50
PART III
Certain information required by Part III is omitted from
this report because the Company will file a definitive proxy
statement within 120 days after the end of its fiscal year
pursuant to Regulation 14A (the Proxy
Statement) for its annual meeting of stockholders to be
held on May 25, 2010, and certain information included in
the Proxy Statement is incorporated herein by reference.
|
|
Item 10.
|
Directors
and Executive Officers and Corporate Governance.
|
We have adopted a Code of Conduct and Ethics for all officers,
directors and shareowners. The Code of Conduct and Ethics is
available on our website,
www.nuvasive.com,
and in our
filings with the Securities and Exchange Commission. We intend
to disclose future amendments to, or waivers from, provisions of
our Code of Conduct and Ethics that apply to our Principal
Executive Officer, Principal Financial Officer, Principal
Accounting Officer, or Controller, or persons performing similar
functions, within four business days of such amendment or waiver.
The other information required by this Item 10 will be set
forth in the Proxy Statement and is incorporated in this report
by reference.
|
|
Item 11.
|
Executive
Compensation.
|
The information required by this item will be set forth in the
Proxy Statement and is incorporated in this report by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
The information required by this item will be set forth in the
Proxy Statement and is incorporated in this report by reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
The information required by this item will be set forth in the
Proxy Statement and is incorporated in this report by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services.
|
The information required by this item will be set forth in the
Proxy Statement and is incorporated in this report by reference.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
(a) The following documents are filed as a part of this
report:
(1) Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2009 and 2008
Consolidated Statements of Operations for the years ended
December 31, 2009, 2008 and 2007
Consolidated Statements of Stockholders Equity for the
years ended December 31, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Schedule II Valuation Accounts
51
All other financial statement schedules have been omitted
because they are not applicable, not required or the information
required is shown in the financial statements or the notes
thereto.
(3) Exhibits. See subsection (b) below.
(b) Exhibits. The following exhibits are filed as part of
this report:
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
2.1
|
|
Asset Purchase Agreement, dated May 8, 2008, by and between
the Company and Osiris Therapeutics, Inc. (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission (the
Commission) on August 8, 2008)
|
2.2
|
|
Amendment to Asset Purchase Agreement, dated September 30,
2008, by and between the Company and Osiris Therapeutics, Inc.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
2.3
|
|
Amendment No. 2 to Asset Purchase Agreement, dated
March 25, 2009, between the Company and Osiris
Therapeutics, Inc. (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
2.4
|
|
Share Purchase Agreement, by and among NuVasive, Inc. and the
stockholders of Cervitech, Inc., as listed therein, dated
April 22, 2009 (incorporated by reference to our
Registration Statement on
Form S-3
(File
No. 333-159098)
filed with the Commission on May 8, 2009)
|
3.1
|
|
Restated Certificate of Incorporation (incorporated by reference
to our Quarterly Report on
Form 10-Q
filed with the Commission on August 13, 2004)
|
3.2
|
|
Restated Bylaws (incorporated by reference to our Current Report
on
Form 8-K
filed with the Commission on December 15, 2008)
|
4.1
|
|
Second Amended and Restated Investors Rights Agreement,
dated July 11, 2002, by and among NuVasive, Inc. and the
other parties named therein (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
4.2
|
|
Amendment No. 1 to Second Amended and Restated
Investors Rights Agreement, dated June 19, 2003, by
and among NuVasive, Inc. and the other parties named therein
(incorporated by reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
4.3
|
|
Amendment No. 2 to Second Amended and Restated
Investors Rights Agreement, dated February 5, 2004,
by and among NuVasive, Inc. and the other parties named therein
(incorporated by reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
4.4
|
|
Registration Rights Agreement, dated as of August 4, 2005,
between NuVasive, Inc. and Pearsalls Limited (incorporated by
reference to our Current Report on
Form 8-K
filed with the Commission on August 10, 2005)
|
4.5
|
|
Registration Rights Agreement Termination Agreement, dated as of
September 26, 2006, between NuVasive, Inc. and Pearsalls
Limited (incorporated by reference to our Current Report on
Form 8-K
filed with the Commission on September 29, 2006)
|
4.6
|
|
Indenture, dated March 7, 2008, between the NuVasive Inc.
and U.S. Bank National Association, as Trustee (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
4.7
|
|
Form of 2.25% Convertible Senior Note due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
4.8
|
|
Registration Rights Agreement, dated March 7, 2007, among
NuVasive, Inc. and Goldman, Sachs & Co., and
J.P. Morgan Securities Inc., related to the
2.25% Convertible Senior Notes due 2013 (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
4.9
|
|
Specimen Common Stock Certificate (incorporated by reference to
our Annual Report on
Form 10-K
filed with the Commission on March 16, 2006)
|
10.1#
|
|
1998 Stock Option/Stock Issuance Plan (incorporated by reference
to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
52
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.2#
|
|
Form of Notice of Grant of Stock Option under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
10.3#
|
|
Form of Stock Option Agreement under our 1998 Stock Option/Stock
Issuance Plan, and form of addendum thereto (incorporated by
reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
10.4#
|
|
Form of Stock Purchase Agreement under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
10.5#
|
|
Form of Stock Issuance Agreement under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to
Amendment No. 4 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on May 11, 2004)
|
10.6#
|
|
Form of Stock Issuance Agreement under our 1998 Stock
Option/Stock Issuance Plan, dated April 21, 2004, and
May 4, 2004 (incorporated by reference to Amendment
No. 4 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on May 11, 2004)
|
10.7#
|
|
2004 Equity Incentive Plan, as amended (incorporated by
reference to Appendix A to our Definitive Proxy Statement)
filed with the Commission on April 11, 2007)
|
10.8#
|
|
Form of Stock Option Award Notice under our 2004 Equity
Incentive Plan (incorporated by reference to Amendment
No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004)
|
10.9#
|
|
Form of Option Exercise and Stock Purchase Agreement under our
2004 Equity Incentive Plan (incorporated by reference to
Amendment No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004).
|
10.10#
|
|
Form of Restricted Stock Unit Award Agreement under our 2004
Equity Incentive Plan
|
10.11#
|
|
2004 Employee Stock Purchase Plan (incorporated by reference to
Amendment No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004)
|
10.12#
|
|
Amendment No. 1 to 2004 Employee Stock Purchase Plan
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
10.13#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Alexis V. Lukianov (incorporated by
reference to our Current Report on
Form 8-K
filed with the Commission on August 8, 2008)
|
10.14#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Keith C. Valentine (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.15#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Kevin C. OBoyle (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.16#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Patrick Miles (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.17#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Jeffrey P. Rydin (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.18#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Jason M. Hannon (incorporated by
reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.19#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Alexis V.
Lukianov (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
53
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.20#
|
|
Amendment No. 2 to Compensation Letter Agreement, dated
August 5, 2009, between NuVasive, Inc. and Alexis V.
Lukianov (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on August 6, 2009)
|
10.21#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Keith C.
Valentine (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.22#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Kevin C.
OBoyle (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.23#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Patrick Miles
(incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.24#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Jeffrey P.
Rydin (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.25#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Jason M.
Hannon (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
10.26#
|
|
Compensation Letter Agreement, dated November 4, 2009,
between NuVasive, Inc. and Pat Miles
|
10.27#
|
|
Compensation Letter Agreement, dated November 4, 2009,
between NuVasive, Inc. and Jeff Rydin
|
10.28#
|
|
Compensation Letter Agreement, dated December 28, 2009,
between NuVasive, Inc. and Jason Hannon
|
10.29#
|
|
Offer Letter Agreement, dated October 19, 2009, between
NuVasive, Inc. and Michael Lambert
|
10.30#
|
|
Compensation Letter Agreement, dated February 24, 2010,
between NuVasive, Inc. and Michael Lambert
|
10.31#
|
|
Severance Agreement, dated September 2, 2009, between
NuVasive, Inc. and Kevin C. OBoyle (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 6, 2009)
|
10.32#
|
|
Form of Indemnification Agreement between NuVasive, Inc. and
each of our directors and officers (incorporated by reference to
our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
10.33
|
|
Sublease, dated October 12, 2004, by and between NuVasive,
Inc. and Gateway, Inc. (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on November 15, 2004)
|
10.34#
|
|
Summary of 2008 annual salaries and annual stock grants for our
Chief Executive Officer, our Chief Financial Officer and our
other named executive officers (incorporated by reference to our
Current Report on
Form 8-K
filed with the Commission on January 11, 2008)
|
10.35#
|
|
Summary of the 2008 bonus payments to our Chief Executive
Officer, our Chief Financial Officer and our other named
executive officers (incorporated by reference to our Current
Report on
Form 8-K
filed with the Commission on February 29, 2008)
|
10.36#
|
|
Summary of 2009 annual salaries and annual stock grants for our
Chief Executive Officer, our Chief Financial Officer and our
other named executive officers (incorporated by reference to our
Current Report on
Form 8-K
filed with the Commission on January 8, 2009)
|
10.37
|
|
Customer Agreement, dated as of June 27, 2007, by and
between NuVasive, Inc. and International Business Machines
Corporation (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on August 8, 2007)
|
10.38
|
|
IBM Global Services Agreement, dated as of June 27, 2007,
by and between NuVasive, Inc. and International Business
Machines Corporation (incorporated by reference to our Annual
Report on
Form 10-K
filed with the Commission on August 8, 2007)
|
10.39
|
|
Lease Agreement for Sorrento Summit, entered into as of
November 6, 2007, between the Company and HCPI/Sorrento,
LLC. (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on November 8, 2007)
|
54
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.40
|
|
Purchase Agreement, dated March 3, 2008, among NuVasive,
Inc. and Goldman, Sachs & Co., and J.P. Morgan
Securities Inc., related to the 2.25% Convertible Senior
Notes due 2013 (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.41
|
|
Confirmation of Call Option Transaction, dated March 3,
2008, to NuVasive, Inc. from Goldman, Sachs & Co.
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.42
|
|
Confirmation of Call Option Transaction, dated March 3,
2008, to NuVasive, Inc. from JPMorgan Chase Bank related to the
2.25% Convertible Senior Notes due 2013 (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.43
|
|
Confirmation of Warrant Transaction, dated March 3, 2008,
to NuVasive, Inc. from Goldman, Sachs & Co. related to
the 2.25% Convertible Senior Notes due 2013 (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.44
|
|
Confirmation of Warrant Transaction, dated March 3, 2008,
to NuVasive, Inc. from Goldman, Sachs & Co. related to
the 2.25% Convertible Senior Notes due 2013 (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.45
|
|
Amendment to the Confirmation of Call Option Transaction, dated
March 11, 2008, to NuVasive, Inc. from Goldman,
Sachs & Co. related to the 2.25% Convertible
Senior Notes due 2013 (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.46
|
|
Amendment to the Confirmation of Call Option Transaction, dated
March 11, 2008, to NuVasive, Inc. from JPMorgan Chase Bank
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.47
|
|
Amendment to the Confirmation of Warrant Transaction, dated
March 11, 2008, to NuVasive, Inc. from Goldman,
Sachs & Co. related to the 2.25% Convertible
Senior Notes due 2013 (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.48
|
|
Amendment to the Confirmation of Warrant Transaction, dated
March 11, 2008, to NuVasive, Inc. from JPMorgan Chase Bank
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
10.49
|
|
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
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.50
|
|
Manufacturing Agreement, dated July 24, 2008 by and between
the Company and Osiris Therapeutics, Inc. (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
10.51
|
|
Amendment to Manufacturing Agreement, dated September 30,
2008, by and between the Company and Osiris Therapeutics, Inc.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
10.52
|
|
Amendment No. 3 to Manufacturing Agreement, dated
March 25, 2009, between the Company and Osiris
Therapeutics, Inc. (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
10.53
|
|
Preferred Stock Purchase Agreement, dated January 13, 2009,
among the Company, Progentix Orthobiology, B.V. and the sellers
listed on Schedule A thereto
|
10.54
|
|
Option Purchase Agreement, dated January 13, 2009, among
the Company, Progentix Orthobiology, B.V. and the sellers listed
on Schedule A thereto
|
10.55
|
|
Exclusive Distribution Agreement, dated January 13, 2009,
between the Company and Progentix Orthobiology, B.V.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
21.1
|
|
List of subsidiaries of NuVasive, Inc.
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm
|
31.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
55
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to
Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended, and
18 U.S.C. section 1350
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to
Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended, and
18 U.S.C. section 1350
|
|
|
|
|
|
Certain confidential information contained in this exhibit was
omitted by means of redacting a portion of the text and
replacing it with an asterisk. We have filed separately with the
Commission an unredacted copy of the exhibit.
|
|
#
|
|
Indicates management contract or compensatory plan.
|
56
SUPPLEMENTAL
INFORMATION
Copies of the Registrants Proxy Statement for the Annual
Meeting of Stockholders to be held on May 25, 2010, and
copies of the form of proxy to be used for such Annual Meeting,
will be furnished to the SEC prior to the time they are
distributed to the Registrants Stockholders.
57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
By:
|
/s/ Alexis
V. Lukianov
|
Alexis V. Lukianov
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: February 26, 2010
|
|
|
|
By:
|
/s/ Michael
J. Lambert
|
Michael J. Lambert
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: February 26, 2010
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Alexis V.
Lukianov and Michael Lambert, jointly and severally, his or her
attorneys-in -fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendments to this
Report on
Form 10-K,
and to file the same, with exhibits thereto and other documents
in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of
said attorneys-in -fact, or his or her substitute or substitutes
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Alexis
V. Lukianov
Alexis
V. Lukianov
|
|
Chairman and Chief Executive Officer (Principal Executive
Officer)
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Michael
J. Lambert
Michael
J. Lambert
|
|
Executive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Jack
R. Blair
Jack
R. Blair
|
|
Director
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Peter
C. Farrell
Peter
C. Farrell
|
|
Director
|
|
February 26, 2010
|
58
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Robert
J. Hunt
Robert
J. Hunt
|
|
Director
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Lesley
H. Howe
Lesley
H. Howe
|
|
Director
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Eileen
M. More
Eileen
M. More
|
|
Director
|
|
February 26, 2010
|
|
|
|
|
|
/s/ Richard
W. Treharne
Richard
W. Treharne
|
|
Director
|
|
February 26, 2010
|
59
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
NuVasive, Inc.
We have audited the accompanying consolidated balance sheets of
NuVasive, Inc. as of December 31, 2009 and 2008, and the
related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended December 31, 2009. Our audits
also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of NuVasive, Inc. at December 31, 2009
and 2008, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2009, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the consolidated financial
statements, NuVasive, Inc. changed its method of accounting for
business combinations with the adoption of the guidance
originally issued in Financial Accounting Standards Board (FASB)
Statement No. 141(R),
Business Combinations
(codified in FASB ASC Topic 805,
Business Combinations
),
effective January 1, 2009.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
NuVasive, Inc.s internal control over financial reporting
as of December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 26, 2010 expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
San Diego, California
February 26, 2010
61
(In thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
65,413
|
|
|
$
|
132,318
|
|
Short-term marketable securities
|
|
|
99,279
|
|
|
|
45,738
|
|
Accounts receivable, net of allowances of $4,163 and $1,952,
respectively
|
|
|
58,462
|
|
|
|
51,622
|
|
Inventory
|
|
|
90,191
|
|
|
|
68,834
|
|
Prepaid expenses and other current assets
|
|
|
3,757
|
|
|
|
3,466
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
317,102
|
|
|
|
301,978
|
|
Property and equipment, net
|
|
|
82,602
|
|
|
|
73,686
|
|
Long-term marketable securities
|
|
|
39,968
|
|
|
|
45,305
|
|
Intangible assets, net
|
|
|
103,338
|
|
|
|
54,768
|
|
Goodwill
|
|
|
102,882
|
|
|
|
2,331
|
|
Other assets
|
|
|
7,872
|
|
|
|
9,338
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
653,764
|
|
|
$
|
487,406
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
26,489
|
|
|
$
|
26,633
|
|
Accrued payroll and related expenses
|
|
|
25,535
|
|
|
|
17,132
|
|
Royalties payable
|
|
|
2,334
|
|
|
|
1,722
|
|
Other current liabilities
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
54,747
|
|
|
|
45,487
|
|
Senior convertible notes
|
|
|
230,000
|
|
|
|
230,000
|
|
Long-term acquisition related liabilities
|
|
|
30,694
|
|
|
|
12,111
|
|
Other long-term liabilities
|
|
|
28,472
|
|
|
|
12,177
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
13,629
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 70,000 shares
authorized, 38,774 and 36,310 issued and outstanding at
December 31, 2009 and 2008, respectively
|
|
|
39
|
|
|
|
36
|
|
Additional paid-in capital
|
|
|
485,757
|
|
|
|
383,293
|
|
Accumulated other comprehensive income (loss)
|
|
|
126
|
|
|
|
(190
|
)
|
Accumulated deficit
|
|
|
(189,700
|
)
|
|
|
(195,508
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
296,222
|
|
|
|
187,631
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
653,764
|
|
|
$
|
487,406
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
$
|
370,340
|
|
|
$
|
250,082
|
|
|
$
|
154,290
|
|
Cost of goods sold (excluding amortization of purchased
technology)
|
|
|
61,110
|
|
|
|
39,008
|
|
|
|
23,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
309,230
|
|
|
|
211,074
|
|
|
|
130,522
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, marketing and administrative
|
|
|
254,997
|
|
|
|
189,126
|
|
|
|
121,676
|
|
Research and development
|
|
|
37,581
|
|
|
|
25,943
|
|
|
|
24,581
|
|
Amortization of intangible assets
|
|
|
5,335
|
|
|
|
2,989
|
|
|
|
1,517
|
|
In-process research and development
|
|
|
|
|
|
|
20,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
297,913
|
|
|
|
238,934
|
|
|
|
147,774
|
|
Interest and other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,507
|
|
|
|
5,599
|
|
|
|
5,216
|
|
Interest expense
|
|
|
(7,116
|
)
|
|
|
(5,571
|
)
|
|
|
(1
|
)
|
Other income, net
|
|
|
461
|
|
|
|
304
|
|
|
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income (expense), net
|
|
|
(5,148
|
)
|
|
|
332
|
|
|
|
5,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
6,169
|
|
|
|
(27,528
|
)
|
|
|
(11,265
|
)
|
Income tax expense
|
|
|
1,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
$
|
4,437
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
|
$
|
(1,371
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NuVasive, Inc.
|
|
$
|
5,808
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to NuVasive, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.15
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
37,426
|
|
|
|
35,807
|
|
|
|
34,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38,751
|
|
|
|
35,807
|
|
|
|
34,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
63
NUVASIVE,
INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance at December 31, 2006
|
|
|
33,929
|
|
|
$
|
34
|
|
|
$
|
333,009
|
|
|
$
|
(25
|
)
|
|
$
|
(156,715
|
)
|
|
$
|
176,303
|
|
Issuance of common stock under employee and director stock
option and purchase plans
|
|
|
949
|
|
|
|
1
|
|
|
|
7,338
|
|
|
|
|
|
|
|
|
|
|
|
7,339
|
|
Issuance of common stock in connection with acquisitions
|
|
|
452
|
|
|
|
|
|
|
|
10,501
|
|
|
|
|
|
|
|
|
|
|
|
10,501
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
13,621
|
|
|
|
|
|
|
|
|
|
|
|
13,621
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
50
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
29
|
|
Net loss attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,265
|
)
|
|
|
(11,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
35,330
|
|
|
|
35
|
|
|
|
364,469
|
|
|
|
54
|
|
|
|
(167,980
|
)
|
|
|
196,578
|
|
Issuance of common stock under employee and director stock
option and purchase plans
|
|
|
980
|
|
|
|
1
|
|
|
|
11,849
|
|
|
|
|
|
|
|
|
|
|
|
11,850
|
|
Convertible Note hedge, net of warrants
|
|
|
|
|
|
|
|
|
|
|
(13,972
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,972
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
20,947
|
|
|
|
|
|
|
|
|
|
|
|
20,947
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on marketable securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
|
|
|
|
519
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(763
|
)
|
|
|
|
|
|
|
(763
|
)
|
Net loss attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,528
|
)
|
|
|
(27,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
36,310
|
|
|
|
36
|
|
|
|
383,293
|
|
|
|
(190
|
)
|
|
|
(195,508
|
)
|
|
|
187,631
|
|
Issuance of common stock under employee and director stock
option and purchase plans
|
|
|
824
|
|
|
|
1
|
|
|
|
12,555
|
|
|
|
|
|
|
|
|
|
|
|
12,556
|
|
Issuance of common stock in connection with acquisitions
|
|
|
1,640
|
|
|
|
2
|
|
|
|
64,214
|
|
|
|
|
|
|
|
|
|
|
|
64,216
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
23,793
|
|
|
|
|
|
|
|
|
|
|
|
23,793
|
|
Tax benefits related to stock-based compensation awards
|
|
|
|
|
|
|
|
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
1,902
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on marketable securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(494
|
)
|
|
|
|
|
|
|
(494
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
810
|
|
|
|
|
|
|
|
810
|
|
Net income attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,808
|
|
|
|
5,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to NuVasive, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
38,774
|
|
|
$
|
39
|
|
|
$
|
485,757
|
|
|
$
|
126
|
|
|
$
|
(189,700
|
)
|
|
$
|
296,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
64
NUVASIVE,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
$
|
4,437
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
29,841
|
|
|
|
23,105
|
|
|
|
12,952
|
|
In-process research and development
|
|
|
|
|
|
|
20,876
|
|
|
|
|
|
Stock-based compensation
|
|
|
23,793
|
|
|
|
20,947
|
|
|
|
13,621
|
|
Lease abandonment (reversal)
|
|
|
(1,997
|
)
|
|
|
4,403
|
|
|
|
|
|
Allowance for doubtful accounts and sales return reserve, net of
write-offs
|
|
|
2,211
|
|
|
|
1,026
|
|
|
|
189
|
|
Allowance for excess and obsolete inventory
|
|
|
2,297
|
|
|
|
(836
|
)
|
|
|
514
|
|
Other
non-cash
adjustments
|
|
|
3,359
|
|
|
|
179
|
|
|
|
109
|
|
Changes in operating assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(8,582
|
)
|
|
|
(25,152
|
)
|
|
|
(8,725
|
)
|
Inventory
|
|
|
(23,133
|
)
|
|
|
(32,451
|
)
|
|
|
(18,026
|
)
|
Prepaid expenses and other current assets
|
|
|
760
|
|
|
|
274
|
|
|
|
349
|
|
Accounts payable and accrued liabilities
|
|
|
5,932
|
|
|
|
5,098
|
|
|
|
5,719
|
|
Accrued payroll and related expenses
|
|
|
7,501
|
|
|
|
5,057
|
|
|
|
3,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
46,419
|
|
|
|
(5,002
|
)
|
|
|
(887
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions and investments
|
|
|
(46,055
|
)
|
|
|
(41,256
|
)
|
|
|
(6,970
|
)
|
Purchases of property and equipment
|
|
|
(32,878
|
)
|
|
|
(39,795
|
)
|
|
|
(24,403
|
)
|
Purchases of short-term marketable securities
|
|
|
(92,494
|
)
|
|
|
(90,150
|
)
|
|
|
(75,135
|
)
|
Sales of short-term marketable securities
|
|
|
66,447
|
|
|
|
63,659
|
|
|
|
129,818
|
|
Purchases of long-term marketable securities
|
|
|
(64,784
|
)
|
|
|
(69,036
|
)
|
|
|
(23,540
|
)
|
Sales of long-term marketable securities
|
|
|
41,861
|
|
|
|
32,267
|
|
|
|
17,000
|
|
Other assets
|
|
|
|
|
|
|
(304
|
)
|
|
|
(2,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(127,903
|
)
|
|
|
(144,615
|
)
|
|
|
14,287
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of long-term liabilities
|
|
|
|
|
|
|
(300
|
)
|
|
|
(300
|
)
|
Issuance of convertible debt, net of costs
|
|
|
|
|
|
|
222,442
|
|
|
|
|
|
Purchase of convertible note hedges
|
|
|
|
|
|
|
(45,758
|
)
|
|
|
|
|
Sale of warrants
|
|
|
|
|
|
|
31,786
|
|
|
|
|
|
Tax benefits related to
stock-based
compensation awards
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
12,556
|
|
|
|
11,850
|
|
|
|
7,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
14,458
|
|
|
|
220,020
|
|
|
|
7,039
|
|
Effect of exchange rate changes on cash
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(66,905
|
)
|
|
|
70,403
|
|
|
|
20,439
|
|
Cash and cash equivalents at beginning of year
|
|
|
132,318
|
|
|
|
61,915
|
|
|
|
41,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
65,413
|
|
|
$
|
132,318
|
|
|
$
|
61,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Landlord paid tenant improvements
|
|
$
|
|
|
|
$
|
7,309
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with acquisitions
|
|
$
|
64,216
|
|
|
$
|
|
|
|
$
|
10,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
5,175
|
|
|
$
|
2,703
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
798
|
|
|
$
|
227
|
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
65
NUVASIVE,
INC.
|
|
1.
|
Organization
and Significant Accounting Policies
|
Description of Business.
NuVasive, Inc. (the
Company or NuVasive) was incorporated in Delaware on
July 21, 1997. The Company designs, develops and markets
products for the surgical treatment of spine disorders. The
Company began commercializing its products in 2001. Its product
portfolio is focused primarily on applications for spine fusion
surgery. Its principal product offering includes a minimally
disruptive surgical platform called Maximum Access Surgery, or
MAS
®
,
as well as a growing offering of biologics, cervical and motion
preservation products. In the spine surgery market, our
currently-marketed products are primarily used to enable access
to the spine and to perform restorative and fusion procedures.
The Company also focuses significant research and development
efforts on 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 our total disc replacement
products. The Company dedicates significant resources to sales
and marketing efforts, including training spine surgeons on its
unique technology and products.
The Company loans its MAS 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 an immaterial quantity of MAS instrument sets,
MaXcess and NeuroVision systems to hospitals. The Company also
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 Companys facilities or
from limited disposable inventories stored at independent sales
agents sites.
The Companys business is considered as operating in one
segment based upon the Companys organizational structure,
the way in which the operations are managed and evaluated and
the lack of availability of separate financial results.
Substantially all of the Companys assets and sales are in
the United States.
The Company evaluated subsequent events through
February 26, 2010, the date on which these financial
statements were issued.
Basis of Presentation and Principles of
Consolidation.
The accompanying consolidated
financial statements include the accounts of the Company and its
wholly owned subsidiaries. In addition, the consolidated
financial statements as of December 31, 2009 and for the
year then ended include the accounts of a variable interest
entity, Progentix Orthobiology, B.V. (Progentix), which is
consolidated pursuant to existing guidance issued by the
Financial Accounting Standards Board (FASB). All significant
intercompany balances and transactions have been eliminated in
consolidation. There has been no material activity by the
Companys subsidiaries during the years presented.
Use of Estimates.
To prepare financial
statements in conformity with generally accepted accounting
principles accepted in the United States of America, management
must make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Concentration of Credit Risk and Significant
Customers.
Financial instruments, which
potentially subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents, short-term
and long-term marketable securities and accounts receivable. The
Company limits its exposure to credit loss by placing its cash
and investments with high credit quality financial institutions.
Additionally, the Company has established guidelines regarding
diversification of its investments and their maturities, which
are designed to maintain principal and maximize liquidity. No
single customer represented greater than ten percent of sales
for any of the years presented.
Fair Value of Financial Instruments.
The
Companys financial instruments consist principally of cash
and cash equivalents, short-term and long-term marketable
securities, accounts receivable, accounts payable, accrued
expenses and Senior Convertible Notes. The carrying amounts of
financial instruments such as cash equivalents,
66
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
accounts receivable, accounts payable and accrued expenses
approximate the related fair values due to the short-term
maturities of these instruments. Marketable securities consist
of
available-for-sale
securities that are reported at fair value with the related
unrealized gains and losses included in accumulated other
comprehensive income (loss), a component of shareholders
equity. The estimated fair value of the Senior Convertible Notes
is determined by using available market information as of
December 31, 2009.
Cash and Cash Equivalents.
The Company
considers all highly liquid investments that are readily
convertible into cash and have an original maturity of three
months or less at the time of purchase to be cash equivalents.
Marketable Securities.
The Company defines
marketable securities as income yielding securities that can be
readily converted into cash. Marketable securities include
U.S. Treasury and agency obligations, certificates of
deposit (CDs) issued by domestic banks, commercial paper and
corporate notes and bonds.
Accounts Receivable and Related Valuation
Accounts.
Accounts receivable in the accompanying
consolidated balance sheets are presented net of allowances for
doubtful accounts and sales returns.
The Company performs credit evaluations of its customers
financial condition and, generally, requires no collateral from
its customers. The Company makes judgments as to its ability to
collect outstanding receivables and provides an allowance for
specific receivables if and when collection becomes doubtful.
Provisions are made based upon a specific review of all
significant outstanding invoices as well as a review of the
overall quality and age of those invoices not specifically
reviewed. In determining the provision for invoices not
specifically reviewed, the Company analyzes historical
collection experience and current economic trends. If the
historical data used to calculate the allowance provided for
doubtful accounts does not reflect the Companys future
ability to collect outstanding receivables or if the financial
condition of customers were to deteriorate, resulting in
impairment of their ability to make payments, an increase in the
provision for doubtful accounts may be required.
In addition, the Company establishes a reserve for estimated
sales return that is recorded as a reduction to revenue. This
reserve is maintained to account for the future return of
products sold in the current period. Product returns were not
material for the years ended December 31, 2009, 2008 and
2007.
Inventory.
Inventory consists primarily of
finished goods, disposables and specialized implants, is stated
at the lower of cost or market and is recorded in cost of goods
sold based on a method that approximates cost. The Company
reviews the components of its inventory on a periodic basis for
excess, obsolete or impaired inventory, and records a reserve
for the identified items. At December 31, 2009 and 2008,
the balance of the allowance for excess and obsolete inventory
is $5.1 million and $2.8 million, respectively.
Goodwill and Intangible Assets.
Goodwill
represents the excess of the aggregate purchase price over the
fair value of the tangible and identifiable intangible assets
acquired by the Company. The goodwill recorded as a result of
the business combinations in the years presented is not
deductible for tax purposes. Goodwill and indefinite lived
intangible assets, which consists of in-process research and
development acquired, are not amortized. The Company assesses
goodwill and indefinite lived intangible assets for impairment
using fair value measurement techniques on an annual basis or
more frequently if facts and circumstance warrant such a review.
For purposes of assessing the impairment of goodwill, the
Company estimates the value of the reporting units using its
market capitalization as the best evidence of fair value. If the
carrying amount of a reporting unit exceeds its fair value, then
a goodwill impairment test is performed to measure the amount of
the impairment loss, if any. During the years ended
December 31, 2009, 2008 and 2007, the Company did not
record any impairment charges related to their goodwill.
Intangible assets are initially measured at their fair value,
determined either by the fair value of the consideration
exchanged for the intangible asset, or the estimated discounted
cash flows expected to be generated from the intangible asset.
Intangible assets with a finite life, such as acquired
technology, manufacturing know-how, licensed technology, supply
agreements and certain trade names and trademarks, are amortized
on a straight-line
67
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
basis over their estimated useful life, ranging from two to
twenty years. Intangible assets with a finite life are tested
for impairment whenever events or circumstances indicate that
the carrying amount may not be recoverable.
In determining the useful lives of intangible assets, we
consider the expected use of the assets and the effects of
obsolescence, demand, competition, anticipated technological
advances, changes in surgical techniques, market influences and
other economic factors. For technology based intangible assets,
we consider the expected life cycles of products which
incorporate the corresponding technology. Trademarks and trade
names that are related to products are assigned lives consistent
with the period in which the products bearing each brand are
expected to be sold.
Property, Plant and Equipment.
Property and
equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, ranging
from two to seven years. Instrument sets are depreciated using
the straight-line method over their estimated useful life of
three years. Leasehold improvements are amortized using the
straight-line method over the estimated useful life of the asset
or the lease term, whichever is shorter. Maintenance and repairs
are expensed as incurred. The Company reviews property, plant
and equipment for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may
not be recoverable. An impairment loss would be recognized when
estimated future undiscounted cash flows relating to the asset
are less than its carrying amount. An impairment loss is
measured as the amount by which the carrying amount of an asset
exceeds its fair value.
Revenue Recognition.
The Company follows the
provisions of the Securities and Exchange Commissions
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. The Company
recognizes 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 acknowledgement 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 instrument sets is recognized
upon receipt of a purchase order and the subsequent shipment to
customers who immediately accept title.
Research and Development.
Research and
development costs are expensed as incurred.
Product Shipment Costs.
Amounts billed to
customers for shipping and handling of products are reflected in
revenues and are not significant for any period presented.
Product shipment costs are included in sales, marketing and
administrative expense in the accompanying consolidated
statements of operations and were $11.9 million,
$9.3 million, and $6.1 million for the years ended
December 31, 2009, 2008, and 2007, respectively.
Income Taxes.
A deferred tax asset or
liability is determined based on the difference between the
financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when
these differences reverse. The Company provides a valuation
allowance against net deferred tax assets unless, based upon the
available evidence, it is more likely than not that the deferred
tax assets will be realized.
Net Income (Loss) Per Share.
The Company
computes basic net income (loss) per share using the
weighted-average number of common shares outstanding during the
period. Diluted net income (loss) per share is computed by
dividing the net income (loss) attributable to NuVasive, Inc.
for the period by the weighted-average number of common shares
outstanding during the period and the weighted average number of
dilutive common stock equivalents, such as outstanding unvested
restricted stock units, options, and warrants. Common stock
equivalents are only included in the calculation of diluted
earnings per share when their effect is dilutive.
The warrants sold to the initial purchasers of the Convertible
Senior Notes (See Note 7)
and/or
their
affiliates to acquire up to 5.1 million shares of the
Companys common stock, subject to adjustment, were
excluded from the calculation of diluted net income (loss) per
share for the years ended December 31, 2009 and 2008 as
their effect is
68
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
anti-dilutive for the periods. In addition, the Senior
Convertible Notes are convertible into shares of the
Companys common stock, 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), and have
been excluded from the diluted net income (loss) per share
calculation for the years ended December 31, 2009 and 2008
as their effect is anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NuVasive, Inc.
|
|
$
|
5,808
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic
|
|
|
37,426
|
|
|
|
35,807
|
|
|
|
34,782
|
|
Dilutive potential common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,280
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted
|
|
|
38,751
|
|
|
|
35,807
|
|
|
|
34,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share attributable to
NuVasive, Inc.
|
|
$
|
0.16
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share attributable to
NuVasive, Inc.
|
|
$
|
0.15
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share does not include the effect
of anti-dilutive common share equivalents from outstanding stock
options or restricted stock units. There were 3.1 million
anti-dilutive common share equivalents excluded from the
calculation at December 31, 2009. Due to the net loss
reported in 2008 and 2007, the effect of all outstanding stock
options is anti-dilutive and is therefore excluded.
Comprehensive Income (Loss).
Comprehensive
income (loss) is defined as the change in equity during a period
from transactions and other events and circumstances from
non-owner sources. Comprehensive income (loss) includes
unrealized gains or losses on the Companys marketable
securities and foreign currency translation adjustments. The
Company has disclosed Comprehensive income (loss) as a component
of stockholders equity.
The components of Accumulated other comprehensive income (loss),
net of tax, is as follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Translation adjustments, net of tax
|
|
$
|
110
|
|
|
$
|
(700
|
)
|
|
$
|
33
|
|
Unrealized (loss) gain on marketable securities, net of tax
|
|
|
16
|
|
|
|
510
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income (loss)
|
|
$
|
126
|
|
|
$
|
(190
|
)
|
|
$
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Comprehensive income (loss) consists of the following (
in
thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Consolidated net income (loss)
|
|
$
|
4,437
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on marketable securities, net of tax
|
|
|
(494
|
)
|
|
|
519
|
|
|
|
50
|
|
Translation adjustments, net of tax
|
|
|
810
|
|
|
|
(763
|
)
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated comprehensive income (loss)
|
|
|
4,753
|
|
|
|
(27,772
|
)
|
|
|
(11,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Net loss attributable to noncontrolling interests
|
|
|
1,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to NuVasive, Inc.
|
|
$
|
6,124
|
|
|
$
|
(27,772
|
)
|
|
$
|
(11,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recently Adopted Accounting
Standards.
Effective January 1, 2009, the
Company implemented the FASBs revised authoritative
guidance for business combinations. This revised guidance
requires an acquiring company to measure all assets acquired and
liabilities assumed, including contingent considerations and all
contractual contingencies, at fair value as of the acquisition
date. In addition, an acquiring company is required to
capitalize in-process research and development and either
amortize it over the life of the product upon commercialization,
or write it off if the project is abandoned or impaired.
Previously, post-acquisition adjustments related to business
combination deferred tax asset valuation allowances and
liabilities for uncertain tax positions were generally required
to be recorded as an increase or decrease to Goodwill. The
revised guidance does not permit this accounting and, generally,
requires any such changes to be recorded in current period
income tax expense. Thus, all changes to valuation allowances
and liabilities for uncertain tax positions established in
acquisition accounting, regardless of the guidance used to
initially account for the business combination, will be
recognized in current period income tax expense. Additionally,
this guidance requires that contingent purchase consideration be
remeasured to estimated fair value at each reporting period with
the change in fair value recorded in the results of operations.
The adoption of the revised guidance will have an impact on the
Companys consolidated financial statements, but the nature
and magnitude of the specific effects will depend upon the
nature, terms and size of the acquisitions consummated after the
effective date of January 1, 2009. The impact of the
adoption of this guidance in 2009 resulted in the capitalization
of in-process research and development totaling $46 million
that would have been expensed under the previous guidance.
Effective January 1, 2009, the Company adopted the revised
authoritative guidance for the accounting treatment afforded
preacquisition contingencies in a business combination. Under
the revised guidance, an acquirer is required to recognize at
fair value an asset acquired or liability assumed in a
business combination that arises from a contingency if the
acquisition-date fair value of the liability can be determined
during the measurement period. If the acquisition-date
fair value cannot be determined, the acquirer will apply the
authoritative guidance used to evaluate contingencies to
determine whether the contingency should be recognized as of the
acquisition date or after the acquisition date. The adoption of
the revised guidance will have an impact on the Companys
consolidated financial statements, but the nature and magnitude
of the specific effects will depend upon the nature, terms and
size of the acquisitions consummated after the effective date of
January 1, 2009.
Effective January 1, 2009, the Company implemented
FASBs revised authoritative guidance for consolidation,
which addresses the accounting and reporting standards for
ownership interests in subsidiaries held by parties other than
the parent, the amount of consolidated net income attributable
to the parent and to the noncontrolling interest, changes in a
parents ownership interest, and the valuation of retained
noncontrolling
70
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
equity investments when a subsidiary is deconsolidated. The
guidance also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. The adoption of the
revised guidance is expected to impact the Companys
consolidated financial statements, but the nature and magnitude
of the specific effects will depend upon the nature, terms and
size of the investments made after the effective date of
January 1, 2009.
Effective January 1, 2009, the Company adopted the
FASBs revised authoritative guidance which amends the
factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a
recognized intangible asset. This guidance requires enhanced
disclosures concerning a companys treatment of costs
incurred to renew or extend the term of a recognized intangible
asset. The adoption of this guidance did not have a material
impact on the Companys consolidated financial position,
results of operations or cash flows.
Effective April 1, 2009, the Company adopted FASBs
revised authoritative guidance for fair value measurements which
clarifies the measurement of fair value in a market that is not
active, and is effective as of the issue date, including
application to prior periods for which financial statements have
not been issued. The Company also adopted additional
authoritative guidance for determining whether a market is
active or inactive, and whether a transaction is distressed, is
applicable to all assets and liabilities (financial and
nonfinancial) and which requires enhanced disclosures. The
adoption of this guidance did not have a material impact on the
Companys consolidated financial position, results of
operations or cash flows.
Effective April 1, 2009, the Company adopted authoritative
guidance which provides additional guidance to provide greater
clarity about the credit and noncredit component of an
other-than-temporary
impairment event and to more effectively communicate when an
other-than-temporary
impairment event has occurred. The adoption of this guidance,
which applies to investments in debt securities, did not have a
material impact on the Companys consolidated financial
position, results of operations or cash flows.
Effective January 1, 2009, the Company adopted an amendment
to authoritative guidance which requires separate accounting for
the debt and equity components of convertible debt issuances
that have a cash settlement feature permitting settlement
partially or fully in cash upon conversion. A component of such
debt issuances that is representative of the approximate fair
value of the conversion feature at inception should be
bifurcated and recorded to equity, with the resulting debt
discount amortized to interest expense in a manner that reflects
the issuers nonconvertible, unsecured debt borrowing rate.
The Companys outstanding Senior Convertible Notes do not
include a cash settlement feature, therefore, the amendment did
not have any impact on the Companys consolidated financial
statements.
Effective January 1, 2009, the Company adopted a new
standard which clarifies how to determine whether certain
instruments or features are indexed to an entitys own
stock. This new standard outlines a two-step approach to
evaluate the instruments contingent exercise provisions
and the instruments settlement provisions. The Company
evaluated the provisions of the new standard and the embedded
conversion options in its outstanding Senior Convertible Notes
and warrants and determined that the embedded conversion options
are indexed to its own stock and, therefore, do not require
bifurcation and separate accounting.
Effective January 1, 2009, the Company adopted
authoritative guidance which addresses whether instruments
granted in share-based payment transactions are participating
securities prior to vesting and therefore need to be included in
the earnings allocation in calculating earnings per share under
the two-class method and requires companies to treat unvested
share-based payment awards that have non-forfeitable rights to
dividends or dividend equivalents as a separate class of
securities in calculating earnings per share. The non-vested
share-based payment awards issued by the Company do not include
non-forfeitable rights to dividends or dividend equivalents,
therefore the adoption of this guidance did not have any impact
on the Companys consolidated financial statements.
71
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Recently Issued Accounting Standards.
In June
2009, the FASB issued revised authoritative guidance that, among
other things, requires a qualitative rather than a quantitative
analysis to determine the primary beneficiary of a variable
interest entity (VIE), which amends previous guidance for
consideration of related party relationships in the
determination of the primary beneficiary of a VIE, amends
certain guidance for determining whether an entity is a VIE,
requires continuous assessments of whether an enterprise is the
primary beneficiary of a VIE, and requires enhanced disclosures
about an enterprises involvement with a VIE. This guidance
is effective for years beginning January 1, 2010. The
Company is currently evaluating the impact the adoption will
have on its consolidated financial statements.
Reclassifications.
Certain amounts in prior
periods have been reclassified to conform with current year
presentation. These reclassifications had no effect on
previously reported net income (loss) or net income (loss) per
share.
Expenses incurred for royalties have been reclassified from
sales, marketing and administrative expense to cost of goods
sold. Royalty expense was $8.7 million, $6.5 million,
and $5.2 million for the years ended December 31,
2009, 2008 and 2007, respectively.
As previously discussed, the Company loans its MAS systems to
surgeons and hospitals who purchase disposables and implants for
use in individual procedures. These systems, or loaned
instrument sets, are comprised of tools and equipment which
facilitate the implantation of the spinal implants. They are not
part of the tangible product sold and title of the loaned
instrument sets never passes to the surgeon or hospital. To
better reflect the true economic nature and be consistent with
industry practice, depreciation expense recorded on loaned
instrument sets has been reclassified from cost of sales to
sales, marketing and administrative expenses. Depreciation
expense was $18.2 million, $11.8 million and
$8.8 million for the years ended December 31, 2009,
2008 and 2007 respectively.
In addition, the amortization of intangible assets, which was
previously included in sales, marketing and administrative
expense, is now presented as a separate line item within
operating expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
Depreciation
|
|
|
of Intangible
|
|
|
Current Year
|
|
|
|
Reported
|
|
|
Royalty Expense
|
|
|
Expense
|
|
|
Assets
|
|
|
Presentation
|
|
|
Year Ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
$
|
44,301
|
|
|
$
|
6,543
|
|
|
$
|
(11,836
|
)
|
|
$
|
|
|
|
$
|
39,008
|
|
Sales, marketing and administrative expense
|
|
|
186,822
|
|
|
|
(6,543
|
)
|
|
|
11,836
|
|
|
|
(2,989
|
)
|
|
|
189,126
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,989
|
|
|
|
2,989
|
|
Year Ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
$
|
27,382
|
|
|
$
|
5,170
|
|
|
$
|
(8,784
|
)
|
|
$
|
|
|
|
$
|
23,768
|
|
Sales, marketing and administrative expense
|
|
|
119,579
|
|
|
|
(5,170
|
)
|
|
|
8,784
|
|
|
|
(1,517
|
)
|
|
|
121,676
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,517
|
|
|
|
1,517
|
|
Cervitech
®
Inc. Acquisition
On May 8, 2009 (the Closing Date), the Company completed
the purchase of all of the outstanding shares of Cervitech,
Inc., a Delaware corporation (Cervitech), pursuant to a Share
Purchase Agreement dated April 22, 2009 (the Purchase
Agreement) for an initial payment of approximately
$49 million consisting of cash totaling approximately
$25 million and the issuance of 638,261 shares of
NuVasive common stock to certain stockholders
72
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of Cervitech. Cervitech, a New Jersey based company, is focused
on the clinical approval of the
PCM
®
cervical disc system, a motion preserving total disc replacement
device in the United States. This acquisition allows NuVasive
the potential to accelerate its entry into the growing
mechanical cervical disc replacement market.
In addition to the initial payment, the Company may be obligated
to make an additional milestone payment of $33 million if
the U.S. Food and Drug Administration (FDA) issues an
approval order allowing the commercialization of
Cervitechs PCM device in the United States with an
intended use for treatment of degenerative disc disease. The
milestone payment may be made in cash or a combination of cash
and up to half in NuVasive common stock, at the Companys
discretion.
Purchase
Price
The acquisition of Cervitech was recorded using the acquisition
method of accounting in accordance with the revised
authoritative guidance for business combinations.
The estimated purchase price is determined as follows (
in
thousands)
:
|
|
|
|
|
Cash paid to sellers
|
|
$
|
25,055
|
|
Market value of NuVasive common stock issued on Closing Date
|
|
|
24,215
|
|
Contingent consideration liability, due on achieving milestone
|
|
|
29,722
|
|
|
|
|
|
|
Total estimated purchase price
|
|
$
|
78,992
|
|
|
|
|
|
|
The preliminary allocation of the estimated purchase price is
based on managements preliminary valuation of the fair
value of tangible, intangible assets and in-process research and
development acquired and liabilities assumed as of the Closing
Date and such estimates are subject to revision. The area of the
purchase price allocation that is not yet finalized relates
primarily to the valuation of income tax related assets
acquired. Consequently, the amounts recorded at
December 31, 2009 are subject to change, and the final
amounts may differ. The following table summarizes the
allocation of the estimated initial purchase price (
in
thousands
):
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated Useful
|
|
|
|
Fair Value
|
|
|
Life
|
|
|
Total current assets
|
|
$
|
1,233
|
|
|
|
|
|
Property, plant and equipment
|
|
|
59
|
|
|
|
|
|
Developed technology
|
|
|
700
|
|
|
|
14 years
|
|
Non-compete agreement
|
|
|
100
|
|
|
|
2 years
|
|
Trade name
|
|
|
700
|
|
|
|
10 years
|
|
In-process research and development
|
|
|
34,800
|
|
|
|
14 years
|
|
Goodwill
|
|
|
55,443
|
|
|
|
|
|
Current liabilities
|
|
|
(483
|
)
|
|
|
|
|
Deferred income tax liabilities
|
|
|
(13,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total estimated initial purchase price allocation
|
|
$
|
78,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Goodwill balance related to the Cervitech Acquisition was
$55.4 million as of December 31, 2009. Goodwill
represents the excess of the purchase price over the fair value
of tangible and identifiable intangible assets acquired. Of the
$55.4 million recorded as goodwill, none is expected to be
deductible for tax purposes.
Contingent
Consideration Liability
The arrangement requires the Company to pay an additional amount
not to exceed $33 million in the event that
Cervitechs device receives FDA approval. The fair value of
the contingent consideration at the Closing Date was
73
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
determined to be $29.7 million using a probability-weighted
discounted cash flow model. This fair value measurement is based
on significant inputs not observable in the market. The key
assumptions in applying this approach were the interest rate and
the probability assigned to the milestone being achieved.
Management will remeasure the fair value of the contingent
consideration at each reporting period, with any change in its
fair value resulting from either the passage of time or events
occurring after the acquisition date, such as changes in the
estimate of the probability of achieving the milestone, being
recorded in the current periods earnings. During the year
ended December 31, 2009, there were no changes in estimate
to affect the fair value of the contingent consideration
liability other than accretion related solely to the passage of
time. For the year ended December 31, 2009, the Company
recorded approximately $1.0 million in expense to reflect
the change in the fair value of the contingent consideration and
increasing the fair value of the contingent consideration
liability to $30.7 million at December 31, 2009. The
$1.0 million change in fair value is recorded in the
statement of operations as sales, marketing and administrative
expenses.
Results
of Operations
The accompanying consolidated statement of operations for the
year ended December 31, 2009 reflect the operating results
of Cervitech since the date of the acquisition. The amount of
loss attributable to Cervitech included in the Companys
consolidated statement of operations from the acquisition date
to December 31, 2009 was $3.3 million. For the year
ended December 31, 2009, the Companys consolidated
results of operations include acquisition-related expenses of
$1.3 million which are included in sales, marketing and
administrative expenses.
The Company has prepared the following unaudited pro forma
financial statement information to compare results of the
periods presented assuming the Cervitech acquisition had
occurred as of the beginning of the periods presented. These
unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be an indicator of the
results of operations that would have actually resulted had the
acquisition occurred at the beginning of each of the periods
presented, or of future results of operations.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
370,878
|
|
|
$
|
252,625
|
|
Net income (loss) attributable to NuVasive, Inc.
|
|
$
|
3,879
|
|
|
$
|
(38,427
|
)
|
Net income (loss) per share basic and diluted
|
|
$
|
0.10
|
|
|
$
|
(1.05
|
)
|
The above pro forma unaudited results of operations do not
include pro forma adjustments relating to costs of integration
or post-integration cost reductions that may be incurred or
realized by the Company in excess of actual amounts incurred or
realized through December 31, 2009.
Investment
in Progentix Orthobiology, B.V.
On January 13, 2009, the Company completed the purchase of
forty percent (40%) of the capital stock of Progentix
Orthobiology, B.V., a company organized under the laws of the
Netherlands (Progentix), from existing shareholders (the
Progentix Shareholders) pursuant to a Preferred Stock Agreement
for $10 million in cash (the Initial Investment). Progentix
has as its objective the development and exploitation of
knowledge and products in the field of bone defects and the
recovery of bone tissue in general. Progentix intends to further
extend the existing knowledge and patent position in the field
of Osteoinductive Bone Graft Material Technology. Since
inception in January 2008, Progentix has incurred approximately
$3.8 million in losses.
NuVasive and Progentix also entered into a Senior Secured
Facility Agreement dated January 13, 2009, whereby
Progentix may borrow up to $5 million from NuVasive to fund
ongoing clinical and regulatory efforts (the Loan). The proceeds
of the Loan are to be utilized towards achievement of all
milestones, as defined in the Preferred Stock Purchase
Agreement. The Loan accrues interest at a rate of six percent
(6%) per year. Other than its
74
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
obligations under the Loan Agreement, NuVasive is not obligated
to provide additional funding to Progentix. At December 31,
2009, the Company had advanced Progentix $3 million in
accordance with the Loan Agreement.
Concurrent with the Preferred Stock Purchase Agreement,
NuVasive, Progentix and the Progentix Shareholders entered into
an Option Purchase Agreement dated January 13, 2009, as
amended (the Option Agreement), whereby NuVasive may be
obligated (the Put Option), upon the achievement within two
years of certain milestones by Progentix, to purchase the
remaining sixty percent (60%) of capital stock of Progentix from
its shareholders for an amount up to $45 million, payable
in a combination of cash or NuVasive common stock at the
Companys sole discretion, subject to certain adjustments
(the Remaining Shares).
NuVasive may also be obligated, in the event that Progentix
achieves the milestones contemplated above within the requisite
two-year period, to make additional payments to Progentix
shareholders, excluding NuVasive, of up to an aggregate total of
$25 million, payable in a combination of cash
and/or
NuVasive common stock, at the Companys sole discretion,
subject to certain adjustments, upon completion of additional
milestones and dependent on NuVasives sales success.
NuVasive also has the right under the Option Agreement, as
amended, to purchase the Remaining Shares (the Call Option) at
any time between the second anniversary and the fourth
anniversary of the Option Agreement (the Option Period) for an
amount up to $35 million, payable in a combination of cash
and/or
NuVasive common stock, at the Companys sole discretion,
subject to certain adjustments. In the event NuVasive achieves
in excess of a specified annual sales run rate on Progentix
products during the Option Period, NuVasive may be required to
purchase the Remaining Shares for an amount up to
$35 million. NuVasive and Progentix also entered into a
Distribution Agreement, as amended, dated January 13, 2009,
whereby Progentix appointed NuVasive as its exclusive
distributor for certain Progentix products. The Distribution
Agreement will be in effect for a term of ten years unless
earlier terminated in accordance with its terms.
In accordance with authoritative guidance issued by the FASB,
the Company has determined that Progentix is a variable interest
entity (VIE) as it does not have the ability to finance its
activities without additional subordinated financial support and
its equity investors will not absorb their proportionate share
of expected losses and will be limited in the receipt of the
potential residual returns of Progentix. Additionally, pursuant
to this guidance, NuVasive is considered its primary beneficiary
as NuVasive has the obligation to absorb a majority of the
expected losses and the right to receive a majority of expected
residual returns of Progentix. This conclusion was reached due
to the existence of the Put Option and Call Option to acquire
the Remaining Shares at prices that were fixed upon entry into
the arrangement, with the specific prices based upon the
achievement of certain milestones within a specified period of
time. The fixed nature of the Put Option and the Call Option
limit Progentix Shareholders potential future returns.
Accordingly, the financial position and results of operations of
Progentix have been included in the consolidated financial
statements from the date of the Initial Investment. The
liabilities recognized as a result of consolidating Progentix do
not represent additional claims on the Companys general
assets. The creditors of Progentix have claims only on the
assets of Progentix, which are not material, and the assets of
Progentix are not available to NuVasive.
Pursuant to authoritative guidance, the equity interests in
Progentix not owned by the Company, which includes shares of
both common and preferred stock, are reported as noncontrolling
interests on the consolidated balance sheet of the Company. The
preferred stock represents 18% of the noncontrolling equity
interests and provides for a cumulative 8% dividend, if and when
declared by Progentixs Board of Directors. As the rights
and conversion features of the preferred stock are substantially
the same as those of the common stock, the preferred stock is
classified as noncontrolling interest and shares in the
allocation of the losses incurred by Progentix. Losses incurred
by Progentix are charged to the Company and to the
noncontrolling interest holders based on their ownership
percentage. The Remaining Shares and the Option Agreement that
was entered into between NuVasive, Progentix and the Progentix
Shareholders are not considered to be freestanding financial
instruments as defined by authoritative guidance. Therefore the
Remaining Shares and the Option Agreement are accounted for as a
combined unit on the consolidated financial statements as a
redeemable noncontrolling interest that is initially recorded at
fair value and classified as mezzanine equity.
75
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pursuant to authoritative guidance, when the embedded Put Option
is exercisable and therefore the Remaining Shares considered
currently redeemable (i.e., at the option of the holder), the
instrument should be adjusted to its maximum redemption amount.
If the embedded Put Option is considered not currently
exercisable (e.g., because a contingency has not been met), and
it is not probable that the embedded Put Option will become
exercisable, an adjustment is not necessary until it is probable
that the embedded Put Option will become exercisable. At
December 31, 2009, the embedded Put Option was not deemed
currently exercisable and therefore the Remaining Shares were
not redeemable because the milestones referred to previously had
not been met. Furthermore, at December 31, 2009, the
Company concluded it is not probable that the milestones will be
met and that the Remaining Shares will become redeemable. The
probability of redemption will be reevaluated at each reporting
period.
On December 30, 2009, NuVasive, Progentix and the Progentix
Shareholders entered into an amendment (the Amendment) to the
Option Agreement and the Distribution Agreement in connection
with the execution of an exclusive supply agreement between the
Company and Ceremed, Inc. The Amendment extends by five months
the period of time allotted for the achievement of each of the
milestones required to trigger the Put Options, reduces the
original amounts to be paid upon the exercise of the Put and
Call Options by an amount up to $14 million, and reduces
the transfer price to be paid to Progentix by NuVasive for the
supply of product. As the Remaining Shares and the Option
Agreement are accounted for as a combined unit in the
consolidated financial statements, this amendment resulted in
the redemption of the noncontrolling equity interests originally
issued in January 2009, and in accordance with authoritative
guidance, the noncontrolling equity interests were recorded at
fair value as of December 30, 2009, the date of the
amendment. The fair value of the equity interests issued on
December 30, 2009 approximated the carrying value of the
noncontrolling equity interests on that date.
In accordance with authoritative guidance, we have recorded the
identifiable assets, liabilities and noncontrolling interests in
the VIE at their fair value upon initial consolidation. There
has been no material change to the balances consolidated at the
date of the Initial Investment, therefore only the balances
consolidated as of December 31, 2009 are included below.
Total assets and liabilities of Progentix as of
December 31, 2009 are as follows
(in thousands):
|
|
|
|
|
Total current assets
|
|
$
|
581
|
|
Identifiable intangible assets, net
|
|
|
16,357
|
|
Goodwill
|
|
|
12,654
|
|
Accounts payable & accrued expenses
|
|
|
467
|
|
Other long term liabilities
|
|
|
82
|
|
Deferred tax liabilities
|
|
|
4,140
|
|
Noncontrolling interests
|
|
|
13,629
|
|
Intangible assets consolidated pursuant to the Progentix
investment are included in the Intangible assets, net balance in
the consolidated balance sheet as of December 31, 2009 and
consist of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
Intangible
|
|
|
|
Amortization
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Assets,
|
|
|
|
(in years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
Non-competition agreement
|
|
|
2
|
|
|
$
|
300
|
|
|
$
|
145
|
|
|
$
|
155
|
|
Existing technology
|
|
|
13
|
|
|
|
5,400
|
|
|
|
398
|
|
|
|
5,002
|
|
In-process research and development
|
|
|
|
|
|
|
11,200
|
|
|
|
|
|
|
|
11,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Progentix intangible assets
|
|
|
|
|
|
$
|
16,900
|
|
|
$
|
543
|
|
|
$
|
16,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Osteocel
Biologics Business Acquisition
On July 24, 2008, NuVasive completed the acquisition of
certain assets of Osiris Therapeutics, Inc. (Osiris) (the
Osteocel
®
Biologics Business Acquisition) for $35.0 million in cash
paid at closing pursuant to the Asset Purchase Agreement, as
amended. The completion date of this transaction is referred to
as the Technology Closing Date. At the Technology Closing Date,
the Company also entered into a Manufacturing Agreement, as
amended (collectively with the Asset Purchase Agreement, the
Agreements) with Osiris.
Under the terms of these Agreements, NuVasive was obligated to
make additional payments of up to $50.0 million, including
milestone-based contingent payments not to exceed
$20.0 million and a non-contingent $30.0 million
payment. The contingent payments were based on achieving
specified sales amounts and were not included in the preliminary
estimate of the purchase price of the Osteocel Biologics
Business. The Company paid the first milestone of
$5 million in cash during the fourth quarter of 2008.
During the year ended December 31, 2009, the Company paid
all remaining obligations in cash totaling $5.0 million and
through the issuance of 1,001,421 shares of the
Companys common stock with a market value of
$40.0 million.
The Companys purchase price allocation was updated in 2009
to reflect the milestone-based payments made in 2009 and to
reflect the impact of the amendments made to the Agreements in
March 2009, which eliminated the performance contingencies
applicable to $30.0 million of the $45.0 million in
then-remaining milestones.
This acquisition provides NuVasive with a comprehensive stem
cell biologic platform with benefits similar to autograft, as
well as rights to acquire the next generation cultured version
of the product. Osteocel is a unique bone matrix product that
provides the three beneficial properties similar to autograft:
osteoconduction (provides a scaffold for bone growth),
osteoinduction (bone formation stimulation) and osteogenesis
(bone production). Osteocel allows surgeons to offer the
benefits of these properties to patients without the discomfort
and potential complications of autograft harvesting, in addition
to eliminating the time spent on a secondary surgical procedure.
Osteocel is produced for use in spinal applications through a
proprietary processing method that preserves the native stem
cell population that resides in marrow rich bone.
Purchase
Price
The purchase price has been allocated to the tangible and
intangible assets acquired based on their respective fair values
as of the Technology Closing Date. The allocation of the
purchase price resulted in an excess of the total purchase price
over the fair value of net tangible and intangible assets
acquired by approximately $33.7 million.
The purchase price is determined as follows (
in
thousands)
:
|
|
|
|
|
Cash paid on Technology Closing Date
|
|
$
|
35,000
|
|
Cash payments
|
|
|
10,000
|
|
Market value of NuVasive common stock issued
|
|
|
39,371
|
|
Transaction costs and other
|
|
|
544
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
84,915
|
|
|
|
|
|
|
77
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the allocation of the purchase
price (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated Useful
|
|
|
|
Fair Value
|
|
|
Life
|
|
|
Manufacturing know-how and trade secrets
|
|
$
|
19,800
|
|
|
|
13 years
|
|
Developed technology
|
|
|
7,200
|
|
|
|
10 years
|
|
Discounted price purchase contract
|
|
|
2,500
|
|
|
|
0.5 years
|
|
Trade name and trademarks
|
|
|
4,700
|
|
|
|
15 years
|
|
Customer contracts and relationships
|
|
|
330
|
|
|
|
0.5-2 years
|
|
In-process research and development
|
|
|
16,700
|
|
|
|
|
|
Goodwill
|
|
|
33,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total estimated initial purchase price allocation
|
|
$
|
84,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded an in-process research and development
(IPR&D) charge of $16.7 million related to the
Osteocel Biologics Business Acquisition. As of the date of the
acquisition, the projects associated with the IPR&D efforts
had not yet reached technological feasibility and the research
and development in-process had no alternative future uses.
Accordingly, the amount was charged to expense on the
acquisition date and is reported as a separate IPR&D line
item on the statement of operations.
Radius
Acquisition
On January 23, 2007, NuVasive and Radius Medical, LLC
(Radius), along with certain members and managers of Radius,
entered into an Asset Purchase Agreement (the Purchase
Agreement) providing for the acquisition by NuVasive of
substantially all of 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 connection with the transaction, Radius
received net cash payments of approximately $5.0 million
and 451,677 unregistered shares of NuVasive common stock. The
Company has included the results of the acquired Radius
operations in its statement of operations from the date of the
acquisition. The Company does not consider the Radius
acquisition material to its results of operations or financial
position, and therefore is not presenting pro forma information.
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 acquisition is consistent
with the Companys objectives of developing or acquiring
innovative technologies.
As part of the acquisition, NuVasive also acquired, as of
January 23, 2007, all of Radius right, title and
interest in and to that certain Supply Agreement dated
November 4, 2004, by and between Maxigen Biotech, Inc.
(MBI) and Radius, as amended to date (the MBI Supply Agreement).
MBI is a Taiwanese company that manufactures FormaGraft and owns
a portion of the core technology underlying FormaGraft. Under
the MBI Supply Agreement and following NuVasives
succession to Radius interest therein, MBI has agreed to
exclusively sell to NuVasive (and NuVasive has agreed to
exclusively purchase from MBI) such quantities as NuVasive may
order of all current and future products manufactured by MBI for
use as synthetic bone graft substitutes consisting of certain
collagens or ceramics, and grants exclusive distributor rights
to NuVasive for North America, EU countries, South American and
Central American countries, Australia, New Zealand and their
respective territories (with additional territories on a
non-exclusive basis). NuVasive is required to purchase a minimum
of $0.9 million of product from MBI per calendar year. In
2009 and 2008, NuVasive purchased a total of $0.9 million
and $1.5 million of product from MBI, respectively. MBI has
also granted to NuVasive an exclusive, perpetual, royalty-free
license to use all such MBI products, and all related
proprietary rights and proprietary information relating thereto,
including without limitation, rights to conduct research and
development, develop modifications, improvements or additional
78
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
products and to use and sell such improvements and additional
products. Radius was required to pay MBI a one-time license fee
in consideration for the above described license, which
obligation was satisfied by Radius.
Purchase
Price
The total purchase consideration consisted of (
in
thousands
):
|
|
|
|
|
Net cash paid to Radius
|
|
$
|
4,970
|
|
Market value of NuVasive common stock issued on the Closing Date
|
|
|
10,501
|
|
Cash deposited in escrow
|
|
|
2,000
|
|
Acquisition-related costs, consisting primarily of professional
fees
|
|
|
306
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
17,777
|
|
|
|
|
|
|
The Company has allocated the total purchase consideration to
the assets acquired based on their respective fair values at the
acquisition date. The following table summarizes the allocation
of the purchase price (
in thousands
).
|
|
|
|
|
MBI Supply Agreement
|
|
$
|
9,400
|
|
Licensed technology
|
|
|
7,145
|
|
Inventory
|
|
|
132
|
|
Goodwill
|
|
|
1,100
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
17,777
|
|
|
|
|
|
|
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 sheet. As of
December 31, 2009, there have been no indicators of
impairment of the Companys investment in MBI.
In March 2008, NuVasive completed a buy-out of royalty
obligations on
SpheRx
®
pedicle screw and related technology products and acquired new
pedicle screw intellectual property for cash payments
aggregating $6.3 million. Of the aggregate 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.
79
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
4.
|
Marketable
Securities.
|
Marketable securities include U.S. government treasury
securities, government-sponsored entity securities and corporate
notes that are classified as
available-for-sale.
A summary of the Companys marketable securities, including
the gross unrealized gains and losses and fair values for those
marketable securities, are as follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Maturity
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
(in Years)
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
Less than 1
|
|
|
$
|
1,979
|
|
|
$
|
|
|
|
$
|
(6
|
)
|
|
$
|
1,973
|
|
Corporate notes
|
|
|
Less than 1
|
|
|
|
4,955
|
|
|
|
4
|
|
|
|
|
|
|
|
4,959
|
|
U.S. government treasury securities
|
|
|
Less than 1
|
|
|
|
27,963
|
|
|
|
24
|
|
|
|
(4
|
)
|
|
|
27,983
|
|
Securities of government-sponsored entities
|
|
|
Less than 1
|
|
|
|
64,317
|
|
|
|
67
|
|
|
|
(20
|
)
|
|
|
64,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term marketable securities
|
|
|
|
|
|
|
99,214
|
|
|
|
95
|
|
|
|
(30
|
)
|
|
|
99,279
|
|
Classified as non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities of government-sponsored entities
|
|
|
1 to 2
|
|
|
|
40,026
|
|
|
|
8
|
|
|
|
(66
|
)
|
|
|
39,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities at December 31, 2009
|
|
|
|
|
|
$
|
139,240
|
|
|
$
|
103
|
|
|
$
|
(96
|
)
|
|
$
|
139,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
118,129
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
118,129
|
|
Commercial paper
|
|
|
1,452
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
1,450
|
|
Corporate notes
|
|
|
4,283
|
|
|
|
4
|
|
|
|
(6
|
)
|
|
|
4,281
|
|
Securities of government-sponsored entities
|
|
|
40,054
|
|
|
|
197
|
|
|
|
(5
|
)
|
|
|
40,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,918
|
|
|
|
201
|
|
|
|
(13
|
)
|
|
|
164,106
|
|
Less cash equivalents
|
|
|
(118,368
|
)
|
|
|
|
|
|
|
|
|
|
|
(118,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term marketable securities
|
|
|
45,550
|
|
|
|
201
|
|
|
|
(13
|
)
|
|
|
45,738
|
|
Classified as non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
|
|
4,467
|
|
|
|
15
|
|
|
|
(52
|
)
|
|
|
4,430
|
|
Securities of government-sponsored entities
|
|
|
40,495
|
|
|
|
380
|
|
|
|
|
|
|
|
40,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities at December 31, 2008
|
|
$
|
90,512
|
|
|
$
|
596
|
|
|
$
|
(65
|
)
|
|
$
|
91,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company reviews its investments to identify and evaluate
investments that have an indication of possible
other-than-temporary
impairment. Factors considered in determining whether a loss is
other-than-temporary
include the length of time and extent to which fair value has
been less than the cost basis, the financial condition and
80
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
near-term prospects of the investee, and the Companys
intent and ability to hold the investment for a period of time
sufficient to allow for any anticipated recovery in market
value. At December 31, 2009, all of the Companys
investments in a gross unrealized loss position had been in such
a position for less than twelve months. These declines in value
are not considered
other-than-temporary
as the Company has both the intent and ability to hold these
investments until their maturity. The Company does not use
derivative financial instruments. The Company places our cash
investments in instruments that meet high credit quality
standards, as specified in our investment policy guidelines.
These guidelines also limit the amount of credit exposure to any
one issue, issuer or type of instrument.
Realized gains and losses and declines in value judged to be
other-than-temporary,
if any, on
available-for-sale
securities are included in other income or expense. Realized
gains and losses for securities sold were immaterial for all
years presented. The cost of securities sold is based on the
specific identification method. Interest and dividends on
securities classified as
available-for-sale
are included in investment income.
|
|
5.
|
Fair
Value Measurements
|
Effective January 1, 2008, the Company adopted the
authoritative guidance for the 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. The Company
measures certain assets at fair value and thus there was no
impact on the Companys consolidated financial statements
upon adoption of the guidance. The guidance requires fair value
measurements 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.
The Companys assets and liabilities, which are measured at
fair value on a recurring basis, at December 31, 2009 were
determined using the following inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Price
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Unobservable
|
|
|
|
|
|
|
Market
|
|
|
Observable
|
|
|
Inputs
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
Inputs (Level 2)
|
|
|
(Level 3)
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S government treasury securities
|
|
$
|
27,983
|
|
|
$
|
27,983
|
|
|
$
|
|
|
|
$
|
|
|
Securities of government-sponsored entities
|
|
|
104,332
|
|
|
|
104,332
|
|
|
|
|
|
|
$
|
|
|
Corporate notes
|
|
|
4,959
|
|
|
|
4,959
|
|
|
|
|
|
|
$
|
|
|
Certificates of deposit
|
|
|
1,973
|
|
|
|
1,973
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities at December 31, 2009
|
|
$
|
139,247
|
|
|
$
|
139,247
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Consideration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term acquisition related liabilities
|
|
$
|
30,694
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the change in the estimated fair
value for the Companys liability measured using
significant unobservable inputs (level 3) for the year
ended December 31, 2009 (in thousands).
|
|
|
|
|
|
|
Fair Value Measurement
|
|
|
|
Using
|
|
|
|
Significant Unobservable
|
|
|
|
Inputs
|
|
|
|
(Level 3)
|
|
|
Fair Value Measurement at December 31, 2008
|
|
$
|
|
|
Contingent consideration liability recorded upon acquisition
|
|
|
29,722
|
|
Change in fair value measurement included in operating expenses
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at December 31, 2009
|
|
$
|
30,694
|
|
|
|
|
|
|
|
|
|
|
|
Effective January 1, 2009, the Company implemented the
authoritative guidance for nonfinancial assets and liabilities
that are remeasured at fair value on a non-recurring basis. As
the Company has not elected to measure any non-financial assets
or liabilities at fair value that were not previously required
to be remeasured at fair value, the adoption of this guidance
did not have a material impact on the financial position or
results of operations. However, it could have an impact in
future periods.
Property and Equipment, net.
Property and
equipment, net, consisted of the following (
in
thousands
)
:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Instrument sets
|
|
$
|
85,730
|
|
|
$
|
62,376
|
|
Machinery and equipment
|
|
|
14,899
|
|
|
|
10,077
|
|
Computer equipment and software
|
|
|
12,449
|
|
|
|
16,190
|
|
Leasehold improvements
|
|
|
15,156
|
|
|
|
15,470
|
|
Furniture and fixtures
|
|
|
5,243
|
|
|
|
3,583
|
|
Land, building and improvements
|
|
|
5,511
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,988
|
|
|
|
113,029
|
|
Less: accumulated depreciation and amortization
|
|
|
(56,386
|
)
|
|
|
(39,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
82,602
|
|
|
$
|
73,686
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $23.4 million, $17.0 million,
and $11.4 million for the years ended December 31,
2009, 2008 and 2007, respectively.
Goodwill and Intangible Assets.
Goodwill and
intangible assets were acquired in connection with business
combinations and asset acquisitions discussed in Notes 2
and 3.
82
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill and intangible assets as of December 31, 2009
consisted of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Intangible
|
|
|
|
(in years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Assets, net
|
|
|
Intangible Assets Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased technology:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology
|
|
|
15
|
|
|
$
|
31,975
|
|
|
$
|
(5,548
|
)
|
|
$
|
26,427
|
|
Manufacturing know-how and trade secrets
|
|
|
13
|
|
|
|
20,408
|
|
|
|
(2,394
|
)
|
|
|
18,014
|
|
Trade name and trademarks
|
|
|
14
|
|
|
|
5,900
|
|
|
|
(520
|
)
|
|
|
5,380
|
|
Customer relationships
|
|
|
14
|
|
|
|
9,730
|
|
|
|
(2,213
|
)
|
|
|
7,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
68,013
|
|
|
$
|
(10,675
|
)
|
|
$
|
57,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets Not Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
206,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets as of December 31, 2008
consisted of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Intangible
|
|
|
|
(in years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Assets, net
|
|
|
Intangible Assets Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased technology:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology
|
|
|
15
|
|
|
$
|
25,875
|
|
|
$
|
(3,165
|
)
|
|
$
|
22,710
|
|
Manufacturing know-how and trade secrets
|
|
|
13
|
|
|
|
19,800
|
|
|
|
(647
|
)
|
|
|
19,153
|
|
Trade name and trademarks
|
|
|
15
|
|
|
|
4,700
|
|
|
|
(133
|
)
|
|
|
4,567
|
|
Customer relationships
|
|
|
14
|
|
|
|
9,730
|
|
|
|
(1,392
|
)
|
|
|
8,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,105
|
|
|
$
|
(5,337
|
)
|
|
$
|
54,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets Not Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense related to the amortization of intangible assets
was $5.3 million, $3.0 million and $1.5 million
for the years ended December 31, 2009, 2008 and 2007,
respectively.
83
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total future amortization expense related to intangible assets
subject to amortization at December 31, 2009 is set forth
in the table below
(in thousands):
|
|
|
|
|
2010
|
|
$
|
5,334
|
|
2011
|
|
|
5,070
|
|
2012
|
|
|
5,048
|
|
2013
|
|
|
5,043
|
|
2014
|
|
|
5,056
|
|
Thereafter through 2027
|
|
|
31,787
|
|
|
|
|
|
|
Total future amortization expense
|
|
$
|
57,338
|
|
|
|
|
|
|
The change to goodwill during the year ended December 31,
2009 is comprised of the following (in thousands):
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
2,331
|
|
Additions recorded in connection with investment in Progentix
|
|
|
12,654
|
|
Additions recorded in connection with additional payments to
Osiris
|
|
|
32,454
|
|
Additions recorded in connection with acquisition of Cervitech
|
|
|
55,443
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
102,882
|
|
|
|
|
|
|
Accounts Payable and Accrued
Liabilities.
Accounts payable and accrued
liabilities consisted of the following (
in
thousands
)
:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Accounts payable
|
|
$
|
10,594
|
|
|
$
|
15,656
|
|
Accrued expenses
|
|
|
15,550
|
|
|
|
10,669
|
|
Other
|
|
|
345
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,489
|
|
|
$
|
26,633
|
|
|
|
|
|
|
|
|
|
|
Other Long-Term Liabilities.
Other long-term
liabilities consisted of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred rent
|
|
$
|
10,333
|
|
|
$
|
9,256
|
|
Deferred tax liabilities
|
|
|
17,700
|
|
|
|
|
|
Other
|
|
|
439
|
|
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,472
|
|
|
$
|
12,177
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
Senior
Convertible Notes
|
In March 2008, the Company issued $230.0 million principal
amount of 2.25% unsecured Senior Convertible 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
pays 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 fair value of the outstanding
Notes at December 31, 2009 is approximately
$228.1 million.
84
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Notes are convertible into shares of the Companys
common stock, 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 Companys 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 Companys
common stock at an initial stock price of $44.74 per share, each
of which is subject to adjustment. In addition, the Company sold
to the Counterparties warrants to acquire up to 5.1 million
shares of the Companys 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 December 31, 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 Companys common stock
exceeds the strike price of the Hedge. The Warrants could have a
dilutive effect on the Companys earnings per share to the
extent that the price of the Companys common stock during
a given measurement period (the quarter or year to date period)
exceeds the strike price of the Warrants.
Leases
The Company leases office facilities and equipment under various
operating lease agreements. The initial terms of these leases
range from three years to 15 years and generally provide
for periodic rent increases and renewal options. Certain leases
require the Company to pay taxes, insurance and maintenance.
In November 2007, the Company entered into a
15-year
lease agreement for the purpose of relocating the Companys
corporate headquarters to an approximately 140,000 square
foot two-building campus style complex in San Diego. Rental
payments consist of base rent that escalates at an annual rate
of three percent over the
15-year
period of the lease, plus common area maintenance expenses paid
to the landlord. 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 transferable
letter of credit. Relocation to the new facility was completed
during August 2008.
In connection with this relocation, in the third quarter of
2008, the Company recorded a liability for approximately
$3.9 million related to lease termination costs in
connection with vacating the Companys former corporate
headquarters. During the third quarter of 2009, due to continued
growth, the Company decided to reoccupy the former corporate
headquarters facility and accordingly, reversed the remaining
lease termination costs liability of $2.0. This amount was
recorded as a reduction of sales, marketing, and administrative
expenses for the year ended December 31, 2009. The activity
for this liability is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 1,
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
Reversal of
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Cash expenses
|
|
|
2008
|
|
|
Cash expenses
|
|
|
liability
|
|
|
2009
|
|
|
Lease termination liabiltiy
|
|
$
|
3,886
|
|
|
$
|
(717
|
)
|
|
$
|
3,169
|
|
|
$
|
(1,172
|
)
|
|
$
|
(1,997
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For financial reporting purposes, rent expense is recognized on
a straight-line basis over the term of the lease. Accordingly,
rent expense recognized in excess of rent paid is reflected as a
liability in the accompanying
85
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated balance sheets. Rent expense, including expenses
directly associated with the facility leases, was approximately
$6.4 million, $4.4 million, and $1.8 million for
the years ended December 31, 2009, 2008, and 2007,
respectively.
The Companys future minimum annual lease payments,
including payments for costs directly associated with the
facility leases, for years ending after December 31, 2009
are as follows
(in thousands):
|
|
|
|
|
|
|
Operating
|
|
|
|
Leases
|
|
|
2010
|
|
$
|
7,214
|
|
2011
|
|
|
7,302
|
|
2012
|
|
|
7,014
|
|
2013
|
|
|
6,042
|
|
2014
|
|
|
4,958
|
|
Thereafter
|
|
|
49,684
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
82,214
|
|
|
|
|
|
|
Other
Commitments
In connection with the acquisition of RSB, the Company is
contingently obligated to make additional annual payments over a
period of 12 years based upon sales of the products derived
from Smart
Plate
®
Gradient
CLP
tm
and related technology. Through December 31, 2009, these
amounts have not been significant.
As a result of the acquisition of Radius Medical LLC in January
2007, the Company is obligated to purchase, on an annual basis,
a minimum number of units of FormaGraft from Maxigen Biotech,
Inc. at an annual cost of approximately $900,000.
In connection with the investment in Progentix as described in
Note 2, the Company is contingently obligated to make
additional payments of up to $69 million based upon the
achievement of specified milestones. In addition, the Company is
obligated to advance an additional $2 million in accordance
with the terms a loan agreement entered into in conjunction with
the investment.
In connection with the acquisition of Cervitech as described in
Note 2, the Company is contingently obligated to make
additional payments up to $33 million upon FDA approval of
the PCM device. The milestone payment may be made in cash or a
combination of cash and up to half in NuVasive common stock, at
the Companys discretion.
Contingencies
The Company is party to certain claims and legal actions arising
in the normal course of business. The Company does not expect
any such claims and legal actions to have a material adverse
effect on its business, results of operations or financial
condition.
Preferred Stock.
There are
5,000,000 shares of preferred stock authorized and none
issued or outstanding at December 31, 2009 and 2008.
Stock Option and Restricted Stock Units.
In
October 1998, the Company adopted the 1998 Stock Incentive Plan
(the 1998 Plan) to grant options to purchase common stock to
eligible employees, non-employee members of the board of
directors, consultants and other independent advisors who
provide services to the Company. Under the 1998 Plan,
4.3 million shares of common stock, as amended, were
reserved for issuance upon exercise of options
86
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
granted by the Company. The board of directors determines the
terms of the stock option agreements, including vesting
requirements. Options under the 1998 Plan have a
10-year
term
and generally vest over a period not to exceed four years from
the date of grant. All options granted under the 1998 Plan allow
for early exercise prior to the option becoming fully vested.
Unvested common shares obtained upon early exercise of options
are subject to repurchase by the Company at the original issue
price.
In April 2004, the board of directors replaced the 1998 Plan
with the 2004 Equity Incentive Plan (the 2004 Plan) under which
7 million shares (plus the remaining shares available
for grant under the 1998 Plan) of the Companys common
stock are authorized for future issuance, and reserved for
purchase upon exercise of options granted. In addition, the 2004
Plan provides for automatic annual increases in the number of
shares reserved for issuance thereunder equal to the lesser of
(i) 4% of the Companys outstanding shares on the last
business day in December of the calendar year immediately
preceding; (ii) 4,000,000 shares; or (iii) a
number of shares determined by the board of directors. As of
December 31, 2009, 39,786 shares remained available
for future grant under the 2004 Plan.
The 2004 Plan provides for the grant of incentive and
nonstatutory stock options, restricted stock units (RSUs) and
rights to purchase stock to employees, directors and consultants
of the Company. The 2004 Plan provides that incentive stock
options will be granted only to employees and are subject to
certain limitations as to fair value during a calendar year.
Under the 2004 Plan, the exercise price of incentive stock
options must equal at least the fair value on the date of grant
and the exercise price of non-statutory stock options and the
issuance price of common stock under the stock issuance program
may be no less than 85% of the fair value on the date of grant
or issuance. The options are exercisable for a period of up to
ten years after the date of grant and generally vest 25% one
year from date of grant and ratably each month thereafter for a
period of 36 months. The RSUs generally vest 25% per year
beginning one year from date of grant. In addition, the board of
directors has provided for the acceleration of 50% of the
unvested options of all employees upon a change in control and
the vesting of the remaining unvested options for those
employees that are involuntarily terminated within a year of the
change in control.
Following is a summary of stock option activity through
December 31, 2009 under all stock option plans (
in
thousands, except per share amounts
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Underlying
|
|
|
Avg. Exercise
|
|
|
Contractual
|
|
|
Value as of
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term (Years)
|
|
|
December 31, 2009
|
|
|
Outstanding at December 31, 2008
|
|
|
5,205
|
|
|
$
|
25.92
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,371
|
|
|
$
|
35.01
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(769
|
)
|
|
$
|
15.12
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(90
|
)
|
|
$
|
32.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
5,717
|
|
|
$
|
29.44
|
|
|
|
7.45
|
|
|
$
|
32,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
3,089
|
|
|
$
|
24.49
|
|
|
|
6.63
|
|
|
$
|
29,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or Expected to Vest at December 31, 2009
|
|
|
5,533
|
|
|
$
|
27.29
|
|
|
|
7.36
|
|
|
$
|
41,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options at December 31,
2009 is based on the Companys closing stock price on
December 31, 2009 of $31.98. The Company received
$9.3 million, $8.8 million and $5.4 million in
proceeds from the exercise of stock options during the years
ended December 31, 2009, 2008 and 2007, respectively.
87
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted Stock Units.
A summary of
restricted stock unit (RSU) activity for the period indicated
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at December 31, 2008
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
293,150
|
|
|
|
36.51
|
|
Vested
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(16,800
|
)
|
|
|
34.58
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
276,350
|
|
|
$
|
36.62
|
|
|
|
|
|
|
|
|
|
|
As the Company began issuing RSUs in January 2009 with annual
vesting, no awards vested during the year ended
December 31, 2009.
Employee Stock Purchase Plan.
In 2004, the
board of directors approved the Employee Stock Purchase Plan
(ESPP). The ESPP initially allowed for the issuance of up to
100,000 shares of NuVasive common stock, increasing
annually on December 31 by the lesser of
(i) 600,000 shares; (ii) 1% of the outstanding
shares of NuVasive common stock; or (iii) a lesser amount
determined by the board of directors. Under the terms of the
ESPP, employees can elect to have up to 15% of their annual
compensation, up to a maximum of $25,000 per year withheld to
purchase shares of NuVasive common stock. The purchase price of
the common stock is equal to 85% of the lower of the fair market
value per share of the common stock on the commencement date of
the two-year offering period or the end of each semi-annual
purchase period. In 2009, 2008, and 2007, 106,575, 131,916, and
113,494 shares, respectively, were purchased under the ESPP
and approximately 1.1 million remain available for issuance
under the ESPP as of December 31, 2009.
Stock-Based Compensation.
The compensation
cost that has been included in the statement of operations for
all share-based compensation arrangements was as follows (
in
thousands, except per share amounts)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Sales, marketing and administrative expense
|
|
$
|
19,549
|
|
|
$
|
17,837
|
|
|
$
|
11,404
|
|
Research and development expense
|
|
|
4,244
|
|
|
|
3,110
|
|
|
|
2,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
23,793
|
|
|
$
|
20,947
|
|
|
$
|
13,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on basic net income (loss) per share
|
|
$
|
(0.64
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on diluted net income (loss) per share
|
|
$
|
(0.61
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company estimates the fair value of stock options and shares
issued to employees under the Employee Stock Purchase Plan using
a Black-Scholes option-pricing model on the date of grant. The
fair value of RSUs is based on the stock price on the date of
grant. The fair value of equity instruments that are expected to
vest are recognized and amortized on an accelerated basis over
the requisite service period. The Black-Scholes option-pricing
model incorporates various and highly sensitive assumptions
including expected volatility, expected term and interest rates.
The expected volatility is based on the historical volatility of
the Companys common stock over the most recent period
commensurate with the estimated expected term of the
Companys stock options. The expected term of the
Companys stock options is based on historical experience.
The risk-free rate for periods within the contractual life of
the option is based on the U.S. Treasury yield in effect at
the time of grant. The Company has never declared or paid
dividends and has no plans to do so in the foreseeable future.
88
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The assumptions used to estimate the fair value of stock options
granted and stock purchase rights under the Employee Stock
Purchase Plan (ESPP) are as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Stock Options
|
|
|
|
|
|
|
Volatility
|
|
45% to 48%
|
|
42% to 45%
|
|
50%
|
Expected term (years)
|
|
3.3 to 4.9
|
|
4.0 to 4.5
|
|
2.5 to 4.5
|
Risk free interest rate
|
|
1.4% to 2.5%
|
|
1.6% to 3.4%
|
|
3.4% to 4.9%
|
Expected dividend yield
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
ESPP
|
|
|
|
|
|
|
Volatility
|
|
40% to 65%
|
|
42%
|
|
50%
|
Expected term (years)
|
|
0.5 to 2.0
|
|
0.5 to 2.0
|
|
0.5 to 2.0
|
Risk free interest rate
|
|
0.9% to 4.9%
|
|
1.5% to 3.0%
|
|
4.4% to 4.9%
|
Expected dividend yield
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
The weighted-average fair value of options granted in the years
ended December 31, 2009, 2008, and 2007, was $13.28,
$14.46, and $10.81 per share, respectively. As of
December 31, 2009, there was $13.5 million of
unrecognized compensation expense for stock options which is
expected to be recognized over a weighted-average period of
approximately 1.1 years. In addition, as of
December 31, 2009, there was $2.4 million of
unrecognized compensation expense for shares expected to be
issued under the Employee Stock Purchase Plan which is expected
to be recognized through October 2011. The total intrinsic value
of options exercised was $17.7 million, $28.1 million,
and $20.2 million, respectively, the years ended
December 31, 2009, 2008 and 2007.
At December 31, 2009, there was $6.1 million of
unrecognized compensation cost related to RSUs which the Company
will amortize to expense in over a weighted-average period of
approximately 3.3 years. Unrecognized compensation cost
will be adjusted for future changes in estimated forfeitures.
Common Stock Reserved for Future Issuance.
The
following table summarizes common shares reserved for issuance
at December 31, 2009 on exercise or conversion of
(in
thousands)
:
|
|
|
|
|
Common stock options:
|
|
|
|
|
Issued and outstanding
|
|
|
5,717
|
|
Available for future grant
|
|
|
40
|
|
Available for issuance under the Employee Stock Purchase Plan
|
|
|
1,104
|
|
Issued and outstanding Restricted Stock Units
|
|
|
276
|
|
Senior Convertible Notes
|
|
|
5,141
|
|
Senior Convertible Note warrants
|
|
|
5,141
|
|
|
|
|
|
|
Total shares reserved for future issuance
|
|
|
17,419
|
|
|
|
|
|
|
89
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The income (loss) before income taxes by region is summarized as
follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
13,093
|
|
|
$
|
(26,671
|
)
|
|
$
|
(11,348
|
)
|
Foreign
|
|
|
(6,924
|
)
|
|
|
(857
|
)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) before income taxes
|
|
$
|
6,169
|
|
|
$
|
(27,528
|
)
|
|
$
|
(11,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of income tax expense consists of the following
(
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
715
|
|
|
$
|
|
|
|
$
|
|
|
State
|
|
|
1,763
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
2,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
(782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,732
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax expense (benefit) is different from that which
would be obtained by applying the statutory federal income tax
rate (35%) to income before taxes and before reduction for
non-controlling interests. These differences are the result of
the following items (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Provision at statutory rate
|
|
$
|
2,159
|
|
|
$
|
(9,635
|
)
|
|
$
|
(3,943
|
)
|
Foreign provision in excess of federal statutory rate
|
|
|
498
|
|
|
|
52
|
|
|
|
|
|
State income taxes (benefit), net of federal benefit
|
|
|
1,146
|
|
|
|
97
|
|
|
|
|
|
Permanent differences
|
|
|
3,323
|
|
|
|
1,751
|
|
|
|
2,093
|
|
Other
|
|
|
471
|
|
|
|
253
|
|
|
|
(1,285
|
)
|
Change in valuation allowance
|
|
|
(5,865
|
)
|
|
|
7,482
|
|
|
|
3,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,732
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities are as
follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
31,422
|
|
|
$
|
31,854
|
|
Capitalized assets
|
|
|
15,566
|
|
|
|
21,201
|
|
Stock based compensation
|
|
|
16,357
|
|
|
|
9,939
|
|
Original issue discount
|
|
|
12,222
|
|
|
|
15,097
|
|
General business credit carry-forwards
|
|
|
3,564
|
|
|
|
4,974
|
|
Other
|
|
|
5,491
|
|
|
|
2,351
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
84,622
|
|
|
|
85,416
|
|
|
|
|
|
|
|
|
|
|
Net valuation allowance
|
|
|
(84,010
|
)
|
|
|
(85,416
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
612
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Acquired intangibles
|
|
$
|
(17,700
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
(17,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net deferred tax assets (liabilities)
|
|
|
(17,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Deferred tax liability, net, attributable to
noncontrolling interests
|
|
|
2,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
(14,971
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
With the exception of Puerto Rico and the Netherlands, the
Company continues to maintain a full valuation allowance on its
net deferred tax assets in all jurisdictions. During 2009, the
Company established a U.S. deferred tax liability
pertaining to intangibles, purchased as part of its Cervitech
stock acquisition, for which tax basis does not exist. Such
deferred tax liability cannot be used to offset deferred tax
assets when analyzing the Companys end of year valuation
allowance as the acquired intangibles are indefinite lived.
Included in the Companys net deferred tax liability
balance at December 31, 2009, is a $12.2 million
deferred tax asset pertaining to future tax deductions of
original issue discount related to the Companys 2008
Treas. Reg. § 1.1275-6 hedge transaction. The
aforementioned deferred tax asset and corresponding valuation
allowance were recorded with an offset to
additional-paid-in-capital (APIC). If, and when, the
Companys valuation allowance is released, any remaining
benefit attributable to such deferred tax asset will be
recognized as an increase to APIC. Further, any current year
benefit associated with original issue discount deductions is
recognized as an increase to APIC.
At December 31, 2009, the Company has federal net operating
loss carryovers of $115.0 million that begin to expire in
2017. In addition, the Company has state net operating loss
carryovers of approximately $74.0 million which will begin
to expire in the year prescribed by applicable state statute.
Included in the aforementioned federal and state net operating
loss carryovers are $39.0 million of excess tax benefit
carryovers related to stock option deduction windfalls that will
be realized in APIC following utilization of all continuing
operations tax attributes.
During 2008, NuVasive elected the
with and without
method direct effects only,
prescribed in
accordance with authoritative guidance, with respect to
recognition of stock option excess tax benefits within APIC and
will utilize continuing operations net operating losses to
offset taxable income before utilization of windfall tax
benefits.
91
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2009, the Company has federal research and
development (R&D) credit carryovers of
approximately $2.2 million which will begin to expire in
2017. At December 31, 2009, the Company has California
R&D credit carryovers of approximately $2.1 million
which can be carried forward indefinitely.
IRC §382 limits the utilization of tax attribute
carryforwards that arise prior to certain cumulative changes in
a corporations ownership. During 2009, the Company
completed a formal IRC §382 study with respect to potential
ownership changes and additional limitations were not
identified. Previous limitations due to §382 have been
reflected in the deferred tax asssets at December 31, 2009.
In accordance with authoritative guidance, the impact of an
uncertain income tax position on the income tax return must be
recognized at the largest amount that is more-likely-than-not to
be sustained upon audit by the relevant taxing authority. An
uncertain income tax position will not be recognized if it has
less than a 50% likelihood of being sustained.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (
in thousands
):
|
|
|
|
|
Unrecognized tax benefits balance at December 31, 2007
|
|
$
|
|
|
Increase related to prior year tax positions
|
|
|
981
|
|
|
|
|
|
|
Unrecognized tax benefits balance at December 31, 2008
|
|
|
981
|
|
Increase related to prior year tax positions
|
|
|
2,293
|
|
|
|
|
|
|
Unrecognized tax benefits balance at December 31, 2009
|
|
$
|
3,274
|
|
|
|
|
|
|
The Companys policy is to recognize interest and penalties
related to income tax matters in income tax expense. Because the
Company has generated net operating losses since inception for
both state and federal purposes, no additional tax liability,
penalties or interest has been recognized for balance sheet or
income statement purposes as of and for the period ended
December, 31, 2009.
Of the Companys total unrecognized tax benefits on
December 31, 2009 and 2008, $2.1 million and $637,000,
respectively, would impact the Companys effective income
tax rate if recognized, were the Company to remove its valuation
allowance.
The Company may have significant changes to their unrecognized
tax benefits for R&D credits when the formal R&D
credit study is completed, which is expected to be within the
next 12 months. The Company cannot estimate the range of
the possible changes at this time.
The Company is subject to taxation in the U.S. and various
foreign and state jurisdictions. All of the Companys tax
years are subject to examination due to the carry forward of
un-utilized net operating losses and R&D credits
UCLA
Litigation
The Company has been involved in a series of related lawsuits
involving families of decedents who donated their bodies through
UCLAs willed body program. The complaint alleges that the
head of UCLAs 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 allege the following causes of action:
(i) breach of fiduciary duty, (ii) negligence,
(iii) fraud, (iv) negligent misrepresentation,
(v) negligent infliction of emotional distress,
(vi) intentional infliction of emotional distress,
(vii) intentional interference with human remains,
(viii) negligent interference with human remains,
(ix) violation of California Business and Professions Code
Section 17200 and (x) injunctive and declaratory
relief. NuVasive been dismissed from these lawsuits by the trial
court but the decision was appealed and in July 2008, the
appellate court reversed the trial courts decision to
dismiss the
92
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company from these lawsuits. The Company has appealed this
decision, the appellate court has heard the Companys
appeal and the Company is currently awaiting the decision of the
Court.
Although the outcome of this lawsuit cannot be determined with
certainty, the Company believes that they acted within the
relevant law in procuring the cadavers for clinical research and
intend to vigorously defend themselves against the claims
contained in the complaint.
Medtronic
Sofamor Danek USA, Inc. Litigation
As previously disclosed, in August 2008, Medtronic Sofamor Danek
USA, Inc. and its related entities (Medtronic) filed suit
against NuVasive in the United States District Court for the
Southern District of California (Medtronic Litigation), alleging
that certain of NuVasives products infringe, or contribute
to the infringement of, twelve U.S. patents assigned or
licensed to Medtronic. Three of the patents were later withdrawn
by Medtronic, leaving nine patents. NuVasive brought
counterclaims against Medtronic alleging infringement of certain
of NuVasives patents. Because of the number of patents
involved, each side selected three patents to proceed with in
the first phase of the litigation. The Medtronic Litigation is
still in its early stages. On January 11, 2010, the parties
filed their opening claim construction briefs to provide their
interpretations of the patent claims at issue in the initial
phase of the case. On January 20, 2010, the parties filed
their responsive claim construction briefs. A claim construction
hearing is scheduled for February 25, 2010. A full schedule
for the initial phase of the lawsuit, including a trial date for
the patents included in the initial phase of the lawsuit, has
not yet been set by the Court. NuVasive believes its own claims
have merit and that Medtronics claims lack merit. As of
December 31, 2009, the probability of a favorable outcome
cannot be reasonably determined, nor can the Company reasonably
estimate a potential loss, therefore, in accordance with the
authoritative guidance on the evaluation of contingencies, the
Company has not recorded an accrual related to this litigation.
Trademark
Infringement Litigation
In September 2009, Neurovision Medical Products, Inc. (NMP)
filed suit against NuVasive in the U.S. District Court for
the Central District of California (Case
No. 2:09-cv-06988-R-JEM)
alleging trademark infringement and unfair competition. NMP is
seeking cancellation of NuVasives NeuroVision
trademark registrations, injunctive relief and damages based on
NMPs valuation of the NeuroVision mark.
NuVasive intends to vigorously pursue defense of the claims, and
on November 23, 2009, denied the allegations in the
NMPs complaint and filed a counterclaim against NMP for
unfair competition and declaratory relief. The case is pending
in the United States District Court and is in the early stages
of the proceedings. An order establishing a schedule for the
case is expected in the middle of 2010.
Contingencies
The Company is party to certain claims and legal actions arising
in the normal course of business. The Company does not expect
any such claims and legal actions to have a material adverse
effect on its business, results of operations or financial
condition.
93
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
12.
|
Quarterly
Data (unaudited)
|
The following quarterly financial data, in the opinion of
management, reflects all adjustments, consisting of normal
recurring adjustments necessary, for a fair presentation of
results for the periods presented
(in thousands, except per
share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total revenues
|
|
$
|
80,008
|
|
|
$
|
88,481
|
|
|
$
|
94,916
|
|
|
$
|
106,935
|
|
Cost of goods sold (excluding amortization of purchased
technology)(1)(2)
|
|
|
12,999
|
|
|
|
14,235
|
|
|
|
15,874
|
|
|
|
18,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit(1)(2)
|
|
|
67,009
|
|
|
|
74,246
|
|
|
|
79,042
|
|
|
|
88,933
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, marketing and administrative(1)(2)(3)(4)
|
|
|
60,527
|
|
|
|
60,274
|
|
|
|
61,720
|
|
|
|
72,476
|
|
Research and development(3)
|
|
|
8,586
|
|
|
|
8,178
|
|
|
|
9,874
|
|
|
|
10,943
|
|
Amortization of intangible assets(4)
|
|
|
1,336
|
|
|
|
1,372
|
|
|
|
1,364
|
|
|
|
1,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses(1)(2)
|
|
|
70,449
|
|
|
|
69,824
|
|
|
|
72,958
|
|
|
|
84,682
|
|
Interest and other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
732
|
|
|
|
383
|
|
|
|
203
|
|
|
|
189
|
|
Interest expense
|
|
|
(1,771
|
)
|
|
|
(2,060
|
)
|
|
|
(1,609
|
)
|
|
|
(1,676
|
)
|
Other income, net(5)
|
|
|
44
|
|
|
|
93
|
|
|
|
188
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income (expense), net
|
|
|
(995
|
)
|
|
|
(1,584
|
)
|
|
|
(1,218
|
)
|
|
|
(1,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(4,435
|
)
|
|
|
2,838
|
|
|
|
4,866
|
|
|
|
2,900
|
|
Income tax expense(5)
|
|
|
97
|
|
|
|
526
|
|
|
|
430
|
|
|
|
679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income
|
|
$
|
(4,532
|
)
|
|
$
|
2,312
|
|
|
$
|
4,436
|
|
|
$
|
2,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NuVasive, Inc.
|
|
$
|
(4,302
|
)
|
|
$
|
2,765
|
|
|
$
|
5,064
|
|
|
$
|
2,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common share
|
|
$
|
(0.12
|
)
|
|
$
|
0.07
|
|
|
$
|
0.13
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
NUVASIVE,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total revenues
|
|
$
|
51,184
|
|
|
$
|
57,417
|
|
|
$
|
66,915
|
|
|
$
|
74,566
|
|
Cost of goods sold (excluding amortization of purchased
technology)(6)(7)
|
|
|
8,267
|
|
|
|
8,697
|
|
|
|
11,255
|
|
|
|
10,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit(6)(7)
|
|
|
42,917
|
|
|
|
48,720
|
|
|
|
55,660
|
|
|
|
63,777
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, marketing and administrative(4)(6)(7)
|
|
|
39,728
|
|
|
|
42,506
|
|
|
|
54,566
|
|
|
|
52,326
|
|
Research and development
|
|
|
6,976
|
|
|
|
6,426
|
|
|
|
6,396
|
|
|
|
6,145
|
|
Amortization of intangible assets(4)
|
|
|
417
|
|
|
|
467
|
|
|
|
931
|
|
|
|
1,174
|
|
In-process research and development
|
|
|
4,176
|
|
|
|
|
|
|
|
16,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses(6)(7)
|
|
|
51,297
|
|
|
|
49,399
|
|
|
|
78,593
|
|
|
|
59,645
|
|
Interest and other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,137
|
|
|
|
1,777
|
|
|
|
1,460
|
|
|
|
1,225
|
|
Interest expense
|
|
|
(434
|
)
|
|
|
(1,663
|
)
|
|
|
(1,719
|
)
|
|
|
(1,755
|
)
|
Other income, net
|
|
|
23
|
|
|
|
70
|
|
|
|
113
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income (expense), net
|
|
|
726
|
|
|
|
184
|
|
|
|
(146
|
)
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income
|
|
$
|
(7,654
|
)
|
|
$
|
(495
|
)
|
|
$
|
(23,079
|
)
|
|
$
|
3,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NuVasive, Inc.
|
|
$
|
(7,654
|
)
|
|
$
|
(495
|
)
|
|
$
|
(23,079
|
)
|
|
$
|
3,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common share
|
|
$
|
(0.22
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Expenses incurred for royalties have been reclassified from
sales, marketing and administrative expense to cost of goods
sold totaling $2.2 million, $2.1 million, and
$2.0 million for the first quarter, second quarter, and
third quarter of 2009, respectively.
|
|
(2)
|
|
Expenses incurred for depreciation of loaned instrument sets
have been reclassified from cost of goods sold to sales,
marketing and administrative expense totaling $4.0 million,
$4.6 million, and $4.6 million for the first quarter,
second quarter, and third quarter of 2009, respectively.
|
|
(3)
|
|
Expenses incurred for intellectual property litigation have been
reclassified from research and development expense to sales,
marketing and administrative expense totaling $1.6 million,
$1.0 million, and $0.8 million for the first quarter,
second quarter, and third quarter of 2009, respectively. No
comparable reclassification was necessary for the 2008 periods.
|
|
(4)
|
|
Expenses incurred related to the amortization of intangible
assets, which was previously included in sales, marketing and
administrative expense, is now presented as a separate line item
within operating expenses.
|
|
(5)
|
|
Expenses incurred related to income tax expense, which was
previously included in other income (expense), net, is now
presented as a separate line item.
|
|
(6)
|
|
Expenses incurred for royalties have been reclassified from
sales, marketing and administrative expense to cost of goods
sold totaling $1.7 million, $1.8 million,
$2.1 million and $1.0 million for the first quarter,
second quarter, third quarter, and fourth quarter of 2008,
respectively.
|
|
(7)
|
|
Expenses incurred for depreciation of loaned instrument sets
have been reclassified from cost of goods sold to sales,
marketing and administrative expense totaling $2.5 million,
$2.6 million, $3.1 million, and $3.6 million for
the first quarter, second quarter, third quarter, and fourth
quarter of 2008, respectively.
|
95
NuVasive,
Inc.
Schedule II:
Valuation Accounts
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of Period
|
|
|
Additions(1)
|
|
|
Deductions(2)
|
|
|
End of Period
|
|
|
Accounts Receivable Valuation Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
1,952
|
|
|
$
|
2,794
|
|
|
$
|
583
|
|
|
$
|
4,163
|
|
Year ended December 31, 2008
|
|
$
|
926
|
|
|
$
|
1,393
|
|
|
$
|
367
|
|
|
$
|
1,952
|
|
Year ended December 31, 2007
|
|
$
|
737
|
|
|
$
|
991
|
|
|
$
|
802
|
|
|
$
|
926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of Period
|
|
|
Additions(3)
|
|
|
Deductions(4)
|
|
|
End of Period
|
|
|
Inventory Reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
$
|
2,778
|
|
|
$
|
6,507
|
|
|
$
|
4,210
|
|
|
$
|
5,075
|
|
Year ended December 31, 2008
|
|
$
|
3,614
|
|
|
$
|
3,208
|
|
|
$
|
4,044
|
|
|
$
|
2,778
|
|
Year ended December 31, 2007
|
|
$
|
3,100
|
|
|
$
|
3,551
|
|
|
$
|
3,037
|
|
|
$
|
3,614
|
|
|
|
|
(1)
|
|
Amount represents customer balances deemed uncollectible.
|
|
(2)
|
|
Uncollectible accounts written-off.
|
|
(3)
|
|
Amount represents excess and obsolete reserve recorded to cost
of sales.
|
|
(4)
|
|
Excess and obsolete inventory written-off against reserve.
|
96
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Asset Purchase Agreement, dated May 8, 2008, by and between
the Company and Osiris Therapeutics, Inc. (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission (the
Commission) on August 8, 2008)
|
|
2
|
.2
|
|
Amendment to Asset Purchase Agreement, dated September 30,
2008, by and between the Company and Osiris Therapeutics, Inc.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
|
2
|
.3
|
|
Amendment No. 2 to Asset Purchase Agreement, dated
March 25, 2009, between the Company and Osiris
Therapeutics, Inc. (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
|
2
|
.4
|
|
Share Purchase Agreement, by and among NuVasive, Inc. and the
stockholders of Cervitech, Inc., as listed therein, dated
April 22, 2009 (incorporated by reference to our
Registration Statement on
Form S-3
(File
No. 333-159098)
filed with the Commission on May 8, 2009)
|
|
3
|
.1
|
|
Restated Certificate of Incorporation (incorporated by reference
to our Quarterly Report on
Form 10-Q
filed with the Commission on August 13, 2004)
|
|
3
|
.2
|
|
Restated Bylaws (incorporated by reference to our Current Report
on
Form 8-K
filed with the Commission on December 15, 2008)
|
|
4
|
.1
|
|
Second Amended and Restated Investors Rights Agreement,
dated July 11, 2002, by and among NuVasive, Inc. and the
other parties named therein (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
4
|
.2
|
|
Amendment No. 1 to Second Amended and Restated
Investors Rights Agreement, dated June 19, 2003, by
and among NuVasive, Inc. and the other parties named therein
(incorporated by reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
4
|
.3
|
|
Amendment No. 2 to Second Amended and Restated
Investors Rights Agreement, dated February 5, 2004,
by and among NuVasive, Inc. and the other parties named therein
(incorporated by reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
4
|
.4
|
|
Registration Rights Agreement, dated as of August 4, 2005,
between NuVasive, Inc. and Pearsalls Limited (incorporated by
reference to our Current Report on
Form 8-K
filed with the Commission on August 10, 2005)
|
|
4
|
.5
|
|
Registration Rights Agreement Termination Agreement, dated as of
September 26, 2006, between NuVasive, Inc. and Pearsalls
Limited (incorporated by reference to our Current Report on
Form 8-K
filed with the Commission on September 29, 2006)
|
|
4
|
.6
|
|
Indenture, dated March 7, 2008, between the NuVasive Inc.
and U.S. Bank National Association, as Trustee (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
4
|
.7
|
|
Form of 2.25% Convertible Senior Note due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
4
|
.8
|
|
Registration Rights Agreement, dated March 7, 2007, among
NuVasive, Inc. and Goldman, Sachs & Co., and
J.P. Morgan Securities Inc., related to the
2.25% Convertible Senior Notes due 2013 (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
4
|
.9
|
|
Specimen Common Stock Certificate (incorporated by reference to
our Annual Report on
Form 10-K
filed with the Commission on March 16, 2006)
|
|
10
|
.1#
|
|
1998 Stock Option/Stock Issuance Plan (incorporated by reference
to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
10
|
.2#
|
|
Form of Notice of Grant of Stock Option under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
10
|
.3#
|
|
Form of Stock Option Agreement under our 1998 Stock Option/Stock
Issuance Plan, and form of addendum thereto (incorporated by
reference to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
10
|
.4#
|
|
Form of Stock Purchase Agreement under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to our
Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
97
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.5#
|
|
Form of Stock Issuance Agreement under our 1998 Stock
Option/Stock Issuance Plan (incorporated by reference to
Amendment No. 4 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on May 11, 2004)
|
|
10
|
.6#
|
|
Form of Stock Issuance Agreement under our 1998 Stock
Option/Stock Issuance Plan, dated April 21, 2004, and
May 4, 2004 (incorporated by reference to Amendment
No. 4 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on May 11, 2004)
|
|
10
|
.7#
|
|
2004 Equity Incentive Plan, as amended (incorporated by
reference to Appendix A to our Definitive Proxy Statement
filed with the Commission on April 11, 2007)
|
|
10
|
.8#
|
|
Form of Stock Option Award Notice under our 2004 Equity
Incentive Plan (incorporated by reference to Amendment
No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004)
|
|
10
|
.9#
|
|
Form of Option Exercise and Stock Purchase Agreement under our
2004 Equity Incentive Plan (incorporated by reference to
Amendment No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004).
|
|
10
|
.10#
|
|
Form of Restricted Stock Unit Award Agreement under our 2004
Equity Incentive Plan
|
|
10
|
.11#
|
|
2004 Employee Stock Purchase Plan (incorporated by reference to
Amendment No. 1 to our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on April 8, 2004)
|
|
10
|
.12#
|
|
Amendment No. 1 to 2004 Employee Stock Purchase Plan
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
|
10
|
.13#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Alexis V. Lukianov (incorporated by
reference to our Current Report on
Form 8-K
filed with the Commission on August 8, 2008)
|
|
10
|
.14#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Keith C. Valentine (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.15#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Kevin C. OBoyle (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.16#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Patrick Miles (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.17#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Jeffrey P. Rydin (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.18#
|
|
Compensation Letter Agreement, dated August 5, 2008,
between NuVasive, Inc. and Jason M. Hannon (incorporated by
reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.19#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Alexis V.
Lukianov (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.20#
|
|
Amendment No. 2 to Compensation Letter Agreement, dated
August 5, 2009, between NuVasive, Inc. and Alexis V.
Lukianov (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on August 6, 2009)
|
|
10
|
.21#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Keith C.
Valentine (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.22#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Kevin C.
OBoyle (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.23#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Patrick Miles
(incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
98
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.24#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Jeffrey P.
Rydin (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.25#
|
|
Amendment to Compensation Letter Agreement, dated
December 10, 2008, between NuVasive, Inc. and Jason M.
Hannon (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on March 2, 2009)
|
|
10
|
.26#
|
|
Compensation Letter Agreement, dated November 4, 2009,
between NuVasive, Inc. and Pat Miles
|
|
10
|
.27#
|
|
Compensation Letter Agreement, dated November 4, 2009,
between NuVasive, Inc. and Jeff Rydin
|
|
10
|
.28#
|
|
Compensation Letter Agreement, dated December 28, 2009,
between NuVasive, Inc. and Jason Hannon
|
|
10
|
.29#
|
|
Offer Letter Agreement, dated October 19, 2009, between
NuVasive, Inc. and Michael Lambert
|
|
10
|
.30#
|
|
Compensation Letter Agreement, dated February 24, 2010,
between NuVasive, Inc. and Michael Lambert
|
|
10
|
.31#
|
|
Severance Agreement, dated September 2, 2009, between
NuVasive, Inc. and Kevin C. OBoyle (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 6, 2009)
|
|
10
|
.32#
|
|
Form of Indemnification Agreement between NuVasive, Inc. and
each of our directors and officers (incorporated by reference to
our Registration Statement on
Form S-1
(File
No. 333-113344)
filed with the Commission on March 5, 2004)
|
|
10
|
.33
|
|
Sublease, dated October 12, 2004, by and between NuVasive,
Inc. and Gateway, Inc. (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on November 15, 2004)
|
|
10
|
.34#
|
|
Summary of 2008 annual salaries and annual stock grants for our
Chief Executive Officer, our Chief Financial Officer and our
other named executive officers (incorporated by reference to our
Current Report on
Form 8-K
filed with the Commission on January 11, 2008)
|
|
10
|
.35#
|
|
Summary of the 2008 bonus payments to our Chief Executive
Officer, our Chief Financial Officer and our other named
executive officers (incorporated by reference to our Current
Report on
Form 8-K
filed with the Commission on February 29, 2008)
|
|
10
|
.36#
|
|
Summary of 2009 annual salaries and annual stock grants for our
Chief Executive Officer, our Chief Financial Officer and our
other named executive officers (incorporated by reference to our
Current Report on
Form 8-K
filed with the Commission on January 8, 2009)
|
|
10
|
.37
|
|
Customer Agreement, dated as of June 27, 2007, by and
between NuVasive, Inc. and International Business Machines
Corporation (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on August 8, 2007)
|
|
10
|
.38
|
|
IBM Global Services Agreement, dated as of June 27, 2007,
by and between NuVasive, Inc. and International Business
Machines Corporation (incorporated by reference to our Annual
Report on
Form 10-K
filed with the Commission on August 8, 2007)
|
|
10
|
.39
|
|
Lease Agreement for Sorrento Summit, entered into as of
November 6, 2007, between the Company and HCPI/Sorrento,
LLC. (incorporated by reference to our Annual Report on
Form 10-K
filed with the Commission on November 8, 2007)
|
|
10
|
.40
|
|
Purchase Agreement, dated March 3, 2008, among NuVasive,
Inc. and Goldman, Sachs & Co., and J.P. Morgan
Securities Inc., related to the 2.25% Convertible Senior
Notes due 2013 (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.41
|
|
Confirmation of Call Option Transaction, dated March 3,
2008, to NuVasive, Inc. from Goldman, Sachs & Co.
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.42
|
|
Confirmation of Call Option Transaction, dated March 3,
2008, to NuVasive, Inc. from JPMorgan Chase Bank related to the
2.25% Convertible Senior Notes due 2013 (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.43
|
|
Confirmation of Warrant Transaction, dated March 3, 2008,
to NuVasive, Inc. from Goldman, Sachs & Co. related to
the 2.25% Convertible Senior Notes due 2013 (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.44
|
|
Confirmation of Warrant Transaction, dated March 3, 2008,
to NuVasive, Inc. from Goldman, Sachs & Co. related to
the 2.25% Convertible Senior Notes due 2013 (incorporated
by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
99
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.45
|
|
Amendment to the Confirmation of Call Option Transaction, dated
March 11, 2008, to NuVasive, Inc. from Goldman,
Sachs & Co. related to the 2.25% Convertible
Senior Notes due 2013 (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.46
|
|
Amendment to the Confirmation of Call Option Transaction, dated
March 11, 2008, to NuVasive, Inc. from JPMorgan Chase Bank
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.47
|
|
Amendment to the Confirmation of Warrant Transaction, dated
March 11, 2008, to NuVasive, Inc. from Goldman,
Sachs & Co. related to the 2.25% Convertible
Senior Notes due 2013 (incorporated by reference to our
Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.48
|
|
Amendment to the Confirmation of Warrant Transaction, dated
March 11, 2008, to NuVasive, Inc. from JPMorgan Chase Bank
related to the 2.25% Convertible Senior Notes due 2013
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 9, 2008)
|
|
10
|
.49
|
|
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
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.50
|
|
Manufacturing Agreement, dated July 24, 2008 by and between
the Company and Osiris Therapeutics, Inc. (incorporated by
reference to our Quarterly Report on
Form 10-Q
filed with the Commission on August 8, 2008)
|
|
10
|
.51
|
|
Amendment to Manufacturing Agreement, dated September 30,
2008, by and between the Company and Osiris Therapeutics, Inc.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on November 7, 2008)
|
|
10
|
.52
|
|
Amendment No. 3 to Manufacturing Agreement, dated
March 25, 2009, between the Company and Osiris
Therapeutics, Inc. (incorporated by reference to our Quarterly
Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
|
10
|
.53
|
|
Preferred Stock Purchase Agreement, dated January 13, 2009,
among the Company, Progentix Orthobiology, B.V. and the sellers
listed on Schedule A thereto
|
|
10
|
.54
|
|
Option Purchase Agreement, dated January 13, 2009, among
the Company, Progentix Orthobiology, B.V. and the sellers listed
on Schedule A thereto
|
|
10
|
.55
|
|
Exclusive Distribution Agreement, dated January 13, 2009,
between the Company and Progentix Orthobiology, B.V.
(incorporated by reference to our Quarterly Report on
Form 10-Q
filed with the Commission on May 8, 2009)
|
|
21
|
.1
|
|
List of subsidiaries of NuVasive, Inc.
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
32
|
.1
|
|
Certification of the Chief Executive Officer pursuant to
Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended, and
18 U.S.C. section 1350
|
|
32
|
.2
|
|
Certification of the Chief Financial Officer pursuant to
Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended, and
18 U.S.C. section 1350
|
|
|
|
|
|
Certain confidential information contained in this exhibit was
omitted by means of redacting a portion of the text and
replacing it with an asterisk. We have filed separately with the
Commission an unredacted copy of the exhibit.
|
|
#
|
|
Indicates management contract or compensatory plan.
|
100
EXECUTION COPY
EXHIBIT
10.53
PREFERRED STOCK PURCHASE AGREEMENT
among
NUVASIVE, INC.,
PROGENTIX ORTHOBIOLOGY, B.V.
and
The Sellers listed on
Schedule A
attached hereto
January 13, 2009
TABLE OF CONTENTS
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
|
SALE AND TRANSFER OF THE INITIAL SHARES
|
|
|
2
|
|
|
|
|
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1.1
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Sale and Transfer of the Initial Shares
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2
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1.2
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Closing of the Purchase of the Initial Shares
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2
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1.3
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Notary
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2
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2.
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REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE SELLER SHARES
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3
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2.1
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Authority; Execution and Delivery; Enforceability
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3
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2.2
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Non-Contravention
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3
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2.3
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Title to Seller Shares
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3
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2.4
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Consents and Approvals
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4
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2.5
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Litigation and Claims
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4
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2.6
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No Finder
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4
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3.
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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4
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3.1
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Organization and Good Standing
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4
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3.2
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Authority; No Conflict
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5
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3.3
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Capitalization
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6
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3.4
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Financial Statements
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6
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3.5
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Books and Records
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6
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3.6
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Title to Properties; Encumbrances
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7
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3.7
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Condition and Sufficiency of Assets
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7
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3.8
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Accounts Receivable
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8
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3.9
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Inventory
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8
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3.10
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No Undisclosed Liabilities
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8
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3.11
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Taxes
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8
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3.12
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No Material Adverse Change
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10
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3.13
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Pensions
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10
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3.14
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Legal Proceedings; Orders
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10
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3.15
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Absence of Certain Changes and Events
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11
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3.16
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Contracts; No Defaults
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12
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3.17
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Insurance
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14
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3.18
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Environmental Matters
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16
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3.19
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Employees
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17
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3.20
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Intellectual Property
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17
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3.21
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Certain Payments
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21
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3.22
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Authorizations; Regulatory Compliance
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21
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3.23
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Products; Product Liability
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23
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3.24
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Customers and Suppliers
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23
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3.25
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Capital Expenditures
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24
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3.26
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Relationships with Affiliates
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24
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3.27
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Brokers
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24
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3.28
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Disclosure
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24
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|
-i-
TABLE OF CONTENTS
(continued)
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Page
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4.
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REPRESENTATIONS AND WARRANTIES OF PURCHASER
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24
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4.1
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Organization and Good Standing
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24
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4.2
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Authority; No Conflict
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25
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4.3
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Certain Proceedings
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25
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4.4
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Brokers
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26
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4.5
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No Other Representations
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26
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5.
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CONDUCT OF BUSINESS DURING THE OPTION PERIOD
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26
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5.1
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Conduct of Business of the Company
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26
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5.2
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Clinical Trials
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29
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5.3
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FDA Approval Matters
|
|
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29
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5.4
|
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Payment of Taxes, Etc
|
|
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30
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6.
|
|
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ADDITIONAL AGREEMENTS
|
|
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30
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6.1
|
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|
Access to Properties and Information
|
|
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30
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6.2
|
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|
Notification of Certain Matters
|
|
|
30
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6.3
|
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Confidentiality; Publicity
|
|
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30
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6.4
|
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|
Use of Proceeds from the Facility
|
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31
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6.5
|
|
|
Monthly and Quarterly Statements
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|
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31
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6.6
|
|
|
Audits
|
|
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31
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6.7
|
|
|
Recapitalization
|
|
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31
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7.
|
|
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INDEMNIFICATION; REMEDIES
|
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31
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7.1
|
|
|
Survival; Right to Indemnification Not Affected by Knowledge
|
|
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31
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7.2
|
|
|
Indemnification and Payment of Damages by Sellers
|
|
|
32
|
|
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7.3
|
|
|
Indemnification and Payment of Damages by Purchaser
|
|
|
33
|
|
|
|
|
7.4
|
|
|
Limitations on Indemnification
|
|
|
33
|
|
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|
7.5
|
|
|
Procedure for IndemnificationThird Party Claims
|
|
|
34
|
|
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|
|
7.6
|
|
|
Procedure for IndemnificationOther Claims
|
|
|
35
|
|
|
|
|
7.7
|
|
|
Remedies Exclusive
|
|
|
35
|
|
|
|
|
|
|
|
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|
|
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8.
|
|
|
CLOSING DELIVERABLES
|
|
|
35
|
|
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|
|
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|
|
|
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8.1
|
|
|
Closing Deliverables of the Company
|
|
|
35
|
|
|
|
|
8.2
|
|
|
Closing Deliverables of the Purchaser
|
|
|
37
|
|
|
|
|
8.3
|
|
|
Closing Deliverables of the Parties
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
|
GENERAL PROVISIONS
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.1
|
|
|
Expenses
|
|
|
38
|
|
|
|
|
9.2
|
|
|
Notices
|
|
|
38
|
|
|
|
|
9.3
|
|
|
Jurisdiction; Service of Process
|
|
|
39
|
|
|
|
|
9.4
|
|
|
Dispute Resolution
|
|
|
39
|
|
|
|
|
9.5
|
|
|
Waiver
|
|
|
40
|
|
|
|
|
9.6
|
|
|
Entire Agreement and Modification
|
|
|
41
|
|
|
|
|
9.7
|
|
|
Assignments, Successors, and No Third-Party Rights
|
|
|
41
|
|
-ii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
Page
|
|
|
|
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|
9.8
|
|
|
Release of Claims
|
|
|
41
|
|
|
|
|
9.9
|
|
|
Severability
|
|
|
41
|
|
|
|
|
9.10
|
|
|
Section Headings, Construction
|
|
|
42
|
|
|
|
|
9.11
|
|
|
Time of Essence
|
|
|
42
|
|
|
|
|
9.12
|
|
|
Governing Law
|
|
|
42
|
|
|
|
|
9.13
|
|
|
Counterparts
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
DEFINITIONS
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Index of Other Defined Terms:
|
|
|
52
|
|
-iii-
SCHEDULES AND EXHIBITS
|
|
|
Schedule A
|
|
Sellers Schedule
|
|
|
|
Exhibit A
|
|
Option Purchase Agreement
|
Exhibit B
|
|
Facility Agreement
|
Exhibit C
|
|
Amended Articles of Association
|
Exhibit D
|
|
Notarial Deed
|
Exhibit E
|
|
Form of Proprietary Inventions Agreement
|
Exhibit F
|
|
Opinion of Counsel
|
Exhibit G
|
|
Distribution Agreement
|
Exhibit H
|
|
Revos License Agreement
|
Exhibit I
|
|
Pledge Agreement
|
Exhibit J
|
|
Shareholders Agreement
|
Exhibit K
|
|
Founders Non-competition Agreement (Bruijn)
|
Exhibit L
|
|
Founders Non-competition Agreement (Blitterswijk)
|
Exhibit M
|
|
Investor Non-competition Agreement
|
-iv-
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT
(
Agreement
) is made as of January 13, 2009 (the
Effective Date
), by and among NuVasive, Inc., a Delaware corporation (
Purchaser
), Progentix
Orthobiology B.V., a company organized under the laws of the Netherlands (the
Company
), and the
shareholders of the Company as set forth on
Schedule A
attached hereto (each a
Seller
,
and collectively, the
Sellers
, and along with the Company, the
Seller Parties
).
RECITALS
The Sellers desire to sell, and Purchaser desires to purchase, 7,200 ordinary shares,
1.00
par value per share, and 1,600 cumulative preference shares,
1.00 par value per share, of the
Company, for an aggregate purchase price of $10,000,000, which shares represent, immediately after
such issuance, forty percent (40%) of the outstanding capital stock of the Company on a
fully-diluted basis (the
Initial Shares
).
Purchaser and the Seller Parties have entered into an Option Purchase Agreement, dated as of
the date hereof, in the form attached hereto as
Exhibit A
(the
Option Purchase
Agreement
), pursuant to which, and subject to certain exceptions set forth therein, (i) Purchaser
may elect, in its sole discretion, to cause the Sellers to sell to Purchaser the remaining issued
and outstanding shares of the capital stock of the Company held by the Sellers (the
Remaining
Shares
,
and along with the Initial Shares, the
Seller Shares
) upon delivery of a Purchase
Election Notice (as defined therein) to the Sellers Representative (as defined in the Option
Purchase Agreement) at any time between the second anniversary of the date of the Option Purchase
Agreement and the fourth anniversary thereof (the
Call Option Period
), and (ii) Purchaser shall
be obligated to purchase from the Sellers all of the Remaining Shares in the event (A) the Sellers
Representative (as defined in the Option Purchase Agreement) delivers a Milestone Completion Notice
(as defined therein) to Purchaser at any time between the date of the Option Purchase Agreement and
the second anniversary thereof (the
Put Option Period
) or (B) Purchasers *** (as defined
in the Option Purchase Agreement) is greater than *** at any time during the Call Option
Period. Any purchase of the Remaining Shares by the Purchaser pursuant to the Option Purchase
Agreement shall be referred to herein as an
Acquisition
. The period from the date of the Option
Agreement through the expiration of the Call Option Period shall be referred to herein as the
Option Period
.
In connection with this Agreement and the Option Purchase Agreement, Purchaser has entered
into a Facility Agreement with the Company, dated as of the date hereof, in the form attached
hereto as
Exhibit B
(the
Facility Agreement
) pursuant to which Purchaser is lending up to
$5,000,000 to the Company.
In connection with this Agreement and the Option Purchase Agreement, pursuant to a notarial
deed of amendment to the Companys Articles of Association in the form attached hereto as
Exhibit C
(the
Amended Articles
), which includes among other things, the creation
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request
for Confidential Treatment filed separately with the Commission.
|
of cumulative preference shares A (the
Series A Preferred Stock
) and cumulative preference
shares B (the
Series B Preferred Stock
), and pursuant to the execution of the notarial deed with
respect to the Amended Articles, (i) the cumulative preference shares held by the Sellers shall be
converted into shares of Series A Preferred Stock, and (ii) the Initial Shares purchased by
Purchaser pursuant to the terms herein shall be converted into shares of Series B Preferred Stock,
such that Purchaser will own shares of the Series B Preferred Stock, representing, immediately
after such issuance, forty percent (40%) of the outstanding capital stock of the Company on a
fully-diluted basis (the
Recapitalization
). The Company has filed a declaration of no-objection
with the Dutch Ministry of Justice with respect to the Amended Articles.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
SALE AND TRANSFER OF THE INITIAL SHARES
.
1.1
Sale and Transfer of the Initial Shares.
(a) On the Closing Date (as defined below), subject to the conditions set forth in this
Section 1
, Purchaser or its designee shall purchase, and the Sellers shall sell and issue
to Purchaser, the Initial Shares for the aggregate purchase price of $10,000,000 (the
Purchase
Price
) as set forth on
Schedule A
attached hereto. At the Closing (as defined below),
Purchaser shall transfer (i) an amount of cash (in United States dollars of immediately available
funds) equal to the Purchase Price minus the Seller Funded Expenses (the
Upfront Payment
) to the
third party account of the Notary in accordance with the instructions in the Notary Instruction
Letter, and (ii) on behalf of the Sellers, the amounts set forth on the Estimated Closing
Certificate to the persons listed therein.. Prior to the transfer of the Initial Shares, the
Notary shall hold the Upfront Payment on behalf of Purchaser. After the transfer of the Initial
Shares, the Notary shall hold the Upfront Payment on behalf of the Sellers. As soon as possible
after the Closing, but in any event within one (1) Business Day of the Closing Date, the Notary
shall pay to the Sellers an amount equal to the Upfront Payment, pursuant to the allocation set
forth on
Schedule A
attached hereto (the
Pro Rata Allocation
)
(b) The parties acknowledge and agree that the aggregate fair market value of the Initial
Shares as of the Closing Date is equal to the Purchase Price for the Initial Shares, and the
parties agree to file all Tax Returns in a manner consistent with this sentence and not to take any
Tax position inconsistent with this sentence.
1.2
Closing of the Purchase of the Initial Shares.
The closing of the purchase and sale of
the Initial Shares (the
Closing
) shall take place at the offices of DLA Piper Nederland N.V.,
Meerparc, Amstelveenseweg 638, 1081 JJ Amsterdam, the Netherlands, as soon as practicable, or at
such other time, date and place as are mutually agreed upon by the Company and Purchaser (the
Closing Date
). At the Closing, the Notary shall execute the deed of transfer of the Initial
Shares through the notarial deed in the form substantially attached hereto as
Exhibit D
.
Immediately thereafter, the Notary shall transfer the Upfront Payment to the Sellers, all in
accordance with the instruction letter from the Notary.
2
1.3
Notary
. The Seller Parties are aware that the Notary is a civil law notary working at DLA
Piper Nederland N.V., the firm that advises Purchaser in respect of the matters set out in this
Agreement. With reference to the Code of Conduct (
Verordening beroeps- en gedragsregels
)
established by the Royal Notarial Professional Organization (
Koninklijke Notariële
Beroepsorganisatie
), parties hereby acknowledge and confirm that (i) the Notary shall execute any
and all deeds related to the Closing Documents; and (ii) Purchaser is assisted and represented by
DLA Piper Nederland N.V. in relation to the Closing Documents and any other agreements that may be
concluded, or disputes that may arise, in connection therewith.
2.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE SELLER SHARES
Each Seller, severally but not jointly, hereby represents and warrants to Purchaser as to such
Seller and the Seller Shares owned by such Seller, as of the Effective Date and as of the Closing
Date, as set forth below. Each exception to such representations and warranties set forth in the
Seller Parties Disclosure Schedule is identified by reference to, or has been grouped under a
heading referring to, a specific section of this Agreement, and the disclosures in any section or
subsection of the Seller Parties Disclosure Schedule shall qualify other sections and subsections
in this Agreement to the extent it is reasonably apparent from a reading of the disclosure that
such disclosure is applicable to such other sections and subsections.
2.1
Authority; Execution and Delivery; Enforceability.
Each Seller has full power, authority
and capacity to execute and deliver this Agreement and to perform such Sellers respective
obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Seller and constitutes the legal, valid and binding
obligation of such Seller enforceable against such Seller in accordance with its terms, subject to
bankruptcy and other similar Legal Requirements of general applicability relating to or affecting
creditors rights and to general equity principles.
2.2
Non-Contravention.
The execution and delivery of this Agreement by such Seller does not,
and the consummation of the transactions contemplated hereby and compliance with the terms hereof,
will not (or would not with the giving of notice or the passage of time):
(a) constitute a default under or a violation or breach (with or without notice) of, result in
the acceleration of any obligation under, any provision of any contract or other instrument to
which such Seller is a party or result in the termination or revocation of any authorization held
by such Seller or the Company necessary to the ownership of the Seller Shares or the operation of
the business of the Company;
(b) violate any Order or any Legal Requirement affecting such Seller; or
(c) result in the creation of any Encumbrance on the Seller Shares.
2.3
Title to Seller Shares.
Each Seller is and will be on the Closing Date the holder and
beneficial owner of the Seller Shares owned by such Seller. The Seller Shares owned by such Seller
as of the Effective Date are as set forth on Part 2.3 of the Seller Parties Disclosure Schedule.
Each Seller has good and valid title to the Seller Shares owned by such Seller as set forth on Part
2.3 of the Seller Parties Disclosure Schedule, free and clear of all Encumbrances.
3
At the Closing, each Seller will transfer legal and beneficial, good and valid title to each
of the Initial Shares owned by such Seller, free and clear of all Encumbrances. No Seller is
currently bound by any contract, agreement, arrangement, commitment or understanding (written or
oral) with, and has not granted any option or right currently in effect or which would arise after
the Effective Date, any Person other than Purchaser with respect to the acquisition of any of
Initial Shares.
2.4
Consents and Approvals.
Except as set forth in the Seller Parties Disclosure Schedule, no
consent, approval, waiver, license, permit, order or authorization of, or registration, declaration
or filing with, any Governmental Body, and no consent, approval, waiver or other similar
authorization of any other Person (including, without limitation, any Person who is a party to a
Contract binding on or affecting the Company or any Subsidiary), is required to be obtained by or
on behalf of such Sellers as a result of, or in connection with, or as a condition of the lawful
execution, delivery and performance of this Agreement or the consummation of the transactions
contemplated hereby.
2.5
Litigation and Claims.
There is no Action pending or, to the Knowledge of such Seller,
Threatened, against or affecting such Seller that could reasonably be expected to affect such
Sellers ability to consummate the transactions contemplated hereby.
2.6
No Finder.
Except as set forth in the Seller Parties Disclosure Schedule, neither such
Seller nor any party acting on such Sellers behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the transactions contemplated
hereby, and the Company will not be liable or obligated in any way whatsoever with respect to any
such fee or commission.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser, as of the Effective Date and as of
the Closing Date, as set forth below. Each exception to such representations and warranties set
forth in the Seller Parties Disclosure Schedule is identified by reference to, or has been grouped
under a heading referring to, a specific section of this Agreement, and the disclosures in any
section or subsection of the Seller Parties Disclosure Schedule shall qualify other sections and
subsections in this Agreement to the extent it is reasonably apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and subsections.
3.1
Organization and Good Standing
.
(a) Part 3.1 of the Seller Parties Disclosure Schedule contains a complete and accurate list
for the Company of its name, its jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business, and its capitalization (including the identity of each stockholder and
the number of shares held by each). The Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with full corporate power
and authority to conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is a private company with limited liability duly qualified to do business
as a foreign corporation and is in good standing under the
4
laws of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified would not reasonably be expected to have
a Material Adverse Effect.
(b) The Company made available to Purchaser in the Data Room copies of the Organizational
Documents of the Company, as currently in effect.
3.2
Authority; No Conflict
.
(a) The Closing Documents to which the Company is a party have been authorized by the board of
directors (
Board of Directors
) of the Company and, to the extent required, by the shareholders of
the Company. Upon the execution and delivery by the Company of such Closing Documents, such
Closing Documents will constitute the legal, valid, and binding obligations of the Company,
enforceable against it in accordance with their respective terms, subject to bankruptcy and other
similar Legal Requirements of general applicability relating to or affecting creditors rights and
to general equity principles. The execution and delivery of such Closing Documents by the Company
and the performance of the Contemplated Transactions by it does not conflict with any provision of
the Organizational Documents of the Company.
(b) Neither the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Company, or (B) any resolution adopted by the board of directors or
the shareholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy
or obtain any relief under, any Legal Requirement or any Order to which the Company, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the terms or requirements
of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause the Company to become subject to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be reassessed or revalued by any taxing
authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of any provision of, or
give any Person the right to declare a default or exercise any remedy under, or to
5
accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or with respect to any of
the assets owned or used by the Company, other than Permitted Encumbrances.
Except as set forth in Part 3.2 of the Disclosure Schedule the Company is not nor will it be
required to give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3
Capitalization
. As of immediately prior to the Closing (without giving effect to the
Recapitalization), the authorized equity securities of the Company consist of 60,000 ordinary
shares, par value
1 per share, of which 18,000 shares are issued and outstanding and 30,000
cumulative preference shares, par value
1 per share, of which 4,000 shares are issued and
outstanding. No shares or classes of the Companys capital are reserved for issuance. No
reference to any purported Encumbrance appears in the shareholders register of the Company. All
of the outstanding equity securities of the Company have been duly authorized and validly issued
and are fully paid. Except as set forth in Part 3.3 of the Seller Parties Disclosure Schedule,
there are no Contracts relating to the issuance, sale, transfer or voting of any issued or issuable
equity securities or other securities (including, but not limited, to any options, stock
appreciation rights, warrants or other instruments or securities exercisable or exchangeable for,
or convertible into, equity securities) of the Company. None of the outstanding equity securities
or other securities of the Company was issued in violation of any Legal Requirement. The Company
does not own, nor does it have any Contract to acquire, any equity securities or other securities
of any Person or any direct or indirect equity or ownership interest in any other business. The
Company does not have any Subsidiaries.
3.4
Financial Statements
. The Company has made available to Purchaser in the Data Room the
unaudited balance sheet of the Company and the related unaudited statements of income, changes in
stockholders equity, and cash flow balance sheet of the Company as of December 31
,
2008 (the
Balance Sheet
) and the related unaudited statements of income, changes in shareholders equity,
and cash flow for the twelve (12) months then ended (collectively, the
Financial Statements
),
including in each case the notes thereto (except that the unaudited Financial Statements may not
contain all required footnotes and the interim Financial Statements are subject to year-end
adjustments). The Financial Statements fairly present in all material respects the financial
condition and the results of operations, changes in stockholders equity, and cash flow of the
Company as at the respective dates of and for the periods referred to in the Financial Statements.
The Financial Statements referred to in this
Section 3.4
reflect the consistent application
of such accounting principles throughout the periods involved, except as disclosed in the notes to
such Financial Statements. No financial statements of any Person other than the Company are
required to be included in the consolidated financial statements of the Company.
3.5
Books and Records
. The books and records of the Company, all of which have been made
available to Purchaser in the Data Room, are complete and correct in all material
6
respects and have been maintained in accordance with sound business practices in the
Netherlands, including the maintenance of an adequate system of internal controls. The minute
books of the Company contain materially accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors and the Supervisory Board of
Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee
has been held for which minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be in the possession of the Company.
3.6
Title to Properties; Encumbrances
. The Company does not currently own, nor has it ever
owned (a) any real property, (b) any leasehold interests or (c) any buildings, plants, structures
and/or equipment. Part 3.6 of the Seller Parties Disclosure Schedule contains a complete and
accurate list of all (A) the Assets that the Company purports to own, including all of the
properties and assets reflected in the Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in Part 3.6 of the Seller Parties Disclosure
Schedule and personal property sold since the date of the Balance Sheet, as the case may be, in the
Ordinary Course of Business), and (B) all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for personal property acquired
and sold since the date of the Balance Sheet in the Ordinary Course of Business and consistent with
past practice), which subsequently purchased or acquired properties and assets (other than
inventory and short-term investments) are listed in Part 3.6 of the Seller Parties Disclosure
Schedule. The Company is the sole owner and has good and marketable title (or leasehold title, as
the case may be) to the Assets free and clear of all Encumbrances, and the Assets reflected in the
Balance Sheet are free and clear of all Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and assets, (i) mortgages or
security interests shown on the Balance Sheet as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (ii) mortgages or security interests incurred in connection with the
purchase of property or assets after the date of the Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a default) exists, (iii)
liens for current taxes not yet due, and (iv) Encumbrances pursuant to the Pledge Agreement (as
defined below) or the Facility Agreement and (v) Encumbrances incurred in the Ordinary Course of
the Business, consistent with past practice, or created by the express provisions of the Contracts,
each of the type identified on Part 3.6 of the Seller Parties Disclosure Schedule (together, the
Permitted Encumbrances
). All such assets are suitable for the uses to which they are being put
or have been put in the Ordinary Course of Business and are in good working order, ordinary wear
and tear excepted.
3.7
Condition and Sufficiency of Assets
. Except as set forth on Part 3.7 of the Seller
Parties Disclosure Schedule, the Assets are all assets of the Company used in or related to the
processing and manufacturing of the Products. Xpand Biotechnology B.V., a private company with
limited liability (
Xpand
), transferred to the Company the Company Proprietary Rights and prior to
such transfer of the Company Proprietary Rights, Xpand was the sole and rightful owner of the
Company Proprietary Rights. Except as set forth on Part 3.7 of the Seller Parties Disclosure
Schedule, the Assets and the Company Proprietary Rights of the Company
7
constitute all of the assets, property, real personal or mixed, tangible or intangible, of the
Company used in or held for use in for the operation of the Business as presently conducted.
3.8
Accounts Receivable
. The Company currently has no accounts receivable, nor has it
previously had any accounts receivable prior to the Closing Date.
3.9
Inventory
. The Company currently has no inventory, nor has it previously had any inventory
prior to the Closing Date.
3.10
No Undisclosed Liabilities
. The Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or otherwise), except for (a)
liabilities or obligations reflected or reserved against in the Balance Sheet, (b) liabilities or
obligations incurred since the Balance Sheet Date in the Ordinary Course of Business, (c)
liabilities of a type or nature not required to be reflected in the Financial Statements, which are
not material, individually or in the aggregate, or (d) liabilities or obligations set forth in Part
3.10 of the Seller Parties Disclosure Schedule. Except as set forth in Part 3.10 of the Seller
Parties Disclosure Schedule the Company is not a guarantor or indemnitor of any Indebtedness of any
other Person.
3.11
Taxes
.
(a) The Company has paid on a timely basis all Taxation that was due and payable on or before
the Closing Date. The unpaid taxes of the Company for all Tax periods through the Balance Sheet
Date do not exceed the accruals and reserves for Taxation (excluding accruals and reserves for
deferred Taxation established to reflect timing differences between book and Tax income) set forth
on the Balance Sheet.
(b) All notices and returns required to have been given or made, have been properly and duly
submitted by the Company to the relevant Governmental Body and all information, notices,
computations and returns submitted to such Governmental Body are true, accurate and complete and
are not the subject of any dispute nor are likely to become the subject of any dispute with such
Governmental Body. The Company has not been informed by any Governmental Body that such
Governmental Body formally asserts that the Company was required to file any Tax Return that was
not filed, and, to the Sellers Knowledge, no such assertion is planned by any Governmental Body.
The Company has not (i) waived any statute of limitations with respect to Taxation, (ii) requested
any extension of time within which to file any Tax Return, or (iii) executed or filed any power of
attorney with any taxing authority. All records that the Company is required to keep for Taxation
purposes, have been duly kept and are available for inspection at the Company premises.
(c) The amount of Taxation chargeable to the Company has not been affected by any concession,
arrangements, agreement or other formal or informal arrangement with any Governmental Body (not
being a concession, agreement or arrangement available to companies generally). The Company is not
subject to a special Tax regime. The Company is not required to include any amounts in income, or
to exclude any items of deduction in a taxable period beginning after the Closing Date as a result
of (i) an instalment sale or open transaction arising in a taxable period ending on or before the
Closing Date; (ii) a prepaid amount received, or paid, in
8
a taxable period ending on or before the Closing Date; (iii) deferred gains that could be
recognized in a taxable period ending after the Closing Date; or (iv) any similar item of deferred
income or expense.
(d) In relation to Tax, the Company has not been subject to and is not currently subject to
any investigation, audit or visit by any Governmental Body, and, to the Sellers Knowledge, no such
investigation, audit or visit is planned by any Governmental Body.
(e) Since its incorporation, the Company has not been involved in any Taxation controversy
and/or litigation with or against any Governmental Body.
(f) The Company has made all deductions and/or withholdings in respect, or in account, of any
Taxation from any payments made by the Company that it is obliged or entitled to have made and has
accounted in full to the appropriate authority for all amounts so deducted and/or withheld.
(g) The Company has not received any notice from any Governmental Body that required or will
require the Company to withhold Taxation from any payment made since the Balance Sheet Date in
respect of which such withheld Taxation has not been accounted for in full to the appropriate
authority.
(h) The Company has not claimed or been granted exemptions from Taxation that may give rise to
the assessment and/or payment of Taxation in connection with any transactions involving the
Company, including but not limited to this Agreement, reorganisations, mergers and/or disposals of
the Company.
(i) All applications by the Company for governmental subsidies, which have been made or are
reflected in the Balance Sheet have been duly and correctly made and no refunds and no interest,
penalties or additions regarding such refunds are or will be due in respect of governmental
subsidies.
(j) The Company
(i) has always been resident, for Tax purposes, in the Netherlands;
(ii) is not and has never been resident, for Tax purposes, in any other jurisdiction;
(iii) does not have and has never had a taxable presence outside the Netherlands; and
(iv) is not deemed to have and has never been deemed to have had a taxable presence outside
the Netherlands.
(k) No Taxation, for which any other person or entity is or may be liable, will be charged in
any way to the Company, and the Company is not a party to or bound by any Tax indemnity, Tax
sharing, Tax allocation or similar agreement.
9
(l) Each transaction between the Sellers or any Affiliate of the Sellers on the one hand and
the Company on the other hand is and has been done at an arms length basis.
(m) The Company is not liable for Taxation imposed on or due by any third party, including,
without limitation, any sub-contractor, the Sellers or any Affiliate of the Sellers, except to the
extent that full provision has been made in the Financial Statements of the Company.
(n) Other than by their own expiration over time, there is no limitation on the utilization by
the Company of its net operating losses, built-in losses, Tax credits or similar items under the
Tax laws of any jurisdiction (other than any such limitations arising as a result of the
consummation of the Contemplated Transactions).
(o) The Company does not own any interest in any entity that is characterized as a partnership
for Tax purposes.
(p) There are no Tax liens or other Encumbrances with respect to Taxation upon any of the
Assets of the Company, other than Permitted Encumbrances.
(q) The Company has delivered or made available to Purchaser in the Data Room for inspection
(i) complete and correct copies of all Tax Returns of the Company relating to Taxation and (ii)
complete and correct copies of all documents from any Governmental Body received by or agreed to by
or on behalf of the Company relating to Taxation since the Companys formation.
3.12
No Material Adverse Change
. Since the date of the Balance Sheet, there has not been a
Material Adverse Effect.
3.13
Pensions.
The Company has no, and has never had any retirement benefit schemes, early
retirement schemes, pre-pension schemes or other pension arrangements, relating to the Business
(the
Pension Schemes
), in operation or proposed.
3.14
Legal Proceedings; Orders
.
(a) There is no pending Proceeding:
(i) that has been commenced by or against the Company or that otherwise relates to or may
affect the business of, or any of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.
To Sellers Knowledge, (1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the commencement of any such
Proceeding. Seller Parties have made available to Purchaser in the Data Room copies of all
pleadings, correspondence, and other documents relating to each Proceeding listed in Part 3.14(a)
of the Seller Parties Disclosure Schedule. The Proceedings listed in Part 3.14(a)
10
of the Seller Parties Disclosure Schedule could not reasonably be expected to have a Material
Adverse Effect.
(b) There is no Order to which the Company, or any of the assets owned or used by the Company,
is subject.
(c) No officer, director, agent, or employee of the Company is subject to any Order that
prohibits such officer, director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(d) The Company is, and at all times has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by it, is or has been
subject.
(e) No event has occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Company, or any of the assets owned or used by the Company, is subject.
(f) The Company has not received, at any time, any notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of any Order to which
the Company, or any of the assets owned or used by the Company, is or has been subject.
3.15
Absence of Certain Changes and Events
. Except as set forth in Part 3.15 of the Seller
Parties Disclosure Schedule, since the Balance Sheet Date, the Company has conducted its business
only in the Ordinary Course of Business and none of the following actions or events has occurred:
(a) any material loss, damage or destruction to, or any material interruption in the use of,
any of the assets of the Company (whether or not covered by insurance) that has had or could
reasonably be expected to have a Material Adverse Effect;
(b) (i) any declaration, accrual, set aside or payment of any dividend or any other
distribution in respect of any shares of capital stock of the Company, or (ii) any repurchase,
redemption or other acquisition by the Company of any shares of capital stock or other securities;
(c) any sale, issuance or grant, or authorization of the issuance of, (i) shares or other
securities of the Company, (ii) any option, warrant or right to acquire any shares or any other
securities of the Company, or (iii) any instrument convertible into or exchangeable for shares or
other securities of the Company;
(d) any amendment or waiver of any of the rights of the Company under any share purchase
agreement;
11
(e) any amendment to any Organizational Document of the Company, any merger, consolidation,
share exchange, business combination, recapitalization, reclassification of shares, share split,
reverse share split or similar transaction involving the Company;
(f) any creation of any Subsidiary of the Company or acquisition by the Company of any equity
interest or other interest in any other Person;
(g) any capital expenditure by the Company which, when added to all other capital expenditures
made on behalf of the Company since the Balance Sheet Date, exceeds
10,000 in the aggregate;
(h) except in the Ordinary Course of Business, any action by the Company to (i) enter into or
suffer any of the assets owned or used by it to become bound by any Material Contract (as defined
in
Section 3.16
), or (ii) amend or terminate, or waive any material right or remedy under,
any Material Contract;
(i) any (i) acquisition, lease or license by the Company of any material right or other
material asset from any other Person, (ii) sale or other disposal or lease or license by the
Company of any material right or other material asset to any other Person, or (iii) waiver or
relinquishment by the Company of any right, except for rights or other assets acquired, leased,
licensed or disposed of in the Ordinary Course of Business;
(j) any write-off as uncollectible, or establishment of any extraordinary reserve with respect
to, any Indebtedness of the Company;
(k) any pledge of any assets of or sufferance of any of the assets of the Company to become
subject to any Encumbrance, except for Permitted Encumbrances and pledges of immaterial assets made
in the Ordinary Course of Business;
(l) any (i) loan by the Company to any Person, or (ii) the incurrence or guarantee by the
Company of any Indebtedness by the Company;
(m) any (i) adoption, establishment, entry into or amendment by the Company of any Pension
Scheme or (ii) payment of any bonus or any profit sharing or similar payment to, or material
increase in the amount of the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of the directors or officers of the Company;
(n) any change of the methods of accounting or accounting practices of the Company in any
material respect;
(o) any material Tax election by the Company;
(p) any commencement or settlement of any Proceeding by the Company; and
(q) any agreement or commitment to take any of the actions referred to in clauses (c) through
(p) above.
12
3.16
Contracts; No Defaults.
(a) Part 3.16(a) of the Seller Parties Disclosure Schedule contains a complete and accurate
list, and Seller Parties have made available to Purchaser in the Data Room true and complete copies
of, each Contract, other instrument or document (including of any amendments) to which the Company
is a party or by which its assets are subject or bound:
(i) with any director, officer or Affiliate of the Company;
(ii) evidencing, governing or relating to Indebtedness;
(iii) not entered into in the Ordinary Course of Business that involves expenditures or
receipts;
(iv) that in any way purports to restrict the business activity of the Company or any of its
Affiliates or to limit the freedom of the Company or any of its Affiliates to engage in any line of
business or to compete with any Person or in any geographic area or to hire or retain any Person;
(v) relating to the employment of, or the performance of services by, any employee or
consultant, or pursuant to which the Company is or may become obligated to make any severance,
termination or similar payment to any current or former employee or director; or pursuant to which
the Company is or may become obligated to make any bonus or similar payment (other than payments
constituting base salary) to any current or former employee or director;
(vi) (A) relating to the acquisition, transfer, development, sharing or license of any
Proprietary Rights (except for any Contract pursuant to which (1) any Proprietary Rights is
licensed to the Company under any third party software license generally available to the public,
or (2) any Proprietary Rights is licensed by the Company to any Person on a non exclusive basis);
or (B) of the type referred to in
Section 3.20(d)
;
(vii) providing for indemnification of any officer, director, employee or agent;
(viii) (A) relating to the acquisition, issuance, voting, registration, sale or transfer of
any securities, (B) providing any Person with any preemptive right, right of participation, right
of maintenance or any similar right with respect to any securities, or (C) providing the Company
with any right of first refusal with respect to, or right to repurchase or redeem, any securities;
(ix) incorporating or relating to any guaranty, any warranty or any indemnity or similar
obligation, except for Contracts substantially identical to the standard forms of end user licenses
made available by Seller Parties to Purchaser in the Data Room;
(x) relating to any currency hedging;
13
(xi) (A) imposing any confidentiality obligation on the Company or any other Person, or (B)
containing standstill or similar provisions;
(xii) (A) to which any Governmental Body is a party or under which any Governmental Body has
any rights or obligations, or (B) directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between the Company and any contractor or
subcontractor to any Governmental Body);
(xiii) contemplating or involving the payment or delivery of cash or other consideration in an
amount or having a value in excess of
5,000 in the aggregate, or contemplating or involving the
performance of services having a value in excess of
5,000 in the aggregate; and
(xiv) any other Contract, if a breach of such Contract could reasonably be expected to have a
Material Adverse Effect.
(b) Each of the foregoing is a
Material Contract
.
(i) Each Material Contract is valid and in full force and effect, and is enforceable against
the Company in accordance with its terms, subject to bankruptcy and other similar Legal
Requirements of general applicability relating to or affecting creditors rights and to general
equity principles.
(ii) The Company has not violated or breached, or committed any default under, any Material
Contract, except for violations, breaches and defaults that have not had and would not reasonably
be expected to have a Material Adverse Effect; and, to Sellers Knowledge, no other Person has
violated or breached, or committed any default under, any Material Contract, except for violations,
breaches and defaults that have not had and would not reasonably be expected to have a Material
Adverse Effect.
(iii) Except as set forth on Part 3.16(b) of the Seller Parties Disclosure Schedule, to
Sellers Knowledge, no event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will or would reasonably be expected to, (A) result in a violation
or breach of any of the provisions of any Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Material Contract, (C) give any Person the right
to receive or require a rebate, chargeback, penalty or change in delivery schedule under any
Material Contract, (D) give any Person the right to accelerate the maturity or performance under
any Material Contract, (E) result in the disclosure, release or delivery of the Company Source
Code, or (F) give any Person the right to cancel, terminate or modify any Material Contract, except
in each such case for defaults, acceleration rights, termination rights and other rights that have
not had and would not reasonably be expected to have a Material Adverse Effect.
(iv) The Company has not received any notice or other communication regarding any actual or
possible violation or breach of, or default under, any Material Contract, except in each such case
for defaults, acceleration rights, termination rights and other rights that have not had and would
not reasonably be expected to have a Material Adverse Effect.
14
3.17
Insurance
.
(a) Seller Parties have made available to Purchaser in the Data Room:
(i) true and complete copies of all policies of insurance to which the Company is a party or
under which the Company, or any director of the Company, in his capacity as such, is or has been
covered at any time preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies of insurance; and
(iii) any statement by the auditor of the Companys financial statements with regard to the
adequacy of such entitys coverage or of the reserves for claims.
(b) The Company:
(i) has no self-insurance arrangements by or affecting the Company, including any reserves
established thereunder;
(ii) has not concluded contracts or arrangements, other than a policy of insurance, for the
transfer or sharing of any risk by the Company;
(iii) has made available to Purchaser in the Data Room all obligations of the Company to third
parties with respect to insurance (including such obligations under leases and service agreements)
and identifies the policy under which such coverage is provided; and
(iv) has not suffered any loss experience or received any claim under any policy for the
current policy year.
(c) All policies to which the Company is a party or that provide coverage to the Company, or
any director or officer of the Company in his capacity as such:
(i) are valid, outstanding, and enforceable;
(ii) are issued by an insurer that is financially sound and reputable;
(iii) taken together, provide adequate insurance coverage for the assets and the operations of
the Company for all risks normally insured against by a Person carrying on the same business or
businesses as the Company;
(iv) are sufficient for compliance with all Legal Requirements and Contracts to which the
Company is a party or by which any of them is bound;
(v) will continue in full force and effect following the consummation of the Contemplated
Transactions; and
(vi) do not provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company.
15
(d) The Company has not received (A) any refusal of coverage or any notice that a defense will
be afforded with reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its obligations thereunder.
(e) The Company has paid all premiums due, and has otherwise performed all of its respective
obligations, under each policy to which the Company is a party or that provides coverage to the
Company or director thereof.
(f) The Company has given notice to the insurer of all claims that may be insured under any
policy provided by such insurer.
3.18
Environmental Matters
.
(a) The Company is, and at all times has been, in material compliance with, and has not been
and is not in violation of or liable under, any Environmental Law. To Sellers Knowledge, there is
no actual order, written notice, or other written communication from, nor has any order, notice, or
other communication been Threatened from (i) any Governmental Body or private citizen, or (ii) the
current or prior owner or operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any
of the Facilities or any other properties or assets (whether real, personal, or mixed) in which the
Company had an interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or processed by the
Company, or any other Person for whose conduct they are or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(b) There are no pending or, to Sellers Knowledge, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(c) The Company has not received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company had an interest, or with respect to
any property or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company, or any other Person for whose conduct
they are or may be held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
16
(d) The Company has no Environmental, Health, and Safety Liabilities with respect to the
Facilities or, with respect to any other properties and assets (whether real, personal, or mixed)
in which the Company (or any predecessor), has or had an interest, or at any property geologically
or hydrologically adjoining the Facilities or any such other property or assets.
(e) Except as set forth on Part 3.18(e) of the Seller Parties Disclosure Schedule, there are
no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed)
or other containers, either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. The Company has not permitted or conducted any, and to Sellers Knowledge
there is no, Hazardous Activity conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or, to Sellers Knowledge, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or processed from or by
the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in
which the Company has or had an interest, or any geologically or hydrologically adjoining property.
(g) The Company has delivered to Purchaser true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by the Company pertaining
to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company with Environmental Laws.
3.19
Employees
. The Company has no employees, nor has it ever had any employees, prior to the
Closing Date. The Company is not a party to any collective labour agreement.
3.20
Intellectual Property
.
(a) With respect to Proprietary Rights of the Company:
(i) Part 3.20(a)(i)(A) of the Seller Parties Disclosure Schedule lists all of the Patents
owned by the Company, setting forth in each case the jurisdictions in which Issued Patents have
been issued and Patent Applications have been filed. Part 3.20(a)(i)(B) of the Seller Parties
Disclosure Schedule lists all of the Patents in which the Company has any right, title or interest
(including without limitation interest acquired through a license or other right to use) other than
those owned by the Company, setting forth in each case the jurisdictions in which the Issued
Patents have been issued and Patent Applications have been filed, and the nature of the right,
title or interest held by the Company. Except as set forth on Part 3.20(a)(i)(A) of the Seller
Parties Disclosure Schedule, the Company has obtained a Patent with respect to each Product;
(ii) Part 3.20(a)(ii)(A) of the Seller Parties Disclosure Schedule lists all of the Registered
Trademarks owned by the Company, setting forth in each case the jurisdictions in which Registered
Trademarks have been registered and trademark applications for registration
17
have been filed. Part 3.20(a)(ii)(B) of the Seller Parties Disclosure Schedule lists all of
the Registered Trademarks in which the Company has any right, title or interest, other than those
owned by the Company (including without limitation interest acquired through a license or other
right to use), setting forth in each case the jurisdictions in which Registered Trademarks have
been registered and trademark applications for registration have been filed, and the nature of the
right, title or interest held by the Company;
(iii) Part 3.20(a)(iii)(A) of the Seller Parties Disclosure Schedule lists all of the
Registered Copyrights owned by the Company, setting forth in each case the jurisdictions in which
Copyrights have been registered and applications for copyright registration have been filed. Part
3.20(a)(iii)(B) of the Seller Parties Disclosure Schedule lists all of the Registered Copyrights in
which the Company has any right, title or interest, other than those owned by the Company
(including without limitation interest acquired through a license or other right to use), setting
forth in each case the jurisdictions in which the Registered Copyrights have been registered and
applications for copyright registration have been filed, and the nature of the right, title or
interest held by the Company; and
(iv) The Company has good and valid title to all of the Company Proprietary Rights identified
in Parts 3.20(a)(i)(A), 3.20(a)(ii)(A) and 3.20(a)(iii)(A) of the Seller Parties Disclosure
Schedule and all Trade Secrets owned by the Company, free and clear of all Encumbrances, except for
Permitted Encumbrances. The Company has a valid right to use, license and otherwise exploit all
Proprietary Rights identified in Parts 3.20(a)(i)(B), 3.20(a)(ii)(B), and 3.20(a)(iii)(B) of the
Seller Parties Disclosure Schedule and all Trade Secrets used by the Company, other than those
owned by the Company (including without limitation interest acquired through a license or other
right to use). Except as set forth on Part 3.20(a)(iv) of the Seller Parties Disclosure Schedule,
the Company Proprietary Rights identified in Part 3.20(a) of the Seller Parties Disclosure
Schedule, together with the Trade Secrets used by the Company, constitutes (A) all Proprietary
Rights used or proposed as of the Effective Date to be used in the business of the Company as
conducted prior to or on the Effective Date or as proposed to be conducted by Company as of the
Effective Date and (B) all Proprietary Rights necessary or appropriate to make, use, offer for
sale, sell or import the Product(s).
(b) Part 3.20(b) of the Seller Parties Disclosure Schedule lists all oral and written
contracts, agreements, licenses and other arrangements relating to the Company Proprietary Rights
or the Product(s), as follows:
(i) Part 3.20(b)(i) lists: (A) any agreement granting any right to make, have made,
manufacture, use, sell, offer to sell, import, export, or otherwise distribute any Product(s), with
or without the right to sublicense the same, on an exclusive basis; (B) any license of Proprietary
Rights to or from the Company, with or without the right to sublicense the same, on an exclusive
basis; (C) joint development agreements; (D) any agreement by which the Company grants any
ownership right to the Company Proprietary Rights owned by the Company; (E) any agreement under
which the Company undertakes any ongoing royalty or payment obligations with respect to an Company
Proprietary Right; (F) any agreement under which the Company grants an option relating to the
Company Proprietary Rights; (G) any agreement under which any party is granted any right to access
Company Source Code or to use Company Source Code to create derivative works of the Products; (H)
any Agreement pursuant
18
to which the Company has deposited or is required to deposit with an escrow agent or any other
Person the Company Source Code, and further describes whether the execution of this Agreement or
the consummation of any of the transactions contemplated hereby could reasonably be expected to
result in the release or disclosure of the Company Source Code; and (I) any agreement or other
arrangement limiting any of the Companys ability to transact business in any market, field or
geographical area or with any Person, or that restricts the use, transfer, delivery or licensing of
Company Proprietary Rights (or any tangible embodiment thereof);
(ii) Part 3.20(b)(ii) of the Seller Parties Disclosure Schedule lists all licenses,
sublicenses and other agreements to which the Company is a party and pursuant to which the Company
is authorized to use any Proprietary Rights owned by any Person, excluding standardized
nonexclusive licenses for off the shelf or other software widely available through regular
commercial distribution channels on standard terms and conditions and were obtained by the Company
in the Ordinary Course of Business. Except as set forth in 3.20(b)(iii) of the Seller Parties
Disclosure Schedule, there are no royalties, fees or other amounts payable by the Company to any
Person by reason of the ownership, use, sale or disposition of Company Proprietary Rights;
(iii) Except as set forth in Part 3.20(b)(iii) of the Seller Parties Disclosure Schedule, the
Company has not entered into any written or oral contract, agreement, license or other arrangement
to indemnify any other person against any charge of infringement of the Company Proprietary Rights,
other than indemnification provisions contained in standard sales or agreements to customers or end
users arising in the Ordinary Course of Business, the forms of which have been delivered to
Purchaser or its counsel;
(iv) Part 3.20(b)(iv) of the Seller Parties Disclosure Schedule lists any Product that
contains any software that may be subject to an open source or general public license, a
description of such Product and the open source or general public license applicable to such
Product. Except as set forth in Part 3.20(b)(iv) of the Seller Parties Disclosure Schedule, none
of the Products contains any software that may be subject to an open source or general public
license; and
(v) There are no outstanding obligations other than as disclosed in Part 3.20(b) of the Seller
Parties Disclosure Schedule to pay any amounts or provide other consideration to any other Person
in connection with the Company Proprietary Rights (or any tangible embodiment thereof).
(c) Except as set forth in Part 3.20(c) of the Seller Parties Disclosure Schedule:
(i) The Company does not jointly own, license or claim any right, title or interest with any
other Person of the Company Proprietary Rights. No current or former officer, manager, director,
stockholder, member, employee, consultant or independent contractor of the Company has any right,
title or interest in, to or under the Company Proprietary Rights in which the Company has (or
purports to have) any right, title or interest that has not been exclusively assigned, transferred
or licensed to Company;
19
(ii) No Person has asserted or Threatened a claim, nor, to Sellers Knowledge, are there any
facts which could give rise to a claim, which would adversely affect the Companys ownership rights
to, or rights under, the Company Proprietary Rights, or any contract, agreement, license or and
other arrangement under which the Company claims any right, title or interest under the Company
Proprietary Rights or restricts in any material respect the use, transfer, delivery or licensing by
the Company of the Company Proprietary Rights or Products;
(iii) The Company is not subject to any proceeding or outstanding decree, order, judgment or
stipulation restricting in any manner the use, transfer or licensing of the Company Proprietary
Rights by the Company, the use, transfer or licensing of any Product by the Company, or which may
affect the validity, use or enforceability of the Company Proprietary Rights; and
(iv) To Sellers Knowledge, no Company Proprietary Rights have been infringed or
misappropriated by any Person and there is no unauthorized use, disclosure or misappropriation of
the Company Proprietary Rights by any current or former officer, manager, director, stockholder,
member, employee, consultant or independent contractor of the Company.
(d) Except as set forth in Part 3.20(d) of the Seller Parties Disclosure Schedule:
(i) all Patents in which the Company has any right, title or interest have been duly filed or
registered (as applicable) with the applicable Governmental Body, and maintained, including the
submission of all necessary filings and fees in accordance with the legal and administrative
requirements of the appropriate Governmental Body, and have not lapsed, expired or been abandoned;
(ii) (A) all Patents in which the Company has any right, title or interest, disclose
patentable subject matter, have been prosecuted in good faith and are in good standing, (B) there
are no inventorship challenges to any such Patents, (C) no interference has been declared or
provoked relating to any such Patents, (D) all Issued Patents in which the Company has any right,
title or interest are valid and enforceable, and (E) all maintenance and annual fees have been
fully paid, and all fees paid during prosecution and after issuance of any patent have been paid in
the correct entity status amounts, with respect to Issued Patents in which the Company has any
right, title or interest;
(iii) To Sellers Knowledge, there is no material fact with respect to any Patent Application
in which the Company has any right, title or interest that would (A) preclude the issuance of an
Issued Patent from such Patent Application (with valid claims no less broad in scope than the
claims as currently pending in such Patent Application), (B) render any Issued Patent issuing from
such Patent Application invalid or unenforceable, or (C) cause the claims included in such Patent
Application to be narrowed; and
(iv) No Person has asserted or Threatened a claim, nor, to Sellers Knowledge, are there any
facts which could give rise to a claim, that the Product (or the
20
Company Proprietary Right embodied in the Product) infringes or misappropriates any third
party Proprietary Rights.
(e) The Company has taken all commercially reasonable and customary measures and precautions
necessary to protect and maintain the confidentiality of all Trade Secrets in which the Company has
any right, title or interest and otherwise to maintain and protect the full value of all such Trade
Secrets. Without limiting the generality of the foregoing, except as set forth in Part 3.20(e) of
the Seller Parties Disclosure Schedule:
(i) All current and former consultants and independent contractors to the Company or to any
entity that assigned Company Proprietary Rights to the Company, including but not limited to Xpand,
who are or were involved in, or who have contributed to, the creation or development of the Company
Proprietary Rights have executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is substantially identical to the
form of Nondisclosure Agreement made available to Purchaser in the Data Room. Each current and
former consultant or independent contractor of the Company is obligated to assist the Company with
respect to the protection of the Company Proprietary Rights. No current or former employee,
officer, director, stockholder, consultant or independent contractor to the Company has any right,
claim or interest in or with respect to the Company Proprietary Rights; and
(ii) Except as disclosed as required under
Section 3.20(b)(i)
above, the Company has
not disclosed or delivered to any Person, or permitted the disclosure or delivery to any escrow
agent or other Person, of the Company Source Code. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would reasonably be
expected to, result in the disclosure or delivery to any Person of the Company Source Code.
(f) Except with respect to demonstration or trial copies, no product, system, program or
software module designed, developed, sold, licensed or otherwise made available by the Company to
any Person, including without limitation the Product(s), contains any back door, time bomb,
Trojan horse, worm, drop dead device, virus or other software routines or hardware
components designed to permit unauthorized access or to disable or erase software, hardware or data
without the consent of the user.
3.21
Certain Payments
. Neither the Company or any director, officer, agent, or employee of
the Company, or any other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form, whether in money,
property, or services in violation of any Legal Requirement or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the Company.
3.22
Authorizations; Regulatory Compliance.
Part 3.22 of the Seller Parties Disclosure
Schedule sets forth a complete list of all material approvals, clearances, authorizations, licenses
or registrations required by any Governmental Body in the European Union or in the Netherlands
having regulatory authority or jurisdiction over the Business and the
21
Products, whether required of the Company or, to the Sellers Knowledge, required of any of
its suppliers or manufacturers. Except as set forth on Part 3.22 of the Seller Parties Disclosure
Schedule:
(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 Body having regulatory
authority or jurisdiction over the Business and the Products.
(b) The Company and, to Sellers Knowledge, 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 Body, relating to the 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 the Company in compliance with the quality control procedures and specifications
made available by the Company to Purchaser in the Data Room and all applicable laws, statutes,
rules, regulations, ordinances, standards, guidelines or orders administered, issued or enforced by
the FDA or any other Governmental Body. Further, no action has been taken by any Governmental Body
or, to Sellers 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) The Company has not received and, to Sellers Knowledge, its manufacturers or suppliers
have not received from the FDA or any other Governmental Body, and to Sellers 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
Body, and there have been no seizures conducted or, to Sellers Knowledge, Threatened by the FDA or
other Governmental Body, 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 Body relating to the Business or to the Products.
(d) Except as set forth on Part 3.22(d) of the Seller Parties Disclosure Schedule, 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 Body on or prior to Closing Date.
(e) To Sellers Knowledge, there are no currently existing facts that will (i) cause the
withdrawal or recall, or require suspension or additional approvals or clearances, of any Products
currently sold by the Company, (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.
22
(f) Except as set forth on Part 3.22 (f) of the Seller Parties Disclosure Schedule: (i) none
of the Products manufactured, marketed or sold by the Company have been recalled or subject to a
field safety notification (whether voluntarily or otherwise); (ii) to Sellers Knowledge, none of
the Products manufactured, marketed or sold by the Companys manufacturers and suppliers on the
Companys behalf has been recalled or subject to a field safety notification (whether voluntary or
otherwise); and (iii) Seller Parties have 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 the Company.
(g) The Company has submitted to the FDA all Biological Product Deviation Reports relating to
performance issues that could lead to serious injury or death that the Company 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 Sellers Knowledge, except as
set forth on Part 3.22(g) of the Seller Parties Disclosure Schedule, no circumstances have arisen
that would require Company to submit a Biological Product Deviation Report to the FDA.
3.23
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, and (ii) 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) Part 3.23(b) of the Seller Parties Disclosure Schedule sets forth the forms of the
Companys 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 Part
3.23(b) of the Seller Parties Disclosure Schedule, there are no existing or, to Sellers Knowledge,
Threatened, claims against the Company 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. The Company 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
Sellers Knowledge, there has been no inquiry or investigation made in respect thereof by any
Governmental Body.
3.24
Customers and Suppliers
. The Company does not currently have customers, nor has it ever
had any customers prior to the Closing Date. Part 3.24 of the Seller Parties Disclosure Schedule
identifies the Business ten (10) largest suppliers (measured by euro volume in each case) during
the period from the formation of the Company through December 31, 2008, showing with respect to
each, the name and address, euro volume and nature of the relationship. The Company is not
required to provide any bonding or other financial security arrangements in
23
connection with any of the transactions with its suppliers. Seller Parties have not received
any communication of any intention of any supplier identified on Part 3.24 of the Seller Parties
Disclosure Schedule to discontinue its relationship as a supplier of, or materially reduce its
sales to the Company (or, post- Closing, from or to Purchaser).
3.25
Capital Expenditures
. Set forth on Part 3.25 of the Seller Parties Disclosure Schedule
is a list of the Companys approved capital expenditure projects related to the Business 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,
since the formation of the Company.
3.26
Relationships with Affiliates
. Neither Sellers nor, to Sellers Knowledge, any
Affiliate of any Seller has or had any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to the Companys businesses. Neither
Sellers nor, to Sellers Knowledge, any Affiliate of any Seller owns or has owned (of record or as
a beneficial owner) an equity interest or any other financial or profit interest in, a Person that
has (i) had business dealings or a material financial interest in any transaction with the Company,
or (ii) engaged in competition with the Company with respect to any line of the products or
services of the Company in any market presently served by the Company. Except as set forth in Part
3.26 of the Seller Parties Disclosure Schedule, neither Seller nor, to Sellers Knowledge, any
Affiliate of Sellers is a party to any Contract with, or has any claim or right against, the
Company.
3.27
Brokers
. No broker, finder, investment banker or other Person is entitled to any
brokerage, finders or other fee or commission in connection with the Contemplated Transactions
based upon arrangements made by or on behalf of the Company.
3.28
Disclosure
. Except as set forth in Part 3.28 of the Seller Parties Disclosure Schedule:
(a) No representation or warranty of Seller Parties in this Agreement and no statement in the
Disclosure Schedule omits 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.
(b) There is no fact known to Seller Parties that has specific application to Seller Parties
(other than general economic or industry conditions) and that materially adversely affects or, as
far as Seller Parties can reasonably foresee, materially Threatens, the assets, business,
prospects, financial condition, or results of operations of the Company (on a consolidated basis)
that has not been set forth in this Agreement or the Seller Parties Disclosure Schedule.
4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller Parties as follows:
4.1
Organization and Good Standing
. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. Purchaser has
24
full corporate power and authority to execute and deliver this Agreement and the Closing
Documents, to perform its obligations hereunder and thereunder and to conduct its business as it is
now being conducted and to own or use the properties and assets that it purports to own or use.
Purchaser is duly qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires such qualification,
except whether the failure to do so would not have a material adverse effect on Purchasers ability
to perform its obligations hereunder.
4.2
Authority; No Conflict
.
(a) This Agreement and the Closing Documents have been authorized by Purchasers board of
directors and, to the extent required, the stockholders of Purchaser. This Agreement constitutes
the legal, valid, and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to bankruptcy and other similar Legal Requirements of general applicability
relating to or affecting creditors rights and to general equity principles. Upon the execution
and delivery by Purchaser of the Closing Documents, the Closing Documents will constitute the
legal, valid, and binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms
,
enforceable against Purchaser in accordance with their respective
terms, subject to bankruptcy and other similar Legal Requirements of general applicability relating
to or affecting creditors rights and to general equity principles
.
(b) Except as set forth in Part 4.2 of the Purchaser Disclosure Schedule, or as would not have
a material adverse effect on Purchasers ability to perform its obligations hereunder, neither the
execution and delivery of this Agreement by Purchaser nor the consummation or performance of any of
the Contemplated Transactions by Purchaser will directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with or result in a violation of (A) any provision of Purchasers
Organizational Documents or (B) any resolution adopted by the board of directors or the
stockholders of Purchaser; or
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or
Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or Order to which Purchaser
,
or any of the assets
owned or used by Purchaser, may be subject.
Except as set forth in Part 4.2 of the Purchaser Disclosure Schedule, Purchaser is not and will not
be required to obtain any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated Transactions.
4.3
Certain Proceedings
. There is no Action or Proceeding pending or, to the knowledge of
Purchaser, Threatened in writing, against or affecting Purchaser that could reasonably be expected
to affect Purchasers ability to challenge, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with the consummation of the
25
Contemplated Transactions. To Purchasers knowledge, no such Proceeding has been Threatened.
4.4
Brokers
. Purchaser and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders fees or agents commissions or other similar
payment in connection with this Agreement and will indemnify and hold Sellers harmless from any
such payment alleged to be due by or through Purchaser as a result of the action of Purchaser or
its officers or agents.
4.5
No Other Representations.
Purchaser acknowledges that the Company does not make any
representation or warranty with respect to any projections, estimates or budgets delivered to or
made available to Purchaser of future revenues, future results of operations (or any component
thereof), future cash flows or future financial condition (or any component thereof) of the Company
or the future business and operations of the Company.
5.
CONDUCT OF BUSINESS DURING THE OPTION PERIOD
5.1
Conduct of Business of the Company
. The Company covenants and agrees that, during the
period beginning on the date hereof and ending on the termination or expiration of the Option
Period (as set forth in the Option Purchase Agreement), unless the Supervisory Board of Directors
(including the director designated by Purchaser) shall approve or the Purchaser Representative (as
defined below) shall otherwise consent in writing, the business of the Company shall be conducted
only in, and the Company shall not take any action except in, the Ordinary Course of Business and
in a manner consistent with past practice; and the Company shall use commercially reasonable
efforts to preserve intact its business organization and to preserve the current relationships of
the Company with customers, suppliers and other persons with which the Company has significant
business relations. Without limiting the foregoing, the Company shall not do, or enter into any
agreement or understanding to do, any of the following prior to the expiration or termination of
the Option Period without providing notice of such to a designated representative of Purchaser (the
Purchaser Representative
) and obtaining the approval of the Supervisory Board of Directors
(including the director designated by Purchaser) or the prior written consent of Purchaser
Representative. The Purchaser Representative shall use commercially reasonable efforts to respond
to such request for written consent within five (5) Business Days of Purchasers receipt of the
Companys notice. The Purchaser Representative shall initially be Jason Hannon, who shall serve
until Purchaser designates another individual upon two (2) Business Days prior written notice to
the Company in accordance with
Section 9.2
hereof. Each of the clauses below shall
constitute an independent obligation of the Company, not qualified by any other such clause, and
shall be deemed to be cumulative:
(a)
Organizational Documents
. Cause or permit any amendments to its Articles of Association
or other organizational documents to the extent such amendment would reasonably be expected to
adversely affect the Purchaser.
(b)
Dividends; Repurchases; Changes in Capital Stock
. Except as otherwise specifically
contemplated in this Agreement (i) declare or pay any dividends on, or make any other distributions
(whether in cash, stock or property) in respect of, any of its capital stock, (ii) issue or
authorize the issuance of any other securities in respect of, in lieu of or in
26
substitution for shares of its outstanding capital stock, or (iii) repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock (other than pursuant to repurchase
rights of the Company that permit the Company to repurchase securities from the holders thereof at
the original purchase price therefor in connection with the termination of services of such holder
as an employee of or consultant to the Company);
(c)
Stock Option Plans, Warrants, Etc.
Grant any options, warrants or other rights to
directly or indirectly acquire shares of capital stock of the Company;
(d)
Material Contracts
. Enter into any Material Contract or commitment, or violate, amend or
otherwise modify or waive (other than in the Ordinary Course of Business) any of the terms of any
Material Contract other than Contracts that are entered into in the Ordinary Course of Business;
(e)
Issuance of Securities
. Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities or other instruments (including
notes or other evidences of Indebtedness) convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character obligating it to issue any
such shares or other convertible instruments or securities;
(f)
Company Proprietary Rights
. Other than pursuant to the Distribution Agreement or the sale
of the Companys inventory in the Ordinary Course of Business:
(i) (A) sell, license, assign or transfer any Company Proprietary Rights or other properties
or assets which are material, individually or in the aggregate, when taken as a whole, to any other
person other than Purchaser, or (B) except for Permitted Encumbrances, encumber any Company
Proprietary Rights; or
(ii) License, or otherwise acquire, any Company Proprietary Rights not owned by the Company or
Purchaser from any third party on terms requiring any royalty payments;
(g)
Marketing or Other Rights
. Except with the consent of Purchaser, such consent not to be
unreasonably withheld, enter into or amend, in any material respect, any agreement pursuant to
which any other party is granted manufacturing, marketing or other development or distribution
rights of any type or scope with respect to any of the Companys products or technology;
(h)
Indebtedness
. Except for Indebtedness incurred pursuant to the Facility Agreement and
trade payables incurred and paid in the Ordinary Course of Business, incur any Indebtedness or
guarantee any such Indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(i)
Repayment of Indebtedness
. Except for Indebtedness repaid pursuant to the Facility
Agreement, repay in cash or repurchase for cash any Indebtedness to any Affiliate of the Company,
or any securities representing Indebtedness convertible into capital stock of the Company;
27
(j)
Leases
. Enter into any operating lease with an annual commitment in excess of
10,000;
(k)
Insurance
. Materially reduce the amount of any material insurance coverage provided by
insurance policies in effect on the Effective Date;
(l)
Termination or Waiver
. Terminate or waive any right that has material value to the
Company, other than in the Ordinary Course of Business;
(m)
Employee Benefit Plans; New Hires; Pay Increases
. Adopt or amend any employee benefit
plan or arrangement, pay any special bonuses or special remuneration to any employee or director
(other than pre-existing obligations) which in the aggregate exceed 20% of the Companys
then-current annual aggregate salary obligation, or, except in the Ordinary Course of Business
consistent with past practices, increase the salaries, bonuses or wage rates of its employees;
(n)
Severance Arrangements
. Adopt or approve any severance, bonus or benefit acceleration
arrangements (whether individually or more broadly) that could be triggered after the consummation
of the Acquisition;
(o)
Lawsuits
. Commence a lawsuit other than (i) for the routine collection of bills, (ii) in
such cases where it in good faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business,
provided
, that it consults with
Purchaser prior to the filing of such a suit, or (iii) against Purchaser with respect to this
Agreement or the Closing Documents;
(p)
Acquisitions
. Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or capital stock of, or by any other manner, any
business or any corporation, partnership, association or other business organization or division
thereof which are material, individually or in the aggregate, to the Companys business, taken as a
whole;
(q)
Taxes
. Make or change any election in respect of Taxes, adopt or request permission of
any Taxation Authority to change any accounting method in respect of Taxes, enter into any closing
agreement in respect of Taxes, settle any claim or assessment in respect of Taxes, surrender or
allow to expire any right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes, or take (or permit any
Subsidiary to take) any such actions with respect to any Subsidiary;
(r)
Other Transactions
. Except for an Acquisition pursuant to the Option Purchase Agreement,
merge or consolidate with any entity, or liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(s)
Proprietary Inventions Agreements
. Hire or employ, any employee or consultant having
access to confidential or proprietary information of the Company unless such employee or consultant
enters into, or has entered into, a proprietary information and inventions agreement or a
confidentiality agreement, with the Company in the form of
Exhibit E
attached
28
hereto, or amend or otherwise modify, or grant a waiver under, any such confidentiality or
proprietary information agreement with any such person;
(t)
Related Party Transactions
. Enter into any transaction with any director, officer,
employee, significant stockholder or family member of or consultant to any such person, corporation
or other entity of which any such person beneficially owns 10% or more of the equity interests or
has 10% or more of the voting power, or Subsidiary or Affiliate of the Company, except (i) as
approved by a majority of the disinterested directors of the Company on terms and conditions which
are fair and reasonable to the Company and no less favorable to the Company as could be obtained
from a third party on an arms-length basis and (ii) transactions with Purchaser;
(u)
Principal Business
. Engage in any business other than the Business;
(v)
Other Activities
. Knowingly engage in any other activity which could reasonably be
expected to (i) materially impair the ability of Purchaser to exercise its Call Option (as defined
in the Option Purchase Agreement) or (ii) materially impair the ability of Purchaser or the Company
to consummate the Acquisition; or
(w)
Subsidiaries
. Permit any Subsidiary of the Company to take any action from which the
Company would be prohibited pursuant to this
Section 5.1
.
5.2
Clinical Trials
. From time to time and at the reasonable request of Purchaser, the
Company shall provide Purchaser with updates concerning the progress of and developments in and
results of the Companys clinical trials. In addition, the Company shall (a) invite Purchaser to
participate in all meetings with clinical investigators, (b) make available to Purchaser copies of
all written communication provided to and from such investigators, and (c) make available to
Purchasers copies of any interim data and data analysis generated with respect to its clinical
trials. At least thirty (30) days prior to finalizing such protocols or delivering drafts or copies
thereof to institutional review boards or regulatory authorities, selecting such clinical
investigators and engaging in such clinical trials, the Company shall furnish to Purchaser for its
review and comment and shall consult with Purchaser regarding, (i) clinical trial protocols, (ii)
lists of clinical investigators, (iii) copies of all forms of clinical investigator contracts, and
(iv) patient data forms for any of its proposed clinical trials. All information obtained by
Purchaser pursuant to this
Section 5.2
shall be kept confidential in accordance with
Section 6.3
of this Agreement to the extent it constitutes Confidential Information
thereunder.
5.3
FDA Approval Matters
.
(a) The Company shall notify Purchaser of any material communications with the FDA or any
corollary entity in any other jurisdiction, including outside of the United States of America, or
any other Governmental Body, whether written or oral, as soon as reasonably practicable, but in no
event later than five (5) Business Days after the receipt of such communication, and within such
same time period, the Company shall provide Purchaser with copies of any such written
communications and written summaries of any such oral communications.
29
(b) From time to time and at the reasonable request of Purchaser, the Company shall provide
Purchaser with updates concerning the progress of the Companys regulatory filings and strategy for
obtaining necessary regulatory approvals to market and sell the products of the Company. The
Company shall furnish to Purchaser for its review and comment, and shall consult with Purchaser
regarding, any material regulatory filing prior to finalizing such filings and delivering them to
the relevant regulatory authorities.
5.4
Payment of Taxes, Etc
. The Company shall, and shall cause each of its Subsidiaries to,
timely file all of its Tax Returns as they become due (taking all timely filed proper extension
requests into account), all such Tax Returns to be true, correct and complete, and the Company
shall, and shall cause each of its Subsidiaries to, timely pay and discharge as they become due and
payable all Taxes (other than Taxes contested in good faith by the Company or its Subsidiaries in
appropriate proceedings), assessments and other governmental charges or levies imposed upon it or
its income or any of its property as well as all claims of any kind (including claims for labor,
materials and supplies) that, if unpaid, may by law become an Encumbrance, other than a Permitted
Encumbrance.
6.
ADDITIONAL AGREEMENTS
6.1
Access to Properties and Information
. At all times until the earlier of (i) the
expiration of the Option Period and (ii) the consummation of the Acquisition, the Company will
afford to Purchaser and its authorized representatives, upon reasonable notice, reasonable access
during normal business hours to all properties, books, records, contracts and documents of the
Company as Purchaser and such authorized representatives may reasonably request and a complete
opportunity to make such investigations as Purchaser and such authorized representatives reasonably
request, and the Company will furnish or cause to be furnished to Purchaser and its authorized
representatives all such information with respect to the affairs and businesses of the Company as
they may reasonably request. All information obtained by Purchaser pursuant to this
Section
6.1
shall be kept confidential in accordance with
Section 6.3
of this Agreement to the
extent it constitutes Confidential Information thereunder. No investigation pursuant to this
Section 6.1
shall affect any representation or warranty in this Agreement or the Closing
Documents of any party hereto or thereto or any condition to the obligations of the parties hereto
or thereto.
6.2
Notification of Certain Matters
. Each of the parties to this Agreement shall give prompt
notice to the other parties of the occurrence or non-occurrence of any event which would likely
cause any representation or warranty made by such party herein to be untrue or inaccurate or any
covenant, condition or agreement contained herein not to be complied with or satisfied
(
provided
,
however
, that, any such disclosure shall not in any way be deemed to
amend, modify or in any way affect the representations, warranties and covenants made by any party
in or pursuant to this Agreement).
6.3
Confidentiality; Publicity
. Except as may be required by law or as otherwise permitted or
expressly contemplated herein, no party hereto or their respective Affiliates, employees, agents
and representatives shall disclose to any third party this Agreement, the subject matter or terms
hereof or (except with regard to disclosures by Purchaser of confidential information of the
Company following the Closing) any confidential information or other
30
proprietary knowledge concerning the business or affairs of any other party (
Confidential
Information
) which it may have acquired from such party in the course of pursuing the transactions
contemplated by this Agreement without the prior consent of the other parties hereto;
provided
, that any information that is otherwise publicly available, without breach of this
provision, or has been obtained from a third party without a breach of such third partys duties,
shall not be deemed confidential information. No press release or other public announcement
related to this Agreement or the transactions contemplated hereby shall be issued by any party
without the prior written consent of the other parties hereto.
6.4
Use of Proceeds from the Facility
. Unless set forth in the Operating Budget or otherwise
approved by Board of Directors (including the director designated by Purchaser), the proceeds from
the Facility Agreement may only be used (a) to fund development of the Company Proprietary Rights
for purposes of achieving the Milestones (as defined in the Option Purchase Agreement), or (b) for
purposes of fulfilling its obligations under the Distribution Agreement (as defined below).
6.5
Monthly and Quarterly Statements
. For so long as Purchaser owns at least twenty percent
(20%) of the outstanding capital stock of the Company on a fully-diluted basis, (a) within four (4)
Business Days of the end of each month, the Company agrees to prepare and furnish to Purchaser (by
mail, facsimile or e-mail) unaudited Financial Statements for the applicable month, and (b) within
four (4) Business Days of the end of each quarter, the Company agrees to prepare and furnish to
Purchaser (by mail, facsimile or e-mail) unaudited Financial Statements for the applicable quarter.
The Financial Statements shall fairly present in all material respects, in conformity with GAAP,
the financial condition and the results of operations, changes in stockholders equity, and cash
flow of the Company as at the respective dates of and for the periods referred to in the Financial
Statements. The Financial Statements shall reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to such Financial
Statements. In the event the Company fails to deliver monthly or quarterly unaudited Financial
Statements to Purchaser on a timely basis, the Company shall pay to Purchaser $10,000 for each
Business Day that such statement is not provided to Purchaser past the applicable deadline.
6.6
Audits
. Upon the request of Purchaser, on an annual basis, the Company shall have a third
party auditor of a nationally recognized certified public accounting firm conduct an audit in
accordance with GAAP and shall conduct a review of its internal controls in accordance with the
requirements set forth under Section 404 of the Sarbanes-Oxley Act, as amended.
6.7
Recapitalization
. Immediately upon receiving a declaration of no-objection from the Dutch
Ministry of Justice with respect to the Amended Articles, the Company shall instruct the Notary to
execute the notarial deed of amendment, as a result of which, the Recapitalization shall be
effected. The shares issued to Purchaser as part of the Recapitalization shall be free and clear
of all Encumbrances.
7.
INDEMNIFICATION; REMEDIES
7.1
Survival; Right to Indemnification Not Affected by Knowledge
. All representations and
warranties of Purchaser and Seller Parties contained herein or in any other
31
Closing Document or document, certificate or other instrument required to be delivered
hereunder or thereunder in connection with the transactions contemplated hereby shall survive the
Closing and shall continue until *** after the Closing (the
Survival Period
),
provided
that (a) the representations and warranties set forth in *** ,
shall survive until sixty (60) days after the expiration of the applicable statutes of
limitations (including any extensions or waivers thereof) and (b) the representations and
warranties set forth in *** shall survive indefinitely ((a) and (b), together,
the
Fundamental Representations
);
provided
,
further
, that to the extent any
written claim for indemnification is made prior to the expiration date of the representations and
warranties on which any such claim for indemnification is based, the expiration of such
representations and warranties shall not affect the right of any Indemnified Person to seek
indemnification for Damages in respect of such claim pursuant to
Section 7
hereof. The
right to indemnification, payment of Damages or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any investigation conducted with
respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or
obligation. The waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not affect the right
to indemnification, payment of Damages, or other remedy based on such representations, warranties,
covenants, and obligations. Notwithstanding the Survival Period, Purchasers rights to
indemnification under the Option Purchase Agreement shall not be affected in the event that a claim
for indemnification has been made prior to the expiration of the Survival Period under the Option
Purchase Agreement (in accordance with the terms and conditions set forth therein).
7.2
Indemnification and Payment of Damages by Sellers.
(a) Each Seller, severally but not jointly, shall indemnify and hold harmless Purchaser, the
Company, and their respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the
Purchaser Indemnified Persons
) from and against and shall pay to the relevant
Purchaser Indemnified Persons the amount of any and all losses, liabilities, claims, damages
(excluding incidental, punitive and consequential damages), deficiencies, judgments, fines,
penalties, fees, costs and expenses (including costs of investigation and defense and reasonable
attorneys fees) and diminutions in value of the Product(s), whether or not involving a third-party
claim (collectively,
Damages
), incurred by such Purchaser Indemnified Person arising directly or
indirectly from or in connection with any breach of any representation or warranty of such Seller
contained in
Section 2
hereof or any covenant or obligation of such Seller in this
Agreement.
(b) Each Seller, severally but not jointly, will indemnify and hold harmless the Purchaser
Indemnified Persons for, and will pay to the applicable Purchaser Indemnified Persons the amount of
any Damages arising, directly or indirectly, from or in connection with:
(i) any Breach of any representation or warranty made by the Company under
Section 3
hereof;
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32
(ii) any Breach of any representation or warranty made by the Company with respect to any
certificate or other document delivered by the Company pursuant to this Agreement; or
(iii) any Breach by the Company of any covenant or obligation of the Company in this
Agreement.
(iv) Notwithstanding the foregoing, at the election of a Purchaser Indemnified Person, in its
sole discretion (but subject to the provisions of this
Section 7
), to the extent that any
Purchaser Indemnified Person is (or may be) entitled to be indemnified by any Seller for Damages
hereunder, a Purchaser Indemnified Person shall be entitled (without limiting any other remedy
available to such Purchaser Indemnified Person) to recover such Damages by set off against any
amounts owed to such Seller under the Option Purchase Agreement;
provided
, that to the
extent the amount so set-off exceeds the amount of Damages for which it is finally determined that
such Purchaser Indemnified Person is entitled to be indemnified, promptly following such final
determination, Purchaser shall remit such excess to such Seller. The remedies provided in this
Section 7.2
will not be exclusive of or limit any other remedies that may be available to
the Purchaser Indemnified Persons under this
Section 7
.
7.3
Indemnification and Payment of Damages by Purchaser
. Purchaser will indemnify and hold
harmless Sellers and their respective Representatives, stockholders, controlling persons and
affiliates (collectively, the
Seller Indemnified Persons
and, together with the Purchaser
Indemnified Persons, the
Indemnified Persons
), and will pay to Seller Indemnified Persons the
amount of any Damages arising, directly or indirectly, from or in connection with (a) any Breach of
any representation or warranty made by Purchaser in this Agreement or in any certificate delivered
by Purchaser pursuant to this Agreement, (b) any Breach by Purchaser of any covenant or obligation
of Purchaser in this Agreement, or (c) any claim by any Person for brokerage or finders fees or
commissions or similar payments based upon any agreement or understanding alleged to have been made
by such Person with Purchaser (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
7.4
Limitations on Indemnification.
(a) No claim shall be made unless, and only to the extent that, the cumulative amount of
Damages incurred buy the Indemnified Persons exceeds *** (the
Basket
), and
upon exceeding such amount, the Indemnified Persons shall be entitled to be indemnified for all
Damages (including all Damages below such amount).
(b) Notwithstanding anything to the contrary set forth in this Agreement, the total Damages
payable by the Sellers pursuant to
Section 7.2
shall not exceed *** (the
Cap
),
except to the extent (i) such Damages are due to fraud or intentional misrepresentation of any of
the Sellers, or (ii) such Damages are due to a breach of a Fundamental Representation; provided,
however, that in no event shall the aggregate amount of Damages recoverable from any Seller
pursuant to
Section 7.2
exceed *** .
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(c) Notwithstanding anything to the contrary set forth in this Agreement, the total Damages
payable by Purchaser pursuant to
Section 7.3
shall not exceed the Cap, except to the extent
(i) such Damages are due to fraud or intentional misrepresentation of any of the Purchaser, or (ii)
such Damages are due to a breach of a Fundamental Representation.
(d) Neither the Sellers nor Purchaser shall have any liability under any provision of this
Agreement for any multiple of damages or diminution in value, other than for diminution in value of
the Product(s).
7.5
Procedure for IndemnificationThird Party Claims
.
(a) Promptly after receipt by an Indemnified Person under
Section 7.2
or
Section
7.3
of notice of the commencement of any Proceeding against it, such Indemnified Person will,
if a claim is to be made against an Indemnifying Person under such Section, give notice to the
Indemnifying Person of the commencement of such claim, but the failure to notify the Indemnifying
Person will not relieve the Indemnifying Person of any liability that it may have to any
Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense
of such action is prejudiced by the Indemnified Persons failure to give such notice.
(b) If any Proceeding referred to in
Section 7.5(a)
is brought against an Indemnified
Person and it gives notice to the party from which such Indemnified Person is entitled to receive
indemnification (an
Indemnifying Person
) of the commencement of such Proceeding, the Indemnifying
Person will be entitled to participate in such Proceeding and, to the extent that it wishes (unless
(i) the Indemnifying Person is also a party to such Proceeding and the Indemnified Person
determines in good faith that joint representation would be inappropriate, or (ii) the Indemnifying
Person fails to provide reasonable assurance to the Indemnified Person of its financial capacity to
defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel satisfactory to the Indemnified Person and, after notice
from the Indemnifying Person to the Indemnified Person of its election to assume the defense of
such Proceeding, the Indemnifying Person will not, as long as it diligently conducts such defense,
be liable to the Indemnified Person under this
Section 7
for any fees of other counsel or
any other expenses with respect to the defense of such Proceeding, in each case subsequently
incurred by the Indemnified Person in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the Indemnifying Person assumes the defense of a Proceeding:
(i) it will be conclusively established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement
of such claims may be effected by the Indemnifying Person without the Indemnified Persons consent
unless (A) there is no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person, provided such settlement or compromise would not materially and
adversely prejudice the business or other commercial interests of the Indemnified Person, and (B)
the sole relief provided is monetary damages that are paid in full by the Indemnifying Person; and
(iii) the Indemnified Person will have no liability with respect to any compromise or settlement of
such claims effected without its consent. If notice is given to an Indemnifying Person of the
commencement of any Proceeding and the Indemnifying Person does not, within ten (10) days after the
Indemnified Persons notice is given, give notice to the Indemnified Person of its
34
election to assume the defense of such Proceeding, the Indemnifying Person will be bound by
any determination made in such Proceeding or any compromise or settlement effected by the
Indemnified Person if it is ultimately determined that the Indemnified Person is entitled to
indemnification.
(c) Notwithstanding the foregoing, if an Indemnified Person determines in good faith that
there is a reasonable probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the Indemnifying Person will not be
bound by any determination of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(d) Each Seller hereby consents to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any indemnified party for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agrees that process may be served on Sellers with respect to such a claim anywhere in
the world.
7.6
Procedure for IndemnificationOther Claims
. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party from whom indemnification
is sought.
7.7
Remedies Exclusive
. Except in the event of fraud or willful misconduct (in which case the
defrauded party shall have all rights and remedies available under this Agreement and available
under the law against the party that committed such fraud or willful misconduct), the remedies
provided in this
Section 7
shall be the exclusive remedies of the parties hereto and their
heirs, Affiliates, successors, and assigns after the Closing with respect to the representations
and warranties set forth in this Agreement. Except as set forth in this
Section 7.7
, no
party may bring or commence any Proceeding with respect to the representations and warranties set
forth in this Agreement, whether in contract, tort or otherwise, except to bring a claim for (a)
fraud or willful misconduct against the party that committed such fraud or willful misconduct and
(b) indemnification in accordance with
Section 7
. Notwithstanding the foregoing, nothing
contained in this Agreement shall limit the rights of any party hereto to seek or obtain injunctive
relief or other equitable remedies to which such party may otherwise be entitled. The provisions
of this
Section 7
constitute an integral part of the consideration given pursuant to this
Agreement and were specifically bargained for and reflected in the total amount of the Purchase
Price payable to the Sellers.
8.
CLOSING DELIVERABLES.
8.1
Closing Deliverables of the Company.
At or prior to the Closing Date, the Company shall
deliver to Purchaser the following:
(a)
Amended Articles of Association
. Evidence of filing the declaration of no-objection for
the Amended Articles with the Dutch Ministry of Justice establishing the rights,
35
preferences and privileges of the Series B Preferred Stock and executed powers of attorney and
shareholder resolutions authorizing the Notary to execute the notarial deed of amendment upon
receipt of the declaration of no-objection from the Dutch Ministry of Justice.
(b)
Government Approvals
. All approvals from any applicable Governmental Body necessary to
consummate the transactions contemplated hereby, with exception of the declaration of no-objection
with respect to the Amended Articles from the Dutch Ministry of Justice.
(c)
Third Party Consents
. All written consents, approvals, waivers, notices or similar
authorizations required to be obtained or given by the Company in order to consummate the
transactions contemplated hereby, in form and substance reasonably satisfactory to Purchaser.
(d)
Certificate of Statutory Director
. The following documents, certified as of the Closing
Date by the Companys Statutory Director as being the true, correct and complete documents of the
Company:
(i) a copy of the articles of association of the Company as in effect immediately prior to the
Closing Date;
(ii) copies of resolutions adopted by the Board of Directors and shareholders of the Company
authorizing the transactions contemplated by this Agreement; and
(iii) the shareholders register of the Company.
(e)
Legal Opinion
. An opinion, dated as of the Closing Date, from counsel for the Seller
Parties, opining as to the matters set forth in
Exhibit F
.
(f)
Option Purchase Agreement
. The Option Purchase Agreement duly executed by the Sellers and
an authorized officer of the Company.
(g)
Distribution Agreement
. The Distribution Agreement in the form attached hereto as
Exhibit G
(the
Distribution Agreement
) dated as of the Closing Date and duly executed by
an authorized officer of Company.
(h)
Revos License Agreement
. The Revos License Agreement in the form attached hereto as
Exhibit H
(the
Revos License Agreement
) dated as of the Closing Date and duly executed by
an authorized officer of Company.
(i)
Facility Agreement
. The Facility Agreement, duly executed by an authorized officer of the
Company.
(j)
Pledge Agreement
. The Pledge Agreement, dated as of the Closing Date, by and between
Purchaser and Company, in the form attached hereto as
Exhibit I
(the
Pledge Agreement
),
duly executed by an authorized officer of the Company.
36
(k)
Shareholders Agreement.
The Amended and Restated Shareholders Agreement in the form
attached hereto as
Exhibit J
(the
Shareholders Agreement
) dated as of the Closing Date
and duly executed by the Sellers and an authorized officer of the Company
(l)
Founders Non-Competition Agreements
. The Founders Non-Competition Agreements in the
forms attached hereto as
Exhibit K
and
Exhibit L
(each, a
Founders
Non-Competition Agreement
) dated as of the Closing Date and duly executed by each of Joost D de
Bruijn and Clemens van Blitterswijk respectively.
(m)
Investor Non-Competition Agreement
. The Investor Non-Competition Agreement in the form
attached hereto as
Exhibit M
(the
Investor Non-Competition Agreement
) dated as of the
Closing Date and duly executed by Edward van Wezel.
(n)
Estimated Closing Certificate
. A certificate of the Statutory Director of the Company,
prepared to the reasonable satisfaction of Purchaser (the
Estimated Closing Certificate
) setting
forth the Companys good faith estimate of the aggregate amount of all legal, financial advisory,
investment banking and other fees and expenses incurred by or on behalf of the Sellers or the
Company in connection with the negotiation, preparation and execution of this Agreement, the
Closing Documents and the Contemplated Transactions (the
Seller Funded Expenses
), to the extent
that such Seller Funded Expenses will not be paid prior to the close of business on the Business
Day immediately preceding the Closing Date (the amounts set forth on the Estimated Closing
Certificate with respect to the Seller Funded Expenses shall be conclusive for the purposes, absent
manifest error).
8.2
Closing Deliverables of the Purchaser.
At or prior to the Closing Date, the Purchaser
shall deliver to the Company the following:
(a)
Government Approvals
. All approvals from any applicable Governmental Body necessary to
consummate the transactions contemplated hereby.
(b)
Third Party Consents
. All written consents, approvals, waivers, notices or similar
authorizations required to be obtained or given by the Purchaser in order to consummate the
transactions contemplated hereby, in form and substance reasonably satisfactory to Company.
(c)
Secretarys Certificate
. The following documents, certified as of the Closing Date by the
Secretary of the Purchaser as being the true, correct and complete documents of the Purchaser:
(i) copies of the certificate of incorporation and bylaws of the Purchaser as in effect
immediately prior to the Closing Date;
(ii) copies of resolutions adopted by the board of directors and shareholders of the Purchaser
authorizing the transactions contemplated by this Agreement; and
(iii) certified good standing certificates, or certificates of compliance, relating to the
Purchaser and each subsidiary, dated within five (5) Business Days of the Closing Date, issued by
the State of Delaware and the jurisdiction of formation of each Subsidiary.
37
(d)
Option Purchase Agreement
. The Option Purchase Agreement dated as of the Closing Date and
duly executed by an authorized officer of the Purchaser.
(e)
Distribution Agreement
. The Distribution Agreement dated as of the Closing Date and duly
executed by an authorized officer of Purchaser.
(f)
Revos License Agreement
. The Revos License Agreement dated as of the Closing Date and
duly executed by an authorized officer of Purchaser.
(g)
Facility Agreement
. The Facility Agreement, duly executed by an authorized officer of
Purchaser.
(h)
Shareholders Agreement
. The Shareholders Agreement, duly executed by an authorized
officer of Purchaser.
(i)
Notarial Deed
. Confirmation from the Notary that he has received the amount due pursuant
to
Section 1.1(a)
.
8.3
Closing Deliverables of the Parties.
At or prior to the Closing Date, the parties shall
execute the notarial deed of transfer of the Initial Shares substantially in the form of
Exhibit D
.
9.
GENERAL PROVISIONS
9.1
Expenses
. Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants.
9.2
Notices
. All notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier service (costs prepaid);
or (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment
confirmed with a copy delivered as provided in clause (a), in each case to the following addresses,
facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or person as a party
may designate by notice to the other parties):
If to Purchaser, addressed to:
NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attn: General Counsel
Fax: (858) 909-2479
38
With a copy to:
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Michael Kagnoff
Fax: (858) 456-3075
If to Seller Parties, addressed to:
Progentix Orthobiology BV
Professor Bronkhorstlaan 10, building 48
3723 MB Bilthoven
The Netherlands
Attention: Joost de Bruijn
Fax: +31 (0)30 229 7299
With a copy to:
Goodwin Procter
llp
Exchange Place
53 State Streeet
Boston, MA 02109
Attn: Michael H. Bison, Esq.
Fax: (617) 523-1231
and
CORP. advocaten
De Lairessestraat 137-143
1075 HJ Amsterdam
Attention: Edwin Renes
Fax: + 31 (0)20 578 83 05
9.3
Jurisdiction; Service of Process
. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be brought against any of
the parties in the United States District Court for the Southern District of New York or the state
courts located in New York, New York, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
9.4
Dispute Resolution
.
(a) Any dispute arising out of or relating to this Agreement or the breach, termination or
validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with
the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes (the
CPR Rules
). The Center for Public Resources shall appoint a neutral
39
advisor from its National CPR Panel. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. §§1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration shall be New York, New
York.
(b) Such proceedings shall be administered by the neutral advisor in accordance with the CPR
Rules as he/she deems appropriate, however, such proceedings shall be guided by the following
agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be accomplished within forty-five (45)
days of the initiation of the procedure;
(ii) no other discovery;
(iii) hearings before the neutral advisor which shall not exceed three hours; such hearings to
take place in one or two days at a maximum; and
(iv) decision to be rendered not later than ten (10) days following such hearings.
(c) Each of Purchaser, the Company and the Sellers (i) hereby unconditionally and irrevocably
submits to the jurisdiction of the United States District Court for the Southern District of New
York, for the purpose of enforcing the award or decision in any such proceeding and (ii) hereby
waives, and agrees not to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its property is exempt or
immune from attachment or execution, that the civil action is brought in an inconvenient forum,
that the venue of the civil action is improper or that this Agreement or the subject matter hereof
may not be enforced in or by such court, and (iii) hereby waives and agrees not to seek any review
by any court of any other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. Each of Purchaser, the Company and Sellers hereby consents to service
of process by registered mail at the address to which notices are to be given. Each of Purchaser,
the Company and the Sellers agrees that its submission to jurisdiction and its consent to service
of process by mail is made for the express benefit of the other parties hereto. Final judgment
against Purchaser, the Company or the Sellers in any such action, suit or proceeding may be
enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction;
provided
,
however
, that any party may at its option bring suit, or institute other judicial
proceedings, in any state or federal court of the United States or of any country or place where
the other parties or their assets, may be found.
9.5
Waiver
. The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right, power, or privilege
or the exercise of any other right, power, or privilege. To the maximum extent permitted by
applicable law: (a) no claim or right arising out of this Agreement or the documents referred to in
40
this Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in this Agreement.
9.6
Entire Agreement and Modification
. This Agreement, along with the Option Purchase
Agreement, supersedes all prior agreements between the parties with respect to its subject matter
(including the Non-Binding Letter of Intent between Purchaser and the Company dated November 28,
2008 and constitutes (along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed by Purchaser and
Seller Parties.
9.7
Assignments, Successors, and No Third-Party Rights
. Neither party may assign any of its
rights under this Agreement without the prior consent of the other parties, except that Purchaser
may assign any of its rights under this Agreement to any Subsidiary of Purchaser. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and assigns.
9.8
Release of Claims
. In consideration of the Purchase Price and the other covenants and
agreements set forth herein and in the Option Purchase Agreement, effective as of the Closing
except as set forth in this Agreement or any exhibit or schedule to this Agreement, including,
without limitation, the Closing Documents (which are hereby excluded from this
Section 9.8
)
and except for any claims arising after the Closing Date, effective as of the Closing, Sellers
hereby fully and forever release and discharge Purchaser and the Company (and their Representatives
and Affiliates) from any and all claims, accusations, demands, liabilities, obligations,
responsibilities, suits, actions and causes of action, whether liquidated or unliquidated, fixed or
contingent, known or unknown, or otherwise, in each case, arising out of, relating to, or otherwise
connected with all prior relationships with or dealings with, between or among any or all of the
parties hereto, and any of their business or other relationships arising out of or related to the
same. Each Seller acknowledges that it may discover facts or law different from or in addition to
the facts or law that they know or believe to be true with respect to the claims released in this
Section 9.8
and agrees, nonetheless, that this Section 9.8 and the release contained herein
shall be and remain effective in all respects notwithstanding such different or additional facts or
the discovery of them. Each Seller further agrees that, to the fullest extent permitted by law, it
will not prosecute, nor allow to be prosecuted on his behalf, in any administrative agency, whether
state or federal, or in any court, whether state or federal, any claim or demand of any type
related to the matters released in this
Section 9.8
.
41
9.9
Severability
. If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or unenforceable.
9.10
Section Headings, Construction
. The headings of Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All references to
Section or Sections refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word including does not limit the preceding
words or terms.
9.11
Time of Essence
. With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
9.12
Governing Law
. This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
9.13
Counterparts
. This Agreement may be executed in one or more counterparts (including by
facsimile or other electronic transmission), each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to constitute one and the same
agreement.
10.
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified or referred to
in this
Section 10
:
Acquisition
has the meaning set forth in the Recitals to this Agreement.
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 Body.
Affiliate
has the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the date hereof.
Agreement
as defined in the first paragraph of this Agreement.
Amended Articles
as defined in the recitals to this Agreement.
Applicable Contract
any Contract (a) under which the Company has or may acquire any rights,
(b) under which the Company has or may become subject to any obligation or liability, or (c) by
which the Company or any of the assets owned or used by it is or may become bound.
42
Assets
means all of the personal properties and assets of any nature owned or used by the
Company (whether real, personal, or mixed and whether tangible or intangible).
Balance Sheet
as defined in
Section 3.4
.
Balance Sheet Date
December 31, 2008.
Blocks Product
shall have the meaning set forth on Exhibit E to the Option Purchase
Agreement.
Breach
a Breach of a representation, warranty, covenant, obligation, or other provision
of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been, in each case, as of the date any representation or warranty is
made, or any covenant or obligation is required to be performed (as applicable), (a) any inaccuracy
in or breach of, or any failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or other occurrence or
circumstance that is or was inconsistent with such representation, warranty, covenant, obligation,
or other provision, and the term Breach means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
Business
All operations and rights relating to the development, manufacturing, marketing
and sale of the Product
Business Day
means any day other than a Saturday, a Sunday or a day on which commercial
banking institutions in Amsterdam, The Netherlands or San Diego, California are authorized or
obligated by law or executive order to be closed. For purposes of this Agreement (unless otherwise
specified as a Business Day), the word day shall mean a calendar day. Whenever any party hereto
is required to provide notice, approval or otherwise respond within any specified period up
Business Days, such period shall commence at 9:00 a.m. local time in the city specified in such
partys address for notice in
Section 9.2
on the first whole Business Day of such period
and shall expire at 5:00 p.m., local time in such city.
Call Option Period
has the meaning set forth in the Recitals to this Agreement.
Closing
as defined in
Section 1.2
.
Closing Date
the date and time as of which the Closing actually takes place.
Closing Documents
this Agreement, the Option Purchase Agreement, the Facility Agreement,
the Amended Articles, the Distribution Agreement, the Revos License Agreement, the Shareholders
Agreement, the Founders Non-Competition Agreements and the Investor Non-Competition Agreement and
each other document or agreement executed and delivered in connection with the Contemplated
Transactions.
Company
Progentix Orthobiology B.V. or any of its direct or indirect Subsidiaries.
Company Common Stock
as defined in the Recitals to this Agreement.
43
Company Proprietary Rights
any Proprietary Rights owned by or licensed to the Company or
otherwise used in the Business.
Company Source Code
any source code, or any portion, aspect or segment of any source code,
relating to any Proprietary Rights owned by or licensed to the Company or otherwise used by the
Company.
Consent
any approval, consent, ratification, waiver, or other authorization (including any
Governmental Authorization).
Contemplated Transactions
all of the transactions contemplated by this Agreement,
including:
(a) the sale of the Initial Shares by Sellers to Purchaser;
(b) the performance by Purchaser, the Company and Sellers of their respective covenants and
obligations under this Agreement; and
(c) Purchasers acquisition of the Initial Shares.
Contract
any agreement, contract, obligation, promise, or undertaking (whether written or
oral and whether express or implied) that is legally binding.
Copyrights
all copyrights, copyrightable works, semiconductor topography and mask work
rights, and applications for registration thereof, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral rights and rights of
ownership of copyrightable works, semiconductor topography works and mask works, and all rights to
register and obtain renewals and extensions of registrations, together with all other interests
accruing by reason of international copyright, semiconductor topography and mask work conventions.
Data Room
the virtual data room on the Companys website at *** pursuant to
which the Company made available certain of its documents to Purchaser.
Encumbrance
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
Environment
soil, land surface or subsurface strata, surface waters (including navigable
waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
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Portions of this page have been omitted pursuant to a request
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44
Environmental, Health, and Safety Liabilities
any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law or Occupational Safety
and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions (including on-site or off-site
contamination, occupational safety and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings,
damages, losses, claims, demands and response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety and Health Law for
cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or
other remediation or response actions (
Cleanup
) required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by
any Governmental Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures required under
Environmental Law or Occupational Safety and Health Law.
The terms removal, remedial, and response action, include the types of activities covered by
the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
§ 9601 et seq., as amended (
CERCLA
) or the equivalent thereof under the Environmental Laws of any
other jurisdiction.
Environmental Law
any Legal Requirement that requires or relates to:
(e) advising appropriate authorities, employees, and the public of intended or actual releases
of pollutants or hazardous substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(f) preventing or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;
(g) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(h) assuring that products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or disposed of;
(i) protecting resources, species, or ecological amenities;
45
(j) reducing to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful substances;
(k) cleaning up pollutants that have been released, preventing the threat of release, or
paying the costs of such clean up or prevention; or
(l) making responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets, including the Environmental Protection Act
(
Wet milieubeheer
), Environmental Activities Decree (
Activiteitenbesluit),
Soil Protection Act
(
Wet bodembescherming
), Waste Water Protection Act (
Wet verontreiniging oppervlaktewateren
) and
the European communitty Regulation on the Registration, Evaluation, Authorisation and restriction
of chemical substances, EC 1907 /2006, (
Verordening op de Registratie, Evaluatie, Autorisatie en
beperkingen van Chemische stiffen)
.
Facilities
any real property, leaseholds, or other interests currently or formerly owned or
operated by the Company and any buildings, plants, structures, or equipment (including motor
vehicles, tank cars, and rolling stock) currently or formerly owned or operated by the Company.
Facility Agreement
as defined in the Recitals to this Agreement.
FDA
United Stated Food and Drug Administration.
FDCA
Federal Food Drug and Cosmetic Act.
Financial Statements
as defined in
Section 3.4(a)
.
Finished Inventory
means all finished goods inventory of Product.
GAAP
generally accepted United States accounting principles, applied on a consistent basis.
Governmental Authorization
any approval, consent, license, permit, waiver, or other
authorization issued, granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
Governmental Body
any:
(m) nation, state, province, county , city, town, village, district, or other jurisdiction of
any nature;
(n) national, federal, state, local, municipal, foreign, or other government;
(o) governmental or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other tribunal);
(p) multi-national organization or body; or
46
(q) body exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
Granules Product
shall have the meaning set forth on Exhibit E to the Option Purchase
Agreement.
Hazardous Activity
the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about, or from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities or the Company.
Hazardous Materials
any waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
Indebtedness
as applied to any person, (a) all indebtedness for borrowed money, whether
current or funded, or secured or unsecured, (b) all indebtedness for the deferred purchase price of
property or services represented by a note or other security, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with respect to property
acquired (even though the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (d) all indebtedness
secured by a purchase money mortgage or other lien to secure all or part of the purchase price of
property subject to such mortgage or lien, (e) all obligations under capital leases in respect of
which such person is liable as lessee, (f) any liability in respect of bankers acceptances or
letters of credit, and (g) all indebtedness referred to in clauses (a), (b), (c), (d), (e) or (f)
above which is directly or indirectly guaranteed by or which such person has agreed (contingently
or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a
creditor against loss.
Initial Shares
as defined in the Recitals to this Agreement.
Issued Patents
all issued patents, reissued or reexamined patents, revivals of patents,
utility models, certificates of invention, registrations of patents and extensions thereof,
regardless of country or formal name, issued by the United States Patent and Trademark Office and
any other applicable Governmental Body.
Knowledge
an individual will be deemed to have Knowledge of a particular fact or other
matter if:
(r) such individual is actually aware of such fact or other matter; or
47
(s) a prudent individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have Knowledge of a particular fact or
other matter if any individual who is serving, or who has at any time served, as a director,
officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
Legal Requirement
any national, federal, state, provincial, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
Material Adverse Effect
an event, violation, inaccuracy, circumstance or other matter shall
be deemed to have a Material Adverse Effect on the Company if such event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in this Agreement but for the presence
of Material Adverse Effect or other materiality qualifications, or any similar qualifications, in
such representations and warranties) had or would reasonably be expected to have a material adverse
effect on: (i) the business, condition, capitalization, assets, liabilities, operations or
financial performance of the Company; (ii) the ability of Seller Parties to consummate the
Contemplated Transactions; or (iii) Purchasers ability to vote, receive dividends with respect to
or otherwise exercise ownership rights with respect to the Initial Shares, other than any event,
change, occurrence or effect resulting from (A) changes in general economic, financial market,
business or geopolitical conditions, (B) general changes or developments in any of the industries
in which the Company operates, (C) changes in any applicable Legal Requirements or applicable
accounting regulations or principles or interpretations thereof, (D) any outbreak or escalation of
hostilities or war or any act of terrorism, (E) the announcement of the acquisition of the Initial
Shares by Purchaser pursuant to this Agreement or (F) any action taken at the written request of
Purchaser.
Material Contract
as defined
Section 3.16(b)
.
Notary
means Mr. Sander Wiggers, civil law notary with DLA Piper Nederland N.V. or his
deputy, substitute or successor in office.
Occupational Safety and Health Law
any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or sponsored by industry associations
and insurance companies), designed to provide safe and healthful working conditions, including the
Working Conditions Act (
Arbeidsomstandighedenwet
) and the Working Conditions Decree
(
Arbeidsomstandighedenbesluit
).
Operating Budget
shall mean a detailed operating budget of the Company in respect of the
applicable fiscal year, which operating budget has been approved by the Board of Directors
(including the director designated by Purchaser).
Option Period
as defined in the Recitals to this Agreement.
48
Option Purchase Agreement
as defined in the Recitals to this Agreement.
Order
any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body
or by any arbitrator.
Ordinary Course of Business
an action taken by a Person will be deemed to have been taken
in the Ordinary Course of Business only if:
(t) such action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person;
(u) such action is not required to be authorized by the board of directors of such Person (or
by any Person or group of Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such Person; and
(v) such action is similar in nature and magnitude to actions customarily taken, without any
authorization by the board of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
Organizational Documents
(a) the articles of association; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or organization of a Person;
and (e) any amendment to any of the foregoing.
Patents
the Issued Patents and the Patent Applications.
Patent Applications
all published or unpublished nonprovisional and provisional patent
applications, reexamination proceedings, invention disclosures and records of invention.
Person
any individual, corporation, limited liability company, partnership, association,
trust or any other entity or organization, including a Governmental Body.
Proceeding
any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
Product
shall mean the Blocks Product, the Granules Product and the Putty Product.
Proprietary Rights
any: (a)(i) Issued Patents, (ii) Patent Applications, (iii) Trademarks,
fictitious business names and domain name registrations, (iv) Copyrights, (v) Trade Secrets, (vi)
all other ideas, inventions, designs, manufacturing and operating specifications, technical data,
and other intangible assets, intellectual properties and rights (whether or not appropriate steps
have been taken to protect, under applicable law, such other intangible assets, properties or
rights); or (b) any right to use or exploit any of the foregoing.
49
Purchaser
as defined in the first paragraph of this Agreement.
Purchaser Disclosure Schedule
the Disclosure Schedule delivered by Purchaser to Sellers, if
any, concurrently with the execution and delivery of this Agreement.
Put Option Period
has the meaning set forth in the Recitals to this Agreement.
Putty Product
shall have the meaning set forth on Exhibit E to the Option Purchase
Agreement.
Registered Copyrights
all copyrights for which registrations have been obtained or
applications for registration have been filed in any applicable Governmental Body, and all
copyrights for which registration is not required.
Registered Trademarks
all trademarks for which registrations have been obtained or
applications for registration have been filed in any applicable Governmental Body.
Release
any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing into the Environment, whether intentional or unintentional.
Remaining Shares
as defined in the Recitals to this Agreement.
Representative
with respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal counsel, accountants,
and financial advisors.
Seller
as defined in the first paragraph of this Agreement.
Seller Parties
as defined in the first paragraph of this Agreement.
Seller Parties Disclosure Schedule
the Disclosure Schedule delivered by the Seller Parties
to Purchaser, concurrently with the execution and delivery of this Agreement.
Seller Shares
as defined in the Recitals of this Agreement.
Sellers Knowledge
means the Knowledge of each of the Sellers on ***
Series A Preferred Stock
as defined in the Recitals to this Agreement.
Series B Preferred Stock
as defined in the Recitals to the Agreement.
Subsidiary
with respect to any Person (the
Owner
), any corporation or other Person of
which securities or other interests having the power to elect a majority of that corporations or
other Persons board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that has not occurred)
are
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request
for Confidential Treatment filed separately with the Commission.
|
50
held by the Owner or one or more of its Subsidiaries; when used without reference to a
particular Person, Subsidiary means a Subsidiary of the Company.
Tax
or
Taxation
means any and all forms of taxation by any tax authority, whether
international, national or local, including without limitation to the generality of the foregoing,
corporate income tax, capital tax, wage tax, real property tax, transfer taxes, registration tax,
VAT, dividend withholding tax, environmental tax, divestment payments, custom duties, stock
exchange tax, exercise tax or gift tax, including but not limited to penalties, interest and any
other costs or expenses related to or associated with any tax matter and all contributions or
premiums which are payable pursuant to industry or governmental social security regulations,
including penalties, interest and any other costs or expenses relating to or associated with any
social security matter.
Tax Returns
means all returns, computations ,declarations, reports, statements and other
documents related to Taxation, including any schedule or attachment thereto and any related or
supporting work papers or information with respect to any of the foregoing, including any amendment
thereof, and the term.
Tax Return
means any one of the foregoing Tax Returns.
Threat of Release
a substantial likelihood of a Release that may require action in order to
prevent or mitigate damage to the Environment that may result from such Release.
Threatened
a claim, Proceeding, dispute, action, or other matter will be deemed to have
been Threatened if any demand or statement has been made (orally or in writing) or any notice has
been given (orally or in writing).
Trade Secrets
all product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
research and development, manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code), computer software and database
technologies, systems, structures and architectures (and related processes, formulae, composition,
improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented, that is a trade secret within the
meaning of the applicable trade-secret protection law.
Trademarks
all (i) trademarks, service marks, marks, logos, insignias, designs, names or
other symbols, (ii) applications for registration of trademarks, service marks, marks, logos,
insignias, designs, names or other symbols, (iii) trademarks, service marks, marks, logos,
insignias, designs, names or other symbols for which registrations has been obtained.
Xpand
Xpand Biotechnology B.V., a private company with limited liability, incorporated
under the laws of the Netherlands.
51
Index of Other Defined Terms
:
|
|
|
Defined Terms
|
|
Section Reference
|
510(k)
|
|
Section 3.22(d)
|
Basket
|
|
Section 7.4(a)
|
Board of Directors
|
|
Section 3.2(a)
|
Cap
|
|
Section 7.4(b)
|
Confidential Information
|
|
Section 6.3
|
CPR Rules
|
|
Section 9.4
|
Damages
|
|
Section 7.2
|
Distribution Agreement
|
|
Section 8.1(g)
|
Estimated Closing Certificate
|
|
Section 8.1(n)
|
Founders Non-Competition Agreement
|
|
Section 8.1(l)
|
Fundamental Representations
|
|
Section 7.1
|
Indemnified Persons
|
|
Section 7.3
|
Indemnifying Persons
|
|
Section 7.5(a)
|
Investor Non-Competition Agreement
|
|
Section 8.1(m)
|
Pension Schemes
|
|
Section 3.13
|
Permitted Encumbrance
|
|
Section 3.6
|
Pledge Agreement
|
|
Section 8.1(j)
|
Pro Rata Allocation
|
|
Section 1.1(a)
|
Purchase Price
|
|
Section 1.1(a)
|
Purchaser Indemnified Persons
|
|
Section 7.2.
|
Purchaser Representative
|
|
Section 5.1
|
Revos License Agreement
|
|
Section 8.1(h)
|
52
|
|
|
Defined Terms
|
|
Section Reference
|
Seller Funded Expenses
|
|
Section 8.1(n)
|
Seller Indemnified Persons
|
|
Section 7.3
|
Shareholders Agreement
|
|
Section 8.1(k)
|
Survival Period
|
|
Section 7.1
|
Upfront Payment
|
|
Section 1.1(a)
|
53
IN WITNESS WHEREOF
, the parties have executed and delivered this Agreement as of the date
first written above.
|
|
|
|
PURCHASER:
NUVASIVE, INC.
|
|
By:
|
/s/ Alexis V. Lukianov
|
|
|
Name:
|
Alexis V. Lukianov
|
|
|
Title:
|
Chief Executive Officer
|
|
|
|
|
|
|
COMPANY:
PROGENTIX ORTHOBIOLOGY B.V.
|
|
By JD de Bruijn Holding BV, its solely authorized statutory director
|
|
|
|
By:
|
/s/ Joost D de Bruijn
|
|
|
Name:
|
Joost D de Bruijn
|
|
|
Title:
|
General Director
|
|
|
Signature Page to Preferred Stock Purchase Agreement
|
|
|
|
|
|
SELLERS:
JD DE BRUIJN HOLDING BV
|
|
|
By:
|
/s/ Joost D de Bruijn
|
|
|
|
Name:
|
Joost D de Bruijn
|
|
|
|
Title:
|
General Director
|
|
|
|
INCUBATION BV
|
|
|
By:
|
/s/ Clemens van Blitterswijk
|
|
|
|
Clemens van Blitterswijk
|
|
|
|
|
|
|
By:
|
/s/ FrankJan van der Velden
|
|
|
|
FrankJan van der Velden
|
|
|
|
|
|
|
BIOGENERATION VENTURES BV
|
|
|
By:
|
/s/ Edward van Wezel
|
|
|
|
Edward van Wezel
|
|
|
|
|
|
|
By:
|
/s/ Willem Hazenberg
|
|
|
|
Willem Hazenberg
|
|
|
|
|
|
|
HUIPIN YUAN
|
|
|
/s/ Huipin Yuan
|
|
|
|
|
|
|
|
[Signature Page to Preferred Stock Purchase Agreement]
SCHEDULE A
Sellers Schedule
|
|
|
|
|
|
|
Pro Rata
|
Seller
|
|
Allocation
|
BioGeneration Ventures BV
|
|
|
29.106
|
%
|
JD de Bruijn Holding BV
|
|
|
28.359
|
%
|
Incubation BV
|
|
|
39.060
|
%
|
Huipin Yuan
|
|
|
3.475
|
%
|
EXHIBIT A
Option Purchase Agreement
Filed separately as Exhibit 10.54 to this Annual Report on Form 10-K.
EXHIBIT
B
(1) NUVASIVE, INC.
as Lender
- and -
(2) PROGENTIX ORTHOBIOLOGY B.V.
as Borrower
USD 5,000,000
SENIOR SECURED FACILITY AGREEMENT
DLA Piper Nederland N.V.
Finance & Projects
Amsterdam
USD 5,000,000 SENIOR SECURED FACILITY AGREEMENT
THIS AGREEMENT
is dated January 13, 2009 (the
Effective Date
)
BETWEEN
1.
|
|
NUVASIVE, INC.
, a company incorporated under the laws of Delaware, having its registered
office at 7475 Lusk Boulevard, San Diego CA 92121, United States (the
Lender
); and
|
|
2.
|
|
PROGENTIX ORTHOBIOLOGY B.V.
a private company with limited liability (
besloten
vennootschap met beperkte aansprakelijkheid
) organised and existing under the laws of the
Netherlands, registered with the chamber of commerce under file number 30234249 and having its
registered office at Professor Bronkhorstlaan 10 D, (3723 MB) Bilthoven, the Netherlands (the
Borrower
),
|
The Lender and the Borrower also referred to as
Party
or
Parties
.
RECITALS
A.
|
|
The Lender will, on or about the date hereof, make an initial preferred equity investment of
USD 10,000,000 in the Borrower.
|
|
B.
|
|
In addition to the proposed acquisition by the Lender of the shares in the capital of the
Borrower, the Lender wishes to lend to the Borrower and the Borrower wishes to borrow from the
Lender subject to the terms and conditions set forth in this Agreement.
|
|
C.
|
|
Parties hereby further agree as follows.
|
IT IS AGREED AS FOLLOWS
1.
|
|
DEFINITIONS
|
|
1.1
|
|
In this Agreement, unless the context otherwise requires, the following words and expressions
have the following meanings:
|
|
|
|
|
|
|
|
Agreement
|
|
means this USD 5,000,000 facility agreement between Lender and Borrower;
|
|
|
|
|
|
|
|
Base Milestones
|
|
has the meaning set forth in the Option Purchase Agreement;
|
|
|
|
|
|
|
|
Business Day
|
|
means a day other than a Saturday or Sunday on which banks are open for
business in Amsterdam, the Netherlands;
|
|
|
|
|
|
|
|
Operating Budget
|
|
has the meaning set forth in the Preferred Stock Purchase Agreement;
|
|
|
|
|
|
|
|
Distribution Agreement
|
|
has the meaning set forth in the Preferred Stock Purchase Agreement;
|
|
|
|
|
|
|
|
Event of Default
|
|
means an event of default specified as such in clause 9;
|
|
|
|
|
|
|
|
IP Pledge Agreement
|
|
means the Pledge Agreement of Intellectual Property Rights, dated as of
the date hereof, by and between the Lender and the Borrower, relating to the pledge of the
Borrowers intellectual property rights;
|
|
|
|
|
|
|
|
Loan
|
|
means the loan made available by the Lender to the Borrower pursuant to Clause
2.1 of this Agreement or the principal amount outstanding for the time being of that
loan;
|
|
|
|
|
|
|
|
Option Purchase Agreement
|
|
means the Option Purchase Agreement, dated the date hereof, by and
among Lender, Borrower and the shareholders of Borrower;
|
|
|
|
|
|
|
|
Preferred Stock Purchase
Agreement
|
|
means the Preferred Stock Purchase
Agreement, dated the date hereof, by and among Lender, Borrower and the shareholders of Borrower;
|
|
|
|
|
|
|
|
Proprietary Rights
|
|
has the meaning set forth in the Option Purchase Agreement;
|
|
|
|
|
|
|
|
Repayment Date
|
|
means the date defined in Clause 5.1.;
|
|
|
|
|
|
|
|
Updated Seller Parties
|
|
has the meaning set forth in the Option Purchase Agreement;
|
|
|
Disclosure Schedule
|
|
|
|
|
|
|
|
|
|
USD
|
|
means United States dollar; and
|
|
|
|
|
|
|
|
Utilisation Date
|
|
means the applicable date on which Lender makes a Loan.
|
1.2
|
|
In this Agreement, unless the context otherwise requires
(a) references to the singular shall include the plural and
vice versa
and (b) Clause headings are
for ease of reference only and shall not affect the construction of the relevant provision.
|
|
1.3
|
|
Except where this Agreement expressly provides otherwise, a person who is not a Party has no
right to exercise or enforce any term or condition of this Agreement.
|
|
2.
|
|
THE FACILITY
|
|
2.1
|
|
Subject to the terms of this Agreement, the Lender shall make available to the Borrower from
time to time a USD facility in an aggregate amount of USD 5,000,000 (five million USD) and the
Borrower accepts such facility. This facility shall remain in effect through the earlier of
the expiration or termination of the Option Period (as defined in the Option Purchase
Agreement).
|
|
2.2
|
|
Unless otherwise agreed by the Lender or approved by the Borrowers non-executive board of
directors (but specifically including any representative of Lender thereon), the Borrower
shall apply any Loans made under the facility towards (i) further development of the
Borrowers portfolio of synthetic osteoinductive scaffolds, including the CuriOs product for
purposes of achieving the Base Milestones, (ii) fulfilling its obligations under the
Distribution Agreement with Lender, dated as of the date hereof, or (iii) any other payments
made in accordance with the Borrowers Operating Budget, it being agreed that Borrower may
apply any Loans to satisfy
|
|
|
general operating expenses, including without limitation general and administrative, rent,
utilities, insurance and similar expenses, as expressly permitted hereunder to the extent
contemplated by Borrowers Operating Budget.
|
|
2.3
|
|
The Lender is not obliged to monitor or verify the application of any Loan.
|
|
3.
|
|
UTILISATION
|
|
3.1
|
|
The Borrower may utilise the facility from time to time by delivery to the Lender of (i) a
duly completed utilisation request in the form attached hereto at Schedule 3 and (ii) an
Updated Seller Parties Disclosure Schedule sufficiently in advance prior to the contemplated
date of extension of the Loan. Any amount proposed to be utilised shall always exceed the
equivalent in USD of EUR 1,000,000, provided that any Updated Seller Parties Disclosure
delivered pursuant to this Section 3.1 shall not be counted as a Disclosure Schedule Request
(as defined under the Option Purchase Agreement) pursuant to Section 1.1(b)(ii)(A) of the
Option Purchase Agreement.
|
|
3.2
|
|
Upon receipt of such utilization request and an Updated Seller Parties Disclosure Schedule,
the Lender shall make available the Loan to the Borrower by means of payment of the same into
the Borrowers account the particulars of which shall be specified in the utilisation request.
|
|
3.3
|
|
The Loan will be disbursed in one amount on the Utilisation Date and any amount not drawn
will be immediately cancelled.
|
|
3.4
|
|
Notwithstanding anything to the contrary contained in any other agreement between the
parties, including without limitation Section 5.1(i) of the Preferred Stock Purchase
Agreement, Lender hereby expressly consents to any utilization request submitted by the
Borrower hereunder.
|
|
4.
|
|
INTEREST
|
|
4.1
|
|
Interest shall accrue on any Loan at an interest rate of 6% per annum commencing on the
applicable Utilization Date. Such interest will be paid by the Borrower on the date the Loan
is due and payable.
|
|
4.2
|
|
Interest shall accrue from day to day and will be calculated on the basis of a year
consisting of 360 days and payable for the actual number of days elapsed.
|
|
4.3
|
|
If the Borrower fails to pay any amount payable by it under this Agreement on its due date,
default interest shall accrue on the overdue amount from the due date up to the date of actual
payment (both before and after judgment) at the aggregate of the rate specified in Clause 4.1
and 2% per annum.
|
|
5.
|
|
REPAYMENT
|
|
5.1
|
|
The Borrower shall repay the Loan in its entirety within ten Business Days of the earlier of
(i) an Event of Default, or (ii) nine (9) months after the earlier of the expiration or
termination of the Option Period (as defined in the Option Purchase Agreement) (the
Repayment
Date
).
|
|
5.2
|
|
No amount repaid may subsequently be re-borrowed.
|
5.3
|
|
The Borrower may not prepay the Loan until after the earlier of the expiration or termination
of the Option Period at which time the Loan may be prepaid without penalty.
|
|
6.
|
|
SECURITY INTEREST
|
|
6.1
|
|
The Borrower and the Lender hereby agree that the Borrower shall grant to the Lender a first
ranking right of pledge, encumbrance, collateral or any other security right over all of the
assets (including Borrowers Proprietary Rights) as specified in Schedule 1 as security for
the repayment of any amount under the Loan.
|
|
6.2
|
|
The security interest will be created by means of the Parties entering into documents
substantially in the forms as set out in Schedule 2 to this Agreement (
Form of Security
Documents
).
|
|
7.
|
|
REPRESENTATIONS AND WARRANTIES
|
|
7.1
|
|
The representations set out in this Clause 7 are:
|
|
(a)
|
|
made by the Borrower on the date of this Agreement; and
|
|
|
(b)
|
|
deemed to be repeated by the Borrower by reference to the facts and
circumstances then existing on each subsequent day for so long as the Loan or other
amount is or may become outstanding under this Agreement.
|
7.2
|
|
The Borrower represents and warrants that :
|
|
(a)
|
|
It is a private limited liability company corporation (
besloten vennootschap
met beperkte aansprakelijkheid
), duly incorporated and validly existing under the laws
of the Netherlands;
|
|
|
(b)
|
|
It has the power to own its assets and carry on its business as it is being
conducted;
|
|
|
(c)
|
|
The obligations expressed to be assumed by it in this Agreement are legal,
valid, binding and enforceable obligations;
|
|
|
(d)
|
|
No Event of Default is outstanding or likely to result from the making of the
Loan;
|
|
|
(e)
|
|
It has not taken any corporate action nor have any other steps been taken or
legal proceedings been started or threatened against it for its bankruptcy, insolvency,
reorganization, moratorium, or other law affecting the rights of creditors generally,
or the appointment of a bankruptcy or moratorium administrator, trustee, receiver or
similar officer;
|
|
|
(f)
|
|
No litigation or administrative proceeding of or before any court or agency has
been started or is threatened against the Borrower which could reasonably be expected
to have a material adverse effect on the business, assets or financial condition of the
Borrower;
|
|
|
(g)
|
|
Its entry into and performance of this Agreement and the transactions
contemplated by this Agreement do not conflict with any law or judicial or official
regulation applicable to it, with its constitutional documents or with any agreement or
document binding on it;
|
|
(h)
|
|
No attachments are made or seizures have been levied or enforced upon or sued
out against (A) any material portion of its revenues or (B) against its assets; and
|
|
|
(i)
|
|
All information supplied by it is true, complete and accurate in all material
respects as of the date it was given and is not misleading in any material respect.
|
7.3
|
|
The Borrower acknowledges that in connection with entering into this Facility
agreement, the Borrower entered into the Option Purchase Agreement and Preferred Stock
Purchase Agreement with Lender. Subject to the disclosure schedules to the Option Purchase
Agreement and Preferred Stock Purchase Agreement, including any Updated Seller Parties
Disclosure Schedule delivered hereunder, the representations and warranties of Borrower set
forth in the Option Purchase Agreement and Preferred Stock Purchase Agreement that are
qualified as to materiality are correct and complete in all respects, and all other
representations and warranties of Borrower set forth in the Option Purchase Agreement and
Preferred Stock Purchase Agreement are correct and complete in all material respects.
Notwithstanding the foregoing, each representation and warranty set forth in the Option
Purchase Agreement which refers to the Effective Date shall be true and correct as of the
date of any Updated Seller Parties Disclosure Schedule notwithstanding that such
representation or warranty, as the case may be, refers to the Effective Date, provided that
such representations and warranties shall be qualified by each Updated Seller Parties
Disclosure Schedule to the extent there are any disclosures of actual facts in existence on
the date of such Updated Seller Parties Disclosure Schedule that have occurred or been
discovered since the Effective Date, and (i) such disclosures are not material, or (ii) the
Borrower obtained the approval of the Supervisory Board of Directors of the Borrower
(including the director designated by the Lender) or the prior written consent of the
Purchaser Representative (as defined in the Preferred Stock Purchase Agreement) pursuant to
Section 5.1 of the Preferred Stock Purchase Agreement with respect to an action of the
Borrower which directly caused such material change.
|
|
8.
|
|
UNDERTAKINGS
|
|
8.1
|
|
The undertakings in this Clause 8 will remain effective from the date of this Agreement until
all amounts to be paid by the Borrower under this Agreement have been irrevocably paid.
|
|
8.2
|
|
The Borrower shall promptly inform the Lender if an Event of Default has occurred or is
likely to occur.
|
|
8.3
|
|
The Borrower shall ensure that at all times the claims of the Lender against it under this
Agreement rank at least pari passu with the claims of all its other unsecured and
unsubordinated creditors save those whose claims are preferred by any laws of general
application and with the exception of any rights of set-off or counterclaims that may be
asserted against it.
|
|
8.4
|
|
The Borrower shall not sell, transfer or otherwise dispose of its assets or revenues with the
exception of disposals of trading assets or the expenditure of cash, in each case on normal
commercial terms and in the ordinary course of business unless and until the Loan is repaid by
Borrower in its entirety.
|
|
9.
|
|
EVENTS OF DEFAULT
|
|
9.1
|
|
Each event described in this Clause 9 is an Event of Default:
|
|
(a)
|
|
The Borrower does not pay (or evidences an intention not to pay) any amount
payable under this Agreement at the time and in the manner as provided for in this
Agreement;
|
|
|
(b)
|
|
Any representation or statement made or deemed to be made by the Borrower in
this Agreement or any other document delivered by it or on its behalf under or in
connection with this Agreement is or proves to have been untrue, inaccurate or
misleading in any material respect when made or deemed to be made;
|
|
|
(c)
|
|
The Borrower fails to duly perform any other obligation under this Agreement,
which non-performance if capable of remedy is not remedied within 21 days after the
Lenders relevant notice to the Borrower;
|
|
|
(d)
|
|
An attachment or seizure affects any assets of the Borrower and is not
discharged within 21 days or any steps are taken to enforce any security interest over
any assets of the Borrower;
|
|
|
(e)
|
|
Any of the following events or circumstances affects the Borrower:
|
|
(i)
|
|
It is unable or shall admit in writing its inability to pay its
debts as they fall due or, by reason of actual or anticipated financial
difficulties, it suspends making payments on any of its debts or commences
negotiations with any of its creditors with a view to rescheduling any of its
indebtedness;
|
|
|
(ii)
|
|
It becomes subject to a winding-up;
|
|
|
(iii)
|
|
It proposes or takes any corporate action, or any person
commences any litigation or administrative proceedings or other formal
procedure, in relation to its winding-up which in the case of an involuntary
action is not dismissed within 30 days;
|
|
(f)
|
|
The Borrower is declared bankrupt, insolvent, subject to reorganization,
moratorium, or to any other law affecting the rights of creditors generally;
|
|
|
(g)
|
|
The Borrower is dissolved, a resolution for its dissolution is passed or a
request for its dissolution is filed;
|
|
|
(h)
|
|
The Borrower terminates all or a substantial part of its business;
|
|
|
(i)
|
|
At any time it is unlawful for the Borrower to perform any or all of its
obligations under this Agreement or any obligation of the Borrower under this Agreement
is illegal, invalid or unenforceable;
|
|
|
(j)
|
|
The Borrower breaches any of its representations, warranties or covenants in
the Option Purchase Agreement, the Preferred Stock Purchase Agreement, the IP Pledge
Agreement or impairs any of the Lenders rights set forth in the Borrowers articles of
association; or
|
|
|
(k)
|
|
Any event or circumstance occurs that, in the opinion of the Lender, might
have, directly or indirectly, a material adverse effect on the Borrowers ability to
perform any of its obligations under this Agreement.
|
9.2
|
|
If an Event of Default has occurred, the Loan together with accrued interest and all other
amounts owing under this Agreement will immediately be due and payable without any default
notice or court intervention being required.
|
|
10.
|
|
COSTS AND EXPENSES
|
|
|
|
The Lender and the Borrower shall each bear their own costs and expenses incurred in
connection with this Agreement.
|
|
11.
|
|
INDEMNITY
|
|
|
|
The Borrower undertakes to indemnify the Lender against any loss or liability incurred by
the Lender (including any loss of margin or other loss or expense on account of funds
borrowed, contracted for or utilised to fund any amount payable under this Agreement) as a
result of:
|
|
(a)
|
|
any payment of principal of or interest on the Loan or of an overdue amount
being received otherwise than on its due date; or
|
|
|
(b)
|
|
an Event of Default.
|
12.
|
|
TAXES
|
|
12.1
|
|
All payments to be made by the Borrower under this Agreement shall be made free and clear of
and without deduction for or on account of tax, except to the extent the Borrower is required
to make such a payment subject to tax. If any tax must be deducted or withheld from any amount
payable or paid by the Borrower, then the Borrower shall pay such additional amounts as are
necessary to ensure that the Lender receives a net amount equal to the amount which it would
have received if no such deduction or withholding had been made or required to be made. The
Borrower shall promptly notify the Lender if it is required to make a deduction or
withholding.
|
|
12.2
|
|
If the Lender is required to pay any amount in respect of tax on any payment due from the
Borrower under this Agreement, the Borrower shall promptly reimburse the Lender for that
payment at its first request.
|
|
13.
|
|
PAYMENTS
|
|
13.1
|
|
All payments payable by the Borrower shall be made and calculated without reference to any
set-off or counterclaim. Each payment by the Borrower under this Agreement shall be made for
value on its due date, without any notice from the Lender being required, by deposit of
immediately available funds to the account designated by the Lender.
|
|
13.2
|
|
All payments pursuant to this Agreement shall be made in United States Dollars (USD).
|
|
13.3
|
|
All payments to be made by the Borrower under this Agreement shall be calculated and be made:
|
|
(a)
|
|
without, and clear of any deduction for, set-off or counterclaim; and
|
|
|
(b)
|
|
clear of any deduction or withholding for, or on account of, any tax, levy,
impost, duty or other charge of a similar nature, other than any such deduction or
withholding required by law.
|
13.4
|
|
If the Borrower is required to make a deduction or withholding as referred to in Subclause
13.3 (b), the amount of the payment due from it shall be increased to an amount which, after
making the deduction or withholding, leaves an amount equal to the payment which would have
been due if no deduction or withholding had been required.
|
|
14.
|
|
SET-OFF
|
|
|
|
The Lender may set off any obligation due and payable by the Borrower under this Agreement
against any obligation (whether or not under this Agreement and whether or not due and
payable) owed by the Lender to the Borrower. If the obligations are in different
currencies, the Lender may convert either obligation at a market rate of exchange in its
usual course of business for the purpose of the set-off.
|
|
15.
|
|
CHANGES TO THE PARTIES
|
|
|
|
All covenants and agreements of the Parties contained in this Agreement shall be binding and
inure to the benefit of their respective successors and permitted assigns. Each of the
Parties may assign any rights or obligations under this Agreement.
|
|
16.
|
|
COUNTERPARTS
|
|
|
|
This Agreement may be executed in any number of counterparts, each of which when so executed
and delivered shall be deemed an original, and such counterparts together shall constitute
only one instrument.
|
|
17.
|
|
NOTICES
|
|
|
|
Any notice or other communications provided under this Agreement shall be in writing in the
English language and addressed or delivered, to the applicable person at the address set
forth in the header of this Agreement, or such other address of which such Party has
specified in any written notice to the other Party hereto.
|
|
18.
|
|
TERMINATION, SUSPENSION, AMENDMENTS, WAIVERS AND REMEDIES CUMULATIVE
|
|
18.1
|
|
The Borrower cannot rescind (
ontbinden
) this Agreement in whole or in part.
|
|
18.2
|
|
The Borrower shall bear the risk of any error (
dwaling
) made by it in relation to this
Agreement.
|
|
18.3
|
|
The Borrower may not suspend (
opschorten
) compliance with its obligations under or in
connection with this Agreement on whatever grounds.
|
|
18.4
|
|
This Agreement may be amended, supplemented or waived only by a written agreement between the
parties.
|
|
18.5
|
|
The rights of the Lender under this Agreement may be exercised as often as necessary, are
cumulative and not exclusive of its rights under general law. No failure or delay on the part
of the Lender in exercising any right shall operate as a waiver or impair that right. No
waiver of any such right shall be effective unless given in writing.
|
19.
|
|
CHANGES TO PARTIES
|
|
19.1
|
|
The Lender may:
|
|
(a)
|
|
assign (
overdragen
) its rights under this Agreement (in whole or in part); or
|
|
|
(b)
|
|
transfer its legal relationship (
rechtsverhouding
) under this Agreement (in whole or in
part) to another person.
|
19.2
|
|
Any transfer as referred to in this Clause 19 shall be made by a deed of transfer governed by
Dutch law. The Borrower hereby cooperates with any transfer in anticipation. Any transfer
shall take effect by notice to the Borrower (whether prior to or after the signing of the deed
of transfer).
|
|
19.3
|
|
The Borrower may not assign, transfer or encumber any of its rights or obligations under or
in connection with this Agreement.
|
|
20.
|
|
EVIDENCE
|
|
|
|
The entries made in the accounts maintained by the Lender; and any certification or
determination by the Lender of an amount or rate under this Agreement; are conclusive
evidence (
dwingend bewijs
) of the matters to which they relate.
|
|
21.
|
|
SEVERABILITY
|
|
|
|
If a provision of this Agreement is invalid or unenforceable in any jurisdiction that shall
not affect the validity or enforceability of any other provision of this Agreement and the
validity or enforceability in other jurisdictions of that or of any other provision of this
Agreement.
|
|
22.
|
|
GOVERNING LAW AND JURISDICTION
|
|
22.1
|
|
This Agreement is governed by the law of the Netherlands.
|
|
22.2
|
|
The competent courts of Amsterdam, the Netherlands shall have exclusive jurisdiction with
regard to disputes in connection with this Agreement.
|
THUS
AGREED
NUVASIVE, INC.
by:
its:
PROGENTIX ORTHOBIOLOGY B.V.
by:
its: Director
Schedule 1
Patents
***
Trademarks
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
Schedule 2
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of the Effective Date by and
between NuVasive, Inc., a company incorporated under the laws of Delaware (Lender) and Progentix
Orthobiology B.V., a private company with limited liability organized and existing under the laws
of the Netherlands (Borrower).
RECITALS
A. Lender has agreed to make certain advances of money and to extend certain
financial accommodation to Borrower (the Loans) in the amounts and manner set forth in that
certain Senior Secured Facility Agreement by and between Lender and Borrower dated the Effective
Date (as the same may be amended, modified or supplemented from time to time, the Loan Agreement;
capitalized terms used herein are used as defined in the Loan Agreement). Lender is willing to
make the Loans to Borrower, but only upon the condition, among others, that Borrower shall grant to
Lender a security interest in the Borrowers Proprietary Rights to secure the obligations of
Borrower under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Borrower has granted to Lender a
security interest in all of Borrowers right, title and interest to and under all of the Borrowers
assets, including its Proprietary Rights.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged,
and intending to be legally bound, as collateral security for the prompt and complete payment when
due of its obligations under the Loan Agreement, Borrower hereby represents, warrants, covenants
and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Borrower grants and pledges to Lender a
security interest in all of Borrowers right, title and interest in, to and under its assets,
including without limitation its Proprietary Rights listed on
Exhibit
A hereto, and
including without limitation all proceeds thereof (such as, by way of example but not by way of
limitation, license royalties and proceeds of infringement suits), the right to sue for past,
present and future infringements, all rights corresponding thereto throughout the world and all
re-issues, divisions continuations, renewals, extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security interest granted to Lender
under the Loan Agreement. The rights and remedies of Lender with respect to the security interest
granted hereby are in addition to those set forth in the Loan Agreement and the IP Pledge
Agreement, and those which are now or hereafter available to Lender as a matter of law or equity.
Each right, power and remedy of Lender provided for herein or in the Loan Agreement or the IP
Pledge Agreement, or now or hereafter existing at law or in equity shall be cumulative and
concurrent and shall be in addition to every right, power or remedy provided for herein and the
exercise by Lender of any one or more of the rights, powers or remedies provided for in this
Intellectual Property Security Agreement, the Loan Agreement or the IP Pledge Agreement, or now or
hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by
any person, including Lender, of any or all other rights, powers or remedies.
This Agreement is governed by the laws of the state of New York without regard to conflicts of law
principles.
IN WITNESS WHEREOF, the parties have caused this Intellectual Property Security Agreement to be
duly executed by its officers thereunto duly authorized as of the first date written above.
|
|
|
|
|
|
|
|
|
|
|
BORROWER:
|
|
|
|
|
|
|
|
Address of Borrower:
|
|
PROGENTIX ORTHOBIOLOGY B.V.
|
|
|
|
|
|
|
|
Professor Bronkhorstlaan
|
|
By: JD de Bruijn Holding BV, its solely
|
10 D, (3723 MB) Bilthoven, the Netherlands
|
|
authorized statutory director
|
|
|
|
|
|
|
|
Attn:
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name: Joost D de Bruijn
|
|
|
|
|
Title: General Director
|
|
|
|
|
|
|
|
|
|
|
|
LENDER:
|
|
|
|
|
|
|
|
Address of Lender:
|
|
NUVASIVE, INC.
|
|
|
|
|
|
|
|
7475 Lusk Boulevard
|
|
By:
|
|
|
|
|
|
|
|
|
|
San Diego, CA 92121
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attn:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT
A
Patents
***
Trademarks
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
Schedule 3
Form of Utilisation Request
|
|
|
From:
|
|
Progentix Orthobiology B.V.
|
|
To:
|
|
NuVasive, Inc.
|
Dated:
Dear Sirs
Progentix Orthobiology B.V. U.S.$5,000,000 Senior Secured Facility Agreement
dated January 8, 2009 (the
Agreement
)
|
1.
|
|
We refer to the Agreement. This is a Utilisation Request. Terms defined in the
Agreement have the same meaning in this Utilisation Request unless given a different meaning
in this Utilisation Request.
|
|
|
2.
|
|
We wish to borrow a Loan on the following terms:
|
|
|
|
|
|
|
|
Proposed Utilisation Date:
|
|
[
] or, if that is not a
|
|
|
|
|
Business Day, the next Business Day)
|
|
|
Amount:
|
|
[
]
|
|
|
Interest Period:
|
|
[
]
|
|
|
Purpose:
|
|
[
]
|
|
3.
|
|
We confirm that no Event of Default is continuing or would result from the proposed
Loan on the date of this Utilisation Request.
|
|
|
4.
|
|
The proceeds of this Loan should be credited to [account].
|
|
|
5.
|
|
This Utilisation Request is irrevocable.
|
Yours faithfully
authorised signatory for
Progentix Orthobiology B.V.
EXHIBIT
C
AMENDMENT OF THE ARTICLES OF ASSOCIATION
PROGENTIX ORTHOBIOLOGY B.V.
On the day of two thousand and nine, appeared before me, Alexander Joannes
Wiggers, civil law notary in Amsterdam:
.
The person appearing declared as follows:
I.
|
|
The Articles of Association of Progentix Orthobiology B.V., a private company with limited
liability (
besloten vennootschap met beperkte aansprakelijkheid),
with corporate seat in
Bilthoven and office address at , registered with the Trade Register under number
(hereinafter referred to as: the Company), were lastly established by a deed of amendment
executed on two thousand and before , civil law notary in (declaration of no
objections dated two thousand and , number B.V.: ).
|
|
II.
|
|
By written resolution of the Companys general meeting of shareholders dated two thousand
and , it has been resolved:
|
|
a.
|
|
to amend the Articles of Association of the Company as mentioned below, and
|
|
|
b.
|
|
to authorize the person appearing to apply for the declaration of no objections
and to execute the notarial deed amending the Articles of Association of the
Company.
|
The shareholders resolution has been attached to this
deed.
III.
|
|
On behalf of the Minister of Justice a declaration of no objections, number B.V.
has been issued in accordance with Article 2:235 Dutch Civil Code on two
thousand and .
|
The declaration of no objections has been attached to this deed.
The person appearing, acting
in said capacity, declared hereby to partially amend the Articles of Association of the Company,
laying them down as follows:
I.
|
Article 3.1
is hereby amended and will read as follows:
|
|
3.1
|
|
The authorised capital of the company amounts to ninety thousand euro
(EUR 90,000), divided into three million (3,000,000) cumulative preference shares A, three
million (3,000,000) cumulative preference shares B and three million
(3,000,000) (3,000,000)
ordinary shares, each share of the value of one euro cent (EUR 0.01).
|
|
II.
|
Article 3.2
is hereby amended and will read as follows:
|
- 1 -
3.2
|
|
Everywhere where mention is made in these articles of association of
cumulative preference shares and cumulative preference shareholders those
terms shall be deemed to include both the cumulative preference shares A and
the cumulative preference shares B, and the holders of cumulative preference
shares A and cumulative preference shares B, unless the contrary is explicitly
clear. Everywhere where mention is made in these articles of association of
shares and shareholders those terms shall be deemed to include both the
ordinary shares and the cumulative preference shares, and the holders of
ordinary shares as well as the holders of cumulative preference shares, unless
the contrary is explicitly clear.
|
|
III.
|
Article 16.5 is hereby deleted and 16.6 through 16.8 are renumbered 16.5
through 16.7.
|
|
IV.
|
Article 21.6 is hereby deleted and 21.8 through 21.10
are renumbered 21.6 through 21.8
|
|
V.
|
Article 26.2
is hereby amended and will read as follows:
|
|
26.2
|
|
All resolutions of the general meeting need to be passed by an absolute majority of the votes
cast, except where a larger majority is required by law or by these articles of association,
and with due observance of the provisions of Article 28.1.
|
|
VI.
|
Article 28.2
is hereby deleted.
|
Finally, the person appearing, acting in said capacity, declared the following.
(i)
|
|
Immediately prior to the execution of this deed the Companys issued share capital
amounts to twenty-thousand euro (EUR 22,000), divided into eighteen thousand (18,000)
ordinary shares and four thousand (4,000) preferred shares, each share with a nominal value of
one euro (EUR 1).
|
|
(ii)
|
|
The ordinary shares, numbered through as well as the preferred shares,
numbered CP 2,401 through CP 4,000 are herewith converted into eight hundred
eighty thousand (880,000) preferred shares B with a nominal value of one Euroe
cent (EUR 0.01), renumbered CPB1 through CPB 880,000
[
note
:
further data to
be derived from deed of transfer to NuVa
].
|
|
(iii)
|
|
The two thousand four hundred (2,400) preferred shares, numbered CP 1 through
CP 2400 are herewith converted into 240,000 preferred shares A with a nominal
value of one Euro cent (EUR 0.01) and renumbered CPA 1 through CPA 240,000.
|
|
(iv)
|
|
Upon the execution of this deed the Companys issued
share capital amounts to
twenty-two thousand euro (EUR 22,000) divided into:
|
|
(a.)
|
|
one million eighty thousand (1,080,000) ordinary shares, numbered 1
through 1,080,000;
|
|
|
(b.)
|
|
twohundred forty thousand (240,000) preferred shares A, numbered CPA1
through CPA 240,000;
|
|
|
(c.)
|
|
eight hundred eighty thousand (880,000) preferred shares
B, numbered
CPB 1 through CPB 880,000;
|
- 2 -
all
shares with each with a nominal value of one euro cent (EUR
0.01).
The person appearing is
known to me, civil law notary, and the identity of the person appearing mentioned in this deed has
been determined by me, civil law notary, by means of the relevant document mentioned
hereinbefore.
This deed has been executed at Amsterdam on the date mentioned at the head of this deed.
The
contents of this deed have been stated and explained to the person appearing by me, civil law
notary.
Furthermore the consequences of this deed have been pointed out to the person appearing. The person
appearing declared to have in good time taken cognisance of the contents of this deed and to agree
with the contents.
Thereupon, after a limited part of this deed had been read out, it has been signed by the person
appearing and by me, civil law notary.
- 3 -
articles
of association for a private limited liability company
Name and registered office
1.1.
|
|
The name of the company is: Progentix Orthobiology B.V.:
|
|
1.2.
|
|
The company has its registered office in the Municipality of Bilthoven.
|
Object
2.
|
|
The object of the company is:
|
|
(a)
|
|
to develop and to sell products which has to do with biotechnology.
|
|
|
(b)
|
|
to establish and acquire, participate in, cooperate with, manage and finance (or cause to
be financed) other enterprises of any legal form whatever;
|
|
|
(c)
|
|
to provide and enter into loans of money, to manage and dispose of registered property and
to furnish security, including security for the debts of other parties;
|
|
|
(d)
|
|
to perform all other activities which are connected with or conductive to the above in the
broadest sense of the word.
|
Capital and shares
3.1.
|
|
The authorised capital of the company amounts to
90,000.00 (ninety thousand euros)
divided into 30,000 (thirty thousand) cumulative preference shares and 60,000 (sixty thousand)
ordinary shares, each of the value of
1.00 (one euro).
|
|
3.2.
|
|
Everywhere where mention is made in these articles of association of shares and
shareholders those terms shall be deemed to include both the ordinary shares and the cumulative
preference shares, and the holders of ordinary shares as well as the holders of cumulative
preference shares, unless the contrary is explicitly clear.
|
Registered shares
4.1.
|
|
The shares shall be in name and shall have been numbered for each kind of shares
separately consecutively starting from the number 1.
|
|
4.2.
|
|
No share certificates can be issued.
|
The issue of shares
|
|
|
|
|
5.1.
|
|
(a)
|
|
The issue of shares (including the granting of rights to subscribe for shares) shall
be effectuated by a resolution of the general meeting of shareholders, referred to below as: the
general meeting.
|
|
|
|
|
|
|
|
(b)
|
|
The general meeting shall also determine the price and the terms and conditions of
|
1
van
Grafhorst
notarissen
|
|
|
issue, with due observance of these articles of association. Upon the resolution to
issue it can be determined that a share premium created by payment(s) above par shall be
formed exclusively for the benefit of holders of the kind of shares
to which the payment(s)
relate.
|
|
|
(c)
|
|
The issue price may not be below par value.
|
|
|
(d)
|
|
The general meeting may delegate its power to pass the resolutions referred to at (a) and (b)
to another organ of the company and may revoke this delegated power.
|
|
|
(e)
|
|
The issue of a share also requires an instrument intended for this purpose and executed
before a civil-law notary practising in the Netherlands, to which the persons concerned are
parties.
|
5.2
|
|
Upon the issue of shares each shareholder shall have a pre-emptive right in proportion to the joint
amount of his shares, except where the law provides otherwise. Upon exercising their pre-emptive
right holders of the kind of shares to be issued shall have priority in proportion to the Joint
amount of the kind of shares in question they are holding, in relation to holders of shares of the
other kind. That pre-emptive right can not be assigned. The pre-emptive right may, each time for a
single issue, be limited or excluded by the body authorised to issue.
|
Payment
on shares
6.1
|
|
The nominal amount must be paid up when subscribing for a share. It may be stipulated that a part
of the nominal amount, not exceeding three-quarters, need be paid up only when the Board of
Managing Directors requests such payment
|
|
6.2
|
|
Payment for shares shall be made in Dutch currency in so far as no other form of contribution has
been agreed upon. Payment may be made in a foreign currency only with the permission of the Board
of Managing Directors.
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Register
of shareholders
7.1
|
|
The Board of Managing Directors shall keep a register containing the
names and addresses of all shareholders, the number of shares held by them and the kind of shares,
together with the date on which they acquired the shares, the date of acknowledgement or service,
and the amount paid up on each share. The register shall also contain the names and addresses of
those who have a right of usufruct or pledge in respect of the shares, together with the date on
which they acquired the right, the date of acknowledgement or service, and specification of the
rights attached to the shares to which they are entitled in accordance with Article 8, together
with the names and addresses of the holders of depositary receipts issued for shares with the
cooperation of the company.
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7.2.
|
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The register shall be regularly updated, subject to the proviso that every change to the
particulars referred to in paragraph 1 should be noted in the register as quickly as possible.
The register shall also contain a note of every discharge from liability granted in respect of
payments not yet made, together with the date on which the discharge is granted.
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7.3.
|
|
Each shareholder and any person having a right of usufruct or
pledge in respect of shares and
each holder of depositary receipts issued for shares with the cooperation of the company shall
be obliged to notify the company in writing of their address.
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7.4.
|
|
The Board of Managing Directors shall, upon request, issue to the person referred to above in
paragraph 1 an extract from the register relating to his right to a share free of
charge. If the share is subject to a usufruct or a pledge, the extract shall specify who is
entitled to the rights referred to in Article 8.
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|
7.5.
|
|
The Board of Managing Directors shall deposit the register at the office of the company
for inspection by the shareholders and by the usufructuaries and pledgees entitled to the
rights referred to in Article 8, paragraph 2, and by the holders of depositary
receipts issued for shares with the cooperation of the company. The particulars contained in
the register in respect of shares that have not been paid up in full shall be available for
public inspection; a copy or extract of such particulars shall be issued at no more than cost
price.
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Usufruct/pledge
8.1.
|
|
A usufruct may be created on shares. The voting right on shares subject to a usufruct
is
vested in the shareholder. Notwithstanding this provision, the usufructuary shall have the
voting right
|
|
-
|
|
if it is a usufruct as referred to in Articles 4:19 and 4:21 of the
Dutch Civil Code (
Burgerlijk Wetboek
), unless provided otherwise by the parties or by
the cantonal section of the court pursuant to Article 4:23, paragraph 4,
of the Dutch Civil Code (
Burgerlijk Wetboek
) when the usufruct is created, or
|
|
|
-
|
|
if this is stipulated when the usufruct is created, provided that both this provision
and (in the event of transfer of the usufruct) the transmission of the voting right
have been approved by the organ of the company designated by the articles of
association for granting approval of a proposed transfer of shares or, in the absence
of such a designation, by the general meeting.
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8.2.
|
|
A shareholder who has no voting rights and a usufructuary who has voting rights shall
have
the rights conferred by law on the holders of depositary receipts issued for shares with the
cooperation of the company. A usufructuary who does not have voting rights shall have the
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rights conferred by law if no provision to the contrary is made when the usufruct is created
or transferred.
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|
8.3.
|
|
Shares may be pledged. The provisions of paragraph 1 and 2 of this Article
shall apply
mutatis mutandis
upon the occasion of creation of the pledge and if another person
exercises the rights of the pledgee.
|
Depositary
receipts
9.1.
|
|
A resolution of the Board of Managing Directors to cooperate in the issue of depositary
receipts for shares in the company shall require the prior approval of the general meeting.
|
|
9.2.
|
|
Depositary receipts for shares may not be issued to bearer. If this provision has been
breached, the rights attached to the relevant shares may not be exercised as long as the
bearer receipts are outstanding.
|
|
9.3.
|
|
For the purposes of these articles of association, depositary receipt holders shall be deemed
to mean the holders of a depositary receipts issued for shares with the cooperation of the
company as well as persons who, pursuant to Article 8, have the rights conferred by
law on depositary receipt holders.
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|
9.4.
|
|
For the purposes of these articles of association depositary receipts are deemed to
mean depositary receipts issued for shares with or without the cooperation of the company.
|
Joint
property
10.
|
|
If shares, restrictive rights on shares or depositary receipts issued for shares are
held jointly, the persons jointly entitled may be represented in dealings with the company
only by one person notified to the company in writing.
|
Acquisition
of shares in its own capital / Reduction of capital
11.1.
|
|
The acquisition by the company of shares in its own capital that have not been fully paid up shall be void.
|
|
11.2.
|
|
Fully paid-up shares in the company may be acquired by the company only free of charge or if
all the following provisions have been fulfilled:
|
|
(a)
|
|
the net assets of the company, less the acquisition price, is not less than the
aggregate of the paid-up and called-up part of the capital and the reserves that must
be kept by law;
|
|
|
(b)
|
|
the aggregate of the nominal value of the shares to be acquired and already
held in the capital of the company by the company and its subsidiaries does not exceed
one-half of the issued capital;
|
|
|
(c)
|
|
authorisation to acquire has been granted by the general meeting or by another
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organ of the company designated by the general meeting for this purpose.
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|
11.3.
|
|
For the purposes of the validity of any acquisition, the deciding factor shall be the
amount of the net assets of the company according to the last approved balance sheet, less the
acquisition price for shares in the companys capital and payments from profits or reserves to
third parties for which the company and its subsidiaries became liable after the date of the
balance sheet. If a period of more than six months has elapsed since the start of the financial
year, without the annual accounts having been adopted, acquisition in accordance with the
provisions of paragraph 2 shall not be permitted.
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|
11.4.
|
|
The preceding paragraphs shall not apply to shares acquired by the company by
universal succession.
|
|
11.5.
|
|
For the purposes of this Article, the term share shall be deemed to include any
depositary receipt issued for such a share.
|
|
11.6.
|
|
The general meeting may decide to reduce the issued
capital by cancelling shares or by
reducing the amount of shares by amending the articles of association, subject to the
relevant provisions of the law.
|
|
11.7.
|
|
Partial repayment on shares or exemption from
the obligation to pay shall only be
possible by way of execution of a resolution to reduce the nominal amount of the shares.
Such a repayment or exemption may occur pro rata with respect to all shares or
exclusively with respect to the shares of a certain kind; the requirement of proportionality
applies to those shares. The requirement of proportionality may be deviated from only
with the consent of all shareholders involved.
|
No support for the acquisition of shares in the company
12.1.
|
|
The company may not, with a view to the subscription for or acquisition by other persons of shares in its capital or depositary receipts for such shares, provide any security, guarantee
the share price, otherwise act as surety for other persons or undertake to be jointly and
severally liable as co-debtor or in any other manner bind itself with or for any other party.
This prohibition applies equally to the companys subsidiaries.
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|
12.2.
|
|
Loans may be granted by the company for the purpose of subscribing for or acquiring shares
in its capital or depositary receipts for such shares only up to a maximum of the amount of
the distributable reserves and with the authorisation of the general meeting.
|
|
12.3.
|
|
The company shall keep a non-distributable reserve equal to the outstanding amount of the
loans referred to in the preceding paragraph.
|
Transfer of Shares
13.1.
|
|
A transfer of shares or of a restrictive right on shares requires an instrument of
transfer to
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which the persons concerned are party and which is executed for this purpose before a civil-law
notary practising in the Netherlands.
|
|
13.2.
|
|
The transfer of a share has effect by law
against the company. Except where the company is also party to the juristic act, the rights
attaching to the shares may be exercised only after the company has acknowledged the juristic act
or the instrument has been served on it in accordance with the relevant statutory provisions or
after the company has acknowledged the transfer by registration in the register of shareholders
referred to in Article 7.
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Restrictions
on transfer / General obligation to offer
14.1.
|
|
Shares may be transferred only
after they have first been offered for sale to the co-shareholders in the manner referred to
below.
|
|
14.2.
|
|
A shareholder need not offer his shares for sale if the transfer occurs with the written
consent of the co-shareholders within three months of the date on which they give their
consent.
|
|
14.3.
|
|
A shareholder who wishes to transfer one or more shares, referred to below as the offeror,
shall notify the Board of Managing Directors which shares he wishes to transfer. Such
notification shall constitute an offer to sell the shares to his co-shareholders. If the
company holds shares in its own capital it may be deemed to be a co-shareholder for this
purpose only if this has been agreed by the offeror in his offer.
|
|
|
|
The share price shall, unless the shareholders unanimously agree otherwise, be determined by one or
more independent experts to be appointed by the shareholders by
mutual agreement. If the
shareholders fail to reach agreement on this matter within two weeks of receipt of notice of the
offer referred to in paragraph 5 below, any party may apply to the cantonal section of the
court (
kantonrechter van de rechtbank
) in whose district the company has its registered office for
the appointment of three independent experts.
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|
14.4.
|
|
The experts referred to in the
preceding paragraph shall be entitled to inspect all books and documents of the company and to
obtain any information which may assist them in their valuation.
|
|
14.5.
|
|
The Board of Managing
Directors shall, within two weeks of receipt of the notification
referred to in paragraph 3,
notify the co-shareholders of the offer made by the offeror and notify each shareholder of the
share price within two weeks of the date on which it is fixed by the experts or agreed by the
shareholders.
|
|
14.6.
|
|
Notwithstanding the provisions of paragraph 8, the Board of
Managing Directors shall, if notified to this effect by all co-shareholders within the period
stipulated in that paragraph,
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inform the offeror without delay that the offer has not been taken up or has not been
taken up in full.
|
|
14.7.
|
|
Shareholders who wish to buy the shares offered for sale shall notify the Board of
Managing Directors accordingly within two weeks of receiving notification of the share
price in accordance with paragraph 5.
|
|
14.8.
|
|
The Board of Managing Directors board shall then allot the offered shares to the
applicants and shall notify the offeror and all shareholders of the allotment within two
weeks of the expiry of the period specified in paragraph 7.
|
|
|
|
In so far as the shares have not been allotted the Board of Managing Directors shall also
notify the offeror and all shareholders of that fact within the specified period.
|
|
14.9.
|
|
The shares shall be allotted by the Board of Managing
Directors to the applicants as follows;
|
|
(a)
|
|
in proportion to the nominal value of the shares held by the applicants;
|
|
|
(b)
|
|
in so far as proportionate allotment is not possible, the allotment shall be
decided by the drawing of lots;
|
|
|
Shares may be allotted to the company only if no application for such shares has been made by the
other co-shareholders.
|
|
|
|
No one may be offered more shares than he has applied for.
|
|
14.10.
|
|
The offeror may withdraw his offer provided he does so within one month after he has been
notified to which shareholders he may sell all the shares to which the offer relates and at what
price.
|
|
14.11.
|
|
The shares purchased shall be delivered, in consideration of
simultaneous payment of the purchase price, within eight days of the expiry of the period
during which the offer may be withdrawn.
|
|
14.12.
|
|
If the offeror has not withdrawn his offer, he may freely transfer the offered shares within a period of three months following the notification referred to in paragraph
6 or 8 that the offer has not been taken up or not taken up in full.
|
|
14.13.
|
|
When determining the price, the experts referred to in paragraph 3 shall decide
fairly who will bear the costs of the valuation. They may indicate that one of the
determinants is whether or not the offeror withdraws his offer,
|
|
14.14.
|
|
The provisions of this Article shall, as far as possible, apply
mutatis mutandis
to the
disposal by the company of shares purchased or otherwise acquired by it.
|
|
14.15.
|
|
The provisions of this Article shall not apply if the shareholder is obliged by law to
transfer a share to a former shareholder.
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Special
obligation to offer
15.1.
|
a.
|
|
If a shareholder dies or loses the unfettered control of his assets or if a
matrimonial community of property or a community of property under a registered partnership of a
shareholder is dissolved, his shares must be offered for sale In accordance with the provisions of
the following paragraphs.
|
|
b.
|
|
The same obligation to offer shares for sale exists if the voting right in
respect of shares is no longer vested in the usufructuary and the usufruct has been created on
the basis of Article 4:19 or 4:21 of the Dutch Civil Code
(Burgerlijk
Wetboek)
, or at the end of a usufruct of this kind.
|
|
|
c.
|
|
Again, the same obligation to offer shares for sale exists if a shareholder/legal
entity is dissolved or if the shares of a shareholder/legal entity are transferred under
universal title as a result of a merger or division
|
15.2.
|
|
If an obligation to offer shares for sale exists, the provisions of Article 14 shall apply
mutatis mutandis
, subject to the proviso that the offeror:
|
|
(a)
|
|
does not have the right to withdraw his offer in accordance with paragraph 10
of that Article;
|
|
|
(b)
|
|
may retain the shares where the offer has not been taken up or not fully taken up.
|
15.3.
|
|
Persons under an obligation to offer for sale one or more shares shall, within thirty
days of
the obligation arising or, in the case referred to in paragraph 6 (b), upon
expiration of
the period referred to in that paragraph notify the Board of Managing Directors of their
offer. In the absence of notification, the Board of Managing Directors shall inform the
persons obliged to offer the shares for sale of their failure to notify and bring the terms
of
the preceding sentence to their attention.
If they still fail to notify the company within eight days, the company shall offer the shares for
sale on behalf of the shareholders(s)
concerned and, if the offer for sale is taken up in full,
deliver the shares to the purchasers(s) in consideration of simultaneous payment of the purchase
price; the company has an irrevocable power to act in this way.
|
|
15.4.
|
|
The company shall, in
the event of a transfer of shares pursuant to the provisions of the preceding paragraph, pay to the
person or persons on whose behalf the offer was made the net balance of the purchase price after
deduction of any costs incurred in the transaction.
|
|
15.5.
|
|
The voting right attached to the shares, the right to participate in the general
meeting and the right to distributions shall be suspended during the period in which the
shareholder fails to discharge the obligation to offer the shares for sale on the basis of the
provisions of this article.
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15.6.
|
|
The obligation under paragraph 1 shall not apply:
|
|
(a)
|
|
if all co-shareholders have given notice in writing within three months of the
obligation arising that they agree to the new shareholder or shareholders;
|
|
|
(b)
|
|
if the shares form part of a community of property to which not only the person
who has contributed the shares to the community but also one or more other persons are
entitled, in so far as the shares are transferred within one year of the dissolution of
the community of property to the person who contributed the shares to the community.
|
Management
16.1.
|
|
The Executive Board, consisting of a number of one or more managing directors to be
determined by the general meeting, under the supervision of a Supervisory Board, consisting of
one or more supervisory directors, shall be charged with the management of the company.
|
16.2.
|
|
Managing directors shall be appointed by the general meeting and may be suspended and
discharged by the general meeting at all times. The Supervisory Board, too, shall be
authorized to suspend managing directors.
The general meeting may grant and deprive one or more managing directors of the title of
general manager at all times.
|
|
16.3.
|
|
The Executive Board can determine a set of rules about its decision-making and about
the particular task(s) of each of the managing directors. All resolutions of the Executive Board
with respect to which the rules do not prescribe a larger majority, shall be adopted by an
absolute majority of the votes cast.
|
16.4.
|
|
All resolutions of the Executive Board with respect to the following subjects shall
require the prior approval of the Supervisory Board, or, for as long as that Board is not yet
functioning, the meeting of holders of cumulative preference shares:
|
|
a.
|
|
the adoption of an annual budget, comprising an investment plan and a financial plan, that must
be drawn up by the Executive Board each year;
|
|
|
b.
|
|
the carrying out of legal acts as a consequence of which the annual plan of the
company is exceeded upon by 10% (ten percent) or more;
|
|
|
c.
|
|
the entering into settlement agreements;
|
|
|
d.
|
|
the conducting and stopping of legal proceedings (inclusive of mediation and
arbitration proceedings) with the exception of interim injunction proceedings that
can not suffer delay;
|
|
|
e.
|
|
the granting of bonuses or result-dependent remunerations to the Executive Board,
|
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|
|
|
the management team or the other employees of the company;
|
|
|
f.
|
|
the entering into any share option agreement and the granting of individual share
options on the basis of such a plan;
|
|
|
g.
|
|
the adoption of (a) pension scheme(s) and the granting of pension rights apart
from those that result from existing pension commitments;
|
|
|
h.
|
|
the entering into contracts, transactions or obligations the amount of which
exceeds
;100,000.00 (one hundred thousand euros).
|
|
|
i.
|
|
the entering into and amending of employment contracts in which a gross annual
remuneration is granted of
50,000.00 (fifty thousand euros) or more;
|
|
|
j.
|
|
the entering into an agreement or arrangement with a (person affiliated with a) shareholder,
managing director or supervisory director of the company or of a subsidiary of the company;
|
|
|
k.
|
|
the appointment of attorneys-in-fact or, as the case may be, empowered persons and
terminating their authorisation and title.
|
16.5.
|
|
All resolutions of the Executive Board with respect to the following subjects shall require
the prior approval of the meeting of cumulative preference shareholders:
|
|
a.
|
|
the opening or closing of branch establishments, taking or terminating a direct
or indirect participating interest in other companies or the termination or
changing of the extent of such a participating interest, in the home country or
abroad.
|
|
|
b.
|
|
the granting of money loans as well as the entering into money loans as a borrower
and into credit arrangements (including also lending to or borrowing from affiliated
companies) that do not exceed an amount of 10% (ten percent) of the total
nominal amount paid on preference shares increased by the share premium;
|
|
|
c.
|
|
binding the company as a guarantor or several co-debtor or binding the company
in another way for obligations of third parties not exceeding an amount of 10% (ten
percent) of the total nominal amount paid on preference shares increased by the
share premium;
|
|
|
d.
|
|
the acquisition, alienation, encumbrance, renting, letting out for rent of, or
acquiring in any other manner or granting of the use or enjoyment of, immovable
and/or movable property and/or property rights;
|
|
|
e.
|
|
The entering into agreements in which a credit is granted to the company that
exceeds an amount of 10% (ten percent) of the total nominal amount paid on the
preference shares increased by the share premium.
|
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|
f.
|
|
long term direct or indirect collaboration with other enterprises and the termination
of such collaboration;
|
|
|
g.
|
|
legal acts that do not fall under the normal conduct of business of the company;
|
|
|
h.
|
|
initiating investments or disinvestments or acquiring or divesting (a) company
activity(ties);
|
|
|
i.
|
|
the application for a moratorium or bankruptcy of the company;
|
|
|
j.
|
|
the granting of registration rights or comparable rights;
|
|
|
k.
|
|
the entering into, terminating or amending of (license) agreements with respect to
intellectual property rights of the company;
|
|
|
l.
|
|
the exercising of voting rights on shares of a company in which the company
participates.
|
16.6.
|
|
For the application of the paragraphs 16.4 and 16.5 a resolution of the
Executive Board to carry out a legal act shall be equated with a resolution of the Executive
Board to adopt or approve of a resolution of any body of a company in which the company has a
participating interest, provided that the latter resolution requires approval as referred to
in the paragraphs 16.4 and 16.5.
|
|
|
The absence of approval as referred to in this paragraph shall not affect the
representative authority of the Executive Board or of the managing directors.
|
16.7.
|
|
In the event of the absence or inability to act of one of the managing directors, the
other
managing directors shall continue to be charged with the management. In the event of
the absence or inability to act of all managing directors, one person designated for that
purpose by the Supervisory Board whether or not from amongst its members shall be
charged temporarily with the management of the company.
The Supervisory Board shall have the right to designate a person as referred to in the
preceding sentence also in the event of the absence or inability to act or one or more, but
not all, managing directors, which person than shall be co-charged with the management.
|
16.8.
|
|
The remuneration and further terms and conditions of employment shall be determined
by the general meeting for each managing director separately.
|
Representation
17.1.
|
|
The Executive Board shall represent the company. Two managing directors acting jointly shall
also have that representative authority. A managing director with the title general manager
shall be authorized to represent the company independently.
|
17.2.
|
|
In all situations in which there is a conflict of interests between the company and one or
|
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|
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more managing directors, the company shall nevertheless be represented in the manner
mentioned above.
|
|
|
A resolution of the Executive Board to carry out a legal act involving a conflict of
interests as referred to above, shall require the prior approval of the Supervisory Board.
|
Supervisory Board
18.1.
|
|
There shall be a Supervisory Board if a resolution of the general meeting to that end has
been deposited at the office of the Commercial Register, for as long as no resolution of the
general meeting, to abolish the Supervisory Board has been deposited there. A Supervisory
Board-shall consist of one or more natural persons. The number of supervising directors shall
be determined by the general meeting. The supervising directors shall be appointed, suspended
and dismissed by the general meeting. If no Supervisory Board has been established, the powers
granted in these articles of association to the Supervisory Board shall be the powers of the
general meeting to the extent to which that is possible.
|
18.2.
|
|
The Supervisory Board shall be charged with supervising the policy conducted by the Executive
Board and the general run of affairs in the company and the enterprise linked to it and in
addition with the tasks imposed on it in these articles of association or in the law. The
Supervisory Board shall give advice to the Executive Board and to the general meeting each
time when this is requested to do so or it deems such advice desirable.
|
|
|
The supervising directors, both jointly and each director individually shall at all times
have access to the offices and properties of the company and shall have the right to inspect
the books, records and correspondence and to check the cash money of the company at all
times.
|
|
|
The Supervisory Board shall have the right to have itself assisted by one or more experts for
the account of the company.
|
|
|
The Supervisory Board may designate one or more delegates from amongst its members, which
delegates shall be charged in particular with the day-to-day supervision of the Executive
Board.
|
18.3.
|
|
The Supervisory Board shall elect a President, a Vice-President and a Secretary from amongst
its members, but it shall also be allowed to elect one of the managing directors as Secretary.
|
18.4.
|
|
The Supervisory Board shall meet at least twice a year and in addition as often as it is
requested to do so by one supervising director or one managing director.
|
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18.5.
|
|
The Supervisory Board may adopt a set of rules about its decision-making process. All
resolutions of the Executive Board with respect to which the rules do no prescribe a larger
majority, shall be adopted by an absolute majority of the votes cast.
|
|
18.6.
|
|
Each managing director shall be obliged to attend the meetings of the Supervisory Board if
invited to do so and to give all information there with respect to the business of the
company.
|
|
18.7.
|
|
Records shall be kept of the resolutions of the Supervisory Board. Those records shall be
kept by the Supervisory Board.
|
Annual
accounts
19.1.
|
|
The financial year of the company coincides with the calendar year.
|
|
19.2.
|
|
Every year within five months after the expiration of the financial year of the company,
except where that term is extended by the general meeting by six months at the most in view of
special circumstances, the Executive Board shall draw up annual accounts that shall be
deposited at the office of the company for inspection by the shareholders.
Within that term
the Executive Board shall also deposit the annual report for inspection, unless section
2:396, paragraph 6, first sentence or section 2:403 of the Dutch Civil
Code
applies.
|
|
|
|
The annual accounts shall be signed by all managing directors and all supervising directors.
|
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If any signature is missing, that shall be reported with mentioning of the reason(s) for
this. The annual accounts shall be accompanied by an opinion from the Supervisory Board.
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19.3.
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a.
|
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The company shall commission an audit of the annual accounts. The general meeting
shall be authorised to commission the audit. If it fails to do so, the Supervisory Board shall
be entitled to do so and if the latter also fails to do this, the Executive Board.
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|
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The assignment may at all times be withdrawn by the general meeting and by the
commissioning party.
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b.
|
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The assignment shall be granted to an accountant. The designation of an
accountant shall not be limited by any recommendation. If the appointment of an
accountant is not required by law, the general meeting shall be entitled to grant such
an assignment also to another party.
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c.
|
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The person to whom the assignment is granted shall report to the Supervisory
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Board and the Executive Board in writing.
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19.4.
|
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The company shall ensure that the
annual accounts that have been drawn up, the annual report, the opinion of the Supervisory Board
and the information to be added under section 2:392 paragraph 1 of the Dutch Civil
Code shall be present at the office of the company from the day of the convocation of the general
meeting intended for the discussion of those documents. The shareholders and the depositary receipt
holders can inspect the documents there and obtain a copy of them free of charge.
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Adoption
of the annual report and accounts
20.1.
|
|
The annual accounts shall be adopted by the general meeting.
The
annual report shall be adopted by the Executive Board.
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20.2.
|
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After the proposal to adopt the annual accounts will have been discussed, a proposal shall
be made to the general meeting to grant discharge to the managing directors for the policy
conducted by them in the financial year in question, in as far as such policy is evident from
the annual account or has been notified to the general meeting, and discharge to the
supervisory directors for their supervision.
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Profit
appropriation
21.1
|
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The profit shall be at the free disposal of the general meeting.
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21.2
|
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The company can only make payments to the shareholders and other parties entitled to the
profit susceptible for distribution in as far as the equity is larger than the part of the
capital paid up and called for, increased by the reserves that must, be maintained under the
law or the articles of association.
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21.3
|
|
Distribution of profit shall occur after the adoption of the annual accounts that evidence
that such distribution is permitted.
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21.4
|
|
If the general meeting of shareholders resolves to distribute profit over the financial year
most recently expired, then first of all, a payment shall occur, where possible; on
cumulative preference shares of a percentage of eight percent (8%) of the nominal amount of
each share.
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21.5
|
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If the distribution referred to above under 4 has not occurred in any year, then a
payment shall occur, if the general meeting resolves to distribute profit in any subsequent
year, first of all. if and to the extent to which this is possible, on the cumulative
preference shares of the amount of the preference dividend that has not been paid to the
cumulative preference shares in the years preceding.
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21.6
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In the event of:
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liquidation or sale of all or almost all assets of the company;
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the granting of exclusive rights of use with respect to all or nearly all assets of
the company;
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a merger of the company;
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the transfer of the enterprise of the company;
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the receipt of a dividend payment from a subsidiary of the company as a consequence of one of
the contingencies referred to above in this paragraph;
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the sale of more than 80% (eighty percent) of the shares of the subscribed share capital, with the exception of the
situation in which an initial Public Offering (IPO) of he shares of the company occurs at a
recognised stock exchange;
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the company shall be obliged to distribute the proceeds generated
as a result thereof (liquid means, shares or other assets) as follows:
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I.
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(i)
|
if the relevant proceeds generated represent an amount
smaller than
15,000,000.00 (fifteen million euros) the holders of cumulative
preference shares shall be entitled
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to twice the amount of the nominal value of the cumulative
preference shares;
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to the premium reserve paid on those preference shares; and
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to any preference of eight percent (8%) in arrears as referred to above, it being understood that if the
remaining amount is too small for such a distribution, that remaining amount shall be
made available to the holders of cumulative preference shares in proportion to the
number of shares in the subscribed capital of the company held by each of them;
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(ii)
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any amount remaining from those proceeds generated after full payment to the holders
of cumulative preference shares in conformity with the provisions under 1 shall be
paid to the holders of cumulative preference shares and the holders of ordinary
shares, this in proportion to the total number of shares in the subscribed capital of
the company held by each of them;
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II.
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if the aforementioned proceeds that are generated represent an amount larger than
15,000,000.00 (fifteen million euros) the generated proceeds shall be divided
between the shareholders in proportion to the total amount of shares in the sub-scribed capital of the company held by each shareholder.
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21.8. In calculating the profit division shares held by the company in its own capital shall not
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count, unless those shares have been encumbered with a right of usufruct or pledge or if
depositary receipts have been issued for them; as a consequence of which the usufructuary,
the pledge or the holder of those depositary receipts is entitled to the right to receive
profit.
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21.9.
|
|
Shares for which the company is holding depositary receipts or with respect to which the
company has a restrictive right on the basis of which it is entitled to profit distribution,
shall not count in the calculation of the profit division either.
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21.10.
|
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The company shall only be allowed to make interim distributions if the requirement
of paragraph 2 has been complied with and with due observance of the fact that the
provisions of the fourth and fifth paragraph of this article with respect to cumulative
preference shares shall apply to the payment of interim dividend on cumulative preference
sharers.
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Dividend
22.
|
|
The dividend may be claimed by the shareholders one month after its declaration, unless
the general meeting determines another period. Such claims shall be barred after five years.
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A dividend not claimed within five years of the date on which it is declared shall revert to
the company.
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General meeting
23.1
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General meetings of shareholders shall be held in the Netherlands in the municipality
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where the company has its registered office.
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23.2.
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A general meeting (referred to
hereinafter as the annual meeting) shall be held annually no later than six months after the end of the companys financial year.
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The agenda shall contain the following items:
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(a)
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the annual accounts;
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(b)
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the annual report, unless Article 2:396, paragraph 6, or
Article 2:403 of the Dutch Civil Code (
Burgerlijk Wetboek
) applies to the
company;
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(c)
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the resolution to discharge the executive directors from liability for their
management during the relevant financial year, in so far as such management is evident
from the annual accounts or has been made known to the general meeting
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(d)
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resolutions tabled by the Board of Managing Directors;
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(e)
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resolutions, the discussion of which has been requested in writing by one or
more shareholders and/or depositary receipt holders solely or jointly representing at
least
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one hundredth of the issued capital, if the company has received such request not later than on the
thirtieth day before the day of the meeting and provided that no important interest of the company
dictates otherwise, which resolutions shall be included in the notice calling the meeting or shall
be announced in the same manner as the resolutions mentioned above at (d);
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(f)
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any other business, subject to the proviso that no legally valid resolutions may be passed in respect of
business not specified in the notice calling the meeting or in any supplementary notice sent within
the period prescribed for giving notice of the meeting, unless the resolution is passed unanimously
at a meeting at which all shareholders and depositary receipt holders for shares are present or
represented.
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23.3.
|
|
Where a resolution providing for an extension as referred to in Article
18, paragraph 2, is passed, the annual meeting at which the annual accounts and
annual report are to be dealt with shall be postponed in accordance with that resolution.
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23.4.
|
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Other general meetings shall be held as frequently as the Board of Managing Directors or the
Supervisory Board calls them. The Board of Managing Directors shall be obliged to call a general
meeting if it receives a written request to this effect, accurately specifying the items to be
dealt with, from one or more shareholders and/or depositary receipt holders representing at least
one tenth of the issued capital. If the Board of Managing Directors does not call a meeting within
four weeks, in such a way that the meeting can be held within six weeks of the request, the persons
making the request shall themselves be entitled to call the meeting
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Calling general meetings
24.1.
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|
Each shareholder and each depositary receipt holder is entitled to attend general
meetings, either in person or represented by proxy appointed in writing, and to address
the meeting.
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Shares which by law carry no voting rights shall not be taken
into account in determining to
what extent a shareholder is present or represented.
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24.2.
|
|
The notice calling a general meeting shall be sent to the addresses of the shareholders and
depositary receipt holders as listed in the register of shareholders. Notice shall be given no
later than on the fifteenth day before the meeting.
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24.3.
|
|
The notices calling the meeting shall specify the items to be dealt with, without prejudice
to the statutory provisions governing special decisions such as those governing legal merger,
division, amendment of the articles of association and reduction of capital.
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24.4.
|
|
if the notice calling the meeting was not sent, or was not sent within the period
prescribed
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for notice of such meeting, no legally valid resolutions may be passed, unless they
are passed unanimously at a meeting at which all shareholders and depositary receipt holders
are present or represented and the views of the Managing Directors and the Supervisory Board
have been heard.
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24.5.
|
|
Each Managing Director and Supervising Director shall be entitled to attend the
general meeting and act there in an advisory capacity.
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Chairing
the general meeting
25.1.
|
|
The general meeting shall be chaired by the President of the Supervisory Board. In the
absence of the President or if there is no Supervisory Board, the meeting shall elect its own
chairman. The general meeting shall itself appoint a chair. Until that moment the meeting
shall be chaired temporarily by the oldest Managing Director (in age) present at the meeting
or, in the absence of any such director, by the oldest person present at the meeting. The minutes of the meeting shall
be kept by a secretary appointed by the chair.
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25.2.
|
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Both the chair and the Supervisory Board and the person who has called the general meeting
may direct that a notarised record of the proceedings at the meeting be drawn up. The
notarised record shall be countersigned by the chair. The costs thereof shall be borne by the
company.
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25.3.
|
|
If a notarised record is not drawn up, the minutes of the general meeting shall be adopted
by the chair and the secretary at that meeting and signed by them in confirmation thereof.
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25.4.
|
|
The Board of Managing Directors shall keep a record of the resolutions passed by the general
meeting. If the Board of Managing Directors is not represented at the general meeting, a copy
of the resolutions passed shall be supplied to the Board of Managing Directors by or on behalf
of the chair of the meeting as soon as possible after the meeting. Such record shall be kept
at the office of the company for inspection by the shareholders and depositary receipt
holders. Each of them shall be issued, on request, with a copy of or extract from such record
at not more than cost price.
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Passing
of resolutions
26.1.
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|
Each share shall carry one vote.
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26.2.
|
|
All resolutions of the general meeting need to be passed by an absolute majority of the
votes cast, except where a larger majority is required by law or by these articles of
association.
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26.3.
|
|
Votes shall be cast orally in respect of business other than elections and shall be cast by
unsigned ballot papers in the case of elections. If an absolute majority is not obtained in an
election ballot, a second ballot shall be held between the two persons for whom the
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most votes were cast in the first ballot.
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26.4
|
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In the case of a tied vote on business other than elections,
the resolution shall be deemed to
have been defeated.
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In the case of a tied vote on elections, the matter shall be decided by lot.
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26.5.
|
|
Blank votes shall be deemed not to have been cast.
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26.6.
|
|
No vote may be cast at a general meeting for a share belonging to the company or a
subsidiary thereof, nor for a share for which the company or a subsidiary thereof holds the
depositary receipts. Usufructuaries and pledgees of shares belonging to the company or its
subsidiaries are, however, not precluded from exercising their right to vote if the usufruct
or pledge was created before the share belonged to the company or a subsidiary thereof.
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|
The company or a subsidiary thereof may not cast a vote for a
share in respect of which it
possesses a right of usufruct or pledge.
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|
Shares for which no voting rights may be exercised pursuant to the above shall not be taken
into account in determining to what extent capital is represented at the general meeting.
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Passing
of resolutions other than in a general meeting
27.
|
|
All resolutions that may be
passed in a general meeting may also be passed other than at such a meeting, unless there are
depositary receipt holders, provided that all shareholders have indicated in writing, whether by
means of telecommunication or otherwise, that they are in favour of the resolution and provided that the views of the
Managing Directors have been heard. The provisions of Article 23, paragraph 5, and
Article 24, paragraph 4, shall apply
mutatis mutandis.
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Special
resolutions
28.1.
|
|
Resolutions to amend these articles of association or to wind up the company may be passed
only at a general meeting at which not less than two thirds of the issued capital is
represented and by a majority of at least three quarters of the votes
cast.
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28.2.
|
|
If this capital is not represented, another meeting shall be called and held within one
month of - but no earlier than fifteen days after - the first meeting. At this second meeting a
resolution as referred to in paragraph l may be passed by a majority of not less than three
quarters of the votes cast, irrespective of the proportion of capital represented at such
meeting.
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The notice calling this new meeting shall state that it is a second meeting for the purposes
of Article 2:230, paragraph 3, of the Dutch Civil Code
(
Burgerlijk Wetboek
).
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Notices
and notifications
29.1.
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|
Notices and other notifications sent by or to the company shall be in writing and may be
sent by means of telecommunication or otherwise. Notices intended for shareholders,
usufructuaries, pledgees and depositary - receipt holders shall be sent to the addresses
referred to in the register of shareholders. Notices intended for the Board of Managing
Directors shall be sent to the address of the company.
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29.2.
|
|
Notifications which must, by law or pursuant to the articles of association, be addressed to
the general meeting may be sent by inclusion in the notices calling a meeting.
|
dissolution
30.1
|
|
After dissolution of the company the liquidation shall be done by the managing directors,
unless the general meeting determines otherwise. The liquidation shall be done under the
supervision of the supervising directors, unless no supervising directors are functioning at
the time of the adoption of the resolution to dissolve the company.
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30.2
|
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During the liquidation the provisions of these articles of association shall continue to be of effect to the largest
extent possible. The provisions in those articles about
managing directo
rs then shall
apply to the liquidators.
|
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30.3
|
|
The provisions of article 21 paragraph 6 shall apply, mutatis mutandis, to the division of
the remaining amount after the liquidation to the largest extent possible.
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|
30.4
|
|
After its liquidation the company shall continue to exist in as far as required for the liquidation of
its assets.
|
conversion
31.
|
|
Cumulative preference shares can always be converted (one into one, without any
additional payment being required) into ordinary shares, this at the request of each holder of
cumulative preference shares. A written notification of the holder of cumulative preference shares in question to the company shall be required for such a conversion, after which that
conversion must be laid down in a notarial deed. By the execution of that request all
cumulative preference shares in question shall, without any other legal act than the
aforementioned notarial deed being required, be converted in just as many ordinary shares of
the same nominal amount, and they shall be numbered consecutively to the ordinary shares that
have already been subscribed at that time. The Executive Board shall be obliged to record the
aforementioned conversion of the cumulative preference shares into ordinary shares in the
Commercial Register and in the shareholders register. In as far as the authorised capital of
the company would contain insufficient ordinary shares to
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realize this conversion without an amendment of the articles of association, the shareholders
shall be obliged to adopt a resolution to amend the articles of association as is required
for that purpose. By subscribing for a share in the capital of the company each shareholder
authorizes the company irrevocably to do all that is necessary for realising this amendment
of the articles of association.
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Final
provision
32.
|
|
Any powers not conferred on other persons shall, within the limits of the law and
these articles of association, be vested in the general meeting.
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21
EXHIBIT
D
SWl\SWl\20048970\158596
TRANSFER OF SHARES
PROGENTIX ORTHOBIOLOGY B.V.
On the fourteenth day of January two thousand and nine, appeared before me, Johan
Hendrik Bennebroek Gravenhorst, candidate civil law notary, hereinafter referred to as: civil Law
notary, as a substitute of Alexander Joannes Wiggers, civil law notary in Amsterdam:
Floris David van der Velde, holding offices at Amstelveenseweg 638,1081 JJ Amsterdam,
born in Haarlem on the twenty-eighth day of January nineteen hundred and seventy-nine,
holder of a driving licence with number 3170900441. unmarried and not registered as a
partner,
acting pursuant to a written power of attomey from:
1.
|
|
J.D. de Bruijn Holding B.V., a private company with limited liability organized under
the laws of the Netherlands, with statutory seat in Amersfoort. The Netherlands and
with office address at Pasteurstraat 16,3817 JL Amersfoort, the Netherlands,
registered with the Trade Register under number 32112279, hereinafter
referred to as: Seller 2;
|
|
2.
|
|
Incubation B.V., a private company with limited liability organized under the laws of
the Netherlands, with statutory seat in Bilthoven, the Netherlands and with office
address at Professor Bronkhorstlaan 10 D, 3723 MB Bilthoven, the Netherlands,
registered with the Trade Register under number 30194071, hereinafter referred to
as: Seller 2;
|
|
3.
|
|
Huipin Yuan, born in Sichuan, China, on the nineteenth day of April nineteen
hundred sixty-six, residing at Nijenheim 2424,3704 VK Zeist, the Netherlands, holder
of a Chinees passport with number Gl9596325, married, hereinafter
referred to as:
Seller 3;
|
|
4.
|
|
Biogeneration Ventures B.V., a private company with limited liability organized
under the laws of the Netherlands, with statutory seat in Leiden, the Netherlands and with
office address at Gooimeer 2-35, 1411 DC Naarden, the Netherlands, registered
with the Trade Register under number 32119447, hereinafter referred to as:
Seller 4,
|
|
|
|
the Seller 1, the Seller 2, the Seller 3 and the Seller 4 hereinafter also collectively
|
- 1 -
|
|
referred to as: the Sellers;
|
|
5.
|
|
NuVasive, Inc, a company organised under the laws of the state of Delaware, United
States of America, with registered seat and office address at 7473 Lusk Boulevard,
San Diego, CA 92121, United States of America, registered with the Delaware
Division of Corporations under number 2775617, hereinafter referred to as: the
Purchaser;
|
|
6.
|
|
Progentix Orthobiology B.V., a private company with limited liability organized under
the laws of the Netherlands, with statutory seat in Bilthoven, the Netherlands and with
office address at Professor Bronkhorstlaan 10 D, 3723 MB Bilthoven, the
Netherlands, registered with the Trade Register under number 30234249, hereinafter referred to
as: the Company
|
The person appearing, acting in said capacity, declared hereby as follows:
PREFERRED STOCK PURCHASE AGREEMENT AND SHARES
By written preferred stock purchase agreement dated the thirteenth day of January two
thousand and nine (hereinafter referred to as: the Preferred Stock Purchase
Agreement):
|
|
the Seller 1 sold to the Purchaser and the Purchaser purchased from the Seller 1 two
thousand eight hundred eighty (2,880) ordinary shares in the capital of the Company,
each share with a nominal value of one euro (EUR 1). numbered 14,239 up to and
including 17,118 (hereinafter referred to as: the Shares 1);
|
|
|
|
the Seller 2 sold to the Purchaser and the Purchaser purchased from the Seller 2
three thousand nine hundred sixty-seven (3,967) ordinary shares in the capital of the
Company, each share with a nominal value of one euro (EUR 1). numbered 5,952 up
to and Including 9,918 (hereinafter referred to as: the Shares 2);
|
|
|
|
the Seller 3 sold to the Purchaser and the Purchaser purchased from the Seller 3
three hundred fifty-three (353) ordinary shares in the capital of the Company, each
share with a nominal value of one euro (EUR 1), numbered 17,648 up to and
including 18,000 (hereinafter referred to as; the Shares 3);
|
|
|
|
the Seller 4 sold to the Purchaser and the Purchaser purchased from the Seller 4 one
thousand six hundred (1,600) cumulative preference shares in the capital of the
Company, each share with a nominal value of one euro (EUR 1), numbered 2,401 up
to and including 4,000 (hereinafter referred to as: the Shares 4),
the Shares 1, the Shares 2, the Shares 3 and the Shares 4 hereinafter also
collectively referred to as the Shares.
|
A copy of the Preferred Stock Purchase Agreement is attached to this deed.
The provisions of the Preferred Stock Purchase Agreement which are still applicable at this
time shall remain in force insofar as not inconsistent with this deed.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER
1
The Shares 1 have been issued by the Company to the Seller 1 by virtue of the Companys
- 2 -
Deed of Incorporation executed before N. van Buitenen, civil law notary in Utrecht, the
Netherlands on the thirty-first day of December two thousand and seven,
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 2
The Shares 2 have been acquired by the Seller 2 pursuant to a purchase agreement, by a
deed of transfer executed before a deputy of N. van Buitenen, aforementioned, on the
twenty-ninth day of September two thousand and eight,
The transfer was acknowledged by the Company on the same day, as is evidenced by the
abovementioned notarial deed.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 3
The Shares 3 have been issued by the Company to the Seller 3 by virtue of the Companys Deed of
Incorporation executed before N. van Buitenen, aforementioned, on the thirty-first
day of December two thousand and seven.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 4
The Shares 4 have been issued by the Company to the Seller 4 by virtue of a deed of
issue executed before N. van Buitenen, aforementioned, on the fourteenth day of January
two thousand and eight.
PAYMENT OF THE PURCHASE PRICE
|
|
The purchase price for the Shares 1 amounts to two million seven hundred fifty-nine
thousand six hundred thiry-five United States Dollars and ninety-one cents (USD
2,759,635.91) (hereinafter referred to as: the Purchase Price 1).
|
|
|
|
The purchase price for the Shares 2 amounts to three million eight hundred thousand
nine hundred twenty-eight United States Dollars and forty-one cents (USD
3,800,928.41) (hereinafter referred to as: the Purchase Price 2).
|
|
|
|
The purchase price for the Shares 3 amounts to three hundred thirty-eight thousand
one hundred three United States Dollars and eighty-eight cents (USD 338,103,88)
(hereinafter referred to as: the Purchase Price 3).
|
|
|
|
The purchase price for the Shares 4 amounts to two million eight hundred thirty-two
thousand two hundred forty-seven United States Dollars and ninety cents (USD
2,832,247.90) (hereinafter referred to as: the Purchase Price 4),
the Purchase Price 1, the Purchase Price 2, the Purchase Price 3 and the Purchase
Price 4 hereinafter also collectively referred to as: the Purchase Price.
|
The Purchaser has paid a part of the Purchase Price, being a total amount of nine million
seven hundred thirty thousand nine hundred sixteen United States Dollars and ten cents
(USD 9,730,916.10), by payment into the bank account of the civil law notaries of DLA
Piper Nederland N.V. with ING Bank, account number 0020031300.
The
undersigned civil law notary is hereby irrevocably instructed to pay:
|
|
The Purchase Price 1, upon the execution of this deed into a bank account in the
name of the Seller 1 with number 0227287436. Therefore, the Seller 1 hereby grants
a discharge to the Purchaser for the payment of the Purchase Price 1.
|
- 3 -
|
|
The Purchase Price 2, upon the execution of this deed into a bank account in the
name of the Sellers 2 with number 0227168216. Therefore, the Seller 2 hereby grants
a discharge to the Purchaser for the payment of the Purchase Price 2.
|
|
|
|
The Purchase Price 3, upon the execution of this deed into a bank account in the
name of the Seller 3 with number 7733949. Therefore, the Seller 3
hereby grants a
discharge to the Purchaser for the payment of the Purchase Price 3.
|
|
|
|
The Purchase Price 4, upon the execution of this deed into a bank account in the
name of the Seller 4 with number 0498622800. Therefore, the Seller 4 hereby grants a
discharge to the Purchaser for the payment of the Purchase Price 4.
|
TRANSFER
Pursuant to the Preferred Stock Purchase Agreement:
|
|
the Seller 1 hereby transfers the Shares 1 to the Purchaser,
who accepts this transfer;
|
|
|
|
the Seller 2 hereby transfers the Shares
2
to the
Purchaser, who accepts this transfer;
|
|
|
|
the Seller 3 hereby transfers the Shares 3 to the Purchaser,
who accepts this transfer;
|
|
|
|
the Seller 4 hereby transfers the Shares 4 to the Purchaser,
who accepts this transfer;
|
FURTHER CONDITIONS
The guarantees and warranties as laid down in the Preferred Stock Purchase Agreement
remain applicable to this transfer. Furthermore parties declare that they will ensure that the
Shares will be converted into cumulative preference shares B in the capital of the
Company as provided in the Recitals of the Preferred Stock Purchase Agreement.
Article 2.
All proceeds from and costs related to the Shares shall, as from this day, accrue to or, as
the case may be, be borne by the Purchaser.
Article 3.
The costs
incidental to this deed and the execution thereof shall be borne by the Purchaser.
Article 4.
The Preferred Stock Purchase Agreement does not contain any conditions subsequent
and/or conditions precedent which can be invoked by the Sellers or the Purchaser with
respect to the sale, purchase and transfer of the Shares.
SHARE TRANSFER RESTRICTIONS
The share transfer restrictions In the Companys articles of association, which consist of an
offering system, have In respect of the transfer of the Shares by this deed been duly
observed, since all shareholders of the Company are a party to this deed and hereby
waive their right pursuant to the share transfer restrictions to acquire the Shares.
ACKNOWLEDGEMENT
The Company declares that it has taken cognisance of and hereby acknowledges the
above transfer of the Shares.
The Company shall immediately enter this transfer in its shareholders register.
- 4 -
NON-APPLICABILITY OF ARTICLE 2:204C OF THE CIVIL CODE
The provisions laid down in Article 2:204c of the Dutch Civil Code do not apply to this transfer to the Purchaser.
INTERDISCIPLINARY COOPERATION
ADVISOR PURCHASER
With reference to the Rules of Professional Conduct
(Verordening beroeps-
en
gedragsregels)
of the Royal Dutch Organisation of Civil Law Notaries
(Koninklljke Notariele
Beroepsorganisatie)
all parties declared expressly to agree that:
a.
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DLA Piper Nederland N.V. acts as counsel to the Purchaser in connection with this
deed or any related agreement, or acts as counsel for or on behalf of the Purchaser in the
event of any dispute relating to this deed or any related agreement; and
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b.
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the undersigned civil law notary executes this deed of transfer even though he is
affiliated with DLA Piper Nederland N.V. as civil law notary.
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POWER OF ATTORNEY:
The person appearing has been authorized by six (6) written powers of attorney, (copies
of) which Have been attached to this deed.
The person appearing is known to me, civil law notary, and the identity of the person
appearing mentioned in this deed has been determined by me civil law notary, by means
of the relevant document mentioned hereinbefore.
This deed is executed at Amsterdam on the date mentioned at the head of this deed. The contents of
this deed have been stated and explained to the person appearing by me,
civil law notary. Furthermore the consequences of this deed have been pointed out to the
person appearing.
The person appearing declares to have in good time taken cognisance of the contents of
this deed and to agree with the contents.
Thereupon, after a limited part of this deed has been read out, it is signed by the person
appearing and by me, civil law notary at fifteen hundred hours and forty minutes (15:40).
Signed.
ISSUED FOR TRUE COPY
By Johan Hendrik Bennebroek
Gravenhorst, candidate civil law notary, as
substitute of Alexander Joannes
Wiggers, civil law notary at Amsterdam
on 14 January 2009 at 15:50 hours.
- 5 -
EXHIBIT E
Form of Proprietary Inventions Agreement
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT F
Form of Legal Opinion
1. Each of the Closing Documents is a valid and binding obligation of the Company, enforceable
by Purchaser against the Company in accordance with its terms.
2. We do not have knowledge of any action, suit or proceeding against the Company that is
pending or has been overtly threatened in writing.
EXHIBIT G
Distribution Agreement
Filed separately as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed May 8, 2009.
EXHIBIT
H
EXCLUSIVE LICENSE AGREEMENT
THIS EXCLUSIVE LICENSE AGREEMENT
(
Agreement
) is made as of January 13, 2009, by and between
RevisiOs B.V., a corporation organized under the laws of Holland (
RevisiOs
) and NuVasive, Inc., a
corporation organized under the laws of the State of Delaware, U.S.A., with an address at 7473 Lusk
Boulevard, San Diego, California 92121 (
NuVasive
).
RECITALS
NuVasive and RevisiOs entered into that certain Exclusive Distribution Agreement of even date
herewith (the
Distribution Agreement
). NuVasive, RevisiOs and Progentix shareholders entered
into that certain Option Purchase Agreement (the
Option Purchase Agreement
).
In connection with the Distribution Agreement and the Option Purchase Agreement, Progentix
desires to grant an exclusive license to NuVasive to certain patent rights owned by Progentix.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
DEFINITIONS
Field
shall mean all spine-related applications.
Improvements
shall mean any invention or discovery conceived and/or reduced to practice by
or on behalf of any employee, agent or other representative of RevisiOs that (a) constitutes an
improvement or modification to an invention claimed by or disclosed in the Patent Rights, or (b)
the practice of which would necessarily infringe one or more of the Patent Rights, and in each case
of subparts (a) and (b), is conceived or reduced to practice at any time prior to fourth (4th)
anniversary of the Effective Date.
Patent Rights
shall mean (a) the patents and patent applications listed on
Exhibit
A
, together with all patents that have issued or in the future may issue from any patent
application on
Exhibit A
, (b) any patents or patent applications, together with all patents
that have issued or in the future may issue from such patent applications, owned or controlled by
RevisiOs to the extent claiming an Improvement, (c) any continuations, divisionals, and
continuations-in-part, to the extent the claims of any such patent application or patents issuing
thereon are directed to subject matter specifically described in the patent applications listed in
subparts (a) or (b) hereto, and (d) any reissues, re-examinations, or extensions thereof, or
substitutes therefore; and the relevant international equivalents of any of the foregoing.
1
Product
shall mean any product the making, using, selling, offering for sale or importation
of which would, absent the license granted herein, infringe one or more of the Patent Rights.
2.
LICENSE GRANT
2.1 On the terms and subject to the conditions of this Agreement, RevisiOs hereby grants to
NuVasive an exclusive, worldwide, perpetual (unless terminated in accordance with Section 4.2),
royalty-free, fully-paid license (with the right to grant sublicenses) under the Patent Rights to
use, offer for sale, sell and import Products for use solely in the Field. NuVasive shall not have
the right to make or have made any such Products, it being agreed that the manufacture of any such
Products would need to be the subject of a mutually agreeable manufacturing agreement between the
parties.
2.2 Progentix shall promptly disclose to NuVasive all Improvements.
2.3 During the term of this Agreement, NuVasive shall not sell, transfer or otherwise provide,
directly or indirectly, to any third party any Product for use outside the Field. To the extent
not prohibited by applicable law, NuVasive shall restrict (through contracts and/or purchase
orders, marketing literature, shipping documents, or similar documents used when a supply,
distribution or similar agreement is not in place) its customers and distributors and require
similar restrictions throughout the supply chain, from selling any Product for use outside the
Field. NuVasive shall use commercially reasonable efforts to enforce such restrictions, including
without limitation by (i) notifying such customer or distributor in writing of such alleged
violation, (ii) conducting an investigation of such alleged violation reasonably appropriate under
the circumstances, and (iii) suspending shipments of Product to a customer or distributor if
NuVasive becomes aware that such customer or distributor is selling such Product for use outside
the Field.
2.4 Only licenses and rights granted expressly herein shall be of legal force and effect. No
license or other right shall be created hereunder by implication, estoppel or otherwise.
3.
REPORTING; RECALLS
3.1 Each party shall immediately notify the other in writing if any Product is, or is
threatened to be, the subject of a recall, market withdrawal or correction.
3.2 Prior to NuVasive selling a Product, the parties shall negotiate and enter into a
pharmacovigilance agreement that is intended to enable the parties to satisfy their respective
adverse event reporting requirements throughout the world.
4.
TERMINATION
4.1 Unless terminated earlier pursuant to Section 4.2 below, this Agreement shall expire on
the expiration of the last to expire patent under the Patent Rights.
2
4.2 This Agreement shall automatically terminate upon expiration or termination of the
Distribution Agreement. RevisiOs may also terminate this Agreement by written notice to NuVasive
if NuVasive has not cured a material breach of this Agreement within sixty (60) days after written
notice thereof from RevisiOs.
4.3 The provisions of Sections 2.2, 5 and 6 shall survive the expiration or any termination of
this Agreement.
5.
NO WARRANTIES
The Patent Rights and technology described therein are provided AS IS and neither party makes any
warranties, written, oral, express or implied, with respect to the Patent Rights or Products,
including without limitation third party infringement or the commercialization success of the
Products. ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE
DISCLAIMED. NuVasive accepts the license granted hereunder subject to the terms hereof. UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR LOSS OF USE OR PROFITS OR OTHER COLLATERAL, SPECIAL,
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH
CLAIMS ARE FOUNDED IN TORT OR CONTRACT.
6.
GENERAL PROVISIONS
6.1
Notices
. All notices, consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier service (costs prepaid);
or (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment
confirmed with a copy delivered as provided in clause (a), in each case to the following addresses,
facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail
address or person as a party may designate by notice to the other parties):
If to RevisiOs, addressed to:
Progentix Orthobiology B.V.
Professor Bronkhorstlaan 10, building 48
3723 MB Bilthoven
The Netherlands
Attn: Joost de Bruijn
Fax: +31 (0)30 229 7299
With a copy to:
Goodwin Procter LLP
Exchange Place
53 State Street
3
Boston, MA 02109
Attn: Michael H. Bison, Esq.
Fax: (617) 570-1231
and
CORP. advocaten
De Lairessestraat 137-143
1075 HJ Amsterdam
Attention: Edwin Renes
Fax: +31 (0)20 578 83 05
If to NuVasive, addressed to:
NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attn: General Counsel
Fax: (858) 909-2479
With a copy to:
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Michael Kagnoff
Fax: (858) 456-3075
6.2
Dispute Resolution
. Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be brought against any of the parties in the
courts located in the city of New York, New York and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the world.
6.3
Further Assurances
. The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other documents, and (c) to do
such other acts and things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this Agreement.
6.4
Waiver
. The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right, power, or privilege
or the exercise of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in
4
this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is given; and (c) no notice
to or demand on one party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
6.5
Entire Agreement and Modification
. This Agreement supersedes all prior agreements between
the parties with respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended except by a written
agreement executed by each of the parties hereto.
6.6
Assignments, Successors, and No Third-Party Rights
. NuVasive may not assign any of its
rights under this Agreement (whether by operation of law or otherwise) without the prior consent of
RevisiOs in each case; provided, however, that NuVasive may, without such consent, assign this
Agreement and its rights and obligations hereunder in connection with the transfer or sale of all
or substantially all of its business or assets related to this Agreement, or in the event of its
merger, consolidation, change in control or other similar transaction. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit
of the successors and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any third party any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement. For the avoidance of
doubt, this Agreement shall be freely assignable by RevisiOs in connection with the transfer or
sale of all or substantially all of its business or assets related to this Agreement, or in the
event of its merger, consolidation, change in control or other similar transaction. This Agreement
and all of its provisions and conditions are for the sole and exclusive benefit of the parties to
this Agreement and their successors and assigns.
6.7
Severability
. If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or unenforceable.
6.8
Section Headings, Construction
. The headings of Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All references to
Section or Sections refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word including does not limit the preceding
words or terms.
6.9
Governing Law
. This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
6.10
Counterparts
. This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement.
5
IN WITNESS WHEREOF
, the parties have executed and delivered this Agreement effective as of the
Effective Date.
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REVISIOS B.V.
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NUVASIVE, INC.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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6
EXHIBIT
A
Patent Rights
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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7
EXHIBIT I
DATED
JANUARY 13, 2009
(1) PROGENTIX ORTHOBIOLOGY B.V.
as Pledgor
- and -
(2) NUVASIVE, INC.
as Pledgee
PLEDGE AGREEMENT OF
INTELLECTUAL PROPERTY RIGHTS
DLA Piper Nederland N.V.
Finance & Projects
Amsterdam
PLEDGE AGREEMENT OF INTELLECTUAL PROPERTY RIGHTS
THIS DEED OF PLEDGE
has been entered into on January 13, 2009,
BETWEEN
(1)
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PROGENTIX ORTHOBIOLOGY B.V.
a private company with limited liability (
besloten
vennootschap met beperkte aansprakelijkheid
) organised and existing under the laws of the
Netherlands, registered with the chamber of commerce under file number 30234249 and having its
registered office at Professor Bronkhorstlaan 10 D, (3723 MB) Bilthoven, the Netherlands (the
Pledgor
); and
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(2)
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NUVASIVE, INC.
, a company incorporated under the laws of Delaware, having its registered
office at 7475 Lusk Boulevard, San Diego CA 92121, United States (
Pledgee
).
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The Pledgor and the Pledgee shall hereinafter each individually be referred to as a
Party
,
and jointly as
Parties
.
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RECITALS
(A)
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The Lender has made available to the Borrower the Loan under the Loan Agreement.
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(B)
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Pursuant to Clause 6 of the Loan Agreement, the Pledgor (as Borrower) has agreed to grant to
the Pledgee (as Lender), by means of a first ranking right of pledge, encumbrance, collateral
or any other security right over all of its Intellectual Property Rights on the terms and
conditions set out in this Deed of Pledge.
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(C)
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Parties accordingly agree as further set forth herein.
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IT IS HEREBY AGREED AS FOLLOWS
1. DEFINITIONS AND INTERPRETATION
1.1
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Words and expressions defined in the Loan Agreement shall have the same meaning when used
herein (including the recitals hereto) unless otherwise defined in this Deed of Pledge.
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1.2
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In this Deed of Pledge, unless the context requires otherwise, the following words and
expressions shall have the following meanings:
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Business Day
means a day other than a Saturday or Sunday on which banks are open for
business in Amsterdam, the Netherlands;
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Deed of Pledge
means this pledge agreement of Intellectual Property Rights by and between
the Pledgor and the Pledgee, including the recitals and Schedules thereto, or any
Supplemental Deed of IP Pledge, as amended from time to time;
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Enforcement Event
means the occurrence of an Event of Default that is continuing,
constituting a default (
verzuim
) within the meaning of Article 6:81 and Article 3:248 of the
Dutch Civil Code with respect to the proper performance of the Secured Obligations;
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Intellectual Property Rights
means all of the present and future intellectual property
rights of which the Pledgor is or may be the owner at any time, including (but not limited
to) (a) the Patents on the works set out in Schedule 1 hereto and (b) the Other IP Rights as
set out in Schedule 2 hereto;
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IP Registers
means any appropriate register or authority in any jurisdiction in which any
of the Intellectual Property Rights are or can be registered;
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Loan Agreement
means the USD 5,000,000 loan agreement (including an obligation on the part
of the Pledgee to pledge the Intellectual Property Rights), which is dated January 8, 2009,
and signed by and between (1) the Pledgee (as Lender) and (2) the Pledgor (as Borrower), as
amended from time to time;
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Other IP Rights
means all other intellectual property rights set out in Schedule 2 hereto,
not being Patents, which shall include, but not be limited to, trade marks, trade names, and
any and all rights of a similar nature, including trade secrets and know-how, and including
any and all rights in connection with applications for, or rights to apply for or acquire
any and all of such rights described; where Other IP Rights in a certain work are owned
jointly with one or more third parties, or where a licence has been granted to a group of
two or more licensees, the word Other IP Rights shall refer to the Pledgors share in such
Other IP Right or in such licence and which also includes any and all receivables which the
Pledgor has or may have at any time under any license to use, exploit or enjoy Intellectual
Property Rights;
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Patent
means (a) all present and future patent rights over new discoveries and inventions
in the field of technology or other industries which are related to either the manufacturing
process or to the final product, in works or objects wholly or partly owned by the Pledgor
as set out in Schedule 1 hereto, (b) all present and future licences on any of the
aforementioned rights granted by third party patent owners to the Pledgor and (c) all other
rights to exploit works protected by any of the aforementioned rights; where the
aforementioned rights in a certain work are owned jointly by the Pledgor in combination with
one or more third parties, or where a licence has been granted to a group of two or more
licensees, the word
Patent
shall refer to the Pledgors share in such right or in such
licence;
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Right of Pledge
or
Pledge
means a first ranking right of pledge (
pandrecht eerste in
rang
) over the Intellectual Property Rights created hereunder or under any Supplemental Deed
of IP Pledge;
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Security Period
means the period beginning on the date of the Deed of Pledge and ending on
the date on which either all the Secured Obligations have been unconditionally and
irrevocably paid and discharged in full, or the rights and obligations pursuant to this Deed
of Pledge have otherwise been terminated to the satisfaction of the Pledgee, whichever event
being the sooner. If the Pledgee considers that an amount paid to it is capable of being
avoided or otherwise set aside in the event of the bankruptcy of the payer or otherwise,
then the amount will not be considered to have been irrevocably paid for the purposes of
this Deed of Pledge; and
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Secured Obligations
means all present and future obligations and liabilities (whether
actual or contingent, and whether owed jointly, severally or alone or in any other capacity
whatsoever) for the payment of an amount of money by the Pledgor towards the Pledgee under
or pursuant to the Loan Agreement (as amended or restated from time to time) together with
all costs, charges and expenses incurred by the Pledgee in connection with the protection,
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preservation or enforcement of its rights under the Loan Agreement or any other document
evidencing or securing any such liabilities;
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Supplemental Deed of IP Pledge
means the supplemental deed of pledge to be drawn up
substantially in accordance with the form attached as Schedule 3 (
Form of Supplemental Deed
of IP Pledge
).
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1.3
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Descriptive headings used in this Deed of Pledge are for convenience only and shall not
affect the meaning or construction of any provision of this Deed of Pledge.
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2.
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AGREEMENT TO PLEDGE
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2.1
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The Pledgor and the Pledgee hereby agree that the Pledgor shall grant to the Pledgee a first
ranking right of pledge, encumbrance, collateral or any other security right over the
Intellectual Property Rights purported to be granted under or pursuant to this Deed of Pledge.
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2.2
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Parties acknowledge and agree that if, and to the extent that, the Intellectual Property
Rights are subject to any right of pledge or other encumbrance that takes priority over the
Right of Pledge, the Right of Pledge will have been created with the highest possible ranking
(
rangorde
) available at such time of creation.
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3.
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CREATION OF THE PLEDGE
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3.1
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The Pledgor hereby grants and creates, whether or not in advance, for the benefit of the
Pledgee and to the extent permissible by applicable law, a Right of Pledge in favour of the
Pledgee over its Intellectual Property Rights in the following manner: in respect of patents,
in accordance with Article 3:236 paragraph 2 jo. Article 3:95 of the Dutch Civil Code jo.
Article 67 of the Patents Act 1995 (
Rijksoctrooiwet 1995
); in respect of trademarks, in
accordance with Article 3:236 paragraph 2 of the Dutch Civil Code jo. Article 11A of the
Uniform Benelux Act on Marks (
Eenvormige Beneluxwet op de merken
); in respect of trade names,
in accordance with Article 3:236 paragraph 2 jo. Article 3:95 of the Dutch Civil Code; and/or
in respect of receivables in accordance with 3:239 of the Dutch Civil Code, for the entirety
of the Security Period, as security for the full and proper fulfilment of the Secured
Obligations. The Pledgee hereby accepts the creation of the Right of Pledge on the terms and
conditions set forth herein.
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3.2
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The Pledge is a separate Right of Pledge on each Intellectual Property Right and in relation
to licenses and royalty receivables, is an undisclosed right of pledge and, following
notification, a disclosed right of pledge.
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3.3
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The Pledgee, or its representative, is, notwithstanding the Pledgors obligations pursuant to
this Clause, entitled to register the Deed of Pledge. The Pledgor must at its own cost and
expense ensure that any Deed of Pledge is submitted for registration with the competent IP
Registers (for those Intellectual Property Rights which can be registered) and the competent
Dutch tax authorities (
Inspectie der Registratie en Successie
) for evidence purposes only.
Registration with the Dutch tax authorities should not be construed to mean that the Deed of
Pledge to be registered concerns a disclosed right of pledge within the meaning of Article
3:236 of the Dutch Civil Code.
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3.4
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The Right of Pledge will include all rights of action, dependent rights (
afhankelijke
rechten
) and ancillary rights (
nevenrechten
), privileges and other rights inherent and/or
attached to the Intellectual Property Rights.
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3.5
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The Pledgor undertakes, in respect of Intellectual Property Rights which were not effectively
pledged under the Deed of Pledge, or in respect of newly acquired Intellectual Property
Rights, to prepare on a monthly basis a Supplemental Deed of IP Pledge, no later than ten
Business Days after the preceding month, to execute the same, and forthwith upon execution of
any Supplemental Deed of IP Pledge to register such Supplemental Deed of IP Pledge and any
ancillary or supporting document with the competent IP Registers (for those Intellectual
Property Rights which can be registered) and with the Dutch tax authorities (
Inspectie der
Registratie en Successie
) (for those Intellectual Property Rights which cannot be registered).
Notwithstanding the Pledgors obligations pursuant to this Clause, the Pledgor hereby
unconditionally and irrevocably authorises the Pledgee to sign the Supplemental Deed of IP
Pledge on its behalf and to subsequently register it (as envisaged in Clause 3.3).
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4.
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GENERAL
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4.1
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The Pledgor undertakes, immediately upon the execution thereof, or otherwise immediately upon
the Pledgees written request, to register any Deed of Pledge or Supplemental Deed of IP
Pledge with the IP Registers for the Netherlands, the Benelux (as a whole), the European
Community (as a whole), and in any other Registration Countries the Pledgee deems to be
relevant. The Pledgee is entitled to present this Deed of Pledge and any Supplemental Deed of
IP Pledge for registration with the IP Registers in any of the Registration Countries.
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4.2
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The Pledgor undertakes to provide the Pledgee forthwith with (i) a copy of an executed Deed
of Pledge and any Supplemental Deed of IP Pledge and (ii) any evidence of registration of such
Deed of Pledge and Supplemental Deed of IP Pledge in any of the Registration Countries.
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5.
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COMPLETION OF THE PLEDGE
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The Pledgor undertakes, promptly following a request, to take any action and sign any
document that the Pledgee reasonably requires in order to give full effect to this Deed of
Pledge and the enforcement thereof.
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6.
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REPRESENTATIONS AND WARRANTIES
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6.1
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In addition to the Pledgors representations and warranties made under or pursuant to the
Loan Agreement, the Pledgor hereby represents and warrants that:
|
|
(a)
|
|
the right of pledge created hereby is a first ranking right of pledge, and that
the Intellectual Property Rights (i) have not been pledged, encumbered with limited
rights (
beperkte rechten
) or otherwise, (ii) are not subject to any attachments
(
beslag
), seizures or arrests, or any comparable levies by which the Intellectual
Property Rights would be placed out of the free disposition by the Pledgor, (iii) have
not been transferred in advance (
bij voorbaat
) to any third party, (iv) are capable of
being assigned and encumbered with limited rights (
beperkte rechten
), and (v) are not
subject to any option or similar right, except to the extent permitted under the Loan
Agreement. Licence(s) or sub-licence(s) granted to one or more third parties in the
normal course of business shall not be regarded as such a restriction;
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|
(b)
|
|
it is entitled, and has full power, to enter into this Deed of Pledge and to
create the Right of Pledge;
|
|
|
(c)
|
|
it is not aware of any infringement (
inbreuk
) by any third party of any of the
Intellectual Property Rights;
|
|
|
(d)
|
|
it holds full and exclusive title (
titel
) to the Intellectual Property Rights,
free and clear of any and all liens or claims of others, and that furthermore it is
entitled and has the authority and full power (
beschikkingsbevoegdheid
) to create the
Right of Pledge and to enter into this Deed of Pledge;
|
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|
(e)
|
|
it is a private company with limited liability (
besloten vennootschap met
beperkte aansprakelijkheid
) duly incorporated and validly existing under the law of the
Netherlands; and
|
|
|
(f)
|
|
Schedule 1 contains a complete list of Patents capable of being pledged at the
date of signing this Deed of Pledge, and that Schedule 2 contains a complete list of
Other IP Rights capable of being pledged at the date of this Deed of Pledge.
|
6.2
|
|
The representations and warranties set out in Clause 6.1 are deemed to be made by the Pledgor
on each date of the registration of a Deed of Pledge or a Supplemental Deed of IP Pledge,
whether with the Dutch tax authorities (
Inspectie der Registratie en Successie
) or with any
other competent IP Registers.
|
|
7.
|
|
COVENANTS
|
|
7.1
|
|
The Pledgor covenants that:
|
|
(a)
|
|
it will not without the prior written consent of the Pledgee waive any
dependent rights (
afhankelijke rechten
) or ancillary rights (
nevenrechten
) attached to
the Intellectual Property Rights;
|
|
|
(b)
|
|
it will not without the Pledgees prior written consent sell, assign,
transfer, pledge or otherwise encumber, release (
kwijtschelden
) or waive (
afstand doen
van
) any rights over its Intellectual Property Rights to any third party, whether or
not as a matter of court composition or out-of-court composition (
gerechtelijk of
buitengerechtelijk akkoord
);
|
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(c)
|
|
as soon as it becomes aware that any of the representations and warranties as
set forth in Clause 6 are or prove to have been incorrect or incomplete or misleading,
it will inform the Pledgee promptly;
|
|
|
(d)
|
|
it will supply to the Pledgee all information in respect of the debtors of
the receivables (referred to in the definition of other Other IP Rights) that is
necessary to enforce the Right of Pledge over such receivables and to enable
notification against such debtors;
|
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|
(e)
|
|
it will use its best endeavours to ensure the confidential nature of trade
secrets and know-how; and
|
|
(f)
|
|
in general, it will do all that is necessary to maintain the Intellectual
Property Rights and the value embedded in them.
|
7.2
|
|
In the case of an Event of Default, and notwithstanding any of the obligations of the Pledgor
under Clause 8.1, the Pledgee can take, and is hereby authorised to take, all necessary
judicial and extra-judicial measures. If the Pledgee takes measures as mentioned in the
previous sentence, the Pledgor will offer any and all such support required, including but not
limited to supplying all necessary documents and information regarding the Intellectual
Property Rights.
|
|
8.
|
|
ENFORCEMENT
|
|
8.1
|
|
Upon the occurrence of an Enforcement Event:
|
|
(a)
|
|
the Pledgee may enforce its Right of Pledge and have recourse to the proceeds
obtained from such enforcement, and furthermore the Pledgee may take, and is hereby
authorised to take, all necessary judicial and extra-judicial measures in relation to
the enforcement of its Right of Pledge, including, but not limited to, a sale as
envisaged in Clause 9.4. If the Pledgee takes such measures, the Pledgor will offer any
and all required support, including but not limited to providing all necessary
documents and information with regard to the relevant Intellectual Property Rights.
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|
(b)
|
|
at its own costs, the Pledgor will promptly notify in writing of the
existence of this Deed of Pledge to:
|
|
(i)
|
|
a third party or the court process server (
deurwaarder
) acting on
behalf of such third party making an attachment (
beslag
) on its Intellectual
Property Rights; or
|
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|
(ii)
|
|
its bankruptcy trustee (
curator
), administrator (
bewindvoerder
)
or similar officer in any jurisdiction; or
|
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|
(iii)
|
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any other relevant person, as the case may be.
|
8.2
|
|
Any failure by the Pledgor to satisfy the Secured Obligations when due shall constitute a
default (
verzuim
) in the performance of the Secured Obligations, without any reminder letter
(
sommatie
) or notice of default (
ingebrekestelling
) being required.
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|
8.3
|
|
The Pledgor is not entitled to request the President of the competent court (
rechtbank
) to
order that the Intellectual Property Rights pledged be sold in a manner deviating from the
provisions of Article 3:250 of the Dutch Civil Code.
|
|
8.4
|
|
The Pledgee shall not be obliged to give notice to the Pledgor of any intention to sell the
pledged Intellectual Property Rights (as provided in Article 3:249 of the Dutch Civil Code)
or, if applicable, of the fact that it has sold the same Intellectual Property Rights (as
provided in Article 3:252 of the Dutch Civil Code).
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8.5
|
|
All monies received or realised by the Pledgee in connection with the Intellectual Property
Rights shall be applied by the Pledgee in accordance with the relevant provisions of this
Agreement and the Loan Agreement, subject to the mandatory provisions of Netherlands law on
enforcement (
uitwinning
).
|
8.6
|
|
The Pledgor hereby irrevocably and unconditionally waives (
doet afstand van
) any rights
granted to the Pledgor under or pursuant to Netherlands law from time to time which aim at
protecting grantors of security for the debts of third parties, including any right it may
have pursuant to Articles 3:233 and 6:139 of the Dutch Civil Code.
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8.7
|
|
In the event that any action is taken under Clause 8.1, the documented costs for the measures
taken by the Pledgee, including but not limited to the costs for the legal counsel and the
legal proceedings (which, for the avoidance of doubt, are part of the Secured Obligations),
will be borne by the Pledgor, and the Pledgor will indemnify (
vrijwaren
) the Pledgee for any
such costs.
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9
|
|
APPLICATION OF PROCEEDS
The Parties hereto agree that upon the enforcement of the Right of
Pledge, all monies collected by the Pledgee will be applied towards
the fulfilment of the Secured Obligations in accordance with, and
pursuant to, the relevant provisions of this Agreement and the Loan
Agreement, subject to the applicable mandatory provisions of the law
of the Netherlands.
|
|
10
|
|
WAIVERS
No delay or omission by the Pledgee in exercising any right, power or
privilege provided, hereunder or by law, shall operate to impair such
right, power or privilege or be construed as a waiver thereof and any
single or partial exercise of such right, power or privilege shall not
preclude any future exercise thereof or the exercise of any other
right, power or privilege.
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11
|
|
ASSIGNMENT AND TRANSFER
|
|
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|
To the fullest extent permitted under the law of the Netherlands, subject always to the
relevant provisions of any of the Loan Agreement, the Pledgee shall be entitled to assign
and/or transfer together with the Secured Obligations all or part of its rights and
obligations under this Deed of Pledge to any assignee and/or transferee, and the Pledgor
hereby in advance gives its irrevocable consent to (
geeft onherroepelijk toestemming bij
voorbaat
), or, if applicable, irrevocably cooperates with, within the meaning of Article
6:159 of the Dutch Civil Code, an assumption of contract (
contractsoverneming
). The Pledgee
shall be entitled to impart any information concerning the Pledgor to any successor or
proposed successor as far as necessary for such assignment and/or transfer. The Pledgor may
not assign any of its rights or obligations under or in connection with this Deed of Pledge.
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12
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|
DISSOLUTION; ANNULMENT; SUSPENSION; SET-OFF
|
|
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|
The Pledgor hereby waives to the fullest extent permitted by law its right to dissolve
(
ontbinden
) or annul (
vernietigen
) the legal acts (
rechtshandelingen
) represented by this
Deed of Pledge, and such waiver is hereby accepted by the Pledgee. The Pledgor may not
suspend (
opschorten
) compliance with its obligations under or in connection with this Deed
of Pledge on whatever grounds. All payments to be made by the Pledgor under this Agreement
shall be made without set-off.
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13
|
|
NOTIFICATION
|
|
13.
|
|
At the Pledgees request, the Pledgor will offer any and all required information, including
a list containing details of all Intellectual Property Rights, which the Pledgee may need, in
order
|
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|
to determine and/or exercise its rights arising out of this Deed of Pledge and it will allow
the Pledgee to gather all information from and examine its books so that the Pledgee may
determine and/or exercise its rights arising out of this Deed of Pledge. Notwithstanding
this obligation, the Pledgor will promptly notify the Pledgee during the year of any
material changes to the Intellectual Property Rights.
|
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13.2
|
|
The Pledgor will notify the Pledgee immediately of all circumstances likely to materially
impair the value of the Intellectual Property Rights. Such circumstances include, but are not
limited to, an application for the filing of or declaration of the Pledgors bankruptcy
(
faillissement
) or moratorium of payments (
surséance van betaling
), the dissolution
(
ontbinding
) of the Pledgor, the cessation of the Pledgors business, any levy or attachment
to the Intellectual Property Rights, or any material litigation pending in relation to the
Intellectual Property Rights.
|
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13.3
|
|
If the bankruptcy of the Pledgor is filed for, or if an attachment is made of Intellectual
Property Rights, the Pledgor will immediately notify the levying bailiffs (
beslagleggende
deurwaarders
), the trustees in bankruptcy (
curatoren
) or the administrator (
bewindvoerder
) of
this Deed of Pledge.
|
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13.4
|
|
In case of a levy or attachment of Intellectual Property Rights that has a material adverse
effect, the Pledgor is obliged to immediately notify the Pledgee once it becomes aware of such
levy or attachment, and to take all necessary measures to ensure that the Pledgee is
authorised to take all appropriate action as referred to in Clause 8 of this Deed of Pledge.
The Pledgor will pay or reimburse all documented expenses related to these measures.
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14.
|
|
TERMINATION
|
|
14.1
|
|
This Deed of Pledge and the Pledgees security interests constituted hereunder or pursuant
hereto shall terminate by operation of law when all the Secured Obligations have been
unconditionally and irrevocably satisfied in full or the Loan Agreement has terminated,
whichever event being the sooner. At the request and cost of the Pledgor, the Pledgee shall
deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction of
the Secured Obligations and/or the termination of this Deed of Pledge and do all other acts
necessary or required by the Pledgee to give effect to the provisions of this Clause.
|
|
14.2
|
|
Without prejudice to the provisions of Article 3:81 of the Dutch Civil Code, the Right of
Pledge may be terminated:
|
|
(a)
|
|
through cancellation (
opzegging
) by means of a written declaration from the
Pledgee to the Pledgor; or
|
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|
(b)
|
|
through renunciation (
afstand
) on the grounds of Article 3:258 paragraph 2 of
the Dutch Civil Code.
|
15.
|
|
POWER OF ATTORNEY
|
|
|
|
The Pledgor hereby unconditionally and irrevocably authorises the Pledgee, with the power
of substitution at any time and from time to time, following the occurrence of an
Enforcement Event, to sign, seal, deliver, execute, register and complete all proxies,
mandates, assignments, deeds and documents and to do all acts which are necessary for the
enforcement of the Pledge and to give proper effect to the intent and purposes of this Deed
of Pledge.
|
16.
|
|
NOTICES
|
|
|
|
Any notice or other communication to be given hereunder shall be made in accordance with
Clause 17 of the Loan Agreement.
|
|
17.
|
|
BINDING NATURE
|
|
17.1
|
|
This Deed of Pledge and all of the provisions of this agreement shall be binding upon and be
to the benefit of the Pledgor and the Pledgee and their respective successors and permitted
assigns.
|
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17.2
|
|
This Deed of Pledge is only legally binding on the Pledgor insofar as the same will not be in
violation of the prohibition on financial assistance as contained in Article 2:207 (c) of the
Dutch Civil Code. One of the consequences of this provision is that no obligations shall be
secured by the Right of Pledge to the extent that, if included, the security interest granted
pursuant to this Deed of Pledge or any part thereof would constitute a violation of Article
2:207 (c) of the Dutch Civil Code.
|
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18.
|
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ENTIRE AGREEMENT
|
|
18.1
|
|
This Deed of Pledge, and any agreements resulting from this Deed of Pledge, represents the
entire understanding and agreement between the Parties in connection with the subject matter
hereof and supersedes all prior agreements in respect of the subject matter hereof.
|
|
18.2
|
|
If there is any conflict or inconsistency between any provisions of this Deed of Pledge and
any provisions of the Loan Agreement, the provisions of the Loan Agreement shall prevail.
|
|
19.
|
|
AMENDMENT
|
|
|
|
No amendment, modification or waiver of any provision of this Deed of Pledge, and no
consent with respect to any departure by the Pledgor therefrom, shall be effective unless
the same shall be in writing and signed by the Pledgor and the Pledgee.
|
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20.
|
|
SEVERABILITY
|
|
|
|
If a provision of this Deed of Pledge is invalid or unenforceable in any jurisdiction that
shall not affect the validity or enforceability of any other provision of this Deed of
Pledge and the validity or enforceability in other jurisdictions of that or of any other
provision of this Deed of Pledge.
|
|
21.
|
|
GOVERNING LAW AND JURISDICTION
|
|
21.1
|
|
This Deed of Pledge will be governed by and construed in accordance with the laws of the
Netherlands.
|
|
21.2
|
|
The competent courts of Amsterdam, the Netherlands shall have exclusive jurisdiction with
regard to disputes in connection with this Deed of Pledge.
|
THIS DEED OF PLEDGE
has been entered into on the date stated above.
PROGENTIX ORTHOBIOLOGY B.V.,
as Pledgor
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Name:
Title:
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NUVASIVE, INC.
, as Pledgee
Name:
Title:
|
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SCHEDULE 1
Patents
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
SCHEDULE 2
Trademarks
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
SCHEDULE 3
Form of Supplemental Deed of IP Pledge
|
|
|
From:
|
|
Progentix Orthobiology B.V.
|
To:
|
|
NuVasive, Inc.
Attn: Jason Hannon
|
Dear Sir
RE:
PLEDGE OF INTELLECTUAL PROPERTY RIGHTS
We refer to the deed of pledge of Intellectual Property Rights, dated January 8, 2009, by and
between Progentix Orthobiology B.V. (as Pledgor) and Nuvasive, Inc. (as Pledgee)(the
Deed of
Pledge
). Capitalised terms used in this Supplemental Deed of IP Pledge shall have the same meaning
given to them in the Deed of Pledge.
Under the terms of the Deed of Pledge, we undertook to pledge to you at your first request the
Intellectual Property Rights which were not effectively pledged under the Deed of Pledge (or
subsequent pledges).
In fulfilment of our above-mentioned obligations we herewith pledge to you all our Intellectual
Property Rights that are capable of being pledged on the date when this Supplemental Deed of IP
Pledge is registered.
In order to effectuate the creation of the right of pledge over the Intellectual Property Rights
described in the previous paragraph, we will promptly register this deed and its attachment in
accordance with the provisions of Clause 3 of the Deed of Pledge.
Yours sincerely,
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PROGENTIX ORTHOBIOLOGY B.V.
|
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By:
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|
Name:
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|
EXHIBIT J
DEED OF ADHERENCE
and
ADDENDUM
to the Subscription and Shareholders Agreement
of 13 January 2008
relating to
Progentix Orthobiology B.V.
by and among
Mr. J.D. de Bruijn
Mr. H. Yuan
J.D. de Bruijn Holding B.V.
BioGeneration Ventures B.V.
Incubation B.V.
NuVasive, Inc
and
Progentix Orthobiology B.V.
Dated 13 January 2008
DEED OF ADHERENCE
and
ADDENDUM
to the Subscription and Shareholders Agreement of 13 January 2008
THE UNDERSIGNED
:
1.
|
|
Progentix Orthobiology B.V.
(the
Company
), a private company with limited
liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws
of the Netherlands, with its statutory seat in Bilthoven and its business address at Professor
Bronkhorstlaan 10-d, 3723 MB Bilthoven, the Netherlands, represented by its statutory director
J.D. de Bruijn Holding B.V. in its turn represented by Mr. J.D. de Bruijn;
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|
2.
|
|
Mr. Huipin Yuan
, (
Mr. Yuan
) currently residing at Laan van Vollenhove 168,
3706 AA, born in Nijiang (China) on the 19
th
of April 1966;
|
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3.
|
|
Mr. Joost Dick de Bruijn
, (
Mr. de Bruijn
)currently residing at Pasteurstraat
16, 3817 JL Amersfoort, born in Pijnacker on the 13
th
of February 1966;
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4.
|
|
J.D. de Bruijn Holding B.V.
, (
De Bruijn Holding
) a private company with
limited liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under
the laws of the Netherlands, with its statutory seat in Amersfoort and its business address at
Pasteurstraat 16, 3817 JL Amersfoort, the Netherlands, represented by its statutory director
Mr. J.D. de Bruijn;
|
|
5.
|
|
BioGeneration Ventures B.V.
, (
BioGeneration
) a private company with limited
liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws
of the Netherlands, with its statutory seat in Amsterdam and its business address at Gooimeer
2 35, 1411 DC Naarden, represented by its statutory director Mr. E.C.M. van Wezel;
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6.
|
|
Incubation B.V
. (
Incubation
) a private company with limited liability
(besloten vennootschap met beperkte
aansprakelijkheid
)
incorporated under the laws of the
Netherlands, with its statutory seat in Bilthoven and its business address at Prof.
Bronkhorstlaan 10, 3723 MB in Bilthoven represented by its statutory directors Dr. C.A. van
Blitterswijk and Mr. F.J.W.E.B. van der Velden;
|
Page 2 of 9
7.
|
|
NuVasive, Inc.
(
NuVasive
), a company incorporated under the laws of Delaware
(Unites States of America), with its business address at 7475 Lusk Boulevard, San Diego CA
92121, represented by [
].
|
Each party hereto individually referred to as
Party
and jointly as
Parties
.
WHEREAS
:
A.
|
|
The Parties hereto, with the exception of Incubation and NuVasive, have entered into a
Subscription and Shareholders Agreement dated 13 January 2008 (
Shareholders Agreement
).
|
|
B.
|
|
Incubation acceded to the Shareholders Agreement by signing a Deed of Adherence dated
22 September 2008. The shares previously held by Mr. Van Blitterswijk and Mr. Van der Velden
were subsequently transferred to Incubation by notarial deed of transfer executed before a
substitute of mr. N. van Buitenen, civil-law notary in Utrecht on 29 September 2008.
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|
C.
|
|
NuVasive is a strategic party that will purchase or has purchased from the existing
shareholders of the Company (the
Existing Shareholders
) 40% (forty percent) of the issued
and outstanding share capital of the Company pursuant to a Preferred Stock Purchase Agreement
dated [
] January 2009 (the
Preferred Stock Purchase Agreement
) and that will optionally
acquire the remaining issued and outstanding share capital of the Company held by the Existing
Shareholders upon the exercise of an option pursuant to an Option Purchase Agreement dated [
]
January 2009 (the
Option Purchase Agreement
).
|
|
D.
|
|
In connection with the Preferred Stock Purchase Agreement, Incubation, De Bruijn
Holding, Mr. Yuan and BioGeneration shall transfer a pro rata part of their shares to NuVasive
through a notarial deed of transfer to be executed before mr. A.J. Wiggers, civil-law notary
in Amsterdam (or his substitute) with DLA Piper Nederland N.V. (
Notary
), this deed
hereinafter referred to as
Deed of Transfer
and the date of execution the
Transfer Date
.
|
|
E.
|
|
The Parties hereto wish to have their mutual relations and respective rights
|
Page 3 of 9
|
|
and obligations in respect of the Company to be governed by the provisions of the
Shareholders Agreement and this Deed of Adherence and Addendum (
Deed of Adherence and
Addendum
).
|
HAVE AGREED AS FOLLOWS
:
Article 1. Accession
1.1
|
|
Solely to the extent provided herein, NuVasive hereby accedes to Articles 8 through 10,
Article 16 and Articles 24 through 26 of the Shareholders Agreement and consequently agrees to
be bound to the terms and conditions of the Shareholders Agreement, effective as per the
Transfer Date.
|
|
1.2
|
|
To the extent this Deed of Adherence and Addendum does not explicitly stipulates otherwise,
NuVasive shall qualify as a
Shareholder
as defined in the Shareholders Agreement and
therefore NuVasive shall have the same rights and the same obligations as apply to any
Shareholder. As set forth above, NuVasive shall not be considered a
Founder
or
Investor
within the meaning of the Shareholders Agreement.
|
|
1.3
|
|
In deviation of the definitions as defined in the Shareholders Agreement, Parties hereto
agree that:
|
|
-
|
|
The definition of
Preferred Shares
as referred to in article 8.3 through 8.6
(
Conversion
), shall mean both preferred shares A as well as preferred shares B.
|
|
|
-
|
|
The definition of
Preferred Shares
as referred to in article
Article
9
(
Anti-Dilution Adjustments
), shall mean both preferred shares A as well as
preferred shares B. To the extent
Article 9
stipulates an issuance price per
preferred share, this price shall with respect to any share held by NuVasive be
the acquisition price per share on the Transfer Date pursuant to the Preferred Stock
Purchase Agreement.
|
Article 2. Deed of Transfer
The execution of the Deed of Transfer shall take place in conjunction with the signing of the
Preferred Stock Purchase Agreement and the Option Purchase Agreement and this Deed of Adherence and
Addendum shall be executed just prior to the Notary ex-
Page 4 of 9
ecuting the Deed of Transfer.
Article 3. Deed of Amendment
3.1
|
|
As soon as reasonably possible after the execution of the Deed of Transfer, a deed of
Amendment to the Articles of Association of the Company (
Deed of Amendment
) in the form
attached hereto as
Exhibit A
shall be executed whereby, amongst others, all shares
transferred to NuVasive pursuant to the Deed of Transfer shall be converted into Preferred
Shares B on a one-to-one basis. The Deed of Amendment shall be executed before the Notary.
|
|
3.2
|
|
During the period the shares in the Company that were acquired by NuVasive through the Deed
of Transfer are not yet converted into Preferred Shares B, these shares shall, notwithstanding
the fact the Deed of Amendment has not yet been executed, by all Parties be considered
Preferred Shares B on an as if converted basis to the fullest possible economical extent.
|
Article 4. Overview of shares
As per the Transfer Date and upon the execution of (i) the Deed of Transfer as well as the (ii) the
Deed of Amendment, the cap table of
Article 2.6
of the Shareholders Agreement (
Overview of
Capital Commitments
) shall read as follows:
|
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|
# Ordinary
|
|
|
# Preferred
|
|
|
# Preferred
|
|
|
approx Percent.
|
|
Party
|
|
Shares
|
|
|
Shares A
|
|
|
Shares B
|
|
|
Stake
|
|
Incubation
|
|
|
5,951
|
|
|
|
|
|
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|
|
|
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|
27.05
|
%
|
De Bruijn Holding
|
|
|
4,320
|
|
|
|
|
|
|
|
|
|
|
|
19.64
|
%
|
Mr. Yuan
|
|
|
529
|
|
|
|
|
|
|
|
|
|
|
|
2.41
|
%
|
BioGeneration
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
10.90
|
%
|
NuVasive
|
|
|
|
|
|
|
|
|
|
|
8,800
|
|
|
|
40.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,800
|
|
|
|
2,400
|
|
|
|
8,800
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article 5. Preferred Share Rights
NuVasive shall have the protective rights and veto rights described in this
Article 5
.
Page 5 of 9
5.1
|
|
Budget
.
|
|
|
|
Prior to the earlier of the expiration or termination of the Option
Period (as defined in the Option Purchase Agreement) NuVasive shall
have the right to approve the Companys operating budget (not to be
unreasonably withheld or delayed) for the year to come before the
budget is being formally presented for approval to the Investor and
the general meeting of shareholders of the Company in accordance with
the Shareholders Agreement. To the extent that NuVasive notifies the
management board of the Company that it does not approve the operating
budget as presented, then the management board of the Company shall
(i) refrain from any actions aimed at or relating to the
implementation of any and all of the items referred to in such budget,
and (ii) submit to NuVasive an amended budget for approval.
|
|
5.2
|
|
Right of First Refusal.
|
|
|
|
Parties hereto agree that
Article 10.1
and
Article 10.2
shall not be
in force and effect during the Option Period. Parties hereto agree
that from and after the earlier of the expiration or termination of
the Option Period, NuVasive shall not be entitled to a right of first
refusal pursuant to
Article 10.4
through
Article 10.7
of the
Shareholders Agreement, but shall be subject to such right of refusal
pursuant to
Article 10.4
of the Shareholders Agreement.
|
|
5.3
|
|
Drag Along Right; Tag Along.
|
|
|
|
Pursuant to
Article 10.8
of the Shareholders Agreement, BioGeneration,
being the Investor as defined in the Shareholders Agreement, has a
drag along right, entitling BioGeneration to demand from its
co-shareholders to mandatorily sell their shares to an Interested
Purchaser and create a Liquidity Event. Parties hereto agree that from
and after the earlier of the expiration or termination of the Option
Period, NuVasive shall be subject to such drag along provision as a
Shareholder. Parties hereto further agree that from and after the
earlier of the expiration or termination of the Option Period,
NuVasive shall be subject to the Tag Along provision included in
Article 10.9
through
Article 10.12
of the Shareholders Agreement as a
Shareholder.
|
Article 6. Liquidity Event
Effective as of the Transfer Date,
Article 8.1
and
Article 8.2
of the Shareholders
Agreement, entitling BioGeneration to a preferred return in case of a Liquidity Event
Page 6 of 9
(and a claw back in the event of certain Liquidity Events), is herewith cancelled. Hence,
BioGeneration shall no longer have a preferred return upon the occurrence of a future Liquidity
Event. For the avoidance of doubt, NuVasive and BioGeneration retain their separate classes of
preferred shares entitling (or requiring) the holders thereof to convert into Ordinary Shares
pursuant to
Article 8.3
through
Article 8.6
of the Shareholders Agreement. The
cancellation of
Article 8.1
and
Article 8.2
of the Shareholders Agreement will
survive the termination or expiration of the Option Period and will not be reversed unless
explicitly agreed upon between the Parties.
Article 7. Supervisory Board
7.1
|
|
Article 16.1
and
Article 16.2
of the Shareholders Agreement (appointment and
nomination of members to the Supervisory Board), shall, until the earlier of the expiration or
termination of the Option Period (as defined in the Option Purchase Agreement) read as
follows:
|
Article 16. Supervisory Board
|
16.1
|
|
The Parties shall procure that the supervisory board of the Company (the
Supervisory Board
) shall be composed of 3 (three) members, to be appointed by the
general meeting of shareholders:
|
|
|
-
|
|
1 (one) of whom shall be appointed upon a binding nomination of NuVasive; and,
|
|
|
-
|
|
1 (one) of whom shall be appointed upon a binding nomination of BioGeneration; and,
|
|
|
-
|
|
1 (one) of whom shall be appointed upon a binding nomination of the Founders.
|
|
|
16.2
|
|
At the Closing Date, the following persons shall be nominated by the following Parties:
|
|
|
|
|
*** as Supervisory Board member on behalf of ***;
|
|
|
|
|
*** as Supervisory Board member on behalf of ***;
|
|
|
|
|
*** as Supervisory Board member on behalf of ***.
|
7.2
|
|
Effective as of the earlier of the expiration or termination of the Option Period, as
defined in the Option Purchase Agreement,
Article 16
of the Shareholders Agreement as
it read on 11 January 2008, will apply.
|
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
Page 7 of 9
7.3
|
|
The Shareholders have the right, but not the obligation, to dismiss the Supervisory Board
member nominated by NuVasive as per the earlier date of the expiration or termination of the
Option Period, without notice, cause or obligations to pay severance. NuVasive will fully
cooperate with the adoption of the Shareholders resolution dismissing its Supervisory Board
member and the appointment of a substitute Supervisory Board member following the expiration
or termination of the Option Period.
|
Article 8. Financial Rights
The preferred shares B shall under no circumstances before and after the expiration or termination
of the Option Period, have any seniority over the preferred shares A, unless the Parties hereto
explicitly and in writing agree that the preferred shares A shall no longer share the economic
rights attached to preferred shares on a pari passu basis. No Party hereto shall use its power or
rights to amend the Articles (or any other document) in such a way that the financial rights of
either class of preferred shares change.
Article 9. Transfer of Shares
Each of the parties agrees that if any person wishes to be registered as a holder of any shares
(whether upon transfer or transmission or by issue) (
New
Shareholder
), the New Shareholder must,
unless he is already a party to this Agreement and the Option Purchase Agreement, become a party to
this Agreement and the Option Purchase Agreement.
Notwithstanding anything to the contrary, each of the Founders and BioGeneration covenants with and
undertakes to NuVasive and the Company that, prior to the expiration or termination of the Option
Period, each will not, except for transfers required by the Articles, without the prior written
consent of NuVasive, dispose or permit the disposal of any interest in or creation of any
Encumbrance over the shares registered in his or its name.
Article 10. Governing Law
10.1
|
|
This Deed of Adherence and Addendum shall be governed by and construed in accordance with the
laws of the Netherlands.
|
Page 8 of 9
10.2
|
|
The courts of Amsterdam shall have exclusive jurisdiction over a dispute arising out of or in
connection with this Deed of Adherence and Addendum.
|
The remainder of this page is intentionally left blank: see signature page.
Page 9 of 9
IN WITNESS WHEREOF this Deed Adherence and Addendum has been signed and executed by all Parties hereto.
|
|
|
|
|
|
|
/s/ J.D. de Bruijn
|
|
|
|
/s/ Mr. H. Yuan
|
|
|
|
|
|
|
|
|
|
Mr. J.D. de Bruijn
|
|
|
|
Mr. H. Yuan
|
|
|
|
|
|
|
|
|
|
/s/
J.D. de Bruijn
|
|
|
|
/s/ J.D. de Bruijn
|
|
|
|
|
|
|
|
|
|
J.D. de Bruijn Holding B.V.
|
|
|
|
Progentix Orthobiology B.V.
|
|
|
By: J.D. de Bruijn
|
|
|
|
By: J.D. de Bruin Holding B.V.
|
|
|
|
|
|
|
By: J.D. de Bruijn
|
|
|
|
|
|
|
|
|
|
Incubation B.V.
|
|
|
|
BioGeneration Ventures B.V.
|
|
|
|
|
|
|
|
|
|
/s/ Mr. F.J.W.E.B. van der Velden
|
|
|
|
/s/ Mr. E.C.M. van Wezel
|
|
|
|
|
|
|
|
|
|
By: Dagomar B.V.
|
|
|
|
By: BioGeneration Management B.V.
|
|
|
By:
Mr. F.J.W.E.B. van der Velden
|
|
|
|
By: Mr. E.C.M. van Wezel
|
|
|
|
|
|
|
|
|
|
/s/ Mr. C.A. van Blitterswijk
|
|
|
|
/s/ Mr. W. Hazenberg
|
|
|
|
|
|
|
|
|
|
By: Mr. C.A. van Blitterswijk
|
|
|
|
By: Mr. W. Hazenberg
|
|
|
|
|
|
|
|
|
|
/s/ Alexis V. Lukianov
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NuVasive, Inc
|
|
|
|
|
|
|
By: Chief Executive Officer
|
|
|
|
|
|
|
Signature Page to Deed of Adherence
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
relating to shareholdings in:
Progentix Orthobiology B.V.
by and among
Dr. C.A.
van Blitterswijk
Mr. F.J.W.E.B. van der Velden
Mr. J.D. de Bruijn
Mr. H. Yuan
J.D. de Bruijn Holding B.V.
BioGeneration Ventures B.V.
and
Progentix Orthobiology B.V.
Execution Copy
TABLE OF CONTENTS
|
|
|
|
|
|
|
Article 1
|
|
Interpretation
|
|
|
6
|
|
Article 2
|
|
Issuance and Contribution
|
|
|
7
|
|
Article 3
|
|
Second Payment
|
|
|
8
|
|
Article 4
|
|
Application of funds
|
|
|
9
|
|
Article 5
|
|
Signing Date
|
|
|
9
|
|
Article 6
|
|
Closing. Conditions to Closing
|
|
|
10
|
|
Article 7
|
|
The Companys operations and (future) subsidiaries
|
|
|
11
|
|
Article 8
|
|
Liquidation Preference and Conversion
|
|
|
11
|
|
Article 9
|
|
Anti-Dilution Adjustments
|
|
|
13
|
|
Article 10
|
|
Transfer of Shares
|
|
|
15
|
|
Article 11
|
|
Encumbrance
|
|
|
18
|
|
Article 12
|
|
Representations and Warranties
|
|
|
18
|
|
Article 13
|
|
Management Board
|
|
|
20
|
|
Article 14
|
|
General meeting of shareholders
|
|
|
22
|
|
Article 15
|
|
Consent of the Investor
|
|
|
23
|
|
Article 16
|
|
Supervisory Board
|
|
|
23
|
|
Article 17
|
|
Information
|
|
|
24
|
|
Article 18
|
|
Budget
|
|
|
26
|
|
Article 19
|
|
Non-Competition Agreements
|
|
|
26
|
|
Article 20
|
|
Future pre-emptive rights
|
|
|
27
|
|
Article 21
|
|
Assignments; Perpetual Covenant
|
|
|
28
|
|
Article 22
|
|
Costs and Expenses
|
|
|
28
|
|
Article 23
|
|
Confidentiality; Announcements
|
|
|
29
|
|
Article 24
|
|
Notices
|
|
|
29
|
|
Article 25
|
|
Entire Agreement
|
|
|
29
|
|
Article 26
|
|
General Provisions
|
|
|
30
|
|
2/31
LIST OF EXHIBITS
|
|
|
Exhibit 1
:
|
|
Notarial deed relating to the Issue
|
|
|
|
Exhibit 2
:
|
|
Representations and warranties
|
|
|
|
Exhibit 3
:
|
|
Notarial deed relating to the incorporation of the Articles
|
|
|
|
Exhibit 4
:
|
|
Business Plan and Budget
|
|
|
|
Exhibit 5
:
|
|
Shareholders resolution
|
|
|
|
Exhibit 6
:
|
|
Powers of attorney relating to Issue
|
|
|
|
Exhibit 7
:
|
|
Disclosure letter
|
|
|
|
Exhibit 8
:
|
|
Spousal Consent
|
|
|
|
Exhibit 9
:
|
|
Management Agreement J.D. de Bruijn
|
|
|
|
Exhibit 10
:
|
|
List with IP-rights
|
|
|
|
Exhibit 11
:
|
|
Template of Secondment Agreement
|
|
|
|
Exhibit 12
:
|
|
List with Assets of TU Twente
|
3/31
SUBSCRIPTION
AND SHAREHOLDERS AGREEMENT
relating to shareholdings in
Progentix Orthobiology B.V.
The undersigned:
1.
|
|
Progentix Orthobiology B.V.
(the
Company),
a private company with limited liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws of the
Netherlands, with its statutory seat in Bilthoven and its business address at Professor
Bronkhorstlaan 10-d, 3723 MB Bilthoven, the Netherlands, represented by its statutory director
(statutair bestuurder)
J.D. de Bruijn Holding B.V. in its turn represented by Mr. J.D. de
Bruijn;
|
|
2.
|
|
Mr. Dr. Clemens Antoni van Blitterswijk
(Mr. Van Blitterswijk),
currently residing
at Coenderssingel 4, 8564 HE Ruigahuizen, born in The Hague on
the 7
th
of
July 1957;
|
|
3.
|
|
Mr. Franciscus Johannes Wilhelmus Ernest Bruno van
der Velden
(Mr. Van
der Velden),
currently residing at Waalbanddijk 68, 4054 MG Echteld, born
in The Hague on the
19
th
of
August 1959;
|
|
4.
|
|
Mr. Huipin Yuan
(Mr.
Yuan),
currently residing at Laan van Vollenhove 168, 3706 AA,
born in Nijiang (China) on the
19
th
of April 1966;
|
|
5.
|
|
Mr. Joost Dick de Bruijn
(Mr. De Bruijn),
currently residing at Pasteurstraat 16,
3817 JL Amersfoort, born in Pijnacker on the 13
th
of February 1966;
|
|
6.
|
|
J.D. de Bruijn Holding B.V.
(De Bruijn Holding),
a private company with limited
liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws
of the Netherlands, with its statutory seat in Amersfoort and its business address at
Pasteurstraat 16, 3817 JL Amersfoort, the Netherlands, represented by its statutory director
(statutair bestuurder) Mr.
J.D. de Bruijn;
|
4/31
7.
|
|
BioGeneration Ventures B.V.
(BioGeneration),
a private company with limited
liability
(besloten vennootschap met beperkte aansprakelijkheid)
incorporated under the laws
of the Netherlands, with its statutory seat in Amsterdam and its business address at
Gooimeer 2 35, 1411 DC Naarden, represented by its statutory
directors
(statutair
bestuurders)
Mr. E.C.M. van Wezel and Mr. W.M. Hazenberg.
|
The parties hereinafter also collectively
referred to as the
Parties
and individually as a
Party;
The
parties 2, 3, 4, 5 and 6 hereinafter also referred to as the
Founders
and individually as a
Founder;
The party 7 hereinafter also referred to as the
investor;
The
parties 2, 3, 4, 6 and 7 hereinafter also collectively referred to as the
Shareholders
and
individually as a
Shareholder;
WHEREAS:
A.
|
|
Progentix B.V., a private company with limited liability seated in Bilthoven is a
company that focuses on the development and exploitation of products in the
field of bone decease and bone repair. The Company will acquire the Osteoinductive Bone Graft Material Technology from Progentix B.V. by means of a postclosing transfer and assignment of all assets and rights that are required to further develop and commercialise the Osteoinductive Bone Graft Material Technology of Progentix B.V.
|
|
B.
|
|
The ambition of Progentix B.V. and the Company is to acquire external funding in
order to be able to market and make profit from the Osteoinductive Bone Graft
Material Technology. For this purpose the Osteoinductive Bone Graft Material
Technology will be carved out of Progentix B.V. thus separating
Progentix other
technology, other rights of intellectual property and subsidies from the assets and
liabilities of the Company.
|
|
C.
|
|
The Founders hold the entire issued and outstanding share capital of the Company, which currently consists of 18,000 ordinary shares with a nominal value of
EUR 1 (one euro) each (the
Ordinary Shares).
|
5/31
D.
|
|
The Investor is a private equity provider that invests in selected companies in the
life sciences industry and other industries; the investment and involvement of the
Investor in a company usually lasts for a period of approximately 3 (three) to 5
(five) years, after which period the Investor intend to liquidate the investment
through an exit, for example by a trade sale or an initial public offering.
|
|
E.
|
|
The Company and the Founders have entered into negotiations
with BioGeneration, regarding the investment by BioGeneration
and as the case may be by co-investors through a new class of shares i.e. preferred shares in the share capital of the Company, the terms and conditions of which are set forth in this subscription and shareholders agreement (the
Agreement)
.
|
|
F.
|
|
The Investor and the Founders have agreed to a fair value of the business of the
Company of EUR 5,500,000 (five million five hundred thousand euro) after closing of the investment round (post money valuation).
|
|
G.
|
|
The Shareholders wish to have their mutual relations and their respective rights
and obligations in respect of their shareholdings in the Company governed by the
provisions of this Agreement and the articles of association of the Company (the
Articles,
as may be amended from time to time);
|
DECLARE TO HAVE AGREED AS FOLLOWS:
Article 1.
Interpretation
1.1
|
|
The recitals, the exhibits (the
Exhibits)
and the schedules to this Agreement form an
integral part of this Agreement and any reference to this Agreement includes such recitals,
Exhibits and schedules. In this Agreement, reference to a recital, article. Exhibit or
schedule is a reference to a recital, article of, or Exhibit or schedule to this Agreement,
unless the context requires otherwise.
|
|
1.2
|
|
In this Agreement, unless the context indicates otherwise, references to the singular Shall
include references to the plural and vice versa and references to any pronoun shall include
the corresponding masculine, female or neuter, and references to persons shall include bodies
and corporate and unincorporated associations of persons.
|
6/31
1.3
|
|
In this Agreement a reference to a particular agreement, enactment, regulation or other
document shall be construed as a reference to such agreement enactment, regulation or document
as it may from time to time be binding, enforceable or in force, as such agreement, enactment,
regulation or document may be novated, assigned, re-enacted (with or without modification),
restated, consolidated, amended or supplemented from time to time hereafter.
|
1.4
|
|
In this Agreement a reference to a company or other legal entity shall be construed so as to
include any legal entity or entities into which such company may during the continuance of
this Agreement be merged by means of a statutory merger or into which it may be split up or
demerged.
|
Article
2.
Issuance and Contribution
2.1
|
|
The Investor shall subscribe for 4,000 (four thousand) cumulative preferred shares, with a
nominal value of EUR 1 (one euro) each (the
Preferred Shares)
in the share capital of the
Company, (the Ordinary Shares and the Preferred Sharers and any and all other (classes of)
shares from time to time outstanding in the share capital of the Company hereinafter referred
to as the
Shares),
against payment in two (2) tranches of an aggregate amount of EUR
1,000,000 (one million euro) (such amount hereinafter referred to as
the
Contribution
).
|
2.2
|
|
The Founders shall procure that the Company issues on the Closing Date (as defined in
Article 6
below) (such issue hereinafter referred to as the
Issue)
the Preferred
Shares to the Investor, against payment of an aggregate amount of EUR 500,000 (five hundred
thousand Euro) hereinafter
(Initial Payment).
|
2.3
|
|
The Issue shall take place pursuant to a notarial deed, a copy of which is attached to this
Agreement as
Exhibit 1
, as soon as mr. N. van Buitenen (or his substitute or
successor) with Van Grafhorst & Van Buitenen Notarissen, in Utrecht (the:
Notary),
has
received the Initial Payment on the third party account with number 55.59.05.519 with the ABN
AMRO Bank in the name of
Kwaliteitsrekening Van Buitenen & Van Grafhorst,
on or before the
Closing Date (as defined in Article 6 below) which shall ultimately be at 31
st
of
January 2008.
|
2.4
|
|
On the Closing Date, the Investor, in reliance on
inter alia
the representations
|
7/31
|
|
and warranties as contained in
Exhibit 2
, hereby
agrees to subscribe for the Preferred Shares
which according to the previous sub-clauses shall be issued to the Investor and the Investor hereby
agrees to contribute on the Closing Date on the Preferred Shares issued through the Issue, an
aggregate amount of EUR 500,000 (five hundred thousand Euro).
|
2.5
|
|
The nominal value of each of the Preferred Shares is EUR 1 (one Euro) and the remainder of
the Initial Payment shall be administered in the books of the Company as share premium
(
agio
).
|
2.6
|
|
For the purpose of illustration, the Parties observe that immediately following the Issue,
the Shares in the Company shall be held as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Party
|
|
# Ordinary Shares
|
|
|
# Preferred Shares
|
|
|
Percent Stake
|
|
Mr. Van Blitterswijk
|
|
|
4,959
|
|
|
|
|
|
|
|
22.55
|
%
|
Mr. Van der Velden
|
|
|
4,959
|
|
|
|
|
|
|
|
22.55
|
%
|
J.D. de Bruijn Holding
|
|
|
7,200
|
|
|
|
|
|
|
|
32.7
|
%
|
Mr. Yuan
|
|
|
882
|
|
|
|
|
|
|
|
4.0
|
%
|
BioGeneration
|
|
|
|
|
|
|
4,000
|
|
|
|
18.2
|
%
|
Total
|
|
|
18,000
|
|
|
|
4,000
|
|
|
|
100
|
%
|
Article
3.
Second Payment
3.1
|
|
The Investor hereby agrees to procure that, subject to the terms and conditions of this
Agreement, the remainder of the Contribution after payment of the Initial Payment in the
amount of EUR 500,000 (five hundred thousand euro) (such amount hereinafter referred to as
Second Payment,
shall be provided to the Company on 1 April 2008 on the condition that the
Investor has unconditionally approved the Budget and Business Plan for 2008.
|
3.2
|
|
The Investor is entitled, at its sole discretion, to cancel Second Payment if (i) the Company
is engaged in any legal dispute relating to (a) any licensed or owned right of intellectual
and/or industrial property or patents which is/are essential to the Companys approved
Business Plan and Budget or its ability to make profit or (b) any product developed or
commercialised by the Company (or its future subsidiaries)
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8/31
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which is essential to the Companys
approved Business Plan and Budget or its ability to make profit, or
if (ii) any intellectual
and/or industrial property rights or patents owned and/or licensed by the Company (or its
future subsidiaries) become invalid or patent applications owned and/or licensed by the
Company (or its future subsidiaries) are rejected by the European Patent Office and/or the
United States Patent and Trademark Office and which is/are crucial to the Companys approved
Business Plan and Budget or its ability to make profit.
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3.3
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When due, the Second Payment will be transferred within 3 weeks to a bank account in the name
of the Company to be provided to the Investor. The Second Payment will be administered in the
books of the Company as share premium (
agio
) on the Preferred Shares the Investor already
holds, except where this Agreement provides otherwise.
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Article
4.
Application of funds.
4.1
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The Company agrees to use the Investment provided by the Investor, subject to the terms and
conditions of this Agreement; for no purposes other than the development of the Companys
business consistent with the approved Business Plan and Budget (jointly referred to as
Business Plan and Budget),
attached hereto as
Exhibit 4
.
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Article 5. Signing Date
On or before the signing of this Agreement (the date of signing shall hereinafter be referred to as
the
Signing Date
and such event the
Signing),
the Parties agree to perform the following acts:
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the Founders will execute such shareholders resolution as is set out
in the minutes of the extraordinary shareholders meeting attached
hereto as
Exhibit 5
, and thus resolve to issue the Preferred Shares in
accordance with the draft deed of Issue attached hereto as
Exhibit 1;
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the Company and the Investor will execute or cause to be executed such
powers of attorney attached hereto as
Exhibit 6
, and grant power of
attorney to each (deputy) civil-law notary of Van Grafhorst & Van
Buitenen Notarissen in Utrecht, the Netherlands, in order to execute
such the draft deed of Issue on the Closing Date.
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Article 6. Closing. Conditions to Closing
6.1
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The Closing shall take place as soon as all conditions to Closing of
Article 6.3
have
either been fulfilled or waived by the Investor though ultimately on
the 31
st
of
January 2008 unless the Founders and the Investor agree to a later date (such date hereinafter
also referred to as the
Closing Date
and such
event as the
Closing)
. On the Closing Date,
the notarial deed relating to the Issue (attached hereto as
Exhibit 1)
shall be
executed by the Notary.
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6.2
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For the purpose of effecting the amendment of the Articles and the Issue, the Parties
furthermore agree that they will execute such deeds, sign such documents, attend such
meetings, exercise such votes, pass such resolutions, waive such rights (under the Articles or
otherwise), give and/or obtain such consent and generally do and procure all things as may be
necessary or convenient for the implementation and completion of this Agreement in accordance
with its terms and conditions.
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6.3
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The obligation of the Investor to consummate the Closing are subject to the fulfilment
satisfactory to the Investor of each of the following Conditions Precedent prior to the
31
st
of January 2008, or the waiver thereof in writing by the Investor, at or prior
to the Closing:
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a.
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the Company shall be the sole legal and beneficial owner of all IP-rights
(which appear from the list attached hereto as
Exhibit 10
) relevant for the
Company to further develop and commercialise the Osteoinductive Bone
Graft Material Technology of Progentix B.V.;
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b.
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secondment agreements (substantially in the form as attached hereto as
Exhibit 11
) are concluded between the Company and Progentix B.V. relating to
the following employees of Progentix B.V.: Joost de Bruijn, Riemke van
Dijkhuizen, Huipin Yuan, Linda van Rijn, Jurren Koerts, Davide Barbieri, Paul
van Bergen;
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c.
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all assets currently owned by the TU Twente (which appear from the list attached hereto as
Exhibit 12)
and relevant for the Company to further develop
and commercialise the Osteoinductive Bone Graft Material Technology of
Progentix B.V. shall have been transferred and assigned unconditionally to
the Company.
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10/31
Article 7. The Companys operations and future subsidiaries
7.1
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The Parties agree to procure that the Company shall, for as long as the Investor holds
Shares, remain the ultimate parent company for all of the Companys operations, future
subsidiaries or the operations of such subsidiaries.
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7.2
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The Company agrees to procure that the articles of association or similar instruments of any
(future) subsidiaries of the Company shall contain such clauses in order to provide that prior
approval of the shareholders meeting of such subsidiary shall be required for those
resolutions of the management board of such subsidiary for which, if such resolution were to
be taken by the management board of the Company, the management board of the Company would
require the prior approval of the holders of the Preferred Shares or of the Supervisory Board.
In addition, each of the Parties agrees to procure that until such time when the articles of
association (or similar constitutional documents) of any of the Companys (future)
subsidiaries shall so have been amended, any rights and obligations of any of the Parties
under the regime of governance clauses and approvals as pursuant to this Agreement shall be
implemented for the Company, shall, mutatis mutandis, also apply to any such subsidiaries and
as such be deemed to be part of this Agreement and agreed and enforceable between the Parties
to this Agreement.
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Article
8.
Liquidation Preference and Conversion
Liquidity Event
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(i)
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the liquidation of the Company;
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(ii)
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the dissolution of the Company;
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(iii)
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the sale of all or substantially all of the Companys assets;
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(iv)
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the licensing on an exclusive basis of all or substantially all of the Companys assets;
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(v)
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a merger or consolidation of the Company with any other company; or
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(vi)
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the sale of more than 80% (eighty percent) of the then outstanding Shares
(by trade sale or otherwise), except for an initial public offering of Shares of
the Company on a recognised stock exchange (an
IPO);
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(any such event hereinafter a
Liquidity
Event),
the Parties shall, irrespective of the
liquidation distribution provisions provided for in the Articles,
allocate and dis-
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11/31
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tribute all proceeds of such event, be it cash, stock or surplus assets, amongst the
Shareholders as follows:
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A.
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in the event the Proceeds are less then EUR 15,000,000 (fifteen million euro)
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(i)
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first, on the Preferred Shares: to the holders of the preferred Shares
an amount equal to twice the sum of the nominal value of these Preferred Shares, the
share premium (
agio
) paid on these Preferred Shares, and the unpaid dividends of 8%
(eight percent) compounded per annum, if any, whereby, if the balance is insufficient
to make such distribution, the available balance will be distributed to the holders of
the Preferred Shares proportional to the total value of their Preferred Shares
shareholdings;
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(ii)
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the amount remaining after full payment to the Preferred
Shareholders pursuant to the preceding subparagraph A. will be distributed to the
holders of Preferred Shares and the holders of the Ordinary Shares, proportional to
their individual shareholdings of Shares in the Company.
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B.
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In the event the direct proceeds of the Liquidity Event are EUR 15,000,000
(fifteen million euro) or more, the proceeds will be allocated and distributed
to the Shareholders pro rata parte the number of Shares each Shareholder
holds on an as if converted basis.
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Claw back
8.2
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In the event a Liquidity Event consists of two or more separate events, whereby
the proceeds initially are less then EUR 15,000,000 (fifteen million euro), the proceeds shall first be
distributed pursuant to
Article 8.1 sub A
. Should it appear that
on or before the 15
th
of November 2012
the sum of all proceeds exceeds
EUR 15,000,000 (fifteen million euro), all and not part of the past and future
proceeds shall be distributed pursuant to
Article 8.1 sub B.
The Preferred Shareholders shall pay to the Ordinary Shareholders an amount equal to (i) the total proceeds the Ordinary
Shareholders should have received if all proceeds were distributed pursuant to
Article 8.1 sub B
less (ii) the amount already received by the
Ordinary Shareholders.
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Conversion
8.3
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The Parties agree that any of the Preferred Shares may be converted, at any time,
into Ordinary Shares at a conversion rate of 1:1 (such conversion a
Conversion),
which conversion rate shall be adjusted so as to reflect this ratio after any amend-
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12/31
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ment of the nominal value by means of any stock splits, combinations, recapitalisations
or any other actions that have lead to a different capitalisation of the Company as if no
such stock split, combination, recapitalisation or any such other
action had taken place.
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8.4
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A Conversion will take place in accordance with the provisions of the Articles pursuant to a
written request by the relevant holder of the Preferred Shares to be delivered at the
Companys address, stating that such holder of Preferred Shares wishes to convert all or part
of the Preferred Shares held by such Shareholder into Ordinary Shares (a
Conversion
Request).
Upon receipt of the Conversion Request the Company will immediately take action to
effectuate such Conversion. To the extent necessary to achieve such Conversion (i) each of the
Parties irrevocably agrees to take all actions and resolutions required to effectuate such
Conversion and (ii) each of the Parties hereby unconditionally and irrevocably grants a power
of attorney to each (deputy) civil-law notary practising in the Netherlands, to execute any
deed of issuance of Shares or amendment to the Articles that may appear necessary to
effectuate the Conversion.
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8.5
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The Parties agree to procure that, notwithstanding any previous Conversions, all (remaining)
Preferred Shares shall be converted (i) upon the occurrence of an IPO and listing of Shares of
the Company on a recognised stock exchange.
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8.6
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The Parties furthermore agree to procure that, not later than at the first closing date of an
IPO, all outstanding depository receipts if any shall be cancelled
(gedecer-tificeerd)
in
exchange for Ordinary Shares at an exchange rate of 1:1, which exchange rate shall be adjusted
so as to reflect this ratio after any amendment of the nominal value by means of any stock
splits, combinations, recapitalisations or any other actions that have lead to a
different capitalisation of the Company as if no such stock split, combination,
recapitalisation or any such other action had taken place.
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Article 9. Anti-Dilution Adjustments
9.1
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In the event of any issue of additional Shares (irrespective of the class of such shares)
after the Closing Date (other than Shares issued pursuant to a stock option plan to employees
or non-employees (such as members of the Scientific Advisory board) which are approved by the
Supervisory Board), for a price per Share less
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13/31
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than the per Preferred Share contribution on, or purchase price for, any of such Shares,
which price per Shares (in case this event occurs prior to a new financing round of the
Company) shall be increased with a deemed annual return of 20% (twenty percent) compounded
per year at any time held by the holders of such Shares that were issued or acquired in
the context of this Agreement taking into account any stock splits, recapitalisation,
amendment of the nominal value of any of the Preferred Shares, earlier application of
anti-dilution provisions or any other relevant transaction (each such issue a
Post-Closing
Issue)
- then the Parties shall be obliged to procure that the Company issues to each of
these holders of the Preferred Shares such number of Preferred Shares (or, at the option Of
one or more holders of the Preferred Shares, any other class of Shares that may exist at
such time) against a per share contribution equal to the nominal value thereof (such issue
the
Compensating Issue),
as is necessary to achieve a situation in which the average price
per Preferred Share and as the case may be: increased with the deemed annual return of 20%
(twenty percent) compounded per year -paid for or contributed on the aggregate number of the
Preferred Shares held by each of the holders of such Shares immediately following the
Compensating Issue, shall not be higher than the price per additional Share issued under the
relevant Post-Closing Issue.
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9.2
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The contribution payable on the Shares issued through the Compensating Issue shall, if
possible, be set off against the share premium (
agio)
already paid on the class of shares to
which the shares issued in the Compensating Issue should belong (so that the relevant holders
of Preferred Shares shall hot be obliged to make any payment on the shares issued to it
through the Compensating Issue), or, to the extent necessary under applicable law, be equal to
the nominal value of the shares issued through the Compensating Issue. The Company and each of
the Shareholders hereby unconditionally and irrevocably grant a power of attorney to each
(deputy) civil-law notary practising in the Netherlands, to waive any pre-emptive rights
and/or to execute a deed of issuance of Preferred Shares to effectuate this anti-dilution
protection.
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9.3
|
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The Parties acknowledge that, in accordance with the Articles, each of the Companys
shareholders may have certain pre-emptive rights on newly to be issued Shares. To the extent
any of the Parties should be a Shareholder of the Company at the time when the provisions of
Article 9.1
are effectuated, each of the Parties hereby agrees to waive any
pre-emptive rights such Party may have on any and all
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14/31
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Shares to be issued to such holders of Preferred Shares through the Compensating Issue
pursuant to the provisions of this
Article 9
.
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Article 10. Transfer of Shares
IPO
10.1
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The Investor, having obtained prior written approval from the Supervisory Board,
ma give notice to the Company and the other Shareholder(s) that in its opinion the
Company should strive to realize an IPO, then each of the Parties shall be obliged
to use best efforts to effect the IPO within a reasonable timeframe. If to that effect,
the Company should propose certain actions that may be necessary for an IPO, all
Parties Will co-operate to complete such actions and will act in good faith in order
to effect such IPO. The Parties agree that in that case they will
inter alia
- comply
with all applicable rules, regulations and requirements for such IPO including with-
out limitation the relevant stock exchange regulations, and agree to enter into such
underwriting-, listing-, lock-up- and other agreements as may be deemed reasonable and necessary.
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10.2
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The Company will bear all costs and expenses in connection with an IPO.
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Sale to a strategic or financial purchaser
10.3
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The Parties agree that any holder of Shares who/which intends
to accept a bona fide offer in writing, received from one or more third parties (such party or parties
hereinafter an
Interested Purchaser),
for all or part of the Shares held by such
Party (such Party an
Offering Shareholder),
shall be obliged to give written notice thereof to the Company and all other Shareholders (the
Notice).
The Notice
shall be given within 10 (ten) business days after receipt of the offer by the Interested Purchaser. In that case, the following provisions shall apply.
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Right of First Refusal
10.4
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Each of the holders of the Preferred Shares shall have the right (which right, in
case more than one such Shareholder should exercise such right, shall be pro rata
to their mutual shareholdings of Shares) to give written notice to the Company and
the Offering Shareholder within a reasonable term (which shall be determined by
the Offering Shareholder in the Notice but shall not be less than 15 (fifteen) busi-
ness days from the date of receipt of the Notice) that such Shareholder wishes to
purchase the Shares offered by the Offering Shareholder at the same price and
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15/31
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conditions as offered by the Interested Purchaser.
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10.5
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For the purpose of
Article 10.4,
the Notice shall be deemed to constitute an offer to
sell which offer may be accepted in the manner described in this sub-article. Subsequently,
the accepting Shareholders(s) shall be obliged to procure that the Shares offered by the
Offering Shareholder shall be transferred to the accepting
Shareholders(s) within 20 (twenty)
business days after acceptance.
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10.6
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To the extent (all or some of the) Shares offered by the Offering Shareholder are not
purchased by the holders of the Preferred Shares pursuant to the previous subclauses, the
holders of the Ordinary Shares shall have the right (which right, in case more than one such
Shareholder should exercise such right, shall be pro rata to their mutual shareholdings of
Shares) to give written notice to the Company and the Offering Shareholder within a reasonable
term (which shall be determined by the Offering Shareholder in the Notice, but shall not be
less than 15 (fifteen) business days from the date the Offering Shareholder has been informed
by the holders of the Preferred Shares that they will not purchase all Shares offered by the
Offering Shareholder) that such Shareholder wishes to purchase the Shares offered by the
Offering Shareholder at the same price and conditions as offered by the Interested Purchaser.
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10.7
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To the extent one or more of the holders of Shares should not exercise their rights under the
previous sub-clauses, each of them agrees to refrain from exercising any other relevant rights
such Shareholder may have under the Articles and to give all reasonable co-operation which the
Offering Shareholder may need to effect the sale and transfer of Shares to the Interested
Purchaser or to those Parties that do exercise their rights under this sub-clause.
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Drag Along
10.8
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In the event that the Offering Shareholder is the Investors (for the purpose of this
Article 10.8
being the Offering Shareholder) receives from an Interested Purchaser a
bona fide offer in writing for more than 80% (eighty percent) of the then outstanding Shares
(including an offer to purchase such Shares in tranches), and to the extent that the Shares
offered by the Offering Shareholder(s) are not sold to the other Shareholders, in such manner
as is described in the previous subclauses, the Offering Shareholder(s) shall have the right
to oblige the other Shareholders to offer all of the Shares held by them to the Interested
Purchaser at the
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16/31
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same price and conditions as offered by the Interested Purchaser, provided, however, that
the Investors shall not be obliged to provide any such Interested Purchaser with any
indemnities and representations and warranties, other than representations and warranties to
the title of the Shares held by it; as soon as the Offering Shareholder(s) reach an
agreement with the Interested Purchaser, then the other Shareholders will also be bound by
such agreement and be obliged to transfer the Shares held by them to the Interested
Purchaser in such a manner as the Offering Shareholder(s) have agreed with the Interested
Purchaser; provided however, that to the extent that the sum of the number of Shares that
the Offering Shareholder(s) and the other Shareholders want to sell and/or are obliged to
sell to the Interested Purchaser, should be higher than the aggregate number of Shares than
the Interested Purchaser wishes to acquire
(supply exceeds demand),
both the Offering
Shareholder(s) and the other Shareholders will reduce the number of Shares to be sold by
them so that the aggregate number of Shares to be sold to the Interested Purchaser shall
consist of Preferred Shares held by the Offering Shareholder(s) and any other Shares held by
the other Shareholders pro rata to the size of their shareholdings of Shares in the Company,
all this with due observance of
Article 8.1
hereof.
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Tag Along
10.9
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In case the Offering Shareholder is a Shareholder, then the Offering Shareholder shall
procure that either the Interested Purchaser or the Offering Shareholder offers to the other
Shareholders to purchase all Shares that the holders of such Shares then would wish to make
available for sale, at the same price and conditions per Share (or, if the Shares held by the
Offering Shareholder are of a different class than (all or some of) the Shares held by any of
the relevant other Shareholders
,
at such price per Share as reflects the difference between
those classes) as offered by the Interested Purchaser to the Offering Shareholder, provided,
however, that in that case, to the extent that the sum of the number of Shares that the
Offering Shareholder wants to sell to the Interested Purchaser and the number of Shares that
the other Shareholders would wish to make available for sale, should be higher than the
aggregate number of Shares that the Interested Purchaser wishes to acquire
(supply exceeds
demand),
both the Offering Shareholder and the other Shareholders will reduce the number of
Shares to be sold by them so that the aggregate number of Shares to be sold to the Interested
Purchaser shall consist of Shares held by the Offering Shareholder and the other Shareholders
pro rata to the size of their shareholdings of Shares in the Company, all this with due
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17/31
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observance of
Article 8.1
hereof. The Offering Shareholder shall procure that
such offer to the other Shareholders shall be made in writing within 1 (one) month after the
Offering Shareholder shall have given the Notice.
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10.10
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For the purpose of clarification, the Parties observe that in case of a bona fide offer in
writing by an Interested Purchaser, then the provisions of the
Articles 10.4 through
10.7
hereof (
Right of First Refusal)
will apply in preference to the provisions of
Article 10.8
(
Drag Along) or
Article 10.9
(Tag Along).
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10.11
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The Parties acknowledge and agree that the arrangements included in the provisions of this
Article 10
are different from the transfer restriction clauses in the Articles in the
sense that they may result in the realisation of prices for Shares that are different than the
prices that may result from the application of the provisions in the Articles relating to the
determination of prices by experts. This deviation, however, is expressly agreed and accepted
by the Parties in their mutual contractual relations as established through this Agreement.
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10.12
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Each of the Parties hereby undertakes towards the other Parties to act in accordance with
the provisions of this article and to co-operate in the effectuation of any transaction in
accordance with the provisions of this
Article 10
. In particular, each of the Parties
hereby agrees to waive its rights under the Articles to the extent such waiver is necessary to
procure that the provisions of this
Article 10
may be applied in such manner as is
described in this
Article 10
.
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Article 11. Encumbrance
Each of the Shareholders undertakes towards the other Shareholders not to create, or suffer or
cause any other person to create, any encumbrance with respect to any of the Shares held by them,
without prior written Investors Consent.
Article 12. Representations and Warranties. Indemnification.
12.1
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Each of the Founders hereby represents and warrants, severally and not jointly,
towards the Investor that all of the Shares held by them are free from any liens,
equities, charges, pledges, rights of usufruct (
vruchtgebruik),
adverse claims and
encumbrances or interests in favour of, or claims made by or which could be made
by, any other person.
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18/31
12.2
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Each of Mr. Van Blitterswijk, Mr. Van der Velden, De Bruijn Holding, Mr. De Bruijn and
Mr. Yuan hereby indemnifies the Investor and holds the Investor harmless for any claim or
liability from any third party that originates from the business of Progentix B.V.,
aforementioned, in as far as the claim or liability does not directly or indirectly -
relate to the Osteoinductive Bone Graft Material Technology (e.g. claims with respect to
non-related subsidies).
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12.3
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Each of the Company, Mr. Van Blitterswijk, Mr. Van der Velden, Mr. De Bruijn and Mr. Yuan
(the
Representing Parties)
hereby represents and warrants towards the Investor that all of
the representations and warranties stated in
Exhibit 2
hereto pertaining to the
Company and the business of the Company (the
Representations and Warranties)
are true,
correct and not misleading on the Signing Date and on the Closing Date.
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12.4
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In the event of a breach or series of breaches of, or default or series of defaults under,
any of the Representations and Warranties (such breach of or default under hereinafter a
Breach
), the Representing Parties shall, subject to the succeeding provisions of this
Article 12
, be severally liable (and not also jointly) and be obliged to place the
Investor that should elect to exercise its rights under this
Article 12
or, at the
option of the Investor, the Company in the same position as the Investor or, as the case may
be, the Company would have been if such Breach had not occurred. For the avoidance of doubt,
the Parties agree that in the event of a Breach the Investor unless the Investor should
demand that not the Investor, but the Company shall be placed in the same position as the
Company would have been if the Breach had not occurred shall be entitled to receive from the
Representing Parties such amount (the
Damage
) as may be calculated by multiplying the
monetary value of the difference between, on the one hand, the position in which the Company
would have been if the Breach had not occurred and, on the other hand, the actual position of
the Company, by the percentage of the Companys share capital that the Shares then directly or
indirectly held by the Investor account for.
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12.5
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The Representing Parties shall not be liable under this
Article 12
for as long as the
amount of Damage per individual Breach does not exceed EUR 10,000 (ten thousand euro).
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19/31
12.6
|
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Any and all liability of the Representing Parties in respect of the Representations and
Warranties shall fully and, save for the condition set out herein, unconditionally expire at
the third anniversary of the Closing Date or in the case of a tax claim as referred to under
D.
(tax warranties)
of Exhibit 2
(Representation and Warranties)
on the day the statutory
limitations period in respect of tax claims expires, provided that any claim which would
otherwise terminate pursuant to this
Article 12
will continue to survive if a claim
notice in writing shall have been timely sent to a Representing Party on or prior to the end
of such term.
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12.7
|
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Any potential Breach that has been disclosed to the Investor in the disclosure letter (the
Disclosure Letter
), attached hereto as
Exhibit 7
, will prevent the Investor from
claiming under the Representations and Warranties in the event that
such potential Breach
would materialize. At the Signing Date, the Investor has no knowledge of a Warranty being
untrue, inaccurate or incomplete.
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12.8
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In the event that the Investor has or believes to have a claim in relation to a Breach, the
Investor shall notify the Representing Parties thereof by service of a registered claim
notification
(aangetekende brief),
stating the nature of the claim, whether or not the
Investor chooses to have the Representing Parties hold harmless either the Investor or the
Company in accordance with the provisions of the second sub-article of this
Article
12
, and the amount of the claim. If a claim of the Investor can reasonably be considered
to be genuine, the Representing Parties shall forthwith remedy the Breach in accordance with
the provisions of this
Article 12
,
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12.9
|
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The liability of each of the Representing Parties with respect to the Representations and
Warranties shall be limited to the following amounts, which have been agreed in negotiations
between the Parties:
|
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Representing Party
|
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Maximum liability amount
|
Company
|
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EUR 1,000,000
|
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Mr. Van Blitterswijk
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EUR 50,000
|
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Mr. Van der Velden
|
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EUR 50,000
|
|
|
|
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Mr. J.D. de Bruijn
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EUR 50,000
|
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Mr. Yuan
|
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EUR 10,000
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20/31
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provided, however, that the Company shall be entitled, if and to the extent (partial)
payment of Damages would immediately result in bankruptcy of the Company (such amount of
Damages that would result in bankruptcy of the Company hereinafter referred to as the
Excess
Damages
), to pay the Excess Damages by means of an issuance of such a number of Preferred
Shares, or at the option of the Investor, any other classes of Shares that may exist at that
time, at their then current fair market value, to be calculated in accordance with the
procedure described in the Articles, to the Investor as is equal to the Excess Damages.
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12.10
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In view of the provisions of article 1:88 of the Dutch Civil Code Mr. De Bruijn and Mr. Yuan
shall procure that the Investor shall have received on or prior to the Closing Date a duly
signed declaration of spousal consent, in the form attached hereto as
Exhibit 8
.
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Article 13. Management Board
13.1
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The management board
(statutair bestuur)
of the Company shall require Investors Consent, to
the extent not provided for in the budget approved in accordance with the provision of this
Article 13.1
and
Article 17
hereof, for resolutions relating to any of the
following decisions, provided, however that each of such decisions has an aggregate value in
excess of EUR 25,000 (twenty-five thousand euro):
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(a)
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opening or shutting down (branch)offices, direct or indirect participation in the
capital of another company and terminating or changing the size of any such
participation, whether or not abroad;
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(b)
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lending and borrowing money (including inter-company loans) in excess of 10% (ten
percent) of the Contribution, with the exception of acquiring money under a credit
already granted to the Company by a bank;
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(c)
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entering into agreements by which the Company binds itself as guarantor or as
severally-liable co-debtor, or otherwise guarantees or agrees to bind itself as security
for a debt of a third party in excess of 10% (ten percent) of the Contribution;
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(d)
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acquiring, alienating, encumbering, leasing, letting and in any other way
obtaining and giving the use or benefit of (registered) property and assets;
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(e)
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entering into agreements, whereby the Company is granted credit by a bank in
excess of 10% (ten percent) of the Contribution;
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(f)
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long term direct or indirect co-operation with another company and the
termination of such co-operation;
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(g)
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transactions outside the ordinary course of the business of the Company;
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(h)
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investments or divestitures, or otherwise acquiring or disposing of a business;
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(i)
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application for bankruptcy or the suspension of payments;
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(j)
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granting registration rights or similar rights, except as provided for in
this Agreement;
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(k)
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preparation or direct or indirect enablement of a Liquidity Event;
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(l)
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concluding,
terminating or amending any (licensing) agreement relating to licensed intellectual property
rights of the Company; and
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(m)
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exercising the voting rights attributable to shares held by
the Company.
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13.2
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The protective rights of the Investor as laid down in
Article 13.1
shall
automatically lapse in the event at least 75% (seventy-five percent) Of the Preferred Shares
have been converted into Ordinary Shares.
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13.3
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The management board
(statutaire bestuur)
of the Company shall require, to the extent not
provided for in the budget approved in accordance with the provision of
Article 13.1
and
Article 17
hereof, the prior written approval of the Supervisory Board (as defined
below) for resolutions relating to the any of the following decisions provided, however that
each of such decisions has an aggregate value in excess of EUR 10,000 (ten thousand euro):
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(a)
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the adoption of the annual budget, which shall include an investment plan and a
financing plan, annually and obligatory to be drawn up by the management board;
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(b)
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any expenditure that exceeds the budget by 10% (ten percent) of the level in
the Companys budget as approved by the Investor;
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(c)
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making settlements;
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(d)
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being a party to legal proceedings, including conducting arbitration proceedings
with the exception of taking legal measures that cannot be delayed;
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(e)
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granting bonuses or profit rights to the management board, management team or
personnel of the Company;
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(f)
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adopting a share option plan and granting individual stock options under such
plan;
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(g)
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establishing pension plans and granting pension rights in excess of those arising
from existing arrangements;
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(h)
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entering into any contract, transaction or commitment exceeding an aggre-
gate value of EUR 100,000 (one hundred thousand euro);
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(i)
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entering into and changing employment agreements, whereby a gross
remuneration is granted in excess of EUR 50,000 (fifty thousand euro) per annum;
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(j)
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entering into an arrangement or agreement with (an individual related to) a
shareholder, a managing or supervisory director of the Company or of any of its
subsidiaries;
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(k)
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appointing proxy holders
(procuratiehouders
c.q.
gevolmachtigden)
and
determining their authority and title;
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(l)
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appointing advisors or investment bankers with respect to a sale, IPO or
financing round.
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Article 14. General meeting of shareholders
14.1
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The following resolutions of the general meeting of shareholders of the Company
shall be adopted by (i) a simple majority of the votes validly cast at a meeting of
shareholders of the Company including (ii) Investors
Consent:
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(a)
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issuance of Shares;
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(b)
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limitation or exclusion of pre-emptive rights in respect of an issuance of
Shares;
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(c)
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transfer or revocation of the authority to issue Shares to another corporate
body;
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(d)
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acquisition or transfer of Shares or depository receipts thereof by the Company
or any of its subsidiaries;
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(e)
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reduction of the Companys issued capital;
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(f)
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amendment of the Articles;
|
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(g)
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statutory merger or statutory demerger;
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(h)
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dissolution of the Company; and
|
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(i)
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the distribution of dividends.
|
14.2
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A resolution to appoint, dismiss or suspend a statutory director
(statutair bestuurder)
shall be adopted by a 2/3 (two/thirds) majority of the votes validly cast at a meeting of
shareholders of the Company in which at least 50% (fifty percent) of the issued and
outstanding share capital of the Company is present.
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14.3
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The Parties hereby agree that the protective rights of the Investor set forth in
Article
14.1
shall automatically lapse in the event at least 75% (seventy-five percent)
of the Preferred Shares have been converted into Ordinary Shares.
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23/31
Article 15. Consent of the Investor
To the extent this Agreement prescribes the consent of the Investor this consent shall mean the
explicit consent of the Investor, which consent shall either be in writing or somehow recorded for
purposes of evidence (hereinafter referred to as:
Investors Consent
). In the event the Company
has more investors then the Investor due the syndication of the investment, the definition of
Investors Consent shall include the consent of at least 50% (fifty percent) of all outstanding
Preferred Shares.
Article 16. Supervisory Board
16.1
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The Parties shall procure that the supervisory board of the Company (the
Supervisory Board)
shall be composed of 3 (three) members, to be appointed by the general meeting of
shareholders:
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1(one) of whom shall be appointed upon a binding nomination
of the Investor; and,
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1(one) of whom shall be appointed upon a binding nomination of the Founders; and,
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1(one) of whom shall be appointed as an independent member recognised as an industry
expert upon a binding nomination of the Investor together with the Founders.
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At the Closing Date, the following persons shall be nominated by the following Parties:
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Mr. E.C.M. van Wezel as Supervisory Board member on behalf of the Investor;
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Dr. C.A. Van Blitterswijk as Supervisory Board member on behalf of the
Founders.
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The third, independent Supervisory Board member, shall be nominated as soon as reasonably
possible.
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16.2
|
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Each of the Shareholders hereby agrees to Vote at the relevant general meetings of
shareholders in favour of any binding nominations made in accordance with this
Article
16
, unless any candidate nominated cannot reasonably be regarded as an appropriate member
of the Supervisory Board. Likewise each of the Shareholders hereby agrees to vote at the
relevant general meeting of shareholders in favour of
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24/31
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any proposals to suspend or dismiss a Supervisory Board member if such proposal is made by
the same Party which is entitled to nominate candidates for the seat then held by such
Supervisory Board member.
|
16.3
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The Parties shall procure that the Supervisory Board shall meet at regular intervals, but at
least quarterly. Votes may be rendered by power of attorney given by one Supervisory Board
member to another member. The Parties agree that the Supervisory Board will adopt resolutions
by a simple majority of the votes of the members present.
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16.4
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The Supervisory Board members shall receive reimbursement of all reasonable expenses incurred
for their membership of the Supervisory Board.
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16.5
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To the extent allowed under applicable law, the Company shall indemnify and keep indemnified
the members of the Supervisory Board from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgements, suits, costs or expenses of any kind or
nature whatsoever to which such member may become subject by reason of its/their status as
member of the Supervisory Board, unless such liabilities, obligations, losses, damages,
penalties, actions, judgements, suits, costs or expenses of any kind or nature whatsoever
is/are caused by its/their gross negligence, wilful misconduct or fraud.
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16.6
|
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The Supervisory Board members shall have the benefit of directors insurance in amounts and
covering risks as is determined by the management board (
statutaire bestuur)
of the Company,
subject to Investors Consent.
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Article 17.
Information
17.1
|
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The Company agrees to furnish to the Investor the following
information in electronic format:
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|
Monthly financial- and management updates of the Company and its subsidiaries:
within 15 (fifteen) days following the end of each month a report comprising updates on
cash position and cash burn, actual versus budget;
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Quarterly financial- and management statements of the Company and its
subsidiaries: within 30 (thirty) days following the end of each quarter a report
comprising at least a profit and loss account for the prior quarter, actual versus
budget updates on cash position and cash burn, updated sales and profit
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25/31
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and loss forecasts, estimates for the running quarter, a quarterly progress report, and other
key performance indicators relating to the Company;
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Annual reports: within 90 (ninety) days after the end of each financial year
the audited financial statements according to generally accepted accounting principles
in the Netherlands;
|
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Annual budget: at least 60 (sixty) days before the end of each financial year,
which budget will include a projected income statement, cash flow
projections and a balance sheet of the Company and its subsidiaries on a monthly basis for the
following financial year;
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Any other information which the Investor may reasonably require to monitor the
Companys and its subsidiaries business strategy, major business developments and the
financial and overall performance of the Company and its subsidiaries on a regular
basis.
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17.2
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The Company and the Founders agree to allow the Investor and its external advisers for as
long as the Investor is a Shareholder, to visit each and every office of the Company and/or
any of its subsidiaries as often as the Investor should reasonably request (after having
given a reasonable written notice) and to inspect and copy the Companys and/or its
subsidiaries books and records (including corporate and financial records) and discuss its
business and financial matters with the Companys management unless, either (i) after an IPO
such visits and/or inspections cannot, under the regulations applicable to companies listed on
the relevant stock exchange, be allowed to the investor or (ii) such visits and/or inspections
cannot be allowed to the Investor due to non disclosure obligations of the Company in
connection with its business. All costs and expenses in relation to the provisions in this
sub-article, shall be borne by the Investor who incurred such costs and expenses. Should it
appear from these inspections that the Company has not or not
timelymet its obligations
pursuant to
Article 17.1
all costs shall be borne by the Company.
|
Article 18. Budget
To the extent that the Investor should notify the Company that it does not approve the budget
provided to them pursuant to
Article 17.1,
then the
Company shall (i) refrain from any
actions aimed at or relating to the implementation of any and all of the items referred to in such
budget, and (ii) submit to the Investor an amended budget.
26/31
Article 19. Non-Competition Agreements
19.1
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|
Each of the Mr. De Bruijn and Mr. Yuan hereby undertakes and covenants with the Company and
the Investor that he shall not, except with the prior written approval of the Company and each
of the Investors:
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a.
|
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while he is (either directly or indirectly) a manager with or advisor to the
Company or its (future) subsidiaries, be engaged or interested
directly or indirectly (in any capacity whatsoever) in Osteoinductive Bone Graft Material
Technology; or
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b.
|
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during a period commencing on the date he (either directly or indirectly) no
longer is a holder of Shares in the capital of the Company, manager with or
advisor to the Company or its (future) subsidiaries and ending two (2) years
later or, if earlier, at the IPO: (i) carry on or be concerned,
engaged or interested directly or indirectly in any capacity whatsoever in Osteoinductive Bone
Graft Material Technology; or (ii) either on his own behalf or
in any other capacity whatsoever directly or indirectly do or say anything which may lead to
any person or entity ceasing to do business with the Company or its (future)
subsidiaries on substantially the same terms as previously (or at
all) or endeavour to entice away from the Company or its (future) subsidiaries or solicit
any person, firm or company who at the date of cessation does business with
the Company or its (future) subsidiaries or which has during such a period
been a customer of the Company or its (future) subsidiaries; or (iii) either on
his/its own behalf or in any other capacity whatsoever directly or indirectly
employ, engage or induce, or seek to induce, to leave the service of the
Company or its (future) subsidiaries, any person who at that
date is employed by the Company or its (future) subsidiaries.
|
Article 20. Future pre-emptive rights
In the event of an issue of new Shares (irrespective of the class of such Shares) and
notwithstanding any contrary provision in the Articles (as the Articles may read from time to
time), all Shareholders (including the holders of Preferred Shares and/or any future classes of
Preferred Shares) shall (in deviation Of section 2:206a subsection 2 of the Dutch Civil Code) have
a first right to subscribe for any newly issued Shares in proportion to their individual
shareholdings of Shares in the Company. In the event a Shareholder does not exercise its
pre-emptive rights in respect of such newly issued Shares, the other Shareholders shall have
pre-emptive rights in respect of those shares in proportion to
27/31
their individual shareholdings of Shares in the Company. For the purpose of clarification, the
Parties observe that in case of an issue of new Shares, the provisions of
Article 9
hereof
(Anti-Dilution Adjustments) will apply in preference to the provisions of this
Article 20
(Future Pre-emptive rights). The Investor is entitled to exercise any pre-emptive rights of any
Shareholder that does not exercise its own pre-emptive rights, whereby BioGeneration is entitled to
transfer or assign its pre-emptive rights to affiliates, to successor funds and/or to Forbion
Capital Partners.
Article 21. Assignments; Perpetual Covenant
21.1
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The Investor shall at all times have the right to transfer the Shares held by it along with
their rights and obligations under this Agreement to any (other) company, for as long as such
(other) company is controlled by the Investor, for as long as such (other) company (directly
or indirectly) controls the relevant Investor, or for as long such company is an investment
fund or similar entity managed by one or more investment managers of such Investor or managed
by the same general partner or manager as such Investor or by any other general partner or
manager within the same group as such Investor or its general partner, except for portfolio
companies and provided that such transfer takes place in accordance with
Article 21.2
hereof. Each of the other Parties hereby agrees to unconditionally co-operate to effect any
such transfer.
|
21.2
|
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Notwithstanding any other provisions of this Agreement, no Party shall transfer any Shares to
any transferee which is not bound by the provisions of this Agreement without procuring that
such transferee shall have agreed to become a party to this Agreement effective as from the
moment that it shall be a shareholder of the Company, and by doing so shall have accepted the
rights and obligations under this Agreement which apply to the transferor of the relevant
Shares immediately prior to the transfer of such Shares.
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Article 22. Costs and Expenses
22.1
|
|
All fees, costs and expenses, up to a maximum amount of EUR 30,000 (thirty thousand euro)
charged by the advisor(s) of the Investor in relation to the drawing up and negotiation of
this Agreement and the (notarial) execution thereof, shall, be borne by the Company. All fees,
costs and expenses incurred in excess thereof and all fees, costs and expenses incurred by the
other Parties shall be borne by
|
28/31
22.2
|
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Each of the Parties represents that he/it has not incurred and will not incur any brokerage
fees, agents fees or any other commissions in connection with the transactions contemplated
by this Agreement.
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Article 23. Confidentiality; Announcements
23.1
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|
Each of the Parties agrees to keep secret and strictly confidential and not to use, disclose
or divulge to any third party or to enable or cause any person to become
aware of (except for the purposes of the Companys and/or its subsidiaries business) any
confidential information relating to the Company and/or its subsidiaries including but not
limited to intellectual property (whether owned or licensed by the Company and/or its
subsidiaries), lists of customers, reports, notes, memoranda and all other documentary
records pertaining to the Company and/or its subsidiaries, or its/their business affairs,
finances, suppliers, customers or contractual or other arrangements but excluding any
information which is in the public domain or which they are required to disclose by law or
by the rules of any regulatory body to which the relevant Party is subject.
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23.2
|
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Notwithstanding the previous sub-clause, the Company and the Investor shall have the right to
(i) make such announcements in connection with the participation of the Investor in the
Company as is customary for such Party to make, for example through press releases or
tombstone advertisements in newspapers, provided however that information made public reveals
nothing more than (a) the name of the Investor (b) total invested amount, and (ii) use,
disclose or divulge any such information to its (supervisory) board members, members of their
investment committee or similar committees, other financial investors and financial
institutions in their capacity as lenders to the Company.
|
Article 24. Notices
Any notices given in connection with this Agreement must be in writing and may be given by fax and
registered mail to the addresses referred to in this Agreement or, in respect of any of such
addresses, to such other address as the recipient may notify to the other Parties for such purpose.
29/31
Article 25. Entire Agreement
This Agreement and its Exhibits, annexes and schedules sets out the entire agreement and
understanding between the Parties with respect to the subject matter of this Agreement and
supersedes and terminates all prior understandings, discussions and agreements with respect to the
subject matter of this Agreement between the Parties.
Article 26. General Provisions
26.1
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In accordance with the laws designated to combat money laundering, each Party including any
Party acting on behalf of a fund, hereby certifies:
|
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a.
|
|
that he/it has identified the underlying investors in all the funds for which
he/it is acting; and
|
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b.
|
|
that he/it is unaware of any activities on the part of such investors which
lead it to suspect that anyone of such investors is or has been involved in criminal
conduct or money laundering activities, and that in case of any suspicion of
any such activity he/it will, subject to any legal constraints, inform the competent authorities of such suspicions and activities; and
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c.
|
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he/it will retain, until further notice, all documentation required to identify
the underlying investors in the funds for which he/it is acting.
|
26.2
|
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Amendments to this Agreement, in order to be effective, must be made in writing and be signed
by all Parties to this Agreement
|
26.3
|
|
In the event of any discrepancies or contradictions between this Agreement and the Articles,
this Agreement shall prevail to the extent permitted under the laws of the Netherlands.
|
26.4
|
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Each of the Parties hereby waives its right to have this Agreement rescinded
(ontbonden)
or
to claim the rescission (
ontbinding)
thereof, or to cancel or terminate (
opzeggen
) this
Agreement.
|
26.5
|
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Should any provision of this Agreement be or become partly or entirely invalid or
impractical, then this shall not affect the validity of the remaining provisions.
|
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26.6
|
|
This Agreement shall be governed by and construed in accordance with the laws of
the Netherlands.
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30/31
26.7
|
|
The courts of Amsterdam, the Netherlands shall have exclusive jurisdiction over a
dispute arising out of or in connection with this Agreement, as well as over any claims to
demand performance under this Agreement.
|
In witness whereof this Agreement has been sighed and executed by the Parties hereto in singular on
the 11
th
of January 2008.
|
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/s/ Dr. C.A. van Blitterswijk
|
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/s/ Mr. F.J.W.E.B. van der Velden
|
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Dr. C.A. van Blitterswijk
|
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Mr. F.J.W.E.B. van der Velden
|
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/s/ Mr. H. Yuan
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/s/ Mr. J.D. de Bruijn
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Mr. H. Yuan
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Mr. J.D. de Bruijn
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/s/ J.D. de Bruijn
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/s/ J.D. de Bruijn
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J.D. de Bruijn Holding B.V.
|
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Progentix Orthobiology B.V.
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By: J.D. de Bruijn
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By: J.D. de Bruijn Holding B.V.
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By: J.D. de Bruijn
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/s/ Mr. E.C.M. van Wezel
/s/ Mr. W.M. Hazenberg
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BioGeneration Ventures B.V.
By: BioGeneration Management B.V.
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By: Mr. E.C.M. van Wezel
By: Mr. W.M. Hazenberg
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31/31
EXHIBIT K
FOUNDERS NON-COMPETITION AGREEMENT
THIS FOUNDERS NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Joost D de Bruijn
(
Bruijn
). Terms not otherwise defined herein shall have the respective meanings ascribed to them
in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Bruijn.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE.
Bruijn understands that, solely to extent expressly set forth herein, he is
prohibited from (i) engaging in any competition with the Purchasers group of companies, which
group includes the Company (the
Purchasers Group
) and (ii) soliciting any person of the
Purchasers Group to leave the latter.
2.
NON-COMPETITION.
Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Bruijn agrees that he will not, whether on his own
behalf or on behalf of or in conjunction with any person, directly or indirectly, (i) engage in any
commercial activity with any competitor of the Purchasers Group with respect to any of the
Products in the Field (a
Competing Business
) if such activity is related to the commercialization
of a biologic
(e.g. bone graft material and/or biologically active compound) or other Product or compound
intended to foster bone growth that will compete with the Products and includes a use in spinal
applications (
Competitive Services
), or (ii) provide Competitive Services to, any person (or any
affiliate of any person) who or which is engaged in a Competing Business with respect to such
Competing Business (whether directly or indirectly). Purchaser expressly acknowledges and agrees
that Bruijn is or may become a member of a not-for-profit institution or association (collectively,
the
Institutions
) and notwithstanding anything to the contrary contained herein, nothing in this
Agreement shall preclude or in any way restrict Bruijn from providing educational services at any
such Institution or conducting research at any such Institution. A complete list of the research
activities of Bruijn relating to any biologic or other Product or compound intended to foster bone
growth as of the date of this Agreement is attached hereto as
Exhibit A
.
3.
NON-SOLICITATION.
(a) Bruijn agrees that he will not, whether on his own behalf or on behalf of or in
conjunction with any person, directly or indirectly, 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 the Company and who was immediately prior to the
closing of the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing
),
an employee of the Company to leave the employment of the Company.
(b) Bruijn agrees that he will not, whether on his 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 the Company, any employee of, or consultant then under contract
with the Company who is or has been engaged in the business of the Company (the
Business
).
(c) Bruijn agrees that he will not, directly or indirectly: (i) solicit, induce or attempt to
induce any customer to cease doing business in whole or in part with the Purchasers Group; (ii)
attempt to limit or interfere with any business agreement existing between the Purchasers Group
and any third party; or (iii) disparage the business reputation or employees of the Purchasers
Group or take any actions, knowingly, willfully or, recklessly, that are harmful to the Purchaser
Groups goodwill with their customers, clients, publishers, advertisers, marketers, vendors,
employees, service providers, media or the public.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
BREACH.
In the event of a breach by Bruijn of his obligations pursuant to this Agreement,
Bruijn agrees that he shall forfeit to Purchaser, without any further notice or demand being
required, an immediately payable penalty in the amount of fifty percent (50%) of any amounts
received by Bruijn Holding B.V. under the Preferred Stock Purchase Agreement (the
Liquidated
Damages
) for any such violation, without limiting or precluding the right of the Purchaser to
claim from Bruijn specific performance or any damages which the Purchaser has incurred;
provided
, that any Liquidated Damages collected by Purchaser hereunder shall be offset
against any Damages to which Purchaser is otherwise entitled under the Preferred Stock Purchase
Agreement.
8.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Bruijn and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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|
|
JOOST D DE BRUIJN
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NUVASIVE INC.
|
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By:
|
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|
|
|
|
|
|
Joost D de Bruijn
|
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|
|
Name:
|
|
|
|
|
Title:
|
Exhibit A
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
EXHIBIT L
FOUNDERS NON-COMPETITION AGREEMENT
THIS FOUNDERS NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Clemens van
Blitterswijk
(
Blitterswijk
). Terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands, held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Blitterswijk.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE.
Blitterswijk understands that, solely to extent expressly set forth herein, he is
prohibited from (i) engaging in any competition with the Purchasers group of companies, which
group includes the Company (the
Purchasers Group
) and (ii) soliciting any person of the
Purchasers Group to leave the latter.
2.
NON-COMPETITION
. Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Blitterswijk agrees that he will not, whether on his
own behalf or on behalf of or in conjunction with any person, directly or indirectly; (i) engage in
any commercial activity with any competitor of the Purchasers Group with respect to any of the
Products in the Field (a
Competing Business
) if such activity is related to the commercialization
of a
1
biologic (e.g. bone graft material and/or biologically active compound) or other Product or
compound intended to foster bone growth that will compete with the Products and includes a use in
spinal applications (
Competitive Services
), or (ii) provide Competitive Services to, any person
(or any affiliate of any person) who or which is engaged in a Competing Business. Purchaser
expressly acknowledges and agrees that Blitterswijk is or may become a member of a not-for-profit
institution or association (collectively, the
Institutions
) and notwithstanding anything to the
contrary contained herein, nothing in this Agreement shall preclude or in any way restrict
Blitterswijk from providing educational services at any such Institution or conducting research at
any such Institution. A complete list of the research activities of Blitterswijk relating to any
biologic or other Product or compound intended to foster bone growth as of the date of this
Agreement is attached hereto as
Exhibit A
. Purchaser expressly acknowledges and agrees
that Blitterswijk is or may in the future enter the business of venture capital investing and in
such capacity may review the business plans and related proprietary information of many
enterprises, including enterprises which may have products or services which compete directly or
indirectly with those of the Company and/or Purchaser Group. Nothing in this Agreement shall
preclude or in any way restrict any venture capital firm or similar institutional investor with
which Blitterswijk is affiliated from investing or participating in any particular enterprise, or
any other general partner, member, officer or employee of any such venture capital firm or similar
institutional investor from serving on the board of directors of any enterprise in which it makes
an investment, whether or not such enterprise has products or services which compete with those of
the Company and/or the Purchaser Group.
3.
NON-SOLICITATION.
(a) Blitterswijk agrees that he will not, whether on his own behalf or on behalf of or in
conjunction with any person, directly or indirectly: 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 the Company and who was immediately prior to the
closing of the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing
),
an employee of the Company to leave the employment of the Company.
(b) Blitterswijk agrees that he will not, whether on his 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 the Company, any employee of, or consultant then under contract
with the Company who is or has been engaged in the business of the Company (the
Business
).
(c) Blitterswijk agrees that he will not, directly or indirectly: (i) solicit, induce or
attempt to induce any customer to cease doing business in whole or in part with the Purchasers
Group; (ii) attempt to limit or interfere with any business agreement existing between the
Purchasers Group and any third party; or (iii) disparage the business reputation or employees of
the Purchasers Group or take any actions, knowingly, willfully or, recklessly, that are harmful to
the Purchaser Groups goodwill with their
2
customers, clients, publishers, advertisers, marketers, vendors, employees, service providers,
media or the public.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
BREACH.
In the event of a breach by Blitterswijk of his obligations pursuant to this
Agreement, Blitterswijk agrees that he shall forfeit to Purchaser, without any further notice or
demand being required, an immediately payable penalty in the amount of fifty percent (50%) of any
amounts received by Incubation B.V. under the Preferred Stock Purchase Agreement (the
Liquidated
Damages
) for any such violation, without limiting or precluding the right of the Purchaser to
claim from Blitterswijk specific performance or any damages which the Purchaser has incurred;
provided
, that any Liquidated Damages collected by Purchaser hereunder shall be offset
against any Damages to which Purchaser is otherwise entitled under the Preferred Stock Purchase
Agreement.
8.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Blitterswijk and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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CLEMENS VAN BLITTERSWIJK
|
|
NUVASIVE INC.
|
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By:
|
|
|
|
|
|
|
|
Clemens van Blitterswijk
|
|
|
|
Name:
|
|
|
|
|
Title:
|
3
Exhibit A
***
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
|
4
EXHIBIT M
INVESTOR NON-COMPETITION AGREEMENT
THIS INVESTOR NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Edward van Wezel
(
Wezel
). Terms not otherwise defined herein shall have the respective meanings ascribed to them
in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Wezel.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE
. Wezel understands that, solely to extent expressly set forth herein, he is
prohibited from engaging in any competition with the Purchasers group of companies, which group
includes the Company (the
Purchasers Group
).
2.
NON-COMPETITION.
Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Wezel agrees that he will not personally serve as a
member of the supervisory board (raad van comissarissen) of any party that is a competitor of the
Purchasers Group with respect to any of the Products in the Field if such competitor is engaged in
the business of commercializing a biologic (e.g. bone graft material and/or biologically active
compound) or other Product or compound intended to foster bone growth that will
1
compete with the Products and includes a use in spinal applications (a
Competing Business
).
Wezel further agrees that he will not personally serve as a member of the board of directors or a
substantially equivalent governing body of any Competing Business, if BioGeneration Ventures BV
makes an investment in any such Competing Business outside the Netherlands. Purchaser expressly
acknowledges and agrees that Wezel is in the business of venture capital investing and therefore
(a) Wezel reviews the business plans and related proprietary information of many enterprises,
including enterprises which may have products or services which compete directly or indirectly with
those of the Company and/or Purchaser Group, (b) Wezel monitors investments in Competing
Businesses, including consulting with members of BioGeneration Ventures BV that serve on the board
of directors, and (c) Wezel may take any and all actions on behalf of BioGeneration Ventures BV as
a shareholder of a Competing Business (including, without limitation, the activities described in
clauses (a) and (b) of this Section 2). Nothing in this Agreement shall preclude or in any way
restrict any venture capital firm or similar institutional investor with which Wezel is affiliated
from investing or participating in any particular enterprise, or any other general partner, member,
officer or employee of any such venture capital firm or similar institutional investor from serving
on the supervisory board (raad van comissarissen) or the board of directors or a substantially
equivalent governing body of an entity in which it makes an investment, whether or not such entity
has products or services which compete with those of the Company and/or the Purchaser Group.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Wezel and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
2
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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EDWARD VAN WEZEL
|
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NUVASIVE INC.
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By:
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|
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|
|
|
Edward van Wezel
|
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|
|
Name:
|
|
|
|
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Title:
|
3
EXECUTION COPY
EXHIBIT
10.54
OPTION PURCHASE AGREEMENT
among
NUVASIVE, INC.,
PROGENTIX ORTHOBIOLOGY, B.V.
and
The Sellers listed on
Schedule A
attached hereto
January 13, 2009
TABLE OF CONTENTS
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Page
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1.
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CALL AND PUT OPTIONS
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2
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1.1
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Purchasers Call Option
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2
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1.2
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Sellers Put Option
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4
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1.3
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No Obligation
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6
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1.4
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Closing
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6
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1.5
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Seller Shares
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7
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1.6
|
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Purchase Price
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7
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1.7
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Milestone Payments
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8
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1.8
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Second Put Option
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9
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1.9
|
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Escrow Arrangements
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11
|
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1.10
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Notary
|
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12
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1.11
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Time for Determination; Dispute Mechanism
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12
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1.12
|
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Acknowledgement of Sellers and Purchaser
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14
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1.13
|
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Withholding
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14
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1.14
|
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Working Capital
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14
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2.
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REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE SELLER SHARES
|
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14
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2.1
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Authority; Execution and Delivery; Enforceability
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15
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2.2
|
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Non-Contravention
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15
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2.3
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Title to Seller Shares
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15
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2.4
|
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Consents and Approvals
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15
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2.5
|
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Litigation and Claims
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16
|
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2.6
|
|
No Finder
|
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16
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3.
|
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REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY
|
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16
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3.1
|
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Organization and Good Standing
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16
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3.2
|
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Authority; No Conflict
|
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16
|
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3.3
|
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Capitalization
|
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18
|
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3.4
|
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Financial Statements
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18
|
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3.5
|
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Books and Records
|
|
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18
|
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3.6
|
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Title to Properties; Encumbrances
|
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19
|
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3.7
|
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Condition and Sufficiency of Assets
|
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19
|
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3.8
|
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Accounts Receivable
|
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19
|
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3.9
|
|
Inventory
|
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20
|
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3.10
|
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No Undisclosed Liabilities
|
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20
|
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3.11
|
|
Taxes
|
|
|
20
|
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3.12
|
|
No Material Adverse Change
|
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22
|
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3.13
|
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Pensions
|
|
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22
|
|
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3.14
|
|
Legal Proceedings; Orders
|
|
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22
|
|
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3.15
|
|
Absence of Certain Changes and Events
|
|
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23
|
|
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3.16
|
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Contracts; No Defaults
|
|
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25
|
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3.17
|
|
Insurance
|
|
|
27
|
|
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3.18
|
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Environmental Matters
|
|
|
28
|
|
-i-
TABLE OF CONTENTS
(continued)
|
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Page
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3.19
|
|
Employees
|
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29
|
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3.20
|
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Intellectual Property
|
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29
|
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3.21
|
|
Certain Payments
|
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34
|
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3.22
|
|
Authorizations; Regulatory Compliance
|
|
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34
|
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3.23
|
|
Products; Product Liability
|
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35
|
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3.24
|
|
Customers and Suppliers
|
|
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36
|
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3.25
|
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Capital Expenditures
|
|
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36
|
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3.26
|
|
Relationships with Affiliates
|
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36
|
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3.27
|
|
Brokers
|
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37
|
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3.28
|
|
Disclosure
|
|
|
37
|
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4.
|
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
|
|
37
|
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|
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|
|
|
|
|
4.1
|
|
Organization and Good Standing
|
|
|
37
|
|
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|
4.2
|
|
Authority; No Conflict
|
|
|
37
|
|
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4.3
|
|
Certain Proceedings
|
|
|
38
|
|
|
|
4.4
|
|
Brokers
|
|
|
38
|
|
|
|
4.5
|
|
Issuance of Shares
|
|
|
38
|
|
|
|
4.6
|
|
Securities Law Matters
|
|
|
38
|
|
|
|
4.7
|
|
No Other Representations
|
|
|
39
|
|
|
|
|
|
|
|
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|
|
5.
|
|
COVENANTS
|
|
|
39
|
|
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|
|
|
|
|
|
|
|
|
|
5.1
|
|
Notices; Consents; Filings
|
|
|
39
|
|
|
|
5.2
|
|
Further Assurances
|
|
|
39
|
|
|
|
5.3
|
|
Exclusivity
|
|
|
40
|
|
|
|
5.4
|
|
Notification of Certain Matters
|
|
|
41
|
|
|
|
5.5
|
|
Confidentiality; Publicity
|
|
|
41
|
|
|
|
5.6
|
|
Post-Closing Cooperation
|
|
|
41
|
|
|
|
5.7
|
|
Tax Matters
|
|
|
42
|
|
|
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5.8
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|
Execution of Further Documents
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43
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5.9
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|
Registration Rights
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43
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5.10
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|
Right of First Refusal/Right of Notice
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|
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45
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|
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5.11
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|
Sellers Right to Audit Purchasers Net Sales
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46
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6.
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|
INDEMNIFICATION; REMEDIES
|
|
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46
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6.1
|
|
Survival; Right to Indemnification Not Affected by Knowledge
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46
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6.2
|
|
Indemnification and Payment of Damages by Sellers
|
|
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47
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6.3
|
|
Indemnification and Payment of Damages by Purchaser
|
|
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48
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6.4
|
|
Limitations on Indemnification
|
|
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48
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6.5
|
|
No Bar
|
|
|
49
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|
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6.6
|
|
Procedure for IndemnificationThird Party Claims
|
|
|
49
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|
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6.7
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|
Procedure for IndemnificationOther Claims
|
|
|
50
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|
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6.8
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|
Remedies Exclusive
|
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51
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6.9
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|
Rights of Set-Off
|
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51
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6.10
|
|
Sellers Representative
|
|
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51
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|
-ii-
TABLE OF CONTENTS
(continued)
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Page
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6.11
|
|
***
|
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52
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7.
|
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CLOSING CONDITIONS
|
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53
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7.1
|
|
Conditions Precedent to Obligations of Purchaser
|
|
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53
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|
7.2
|
|
Conditions Precedent to Obligations of Seller Parties
|
|
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55
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8.
|
|
TERMINATION
|
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56
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8.1
|
|
Termination
|
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56
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8.2
|
|
Effect of Termination
|
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|
57
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|
9.
|
|
GENERAL PROVISIONS
|
|
|
57
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9.1
|
|
Expenses
|
|
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57
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|
9.2
|
|
Notices
|
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|
57
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|
9.3
|
|
Jurisdiction; Service of Process
|
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59
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9.4
|
|
Dispute Resolution
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59
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9.5
|
|
Waiver
|
|
|
60
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|
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|
9.6
|
|
Entire Agreement and Modification
|
|
|
60
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|
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|
9.7
|
|
Assignments, Successors, and No Third-Party Rights
|
|
|
60
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|
9.8
|
|
Release of Claims
|
|
|
60
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|
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|
9.9
|
|
Severability
|
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61
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9.10
|
|
Section Headings, Construction
|
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61
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9.11
|
|
Time of Essence
|
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61
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|
9.12
|
|
Governing Law
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61
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|
9.13
|
|
Counterparts
|
|
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61
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10.
|
|
DEFINITIONS
|
|
|
61
|
|
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|
***
|
|
Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.
|
-iii-
SCHEDULES AND EXHIBITS
|
|
|
Schedule A
|
|
Sellers Schedule
|
|
|
|
Exhibit A
|
|
Notarial Deed
|
Exhibit B
|
|
Purchase Election Notice
|
Exhibit C
|
|
Milestone Completion Notice
|
Exhibit D
|
|
Form of True-Up Agreement
|
Exhibit E
|
|
Manufacturing Specifications
|
Exhibit F
|
|
Pre-Clinical Model
|
Exhibit G
|
|
Study Model
|
Exhibit H
|
|
Patent Claims
|
Exhibit I
|
|
Sales Run Rate Amounts
|
Exhibit J
|
|
Opinion of Counsel
|
Exhibit K
|
|
Form of Escrow Agreement
|
Exhibit L
|
|
Founders Non-Competition Agreement (Bruijn)
|
Exhibit M
|
|
Founders Non-Competition Agreement (Blitterswijk)
|
Exhibit N
|
|
Investor Non-Competition Agreement
|
-iv-
OPTION PURCHASE AGREEMENT
THIS OPTION PURCHASE AGREEMENT (
Agreement
)
is made as of January 13, 2009 (
Effective
Date
), by and among NuVasive, Inc., a Delaware corporation (
Purchaser
), Progentix Orthobiology
B.V., a company organized under the laws of the Netherlands (the
Acquired Company
), the
shareholders of the Acquired Company as set forth on
Schedule A
attached hereto (each a
Seller
, and collectively, the
Sellers
, and along with the Acquired Company, the
Seller
Parties
) and Edward van Wezel and Joost D de Bruijn (each, the
Sellers Representative
).
RECITALS
Purchaser and the Seller Parties have entered into a Preferred Stock Purchase Agreement, dated
as of the date hereof (the
Preferred Stock Purchase Agreement
), pursuant to which Purchaser is
purchasing 7,200 ordinary shares
1.00 par value per share, and 1,600 cumulative preference shares,
par value
1.00 per share, of the Acquired Company from the Sellers for an aggregate purchase price
of $10,000,000, which shares shall represent immediately after such issuance, forty percent (40%)
of the outstanding capital stock of the Acquired Company on a fully-diluted basis.
Subject to the terms and conditions set forth herein, (i) Purchaser may elect, in its sole
discretion, to cause Sellers to sell to Purchaser all of their issued and outstanding shares of the
capital stock of the Acquired Company held by them representing the remaining sixty percent (60%)
of the outstanding capital stock of the Company on a fully-diluted basis (the
Seller Shares
) upon
delivery of a Purchase Election Notice (as defined below) to the Sellers Representative at any
time between the second anniversary of the Effective Date and the fourth anniversary of the
Effective Date (the
Call Option Period
), and (ii) Purchaser shall be obligated to purchase from
Sellers all of the Seller Shares in the event (A) the Sellers Representative delivers a Milestone
Completion Notice (as defined below) to Purchaser at any time between the date of this Agreement
and the second anniversary of the Effective Date (the
Put Option Period
) or (B) Purchasers
*** (as defined below) is greater than *** at any time during the Call Option Period.
Any purchase of the Seller Shares by Purchaser shall be referred to herein as an
Acquisition
.
The period from the date of the Option Agreement through the expiration of the Call Option Period
shall be referred to herein as the
Option Period
.
In connection with this Agreement and the Preferred Stock Purchase Agreement, pursuant to a
notarial deed of amendment to the Acquired Companys Articles of Association in the form attached
hereto as
Exhibit A
(the
Amended Articles
), which includes among other things, the
creation of cumulative preference shares A (the
Series A Preferred Stock
) and cumulative
preference shares B (the
Series B Preferred Stock
), and pursuant to the execution of the notarial
deed with respect to the Amended Articles, (i) the cumulative preference shares held by the Sellers
shall be converted into shares of Series A Preferred Stock, and (ii) the Initial Shares (as defined
in the Preferred Stock Purchase Agreement) purchased by Purchaser pursuant
|
|
|
***
|
|
Portions of this page have been omitted pursuant to a request for Confidential Treatment
filed separately with the Commission.
|
1
to the Preferred Stock Purchase Agreement shall be converted into shares of Series B Preferred
Stock, representing, immediately after such issuance, forty percent (40%) of the outstanding
capital stock of the Acquired Company on a fully-diluted basis (the
Recapitalization
). The
Acquired Company has filed a declaration of no-objection with the Dutch Ministry of Justice with
respect to the Amended Articles.
To the extent applicable, the parties have complied with the provisions of the Social and
Economic Council Merger Regulation (
SER-besluit Fusiegedragsregels 2000
) and the Works Council Act
(
Wet op de ondernemingsraden
).
Parties acknowledge that no notification to the Dutch Competition Authority (
Nederlandse
Mededingingsautoriteit
) or any other competition authority is required for the transaction
contemplated by this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.1
Purchasers Call Option
.
(a)
Purchasers Rights
. Purchaser shall have an exclusive option to acquire, at its sole
election and on the terms and conditions set forth herein, all, but not less than all, of the
Seller Shares, which option may be exercised at any time during the Call Option Period. In
connection therewith, each Seller hereby grants to Purchaser an exclusive right, exercisable at any
time during the Call Option Period, to acquire all, but not less than all, of the Seller Shares
held by such Seller on the terms set forth in this
Section 1.1
(the
Call Option
).
(b)
Exercise of Call Option
.
(i)
Notice
. Purchaser may exercise the Call Option by giving notice, in substantially
the form attached hereto as
Exhibit B
(the
Purchase Election Notice
), to the Sellers
Representative (which, in turn, shall deliver copies of the Purchase Election Notice to each
Seller), at any time during the Call Option Period. The Purchase Election Notice shall set forth
the Purchasers calculation of the Initial Purchase Price (as defined below) and the proposed
closing date of the Acquisition (which shall be the Business Day immediately following the
expiration of the Call Option Review Period (as defined below)), in each case, subject to the
dispute resolution procedures set forth in
Section 1.11
.
(ii)
Disclosure Schedules
.
(A) Attached to this Agreement is a schedule of disclosures and exceptions to the
representations and warranties made by the Seller Parties pursuant to
Section 2
and
Section 3
of this Agreement (the
Seller Parties Disclosure Schedule
). At any time and
from time to time during the Call Option Period, but no more than three (3) times during the Call
Option Period, Purchaser may, upon written notice to the Sellers Representative (a
Disclosure
Schedule Request
), require the Seller Parties to prepare, as if such representations and
2
warranties were made as of the date of such request, an updated schedule of disclosures and
exceptions to the representations and warranties of the Seller Parties contained in
Section
2
and
Section 3
of the this Agreement (an
Updated Seller Parties Disclosure
Schedule
), except to the extent any such representations and warranties refer expressly to an
earlier date. The Acquired Company shall prepare and deliver to Purchaser an Updated Seller
Parties Disclosure Schedule within ten (10) days of receipt of a Disclosure Schedule Request by the
Sellers Representative. Any Updated Seller Parties Disclosure Schedule delivered pursuant to this
Agreement shall refer only to (1) disclosures of actual facts contained in the Seller Parties
Disclosure Schedule, and (2) disclosures of actual facts in existence on the date of such Updated
Seller Parties Disclosure Schedule that have occurred or have been discovered since the Effective
Date, and the Updated Seller Parties Disclosure Schedule shall not otherwise limit or modify any of
the representations and warranties made in this Agreement. No disclosure of a fact or event on any
Updated Seller Parties Disclosure Schedule shall be deemed to cure any failure to disclose such
fact or event on any previously delivered Seller Parties Disclosure Schedule or Updated Seller
Parties Disclosure Schedule, or otherwise amend any previously delivered Seller Parties Disclosure
Schedule or Updated Seller Parties Disclosure Schedule.
(B) Within ten (10) days after receipt of the Purchase Election Notice, the Sellers
Representative shall deliver to Purchaser an Updated Seller Parties Disclosure Schedule. The
Updated Seller Parties Disclosure Schedule shall refer only to (1) disclosures of actual facts
contained on the Seller Parties Disclosure Schedule attached to this Agreement, and (2) disclosures
of actual facts in existence on the date of such Updated Seller Parties Disclosure Schedule that
have occurred or been discovered since the Effective Date of this Agreement, and the Updated Seller
Parties Disclosure Schedule shall specifically qualify by the existence of the facts or events set
forth therein (but not otherwise limit or modify) any of the representations and warranties made in
this Agreement. No disclosure of a fact or event on any Updated Seller Parties Disclosure Schedule
shall be deemed to cure any failure to disclose such fact or event on any previously delivered
Seller Parties Disclosure Schedule or Updated Seller Parties Disclosure Schedule, or otherwise
amend any previously delivered Seller Parties Disclosure Schedule or Updated Seller Parties
Disclosure Schedule. In the event an Updated Seller Parties Disclosure Schedule is not delivered
to Purchaser within the ten (10) day time period, the most recent Updated Seller Parties Disclosure
Schedule delivered to the Purchaser, or, if none, the Seller Parties Disclosure Schedule, shall be
deemed to be the final Updated Seller Parties Disclosure Schedule for all purposes of this
Agreement, and all references in this Agreement to the Updated Seller Parties Disclosure Schedule
shall be deemed to refer to such most recent Updated Seller Parties Disclosure Schedule or Seller
Parties Disclosure Schedule, as applicable.
(iii)
Review Period
. Purchaser shall have a further period of ten (10) days after
receipt of such Updated Seller Parties Disclosure Schedule to review such Updated Seller Parties
Disclosure Schedule (or if no such Updated Seller Parties Disclosure Schedule is delivered within
the time period specified in paragraph above, then ten (10) days following the expiration of such
period) (the
Call Option Review Period
), and shall have the right at its election to rescind its
exercise of the Call Option, in its sole discretion, at any time during the Call Option Review
Period by notice to the Sellers Representative (the
Call Option Rescission Notice
), if it is not
satisfied in any manner with its review of such Updated Seller Parties Disclosure Schedule. In the
event that Purchaser delivers a Call Option Rescission Notice to the
3
Sellers Representative within the Call Option Review Period, Purchaser shall be deemed to
have not exercised the Call Option at such time, and the parties respective rights and obligations
under this Agreement shall continue as though no Purchase Election Notice had been delivered until
the expiration of the Call Option Period. In the event that Purchaser does not deliver a Call
Option Rescission Notice during the Call Option Review Period, the closing of the Acquisition shall
be consummated on the later of (x) the Business Day immediately following expiration of the Call
Option Review Period in accordance with the terms herein and (y) the Business Day immediately
following the final determination of the Initial Purchase Price pursuant to
Section 1.11
.
1.2
Sellers Put Option
.
(a)
Purchasers Obligations
. In the event that the Acquired Company achieves the Base
Milestones (as defined below) during the Put Option Period, Purchaser shall have an obligation,
subject to
Section 1.2(b)(iii)
below, to acquire all of the Seller Shares on the terms and
conditions set forth herein (the
Put Option
). In connection therewith, subject to
Section
1.2(b)(iii)
, Purchaser shall have a binding obligation to acquire from each Seller all, but not
less than all, of the Seller Shares held by such Seller on the terms set forth in this
Section
1.2
.
(b)
Exercise of Put Option
.
(i)
Notice
. The Sellers Representative shall exercise the Put Option and cause
Purchaser to consummate the Acquisition by delivery of a written notice to Purchaser specifying
successful completion of the Base Milestones in the form attached hereto as
Exhibit C
(the
Milestone Completion Notice
). The Milestone Completion Notice shall also set forth the Sellers
Representatives calculation of the Initial Purchase Price (as defined below) and the proposed
closing date of the Acquisition (which shall be the Business Day immediately following the
expiration of the Put Option Review Period (as defined below) subject to the exceptions set forth
in
Section 1.2(b)(iii)
below), and in each case, subject to the dispute resolution
procedures set forth in
Section 1.11
.
(ii)
Disclosure Schedules
. Along with the Milestone Completion Notice delivered by
the Sellers Representative, the Sellers Representative shall deliver to Purchaser an Updated
Seller Parties Disclosure Schedule. The Updated Seller Parties Disclosure Schedule shall refer
only to (A) disclosures of actual facts contained on the Seller Parties Disclosure Schedule
attached to this Agreement; and (B) disclosures of actual facts in existence on the date of such
Updated Seller Parties Disclosure Schedule that have occurred or been discovered since the
Effective Date, and the Updated Seller Parties Disclosure Schedule shall specifically qualify by
the existence of the facts or events set forth therein (but not otherwise limit or modify) any of
the representations and warranties made in this Agreement. No disclosure of a fact or event on any
Updated Seller Parties Disclosure Schedule shall be deemed to cure any failure to disclose such
fact or event on any previously delivered Seller Parties Disclosure Schedule or Updated Seller
Parties Disclosure Schedule, or otherwise amend any previously delivered Seller Parties Disclosure
Schedule or Updated Seller Parties Disclosure Schedule. In the event an Updated Seller Parties
Disclosure Schedule is not delivered to Purchaser with the Milestone Completion Notice, the most
recent Updated Seller Parties Disclosure Schedule delivered to Purchaser, or, if none, the Seller
Parties Disclosure Schedule,
4
shall be deemed to be the final Updated Seller Parties Disclosure Schedule for all purposes of
this Agreement, and all references in this Agreement to the Updated Seller Parties Disclosure
Schedule shall be deemed to refer to such most recent Updated Seller Parties Disclosure Schedule or
Seller Parties Disclosure Schedule, as applicable.
(iii)
Review Period
. Purchaser shall have a period of ten (10) days after receipt of
such Updated Seller Parties Disclosure Schedule to review such Updated Seller Parties Disclosure
Schedule (or if no such Updated Seller Parties Disclosure Schedule is delivered within the time
period specified in paragraph above, then ten (10) days following the expiration of such period) (a
Put Option Review Period
), and shall not be obligated to consummate the Acquisition by notice to
the Sellers Representative (a
Put Option Rescission Notice
), if (A) any Seller Parties have
materially breached any of the representations, warranties or covenants set forth in this Agreement
or the Preferred Stock Purchase Agreement or Purchasers rights under the Amended Articles or the
Seller Parties are unable to deliver the certificate required under
Section 7.1(e)
hereof,
(B) the Acquired Company has suffered or incurred a Material Adverse Effect, (C) the Acquired
Company is subject to (1) an Action or there is an Action Threatened involving a claim that any
Product infringes the proprietary rights of a third party, (2) an Action or there is an Action
Threatened involving a claim that any Product has resulted in personal injury or death to a human
patient or Purchaser in good faith has determined that a Product recall is required to correct a
material defect in any Product, or (3) an Action or there is an Action Threatened or an
investigation proceeding by any Governmental Body regarding the conduct of the Acquired Company or
involving any Product, or (D) any of the Sellers breach their non-competition obligations under the
Founders Non-Competition Agreements (as defined in the Preferred Stock Purchase Agreement) or the
Investor Non-Competition Agreement (as defined in the Preferred Stock Purchase Agreement),
Notwithstanding the foregoing, in the event Purchaser disputes in good faith that the Base
Milestones have not been successfully completed, then Purchaser shall not be obligated to
consummate the Acquisition until the Purchaser and Sellers resolve the dispute in accordance with
Section 1.11
. In the event that Purchaser delivers a Put Option Rescission Notice to the
Sellers Representative within the Put Option Review Period, Purchaser shall not be obligated to
consummate the Acquisition and Purchaser shall be entitled, at its sole option, to terminate this
Agreement in accordance with
Section 8
herein. In the event that none of the events
described in clause (A),(B),(C), or (D) have occurred, the closing of the Acquisition shall be
consummated on the later of (x) the Business Day immediately following expiration of the Put Option
Review Period in accordance with the terms herein and (y) the Business Day immediately following
the final determination of the Initial Purchase Price pursuant to
Section 1.11
, provided
that in the event that Company delivers a Milestone Completion Notice to Purchaser prior to January
1, 2010, the consummation of the Acquisition shall not occur until after January 1, 2010, at which
time the consummation of the Acquisition shall occur at a date and time mutually agreeable to
Purchaser and the Sellers Representative, which date and time shall be no later than March 31,
2010.
(iv)
Cure Period
. In the event that Purchaser delivers a Put Option Rescission Notice
to the Sellers Representative as a result of any of the events described in clause (A),(B), or (C)
in
Section 1.2(b)(iii)
above and this Agreement is not terminated pursuant to
Section
1.2(b)(iii)
, and the event which triggered the Put Option Rescission Notice is cured at any
time prior to seven (7) years from the Effective Date of this Agreement, then the Sellers
5
Representative shall notify Purchaser within ten (10) Business Days of such cure (the
Cure
Notice
) and shall deliver to Purchaser an Updated Seller Parties Disclosure Schedule at such time.
Any Updated Seller Parties Disclosure Schedule delivered pursuant to this Section shall refer only
to (A) disclosures of actual facts contained in the Seller Parties Disclosure Schedule, and (B)
disclosures of actual facts in existence on the date of such Updated Seller Parties Disclosure
Schedule that have occurred or have been discovered since the date of this Agreement, and the
Updated Seller Parties Disclosure Schedule shall not otherwise limit or modify any of the
representations and warranties made in this Agreement. No disclosure of a fact or event on any
Updated Seller Parties Disclosure Schedule shall be deemed to cure any failure to disclose such
fact or event on any previously delivered Seller Parties Disclosure Schedule or Updated Seller
Parties Disclosure Schedule, or otherwise amend any previously delivered Seller Parties Disclosure
Schedule or Updated Seller Parties Disclosure Schedule. In the event an Updated Seller Parties
Disclosure Schedule is not delivered to Purchaser with the Cure Notice, the most recent Updated
Seller Parties Disclosure Schedule delivered to Purchaser, or, if none, the Seller Parties
Disclosure Schedule, shall be deemed to be the final Updated Seller Parties Disclosure Schedule for
all purposes of this Agreement, and all references in this Agreement to the Updated Seller Parties
Disclosure Schedule shall be deemed to refer to such most recent Updated Seller Parties Disclosure
Schedule or Seller Parties Disclosure Schedule, as applicable. Upon delivery by the Sellers
Representative of the Cure Notice and the Updated Seller Parties Disclosure Schedule to Purchaser,
Purchaser shall have an exclusive option (the
Cure Option
) to acquire, at its sole election and
on the terms set forth in the Milestone Completion Notice, all, but not less than all, of the
Seller Shares within thirty (30) days of receiving the Cure Notice and the Updated Seller Parties
Disclosure Schedule (the
Cure Option Period
). Purchaser may exercise the Cure Option by
delivering a Purchase Election Notice to the Sellers Representative at any time during the Cure
Option Period. The Purchase Election Notice shall set forth the Initial Purchase Price (as set
forth in the Milestone Completion Notice) and the proposed closing date of the Acquisition (which
shall be the Business Day immediately following the expiration of the Cure Option Period), in each
case, subject to the dispute resolution procedures set forth in
Section 1.11
.
1.3
No Obligation
. Notwithstanding anything to the contrary in this Agreement, none of the
parties hereto shall have any obligation to consummate the Acquisition unless and until Purchaser
delivers a Purchase Election Notice to the Sellers Representative or the Sellers Representative
delivers a Milestone Completion Notice or a Second Put Option Notice (as defined below) to
Purchaser. The parties agree and acknowledge that Purchaser is under no obligation to deliver any
Purchase Election Notice or any Disclosure Schedule Request at any time.
1.4
Closing
. Subject to the fulfillment or waiver of all of the conditions contained in
Section 7
, on the closing date specified in the Purchase Election Notice, the Milestone
Completion Notice or the Second Put Option Notice, as the case may be, or, if later, the Business
Day immediately following the final determination of the Initial Purchase Price pursuant to
Section 1.11
, a closing (the
Closing
) will be held at the offices of DLA Piper Nederland
N.V., Meerparc, Amstelveenseweg 638, 1081 JJ Amsterdam, the Netherlands (or such other place as
the parties may agree), to the extent required in the presence of the Notary, and the date of
Closing is referred to herein as the
Closing Date
. On the Closing Date, Purchaser and Seller
Parties shall cause the Acquisition to be consummated.
6
1.5
Seller Shares
. Subject to the terms and conditions of this Agreement, at the Closing, the
Notary shall execute the deed of transfer of the Seller Shares through the notarial deed in the
form substantially attached hereto as
Exhibit A
. Immediately thereafter, the Notary shall
transfer the Initial Purchase Price to the Sellers in accordance with the instruction letter from
the Notary.
1.6
Purchase Price
.
(a) The initial purchase price for the Shares will be calculated as set forth in Section
1.6(b) below (the
Initial Purchase Price
). At the Closing, Purchaser shall transfer 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
), equal to the Initial Purchase Price
minus
(i) the Escrow Amounts, (ii) the Seller Funded Expenses and (iii) the Loan Amount
(the
Upfront Payment
) to the third party account of the Notary in accordance with the
instructions in the Notary Instruction Letter. Prior to the transfer of the Seller Shares, the
Notary shall hold the Upfront Payment on behalf of Purchaser. After the transfer of the Seller
Shares, the Notary shall hold the Upfront Payment on behalf of the Sellers. As soon as possible
after the Closing, but in any event within one (1) Business Day of the Closing Date, the Notary
shall pay to Sellers the Upfront Payment, pursuant to the allocation set forth on
Schedule
A
attached hereto (the
Proceeds Allocation
) and to the bank accounts or brokerage accounts so
indicated by the Sellers. If there are any changes to the Proceeds Allocation after the Effective
Date, the Sellers Representative shall notify Purchaser within five (5) Business Days of any such
changes, and shall deliver to Purchaser an updated Proceeds Allocation executed by each of the
Sellers (a
Revised Proceeds Allocation
). Unless and until Purchaser receives a Revised Proceeds
Allocation, Sellers shall be bound by the Proceeds Allocation set forth on
Schedule A
attached hereto.
(b) If Purchaser elects to issue shares of Purchaser Common Stock in respect of some or all of
the Upfront Payment, then:
(i) prior to such issuance and upon request by Purchaser, (A) Sellers 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
(B) the number of shares of Purchaser Common Stock to be issued shall be equal to (x) the Upfront
Payment less the amount of any cash transferred to the Notary in respect of the Initial Purchase
Price, divided by (y) the closing price of the Purchaser Common Stock on the Qualified Stock
Exchange on the Closing Date;
(ii) to the extent that the Upfront Payment consists of cash and Purchaser Common Stock, each
Seller shall receive the same proportion of cash and Purchaser Common Stock as each other Seller;
and
(iii) at each Sellers sole election, Purchaser shall execute the True-Up Agreement in
substantially the form attached hereto as
Exhibit D
with respect to the shares of Purchaser
Common Stock issued to each Seller so electing.
(c) The Initial Purchase Price shall be determined as follows:
7
(i) The Initial Purchase Price shall be $45,000,000 plus, if applicable, any amounts payable
pursuant to
Section 1.6(c)(iii)
if (x) the Sellers Representative delivers a Milestone
Completion Notice to the Purchaser during the Put Option Period and (y) each of the following
milestones (each, a
Base Milestone
, and collectively, the
Base Milestones
) has been achieved by
the Acquired Company on or prior to the date of the Milestone Completion Notice:
(A) ***;
(B) ***; and
(C) The Acquired Company has successfully completed ***.
(ii) In the event Purchaser delivers a Purchase Election Notice to the Sellers Representative
during the Call Option Period, the Initial Purchase Price shall be $35,000,000, and in no event
shall the Purchaser be obligated to pay Sellers any amounts in respect of the Milestones.
(iii) In addition to the amounts specified in
Section 1.6(c)(i)
, the Initial Purchase
Price shall be increased by the following amounts if, in addition to the Base Milestones, any of
the following milestones (each an
Additional Milestone
, and collectively the
Additional
Milestones
) has been achieved by the Acquired Company prior to delivery of the Milestone
Completion Notice. The Base Milestones and the Additional Milestones shall together be referred to
herein as the
Milestones
.
(A) $5,000,000, provided the Acquired Company has successfully completed the ***;
(B) $5,000,000, provided the Acquired Company is issued a patent *** (the
Patent
);
(C) $10,000,000, provided ***, except as provided in
Section 5.11
hereof; and
(D) $5,000,000, provided ****, except as provided in
Section
5.11
hereof.
1.7
Milestone Payments
. From and after the Closing Date but prior to the expiration of the
Put Option Period (the
Post-Closing Milestone Period
), in addition to the consideration set forth
in
Section 1.6(c)
above, in the event that (x) the Acquired Company has achieved the Base
Milestones and the Sellers Representative has delivered a Milestone Completion Notice, but the
Acquired Company has not achieved an Additional Milestone on the Closing Date, and (y) the Acquired
Company achieves the Additional Milestone during the Post-Closing Milestone Period, Purchaser shall
pay to Sellers the additional amount payable in respect of such Additional Milestone in cash or, at
Purchasers sole election, in shares of Purchaser Common
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Stock, as set forth in
Section 1.6(b)(iii)
(each, a
Milestone Payment
, and
collectively, the
Milestone Payments
). The Milestone Payments and the Initial Purchase Price
shall be referred to herein together as the
Aggregate Purchase Price
. Upon achieving an
Additional Milestone, Purchaser shall promptly provide written notice to Sellers Representative
specifying the Additional Milestone achieved, and Purchaser shall pay the applicable Milestone
Payment to Sellers within ten (10) Business Days thereof to the bank accounts or brokerage accounts
indicated by the Sellers in accordance with the Proceeds Allocation, subject in each case, to the
dispute resolution procedures set forth in
Section 1.11
. In the event of a Change of
Control of Purchaser, Purchaser agrees to either (a) cause the acquirer to assume, whether in
writing or by operation of law, all remaining Milestone Payments subject to the terms and
conditions set forth herein or (b) accelerate the remaining Milestone Payments such that the
Milestone Payments become payable immediately prior to the closing of the Change of Control
transaction.
1.8
Second Put Option
.
(a)
Purchasers Obligations
. From the date of the expiration of the Put Option Period through
the fourth anniversary of the Effective Date (the
Second Put Option Period
), in the event the
Purchasers *** is greater than *** at any time during the Second Put Option Period (the
Second Put Option Condition
), Purchaser shall be obligated to purchase from Sellers all of the
Seller Shares in accordance with the terms of
Section 1.6(a)
for an Initial Purchase Price
of $35,000,000, less (i) the Escrow Amounts, (ii) the Seller Funded Expenses and (iii) the Loan
Amount provided, that at no time shall Purchaser be required to validate its *** to the
Sellers, except as provided in
Section 5.11
hereof, and provided further, that in no event
shall the Purchaser be obligated to pay to Sellers any amounts in respect of Milestones (the
Second Put Option
).
(b)
Exercise of Second Put Option
.
(i)
Notice
. In the event a Second Put Option is triggered, Purchaser shall notify the
Sellers Representative of such event within five (5) Business Days, and thereafter, the Sellers
Representative shall have ten (10) Business Days to exercise the Second Put Option and cause
Purchaser to consummate the Acquisition by delivery of a written notice to Purchaser by the
Sellers Representative (
Second Put Option Notice
) specifying the Initial Purchase Price and the
date that the closing of the Acquisition shall be consummated pursuant to
Section 1.8(c)
below.
(ii)
Disclosure Schedules
. Along with the Second Put Option Notice delivered by the
Sellers Representative to Purchaser, the Sellers Representative shall deliver to Purchaser an
Updated Seller Parties Disclosure Schedule. The Updated Seller Parties Disclosure Schedule shall
refer only to (A) disclosures of actual facts contained on the Seller Parties Disclosure Schedule
attached to this Agreement; and (B) disclosures of actual facts in existence on the date of such
Updated Seller Parties Disclosure Schedule that have occurred or been discovered since the
Effective Date, and the Updated Seller Parties Disclosure Schedule shall specifically qualify by
the existence of the facts or events set forth therein (but not otherwise limit or modify) any of
the representations and warranties made in this Agreement. No
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disclosure of a fact or event on any Updated Seller Parties Disclosure Schedule shall be deemed to
cure any failure to disclose such fact or event on any previously delivered Seller Parties
Disclosure Schedule or Updated Seller Parties Disclosure Schedule, or otherwise amend any
previously delivered Seller Parties Disclosure Schedule or Updated Seller Parties Disclosure
Schedule. In the event an Updated Seller Parties Disclosure Schedule is not delivered to Purchaser
with the Second Put Option Notice, the most recent Updated Seller Parties Disclosure Schedule
delivered to Purchaser, or, if none, the Seller Parties Disclosure Schedule, shall be deemed to be
the final Updated Seller Parties Disclosure Schedule for all purposes of this Agreement, and all
references in this Agreement to the Updated Seller Parties Disclosure Schedule shall be deemed to
refer to such most recent Updated Seller Parties Disclosure Schedule or Seller Parties Disclosure
Schedule, as applicable.
(iii)
Review Period
. Purchaser shall have a period of ten (10) days after receipt of
such Updated Seller Parties Disclosure Schedule to review such Updated Seller Parties Disclosure
Schedule (or if no such Updated Seller Parties Disclosure Schedule is delivered within the time
period specified in paragraph above, then ten (10) days following the expiration of such period) (a
Second Put Option Review Period
), and shall not be obligated to consummate the Acquisition by
notice to the Sellers Representative (a
Second Put Option Rescission Notice
), if (A) any Seller
Parties have materially breached any of the representations, warranties or covenants set forth in
this Agreement or the Preferred Stock Purchase Agreement or Purchasers rights under the Amended
Articles or the Seller Parties are unable to deliver the certificate required under
Section
7.1(e)
hereof, (B) the Acquired Company has suffered or incurred a Material Adverse Effect, (C)
the Acquired Company is subject to (1) an Action or there is an Action Threatened involving a claim
that any Product infringes the proprietary rights of a third party, (2) an Action or there is an
Action Threatened involving a claim that any Product has resulted in personal injury or death to a
human patient or Purchaser in good faith has determined that a Product recall is required to
correct a material defect in any Product, or (3) an Action or there is an Action Threatened or an
investigation proceeding by any Governmental Body regarding the conduct of the Acquired Company or
involving any Product, or (D) any of the Sellers breach their non-competition obligations under the
Founders Non-Competition Agreements (as defined in the Preferred Stock Purchase Agreement) or the
Investor Non-Competition Agreement (as defined in the Preferred Stock Purchase Agreement). In the
event that Purchaser delivers a Second Put Option Rescission Notice to the Sellers Representative
within the Second Put Option Review Period, Purchaser shall not be obligated to consummate the
Acquisition and Purchaser shall be entitled, at its sole option, to terminate this Agreement in
accordance with
Section 8
herein. In the event that none of the events described in clause
(A),(B),(C), or (D) have occurred, the closing of the Acquisition shall be consummated on the later
of (x) the Business Day immediately following expiration of the Second Put Option Review Period in
accordance with the terms herein and (y) the Business Day immediately following the final
determination of the Initial Purchase Price pursuant to
Section 1.11
.
(iv)
Second Cure Period
. In the event that Purchaser delivers a Second Put Option
Rescission Notice to the Sellers Representative as a result of any of the events described in
clause (A),(B), or (C) in
Section 1.8(b)(iii)
above and this Agreement is not terminated
pursuant to
Section 1.8(b)(iii)
, and the event which triggered the Second Put Option
Rescission Notice is cured at any time prior to seven (7) years from the Effective Date of this
Agreement, then the Sellers Representative shall notify Purchaser within ten (10) Business Days
10
of such cure (the
Second Cure Notice
) and shall deliver to Purchaser an Updated Seller Parties
Disclosure Schedule at such time. Any Updated Seller Parties Disclosure Schedule delivered
pursuant to this Section shall refer only to (A) disclosures of actual facts contained in the
Seller Parties Disclosure Schedule, and (B) disclosures of actual facts in existence on the date of
such Updated Seller Parties Disclosure Schedule that have occurred or have been discovered since
the date of this Agreement, and the Updated Seller Parties Disclosure Schedule shall not otherwise
limit or modify any of the representations and warranties made in this Agreement. No disclosure of
a fact or event on any Updated Seller Parties Disclosure Schedule shall be deemed to cure any
failure to disclose such fact or event on any previously delivered Seller Parties Disclosure
Schedule or Updated Seller Parties Disclosure Schedule, or otherwise amend any previously delivered
Seller Parties Disclosure Schedule or Updated Seller Parties Disclosure Schedule. In the event an
Updated Seller Parties Disclosure Schedule is not delivered to Purchaser with the Second Cure
Notice, the most recent Updated Seller Parties Disclosure Schedule delivered to Purchaser, or, if
none, the Seller Parties Disclosure Schedule, shall be deemed to be the final Updated Seller
Parties Disclosure Schedule for all purposes of this Agreement, and all references in this
Agreement to the Updated Seller Parties Disclosure Schedule shall be deemed to refer to such most
recent Updated Seller Parties Disclosure Schedule or Seller Parties Disclosure Schedule, as
applicable. Upon delivery by the Sellers Representative of the Second Cure Notice and the Updated
Seller Parties Disclosure Schedule to Purchaser, Purchaser shall have an exclusive option (the
Second Cure Option
) to acquire, at its sole election and on the terms set forth in the Milestone
Completion Notice, all, but not less than all, of the Seller Shares within thirty (30) days of
receiving the Second Cure Notice and the Updated Seller Parties Disclosure Schedule (the
Second
Cure Option Period
). Purchaser may exercise the Second Cure Option by delivering a Purchase
Election Notice to the Sellers Representative at any time during the Second Cure Option Period.
The Purchase Election Notice shall set forth the Initial Purchase Price (as set forth in the Second
Put Option Notice) and the proposed closing date of the Acquisition (which shall be the Business
Day immediately following the expiration of the Second Put Option Review Period), in each case,
subject to the dispute resolution procedures set forth in
Section 1.11
.
1.9
Escrow Arrangements.
(a) Subject to the terms and conditions of this Agreement and the Escrow Agreement, at the
Closing, Purchaser shall deposit in an account (the
Escrow Account
) with U.S. Bank National
Association, or another escrow agent mutually agreeable to the Purchaser and the Acquired Company,
provided such escrow agent is a bank or trust company organized under the laws of the United States
of America or of the State of New York having (or if such bank or trust company is a member of a
bank company, its bank holding company shall have) a combined capital and surplus of not less than
$50,000,000 (the
Escrow Agent
), out of the Initial Purchase Price, an aggregate of ten percent
(10%) of the Initial Purchase Price plus an amount equal to $1,500,000 (the
General Escrow
Amount
) for claims for Damages pursuant to Section 6.2 hereof, which amounts shall be in cash and
not shares of Purchaser Common Stock.
(b) Subject to the terms and conditions of this Agreement and the Escrow Agreement, at the
Closing, Purchaser shall deposit in the Escrow Account with the Escrow
11
Agent, out of the Initial Purchase Price, an aggregate of *** (the
Special Escrow Amount
,
and together with the General Escrow Amount, the
Escrow Amounts
) for claims for Damages in
connection with ***, which amounts shall be in cash and not shares of Purchaser Common Stock.
1.10
Notary
. The Sellers are aware that the Notary is a civil law notary working at DLA Piper
Nederland N.V., the firm that advises Purchaser in respect of the matters set out in this
Agreement. With reference to the Code of Conduct (
Verordening beroeps- en gedragsregels
)
established by the Royal Notarial Professional Organization (
Koninklijke Notariële
Beroepsorganisatie
), parties hereby acknowledge and confirm that (i) the Notary shall execute any
and all deeds related to the Closing Documents; and (ii) Purchaser is assisted and represented by
DLA Piper Nederland N.V. in relation to the Closing Documents and any other agreements that may be
concluded, or disputes that may arise, in connection therewith.
1.11
Time for Determination; Dispute Mechanism
.
(a)
Initial Purchase Price
. If Purchaser, at any time, objects to the Sellers determination
that a Milestone has been completed, then Purchaser shall deliver a dispute notice (a
Pre-Closing
Milestone Dispute Notice
) to the Sellers Representative within fifteen (15) days following
delivery of the Milestone Completion Notice. Purchaser, on the one hand, and the Sellers
Representative, on the other, shall attempt in good faith to resolve any such objections within
fifteen (15) days of the receipt by the Sellers Representative of the Pre-Closing Milestone
Dispute Notice. If no Pre-Closing Milestone Dispute Notice is delivered within the fifteen (15)
day time period, then the Initial Purchase Price specified in the Milestone Completion Notice shall
be deemed to be accepted.
(b)
Milestone Payments.
In the event that any Sellers believe that any Additional Milestone
has been achieved during the Post-Closing Milestone Period, the Sellers Representative shall
provide notice of such achievement to Purchaser. If Purchaser determines in its sole and
reasonable discretion that such Additional Milestone has been achieved during the Post-Closing
Milestone Period, then within thirty (30) days of such notice from Sellers Representative or, if
earlier, within thirty (30) days of Purchasers determination that such Additional Milestone has
been achieved, Purchaser shall notify Sellers Representative of its determination and pay to
Sellers the Additional Milestone Payment payable in respect of such Additional Milestone. If
Sellers Representative delivers such a notice and Purchaser determines, in its sole and reasonable
discretion, that the applicable Additional Milestone has not been achieved, then, within thirty
(30) days of Sellers Representatives notice Purchaser shall notify Sellers Representative of
such determination. If Sellers Representative believes that Sellers are entitled to payment of
all or any portion of an Additional Milestone Payment hereunder which they have not received within
thirty (30) days following the achievement of the Additional Milestone for which payment is due,
Sellers Representative may, not later than twelve (12) months following the achievement of such
Additional Milestone, deliver to Purchaser a notice setting forth Sellers Representatives
determination that all or a portion of such Additional Milestone Payment is due under this
Agreement (the
Post-Closing Assessment Notice
). If Sellers Representative does not deliver to
Purchaser a Post-Closing Assessment
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Notice within such twelve (12) month period, then Sellers shall have been deemed to agree that the
Additional Milestone has not been met and no payment with respect to such Additional Milestone is
due to Sellers hereunder and Sellers shall have no further rights to such Milestone Payment or any
portion thereof. Such Post-Closing Assessment Notice may be delivered before or after the
expiration of the Post-Closing Milestone Period without affecting Sellers rights to the applicable
Milestone Payment, provided that that applicable Additional Milestone was actually achieved prior
to the expiration of such Post-Closing Milestone Period. If Purchaser shall object to Sellers
determination that a Additional Milestone has been achieved as set forth in the Post-Closing
Assessment Notice, then Purchaser shall deliver a dispute notice (a
Post-Closing Milestone Dispute
Notice
) to Sellers Representative within fifteen (15) days following Sellers Representatives
delivery of the Post-Closing Assessment Notice. A representative of Purchaser, on the one hand,
and the Sellers Representative, on the other, shall attempt in good faith to resolve any such
objections within fifteen (15) days of the receipt by Sellers of the Post-Closing Milestone Dispute
Notice. If no Post-Closing Milestone Dispute Notice is delivered within the fifteen (15) day time
period, then Sellers determination that the Additional Milestone has been achieved, and that the
amount of the Milestone Payment specified in the Post-Closing Milestone Dispute Notice is due
hereunder, shall be deemed to be accepted and Purchaser shall pay to Sellers those amounts set
forth in the Post-Closing Assessment Notice no later than five (5) days after the expiration of
such fifteen (15) day time period.
(c)
Second Put Option Condition
. If Sellers at any time believe that the Second Put Option
Condition has been satisfied and Sellers Representative has not received a Second Put Option
Notice, the Sellers Representative shall deliver a notice of such achievement to Purchaser no
later than thirty (30) days after the expiration of the Second Put Option Period (the
Second Put
Option Dispute Notice
, and together with any Pre-Closing Milestone Dispute Notice and any
Post-Closing Milestone Dispute Notice, a
Dispute Notice
). Purchaser, on the one hand, and the
Sellers Representative, on the other, shall attempt in good faith to resolve within fifteen (15)
days of the receipt by Purchaser of the Second Put Option Dispute Notice whether the Second Put
Option Condition has been satisfied. If Sellers Representative fails to deliver the Second Put
Option Dispute Notice within thirty (30) days following the expiration of the Second Put Option
Period, it shall be definitively determined that the Second Put Option Condition has not been
satisfied.
(d)
Dispute Resolution
. If Purchaser and Sellers shall be unable to resolve any such dispute
within the fifteen (15) day period following the non-objecting partys receipt of a Dispute Notice,
then within five (5) days thereafter, Purchaser and the Sellers Representative shall designate an
arbitrator to resolve any and all matters that remain in dispute and were properly included in the
Dispute Notice. The dispute shall be resolved by arbitration in New York, New York administered by
the American Arbitration Association in accordance with its Commercial Arbitration Rules (the
AAA
Rules
),
provided
,
however
, that Purchaser and the Sellers Representative shall
agree on the selection of an independent medical or scientific expert (the
Independent Expert
)
who will make a report to the arbitrator which the arbitrator will be required to use as the basis
for his or her decision. In the event that Purchaser and the Sellers Representative are unable to
agree on the arbitrator within such five (5) day period, AAA will have the authority to select an
arbitrator within five (5) Business Days thereafter. In the event that Purchaser and the Sellers
Representative are unable to agree on the Independent Expert, the arbitrator shall have the
authority to determine the Independent Expert. The Sellers
13
Representative and Purchaser shall use reasonable efforts to cause the arbitrator to render a
written decision resolving the matters submitted on a timely basis to the arbitrator within thirty
(30) days of the receipt of such submission. The arbitrators decision shall be based solely on
written submissions made on a timely basis by the Sellers Representative and Purchaser and their
respective representatives and not by independent review. The arbitrator shall address only those
items in dispute and may not assign a value greater than the greatest value for such item claimed
by either party or smaller than the smallest value for such item claimed by either party. Judgment
may be entered upon the determination of the arbitrator in any court having jurisdiction over the
party against which such determination is to be enforced. The fees and expenses of the arbitrator
incurred pursuant to this
Section 1.11(d)
shall be borne by Purchaser and Sellers (in
accordance with their respective Proceeds Allocations), pro rata, based on the difference between
the amount of the Initial Purchase Price or Milestone Payment (as the case may be), as finally
determined by the arbitrator pursuant to this clause (d), and the amount of the Initial Purchase
Price or Milestone Payment (as the case may be) asserted by each party in the Milestone Completion
Notice, the Post-Closing Assessment Notice or the Second Put Option Notice, as the case may be, and
the Dispute Notice, as applicable.
1.12
Acknowledgement of Sellers and Purchaser
. Sellers and Purchaser acknowledge that (i)
Purchaser has no obligation to aid or assist the Acquired Company in order to achieve any Milestone
or to maximize any Milestone, (ii) the parties solely intend the express provisions of the Closing
Documents to govern their contractual relationship, and (iii) unless and until Purchaser, at its
sole election, issues a Purchase Election Notice, or unless and until the Sellers Representative
issues a Milestone Completion Notice or Second Put Option Notice, Purchaser is under no obligation
to purchase the Seller Shares from Sellers. The Sellers hereby waive, on their behalf and on
behalf of any of their successors and assigns, any fiduciary duty (but, for avoidance of doubt, not
any implied covenant of good faith and fair dealing) of Purchaser to Sellers, with respect to the
matters contemplated by this
Section 1.12
.
1.13
Withholding.
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to Sellers such amounts as Purchaser is required to
deduct and withhold under any Tax law, with respect to the making of such payment. Purchaser shall
notify Sellers of the basis for such withholding no less than fifteen (15) days prior to the
proposed withholding and shall consider in good faith any views of Sellers with respect to whether
such withholding is required under the United States Internal Revenue Code of 1986 (as amended), or
any provisions of state or local Tax law, with respect to the making of such payment, provided
however, that Sellers provide to Purchaser such documentation as Purchaser reasonably requests to
support Sellers views with respect to whether such withholding is required.
1.14
Working Capital.
One (1) day prior to the Closing, the Sellers Representative shall
deliver to Purchaser a financial statement setting forth the Working Capital of the Business on the
Closing Date.
2.
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REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE SELLER SHARES
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Each Seller, severally but not jointly, hereby represents and warrants to Purchaser as to such
Seller and the Seller Shares owned by such Seller, as set forth below. Each exception to such
representations and warranties set forth in the Seller Parties Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific section of this
Agreement
,
and the disclosures in any section or subsection of the Seller Parties Disclosure
Schedule shall qualify other sections and subsections in this Agreement to the extent it is
reasonably apparent from a reading of the disclosure that such disclosure is applicable to such
other sections and subsections.
2.1
Authority; Execution and Delivery; Enforceability.
Each Seller has full power, authority
and capacity to execute and deliver this Agreement and to perform such Sellers respective
obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Seller and constitutes the legal, valid and binding
obligation of such Seller enforceable against such Seller in accordance with its terms, subject to
bankruptcy and other similar Legal Requirements of general applicability relating to or affecting
creditors rights and to general equity principles.
2.2
Non-Contravention.
The execution and delivery of this Agreement by such Seller does not,
and the consummation of the transactions contemplated hereby and compliance with the terms hereof,
will not (or would not with the giving of notice or the passage of time):
(a) constitute a default under or a violation or breach (with or without notice) of, result in
the acceleration of any obligation under, any provision of any contract or other instrument to
which such Seller is a party or result in the termination or revocation of any authorization held
by such Seller or the Acquired Company necessary to the ownership of the Seller Shares or the
operation of the business of the Acquired Company;
(b) violate any Order or any Legal Requirement affecting such Seller; or
(c) result in the creation of any Encumbrance on the Seller Shares.
2.3
Title to Seller Shares.
Each Seller is and will be on the Closing Date the holder and
beneficial owner of the Seller Shares owned by such Seller. The Seller Shares owned by such Seller
as of the Effective Date are as set forth on Part 2.3 of the Seller Parties Disclosure Schedule.
Each Seller has good and valid title to the Seller Shares owned by such Seller as set forth on Part
0 of the Seller Parties Disclosure Schedule, free and clear of all Encumbrances. At the Closing,
each Seller will transfer legal and beneficial, good and valid title to each of the Seller Shares
owned by such Seller, free and clear of all Encumbrances. No Seller is bound by any contract,
agreement, arrangement, commitment or understanding (written or oral) with, and has not granted any
option or right currently in effect or which would arise after the Effective Date to, any Person
other than Purchaser with respect to the acquisition of any Seller Shares.
2.4
Consents and Approvals.
Except as set forth in the Seller Parties Disclosure Schedule, no
consent, approval, waiver, license, permit, order or authorization of, or registration, declaration
or filing with, any Governmental Body, and no consent, approval, waiver or other similar
authorization of any other Person (including, without limitation, any Person who is a party to a
Contract binding on or affecting the Acquired Company or any Subsidiary), is required
15
to be obtained by or on behalf of such Sellers as a result of, or in connection with, or as a
condition of the lawful execution, delivery and performance of this Agreement or the consummation
of the transactions contemplated hereby.
2.5
Litigation and Claims.
There is no Action pending or, to the Knowledge of such Seller,
Threatened, against or affecting such Seller that could reasonably be expected to affect such
Sellers ability to consummate the transactions contemplated hereby.
2.6
No Finder.
Except as set forth in the Seller Parties Disclosure Schedule, neither such
Seller nor any party acting on such Sellers behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the transactions contemplated
hereby, and the Acquired Company will not be liable or obligated in any way whatsoever with respect
to any such fee or commission.
3.
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REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY
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The Acquired Company hereby represents and warrants to Purchaser as set forth below. Each
exception to such representations and warranties set forth in the Seller Parties Disclosure
Schedule is identified by reference to, or has been grouped under a heading referring to, a
specific section of this Agreement, and the disclosures in any section or subsection of the Seller
Parties Disclosure Schedule shall qualify other sections and subsections in this Agreement to the
extent it is reasonably apparent from a reading of the disclosure that such disclosure is
applicable to such other sections and subsections.
3.1
Organization and Good Standing
.
(a) Part 3.1 of the Seller Parties Disclosure Schedule contains a complete and accurate list
for the Acquired Company of its name, its jurisdiction of incorporation, other jurisdictions in
which it is authorized to do business, and its capitalization (including the identity of each
stockholder and the number of shares held by each), in each case as of the Effective Date. The
Acquired Company is a corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets that it purports to
own or use, and to perform all its obligations under Applicable Contracts. The Acquired Company is
a private company with limited liability duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the activities conducted
by it, requires such qualification, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect.
(b) The Acquired Company made available to Purchaser in the Data Room copies of the
Organizational Documents of the Acquired Company, as currently in effect.
3.2
Authority; No Conflict
.
(a) The Closing Documents to which the Acquired Company is a party have been authorized by the
board of directors (
Board of Directors
) of the Acquired Company and, to the extent required, by
the shareholders of the Acquired Company. Upon the execution and
16
delivery by the Acquired Company of such Closing Documents, such Closing Documents will constitute
the legal, valid, and binding obligations of the Acquired Company, enforceable against it in
accordance with their respective terms, subject to bankruptcy and other similar Legal Requirements
of general applicability relating to or affecting creditors rights and to general equity
principles. The execution and delivery of such Closing Documents by the Acquired Company and the
performance of the Contemplated Transactions by it does not conflict with any provision of the
Organizational Documents of the Acquired Company.
(b) Neither the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Acquired Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy
or obtain any relief under, any Legal Requirement or any Order to which the Acquired Company, or
any of the assets owned or used by the Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the terms or requirements
of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by the Acquired Company or that otherwise
relates to the business of, or any of the assets owned or used by, the Acquired Company;
(iv) cause the Acquired Company to become subject to, or to become liable for the payment of,
any Tax;
(v) cause any of the assets owned by the Acquired Company to be reassessed or revalued by any
taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of any provision of, or
give any Person the right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or with respect to any of
the assets owned or used by the Acquired Company, other than Permitted Encumbrances.
Except as set forth in Part 3.2 of the Disclosure Schedule the Acquired Company is not nor will it
be required to give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
17
3.3
Capitalization
. As of the Effective Date (without giving effect to the Recapitalization),
the authorized equity securities of the Acquired Company consist of 60,000 ordinary shares, par
value
1 per share, of which 18,000 shares are issued and outstanding and 30,000 cumulative
preference shares, par value
1 per share, of which 4,000 shares are issued and outstanding. As of
the Effective Date, no shares or classes of the Acquired Companys capital are reserved for
issuance. No reference to any purported Encumbrance appears in the shareholders register of the
Acquired Company. All of the outstanding equity securities of the Acquired Company have been duly
authorized and validly issued and are fully paid. Except as set forth in Part 3.3 of the Seller
Parties Disclosure Schedule, as of the Effective Date, there are no Contracts relating to the
issuance, sale, transfer or voting of any issued or issuable equity securities or other securities
(including, but not limited, to any options, stock appreciation rights, warrants or other
instruments or securities exercisable or exchangeable for, or convertible into, equity securities)
of the Acquired Company. None of the outstanding equity securities or other securities of the
Acquired Company was issued in violation of any Legal Requirement. As of the Effective Date, the
Acquired Company does not own, nor does it have any Contract to acquire, any equity securities or
other securities of any Person or any direct or indirect equity or ownership interest in any other
business. As of the Effective Date, the Acquired Company does not have any Subsidiaries.
3.4
Financial Statements
. The Acquired Company has made available to Purchaser in the Data
Room the unaudited balance sheet of the Acquired Company and the related unaudited statements of
income, changes in stockholders equity, and cash flow balance sheet of the Acquired Company as of
December 31, 2008 (the
Balance Sheet
) and the related unaudited statements of income, changes in
shareholders equity, and cash flow for the twelve (12) months then ended (collectively, the
Financial Statements
), including in each case the notes thereto (except that the unaudited
Financial Statements may not contain all required footnotes and the interim Financial Statements
are subject to year-end adjustments). The Financial Statements fairly present in all material
respects the financial condition and the results of operations, changes in stockholders equity,
and cash flow of the Acquired Company as at the respective dates of and for the periods referred to
in the Financial Statements. The Financial Statements referred to in this
Section 3.4
reflect the consistent application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such Financial Statements. No financial statements of any
Person other than the Acquired Company are required to be included in the consolidated financial
statements of the Acquired Company.
3.5
Books and Records
. The books and records of the Acquired Company, all of which have been
made available to Purchaser in the Data Room, are complete and correct in all material respects and
have been maintained in accordance with sound business practices in the Netherlands, including the
maintenance of an adequate system of internal controls. The minute books of the Acquired Company
contain materially accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Board of Directors and the Supervisory Board of Directors of the
Acquired Company, and no meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the Acquired Company.
18
3.6
Title to Properties; Encumbrances
. As of the Effective Date, the Acquired Company does
not own (a) any real property, (b) any leasehold interests or (c) any buildings, plants, structures
and/or equipment. Part 3.6 of the Seller Parties Disclosure Schedule contains a complete and
accurate list as of the Effective Date of all (A) Assets that the Acquired Company purports to own,
including all of the properties and assets reflected in the Balance Sheet (except for assets held
under capitalized leases disclosed or not required to be disclosed in Part 3.6 of the Seller
Parties Disclosure Schedule and personal property sold since the date of the Balance Sheet, as the
case may be, in the Ordinary Course of Business), and (B) all of the properties and assets
purchased or otherwise acquired by the Acquired Company from the date of the Balance Sheet through
the Effective Date (except for personal property acquired and sold since the date of the Balance
Sheet in the Ordinary Course of Business and consistent with past practice), which subsequently
purchased or acquired properties and assets (other than inventory and short-term investments) are
listed in Part 3.6 of the Seller Parties Disclosure Schedule. The Acquired Company is the sole
owner and has good and marketable title (or leasehold title, as the case may be) to the Assets free
and clear of all Encumbrances, and the Assets reflected in the Balance Sheet are free and clear of
all Encumbrances and are not, in the case of real property, subject to any rights of way, building
use restrictions, exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (i) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists, (ii) mortgages or
security interests incurred in connection with the purchase of property or assets after the date of
the Balance Sheet (such mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse of time or both,
would constitute a default) exists, (iii) liens for current taxes not yet due, (iv) Encumbrances
pursuant to the Pledge Agreement or the Facility Agreement and (v) Encumbrances incurred in the
Ordinary Course of Business, consistent with past practice, or created by the express provisions of
the Contracts, each of the type identified on Part 3.6 of the Seller Parties Disclosure Schedule
(together, the
Permitted Encumbrances
). All such 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, ordinary wear and tear excepted.
3.7
Condition and Sufficiency of Assets
. As of the Effective Date, except as set forth on
Part 3.7 of the Seller Parties Disclosure Schedule, the Assets are all assets of the Acquired
Company used in or related to the processing and manufacturing of the Products. Xpand
Biotechnology B.V., a private company with limited liability (
Xpand
), transferred to the Acquired
Company the Acquired Company Proprietary Rights and prior to such transfer of the Acquired Company
Proprietary Rights, Xpand was the sole and rightful owner of the Acquired Company Proprietary
Rights. Except as set forth on Part 3.7 of the Seller Parties Disclosure Schedule, the Assets and
the Acquired Company Proprietary Rights of the Acquired Company constitute all of the assets,
property, real personal or mixed, tangible or intangible, of the Acquired Company used in or held
for use in for the operation of the Business as presently conducted as of the Effective Date.
3.8
Accounts Receivable
. As of the Effective Date, the Acquired Company has no accounts
receivable, nor has it previously had any accounts receivable prior to the Effective Date.
19
3.9
Inventory
. As of the Effective Date, the Acquired Company has no inventory, nor has it
previously had any inventory prior to the Effective Date.
3.10
No Undisclosed Liabilities
. As of the Effective Date, the Acquired Company has no
liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations reflected or reserved against in
the Balance Sheet, except for (a) liabilities or obligations reflected or reserved against in the
Balance Sheet, (b) liabilities or obligations incurred since the Balance Sheet Date in the Ordinary
Course of Business, (c) liabilities of a type or nature not required to be reflected in the
Financial Statements, which are not material, individually or in the aggregate, or (d) liabilities
or obligations set forth in Part 3.10 of the Seller Parties Disclosure Schedule. Except as set
forth in Part 3.10 of the Seller Parties Disclosure Schedule the Acquired Company is not a
guarantor or indemnitor of any Indebtedness of any other Person.
3.11
Taxes
.
(a) The Acquired Company has paid on a timely basis all Taxation that was due and payable on
or before the Closing Date. The unpaid taxes of the Acquired Company for all Tax periods through
the Balance Sheet Date do not exceed the accruals and reserves for Taxation (excluding accruals and
reserves for deferred Taxation established to reflect timing differences between book and Tax
income) set forth on the Balance Sheet.
(b) All notices and returns required to have been given or made, have been properly and duly
submitted by the Acquired Company to the relevant Governmental Body and all information, notices,
computations and returns submitted to such Governmental Body are true, accurate and complete and
are not the subject of any dispute nor are likely to become the subject of any dispute with such
Governmental Body. The Acquired Company has not been informed by any Governmental Body that such
Governmental Body formally asserts that the Acquired Company was required to file any Tax Return
that was not filed, and, to the Sellers Knowledge, no such assertion is planned by any
Governmental Body. The Acquired Company has not (i) waived any statute of limitations with respect
to Taxation, (ii) requested any extension of time within which to file any Tax Return, or (iii)
executed or filed any power of attorney with any taxing authority. All records that the Acquired
Company is required to keep for Taxation purposes, have been duly kept and are available for
inspection at the Acquired Company premises.
(c) The amount of Taxation chargeable to the Acquired Company has not been affected by any
concession, arrangements, agreement or other formal or informal arrangement with any Governmental
Body (not being a concession, agreement or arrangement available to companies generally). The
Acquired Company is not subject to a special Tax regime. The Acquired Company is not required to
include any amounts in income, or to exclude any items of deduction in a taxable period beginning
after the Closing Date as a result of: (i) an instalment sale or open transaction arising in a
taxable period ending on or before the Closing Date; (ii) a prepaid amount received, or paid, in a
taxable period ending on or before the Closing Date; (iii) deferred gains that could be recognized
in a taxable period ending after the Closing Date; or (iv) any similar item of deferred income or
expense.
20
(d) In relation to Tax, the Acquired Company has not been subject to and is not currently
subject as of the Effective Date to any investigation, audit or visit by any Governmental Body,
and, to the Sellers Knowledge, no such investigation, audit or visit is planned by any
Governmental Body.
(e) Since its incorporation through the Effective Date, the Acquired Company has not been
involved in any Taxation controversy and/or litigation with or against any Governmental Body.
(f) The Acquired Company has made all deductions and/or withholdings in respect, or in
account, of any Taxation from any payments made by the Acquired Company that it is obliged or
entitled to have made and has accounted in full to the appropriate authority for all amounts so
deducted and/or withheld.
(g) The Acquired Company has not received any notice from any Governmental Body that required
or will require the Acquired Company to withhold Taxation from any payment made since the Balance
Sheet Date in respect of which such withheld Taxation has not been accounted for in full to the
appropriate authority.
(h) The Acquired Company has not claimed or been granted exemptions from Taxation that may
give rise to the assessment and/or payment of Taxation in connection with any transactions
involving the Acquired Company, including but not limited to this Agreement, reorganisations,
mergers and/or disposals of the Acquired Company.
(i) All applications by the Acquired Company for governmental subsidies, which have been made
or are reflected in the Balance Sheet have been duly and correctly made and no refunds and no
interest, penalties or additions regarding such refunds are or will be due in respect of
governmental subsidies.
(j) The Acquired Company
(i) has always been resident, for Tax purposes, in the Netherlands;
(ii) is not and has never been resident, for Tax purposes, in any other jurisdiction;
(iii) does not have and has never had a taxable presence outside the Netherlands; and
(iv) is not deemed to have and has never been deemed to have had a taxable presence outside
the Netherlands.
(k) No Taxation, for which any other person or entity is or may be liable, will be charged in
any way to the Acquired Company, and the Acquired Company is not a party to or bound by any Tax
indemnity, Tax sharing, Tax allocation or similar agreement.
21
(l) Each transaction between the Sellers or any Affiliate of the Sellers on the one hand and
the Acquired Company on the other hand is and has been done at an arms length basis.
(m) The Acquired Company is not liable for Taxation imposed on or due by any third party,
including, without limitation, any sub-contractor, the Sellers or any Affiliate of the Sellers,
except to the extent that full provision has been made in the Financial Statements of the Acquired
Company.
(n) Other than by their own expiration over time, there is no limitation on the utilization by
the Acquired Company of its net operating losses, built-in losses, Tax credits or similar items
under the Tax laws of any jurisdiction (other than any such limitations arising as a result of the
consummation of the Contemplated Transactions).
(o) The Acquired Company does not own any interest in any entity that is characterized as a
partnership for Tax purposes.
(p) There are no Tax liens or other Encumbrances with respect to Taxation upon any of the
Assets of the Acquired Company, other than with respect to Permitted Encumbrances.
(q) The Acquired Company has delivered or made available to Purchaser in the Data Room for
inspection (i) complete and correct copies of all Tax Returns of the Acquired Company relating to
Taxation and (ii) complete and correct copies of all documents from any Governmental Body received
by or agreed to by or on behalf of the Acquired Company relating to Taxation since the Acquired
Companys formation.
3.12
No Material Adverse Change
. Since the date of the Balance Sheet, there has not been a
Material Adverse Effect.
3.13
Pensions.
As of the Effective Date, the Acquired Company has no, and has never had any
retirement benefit schemes, early retirement schemes, pre-pension schemes or other pension
arrangements, relating to the Business (the
Pension Schemes
), in operation or proposed.
3.14
Legal Proceedings; Orders
.
(a) There is no pending Proceeding:
(i) that has been commenced by or against the Acquired Company or that otherwise relates to or
may affect the business of, or any of the assets owned or used by, the Acquired Company; or
(ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.
To Sellers Knowledge, (1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the commencement
22
of any such Proceeding. Seller Parties have made available to Purchaser in the Data Room copies of
all pleadings, correspondence, and other documents relating to each Proceeding listed in Part
3.14(a) of the Seller Parties Disclosure Schedule. The Proceedings listed in Part 3.14(a) of the
Seller Parties Disclosure Schedule could not reasonably be expected to have a Material Adverse
Effect.
(b) There is no Order to which the Acquired Company, or any of the assets owned or used by the
Acquired Company, is subject.
(c) No officer, director, agent, or employee of the Acquired Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the Acquired Company.
(d) The Acquired Company is, and at all times has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of the assets owned or used by it, is or
has been subject.
(e) No event has occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Acquired Company, or any of the assets owned or used by the Acquired
Company, is subject.
(f) The Acquired Company has not received, at any time, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Acquired Company, or any of the assets owned or used by the Acquired
Company, is or has been subject.
3.15
Absence of Certain Changes and Events
. Except as set forth in Part 3.15 of the Seller
Parties Disclosure Schedule, since the Balance Sheet Date through the Effective Date, the Acquired
Company has conducted its business only in the Ordinary Course of Business and none of the
following actions or events has occurred:
(a) any material loss, damage or destruction to, or any material interruption in the use of,
any of the assets of the Acquired Company (whether or not covered by insurance) that has had or
could reasonably be expected to have a Material Adverse Effect;
(b) (i) any declaration, accrual, set aside or payment of any dividend or any other
distribution in respect of any shares of capital stock of the Acquired Company, or (ii) any
repurchase, redemption or other acquisition by the Acquired Company of any shares of capital stock
or other securities;
(c) any sale, issuance or grant, or authorization of the issuance of, (i) shares or other
securities of the Acquired Company, (ii) any option, warrant or right to acquire any shares or any
other securities of the Acquired Company, or (iii) any instrument convertible into or exchangeable
for shares or other securities of the Acquired Company;
23
(d) any amendment or waiver of any of the rights of the Acquired Company under any share
purchase agreement;
(e) any amendment to any Organizational Document of the Acquired Company, any merger,
consolidation, share exchange, business combination, recapitalization, reclassification of shares,
share split, reverse share split or similar transaction involving the Acquired Company;
(f) any creation of any Subsidiary of the Acquired Company or acquisition by the Acquired
Company of any equity interest or other interest in any other Person;
(g) any capital expenditure by the Acquired Company which, when added to all other capital
expenditures made on behalf of the Acquired Company since the Balance Sheet Date, exceeds
10,000
in the aggregate;
(h) except in the Ordinary Course of Business, any action by the Acquired Company to (i) enter
into or suffer any of the assets owned or used by it to become bound by any Material Contract (as
defined in Section 3.16), or (ii) amend or terminate, or waive any material right or remedy under,
any Material Contract;
(i) any (i) acquisition, lease or license by the Acquired Company of any material right or
other material asset from any other Person, (ii) sale or other disposal or lease or license by the
Acquired Company of any material right or other material asset to any other Person, or (iii) waiver
or relinquishment by the Acquired Company of any right, except for rights or other assets acquired,
leased, licensed or disposed of in the Ordinary Course of Business;
(j) any write-off as uncollectible, or establishment of any extraordinary reserve with respect
to, any Indebtedness of the Acquired Company;
(k) any pledge of any assets of or sufferance of any of the assets of the Acquired Company to
become subject to any Encumbrance, except for Permitted Encumbrances and pledges of immaterial
assets made in the Ordinary Course of Business;
(l) any (i) loan by the Acquired Company to any Person, or (ii) any incurrence or guarantee of
Indebtedness by the Acquired Company;
(m) any (i) adoption, establishment, entry into or amendment by the Acquired Company of any
Pension Scheme or (ii) payment of any bonus or any profit sharing or similar payment to, or
material increase in the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of the directors or officers of the Acquired Company;
(n) any change of the methods of accounting or accounting practices of the Acquired Company in
any material respect;
(o) any material Tax election by the Acquired Company;
24
(p) any commencement or settlement of any Proceeding by the Acquired Company; and
(q) any agreement or commitment to take any of the actions referred to in clauses (c) through
(p) above.
3.16
Contracts; No Defaults
.
(a) Part 3.16(a) of the Seller Parties Disclosure Schedule contains a complete and accurate
list as of the Effective Date, and Seller Parties have made available to Purchaser in the Data Room
true and complete copies of, each Contract, other instrument or document (including of any
amendments) to which the Acquired Company is a party or by which its assets are subject or bound:
(i) with any director, officer or Affiliate of the Acquired Company;
(ii) evidencing, governing or relating to Indebtedness;
(iii) not entered into in the Ordinary Course of Business that involves expenditures or
receipts;
(iv) that in any way purports to restrict the business activity of the Acquired Company or any
of its Affiliates or to limit the freedom of the Acquired Company or any of its Affiliates to
engage in any line of business or to compete with any Person or in any geographic area or to hire
or retain any Person;
(v) relating to the employment of, or the performance of services by, any employee or
consultant, or pursuant to which the Acquired Company is or may become obligated to make any
severance, termination or similar payment to any current or former employee or director; or
pursuant to which the Acquired Company is or may become obligated to make any bonus or similar
payment (other than payments constituting base salary) to any current or former employee or
director;
(vi) (A) relating to the acquisition, transfer, development, sharing or license of any
Proprietary Rights (except for any Contract pursuant to which (1) any Proprietary Rights is
licensed to the Acquired Company under any third party software license generally available to the
public, or (2) any Proprietary Rights is licensed by the Acquired Company to any Person on a non
exclusive basis); or (B) of the type referred to in
Section 3.20(d)
;
(vii) providing for indemnification of any officer, director, employee or agent;
(viii) (A) relating to the acquisition, issuance, voting, registration, sale or transfer of
any securities, (B) providing any Person with any preemptive right, right of participation, right
of maintenance or any similar right with respect to any securities, or (C) providing the Acquired
Company with any right of first refusal with respect to, or right to repurchase or redeem, any
securities;
25
(ix) incorporating or relating to any guaranty, any warranty or any indemnity or similar
obligation, except for Contracts substantially identical to the standard forms of end user licenses
made available by Seller Parties to Purchaser in the Data Room;
(x) relating to any currency hedging;
(xi) (A) imposing any confidentiality obligation on the Acquired Company or any other Person,
or (B) containing standstill or similar provisions;
(xii) (A) to which any Governmental Body is a party or under which any Governmental Body has
any rights or obligations, or (B) directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between the Acquired Company and any contractor or
subcontractor to any Governmental Body);
(xiii) contemplating or involving the payment or delivery of cash or other consideration in an
amount or having a value in excess of
5,000 in the aggregate, or contemplating or involving the
performance of services having a value in excess of
5,000 in the aggregate; and
(xiv) any other Contract, if a breach of such Contract could reasonably be expected to have a
Material Adverse Effect.
(b) Each of the foregoing is a
Material Contract
.
(i) Each Material Contract is valid and in full force and effect, and is enforceable against
the Acquired Company in accordance with its terms, subject to bankruptcy and other similar Legal
Requirements of general applicability relating to or affecting creditors rights and to general
equity principles.
(ii) The Acquired Company has not violated or breached, or committed any default under, any
Material Contract, except for violations, breaches and defaults that have not had and would not
reasonably be expected to have a Material Adverse Effect; and, to Sellers Knowledge, no other
Person has violated or breached, or committed any default under, any Material Contract, except for
violations, breaches and defaults that have not had and would not reasonably be expected to have a
Material Adverse Effect.
(iii) Except as set forth on Part 3.16(b) of the Seller Parties Disclosure Schedule, to
Sellers Knowledge, no event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will or would reasonably be expected to, (A) result in a violation
or breach of any of the provisions of any Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Material Contract, (C) give any Person the right
to receive or require a rebate, chargeback, penalty or change in delivery schedule under any
Material Contract, (D) give any Person the right to accelerate the maturity or performance under
any Material Contract, (E) result in the disclosure, release or delivery of the Acquired Company
Source Code, or (F) give any Person the right to cancel, terminate or modify any Material Contract,
except in each such case for defaults, acceleration rights, termination rights and other rights
that have not had and would not reasonably be expected to have a Material Adverse Effect.
26
(iv) The Acquired Company has not received any notice or other communication regarding any
actual or possible violation or breach of, or default under, any Material Contract, except in each
such case for defaults, acceleration rights, termination rights and other rights that have not had
and would not reasonably be expected to have a Material Adverse Effect.
3.17
Insurance
.
(a) Seller Parties have made available to Purchaser in the Data Room:
(i) true and complete copies of all policies of insurance to which the Acquired Company is a
party or under which the Acquired Company, or any director of the Acquired Company, in his capacity
as such, is or has been covered at any time preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies of insurance; and
(iii) any statement by the auditor of the Acquired Companys financial statements with regard
to the adequacy of such entitys coverage or of the reserves for claims.
(b) The Acquired Company:
(i) has no self-insurance arrangements by or affecting the Acquired Company, including any
reserves established thereunder;
(ii) has not concluded contracts or arrangements, other than a policy of insurance, for the
transfer or sharing of any risk by the Acquired Company;
(iii) has made available to Purchaser in the Data Room all obligations of the Acquired Company
to third parties with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided; and
(iv) has not suffered any loss experience or received any claim under any policy for the
current policy year.
(c) All policies to which the Acquired Company is a party or that provide coverage to the
Acquired Company, or any director or officer of the Acquired Company in his capacity as such:
(i) are valid, outstanding, and enforceable;
(ii) are issued by an insurer that is financially sound and reputable;
(iii) taken together, provide adequate insurance coverage for the assets and the operations of
the Acquired Company for all risks normally insured against by a Person carrying on the same
business or businesses as the Acquired Company;
27
(iv) are sufficient for compliance with all Legal Requirements and Contracts to which the
Acquired Company is a party or by which any of them is bound;
(v) will continue in full force and effect following the consummation of the Contemplated
Transactions; and
(vi) do not provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Acquired Company.
(d) The Acquired Company has not received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations thereunder.
(e) The Acquired Company has paid all premiums due, and has otherwise performed all of its
respective obligations, under each policy to which the Acquired Company is a party or that provides
coverage to the Acquired Company or director thereof.
(f) The Acquired Company has given notice to the insurer of all claims that may be insured
under any policy provided by such insurer.
3.18
Environmental Matters
.
(a) The Acquired Company is, and at all times has been, in material compliance with, and has
not been and is not in violation of or liable under, any Environmental Law. To Sellers Knowledge,
there is no actual order, written notice, or other written communication from, nor has any order,
notice, or other communication been Threatened from (i) any Governmental Body or private citizen,
or (ii) the current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets (whether real, personal, or
mixed) in which the Acquired Company had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported,
used, or processed by the Acquired Company, or any other Person for whose conduct they are or may
be held responsible, or from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to Sellers Knowledge, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed) in which the
Acquired Company has or had an interest.
(c) The Acquired Company has not received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with any
28
Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the
cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or
any other properties or assets (whether real, personal, or mixed) in which the Acquired Company had
an interest, or with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the Acquired Company, or any
other Person for whose conduct they are or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) The Acquired Company has no Environmental, Health, and Safety Liabilities with respect to
the Facilities or, with respect to any other properties and assets (whether real, personal, or
mixed) in which the Acquired Company (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any such other property or
assets.
(e) Except as set forth on Part 3.18(e) of the Seller Parties Disclosure Schedule, there are
no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed)
or other containers, either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. The Acquired Company has not permitted or conducted any, and to Sellers
Knowledge there is no, Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Acquired Company has or had an
interest.
(f) There has been no Release or, to Sellers Knowledge, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or processed from or by
the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in
which the Acquired Company has or had an interest, or any geologically or hydrologically adjoining
property.
(g) The Acquired Company has delivered to Purchaser true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by the Acquired Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Acquired Company with Environmental Laws.
3.19
Employees
. The Acquired Company has no employees, nor has it ever had any employees,
prior to the Effective Date. The Acquired Company is not a party to any collective labour
agreement.
3.20
Intellectual Property
.
(a) With respect to Proprietary Rights of the Acquired Company:
(i) Part 3.20(a)(i)(A) of the Seller Parties Disclosure Schedule lists all of the Patents
owned by the Acquired Company as of the Effective Date, setting forth in each
29
case the jurisdictions in which Issued Patents have been issued and Patent Applications have been
filed. Part 3.20(a)(i)(B) of the Seller Parties Disclosure Schedule lists all of the Patents in
which the Acquired Company has any right, title or interest as of the Effective Date (including
without limitation interest acquired through a license or other right to use) other than those
owned by the Acquired Company, setting forth in each case the jurisdictions in which the Issued
Patents have been issued and Patent Applications have been filed, and the nature of the right,
title or interest held by the Acquired Company. Except as set forth on Part 3.20(a)(i)(A) of the
Seller Parties Disclosure Schedule, the Acquired Company has obtained a Patent with respect to each
Product;
(ii) Part 3.20(a)(ii)(A) of the Seller Parties Disclosure Schedule lists all of the Registered
Trademarks owned by the Acquired Company as of the Effective Date, setting forth in each case the
jurisdictions in which Registered Trademarks have been registered and trademark applications for
registration have been filed. Part 3.20(a)(ii)(B) of the Seller Parties Disclosure Schedule lists
all of the Registered Trademarks in which the Acquired Company has any right, title or interest as
of the Effective Date, other than those owned by the Acquired Company (including without limitation
interest acquired through a license or other right to use), setting forth in each case the
jurisdictions in which Registered Trademarks have been registered and trademark applications for
registration have been filed, and the nature of the right, title or interest held by the Acquired
Company;
(iii) Part 3.20(a)(iii)(A) of the Seller Parties Disclosure Schedule lists all of the
Registered Copyrights owned by the Acquired Company as of the Effective Date, setting forth in each
case the jurisdictions in which Copyrights have been registered and applications for copyright
registration have been filed. Part 3.20(a)(iii)(B) of the Seller Parties Disclosure Schedule lists
all of the Registered Copyrights in which the Acquired Company has any right, title or interest as
of the Effective Date, other than those owned by the Acquired Company (including without limitation
interest acquired through a license or other right to use), setting forth in each case the
jurisdictions in which the Registered Copyrights have been registered and applications for
copyright registration have been filed, and the nature of the right, title or interest held by the
Acquired Company; and
(iv) The Acquired Company has good and valid title to all of the Acquired Company Proprietary
Rights identified in Parts 3.20(a)(i)(A), 3.20(a)(ii)(A) and 3.20(a)(iii)(A) of the Seller Parties
Disclosure Schedule and all Trade Secrets owned by the Acquired Company, free and clear of all
Encumbrances, except for Permitted Encumbrances. The Acquired Company has a valid right to use,
license and otherwise exploit all Proprietary Rights identified in Parts 3.20(a)(i)(B),
3.20(a)(ii)(B), and 3.20(a)(iii)(B) of the Seller Parties Disclosure Schedule and all Trade Secrets
used by the Acquired Company, other than those owned by the Acquired Company (including without
limitation interest acquired through a license or other right to use). Except as set forth on Part
3.20(a)(iv) of the Seller Parties Disclosure Schedule, the Acquired Company Proprietary Rights
identified in Part 3.20(a) of the Seller Parties Disclosure Schedule, together with the Trade
Secrets used by the Acquired Company, constitutes (A) all Proprietary Rights used or currently
proposed as of the Effective Date to be used in the business of the Acquired Company as conducted
prior to or on the Effective Date, or as proposed to be conducted by Acquired Company as of the
Effective Date
30
and (B) all Proprietary Rights necessary or appropriate to make, use, offer for sale, sell or
import the Product(s).
(b) Part 3.20(b) of the Seller Parties Disclosure Schedule lists all oral and written
contracts, agreements, licenses and other arrangements relating to the Acquired Company Proprietary
Rights or the Product(s) as of the Effective Date, as follows:
(i) Part 3.20(b)(i) lists as of the Effective Date: (A) any agreement granting any right to
make, have made, manufacture, use, sell, offer to sell, import, export, or otherwise distribute any
Product(s), with or without the right to sublicense the same, on an exclusive basis; (B) any
license of Proprietary Rights to or from the Acquired Company, with or without the right to
sublicense the same, on an exclusive basis; (C) joint development agreements; (D) any agreement by
which the Acquired Company grants any ownership right to the Acquired Company Proprietary Rights
owned by the Acquired Company; (E) any agreement under which the Acquired Company undertakes any
ongoing royalty or payment obligations with respect to an Acquired Company Proprietary Right; (F)
any agreement under which the Acquired Company grants an option relating to the Acquired Company
Proprietary Rights; (G) any agreement under which any party is granted any right to access Acquired
Company Source Code or to use Acquired Company Source Code to create derivative works of the
Products; (H) any Agreement pursuant to which the Acquired Company has deposited or is required to
deposit with an escrow agent or any other Person the Acquired Company Source Code, and further
describes whether the execution of this Agreement or the consummation of any of the transactions
contemplated hereby could reasonably be expected to result in the release or disclosure of the
Acquired Company Source Code; and (I) any agreement or other arrangement limiting any of the
Acquired Companys ability to transact business in any market, field or geographical area or with
any Person, or that restricts the use, transfer, delivery or licensing of Acquired Company
Proprietary Rights (or any tangible embodiment thereof);
(ii) Part 3.20(b)(ii) of the Seller Parties Disclosure Schedule lists all licenses,
sublicenses and other agreements to which the Acquired Company is a party and pursuant to which the
Acquired Company is authorized to use any Proprietary Rights owned by any Person, excluding
standardized nonexclusive licenses for off the shelf or other software widely available through
regular commercial distribution channels on standard terms and conditions and were obtained by the
Acquired Company in the Ordinary Course of Business. Except as set forth in 3.20(b)(iii) of the
Seller Parties Disclosure Schedule, there are no royalties, fees or other amounts payable by the
Acquired Company to any Person by reason of the ownership, use, sale or disposition of Acquired
Company Proprietary Rights;
(iii) Except as set forth in Part 3.20(b)(iii) of the Seller Parties Disclosure Schedule, the
Acquired Company has not entered into any written or oral contract, agreement, license or other
arrangement to indemnify any other person against any charge of infringement of the Acquired
Company Proprietary Rights, other than indemnification provisions contained in standard sales or
agreements to customers or end users arising in the Ordinary Course of Business, the forms of which
have been delivered to Purchaser or its counsel;
(iv) Part 3.20(b)(iv) of the Seller Parties Disclosure Schedule lists any Product that
contains any software that may be subject to an open source or general public
31
license, a description of such Product and the open source or general public license applicable to
such Product. Except as set forth in Part 3.20(b)(iv) of the Seller Parties Disclosure Schedule,
none of the Products contains any software that may be subject to an open source or general public
license; and
(v) There are no outstanding obligations other than as disclosed in Part 3.20(b) of the Seller
Parties Disclosure Schedule to pay any amounts or provide other consideration to any other Person
in connection with the Acquired Company Proprietary Rights (or any tangible embodiment thereof).
(c) Except as set forth in Part 3.20(c) of the Seller Parties Disclosure Schedule:
(i) The Acquired Company does not jointly own, license or claim any right, title or interest
with any other Person of the Acquired Company Proprietary Rights. No current or former officer,
manager, director, stockholder, member, employee, consultant or independent contractor of the
Acquired Company has any right, title or interest in, to or under the Acquired Company Proprietary
Rights in which the Acquired Company has (or purports to have) any right, title or interest that
has not been exclusively assigned, transferred or licensed to Acquired Company;
(ii) No Person has asserted or Threatened a claim, nor, to Sellers Knowledge, are there any
facts which could give rise to a claim, which would adversely affect the Acquired Companys
ownership rights to, or rights under, the Acquired Company Proprietary Rights, or any contract,
agreement, license or and other arrangement under which the Acquired Company claims any right,
title or interest under the Acquired Company Proprietary Rights or restricts in any material
respect the use, transfer, delivery or licensing by the Acquired Company of the Acquired Company
Proprietary Rights or Acquired Company Products;
(iii) The Acquired Company is not subject to any proceeding or outstanding decree, order,
judgment or stipulation restricting in any manner the use, transfer or licensing of the Acquired
Company Proprietary Rights by the Acquired Company, the use, transfer or licensing of the Acquired
Company Product by the Acquired Company, or which may affect the validity, use or enforceability of
the Acquired Company Proprietary Rights; and
(iv) To Sellers Knowledge, no Acquired Company Proprietary Rights have been infringed or
misappropriated by any Person and there is no unauthorized use, disclosure or misappropriation of
the Acquired Company Proprietary Rights by any current or former officer, manager, director,
stockholder, member, employee, consultant or independent contractor of the Acquired Company.
(d) Except as set forth in Part 3.20(d) of the Seller Parties Disclosure Schedule:
(i) all Patents in which the Acquired Company has any right, title or interest have been duly
filed or registered (as applicable) with the applicable Governmental Body, and maintained,
including the submission of all necessary filings and fees in accordance
32
with the legal and administrative requirements of the appropriate Governmental Body, and have not
lapsed, expired or been abandoned;
(ii) (A) all Patents in which the Acquired Company has any right, title or interest, disclose
patentable subject matter, have been prosecuted in good faith and are in good standing, (B) there
are no inventorship challenges to any such Patents, (C) no interference has been declared or
provoked relating to any such Patents, (D) all Issued Patents in which the Acquired Company has any
right, title or interest are valid and enforceable, and (E) all maintenance and annual fees have
been fully paid, and all fees paid during prosecution and after issuance of any patent have been
paid in the correct entity status amounts, with respect to Issued Patents in which the Acquired
Company has any right, title or interest;
(iii) To Sellers Knowledge, there is no material fact with respect to any Patent Application
in which the Acquired Company has any right, title or interest that would (A) preclude the issuance
of an Issued Patent from such Patent Application (with valid claims no less broad in scope than the
claims as currently pending in such Patent Application), (B) render any Issued Patent issuing from
such Patent Application invalid or unenforceable, or (C) cause the claims included in such Patent
Application to be narrowed; and
(iv) No Person has asserted or Threatened a claim, nor, to Sellers Knowledge, are there any
facts which could give rise to a claim, that the Acquired Company Product (or the Acquired Company
Proprietary Right embodied in the Acquired Company Product) infringes or misappropriates any third
party Proprietary Rights.
(e) The Acquired Company has taken all commercially reasonable and customary measures and
precautions necessary to protect and maintain the confidentiality of all Trade Secrets in which the
Acquired Company has any right, title or interest and otherwise to maintain and protect the full
value of all such Trade Secrets. Without limiting the generality of the foregoing, except as set
forth in Part 3.20(e) of the Seller Parties Disclosure Schedule:
(i) All current and former consultants and independent contractors to the Acquired Company or
to any entity that assigned Acquired Company Proprietary Rights to the Acquired Company, including
but not limited to Xpand, who are or were involved in, or who have contributed to, the creation or
development of the Acquired Company Proprietary Rights have executed and delivered to the Acquired
Company an agreement (containing no exceptions to or exclusions from the scope of its coverage)
that is substantially identical to the form of Nondisclosure Agreement made available to Purchaser
in the Data Room. Each current and former consultant or independent contractor of the Acquired
Company is obligated to assist the Acquired Company with respect to the protection of the Acquired
Company Proprietary Rights. No current or former employee, officer, director, stockholder,
consultant or independent contractor to the Acquired Company has any right, claim or interest in or
with respect to the Acquired Company Proprietary Rights; and
(ii) Except as disclosed as required under
Section 3.20(b)(i)
above, the Acquired
Company has not disclosed or delivered to any Person, or permitted the disclosure or delivery to
any escrow agent or other Person, of the Acquired Company Source Code. No event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
33
time) will, or would reasonably be expected to, result in the disclosure or delivery to any Person
of the Acquired Company Source Code.
(f) Except with respect to demonstration or trial copies, no product, system, program or
software module designed, developed, sold, licensed or otherwise made available by the Acquired
Company to any Person, including without limitation the Acquired Company Product(s), contains any
back door, time bomb, Trojan horse, worm, drop dead device, virus or other software
routines or hardware components designed to permit unauthorized access or to disable or erase
software, hardware or data without the consent of the user.
3.21
Certain Payments
. Neither the Acquired Company or any director, officer, agent, or
employee of the Acquired Company, or any other Person associated with or acting for or on behalf of
the Acquired Company, has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services in violation of any Legal Requirement or (b)
established or maintained any fund or asset that has not been recorded in the books and records of
the Acquired Company.
3.22
Authorizations; Regulatory Compliance.
Part 3.22 of the Seller Parties Disclosure
Schedule sets forth a complete list of all material approvals, clearances, authorizations, licenses
or registrations required by any Governmental Body in the European Union or in the Netherlands
having regulatory authority or jurisdiction over the Business and the Products, whether required of
the Acquired Company or, to the Sellers Knowledge, required of any of its suppliers or
manufacturers. Except as set forth on Part 3.22 of the Seller Parties Disclosure Schedule:
(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 Body having regulatory
authority or jurisdiction over the Business and the Products.
(b) The Acquired Company and, to Sellers Knowledge, 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 Body, relating to the 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 the Acquired Company in compliance with the quality control
procedures and specifications made available by the Acquired Company to Purchaser in the Data Room
and all applicable laws, statutes, rules, regulations, ordinances, standards, guidelines or orders
administered, issued or enforced by the FDA or any other Governmental Body. Further, no action has
been taken by any Governmental Body or, to Sellers 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.
34
(c) The Acquired Company has not received and, to Sellers Knowledge, its manufacturers or
suppliers have not received from the FDA or any other Governmental Body, and to Sellers 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 Body, and there have been no seizures conducted or, to Sellers Knowledge, Threatened
by the FDA or other Governmental Body, 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 Body relating to the Business or to the Products.
(d) Except as set forth on Part 3.22(d) of the Seller Parties Disclosure Schedule, 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 Body on or prior to Closing Date.
(e) To Sellers Knowledge, there are no currently existing facts that will (i) cause the
withdrawal or recall, or require suspension or additional approvals or clearances, of any Products
currently sold by the Acquired Company, (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 Part 3.22 (f) of the Seller Parties Disclosure Schedule: (i) none
of the Products manufactured, marketed or sold by the Acquired Company have been recalled or
subject to a field safety notification (whether voluntarily or otherwise); (ii) to Sellers
Knowledge, none of the Products manufactured, marketed or sold by the Acquired Companys
manufacturers and suppliers on the Acquired Companys behalf has been recalled or subject to a
field safety notification (whether voluntary or otherwise); and (iii) Seller Parties have 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 the Acquired Company.
(g) The Acquired Company has submitted to the FDA all Biological Product Deviation Reports
relating to performance issues that could lead to serious injury or death that the Acquired Company
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 Sellers
Knowledge, except as set forth on Part 3.22(g) of the Seller Parties Disclosure Schedule, no
circumstances have arisen that would require Acquired Company to submit a Biological Product
Deviation Report to the FDA.
3.23
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, and (ii) is, and at
all relevant times has conformed in all material respects to all specifications and any promises,
35
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) Part 3.23(b) of the Seller Parties Disclosure Schedule sets forth the forms of the
Acquired Companys 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 Part 3.23(b) of the Seller Parties Disclosure Schedule, there are no existing or, to
Sellers Knowledge, Threatened, claims against the Acquired Company 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. The Acquired Company 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 Sellers Knowledge, there has been no inquiry or
investigation made in respect thereof by any Governmental Body.
3.24
Customers and Suppliers
. The Acquired Company does not currently have customers, nor has
it ever had any customers prior to the Effective Date, other than Purchaser. Part 3.24 of the
Seller Parties Disclosure Schedule identifies the Business ten (10) largest suppliers (measured by
euro volume in each case) during the period from the formation of the Acquired Company through
December 31, 2008, showing with respect to each, the name and address, euro volume and nature of
the relationship. The Acquired Company is not required to provide any bonding or other financial
security arrangements in connection with any of the transactions with its suppliers. As of the
Effective Date, Seller Parties have not received any communication of any intention of any supplier
identified on Part 3.24 of the Seller Parties Disclosure Schedule to discontinue its relationship
as a supplier of, or materially reduce its sales to the Acquired Company (or, post- Closing, from
or to Purchaser).
3.25
Capital Expenditures
. Set forth on Part 3.25 of the Seller Parties Disclosure Schedule
is a list of the Acquired Companys approved capital expenditure projects related to the Business
as of the Effective Date 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, since the formation of the Acquired Company.
3.26
Relationships with Affiliates
. Neither Sellers nor, to Sellers Knowledge, any Affiliate
of any Seller has or had any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companys businesses. Neither
Sellers nor, to Sellers Knowledge, any Affiliate of any Seller owns or has owned (of record or as
a beneficial owner) an equity interest or any other financial or profit interest in, a Person that
has (i) had business dealings or a material financial interest in any transaction with the Acquired
Company, or (ii) engaged in competition with the Acquired Company with respect to any line of the
products or services of the Acquired Company in any market presently served by the Acquired
Company. Except as set forth in Part 3.26 of the Seller Parties Disclosure Schedule, neither
Seller nor, to Sellers Knowledge, any Affiliate of Sellers is a party to any Contract with, or has
any claim or right against, the Acquired Company.
36
3.27
Brokers
. No broker, finder, investment banker or other Person is entitled to any
brokerage, finders or other fee or commission in connection with the Contemplated Transactions
based upon arrangements made by or on behalf of the Acquired Company.
3.28
Disclosure
. Except as set forth in Part 3.28 of the Seller Parties Disclosure Schedule:
(a) As of the Closing Date, no representation or warranty of Seller Parties in this Agreement
and no statement in the Disclosure Schedule omits 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.
(b) As of the Closing Date, there is no fact known to Seller Parties that has specific
application to Seller Parties (other than general economic or industry conditions) and that
materially adversely affects or, as far as Seller Parties can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or results of operations of the
Acquired Company (on a consolidated basis) that has not been set forth in this Agreement or the
Seller Parties Disclosure Schedule.
4.
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REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser represents and warrants to the Seller Parties as follows:
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4.1
Organization and Good Standing
. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. Purchaser has full
corporate power and authority to execute and deliver this Agreement and the Closing Documents, to
perform its obligations hereunder and thereunder and to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or use. Purchaser is
duly qualified to do business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such qualification, except
whether the failure to do so would not have a material adverse effect on Purchasers ability to
perform its obligations hereunder.
4.2
Authority; No Conflict
.
(a) This Agreement and the Closing Documents have been authorized by Purchasers board of
directors and, to the extent required, the stockholders of Purchaser. This Agreement constitutes
the legal, valid, and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to bankruptcy and other similar Legal Requirements of general applicability
relating to or affecting creditors rights and to general equity principles. Upon the execution
and delivery by Purchaser of the Closing Documents, the Closing Documents will constitute the
legal, valid, and binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms, enforceable against Purchaser in accordance with their respective
terms, subject to bankruptcy and other similar Legal Requirements of general applicability relating
to or affecting creditors rights and to general equity principles.
37
(b) Except as set forth in Part 4.2 of the Purchaser Disclosure Schedule, or as would not have
a material adverse effect on Purchasers ability to perform its obligations hereunder, neither the
execution and delivery of this Agreement by Purchaser nor the consummation or performance of any of
the Contemplated Transactions by Purchaser will directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with or result in a violation of (A) any provision of Purchasers
Organizational Documents or (B) any resolution adopted by the board of directors or the
stockholders of Purchaser; or
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or
Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or Order to which Purchaser, or any of the assets
owned or used by Purchaser, may be subject.
Except as set forth in Part 4.2 of the Purchaser Disclosure Schedule, Purchaser is not and will not
be required to obtain any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated Transactions.
4.3
Certain Proceedings
. There is no Action or Proceeding pending or, to the knowledge of
Purchaser, Threatened in writing, against or affecting Purchaser that could reasonably be expected
to affect Purchasers ability to challenge, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with the consummation of the Contemplated Transactions. To
Purchasers knowledge, no such Proceeding has been Threatened.
4.4
Brokers
. Purchaser and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders fees or agents commissions or other similar
payment in connection with this Agreement and will indemnify and hold Sellers harmless from any
such payment alleged to be due by or through Purchaser as a result of the action of Purchaser or
its officers or agents.
4.5
Issuance of Shares.
Subject to the accuracy of any representations and warranties made by
the Sellers at the time of such issuance, the issuance and delivery of any shares of Purchasers
Common Stock pursuant to this Agreement is and shall be in compliance with applicable federal and
state securities laws and such shares, when issued, shall be duly authorized, validly issued, fully
paid and non-assessable and free and clear of all Encumbrances.
4.6
Securities Law Matters
.
(a) The Purchaser Common Stock is registered pursuant to Section 12(g) of the Exchange Act and
is quoted on the Qualified Stock Exchange and Purchaser has taken no action designed to, or
reasonably likely to have the effect of, terminating the registration of the Purchaser Common Stock
under the Exchange Act or delisting the Purchaser Common Stock from the Qualified Stock Exchange,
nor has Purchaser received any notification that the SEC or the Qualified Stock Exchange is
contemplating terminating such registration or listing. Purchaser is a WKSI. Other than such
filings and notifications as have occurred (and will be
38
supplemented following the execution of this Agreement), no consent, approval, authorization or
order of, or filing, notification or registration with, the Qualified Stock Exchange is required
for the quoting of Purchasers Common Stock on the Qualified Stock Exchange. Purchaser is in
compliance with the listing or maintenance requirements of the Qualified Stock Exchange, except as
would not reasonably be expected to result in the delisting of Purchasers Common Stock from the
Qualified Stock Exchange.
(b) Purchaser has been subject to, and has complied with, all of the reporting requirements of
the Exchange Act for the twelve (12) month period preceding the Closing and Purchaser is eligible
to register securities on Form S-3 under the Securities Act. Purchaser has made available to
Sellers true and complete copies of (i) its Annual Report on Form 10-K Purchasers most recently
completed fiscal year as filed with the U.S. Securities and Exchange Commission (the
SEC
), and
(ii) all other reports and amendments thereto (including Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K) filed by Purchaser with the SEC since the end of Purchasers most recently
completed fiscal year (collectively, the
SEC Reports
). As of their respective dates, and as of
the date of the last amendment thereof, if amended after filing, to Purchasers knowledge, none of
such reports contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.7
No Other Representations.
Purchaser acknowledges that the Acquired Company does not make
any representation or warranty with respect to any projections, estimates or budgets delivered to
or made available to Purchaser of future revenues, future results of operations (or any component
thereof), future cash flows or future financial condition (or any component thereof) of the
Acquired Company or the future business and operations of the Acquired Company.
5.1
Notices; Consents; Filings
. From and after the delivery of a Purchase Election Notice or
the delivery of a Milestone Completion Notice or Second Put Option Notice, as the case may be,
until the Closing, the Seller Parties shall use their commercially reasonable best efforts, at the
Seller Parties expense, to obtain the consents described in the Seller Parties Disclosure
Schedule. In the event that any of the Seller Parties shall fail to obtain any third party consent
necessary for the consummation of the transactions contemplated hereby, the Sellers shall use
commercially reasonable best efforts, and take any such actions reasonably requested by Purchaser,
to minimize any adverse effect upon the Acquired Company and Purchaser, their respective
Subsidiaries, and their respective businesses resulting, or which could reasonably be expected to
result after the Closing, from the failure to obtain such consent.
5.2
Further Assurances
.
(a) Following the delivery of a Purchase Election Notice, a Milestone Completion Notice, or a
Second Put Option Notice, as the case may be, each of Purchaser and the Acquired Company will:
39
(i) use its commercially reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Acquisition and the
transactions contemplated hereby, including using its commercially reasonable best efforts to
obtain all permits, consents, approvals, authorizations, qualifications and orders of governmental
authorities as are necessary for the consummation of the Acquisition and the other transactions
contemplated hereby and to fulfill the conditions set forth in
Section 7
. In case, at any
time after the Closing, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this Agreement shall use their
commercially reasonable best efforts to take all such action; and
(ii) cooperate and use its commercially reasonable best efforts to vigorously contest and
resist any action, including administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation
of the Acquisition and the other transactions contemplated hereby, including by vigorously pursuing
all available avenues of administrative and judicial appeal.
(b) From the Effective Date until the Closing, the parties hereto will take all further action
that is necessary or desirable to carry out the purposes of this Agreement, and the proper officers
and directors of each party to this Agreement shall use their commercially reasonable best efforts
to take all such action and shall refrain from taking any actions which would be contrary to,
inconsistent with or against, or would frustrate the essential purposes of, the transactions
contemplated by this Agreement, if Purchaser were to deliver a Purchase Election Notice or the
Acquired Company were to deliver a Milestone Completion Notice or a Second Put Option Notice.
5.3
Exclusivity
.
(a) From and after the date of this Agreement until the Closing or termination of this
Agreement pursuant to Section 8, the Acquired Company will not, nor will it authorize or permit any
of its officers, directors, Affiliates or employees or any investment banker, attorney or other
advisor or representative retained by it to, directly or indirectly, (i) solicit, initiate or
induce the making, submission or announcement of any Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in
discussions with any person with respect to any Acquisition Proposal, except as to disclose the
existence of these provisions, (iv) endorse or recommend any Acquisition Proposal, or (v) enter
into any letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal. The Seller Parties and the
Acquired Companys subsidiaries will, and will cause their respective officers, directors,
Affiliates, employees, investment bankers, attorneys and other advisors and representatives to,
immediately cease any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Without limiting the foregoing, it
is understood that any violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of the Acquired Company or any of its subsidiaries or any
40
investment banker, attorney or other advisor or representative of the Acquired Company or any of
its subsidiaries shall be deemed to be a breach of this
Section 5.3
by the Acquired
Company.
(b) In addition to the obligations of the Acquired Company set forth in Section 5.3(a), the
Acquired Company as promptly as practicable shall advise Purchaser in writing of any Acquisition
Proposal or of any request for nonpublic information or other inquiry which the Acquired Company
reasonably believes could lead to an Acquisition Proposal, the material terms and conditions of
such Acquisition Proposal (to the extent known), and the identity of the person or group making any
such request, inquiry or Acquisition Proposal. The Acquired Company agrees to keep Purchaser
informed on a current basis of the status and details (including any material amendments or
proposed amendments) of any such request, inquiry or Acquisition Proposal.
5.4
Notification of Certain Matters
. Each of the parties to this Agreement shall give prompt
notice to the other parties of the occurrence or non-occurrence of any event which would likely
cause any representation or warranty made by such party herein to be untrue or inaccurate or any
covenant, condition or agreement contained herein not to be complied with or satisfied
(
provided
,
however
, that, any such disclosure shall not in any way be deemed to
amend, modify or in any way affect the representations, warranties and covenants made by any party
in or pursuant to this Agreement).
5.5
Confidentiality; Publicity
. Except as may be required by law to comply with applicable
governmental regulations or as otherwise permitted or expressly contemplated herein, no party
hereto or their respective Affiliates, employees, agents and representatives shall disclose to any
third party this Agreement (provided that Purchaser may file this Agreement with the SEC), the
subject matter or terms hereof or (except with regard to disclosures by Purchaser of confidential
information of the Acquired Company following the Closing) any confidential information or other
proprietary knowledge concerning the business or affairs of any other party which it may have
acquired from such party in the course of pursuing the transactions contemplated by this Agreement
without the prior consent of the other parties hereto;
provided
, that any information that
is otherwise publicly available (including by reason of Purchasers filings with the SEC), without
breach of this provision, or has been obtained from a third party without a breach of such third
partys duties, shall not be deemed confidential information. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby shall be issued by
any party without the prior written consent of the other parties hereto.
5.6
Post-Closing Cooperation
.
(a) Sellers agree further that, following the Closing Date, if any consent or waiver set forth
in Part 3.2 of the Seller Parties Disclosure Schedule has not been delivered to Purchaser by Seller
Parties at or prior to the Closing Date, Sellers shall use commercially reasonable efforts to
assist the Acquired Company to obtain such approval or permit at the sole expense of Sellers
following the Closing Date.
(b) Sellers agree further that, if reasonably requested by Purchaser, at Purchasers sole
expense, Sellers shall reasonably cooperate with Purchaser to provide
41
reasonable access to records and personnel of the Acquired Company to the extent still in Sellers
possession or control and to the extent Purchaser finds such access necessary in order to
transition the Business into service of Purchaser.
(c) At or prior to the Closing Date, Sellers shall cause Purchaser to be designated as an
additional loss payee with respect to any loss related to the Assets on all insurance policies
identified on Part 3.17 of the Seller Parties Disclosure Schedule.
(d) Each of the parties agrees to cooperate with the other in the preparation and filing of
all forms, notifications, reports and information, if any, required or reasonably deemed advisable
pursuant to any law, rule or regulation in connection with the transactions contemplated by this
Agreement.
5.7
Tax Matters
.
(a)
Preparation and Filing of Tax Returns
. Purchaser shall prepare or cause to be prepared
and file or cause to be filed on a timely basis all Tax Returns of the Acquired Company for all
taxable periods ending after the Closing Date. The Seller Parties shall prepare or cause to be
prepared and file or cause to be filed on a timely basis all Tax Returns of the Acquired Company
for all taxable periods ending on or before the Closing Date. With respect to any and all Tax
Returns of the Acquired Company for any taxable period ending on the Closing Date and for any
taxable period ending before the Closing Date for which such Tax Returns have not been filed as of
the Closing Date, at least sixty (60) days prior to filing, the Seller Parties shall provide
Purchaser with a draft of each such Tax Return for review and comment. The Seller Parties shall
consider all reasonable comments of Purchaser with respect to the Tax Returns prior to filing.
None of the Seller Parties shall file any amended Tax Returns with respect to the Acquired Company
without the prior written consent of Purchaser, which shall not be unreasonably withheld,
conditioned or delayed.
(b)
Liability for Income Taxes
. Immediately upon written demand from Purchaser, Sellers shall
reimburse Purchaser for all income Taxes of the Acquired Company for any income Tax period ending
on or before the close of the Closing Date (a
Pre-Closing Tax Period
) and for Sellers portion
(as determined pursuant to
Section 5.7(c)
of all income Taxes of the Acquired Company for
any income Tax period that begins before the Closing Date and ends after the Closing Date (a
Straddle Period
). Purchaser shall be responsible for all income Taxes of the Acquired Company
for any income Tax period that begins after the Closing Date (a
Post-Closing Tax Period
) and for
its portion (as determined pursuant to
Section 5.7(c)
) of all income Taxes of the Acquired
Company for any Straddle Period. Any amounts paid by Sellers to Purchaser pursuant to this
Section 5.7
shall be treated as an adjustment to the Purchase Price unless otherwise
required by Law.
(c)
Apportionment of Straddle Period Income Taxes
. With respect to any Straddle Period, the
income Taxes attributable to such Straddle Period shall be apportioned between the portion of the
Straddle Period that begins on the first day of the Straddle Period and ends at the close of the
Closing Date (the
Pre-Closing Straddle Period
), which portion shall be the responsibility of
Sellers, and the portion of the Straddle Period that begins on the date immediately following the
Closing Date and ends on the last day of the Straddle Period (
Post-
42
Closing Straddle Period
), which portion shall be the responsibility of Purchaser. The portion of
the income Tax allocated to the Pre-Closing Straddle Period shall equal the amount which would be
payable if the Straddle Period ended on the last day of the Pre-Closing Straddle Period, provided
that all permitted allowances, exemptions and deductions that are normally computed on the basis of
an entire year or period (such as depreciation) shall accrue on a daily basis. The portion of the
income Tax allocated to the Post-Closing Straddle Period shall equal the balance of the income Tax
attributable to the Straddle Period.
(d)
Tax Cooperation
. Sellers and Purchaser shall provide each other party with such
information and records and access to such of its officers, directors, employees and agents as may
be reasonably requested by such other party in connection with the preparation of any tax return or
any audit or other proceeding relating to the Acquired Company. Sellers and Purchaser shall
cooperate in good faith, as and to the extent reasonably requested by one another in connection
with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include using commercially reasonable efforts to retain and (upon a partys
request) provide records and information that are reasonably relevant to any such audit,
litigation, or other proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided hereunder. Sellers and
Purchaser agree to use commercially reasonable efforts to retain all books and records with respect
to Tax matters pertinent to the Acquired Company relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the extent notified,
any extensions thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority. Notwithstanding the foregoing, the Seller
Parties shall use their respective best efforts to retain copies of all relevant Tax records
relating to the Acquired Company for periods prior to the Closing, and neither Purchaser nor the
Acquired Company, nor any Affiliate of Purchaser or the Acquired Company shall be liable for
failure to provide to any Seller Party any information or documentation of any kind relating to any
Tax period prior to the Closing.
(e)
Transfer Taxes
. All transfer, documentary, sales, use, stamp, registration and other such
Taxes incurred in connection with the sale of Seller Shares shall be borne and paid by Sellers.
5.8
Execution of Further Documents
. From and after the Closing, upon the reasonable request
of Purchaser, Sellers shall, at the expense of Purchaser, execute, acknowledge and deliver all such
further deeds, bills of sale, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required or appropriate to convey and transfer to and vest in
Purchaser and protect its right, title and interest in the capital stock of the Acquired Company to
be transferred hereunder and to carry out the transactions contemplated by this Agreement.
5.9
Registration Rights
.
(a)
Mandatory Registration Statement
. In the event that Purchaser determines to issue shares
of its Common Stock as part of the Upfront Payment, Purchaser agrees to file with the Securities
and Exchange Commission as soon as reasonably practicable, but in no event later than one (1)
Business Day following the Closing, an automatic shelf
43
registration statement on Form S-3ASR with respect to at least the number of shares of Purchaser
Common Stock to be issued on the Closing Date (including the prospectus, amendments and supplements
to such registration statement or prospectus, including pre- and post-effective amendments, all
exhibits thereto and all material incorporated by reference or deemed to be incorporated by
reference, if any, in such registration statement, the
Mandatory Registration Statement
).
Notwithstanding anything herein to the contrary, Purchaser may not issue shares of Purchaser Common
Stock in respect of any Milestone Payment (x) to the extent that the aggregate number of shares of
Purchaser Common Stock issued hereunder would exceed the number of shares of Purchaser Common Stock
covered by the Mandatory Registration Statement unless, prior to the date of such issuance,
Purchaser (i) amends such Mandatory Registration Statement to include all such shares of Purchaser
Common Stock or (ii) files a shelf registration on Form S-3 (or such other form under the
Securities Act then available to Purchaser providing for the resale pursuant to Rule 415 from time
to time by the holders of any and all registrable shares), which amendment or registration
statement has either been declared effective by the SEC prior the date of such issuance or become
effective automatically as a result of Purchasers status as a WKSI or (y) unless such shares have
been approved for listed on the Qualified Stock Exchange, subject only to official notice of
issuance.
(b)
Suspension.
The Purchaser shall use its best efforts to keep any Mandatory Registration
Statement continuously effective for six (6) months following the time at which a Mandatory
Registration Statement becomes effective. During such time, the Purchaser may suspend the use of
any Mandatory Registration Statement by written notice to the Sellers for a period not to exceed an
aggregate of sixty (60) calendar days.
(c)
Indemnification by Purchaser
. Upon the registration of the shares of Purchaser Common
Stock pursuant to
Section 5.9(a)
, Purchaser shall indemnify and hold harmless each Seller,
against any losses, claims, damages or liabilities, joint or several, to which such Seller may
become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Mandatory Registration Statement, or
any amendment or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and Purchaser hereby agrees to reimburse such Seller for any
legal or other expenses reasonably incurred by them in connection with investigating or defending
any such action or claim as such expenses are incurred;
provided
,
however
, that Purchaser shall not
be liable to such Seller in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Mandatory Registration Statement, or amendment or
supplement, in reliance upon and in conformity with written information furnished to Purchaser by
such Seller expressly for use therein.
(d)
Indemnification by the Sellers.
Each Seller agrees, as a consequence of the inclusion of
any of such Sellers shares of Purchaser Common Stock in the Mandatory Registration Statement,
severally and not jointly, to (i) indemnify and hold harmless Purchaser, its directors, its
officers who sign the Mandatory Registration Statement and each person, if any, who controls
Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which Purchaser or
44
such other persons may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact contained in the Mandatory
Registration Statement, or any amendment or supplement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished to Purchaser by or
on behalf of such Seller, and (ii) reimburse Purchaser and such other persons for any legal or
other expenses reasonably incurred by Purchaser in connection with investigating or defending any
such action or claim as such expenses are incurred.
5.10
Right of First Refusal/Right of Notice
.
(a)
Right of First Refusal
. After the expiration of the Option Period through the termination
of the Distribution Agreement, if the Acquired Company receives a bona fide offer from any party
with respect to any transaction which would result in the sale of substantially all of the Acquired
Companys assets or the sale of all or such portion of the Acquired Companys capital stock such
that, following such transaction, the buyer would own shares having a majority of the combined
voting power on a fully diluted basis of all of classes of the Acquired Companys equity securities
(each, a
Sale of the Acquired Company
), the Acquired Company shall provide Purchaser a copy of
the offer (upon condition of confidentiality) (the
Sale Notice
). On receipt of the Sale Notice,
Purchaser shall have the right and option (the
Right of First Refusal
), exercisable at any time
by providing written notice to the Acquired Company during the period of fifteen (15) Business Days
following Purchasers receipt of the Sale Notice, to elect to purchase all, but not less than all,
of the offered securities or assets in connection with the Sale of the Acquired Company, at the
same price and upon the same terms and conditions contained in the Sale Notice (the
Purchaser
Notice
). The Acquired Company will not, following receipt of the Purchaser Notice through the
date ninety (90) days thereafter (the
ROFR Period
), for so long as Purchaser continues to
negotiate with the Acquired Company the terms of a definitive agreement, directly or indirectly,
facilitate, solicit, recommend or encourage any offer by, or enter into any agreement with any
person or entity that would, if the transaction contemplated thereby were completed, result in a
Sale of the Acquired Company.
(b)
Failure to Agree
. If Purchaser does not deliver a Purchase Election Notice within fifteen
(15) Business Days of the Sale Notice or if after good faith negotiations Purchaser and the
Acquired Company are unable to agree upon the terms of a definitive agreement for a Sale of the
Acquired Company during the ROFR Period, then the Acquired Company shall be free for a period of
one (1) year to enter into a Sale of the Acquired Company with the buyer identified in the Sale
Notice on substantially the terms set forth in the Sale Notice which financial terms and conditions
shall not be less favorable to the Acquired Company when taken in their totality than the terms and
conditions last offered in writing by Purchaser to the Acquired Company during the ROFR Period.
(c)
Right of Notice
. After the expiration of the Option Period through the termination of the
Distribution Agreement, (i) if the Acquired Company decides to commence
45
discussion with any party with respect to a Sale of the Acquired Company, then the Acquired Company
will provide Purchaser with notice of such within three (3) Business Days of the commencement of
such discussions or (ii) if the Acquired Company receives a proposal or offer from any party with
respect to any transaction that would result in a Sale of the Acquired Company, and the Acquired
Company decides to proceed with such proposal or offer, the Acquired Company shall provide
Purchaser with notice and a brief description of any offer or proposal within three (3) Business
Days of the receipt of such offer or proposal.
5.11
Sellers Right to Audit Purchasers Net Sales
.
(a) Within thirty (30) days following the expiration of the Put Option Period, Purchaser shall
deliver a sales report to the Sellers with respect to Purchasers Net Sales of the Products during
each of the first two (2) years during the Put Option Period. The sales report shall include Net
Sales of Products by month during each of the two years during the Put Option Period.
(b) Within thirty (30) days following the end of each calendar quarter ending during the Call
Option Period, Purchaser shall deliver a sales report to the Sellers with respect to Purchasers
Net Sales of Products during the most recently completed calendar quarter ending during the Call
Option Period. The sales report shall include Net Sales of Products by month during the most
recent completed calendar quarter.
(c) At any time during the Call Option Period and during the thirty (30) day period following
the expiration of the Call Option Period, up to a maximum of two (2) times, the Purchaser shall
permit, upon reasonable written notice from the Sellers Representative to Purchaser and at
Sellers sole expense, an independent auditor with a nationally recognized certified public
accounting firm selected by the Sellers Representative and reasonably acceptable to Purchaser to
audit the books and records of Purchaser to verify Net Sales of Products. If such inspections
should disclose underreporting of Net Sales by an amount of five percent (5%) or greater, Purchaser
shall reimburse Sellers for the cost of the audit within five (5) Business Days of the completion
date of the Sellers audit. In the event Purchaser has underreported Net Sales, Sellers shall be
entitled to use the post-audit calculations for purposes of determining whether Sellers are
entitled to receive a Milestone Payment or exercise their Put Option or Second Put Option under
this Agreement, in each case, subject to the dispute resolution procedures set forth in
Section
1.11
. Any audit shall not unreasonably interfere with Purchasers business activities.
6.
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INDEMNIFICATION; REMEDIES
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6.1
Survival; Right to Indemnification Not Affected by Knowledge
. All representations and
warranties of Purchaser and Seller Parties contained herein or in any other Closing Document or
document, certificate or other instrument required to be delivered hereunder or thereunder in
connection with the transactions contemplated hereby shall survive the Closing and shall continue
until *** after the Closing (the
General Indemnity Escrow Period
),
provided
that (a) the representations and warranties set forth in ***
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separately with the Commission.
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46
shall survive until sixty (60) days after the expiration of the applicable statutes of limitations
(including any extensions or waivers thereof) and (b) the representations and warranties set forth
in *** shall survive indefinitely ((a) and (b), together, the
Fundamental Representations
);
provided
,
further
, that to the extent any written
claim for indemnification is made prior to the expiration date of the representations and
warranties on which any such claim for indemnification is based, the expiration of such
representations and warranties shall not affect the right of any Indemnified Person to seek
indemnification for Damages in respect of such claim pursuant to
Section 6
hereof. The
right to indemnification, payment of Damages or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any investigation conducted with
respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or
obligation. The waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not affect the right
to indemnification, payment of Damages, or other remedy based on such representations, warranties,
covenants, and obligations.
6.2
Indemnification and Payment of Damages by Sellers
.
(a)
From and after the Closing
. each Seller, severally but not jointly, shall indemnify and
hold harmless Purchaser, the Acquired Company, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the
Purchaser Indemnified Persons
) from and
against and shall pay to the relevant Purchaser Indemnified Persons the amount of any and all
losses, liabilities, claims, damages (excluding incidental, punitive and consequential damages),
deficiencies, judgments, fines, penalties, fees, costs and expenses (including costs of
investigation and defense and reasonable attorneys fees), and diminutions in value of the
Product(s), whether or not involving a third-party claim (collectively,
Damages
), incurred by
such Purchaser Indemnified Person arising directly or indirectly from or in connection with any
breach of any representation or warranty of such Seller contained in
Section 2
hereof or of
any covenant or obligation of such Seller in this Agreement.
(b) From and after the Closing, each Seller, severally but not jointly, will indemnify and
hold harmless the Purchaser Indemnified Persons for, and will pay to the applicable Purchaser
Indemnified Persons the amount of any Damages arising, directly or indirectly, from or in
connection with:
(i) any Breach of any representation or warranty made by the Acquired Company under
Section 3
hereof;
(ii) any Breach of any representation or warranty made by the Acquired Company with respect to
the Preferred Stock Purchase Agreement to the extent not satisfied or waived prior to Closing
(subject to the limitations set forth in Section 7 of the Preferred Stock Purchase Agreement but
notwithstanding the Survival Period (as defined in the Preferred Stock Purchase Agreement),
provided that the Acquired Company was notified of such
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separately with the Commission.
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47
Breach within eighteen (18) months of the date of the Preferred Stock Agreement), any certificate
or other document delivered by the Acquired Company pursuant to this Agreement; or
(iii) any Breach by Sellers or the Acquired Company of any covenant or obligation in this
Agreement or the Preferred Stock Purchase Agreement to the extent not satisfied or waived prior to
Closing (subject to the limitations set forth in Section 7 of the Preferred Stock Purchase
Agreement in the case of any Breach of any covenant or obligation in the Preferred Stock Purchase
Agreement).
(iv) Notwithstanding the foregoing, at the election of a Purchaser Indemnified Person, in its
sole discretion (but subject to the provisions of this
Section 6
), a Purchaser Indemnified
Person shall be entitled (without limiting any other remedy available to such Purchaser Indemnified
Person) to recover the Damages by set off against the General Escrow Amount in accordance with
Section 6.9
. The remedies provided in this
Section 6.2
will not be exclusive of or
limit any other remedies that may be available to the Purchaser Indemnified Persons under this
Section 6
.
(c) Notwithstanding anything else herein to the contrary, for purposes of determining whether
there has been a Breach of the representations and warranties of the Seller Parties under Sections
2 and 3 hereof, each representation and warranty which refers to the Effective Date shall be
true and correct as of the Closing Date notwithstanding that such representation or warranty, as
the case may be, refers to the Effective Date, provided that such representations and warranties
shall be qualified by each Updated Seller Parties Disclosure Schedule to the extent there are any
disclosures of actual facts in existence on the date of such Updated Seller Parties Disclosure
Schedule that have occurred or been discovered since the Effective Date, and (i) such disclosures
are not material, or (ii) the Acquired Company obtained the approval of the Supervisory Board of
Directors of the Acquired Company (including the director designated by the Purchaser) or the prior
written consent of the Purchaser Representative (as defined in the Preferred Stock Purchase
Agreement) pursuant to Section 5.1 of the Preferred Stock Purchase Agreement with respect to an
action of the Acquired Company which action directly caused such material change.
6.3
Indemnification and Payment of Damages by Purchaser
. From and after the Closing,
Purchaser will indemnify and hold harmless Sellers and their respective Representatives,
stockholders, controlling persons and affiliates (collectively, the
Seller Indemnified Persons
and, together with the Purchaser Indemnified Persons, the
Indemnified Persons
), and will pay to
Seller Indemnified Persons the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Purchaser in this
Agreement or in any certificate delivered by Purchaser pursuant to this Agreement, (b) any Breach
by Purchaser of any covenant or obligation of Purchaser in this Agreement, or (c) any claim by any
Person for brokerage or finders fees or commissions or similar payments based upon any agreement
or understanding alleged to have been made by such Person with Purchaser (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions.
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6.4
Limitations on Indemnification
.
(a) No claim shall be made unless, and only to the extent that, the cumulative amount of
Damages incurred buy the Indemnified Persons exceeds *** (the
Basket
), and upon exceeding such
amount, the Indemnified Persons shall be entitled to be indemnified for all Damages (including all
Damages below such amount
)
. Notwithstanding the foregoing, any claim in respect of a dispute
relating to the Working Capital may be made by the Indemnified Persons without regard to the
Basket.
(b) Notwithstanding anything to the contrary set forth in this Agreement, the total Damages
payable by Sellers pursuant to
Section 6.2
shall not exceed an amount equal to ***
percent (***%) of the Aggregate Purchase Price (the
Cap
), except to the extent (i) such Damages
are due to fraud or intentional misrepresentation of any of the Sellers, or (ii) such Damages are
due to a breach of a Fundamental Representation; provided, however, that in no event shall the
aggregate amount of Damages recoverable from any Seller pursuant to
Section 6.2
exceed ***
; and provided further, any *** shall be excluded from counting towards the Cap.
(c) Notwithstanding anything to the contrary set forth in this Agreement, the total Damages
payable by Purchaser pursuant to
Section 6.3
shall not exceed the Cap, except to the extent
(i) such Damages are due to fraud or intentional misrepresentation of any of the Purchaser, or (ii)
such Damages are due to a breach of a Fundamental Representation; and provided, that any ***
shall be excluded from counting towards the Cap.
(d) With respect to any Damages recoverable by the Purchaser Indemnified Persons for the
matters referred to in
Section 6.2
, the Purchaser Indemnified Persons shall be obligated to
first exhaust the General Escrow Amount or any right of set-off pursuant to
Section 6.9
hereof or
Section 7.3
of the Preferred Stock Purchase Agreement before proceeding against
any Seller.
(e) Neither the Sellers nor Purchaser shall have any liability under any provision of this
Agreement for any multiple of damages or diminution in value, other than for diminution in value of
the Product(s).
6.5
No Bar
. Subject to
Section 6.4(d)
, if the General Escrow Amount is insufficient
to set off the aggregate of all claims made hereunder for Damages, then Purchaser may take any
action or exercise any remedy available to it by appropriate legal proceedings to collect any such
Damages.
6.6
Procedure for IndemnificationThird Party Claims
.
(a) Promptly after receipt by an Indemnified Person under
Section 6.2
or
Section
6.3
of notice of the commencement of any Proceeding against it, such Indemnified Person will,
if a claim is to be made against an Indemnifying Person under such Section, give notice to the
Indemnifying Person of the commencement of such claim, but the failure to notify the Indemnifying
Person will not relieve the Indemnifying Person of any liability that it may
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have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates
that the defense of such action is prejudiced by the Indemnified Persons failure to give such
notice.
(b) If any Proceeding referred to in
Section 6.6(a)
is brought against an Indemnified
Person and it gives notice to the party from which such Indemnified Person is entitled to receive
indemnification (an
Indemnifying Person
) of the commencement of such Proceeding, the Indemnifying
Person will be entitled to participate in such Proceeding and, to the extent that it wishes (unless
(i) the Indemnifying Person is also a party to such Proceeding and the Indemnified Person
determines in good faith that joint representation would be inappropriate, or (ii) the Indemnifying
Person fails to provide reasonable assurance to the Indemnified Person of its financial capacity to
defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel satisfactory to the Indemnified Person and, after notice
from the Indemnifying Person to the Indemnified Person of its election to assume the defense of
such Proceeding, the Indemnifying Person will not, as long as it diligently conducts such defense,
be liable to the Indemnified Person under this Section 6 for any fees of other counsel or any other
expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Proceeding, other than reasonable costs
of investigation. If the Indemnifying Person assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in that Proceeding are
within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the Indemnifying Person without the Indemnified Persons consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any violation of the
rights of any Person, provided such settlement or compromise would not materially and adversely
prejudice the business or other commercial interests of the Indemnified Person, and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying Person; and (iii) the
Indemnified Person will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an Indemnifying Person of the
commencement of any Proceeding and the Indemnifying Person does not, within ten (10) days after the
Indemnified Persons notice is given, give notice to the Indemnified Person of its election to
assume the defense of such Proceeding, the Indemnifying Person will be bound by any determination
made in such Proceeding or any compromise or settlement effected by the Indemnified Person if it is
ultimately determined that the Indemnified Person is entitled to indemnification.
(c) Notwithstanding the foregoing, if an Indemnified Person determines in good faith that
there is a reasonable probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the Indemnifying Person will not be
bound by any determination of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(d) Each Seller hereby consents to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any indemnified party for purposes of any claim that an
50
Indemnified Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agrees that process may be served on Sellers with respect to such a
claim anywhere in the world.
6.7
Procedure for IndemnificationOther Claims
. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party from whom indemnification
is sought.
6.8
Remedies Exclusive
. From and after the Closing, except in the event of fraud or willful
misconduct (in which case the defrauded party shall have all rights and remedies available under
this Agreement and available under the law against the party that committed such fraud or willful
misconduct), the remedies provided in this
Section 6
shall be the exclusive remedies of the
parties hereto and their heirs, Affiliates, successors, and assigns after the Closing with respect
to the representations and warranties set forth in this Agreement. Except as set forth in this
Section 6.8
, no party may bring or commence any Proceeding with respect to the
representations and warranties set forth in this Agreement, whether in contract, tort or otherwise,
except to bring a claim for (a) fraud or willful misconduct against the party that committed such
fraud or willful misconduct and (b) indemnification in accordance with
Section 6
.
Notwithstanding the foregoing, nothing contained in this Agreement shall limit the rights of any
party hereto to seek or obtain injunctive relief or other equitable remedies to which such party
may otherwise be entitled. The provisions of this
Section 6
constitute an integral part of
the consideration given pursuant to this Agreement and were specifically bargained for and
reflected in the total amount of the Aggregate Purchase Price payable to the Sellers.
6.9
Rights of Set-Off
. To the extent than any Purchaser Indemnified Person is (or may be)
entitled to be indemnified by any Seller for Damages hereunder, Purchaser shall have the right to
withhold and set-off against any amount otherwise due to be paid (but not yet paid) to such Seller
pursuant to this Agreement the amount of any such Damages to which any Purchaser Indemnified
Persons may be entitled under this
Section 6
hereof or any other agreement entered into
pursuant to this Agreement (except with respect to the Distribution Agreement);
provided
,
that to the extent the amount so set-off exceeds the amount of Damages for which it is finally
determined that such Purchaser Indemnified Person is entitled to be indemnified, promptly following
such final determination, Purchaser shall remit such excess to the Sellers Representative.
6.10
Sellers Representative
.
(a) By virtue of the approval and adoption of this Agreement by the requisite consent of the
Sellers, each of the Sellers shall be deemed to have agreed to appoint each of Edward van Wezel and
Joost D de Bruijn as its agent and attorney-in-fact and as the Sellers Representative for and on
behalf of the Sellers to give and receive notices and communications, to authorize payment to any
Indemnified Person from the Escrow Account in satisfaction of claims by any Indemnified Person, to
object to such payments, to agree to, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of arbitrators with respect to such
claims, to assert, negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to, any other claim by any
Indemnified Person against any Seller or by
51
any Seller against any Indemnified Person or any dispute between any Indemnified Person and
any such Seller, in each case relating to this Agreement or the transactions contemplated hereby,
and to take all other actions that are either (i) necessary or appropriate in the judgment of the
Sellers Representative for the accomplishment of the foregoing or (ii) specifically mandated by
the terms of this Agreement or the Escrow Agreement. Such agency may be changed by the Sellers
with the right to a majority of the Escrow Account from time-to-time. Notwithstanding the
foregoing, the Sellers Representative may resign at any time by providing written notice of intent
to resign to the Sellers, which resignation shall be effective upon the earlier of (A) thirty (30)
calendar days following delivery of such written notice or (B) the appointment of a successor by
the holders of a majority in interest of the Escrow Account. No bond shall be required of the
Sellers Representative, and the Sellers Representative shall not receive any compensation for its
services. Until notified in writing signed by an authorized person on behalf of the Sellers that
the Sellers Representative has resigned or been removed and that a successor has been appointed,
Purchaser shall be entitled to rely upon any instruction, notice, decision, action or inaction of
the Sellers Representative whether in receipt of a writing signed by one or both of the
individuals serving in such capacity. Any notice delivered by Purchaser or Sellers
Representative, as the case may be, shall be delivered in accordance with
Section 9.2
hereof.
(b) The Sellers Representative shall not be liable for any act done or omitted hereunder as
Sellers Representative while acting in good faith, even if such act or omission constitutes
negligence on the part of such Sellers Representative. The Sellers Representative shall only
have the duties expressly stated in this Agreement and shall have no other duty, express or
implied. The Sellers Representative may engage attorneys, accountants and other professionals and
experts. The Sellers Representative may in good faith rely conclusively upon information,
reports, statements and opinions prepared or presented by such professionals, and any action taken
by the Sellers Representative based on such reliance shall be deemed conclusively to have been
taken in good faith. The Sellers shall indemnify the Sellers Representative and hold the Sellers
Representative harmless against any loss, liability or expense incurred on the part of the Sellers
Representative (so long as the Sellers Representative was acting in good faith in connection
therewith) and arising out of or in connection with the acceptance or administration of the
Sellers Representative duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Sellers Representative and reasonable travel expenses for services
rendered as Sellers Representative (
Sellers Representative Expenses
). The Sellers
Representative shall have the right to retain Sellers Representative Expenses from the Escrow
Account prior to any distribution to the Sellers. Prior to any such distribution from the Escrow
Account, the Sellers Representative shall deliver to the Escrow Agent a certificate setting forth
the Sellers Representative Expenses actually incurred. A decision, act, consent or instruction of
the Sellers Representative, including an amendment, extension or waiver of this Agreement pursuant
to its authority hereunder, shall constitute a decision of the Sellers and shall be final, binding
and conclusive upon the Sellers.
6.11 ***
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7.
CLOSING CONDITIONS
7.1
Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to
consummate the transactions contemplated under this Agreement are subject to the fulfillment of
each of the following conditions, any or all of which may be waived in whole or in part by
Purchaser, in its sole discretion:
(a)
Delivery of the Applicable Notice
. Purchaser shall have delivered a Purchase Election
Notice to the Acquired Company or the Sellers Representative shall have delivered a Milestone
Completion Notice or Second Put Option Notice to Purchaser.
(b)
Representations and Warranties
. Each representation and warranty contained in
Section
2
and
Section 3
which is qualified as to materiality shall be true and correct and each
such representation and warranty that is not so qualified shall be true and correct in all material
respects, in each case as of the date hereof and at and as of the Closing as if made at and as of
such time, except that the representations and warranties made by the Seller Parties which address
matters only as of a particular date shall remain true and correct as of such date.
(c)
Performance
. The Seller Parties shall each have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be performed or complied
with by them prior to or at the Closing.
(d)
No Material Adverse Effect
. Between the date of the execution of this Agreement and the
Closing Date, the Acquired Company and its Subsidiaries shall not have suffered or experienced a
Material Adverse Effect.
(e)
Certificates
. Purchaser shall have received (i) a certificate of the Sellers
Representative certifying to the fulfillment of the conditions specified in
Section 7.1(b)
,
Section 7.1(c)
and
Section 7.1(d)
, (ii) a certificate of the Sellers
Representative certifying the Working Capital specified in
Section 1.14
. and (ii) such
other evidence with respect to the fulfillment of said conditions as Purchaser may reasonably
request.
(f)
No Injunction
. There shall not be pending, Threatened or in effect any injunction or
restraining order issued by a court of competent jurisdiction in an Action against (i) the
consummation of the transactions contemplated hereby, or (ii) the right of the Acquired Company or
any Subsidiary to operate their respective businesses after Closing on substantially the same basis
as operated on the Effective Date.
(g)
Government Approvals
. The parties hereto shall have received all approvals from any
applicable Governmental Body necessary to consummate the transactions contemplated hereby.
(h)
Third Party Consents
. The Seller Parties shall have obtained and delivered to Purchaser
all written consents, approvals, waivers, notices or similar authorizations required to be obtained
or given by the Sellers in order to consummate the transactions contemplated hereby, in form and
substance reasonably satisfactory to Purchaser.
53
(i)
Resignations
. Purchaser shall have received the written resignations of all directors of
the Acquired Company, effective as of the Closing.
(j)
Shareholders Register
. Purchaser shall have received the shareholders register
(
aandeelhoudersregister
) of the Acquired Company.
(k)
Certificate of Statutory Director
. Purchaser shall have received the following documents,
certified as of the Closing Date by the Statutory Director of the Acquired Company as being the
true, correct and complete documents of the Acquired Company:
(i) a copy of the articles of association of the Acquired Company as in effect immediately
prior to the Closing Date;
(ii) copies of resolutions adopted by the Board of Directors and shareholders of the Acquired
Company authorizing the transactions contemplated by this Agreement; and
(iii) the shareholders register of the Acquired Company.
(l)
Legal Opinion
. Purchaser shall have received an opinion, dated as of the Closing Date,
from counsel for the Seller Parties, opining as to the matters set forth in
Exhibit J
.
(m)
Estimated Closing Certificate
. Purchaser shall have received a certificate of the
Sellers Representative, prepared to the reasonable satisfaction of Purchaser (the
Estimated
Closing Certificate
) setting forth the Acquired Companys good faith estimate of the aggregate
amount of all legal, financial advisory, investment banking and other fees and expenses incurred by
or on behalf of the Sellers or the Acquired Company in connection with the negotiation, preparation
and execution of this Agreement, the Closing Documents and the transactions contemplated hereby and
thereby (the
Seller Funded Expenses
), to the extent that such Seller Funded Expenses will not be
paid prior to the close of business on the Business Day immediately preceding the Closing Date (the
amounts set forth on the Estimated Closing Certificate with respect to the Seller Funded Expenses
shall be conclusive for the purposes).
(n)
Escrow Agreement
. Purchaser shall have received the Indemnity Escrow Agreement, dated as
of the date hereof, by and among the Purchaser, the Sellers and the Escrow Agent in the form
attached hereto as
Exhibit K
(an
Escrow Agreement
) duly executed by the Escrow Agent,
each of the Sellers, the Sellers Representative and an authorized officer of the Acquired Company.
(o)
Founders Non-Competition Agreements
. Purchaser shall have received the Founders
Non-Competition Agreements in the forms attached hereto as
Exhibit L
and
Exhibit M
(each, a
Founders Non-Competition Agreement
) dated as of the Closing Date and duly executed by
each of Joost D de Bruijn and Clemens van Blitterswijk respectively.
(p)
Investor Non-Competition Agreement
. Purchaser shall have received the Investor
Non-Competition Agreement in the form attached hereto as
Exhibit N
(the
Investor
Non-Competition Agreement
) dated as of the Closing Date and duly executed by Edward van Wezel.
54
(q)
Shareholders Consent
. Seller Parties shall have received an executed shareholders
resolution (under the condition precedent of the Purchaser becoming the sole shareholders of the
Acquired Company): (A) appointing a new statutory director to the board of the Acquiring Company,
(B) accepting the resignations of the statutory director delivered pursuant to clause 7.1(i) above
and (C) granting discharge to the resigning statutory director for his/its management to the extent
such management appears from the annual accounts or has been otherwise brought to the attention of
the general meeting of shareholders.
7.2
Conditions Precedent to Obligations of Seller Parties.
The obligation of the Seller
Parties to consummate the transactions contemplated by this Agreement are subject to the
fulfillment of each of the following conditions, any or all of which may be waived in whole or in
part by the Seller Parties:
(a)
Delivery of the Applicable Notice
. Purchaser shall have delivered a Purchase Election
Notice to the Acquired Company or the Acquired Company shall have delivered a Milestone Completion
Notice or Second Put Option Notice to Purchaser.
(b)
Representations and Warranties
. Each representation and warranty contained in
Section
4
which is qualified as to materiality shall be true and correct and each such representation
and warranty that is not so qualified shall be true and correct in all material respects, in each
case as of the date hereof and at and as of the Closing as if made at and as of such time, except
that the representations and warranties made by Purchaser which address matters only as of a
particular date shall remain true and correct as of such date.
(c)
Performance
. Purchaser shall have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be performed or complied with by
Purchaser prior to or at the Closing.
(d)
Certificates
. The Seller Parties shall have received (a) a certificate of an executive
officer of Purchaser, dated the Closing Date, certifying to the fulfillment of the conditions
specified in
Section 7.2(b)
,
Section 7.2(c)
and
Section 7.2(d)
, and (b)
such other evidence with respect to the fulfillment of said conditions as Seller Parties may
reasonably request.
(e)
Secretarys Certificate
. Seller Parties shall have received the following documents,
certified as of the Closing Date by the Secretary of the Purchaser as being the true, correct and
complete documents of the Acquired Company:
(i) copies of the certificate of incorporation and bylaws of the Purchaser as in effect
immediately prior to the Closing Date;
(ii) copies of resolutions adopted by the board of of the Purchaser authorizing the
transactions contemplated by this Agreement;
(iii) certified good standing certificates, or certificates of compliance relating to the
Purchaser, dated within five (5) Business Days of the Closing Date, issued by the State of
Delaware.
55
(f)
No Injunction
. There shall not be in effect any injunction or restraining order issued by
a court of competent jurisdiction in an Action against the consummation of the transactions
contemplated hereby.
(g)
Government Approvals
. The parties hereto shall have received all approvals from any
applicable Governmental Body necessary to consummate the transactions contemplated hereby.
(h)
Third Party Consents
. Purchaser shall have obtained and delivered to the Seller Parties
any written consents, approvals, waivers, notices or similar authorizations required to be obtained
by Purchaser in order to consummate the transactions contemplated hereby, in form and substance
reasonably satisfactory to the Seller Parties.
(i)
Notary
. The Notary shall confirm to the parties that he has received the amount due
pursuant to
Section 1.6
. At or prior to the Closing Date, the parties shall execute the
notarial deed of transfer of the Seller Shares substantially in the form of
Exhibit C
.
(j)
Seller Funded Expenses
. Purchaser shall provide sufficient funds to the Acquired Company
to enable the Acquired Company to pay all Seller Funded Expenses to the extent that they have not
been paid prior to the close of business on the Business Day immediately preceding the Closing
Date, up to the amount thereof set forth in the Estimated Closing Certificate. At the Closing, the
Acquired Company shall pay such Seller Funded Expenses, up to the amount of the Seller Funded
Expenses that have not been paid prior the close of business on the Business Day immediately
preceding the Closing Date as set forth in Estimated Closing Certificate.
(k)
Escrow Agreement
. Seller Parties shall have received the Escrow Agreement duly executed
by the Escrow Agent and an authorized officer of Purchaser.
8.
TERMINATION
8.1
Termination
. This Agreement may be terminated and the Acquisition may be abandoned at any
time prior to the Closing, notwithstanding any requisite approval and adoption of this Agreement
and the transactions contemplated hereby by the shareholders of the Acquired Company:
(a) by duly authorized mutual written consent executed by each of Purchaser and the Seller
Parties.
(b) automatically if there shall be any law that makes consummation of the Acquisition illegal
or otherwise prohibited or if any court of competent jurisdiction or Governmental Body shall have
issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Acquisition and such order, decree, ruling or other action shall have become final
and non-appealable.
(c) by Purchaser, pursuant to
Section 1.2(b)(iii)
or
Section 1.8(b)(iii)
.
56
(d) automatically, upon (i) expiration or termination of the Call Option Period without a
Purchase Election Notice having been delivered by Purchaser, (ii) expiration or termination of the
Put Option Period without a Milestone Completion Notice having been delivered by the Sellers
Representative and (iii) thirty (30) days after expiration or termination of the Second Put Option
Period without a Section Put Option Notice having been delivered by the Sellers Representative.
8.2
Effect of Termination
. In the event of the termination of this Agreement pursuant to
Section 8.1
, this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of Purchaser, the Acquired Company, the Sellers, the Sellers
Representative or any of their respective officers, directors, or stockholders, and all rights and
obligations of any party hereto shall cease, except for liabilities arising from a breach of this
Agreement prior to such termination;
provided
, that the provisions of
Section 5.5
,
Section 8
and
Section 9
(excluding
Section 9.8
) shall survive the
termination of this Agreement for any reason.
9.
GENERAL PROVISIONS
9.1
Expenses
. Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants.
9.2
Notices
. All notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier service (costs prepaid);
or (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment
confirmed with a copy delivered as provided in clause (a), in each case to the following addresses,
facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or person as a party
may designate by notice to the other parties):
If to Purchaser, addressed to:
NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attn: General Counsel
Fax: (858) 909-2479
With a copy to:
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Michael Kagnoff
Fax: (858) 456-3075
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If to Seller Parties or the Sellers Representative, addressed to:
Progentix Orthobiology BV
Professor Bronkhorstlaan 10, building 48
3723 MB Bilthoven
The Netherlands
Attention: Joost de Bruijn
Fax: +31 (0)30 229 7299
and
BioGeneration Ventures B.V.
Gooimeer 2 35
1411 DC Naarden
The Netherlands
Attention: Edwin van Wezel
With a copy to:
Goodwin Procter LLP
Exchange Place
53 State Streeet
Boston, MA 02109
Attn: Michael H. Bison, Esq.
Fax: (617) 523-1231
and
CORP. advocaten
De Lairessestraat 137-143
1075 HJ Amsterdam
Attention: Edwin Renes
Fax: + 31 (0)20 578 83 05
9.3
Jurisdiction; Service of Process
. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be brought against any of
the parties in the United States District Court for the Southern District of New York or the state
courts located in New York, New York, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
9.4
Dispute Resolution
.
(a) Except as provided in
Section 1.11
, any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled by arbitration
conducted expeditiously in accordance with the Center for Public Resources Rules for
58
Nonadministered Arbitration of Business Disputes (the
CPR Rules
). The Center for Public
Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. §§1-16, and judgment upon the award
rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of
arbitration shall be New York, New York.
(b) Such proceedings shall be administered by the neutral advisor in accordance with the CPR
Rules as he/she deems appropriate, however, such proceedings shall be guided by the following
agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be accomplished within forty-five (45)
days of the initiation of the procedure;
(ii) no other discovery;
(iii) hearings before the neutral advisor which shall not exceed three hours; such hearings to
take place in one or two days at a maximum; and
(iv) decision to be rendered not later than ten (10) days following such hearings.
(c) Each of Purchaser, the Acquired Company and the Sellers (i) hereby unconditionally and
irrevocably submits to the jurisdiction of the United States District Court for the Southern
District of New York, for the purpose of enforcing the award or decision in any such proceeding and
(ii) hereby waives, and agrees not to assert in any civil action to enforce the award, any claim
that it is not subject personally to the jurisdiction of the above-named court, that its property
is exempt or immune from attachment or execution, that the civil action is brought in an
inconvenient forum, that the venue of the civil action is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court, and (iii) hereby waives and agrees
not to seek any review by any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of Purchaser, the Acquired Company and Sellers
hereby consents to service of process by registered mail at the address to which notices are to be
given. Each of Purchaser, the Acquired Company and the Sellers agrees that its submission to
jurisdiction and its consent to service of process by mail is made for the express benefit of the
other parties hereto. Final judgment against Purchaser, the Acquired Company or the Sellers in any
such action, suit or proceeding may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such
other jurisdiction;
provided
,
however
, that any party may at its option bring suit,
or institute other judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
9.5
Waiver
. The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right, power, or privilege
or the exercise of any other right, power, or privilege. To the maximum extent permitted by
59
applicable law: (a) no claim or right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in this Agreement.
9.6
Entire Agreement and Modification
. This Agreement, along with the Preferred Stock
Purchase Agreement, supersedes all prior agreements between the parties with respect to its subject
matter (including the Letter of Intent between Purchaser and the Acquired Company dated November
28, 2008 and constitutes (along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed by Purchaser and
Seller Parties.
9.7
Assignments, Successors, and No Third-Party Rights
. Neither party may assign any of its
rights under this Agreement without the prior consent of the other parties, except that Purchaser
may assign any of its rights under this Agreement to any Subsidiary of Purchaser and in the event
of a Change of Control of Purchaser, Purchaser shall cause the acquirer to assume, whether in
writing or by operation of law, all of Purchasers obligations under this Agreement. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to
the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties to this Agreement
any legal or equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors and assigns.
9.8
Release of Claims
. In consideration of the Aggregate Purchase Price and the other
covenants and agreements set forth herein, effective as of the Closing except as set forth in this
Agreement or any exhibit or schedule to this Agreement, including, without limitation, the Closing
Documents (which are hereby excluded from this
Section 9.8
), effective as of the Closing,
Sellers hereby fully and forever release and discharge Purchaser and the Acquired Company (and
their Representatives and Affiliates) from any and all claims, accusations, demands, liabilities,
obligations, responsibilities, suits, actions and causes of action, whether liquidated or
unliquidated, fixed or contingent, known or unknown, or otherwise, in each case, arising out of,
relating to, or otherwise connected with all prior relationships with or dealings with, between or
among any or all of the parties hereto, and any of their business or other relationships arising
out of or related to the same. Each Seller acknowledges that it may discover facts or law
different from or in addition to the facts or law that they know or believe to be true with respect
to the claims released in this
Section 9.8
and agrees, nonetheless, that this
Section
9.8
and the release contained herein shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery of them. Each Seller further
agrees that, to the fullest extent permitted by law, it will not prosecute, nor allow to be
prosecuted on his behalf, in any administrative agency, whether state or federal, or in any court,
60
whether state or federal, any claim or demand of any type related to the matters released in this
Section 9.8
.
9.9
Severability
. If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or unenforceable.
9.10
Section Headings, Construction
. The headings of Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All references to
Section or Sections refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word including does not limit the preceding
words or terms.
9.11
Time of Essence
. With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
9.12
Governing Law
. This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
9.13
Counterparts
. This Agreement may be executed in one or more counterparts (including by
facsimile or other electronic transmission), each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to constitute one and the same
agreement.
10.
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified or referred to
in this
Section 10
:
Acquired Company
Progentix Orthobiology B.V. or any of its direct or indirect Subsidiaries
or any successors thereto.
Acquired Company Proprietary Rights
any Proprietary Rights owned by or licensed to the
Acquired Company or otherwise used in the business of the Acquired Company.
Acquired Company Source Code
any source code, or any portion, aspect or segment of any
source code, relating to any Proprietary Rights owned by or licensed to the Acquired Company or
otherwise used by the Acquired Company.
Acquisition
as defined in the Recitals to this Agreement.
Acquisition Proposal
means any bona fide offer or proposal (other than an offer or proposal
by Purchaser) relating to (a) any transaction or series of related transactions other than the
transactions contemplated by this Agreement or the Preferred Stock Purchase Agreement involving the
purchase of all or any significant portion of the capital stock or assets of the Acquired Company,
(b) any agreement to enter into a business combination with the Acquired
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Company, (c) any agreement
made, other than in the ordinary course of business, for the license, sale or other disposition of
Acquired Company Proprietary Rights, and (d) any other
extraordinary business transaction involving or otherwise relating to the Acquired Company or
Acquired Company Proprietary Rights.
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 Body.
Affiliate
has the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the date hereof.
Agreement
as defined in the first paragraph of this Agreement.
Amended Articles
as defined in the recitals to this Agreement
Applicable Contract
any Contract (a) under which the Acquired Company has or may acquire
any rights, (b) under which the Acquired Company has or may become subject to any obligation or
liability, or (c) by which the Acquired Company or any of the assets owned or used by it is or may
become bound.
Assets
means all of the personal properties and assets of any nature owned or used by the
Acquired Company (whether real, personal, or mixed and whether tangible or intangible).
Balance Sheet
as defined in Section 3.4.
Balance Sheet Date
December 31, 2008
.
Blocks Product
shall have the meaning set forth on
Exhibit E
hereto.
Breach
a Breach of a representation, warranty, covenant, obligation, or other provision
of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been, in each case, as of the date any representation or warranty is
made, or any covenant or obligation is required to be performed (as applicable), (a) any inaccuracy
in or breach of, or any failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or other occurrence or
circumstance that is or was inconsistent with such representation, warranty, covenant, obligation,
or other provision, and the term Breach means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
Business
All operations and rights relating to the development, manufacturing, marketing
and sale of the Product
Business Day
means any day other than a Saturday, a Sunday or a day on which commercial
banking institutions in Amsterdam, The Netherlands or San Diego, California are authorized or
obligated by law or executive order to be closed. For purposes of this Agreement
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(unless otherwise
specified as a Business Day), the word day shall mean a calendar day. Whenever any party hereto
is required to provide notice, approval or otherwise respond within
any specified period up Business Days, such period shall commence at 9:00 a.m. local time in
the city specified in such partys address for notice in Section 9.2 on the first whole Business
Day of such period and shall expire at 5:00 p.m., local time in such city.
Call Option Period
as defined in the Recitals to this Agreement.
Change of Control
the acquisition of the Purchaser by another entity by means of any
transaction or series of related transactions to which the Purchaser is party (including, without
limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale
of stock for capital raising purposes) other than a transaction or series of transactions in which
the holders of the voting securities of the Purchaser outstanding immediately prior to such
transaction continue to retain (either by such voting securities remaining outstanding or by such
voting securities being converted into voting securities of the surviving entity), as a result of
shares in the Purchaser held by such holders prior to such transaction, at least fifty percent
(50%) of the total voting power represented by the voting securities of the Purchaser or such
surviving entity outstanding immediately after such transaction or series of transactions.
Closing
as defined in Section 1.1(c).
Closing Date
the date and time as of which the Closing actually takes place.
Closing Documents
this Agreement, the Founders Non-Competition Agreements, the Investor
Non-Competition Agreement, the Escrow Agreement and each other document or agreement executed and
delivered in connection with the Contemplated Transactions.
Consent
any approval, consent, ratification, waiver, or other authorization (including any
Governmental Authorization).
Contemplated Transactions
all of the transactions contemplated by this Agreement,
including:
(a) the sale of the Seller Shares by Sellers to Purchaser;
(b) the performance by Purchaser and Sellers of their respective covenants and obligations
under this Agreement; and
(c) Purchasers acquisition and ownership of the Seller Shares and exercise of control over
the Acquired Company.
Contract
any agreement, contract, obligation, promise, or undertaking (whether written or
oral and whether express or implied) that is legally binding.
Copyrights
all copyrights, copyrightable works, semiconductor topography and mask work
rights, and applications for registration thereof, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral rights and rights of
ownership of copyrightable works, semiconductor topography works and mask works, and all
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rights to
register and obtain renewals and extensions of registrations, together with all other
interests accruing by reason of international copyright, semiconductor topography and mask
work conventions.
Data Room
the virtual data room on the Acquired Companys website at *** pursuant to
which the Acquired Company made available certain of its documents to Purchaser, or any additional
documents delivered to Purchaser in any other virtual data room established by the Acquired Company
after the Effective Date, provided that (i) the Acquired Company makes such data room available to
Purchaser, (ii) the Acquired Company provides Purchaser written instructions to enable Purchaser to
obtain access to such data room and (iii) any documents included in the virtual data room were not
in existence as of the Effective Date.
Distribution Agreement
the Distribution Agreement dated as of the Effective Date, by and
between Purchaser and the Acquired Company.
Encumbrance
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
Environment
soil, land surface or subsurface strata, surface waters (including navigable
waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
Environmental, Health, and Safety Liabilities
any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law or Occupational Safety
and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions (including on-site or off-site
contamination, occupational safety and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings,
damages, losses, claims, demands and response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety and Health Law for
cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or
other remediation or response actions (
Cleanup
) required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by
any Governmental Body or any other Person) and for any natural resource damages; or
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(d) any other compliance, corrective, investigative, or remedial measures required under
Environmental Law or Occupational Safety and Health Law.
The terms removal, remedial, and response action, include the types of activities covered by
the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
§ 9601 et seq., as amended (
CERCLA
), or the equivalent thereof under the Environmental Laws of
any other jurisdiction.
Environmental Law
any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended or actual releases
of pollutants or hazardous substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of release, or
paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
Exchange Act
Securities Exchange Act of 1934, as amended
Facilities
any real property, leaseholds, or other interests currently or formerly owned or
operated by the Acquired Company and any buildings, plants, structures, or equipment (including
motor vehicles, tank cars, and rolling stock) currently or formerly owned or operated by the
Acquired Company; including the Environmental Protection Act (
Wet milieubeheer
), Environmental
Activities Decree (
Activiteitenbesluit
), Soil Protection Act (
Wet bodembescherming
), Waste
Water Protection Act (
Wet verontreiniging oppervlaktewateren
) and the European communitty
Regulation on the Registration, Evaluation, Authorisation and restriction of chemical substances,
EC 1907 /2006, (
Verordening op de Registratie, Evaluatie, Autorisatie en beperkingen van Chemische
stiffen
).
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Facility Agreement
means the Senior Secured Facility Agreement dated as of the Effective
Date by and between Purchaser and the Acquired Company.
FDA
the United States Food and Drug Administration.
FDCA
Federal Food Drug and Cosmetic Act.
Financial Statements
as defined in Section 3.4(a).
Finished Inventory
means all finished goods inventory of Product.
GAAP
generally accepted United States accounting principles, applied on a consistent
basis.
Granules Product
shall have the meaning set forth on
Exhibit E
hereto.
Governmental Authorization
any approval, consent, license, permit, waiver, or other
authorization issued, granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
Governmental Body
any:
(a) nation, state, province, county , city, town, village, district, or other jurisdiction of
any nature;
(b) national, federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
Hazardous Activity
the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about, or from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities or the Acquired Company.
Hazardous Materials
any waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
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Indebtedness
as applied to any person, (a) all indebtedness for borrowed money, whether
current or funded, or secured or unsecured, (b) all indebtedness for the deferred
purchase price of property or services represented by a note or other security, (c) all
indebtedness created or arising under any conditional sale or other title retention agreement with
respect to property acquired (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of such property), (d)
all indebtedness secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations under leases which
shall have been or must be, in accordance with GAAP, recorded as capital leases in respect of which
such person is liable as lessee, (f) any liability in respect of bankers acceptances or letters of
credit, and (g) all indebtedness referred to in clauses (a), (b), (c), (d), (e) or (f) above which
is directly or indirectly guaranteed by or which such person has agreed (contingently or otherwise)
to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against
loss.
Issued Patents
all issued patents, reissued or reexamined patents, revivals of patents,
utility models, certificates of invention, registrations of patents and extensions thereof,
regardless of country or formal name, issued by the United States Patent and Trademark Office and
any other applicable Governmental Body.
Knowledge
an individual will be deemed to have Knowledge of a particular fact or other
matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have Knowledge of a particular fact or
other matter if any individual who is serving, or who has at any time served, as a director,
officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
Legal Requirement
any national, federal, state, provincial, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
Loan Amount
the amount of unpaid principal and interest which the Acquired Company owes
Purchaser at the Closing under the Facility Agreement, minus (i) any amount by which Working
Capital exceeds zero ($0) as of Closing, plus (ii) any amount by which Working Capital is less than
zero ($0) as of the Closing minus (iii) the reasonable expenses incurred by the Acquired Company in
connection with any audit required by Section 6.6 of the Preferred Stock Purchase Agreement.
Material Adverse Effect
an event, violation, inaccuracy, circumstance or other matter shall
be deemed to have a Material Adverse Effect on the Acquired Company if such event, violation,
inaccuracy, circumstance or other matter (considered together with all other matters
67
that would
constitute exceptions to the representations and warranties set forth in this Agreement but for the
presence of Material Adverse Effect or other materiality qualifications, or any
similar qualifications, in such representations and warranties) had or would reasonably be
expected to have a material adverse effect on: (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of the Acquired Company; (ii) the ability of
Seller Parties to consummate the Contemplated Transactions; or (iii) Purchasers ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with respect to the Seller
Shares or the Acquired Company, other than any event, change, occurrence or effect resulting from
(A) changes in general economic, financial market, business or geopolitical conditions, (B) general
changes or developments in any of the industries in which the Acquired Company operates, (C)
changes in any applicable Legal Requirements or applicable accounting regulations or principles or
interpretations thereof, (D) any outbreak or escalation of hostilities or war or any act of
terrorism, (E) the announcement of the acquisition of the Acquired Company pursuant to this
Agreement or (F) any action taken at the written request of Purchaser.
Material Contract
as defined
Section 3.16(b)
.
Net Sales
means ***.
Notary
means Sander Wiggers, civil law notary with DLA Piper Nederland N.V. or his deputy,
substitute or successor in office.
Occupational Safety and Health Law
any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or sponsored by industry associations
and insurance companies), designed to provide safe and healthful working conditions
,
including the
Working Conditions Act (
Arbeidsomstandighedenwet
) and the Working Conditions Decree
(
Arbeidsomstandighedenbesluit
).
Option Period
as defined in the recitals to this Agreement
Order
any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body
or by any arbitrator.
Ordinary Course of Business
an action taken by a Person will be deemed to have been taken
in the Ordinary Course of Business only if:
(a) such action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors of such Person (or
by any Person or group of Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such Person; and
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(c) such action is similar in nature and magnitude to actions customarily taken, without any
authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as such Person.
Organizational Documents
(a) the articles of association; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or organization of a Person;
and (e) any amendment to any of the foregoing.
Patents
the Issued Patents and the Patent Applications.
Patent Applications
all published or unpublished nonprovisional and provisional patent
applications, reexamination proceedings, invention disclosures and records of invention.
Person
any individual, corporation, limited liability company, partnership, association,
trust or any other entity or organization, including a Governmental Body.
Pledge Agreement
means the Pledge Agreement of Intellectual Property Assets dated as of
the Effective Date by and between Purchaser and the Acquired Company and any other security
agreement entered into by Purchaser and any Seller Party in connection with the Facility Agreement.
Post-Closing Straddle Period
as defined
Section 5.7(c)
.
Post-Closing Tax Period
as defined
Section 5.7b)
.
Pre-Closing Straddle Period
as defined
Section 5.7(c)
.
Pre-Closing Tax Period
as defined
Section 5.7(b)
.
Preferred Stock Purchase Agreement
as defined in the Recitals to this Agreement.
Proceeding
any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
Product(s)
the Blocks Product, the Granules Product and the Putty Product
.
Proprietary Rights
any: (a)(i) Issued Patents, (ii) Patent Applications, (iii) Trademarks,
fictitious business names and domain name registrations, (iv) Copyrights, (v) Trade Secrets, (vi)
all other ideas, inventions, designs, manufacturing and operating specifications, technical data,
and other intangible assets, intellectual properties and rights (whether or not appropriate steps
have been taken to protect, under applicable law, such other intangible assets, properties or
rights); or (b) any right to use or exploit any of the foregoing.
Purchaser
as defined in the first paragraph of this Agreement.
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Purchaser Disclosure Schedule
the Disclosure Schedule delivered by Purchaser to Sellers, if
any, concurrently with the execution and delivery of this Agreement.
Put Option Period
as defined in the Recitals to this Agreement.
Putty Product
shall have the meaning set forth on
Exhibit E
hereto.
Qualified Stock Exchange
the NASDAQ Global Select Market;
provided
that, if as of
the applicable date, the Purchaser Common Stock is not then listed on the NASDAQ Global Select
Market, such national securities exchange in the United States on which the Purchaser Common Stock
is then traded.
Recapitalization
has the meaning set forth in the recitals to this Agreement.
Registered Copyrights
all copyrights for which registrations have been obtained or
applications for registration have been filed in any applicable Governmental Body, and all
copyrights for which registration is not required.
Registered Trademarks
all trademarks for which registrations have been obtained or
applications for registration have been filed in any applicable Governmental Body.
Release
any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing into the Environment, whether intentional or unintentional.
Representative
with respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal counsel, accountants,
and financial advisors.
Sales Run Rate
*** times Purchasers actual Net Sales for the most recently completed
*** months.
Securities Act
the Securities Act of 1933 or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
Seller
as defined in the first paragraph of this Agreement.
Seller Parties
as defined in the first paragraph of this Agreement.
Seller Parties Disclosure Schedule
the Disclosure Schedule delivered by Seller Parties to
Purchaser, concurrently with the execution and delivery of this Agreement.
Seller Shares
as defined in the Recitals of this Agreement.
Sellers Knowledge
means the Knowledge of each of the Sellers on ***
Sellers Representative
as defined in the first paragraph of this Agreement.
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|
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***
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|
Portions of this page have been omitted pursuant to a request
for Confidential Treatment filed separately with the Commission.
|
70
Series A Preferred Stock
as defined in the Recitals to this Agreement.
Series B Preferred Stock
as defined in the Recitals to this Agreement.
Straddle Period
as defined in
Section 5.7(b)
.
Subsidiary
with respect to any Person (the
Owner
), any corporation or other Person of
which securities or other interests having the power to elect a majority of that corporations or
other Persons board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that has not occurred)
are held by the Owner or one or more of its Subsidiaries; when used without reference to a
particular Person, Subsidiary means a Subsidiary of the Acquired Company.
Tax
or
Taxation
means any and all forms of taxation by any tax authority, whether
international, national or local, including without limitation to the generality of the foregoing,
corporate income tax, capital tax, wage tax, real property tax, transfer taxes, registration tax,
VAT, dividend withholding tax, environmental tax, divestment payments, custom duties, stock
exchange tax, exercise tax or gift tax, including but not limited to penalties, interest and any
other costs or expenses related to or associated with any tax matter and all contributions or
premiums which are payable pursuant to industry or governmental social security regulations,
including penalties, interest and any other costs or expenses relating to or associated with any
social security matter.
Tax Returns
means all returns, computations ,declarations, reports, statements and other
documents related to Taxation, including any schedule or attachment thereto and any related or
supporting work papers or information with respect to any of the foregoing, including any amendment
thereof, and the term.
Tax Return
means any one of the foregoing Tax Returns.
Threat of Release
a substantial likelihood of a Release that may require action in order to
prevent or mitigate damage to the Environment that may result from such Release.
Threatened
a claim, Proceeding, dispute, action, or other matter will be deemed to have
been Threatened if any demand or statement has been made (orally or in writing) or any notice has
been given (orally or in writing).
Trade Secrets
all product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
research and development, manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code), computer software and database
technologies, systems, structures and architectures (and related processes, formulae, composition,
improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented, that is a trade secret within the
meaning of the applicable trade-secret protection law.
71
Trademarks
all (i) trademarks, service marks, marks, logos, insignias, designs, names or
other symbols, (ii) applications for registration of trademarks, service marks, marks, logos,
insignias, designs, names or other symbols, (iii) trademarks, service marks, marks, logos,
insignias, designs, names or other symbols for which registrations has been obtained.
Updated Company Disclosure Schedule
upon notice sellers must give purchasers an updated
disclosure schedule, as if such representations and warranties were made as of the date of such
Updated Company Disclosure Schedule.
WKSI
well-known seasoned issuer within the meaning of Section 405 of the Securities Act (or
any successor provision thereto).
Working Capital
shall mean the amount, if any, by which the aggregate of the Current Assets
of the Acquired Company exceeds the aggregate of the Current Liabilities of the Acquired Company as
of the Closing Date;
Current Assets
shall mean all the current assets of the Acquired Company as
of the Closing Date; and
Current Liabilities
shall mean the current liabilities of the Acquired
Company as of the Closing Date, excluding the unpaid principal and interest the Acquired Company
owes to Purchaser under the Facility Agreement and the Seller Funded Expenses.
Xpand
Xpand Biotechnology B.V., a private company with limited liability, incorporated
under the laws of the Netherlands.
72
Index of Other Defined Terms
:
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|
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Defined Terms
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Section Reference
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510(k)
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Section 3.22(d)
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|
AAA Rules
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Section 1.11(c)
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Additional Milestone
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|
Section 1.6(c)(iii)
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Aggregate Purchase Price
|
|
Section 1.7
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|
Base Milestones
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|
Section 1.6(c)(i)
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Basket
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|
Section 6.4(a)
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Board of Directors
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|
Section 3.2(a)
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Call Option
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Section 1.1(a)
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Call Option Rescission Period
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|
Section 1.1(b)(iii)
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Call Option Review Period
|
|
Section 1.1(b)(iii)
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Cap
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|
Section 6.4(b)
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CPR Rules
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|
Section 9.4
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|
Cure Notice
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Section 1.2(b)(iv)
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|
Cure Option
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|
Section 1.2(b)(iv)
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Cure Option Period
|
|
Section 1.2(b)(iv)
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Damages
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|
Section 6.2(a)
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Disclosure Schedule Request
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|
Section 1.1(b)(ii)
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Escrow Agent
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|
Section 1.9(a)
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Escrow Agreement
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|
Section 7.1(n)
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Escrow Amounts
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|
Section 1.9(a)
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Estimated Closing Certificate
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|
Section 7.1(m)
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Founders Non-Competition Agreement
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Section 7.1(o)
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Fundamental Representations
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|
Section 6.1
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73
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Defined Terms
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Section Reference
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General Escrow Amount
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Section 1.9(a)
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General Indemnity Escrow Period
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Section 6.1
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Indemnified Persons
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|
Section 6.3
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Indemnifying Persons
|
|
Section 6.6(b)
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|
Independent Expert
|
|
Section 1.11(d)
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|
Initial Purchase Price
|
|
Section 1.6(a)
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|
|
|
Investor Non-Competition Agreement
|
|
Section 7.1(p)
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|
|
Mandatory Registration Statement
|
|
Section 5.9(a)
|
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|
Milestone
|
|
Section 1.6(c)(iii)
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|
|
Milestone Completion Notice
|
|
Section 1.2(b)(i)
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|
Milestone Payments
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|
Section 1.7
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Pension Schemes
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|
Section 3.13
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Permitted Encumbrance
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Section 3.6
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Post Closing Milestone Assessment Notice
|
|
Section 1.11(b)
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Post-Closing Milestone Period
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|
Section 1.7
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Pre-Closing Milestone Dispute Notice
|
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Section 1.11(a)
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Proceeds Allocation
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|
Section 1.6(a)
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Purchase Election Notice
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Section 1.1(b)(i)
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Purchaser Common Stock
|
|
Section 1.6(a)
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Purchaser Indemnified Persons
|
|
Section 6.2(a)
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Purchaser Notice
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Section 5.10(a)
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Put Option
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|
Section 1.2(a)
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Put Option Review Period
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|
Section 1.2(b)(iii)
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Revised Proceeds Allocation
|
|
Section 1.6(a)
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Right of First Refusal
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Section 5.10(a)
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74
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Defined Terms
|
|
Section Reference
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|
|
ROFR Period
|
|
Section 5.10(a)
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Sale Notice
|
|
Section 5.10(a)
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Sale of the Acquired Company
|
|
Section 5.10(a)
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SEC
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|
Section 4.6(b)
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SEC Reports
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Section 4.6(b)
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Second Cure Notice
|
|
Section 1.8(b)(iv)
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Second Cure Option
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|
Section 1.8(b)(iv)
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Second Cure Option Period
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Section 1.8(b)(iv)
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Second Put Option
|
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Section 1.8(a)
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Second Put Option Condition
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|
Section 1.8(a)
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Second Put Option Notice
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Section 1.8(b)(i)
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Second Put Option Period
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|
Section 1.8(a)
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Second Put Option Rescission Notice
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Section 1.8(b)(iii)
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Second Put Option Review Period
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Section 1.8(b)(iii)
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Seller Funded Expenses
|
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Section 7.1(m)
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|
Seller Indemnified Persons
|
|
Section 6.3
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|
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Seller Parties Disclosure Schedule
|
|
Section 1.1(b)(ii)
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Sellers Representative Expenses
|
|
Section 6.11(b)
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Special Escrow Amount
|
|
Section 1.9(b)
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***
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***
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***
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***
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Updated Seller Parties Disclosure Schedule
|
|
Section 1.1(b)(ii)
|
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|
Upfront Payment
|
|
Section 1.6(a)
|
|
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***
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Portions of this page have been omitted pursuant to a request
for Confidential Treatment filed separately with the Commission.
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75
IN WITNESS WHEREOF
, the parties have executed and delivered this Agreement as of the date
first written above.
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PURCHASER:
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ACQUIRED COMPANY:
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NUVASIVE, INC.
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PROGENTIX ORTHOBIOLOGY B.V.
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By JD de Bruijn Holding BV, its
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solely authorized statutory director
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By:
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/s/ Alexis V. Lukianov
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By:
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/s/ Joost D de Bruijn
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Name:
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Alexis V. Lukianov
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Name:
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Joost D de Bruijn
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Title:
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Chief Executive Officer
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Title:
|
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General Director
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SELLERS REPRESENTATIVE:
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EDWARD VAN WEZEL
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/s/ Edward Van Wezel
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JOOST D DE BRUIJN
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/s/ Joost D de Bruijn
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Signature Page to Option Purchase Agreement
|
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SELLERS:
JD DE BRUIJN HOLDING BV
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By:
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/s/ Joost D de Bruijn
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Name:
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Joost D de Bruijn
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Title:
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General Director
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INCUBATION BV
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By:
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/s/ Clemens van Blitterswijk
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Clemens van Blitterswijk
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By:
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/s/ FrankJan van der Velden
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FrankJan van der Velden
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BIOGENERATION VENTURES BV
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By:
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/s/ Edward van Wezel
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Edward van Wezel
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By:
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/s/ Willem Hazenberg
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Willem Hazenberg
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HUIPIN YUAN
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/s/ Huipin Yuan
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Signature Page to Option Purchase Agreement
SCHEDULE A
Sellers Schedule
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Seller Shares Owned by
|
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Seller
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Seller
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Proceeds Allocation
|
Incubation BV
|
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9,918 ordinary shares
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45.08%
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JD de Bruijn Holding BV
|
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7,200 ordinary shares
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32.73%
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BioGeneration Ventures
BV
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4,000 preference shares
|
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18.18%
|
Huipin Yuan
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882 ordinary shares
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4.01%
|
EXHIBIT A
TRANSFER OF SHARES
PROGENTIX ORTHOBIOLOGY B.V.
On the day of two thousand and nine, appeared before me, Alexander Joannes
Wiggers, civil law notary in Amsterdam:
,
acting pursuant to a written power of attorney from:
1.
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J.D. de Bruijn Holding B.V., a private company with limited liability organized under
the laws of the Netherlands, with statutory seat in Amersfoort, the Netherlands and
with office address at Pasteurstraat 16,3817 JL Amersfoort, the Netherlands,
registered with the Trade Register under number 32112279, hereinafter referred to
as: Seller 1;
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2.
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Incubation B.V., a private company with limited liability organized under the laws of
the Netherlands, with statutory seat in Bilthoven, the Netherlands and with office
address at Professor Bronkhorstlaan 10 D, 3723 MB Bilthoven, the Netherlands,
registered with the Trade Register under number 30194071, hereinafter referred to
as: Seller 2;
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3.
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Huipin Yuan, born in Nijiang, China, on the nineteenth day of April nineteen hundred
sixty-six, residing at Laan van Vollenhove 168, 3706 AA Zelst, the Netherlands, holder
of a
passport with number
,
married//unmarried//registered as partner, hereinafter referred to as: Seller 3;
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4.
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Biogeneration Ventures B.V., a private company with limited liability organized
under the laws of the Netherlands, with statutory seat in Leiden, the Netherlands and
with office address at Gooimeer 2-35, 1411 DC Naarden, the Netherlands, registered
with the Trade Register under number 32119447, hereinafter referred to as: Seller
4,
Seller 1, Seller 2, Seller 3 and Seller 4 hereinafter also collectively referred to as:
Sellers;
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5.
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NuVasive, Inc. a company organised under the laws of the state of Delaware, United
States of America, with registered seat and office address at 7473 Lusk Boulevard,
San Diego, CA 92121, United States of America, registered with the Delaware
Division of Corporations under number 2775617, hereinafter referred to as; the
Purchaser.
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6.
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Progentix Orthobiology B.V., a private company with
limited liability
(besloten
vennootschap met beperkte aansprakelijkheid),
with corporate seat in Bilthoven, the
Netherlands and office address at Professor Bronkhorstlaan 10 D, 3723 MB
|
- 1 -
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Bilthoven, the Netherlands, registered with the Trade Register under number
30234249, hereinafter referred to as: the Company.
|
The person appearing, acting in said capacity, declared hereby as follows:
WHEREAS
A.
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OPTION PURCHASE AGREEMENT
|
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By written option purchase agreement dated the day of two thousand and
nine (hereinafter referred to as: the Option Purchase Agreement) in which:
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-
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the Purchaser has received an exclusive option // obligation to acquire four
thousand three hundred twenty (4,320) shares in the capital of the Company,
each share with a nominal value of one euro (EUR 1), numbered 9,919 up to and
including 14,238 (hereinafter referred to as: the Option 1);
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-
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the Purchaser has received an exclusive option // obligation to acquire five
thousand nine hundred fifty-one (5,951) shares in the capital of the Company,
each share with a nominal value of one euro (EUR 1), numbered 1 up to and
including 5,951 (hereinafter referred to as: the Option 2);
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-
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the Purchaser has received an exclusive option // obligation to acquire five
hundred twenty-nine (529) shares in the capital of the Company, each share with
a nominal value of one euro (EUR 1), numbered 17,119 up to and including
17,647 (hereinafter referred to as: the Option 3);
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-
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the Purchaser has received an exclusive option // obligation to acquire two
thousand four hundred (2,400) cumulative preference shares in the capital of the
Company, each share with a nominal value of one euro (EUR 1), numbered 1 up
to and including 2,400 (hereinafter referred to as: the Option 4).
the Option 1, the Option 2, the Option 3 and the Option 4 hereinafter also
collectively referred to as the Options.
|
B.
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EVIDENCE
|
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Purchaser has exercised the Options in accordance with the provisions of the Option
Purchase Agreement as is evidenced by a declaration signed by all relevant parties
which is attached, to this deed.
|
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C.
|
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SHARES
|
|
-
|
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the Seller 1 hereby sells to the Purchaser and the Purchaser hereby purchases
from the Seller 1 four thousand three hundred twenty (4,320) shares in the
capital of the Company, each share with a nominal value of one euro (EUR 1),
numbered 9,919 up to and Including 14,238 (hereinafter referred to as: the
Shares 1);
|
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-
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the Seller 2 hereby sells to the Purchaser and the Purchaser hereby purchases
from the Seller 2 five thousand nine hundred fifty-one (5,951) shares in the
capital of the Company, each share with a nominal value of one euro (EUR 1),
numbered 1 up to and including 5,951 (hereinafter referred to as: the
Shares 2);
|
- 2 -
|
-
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|
the Seller 3 hereby sells to the Purchaser and the Purchaser hereby purchases
from the Seller 3 five hundred twenty-nine (529) shares in the capital of the
Company, each share with a nominal value of one euro (EUR 1), numbered
17,119 up to and including 17,647 (hereinafter referred to as: the Shares 3);
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|
-
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the Seller 4 hereby sells to the Purchaser and the Purchaser hereby purchases
from the Seller 4 two thousand four hundred (2,400) cumulative preference
shares in the capital of the Company, each share with a nominal value of one
euro (EUR 1), numbered 1 up to and including 2,400 (hereinafter referred to as:
the Shares 4).
|
The Shares 1, the Shares 2, the Shares 3 and the Snares 4 hereinafter also collectively
referred to as the Shares.
A copy of the Option Purchase Agreement is attached to this deed.
The provisions of the Option Purchase Agreement which are still applicable at this time
shall remain in force insofar as not inconsistent with this deed.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 1
The Shares 1 have been issued by the Company to the Seller 1 by virtue of the Companys
Deed of Incorporation executed before N. van Buitenen, civil law notary in Utrecht, the
Netherlands on the thirty-first day of December two thousand and seven.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 2
The Shares 2 have been acquired by the Seller 2 pursuant to a purchase agreement, by a
deed of transfer executed before N. van Buitenen, aforementioned, on the twenty-ninth day
of September two thousand and eight.
The transfer was acknowledged by the Company on the same day, as is evidenced by the
abovementioned notarial deed.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 3
The Shares 3 have been issued by the Company to the Seller 3 by virtue of the Companys
Deed of Incorporation executed before N. van Buitenen, civil law notary in Utrecht, the
Netherlands on the thirty-first day of December two thousand and seven.
PREVIOUS ACQUISITION OF SHARES BY THE SELLER 4
The Shares 4 have been issued by the Company to the Seller 4 by virtue of a deed of
issue executed before N. van Buitenen, aforementioned, on the fourteenth day of January
two thousand and eight.
PAYMENT OF THE PURCHASE PRICE
-
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The purchase price for the Shares 1 amounts to euro (EUR ) (hereinafter
referred to as: the Initial Purchase Price 1).
|
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-
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The purchase price for the Shares 2 amounts to euro (EUR ) (hereinafter
referred to as: the Initial Purchase Price 2).
|
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-
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The purchase price for the Shares 3 amounts to
euro (EUR ) (hereinafter referred to as: the Initial Purchase Price 3).
|
- 3 -
-
|
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The purchase price for the Shares 4 amounts to euro (EUR ) (hereinafter
referred to as: the Initial Purchase Price 4).
|
The Initial Purchase Price 1, the Initial Purchase Price 2, the Initial Purchase Price 3 and
the Initial Purchase Price 4 hereinafter also collectively referred to as: the Initial
Purchase Price.
The Purchaser has paid the Initial Purchase Price (as defined in the Option Purchase
Agreement) decreased with (i) the Escrow Amount (as defined in the Option Purchase
Agreement), (ii) the Seller Funded Expenses (as defined in the Option Purchase
Agreement) and (iii) the Loan Amount (as defined in the Option Purchase Agreement),
being in total an amount of United States Dollars (USD ) hereinafter referred to as:
the Upfront Payment, by payment into the bank account of the civil law notaries of DLA
Piper Nederland N.V. with ING Bank, account number 672644428.
The undersigned civil law notary is hereby irrevocably instructed to pay a part of the
Upfront Payment, being an amount of:
-
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[USD ], upon the execution of this deed into a bank account in the name of the
Seller 1 with number . Therefore, the Seller 1. hereby grants a discharge to the
Purchaser for this part of the Upfront Payment;
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[USD ], upon the execution of this deed into a bank account in the name of the
Seller 2 with number . Therefore, the Seller 2 hereby grants a discharge to the
Purchaser for this part of the Upfront Payment.
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[USD ], upon the execution of this deed into
a bank account in the name of the
Seller 3 with number . Therefore, the Seller 3 hereby grants a discharge to the
Purchaser for this part of the Upfront Payment.
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[USD ], upon the execution of this deed into a bank account in the name of the
Seller 4 with number . Therefore, the Seller 4 hereby grants a discharge to the
Purchaser for this part of the Upfront Payment.
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[DLA remark: to be completed upon receipt of the Proceeds Allocation, or in the
event- the Revised Proceeds Allocation.
In the event of payment of the purchase price in common stock of Purchaser, this
payment section of the purchase price will be included accordingly.]
TRANSFER
Pursuant to the Option Purchase Agreement
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the Seller 1 hereby transfers the Shares 1 to the Purchaser, who accepts this transfer;
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the Seller 2 hereby transfers the Shares 2 to the Purchaser, who accepts this transfer;
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the Seller 3 hereby transfers the Shares 3 to the
Purchaser, who accepts this transfer;
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the Seller 4 hereby transfers the Shares 4 to the Purchaser, who accepts this transfer.
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FURTHER CONDITIONS
The guarantees and warranties as laid down in the Option Purchase Agreement remain
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applicable to this transfer.
Article 2.
All proceeds from and costs related to the Shares shall, as from this day, accrue to or, as
the case may be, be borne by the Purchaser.
Article 3.
The costs Incidental to this deed and the execution thereof shall be borne by the
Purchaser.
Article 4.
All conditions subsequent which have been agreed upon In the Option Purchase
Agreement have now lapsed and are hereby rendered entirely devoid of legal effect
Neither the Sellers nor the Purchaser may any longer claim the benefit of any condition
subsequent in respect of this purchase and transfer of the Shares.
The conditions precedent as inserted in the Option Purchase Agreement, have been
fulfilled, as a result whereof the transfer can be effected unconditionally.
SHARE TRANSFER RESTRICTIONS
The share transfer restrictions in the Companys articles of association, which consist of an
offering system, have in respect of the transfer of the Shares by this deed been duly
observed, since all shareholders of the Company are a party to this deed and hereby
waive their right pursuant to the share transfer restrictions to acquire the Shares.
ACKNOWLEDGEMENT
The Company declares that it has taken cognisance of and hereby acknowledges the
above transfer of the Shares.
The Company shall immediately enter this transfer in its shareholders register.
NONAPPLICABILITY
OF ARTICLE 2;204C OF THE CIVIL CODE
The provisions laid down in Article 2:204c of the Dutch Civil Code do not apply to this
transfer to the Purchaser.
INTERDISCIPLINARY
COOPERATION ADVISOR PURCHASER
With reference to the Rules of Professional Conduct (
Verordening beroeps- en
gedragsregels
) of the Royal Dutch Organisation of Civil Law
Notaries (
Koninklijke
Notari
ĕ
le
Beroepsorganisatie)
all parties declared expressly to agree that:
a.
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DLA Piper Nederland N.V. acts as counsel to the Purchaser
in connection with this
deed or any related agreement, or acts as counsel for or on behalf of the Purchaser in
the event of any dispute relating to this deed or any related agreement; and
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b.
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the undersigned civil law notary executes this deed of transfer even though he is
affiliated with DLA Piper Nederland N.V. as civil law notary.
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POWER OF ATTORNEY:
The person appearing has been authorized by six (6) written powers of attorney, (copies
of) which have been attached to this deed.
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The person appearing is known to me, civil law notary, and the identity of the person
appearing mentioned in this deed has been determined by me, civil law notary, by means
of the relevant document mentioned hereinbefore.
This deed is executed at Amsterdam on the date mentioned at the head of this deed.
The contents of this deed have been stated and explained to the person appearing by me,
civil law notary. Furthermore the consequences of this deed have been pointed out to the
person appearing.
The person appearing declares to have in good time taken cognisance of the contents of
this deed and to agree with the contents.
Thereupon, after a limited part of this deed has been read out, it is signed by the person
appearing and by me, civil law notary.
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EXHIBIT B
PURCHASER ELECTION NOTICE
(To be signed only upon exercise of Call Option)
Progentix Orthobiology BV
Professor Bronkhorstlaan 10, building 48
3723 MB Bilthoven
The Netherlands
Attn: Joost de Bruijn
Fax No.: +31 (0)30 229 7299
BioGeneration Ventures B.V.
Gooimeer 2 35
1411 DC Naarden
The Netherlands
Attention: Edwin van Wezel
Goodwin Procter LLP
Exchange Place
53 State Street
Boston, MA 02109
Attn: Michael H. Bison, Esq.
Fax No.: (617) 523-1231
CORP. advocaten
De Lairessestraat 137-143
1075 HJ Amsterdam
Attn: Edwin Renes
Fax No.: +31 (0)20 578 83 05
[Date]
Gentlemen:
NuVasive, Inc., a Delaware corporation (
Purchaser
), hereby elects to exercise its call
option (the
Call Option
) to acquire all of the issued and outstanding shares of capital stock of
Progentix Orthobiology B.V., a company organized under the laws of the Netherlands (the
Company
),
pursuant to Section 1.1(b)(i) of the Option Purchase Agreement dated January 13, 2009 (the
Agreement
) by and among Purchaser, the Company and the shareholders of the Company (the
Sellers
). Pursuant to Section 1.6(c)(ii) of the Agreement, Purchaser shall purchase all of the
Sellers issued and outstanding shares of the capital stock of the Company for an initial purchase
price of $35,000,000. Purchaser proposes the closing of the acquisition to occur on [the Business
Day immediately following the expiration of the Call Option Review Period]. Capitalized terms not
otherwise defined herein shall have the meanings set forth in the Agreement.
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NUVASIVE, INC.
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Name:
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Title:
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Exhibit A
Purchasers Calculation
EXHIBIT C
MILESTONE COMPLETION NOTICE
(To be signed only upon exercise of Put Option)
NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attn: General Counsel
Fax No.: (858) 909-2479
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Michael Kagnoff
Fax No.: (858) 456-3075
[Date]
Attention General Counsel:
Progentix Orthobiology B.V., a company organized under the laws of the Netherlands (the
Company
), has successfully completed the Base Milestones set forth in Section 1.6(c)(i) of the
Option Purchase Agreement dated January 13, 2009 (the
Agreement
) by and among NuVasive, Inc., a
Delaware corporation (
Purchaser
), the Company and the shareholders of the Company (the
Sellers
). Pursuant to Section 1.2 of the Agreement, the Sellers Representative hereby is
exercising its put option (the
Put Option
) to cause Purchaser to purchase all of the Sellers
issued and outstanding shares of capital stock of the Company at an initial purchase price of $
[___], as calculated pursuant to
Exhibit A
hereto. The Sellers Representative proposes
the closing of the Put Option occur on [the Business Day immediately following the expiration of
the Put Option Review Period]. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreement.
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SELLERS REPRESENTATIVE
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Name:
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EXHIBIT D
TRUE-UP AGREEMENT
This True-Up Agreement is entered into as of ____________, 20___, by and among NuVasive, Inc.,
a Delaware corporation (
Purchaser
) and the undersigned Sellers (the
Sellers
) of
Progentix Orthobiology B.V., a company organized under the laws of the Netherlands (the
Acquired Company
). Capitalized terms not defined herein shall have the meanings set
forth in the Option Purchase Agreement (as defined below).
WHEREAS, the Purchaser is entering into an Option Purchase Agreement with the Acquired Company
and the Sellers, dated as of January 8, 2009 (the
Option Purchase Agreement
), pursuant to
which Purchaser may purchase from the Sellers all of the outstanding capital stock of the Acquired
Company (the
Acquisition
).
WHEREAS, pursuant to the terms of the Option Purchase Agreement, at the sole election of the
Purchaser, all or a portion of the Initial Purchase Price or Milestone Payments (collectively, the
Aggregate Purchase Price
) may be paid by Purchaser to the Sellers in the form of shares
of common stock (
Purchaser Common Stock
) of the Purchaser (the
Stock
Consideration
), with the exact number of shares determined based on the closing price (the
Closing Price
) of the Purchaser Common Stock on the Qualified Stock Exchange on the
Trading Day (as defined below) immediately prior to the date of each applicable payment (each, a
Payment Date
). For purposes of this Agreement, the term Trading Day shall mean any day
when the Qualified Stock Exchange is open for trading.
WHEREAS, pursuant to Section 1.6(b)(iii) of the Option Purchase Agreement, Purchaser has
elected to cause each of the Sellers to execute this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:
Section 1. Appointment of Market Maker
. In the event that the Purchaser elects to
issue Stock Consideration as any portion of the Aggregate Purchase Price:
(a) Each Seller agrees to engage ____________(the
Market Maker
) to serve as its
sole broker for the sale of any Purchaser Common Stock issued by Purchaser as part of the Stock
Consideration during the thirty (30) Trading Days immediately following a Payment Date (each such
period, a
Trading Period
); and
(b) Each Seller agrees to execute an irrevocable Letter of Instruction to the Market Maker in
the form attached hereto as
Exhibit A
.
Section 2. Adjustments to Stock Consideration
.
(a) If a Seller sells all or a portion of the Purchaser Common Stock issued at a Payment Date
in a sale executed by the Market Maker prior to the expiration of the Trading Period associated
with such Payment Date (the
Expiration Date
) at a price per
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share below the Closing
Price, as adjusted for stock splits, stock dividends, reclassifications or similar events (any such
sale price hereinafter referred to as the
Sale Price
), the Purchaser shall pay to the
Seller in cash an amount equal to (i) the product of the Closing Price and the number of shares of
Purchaser Common Stock sold by such Seller at such Sale Price during the relevant Trading Period,
less
(ii) the product of such Sale Price and the number of shares of Purchaser Common Stock
sold by such Seller at such Sale Price during the relevant Trading Period (each of (i) and (ii)
above as adjusted for stock splits, stock dividends, reclassifications or similar events). The
increase in Stock Consideration payable to any Seller shall hereinafter be referred to as the
True-Up Amount
. As soon as practicable following determination of the True-Up Amount and
receipt of evidence of the True-Up Amount reasonably satisfactory to Purchaser through the delivery
of stock confirmation or account records, and subject to Section 2(c) herein, Purchaser shall pay
the True-Up Amount to the Seller in cash.
(b) If a Seller sells all or a portion of the Purchaser Common Stock issued at a Payment Date
in a sale executed by the Market Maker prior to the Expiration Date associated with such Payment
Date at a Sale Price above the Closing Price, as adjusted for stock splits, stock dividends,
reclassifications or similar events, the Seller shall pay to Purchaser in cash (i) the product of
the applicable Sale Price and the number of shares of Purchaser Common Stock sold by such Seller at
such Sale Price during the relevant Trading Period,
less
(ii) the product of the Closing
Price and the number of shares of Purchaser Common Stock sold by such Seller at such Sale Price
during the relevant Trading Period (each of (i) and (ii) above as adjusted for stock splits, stock
dividends, reclassifications or similar events). The decrease in Stock Consideration payable to
any Seller shall hereinafter be referred to as the
Excess Amount
. Seller will cause the
Market Maker to retain the Excess Amount, for and on behalf of the Purchaser, out of the Sellers
proceeds from the sale of Purchaser Common Stock. As soon as practicable following the Sellers
sale of Purchaser Common Stock, the Market Maker will remit the Excess Amount to the Purchaser in
accordance with its routine business practices.
(c) Notwithstanding the foregoing, in no event, without the written consent of the Purchaser,
shall the aggregate number of all sales of the Purchaser Common Stock executed by the Market Maker
on behalf of the Sellers, exceed 100,000 shares of Purchaser Common Stock on any Trading Day (the
Volume Limitation
). Each Seller hereby acknowledges and agrees that Purchaser will not
be obligated to pay the True-Up Amount to such Seller in the event the Market Makers sales of
Purchaser Common Stock exceed the Volume Limitation on any Trading Day.
Section 3. Seller Acknowledgment
.
Each Seller hereby acknowledges that the Purchaser
has not provided any advice, financial or otherwise, to such Seller with respect to the matters set
forth herein, and each Seller hereby releases the Purchaser from any liability with respect to
Sellers sale of Purchaser Common Stock beyond, the obligation, if any, to pay the True-Up Amount.
Section 4. Representations and Warranties of Sellers
.
Each Seller hereby represents
and warrants to the Purchaser that (i) such Seller has full power, authority and capacity to
execute and deliver this Agreement and to perform such Sellers respective obligations hereunder
and to consummate the transactions contemplated hereby, and (ii) this Agreement has been duly
executed and delivered by such Seller and constitutes the
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legal, valid and binding obligation of
such Seller enforceable against such Seller in accordance with its terms.
Section 5. Consent to Jurisdiction and Service
. Purchaser and each of the Sellers
hereby absolutely and irrevocably consent and submit to the jurisdiction of the courts of the State
of New York and of any Federal court located in the State of New York in connection with any
actions or proceedings brought against Purchaser or the Sellers arising out of or relating to this
Agreement. In any such action or proceeding, Purchaser and each of the Sellers hereby absolutely
and irrevocably waive personal service of any summons, complaint, declaration or other process and
hereby absolutely and irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Purchaser and each of the Sellers, as the case may be, at
their respective addresses in accordance with Section 6 hereof.
Section 6. Notices
.
Any notice permitted or required hereunder shall be deemed to
have been duly given when delivered in accordance with Section 9.2 of the Option Purchase
Agreement.
Section 7. Binding Effect
.
This Agreement shall be binding upon the respective
parties hereto and their heirs, executors, successors and assigns.
Section 8. Modifications
.
This Agreement may not be altered or modified without a
writing signed by all the parties hereto. Conduct or lack of conduct shall not constitute a waiver
of any of the terms and conditions of this Agreement, and no waiver shall be valid unless such
waiver is specified in writing by the party or parties against which such waiver is effective, and
then only to the extent so specified. A waiver of any of the terms and conditions of this
Agreement on one occasion shall not constitute a waiver of the other terms of this Agreement, or of
such terms and conditions on any other occasion.
Section 9. Governing Law
.
This Agreement shall be governed by and construed under
the laws of the State of New York without giving effect to the conflict of laws provisions of the
laws of the State of New York, and shall inure to the benefit of and the obligations created hereby
shall be binding upon the successors and assigns of the parties hereto.
Section 10. Counterparts
.
This Agreement may be executed in separate counterparts
(including by facsimile or other electronic transmission), each of which when executed and
delivered shall be an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11. Severability
.
If any provision of this Agreement shall be held invalid,
unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired.
Section 12. Merger of Agreement
.
This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement between the parties hereto with
respect to the subject matter hereof whether oral or written.
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Section 13. Assignment
. Neither this Agreement nor any rights or obligations
hereunder may be assigned by any party without the prior written consent of the other parties
hereto. Except as explicitly stated elsewhere in this Agreement, nothing under this Agreement
shall be construed to give any rights or benefits in this Agreement to anyone other than Purchaser
and the Sellers, and the duties and responsibilities undertaken pursuant to this Agreement shall be
for the sole and exclusive benefit of the parties hereto; provided, that Purchaser shall be
entitled to assign this Agreement in whole to any successor in.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this True-Up Agreement to be executed by
their respective authorized persons, hereunto duly authorized, as of the day and year first above
written.
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PURCHASER:
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NUVASIVE, INC.
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SELLER:
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Address:
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Exhibit A
IRREVOCABLE LETTER OF INSTRUCTION
_________ __, 200_
[BROKER NAME
AND ADDRESS]
Ladies and Gentlemen:
The undersigned has entered into a True-up Agreement with NuVasive, Inc., a Delaware
corporation (
Purchaser
), dated as of ____________, 20___ (the
True-Up Agreement
), whereby the
undersigned has agreed to execute this irrevocable letter of instructions to you. Capitalized
terms not defined herein have the meanings set forth in the True-Up Agreement.
Reference is made to that certain Option Purchase Agreement (the
Option Purchase Agreement
),
dated as of January 8, 2008, by and among Purchaser, the Acquired Company and the Sellers, pursuant
to which Purchaser has purchased all of the outstanding shares of capital stock of the Acquired
Company from the Sellers (the
Acquisition
). In connection with the Acquisition, pursuant to the
terms of the Option Purchase Agreement, Purchaser has elected to issue shares of common stock of
the Purchaser (the
Purchaser Common Stock
) to the undersigned as consideration for the
undersigneds shares of capital stock of the Acquired Company.
The undersigned now wishes to sell up to _________ shares of Purchaser Common Stock received
in connection with the Acquisition subject to the plan set forth on
Schedule A
attached
hereto. Please accept this letter as irrevocable authorization to (i) release the Excess Amount to
the Purchaser out of the undersigneds proceeds from the sale of Purchaser Common Stock and (ii)
not sell more than 100,000 shares of Purchaser Common Stock on behalf of all of the Sellers on any
Trading Day, unless otherwise directed by Purchaser.
This Irrevocable Letter of Instruction shall not apply to any shares of Purchaser Common
Stock received in connection with the Acquisition which remain unsold after the close of trading on
the Expiration Date.
The undersigned hereby acknowledges and agrees that Purchaser is intended to be, and shall be,
a third party beneficiary of this Irrevocable Letter of Instruction.
EXHIBIT E
Products and Specifications
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT F
Pre-Clinical Model
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT G
Pre-Clinical
Primate Model
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT H
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT I
Sales Run Rate Amounts
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***
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Portions of this page have been omitted pursuant to a request
for Confidential Treatment filed separately with the Commission.
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EXHIBIT J
Form of Legal Opinion
1. Each of the Closing Documents is a valid and binding obligation of the Acquired Company,
enforceable by Purchaser against the Acquired Company in accordance with its terms.
2. We do not have knowledge of any action, suit or proceeding against the Acquired Company
that is pending or has been overtly threatened in writing.
EXHIBIT K
Form Of Escrow Agreement
This
Escrow Agreement
(this
Agreement
) is made as of
, 20
, by and among
(
Escrow Agent
), NuVasive, Inc., a Delaware corporation (
Purchaser
), Progentix
Orthobiology, B.V., a company organized under the laws of the Netherlands (the
Company
), and
Edward van Wezel and Joost D de Bruijn, solely in their capacity as the Sellers Representative
under the Option Purchase Agreement (as defined below). Terms not otherwise defined herein shall
have the respective meanings ascribed to them in the Option Purchase Agreement. If the terms of
this Agreement conflict in any way with the provisions of the Option Purchase Agreement, then the
provisions of the Option Purchase Agreement shall control.
RECITALS
A. Purchaser has entered into an Option Purchase Agreement (the
Option Purchase Agreement
),
dated as of January
, 2009, by and among Purchaser, Company and the shareholders of the Company
(the
Sellers
), pursuant to which Purchaser may acquire all of the issued and outstanding shares
of the capital stock of the Company (the
Seller Shares
) from the Sellers.
B. Pursuant to Section 1.9(a) of the Option Purchase Agreement, an aggregate of ten percent
(10%) of the Initial Purchase Price (as defined in the Option Purchase Agreement), plus an amount
equal to $1,500,000 (the
General Escrow Cash
) is to be delivered to and deposited with the Escrow
Agent, such deposit, together with any interest that may be earned thereon, to constitute and to be
held in an escrow fund (the
General Escrow Fund
) and to be governed by the provisions set forth
herein and in the Option Purchase Agreement.
C. Pursuant to Section 1.9(b) of the Option Purchase Agreement, an aggregate of
(the
Special Escrow Cash
and, together with the General Escrow Cash, the
"
Escrow Cash
) is to be delivered to and deposited with the Escrow Agent, such deposit, together
with any interest that may be earned thereon, to constitute and to be held in an escrow fund (the
"
Special Escrow Fund
and, together with the General Escrow Fund, the
Escrow Fund
) and to be
governed by the provisions set forth herein and in the Option Purchase Agreement.
D. The parties hereto desire to set forth additional terms and conditions relating to the
operation of the Escrow Fund.
NOW, THEREFORE, in consideration of the premises and the covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Escrow Fund
.
(a) Pursuant to Section 1.9 of the Option Purchase Agreement, as soon as reasonably
practicable after the Closing Date, Purchaser shall cause the Escrow Cash to be deposited with the
Escrow Agent. Escrow Agent agrees to accept delivery of the Escrow Cash and to hold such Escrow
Cash in escrow subject to the terms and conditions of this Agreement and the Option Purchase
Agreement.
(b) As of any particular time, the Escrow Agent may assume without inquiry that the Escrow
Cash that shall have been deposited with the Escrow Agent by Purchaser is all of the Escrow Cash
required to be held in the Escrow Fund by the Escrow Agent.
(c) The Escrow Cash shall be held and distributed by the Escrow Agent in accordance with the
provisions of the Option Purchase Agreement and this Agreement.
(d) No Escrow Cash or any beneficial interest therein may be pledged, encumbered, sold,
assigned or transferred by the Sellers or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of the Sellers, prior to the distribution to the
Sellers of such Escrow Cash by the Escrow Agent in accordance with this Agreement;
provided
that the Escrow Cash or any beneficial interest therein may be transferred by operation of law
provided that each assignee or transferee thereof agrees in writing to be bound by all the terms
and conditions of this Agreement and the Option Agreement as if he were an original party the
respective agreements and further provided that the assignor provides the other parties to the
respective agreements prior written notice of such assignment or transfer.
2.
Escrow Period
. The period during which claims for Damages may be made (the
Claims
Period
) shall commence at the Closing and terminate on (a) in case of the General Escrow Fund, the
date that is eighteen (18) months after the Closing (the
General Escrow Period
) and (b) in the
case of the Special Escrow Fund, the date that
after the Closing (or earlier
pursuant to Part 3.20(c) of the Seller Parties Disclosure Schedule (as defined in the Option
Agreement) in which case at such time Purchaser shall direct the Escrow Agent to release such
portion of the remaining Special Escrow Fund to the Sellers in accordance with the Proceeds
Allocation set forth on Schedule I) (the
Special Escrow Period
). Notwithstanding the foregoing,
all or a portion of the General Escrow Fund may be retained beyond the General Escrow Period as
provided in Section 5(a) of this Agreement.
3.
Rights and Obligations of the Parties
.
(a) The Escrow Agent shall be entitled to such rights and shall perform such duties as escrow
agent as set forth herein and as set forth in the Option Purchase Agreement (collectively, the
"
Duties
), in accordance with the provisions of this Agreement and the Option Purchase Agreement.
Such Duties shall include the following: (i) safeguarding and treating the Escrow Fund as a trust
fund in accordance with the provisions of this Agreement and not as the property of Purchaser, and
holding the Escrow Fund in a separate account, apart from any other funds or accounts of the Escrow
Agent or any other Person and (ii) holding and disposing of the Escrow Fund only in accordance with
the provisions of this Agreement. The Duties of the Escrow Agent with respect to the Escrow Cash
may be altered, amended, modified or revoked only by a writing signed by Purchaser, the Escrow
Agent and the Sellers Representative.
(b) Purchaser and the Sellers Representative shall be entitled to their respective rights and
shall perform their respective duties and obligations as set forth herein and in the Option
Purchase Agreement, in accordance with the provisions of this Agreement and the Option Purchase
Agreement.
4.
Claims Against the Escrow Fund
.
(a) On or before the last day of the General Escrow Period or the Special Escrow Period, as
the case may be, Purchaser may deliver to the Escrow Agent a certificate signed by any officer of
Purchaser (an
Officers Certificate
):
(i) stating that a Purchaser Indemnified Person has incurred, paid, reserved or accrued, or
reasonably anticipates that it may incur, pay, reserve or accrue, Damages (or that with respect to
any Tax matters, that any Governmental Body may raise such matter in an audit of Purchaser or its
subsidiaries, which are reasonably likely to give rise to Damages);
(ii) stating the amount of such Damages (which, in the case of Damages not yet incurred, paid,
reserved or accrued, may be the maximum amount reasonably anticipated by Purchaser to be incurred,
paid, reserved or accrued);
(iii) specifying in reasonable detail (based upon the information then possessed by Purchaser)
the individual items of such Damages included in the amount so stated and the nature of the claim
to which such Damages are related; and
(iv) stating whether the claim is against the General Escrow Fund or the Special Escrow Fund.
No delay in providing such Officers Certificate within the General Escrow Period or Special Escrow
Period, as the case may be, shall affect any Purchaser Indemnified Persons rights hereunder,
unless (and then only to the extent that) any Seller is materially prejudiced thereby.
(b) At the time of delivery of any Officers Certificate to the Escrow Agent, a duplicate copy
of such Officers Certificate shall be delivered to the Sellers Representative by or on behalf of
Purchaser (on behalf of itself or any other Purchaser Indemnified Person) and, in the case of a
claim against the General Escrow Fund, for a period of 30 days after such delivery to the Escrow
Agent of such Officers Certificate, the Escrow Agent shall make no payment pursuant to this
Section 4 unless the Escrow Agent shall have received written authorization from the Sellers
Representative to make such delivery. After the expiration of such 30-day period, the Escrow Agent
shall make delivery of cash in the amount of the maximum Damages set forth in such Officers
Certificate from the General Escrow Fund to Purchaser in accordance with this Section 4; provided,
however, that no such delivery may be made if and to the extent the Sellers Representative shall
object in a written statement to any claim or claims made in the Officers Certificate, and such
statement shall have been delivered to the Escrow Agent and to Purchaser prior to the expiration of
such 30-day period. In the case of a claim against the Special Escrow Fund, upon delivery of any
Officers Certificate to the Escrow Agent, the Escrow Agent shall immediately release the Special
Escrow Cash to Purchaser, and in no event shall the Sellers Representative object to the release
of such funds by the Escrow Agent.
(c) If the Sellers Representative objects in writing to any claim or claims by Purchaser
against the General Escrow Fund made in any Officers Certificate within such 30-day period,
Purchaser and the Sellers Representative shall attempt in good faith for 30 days after Purchasers
receipt of such written objection to resolve such objection. If Purchaser and the Sellers
Representative shall so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and delivered to the Escrow Agent. The Escrow Agent shall be entitled to
conclusively rely on any such memorandum and the Escrow Agent shall distribute cash from the
General Escrow Fund in accordance with the terms of such memorandum. If no such agreement can be
reached during the 30-day period for good faith negotiation, then upon the expiration of such
30-day period, either Purchaser or the Sellers Representative may bring proceeding pursuant to the
dispute resolution proceedings set forth in Section 9.4 of the Option Purchase Agreement to resolve
the matter. The decision of the arbiter as to the validity and amount of any claim in such
Officers Certificate shall be nonappealable, binding and conclusive upon the parties to this
Agreement and the Escrow Agent shall be entitled to act in accordance with such decision and shall
distribute cash from the General Escrow Fund in accordance therewith.
5.
Distribution of Escrow Fund Upon Expiration of the Escrow Periods
.
(a)
Retention of Funds to Satisfy Pending Claims
. Such portion of the General Escrow
Fund at the conclusion of the General Escrow Period that may be necessary to satisfy any unresolved
or unsatisfied claims made against the General Escrow Fund for Damages specified in any
Officers Certificate delivered to the Sellers Representative and Escrow Agent prior to
expiration of the General Escrow Period (the
Reserve Amount
) shall remain in the General Escrow
Fund until such claims for Damages have been resolved or satisfied pursuant to Section 6 of the
Option Purchase Agreement and prior to such resolution or satisfaction of any such claim, none of
the Reserve Amount shall be delivered or distributed to any Person;
provided
, that prior to
any distribution to Sellers pursuant to this Section 5(b), the Escrow Agent shall first distribute
to the Sellers Representative on behalf of the Sellers an amount in respect of the Sellers
Representative Expenses actually incurred as set forth in a certificate delivered by the Sellers
Representative to the Escrow Agent prior to such distribution. For purposes of determining at any
particular time the amount of Escrow Cash in the General Escrow Fund that is necessary or
sufficient to satisfy and/or provide for all such claims, Purchaser shall be assumed to be entitled
to the full amount of Damages stated in good faith in such Officers Certificate(s). The amount
retained in the General Escrow Fund after the expiration of the General Escrow Period with respect
to a particular pending claim shall be available to Purchaser only with respect to such pending
claim and shall not be available to Purchaser for any other pending claim. The General Escrow
Amount shall be available to Purchaser only with respect to claims made under Section 6.2 of the
Option Purchase Agreement and the Special Escrow Amount shall be available to Purchaser only with
respect to claims made under Section 6.11 of the Option Purchase Agreement.
(b)
Distributions from Escrow Fund to the Sellers
. Promptly after the expiration of
the General Escrow Period or the Special Escrow Period, as the case may be, and in any event no
later than thirty (30) days after such expiration, such portion of the then remaining General
Escrow Fund in excess of any Reserve Amount and such portion of the then remaining Special Escrow
Fund shall be paid to the Sellers in accordance with the Proceeds Allocation set forth on Schedule
I hereto (the
Proceeds Allocation
);
provided
,
however
, that prior to any
distribution to Sellers pursuant to this Section 5(b), the Escrow Agent shall first distribute to
the Sellers Representative on behalf of the Sellers an amount in respect of the Sellers
Representative Expenses actually incurred as set forth in a certificate delivered by the Sellers
Representative to the Escrow Agent prior to such distribution. The Escrow Agent need not monitor
or inquire into the Sellers tax treatment of funds distributed to them and shall allocate for
income tax purposes the income earned on the Escrow Fund to Purchaser in accordance with Section
6(b).
(c)
Distributions of Reserve Amount
. Promptly following the resolution or
satisfaction of any claim for Damages relating to any portion of the Reserve Amount (and in any
event no later than thirty (30) after such resolution and satisfaction), such portion of the
Reserve Amount shall be paid to Purchaser and/or to the Sellers, as the case may be, in accordance
with the terms of a memorandum setting forth an agreement between Purchaser and the Sellers
Representative or the artbiters decision, as applicable. No Reserve Amount shall be subject to
any claim or right of offset except with respect to the claim for which such Reserve Amount was
retained following the expiration of the General Escrow Period.
6.
Investment of Escrow Cash
.
(a) The Escrow Agent shall hold the Escrow Cash in escrow and shall invest the Escrow Cash and
any interest or income thereon only in Permitted Investments.
Permitted Investments
shall mean
(i) such investments as may be specified from time to time by written instruction from the
Purchaser or (ii) in the absence of written instructions to the contrary, investments in the Escrow
Agents insured money market account as described in
Annex A
hereto (
IMMA
).
Notwithstanding the foregoing, Permitted Investments shall be limited to the following (1) direct
obligations of the United States government having maturities of 90 days or less, (2) money market
funds that invest solely in direct obligations of the United States government, (3) repurchase
obligations for underlying securities of the types described in clause (1) and (4) the IMMA. The
Escrow Agent or any of its affiliates may receive compensation with respect to any investment
directed hereunder. The Escrow Agent will act
upon investment instructions the day that such instructions are received, provided the
requests are communicated within a sufficient amount of time to allow the Escrow Agent to make the
specified investment. Instructions received after an applicable investment cutoff deadline will be
treated as being received by the Escrow Agent on the next business day, and the Escrow Agent shall
not be liable for any loss arising directly or indirectly, in whole or in part, from the inability
to invest funds on the day the instructions are received. The Escrow Agent shall not be liable for
any loss incurred by the actions of third parties or for any loss arising by error, failure or
delay in the making of an investment or reinvestment, and the Escrow Agent shall not be liable for
any loss of principal or income in connection therewith, unless such error, failure or delay
results from the Escrow Agents gross negligence, willful misconduct, fraud or breach of this
Agreement. As and when the Escrow Cash and any interest or income thereon is to be released under
this Agreement, the Escrow Agent shall cause the Permitted Investments to be converted into cash in
accordance with its customary procedures and shall not be liable for any loss of principal or
income in connection therewith. The Escrow Agent shall not be liable for any loss of principal or
income due to the choice of Permitted Investments in which the Escrow Cash is invested or the
choice of Permitted Investments converted into cash pursuant to this Section 6.
(b) All interest attributable to the Escrow Cash shall first be distributed to Purchaser up to
any amount paid in fees to the Escrow Agent. Any remaining interest shall be added to the Escrow
Cash and be part of the Escrow Fund for all purposes hereunder. At the time of delivery to the
Sellers, the Escrow Agent shall deliver to the Sellers any accrued but unpaid interest on such
amount of the Escrow Cash distributable to the Sellers hereunder (but not any accrued and unpaid
interest on such amount of the Escrow Cash that is distributable to Purchaser hereunder, which
shall instead be delivered to Purchaser, except to the extent the memorandum or arbiters decision
relating to such amounts awarded to Purchaser specifically states that interest has already been
taken to account and included in such awarded amount, in which case such interest shall be
distributed to Sellers). The parties acknowledge that, for tax reporting purposes, all interest
attributable to the Escrow Cash, and interest thereon, held in the Escrow Fund by the Escrow Agent
pursuant to this Agreement shall be allocable to Purchaser.
7.
Exculpatory Provisions
.
(a) The Escrow Agent shall be obligated only for the performance of such Duties as are
specifically set forth herein and may rely and shall be protected in relying or refraining from
acting on any instrument reasonably believed to be genuine and to have been signed or presented by
the proper party or parties. The Escrow Agent shall not be liable for forgeries or false
impersonations. The Escrow Agent shall not be liable for any act done or omitted hereunder as
escrow agent except for gross negligence, willful misconduct or breach of this Agreement. The
Escrow Agent shall in no case or event be liable for any representations or warranties of the
Sellers, the Sellers Representative or Purchaser or for punitive, incidental or consequential
damages. Any act done or omitted pursuant to the advice or opinion of counsel shall be conclusive
evidence of the good faith of the Escrow Agent.
(b) In the event of a dispute between the parties hereto, the Escrow Agent is hereby expressly
authorized to disregard any and all notifications given by any of the parties hereto or by any
other person, excepting only memoranda of agreement as provided in Section 9.4 of the Option
Purchase Agreement and orders or process of courts of law as provided in Section 9.4 of the Option
Purchase Agreement to which Escrow Agent shall be entitled to conclusively rely and shall
distribute the Escrow Fund in accordance with the terms thereof, and is hereby expressly authorized
to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent obeys
or complies with any such order, judgment or decree of any court, the Escrow Agent shall not be
liable to any of the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment, or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without jurisdiction.
(c) In the event of any ambiguity or uncertainty hereunder or in any notice, instruction or
other communication received by the Escrow Agent hereunder, the Escrow Agent may, in its sole
discretion, refrain from taking any action other than retaining possession of the Escrow Fund,
unless the Escrow Agent receives written instructions, signed by Purchaser and the Sellers
Representative, which eliminates such ambiguity or uncertainty.
(d) The Escrow Agent shall not be liable in any respect on account of the identity, authority
or rights of the parties executing or delivering or purporting to execute or deliver the Option
Purchase Agreement, this Agreement or any documents or papers deposited or called for thereunder or
hereunder.
(e) The Escrow Agent shall not be liable for the outlawing of any rights under any statute of
limitations with respect to the Option Purchase Agreement, this Agreement or any documents
deposited with the Escrow Agent.
8.
Resignation and Removal of the Escrow Agent
. The Escrow Agent may resign as escrow
agent of the Escrow Fund at any time, with or without cause, by giving at least thirty (30) days
prior written notice to each of Purchaser and the Sellers Representative, such resignation to be
effective thirty (30) days following the date such notice is given. In addition, Purchaser and the
Sellers Representative may jointly remove the Escrow Agent as escrow agent at any time, with or
without cause, by an instrument executed by Purchaser and the Sellers Representative (which may be
executed in counterparts) given to the Escrow Agent, which instrument shall designate the effective
date of such removal. In the event of any such resignation or removal, a successor escrow agent,
which shall be a bank or trust company organized under the laws of the United States of America or
of the State of New York having (or if such bank or trust company is a member of a bank company,
its bank holding company shall have) a combined capital and surplus of not less than $50,000,000,
shall be appointed by Purchaser on the terms of this Agreement with the written approval of the
Sellers Representative, which approval shall not be unreasonably withheld or delayed. In the
event that a successor escrow agent has not been appointed within thirty (30) days after notice of
the Escrow Agents resignation or removal the Escrow Agent shall be entitled to petition a court of
competent jurisdiction to have a successor escrow agent appointed. Any such successor escrow agent
shall deliver to Purchaser and the Sellers Representative, a written instrument accepting such
appointment, and thereupon it shall succeed to all the rights and duties of the escrow agent
hereunder and shall be entitled to receive possession of the Escrow Fund. Upon receipt of the
identity of the successor escrow agent, the Escrow Agent shall deliver the Escrow Fund then held
hereunder to the successor escrow agent.
9.
Sellers Representative
. The Sellers Representative (and each successor as such,
as of the time he, she or it becomes the Sellers Representative) represents and warrants to the
Escrow Agent that he, she or it has the right, power and authority to enter into an perform this
Agreement as agent of and on behalf of the Sellers, to give and receive all directions and notices
hereunder and to make all determinations that may be required or that he, she or it deems
appropriate under this Agreement. Until notified in writing signed by an authorized person on
behalf of the Sellers that the Sellers Representative has resigned or been removed and that a
successor (named therein) has been appointed, the Escrow Agent shall be entitled to rely upon any
instruction, notice, decision, action or inaction of the Sellers Representative whether in receipt
of a writing signed by one or both of the individuals serving in such capacity, and shall have no
duty to inquire into the authority of any person reasonably believed by the Escrow Agent to be the
Sellers Representative.
10.
Further Instruments
. If the Escrow Agent reasonably requires other or further
instruments in connection with its performance of the Duties, the necessary parties hereto shall
join in furnishing such instruments.
11.
Disputes
. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the cash and/or other property held by
the Escrow Agent hereunder, the Escrow Agent is authorized and directed to act in accordance with,
and in reliance upon, the provisions of this Agreement and the Option Purchase Agreement. Section
9.4 of the Option Purchase Agreement insofar as it relates to submission to jurisdiction and
dispute resolution procedures in the event of any dispute solely between Purchaser and the Sellers
Representative under any section of this Agreement is hereby incorporated by reference.
12.
Escrow Fees and Expenses
. Purchaser shall pay the Escrow Agent such fees and
reimburse the Escrow Agent for such expenses as are established and contemplated by the Fee
Schedule attached hereto as
Annex B
.
13.
Indemnification
. In consideration of the Escrow Agents acceptance of this
appointment, Purchaser and the Sellers Representative (on behalf of the Sellers), hereby jointly
and severally, agree to indemnify and hold the Escrow Agent harmless as to any liability incurred
by it to any person, firm or corporation by reason of its having accepted such appointment or in
carrying out the provisions of this Agreement and the Option Purchase Agreement, and to reimburse
the Escrow Agent for all its costs and expenses (including, without limitation, counsel fees and
expenses) reasonably incurred by reason of any matter as to which such indemnity is paid pursuant
to this Section 13;
provided
,
however
, that no indemnity need be paid in case of
the Escrow Agents gross negligence, willful misconduct, fraud or breach of this Agreement.
14.
General
.
(a) Any notice given hereunder shall be in writing and shall be deemed effective upon the
earlier of personal delivery, the third day after mailing by certified or registered mail, postage
prepaid, or upon delivery via facsimile (with confirmation of receipt) as follows:
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(i)
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If to Purchaser, to:
|
|
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NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attention: General Counsel
Facsimile No.: (858) 909-2479
Telephone No.: (858) 909-1979
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With a copy (which shall not constitute notice) to:
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DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attention: Michael Kagnoff
Facsimile No.: (858) 456-3075
Telephone No.: (858) 638-6722
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(ii)
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If to the Sellers Representative, to:
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Progentix Orthobiology BV
Professor Bronkhorstlaan 10, building 48
3723 MB Bilthoven
The Netherlands
Attention: Joost de Bruijn
Fax: +31 (0)30 229 7299
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and
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BioGeneration Ventures B.V.
Gooimeer 2 35
1411 DC Naarden
The Netherlands
Attention: Edwin van Wezel
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With a copy (which shall not constitute notice) to:
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Goodwin Procter LLP
Exchange Place
53 State Street
Boston, MA 02109
Attn: Michael H. Bison, Esq.
Fax: (617) 523-1231
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and
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CORP. advocaten
De Lairessestraat 137-143
1075 HJ Amsterdam
Attention: Edwin Renes
Fax: + 31 (0)20 578 83 05
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(iii)
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If to the Escrow Agent, to:
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Attention:
Facsimile No.:
Telephone No.:
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or to such other address as any party may have furnished in writing to the other parties in the
manner provided above. Any notice addressed to the Escrow Agent shall be effective only upon
receipt. If any Officers Certificate, any objection thereto or any other document of any kind is
required to be delivered to the Escrow Agent and any other person, the Escrow Agent may assume
without inquiry that such Officers Certificate, objection or other document was received by such
other person on the date on which it was received by the Escrow Agent.
(b) The captions in this Agreement are for convenience only and shall not be considered a part
of or affect the construction or interpretation of any provision of this Agreement.
(c) This Agreement may be executed in any number of counterparts (including by facsimile or
other electronic transmission), each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one instrument.
(d) No party may, without the prior express written consent of each other party, assign this
Agreement in whole or in part. This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto. This Agreement may only be amended in
a writing signed by Purchaser, the Escrow Agent and the Sellers Representative (subject to the
limitations set forth in the Option Purchase Agreement).
(e) This Agreement shall be governed by and construed in accordance with the laws of the State
of New York as applied to contracts made and to be performed entirely within the State of New York
without reference to conflicts of laws principles. The parties to this Agreement hereby agree to
submit to personal jurisdiction in the State of New York.
15.
Tax Reporting Matters
. Purchaser and the Sellers Representative each agree to
provide the Escrow Agent with certified tax identification numbers for Purchaser and the Sellers,
respectively, by furnishing appropriate Forms W-9 (or Forms W-8, in the case of non-U.S. persons)
and other forms and documents that the Escrow Agent may reasonably request (collectively,
Tax
Reporting Documentation
) to the Escrow Agent within 30 days after the Closing Date. The parties
hereto understand that, if such Tax Reporting Documentation is not so certified to the Escrow
Agent, the Escrow Agent may be required by the Internal Revenue Code of 1986 (the
Code
), as it
may be amended from time to time, to withhold a portion of any payments made to Purchaser or the
Sellers pursuant to this Agreement. If the date of a payment from the Escrow Fund occurs more than
six months after the Closing Date, a portion of the payment will be treated by the Sellers as
imputed interest to the extent required under the Code. The Escrow Agent need not monitor the
Sellers tax treatment of any distributions made to them.
16.
Patriot Act Compliance
. To help the government fight the funding of terrorism and
money laundering activities, federal law requires all financial institutions to obtain, verify and
record information that identifies each person who opens an account. For a non-individual person
such as a business entity, a charity, a trust or other legal entity the Escrow Agent will ask for
documentation to verify its formation and existence as a legal entity. The Escrow Agent may also
ask to see financial statements, licenses, identification and authorization documents from
individuals claiming authority to represent the entity or other relevant documentation. Purchaser
and the Sellers Representative each agree to provide all such information and documentation as to
Purchaser and the Sellers as requested by Escrow Agent to ensure compliance with federal law.
[
Signature Page Follows
]
In witness whereof
, each of the parties hereto has executed this Escrow Agreement as of
the date first above written.
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ESCROW AGENT:
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By:
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Name:
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Title:
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PURCHASER:
NUVASIVE, INC.
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By:
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Name:
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Title:
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COMPANY:
PROGENTIX ORTHOBIOLOGY, B.V.
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By:
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Name:
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Title:
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SELLERS REPRESENTATIVE
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Name:
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Name:
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Schedule I
Proceeds Allocation
|
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Seller
|
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Allocation
|
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BioGeneration Ventures BV
|
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18.18
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%
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JD de Bruijn Holding BV
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32.73
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%
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Incubation BV
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45.08
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%
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Huipin Yuan
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4.01
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%
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EXHIBIT
L
FOUNDERS NON-COMPETITION AGREEMENT
THIS FOUNDERS NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Joost D de Bruijn
(
Bruijn
). Terms not otherwise defined herein shall have the respective meanings ascribed to them
in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Bruijn.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE.
Bruijn understands that, solely to extent expressly set forth herein, he is
prohibited from (i) engaging in any competition with the Purchasers group of companies, which
group includes the Company (the
Purchasers Group
) and (ii) soliciting any person of the
Purchasers Group to leave the latter.
2.
NON-COMPETITION.
Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Bruijn agrees that he will not, whether on his own
behalf or on behalf of or in conjunction with any person, directly or indirectly, (i) engage in any
commercial activity with any competitor of the Purchasers Group with respect to any of the
Products in the Field (a
Competing Business
) if such activity is related to the commercialization
of a biologic
(e.g. bone graft material and/or biologically active compound) or other Product or compound
intended to foster bone growth that will compete with the Products and includes a use in spinal
applications (
Competitive Services
), or (ii) provide Competitive Services to, any person (or any
affiliate of any person) who or which is engaged in a Competing Business with respect to such
Competing Business (whether directly or indirectly). Purchaser expressly acknowledges and agrees
that Bruijn is or may become a member of a not-for-profit institution or association (collectively,
the
Institutions
) and notwithstanding anything to the contrary contained herein, nothing in this
Agreement shall preclude or in any way restrict Bruijn from providing educational services at any
such Institution or conducting research at any such Institution. A complete list of the research
activities of Bruijn relating to any biologic or other Product or compound intended to foster bone
growth as of the date of this Agreement is attached hereto as
Exhibit A
.
3.
NON-SOLICITATION.
(a) Bruijn agrees that he will not, whether on his own behalf or on behalf of or in
conjunction with any person, directly or indirectly, 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 the Company and who was immediately prior to the
closing of the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing
),
an employee of the Company to leave the employment of the Company.
(b) Bruijn agrees that he will not, whether on his 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 the Company, any employee of, or consultant then under contract
with the Company who is or has been engaged in the business of the Company (the
Business
).
(c) Bruijn agrees that he will not, directly or indirectly: (i) solicit, induce or attempt to
induce any customer to cease doing business in whole or in part with the Purchasers Group; (ii)
attempt to limit or interfere with any business agreement existing between the Purchasers Group
and any third party; or (iii) disparage the business reputation or employees of the Purchasers
Group or take any actions, knowingly, willfully or, recklessly, that are harmful to the Purchaser
Groups goodwill with their customers, clients, publishers, advertisers, marketers, vendors,
employees, service providers, media or the public.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
BREACH.
In the event of a breach by Bruijn of his obligations pursuant to this Agreement,
Bruijn agrees that he shall forfeit to Purchaser, without any further notice or demand being
required, an immediately payable penalty in the amount of fifty percent (50%) of any amounts
received by Bruijn Holding B.V. under the Preferred Stock Purchase Agreement (the
Liquidated
Damages
) for any such violation, without limiting or precluding the right of the Purchaser to
claim from Bruijn specific performance or any damages which the Purchaser has incurred;
provided
, that any Liquidated Damages collected by Purchaser hereunder shall be offset
against any Damages to which Purchaser is otherwise entitled under the Preferred Stock Purchase
Agreement.
8.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Bruijn and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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JOOST D DE BRUIJN
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NUVASIVE INC.
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By:
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Joost D de Bruijn
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Name:
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Title:
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Exhibit A
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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EXHIBIT
M
FOUNDERS NON-COMPETITION AGREEMENT
THIS FOUNDERS NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Clemens van
Blitterswijk
(
Blitterswijk
). Terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands, held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Blitterswijk.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE.
Blitterswijk understands that, solely to extent expressly set forth herein, he is
prohibited from (i) engaging in any competition with the Purchasers group of companies, which
group includes the Company (the
Purchasers Group
) and (ii) soliciting any person of the
Purchasers Group to leave the latter.
2.
NON-COMPETITION
. Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Blitterswijk agrees that he will not, whether on his
own behalf or on behalf of or in conjunction with any person, directly or indirectly; (i) engage in
any commercial activity with any competitor of the Purchasers Group with respect to any of the
Products in the Field (a
Competing Business
) if such activity is related to the commercialization
of a
1
biologic (e.g. bone graft material and/or biologically active compound) or other Product or
compound intended to foster bone growth that will compete with the Products and includes a use in
spinal applications (
Competitive Services
), or (ii) provide Competitive Services to, any person
(or any affiliate of any person) who or which is engaged in a Competing Business. Purchaser
expressly acknowledges and agrees that Blitterswijk is or may become a member of a not-for-profit
institution or association (collectively, the
Institutions
) and notwithstanding anything to the
contrary contained herein, nothing in this Agreement shall preclude or in any way restrict
Blitterswijk from providing educational services at any such Institution or conducting research at
any such Institution. A complete list of the research activities of Blitterswijk relating to any
biologic or other Product or compound intended to foster bone growth as of the date of this
Agreement is attached hereto as
Exhibit A
. Purchaser expressly acknowledges and agrees
that Blitterswijk is or may in the future enter the business of venture capital investing and in
such capacity may review the business plans and related proprietary information of many
enterprises, including enterprises which may have products or services which compete directly or
indirectly with those of the Company and/or Purchaser Group. Nothing in this Agreement shall
preclude or in any way restrict any venture capital firm or similar institutional investor with
which Blitterswijk is affiliated from investing or participating in any particular enterprise, or
any other general partner, member, officer or employee of any such venture capital firm or similar
institutional investor from serving on the board of directors of any enterprise in which it makes
an investment, whether or not such enterprise has products or services which compete with those of
the Company and/or the Purchaser Group.
3.
NON-SOLICITATION.
(a) Blitterswijk agrees that he will not, whether on his own behalf or on behalf of or in
conjunction with any person, directly or indirectly: 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 the Company and who was immediately prior to the
closing of the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing
),
an employee of the Company to leave the employment of the Company.
(b) Blitterswijk agrees that he will not, whether on his 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 the Company, any employee of, or consultant then under contract
with the Company who is or has been engaged in the business of the Company (the
Business
).
(c) Blitterswijk agrees that he will not, directly or indirectly: (i) solicit, induce or
attempt to induce any customer to cease doing business in whole or in part with the Purchasers
Group; (ii) attempt to limit or interfere with any business agreement existing between the
Purchasers Group and any third party; or (iii) disparage the business reputation or employees of
the Purchasers Group or take any actions, knowingly, willfully or, recklessly, that are harmful to
the Purchaser Groups goodwill with their
2
customers, clients, publishers, advertisers, marketers, vendors, employees, service providers,
media or the public.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
BREACH.
In the event of a breach by Blitterswijk of his obligations pursuant to this
Agreement, Blitterswijk agrees that he shall forfeit to Purchaser, without any further notice or
demand being required, an immediately payable penalty in the amount of fifty percent (50%) of any
amounts received by Incubation B.V. under the Preferred Stock Purchase Agreement (the
Liquidated
Damages
) for any such violation, without limiting or precluding the right of the Purchaser to
claim from Blitterswijk specific performance or any damages which the Purchaser has incurred;
provided
, that any Liquidated Damages collected by Purchaser hereunder shall be offset
against any Damages to which Purchaser is otherwise entitled under the Preferred Stock Purchase
Agreement.
8.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Blitterswijk and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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CLEMENS VAN BLITTERSWIJK
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NUVASIVE INC.
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By:
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Clemens van Blitterswijk
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Name:
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Title:
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3
Exhibit A
***
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***
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Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.
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4
EXHIBIT
N
INVESTOR NON-COMPETITION AGREEMENT
THIS INVESTOR NON-COMPETITION AGREEMENT
(the
Agreement
) is made as of January 13, 2009, by
on the one hand
NuVasive, Inc.
, a Delaware corporation, whose registered office is at 7473 Lusk
Boulevard, San Diego, California 92121 (the
Purchaser
) and on the other hand
Edward van Wezel
(
Wezel
). Terms not otherwise defined herein shall have the respective meanings ascribed to them
in the Preferred Stock Purchase Agreement (as defined below).
RECITALS
(i) Purchaser intends to purchase from the Sellers forty percent (40%) of the shares in the
capital of
Progentix Orthobiology B.V.
, a company organized under the laws of the Netherlands with
Company No. 30234249, whose registered office is at Professor Bronkhorstlaan 10 D (3723 MB)
Bilthoven, the Netherlands held by the Sellers (the
Company
).
(ii) In connection with the transactions contemplated thereby, the Company has entered into a
Distribution Agreement, dated January 13, 2009, with Purchaser (the
Distribution Agreement
)
regarding the manufacture by the Company and distribution by Purchaser of certain products (the
Products
) set forth on Exhibit A attached thereto in the Field (as defined in the Distribution
Agreement).
(iii) As stipulated in the Preferred Stock Purchase Agreement, dated January 13, 2009, by and
among Purchaser, the Company and the Sellers (the
Preferred Stock Purchase Agreement
), Purchaser
has conditioned the closing of the transactions contemplated by the Preferred Stock Purchase
Agreement on the execution of this Agreement by Wezel.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
PURPOSE
. Wezel understands that, solely to extent expressly set forth herein, he is
prohibited from engaging in any competition with the Purchasers group of companies, which group
includes the Company (the
Purchasers Group
).
2.
NON-COMPETITION.
Except with respect to RevOs, a synthetic polymer-Nano HA composite bone
substitute intended to mimic cortical bone, Wezel agrees that he will not personally serve as a
member of the supervisory board (raad van comissarissen) of any party that is a competitor of the
Purchasers Group with respect to any of the Products in the Field if such competitor is engaged in
the business of commercializing a biologic (e.g. bone graft material and/or biologically active
compound) or other Product or compound intended to foster bone growth that will
1
compete with the Products and includes a use in spinal applications (a
Competing Business
).
Wezel further agrees that he will not personally serve as a member of the board of directors or a
substantially equivalent governing body of any Competing Business, if BioGeneration Ventures BV
makes an investment in any such Competing Business outside the Netherlands. Purchaser expressly
acknowledges and agrees that Wezel is in the business of venture capital investing and therefore
(a) Wezel reviews the business plans and related proprietary information of many enterprises,
including enterprises which may have products or services which compete directly or indirectly with
those of the Company and/or Purchaser Group, (b) Wezel monitors investments in Competing
Businesses, including consulting with members of BioGeneration Ventures BV that serve on the board
of directors, and (c) Wezel may take any and all actions on behalf of BioGeneration Ventures BV as
a shareholder of a Competing Business (including, without limitation, the activities described in
clauses (a) and (b) of this Section 2). Nothing in this Agreement shall preclude or in any way
restrict any venture capital firm or similar institutional investor with which Wezel is affiliated
from investing or participating in any particular enterprise, or any other general partner, member,
officer or employee of any such venture capital firm or similar institutional investor from serving
on the supervisory board (raad van comissarissen) or the board of directors or a substantially
equivalent governing body of an entity in which it makes an investment, whether or not such entity
has products or services which compete with those of the Company and/or the Purchaser Group.
4.
RESTRICTED PERIOD.
The prohibitions set forth above shall apply from the date of closing of
the transactions contemplated by the Preferred Stock Purchase Agreement (the
Closing Date
)
through the second anniversary of the Closing Date.
5.
TERRITORY.
The prohibitions set forth above will globally apply, unless the Purchaser has
in written form indicated differently.
6.
MISCELLANEOUS.
This Agreement shall be binding upon and for the benefit of the undersigned
parties. Failure to enforce any provision of this Agreement shall not constitute a waiver of any
term thereof. Any amendment to this Agreement must be in writing and signed by an authorized
representative of each party. This Agreement may be signed in counterparts.
7.
GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in
accordance with the laws of the Netherlands and shall be binding upon the parties hereto in the
Netherlands and worldwide. Wezel and the Purchaser agree that any dispute arising out of or
relating to this Agreement shall be subject to the exclusive jurisdiction of the courts in the
Netherlands, and each party agrees to submit to the personal and exclusive jurisdiction and venue
of such courts.
2
IN WITNESS WHEREOF
, the parties have executed this Agreement as of the day and year first
above.
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EDWARD VAN WEZEL
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NUVASIVE INC.
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By:
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Edward van Wezel
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Name:
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Title:
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3