UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 13, 2014

 

 

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   000-50744   33-0768598

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices, with zip code)

(858) 909-1800

(Registrant’s telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


Item 1.01 Entry into a Material Definitive Agreement.

On May 13, 2014, the Board of Directors (the “Board”) of NuVasive, Inc. (the “Company”) approved and adopted a new form of indemnity agreement to be entered into with each of the current directors and certain executives of the Company (including the named executive officers) as well as certain Company fiduciaries, which such agreements will supersede and replace any and all prior indemnity agreements to which each such director or current executive was a party with the Company.

The new form of indemnity agreement supplements and clarifies the indemnification rights provided under the Company’s certificate of incorporation, bylaws, and applicable law. The new indemnity agreement provides, among other things, that the Company will indemnify the director or executive (the “Indemnitee”) against all expenses, judgments, damages, witness fees, fines, and amounts paid in settlement, actually and reasonably incurred by the Indemnitee and by reason of the Indemnitee’s service as a director or officer to the fullest extent permitted by the Company’s certificate of incorporation, bylaws, and the General Corporation Law of the State of Delaware or other applicable law and to any greater extent that applicable law may in the future permit, subject to certain exceptions specified in the agreement. The new indemnity agreement also provides for the advancement of expenses in connection with legal proceedings, certain procedures for determining whether the Indemnitee is entitled to indemnification and dispute resolution procedures, and allows the Company to assume the defense of a claim against an Indemnitee if the Company is obligated to provide indemnification for such claim.

The foregoing description of the new indemnity agreement is a general description only and is qualified in its entirety by reference to the new indemnity agreement, the form of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.

Item 5.02 Compensatory Arrangements of Certain Officers.

(e)      On May 13, 2014, the Compensation Committee of the Board (the “Compensation Committee”) approved and adopted (1) a form of change in control agreement and authorized the Company to enter into such agreements with certain executives of the Company (the “Change in Control Agreements”), and (2) the NuVasive, Inc. Executive Severance Plan (the “Executive Severance Plan”). The Change in Control Agreements and the Executive Severance Plan will cover the Company’s Chief Executive Officer, Alexis V. Lukianov, all of the Company’s other named executive officers (the President and Chief Operating Officer, Keith C. Valentine; the President, Global Products and Services, Patrick Miles; the Executive Vice President and Chief Financial Officer, Michael J. Lambert; and the Executive Vice President U.S. Sales, Matthew W. Link), and certain other executives as designated by the Compensation Committee. As a condition to entering into a Change in Control Agreement and receiving coverage under the Executive Severance Plan, an executive must agree to terminate any rights that he or she may have to severance and change in control benefits under certain existing agreement(s) with the Company (including equity acceleration).

The new form of Change in Control Agreements require a “double-trigger” of events before any benefits are payable. Severance benefits are payable in the event there is a change in control of the Company (as defined in the Change in Control Agreements) and the executive’s employment is involuntarily terminated by the Company for reasons other than death, disability or cause (as defined in the Change in Control Agreements) or by the executive for good reason (as defined in the Change in Control Agreements) either in contemplation of the change in control or within a period of twenty-four (24) months following the change in control. The severance benefits under this new form Change in Control Agreements would consist of (1) a lump-sum cash

 

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severance payment equal to the sum of (A) two (2) times (2x) the sum of the executive’s annual base salary plus the greater of the executive’s target annual bonus for the year of termination or the highest of the three (3) annual bonuses paid to the executive prior to the termination of employment; (B) a pro rata portion (based on the number of full and partial months in the calendar year prior to the executive’s termination date but not exceeding six (6) months’ worth) of the highest grant date fair value of the long-term cash and/or equity awards granted to the executive over the three (3) calendar year period prior to the calendar year of the termination of employment; (C) the after-tax cost of continued participation in the Company’s employee benefit plans for a period of twenty-four (24) months; and (D) a pro rata portion (based on the number of full and partial months in the calendar year prior to the executive’s termination date) of the greater of the executive’s target annual bonus for the year of termination or the highest of the three (3) annual bonuses paid to the executive prior to the termination of employment; (2) full vesting of all Company equity and long-term incentive awards granted to the executive to the extent vesting is based on service with the Company; and (3) the right to exercise all outstanding stock options or stock appreciation rights until the later of twenty-four (24) months following the executive officer’s separation from service or such later date as may be applicable under the terms of the award agreement, but by no later than the end of the maximum full term of the award; provided, however, that, if any stock option or stock appreciation right is cashed-out in connection with a change in control, the executive officer will receive a lump-sum cash payment equal to the time value of the right to exercise those awards for that period (based on the Black Scholes option pricing model). The severance benefits provided by the Change in Control Agreements are contingent upon the executive officer providing an effective release of claims against the Company.

The Executive Severance Plan provides certain severance benefits upon an involuntary termination of employment by the Company that is not for cause (as defined in the Executive Severance Plan). Benefits are not provided in the event of termination of employment due to retirement, death or disability, with the sole exception that such benefits are provided to Mr. Lukianov in the event of his death or disability (consistent with his current employment agreement). No benefits are provided under the Executive Severance Plan in any situation in which the executive is provided with severance benefits under any form of Change in Control Agreement.

Executive Severance Plan benefits for executives other than our Chief Executive Officer would consist of nine (9) months of outplacement assistance and a lump-sum cash payment equal to the sum of (1) the executive’s annual base salary, (2) a pro rata portion (based on service from the beginning of the year until the date of termination of employment) of his annual incentive bonus target for the year in which the termination of employment occurs, and (3) the after-tax cost of health benefits for a period of one (1) year from the date of termination of employment. For our Chief Executive Officer, the severance benefits would include the nine (9) months of outplacement assistance and a lump-sum cash severance payment equal to the sum of: (1) two times (2x) the sum of his annual base salary and annual target incentive bonus in effect for the calendar year in which the termination of employment occurs; (2) a pro rata portion (based on service from the beginning of the year until the date of termination of employment) of his cash performance award for the year in which termination of employment occurs based on actual performance for the relevant performance period; and (3) the after-tax cost of health benefits for a period of two (2) years from the date of termination of employment. In addition, for Mr. Lukianov only, Executive Severance Plan benefits would include (A) full vesting of all outstanding Company equity and long-term incentive awards to the extent vesting is based on service with the Company, with awards subject to performance conditions remaining subject to and payable in accordance with the performance conditions being measured pursuant to the terms and conditions of his respective awards agreements; and (B) the right to exercise all vested and unexercised stock options outstanding on the date of termination of employment for a period of twenty-four (24) months following the date of termination of employment or the remaining term thereof if shorter. All severance benefits under the Executive Severance Plan are conditioned upon the executive providing an effective release of claims against the Company.

 

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The foregoing description of the Company’s new Change in Control Agreements and Executive Severance Plan is a general description only and is qualified in its entirety by reference to the Change in Control Agreement and Executive Severance Plan, the forms of which are attached hereto as Exhibits 99.2 and 99.3 and incorporated herein by reference.

The disclosures made above under Item 1.01 regarding the approval and adoption by the Board of a new form of indemnity agreement to be entered into with each of the current directors and certain executives of the Company (including the qualification and reference to Exhibit 99.1) are incorporated to this disclosure under Item 5.02(e) by reference.

Item 5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On May 13, 2014, the Board - pursuant to Article IX (Amendments) of the Company’s Restated Bylaws (the “Restated Bylaws”) (which generally allows the Board to amend the Restated Bylaws by the affirmative vote of a majority of the Board) - approved and adopted an amendment to the Restated Bylaws in connection with the approval and adoption of the new form of indemnity agreement to be entered into with each of the current directors and certain current executives of the Company. That amendment to the Restated Bylaws redefined the term “Expenses”, as contained in Article VII (Indemnification) therein, to exclude any amounts paid in settlement or judgment that are the result of a proceeding in which the Company may be required to indemnify a director or executive.

The foregoing description of the amendment to the Restated Bylaws is a general description only and is qualified in its entirety by reference to the Amendment No. 1 to the Restated Bylaws of NuVasive, Inc., which is attached hereto as Exhibit 3.1 and incorporated herein by reference

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.

 

 

Description

 

3.1

 

Amendment No. 1 to the Restated Bylaws of NuVasive, Inc.

99.1

 

Form of Indemnification Agreement between NuVasive, Inc. and its directors and certain executives thereof

99.2

 

Form of Change in Control Agreement between NuVasive, Inc. and certain executives thereof

99.3

 

NuVasive, Inc. Executive Severance Plan

 

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SIGNATURES

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

 

    NUVASIVE, INC.
Date:  May 19, 2014     By:         /s/ Jason Hannon
      Jason Hannon
      Executive Vice President & General Counsel

 

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EXHIBIT INDEX

 

Exhibit No.

 

  

Description

 

3.1   

Amendment No. 1 to the Restated Bylaws of NuVasive, Inc.

99.1   

Form of Indemnification Agreement between NuVasive, Inc. and its directors and certain executives thereof

99.2   

Form of Change in Control Agreement between NuVasive, Inc. and certain executives thereof

99.3   

NuVasive, Inc. Executive Severance Plan

 

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Exhibit 3.1

AMENDMENT NO. 1

TO THE RESTATED BYLAWS OF

NUVASIVE, INC.

The following amendment (the “ Amendment ”) was made to the Restated Bylaws of NuVasive, Inc. (the “ Company ”) pursuant to resolutions adopted by the Company’s Board of Directors at a meeting held on May 14, 2014:

1.     Article VII, Section 11(b) of the Restated Bylaws of the Company is, effective immediately, hereby amended in its entirety to read as follows:

“(b) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines and, except for amounts paid in settlement or judgment, any other costs and expenses of any nature or kind incurred in connection with any proceeding.”

2.     Except as expressly modified by this Amendment, all terms, provisions, covenants and agreements contained in the Restated Bylaws of the Company shall remain unmodified and in full force and effect.

Exhibit 99.1

FORM OF INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated                      , 2014, is made between NuVasive, Inc., a Delaware corporation (the “ Company ”), and                                          (the “ Indemnitee ”).

RECITALS

A.        The Company desires to attract and retain the services of talented and experienced individuals, such as Indemnitee, to serve as directors and officers of the Company and its subsidiaries and wishes to indemnify its directors and officers to the maximum extent permitted by law;

B.        The Company and Indemnitee recognize that corporate litigation in general has subjected directors and officers to expensive litigation risks;

C.        Section 145 of the General Corporation Law of Delaware (“Section 145”), under which the Company is organized, empowers the Company to indemnify its directors and officers by agreement and to indemnify persons who serve, at the request of the Company, as the directors and officers of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;

D.        The Company’s Bylaws expressly provide that the indemnification provisions set forth therein, which include mandatory advancement (subject to limited exceptions), are not exclusive and may be supplemented by contracts such as this Indemnification Agreement;

E.        Section 145(g) allows for the purchase of management liability insurance by the Company, which - in theory - can cover asserted liabilities without regard to whether they are indemnifiable or not;

F.        Individuals considering service with, or presently serving, the Company expect to be extended market terms of indemnification commensurate with their position, and that entities such as Company will endeavor to maintain appropriate management liability insurance; and

G.        In order to induce Indemnitee to serve or continue to serve as a director or officer of the Company and/or one or more subsidiaries of the Company, the Company and Indemnitee enter into this Agreement.


AGREEMENT

NOW, THEREFORE, Indemnitee and the Company hereby agree as follows:

1.          Definitions . As used in this Agreement:

(a)      “ Agent ” means any person who is or was (i) a director, officer, employee or other agent of the Company or a subsidiary of the Company; (ii) serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, limited liability company, employee benefit plan, nonprofit entity, partnership, joint venture, trust or other enterprise; or (iii) a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company; or (iv) a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation.

(b)      “ Board ” means the Board of Directors of the Company.

(c)      A “ Change in Control ” shall be deemed to have occurred if (i) any “person”, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the total voting power represented by the Company’s then outstanding voting securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation or a sale of all or substantially all of the Company’s assets with or to another entity, other than a merger, consolidation or asset sale that would result in the holders of the Company’s outstanding voting securities immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a majority of the total voting power represented by the voting securities of the Company or such surviving or successor entity outstanding immediately thereafter, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company.

(d)      “ Expenses ” shall include all reasonable out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, or Section 145 or otherwise; provided, however, that “Expenses” shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a Proceeding.

(e)      “ Independent Counsel ” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in relevant matters of corporation law and neither currently is, nor in the past five years has been, retained to represent: (i) the Company or

 

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Indemnitee in any matter material to either such party, or (ii) any other party to or witness in the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Where required by this Agreement, Independent Counsel shall be retained at the Company’s sole expense.

(f)      “ Proceeding ” means any threatened, pending, or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether formal or informal, civil, criminal, administrative, or investigative, including any such investigation or proceeding instituted by or on behalf of the Corporation or its Board of Directors, in which Indemnitee is or reasonably may be involved as a party or target, that is by reason of Indemnitee’s being an Agent of the Corporation.

(g)      “ Subsidiary ” means any corporation of which more than 50% of the outstanding voting securities are owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.

2.          Agreement to Serve . Indemnitee agrees to serve and/or continue to serve as an Agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an Agent of the Company, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws or Certificate of Incorporation of the Company or any subsidiary of the Company or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment or other service by Indemnitee.

3.          Liability Insurance .

(a)       Maintenance of D&O Insurance . The Company hereby covenants and agrees that, so long as Indemnitee shall continue to serve as an Agent of the Company, and, thereafter, so long as Indemnitee shall be subject to any possible Proceeding by reason of the fact that Indemnitee was an Agent of the Company, the Company, subject to Section 3(c), shall maintain in full force and effect directors’ and officers’ liability insurance (“ D&O Insurance ”) in reasonable amounts from established and reputable insurers of a minimum A.M. Best rating of A- VII, and as more fully described below. In the event of a Change in Control, the Company shall, as set forth in Section 3(c) below, either: (i) maintain such D&O Insurance for six years; or (ii) purchase a six-year tail for such D&O Insurance, in each case, from and following the closing of such event. Should a tail policy be purchased, reasonable efforts shall be made to try to negotiate that such policy is purchased by the Company’s D&O insurance broker at that time, and under the same or better terms and limits for individuals that is in place at that time.

(b)       Rights and Benefits . In all policies of D&O Insurance, Indemnitee shall qualify as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of (i) the Company’s independent directors (as defined by the insurer), if Indemnitee is such an independent director; (ii) the Company’s non-independent directors, if Indemnitee is not an independent director; (iii) the Company’s officers, if Indemnitee is an officer of the Company; or (iv) the Company’s key employees, if Indemnitee is not a director or officer but is a key employee.

 

 

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(c)       Limitation on Required Maintenance of D&O Insurance . Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance at all, or of any type, terms, or amount, if the Company determines in good faith and after using commercially reasonable efforts that: (i) such insurance is not reasonably available; (ii) the premium costs for such insurance are disproportionate to the amount of coverage provided; (iii) the coverage provided by such insurance is limited so as to provide an insufficient or unreasonable benefit; (iv) Indemnitee is covered by similar insurance maintained by a subsidiary of the Company; or (v) the Company is to be acquired and a policy (tail or otherwise) of reasonable terms and duration can be purchased for pre-closing acts or omissions by Indemnitee.

4.          Mandatory Indemnification . Subject to the terms of this Agreement:

(a)       Third Party Proceedings . If Indemnitee was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses and liabilities of any type whatsoever (including, without limitation, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, provided that Indemnitee (i) acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, (ii) with respect to any criminal action or Proceeding, had no reasonable cause to believe his or her conduct was unlawful.

(b)       Proceedings By or In The Right of Company . If Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against any and all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, provided Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company; provided, however, that that no indemnification shall be due under this Section 4(b) in respect to any claim, issue or matter for which Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction unless and only to the extent that the Delaware Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such amounts which the Delaware Court of Chancery or such other court shall deem proper.

(c)       Actions where Indemnitee is Deceased . If Indemnitee is a person who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, and if, prior to, during the pendency of, or after, completion of

 

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such Proceeding Indemnitee is deceased, the Company shall indemnify Indemnitee’s heirs, executors and/or administrators against all Expenses and liabilities of any type whatsoever to the extent Indemnitee would have been entitled to indemnification pursuant to this Agreement were Indemnitee still alive.

(d)       Certain Terminations . The termination of any Proceeding or of any claim, issue, or matter therein by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(e)       Limitations . Notwithstanding the foregoing provisions of Sections 4(a) through (d) hereof, but subject to the exception set forth in Section 13 which shall control, the Company shall not be obligated to indemnify the Indemnitee for Expenses or liabilities of any type whatsoever for which payment (and the Company’s indemnification obligations under this Agreement shall be reduced by such payment) is actually made to or on behalf of Indemnitee, by the Company or otherwise, under a corporate insurance policy, or under a valid and enforceable indemnity clause, right, bylaw, or agreement; and, in the event the Company has previously made a payment to Indemnitee for an Expense or liability of any type whatsoever for which payment is actually made to or on behalf of the Indemnitee under an insurance policy, or under a valid and enforceable indemnity clause, bylaw or agreement, Indemnitee shall return to the Company the amounts subsequently received by the Indemnitee from such other source of indemnification.

(f)       Witness . In the event that Indemnitee is not a party or threatened to be made a party to a Proceeding, but is subpoenaed (or given a written request to be interviewed by or provide documents or information to a government authority) in such a Proceeding by reason of the fact that the Indemnitee is or was an Agent of the Company, or by reason of anything witnessed or allegedly witnessed by the Indemnitee in that capacity, the Company shall indemnify the Indemnitee against all actually and reasonable out of pocket costs (including, without limitation, legal fees) reasonably incurred by the Indemnitee in responding to such subpoena or written request for an interview. As a condition to this right, Indemnitee must provide notice of such subpoena or request to the Company within 14 days, subject to the terms of Section 7(a).

5.          Indemnification for Expenses in a Proceeding in Which Indemnitee is Wholly or Partly Successful .

(a)       Successful Defense . Notwithstanding any other provisions of this Agreement, to the extent Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with the investigation, defense or appeal of such Proceeding.

 

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(b)       Partially Successful Defense . Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party to any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time and is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with each successfully resolved claim, issue or matter.

(c)       Dismissal . For purposes of this section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(d)       Contribution . If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee, then to the extent allowed by law, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such action, suit or proceeding arose, and (ii) the relative fault of Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, active or passive conduct, and opportunity to correct or prevent the circumstances resulting in such judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

6.          Mandatory Advancement of Expenses .

(a)      Subject to the terms of this Agreement and following notice pursuant to Section 7(a) below, the Company shall advance – on an interest-free basis – all Expenses reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any Proceeding to which Indemnitee is a party or is threatened to be made a party by reason of the fact that Indemnitee is or was an Agent of the Company (unless there has been a final determination that Indemnitee is not entitled to indemnification for such Expenses) upon receipt satisfactory documentation supporting such Expenses. Such advances are intended to be an obligation of the Company to Indemnitee hereunder and shall in no event be deemed to be a personal loan. Such advancement of Expenses shall otherwise be unsecured and without regard to Indemnitee’s ability to repay. The advances to be made hereunder shall be paid by the Company to Indemnitee within 30 days following delivery of a written request therefore by Indemnitee to the Company, along with such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to advancement (which shall include without limitation reasonably detailed

 

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invoices for legal services, but with disclosure of confidential work product not required). The Company shall discharge its advancement duty by, at its option, (i) paying such Expenses on behalf of Indemnitee, (ii) advancing to Indemnitee funds in an amount sufficient to pay such Expenses, or (iii) reimbursing Indemnitee for Expenses already paid by Indemnitee. In the event that the Company fails to pay Expenses as incurred by Indemnitee as required by this paragraph, Indemnitee may seek mandatory injunctive relief (including, without limitation, specific performance) from any court having jurisdiction to require the Company to pay Expenses as set forth in this paragraph. If Indemnitee seeks mandatory injunctive relief pursuant to this paragraph, it shall not be a defense to enforcement of the Company’s obligations set forth in this paragraph that Indemnitee has an adequate remedy at law for damages.

(b)       Undertakings. By execution of this Agreement, Indemnitee agrees to repay the amount advanced only in the event and to the extent that it shall be finally determined that Indemnitee is not entitled to indemnification by the Company to the extent set forth in this agreement and under Delaware law. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement. No additional undertaking, or security, shall be required of Indemnitee.

7.          Notice and Other Indemnification Procedures .

(a)       Notice by Indemnitee . Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, Indemnitee shall, if Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof; provided, however, that a delay in giving such notice will not deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company; and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding and has notice thereof. The omission to notify the Company will not relieve the Company from any liability for indemnification which it may have to Indemnitee otherwise than under this Agreement.

(b)       Insurance . If the Company receives notice pursuant to Section 7(a) hereof of the commencement of a Proceeding that may be covered under D&O Insurance then in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

(c)       Defense . In the event the Company shall be obligated to pay the Expenses of any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee of written notice of the Company’s election so to do. After delivery of such notice, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of any other counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided, however, that (i) Indemnitee shall have the right to employ his or her own counsel in any such Proceeding at Indemnitee’s expense, and (ii) Indemnitee shall have the right

 

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to employ his or her own counsel in any such Proceeding at the Company’s expense if (A) the Company has authorized the employment of counsel by Indemnitee at the expense of the Company, (B) Indemnitee shall have reasonably concluded (based on the written advice of Indemnitee’s legal counsel) that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding. In addition to all the requirements above, if the Company has D&O Insurance, or other insurance, with a panel counsel requirement that may cover the matter for which indemnity is claimed by Indemnitee, then Indemnitee shall use such panel counsel or other counsel approved by the insurers, unless there is an actual conflict of interest posed by representation by all such counsel, or unless and to the extent Company waives such requirement in writing. Indemnitee and his or her counsel shall provide reasonable cooperation with such insurer on request of the Company.

8.          Right to Indemnification .

(a)       Right to Indemnification . In the event that Section 5(a) is inapplicable, the Company shall indemnify Indemnitee pursuant to this Agreement unless, and except to the extent that, it shall have been determined by one of the methods listed in Section 8(b) that Indemnitee has not met the applicable standard of conduct required to entitle Indemnitee to such indemnification.

(b)       Determination of Right to Indemnification . A determination of Indemnitee’s right to indemnification under this Section 8 shall be made at the election of the Board by (i) a majority vote of directors who are not parties to the Proceeding for which indemnification is being sought, even though less than a quorum, or by a committee consisting of directors who are not parties to the Proceeding for which indemnification is being sought, who, even though less than a quorum, have been designated by a majority vote of the disinterested directors, or (ii) if there are no such disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee. However, in the event there has been a Change in Control, then the determination shall, at Indemnitee’s sole option, be made either by a) by Independent Counsel as in (b)(ii), above, with Indemnitee choosing the Independent Counsel subject to Company’s consent, such consent not to be unreasonably withheld; or b) by a majority vote of all disinterested directors. A director who is party to the Proceeding for which indemnification is being sought is not a disinterested director.

(c)       Submission for Decision . As soon as practicable, and in no event later than 30 days after Indemnitee’s written request for indemnification, the Board shall select the method for determining Indemnitee’s right to indemnification. Indemnitee shall cooperate with the person or persons or entity making such determination with respect to Indemnitee’s right to indemnification, including providing to such person, persons or entity, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board shall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement.

 

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(d)       Application to Court . If (i) a claim for indemnification or advancement of Expenses is denied, in whole or in part, (ii) no disposition of such claim is made by the Company within 60 days after the request therefore, (iii) the advancement of Expenses is not timely made pursuant to Section 6 of this Agreement, or (iv) payment of indemnification is not made pursuant to Section 5 of this Agreement, Indemnitee shall have the right at his option to apply to the Delaware Court of Chancery, a California state or federal court, the court in which the Proceeding is or was pending, or any other court of competent jurisdiction, for the purpose of enforcing Indemnitee’s right to indemnification (including the advancement of Expenses) pursuant to this Agreement. Upon written request by Indemnitee, the Company shall consent to service of process.

(e)       Expenses Related to the Enforcement or Interpretation of this Agreement . The Company shall indemnify Indemnitee against Expenses incurred by Indemnitee in connection with any hearing or proceeding under this Section 8 involving Indemnitee, and against Expenses incurred by Indemnitee in connection with any other proceeding between the Company and Indemnitee to the extent involving the interpretation or enforcement of the rights of Indemnitee under this Agreement, if and to the extent Indemnitee is successful.

(f)       Miscellaneous .

(i)      In no event shall Indemnitee’s right to indemnification (apart from advancement of Expenses) be determined prior to a final adjudication in the Proceeding at issue if the Proceeding is both ongoing, and of the nature to have a final adjudication.

(ii)      In any proceeding to determine Indemnitee’s right to indemnification or advancement, Indemnitee shall be presumed to be entitled to indemnification or advancement, with the burden of proof on the Company to prove, by a preponderance of the evidence (or higher standard if required by relevant law) that Indemnitee is not so entitled.

(iii)      Indemnitee shall be fully indemnified for those matters where, in the performance of his duties for the Company, he relied in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of the Company’s officers or employees, or committees of the board of directors, or by any other person as to matters Indemnitee reasonably believed were within such other person’s professional or expert competence and who was selected with reasonable care by or on behalf of the Company.

9.          Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated:

(a)       Claims Initiated by Indemnitee . To indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee (including cross actions), with a reasonable allocation where appropriate, unless (i) such indemnification is expressly required to be made by law, (ii) the Proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) the Proceeding is brought pursuant to Section 8 specifically to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 in advance of a final determination, in which case 8(e)’s and 9(b)’s fees-on-fees provisions shall control;

 

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(b)       Fees-on-Fees . To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any Proceeding instituted by Indemnitee to enforce or interpret this Agreement, to the extent Indemnitee is not successful in such a Proceeding;

(c)       Unauthorized Settlements . To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld;

(d)       Claims Under Section 16(b) . To indemnify Indemnitee for Expenses associated with any Proceeding related to, or the payment of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law (provided, however, that the Company must advance Expenses for such matters as otherwise permissible under this Agreement); or

(e)       Payments Contrary to Law . To indemnify or advance Expenses to Indemnitee for which payment is prohibited by applicable law.

10.       Non-Exclusivity . The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while occupying Indemnitee’s position as an Agent of the Company. Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an Agent of the Company and shall inure to the benefit of the heirs, executors and administrators of Indemnitee.

11.       Permitted Defenses . It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for Expenses pursuant to Section 6 hereof, provided that the required documents have been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 9 hereof. Neither the failure of the Company (including its Board of Directors) or an Independent Counsel to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors) or an Independent Counsel that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. In making any determination concerning Indemnitee’s right to indemnification, there shall be a presumption that Indemnitee has satisfied the applicable standard of conduct. Any determination by the Company concerning Indemnitee’s right to indemnification that is adverse to Indemnitee may be challenged by the Indemnitee in the Court of Chancery of the State of Delaware.

 

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12.         Subrogation . In the event the Company is obligated to make a payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery under any corporate insurance policy or any other indemnity agreement covering Indemnitee, who shall execute all documents reasonably required and take all action that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights (provided that the Company pays Indemnitee’s costs and expenses of doing so), including, without limitation, by assigning all such rights to the Company or its designee to the extent of such indemnification or advancement of Expenses. The Company’s obligation to indemnify or advance expenses under this Agreement shall be reduced by any amount Indemnitee has collected from such other source, and in the event that Company has fully paid such indemnity or expenses, Indemnitee shall return to the Company any amounts subsequently received from such other source of indemnification. With regard to Fund Indemnitors, however, Section 13 shall control over this section.

13.         Primacy of Indemnification . The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses or liability insurance provided by a third-party investor in Company and certain of its affiliates (collectively, the “ Fund Indemnitors ”). The Company hereby agrees that (a) it is the indemnitor of first resort, i.e. , its obligations to Indemnitee under this Agreement and any indemnity provisions set forth in its Certificate of Incorporation, Bylaws or elsewhere (collectively, “ Indemnity Arrangements ”) are primary, and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same Expenses or liabilities incurred by Indemnitee is secondary and excess, (b) it shall advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of Indemnitee, to the extent legally permitted and as required by any Indemnity Arrangement, without regard to any rights Indemnitee may have against the Fund Indemnitors, and (c) it irrevocably waives, relinquishes and releases the Fund Indemnitors from any claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind arising out of or relating to any Indemnity Arrangement. The Company further agrees that no advancement or indemnification payment by any Fund Indemnitor on behalf of Indemnitee shall affect the foregoing, and the Fund Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 13. The Company, on its own behalf and on behalf of its insurers to the extent allowed by the policies, waives subrogation rights against Indemnitee.

14.         Broadest Interpretation. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation or Bylaws as now or hereafter in effect, or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

 

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15.        No Imputation . The knowledge or actions, or failure to act, of any director, officer, employee, or agent of the Company, or the Company itself shall not be imputed to Indemnitee for the purpose of determining Indemnitee’s rights hereunder.

16.        Survival of Rights .

(a)      All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an Agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding by reason of the fact that Indemnitee was serving in the capacity referred to herein.

(b)      The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

17.        Interpretation of Agreement . It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent permitted by law, including those circumstances in which indemnification would otherwise be discretionary.

18.        Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to this Section.

19.        Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters addressed herein, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters addressed herein (including, without limitation, any prior indemnification agreement (with any amendments thereto) entered into between the Company and the Indemnitee) are expressly superseded by this Agreement.

20.        Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless it is in a writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

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21.       Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) upon delivery if delivered by hand to the party to whom such notice or other communication shall have been directed, (b) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the third business day after the date on which it is so mailed, (c) one business day after the business day of deposit with a nationally recognized overnight delivery service, specifying next day delivery, with written verification of receipt, or (d) on the same day as delivered by confirmed facsimile transmission if delivered during business hours or on the next successive business day if delivered by confirmed facsimile transmission after business hours. Addresses for notice to either party shall be as shown on the signature page of this Agreement, or to such other address as may have been furnished by either party in the manner set forth above.

22.       Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. This Agreement is intended to be an agreement of the type contemplated by Section 145(f) of the General Corporation Law of Delaware.

23.       Counterparts; Execution . This Agreement may be executed (including via electronic signature (.PDF format included)) in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforcement is sought needs to be produced to evidence the existence of this Agreement.

The parties hereto have entered into this Indemnification Agreement, including the undertaking contained herein, effective as of the date first above written.

 

Indemnitee:         The Company:

                                                                                    

       

NUVASIVE, INC.

Address:                                                                     

       

By:                                                                           

                                                                                    

 

       

 

Name:                                                                     

       

Title:                                                                      

 

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Exhibit 99.2

FORM OF CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”), dated as of                           , 201    , is by and between NuVasive, Inc. (the “Company”) and                              , (the “Executive”) (each a “Party”, and, collectively, the “Parties”).

WHEREAS, the Company considers it to be in the best interests of the stockholders to retain the continuity of management, including Executive, throughout periods of potential transition and to allow Executive to maintain objectivity in connection with any potential Change in Control of the Company.

WHEREAS, Executive and the Company may have entered into certain agreements (collectively, the “Existing Agreements”) that provide Executive with certain “change-in-control” rights and privileges and/or rights and privileges in the event that [her/his] employment with the Company were to terminate in certain specified circumstances.

WHEREAS, on or about the date hereof, Executive and the Company are entering into an Indemnification Agreement that provides the Executive with certain indemnification rights regarding his performance of his duties on behalf of the Company, and the Company has adopted an Executive Severance Plan pursuant to which Executive shall enjoy certain rights and privileges in the event that [his/her] employment with the Company were to terminate in certain specified circumstances (such Indemnification Agreement, the Executive Severance Plan and the Agreement collectively being referred to herein as the “New Agreements”).

WHEREAS, the New Agreements (i) are intended to supersede the Existing Agreements in their entirety, and (ii) the Executive has evaluated each of the Existing Agreements and the New Agreements and sees material value in terminating any rights and privileges that [he/she] may have or have otherwise had under the Existing Agreements entering into the New Agreements to serve as the sole agreement between [him/her] and the Company regarding the matters covered therein.

NOW THEREFORE, in consideration of the covenants and conditions set forth herein, the Parties, intending to be legally bound, hereby agree as follows:

1.         Term of Agreement . This Agreement shall commence on the date hereof and continue in effect until the earlier of (a) Executive’s Separation from Service other than within twenty-four (24) months following a Change in Control (each as defined below); (b) the Company’s satisfaction of all of its obligations under this Agreement; or (c) the execution of a written agreement between the Company and Executive terminating this Agreement.


2.         Definitions . As used in this Agreement:

(a)      “Annual Compensation” means the sum of the following:

(i)      one year of Executive’s base salary, the highest rate at which Executive was paid at any time during the twelve (12)-month period prior to the Executive’s Separation from Service; plus

(ii)      the greater of (A) the Executive’s target annual bonus amount for the year in which the Separation from Service occurs, or (B) the highest annual bonus paid to the Executive out of the three (3) prior bonuses paid to the Executive prior to the Executive’s Separation from Service.

(b)      “Benefits Cash-out Amount” means a single, lump-sum cash amount equal to (i) 229.56% multiplied by (ii) the sum of (A) the total cost of the projected premiums for group medical, dental and vision insurance coverage (the “Health Benefits”) for a period of twenty-four (24) months following the date of the Separation from Service, based on the projected premium rates for such period for continuation of coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) determined, in all cases, as of the date of the Separation from Service (1) based on the Company plans in which the Executive participates and the level of the Executive’s Health Benefits coverage as of immediately preceding the date of the Separation from Service or, if more favorable to the Executive, the level of the Executive’s Health Benefits coverage as in effect at any time during the ninety (90)-day period immediately preceding the date of the Change in Control, and (2) assuming, to the extent applicable, an increase of four percent (4%) in the applicable premium rates at the beginning of each calendar year during such twenty-four (24)-month period from those in effect as of the end of the previous calendar year, (B) the cost to the Company to provide the Executive for the twenty-four (24)-month period commencing on the date of the Separation from Service and determined based on the per employee monthly premium or allowance as in effect as of the date of the Separation from Service (with any annual premium or allowance to be divided by twelve) for group short- and long-term disability, group term life, Company paid voluntary life, accidental death and dismemberment and travel and accident insurance benefits (and excluding any supplemental benefits paid entirely through employee contributions), a supplemental executive physical benefit, and access to an employee assistance plan, in each case, under the plans in which the Executive is eligible and the level of the Executive’s coverage as of the date of the Separation from Service or, if more favorable to the Executive, the level of such coverage as in effect at any time during the ninety (90)-day period immediately preceding the Change in Control, and (C) the cost to the Company of providing Executive with a qualified plan defined contribution match for the period of twenty-four (24) months following date of the Separation from Service (1) based on the qualified plan defined contribution plan in effect on the date of such Separation from Service, or, if more favorable to the Executive, based on the qualified plan defined contribution plan as in effect at any time during the ninety (90)-day period immediately preceding the date of the Change in Control, and (2) assuming that Executive makes the maximum amount of employee contributions allowed under any such plan. For the avoidance of doubt, the cash amount in this subsection (b) shall be in lieu of the provision of any welfare benefits following the date of the Separation from Service and the Executive’s sole right to post-termination welfare benefits shall be those required to be made available under COBRA, the cost of which (if elected) shall be borne solely by the Executive.

 

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(c)      “Cause” means (i) Executive’s willful and repeated failure to satisfactorily perform his or her material duties which is not remedied within a thirty (30) days’ written notice from the Company specifying such failure; (ii) Executive’s repeated and willful failure to follow the lawful directions of the Company’s Board of Directors which is not remedied within a thirty (30) days’ written notice from the Company specifying such failure; (iii) Executive’s conviction of or plea of nolo contendre to a crime involving moral turpitude; (iv) Executive engaging, or in any manner participating, in any activity which is directly competitive and materially and demonstrably injurious to the Company; or (v) commission of an intentional act of fraud, embezzlement or theft by the Executive in the course of Executive’s employment by the Company.

(d)      “Change in Control” means the occurrence of any one or a combination of the following:

(i)      any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total fair market value or total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any acquisition of such voting power by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or

(ii)      the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company); or

(iii)      approval by the stockholders of a plan of complete liquidation or dissolution of the Company.

The Compensation Committee of the Board of Directors of the Company is empowered to determine, and shall, when necessary, so determine, whether multiple acquisitions of the voting securities of the Company and/or multiple asset transactions, as applicable, are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.

(e)      “Code” means the Internal Revenue Code of 1986, as amended from time-to-time.

(f)      “Disability” means that, at the time Executive Separates from Service, Executive has been unable to perform the duties of Executive’s position for a period of 180 consecutive days as the result of an incapacity due to physical or mental illness.

 

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(g)      “Good Reason” means the occurrence of one of the following which occurs either in contemplation of a Change in Control or within twenty-four (24) months following a Change in Control and without Executive’s express, written consent: (i) a significant reduction of Executive’s duties, position or responsibilities (including, without limitation, any negative change in reporting hierarchy involving the Executive or the person to whom he or she directly reports), or Executive’s removal from such position and responsibilities; (ii) a reduction by the Company in Executive’s (A) base salary or target annual bonus as in effect immediately prior to such reduction, or (B) a change to the timing associated with long-term incentive awards or a reduction in the annual grant date fair value of such awards relative to the highest fair value award granted to Executive during the three (3)-year period prior to the Change in Control; (iii) a material reduction by the Company in the kind or aggregate level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that Executive’s overall benefits package is significantly reduced; (iv) Executive is requested to relocate (except for office relocations that would not increase Executive’s one way commute to more than fifty (50) miles); or (v) the failure of the Company to obtain the assumption of this Agreement pursuant to Section 7. For avoidance of doubt (as examples and not an exhaustive list), a significant reduction of duties, position or responsibilities shall have occurred if the Executive was a Section 16 reporting officer immediately prior to the Change in Control and is no longer a Section 16 reporting officer immediately following the Change in Control. Any good faith determination of Good Reason by the Executive shall be binding on the Company provided the Company does not remedy the occurrence giving rise to Good Reason within thirty (30) days’ written notice thereof from the Executive.

(h)      “Long-term Incentive Award Value” means the highest grant date fair value of any long-term incentive award (cash and/or equity-based incentive) granted to Executive in the three (3) calendar year period prior to the calendar year of the Separation from Service.

(i)      “Separation from Service” or “Separates from Service” means a termination of employment with the Company that qualifies as a separation from service in accordance with Section 409A of the Code.

(j)      “Specified Employee” means an employee who is determined by the Company to be a Specified Employee in accordance with Section 409A of the Code.

3.         Severance Payments and Benefits .

(a) If a Change in Control occurs and, in contemplation of that Change in Control or within a period of twenty-four (24) months following the closing of a transaction that constitutes a Change in Control, Executive incurs a Separation from Service on account of (i) an involuntary termination by the Company for reasons other than death, Disability or Cause, or (ii) a voluntary termination elected by the Executive for Good Reason, then -- subject to (A) Executive signing and not revoking a Separation Agreement and General Release of All Claims in the form attached hereto as Exhibit A , and (B) Section 4 below -- Executive shall (and the Company (or any successor thereto) shall pay, award and/or provide):

 

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(1)      receive a lump-sum cash severance payment in an amount equal to the sum of (a) two times (2x) Executive’s Annual Compensation; (b) the product of (x) Executive’s Long-term Incentive Award Value, multiplied by (y) a fraction, the numerator of which is the number of full and partial calendar months between January 1 of the year of Separation from Service and the date of the Executive’s Separation from Service (provided, however, that such numerator shall not exceed six (6)) and the denominator of which is twelve (12); (c) the Benefits Cash-out Amount; and (d) the product of (x) the greater of (A) Executive’s target annual bonus amount for the year in which the Separation from Service occurs, or (B) the highest annual bonus paid to the Executive out of the three (3) prior bonuses paid to the Executive prior to the Executive’s Separation from Service, multiplied by (y) a fraction, the numerator of which is the number of full and partial calendar months between January 1 of the year of Separation from Service and the date of the Executive’s Separation from Service and the denominator of which is twelve (12); and

(2)      become fully vested in all Company equity and long-term incentive awards granted to Executive (including, but not limited to, any and all stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and all other stock and cash-based long-term incentive awards) to the extent that such vesting is based on service with the Company. With respect to any performance shares and performance unit awards, (a) the final number of units and/or shares payable under such awards shall only be determined in accordance with the terms and conditions of the respective grant agreement governing such award, and accordingly, (b) distribution of such awards can only take place following such share and/or unit amount determination. Notwithstanding the foregoing, the full and immediate vesting of any restricted stock units, performance shares, performance units, shall not change the payment date thereof or otherwise apply to the extent it would result in adverse tax consequences under Section 409A of the Code.; and

(3)      notwithstanding anything to the contrary in the respective award agreement(s), be entitled to exercise any stock options or stock appreciation rights until the expiration of twenty-four (24) months following Executive’s Separation from Service (or until such later date as may be applicable under the terms of the award agreement governing the stock option or stock appreciation right upon termination of employment), subject to the maximum full term of the stock option or stock appreciation right; provided, however, that, if any stock option or stock appreciation right is terminated or cashed-out in connection with a Change in Control, the Executive shall receive a lump-sum cash payment equal to the time value (i.e., under the Black Scholes option pricing model) of such stock options or stock appreciation rights inclusive of the economic value for the period of twenty-four (24) months following Executive’s Separation from Service (or until such later date as may be applicable under the terms of the award agreement governing the stock option or stock appreciation right upon termination of employment), subject to the maximum full term of the stock option or stock appreciation right.

 

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(b)      If Executive is not a Specified Employee, all payments made to Executive under Section 3(a) immediately above shall be made on the sixtieth (60 th ) calendar day following Executive’s Separation from Service, provided that Executive’s release of claims in the form attached hereto as Exhibit A must be effective and not revocable on the date payment is to be made in order to receive such payments. If Executive is a Specified Employee, to the extent required to comply with Section 409A of the Code, payments made under Section 3(a) immediately above shall be made within ten (10) calendar days following the date following the first (1 st ) day of the seventh (7 th ) month after the date of Executive’s Separation from Service, provided that no such payment shall be made to Executive if the release of claims in the form attached hereto as Exhibit A has not become effective as of the six (6)-month anniversary of the date of Executive’s Separation from Service. If all or any portion of any amounts payable to Executive pursuant to Section 3(a) immediately above is deferred to comply with Code Section 409A, such payments shall accrue interest at the six (6)-month Libor rate, and, on or before the date of the Executive’s Separation from Service, the Company shall make an irrevocable contribution of the amount deferred to comply with Section 409A of the Code to a grantor trust established by the Company prior to the Change in Control consistent with the terms of Rev. Proc. 92-64, 1992-33 I.R.B. 11, with irrevocable instructions to pay such amounts to Executive within ten (10) calendar days following the date following the first (1 st ) day of the seventh (7 th ) month after the date of Executive’s Separation from Service. Such grantor trust shall have an independent trustee and the Company shall bear all costs, expenses and fees, including legal and trustee fees, of establishing and maintaining such trust.

4.         Parachute Payments . In the event that any of the severance payments and other benefits provided by this Agreement or otherwise payable to Executive (a) constitute “parachute payments” within the meaning of Section 280G of the Code, and (b) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then Executive’s severance payments and benefits under this Agreement or otherwise shall be payable either in full or in such lesser amount which would result in no portion of such severance payments or benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the Excise Tax, results in the receipt by Executive, on an after-tax basis, of the greatest amount of severance payments and benefits under this Agreement or otherwise, notwithstanding that all or some portion of such severance payments or benefits may be taxable under Section 4999 of the Code. Any reduction in the severance payments and benefits required by this Section shall be made in the following order: (i) reduction of cash payments; (ii) reduction of accelerated vesting of equity awards other than stock options; (iii) reduction of accelerated vesting of stock options; and (iv) reduction of other benefits paid or provided to Executive. The calculations in Section 4 will be performed by the professional firm engaged by the Company for general tax purposes as of the day prior to the date of the event that might reasonably be anticipated to result in severance payments and benefits that would otherwise be subject to the Excise Tax. If the tax firm so engaged by the Company is serving as accountant or auditor for the acquiring company, the Company shall appoint a nationally recognized tax firm to make the determinations required by this Section. The Company shall bear all expenses with respect to the determinations by such firm required to be made by this Section 4. The Company and Executive shall furnish such tax firm such information and documents as the tax firm may reasonably request in order to make its

 

6


required determination. The tax firm will provide its calculations, together with detailed supporting documentation, to the Company and Executive as soon as practicable following its engagement. Any good faith determinations of the tax firm made hereunder shall be final, binding and conclusive upon the Company and Executive. However, the Executive shall have the final authority to make any good faith determination(s) associated with the assumptions used by the tax firm in providing its calculations, and such good faith determination by the Executive shall be binding on the Company. As a result of the uncertainty in the application of Sections 409A, 280G or 4999 of the Code at the time of the initial determination by the professional tax firm described in this Section 4, it is possible that the Internal Revenue Service (the “IRS”) or other agency will claim that an Excise Tax greater than that amount, if any, determined by such professional firm for the purposes of Section 4 is due (the “Additional Excise Tax”). Executive shall notify the Company in writing of any claim by the IRS or other agency that, if successful, would require payment of Additional Excise Tax. Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to payments made or due to Executive. The Company shall pay all reasonable fees, expenses and penalties of Executive relating to a claim by the IRS or other agency. In the event it is finally determined that a further reduction would have been required under Section 4 to place Executive in a better after-tax position, Executive shall repay the Company such amount within 30 days thereof in order to effect such result.

5.         No Mitigation . Executive shall not be required to mitigate the amount of any payment or benefit provided for in Section 3 hereof by seeking other employment or otherwise, nor shall the amount of such payment be reduced by reason of compensation or other income Executive receives for services rendered after Executive’s Separation from Service from the Company.

6.         Exclusive Remedy . In the event of Executive’s Separation from Service on account of an involuntary termination without Cause or a voluntary termination for Good Reason within twenty-four (24) months following a Change in Control, the provisions of Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled (including any contrary provisions in any employment agreement Executive may have with the Company), whether at law, tort or contract, in equity, or under this Agreement. Payments made to or on behalf of Executive under any other severance plan, policy, contract or arrangement with the Company shall reduce amounts payable under this Agreement on a dollar for dollar basis.

7.         Company’s Successors . The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to expressly assume and agree to perform the obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section 7, Company includes any successor to its business or assets as aforesaid which executes and delivers this Agreement or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

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8.         Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or five (5) days after deposit with postal authorities transmitted by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first or last page of this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

9.         Amendment or Waiver . No provisions of this Agreement may be amended, modified, waived or discharged unless Executive and the Company agree to such amendment, modification, waiver or discharge in writing. No amendment, modification, waiver or discharge of this Agreement shall result in the accelerated payment of any benefit or payment provided for in Section 3. No waiver by either party at any time of the breach of, or lack of compliance with, any conditions or provisions of this Agreement shall be deemed a waiver of the provisions or conditions hereof.

10.       Entire Agreement . This Agreement represents the entire agreement between Executive and the Company with respect to the matters set forth herein and supersedes and replaces any prior agreements in their entirety. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement will be made by either party which are not set forth expressly herein. No future agreement between Executive and the Company may supersede this Agreement, unless it is in writing and specifically makes reference to this Section 10.

11.       Executive’s Successors . This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amounts are still payable hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there be no such designees, to Executive’s estate.

12.       No Funding Obligation . This Agreement shall be unfunded. Any payment made under this Agreement shall be made from the Company’s general assets except as provided in Section 3(c), and the Executive’s rights shall be no greater than those of general unsecured creditor of the Company.

13.       Legal Fees . In the event of any dispute or controversy arising out, relating to, or in connection with this Agreement, the Company shall reimburse Executive for reasonable attorney fees, costs and expenses incurred with respect thereto if Executive substantially prevails on the merits with respect to any breach of this Agreement by the Company.

14.       Headings . All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

15.       Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

 

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16.       Withholding . All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and excise taxes.

17.       Applicable Law . This Agreement shall be interpreted and enforced in accordance with the laws of the State of California (with the exception of its conflict of law provisions). This Agreement is intended to comply with or be exempt from Section 409A of the Code and the regulations promulgated thereunder.

18.       Counterparts; Electronic Signatures . This Agreement may be executed (including via electronic signature) in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF , this Agreement is executed effective as of the date set forth above.

 

 

NuVasive, Inc.
By:    

 

ACCEPTED AND AGREED TO AS OF THE DATE FIRST SET FORTH ABOVE:

 

[Executive]

 

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EXHIBIT A

SEPARATION AGREEMENT

AND GENERAL RELEASE OF ALL CLAIMS

This Separation Agreement and General Release of All Claims (“Separation Agreement”) is made by and between NuVasive, Inc. (“Company”) and                          (“Executive”) with respect to the following facts:

A.        Executive and Company are parties to that certain Change in Control Agreement dated              , 20      (“CIC Agreement”).

B.        Executive’s employment with Company will terminate effective                          (“Separation Date”). Pursuant to the CIC Agreement, Executive is entitled to certain severance payments and benefits as described below, contingent upon Executive entering into and complying with this Separation Agreement.

C.        The parties desire to settle all claims and issues that have, or could have been, raised by Executive in relation to Executive’s employment with Company and arising out of or in any way related to the acts, transactions or occurrences between Executive and Company to date, including, but not limited to, Executive’s employment with Company or the termination of that employment, on the terms set forth below.

THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is agreed by and between the undersigned as follows:

1.         Severance Package . In exchange for the promises set forth herein, as required by the CIC Agreement, Company agrees to provide Executive with the following payments and benefits (“Severance Package”), to which Executive is not otherwise entitled absent entering into this Separation Agreement. Executive acknowledges and agrees that this Severance Package constitutes adequate legal consideration for the promises and representations made by Executive in this Separation Agreement. All capitalized terms set forth herein, not defined within this Separation Agreement, shall have the definition provided in the CIC Agreement.

1.1     Cash Severance Payment . Company agrees to provide Executive with a cash severance payment equal to a total gross amount prior to the reduction thereof for applicable income and employment taxes as set forth on Schedule A-1 hereto (“Cash Severance Payment”). The Cash Severance Payment, as reduced by applicable income and employment taxes will be paid-out in a lump-sum on the date specified in Section 3(c) of the CIC Agreement.

1.2     Acceleration of Equity Awards. Company shall provide Executive with full and immediate vesting (without consideration to any vesting criteria otherwise stated in the respective awards agreements) of Company equity and longer term-incentive awards granted to Executive, including, but not limited to, any and all stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock and cash-based long-term incentive awards. Details of the equity awards subject to this acceleration provision are set forth on Schedule A-1 hereto. Notwithstanding the foregoing,

 

10


with respect to any performance shares and performance unit awards, (a) the final number of units and/or shares associated with such awards shall only be determined in accordance with the terms and conditions of the respective grant agreement governing such award, and (b) accordingly, distribution of such awards can only take place following such share and/or unit amount determination (subject to delay as necessary to avoid any adverse tax consequences under Section 409A of the Code).

1.3     Extension of Exercise Period for Equity Awards . Executive shall be entitled to exercise any stock options or stock appreciation rights until the expiration of twenty-four (24) months following Executive’s Separation Date (or until such later date as may be applicable under the terms of the award agreement governing the stock option or stock appreciation right upon termination of employment), subject to the maximum full term of the stock option or stock appreciation right. Details of the extension of the exercise period are set forth on Schedule A-1 hereto.

1.4     Reduction for Parachute Payments . The payments and benefits set forth on Schedule A-1 reflect any reductions in severance payments of benefits required under Section 4 of the CIC Agreement.

2.         General Release .

2.1     Executive unconditionally, irrevocably and absolutely releases and discharges Company, and any parent or subsidiary corporations, divisions or affiliated corporations, partnerships or other affiliated entities of the foregoing, past and present, as well as their respective employees, officers, directors, shareholders, agents, successors and assigns (collectively, “Released Parties”), from all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Executive’s employment with Company, the termination of Executive’s employment, breach of any offer letter or other employment arrangement with Company and all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Executive’s employment with Company, and the termination of employment with Company. This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, as applicable, but not limited to alleged violations of the California Labor Code, the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Family Medical Leave Act, the California Family Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended, and all claims for attorneys’ fees, costs and expenses.

2.2     Executive expressly waives Executive’s right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by Executive or on Executive’s behalf, related in any way to the matters released herein.

2.3     The parties acknowledge that this general release is not intended to bar any claims that, by statute, may not be waived, such as Executive’s right to file a charge with the National Labor Relations Board or Equal Employment Opportunity Commission and other

 

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similar government agencies, and claims for statutory indemnity, workers’ compensation benefits or unemployment insurance benefits, as applicable, or any challenge to the validity of Executive’s release of claims under the Age Discrimination in Employment Act of 1967, as amended, as set forth in this Separation Agreement. Furthermore, this general release does not waive Executive’s right to enforce the terms of this Separation Agreement or to bring any claims Executive may have for vested equity awards, or benefits or insurance coverage available to Executive as a director or officer of Company under any Company policy or the Indemnification Agreement.

2.4     Executive acknowledges that Executive may discover facts or law different from, or in addition to, the facts or law that Executive knows or believes to be true with respect to the claims released in this Separation Agreement and agrees, nonetheless, that this Separation Agreement and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.

2.5     Executive declares and represents that Executive intends this Separation Agreement to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and Executive intends the release herein to be final and complete. Executive executes this release with the full knowledge that this release covers all possible claims against the Released Parties, to the fullest extent permitted by law.

3.         California Civil Code Section 1542 Waiver . Executive expressly acknowledges and agrees that all rights under Section 1542 of the California Civil Code are expressly waived. That section provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Executive waives any right which Executive has or may have under 1542 to the full extent Executive may lawfully waive such rights pertaining to this general release of claims.

4.         Representation Concerning Filing of Legal Actions . Executive represents that, as of the date of this Separation Agreement, Executive has not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against Company or any of the other Released Parties in any court or with any governmental agency, related to the matters released in this Separation Agreement.

5.         Mutual Non-disparagement . Executive agrees that Executive will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Company or any of the other Released Parties. In exchange for Executive’s promises in this paragraph, Company agrees to instruct its officers and directors to not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputation, practices or conduct of Executive.

 

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6.         Return of Company Property .

6.1     Executive understands and agrees that as a condition of receiving the Severance Payment, all Company property must be returned to Company. By signing this Separation Agreement, Executive represents that Executive has returned all Company property, data and information belonging to Company, including all code and computer programs, and information of whatever nature, as well as any other materials, keys, passcodes, access cards, credit cards, computers, documents or information, including, but not limited to, confidential information in Executive’s possession or control. Further, Executive represents that Executive has retained no copies thereof, including electronic copies and agrees that Executive will not use or disclose to others any confidential or proprietary information of Company.

6.2    Executive acknowledges and agrees that nothing in this Separation Agreement and/or the related CIC Agreement in any way modify or amend any of the terms and conditions of that certain Proprietary Information and Inventions Agreement (the “PIIA”) by and between the Executive and the Company, dated                          , which such agreement remains in full force and effect.

7.         Nonsolicitation . Executive acknowledges and agrees that the terms and conditions of the “non-solicitation” clause from Article VI of the PIIA remain applicable to the Executive, notably, for the twelve (12)–month period following the Termination Date.

8.         Confidentiality. Executive agrees to keep the terms of this Separation Agreement confidential, except that Executive may confidentially disclose the fact and terms of this Separation Agreement to Executive’s immediate family and attorney or accountant, if any, as needed for legal or tax advice, but in no event may Executive discuss this Separation Agreement or its terms with any current, former or prospective Executive of Company.

8.1    Nothing in this Separation Agreement shall prohibit either party from making truthful statements in any legal proceedings or as otherwise required by law.

8.2     Executive further agrees to comply with the continuing obligations set forth in the surviving provisions of the Company’s existing proprietary rights agreement (“Nondisclosure Agreement”) previously signed by Executive.

9.         Affirmation . Executive affirms that other than the Severance Payment referenced herein, Executive has been paid all compensation, wages, bonuses, and commissions due, and has been provided all leaves (paid or unpaid) and benefits to which Executive may be entitled.

10.         No Admissions . By entering into this Separation Agreement, the Released Parties make no admission that they have engaged, or are now engaging, in any unlawful conduct. The parties understand and acknowledge that this Separation Agreement is not an admission of liability and shall not be used or construed as such in any legal or administrative proceeding.

 

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11.     Older Workers’ Benefit Protection Act . This Separation Agreement is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f). Executive is advised to consult with an attorney before executing this Separation Agreement.

11.1     Acknowledgments/Time to Consider . Executive acknowledges and agrees that (a) Executive has read and understands the terms of this Separation Agreement; (b) Executive has been advised in writing to consult with an attorney before executing this Separation Agreement; (c) Executive has obtained and considered such legal counsel as Executive deems necessary; (d) Executive has been given twenty-one (21) days to consider whether or not to enter into this Separation Agreement (although Executive may elect not to use the full 45-day period at Executive’s option); and (e) by signing this Separation Agreement, Executive acknowledges that Executive does so freely, knowingly, and voluntarily.

11.2     Revocation/Effective Date . This Separation Agreement shall not become effective or enforceable until the eighth (8 th ) day after Executive signs this Separation Agreement. In other words, Executive may revoke Executive’s acceptance of this Separation Agreement within seven (7) days after the date Executive signs it. Executive’s revocation must be in writing and received by Company, before the seventh (7 th ) day in order to be effective. If Executive does not revoke acceptance within the seven (7)-day period, Executive’s acceptance of this Separation Agreement shall become binding and enforceable on the eighth day (“Effective Date”). The Severance Package will become due and payable in accordance with paragraph 1 above after the Effective Date, provided Executive does not revoke.

12.      Preserved Rights of Executive . This Separation Agreement does not waive or release any rights or claims that Executive may have under the Age Discrimination in Employment Act that arise after the execution of this Separation Agreement. In addition, this Agreement does not prohibit Executive from challenging the validity of this Separation Agreement’s waiver and release of claims under the Age Discrimination in Employment Act of 1967, as amended.

13.     Severability . In the event any provision of this Separation Agreement shall be found unenforceable, the unenforceable provision shall be deemed deleted and the validity and enforceability of the remaining provisions shall not be affected thereby.

14.     Full Defense . This Separation Agreement may be pled as a full and complete defense to, and may be used as a basis for an injunction against, any action, suit or other proceeding that may be prosecuted, instituted or attempted by Executive in breach hereof. Executive agrees that in the event an action or proceeding is instituted by the Released Parties in order to enforce the terms or provisions of this Separation Agreement, the Released Parties shall be entitled to an award of reasonable costs and attorneys’ fees incurred in connection with enforcing this Separation Agreement, to the fullest extent permitted by law.

15.     Applicable Law . The validity, interpretation and performance of this Separation Agreement shall be construed and interpreted according to the laws of the United States of America and the State of California.

 

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16.         Entire Agreement; Modification .

16.1    This Separation Agreement, and the surviving provisions of any Award Agreements for performance-based equity awards, the Company’s CIC Agreement, and the PIIA are intended to be the entirety of surviving agreements between the parties and such agreements collectively supersede any and all other and prior agreements, written or oral, between the parties regarding this subject matter are hereby cancelled and shall have no further effect.

16.2    This Separation Agreement may be amended only by a written instrument executed by all parties hereto.

[Signature Page to Follow]

 

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THE PARTIES TO THIS SEPARATION AGREEMENT HAVE READ THE FOREGOING SEPARATION AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS SEPARATION AGREEMENT ON THE DATES SHOWN BELOW.

 

Dated:

  

 

  

By:

  

 

      NuVasive, Inc.

Dated:

  

 

  

By:

  

 

     

Its:

  

 

 

[Signature Page]

 

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Schedule A-1

Set forth below are the details of the Severance Package provided to Executive pursuant to the CIC Agreement and this Separation Agreement.

Severance Payment (paragraph 1.1 of this Separation Agreement and Section 3(a) of the CIC Agreement):

Acceleration of Equity Awards (paragraph 1.2 of this Separation Agreement and Section 3(a) of the CIC Agreement):

Extension of Exercise Period for Equity Awards (paragraph 1.3 of this Separation Agreement and Section 3(a) of the CIC Agreement):

 

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Exhibit 99.3

NUVASIVE, INC.

EXECUTIVE SEVERANCE PLAN

I.        INTRODUCTION

NuVasive, Inc. (“NuVasive”) hereby adopts the NuVasive, Inc. Executive Severance Plan and Summary Plan Description (the “Plan”), to provide severance benefits to eligible executives of NuVasive whose employment is terminated involuntarily under certain circumstances. The Plan is effective as of May 13, 2014, and supersedes any and all other severance plans, policies or practices. All benefit determinations under the Plan and interpretation of Plan provisions will be made by NuVasive (or its designee) in its sole discretion as Plan Administrator. The Plan is described in further detail below.

II.        ELIGIBILITY

Any executive working for NuVasive at a position designated by the Plan Administrator at the level of Vice President and above (hereinafter referred to as “executive”), and whose employment is terminated involuntarily is eligible for severance benefits described in Section III of this Plan, PROVIDED each of the following requirements is met:

A.        The termination of employment is involuntary.

B.        The termination is not due to retirement, death or disability of the executive, with the sole exception that the termination of employment due to death or disability of the executive serving as the Chief Executive Officer of NuVasive on the effective date of this Plan shall be treated as an involuntary termination of that executive’s employment for purposes of this Plan.

C.        The termination of employment is not for “cause” (as defined below). For purposes of the Plan, “cause” shall mean the following:

1.        executive’s repeated failure to satisfactorily perform executive’s job duties;

2.        refusal or failure to follow the lawful directions of executive’s direct supervisor, the Company’s Chief Executive Officer or Board of Directors, as applicable;

3.        conviction of a crime involving moral turpitude; or

4.        engaging in acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the executive with respect to his/her obligations or otherwise relating to the business of NuVasive, its affiliates or customers.

NuVasive, as Plan Administrator, will, in its sole discretion, determine if a termination of employment is for “cause”.


D.        The executive is not a temporary employee or a new hire who has not yet started to work on a regular, full-time or part-time basis (as appropriate).

E.        The executive is not covered under any other severance-type plan, policy, arrangement or agreement that provides severance payments and benefits more favorable in the aggregate to those provided herein. If any such plan, policy, arrangement or agreement exists, the executive will receive payments and benefits pursuant to that plan, policy, arrangement or agreement and shall not receive any of the severance payments and benefits described herein. In no case will the executive receive severance payments and benefits under any other such severance-type plan, policy, arrangement or agreement and this Plan.

F.        In the event that an executive is party to a “Change in Control” Agreement with NuVasive that also provides for severance benefits, in the event of a “Change in Control” (as defined therein) the executive shall not receive benefits under this Plan, but instead shall receive only the severance benefits provided under such “Change in Control” Agreement (i.e., there shall be no “double-dipping and only the “Change in Control” Agreement shall apply in such an event).

G.        The executive has not agreed in writing to waive severance benefits under this Plan or otherwise payable from NuVasive.

H.        The executive (or, in the event of the executive’s death or incapacity, the executive’s executor, representative or guardian, as applicable) signs and does not revoke a separation agreement and general release of all claims in such form as the Company may from time-to-time reasonably require (“Separation Agreement”).

I.        The executive has returned all NuVasive property and equipment that was assigned to, or taken general control of by, her or him during his or her tenure with NuVasive.

A terminated executive must satisfy all of the requirements set forth above in order to receive severance benefits under the Plan. Eligibility for severance benefits under the Plan will be determined by NuVasive upon an eligible executive’s termination of employment. NuVasive has full power and authority to interpret the provisions of the Plan and render decisions on eligibility for benefits. If NuVasive determines that an eligible executive satisfies all of the eligibility conditions described above, the executive will receive severance benefits calculated in accordance with Section III below. The severance benefits will be paid following the eligible executive’s termination of employment in accordance with the terms set forth below and in the respective Separation Agreement.

III.        SEVERANCE BENEFITS

A.         Severance Pay and Benefits . The following severance pay and benefits are payable under this Plan:

1)         Severance Pay . The severance pay provided to an eligible involuntarily terminated executive under this Plan consists of (a) for the Chief Executive Officer, an amount equal to the sum of (i) two times (2x) the sum of (x) his or her regular annual base salary and (y) his or her annual target incentive bonus in effect for calendar year in which the termination of

 

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employment occurs, (ii) the pro-rated amount (measuring the number of days from January 1 st to the date of involuntary termination as the numerator and 365 as the denominator) of the cash performance award that he or she was eligible for in the year of separation, which pro rated amount shall be determined based on actual performance for the relevant performance period, plus (iii) a lump-sum amount equal to the after-tax cost of health benefits for a period of two (2) years from the date of termination of employment; and (b) for any eligible executive other than the Chief Executive Officer, an amount equal to the sum of (i) one times (1x) his or her regular annual base salary, (ii) the pro-rated amount (measuring the number of days from January 1 st to the date of involuntary termination as the numerator and 365 as the denominator ) of his or her annual incentive bonus target in effect for the calendar year in which the termination of employment occurs (with any such pro-rated bonus being paid as a severance benefit and not under any Company performance plan), plus (iii) a lump-sum amount equal to the after-tax cost of health benefits for a period of one (1) year from the date of termination of employment.

The amount of severance pay to an eligible executive shall be based upon the executive’s regular annual base salary in effect immediately before executive’s termination of employment, determined without regard to any overtime, bonuses, fringe benefits, reimbursements or other irregular payments. The executive’s general release of all claims referred to in Section II.H. must be effective the sixtieth (60 th ) day following the executive’s termination of employment in order for executive to receive any severance pay or benefits under the Plan. Severance pay will be paid in a single cash lump-sum on the sixtieth (60 th ) day following the executive’s termination of employment (or as soon as administratively practicable after such sixtieth (60 th ) day), provided that the amount specified in Section III.A.1)(a)(ii) shall be paid in a lump-sum cash payment on the sixtieth (60 th ) day following the end of the performance period.

2)         Outplacement Services . NuVasive will provide nine (9) months of outplacement assistance through a designated service provider to eligible executives. In no event shall an eligible executive receive cash or other severance benefits in lieu of outplacement assistance.

3)         After-tax Cost of Health Benefits . The after-tax cost of health benefits for purposes of Section III.A.1) this Plan shall be a lump-sum cash amount equal to (a) 229.56% multiplied by (b) the total cost of the projected premiums for group medical, dental and vision insurance coverage (the “Health Benefits”) for the applicable period following termination of employment specified in Section III.A.1), based on the projected premium rates for such period for continuation coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), determined, in all cases, as of the date of the termination of employment (i) based on the NuVasive plans in which the executive participates and the level of the executive’s health benefits coverage as of immediately preceding the date of termination of employment, and (ii) assuming, to the extent applicable, an increase of four percent (4%) in the applicable COBRA premium rates at the beginning of each calendar year during the applicable period following termination of employment specified in Section III.A.1), from those in effect as of the end of the previous calendar year.

4)         Effect on Equity and Long-term Incentive Awards Granted to Current CEO . Notwithstanding any provision in any relevant plan or award agreement to the contrary and solely with respect to the Chief Executive Officer of NuVasive on the effective date of this

 

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Plan, (a) all outstanding equity and long-term incentive awards held by the Chief Executive Officer on the date of termination of employment (including, but not limited to, those subject to performance conditions) shall, subject only to the measurement conditions for performance-based awards (as provided for in subsection 4(c) immediately below) - become fully vested, (b) all vested, outstanding and unexercised stock options outstanding on the date of termination of employment (including those that become vested pursuant to this Section III.A.4) shall remain exercisable for a period equal to the lesser of twenty-four (24) months following the date of termination of employment or the remaining term thereof, and (c) all outstanding equity and long-term incentive awards outstanding on the date of termination of employment that are subject to performance conditions shall remain subject to and payable in accordance with the performance conditions and terms thereof (provided, however, that – in furtherance of subsection 4(a) immediately above – any continued service requirement thereof shall be deemed to have been fulfilled).

B.         No Separate Fund . All severance benefits payable under the Plan are payable from NuVasive’s general assets. There is no separate trust or fund established for the payment of severance benefits under the Plan. All amounts shall be less all appropriate deductions, including federal, state and local withholding taxes.

C.         Additional Benefits . NuVasive reserves the right to pay benefits in addition to those required by the Plan based on special circumstances. Any exception will be considered unique and shall not be precedent-setting. Payment of additional amounts or provision of additional benefits will be subject to such terms and conditions as NuVasive may determine. Any and all such determinations shall be made by NuVasive in its sole and absolute discretion.

D.         Section 409A .

1.        It is the intent of this Plan that the payments and benefits provided are exempt from Section 409A, and should be interpreted and construed in such a manner

2.        “Termination of employment”, “resignation”, “separation from service”, or correlative phrases or terms, as used in this Plan means, for purposes of any payments under this Plan that are payments of deferred compensation, has the same meaning as “separation from service” as defined in section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

3.        If a payment obligation under this Plan arises on account of the executive’s separation from service while the executive is a “specified employee” (as defined under section 409A of the Code and determined in good faith by the Compensation Committee), any payment of “deferred compensation” (as defined under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest and shall be paid within 15 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of the executive’s estate following his death. For purposes of the preceding sentence, interest shall accrue at the six (6)-month Libor rate.

 

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4.        Each payment and benefit payable under this Plan, and each other benefit required to be aggregated with the payment and benefits under this Plan pursuant to section 409A of the Code, is hereby designated as a separate payment, as provided in Treasury Regulation section 1.409A-2(b)(2)(iii), and will not collectively be treated as a single payment.

IV.        CLAIMS PROCEDURE

Severance benefits under this Plan will automatically be paid to executives who qualify for such benefits. An executive who believes that he or she is entitled to severance benefits under this Plan that have not been provided should file a claim with NuVasive’s Human Resources Department. The claim must be in writing. If the claim is denied, NuVasive shall provide written notice of such denial to the petitioning executive within 90 days (180 days if additional processing time is required) of its initial receipt of the claim. Such notice will include an explanation of the factors on which the denial is based (including specific reasons for the denial and specific references to plan provisions) and what, if any, additional information is needed to support the claim or to request a review of the decision. Further review of the claim and access to relevant plan information may be obtained by filing a written request for review with the Human Resources Department within 90 days of receiving the denial. The decision on review will be made no later than 60 days (120 days if additional processing time is required) after the request for review is received and shall contain an explanation of the right to file suit under ERISA Section 502(a) with respect to a claim denied upon such review.

V.        STATEMENT OF RIGHTS ERISA

The Plan is an employee benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The following statement is required by ERISA:

ERISA provides that all employees who may become eligible for benefits under the Plan shall be entitled to:

 

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Examine, without charge, at NuVasive’s offices all documents relating to the Plan.

 

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Obtain copies of all documents relating to the Plan upon written request. A reasonable charge may be imposed for the copies.

In addition to creating rights for employees, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. These people, called “fiduciaries” of the plan, have a duty to act prudently and in the interest of all employees. No one, including NuVasive, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have NuVasive review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from NuVasive and do not receive them within 30 days, you may file a suit in federal court and the court may require NuVasive to provide the materials and pay you a penalty of up to $110 per day until you receive the materials, unless the materials were not sent because of reasons beyond

 

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the control of NuVasive. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about the Plan, you should contact NuVasive (Human Resources). If you have any questions about this statement or about your rights under ERISA, you should contact the nearest Area Office of the Employee Benefits Security Administration, U.S. Department of Labor listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, D.C. 20210.

VI.       AMENDMENT AND TERMINATION

NuVasive, by action of its Board of Directors or Compensation Committee of the Board of Directors, reserves the right to terminate or amend the Plan at any time and in any manner in its sole discretion. No executive shall have any vested interest in severance benefits payable under this Plan prior to satisfying all of the terms and conditions for payment of benefits under this Plan.

VII.      EMPLOYMENT RIGHTS

Nothing in this Plan shall have any effect on NuVasive’s right to terminate an executive, with or without cause, at any time (subject to the terms of any written employment contract between the executive and NuVasive). The payment of severance benefits under this Plan does not extend an executive’s term of employment.

VIII.     NON-ALIENATION OF BENEFITS

No benefit under the Plan may be assigned, transferred, pledged as security for indebtedness or otherwise encumbered by any eligible executive or subject to any legal process for the payment of any claim against an eligible executive.

IX.       GOVERNING LAW

This Plan shall be governed by and construed in accordance with the laws of the State of California to the extent such laws are not preempted by ERISA.

 

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