QIG GROUP, LLC (Form: 10-12B/A, Received: 12/30/2015 17:02:33)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on December 30, 2015

File No. 001-37525

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 2

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or 12(g) of

the Securities Exchange Act of 1934

Nuvectra Corporation*

(Exact name of registrant as specified in its charter)


Delaware		30-0513847
(State of incorporation or organization)		(I.R.S. Employer Identification No.)

5700 Granite Parkway, Suite 960, Plano, Texas		75024
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (214) 618-4823

(Copies of all communications, including communications sent to agent for service)

Michael Dinkins Executive Vice President and Chief Financial Officer

Greatbatch, Inc.

2595 Dallas Parkway, Suite 310

Frisco, Texas 75034

(214) 618-5242

John J. Zak, Esq.

Craig M. Fischer, Esq.

Hodgson Russ LLP

140 Pearl Street, Suite 100

Buffalo, New York 14202

(716) 856-4000

Securities to be registered pursuant to Section 12(b) of the Act:


Title of Each Class to be so Registered		Name of Each Exchange on which Each Class is to be Registered
Common Stock, $0.001 par value		The NASDAQ Stock Market LLC

Securities to be registered pursuant to Section 12(g) of the Act: None

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

*	Immediately prior to completion of the spin-off, QiG Group, LLC, a limited liability company organized under the laws of Delaware, will be converted into Nuvectra Corporation.

Nuvectra Corporation

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT

AND ITEMS OF FORM 10

Certain information required to be included in this Form 10 is incorporated by reference to those portions of the information statement filed herewith as Exhibit 99.1 that we specifically identify below.

Item 1. Business.

The information required by this item is contained under the sections of the information statement entitled “Summary,” “Business” and “Where You Can Find More Information” and is incorporated herein by reference.

Item 1A. Risk Factors .

The information required by this item is contained under the section of the information statement entitled “Risk Factors” and is incorporated herein by reference.

Item 2. Financial Information .

The information required by this item is contained under the section of the information statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated herein by reference.

Item 3. Properties .

The information required by this item is contained under the section of the information statement entitled “Business – Facilities” and is incorporated herein by reference.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.

Item 5. Directors and Executive Officers.

The information required by this item is contained under the section of the information statement entitled “Management” and is incorporated herein by reference.

Item 6. Executive Compensation.

The information required by this item is contained under the section of the information statement entitled “Executive Compensation” and is incorporated herein by reference.

Item 7. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is contained under the sections of the information statement entitled “Our Relationship with Greatbatch After the Spin-Off,” “Management” and “Certain Relationships and Related Person Transactions” and is incorporated herein by reference.

Item 8. Legal Proceedings.

Item 9. Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained under the sections of the information statement entitled “The Spin-Off,” “Listing and Trading of our Common Stock” and “Dividend Policy” and is incorporated herein by reference.

Item 10. Recent Sales of Unregistered Securities.

None.

Item 11. Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the section of the information statement entitled “Description of Nuvectra Capital Stock” and is incorporated herein by reference.

Item 12. Indemnification of Directors and Officers.

The information required by this item is contained under the section of the information statement entitled “Indemnification and Limitations of Liability of Directors and Officers” and is incorporated herein by reference.

Item 13. Financial Statements and Supplementary Data.

The information required by this item is contained under the sections of the information statement entitled “Unaudited Condensed Combined Pro Forma Financial Statement” and “Index to Combined Financial Statements” and the combined financial statements referenced therein and is incorporated herein by reference.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 15. Financial Statements and Exhibits.

(a)

Financial Statements

(b)

Exhibits

The following documents are filed as exhibits hereto:


Exhibit No.		Exhibit Description

2.1		Form of Separation and Distribution Agreement between Greatbatch, Inc. and QiG Group, LLC

3.1		Form of Certificate of Incorporation of Nuvectra Corporation*

3.2		Form of By-laws of Nuvectra Corporation*

3.3		Form of Certificate of Conversion*

4.1		Specimen Common Stock Certificate of Nuvectra Corporation*

10.1		Form of Transition Services Agreement between Greatbatch, Inc. and QiG Group, LLC

10.2		Form of Tax Matters Agreement between Greatbatch, Inc. and QiG Group, LLC


Exhibit No.		Exhibit Description

10.3		Form of Employee Matters Agreement between Greatbatch, Inc. and QiG Group, LLC*

10.4		Form of Supply Agreement by and between Greatbatch Ltd. and QiG Group, LLC

10.5		Form of Product Component Framework Agreement between Greatbatch Ltd. and QiG Group, LLC*

10.6		Form of Officer Indemnification Agreement*

10.7		Form of Director Indemnification Agreement*

10.8		Form of Nuvectra Corporation 2016 Equity Incentive Plan†

10.9		Employment Offer Letter between Greatbatch, Inc. and Scott F. Drees*†

10.10		Employment Offer Letter between Greatbatch, Inc. and Walter Z. Berger*†

21.1		List of subsidiaries of Nuvectra Corporation*

99.1		Information Statement of Nuvectra Corporation, preliminary and subject to completion, dated as of December 30, 2015.*

*	Filed herewith.

†	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 3.1

CERTIFICATE OF INCORPORATION

NUVECTRA CORPORATION

The undersigned, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly the General Corporation Law of the State of Delaware, or any applicable successor thereto, as the same may be amended or supplemented from time to time (the “ Delaware General Corporation Law ”)), hereby certifies that:

ARTICLE I

NAME

The name of the corporation is Nuvectra Corporation (the “ Corporation ”).

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

DETAILS OF INCORPORATOR


Name:		Mailing Address:

ARTICLE IV

PURPOSE AND DURATION

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law. The Corporation is being incorporated in connection with the conversion of QiG Group, LLC, a Delaware limited liability company (the “ LLC ”), to the Corporation, and this Certificate of Incorporation is being filed simultaneously with the Certificate of Conversion of the LLC (the “ Certificate of Conversion ”) to the Corporation. The Corporation is to have a perpetual existence.

ARTICLE V

CAPITAL STOCK

Section 1. The Corporation is authorized to issue two classes of capital stock which shall be designated, respectively, “ Common Stock ” and “ Preferred Stock .” The total number of shares that the Corporation is authorized to issue is Million ( ), of which Million ( ) shares shall be Common Stock and Million ( ) shares shall be Preferred Stock. The Common Stock shall have a par value of $0.001 per share and the Preferred Stock shall have a par value of $0.001 per share. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation with the power to vote thereon irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law or any successor provision thereof, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.

Section 2. Upon the effectiveness of the Certificate of Conversion and this Certificate of Incorporation (the “ Effective Time ”), all limited liability company interests in the LLC outstanding immediately prior to the Effective Time will be deemed to be issued and outstanding, fully paid and nonassessable shares of Common Stock, without any action required on the part of the Corporation or the former holders of such limited liability company interests.

Section 3. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “ Board of Directors ”) is hereby authorized to provide from time to time by resolution or resolutions for the creation and issuance, out of the authorized and unissued shares of Preferred Stock, of one or more series of Preferred Stock by filing a certificate (a “ Certificate of Designation ”) pursuant to the Delaware General Corporation Law, setting forth such resolution and, with respect to each such series, establishing the designation of such series and the number of shares to be included in such series and fixing the voting powers (full or limited, or no voting power), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of the shares of each such series. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior to, rank equally with or be junior to the Preferred Stock of any other series. In addition, without limiting the generality of the foregoing, the Board of Directors is authorized, with respect to each such series, to determine in the resolution or resolutions providing for the establishment of such series of Preferred Stock (i) the redemption provisions, if any, applicable to such series, including the redemption price or prices to be paid, (ii) whether dividends, if any, will be cumulative or noncumulative, the dividend rate of such series, and the dates, conditions and preferences of dividends on such series, (iii) the rights of such series upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Corporation, (iv) the provisions, if any, pursuant to which the shares of such series are convertible into, or exchangeable for, shares of any other class or classes or any other series of the same or any other class or classes of stock or other securities of the Corporation, at such price or prices or at such exchange rate or rates and with such adjustments applicable thereto, (v) the right, if any, to subscribe for or to purchase any securities of the Corporation, and (vi) the provisions, if any, of a sinking fund applicable to such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may be different from those of any and all other series at any time outstanding. Except as otherwise expressly provided in the resolution or resolutions providing for the establishment of any series of Preferred Stock, no vote of the holders of shares of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock so authorized in accordance with this Certificate of Incorporation. Unless otherwise provided in the Certificate of Designation establishing a series of Preferred Stock, the Board of Directors may, by resolution or resolutions, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of such series and, if the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

Section 4.

(a) Except as otherwise expressly provided herein or required by law or the relevant Certificate of Designation of any class or series of Preferred Stock, the holders of outstanding shares of Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes. Except as otherwise expressly provided herein or required by law, each holder of outstanding shares of Common Stock shall be entitled to one vote in respect of each share of Common Stock held thereby of record on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation.

(b) Subject to applicable law, the holders of Common Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board of Directors may determine in its sole discretion, subject to any preferential dividend rights of outstanding Preferred Stock.

(c) Upon any liquidation, dissolution or winding up of the affairs of the Corporation and its subsidiaries, whether voluntary or involuntary (a “ Liquidation Event ”), after the payment or provision for payment of all debts and liabilities of the Corporation and all preferential amounts to which the holders of any outstanding class or series of Preferred Stock may be entitled pursuant to the terms thereof with respect to the distribution of assets in liquidation, the holders of Common Stock shall be entitled to share ratably in the remaining assets of the Corporation available for distribution. The term “ Liquidation Event ” shall not be deemed to be occasioned by or to include any voluntary consolidation, reorganization or merger of the Corporation with or into any other corporation or entity or other corporations or entities or a sale, lease or conveyance of all or a part of the Corporation’s assets.

(d) No holder of shares of Common Stock shall be entitled to any pre-emptive, subscription, redemption or conversion rights.

ARTICLE VI

BOARD OF DIRECTORS

For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:

Section 1.

(a) The management of the business and the conduct of the affairs of the Corporation shall be vested in the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.

(b) Other than any directors elected by the separate vote of the holders of one or more series of Preferred Stock, the Board of Directors shall be and is divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the effectiveness of this Certificate of Incorporation (the “ Qualifying Record Date ”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, at each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this Article VI Section 1(b), each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

(c) Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then outstanding shares of stock of the Corporation having the power to vote in the election of directors (the “ Voting Stock ”), voting together as a single class.

(d) Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, any vacancies on the Board of Directors resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office for a term that shall coincide with the remaining term of the class to which the director shall have been appointed and until such director’s successor shall have been elected and qualified or until his or her earlier death, resignation, disqualification, retirement or removal. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible.

Section 2.

(a) In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal By-laws of the Corporation (the “ By-laws ”). In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the adoption, amendment or repeal of the By-laws by the stockholders of the Corporation shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then outstanding shares of the Voting Stock, voting together as a single class.

(b) The directors of the Corporation need not be elected by written ballot unless the By-laws so provide.

ARTICLE VII

STOCKHOLDERS

Section 1. Subject to the special rights of the holders of one or more series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the taking of any action by written consent of the stockholders in lieu of a meeting of the stockholders is specifically denied.

Section 2. Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time by the Board of Directors, the Chairman of the Board of Directors or the Chief Executive Officer of the Corporation, but such special meetings may not be called by stockholders or any other person or persons.

Section 3. Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the By-laws.

ARTICLE VIII

LIABILITY AND INDEMNIFICATION

Section 1. To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended hereafter to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended, automatically and without further action, upon the date of such amendment. The rights to indemnification and the advancement of expenses under this Article VIII shall not be exclusive of any other right that any person may have or may hereafter acquire under any statute, the By-laws, any agreement, vote of stockholders or disinterested directors or otherwise.

Section 2. The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) to any person made or threatened to be made a party to an action, suit or proceeding or is otherwise involved (including as a witness) in any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise, including services with respect to employee benefit plans, as a director or officer at the request of the Corporation or any predecessor to the Corporation.

Section 3. The Corporation, to the fullest extent permitted by law and to the extent authorized from time to time by the Board of Directors, may indemnify and advance expenses (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) to any person made or threatened to be made a party to an action, suit or proceeding or is otherwise involved (including as a witness) in any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.

Section 4. Neither any amendment nor repeal of this Article VIII, nor the adoption by amendment of this Certificate of Incorporation of any provision inconsistent with this Article VIII, shall eliminate or reduce the effect of this Article VIII in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VIII, would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.

ARTICLE IX

EXCLUSIVE FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, this Certificate of Incorporation or the By-laws, (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the By-laws or (e) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article IX.

ARTICLE X

AMENDMENTS

Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or by this Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Articles VI, VII, VIII, IX and this Article X.

[ Signature Page to Follow ]

IN WITNESS WHEREOF , this Certificate of Incorporation of the Corporation has been signed by its Incorporator this of 2016.


NUVECTRA CORPORATION

By:
		Name:
		Title:

Exhibit 3.2

BY-LAWS OF

NUVECTRA CORPORATION

(as of , 2016)

ARTICLE I—CORPORATE OFFICES

1.1 REGISTERED OFFICE.

The registered office of Nuvectra Corporation (the “ Corporation ”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended from time to time (the “ Certificate of Incorporation ”).

1.2 OTHER OFFICES.

The Corporation’s board of directors (the “ Board ”) may at any time establish other offices at any place or places.

ARTICLE II—MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “ DGCL ”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.

2.2 ANNUAL MEETING.

The Board shall designate the date and time of the annual meeting of stockholders. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 may be transacted. The Board may postpone, reschedule or cancel any annual meeting previously scheduled by the Board.

2.3 SPECIAL MEETING.

Special meetings of the stockholders may be called only in the manner set forth in the Certificate of Incorporation. Any such special meeting shall be held at such place, if any, either within or without the State of Delaware (including by means of remote communication as authorized by Section 211(a)(2) of the DGCL), and at such date and time determined by the Board or as the Chairman of the Board shall designate, as set forth in the notice of the meeting. The Board or Chairman of the Board may postpone, reschedule or cancel any special meeting of stockholders scheduled in compliance with the manner set forth in the Certificate of Incorporation.

No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

2.4 ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING.

(i) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of the Board or the Chairman of the Board, or (c) otherwise properly brought before the meeting by a stockholder present in person who (A)(1) was a beneficial

owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 in all applicable respects, or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “ Exchange Act ”).

The foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these by-laws, and stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders. For purposes of this Section 2.4, “present in person” shall mean that the stockholder proposing that business be brought before the annual meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 of these by-laws, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5 of these by-laws.

(ii) For business to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation (the “ Secretary ”) and (b) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however , that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “ Timely Notice ”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

(iii) To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary shall set forth:

(a) As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “ Stockholder Information ”);

(b) As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) (“ Synthetic Equity Position ”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of shares of the Corporation; provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that

would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided , further , that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a derivatives dealer, (B) any rights to dividends on the shares of any class or series of shares of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C)(x) if such Proposing Person is (i) a general or limited partnership, syndicate or other group, the identity of each general partner and each person who functions as a general partner of the general or limited partnership, each member of the syndicate or group and each person controlling the general partner or member, (ii) a corporation or a limited liability company, the identity of each officer and each person who functions as an officer of the corporation or limited liability company, each person controlling the corporation or limited liability company and each officer, director, general partner and person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (iii) a trust, any trustee of such trust (each such person or persons set forth in the preceding clauses (i), (ii) and (iii), a “ Responsible Person ”), any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person and any material interests or relationships of such Responsible Person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (y) if such Proposing Person is a natural person, any material interests or relationships of such natural person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, (D) any material shares or any Synthetic Equity Position in any principal competitor of the Corporation in any principal industry of the Corporation held by such Proposing Persons, (E) a summary of any material discussions regarding the business proposed to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including their names) , (F) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (G) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (H) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (I) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (I) are referred to as “ Disclosable Interests ”); provided , however , that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these by-laws on behalf of a beneficial owner; and

(c) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the by-laws of the Corporation, the language of the proposed amendment), (C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing Persons or between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided , however , that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these by-laws on behalf of a beneficial owner.

(d) an undertaking by the Proposing Person to update and supplement, in writing, its notice to the Corporation in compliance with the requirements set forth in Section 2.4(v) of the by-laws.

(iv) For purposes of this Section 2.4, the term “ Proposing Person ” shall mean (a) the stockholder providing the notice of business proposed to be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made and (c) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation or associate (within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these by-laws) of such stockholder or beneficial owner.

(v) A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi) Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(vii) This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders, other than any proposal made in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(viii) For purposes of these by-laws, “ public disclosure ” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

2.5 ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS.

(i) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given for such special meeting) may be made at such meeting only (a) by or at the direction of the Board, including by any committee or persons authorized to do so by the Board or these by-laws, or (b) by a stockholder present in person (A) who was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.5 as to such notice and nomination.

The foregoing clause (b) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting or special meeting. For purposes of this Section 2.5, “present in person” shall mean that the stockholder proposing that the business be brought before the meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such stockholder, appear at such meeting. A “qualified representative” of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust.

(ii) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (a) provide Timely Notice (as defined in Section 2.4(ii) of these by-laws) thereof in writing and in proper form to the Secretary of the Corporation, (b) provide the information with respect to such stockholder and its proposed nominee as required by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. Without qualification, if the election of directors is a matter specified in the notice of meeting given for a special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at such special meeting, the stockholder must (a) provide timely notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, (b) provide the information with respect to such stockholder and its proposed nominee as required by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4(ix) of these by-laws) of the date of such special meeting was first made. In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(iii) To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary shall set forth:

(a) As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(iii)(a) of these by-laws) except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(a);

(b) As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(b) shall be made with respect to the election of directors at the meeting);

(c) As to each person whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such proposed nominee were a Nominating Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each proposed nominee or his or her respective associates or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as “ Nominee Information ”), and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi); and

(d) The Corporation may require any proposed nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee.

(iv) For purposes of this Section 2.5, the term “ Nominating Person ” shall mean (a) the stockholder providing the notice of the nomination proposed to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made and (c) any associate of such stockholder or beneficial owner or any other participant in such solicitation.

(v) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi) To be eligible to be a nominee for election as a director of the Corporation at an annual or special meeting, the proposed nominee must be nominated in the manner prescribed in Section 2.5 and must deliver (in accordance with the time period prescribed for delivery in a notice to such proposed nominee given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, (a) a completed written questionnaire (in a form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such proposed nominee and (b) a written representation and agreement (in form provided by the Corporation) that such proposed nominee (A) is not and, if elected as a director during his or her term of office, will not become a party to (1) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “ Voting Commitment ”) or (2) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (B) is not, and will

not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director and (C) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors and in effect during such person’s term in office as a director (and, if requested in writing by any proposed nominee, the Secretary of the Corporation shall provide to such proposed nominee all such policies and guidelines then in effect).

(vii) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

(viii) No proposed nominee shall be eligible for nomination as a director of the Corporation unless such proposed nominee and the Nominating Person seeking to place such proposed nominee’s name in nomination have complied with this Section 2.5. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the proposed nominee in question (but in the case of any form of ballot listing other qualified nominees, only the ballots case for the nominee in question) shall be void and of no force or effect.

2.6 NOTICE OF STOCKHOLDERS’ MEETINGS.

Unless otherwise provided by law, the Certificate of Incorporation or these by-laws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with either Section 2.7 or Section 8.1 of these by-laws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, except that where any other minimum or maximum notice period for any action to be taken at such meeting is required under the DGCL, then such other minimum or maximum notice period shall control. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

Notice of any meeting of stockholders shall not be required to be given to any stockholder who attends such meeting in person or by proxy and does not, at the beginning of such meeting, object to the transaction of any business because the meeting has not been lawfully called or convened, or who, either before or after the meeting, submits a signed waiver of notice or waives notice by electronic transmission, in person or by proxy. To the extent permitted by law, a stockholder’s attendance at an annual meeting, in person or by proxy, waives objection to consideration of a particular matter at such annual meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter when it is presented. Any stockholder so waiving notice of a meeting shall be bound by the proceedings of such meeting in all respects as if due notice thereof had been given.

2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Notice of any meeting of stockholders shall be deemed given:

(i) if mailed, when deposited in the U.S. mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation’s records, or, if a stockholder shall have filed with the Secretary a written request that notices to such stockholder be mailed to some other address, then directed to such stockholder at such other address; or

(ii) if electronically transmitted as provided in Section 8.1 of these by-laws.

An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.8 QUORUM.

Unless otherwise provided by applicable law, the Certificate of Incorporation or other provisions of these by-laws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Where a separate vote by one or more series or classes is required, a majority in voting power of the outstanding shares of such one or more series or classes present in person, or by remote communication, if applicable, or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these by-laws until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.9 ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these by-laws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.10 CONDUCT OF BUSINESS.

The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting, the conduct of business and whether any nomination or item of business has been properly brought before the meeting in accordance with these by-laws.

2.11 VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these by-laws and applicable law.

Except as may be otherwise provided in the Certificate of Incorporation or these by-laws, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

At all duly called or convened meetings of stockholders, at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these by-laws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or regulation applicable to the Corporation or its securities, all other elections and questions presented to the stockholders at a duly called or convened meeting, at which a quorum is present, shall be decided by the majority of the votes cast affirmatively or negatively (excluding abstentions and broker non-votes) and shall be valid and binding upon the Corporation.

2.12 [Reserved.]

2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action.

If the Board does not so fix a record date:

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however , that the Board may fix a new record date for the adjourned meeting.

2.14 PROXIES.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Any proxy to be voted or acted upon at a meeting of stockholders must be delivered to the Secretary or his or her representative at or before the time of the meeting. Except as otherwise limited therein, proxies shall entitle the persons authorized thereby with respect to a meeting of stockholders to vote at any adjournment or postponement of such meeting but shall not be valid after final adjournment of such meeting. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the applicable provisions of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.

2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

2.16 INSPECTORS OF ELECTION.

Before any meeting of stockholders, the Board shall, as required by applicable law, appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

Such inspectors shall:

(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

(ii) receive votes or ballots;

(iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;

(iv) count and tabulate all votes;

(v) determine when the polls shall close;

(vi) determine the result; and

(vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such persons to assist them in performing their duties as they determine.

2.17 MEETINGS BY REMOTE COMMUNICATIONS.

Unless otherwise provided in the Certificate of Incorporation, if authorized by the Board, any annual or special meeting of stockholders, whether such meeting is to be held at a designated place or by means of remote communication, may be conducted in whole or in part by means of remote communication. If authorized by the Board, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communications: (a) participate in such meeting of stockholders; and (b) be deemed present in person and vote at such meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that: (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder; (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

ARTICLE III—DIRECTORS

3.1 POWERS.

Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation or these by-laws relating to action required to be approved by the stockholders, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

3.2 NUMBER OF DIRECTORS.

The authorized number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Except as provided in Section 3.4 of these by-laws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the Certificate of Incorporation or these by-laws. The Certificate of Incorporation or these by-laws may prescribe other qualifications for directors.

As provided in the Certificate of Incorporation, the directors of the Corporation shall be divided into three (3) classes.

3.4 RESIGNATION AND VACANCIES.

Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Any vacancy or newly created directorship in the Board of Directors, however occurring, may be filled only in the manner provided in and to the extent permitted under the Certificate of Incorporation. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under these by-laws in the case of the death, removal or resignation of any director.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation or these by-laws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this by-law shall constitute presence in person at the meeting.

3.6 REGULAR MEETINGS.

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

3.7 SPECIAL MEETINGS; NOTICE.

Special meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer or one-third of the authorized number of directors (rounded up to the nearest whole number).

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile; or

(iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by United States first-class mail, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting. Notice of any meeting of the Board shall not, however, be required to be given to any Director who submits a signed waiver of notice, or waives notice of such meeting by electronic transmission, whether before or after the meeting, or if he or she is be present at such meeting; and any meeting of the Board shall be a legal meeting without any notice thereof having been given to all of the Directors if all the Directors of the Corporation then in office are present thereat or have waived notice thereof.

3.8 QUORUM.

At all meetings of the Board, a majority of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these by-laws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.10 FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the Certificate of Incorporation or these by-laws, the Board shall have the authority to fix the compensation of directors.

3.11 REMOVAL OF DIRECTORS.

Any Director, or the entire Board of Directors, may only be removed from office in the manner provided in and to the extent permitted under the Certificate of Incorporation.

ARTICLE IV—COMMITTEES

4.1 COMMITTEES OF DIRECTORS.

The Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation. The Board, subject to the applicable requirements of law (including the rules or regulations of any stock exchange applicable to the Corporation), may at any time change, increase or decrease the number of members of a committee or terminate the existence of a committee. A Director’s membership on a committee shall terminate on the date of his or her death, removal or resignation, but the Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, or removal or increase in the number of members of the

committee. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these by-laws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders (other than the election or removal of Directors), any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any by-law of the Corporation.

4.2 COMMITTEE MINUTES.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3 MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) Section 3.5 (place of meetings and meetings by telephone);

(ii) Section 3.6 (regular meetings);

(iii) Section 3.7 (special meetings and notice);

(iv) Section 3.8 (quorum);

(v) Section 7.12 (waiver of notice); and

(vi) Section 3.9 (action without a meeting),

with such changes in the context of those by-laws as are necessary to substitute the committee and its members for the Board and its members. However :

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee;

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee; and

(iv) the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.

ARTICLE V—OFFICERS

5.1 OFFICERS.

The officers of the Corporation shall be a President and a Secretary. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, a Treasurer, one (1) or more Vice Presidents, one (1) or more Assistant Vice Presidents, one (1) or more Assistant Treasurers, one (1) or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these by-laws. Any number of offices may be held by the same person.

5.2 APPOINTMENT OF OFFICERS.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these by-laws, subject to the rights, if any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS.

The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these by-laws or as the Board may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.

5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

The Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, the Secretary or Assistant Secretary of this Corporation, or any other person authorized by the Board , the Chief Executive Officer, the President or a Vice President, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7 AUTHORITY AND DUTIES OF OFFICERS.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

ARTICLE VI—RECORDS AND REPORTS

6.1 MAINTENANCE AND INSPECTION OF RECORDS.

The Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these by-laws as amended to date, accounting books and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal executive office.

6.2 INSPECTION BY DIRECTORS.

Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

ARTICLE VII—GENERAL MATTERS

7.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

The Board, except as otherwise provided in these by-laws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

7.2 STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of the Corporation shall be represented by certificates or shall be uncertificated. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or vice-Chairman of the Board, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

7.3 SPECIAL DESIGNATION ON CERTIFICATES.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however , that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

7.4 LOST CERTIFICATES.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.5 CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these by-laws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

7.6 DIVIDENDS.

The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

7.7 FISCAL YEAR.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.8 SEAL.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.9 TRANSFER OF STOCK.

Shares of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such

endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

7.10 STOCK TRANSFER AGREEMENTS.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

7.11 REGISTERED STOCKHOLDERS.

The Corporation:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.12 WAIVER OF NOTICE.

Except with respect to Sections 2.6 and 3.7 of these by-laws (which have specific waiver provisions included therein), whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these by-laws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these by-laws.

7.13 VOTING OF SECURITIES .

Unless otherwise provided by the Board, the chief executive officer, the chief financial officer or the general counsel of the Corporation may waive notice of and act on behalf of the Corporation, or appoint another person or persons to act as proxy or attorney in fact for the Corporation with or without discretionary power or power of substitution, at any meeting of stockholders or stockholders of any other corporation, entity or organization, any of whose securities or interests are held by the Corporation.

7.14 CONFLICT WITH APPLICABLE LAW OR CERTIFICATE OF INCORPORATION .

These by-laws are adopted subject to any applicable law and the Certificate of Incorporation. Whenever these by-laws may conflict with any applicable law or the Certificate of Incorporation, such conflict shall be resolved in favor of such law or the Certificate of Incorporation.

ARTICLE VIII—NOTICE BY ELECTRONIC TRANSMISSION

8.1 NOTICE BY ELECTRONIC TRANSMISSION.

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these by-laws, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these by-laws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:

(i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and

(ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i)

if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii)

if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii)

if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv)

if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

8.2 DEFINITION OF ELECTRONIC TRANSMISSION.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE IX—INDEMNIFICATION

9.1 GENERAL. The rights to indemnification and the advancement of expenses under this Article IX shall not be exclusive of any other right that any person may have or may hereafter acquire under any statute, the Certificate of Incorporation , any agreement, vote of stockholders or disinterested directors or otherwise.

9.2 INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) to any person made or threatened to be made a party to an action, suit or proceeding or is otherwise involved (including as a witness) in any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise, including services with respect to employee benefit plans, as a director or officer at the request of the Corporation or any predecessor to the Corporation.

9.3 INDEMNIFICATION OF OTHERS. The Corporation, to the fullest extent permitted by law and to the extent authorized from time to time by the Board, may indemnify and advance expenses (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) to any person made or threatened to be made a party to an action, suit or proceeding or is otherwise involved (including as a witness) in any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.

9.4 AMENDMENT. Neither any amendment nor repeal of this Article IX, nor the adoption by amendment of these by-laws of any provision inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article IX would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.

ARTICLE X—AMENDMENTS

Subject to the limitations set forth in Section 9.4 of these by-laws or the provisions of the Certificate of Incorporation, the Board is expressly empowered to adopt, amend or repeal the by-laws of the Corporation. Any adoption, amendment or repeal of the by-laws of the Corporation by the Board shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the by-laws of the Corporation; provided, however , that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders at any regular or special meeting of the stockholders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of stock of the Corporation having the power to vote in the election of directors, voting together as a single class.

Exhibit 3.3

CERTIFICATE OF CONVERSION

FROM A LIMITED LIABILITY COMPANY

TO A CORPORATION

QIG GROUP, LLC

Pursuant to Section 265 of the General Corporation Law of the State of

Delaware and Section 18-216 of the Delaware Limited Liability

Company Act

QIG Group, LLC, a Delaware limited liability company (the “Limited Liability Company”), does hereby certify to the following facts relating to the conversion of the Limited Liability Company to a Delaware corporation (the “Conversion”) under the name Nuvectra Corporation.

The Limited Liability Company was formed on November 14, 2008 under the laws of the State of Delaware.

The name and type of entity of the Limited Liability Company immediately prior to filing this Certificate of Conversion are (a) QIG Group, LLC and (b) a limited liability company, respectively.

The name of the corporation into which the Limited Liability Company shall be converted, as set forth in its Certificate of Incorporation, is Nuvectra Corporation.

The Conversion has been approved in accordance with Section 265 of the General Corporation Law of the State of Delaware and Section 18-216 of the Delaware Limited Liability Company Act.

[ Signature Page Follows ]

IN WITNESS WHEREOF, the undersigned being duly authorized to sign on behalf of the converting Limited Liability Company has executed this Certificate of Conversion on the day of , .


By:
Name:
Title:

Exhibit 4.1

LOGO

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

between

GREATBATCH, INC.

and

QIG GROUP, LLC

(to be converted into Nuvectra Corporation)

dated as of , 2016

TABLE OF CONTENTS


		PAGE

ARTICLE I DEFINITIONS			1
Section 1.1	Definitions		1
Section 1.2	Interpretation		4

ARTICLE II ASSIGNMENT OF EMPLOYEES			6
Section 2.1	Active Employees		6
Section 2.2	Former Employees		6
Section 2.3	Employment Law Obligations		7
Section 2.4	Employee Records		7

ARTICLE III EQUITY AND INCENTIVE COMPENSATION PLANS			9
Section 3.1	General Principles		9
Section 3.2	Equity Incentive Programs		10
Section 3.3	Section 16(b) of the Exchange Act; Code Sections 162(m) and 409A		13
Section 3.4	Cash Incentive Awards		13

ARTICLE IV GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES			14
Section 4.1	General Principles		14
Section 4.2	Sponsorship and/or Establishment of Nuvectra Plans		15
Section 4.3	Service Credit		15
Section 4.4	Plan Administration		16

ARTICLE V 401(K) PLANS			17
Section 5.1	General Principles		17
Section 5.2	Transfer of Accounts		17
Section 5.3	Employee Securities		17
Section 5.4	Third-Party Vendors		17

ARTICLE VI WELFARE PLANS			18
Section 6.1	Establishment of Nuvectra Welfare Plans		18
Section 6.2	Transitional Matters Under Nuvectra Welfare Plans		18
Section 6.3	Continuity of Benefits, Benefit Elections and Beneficiary Designations		19
Section 6.4	Insurance Contracts		20
Section 6.5	Third-Party Vendors		20

ARTICLE VII WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION			21

ARTICLE VIII EMPLOYMENT AGREEMENTS, SEVERANCE AND OTHER MATTERS			21
Section 8.1	Employment Agreements		21
Section 8.2	Severance		21
Section 8.3	Accrued Time Off		21
Section 8.4	Leaves of Absence		21
Section 8.5	Restrictive Covenants in Employment and Other Agreements		22

TABLE OF CONTENTS

(Continued)


		PAGE

ARTICLE IX MISCELLANEOUS			23
Section 9.1	Preservation of Rights to Amend		23
Section 9.2	Confidentiality		23
Section 9.3	Administrative Complaints/Litigation		23
Section 9.4	Reimbursement and Indemnification		23
Section 9.5	Costs of Compliance with Agreement		24
Section 9.6	Fiduciary Matters		24
Section 9.7	Form S-8		24
Section 9.8	Entire Agreement		24
Section 9.9	Binding Effect; No Third-Party Beneficiaries; Assignment		24
Section 9.10	Amendment; Waivers		25
Section 9.11	Remedies Cumulative		25
Section 9.12	Notices		25
Section 9.13	Counterparts; Facsimile Signatures		25
Section 9.14	Severability		25
Section 9.15	Governing Law		26
Section 9.16	Performance		26
Section 9.17	Construction		26
Section 9.18	Effect if Distribution Does Not Occur		26

- ii -

EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT dated as of , 2016 by and between Greatbatch, Inc., a Delaware corporation (“Greatbatch”), and QiG Group, LLC, a Delaware limited liability company (to be converted into Nuvectra Corporation, a Delaware corporation) (“Nuvectra”). Greatbatch and Nuvectra are sometimes referred to herein, individually, as a “Party,” and, collectively, as the “Parties.”

RECITALS

WHEREAS , Nuvectra is an indirect subsidiary of Greatbatch; and

WHEREAS , the Board of Directors of Greatbatch has determined that it would be appropriate and in the best interests of Greatbatch and its stockholders to effectuate the Distribution as described in the Separation and Distribution Agreement between Greatbatch and Nuvectra dated as of the date hereof (the “Separation Agreement”); and

WHEREAS , the Separation Agreement provides, among other things, subject to the terms and conditions thereof, for the Distribution and for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of Nuvectra and its subsidiaries from Greatbatch; and

WHEREAS , in order to ensure an orderly transition under the Separation Agreement, it will be necessary for the Parties to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans and programs, and certain employment matters.

NOW, THEREFORE , in consideration of the premises and the mutual covenants and agreements herein contained, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions . As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1 :

“Adjusted Greatbatch Awards” means Adjusted Greatbatch Options, Adjusted Greatbatch RSAs, and Adjusted Greatbatch RSUs.

“Adjusted Greatbatch Options” means Greatbatch Options adjusted as set forth in Section 3.2(a)(i) .

“Adjusted Greatbatch RSAs” means Greatbatch RSAs adjusted as set forth in Section 3.2(a)(ii) .

“Adjusted Greatbatch RSUs” means Greatbatch RSUs adjusted as set forth in Section 3.2(a)(iii) .

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“Agreement” means this Employee Matters Agreement together with all Schedules hereto and all amendments, modifications and changes hereto and thereto entered into in accordance with Section 9.10 .

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Part 6 of Subtitle B of Title I of ERISA and at Code Section 4980B.

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

“Distribution Ratio” means the number of shares of Nuvectra Common Stock to be distributed for each share of Greatbatch Common Stock.

“Employee” means any Greatbatch Employee, Former Greatbatch Employee, Nuvectra Employee or Former Nuvectra Employee.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Former Greatbatch Employee” has the meaning set forth in Section 2.2(b) .

“Former Nuvectra Employee” has the meaning set forth in Section 2.2(c) .

“Greatbatch” has the meaning set forth in the preamble to this Agreement.

“Greatbatch 401(k) Plan” means the Greatbatch, Inc. 401(k) Retirement Plan.

“Greatbatch Employee” means any individual who is employed by a member of the Greatbatch Group on the Distribution Date other than the Nuvectra Employees and, only for purposes of Article III and any defined terms as used therein, as of the day after the Distribution Date.

“Greatbatch FSA” has the meaning set forth in Section 6.3(b) .

“Greatbatch Group” means Greatbatch and each Subsidiary of Greatbatch, collectively, other than Nuvectra and each Nuvectra Subsidiary.

“Greatbatch Legacy Equity Plan” means any equity plan sponsored or maintained by Greatbatch immediately prior to the Distribution Date.

“Greatbatch Option” means an option to purchase shares of Greatbatch Common Stock granted and outstanding immediately prior to the Distribution Date pursuant to any of the Greatbatch Legacy Equity Plans.

“Greatbatch Post-Distribution Stock Value” means the closing per-share price, as reported on the NYSE, of a share of Greatbatch Common Stock on the Distribution Date.

“Greatbatch RSA” means a restricted stock award issued and outstanding immediately prior to the Distribution Date under any of the Greatbatch Legacy Equity Plans.

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“Greatbatch RSU” means a restricted stock unit award issued and outstanding immediately prior to the Distribution Date under any of the Greatbatch Legacy Equity Plans.

“Greatbatch Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the Greatbatch Group on the Distribution Date.

“Nasdaq” means the NASDAQ Stock Market.

“Nuvectra” has the meaning set forth in the preamble to this Agreement.

“Nuvectra 401(k) Plan” has the meaning set forth in Section 5.1 .

“Nuvectra 401(k) Plan Beneficiaries” has the meaning set forth in Section 5.1 .

“Nuvectra Awards” means Nuvectra Options, Nuvectra RSAs, and Nuvectra RSUs.

“Nuvectra Employee” means any individual who is employed by a member of the Nuvectra Group on the Distribution Date or will be transferred to a member of the Nuvectra Group and is listed on Schedule II to the Separation Agreement; provided , however , that for purposes of Article III and any defined terms as used therein, “Nuvectra Employee” means any such individual who is employed by a member of the Nuvectra Group on the date immediately following the Distribution Date.

“Nuvectra Equity Plan” means the Nuvectra Corporation 2016 Equity Incentive Plan adopted by the board of managers of Nuvectra and approved by Nuvectra’s sole membership interest holder prior to the Distribution under which the Nuvectra equity-based awards described in Article III shall be issued.

“Nuvectra FSA” has the meaning set forth in Section 6.3(b) .

“Nuvectra Group” means, collectively, Nuvectra and each Nuvectra Subsidiary.

“Nuvectra Option” means an option to purchase shares of Nuvectra Common Stock granted pursuant to the Nuvectra Equity Plan as described in Section 3.2(a)(i) .

“Nuvectra RSA” means a restricted stock award for shares of Nuvectra Common Stock issued under the Nuvectra Equity Plan as described in Section 3.2(a)(ii) .

“Nuvectra RSU” means a restricted stock unit for shares of Nuvectra Common Stock issued under the Nuvectra Equity Plan as described in Section 3.2(a)(iii) .

“Nuvectra Stock Value” means the closing per-share price, as reported on Nasdaq, of Nuvectra Common Stock on the Distribution Date (or, if the Distribution Date is not a Nasdaq trading day, on the first trading day following the Distribution Date).

“Nuvectra Subsidiary” means any Subsidiary of Nuvectra on the Distribution Date.

“Nuvectra Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the Nuvectra Group on or after the Distribution Date.

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“Nuvectra Welfare Plan Participants” has the meaning set forth in Section 6.1 .

“NYSE” means the New York Stock Exchange.

“Participating Nuvectra Employers” has the meaning set forth in Section 6.1 .

“Participation Period” has the meaning set forth in Section 6.3(b) .

“Party” or “Parties” has the meaning set forth in the preamble to this Agreement.

“Privacy Contract” means any contract entered into in connection with applicable privacy protection laws or regulations.

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

“WARN” means the Worker Adjustment and Retraining Notification Act, and any applicable state or local law equivalent.

“Welfare Plan” means a “welfare plan” as defined in ERISA Section 3(1) and also means a cafeteria plan under Code Section 125 and any benefits offered thereunder, including pre-tax premium conversion benefits, a dependent care assistance program, contribution funding toward a health savings account and flex or cashable credits.

Capitalized terms used, but not otherwise defined in this Agreement, shall have the respective meanings assigned to such terms in the Separation Agreement.

Section 1.2 Interpretation . In this Agreement, unless the context clearly indicates otherwise:

(a) words used in the singular include the plural and words used in the plural include the singular;

(b) if a word or phrase is defined in this Agreement, its other grammatical forms, as used in this Agreement, shall have a corresponding meaning;

(d) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation;”

(e) the words “shall” and “will” are used interchangeably and have the same meaning;

(f) the word “or” shall have the inclusive meaning represented by the phrase “and/or;”

(g) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including;”

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(h) all references to a specific time of day in this Agreement shall be based upon Eastern Standard Time or Eastern Daylight Savings Time, as applicable, on the date in question;

(i) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless otherwise specified;

(j) accounting terms used herein shall have the meanings historically ascribed to them by Greatbatch and its Subsidiaries, including Nuvectra and the Nuvectra Subsidiaries for this purpose, in its and their internal accounting and financial policies and procedures in effect immediately prior to the date of this Agreement;

(k) reference to any Article, Section or Schedule means such Article or Section of, or such Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(l) the words “this Agreement,” “herein,” “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement;

(m) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by this Agreement;

(n) reference to any “law” (including statutes and ordinances) means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(o) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and any reference to a third party shall be deemed to mean a Person who is not a Party or an Affiliate of a Party;

(p) if there is any conflict between the provisions of the main body of this Agreement and the Schedules hereto, the provisions of the main body of this Agreement shall control unless explicitly stated otherwise in such Schedule;

(q) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the U.S.;

(r) the titles to Articles and headings of Sections contained in this Agreement, in any Schedule and in the table of contents to this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and

(s) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.

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ARTICLE II

ASSIGNMENT OF EMPLOYEES

Section 2.1 Active Employees .

(a) Nuvectra Employees . Except as otherwise set forth in this Agreement, effective as of the Distribution Date, the employment of the Nuvectra Employees shall be continued by a member of the Nuvectra Group.

(b) Greatbatch Employees . Except as otherwise set forth in this Agreement, effective as of the Distribution Date, the employment of the Greatbatch Employees shall be continued by a member of the Greatbatch Group.

(c) At Will Status . Nothing in this Agreement shall create any obligation on the part of any member of the Greatbatch Group or any member of the Nuvectra Group to continue the employment of any employee for any period following the date of this Agreement or the Separation or the Distribution or to change the employment status of any employee from “at will,” to the extent such employee is an “at will” employee under applicable law.

(d) Severance . The assignment, transfer or continuation of the employment of employees as contemplated by this Agreement or otherwise effected in connection with the Separation or the Distribution shall not be deemed a severance of employment of any employee for any purpose, including for purposes of any plan, policy, practice or arrangement of any member of the Greatbatch Group or any member of the Nuvectra Group.

(e) Change of Control/Change in Control . No provision in this Agreement or the Separation Agreement nor any transaction undertaken by either Party in connection with the Distribution shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever, or be deemed a “change of control” or “change in control” for any purpose including for purpose of any plan, policy, practice or arrangement relating to directors, employees or consultants of any member of the Greatbatch Group or any member of the Nuvectra Group.

Section 2.2 Former Employees

(a) General Principles . Except as otherwise provided in this Agreement, each former employee of any member of the Greatbatch Group or any member of the Nuvectra Group as of the Distribution Date will be considered a former employee of the Greatbatch Group or the Nuvectra Group based on his or her employer as of his or her last day of employment with any member of the Greatbatch Group or the Nuvectra Group.

(b) Former Greatbatch Employees . Former employees of the Greatbatch Group shall be deemed to include all employees who, as of their last day of employment, were employed by a member of the Greatbatch Group and will not be either a Nuvectra Employee or a Greatbatch Employee for purposes of this Agreement (collectively, the “Former Greatbatch Employees”).

(c) Former Nuvectra Employees . Former employees of the Nuvectra Group shall be deemed to include all employees who, as of their last day of employment, were employed by a member of the Nuvectra Group and will not be either a Nuvectra Employee or a Greatbatch Employee for purposes of this Agreement (collectively, the “Former Nuvectra Employees”).

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Section 2.3 Employment Law Obligations .

(a) WARN Act . After the Distribution Date, (i) Greatbatch shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any Greatbatch Employee and (ii) Nuvectra shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any Nuvectra Employee.

(b) Compliance with Employment Laws . On and after the Distribution Date, (i) each member of the Greatbatch Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Greatbatch Employees and the treatment of any applicable Former Greatbatch Employees in respect of their former employment, and (ii) each member of the Nuvectra Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Nuvectra Employees and the treatment of any applicable Former Nuvectra Employees in respect of their former employment.

Section 2.4 Employee Records .

(a) Records Relating to Greatbatch Employees and Former Greatbatch Employees . All records and data in any form relating to Greatbatch Employees and Former Greatbatch Employees shall be the property of the Greatbatch Group; provided , however , that records and data pertaining to such an Employee and relating to any period that such an Employee was (i) employed by any member of the Nuvectra Group or (ii) covered under any employee benefit plan sponsored by any member of the Nuvectra Group (to the extent that such records or data relate to such coverage) prior to the Distribution Date shall be shared with appropriate members of the Nuvectra Group by the Greatbatch Group to the extent such records are reasonably necessary for payroll or employee benefit plan purposes.

(b) Records Relating to Nuvectra Employees and Former Nuvectra Employees . All records and data in any form relating to Nuvectra Employees and Former Nuvectra Employees shall be the property of the Nuvectra Group; provided , however that records and data pertaining to such an Employee and relating to any period that such an Employee was (i) employed by any member of the Greatbatch Group or (ii) covered under any employee benefit plan sponsored by any member of the Greatbatch Group (to the extent that such records or data relate to such coverage) prior to the Distribution Date shall be shared with appropriate members of the Greatbatch Group by the Nuvectra Group to the extent such records are reasonably necessary for payroll or employee benefit plan purposes.

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(c) Sharing of Records . Each Party shall use its respective commercially reasonable efforts to provide the other Party, upon request, such employee-related records and information as necessary or appropriate to carry out their respective obligations under applicable law (including any relevant privacy protection laws or regulations in any applicable jurisdictions or Privacy Contract), this Agreement, any other Ancillary Agreement or the Separation Agreement, and for the purposes of administering their respective employee benefit plans and policies. All information and records regarding employment, personnel and employee benefit matters provided to the other Party shall be accessed, retained, held, used, copied and transmitted in accordance with all applicable laws, policies and Privacy Contracts relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such records by such receiving Party.

(d) Access to Records . To the extent not inconsistent with this Agreement and any applicable privacy protection laws or regulations or Privacy Contracts, access to such records and information, as described in this Section 2.4 , after the Distribution Date, will be provided to members of the Greatbatch Group and members of the Nuvectra Group in accordance with the Separation Agreement. In addition, Greatbatch shall be provided reasonable access to those records necessary for its administration of any benefit plans, policies, arrangements or programs on behalf of Greatbatch Employees and Former Greatbatch Employees after the Distribution Date, as permitted by any applicable privacy protection laws or regulations or Privacy Contracts. Greatbatch shall also be permitted to retain copies of all agreements with any Nuvectra Employee or Former Nuvectra Employee in which any member of the Greatbatch Group has a valid business interest. In addition, Nuvectra shall be provided reasonable access to those records necessary for its administration of any benefit plans, policies, arrangements or programs on behalf of Nuvectra Employees and Former Nuvectra Employees after the Distribution Date, as permitted by any applicable privacy protection laws or regulations or Privacy Contracts. Nuvectra shall also be permitted to retain copies of all agreements with any Greatbatch Employee or Former Greatbatch Employee in which any member of the Nuvectra Group has a valid business interest.

(e) Maintenance of Records . With respect to retaining, destroying, transferring, sharing, copying and permitting access to all such records and information, Greatbatch and Nuvectra shall (and shall cause their respective Subsidiaries to) comply with all applicable laws, regulations, Privacy Contracts and internal policies, and shall indemnify and hold harmless each other from and against any and all liability, claims, actions, and damages that arise from a failure (by the indemnifying party or its Subsidiaries or their respective agents) to so comply with all applicable laws, regulations, Privacy Contracts and internal policies applicable to such records and information.

(f) No Access to Computer Systems or Files . Except as set forth in the Separation Agreement or any other Ancillary Agreement, no provision of this Agreement shall give (i) any member of the Greatbatch Group direct access to the computer systems or other files, records or databases of any member of the Nuvectra Group or (ii) any member of the Nuvectra Group direct access to the computer systems or other files, records or databases of any member of the Greatbatch Group, unless specifically permitted by the owner of such systems, files, records or databases.

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(g) Relation to Separation Agreement . The provisions of this Section 2.4 shall be in addition to, and not in derogation of, the provisions of the Separation Agreement governing Confidential Information, including Section 6.8 of the Separation Agreement.

(h) Confidentiality . Except as otherwise set forth in this Agreement, all records and data relating to Employees shall, in each case, be subject to the confidentiality provisions of the Separation Agreement and any other applicable agreement and applicable law.

(i) Cooperation . Each Party shall use commercially reasonable efforts to cooperate with the other Party to share, retain and maintain data and records that are necessary or appropriate to further the purposes of this Section 2.4 and for each Party to administer its respective benefit plans, policies, arrangements or programs to the extent consistent with this Agreement and applicable law, and each Party agrees to cooperate as long as is reasonably necessary to further the purposes of this Section 2.4 . Except as provided under any other Ancillary Agreement, no Party shall charge another Party a fee for such cooperation.

ARTICLE III

EQUITY AND INCENTIVE COMPENSATION PLANS

Section 3.1 General Principles.

(a) For the avoidance of doubt, the provisions of this Article III shall not apply unless the Distribution and approval by the appropriate administrators of the applicable plans takes place. Greatbatch and Nuvectra shall take any and all reasonable action as shall be necessary and appropriate to give effect to the provisions of this Article III.

(b) Where an award granted under one of the Greatbatch Legacy Equity Plans is supplemented by an award under the Nuvectra Equity Plan in accordance with the provisions of this Article III, such award generally shall be on terms which are in all material respects identical to the terms of the award which it supplements (including any requirements of continued employment) but subject to any necessary changes to take into account that (i) the award relates to Nuvectra Common Stock, (ii) the Nuvectra Equity Plan is administered by Nuvectra, (iii) if applicable, the grantee under the award is employed or affiliated with a new employer or plan sponsor and (iv) the other specific provisions described in this Article III.

(c) Following the Distribution, a grantee who has outstanding awards that are supplemented with awards under the Nuvectra Equity Plan (as described in Section 3.1(b) above) shall be considered to have been employed by the applicable plan sponsor before and after the Distribution for purposes of (i) vesting and (ii) determining the date of termination of employment as it applies to any such supplemental awards under the Nuvectra Equity Plan. Following the Distribution, (i) service as an employee with Nuvectra will be deemed to be services to Greatbatch with respect to Adjusted Greatbatch Options, Adjusted Greatbatch RSAs, or Adjusted Greatbatch RSUs held by Nuvectra Employees immediately after the Distribution Date and (ii) service as an employee with Greatbatch will be deemed to be services to Nuvectra with respect to Nuvectra Options, Nuvectra RSAs, or Nuvectra RSUs held by Greatbatch Employees immediately after the Distribution Date.

(d) No award described in this Article III, whether outstanding or to be issued, adjusted, substituted or cancelled by reason of or in connection with the Distribution, shall be adjusted, settled, cancelled, or exercisable, until in the judgment of the administrator of the applicable plan or program such action is consistent with all applicable law, including federal securities laws and the adjustment, settlement, cancellation or exercisability is in a manner consistent with Section 409A of the Code or other applicable law. Any period of exercisability will not be extended on account of a period during which such an award is not exercisable in accordance with the preceding sentence.

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Section 3.2 Equity Incentive Programs .

(a) The Parties shall use commercially reasonable efforts to take all actions necessary or appropriate so that each outstanding Greatbatch Option, Greatbatch RSA or Greatbatch RSU award granted under a Greatbatch Legacy Equity Plan shall be adjusted as set forth in this Section 3.2 .

(i) Greatbatch Options and Nuvectra Options . As determined by the Greatbatch Compensation Committee pursuant to its authority under the applicable Greatbatch Legacy Equity Plan, each Greatbatch Option, regardless of by whom held, whether vested or unvested, shall be converted on the Distribution Date into both an Adjusted Greatbatch Option and a Nuvectra Option, and both the Adjusted Greatbatch Option and the Nuvectra Option shall, except as otherwise provided in this Section 3.2(a)(i) , be subject to the same terms and conditions (including with respect to vesting) after the Distribution Date as applicable to such Greatbatch Option immediately prior to the Distribution Date; provided , however , that from and after the Distribution Date:

(A) the number of shares of Greatbatch Common Stock subject to such Adjusted Greatbatch Option, shall be equal to the number of shares of Greatbatch Common Stock subject to such Greatbatch Option immediately prior to the Distribution Date;

(B) the number of shares of Nuvectra Common Stock subject to such Nuvectra Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (1) the number of shares of Greatbatch Common Stock subject to the Greatbatch Option immediately prior to the Distribution Date by (2) the Distribution Ratio;

(C) the per share exercise price of such Adjusted Greatbatch Option, rounded up to the nearest hundredth of a cent, shall be equal to the product obtained by multiplying (1) the per share exercise price of such Greatbatch Option immediately prior to the Distribution Date by (2) a fraction (I) the numerator of which is the Greatbatch Post-Distribution Stock Value and (II) the denominator of which is the sum of the Greatbatch Post-Distribution Stock Value and the Nuvectra Stock Value; and

(D) the per share exercise price of such Nuvectra Option, rounded up to the nearest hundredth of a cent, shall be equal to the product obtained by multiplying (1) the per share exercise price of the Greatbatch Option immediately prior to the Distribution Date by (2) a fraction (I) the numerator of which is the Nuvectra Stock Value and (II) the denominator of which is the sum of the Greatbatch Post-Distribution Stock Value and the Nuvectra Stock Value;

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provided , however , that the exercise price, the number of shares of Greatbatch Common Stock and shares of Nuvectra Common Stock subject to such options, and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Code Section 409A; and provided , further , that, in the case of any Greatbatch Option to which Code Section 421 applies by reason of its qualification under Code Section 422 as of immediately prior to the Distribution Date, the exercise price, the number of shares of Greatbatch Common Stock and shares of Nuvectra Common Stock subject to such option, and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Code Section 424(a).

(ii) Greatbatch RSAs and Nuvectra RSAs . Each holder of a Greatbatch RSA award shall receive, as of the Distribution Date, a Nuvectra RSA for such number of shares as determined by applying the Distribution Ratio in the same way as if the outstanding Greatbatch RSAs were comprised of fully vested shares of Greatbatch Common Stock as of the Distribution Date. Except as set forth in this Section 3.2(a)(ii) , the Greatbatch RSA and the Nuvectra RSA both shall be subject to substantially the same terms and conditions immediately following the Distribution Date as applicable to the Greatbatch RSA immediately prior to the Distribution Date.

(iii) Greatbatch RSU Awards and Nuvectra RSU Awards . Each holder of an outstanding Greatbatch RSU award shall receive, as of the Distribution Date, a Nuvectra RSU award in such number of restricted stock units as determined by applying the Distribution Ratio in the same way as if the outstanding Greatbatch RSU award comprised fully vested shares of Greatbatch Common Stock as of the Distribution Date. Except as set forth in this Section 3.2(a)(iii) , the Greatbatch RSU award and the Nuvectra RSU award both shall be subject to substantially the same terms and conditions immediately following the Distribution Date as applicable to the Greatbatch RSU award immediately prior to the Distribution Date. With respect to any Greatbatch RSU award that is subject to performance vesting requirements, which is held by either a Greatbatch Employee or Former Greatbatch Employee, the performance metric for both the Greatbatch RSU award and the corresponding Nuvectra RSU award shall continue to be total shareholder return of Greatbatch’s common stock versus Greatbatch’s peer group, but this performance metric shall be adjusted so as to treat the Distribution as a dividend of an amount of cash that is equal to the opening per-share price, as reported on Nasdaq, of a share of Nuvectra common stock on the Distribution Date that is reinvested into shares of Greatbatch Common Stock at the opening per-share price on the Distribution Date, as reported on NYSE. With respect to any Greatbatch RSU award subject to performance vesting requirements that is held by either a Nuvectra Employee or a Former Nuvectra Employee, such Nuvectra Employee or Former Nuvectra Employee shall receive, as of the Distribution Date, (A) a modified Greatbatch RSU award, which shall not be subject to any performance vesting requirement, but shall be subject to a time-based vesting requirement that would be satisfied at the end of what was the applicable performance period, for a number of shares of Greatbatch common stock based upon performance under the previously applicable performance metric for such Greatbatch RSU award up to the Distribution Date and (B) an Nuvectra RSU award, which shall not be subject to any performance vesting requirement, but shall be subject to a time-based vesting requirement that would be satisfied at the end of what was the applicable performance period of the relevant Greatbatch RSU.

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(b) Miscellaneous Award Terms . After the Distribution Date, Adjusted Greatbatch Awards, regardless of by whom held, shall be settled by Greatbatch, and Nuvectra Awards, regardless of by whom held, shall be settled by Nuvectra; provided , however , that Greatbatch shall be, if applicable, responsible for any dividend equivalent payments with respect to Adjusted Greatbatch RSAs and Adjusted Greatbatch RSUs and Nuvectra RSAs and Nuvectra RSUs held by Greatbatch Employees or Former Greatbatch Employees, and Nuvectra shall be, if applicable, responsible for any dividend equivalent payments with respect to Adjusted Greatbatch RSAs and Adjusted Greatbatch RSUs and Nuvectra RSAs and Nuvectra RSUs held by Nuvectra Employees or Former Nuvectra Employees. Except as otherwise provided in this Agreement (such as in Section 3.2(d) or Section 4.3 ), with respect to awards adjusted pursuant to this Section 3.2 , (i) employment with the Greatbatch Group shall be treated as employment with the Nuvectra Group with respect to Nuvectra Awards held by Greatbatch Employees, and (ii) employment with the Nuvectra Group shall be treated as employment with the Greatbatch Group with respect to Adjusted Greatbatch Awards held by Nuvectra Employees. In addition, none of the Separation, the Distribution, or any employment transfer described in Section 2.1 shall constitute a termination of employment for any Employee for purposes of any Greatbatch Award or any Adjusted Greatbatch Award. Following the Distribution Date, any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or Greatbatch Legacy Equity Plan (A) with respect to Adjusted Greatbatch Awards, shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the award agreement, employment agreement or Greatbatch Legacy Equity Plan applicable to such award (a “Greatbatch Change of Control”), and (B) with respect to Nuvectra Awards, shall be deemed to refer to a “Change in Control” as defined in the Nuvectra Equity Plan (a “Nuvectra Change of Control”). Without limiting the foregoing, with respect to provisions related to vesting of awards, a Greatbatch Change of Control shall be treated as a Nuvectra Change of Control for purposes of Nuvectra Awards held by Greatbatch Employees, and a Nuvectra Change of Control shall be treated as an Greatbatch Change of Control for purposes of Adjusted Greatbatch Awards held by Nuvectra Employees.

(c) Tax Reporting and Withholding . Following the Distribution Date, and for the duration of the applicable Transition Services Agreement provisions under which Greatbatch provides payroll services for Nuvectra, it is expected that (i) Greatbatch will be responsible for all income, payroll and other tax remittance and reporting related to income of Greatbatch Employees, Former Greatbatch Employees, including in respect of Adjusted Greatbatch Awards and Nuvectra Awards, and individuals who are or were Greatbatch non-employee directors, including in respect of Adjusted Greatbatch Awards and Nuvectra Awards, and (ii) Nuvectra will be responsible for all income, payroll and other tax remittance and reporting related to income of Nuvectra Employees and Former Nuvectra Employees in respect of Adjusted Greatbatch Awards and Nuvectra Awards. Greatbatch or Nuvectra, as applicable, shall facilitate performance by the other Party of its obligations hereunder by promptly remitting amounts or shares withheld in conjunction with a transfer of shares or cash, either (as mutually agreed by the Parties) directly to the applicable taxing authority or to the other Party for remittance to such taxing authority. The Parties will cooperate and communicate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient and appropriate manner.

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(d) Equity-Based Awards in Certain Non-U S. Jurisdictions . Notwithstanding the foregoing provisions of this Section 3.2 , the Parties may mutually agree, in their sole discretion, not to adjust certain outstanding equity-based awards under the Greatbatch Legacy Equity Plans pursuant to the foregoing provisions of this Section 3.2 , where those actions would create or trigger adverse legal, accounting or tax consequences for Greatbatch, Nuvectra, or the affected non-U.S. award holders. In such circumstances, Greatbatch or Nuvectra may take any action necessary or advisable to prevent any such adverse legal, accounting or tax consequences, including, but not limited to, agreeing that the outstanding awards under the Greatbatch Legacy Equity Plan of the affected non-U.S. award holders shall terminate in accordance with the terms of the Greatbatch Legacy Equity Plan and the underlying award agreements, in which case Nuvectra or Greatbatch, as applicable, shall equitably compensate the affected non-U.S. award holders in an alternate manner determined by Nuvectra or Greatbatch, as applicable, in its sole discretion, or apply an alternate adjustment method. Where and to the extent required by applicable Law or tax considerations outside the United States, the adjustments described in this Section 3.2 shall be deemed to have been effectuated immediately prior to the Distribution Date.

Section 3.3 Section 1 6(b) of the Exchange Act; Code Sections 162(m) and 409A .

(a) By approving the adoption of this Agreement, the respective boards of directors of Greatbatch and Nuvectra intend to exempt from the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3 thereunder, all acquisitions and dispositions of equity incentive awards by directors and executive officers of each of Greatbatch and Nuvectra, and the respective boards of directors of Greatbatch and Nuvectra also intend to expressly approve, in respect of any equity-based award, the use of any method for the payment of an exercise price and the satisfaction of any applicable tax withholding (specifically including the actual or constructive tendering of shares in payment of an exercise price and the withholding of option shares from delivery in satisfaction of applicable tax withholding requirements) to the extent such method is permitted under the applicable equity incentive plan and award agreement.

(b) Notwithstanding anything in this Agreement to the contrary, Greatbatch and Nuvectra agree to negotiate in good faith regarding the need for any treatment different from that otherwise provided herein to ensure that (i) a federal income tax deduction for the payment of any annual incentive or long-term incentive award, or other compensation is not limited by reason of Code Section 162(m), and (ii) the treatment of such annual incentive or long-term incentive award, or other compensation does not cause the imposition of a tax under Code Section 409A.

Section 3.4 Cash Incentive Awards . Nuvectra shall assume and perform all liabilities with respect to the participation of each Nuvectra Employee in any cash-based annual bonus or other cash incentive compensation plan of Greatbatch (including, for avoidance of doubt, any cash-based transition bonus agreement or arrangement entered into in connection with the Distribution) with respect to performance periods that are ongoing as of the Distribution Date. Greatbatch shall, as it determines in its sole discretion, (i) pay each Nuvectra Employee directly for any amount owed or (ii) reimburse Nuvectra in full after Nuvectra’s payment in full of each amount owed to a Nuvectra Employee, in either case, that was earned for fiscal year 2015 performance under Greatbatch’s cash incentive compensation plan.

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ARTICLE IV

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 4.1 General Principles .

(a) Each member of the Greatbatch Group and each member of the Nuvectra Group shall take any and all reasonable action as shall be necessary or appropriate so that active participation in the Greatbatch 401(k) Plan and Greatbatch Welfare Plans by all Nuvectra Employees and Former Nuvectra Employees shall terminate in connection with the Distribution effective as of 11:59 p.m. on the Distribution Date, and each member of the Nuvectra Group shall cease to be a participating employer under the terms of such Greatbatch 401(k) Plan and Greatbatch Welfare Plans as of such time. Except as otherwise provided in this Agreement, one or more members of the Nuvectra Group (as designated by Nuvectra) shall assume, effective as of the Distribution Date, all employee benefits liabilities for Nuvectra Employees and Former Nuvectra Employees, and the assets relating to such employee benefits for Nuvectra Employees and Former Nuvectra Employees shall be transferred to one or more members of the Nuvectra Group (as designated by Nuvectra); and one or more members of the Greatbatch Group (as designated by Greatbatch) shall continue to be responsible for or assume all employee benefits liabilities for Greatbatch Employees and Former Greatbatch Employees and the assets relating to such employee benefits for Greatbatch Employees and Former Greatbatch Employees shall be transferred to or continue to be held by one or more members of the Greatbatch Group (as designated by Greatbatch).

(b) Except as otherwise provided in this Agreement, effective as of the day after the Distribution Date, one or more members of the Nuvectra Group (as determined by Nuvectra) shall assume or continue the sponsorship of, and no member of the Greatbatch Group shall have any further liability for or under, the following agreements, obligations and liabilities, and Nuvectra shall indemnify each member of the Greatbatch Group, and the officers, directors, and employees of each member of the Greatbatch Group, and hold them harmless with respect to such agreements, obligations or liabilities:

(i) any and all individual agreements entered into between any member of the Greatbatch Group and any Nuvectra Employee or Former Nuvectra Employee;

(ii) any and all agreements entered into between any member of the Greatbatch Group and any individual who is an independent contractor providing services primarily for the business activities of the Nuvectra Group;

(iii) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), commissions and bonuses payable to any Nuvectra Employees or Former Nuvectra Employees after the Distribution Date, without regard to when such wages, salaries, incentive compensation, commissions and bonuses are or may have been earned;

(iv) any and all moving expenses and obligations related to relocation, repatriation, transfers or similar items incurred by or owed to any Nuvectra Employees or Former Nuvectra Employees, whether or not accrued as of the Distribution Date (other than such expenses and obligations incurred by Greatbatch on or prior to the Distribution Date as a result of which there is an existing liability as of the Distribution Date);

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(v) any and all immigration-related, visa, work application or similar rights, obligations and liabilities related to any Nuvectra Employees or Former Nuvectra Employees; and

(vi) any and all liabilities and obligations whatsoever with respect to claims made by or with respect to any Nuvectra Employees or Former Nuvectra Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the Greatbatch Group pursuant to this Agreement, including such liabilities relating to actions or omissions of or by any member of the Nuvectra Group or any officer, director, employee or agent thereof on or prior to the Distribution Date.

(c) Except as otherwise provided in this Agreement, effective as of the day after the Distribution Date, no member of the Nuvectra Group shall have any further liability for, and Greatbatch shall indemnify each member of the Nuvectra Group, and the officers, directors, and employees of each member of the Nuvectra Group, and hold them harmless with respect to any and all liabilities and obligations whatsoever with respect to, claims made by or with respect to any Greatbatch Employees or Former Greatbatch Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the Nuvectra Group pursuant to this Agreement, including such liabilities relating to actions or omissions of or by any member of the Greatbatch Group or any officer, director, employee or agent thereof on or prior to the Distribution Date.

(d) This Agreement is not intended and shall not create any third party rights or provide any Nuvectra Employee, Former Nuvectra Employee, Greatbatch Employee or Former Greatbatch Employee (or any beneficiary or dependent thereof) with any rights to any specific benefits or, in the case of active employees, continued employment.

Section 4.2 Sponsorship and/or Establishment of Nuvectra Plans . Except as otherwise provided in this Agreement, sponsorship of benefit plans that cover solely Nuvectra Employees, and to the extent applicable, Former Nuvectra Employees, shall become effective on or before the Distribution Date by the member of the Nuvectra Group as identified in this Agreement, and to the extent necessary to achieve such sponsorship, each member of the Greatbatch Group and each member of the Nuvectra Group shall take appropriate action, including transfer of sponsorship of each such plan.

Section 4.3 Service Credit .

(a) Service for Eligibility and Vesting Purposes . Except as otherwise provided in any other provision of this Agreement, for purposes of eligibility and vesting under the Nuvectra 401(k) Plan and Nuvectra Welfare Plans, Nuvectra shall, and shall cause each member of the Nuvectra Group to, credit each Nuvectra Employee and Former Nuvectra Employee with service for any period of employment with any member of the Greatbatch Group on or prior to the Distribution Date to the same extent that such service would be credited for the same purpose if it had been performed for a member of the Nuvectra Group.

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(b) Service for Benefit Purposes . Except as otherwise provided in any other provision of this Agreement, for purposes of benefit levels and accruals and benefit commencement entitlements under the Nuvectra 401(k) Plan and Nuvectra Welfare Plans, Nuvectra shall, and shall cause each member of the Nuvectra Group to, credit each Nuvectra Employee and Former Nuvectra Employee with service for any period of employment with any member of the Greatbatch Group on or prior to the Distribution Date to the same extent that such service is taken into account for the same purpose pursuant to the terms of the Greatbatch 401(k) Plan and Greatbatch Welfare Plans.

(c) Evidence of Prior Service . Notwithstanding anything to the contrary, but subject to applicable law, upon reasonable request by one Party to the other Party, the first Party will provide to the other Party information relating to and confirming service for purposes of seniority (or seniority date) and service date for such Employees for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any Employee.

Section 4.4 Plan Administration .

(a) Transition Services . The Parties acknowledge that the Greatbatch Group may provide administrative services for certain of the Nuvectra Group’s benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by applicable health information privacy laws) in connection with such administrative services.

(b) Administration . Nuvectra shall use commercially reasonable efforts to, and shall cause each member of the Nuvectra Group to use commercially reasonable efforts to, administer its benefit plans in a manner that does not jeopardize the tax-favored status of the tax-favored benefit plans maintained by any member of the Greatbatch Group. Greatbatch shall use commercially reasonable efforts to, and shall cause each member of the Greatbatch Group to use commercially reasonable efforts to, administer its benefit plans in a manner that does not jeopardize the tax-favored status of the tax-favored benefit plans maintained by any member of the Nuvectra Group.

(c) Participant Elections and Beneficiary Designations . All participant elections and beneficiary designations made under any plan sponsored by a member of the Greatbatch Group prior to the Distribution Date as of which assets or liabilities relating to that plan are transferred or allocated to a member of the Nuvectra Group shall continue in effect under any plan maintained by any member of the Nuvectra Group to which liabilities are transferred or allocated pursuant to this Agreement until such time as any applicable participant changes his elections or beneficiary designations in accordance with the procedures of the relevant plan, including deferral, investment, and payment form elections, dividend elections, coverage options and levels, beneficiary designations and the rights of alternate payees under qualified domestic relations orders.

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ARTICLE V

401(K) PLANS

Section 5.1 General Principles . Effective on or before the Distribution Date, Nuvectra (or another member of the Nuvectra Group) shall establish and adopt a qualified employee cash or deferred arrangement under Code Section 401(k) (the “Nuvectra 401(k) Plan”) intended to be qualified under Code Section 401(a) and containing provisions that will provide, among other things, benefits for each Nuvectra Employee and Former Nuvectra Employee who was a participant (or former participant with a remaining account balance) in the Greatbatch 401(k) Plan as of the Distribution Date (and each beneficiary and alternate payee of such person) (the “Nuvectra 401(k) Plan Beneficiaries”) substantially the same in all material respects (provided that no reduction in accrued benefits results (except as provided in this Article V)) to those in effect for the Nuvectra 401(k) Plan Beneficiaries under the Greatbatch 401(k) Plan as of the date of transfer of assets and liabilities with respect to such Nuvectra 401(k) Plan (as described below). Each Nuvectra Employee who was an active participant in the Greatbatch 401(k) Plan on the Distribution Date shall participate in the Nuvectra 401(k) Plan effective from and after the Distribution Date. Nuvectra Employees and Former Nuvectra Employees shall not make or receive additional contributions under the Greatbatch 401(k) Plan after the Distribution Date. A Greatbatch Employee or Former Greatbatch Employee shall not participate in the Nuvectra 401(k) Plan.

Section 5.2 Transfer of Accounts . On or as soon as practicable after the Distribution Date, Greatbatch shall cause to be transferred from the trust under the Greatbatch 401(k) Plan to the trust under the Nuvectra 401(k) Plan the aggregate amount that was credited to the accounts of the Nuvectra 401(k) Plan Beneficiaries as of such transfer date. The transfer shall, to the extent reasonably possible, be an in-kind transfer, subject to the reasonable consent of the trustee of the Nuvectra 401(k) Plan trust and shall include the transfer of the aggregate assets held in the accounts relating to each Nuvectra 401(k) Plan Beneficiary under the Greatbatch 401(k) Plan and any participant loan notes held under such plans. The transfer of assets shall be conducted in accordance with Code Section 414(l), Treasury Regulation Section 1.414(l)-1 and ERISA Section 208. During the period after the Distribution Date and before such transfer of assets, with respect to any Nuvectra Employee or Former Nuvectra Employee who has an outstanding loan balance under the Greatbatch 401(k) Plan, Greatbatch shall provide that any amount received as payment on any such loan, in accordance with its terms, is timely remitted as directed by the administrator of the Greatbatch 401(k) Plan for crediting under the Greatbatch 401(k) Plan in respect of such loan, and Greatbatch shall cause the administrator of the Greatbatch 401(k) Plan to apply such amounts in satisfaction of such loan.

Section 5.3 Employer Securities . Greatbatch and Nuvectra each presently intend to preserve the right, for a period of time, of Greatbatch Employees and Nuvectra Employees to receive distributions in kind from, respectively, the Greatbatch 401(k) Plan and the Nuvectra 401(k) Plan if, and to the extent, investments under such plans are comprised of Greatbatch Common Stock or Nuvectra Common Stock. Each of Greatbatch and Nuvectra shall determine the extent to which and when Greatbatch Common Stock (in the case of the Nuvectra 401(k) Plan) and Nuvectra Common Stock (in the case of the Greatbatch 401(k) Plan) shall cease to be an investment alternative thereunder.

Section 5.4 Third-Party Vendors . Except as provided below, to the extent the Greatbatch 401(k) Plan is administered by a third-party vendor, Greatbatch and Nuvectra will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor

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for Nuvectra and to maintain any pricing discounts or other preferential terms for both Greatbatch and Nuvectra for a reasonable term with respect to such vendor. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party with respect to any third-party vendors. Each Party shall be responsible for any additional charges or administrative fees that such Party may incur pursuant to this Section 5.4 .

ARTICLE VI

WELFARE PLANS

Section 6.1 Establishment of Nuvectra Welfare Plans .

(a) Except as provided below, the members of the Nuvectra Group who had previously adopted a Greatbatch Welfare Plan and were participating employers therein on the Distribution Date (“Participating Nuvectra Employers”) shall on or before 11:59 p.m. on that date, withdraw from such participation, and, effective on or after the Distribution Date, Nuvectra and/or the Participating Nuvectra Employers (with Nuvectra included in the definition of Participating Nuvectra Employers for purposes of this Article VI) shall assume sponsorship, under newly established welfare plans, of the coverage and benefits which were offered under such plans to the Nuvectra Employees and the Former Nuvectra Employees (and their eligible spouses and dependents as the case may be) of the Participating Nuvectra Employers (collectively, the “Nuvectra Welfare Plan Participants”). The appropriate members of the Nuvectra Group shall ensure that such coverage and benefits are provided to the Nuvectra Welfare Plan Participants on an uninterrupted basis. Except as provided below, effective as soon as possible after the Distribution Date, liabilities relating to the Nuvectra Welfare Plan Participants shall be spun off from each Greatbatch Welfare Plan and allocated to the corresponding new Nuvectra Welfare Plan.

(b) As a result of withdrawal from participation in the Greatbatch Welfare Plans by the Participating Nuvectra Employers, the Nuvectra Welfare Plan Participants ceased to be eligible for coverage as an active employee under the Greatbatch Welfare Plans at 11:59 p.m. on the Distribution Date. Nuvectra Welfare Plan Participants shall not participate in any Greatbatch Welfare Plans after 11:59 p.m. on the Distribution Date.

Section 6.2 Transitional Matters Under Nuvectra Welfare Plans .

(a) Treatment of Incurred Claims .

(i) Insured Benefits . With respect to benefits that, on or prior to the Distribution Date, were provided for under the Greatbatch Welfare Plans through the purchase of insurance, Greatbatch shall cause the Greatbatch Welfare Plans to fully perform, pay and discharge all claims of Nuvectra Welfare Plan Participants that were incurred prior to the Distribution Date.

(ii) Uninsured/Self-Insured Benefits . Except as otherwise specifically provided in this Agreement, Greatbatch shall retain all Liabilities relating to Incurred Claims under the Greatbatch Welfare Plans, and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such

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Incurred Claims. Nuvectra shall be responsible for all Liabilities relating to Incurred Claims under any Nuvectra Welfare Plan and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims.

(iii) Incurred Claims . For purposes of this Section 6.2(a) , an “Incurred Claim” is deemed to be incurred (A) with respect to medical, dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or liability; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or liability; (C) with respect to long-term disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier, giving rise to such claim or liability; and (D) with respect to a period of continuous hospitalization, upon the date of admission to the hospital, unless otherwise provided under the terms of the applicable Greatbatch Welfare Plan.

(b) Credit for Deductibles and Other Limits . With respect to each Nuvectra Welfare Plan Participant, the Nuvectra Welfare Plans will give credit in its initial plan year for any amount paid, number of services obtained or visits provided under the comparable type Greatbatch Welfare Plan by such Nuvectra Welfare Plan Participant in the plan year which includes the Distribution Date toward deductibles, number of services or visits, or other similar permissible limitations to the extent such amounts are taken into account under the comparable type Greatbatch Welfare Plan.

(c) COBRA . Effective as of the Distribution Date, Nuvectra shall be responsible for COBRA with respect to all Nuvectra Employees and Former Nuvectra Employees. As of the effective date of the Nuvectra Welfare Plan, Nuvectra will satisfy all requirements under COBRA with respect to all Nuvectra Employees under the Nuvectra Welfare Plans.

Section 6.3 Continuity of Benefits, Benefit Elections and Beneficiary Designations .

(a) Benefit Elections and Designations . As of the Distribution Date (or such other date provided for under Section 6.3(b) ), Nuvectra shall cause the Nuvectra Welfare Plans to recognize and give effect to all elections and designations (including all coverage and contribution elections and beneficiary designations) made by each Nuvectra Welfare Plan Participant under, or with respect to, the corresponding Greatbatch Welfare Plan for plan year 2016.

(b) Additional Details Regarding Flexible Spending Accounts . Effective as of the Distribution Date, a Participating Nuvectra Employer will establish under the Nuvectra Welfare Plans a health care flexible spending account and/or dependent care flexible spending account (each a “Nuvectra FSA”) for each Nuvectra Welfare Plan Participant that has a health care flexible spending account and/or dependent care flexible spending account under the Greatbatch Welfare Plans (each a “Greatbatch FSA”) immediately prior to the Distribution Date. All activity under a Nuvectra Welfare Plan Participant’s Greatbatch FSA (that is, both contributions to and expenses paid from each account) for plan year 2016 through the Distribution Date shall be treated as activity under the corresponding Nuvectra FSA, such that the Nuvectra Welfare Plan Participant’s account balance in his Nuvectra FSA on the Distribution Date will be equal to

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such participant’s Greatbatch FSA balance immediately prior to the Distribution Date. A Nuvectra Welfare Plan Participant’s Greatbatch FSA salary reduction election will apply with respect to his Nuvectra FSA for the portion of plan year 2016 beginning on the Distribution Date and ending on December 31, 2016 (the “Participation Period”). A Nuvectra Welfare Plan Participant will continue to have access to his Greatbatch FSA in accordance with its terms and conditions. Thus, the Parties agree that (i) all qualifying expenses incurred by a Nuvectra Welfare Plan Participant during a Participation Period will be reimbursed under the Nuvectra Welfare Plan Participant’s Nuvectra FSA and (ii) all qualifying expenses incurred by the Nuvectra Welfare Plan Participant for plan year 2016 prior to the Participation Period will be reimbursed under the Nuvectra Welfare Plan Participant’s Greatbatch FSA (in both cases in accordance with the applicable account’s terms and conditions and to the extent credits are available). Following the Distribution Date, with respect to the portion of plan year 2016 prior to the Participation Period, the Parties will determine and agree on the aggregate amount of Nuvectra Welfare Plan Participants’ contributions to the Greatbatch FSA (“Aggregate FSA Contribution Amount”) and the aggregate amount of Nuvectra Welfare Plan Participants’ expenses incurred and reimbursed from the Greatbatch FSA (“Aggregate FSA Expense Amount”). If the Aggregate FSA Expense Amount exceeds the Aggregate FSA Contribution Amount, Nuvectra shall reimburse Greatbatch for the total amount of the excess no later than 30 days after the Distribution Date; if the Aggregate FSA Contribution Amount exceeds the Aggregate FSA Expense Amount, Greatbatch shall reimburse Nuvectra for the total amount of the excess no later than 30 days after the Distribution Date. Within 30 days after the Distribution Date, the Parties will determine and agree on the total amount of the reimbursements made to Nuvectra Welfare Plan Participants from their Greatbatch FSAs for qualifying expenses incurred prior to the Distribution Date and Nuvectra will reimburse Greatbatch for such amount within 30 days after such determination has been made.

(c) Employer Non-Elective Contributions . As of the Distribution Date, Nuvectra shall cause any Nuvectra Welfare Plan that constitutes a cafeteria plan under Section 125 of the Code to recognize and give effect to all non-elective employer contributions payable and paid toward coverage of a Nuvectra Welfare Plan Participant under the corresponding Greatbatch Welfare Plan that is a cafeteria plan under Section 125 of the Code for the applicable cafeteria plan year.

Section 6.4 Insurance Contracts . To the extent any Greatbatch Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, Greatbatch and Nuvectra will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for Nuvectra (except to the extent changes are required under applicable state insurance laws) and to maintain any pricing discounts or other preferential terms for both Greatbatch and Nuvectra for a reasonable term under such contracts. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party under any insurance contracts. Each Party shall be responsible for any additional premiums, charges or administrative fees that such Party may incur pursuant to this Section 6.4 .

Section 6.5 Third-Party Vendors . Except as provided below, to the extent any Greatbatch Welfare Plan is administered by a third-party vendor, Greatbatch and Nuvectra will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for Nuvectra and to maintain any pricing discounts or other preferential terms for both

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Greatbatch and Nuvectra for a reasonable term with respect to such vendor. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party with respect to any third-party vendors. Each Party shall be responsible for any additional premiums, charges or administrative fees that such Party may incur pursuant to this Section 6.5 .

ARTICLE VII

WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

Effective as of the Distribution Date, Nuvectra shall have (and, to the extent it has not previously had such obligations, assume) the obligations for all claims and liabilities relating to workers’ compensation and unemployment compensation benefits for all Nuvectra Employees and Former Nuvectra Employees. Nuvectra shall use commercially reasonable efforts to provide that workers’ compensation and unemployment insurance costs are not adversely affected for either Party by reason of the Distribution.

ARTICLE VIII

EMPLOYMENT AGREEMENTS, SEVERANCE AND OTHER MATTERS

Section 8.1 Employment Agreements . Effective as of the Distribution Date, Nuvectra hereby assumes Greatbatch’s rights and obligations arising under the employment agreements described in Schedule 8.l and agrees to honor the terms and conditions of those agreements applicable to Nuvectra as a successor under the terms of such agreements. The terms of the employment agreements shall in all other respects be unaffected. The Parties agree that the Nuvectra Employees who are covered by employment agreements described above are express third party beneficiaries of this Section 8.1 .

Section 8.2 Severance .

(a) Except as otherwise provided in this Agreement, immediately following the Distribution, Greatbatch shall have no liability or obligation under any Greatbatch severance plan, program, or policy with respect to Nuvectra Employees or Former Nuvectra Employees.

(b) Except as otherwise provided in this Agreement, effective after the Distribution Date, Nuvectra shall assume and shall be responsible for administering all payments and benefits under the applicable Greatbatch severance policies or any termination agreements with Former Nuvectra Employees whose employment terminated prior to the Distribution Date for an eligible reason under such policies or in accordance with such agreements.

Section 8.3 Accrued Time Off . Nuvectra shall recognize and assume all liability for all vacation, holiday, sick leave, flex days, personal days and paid-time off with respect to Nuvectra Employees, and Nuvectra shall credit each Nuvectra Employee with such accrual.

Section 8.4 Leaves of Absence . Nuvectra will continue to apply leave of absence policies applicable to inactive Nuvectra Employees who are on an approved leave of absence as of the Distribution Date that are substantially similar in all material respects to those that were applied by Greatbatch prior to the Distribution Date. Leaves of absence taken by Nuvectra Employees prior to the Distribution Date shall be deemed to have been taken as employees of a member of the Nuvectra Group.

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Section 8.5 Restrictive Covenants in Employment and Other Agreements .

(a) To the fullest extent permitted by the agreements described in this Section 8.5(a) and applicable law, Greatbatch shall assign, or cause any member of the Greatbatch Group to assign, to Nuvectra or a member of the Nuvectra Group, as designated by Nuvectra, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the Greatbatch Group and a Nuvectra Employee or Former Nuvectra Employee, with such assignment effective as of the Distribution Date. To the extent that assignment of such agreements is not permitted, effective as of the Distribution Date, each member of the Nuvectra Group shall be considered to be a successor to each member of the Greatbatch Group for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the Greatbatch Group and a Nuvectra Employee or Former Nuvectra Employee whom Nuvectra reasonably determines have substantial knowledge of the business activities of the Nuvectra Group, such that each member of the Nuvectra Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the Nuvectra Group; provided , however , that in no event shall Greatbatch be permitted to enforce such restrictive covenant agreements against Nuvectra Employees or Former Nuvectra Employees for action taken in their capacity as employees of a member of the Nuvectra Group.

(b) To the fullest extent permitted by the agreements described in this Section 8.5(b) and applicable law, Nuvectra shall assign, or cause any member of the Nuvectra Group to assign, to Greatbatch or a member of the Greatbatch Group, as designated by Greatbatch, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the Nuvectra Group and a Greatbatch Employee or Former Greatbatch Employee, with such assignment effective as of the Distribution Date. To the extent that assignment of such agreements is not permitted, effective as of the Distribution Date, each member of the Greatbatch Group shall be considered to be a successor to each member of the Nuvectra Group for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the Nuvectra Group and a Greatbatch Employee or Former Greatbatch Employee whom Greatbatch reasonably determines have substantial knowledge of the business activities of the Greatbatch Group, such that Greatbatch and each member of the Greatbatch Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the Greatbatch Group; provided , however , that in no event shall Nuvectra be permitted to enforce such restrictive covenant agreements against Greatbatch Employees or Former Greatbatch Employees for action taken in their capacity as employees of a member of the Greatbatch Group.

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ARTICLE IX

MISCELLANEOUS

Section 9.1 Preservation of Rights to Amend . The rights of each member of the Greatbatch Group and each member of the Nuvectra Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.

Section 9.2 Confidentiality . Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith that is not otherwise public through no fault of such Party is confidential and is subject to the terms of the confidentiality provisions set forth in the Separation Agreement.

Section 9.3 Administrative Complaints/Litigation . Except as otherwise provided in this Agreement, on and after the Distribution Date, Nuvectra shall assume, and be solely liable for, the handling, administration, investigation and defense of actions, including ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims asserted at any time against Greatbatch or any member of the Greatbatch Group by any Nuvectra Employee or Former Nuvectra Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant or otherwise) to or with respect to the business activities of any member of the Nuvectra Group, whether or not such employment or services were performed before or after the Distribution. To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both Greatbatch Employees (or Former Greatbatch Employees) and Nuvectra Employees (or Former Nuvectra Employees) and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Employees included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Separation Agreement shall apply with respect to each Party’s indemnification obligations under this Section 9.3 .

Section 9.4 Reimbursement and Indemnification . Greatbatch and Nuvectra each agree to reimburse the other Party, within 30 days of receipt from the other Party of reasonable verification, for all costs and expenses which the other Party may incur on its behalf as a result of any of the respective Greatbatch and Nuvectra Welfare Plans (including, but not limited to, Nuvectra’s reimbursement of Greatbatch for all COBRA liabilities for Nuvectra Employees and Former Nuvectra Employees), 401(k) Plan and, as contemplated by Section 8.2 , any termination or severance payments or benefits. All liabilities retained, assumed or indemnified against by Nuvectra pursuant to this Agreement, and all liabilities retained, assumed or indemnified against by Greatbatch pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Separation Agreement. Notwithstanding anything to the contrary, (i) no provision of this Agreement shall require any member of the Nuvectra Group to pay or reimburse to any member of the Greatbatch Group any benefit-related cost item that a member of

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the Nuvectra Group has previously paid or reimbursed to any member of the Greatbatch Group; and (ii) no provision of this Agreement shall require any member of the Greatbatch Group to pay or reimburse to any member of the Nuvectra Group any benefit-related cost item that a member of the Greatbatch Group has previously paid or reimbursed to any member of the Nuvectra Group.

Section 9.5 Costs of Compliance with Agreement . Except as otherwise provided in this Agreement or any other Ancillary Agreement, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.

Section 9.6 Fiduciary Matters . Greatbatch and Nuvectra each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any liabilities caused by the failure to satisfy any such responsibility.

Section 9.7 Form S-8 . Before the Distribution or as soon as reasonably practicable thereafter and subject to applicable law, Nuvectra shall prepare and file with the SEC a registration statement on Form S-8 (or another appropriate form) registering under the Securities Act of 1933, as amended, the offering of a number of shares of Nuvectra Common Stock at a minimum equal to the number of shares subject to the Nuvectra Options, the Nuvectra RSAs and the Nuvectra RSUs. Nuvectra shall use commercially reasonable efforts to cause any such registration statement to be kept effective (and the current status of the prospectus or prospectuses required thereby shall be maintained) as long as any Nuvectra Options, Nuvectra RSAs, or Nuvectra RSUs may remain outstanding.

Section 9.8 Entire Agreement . This Agreement, together with the documents referenced herein (including the Separation Agreement, any other Ancillary Agreements and the plans and agreements referenced herein), constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent any provision of this Agreement conflicts with the provisions of the Separation Agreement, the provisions of this Agreement shall be deemed to control with respect to the subject matter hereof.

Section 9.9 Binding Effect; No Third-Party Beneficiaries; Assignment . This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon any third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan. Except as otherwise provided in

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Section 8.1 , the provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Party.

Section 9.10 Amendment; Waivers . No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties. Any Party may, at any time, (a) extend the time for the performance of any of the obligations or other acts of another Party, (b) waive any inaccuracies in the representations and warranties of another Party contained herein or in any document delivered pursuant hereto, and (c) waive compliance by another Party with any of the agreements, covenants or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement contained herein, nor shall any single or partial exercise of any such right preclude other or further exercises thereof or of any other right.

Section 9.11 Remedies Cumulative . All rights and remedies existing under this Agreement or the Schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 9.12 Notices . Unless otherwise expressly provided herein, all notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to be duly given: (a) when personally delivered, (b) if mailed by registered or certified mail, postage prepaid, return receipt requested, on the date the return receipt is executed or the letter is refused by the addressee or its agent, (c) if sent by overnight courier which delivers only upon the executed receipt of the addressee, on the date the receipt acknowledgment is executed or refused by the addressee or its agent, or (d) if sent by facsimile or electronic mail, on the date confirmation of transmission is received (provided that a copy of any notice delivered pursuant to this clause (d) shall also be sent pursuant to clause (a), (b) or (c)), addressed to the attention of the addressee’s General Counsel at the address of its principal executive office or to such other address or facsimile number for a Party as it shall have specified by like notice.

Section 9.13 Counterparts; Facsimile Signatures . This Agreement, including the Schedules hereto and the other documents referred to herein, may be executed in multiple counterparts, each of which when executed shall be deemed to be an original but all of which together shall constitute one and the same agreement. Delivery of an executed signature page to this Agreement, and any of the other agreements, documents and instruments contemplated hereby, by facsimile transmission shall be as effective as delivery of a manually signed counterpart hereof or thereof.

Section 9.14 Severability . If any term or other provision of this Agreement or the Schedules attached hereto is determined by a non-appealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and

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effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

Section 9.15 Governing Law . To the extent not preempted by applicable federal law, this Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware without regard to any conflicts of law provisions thereof that would result in the application of the laws of any other jurisdiction.

Section 9.16 Performance . Each of Greatbatch and Nuvectra shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any member of the Greatbatch Group and any member of the Nuvectra Group, respectively. The Parties each agree to take such further actions and to execute, acknowledge and deliver, or to cause to be executed, acknowledged and delivered, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

Section 9.17 Construction . This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against any Party.

Section 9.18 Effect if Distribution Does Not Occur . Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF , the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.


GREATBATCH, INC.

By:
Name:
Title:

QIG GROUP, LLC
(to be converted into Nuvectra Corporation)

By:
Name:
Title:

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Exhibit 10.5

PRODUCT COMPONENT FRAMEWORK AGREEMENT

This PRODUCT COMPONENT FRAMEWORK AGREEMENT (the “ Agreement ”), effective the day of , (the “Effective Date”) is by and between Greatbatch Ltd. , a New York corporation, located at 10000 Wehrle Drive, Clarence, New York, 14031, (“ Greatbatch ”) and QiG Group, LLC , a Delaware limited liability company, located at 5700 Granite Parkway, Suite 960, Plano, Texas, 75024 (“ QiG Group ”). Greatbatch and QiG Group are referred to collectively as the “Parties” and individually as a “Party,”

RECITALS:

WHEREAS , QiG Group and Greatbatch entered into that certain Restricted License Agreement, dated , , pursuant to which QiG Group licensed to Greatbatch certain of its intellectual property (the “ Restricted License Agreement ”);

WHEREAS , QiG Group and Greatbatch entered into that certain Unrestricted License Agreement, dated , , pursuant to which QiG Group licensed to Greatbatch certain of its intellectual property (the “ Unrestricted License Agreement ”);

WHEREAS, QiG Group desires to purchase, and require the QiG Affiliates and the QiG Licensees to purchase, exclusively from Greatbatch, all Product Components for each Product it or they, as applicable, may develop or have developed on its or their behalf;

WHEREAS, Greatbatch is in the business of manufacturing and supplying Product Components; and

WHEREAS, the Parties desire to establish a framework of the terms and conditions that shall apply to QiG Group’s or each QiG Licensee’s or QiG Affiliate’s, as applicable, purchase of all Product Components exclusively from Greatbatch.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, Greatbatch and QiG Group hereby agree as follows:

Article I.

DEFINITIONS

As used in this Agreement, the following capitalized terms, whether used in the singular or plural, shall have the meanings set forth in this Article I:

Section 1.01 “ Affiliate ” means, with respect to any Person, any other Person which controls, is controlled by or is under common control with such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. Without limiting the generality of the foregoing, a Person shall be deemed to control another Person if any of the following conditions is met: (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities

Section 1.02 “ Change of Control ” means (i) a consolidation or merger of a party or other change of control transaction (other than a merger to reincorporate a party in a different jurisdiction) in which the shareholders or members, as applicable, of a party immediately prior to such transaction do not continue to hold a greater than 50% interest in the successor or survivor entity immediately following such transaction, (ii) a transaction or series of transactions that results in the transfer of more than 50% of the voting power of a party to an unaffiliated Person or (iii) the sale, lease, transfer or other disposition of all or substantially all of the assets of a party (which shall include any effective transfer of such assets regardless of the structure of any such transaction as a license or otherwise).

Section 1.03 “ FDA ” means the United States Food and Drug Administration or any successor entity.

Section 1.04 “ FDA Approval ” means the receipt of all Regulatory Approvals from the FDA that would permit a Person to sell the Products in the United States.

Section 1.05 “ Field of Use ” means sacral nerve stimulation and/or deep brain stimulation.

Section 1.06 “ Initial Term ” has the meaning set forth in Section 2.01.

Section 1.07 “ Licensed IP ” has the meaning in the Restricted License Agreement and the Unrestricted License Agreement.

Section 1.08 “Person ” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).

Section 1.09 “ Product ” means any product for applications in the Field of Use that are currently in development or that may be developed by QiG Group or by any QiG Affiliates or QiG Licensees that is based on, uses or incorporates the Licensed IP including, without limitation, the Pelvistim sacral nerve stimulation system currently under development (the “ Pelvistim System ”); provided that nothing herein is intended to include any surgical accessories or peripheral devices, including, without limitation, torque wrenches, introducers, tunneling tools, adjustable belts, patient programmers, clinician programmers, external pulse generators and patient feedback tools.

Section 1.10 “ Product Components ” means all products, parts or components that are based on, uses or incorporates any Licensed IP and that are intended to be incorporated within, used in conjunction with or sold as part of any Product, including, but not limited to, the Pelvistim System or a deep brain stimulation system medical device ).

Section 1.11 “ QiG Affiliates ” means each direct or indirect Affiliate of QiG Group.

Section 1.12 “ QiG Licensees ” means each Person to which QiG Group licenses any or all of its rights to and under the Licensed IP.

Section 1.13 “ QiG Supply Agreement ” means that certain Supply Agreement, effective January [ ], 2016, by and between Greatbatch and QiG Group.

Section 1.14 “ Regulatory Approvals ” means all approvals necessary for the commercial sale of a Product for any indication in a given country or regulatory jurisdiction, which shall include satisfaction of all applicable regulatory and notification requirements, but which shall exclude any pricing and reimbursement approvals.

Section 1.15 “ Renewal Term ” has the meaning set forth in Section 2.03.

Section 1.16 “ Steering Committee ” has the meaning set forth in Section 3.02.

Section 1.17 “ Steering Committee Representative ” has the meaning set forth in Section 3.02.

Section 1.18 “ Substantial Completion ” means that a Product or Product Component has substantially completed all design, development and testing phases and such Product or Product Component, as applicable, is ready for submission to obtain Regulatory Approval or, if Regulatory Approval is not required, is ready for commercial sale.

Section 1.19 “Supply Agreement” has the meaning set forth in Section 2.03.

Section 1.20 “ Term ” has the meaning set forth in Section 4.01.

Article II.

SALE AND PURCHASE OBLIGATIONS

Section 2.01 Except as set forth in this Article II and provided that the QiG Supply Agreement has not been terminated by QiG Group pursuant to Section III.A(i) or Section III.A(ii) thereof, QiG Group agrees to purchase, and require each QiG Affiliate and QiG Licensee to purchase, exclusively from Greatbatch, all of its or their, as applicable, requirements for Product Components with respect to each Product it or they, as applicable, develops or has developed on its or their behalf. With respect to each Product, the period during which QiG Group, a QiG Affiliate or a QiG Licensee, as applicable, shall be required to purchase all such Product Components with respect to such Product exclusively from Greatbatch shall commence upon the Substantial Completion of the development of such Product and continue until the date that is five (5) years after the date of receipt of FDA Approval for such Product (the “ Initial Term ”); provided, however, if the Product is to never be sold in the United States or does not need FDA Approval to be sold in the United States, the “Initial Term” shall be the period commencing upon the Substantial Completion of the development of such Product and ending on the date that is five (5) years after the date of (i) receipt of Regulatory Approval outside the United States for such Product if Regulatory Approval is necessary to permit the sale of such Product outside the United States, or (ii) the first commercial sale of such Product if no Regulatory Approvals are necessary to permit the sale of such Products.

Section 2.02 Upon the Substantial Completion of a Product and prior to QiG Group, or any QiG Affiliates or QiG Licensees purchasing any such Product or Product Components with respect to such Product from a third party, QiG Group will promptly notify Greatbatch of such Substantial Completion and, if Greatbatch elects to be the exclusive manufacturer of the Product Components with respect to such Product, the Parties agree (and QiG Group shall cause the QiG Affiliates and the QiG Licensees to agree) to negotiate exclusively and in good faith for a period not to exceed 120 days regarding entry into a definitive manufacturing and supply agreement for the manufacture and supply of Product Components with respect to such Product(s) (each, a “ Supply Agreement ”), which shall document the purchase and sale obligations described in Sections 2.01 and 2.04 below with respect to such Product(s). The Supply Agreement shall contain terms and conditions substantially similar to the terms of the QiG Supply Agreement, a copy of which is attached hereto as Exhibit A , including, without limitation, (i) pricing for such Product Components that allows each party to achieve substantially similar profit margins as achieved by such party pursuant to the QiG Supply Agreement, (ii) a provision that is substantially similar to Section II.A. of the QiG Supply Agreement, (iii) a term provision reflecting the Initial Term and a requirement that such Supply Agreement shall automatically be renewed after the Initial Term for successive terms of one (1) year each (each a “ Renewal Term ”) unless notice of non-renewal or termination is given not less than three (3) months prior to the expiration of such Initial Term or Renewal Term, (iv) a right of first refusal provision substantially similar to Section II.C of the QiG Supply Agreement, (v) warranty periods, indemnities, limits of liability and manufacturing, quality and supply obligations substantially similar to those set forth in the QiG Supply Agreement, and (vi) a “Field of Use” definition that reasonably reflects the field of use for such Product.

Section 2.03 If, despite good faith and commercially reasonable efforts, Greatbatch and QiG Group, or an QiG Affiliate or QiG Licensee, as applicable, do not execute and deliver a new Supply Agreement within 120 days of QiG Group’s, QiG Affiliate’s or QiG Licensee’s, as

applicable, notice to Greatbatch of Substantial Completion of development of a new Product or Product Component, as applicable, QiG Group, or such QiG Affiliate or QiG Licensee, as applicable, shall be free to negotiate a manufacturing and supply agreement with any other third party supplier (a “ Third Party Supplier Agreement ”), provided that prior to QiG Group’s, QiG Affiliate’s or QiG Licensee’s, as applicable, execution of a Third Party Supplier Agreement, QiG Group, or such QiG Affiliate or QiG Licensee, as applicable, will provide to Greatbatch the key terms of such proposed Third Party Supplier Agreement and for a period lasting at least fourteen (14) days after Greatbatch’s receipt of such terms, Greatbatch will have the opportunity to enter into a manufacturing and supply agreement with QiG Group, or such QiG Affiliate or QiG Licensee, as applicable, on terms substantially consistent with such Third Party Supply Agreement. For the avoidance of doubt, the Parties agree that if the QiG Supply Agreement has been terminated by QiG Group pursuant to Section III.A(i) or Section III.A(ii) thereof, this Agreement will no longer be in effect and QiG Group, QiG Affiliates and QiG Licensees may seek another third party supplier to manufacture any Products or Product Components that are subject to this Article II.

Section 2.04 In the event that Greatbatch elects to be the exclusive manufacturer of the Product Components with respect to such Product, Greatbatch agrees that it shall, subject to the terms of the applicable Supply Agreement and during each such Initial Term, manufacture and sell to QiG Group and each of the QiG Affiliates and QiG Licensees all Product Components as may be ordered by QiG Group, the QiG Affiliates, or the QiG Licensees with respect to the Product.

Article III.

PRODUCT DESIGN AND MANUFACTURING INPUT

Section 3.01 During the Term, QiG Group will provide Greatbatch through the Parties’ respective Steering Committee Representatives with information regarding, and an opportunity to participate in, all product design programs and planning for any Product Components for each Product being developed. In connection therewith, QiG Group shall provide to Greatbatch from time to time with information that may be relevant to the manufacture, design, testing and production of any Product Components. In addition, to the extent practical, QiG Group shall notify Greatbatch in advance and permit Greatbatch to be present and to participate in appropriate planning meetings with respect to the Product Components of each Products.

Section 3.02 Steering Committee .

(a) Each party shall designate three (3) individuals (“ Steering Committee Representatives ”) who shall be its representatives on the steering committee (the “ Steering Committee ”) and responsible for monitoring implementation and coordination of the Parties’ respective obligations under this Agreement. At least one of the Steering Committee Representatives from each Party shall have authority to make decisions regarding all matters within the scope of this Agreement. Each Party shall have the right, at any time, to notify the other Party of any change in any of its Steering Committee Representatives, and to send an alternate to any meeting of the Steering Committee.

(b) The Steering Committee shall determine the frequency of its meetings, which shall meet no less frequently than quarterly, and may meet more often to the extent

reasonably requested by either Party. There shall be two (2) Steering Committee Representatives from each Party at any formal meeting of the Steering Committee. The Steering Committee will designate one (1) of the Steering Committee Representatives to record minutes of any material recommendations made at each meeting.

(i) generally, to monitor implementation of this Agreement and the Parties’ performance of their respective obligations hereunder and under each Supply Agreement, including the QiG Supply Agreement;

(ii) negotiate, in good faith, on the pricing terms, specifications and other terms and conditions of any Supply Agreement;

(iii) to monitor cooperation and progress with respect to each Party’s input on, and development of, Product Components; and

(iv) to attempt to informally resolve any issues or disputes arising under this Agreement or any Supply Agreement, including the QiG Supply Agreement.

Article IV.

TERM

Section 4.01 This Agreement will be in full force and effect from the Effective Date until the Parties agree in writing to terminate this Agreement (the “ Term ”).

Article V.

MISCELLANEOUS

Section 5.01 Amendment . This Agreement may not be modified, changed or terminated orally. No change, modification, addition, or amendment shall be valid unless in writing indicating an intent to modify this Agreement and signed by an authorized officer of each Party.

Section 5.02 No Waiver . The failure of any Party to enforce at any time or for any period any of the provisions of this Agreement shall not be construed to be waiver of those provisions or of the right of that Party thereafter to enforce each and every provision hereof. No rights under this Agreement shall be waived except by an instrument in writing signed by the Party sought to be charged with such waiver.

Section 5.03 Assignment . This Agreement shall be binding upon, and shall inure to the benefit of, the Parties’ respective successors and permitted assigns. This Agreement shall not be assignable by QiG Group or Greatbatch without the prior written consent of the other; provided , however , that, upon thirty (30) days’ prior written notice to the non-assigning Party, such Party, (i) may assign this Agreement, in whole or in part, to any Affiliate provided that it shall remain primarily liable under this Agreement and/or (ii) shall assign this Agreement to its successor in connection with a Change of Control provided that such successor, in the reasonable judgment of the non-assigning Party is able to perform the assigning Party’s obligations under this Agreement and/or the applicable unexecuted Supply Agreement, if any.

Section 5.04 Notices . Unless otherwise provided in this Agreement, any notice to be given hereunder shall be in writing and (a) delivered personally (to be effective when so delivered), (b) mailed by registered or certified mail, return receipt requested (to be effective four days after the date it is mailed) or (c) sent by Federal Express or other overnight courier service (to be effective when received by the addressee), to the following addresses (or to such other addresses which any Party shall designate in writing to the other Party):

If to Greatbatch:

Greatbatch Ltd.

10000 Wehrle Drive

Clarence, NY 14031

Attention: General Counsel

If to QiG Group:

QiG Group, LLC

5700 Granite Parkway, Suite 960

Plano, Texas, 75024

Attention: Chief Executive Officer

Section 5.05 Successors and Assigns . This Agreement is binding on and inures to the benefit of the Parties and their respective permitted successors and permitted assigns.

Section 5.06 Injunctive Relief . The Parties hereto agree that irreparable harm would occur in the event that any of the agreements or provisions of this Agreement were not performed fully by the Parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of the Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the Parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the Parties hereto shall be entitled to an injunction or injunctions, without the necessity of proving actual damages, to restrain, enjoin and prevent breaches of this Agreement by the other Parties and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, such remedy being in addition to, and not in lieu of, any other rights and remedies to which the other Parties are entitled to at law or in equity.

Section 5.07 Governing Law . This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without giving effect to the provisions, policies or principles thereof relating to choice or conflict of laws.

Section 5.08 Waiver of Jury Trial . Each Party acknowledges and agrees that any controversy that may arise under this Agreement, including any appendices attached to this Agreement, is likely to involve complicated and difficult issues and, therefore, each such Party

irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement, including any appendices attached to this Agreement, or the transactions contemplated hereby.

Section 5.09 No Third-Party Beneficiaries . This Agreement benefits solely the Parties to this Agreement and their respective permitted successors and permitted assigns and nothing in this Agreement, express or implied, confers on any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 5.10 Titles of Sections . The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

Section 5.11 Entire Agreement . This Agreement, the Restricted License Agreement and the Unrestricted License Agreement constitutes the entire agreement among the Parties hereto with respect to the subject matter hereof and thereof, and supersedes any prior agreement or understanding among the Parties hereto with respect to the subject matter hereof. For the avoidance of doubt, nothing in this Agreement shall expand the rights of Greatbatch under the Restricted License Agreement or the Unrestricted License Agreement.

Section 5.12 Counterparts . This Agreement may be executed either directly or by an attorney-in-fact, in any number of counterparts of the signature pages, each of which shall be considered an original. Facsimile or pdf transmission of an executed counterpart of this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart, and such facsimile or pdf signatures shall be deemed original signatures for purposes of enforcement and construction of this Agreement.

Section 5.13 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be enforced to the maximum extent possible without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their authorized representatives.


QiG Group, LLC						Greatbatch Ltd.

By:						By:
Name:						Name:
Title:						Title:
Date:						Date:

Exhibit 10.6

OFFICER INDEMNIFICATION AGREEMENT

This Officer Indemnification Agreement, dated as of (this “ Agreement ”), is made by and between Nuvectra Corporation, a Delaware corporation (the “ Company ”), and (“ Indemnitee ”).

RECITALS :

A. Pursuant to Sections 141 and 142 of the General Corporation Law of the State of Delaware, significant authority with respect to the management of the Company has been delegated to the officers of the Company.

B. Thus, it is critically important to the Company and its stockholders that the Company be able to attract and retain the most capable persons reasonably available to serve as officers of the Company.

C. In recognition of the need for corporations to be able to induce capable and responsible persons to accept positions in corporate management, Delaware law authorizes (and in some instances requires) corporations to indemnify their directors and officers, and further authorizes corporations to purchase and maintain insurance for the benefit of their directors and officers.

D. The Delaware courts have recognized that indemnification by a corporation serves the dual policies of (1) allowing corporate officials to resist unjustified lawsuits, secure in the knowledge that, if vindicated, the corporation will bear the expense of litigation and (2) encouraging capable women and men to serve as corporate directors and officers, secure in the knowledge that the corporation will absorb the costs of defending their honesty and integrity.

E. Under Delaware law, an officer’s right to be reimbursed for the costs of defense of criminal actions, whether such claims are asserted under state or federal law, does not depend upon the merits of the claims asserted against the officer and is separate and distinct from any right to indemnification the officer may be able to establish, and indemnification of the officer against criminal fines and penalties is permitted if the officer satisfies the applicable standard of conduct.

F. Indemnitee is an officer of the Company and his/her willingness to serve in such capacity is predicated, in substantial part, upon the Company’s willingness to indemnify him/her in accordance with the principles reflected above, to the fullest extent permitted by the laws of the state of Delaware, and upon the other undertakings set forth in this Agreement.

G. Therefore, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s continued service as an officer of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or by-laws (collectively, the “ Constituent Documents ”), any change in the composition of the Company’s Board of Directors (the “ Board ”) or any change-in-control or

business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancement of Expenses (as defined in Section 1(e)) to Indemnitee as set forth in this Agreement and for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

H. In light of the considerations referred to in the preceding recitals, it is the Company’s intention and desire that the provisions of this Agreement be construed liberally, subject to their express terms, to maximize the protections to be provided to Indemnitee hereunder.

AGREEMENT :

NOW, THEREFORE, the parties hereby agree as follows:

1. Certain Definitions . In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:

(a) An “ Affiliate ” of, or a Person “Affiliated” with, a specified Person, means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under current control with, the Person specified.

(b) “ Change in Control ” means:

(i) any acquisition or series of acquisitions by any Person other than the Company, any of the subsidiaries of the Company, any employee benefit plan of the Company, or any of their subsidiaries, or any Person holding common shares of the Company for or pursuant to the terms of such employee benefit plan, that results in that Person becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of either the then outstanding shares of the common stock of the Company (“ Outstanding Company Common Stock ”) or the combined voting power of the Company’s then outstanding securities entitled to then vote generally in the election of directors of the Company (“ Outstanding Company Voting Securities ”), except that any such acquisition of Outstanding Company Common Stock or Outstanding Company Voting Securities will not constitute a Change in Control while such Person does not exercise the voting power of its Outstanding Company Common Stock or otherwise exercise control with respect to any matter concerning or affecting the Company, or Outstanding Company Voting Securities, and promptly sells, transfers, assigns or otherwise disposes of that number of shares of Outstanding Company Common Stock necessary to reduce its beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of the Outstanding Company Common Stock to below 30%.

(ii) during any period not longer than 24 consecutive months, individuals who at the beginning of such period constitute the Board cease to constitute at least a majority of the Board, unless the election, or the nomination for election by the Company’s stockholders, of each new Board member was approved by a vote of at least 3/4ths of the Board members then still in office who were Board members at the beginning of such period (including for these purposes, new members whose election or nomination was so approved).

(iii) approval by the stockholders of the Company of:

(A) a dissolution or liquidation of the Company,

(B) a sale of 50% or more of the assets of the Company, taken as a whole (with the stock or other ownership interests of the Company in any of its subsidiaries constituting assets of the Company for this purpose) to a Person that is not an Affiliate of the Company (for purposes of this paragraph “sale” means any change of ownership), or

(C) an agreement to merge or consolidate or otherwise reorganize, with or into one or more Persons that are not Affiliates of the Company, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity immediately after any such merger, consolidation or reorganization are, or will be, owned, directly or indirectly, by stockholders of the Company immediately before such merger, consolidation or reorganization (assuming for purposes of such determination that there is no change in the record ownership of the Company’s securities from the record date for such approval until such merger, consolidation or reorganization and that such record owners hold no securities of the other parties to such merger, consolidation or reorganization), but including in such determination any securities of the other parties to such merger, consolidation or reorganization held by Affiliates of the Company.

(c) “ Claim ” means (i) any threatened, asserted, pending or completed claim, demand, action, suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; and (ii) any threatened, pending or completed inquiry or investigation, whether made, instituted or conducted by the Company or any other person, including without limitation any federal, state or other governmental entity, that Indemnitee determines might lead to the institution of any such claim, demand, action, suit or proceeding.

(d) “ Controlled Affiliate ” means any corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise, whether or not for profit, that is directly or indirectly controlled by the Company. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity or enterprise, whether through the ownership of voting securities, through other voting rights, by contract or otherwise; provided that direct or indirect beneficial ownership of capital stock or other interests in an entity or enterprise entitling the holder to cast 20% or more of the total number of votes generally entitled to be cast in the election of directors (or persons performing comparable functions) of such entity or enterprise shall be deemed to constitute control for purposes of this definition.

(e) “ Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

(f) “ Exchange Ac t ” means the Securities Exchange Act of 1934, as amended.

(g) “ Expenses ” means attorneys’ and experts’ fees and expenses and all other costs and expenses paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in (including on appeal), any Claim. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(h) “ Incumbent Directors ” means the individuals who, as of the date hereof, are Directors of the Company and any individual becoming a Director subsequent to the date hereof whose election, nomination for election by the Company’s stockholders, or appointment, was approved by a vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination); provided , however , that an individual shall not be an Incumbent Director if such individual’s election or appointment to the Board occurs as a result of an actual or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

(i) “ Indemnifiable Claim ” means any Claim based upon, arising out of or resulting from (i) any actual, alleged or suspected act or failure to act by Indemnitee in his or her capacity as a director, officer, employee or agent of the Company or as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise, whether or not for profit, as to which Indemnitee is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent, (ii) any actual, alleged or suspected act or failure to act by Indemnitee in respect of any business, transaction, communication, filing, disclosure or other activity of the Company or any other entity or enterprise referred to in clause (i) of this sentence, or (iii) Indemnitee’s status as a current or former director, officer, employee or agent of the Company or as a current or former director, officer, employee, member, manager, trustee or agent of the Company or any other entity or enterprise referred to in clause (i) of this sentence or any actual, alleged or suspected act or failure to act by Indemnitee in connection with any obligation or restriction imposed upon Indemnitee by reason of such status. In addition to any service at the actual request of the Company, for purposes of this Agreement, Indemnitee shall be deemed to be serving or to have served at the request of the Company as a director, officer, employee, member, manager, trustee or agent of another entity or enterprise if Indemnitee is or was serving as a director, officer, employee, member, manager, trustee or agent of such entity or enterprise and (i) such entity or enterprise is or at the time of such service was a Controlled Affiliate, (ii) such entity or enterprise is or at the time of such service was an employee benefit plan (or related trust) sponsored or maintained by the Company or a Controlled Affiliate, or (iii) the Company or a Controlled Affiliate directly or indirectly caused or authorized Indemnitee to be nominated, elected, appointed, designated, employed, engaged or selected to serve in such capacity.

(j) “ Indemnifiable Losses ” means any and all Losses relating to, arising out of or resulting from any Indemnifiable Claim.

(k) “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company (or any subsidiary of the Company) or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other named (or, as to a threatened matter, reasonably likely to be named) party to the Indemnifiable Claim 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.

(l) “ Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other) and amounts paid in settlement, including without limitation all interest, assessments and other charges paid or payable in connection with or in respect of any of the foregoing.

(m) “ Person ” has the meaning given that term in Sections 13(d) and 14(d) of the Exchange Act but excluding any Person described in and satisfying the conditions of Rule 13d-1(b)(1) of Section 13.

2. Services to the Company. Indemnitee agrees to serve as an officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders [his/her] resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company or any of its subsidiaries and Indemnitee. Indemnitee specifically acknowledges that [his/her] service to the Company or any of its subsidiaries is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries) or other applicable formal severance policies duly adopted by the Board.

3. Indemnification Obligation. Subject to Section 8, the Company shall indemnify, defend and hold harmless Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Indemnifiable Claims and Indemnifiable Losses, including, without limitation, Indemnifiable Claims brought by or in the right of the Company, Indemnifiable Claims brought by third parties, and Indemnifiable Claims in which the Indemnitee is solely a witness; provided , however , that, except as provided in Sections 5 and 21, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim (i) initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim; (ii) for disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; (iii) if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law or (iv) for Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).

4. Advancement of Expenses . Indemnitee shall, to the fullest extent permitted by applicable law, have the right to advancement by the Company prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating to, arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee. Indemnitee’s right to such advancement is

not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within thirty (30) calendar days after any request by Indemnitee, the Company shall, in accordance with such request (but without duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses; provided that Indemnitee shall repay, without interest any amounts actually advanced to Indemnitee that, at the final disposition of the Indemnifiable Claim to which the advance related, were in excess of amounts paid or payable by Indemnitee in respect of Expenses relating to, arising out of or resulting from such Indemnifiable Claim. In connection with any such payment, advancement or reimbursement, Indemnitee shall execute and deliver to the Company an undertaking in the form attached hereto as Exhibit A (subject to Indemnitee filling in the blanks therein and selecting from among the bracketed alternatives therein), which need not be secured and shall be accepted without reference to Indemnitee’s ability to repay the Expenses. In no event shall Indemnitee’s right to the payment, advancement or reimbursement of Expenses pursuant to this Section 4 be conditioned upon any undertaking that is less favorable to Indemnitee than, or that is in addition to, the undertaking set forth in Exhibit A .

5. Indemnification for Additional Expenses . Without limiting the generality or effect of the foregoing, the Company shall, to the fullest extent permitted by applicable law, indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) calendar days of such request, any and all Expenses paid or incurred by Indemnitee in connection with any Claim made, instituted or conducted by Indemnitee for (a) indemnification or payment, advancement or reimbursement of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Indemnifiable Claims, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless in each case of whether Indemnitee ultimately is determined to be entitled to such indemnification, reimbursement, advance or insurance recovery, as the case may be; provided , however , that Indemnitee shall return, without interest, any such advance of Expenses (or portion thereof) which remains unspent at the final disposition of the Claim to which the advance related.

6. Partial Indemnity . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Indemnifiable Loss, but not for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

7. Procedure for Notification . To obtain indemnification under this Agreement in respect of an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a written request therefor as soon as practicable after receiving notice of such Indemnifiable Claim or Indemnifiable Loss, including a brief description (based upon information then available to Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power. If, at the time of the receipt of such request, the Company has directors’ and officers’ liability insurance in effect under which coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company shall give prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the applicable insurers in accordance with the procedures set forth in the applicable policies. The

Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Indemnifiable Claim or Indemnifiable Loss, in each case substantially concurrently with the delivery or receipt thereof by the Company. The failure by Indemnitee to timely notify the Company of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company from any liability hereunder unless, and only to the extent that, the Company did not otherwise learn of such Indemnifiable Claim or Indemnifiable Loss and such failure results in forfeiture by the Company of substantial defenses, rights or insurance coverage.

8. Determination of Right to Indemnification .

(a) To the extent that (i) Indemnitee shall have been successful on the merits or otherwise in defense of any Indemnifiable Claim or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice or (ii) Indemnitee’s involvement in any Indemnifiable Claim is to prepare to serve and serve as a witness, and not as a party, Indemnitee shall, in each case, be indemnified against all Indemnifiable Losses relating to, arising out of or resulting from such Indemnifiable Claim in accordance with Section 3. For purposes of this Section 8(a)(i), “successful on the merits or otherwise” shall include situations where the Indemnitee’s actions render a substantial benefit to the Company at the expense or temporary hardship of the Indemnitee. To the extent the provisions of Section 8(a) are applicable to an Indemnifiable Claim, no Standard of Conduct Determination (as defined in Section 8(b)) shall be required.

(b) To the extent that the provisions of Section 8(a) are inapplicable to an Indemnifiable Claim that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition precedent to indemnification of Indemnitee hereunder against Indemnifiable Losses relating to, arising out of or resulting from such Indemnifiable Claim (a “ Standard of Conduct Determination ”) shall be made as follows: (i) if a Change in Control shall not have occurred, or if a Change in Control shall have occurred but Indemnitee shall have requested that the Standard of Conduct Determination be made pursuant to this clause (i), (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) if such Disinterested Directors so direct, by a majority vote of a committee of Disinterested Directors designated by a majority vote of all Disinterested Directors, or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and (ii) if a Change in Control shall have occurred and Indemnitee shall not have requested that the Standard of Conduct Determination be made pursuant to clause (i), by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee. Indemnitee will cooperate with the person or persons making such Standard of Conduct Determination, including providing to such person or persons, 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. The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) calendar days of such request, any and all costs and expenses (including attorneys’ and experts’ fees and expenses) incurred by Indemnitee in so cooperating with the person or persons making such Standard of Conduct Determination.

(c) The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 8(b) to be made as promptly as practicable. If (i) the person or persons empowered or selected under Section 8(b) to make the Standard of Conduct Determination shall not have made a determination within 30 calendar days after the later of (A) receipt by the Company of written notice from Indemnitee advising the Company of the final disposition of the applicable Indemnifiable Claim (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, that is permitted under the provisions of Section 7(e) to make such determination and (ii) Indemnitee shall have fulfilled his/her obligations set forth in the second sentence of Section 7(b), then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable period of time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time for the obtaining or evaluation or documentation and/or information relating thereto.

(d) If (i) Indemnitee shall be entitled to indemnification hereunder against any Indemnifiable Losses pursuant to Section 8(a), (ii) no determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law is a legally required condition precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, or (iii) Indemnitee has been determined or deemed pursuant to Section 8(b) or (c) to have satisfied any applicable standard of conduct under Delaware law which is a legally required condition precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, then the Company shall pay to Indemnitee, within thirty (30) calendar days after the later of (x) the Notification Date in respect of the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are related, out of which such Indemnifiable Losses arose or from which such Indemnifiable Losses resulted and (y) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) of this subsection shall have been satisfied, an amount equal to the amount of such Indemnifiable Losses.

(e) If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 8(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 7(b)(ii), the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five (5) business days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(h), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences and clause (i) of this

sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 8(e) to make the Standard of Conduct Determination shall have been selected within thirty (30) days after the Company gives its initial notice pursuant to the first sentence of this Section 8(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 8(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person or firm selected by the Court or by such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 8(b).

9. Presumption of Entitlement . (a) In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct, and the Company may overcome such presumption only by its adducing clear and convincing evidence to the contrary. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Court of Chancery of the State of Delaware. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct shall be a defense to any Claim by Indemnitee for indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

(b) For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.

10. No Other Presumption. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or that indemnification hereunder is otherwise not permitted.

11. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, or the substantive laws of the Company’s jurisdiction of incorporation, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided , however , that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under this Agreement.

12. Liability Insurance and Funding. For the duration of Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as Indemnitee shall be subject to any pending or possible Indemnifiable Claim, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to cause to be maintained in effect policies of directors’ and officers’ liability insurance providing coverage for directors and/or officers of the Company that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. The Company shall, upon request, provide Indemnitee with a copy of all directors’ and officers’ liability insurance policies. In all policies of directors’ and officers’ liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors by such policy. Without limiting the generality or effect of the two immediately preceding sentences, the Company shall not discontinue or significantly reduce the scope or amount of coverage from one policy period to the next (i) without the prior approval thereof by a majority vote of the Incumbent Directors, even if less than a quorum, or (ii) if at the time that any such discontinuation or significant reduction in the scope or amount of coverage is proposed there are no Incumbent Directors, without the prior written consent of Indemnitee (which consent shall not be unreasonably withheld or delayed). The Company may, but shall not be required to, create a trust fund, grant a security interest or use other means, including without limitation a letter of credit, to ensure the payment of such amounts as may be necessary to satisfy its obligations to indemnify and advance expenses pursuant to this Agreement.

13. Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee against other persons or entities (other than Indemnitee’s successors), including any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(f). Indemnitee shall execute all papers reasonably required to evidence such rights (all of Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to be reimbursed by or, at the option of Indemnitee, advanced by the Company).

14. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Indemnifiable Losses to the extent Indemnitee has otherwise actually received payment (net of Expenses incurred in connection therewith) under any insurance policy, the Constituent Documents and Other Indemnity Provisions or otherwise (including from any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(f)) in respect of such Indemnifiable Losses otherwise indemnifiable hereunder.

15. Defense of Claims. The Company shall be entitled to participate in the defense of any Indemnifiable Claim or to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee; provided that if Indemnitee reasonably believes, after consultation with counsel selected by Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee would present such counsel with an actual or potential conflict, (b) the named parties in any such Indemnifiable Claim (including any impleaded parties) include both the Company and Indemnitee and Indemnitee shall conclude that there may be one or more legal defenses available to him or her that are different from or in addition to those available to the Company, or (c) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Indemnifiable Claim) at the Company’s expense. After notice from the Company to Indemnitee of its election to assume the defense of any such Indemnifiable Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Indemnifiable Claim other than reasonable costs of investigation or as otherwise provided in the prior sentence. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Indemnifiable Claim effected without the Company’s prior written consent. The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any threatened or pending Indemnifiable Claim to which the Indemnitee is, or could have been, a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of the Indemnitee from all liability on any claims that are the subject matter of such Indemnifiable Claim. Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement; provided that Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of Indemnitee.

16. Duration . All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director of the Company (or is serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise, whether or not for profit, as to which Indemnitee is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Indemnifiable Claim (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Indemnifiable Claim or proceeding.

17. Successors and Binding Agreement . (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any person acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the “ Company ” for purposes of this Agreement), but shall not otherwise be assignable or delegatable by the Company.

(b) This Agreement shall inure to the benefit of and be enforceable by the Indemnitee’s personal or legal representatives, executors, administrators, heirs, distributees, legatees and other successors.

(c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 17(a) and 17(b). Without limiting the generality or effect of the foregoing, Indemnitee’s right to receive payments hereunder shall not be assignable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by the Indemnitee’s will or by the laws of descent and distribution, and, in the event of any attempted assignment or transfer contrary to this Section 17(c), the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

18. Notices . For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or three (3) business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid or one (1) business day after having been sent for next day delivery by a nationally recognized overnight courier service, addressed to the Company (to the attention of the General Counsel of the Company) and to Indemnitee at the applicable address shown on the signature page hereto, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt.

19. Governing Law . The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the substantive laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the Chancery Court of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the Chancery Court of the State of Delaware.

20. Validity . If any provision of this Agreement or the application of any provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstance shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent, and only to the extent, necessary to make it enforceable, valid or legal. In the event that any court or other adjudicative body shall decline to reform any provision of this Agreement held to be invalid, unenforceable or otherwise illegal as contemplated by the immediately preceding sentence, the parties thereto shall take all such action as may be necessary or appropriate to replace the provision so held to be invalid, unenforceable or otherwise illegal with one or more alternative provisions that effectuate the purpose and intent of the original provisions of this Agreement as fully as possible without being invalid, unenforceable or otherwise illegal.

21. Miscellaneous . No provision of this Agreement may be waived, modified or discharged unless such waiver, modification or discharge is agreed to in writing signed by Indemnitee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement.

22. Legal Fees and Expenses . It is the intent of the Company that Indemnitee not be required to incur legal fees and or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. Accordingly, without limiting the generality or effect of any other provision hereof, if it should appear to Indemnitee that the Company has failed to comply with any of its obligations under this Agreement (including its obligations under Section 4) or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s choice, at the expense of the Company as hereafter provided, to advise and represent Indemnitee in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Without respect to whether Indemnitee prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by Indemnitee in connection with any of the foregoing.

23. Certain Interpretive Matters . Unless the context of this Agreement otherwise requires, (a) “it” or “its” or words of any gender include each other gender, (b) words using the singular or plural number also include the plural or singular number, respectively, (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement, (d) the terms “Article,” “Section,” “Annex” or “Exhibit” refer to the specified Article, Section, Annex or Exhibit of or to this Agreement, (e) the terms “include,” “includes” and “including” will be deemed to be followed by the words “without limitation” (whether or not so expressed), and (f) the word “or” is disjunctive but not exclusive. Whenever this Agreement refers to a number of days, such number will refer to calendar days unless business days are specified and whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period of time or by a particular date that ends or occurs on a non-business day, then such period or date will be extended until the immediately following business day. As used herein, “business day” means any day other than Saturday, Sunday or a United States federal holiday.

24. Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together shall constitute one and the same agreement.

[Signatures Appear On Following Page]

IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized representative to execute this Agreement as of the date first above written.


NUVECTRA CORPORATION

By:
		Name:
		Title:

Address for Notices:
5700 Granite Parkway
Suite 960
Plano, Texas 75024

[NAME]



Address for Notices:

EXHIBIT A

UNDERTAKING

This Undertaking is submitted pursuant to the Officer Indemnification Agreement, dated as of , (the “ Indemnification Agreement ”), between , a Delaware corporation (the “ Company ”), and the undersigned. Capitalized terms used and not otherwise defined herein have the meanings ascribed to such terms in the Indemnification Agreement.

The undersigned hereby requests [payment], [advancement], [reimbursement] by the Company of Expenses which the undersigned has incurred in connection with (the “ Indemnifiable Claim ”).

The undersigned hereby undertakes to repay the [payment], [advancement], [reimbursement] of Expenses made by the Company to or on behalf of the undersigned in response to the foregoing request if it is determined, following the final disposition of the Indemnifiable Claim and in accordance with Section 8 of the Indemnification Agreement, that the undersigned is not entitled to indemnification by the Company under the Indemnification Agreement with respect to the Indemnifiable Claim.

IN WITNESS WHEREOF, the undersigned has executed this Undertaking as of this day of , .

[Indemnitee]

Exhibit 10.7

DIRECTOR INDEMNIFICATION AGREEMENT

This Director Indemnification Agreement, dated as of (this “ Agreement ”), is made by and between Nuvectra Corporation, a Delaware corporation (the “ Company ”), and (“ Indemnitee ”).

RECITALS :

A. Section 141 of the General Corporation Law of the State of Delaware provides that the business and affairs of a corporation shall be managed by or under the direction of its board of directors.

B. By virtue of the managerial prerogatives vested in the directors of a Delaware corporation, directors act as fiduciaries of the corporation and its stockholders.

C. Thus, it is critically important to the Company and its stockholders that the Company be able to attract and retain the most capable persons reasonably available to serve as directors of the Company.

D. In recognition of the need for corporations to be able to induce capable and responsible persons to accept positions in corporate management, Delaware law authorizes (and in some instances requires) corporations to indemnify their directors and officers, and further authorizes corporations to purchase and maintain insurance for the benefit of their directors and officers.

E. The Delaware courts have recognized that indemnification by a corporation serves the dual policies of (1) allowing corporate officials to resist unjustified lawsuits, secure in the knowledge that, if vindicated, the corporation will bear the expense of litigation and (2) encouraging capable women and men to serve as corporate directors and officers, secure in the knowledge that the corporation will absorb the costs of defending their honesty and integrity.

F. Under Delaware law, a director’s right to be reimbursed for the costs of defense of criminal actions, whether such claims are asserted under state or federal law, does not depend upon the merits of the claims asserted against the director and is separate and distinct from any right to indemnification the director may be able to establish, and indemnification of the director against criminal fines and penalties is permitted if the director satisfies the applicable standard of conduct.

G. Indemnitee is a director of the Company and his/her willingness to serve in such capacity is predicated, in substantial part, upon the Company’s willingness to indemnify him/her in accordance with the principles reflected above, to the fullest extent permitted by the laws of the state of Delaware, and upon the other undertakings set forth in this Agreement.

H. Therefore, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s continued service as a director of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights

(intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or by-laws (collectively, the “ Constituent Documents ” ), any change in the composition of the Company’s Board of Directors (the “ Board ”) or any change-in-control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancement of Expenses (as defined in Section 1(e)) to Indemnitee as set forth in this Agreement and for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

I. In light of the considerations referred to in the preceding recitals, it is the Company’s intention and desire that the provisions of this Agreement be construed liberally, subject to their express terms, to maximize the protections to be provided to Indemnitee hereunder.

AGREEMENT :

NOW, THEREFORE, the parties hereby agree as follows:

1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:

(b) “ Change in Control ” means:

(iii) approval by the stockholders of the Company of:

(A) a dissolution or liquidation of the Company,

(d) “Controlled Affiliate” means any corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise, whether or not for profit, that is directly or indirectly controlled by the Company. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity or enterprise, whether through the ownership of voting securities, through other voting rights, by contract or otherwise; provided that direct or indirect beneficial ownership of capital stock or other interests in an entity or enterprise entitling the holder to cast 20% or more of the total number of votes generally entitled to be cast in the election of directors (or persons performing comparable functions) of such entity or enterprise shall be deemed to constitute control for purposes of this definition.

(e) “ Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

(f) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(g) “ Expenses” means attorneys’ and experts’ fees and expenses and all other costs and expenses paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in (including on appeal), any Claim. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(h) “Incumbent Directors” means the individuals who, as of the date hereof, are directors of the Company and any individual becoming a director subsequent to the date hereof whose election, nomination for election by the Company’s stockholders, or appointment, was approved by a vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination); provided , however , that an individual shall not be an Incumbent Director if such individual’s election or appointment to the Board occurs as a result of an actual or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

(j) “Indemnifiable Losses” means any and all Losses relating to, arising out of or resulting from any Indemnifiable Claim.

(k) “Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company (or any subsidiary of the Company) or

Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other named (or, as to a threatened matter, reasonably likely to be named) party to the Indemnifiable Claim 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.

(l) “Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other) and amounts paid in settlement, including without limitation all interest, assessments and other charges paid or payable in connection with or in respect of any of the foregoing.

(m) “Person ” has the meaning given that term in Sections 13(d) and 14(d) of the Exchange Act but excluding any Person described in and satisfying the conditions of Rule 13d-1(b)(1) of Section 13.

2. Services to the Company. Indemnitee agrees to serve as a director of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders [his/her] resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company or any of its subsidiaries and Indemnitee. Indemnitee specifically acknowledges that [his/her] service to the Company or any of its subsidiaries is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director of the Company, by the Company’s Constituent Documents or Delaware law.

4. Advancement of Expenses. Indemnitee shall, to the fullest extent permitted by applicable law, have the right to advancement by the Company prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating to, arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within thirty (30) calendar days after any request by Indemnitee, the Company shall, in accordance with such request (but without duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses; provided that Indemnitee shall repay, without interest any amounts actually advanced to Indemnitee that, at the final disposition of the Indemnifiable Claim to which the advance related, were in excess of amounts paid or payable by Indemnitee in respect of Expenses relating to, arising out of or resulting from such Indemnifiable Claim. In connection with any such payment, advancement or reimbursement, Indemnitee shall execute and deliver to the Company an undertaking in the form attached hereto as Exhibit A (subject to Indemnitee filling in the blanks therein and selecting from among the bracketed alternatives therein), which need not be secured and shall be accepted without reference to Indemnitee’s ability to repay the Expenses. In no event shall Indemnitee’s right to the payment, advancement or reimbursement of Expenses pursuant to this Section 4 be conditioned upon any undertaking that is less favorable to Indemnitee than, or that is in addition to, the undertaking set forth in Exhibit A .

5. Indemnification for Additional Expenses. Without limiting the generality or effect of the foregoing, the Company shall, to the fullest extent permitted by applicable law, indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) calendar days of such request, any and all Expenses paid or incurred by Indemnitee in connection with any Claim made, instituted or conducted by Indemnitee for (a) indemnification or payment, advancement or reimbursement of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Indemnifiable Claims, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless in each case of whether Indemnitee ultimately is determined to be entitled to such indemnification, reimbursement, advance or insurance recovery, as the case may be; provided , however , that Indemnitee shall return, without interest, any such advance of Expenses (or portion thereof) which remains unspent at the final disposition of the Claim to which the advance related.

6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Indemnifiable Loss, but not for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

information then available to Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power. If, at the time of the receipt of such request, the Company has directors’ and officers’ liability insurance in effect under which coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company shall give prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Indemnifiable Claim or Indemnifiable Loss, in each case substantially concurrently with the delivery or receipt thereof by the Company. The failure by Indemnitee to timely notify the Company of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company from any liability hereunder unless, and only to the extent that, the Company did not otherwise learn of such Indemnifiable Claim or Indemnifiable Loss and such failure results in forfeiture by the Company of substantial defenses, rights or insurance coverage.

8. Determination of Right to Indemnification .

(b) To the extent that the provisions of Section 8(a) are inapplicable to an Indemnifiable Claim that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition precedent to indemnification of Indemnitee hereunder against Indemnifiable Losses relating to, arising out of or resulting from such Indemnifiable Claim (a “Standard of Conduct Determination ” ) shall be made as follows: (i) if a Change in Control shall not have occurred, or if a Change in Control shall have occurred but Indemnitee shall have requested that the Standard of Conduct Determination be made pursuant to this clause (i), (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) if such Disinterested Directors so direct, by a majority vote of a committee of Disinterested Directors designated by a majority vote of all Disinterested Directors, or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and (ii) if a Change in Control shall have occurred and Indemnitee shall not have requested that the Standard of Conduct Determination be made pursuant to clause (i), by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee. Indemnitee will cooperate with the person or persons making such Standard of Conduct Determination, including providing to such person or persons, 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. The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) calendar days of such request, any and all costs and expenses (including attorneys’ and experts’ fees and expenses) incurred by Indemnitee in so cooperating with the person or persons making such Standard of Conduct Determination.

(c) The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 8(b) to be made as promptly as practicable. If (i) the person or persons empowered or selected under Section 8(b) to make the Standard of Conduct Determination shall not have made a determination within 30 calendar days after the later of (A) receipt by the Company of written notice from Indemnitee advising the Company of the final disposition of the applicable Indemnifiable Claim (the date of such receipt being the “ Notification Date ” ) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, that is permitted under the provisions of Section 7(e) to make such determination and (ii) Indemnitee shall have fulfilled his/her obligations set forth in the second sentence of Section 7(b), then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable period of time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time for the obtaining or evaluation or documentation and/or information relating thereto.

and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences and clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 8(e) to make the Standard of Conduct Determination shall have been selected within thirty (30) days after the Company gives its initial notice pursuant to the first sentence of this Section 8(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 8(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person or firm selected by the Court or by such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 8(b).

13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee against other persons or entities (other than Indemnitee’s successors), including any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(f). Indemnitee shall execute all papers reasonably required to evidence such rights (all of Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to be reimbursed by or, at the option of Indemnitee, advanced by the Company).

14. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Indemnifiable Losses to the extent Indemnitee has otherwise actually received payment (net of Expenses incurred in connection therewith) under any insurance policy, the Constituent Documents and Other Indemnity Provisions or otherwise (including from any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(f)) in respect of such Indemnifiable Losses otherwise indemnifiable hereunder.

16. Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director of the Company (or is serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise, whether or not for profit, as to which Indemnitee is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Indemnifiable Claim (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Indemnifiable Claim or proceeding.

17. Successors and Binding Agreement. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any person acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the “ Company ” for purposes of this Agreement), but shall not otherwise be assignable or delegatable by the Company.

18. Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or three (3) business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid or one (1) business day after having been sent for next day delivery by a nationally recognized overnight courier service, addressed to the Company (to the attention of the General Counsel of the Company) and to Indemnitee at the applicable address shown on the signature page hereto, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt.

19. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the substantive laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the Chancery Court of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the Chancery Court of the State of Delaware.

20. Validity. If any provision of this Agreement or the application of any provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or

circumstance shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent, and only to the extent, necessary to make it enforceable, valid or legal. In the event that any court or other adjudicative body shall decline to reform any provision of this Agreement held to be invalid, unenforceable or otherwise illegal as contemplated by the immediately preceding sentence, the parties thereto shall take all such action as may be necessary or appropriate to replace the provision so held to be invalid, unenforceable or otherwise illegal with one or more alternative provisions that effectuate the purpose and intent of the original provisions of this Agreement as fully as possible without being invalid, unenforceable or otherwise illegal.

21. Miscellaneous. No provision of this Agreement may be waived, modified or discharged unless such waiver, modification or discharge is agreed to in writing signed by Indemnitee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement.

22. Legal Fees and Expenses. It is the intent of the Company that Indemnitee not be required to incur legal fees and or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. Accordingly, without limiting the generality or effect of any other provision hereof, if it should appear to Indemnitee that the Company has failed to comply with any of its obligations under this Agreement (including its obligations under Section 4) or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s choice, at the expense of the Company as hereafter provided, to advise and represent Indemnitee in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Without respect to whether Indemnitee prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by Indemnitee in connection with any of the foregoing.

23. Certain Interpretive Matters. Unless the context of this Agreement otherwise requires, (a) “it” or “its” or words of any gender include each other gender, (b) words using the singular or plural number also include the plural or singular number, respectively, (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement, (d) the terms “Article,” “Section,” “Annex” or “Exhibit” refer to the specified Article, Section, Annex or Exhibit of or to this Agreement, (e) the terms “include,” “includes” and “including” will be deemed to be followed by the words “without limitation” (whether or not so expressed), and (f) the word “or” is disjunctive but not exclusive. Whenever this Agreement refers to a

number of days, such number will refer to calendar days unless business days are specified and whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period of time or by a particular date that ends or occurs on a non-business day, then such period or date will be extended until the immediately following business day. As used herein, “business day” means any day other than Saturday, Sunday or a United States federal holiday.

24. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together shall constitute one and the same agreement.

[Signatures Appear On Following Page]

IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized representative to execute this Agreement as of the date first above written.


NUVECTRA CORPORATION

By:
		Name:
		Title:

Address for Notices :
		5700 Granite Parkway
		Suite 960
		Plano, Texas 75024

[NAME]



Address for Notices :

EXHIBIT A

UNDERTAKING

This Undertaking is submitted pursuant to the Director Indemnification Agreement, dated as of , (the “ Indemnification Agreement ”), between , a Delaware corporation (the “ Company ”), and the undersigned. Capitalized terms used and not otherwise defined herein have the meanings ascribed to such terms in the Indemnification Agreement.

The undersigned hereby requests [payment], [advancement], [reimbursement] by the Company of Expenses which the undersigned has incurred in connection with (the “ Indemnifiable Claim ”).

IN WITNESS WHEREOF, the undersigned has executed this Undertaking as of this day of , .

[Indemnitee]

Exhibit 10.9

LOGO

July 22, 2015

Scott Drees

3010 Hood St.

Dallas, TX 75219

Dear Scott:

I am very pleased to offer you the opportunity to become Chief Executive Officer of QiG Group, LLC, a subsidiary of Greatbatch, Inc. (“Greatbatch”) that is planned to be spun-off as Nuvectra Corporation, a separate public company. In this position, you will report to Thomas J. Hook, Greatbatch, Inc.’s Chief Executive Officer and to the Special Committee of the Board of Directors providing oversight to matters related to the spin of Nuvectra. This transitional reporting relationship will be in effect until the effective date of the Nuvectra spin. Your employment start date will be mutually agreed upon (the “Effective Date”). Your employment by Greatbatch will be governed by the terms of this letter (the “Employment Letter”).

Employment Duties

You agree to perform your duties and discharge your responsibilities in a faithful manner to the best of your ability. You agree to devote your full business time and attention to the leadership and conduct of your function and the business to the best of your ability. You also agree that you will not accept other gainful employment or engage in any outside business concerns or activities without our consent.

Compensation

Greatbatch provides its Associates with opportunities to be recognized and rewarded based on individual and/or company performance.

Base Compensation : As of the Effective Date, your base compensation will be $15,384.62 payable bi-weekly on Fridays, which is equivalent to $400,000 annually, less appropriate deductions for taxes and other amounts as agreed or as required by law to be withheld.

Short-Term Bonus Plan : You will be eligible to participate in a bonus plan that will provide a cash award based on QiG/Nuvectra performance and your individual contributions. For 2015, you will be eligible to participate in the Greatbatch Growth Bonus Plan (G2B), your target bonus amount will be 60% of your eligible earnings with the opportunity for 120% at maximum. For 2015, your total award level will be paid at target, for a pro-rated time period, to be based on your start date. For 2016, and thereafter, you will be eligible to participate in the cash bonus plan adopted by the Nuvectra Board of Directors. The G2B plan awards are subject to approval by the Greatbatch Board of Directors. All Nuvectra bonus plan awards will be subject to approval by the Nuvectra Board of Directors.

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Equity Award : It is intended that the Nuvectra Board of Directors will award you incentive compensation related to Nuvectra shares as soon as practicable after the effective date of the Nuvectra spin-off, and that such incentive compensation: (i) will be discussed by you and the Nuvectra Board prior to its award, and (ii) will have terms no less favorable than as outlined in this paragraph. The award will relate to a number of shares equal to at least 2 percent of the common stock outstanding on the date of spin, and any options will have a strike price based on the closing price on the grant date. The total award will be allocated as 25% non-qualified stock options and 75% restricted stock units. The award will vest in equal installments over a three-year period. The vesting dates will coincide with the anniversary date of the grant. It is intended that this award will be in lieu of your participation in any Nuvectra long-term incentive plans for a three year period.

Financial Planning Assistance

This benefit provides reimbursement of certain expenses incurred in connection with your personal financial and estate planning.

Other Benefits

Up until the effective date of the spin-off, you will be entitled to participate in any health and medical benefit plans, any pension, profit sharing and retirement plans and any insurance policies or programs from time to time generally offered to Associates of Greatbatch, and which are described in the enclosed benefit summary. Except as expressly provided herein, these plans, policies and programs are subject to change at the sole discretion of Greatbatch. After the effective date of the Nuvectra spin-off, you will participate in Nuvectra plans and programs as determined by the Nuvectra Board of Directors.

Termination of Employment

For a period of one year from the Effective Date, if Greatbatch terminates your employment for reason other than “Cause” prior to the spin-off of Nuvectra, the Company will pay you:

•

severance pay in an amount equal to one year of your base salary and your target bonus in one lump sum, less applicable withholdings

•

an additional lump sum amount equal to the amount Greatbatch would have otherwise contributed toward your group health, vision and dental coverage premium as an active Associate for that twelve-month period.

Your entitlement to severance pay is subject to your execution of a release of all employment-based claims in a form reasonably satisfactory to Greatbatch. Severance pay will be paid within 60 days the termination of your employment unless, at the time of your separation from service, Greatbatch reasonably determines that (i) your severance package is subject to, and not exempt

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from, Internal Revenue Code Section 409A (such a severance package referred to as “409A Payments”) and (ii) you are a “specified employee” for purposes of Internal Revenue Code Section 409A(a)(2)(B)(i), in which case, the 409A Payments will be paid promptly after the earlier of (1) the date immediately following the expiration of the six-month period measured from the date of your “separation from service” or (2) the date of your death. “Cause” means gross negligence or willful misconduct by you in the performance of your duties, dishonesty to the Company, or the commission of a felony that results in a conviction in a court of law. After the effective date of the Nuvectra spin-off, you will be eligible to participate in Nuvectra severance pay and programs as may be adopted by the Nuvectra Board of Directors.

If the sixty (60) day period following your “separation from service” begins in one calendar year and ends in a second calendar year (a “Crossover 60-Day Period”), and if you are owed 409A Payments due to such “separation from service”, then the 409A Payments will be paid in a lump sum during the portion of the Crossover 60-Day Period that falls within the second year.

At-Will Employment

In accepting our offer of employment, you certify that you understand and accept that your employment will be on an “at-will” basis and that except as expressly set forth herein neither you nor any Greatbatch representative has entered into a contract regarding the terms or the duration of your employment. As an at-will employee, you will be free to terminate your employment with the company at any time, with or without cause or advance notice. Likewise, the company will have the right to terminate your employment at any time, with or without cause or advance notice.

Miscellaneous

This Employment Letter supersedes all prior employment and consulting agreements, written or verbal, between you and Greatbach and/or its affiliates. Any such prior agreement is void as of the Effective Date and replaced with this Employment Letter. This Employment Letter contains the entire understanding of Greatbatch and you with respect to the subject matter hereof.

This Letter Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures sent electronically, such as via a PDF attachment, will be deemed the same as original signatures.

Acceptance

This offer of employment is contingent on Greatbatch receiving satisfactory results of a pre- employment background verification and physical, and a negative result on your drug screen. Consistent with our standard operating procedures you are requested to complete and return the enclosed Employment Application Form, Personal Data Sheet, Consent & Disclosure Form, and Inventions, Non-Disclosure and Non-Solicitation Agreement. By accepting the offer presented in this letter, you represent that you are currently not bound by any contractual provisions (including a non-compete clause or other similar restriction, signed or agreed to with respect to your employment by any present or former employer) that prevents, hinders or limits your ability to work for Greatbatch in the manner set forth in this letter. To the extent that you have any confidential or proprietary information of any former employer, you acknowledge that you will keep all such information confidential and will not disclose or make available, directly or indirectly, at any time, any such information to Greatbatch, its managers or employees.

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To confirm your acceptance of this offer, please complete the enclosed Personal Data Sheet, Consent & Disclosure Form and sign this letter on the line below. Return these documents to me via email at toglesby@greatbatch.com within 3 business days.

If you have any questions, please call me at 214-618-4976. Scott, the members of the Greatbatch team look forward to your acceptance of this offer and a productive and successful working relationship.

Sincerely,

/s/ Tonjia Oglesby

Tonjia Oglesby

Executive Director, Human Resources


Understood, agreed, and accepted

/s/ Scott F. Drees	Date	July 22, 2015
Scott Drees


Attachments:		Benefit Summary
		Inventions, Non-Disclosure and Non-Solicitation Agreement

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Exhibit 10.10

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July 22, 2015

Walter Berger

3505 Turtle Creek, SG

Dallas, TX 75219

Dear Walter:

I am very pleased to offer you the opportunity to become Chief Financial Officer of QiG Group, LLC, a subsidiary of Greatbatch, Inc. that is planned to be spun-off as Nuvectra Corporation, a separate public company. In this position, you will report to Michael Dinkins, Greatbatch, Inc.’s Chief Financial Officer, and to the Special Committee of the Board of Directors providing oversight to matters related to the spin of Nuvectra, until such time as the Chief Executive Officer for Nuvectra is hired. Your employment start date will be mutually agreed upon (the “Effective Date”).

Employment Duties

Compensation

Greatbatch provides its Associates with opportunities to be recognized and rewarded based on Individual and/or company performance.

Base Compensation : As of the Effective Date, your base compensation will be $13,461.54 payable bi-weekly on Fridays, which is equivalent to $350,000 annually, less appropriate deductions for taxes and other amounts as agreed or as required by law to be withheld.

Short Term Bonus Plan : You will be eligible to participate in a bonus plan that will provide a cash award based on QiG/Nuvectra performance and your individual contributions. Until the spin of Nuvctra occurs, you will be eligible to participate in the Greatbatch Growth Bonus Plan (G2B), your target bonus amount will be 50% of your eligible earnings with the opportunity for 95% at maximum. For 2015, your minimum total award level will be paid at target, for a pro-rated time period, to be based on your start date. After the date of spin, and thereafter, you will be eligible to participate in the cash bonus plan adopted by the Nuvectra Board of Directors. The G2B plan awards are subject to approval by the Greatbatch Board of Directors. All Nuvectra bonus plan awards will be subject to approval by the Nuvectra Board of Directors.

Equity Award : You will be eligible to receive an award for Nuvectra shares as soon as practicable after the effective date of the Nuvectra spin-off. The award will be for a number equal to 1 percent of the common stock outstanding as of the effective date and will have a strike price based on the closing price on the grant date. The total award will be allocated as 25% non-qualified stock options and 75% restricted stock units. The award will vest in equal installments over a three-year period. The vesting dates will coincide with the anniversary date of the grant. It is intended that this award will be in lieu of your participation in any Nuvectra long-term incentive plans for a three year period.

Financial Planning Assistance

This benefit provides reimbursement of certain expenses incurred in connection with your personal financial and estate planning.

Other Benefits

Termination of Employment

If Greatbatch terminates your employment prior to August 1, 2016 for any reason other than “cause”, the spin of Nuvectra or sale of Nuvectra prior to spin, the Company will pay you:

•

severance pay in an amount equal to one year of your base salary, the equivalent of one years bonus at target and a pro-rated bonus amount for any earned 2016 bonus, in one lump sum, less applicable withholdings and

•

If your employment is terminated as a result of the sale of Nuvectra, prior to spin-off, you will receive a special ‘sale bonus’ in the amount of $350,000 less applicable withholdings.

If the spin of Nuvectra does not occur by July 31, 2016 and you choose to terminate your employment with Greatbatch after that date the Company will pay you:

•

severance pay in an amount equal to one year of your base salary, the equivalent of one year’s bonus at target and a pro-rated bonus amount for any earned 2016 bonus, in one lump sum, less applicable withholdings and

•

Your entitlement to severance pay and the ‘sale bonus’ is subject to your execution of a separation agreement reasonably satisfactory to Greatbatch. Severance pay will be paid within 60 days the termination of your employment unless, at the time of your separation from service, Greatbatch reasonably determines that you are a ‘specified employee” for purposes of Code Section 409A(a)(2)(B)(i) in which case, severance pay will be paid promptly after the earlier of (1) the date immediately following the expiration of the six-month period measured from the date of your “separation from service” or (2) the date of your death. “Cause” means gross negligence or willful misconduct by you in the performance of your duties, dishonesty to the Company, or the commission of a felony that results in a conviction in a court of law.

After the effective date of the Nuvectra spin-off, you will be eligible to participate in Nuvectra severance pay and programs as may be adopted by the Nuvectra Board of Directors.

At-Will Employment

Acceptance

This offer of employment is contingent on Greatbatch receiving satisfactory results of a pre-employment background verification and physical, and a negative result on your drug screen. Consistent with our standard operating procedures you are requested to complete and return the enclosed Employment Application Form, Personal Data Sheet Consent & Disclosure Form, and Inventions, Non-Disclosure and Non-Solicitation Agreement. By accepting the offer presented in this letter, you represent that you are currently not bound by any contractual provisions (including a non-compete clause or other similar restriction, signed or agreed to with respect to your employment by any present or former employer) that prevents, hinders or limits your ability to work for Greatbatch in the manner set forth in this letter. To the extent that you have any confidential or proprietary information of any former employer, you acknowledge that you will keep all such information confidential and will not disclose or make available, directly or indirectly, at any time, any such information to Greatbatch, its managers or employees.

If you have any questions, please call me at 214-618-4976. Walter, the members of the Greatbatch team look forward to your acceptance of this offer and a productive and successful working relationship.

Sincerely,

/s/ Tonjia Oglesby

Tonjia Oglesby

Executive Director, Human Resources

Understood, agreed, and accepted


/s/ Walter Berger				Date July 23, 2015
Walter Berger


Attachments:		Benefit Summary
		Inventions, Non-Disclosure and Non-Solicitation Agreement

Exhibit 21.1

Nuvectra Corporation

List of Subsidiaries as of December 30, 2015


Legal Name of Subsidiary		Jurisdiction of Incorporation or Organization

Algostim, LLC		Delaware

NeuroNexus Technologies, Inc.		Michigan

PelviStim LLC		Delaware

Exhibit 99.1

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, 2016

Dear Fellow Greatbatch Stockholder:

We have previously announced our intention to spin-off our QiG Group subsidiary and its neuromodulation medical device business into a new, publicly-traded company, to be named Nuvectra Corporation. Nuvectra will be focused on the development and commercialization of its neurostimulation technology platform and, in particular, its Algovita spinal cord stimulation system. As two independent, publicly-owned companies, Greatbatch and Nuvectra each will be better positioned to capitalize on their respective significant growth opportunities and focus on their own respective strategic and operational plans, including setting optimal levels of investment in research and development projects and operating and expanding their respective businesses.

The spin-off of Nuvectra is scheduled to occur on , 2016. If you hold Greatbatch common stock at the close of business on the record date for the spin-off, which is , 2016, you will receive share of Nuvectra common stock for every shares of Greatbatch common stock that you hold on that date.

You do not need to take any action to receive shares of Nuvectra common stock to which you are entitled as a Greatbatch stockholder. In addition, you do not need to pay any consideration or surrender or exchange your shares of Greatbatch common stock.

Following the spin-off, Greatbatch common stock will continue to trade on the New York Stock Exchange under the symbol “GB”, while Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR”.

I encourage you to read the attached information statement carefully, which provides a description of the spin-off and includes important business and financial information about Nuvectra, including its historical combined financial statements.

The spin-off is an exciting milestone in our medical device development strategy, as we return the value of the Nuvectra investment to our stockholders. We remain committed to working on your behalf to continue to build long-term stockholder value.

Sincerely,

Thomas J. Hook

President and Chief Executive Officer

Greatbatch, Inc.

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, 2016

Dear Future Nuvectra Stockholder:

It is my pleasure to welcome you as a stockholder of Nuvectra Corporation. We are a medical device company with a primary focus on the rapidly growing field of neuromodulation, and, in particular, the $2.6 billion spinal cord stimulation, sacral nerve stimulation and deep brain stimulation portion of the worldwide neurostimulation market. Neurostimulation serves patients with debilitating disorders such as chronic pain, Parkinson’s disease, epilepsy and incontinence. Neurostimulation systems function by delivering electrical pulses to parts of the body impacting the nervous system.

The Algovita spinal cord stimulation system is the first application of our technology and is indicated for the treatment of chronic pain of the trunk and limbs. We are pursuing development initiatives focused on serving patients and clinicians by applying our technology to broader indications.

As a result of our spin-off from Greatbatch, we believe that investors will be better able to evaluate the distinct fundamentals, growth prospects and performance of our neuromodulation medical device business. We look forward to creating value by serving our customers, impacting the lives of patients and rewarding our stockholders as we begin our new and exciting journey.

I encourage you to learn more about Nuvectra and our exciting business opportunities by reading the attached information statement. Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR.”

We look forward to our future as an independent publicly-traded company and to your support as a stockholder.

Sincerely,

Scott F. Drees

Chief Executive Officer

Nuvectra Corporation

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED DECEMBER 30, 2015

INFORMATION STATEMENT

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Nuvectra Corporation

We are providing this information statement to you as a stockholder of Greatbatch, Inc., or Greatbatch, in connection with Greatbatch’s distribution to its stockholders of all of the outstanding shares of common stock of Nuvectra Corporation (formerly QiG Group, LLC), or Nuvectra, an indirect, wholly-owned subsidiary of Greatbatch. In this information statement, we refer to this distribution of Nuvectra common stock and the transactions related to it as the “spin-off.” All of the issued and outstanding shares of Nuvectra’s common stock will be distributed to Greatbatch stockholders on a pro rata basis in a manner that is intended to be tax-free for U.S. federal income tax purposes (other than with respect to cash received in lieu of fractional shares).

We expect that the distribution of all of the issued and outstanding shares of Nuvectra’s common stock in the spin-off will be made on , 2016, which we refer to as the “spin-off date,” to the holders of record of Greatbatch common stock at the close of business on , 2016, which we refer to as the “record date.” If you are a holder of record of Greatbatch common stock at the close of business on the record date, you will receive share of Nuvectra common stock for every shares of Greatbatch common stock you hold on that date. Greatbatch will distribute the shares of Nuvectra in book-entry form, which means that Nuvectra will not issue physical stock certificates.

You are not required to vote on or take any other action in connection with the spin-off. We are not asking you for a proxy, and you are requested not to send us a proxy. You will not be required to pay any consideration for the shares of Nuvectra common stock you receive in the spin-off or surrender or exchange your shares of Greatbatch common stock or take any action in connection with the spin-off. No approval of the Greatbatch stockholders for the spin-off is required or being sought.

Greatbatch currently indirectly owns all of the outstanding equity of Nuvectra. Accordingly, no trading market for Nuvectra common stock currently exists. We expect, however, that a limited trading market for Nuvectra common stock, commonly known as a “when-issued” trading market, will develop on or shortly before the record date for the spin-off, and we expect that “regular-way” trading of Nuvectra common stock will begin on the first trading day after the spin-off date. Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR.”

We are an “emerging growth company” as defined under the federal securities laws. For implications of our status as an “emerging growth company,” please see “Summary – Emerging Growth Company Status” beginning on page 9.

In reviewing this information statement, you should carefully consider the matters described under “ Risk Factors ” beginning on page 19 for a discussion of certain factors that should be considered by recipients of our common stock.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this information statement is , 2016.

This information statement was first mailed to Greatbatch stockholders on or about , 2016.

TABLE OF CONTENTS


	Page
Summary		3
Questions and Answers About the Spin-Off		10
Cautionary Statement Concerning Forward-Looking Statements		17
Risk Factors		19
The Spin-Off		41
Material U.S. Federal Income Tax Consequences		48
Our Relationship with Greatbatch After the Spin-Off		51
Listing and Trading of our Common Stock		59
Dividend Policy		60
Capitalization		61
Unaudited Condensed Combined Pro Forma Financial Statement		62
Management’s Discussion and Analysis of Financial Condition and Results of Operations		66
Business		83
Management		100
Executive Compensation		104
Security Ownership of Certain Beneficial Owners and Management		110
Description of Nuvectra Capital Stock		112
Indemnification and Limitations of Liability of Directors and Officers		116
Certain Relationships and Related Person Transactions		117
Where You Can Find More Information		119
Index to Combined Financial Statements		F-1

Presentation of Information

In this information statement, unless the context requires otherwise or we specifically indicate otherwise, the terms “Nuvectra,” “we,” “our” and “us” when used in a historical context refer to QiG Group, LLC, or QiG Group, and its subsidiaries Algostim, LLC, or Algostim, and PelviStim LLC, or PelviStim, and Greatbatch’s NeuroNexus Technologies, Inc., or NeuroNexus, subsidiary, the shares of which are being transferred to us by Greatbatch in connection with the spin-off, and when used in the present or future tense refer to Nuvectra and its subsidiaries after giving effect to the spin-off. Immediately prior to completion of the spin-off, QiG Group, a Delaware limited liability company, will convert into Nuvectra Corporation, a Delaware corporation, and all of the assets, operations and liabilities of QiG Group will become assets, operations and liabilities of Nuvectra. “Greatbatch” means Greatbatch, Inc., a Delaware corporation, and its subsidiaries, other than Nuvectra and its subsidiaries, unless the context otherwise requires.

The transaction in which Greatbatch will distribute the shares of Nuvectra common stock to Greatbatch stockholders is referred to in this information statement as the “distribution.” The transactions in which Nuvectra will be separated from Greatbatch and Nuvectra will become an independent publicly-traded company, including the distribution, are referred to in this information statement collectively as the “spin-off.”

Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about Nuvectra assumes the completion of the spin-off.

This information statement is being furnished solely to provide information to Greatbatch’s stockholders who will receive shares of common stock of Nuvectra in the spin-off. It is not provided as an inducement or encouragement to buy or sell any securities of Greatbatch or Nuvectra. This information statement describes our business, our relationship with Greatbatch, and how the spin-off affects Greatbatch and its stockholders, and provides other information to assist you in evaluating the Nuvectra common stock that you will receive in the spin-off. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the front cover. Changes will occur after the date of this information statement, and neither we nor Greatbatch will update the information except in the normal course of our or Greatbatch’s respective public disclosure practices or to the extent required pursuant to federal securities laws.

Trademarks, Trade Names and Service Marks

We own or have rights to use the trademarks, trade names and service marks that we use in connection with the operation of our business. Some of the more important marks that we own or have the rights to use in the United States or in other jurisdictions that appear in this information statement include: Algostim, Algovita, NeuroNexus, Nuvectra and PelviStim. Our rights to some of these trademarks may be limited to select markets. Each trademark, trade name or service mark of any other company appearing in this information statement is, to our knowledge, owned by that other company.

SUMMARY

This summary highlights some of the information in this information statement and may not contain all of the information concerning Nuvectra, the spin-off or other information that may be important to you. You should carefully review this entire information statement, our combined financial statements and the related notes, and the unaudited condensed combined pro forma financial statement included in this information statement.

References in this information statement to the terms “Nuvectra,” “we,” “our” and “us” when used in a historical context refer to QiG Group and its subsidiaries Algostim and PelviStim and Greatbatch’s NeuroNexus subsidiary, the shares of which are being transferred to us by Greatbatch in connection with the spin-off, and when used in the present or future tense refer to Nuvectra and its subsidiaries after giving effect to the spin-off. Immediately prior to completion of the spin-off, QiG Group, a Delaware limited liability company, will convert into Nuvectra, a Delaware corporation, and all of the assets, operations and liabilities of QiG Group will become assets, operations and liabilities of Nuvectra. References in this information statement to our historical assets, liabilities, products, operations or activities of our business generally refer to the historical assets, liabilities, products, operations or activities of our business as it was historically owned, incurred or conducted by QiG Group and its subsidiaries and by NeuroNexus, as subsidiaries of Greatbatch prior to the spin-off.

References in this information statement to “Greatbatch” means Greatbatch, Inc., a Delaware corporation, and its subsidiaries, other than Nuvectra and its subsidiaries, unless the context otherwise requires. The transaction in which Greatbatch will distribute the shares of Nuvectra common stock to Greatbatch stockholders is referred to in this information statement as the “distribution.” The transactions in which Nuvectra will be separated from Greatbatch and Nuvectra will become an independent publicly-traded company, including the distribution, are referred to in this information statement collectively as the “spin-off.” Unless otherwise indicated or the context otherwise requires, the information included in this information statement assumes the completion of the spin-off and all of the transactions referred to in this information statement as occurring in connection with the spin-off.

Overview

Nuvectra is a neuromodulation medical device company initially focused on the development and commercialization of our neurostimulation technology platform for treatment of various disorders through stimulation of tissues associated with the nervous system. Our neurostimulation technology platform has the capability to provide treatment to patients in several established neurostimulation markets such as spinal cord stimulation, or SCS, sacral nerve stimulation, or SNS, deep brain stimulation, or DBS, and other emerging neurostimulation markets. Our Algovita SCS system, or Algovita, is the first application of our neurostimulation technology platform and is indicated for the treatment of chronic pain of the trunk and limbs. We are in the process of developing additional applications for our neurostimulation technology platform. Algovita brings to market a user friendly, robust and flexible design with a broad set of product capabilities and advanced technology. We believe Algovita is well positioned to compete in and help grow the existing SCS market, currently estimated to be approximately $1.6 billion globally. In addition, we believe our neurostimulation technology platform is well positioned to compete in the SCS, SNS and DBS portions of the worldwide neurostimulation market, which we estimate to be approximately $2.6 billion in size. We are currently working to develop our platform for use in the SNS and DBS markets. To date, we have not conducted any clinical trials with respect to the use of our neurostimulation technology platform for applications in the SNS or DBS markets. In addition, we have not yet obtained, or begun the process of obtaining, the necessary regulatory approvals needed for the sale of our neurostimulation technology platform for applications in the SNS or DBS markets.

On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita from the United States Food and Drug Administration, or FDA. We expect to launch Algovita commercially in the United States during

the first half of 2016. Outside of the United States, Algovita received Conformité Européene, or CE, mark approval in June 2014 and has been commercially available to patients in Germany and several other European countries since November 2014.

Our Competitive Strengths

We believe a number of competitive advantages distinguish us from our competitors:

•

Differentiated neurostimulation technology platform. Our neurostimulation technology platform incorporates technological advances that we believe will provide us with competitive advantages in the marketplace and provide meaningful benefits to both physicians and patients as compared to existing alternatives. The implantable pulse generator, or IPG, component of our platform is capable of delivering a broad spectrum of outputs and pulse delivery ranges through its 26 independent current sources. The IPG also features a powerful chipset that enables new waveforms, stimulation outputs and embedded features that can be activated in the future. Our diverse lead portfolio provides additional capabilities for tailoring therapy to a wider spectrum of patients.

•

Broad range of Algovita capabilities . Algovita is based on our differentiated neurostimulation technology platform and features a broad range of technical capabilities, including 26 independent current sources, algorithmic programming, broad pulse delivery ranges and a powerful chip set for targeted SCS therapy delivery. We believe these capabilities provide Algovita with greater flexibility in tailoring therapy to a wider spectrum of SCS patients than the flexibility provided by the current generation of SCS systems that are presently available on the market.

•

Algovita’s robust design helps minimize therapy failures and enables greater control and precision in providing therapy . We believe Algovita’s robust design, including its leads and advanced programming features, will help to minimize early SCS therapy failures and enable greater precision and control in targeting pain sites than the current generation of SCS systems that are presently available on the market. In addition, our advanced leads feature coil-in-coil technology, allowing for elasticity and greater flexibility than the leads of other SCS systems that are presently available on the market, which we believe results in our advanced leads having a reduced likelihood of migration, breakage or kinking. Our 12 electrode lead provides the longest span of coverage available on the market and was designed to address loss of pain relief if the stimulation target changes. Additionally, our algorithmic driven clinician programming system allows for rapid localization of pain targets and use of many different stimulation programs. The stimulation field can also be further refined using direct patient inputs gathered through our patient feedback tool.

•

Algovita’s upgradeable technology enables next generation offerings. Algovita’s proprietary chip set and hardware is capable of being configured for use in next generation treatment offerings. This includes the ability to deliver significantly higher frequencies than most other SCS systems presently available on the market, as well as pulse train stimulation, including burst type stimulation, and customized waveforms. We believe these additional capabilities provide a strong base platform and system for potential new SCS and other treatment options that can be provided via a software or firmware upgrade.

•

Experienced management and engineering team with a track record of successful performance. Our management team has a strong track record of successful performance and execution in the neuromodulation field. Collectively, our management team has over 100 years of experience in the neuromodulation and chronic pain industry. In addition, we have an experienced engineering team with significant expertise in designing and developing medical devices for the neurostimulation market. We believe physicians and customers value working with a team like ours comprised of highly skilled professionals who have in-depth knowledge of the industry, strong engineering and development capabilities and an understanding of the needs of both patients and physicians.

Our Growth Strategies

To pursue our objectives and capitalize on our competitive strengths, we intend to implement the following growth strategies:

•

Expand our sales and marketing organization to drive adoption of Algovita . We will continue to build our worldwide sales organization consisting of direct sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States. Our direct sales representatives and independent sales agents in the United States will target physician specialists involved with SCS treatment decisions located at strategic hospitals and outpatient surgery centers across the United States. Our marketing team will offer education programs designed to create awareness and demand among other stakeholders involved in SCS treatment decisions, including third-party payors, hospital administrators and patients and their families. Internationally, we will continue to expand our network of distributors and independent sales agents in target markets that we believe support SCS therapy and have strong reimbursement coverage.

•

Demonstrate the value of Algovita’s capabilities among surgeons, referring physicians and patients . Algovita was specifically designed to address the limitations of currently available SCS technologies, which we believe has slowed adoption of SCS therapies. We will dedicate significant resources to demonstrate the value of Algovita’s broad capabilities, focusing on its ability to provide flexible treatment options for chronic pain patients. We will leverage our growing sales force to promote awareness of Algovita by training and educating physicians, exhibiting at tradeshows and conducting focused advertising.

•

Invest in clinical and product development to drive product innovation . We intend to invest in clinical and product development in order to expand the capabilities of our neurostimulation technology platform. We expect this investment will result in further product innovations and expanded labeling and new indications for Algovita. These innovations are expected to include next generation IPG capabilities, additional lead offerings, MRI compatibility and advancements in algorithmic programming. We also expect this investment to expand our product opportunities for our neurostimulation technology platform into other established neurostimulation markets, such as SNS, DBS, and other emerging therapies.

•

Pursue strategic partnerships . We intend to pursue strategic partnerships to accelerate our expansion into other established neurostimulation markets. These strategic partnerships may partially or fully fund clinical and development costs for new products, expand our product distribution channels, improve our access to physicians and opinion leaders, supplement our product commercialization efforts, provide a partner that will perform or assist in performing clinical studies for new products, help us to add specialized clinical or regulatory expertise or provide access to or enable us to acquire complementary intellectual property.

•

Leverage infrastructure and achieve operating efficiencies . We intend to leverage our existing infrastructure to achieve operating efficiencies as we grow sales volume. In addition, we will enter into a long-term supply agreement with Greatbatch to benefit from its world class manufacturing capabilities. We will work with Greatbatch to decrease our manufacturing costs and increase product quality.

Our Neurostimulation Technology Platform

Our neurostimulation technology platform was developed to provide the most innovative capabilities currently available on the market and to provide physicians and patients with improved solutions and tailored treatment options. Our platform is fundamental to the design of Algovita and provides the foundation for the development of future products. The key elements of our platform include:

•

Innovative core technology . Our neurostimulation technology platform consists of core technology developed using our advanced engineering and design capabilities in IPGs, independent current sources, algorithmic programming, chipsets and leads. We will own the patents and patent applications that embody the intellectual property underlying our neurostimulation technology platform.

•

Durable and flexible leads. Our leads feature coil-in-coil technology designed to improve lead durability and flexibility, thereby reducing migration, breakage and kinking. In addition, the coil-in-coil design enhances steerability as compared to the straight wire lead designs used by many existing neurostimulation systems.

•

Advanced programmability . The algorithmic driven technologies in our platform are designed to allow physicians to program Algovita and other products incorporating our platform for rapid and sequential delivery of multiple stimulation programs. These products are capable of capturing feedback from patients, and thereby providing physicians and patients with the flexibility to select from a number of different stimulation programs and optimize treatment.

•

Multiple independent current sources . Our neurostimulation technology platform is capable of delivering multiple independent current sources that optimize current delivery and improve field control allowing for finer resolution and precision of therapy.

•

Unique safety features. Our neurostimulation technology platform was designed with unique safety features. The IPG has a deep discharge recovery battery, bi-directional recharge and impedance checks to improve patient safety. The patient remote control indicates the battery status of the IPG, is paired to a single IPG, has quick “stim-off” functionality that permits immediate cessation of treatment and incorporates a patient feedback tool to encourage greater patient input thus improving safety.

•

Future offering capabilities. Our neurostimulation technology platform incorporates a proprietary chipset and hardware that is capable of being configured for use in next generation treatment offerings for Algovita and in other future neurostimulation systems. It is capable of delivering significantly higher frequencies than most other SCS systems presently available on the market, as well as pulse train stimulation and customized waveforms.

The Spin-Off

We are an indirect, wholly-owned subsidiary of Greatbatch. On July 30, 2015, Greatbatch announced that it intended to spin-off Nuvectra and its neuromodulation medical device business from the remainder of its businesses through a tax-free distribution of all of the issued and outstanding shares of common stock of Nuvectra to the stockholders of Greatbatch on a pro rata basis. The entity being spun-off is composed of Nuvectra and its subsidiaries Algostim and PelviStim, and Greatbatch’s NeuroNexus subsidiary, the shares of which are being transferred to us by Greatbatch in connection with the spin-off. On , 2016, Greatbatch’s board of directors approved the distribution of all of the issued and outstanding shares of Nuvectra common stock in the spin-off on the basis of share of Nuvectra common stock for every shares of Greatbatch common stock held as of the close of business on , 2016, the record date for the spin-off.

Conversion of Nuvectra into a Corporation

Nuvectra was initially formed as a limited liability company in Delaware on November 14, 2008, under the name SDI Group, LLC, which was subsequently changed to QiG Group, LLC. Immediately prior to completion of the spin-off, QiG Group will convert into Nuvectra, a Delaware corporation.

Our Post Spin-Off Relationship with Greatbatch

In connection with the spin-off, we will enter into several agreements with Greatbatch to effect the spin-off and provide a framework for our relationship going forward after the spin-off. We and Greatbatch are entering into a separation and distribution agreement, a tax matters agreement, a transition services agreement and an employee matters agreement, which will provide for the allocation between us and Greatbatch of assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to our business for the period prior to, at and after the spin-off. We will also enter into a supply agreement with Greatbatch in connection with the spin-off under which we will agree to purchase, exclusively from Greatbatch, fully assembled Algovita systems and most products, parts and components necessary for the production of Algovita. We will also enter into a product component framework agreement providing Greatbatch with the exclusive right to supply us with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. Additionally, we will enter into two license agreements with Greatbatch in connection with the spin-off pursuant to which we will license to Greatbatch rights in, subject to specified restrictions, certain intellectual property underlying our neurostimulation technology platform. In addition, immediately prior to the completion of the spin-off, Greatbatch will make a cash capital contribution of $75.0 million to us. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding.

For additional information regarding our separation and distribution agreement with Greatbatch and the other transaction agreements, see “Our Relationship with Greatbatch After the Spin-Off.”

Reasons for the Spin-Off

Greatbatch’s board of directors believes that spinning-off Nuvectra is in the best interest of Greatbatch and its stockholders for a number of reasons, including:

•

Distinct investment identity. The spin-off will allow investors to separately value Greatbatch and Nuvectra based on their respective unique investment identities, including the merits, performance, risks and future prospects of Greatbatch’s and our respective businesses.

•

Enhanced strategic and management focus. The spin-off will allow Nuvectra and Greatbatch each to focus their respective attention and financial resources on their distinct operating priorities and strategies and on the different growth opportunities available to each company without diverting human and financial resources to the other’s business.

•

Improved employee incentives. We believe we will be able to better attract, develop and retain key employees through the use of equity-based and performance-based incentive plans and other benefit plans that more directly link employee compensation with the specific business objectives, financial goals and performance metrics of our business.

•

Direct access to capital and tailored capital structure. We will have direct access to our cash on-hand or the capital markets to issue equity or debt securities, which we expect will increase our flexibility to invest in innovation, product development and marketing, pursue strategic partnerships and establish a capital structure tailored to our business.

Greatbatch’s board of directors considered a number of potentially negative factors in evaluating the spin-off, including that:

•

Loss of synergies and increased costs. Currently, we take advantage of general and administrative functions performed by Greatbatch. After the spin-off and the termination of our transition services agreement with Greatbatch, Greatbatch will no longer perform these functions for us, and, because of our smaller scale as a standalone company, our cost of performing these functions may be higher than the amounts reflected in our combined financial statements.

•

Increased significance of some costs and liabilities . Some costs and liabilities that were less significant to Greatbatch as a whole will be more significant for us as a standalone company due to our being smaller than Greatbatch.

•

One-time costs of the spin-off. We expect to incur costs in connection with the transition to being an independent publicly-traded company that may include professional services costs, recruiting and relocation costs associated with hiring key senior management and costs to separate information systems, among others.

•

Inability to realize anticipated benefits of the spin-off. We may not achieve the anticipated benefits of the spin-off for a variety of reasons, including, among others, that we may be more susceptible to industry downturns or market fluctuations as our business will be significantly less diversified than Greatbatch’s business.

•

Limitations placed upon Nuvectra as a result of the tax matters agreement . Under the terms of our tax matters agreement with Greatbatch, we will be restricted from taking certain actions that could cause the spin-off to fail to qualify as a tax-free transaction under applicable law for a period of two years following the completion of the spin-off. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Tax Matters Agreement” for additional information regarding our tax matters agreement with Greatbatch.

The Greatbatch board of directors, however, concluded that the potential benefits of the spin-off outweighed these negative factors. For more information, see the section entitled “The Spin-Off – Reasons for the Spin-Off” included elsewhere in this information statement.

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to stockholders of Greatbatch who will receive shares of Nuvectra common stock in the spin-off. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Nuvectra’s or Greatbatch’s shares of common stock or other securities. The information contained in this information statement is believed by Nuvectra to be accurate as of the date on the cover. Changes may occur after that date, and neither we nor Greatbatch will update the information except in the normal course of our and Greatbatch’s respective disclosure practices or to the extent required pursuant to federal securities laws.

Corporate Information

After the spin-off, our principal executive offices will be located at 5700 Granite Parkway, Suite 960, Plano, Texas 75024 and our telephone number will be (214) 618-4823. Our website address is www.nuvectramed.com. Information contained on, or connected to, our website or Greatbatch’s website is not part of this information statement.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements applicable to public companies that are not emerging growth companies. These include, but are not limited to, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, (ii) an exception from compliance with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We would cease to be an emerging growth company upon the earliest of (1) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act; (2) the last day of the first fiscal year in which our total annual gross revenue exceeds $1.0 billion; (3) the date on which we become a “large accelerated filer,” as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter; and (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF

What is the spin-off?

The spin-off involves the separation of our business from Greatbatch and Greatbatch’s pro rata distribution to its stockholders of all of the outstanding shares of our common stock. Following the spin-off, we will be an independent, publicly-traded company, and Greatbatch will not retain any ownership interest in Nuvectra. You do not have to pay any consideration, give up any of your shares of Greatbatch common stock or take any other action to receive shares of our common stock in the spin-off.

What is Nuvectra and why is Greatbatch spinning-off its neuromodulation medical
device business?

Nuvectra is an indirect, wholly-owned subsidiary of Greatbatch that was organized to develop and operate Greatbatch’s neuromodulation medical device business.

The spin-off of Nuvectra from Greatbatch is intended to provide you with equity ownership in two independent publicly-traded companies – Greatbatch and Nuvectra – that will each be able to focus on their own distinct business, operating needs, priorities and strategies. Greatbatch believes that the spin-off is a tax-efficient way to separate our neuromodulation medical device business from its other businesses in a manner that is also intended to improve long-term performance of our and Greatbatch’s respective businesses for the reasons discussed in “The Spin-Off – Reasons for the Spin-Off.”

Why am I receiving this document?

Greatbatch is delivering this information statement to you because you are a holder of shares of common stock of Greatbatch. Each holder of Greatbatch common stock as of the close of business on the record date will be entitled to receive share of common stock of Nuvectra for every shares of common stock of Greatbatch held at the close of business on the record date. This information statement will help you understand how the spin-off will affect your investment in Greatbatch and your new investment in Nuvectra after the completion of the spin-off.

How will the spin-off work?

The spin-off will be accomplished by Greatbatch by separating Nuvectra from its other businesses, and then distributing all of the outstanding shares of Nuvectra common stock to its stockholders on a pro rata basis that is intended to be tax-free for U.S. federal income tax purposes.

What will Nuvectra’s relationship be with Greatbatch after the spin-off?

We will be an independent publicly-traded company and Greatbatch will not own any Nuvectra common stock after the spin-off. We will, however, enter into a separation and distribution agreement, a tax matters agreement, a transition services agreement and an employee matters agreement with Greatbatch to effect the spin-off and provide a framework for our relationship going forward after the spin-off. We will also enter into a supply agreement with Greatbatch in connection with the spin-off under which we will agree to purchase, exclusively from Greatbatch, fully assembled Algovita systems and most of the products, parts and components necessary for the production of Algovita. We will also enter into a product component framework agreement providing Greatbatch with the exclusive right to supply us

with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. Additionally, we will enter into two license agreements with Greatbatch in connection with the spin-off pursuant to which we will license to Greatbatch rights in, subject to specified restrictions, certain intellectual property underlying our neurostimulation technology platform. For additional information, see “Our Relationship with Greatbatch After the Spin-Off.”

Following the spin-off, will Nuvectra have cash on hand to fund its operating expenses and capital expenditures?

Immediately prior to the completion of the spin-off, Greatbatch will make a cash capital contribution of $75.0 million to us. After the completion of the spin-off, we expect that we will have approximately $ million in cash and cash equivalents on hand. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding.

When will the spin-off occur?

The completion and timing of the spin-off are dependent upon a number of conditions. We expect that Greatbatch will distribute the shares of Nuvectra common stock on , 2016 to holders of record of Greatbatch common stock as of the close of business on the record date.

What is the record date for the spin-off?

The record date for the spin-off will be , 2016.

What do I have to do to participate in the spin-off?

You are not required to take any action to receive Nuvectra common stock in the spin-off, but you are encouraged to read this entire information statement carefully. No vote will be taken for the spin-off. You are not being asked for a proxy.

You do not need to pay any consideration, exchange or surrender your existing shares of Greatbatch common stock or take any other action to receive your shares of Nuvectra common stock. If you own Greatbatch common stock as of the close of business on the record date, a book-entry account statement reflecting your ownership of shares of Nuvectra common stock will be mailed to you, or your brokerage account will be credited with shares of Nuvectra common stock.

You should not and do not need to mail in Greatbatch common stock certificates to receive Nuvectra common stock.

How many shares of Nuvectra
common stock will I receive?

Greatbatch will distribute share of Nuvectra common stock for every shares of Greatbatch common stock you own as of the close of business on the record date. For example, if you own shares of Greatbatch common stock as of the close of business on the record date, you will receive shares of Nuvectra common stock in the spin-off. Based on approximately shares of Greatbatch common stock that we expect to be outstanding on the record date, Greatbatch will distribute a total of

approximately shares of Nuvectra common stock, representing 100% of the outstanding Nuvectra common stock. For more information, see “The Spin-Off.”

Will I receive physical stock certificates representing shares of Nuvectra common
stock?

No. You will not receive a stock certificate for the Nuvectra common stock that you receive in connection with the spin-off. You will receive shares of Nuvectra common stock through the same or substantially similar channels that you currently use to hold or trade shares of Greatbatch common stock, whether through registration in a direct registration system or a brokerage account. Receipt of shares of Nuvectra common stock will be documented for you in substantially the same manner that you typically receive stockholder updates, such as monthly broker statements or other statements.

If you own Greatbatch common stock as of the close of business on the record date, including shares owned in certificate form, we, with the assistance of Computershare Trust Company, N.A., or Computershare, as the settlement and distribution agent, will electronically distribute shares of Nuvectra common stock to you in book-entry form by way of registration in the “direct registration system” (if you hold Greatbatch shares in your own name as a registered stockholder) or to your bank or brokerage firm on your behalf or through the systems of the Depository Trust Company, or DTC (if you hold Greatbatch shares through a bank or brokerage firm that uses DTC). Computershare will mail you a book-entry account statement that reflects your shares of Nuvectra common stock, or your bank or brokerage firm will credit your account for the Nuvectra shares.

Will Greatbatch distribute fractional shares?

No. In lieu of fractional shares of Nuvectra common stock that you would have been entitled to receive, stockholders of Greatbatch will receive cash. Fractional shares you would otherwise be entitled to receive will be aggregated and sold in the public market by Computershare, as distribution agent. The aggregate net cash proceeds of these sales will be distributed ratably to those stockholders who would otherwise have received fractional shares of Nuvectra common stock after making an appropriate deduction of the amount required to be withheld for federal income tax purposes and an amount equal to the brokerage fees and commissions attributable to the sale of the fractional share. If you own less than shares of Greatbatch common stock on the record date, you will not receive any shares of Nuvectra common stock in the spin-off, but you will receive cash in lieu of fractional shares. Cash you receive in lieu of fractional shares will generally be taxable. For more information, see “The Spin-Off – Treatment of Fractional Shares.”

What are the conditions to the spin-off?

The spin-off is subject to a number of conditions, including, among others:

•

the receipt of an opinion from Greatbatch’s third party tax advisor, in form and substance acceptable to Greatbatch, substantially to the effect that the spin-off, for U.S. federal income tax purposes, should qualify as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended, or the Code;

•

the receipt of an opinion from an independent valuation firm to the Greatbatch board of directors confirming the solvency of Nuvectra following the spin-off, which is in form and substance acceptable to Greatbatch;

•

the U.S. Securities and Exchange Commission, or the SEC, declaring effective Nuvectra’s registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of such registration statement shall be in effect and, to the knowledge of either Greatbatch or Nuvectra, no proceedings for such purpose shall be threatened by the SEC;

•

the distribution of this information statement to Greatbatch’s stockholders;

•

no preliminary or permanent injunction or other order, decree, or ruling issued by a court of competent jurisdiction or other governmental authority, and no statute, rule, regulation or executive order promulgated or enacted by any governmental authority will be in effect preventing, or materially limiting the benefits of, the spin-off, and no other event outside Greatbatch’s control will have occurred or failed to occur that prevents the completion of the spin-off;

•

the shares of Nuvectra common stock to be distributed shall have been accepted for listing on the NASDAQ Global Market, subject to official notice of distribution; and

•

no other event or development will have occurred that, in the judgment of Greatbatch’s board of directors, in its sole and absolute discretion, would result in the spin-off having a material adverse effect on Greatbatch or its stockholders.

Neither we nor Greatbatch can assure you that any or all of these conditions will be met. In addition, Greatbatch can decline at any time to go forward with the spin-off. For a complete discussion of all of the conditions to the spin-off, see “The Spin-Off – Spin-Off Conditions and Termination.”

Can Greatbatch decide to cancel the spin-off even if all of the conditions have been met?

Yes. The spin-off is subject to the satisfaction or waiver of several conditions; however, until the spin-off has occurred, Greatbatch’s board of directors has the right to cancel or terminate the spin-off, even if all of the conditions are satisfied. For more information, see “The Spin-Off – Spin-Off Conditions and Termination.”

What if I want to sell my Greatbatch common stock or my Nuvectra common stock?

You should consult with your financial advisor, such as your stockbroker, bank or tax advisor.

What is “regular-way” and “ex-distribution” trading of Greatbatch stock?

Beginning on or shortly before the record date and continuing up to and through the spin-off date, it is expected that there will be two markets in Greatbatch common stock: a “regular-way” market and an “ex-distribution” market. Greatbatch common stock that trades in the “regular-way” market will trade with an entitlement to shares of Nuvectra common stock distributed pursuant to the spin-off. Shares

that trade in the “ex-distribution” market will trade without an entitlement to shares of Nuvectra common stock distributed pursuant to the spin-off.

If you decide to sell your Greatbatch common stock before the spin-off date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your Greatbatch common stock with or without your entitlement to Nuvectra common stock to be received pursuant to the spin-off.

Will the spin-off affect the market price of my Greatbatch common stock?

Likely yes. The trading price of the Greatbatch common stock is expected to change as a result of the spin-off because it will no longer reflect the value of our neuromodulation medical device business. Moreover, the trading price of Greatbatch common stock may fluctuate significantly depending upon a number of factors, some of which may be beyond Greatbatch’s control. Greatbatch’s board of directors believes that the spin-off of Nuvectra from Greatbatch is in the best interests of Greatbatch and its stockholders. That said, we cannot provide you with any guarantees as to the price at which the Greatbatch common stock will trade following the spin-off. We also cannot assure you that following the spin-off the aggregate value of our common stock and Greatbatch common stock will exceed the pre-spin-off value of Greatbatch common stock.

Is the spin-off taxable for U.S. federal income tax purposes?

The effectiveness of the spin-off is conditioned on the receipt by Greatbatch of an opinion from its third party tax advisor to the effect that the spin-off of the Nuvectra common stock should qualify as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code. Assuming the spin-off qualifies as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code, for U.S. federal income tax purposes, gain or loss generally should not be recognized by Greatbatch on the spin-off and, except for gain or loss realized on the receipt of cash paid in lieu of fractional shares, no gain or loss should be recognized by you, and no amount should be included in your income for U.S. federal income tax purposes, upon the receipt of shares of Nuvectra common stock in the spin-off. For more information regarding the material U.S. federal income tax consequences to Greatbatch and to you resulting from the spin-off, see “Material U.S. Federal Income Tax Consequences.”

How will the spin-off affect my tax basis in Greatbatch common stock?

For U.S. federal income tax purposes, your basis in the Greatbatch common stock will be allocated between the Greatbatch common stock and the Nuvectra common stock (including any fractional shares of Nuvectra common stock for which cash is received) received in the spin-off in proportion to the relative fair market values of each on the spin-off date. See “Material U.S. Federal Income Tax Consequences” for a more complete description of the effects of the spin-off on your tax basis.

You should consult your tax advisor about the particular consequences of the spin-off to you, including the application of the tax basis allocation rules and the application of state, local and foreign tax laws.

Are there risks associated with owning Nuvectra common stock?

Yes. Ownership of Nuvectra common stock is subject to both general and specific risks relating to our business, the industry in which we operate, our ongoing contractual relationships with Greatbatch, our status as an independent, publicly-traded company and the occurrence of the spin-off. These risks are described in the “Risk Factors” section of this information statement beginning on page 19. You are encouraged to read that section carefully.

Will I be paid any dividends on Nuvectra common stock?

We currently do not anticipate paying cash dividends on Nuvectra common stock. See “Dividend Policy” for additional information on our dividend policy after the spin-off.

Where will I be able to trade shares of Nuvectra common stock?

Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR.” We anticipate that trading in shares of Nuvectra common stock will begin on a “when-issued” basis on or around the record date and will continue up to and through the spin-off date, and that “regular-way” trading will begin on the first trading day after the spin-off date. If trading does begin on a “when-issued” basis, you may purchase or sell Nuvectra common stock after that time, but your transaction will not settle until after the spin-off date. We cannot predict the trading prices of Nuvectra common stock before, on or after the spin-off date.

Will the number of Greatbatch shares I own change as a result of the spin-off?

No. The number of shares of Greatbatch common stock you own will not change as a result of the spin-off.

The treatment of outstanding Greatbatch equity awards will, in certain respects, differ from the treatment of shares of Greatbatch common stock. For further information regarding the treatment of outstanding Greatbatch equity awards, see “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Employee Matters Agreement.”

What will happen to the listing of Greatbatch common stock?

Greatbatch common stock will continue to be traded on the New York Stock Exchange under the symbol “GB” following the spin-off.

Do I have any appraisal rights in connection with the spin-off?

No. Holders of shares of Greatbatch common stock are not entitled to appraisal rights in connection with the spin-off.

Who will be the settlement agent, distribution agent, transfer agent and registrar for the Nuvectra common stock?

The settlement agent, distribution agent, transfer agent and registrar for Nuvectra common stock will be Computershare. For questions relating to the transfer or mechanics of the stock distribution, you should contact:

Computershare

P.O. Box 30170

College Station, TX 77842-3170

(877) 832-7265

www.computershare.com/investor

If your shares are held by a bank, broker or other nominee, please call them directly.

Where can I find more information?

Before the spin-off date, if you have any questions relating to the spin-off, you should contact:

Greatbatch, Inc.

2595 Dallas Parkway

Suite 310

Frisco, Texas 75034

Attention: Vice President – Business Development

After the spin-off date, Nuvectra stockholders who have any questions relating to Nuvectra or the spin-off should contact us at:

Nuvectra Corporation

5700 Granite Parkway

Suite 960

Plano, Texas 75024

Attention: Chief Financial Officer

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This information statement contains, and other materials we will file with the SEC contain will contain, certain “forward-looking statements” regarding business strategies, market potential, future financial performance and other matters. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan” or “continue,” or the negative of those words and similar expressions, among others. These forward-looking statements address, among other things, the anticipated effects of the spin-off. The matters discussed in these forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements, including those described in the section of this information statement entitled “Risk Factors.” Whether actual future results and developments will conform to the expectations and predictions is subject to a number of risks and uncertainties, including the following factors, many of which are beyond our control:

•

the timing of the commercial launch of Algovita in the United States;

•

our ability to successfully commercialize Algovita and develop and commercialize enhancements to Algovita;

•

the outcome of our future development plans with respect to our neurostimulation technology platform, including our ability to identify additional indications or conditions for which we may develop neurostimulation medical devices or therapies and seek regulatory approval thereof;

•

our ability to identify business development and growth opportunities and to successfully execute on our business development strategy, including with our ability to seek and develop strategic partnerships with third parties to, among other things, fund clinical and development costs, in whole or in part, for new product offerings;

•

to the extent that we are able to enter into strategic partnerships with third parties, the performance by our development partners of their obligations under their agreements with us;

•

the scope of protection we are able to establish and maintain for our intellectual property rights covering Algovita and other products using our neurostimulation technology platform, along with any product enhancements;

•

our expectations regarding the potential market size and the size of the patient populations for our products, including Algovita and any other medical device incorporating our neurostimulation technology platform;

•

our dependence on Greatbatch to manufacture Algovita in sufficient quantities to meet demand;

•

our development, commercialization and marketing capabilities, including our ability to develop and commercialize other products that are superior to the alternatives developed by our competitors;

•

our ability to successfully build an effective commercial infrastructure and sales force in the United States;

•

the implementation of our business model and strategic plans for our business, product candidates, development partners and technology;

•

estimates of our expenses, future revenue, capital requirements, our need for additional financing and our ability to obtain additional capital;

•

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

•

our financial performance, which may exceed or fall short of our and our investors’ expectations;

•

developments and projections relating to our competitors and our industry;

•

breaches or failures of our information technology systems;

•

loss of key employees or our inability to identify and recruit new employees;

•

the impact of our spin-off from Greatbatch and risks relating to our ability to operate effectively as an independent publicly-traded company;

•

the costs and temporary business interruption related to the spin-off;

•

Greatbatch’s performance under the separation and distribution agreement with us and various other transaction agreements that will be executed as part of the spin-off;

•

our ability to transition away from the services to be provided by Greatbatch pursuant to the transition services agreement with us in a timely manner;

•

our ability to achieve the benefits from the spin-off as currently expected;

•

failure of the “regular-way,” “ex-distribution” or “when issued” markets to develop or other unexpected reactions to the spin-off in the capital markets;

•

restrictions on our taking certain strategic actions for a period of two years after the completion of the spin-off due to tax rules and covenants under the tax matters agreement with Greatbatch; and

•

other factors described in the section of this information statement entitled “Risk Factors.”

You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this information statement. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, that expectation or belief is based on our current plans and expectations and is expressed in good faith and believed to have a reasonable basis, but we cannot assure you that the expectation or belief will result or be achieved or accomplished. Neither Greatbatch nor Nuvectra undertake any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events, or other such factors that affect the subject of these statements, except where we or Greatbatch are expressly required to do so pursuant to federal securities laws. Factors that could cause actual results or events to differ materially from those anticipated include the matters described under the sections of this information statement entitled “Summary,” “The Spin-Off,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” each of which contain forward-looking statements.

RISK FACTORS

You should carefully consider the following risks, as well as the other information included in this information statement, in evaluating us and our common stock. The occurrence of any of the risks described below could have a material adverse effect on our business, financial condition, results of operations, our ability to raise capital and growth prospects. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations, our ability to raise capital and growth prospects.

Risks Related to our Business

We are substantially dependent on the market acceptance in the United States for Algovita and the failure of Algovita to gain market acceptance would negatively impact our business.

On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita, and we expect to launch Algovita commercially in the United States during the first half of 2016. If we are unable to achieve significant market acceptance in the United States, our results of operations will be adversely affected as the United States is expected to be the principal market for Algovita. While we currently have other complete medical devices incorporating our neurostimulation technology platform in development, if we are unsuccessful in commercializing Algovita or are unable to market Algovita as a result of a quality problem, failure to maintain regulatory approval for Algovita, unexpected or serious complications or other unforeseen negative effects related to Algovita, we would lose our expected main source of revenue, and our business will be materially adversely affected.

If we fail to develop and retain an effective direct sales force in the United States, our business could suffer.

In order to commercialize Algovita in the United States, we must build a substantial direct sales force. As we initiate our commercial launch of Algovita in the United States in the first half of 2016 and concurrently increase our marketing efforts, we will need to retain, grow and develop our direct sales representatives. There is significant competition for sales representatives experienced in medical device sales. Once hired, the training process is lengthy because it requires significant education for new sales representatives to achieve the level of clinical competency with Algovita expected by physicians. Upon completion of the training, sales representatives typically require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach. If we are unable to attract, motivate, develop and retain a sufficient number of qualified sales representatives, and if our sales representatives do not achieve the productivity levels we expect them to reach, our revenue will not grow at the rate we expect and our financial performance will suffer. Also, to the extent we hire personnel from our competitors, we may have to wait until applicable non-competition provisions have expired before deploying that personnel in restricted territories or incur costs to relocate personnel outside of those territories, and we may be subject to future allegations that these new hires have been improperly solicited, or that they have divulged to us proprietary or other confidential information of their former employers. Any of these risks may adversely affect our business.

We must demonstrate to physicians the merits of Algovita compared to products marketed by our competitors.

Physicians play a significant role in determining the course of a patient’s treatment and, as a result, the type of product that will be used to treat a patient. As a result, our success depends, in large part, on effectively marketing Algovita and SCS therapy to physicians. In order for us to successfully commercialize Algovita, we must successfully demonstrate to physicians the merits of Algovita as compared to our competitors’ SCS systems. Acceptance of Algovita depends, in part, on educating physicians as to the distinctive characteristics, perceived benefits, safety, ease of use and cost-effectiveness of Algovita compared to our competitors’ SCS systems, and communicating to physicians the proper application of Algovita. If we are not successful in convincing physicians of the merits of Algovita or educating them on the use of Algovita, they may not use our products and we may be unable to increase our sales, sustain our growth or achieve profitability.

Additionally, an important part of our sales process also includes the education of physicians on the safe and effective use of Algovita. It is critical to the success of our commercialization efforts to educate physicians on the proper use of Algovita, and to provide them with adequate product support during clinical procedures. If physicians misuse or ineffectively use our products, it could result in unsatisfactory patient outcomes, patient injuries, negative publicity or lawsuits against us, any of which could have an adverse effect on our business. Finally, in the United States, in order for physicians to use Algovita, we expect that the hospital facilities where these physicians treat patients will typically require us to enter into purchasing contracts with them. If we do not receive access to hospital facilities via these contracting processes or otherwise, or if we are unable to secure contracts or tender successful bids, our sales and operating results may be adversely affected.

Our competitors are large, well-established companies with substantially greater resources than us and many have a long history of competing in the SCS market.

Our current and potential competitors are publicly-traded, or are divisions of publicly-traded, major medical device companies that have substantially greater financial, technical, sales and marketing resources than we do. For example, our major competitors, Medtronic, Inc., Boston Scientific Corporation, St. Jude Medical, Inc. and Nevro Corp., each has an approved neuromodulation system in at least the United States, Europe, and Australia. Medtronic, Boston Scientific and St. Jude Medical have each been established for several years while Nevro is a new entrant to the SCS market and is marketing its High Frequency 10 (HF10) SCS therapy for treatment of several chronic pain conditions. Given the size of the SCS market in the United States, we expect that as we prepare to launch Algovita commercially in the United States our competitors will take aggressive action to protect their current market share and position. We expect to face significant competition in establishing our market share in the United States and may encounter currently unforeseen obstacles and competitive challenges.

In addition, we face a particular challenge in overcoming entrenched practices by some physicians who exclusively use the neurostimulation products produced by our larger, more established competitors. Physicians who have completed many successful procedures using neurostimulation products made by these competitors may be reluctant or unwilling to try a new product from a new entrant in the marketplace with which they are less familiar. If these physicians are unwilling to try or, even if they are willing to try, do not subsequently adopt Algovita, our business will be materially adversely affected.

Further, a number of our competitors are currently conducting, or we anticipate will be conducting, clinical trials to demonstrate the efficacy of their SCS systems, which may lead to regulatory approvals for use of their systems for additional indications or support for their marketing claims that their products are superior to Algovita. Competition may increase further as existing competitors enhance their product offerings to compete directly with Algovita or other companies enter the SCS market. If our competitors develop more effective or affordable products, or achieve earlier patent protection or product commercialization than we do, our operations will likely be negatively affected. If we are forced to reduce our prices for Algovita due to increased competition, our business could become less profitable.

We only recently began commercializing Algovita in Europe and we may never achieve market acceptance.

Algovita received CE mark approval in June 2014, enabling us to commercialize it in Europe. We currently sell Algovita in Germany, Switzerland, Austria and Luxembourg. We have limited experience engaging in commercial activities and limited established relationships with physicians and hospitals in those countries. We may be unable to gain broader market acceptance in these countries, which will adversely affect our sales and operating results.

We are dependent upon Greatbatch as a sole-source manufacturer and supplier, making us vulnerable to supply shortages, manufacturing problems and price fluctuations, which could harm our business.

In connection with the spin-off, we will enter into an exclusive supply agreement with Greatbatch under which we will agree to purchase fully assembled Algovita systems and most products, parts and components necessary for the production of Algovita. We will also enter into a product component framework agreement providing

Greatbatch with the exclusive right to supply us with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. Subject to conditions specified in these agreements, Greatbatch will be our exclusive and sole source manufacturer and supplier for our key products, including Algovita. As a result, we will be vulnerable to supply shortages, failure to maintain adequate safety stock and manufacturing problems encountered by Greatbatch, including, for example, Greatbatch’s failure to follow specific protocols and procedures, failure to comply with applicable legal and regulatory requirements, equipment malfunction and environmental factors, failure to properly conduct its own business affairs, and infringement of third-party intellectual property rights, any of which could delay or impede its ability to meet our requirements. Greatbatch may also be unwilling to supply components for Algovita or our other products. In addition, we may not be able to take advantage of price fluctuations or competitive pricing that may become available from alternative supply sources. Our reliance on Greatbatch as our sole source supplier also subjects us to other risks that could harm our business, including:

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we are not the only customer of Greatbatch, and it may therefore give other customers’ needs higher priority than ours;

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in the event our supply agreement with Greatbatch is terminated, we may have difficulty locating and qualifying alternative suppliers on a timely basis or at all;

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in the event our supply agreement with Greatbatch is terminated, switching suppliers may require product redesign and possibly submission to FDA, or other foreign regulatory bodies, which could significantly impede or delay our commercial activities; and

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Greatbatch could encounter financial or other business hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.

Our ability to achieve profitability will depend, in part, on our ability to reduce the per unit cost of Algovita.

Currently, the gross profit generated from the sale of Algovita is not sufficient to cover our operating expenses. To achieve profitability, we need to, among other things, reduce the per unit cost for Algovita. This cannot be achieved without increasing the volume of systems and components that we purchase from Greatbatch. Any increase in manufacturing volumes is dependent upon a corresponding increase in sales. The occurrence of any factor that negatively impacts the sales of Algovita or reduces manufacturing efficiency may prevent us from achieving our desired reduction in per unit costs, which would negatively affect our operating results and may prevent us from attaining profitability.

Our international operations subject us to certain operating risks, which could adversely impact our results of operations and financial condition.

In 2014, following our receipt of CE mark for Algovita in June 2014, we began selling Algovita in Europe through a limited number of distributors. We began our sales in Germany and, to date, have expanded our sales efforts into Luxembourg, Switzerland and Austria. Given that we do not have, or currently plan to use, any direct sales representatives in Europe, we are heavily dependent on the efforts of a limited number of distributors in Europe. The sale and shipment of Algovita and our other products across international borders exposes us and our distributors to risks inherent in operating in foreign jurisdictions. These risks include:

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difficulties in enforcing our intellectual property rights and in defending against third-party threats and intellectual property enforcement actions against us, our distributors, or our suppliers;

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reduced or varied protection for intellectual property rights in some countries;

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pricing pressure that we may experience internationally;

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a shortage of high-quality sales representatives and distributors;

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third-party reimbursement policies that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate the reduction of the selling prices of our products;

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competitive disadvantage to competition with established business and customer relationships;

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foreign currency exchange rate fluctuations;

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the imposition of additional U.S. and foreign governmental controls or regulations;

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economic instability;

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changes in duties and tariffs, license obligations and other non- tariff barriers to trade;

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the imposition of restrictions on the activities of foreign agents, representatives and distributors;

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scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us;

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laws and business practices favoring local companies;

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longer payment cycles;

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difficulties in maintaining consistency with our internal guidelines;

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difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

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the imposition of costly and lengthy new export licensing requirements; and

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the imposition of new trade restrictions.

In addition, our international operations subject us to laws regarding sanctioned countries, entities and persons, customs, import-export, laws regarding transactions in foreign countries, the U.S. Foreign Corrupt Practices Act of 1977 and local anti-bribery and other laws regarding interactions with healthcare professionals. Among other things, these laws restrict, and in some cases prohibit, United States companies from directly or indirectly selling goods, technology or services to people or entities in certain countries. In addition, these laws require that we exercise care in structuring our sales and marketing practices in foreign countries. Our failure to comply with these regulations and laws could subject us to penalties, fines, denial of export privileges, seizures of shipments, product recalls, restrictions on business activities or other criminal, civil or administrative actions.

If we experience any of these risks, our sales in non-U.S. jurisdictions may be harmed and our results of operations would suffer.

Issues with product quality could have a material adverse effect upon our business, subject us to regulatory actions, including product recalls, product liability litigation, and cause a loss of customer confidence in us or our products.

Our success depends upon the quality of our products. Quality management plays an essential role in meeting customer requirements, preventing defects and assuring the safety and efficacy of our products. Quality and safety issues may occur with respect to Algovita or any of our other products at any stage. A quality or safety issue, including a product recall, may result in adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly product liability and other litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. An inability to address a quality or safety issue, including a product recall, in an effective and timely manner may also cause negative publicity, a diversion of management attention, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.

We may not be able to establish or strengthen our brand.

We believe that establishing and strengthening our brand is critical to achieving widespread acceptance for Algovita and our other products, particularly because of the highly competitive nature of the markets in which we operate. Promoting and positioning our brand will depend largely on the success of our marketing efforts and the perception by physicians and our other customers of the quality and efficacy of Algovita and our other products.

Given the established nature of our competitors, and our lack of commercialization experience in the United States, it is likely that our future marketing efforts will require us to incur significant expenses. These brand promotion activities may not yield increased sales and, even if they do yield increased sales, any sales increases may not offset the expenses we incurred to promote our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, Algovita and our other products may not be accepted by physicians and our others customers, which would adversely affect our business, results of operations and financial condition.

Our business could suffer if we lose the services of key members of our senior management or fail to hire necessary personnel and sales representatives.

We are dependent upon the continued services of key members of our senior management. The loss of these individuals could disrupt our operations or our strategic plans. In addition, our future success will depend on, among other things, our ability to continue to hire or contract with, and retain, the necessary qualified scientific, technical and managerial personnel and sales representatives, for whom we compete with numerous other companies, academic institutions and organizations. The loss of members of our management team or our inability to attract or retain other qualified personnel could have a material adverse effect on our business, results of operations and financial condition.

If third-party payors do not provide adequate coverage and reimbursement for the use of Algovita and other neurostimulation devices we market for sale, we may be required to decrease our selling prices, which could have a negative effect on our financial performance.

Our success in marketing Algovita and any other neurostimulation devices we develop depends and will depend in large part on whether United States and international government health administrative authorities, including Medicare and Medicaid in the United States, private health insurers and other organizations adequately cover and reimburse customers for the cost of Algovita and those other devices. Third-party payors continually review their coverage and reimbursement policies and could, without notice, eliminate or reduce coverage or reimbursement for SCS, SNS or DBS therapy and/or Algovita and any other devices we develop.

Further, the trends toward managed care, healthcare cost containment and other changes in government and private sector initiatives are placing increased emphasis on the delivery of more cost-effective medical therapies. As the healthcare industry consolidates, competition to provide products and services to industry participants will continue to intensify, which will result in greater pricing pressures and the exclusion of certain suppliers from important market segments as group purchasing organizations, integrated delivery networks and large single accounts continue to use their market power to consolidate purchasing decisions. Access to adequate coverage and reimbursement for SCS, SNS or DBS therapy and, in particular, for Algovita by third-party payors is essential to the acceptance of Algovita.

In addition, reimbursement systems in international markets vary significantly by country and, in some cases, by region within some countries, and reimbursement approvals are often required be obtained on a country-by-country basis. In many international markets, a product must be approved for reimbursement before it can be approved for sale in that country. Further, many international markets have government-managed healthcare systems that control reimbursement for new devices and procedures. If sufficient coverage and reimbursement is not available for Algovita and other SCS devices in our international markets, the demand for our products and our revenues will be adversely affected.

If we fail to properly manage our anticipated growth, our business could suffer.

We have a relatively short history operating history. We intend to continue to grow and may experience periods of rapid growth and expansion, which could place a significant additional strain on our limited personnel, information technology systems and other resources. In particular, the hiring of our direct sales representatives in the United States requires significant management, financial and other supporting resources. In order to manage

our operations and growth, we will need to continue to improve our operational and management controls, reporting systems and control procedures, which we may be unable to do in a cost efficient manner or at all. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our operating results and business could suffer.

If we are unable to successfully introduce new products or fail to keep pace with advances in technology, our business, financial condition and results of operations could be adversely affected.

Although we continue to develop or seek to develop additional products using our neurostimulation technology platform for commercial introduction, we may be substantially dependent on sales from Algovita for many years. Over the longer term, we will need to successfully introduce new products or advancements to Algovita in order to achieve our strategic business objectives. Product development requires substantial investment and there is inherent risk in the research and development process. A successful product development process depends on many factors, including our ability to properly anticipate and satisfy customer needs, adapt to new technologies, obtain regulatory approvals on a timely basis, demonstrate satisfactory clinical results, manufacture products in an economical and timely manner and differentiate our products from those of its competitors. If we cannot successfully introduce new products or adapt to changing technologies, our products may become obsolete and our revenue and profitability could suffer.

If clinical studies for future indications do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to commercialize our products for these indications.

We will likely need to conduct additional clinical studies and post marketing studies in the future to support approval for new indications and product claims. Clinical testing takes many years, is expensive and carries uncertain outcomes. The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons, including, but not limited to, the following:

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the FDA, institutional review boards or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold;

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patients do not enroll in, or enroll at a lower rate than we expect, or do not complete a clinical study;

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patients or investigators do not comply with study protocols;

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patients do not return for post-treatment follow-up at the expected rate;

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patients experience serious or unexpected adverse side effects for a variety of reasons that may or may not be related to our products such as the advanced stage of co-morbidities that may exist at the time of treatment, causing a clinical study to be put on hold;

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sites participating in an ongoing clinical study withdraw, requiring us to engage new sites;

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difficulties or delays associated with establishing additional clinical sites;

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third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or perform in a manner inconsistent with the investigator agreement, clinical study protocol, good clinical practices or other regulations governing clinical trials;

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third-party organizations do not perform data collection and analysis in a timely or accurate manner;

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regulatory inspections of our clinical studies or manufacturing facilities require us to undertake corrective action or suspend or terminate our clinical studies;

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changes in federal, state, or foreign governmental statutes, regulations or policies;

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interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy;

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the study design is inadequate to demonstrate safety and efficacy; or

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the statistical endpoints are not met.

Clinical failure can occur at any stage of the testing. Our clinical studies or post marketing studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical or non-clinical studies in addition to those we have planned. Our failure to adequately demonstrate the safety and effectiveness of any of our devices would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device or indication for use.

We could also encounter delays if the FDA concludes that our financial relationships with investigators results in a perceived or actual conflict of interest that may have affected the interpretation of a study, the integrity of the data generated at the applicable clinical trial site or the utility of the clinical trial itself. Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash compensation and/or stock options in connection with such services. If these relationships and any related compensation to or ownership interest by the clinical investigator carrying out the study result in perceived or actual conflicts of interest, or if the FDA concludes that the financial relationship may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of our premarket approval application by the FDA. Any such delay or rejection could prevent us from commercializing any of our products currently in development.

Our future success is highly dependent upon our use of our intellectual property rights, including trade secrets, which rights could be adversely impacted by many factors, each of which could have a material adverse effect on our effect on our business, financial condition, results of operations and growth prospects.

As a neuromodulation medical device company initially focused on the development and commercialization of our neurostimulation technology platform, we expect to be highly dependent upon our use of our intellectual property rights. These intellectual property rights could be adversely impacted by many factors, including:

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We may in the future become involved in lawsuits to defend ourselves against intellectual property disputes, which could be expensive and time consuming, and ultimately unsuccessful, and could result in the diversion of significant resources, and hinder our ability to commercialize our existing or future products;

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Our patents and other intellectual property rights infringing or violating the proprietary rights of others (particularly given that our competitors have made substantial investments in patent portfolios and competing technologies and may have applied for or may in the future apply for and obtain, patents that may interfere with our ability to sell our products) as if a third party brings a claim against us, our customers, our suppliers or our distributors, whether merited or not, it could be costly to defend, require us to pay damages on behalf of our customers, suppliers, or distributors, interfere with our ability to make, use, sell, and/or export our products or require us to obtain a license (which we may not be able to obtain on commercially reasonable terms or at all);

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Our intellectual property rights may not provide sufficient commercial protection for Algovita and any future complete medical device that incorporates our neurostimulation technology platform, and potentially enable third parties to use our technology or very similar technology and reduce our ability to compete in the market;

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Third parties seek to may challenge our patents, and, as a result, these patents could be narrowed, invalidated or rendered unenforceable;

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Our current and future patent applications may not result in the issuance of patents in the United States or foreign countries;

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Recent patent reform legislation, including the Leahy-Smith America Invents Act, or any future patent reform legislation may affect the way patent applications are prosecuted, redefine prior art, affect patent litigation or switch the United States patent system from a “first-to-invent” system to a “first-to-file” system, any or all of which could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents;

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If we may fail to maintain the patents and patent applications covering Algovita and our neurostimulation technology platform, whether through unintentional lapse or otherwise, which, if uncurable or left uncured, could allow a competitor to market products that are the same or similar to our own;

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We may become involved in interference or derivation proceedings or re-examination or opposition proceedings provoked by third parties or brought by the United States Patent and Trademark Office or any foreign patent authority to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications, which if the outcome were unfavorable could require us to cease using the related technology or to attempt to license rights to it from the prevailing party;

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We rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position, which we endeavor to protect through non-disclosure and confidentiality agreements with parties who have access to these items. However, despite our best efforts and contractual limitations, our trade secrets and other unpatented or unregistered proprietary information may get disclosed and thereafter are likely to lose trade secret protection; and

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We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

If any of the foregoing occurs, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products, all of which could have a material adverse effect on our business, results of operations and financial condition.

We are subject to certain risks related to our license agreements with Greatbatch, including the potential for Greatbatch to develop competing or similar products.

Under our license agreements with Greatbatch, we have licensed to Greatbatch the right to use certain of the intellectual property underlying our neurostimulation technology platform for applications within the neurostimulation fields of use in the unrestricted license agreement and certain other intellectual property underlying our neurostimulation technology platform for applications outside of the neurostimulation fields of use in the restricted license agreement. In addition, NeuroNexus has licensed to Greatbatch the right to use its intellectual property outside of the neurostimulation fields of use. Greatbatch, through the use of this licensed intellectual property or through the use of other intellectual property that it separately owns or has developed, may seek to develop products, components or improvements to such items that compete against or are similar to our own products and components. In addition, if Greatbatch tries to develop a product that incorporates licensed intellectual property for applications within a prohibited field of use, we may seek to enforce the terms of the license agreements to prohibit such development, which could subject us to costly litigation or may be a distraction to management. In addition, pursuant to the terms of these license agreements, we will be required to indemnify Greatbatch against certain third party infringement claims, which could result in our incurrence of significant expenses to defend any such matters or require us to make significant indemnification payments to Greatbatch.

Our use of “open source” software in our products could subject us to possible litigation.

We use and expect to continue to use some open source software in our products. We may face claims from others claiming ownership of, or seeking to enforce the terms of, an open source license, including by demanding release of the open source software, derivative works or our proprietary source code that was developed using such software. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our software, any of which would have an adverse effect on our business and operating results. Further, if the license terms for the open source code change, we may be forced to re-engineer our products, resulting in additional costs.

We may not be able to adequately protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly developing countries, and the breadth of patent claims allowed can be inconsistent. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories in which we have patent protection that may not be sufficient to terminate infringing activities.

We do not have patent rights in certain foreign countries in which a market may exist. Moreover, in foreign jurisdictions where we do have patent rights, proceedings to enforce such rights could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and our patent applications at risk of not issuing. Additionally, such proceedings could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a competitor from marketing and selling in foreign countries products that are the same as or similar to our products, and our competitive position in the international market would be harmed.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition with potential partners or customers in our markets of interest. In addition, third parties have registered trademarks similar to our trademarks in foreign jurisdictions, and may in the future file for registration of such trademarks. If they succeed in registering or developing common law rights in such trademarks, and if we were not successful in challenging such third-party rights, we may not be able to use these trademarks to market our products in those countries. In any case, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

We have a history of significant net operating losses. If we do not achieve and sustain profitability, our financial condition could suffer.

We have experienced significant net operating losses, and we expect to continue to incur net operating losses for the foreseeable future. We expect to continue to incur net operating losses as we continue to build our direct sales force in the United States and initiate the commercial launch of Algovita in the United States in 2016.

We intend to continue to increase our operating expenses substantially as we add sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States to increase our geographic sales coverage and penetration, invest in research and development programs to accelerate new product launches, expand our marketing and training programs, conduct clinical studies, and increase our general and administrative functions as a result of operating as an independent publicly-traded company. We may not ever generate sufficient sales from our operations to achieve profitability, and even if we do achieve profitability, we may not be able to remain profitable for any substantial period of time. If our revenue grows more slowly than we anticipate, or if our operating expenses are higher than we expect, we may not be able to achieve profitability and our financial condition will suffer.

We will be required to obtain additional funds in the future, and these funds may not be available on acceptable terms or at all.

Our operations have consumed substantial amounts of cash since inception, and we anticipate our expenses will increase as we build a direct sales force in the United States, investigate the use of our neurostimulation technology platform for the treatment of other conditions, continue to grow our business, and transition to operating as an independent publicly-traded company. We believe that our growth will depend, in part, on our ability to commercialize Algovita. Our existing resources, inclusive of the cash capital contribution of $75.0 million to be made by Greatbatch immediately prior to the completion of the spin-off, may not allow us to conduct all of the activities that we believe would be beneficial for our future growth. As a result, we may need to seek additional funds in the future. If we are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts for Algovita or increase our research and development activities, and the growth of our business may be negatively impacted.

Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:

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the outcome, timing of, and costs involved in, seeking and obtaining supplementary or additional approvals from the FDA and other regulatory authorities;

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the scope and timing of our investment in our United States commercial infrastructure and direct sales force;

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the research and development activities we intend to undertake in order to expand the indications and product enhancements that we intend to pursue;

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the costs of commercialization activities including product sales, marketing, manufacturing and distribution;

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the degree and rate of market acceptance of Algovita;

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changes or fluctuations in our inventory supply needs and forecasts of our supply needs;

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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

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our need to implement additional infrastructure and internal systems;

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our ability to hire additional personnel to support our operations as an independent publicly-traded company; and

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the emergence of competing technologies or other adverse market developments.

To finance these activities, we may seek funds through borrowings or rounds of financing, including private or public equity or debt offerings, and strategic partnerships. We may be unable to raise necessary funds on favorable terms, or at all.

If we borrow funds or issue debt securities, these securities could have rights superior to holders of our common stock and could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with strategic partners that may require us to relinquish rights to our technologies, product candidates, or products that we otherwise may not wish to relinquish.

We will need to maintain sufficient levels of inventory, which could consume a significant amount of our resources, reduce our cash flows and lead to inventory impairment charges.

As a result of the need to maintain substantial levels of inventory, we are subject to the risk of inventory obsolescence and expiration, which may lead to inventory impairment charges. In order to market and sell Algovita effectively, we often must maintain high levels of inventory. In particular, as we prepare for our commercial launch of Algovita in the United States, we intend to substantially increase our levels of inventory and our safety stock in order to meet our estimated demand and, as a result, incur significant expenditures

associated with such increases in our inventory and safety stock. The manufacturing process requires lengthy lead times, during which components of Algovita may become obsolete, and we may over- or under-estimate the amount needed of a given component, in which case we may expend extra resources or be constrained in the number of Algovita systems that we can produce. As compared to direct manufacturers, our dependence on Greatbatch as our sole manufacturer exposes us to greater lead times increasing our risk of inventory obsolesce comparatively. Furthermore, Algovita has a limited shelf life due to sterilization requirements, and part or all of a given product or component may expire and its value would become impaired and we would be required to record an impairment charge. If our estimates of required inventory are too high, we may be exposed to further inventory obsolesce risk. In the event that a substantial portion of our inventory becomes obsolete or expires, or in the event we experience a supply chain imbalance as described above, it could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory.

If we increase our sales outside the Unites States, we may be subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.

If we increase our sales outside the Unites States, we may be subject to changes in the exchange rates between such foreign currencies and the U.S. dollar, which could materially impact our reported results of operations and distort period to period comparisons. Fluctuations in foreign currency exchange rates also impact the reporting of our receivables and payables in non-U.S. currencies. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.

In the future, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations.

We are subject to extensive governmental regulation, and our failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies and authorities. The FDA and corresponding state and foreign regulatory agencies and authorities regulate and oversee virtually all aspects of a medical device’s development, testing, manufacturing, labeling, promotion, distribution and marketing, as well as modifications to existing products and the marketing of existing products for new indications.

Generally, unless an exemption applies, a medical device and modifications to a device or its indications must receive either premarket approval or premarket clearance from the FDA before it can be marketed in the United States. The approval process may involve lengthy and detailed laboratory and clinical testing procedures, sampling activities, extensive agency review processes, and other costly and time-consuming procedures. It may take several years to satisfy these requirements, depending on the complexity and novelty of the product or modification. We may not be successful in the future in receiving approvals and clearances in a timely manner or at all. Any delay in obtaining, or any failure to obtain, such approvals could negatively impact our marketing of any future products and reduce our product revenues.

The laws and regulations to which we are subject are complex and have tended to become more stringent over time. Legislative or regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. See “Business – Regulation of our Business” for additional information regarding the regulatory schemes applicable to us and our business.

Our failure to comply with U.S. federal and state regulations or other foreign regulations applicable in the countries where we operate could lead to the issuance of warning letters or untitled letters, the imposition of

injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, termination of distribution, product seizures or civil penalties. In the most extreme cases, criminal sanctions or closure of manufacturing facilities are possible. If any of these risks materialize, our business would be adversely affected.

Algovita and other neurostimulation devices we develop may in the future be subject to notifications, recalls, or voluntary market withdrawals that could harm our reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture that could affect patient safety. Further, under the FDA medical device reporting regulations, we are required to submit information to the FDA when we receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur, which may prompt FDA action. A government-mandated recall or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other issues. Recalls, which include certain notifications and corrections as well as removals, of our products could divert managerial and financial resources and could have an adverse effect on our financial condition, harm our reputation with customers, and reduce our ability to achieve expected revenue.

In addition, the manufacturing of our products is subject to extensive post-market regulation by the FDA and foreign regulatory authorities, and any failure by us or our suppliers, including Greatbatch, to comply with regulatory requirements could result in recalls, facility closures, and other penalties. We and our suppliers are subject to the FDA’s Quality System Regulation and comparable foreign regulations that govern the methods used in, and the facilities and controls used for, the design, manufacture, quality assurance, labeling, packaging, sterilization, storage, shipping, and servicing of medical devices. These regulations are enforced through periodic inspections of manufacturing facilities. Any manufacturing issues at our or our suppliers’ facilities, including failure to comply with regulatory requirements, may result in warning or untitled letters, manufacturing restrictions, voluntary or mandatory recalls or corrections, fines, withdrawals of regulatory clearances or approvals, product seizures, injunctions, or the imposition of civil or criminal penalties, which would adversely affect our business results and prospects.

The misuse or off-label use of our products may harm our image in the marketplace, result in injuries that lead to product liability suits, which could be costly to our business, or result in costly investigations and sanctions from the FDA and other regulatory bodies if we are deemed to have engaged in off-label promotion.

Algovita has received premarket approval from the FDA and CE mark approval for use in the treatment of chronic pain of the trunk or limbs. We cannot, however, prevent a physician from using our product off-label, when in the physician’s independent professional medical judgment she deems it appropriate. There may be increased risk of injury to patients if physicians attempt to use our product off-label. Furthermore, the use of our product for indications other than those approved by the applicable regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. Physicians may also misuse our product or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability litigation. If our products are misused or used with improper technique, we may become subject to costly litigation, including product liability litigation, by our customers or their patients. In addition, if the FDA or other regulatory bodies determines that our promotional materials or training constitute promotion of an off-label use, it or they, as applicable, could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions that may result in fines, penalties, injunctions or other restrictions. Any of these events could significantly harm our business and results of operations.

We may be subject to federal, state and foreign healthcare laws and regulations, and a finding of failure to comply with such laws and regulations could have a material adverse effect on our business.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payors for our products, we are subject to

healthcare fraud and abuse regulation and enforcement by federal, state and foreign governments, which could significantly impact our business. In the United States, the laws that may affect our ability to operate include, but are not limited to:

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the U.S. federal Anti-Kickback Statute;

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the U.S. federal False Claims Act and civil money penalties, including whistleblower and qui tam actions;

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Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology and Clinical Health Act;

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federal regulation of payments made to physicians and other healthcare providers (known as the physician sunshine requirements), which requirements have been recently expanded under the Patient Protection and Affordable Care Act, or ACA;

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U.S. Foreign Corrupt Practices Act of 1977 and other anti-bribery laws; and

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state and foreign law equivalents of each of the above federal laws.

See “Business – Regulation of our Business” for a detailed description of each of these laws and their impact on our operations. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Healthcare legislative reform measures may have a material adverse effect on us.

In March 2010, the ACA was signed into law, which includes, among other things, a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions. Beginning on January 1, 2016, this excise tax will be suspended through December 31, 2017, but if this suspension is not continued or made permanent thereafter, the excise tax will be automatically reinstated starting on January 1, 2018 and would result in a significant increase in the tax burden on our industry. If any efforts we undertake to offset the excise tax in the future are unsuccessful, the increased tax burden could have an adverse effect on our results of operations and cash flows. Other elements of the ACA, including comparative effectiveness research, an independent payment advisory board and payment system reforms and shared savings pilots and other provisions, may significantly affect the payment for, and the availability of, healthcare services and result in fundamental changes to federal healthcare reimbursement programs, any of which may materially affect our business. The full impact of the ACA, as well as other laws and reform measures that may be proposed and adopted in the future, remains uncertain, but may continue the downward pressure on medical device pricing, especially under the Medicare program, and may also increase our regulatory burden and operating costs.

Additional state and federal healthcare reform measures may be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Risks Related to the Spin-Off

We may be unable to achieve some or all of the benefits expected to result from being an independent publicly-traded company.

We believe that, as an independent publicly-traded company, we will have the ability to focus on the commercialization of Algovita, pursue development of other medical devices incorporating our technology and seek regulatory approvals for these new devices and other treatment indications with respect to Algovita. However, we may be unable to achieve some or all of the benefits expected to result from being an independent publicly-traded company in the time expected, if at all, which could have an adverse effect on our financial condition and results of operations. For instance, it may take longer than anticipated for us to, or we may never, succeed in achieving market acceptance of Algovita in the United States or other foreign countries, and we may be unable to compete successfully against more well established companies that provide similar SCS products and therapies. Our lack of a well-established product in the market, effective commercial infrastructure and a direct sales force, coupled with increased costs resulting from operating as an independent publicly-traded company and funding ongoing product development, may materially inhibit our ability to realize the full value of our company and to achieve our short-term and long-term strategic objectives.

We may incur material costs and expenses and have to devote substantial management time as a result of our operating as an independent publicly-traded company, which could adversely affect our profitability.

As a result of our spin-off from Greatbatch, our management may need to divert attention away from operational matters to devote substantial time to compliance with the requirements of being an independent publicly-traded company. We may also incur costs and expenses greater than those we currently incur. These increased costs and expenses may arise from various factors, including financial reporting, accounting and audit services, insurance, costs associated with information technology systems, complying with federal securities laws (including compliance with the Sarbanes-Oxley Act, the Dodd Frank Wall Street Reform and Consumer Protection Act and rules and regulations implemented by the SEC and NASDAQ) and legal and human resources-related functions. Although Greatbatch will continue to provide many of these services to us under the transition services agreement, this arrangement may not capture all the benefits our business has enjoyed as a result of being integrated with Greatbatch. These services are being provided by Greatbatch for only a limited period of time, and we will be required to establish the necessary infrastructure and systems to perform these functions and services on an ongoing basis. We may also incur one-time costs in connection with the transition to being an independent publicly-traded company, including relating to compensation costs, recruiting costs associated with building out our sales organization and costs to separate information systems. In addition, upon completion of the spin-off, we expect to need to make significant investments to replicate or outsource from other providers facilities, systems, infrastructure and personnel of Greatbatch to which we will no longer have access, which may be costly to implement. These costs may be greater than anticipated and could have a material adverse effect on our financial position, results of operations and cash flows. Prior to the spin-off, we were able to utilize Greatbatch’s purchasing power in procuring goods and services and have benefitted from resulting economies of scale and vendor relationships. As an independent publicly-traded company, we may be unable to obtain goods and services at the prices and on the terms obtained prior to the completion of the spin-off.

The spin-off requires significant time and attention of our management and may distract our employees, which could have an adverse effect on us.

Execution of the spin-off requires significant time and attention from our management, which may distract management from the operation of our business. Our employees may also be distracted because of uncertainty about their future roles with Nuvectra pending the completion of the spin-off. Any such difficulties could have an adverse effect on our business, financial condition and results of operations.

Our historical financial information may not be representative of the results we would have achieved as an independent publicly-traded company during the periods presented and may not be a reliable indicator of our future results.

Our historical financial information included in this information statement reflects our business as operated as part of Greatbatch’s organization. This historical financial information is derived from Greatbatch’s consolidated financial statements and accounting records. Accordingly, our historical financial information included in this information statement may not necessarily reflect what our financial position, results of operations or cash flows would have been had we been an independent publicly-traded company during the periods presented or those that we may achieve in the future. The expenses reflected in our historical financial information includes an allocation of general corporate overhead expenses from Greatbatch relating to the following support functions provided for us by Greatbatch: executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement and facilities. While our management considers the expense allocation methodology and results to be reasonable for all periods presented, these allocations may not be indicative of the actual expenses that we would have incurred as an independent publicly-traded company or of the costs we will incur in the future after the completion of the spin-off. Accordingly, the historical financial information presented herein should not be assumed to be indicative of what our financial condition or results of operations actually would have been as an independent publicly-traded company or to be a reliable indicator of what our financial condition or results of operations actually could be in the future.

In addition, our working capital requirements and capital for general corporate purposes, including research and development funds and capital expenditures, have historically been funded by cash from Greatbatch. Following the completion of the spin-off, we may need to obtain additional financing from lenders, through public offerings or private placements of debt or equity securities, strategic partnerships or other arrangements to fund these capital requirements. The cost of this capital may be higher than Greatbatch’s cost of capital prior to the spin-off.

The supply agreement and license agreements with Greatbatch may not reflect as favorable of terms as would have resulted from arm’s-length negotiations with unaffiliated third parties.

The supply agreement and license agreements that we will enter into with Greatbatch were prepared in connection with the spin-off and while we were still a wholly owned subsidiary of Greatbatch. Accordingly, during the period in which the terms of those agreements were prepared, we did not have an independent board of directors or a management team that was independent of Greatbatch. As a result, the terms of these agreements may not reflect as favorable of terms as would have resulted from arm’s-length negotiations with unaffiliated third parties.

Our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.

Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them, and may require us to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We will enter into several agreements with Greatbatch in connection with the spin-off, which may limit our ability to take actions beneficial to us for a period of time after the completion of the spin-off and may impair our future success.

The separation and distribution agreement, tax matters agreement, transition services agreement and employee matters agreement to be entered into between us and Greatbatch were negotiated while we were still a wholly-owned subsidiary of Greatbatch. As such, these agreements contains terms that may limit our ability, for a period of time after the completion of the spin-off, to take some actions that may be beneficial to us. As an example, to

preserve the tax-free treatment of the spin-off, for a two-year period following the completion of the spin-off, we may be prohibited, except in specific circumstances, from taking certain actions, including:

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facilitating or otherwise participating in any acquisition (or deemed acquisition) of shares of our common stock that would result in any stockholder owning (or being deemed to owning) fifty percent or more (by vote or value) of the outstanding shares of our common stock;

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issuing equity securities beyond certain thresholds, or

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repurchasing our common stock.

Under the tax matters agreement that we intend to enter into with Greatbatch, we will be prohibited from taking or failing to take any action that prevents the spin-off from qualifying as a tax-free transaction. Further, during the two-year period following the completion of the spin-off, without obtaining the consent of Greatbatch or an unqualified opinion of a nationally recognized law or accounting firm, we may be prohibited from taking certain specified actions that could affect the tax treatment of the spin-off.

Under the separation and distribution agreement, a court could disregard the allocation of liabilities as agreed upon between us and Greatbatch, and require that we assume responsibility for obligations allocated to Greatbatch, particularly if Greatbatch were to refuse or were unable to pay or perform its allocated obligations.

Following the spin-off, we will continue to be dependent on Greatbatch for certain support services for our business pursuant to the transition services agreement.

Pursuant to the transition services agreement, Greatbatch will provide us with certain services for a limited period of time including, among others, employee payroll administration, information technology, finance and tax, order management and processing, regulatory compliance, Sarbanes-Oxley Act compliance and other support services. Although Greatbatch will be contractually obligated to provide us with certain support services during the term of the transition services agreement, these services may not be performed as efficiently or proficiently as they were performed prior to the spin-off or may not be performed at all by Greatbatch. When Greatbatch ceases to provide these services for us, our costs may increase as a result of having to procure these services from third parties. In addition, we may not be able to replace these services in a timely manner or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to the transition services agreement. To the extent that we require additional services to be performed by Greatbatch that are not included in the transition services agreement, we will need to negotiate the terms for receiving such services with Greatbatch, which may result in increased costs to us.

As we build our information technology infrastructure and transition our data to our own systems, we could incur substantial additional costs and experience temporary business interruptions.

After the spin-off, we will continue to install and implement information technology infrastructure to support our critical business functions, including systems relating to accounting and reporting, customer service, inventory control and distribution. We may incur temporary interruptions in business operations if we cannot transition effectively from Greatbatch’s existing transactional and operational systems. In particular, Greatbatch’s information technology networks and systems are complex, and duplicating these networks and systems will be challenging. We may not be successful in effectively and efficiently implementing our new systems and transitioning our data, and we may incur substantially higher costs for implementation than currently anticipated. In addition, our information technology systems, some of which may be managed by third-parties, may be susceptible to damage, disruptions, or shutdowns due to computer viruses, attacks by computer hackers, power outages, hardware failures, telecommunication failures, user errors, or catastrophic events. Our failure to avoid operational interruptions as we implement the new systems or our failure to implement the new systems effectively and efficiently, could disrupt our business and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In connection with the spin-off, we will agree to indemnify Greatbatch for certain liabilities. If we are required to make payments to Greatbatch as a result of these indemnification obligations, we may need to divert cash to meet those obligations and our financial results could be negatively impacted.

Pursuant to the separation and distribution agreement between us and Greatbatch, we and Greatbatch will each agree to indemnify the other for certain liabilities, in each case in an uncapped amount. The amount of those indemnification payments to Greatbatch may be significant to us and could negatively impact our business, particularly any indemnification payment that is payable as a result of failing to preserve the tax-free treatment of the spin-off. Third parties could also seek to hold us responsible for any liabilities that Greatbatch has agreed to retain. Further, any indemnification payment from Greatbatch may not be sufficient to protect us against the full amount of a liability we are required to pay to a third party, and Greatbatch may not, in the future, be able to fully satisfy its indemnification obligations to us. Moreover, even if we are ultimately indemnified by of Greatbatch, we may be temporarily required to bear the losses ourselves. Each of these risks could negatively affect our business, financial condition, results of operations and cash flows.

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent publicly-traded company.

We have historically operated as part of Greatbatch’s corporate organization, and Greatbatch has assisted us by providing various corporate functions. Following the spin-off, Greatbatch will have no obligation to provide us with any assistance other than pursuant to the terms of the transition services agreement. The services to be provided by Greatbatch do not include every corporate function that Greatbatch has historically provided for us, and Greatbatch is only obligated to provide those services for the limited time periods set forth in the transition services agreement. Accordingly, we will need to provide internally or obtain from unaffiliated third parties the services that we currently receive from Greatbatch, many of which are necessary to operate as an independent publicly-traded company. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from Greatbatch. If we fail to establish or obtain the quality of services necessary to operate effectively or incur greater costs, our profitability, financial condition and results of operations may be adversely affected.

If the spin-off were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, Greatbatch and its stockholders could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify Greatbatch.

Greatbatch expects to receive an opinion from its third party tax advisor with respect to the tax-free treatment of the spin-off. Accordingly, the spin-off is conditioned upon the receipt by Greatbatch of an opinion from its third party tax advisor that the spin-off should qualify as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code. This opinion will be based on, among other things, current law and certain assumptions and representations made by Greatbatch and us. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached in the opinion. This opinion will be expressed as of the date issued and will not cover subsequent periods. As a result, this opinion is not expected to be issued until after the date of this information statement. This opinion will not binding on the IRS or any court and will be subject to other qualifications and limitations. The IRS may not agree with the conclusions expected to be set forth in the opinion, and it is possible that the IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that contrary position.

We generally will be responsible for any taxes imposed on Greatbatch that arise from the failure of the spin-off to receive tax-free treatment for U.S. federal income tax purposes to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business or a breach of the relevant representations or any covenants made by us in the tax matters agreement. Our indemnification obligations to Greatbatch will not be limited by any maximum amount. If we are required to indemnify Greatbatch under the

circumstances set forth in the tax matters agreement, we may also be subject to substantial tax liabilities. For more information regarding the Tax Matters Agreement, see “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Tax Matters Agreement.”

We might not be able to engage in desirable strategic transactions and equity issuances following the spin-off because of restrictions relating to requirements for tax-free distributions.

Our ability to engage in significant equity issuances will be limited or restricted after the spin-off in order to preserve, for U.S. federal income tax purposes, the tax-free nature of the spin-off. Even if the spin-off otherwise qualifies for tax-free treatment under Sections 368(a)(1)(D) and 355 of the Code, it may result in corporate-level taxable gain to Greatbatch under Section 355(e) of the Code if there is a 50% or greater change in ownership, by vote or value, of shares of our stock or Greatbatch’s common stock occurring as part of a plan or series of related transactions that includes the spin-off. Any acquisitions or issuances of our stock or Greatbatch’s common stock within two years before or after the spin-off are generally (subject to exceptions) presumed to be part of such a plan. The process for determining whether an acquisition or issuance triggering these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. The tax liability to Greatbatch resulting from the application of Section 355(e) could be substantial. Under the tax matters agreement that we will enter into with Greatbatch, we will be prohibited from taking or failing to take any action that prevents the spin-off from being tax-free. Therefore, these restrictions may limit our ability to pursue strategic transactions, issue equity, or engage in other transactions.

The Greatbatch board of directors has reserved the right, in its sole discretion, to amend, modify, abandon or terminate the spin-off at any time prior to the spin-off date.

Until the spin-off occurs, Greatbatch’s board of directors will have the sole discretion, to amend, modify, abandon or terminate the spin-off at any time prior to the spin-off date, even if all of the conditions to the spin-off have been satisfied. This means Greatbatch may amend, modify, abandon or terminate spin-off if at any time Greatbatch’s board of directors determines, in its sole and absolute discretion, that the spin-off is not in the best interests of Greatbatch and its stockholders or that legal, market or regulatory conditions or other circumstances are such that the spin-off is no longer advisable at that time. If Greatbatch’s board of directors determines to cancel the spin-off, stockholders of Greatbatch will not receive any distribution of our shares of common stock.

The spin-off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws.

The spin-off is subject to review under various state and federal fraudulent conveyance laws. Fraudulent conveyance laws generally provide that an entity engages in a constructive fraudulent conveyance when (i) the entity transfers assets and does not receive fair consideration or reasonably equivalent value in return; and (ii) the entity: (a) is insolvent at the time of the transfer or is rendered insolvent by the transfer; (b) has unreasonably small capital with which to carry on its business; or (c) intends to incur or believes it will incur debts beyond its ability to repay its debts as they mature. An unpaid creditor or an entity acting on behalf of a creditor (including without limitation a trustee or debtor-in-possession in a bankruptcy by us or Greatbatch or any of our respective subsidiaries) may bring an action alleging that the spin-off or any of the related transactions constituted a constructive fraudulent conveyance. If a court accepts these allegations, it could impose a number of remedies, including without limitation, voiding our claims against Greatbatch, requiring our stockholders to return to Greatbatch some or all of the shares of our common stock issued in the spin-off, or providing Greatbatch with a claim for money damages against us in an amount equal to the difference between the consideration received by Greatbatch and our fair market value at the time of the spin-off.

Risks Related to our Common Stock Following Completion of the Spin-Off

An active, liquid and orderly market for our common stock may not develop or be sustained, and the trading price of our common stock is likely to be volatile.

The trading price of our common stock could be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this information statement and others such as:

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results from, or any delays in, clinical trial programs relating to our product candidates, including any additional planned clinical trials for Algovita;

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announcements of new products by us or our competitors;

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adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

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our operating results;

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changes or developments in laws or regulations applicable to Algovita and our other products;

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any adverse changes in our relationship with any manufacturers or suppliers, including our sole source supplier, Greatbatch;

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the success of our efforts to acquire or develop additional products;

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any intellectual property infringement actions in which we may become involved;

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announcements concerning our competitors or the medical device industry in general;

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achievement of expected product sales and profitability;

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manufacture, supply or distribution shortages;

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FDA or foreign regulatory actions affecting us or our industry or other healthcare reform measures in the United States;

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changes in financial estimates or recommendations by securities analysts;

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trading volume of our common stock;

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sales of our common stock by us, our executive officers and directors or our stockholders in the future;

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general economic and market conditions and overall fluctuations in the United States equity markets; and

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the loss of any of our key scientific personnel or executive officers.

In addition, the stock markets in general, and the markets for equity securities of medical device companies in particular, have experienced volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.

An active, liquid and orderly market for our common stock may not develop.

Prior to the spin-off, there has been no public market for shares of our common stock, and, after the completion of the spin-off, an active public market for our shares may not develop or be sustained. The lack of an active market may impair our stockholders’ ability to sell their shares at the time they wish to sell them or at a price that

they consider reasonable. An inactive market for our common stock may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies or in-license new product candidates using our shares of common stock as consideration.

If securities or industry analysts issue inaccurate or unfavorable research regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We may not have any analysts that choose to cover us. If we have analysts choose to cover us and they downgrade our stock or issue inaccurate or unfavorable research regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of these analysts, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our trading volume to decline and, as a result, our stock price may become more volatile and could decline.

We will be an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

Following the spin-off, we will be an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of some of the exemptions from the reporting requirements that are afforded to emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we intend to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may become more volatile. We may take advantage of these exemptions until we are no longer an emerging growth company.

Your percentage of ownership in us may be diluted in the future.

As with any independent publicly-traded company, your percentage ownership in us may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including incentive equity awards that we expect will be granted to our directors, officers and employees. If we issue common stock, preferred stock or securities convertible into common stock, our stockholders would experience dilution and, as a result, our stock price may decline.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected.

As an independent publicly-traded company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our second Annual Report on Form 10-K following our spin-off, provide a management report on internal control over financial reporting. The Sarbanes-Oxley Act also requires that our internal control over financial reporting be attested to by our independent registered public accounting firm, to the extent we are no longer an emerging growth company, as defined by the JOBS Act. We do not expect to have our independent registered public accounting firm attest to our internal control over financial reporting for so long as we are an emerging growth company. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process will be time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal

control over financial reporting are effective, or, when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are then-listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Provisions in our certificate of incorporation, by-laws and under Delaware law may discourage a takeover that stockholders may consider favorable and could lead to entrenchment of management.

We expect that following the spin-off, our certificate of incorporation and by-laws will contain provisions that could significantly reduce the value of our shares to a potential acquirer or delay or prevent changes in control or changes in our management without the consent of our Board of Directors. The provisions in our certificate of incorporation and by-laws will include the following:

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a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;

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the required approval of at least 66 2/3% of the voting power of all shares of capital stock then entitled to vote generally in the election of directors to remove a director for cause, and the prohibition on removal of directors without cause;

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the ability of our Board of Directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

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the ability of our Board of Directors to alter our by-laws without obtaining stockholder approval;

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the required approval of at least 66 2/3% of the voting power of all shares of capital stock then entitled to vote generally in the election of directors to amend, alter, change, repeal or adopt any provision of our by-laws and certain provisions of our certificate of incorporation;

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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

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the requirement that a special meeting of stockholders may be called only by our Board of Directors, Chairman of our Board of Directors or our Chief Executive Officer, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors for cause; and

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advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.

We are also subject to the anti-takeover provisions contained in Section 203 of the General Corporation Law of the State of Delaware, or the DGCL. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our certificate of incorporation, by-laws and individual indemnity agreements that we expect to enter into with our officers and directors will provide that we will be required to indemnify our directors and officers, and, to the extent authorized from time to time by our Board of Directors, our other employees and agents, to the fullest extent permitted by Delaware law, subject to specified exceptions. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

THE SPIN-OFF

Background

Greatbatch’s board of directors and management regularly review Greatbatch’s various businesses to ensure that resources are deployed and activities are pursued in the best interests of its stockholders. On July 30, 2015, Greatbatch announced that it intended to spin-off Nuvectra and its neuromodulation medical device business from the remainder of its business through a tax-free distribution of all of the issued and outstanding shares of common stock of Nuvectra to the stockholders of Greatbatch on a pro rata basis. The entity being spun-off is composed of Nuvectra and its subsidiaries Algostim and PelviStim, and Greatbatch’s NeuroNexus subsidiary, the shares of which are being transferred to us by Greatbatch in connection with the spin-off.

On , 2016, Greatbatch’s board of directors approved the distribution of all of the issued and outstanding shares of Nuvectra common stock in a spin-off on the basis of share of Nuvectra common stock for every shares of Greatbatch common stock held as of the close of business on , 2016, the record date for the spin-off. Greatbatch stockholders will receive cash in lieu of any fractional shares of Nuvectra common stock that they would have received after application of this ratio. Greatbatch’s stockholders will not be required to make any payment, surrender or exchange any shares of Greatbatch common stock or take any other action to receive their shares of Nuvectra’s common stock in the spin-off. The distribution of Nuvectra’s common stock in the spin-off as described in this information statement is subject to the satisfaction or waiver of several conditions. For a more detailed description of these conditions, see this section under “– Spin-Off Conditions and Termination.”

Reasons for the Spin-Off

Greatbatch’s board of directors has determined that spinning-off Nuvectra would be in the best interests of Greatbatch and its stockholders. Our business and the businesses of Greatbatch have distinct operating, business and financial characteristics. In making the determination to spin off our neuromodulation medical device business, Greatbatch’s board of directors noted that the spin-off would permit Greatbatch to focus on its core business of designing and manufacturing products and components for sale to medical device original equipment manufacturers and would permit us to focus our attention and financial resources on our neuromodulation medical device business, which involves the development and sale of neuromodulation medical devices to physicians, hospitals and other healthcare providers generally in competition with other medical device original equipment manufacturers. Greatbatch’s board of directors considered that the issues arising from distinct operating priorities and strategies would become particular acute upon receipt of final approval of our premarket approval application for Algovita, which is our first complete medical device that uses our neurostimulation technology platform. Prior to that date, Algovita, except for a limited release in Europe, remained in the development, testing and approval phase, and therefore the operation of these businesses within the same corporate structure was not determined to materially constrain either business. Given that premarket approval for Algovita from the FDA has been received, Greatbatch’s board of directors determined that it was an appropriate time to pursue the spin-off. A variety of other positive and negative factors were considered by Greatbatch’s board of directors in evaluating the spin-off. The Greatbatch board of directors considered the following to be the material potential benefits to the spin-off:

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Distinct investment identity. The spin-off will allow investors to separately value Greatbatch and Nuvectra based on their respective unique investment identities, including the merits, performance, risks and future prospects of Greatbatch’s and our respective businesses. The spin-off will also provide investors with two distinct investment opportunities with different fundamentals and growth prospects, which we believe will improve investor understanding of the business and financial characteristics of Greatbatch and Nuvectra and facilitate independent valuation assessments for each company that fully recognize the value of each company.

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Enhanced strategic and management focus. The spin-off will allow Nuvectra and Greatbatch each to focus their respective attention and financial resources on their distinct operating priorities and

strategies and on the different growth opportunities available to each company without diverting human and financial resources to the other’s business or otherwise being constrained by a board of directors or management that is also responsible for overseeing and furthering the objectives of the other company and its business. The spin-off will also enhance the opportunities for success for each company by reducing internal complexity and enabling each of Nuvectra and Greatbatch to avoid management, systemic and other problems that may arise by operation of different businesses within the same corporate structure.

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Improved employee incentives. We believe that competition for qualified employees is significant in the neuromodulation medical device industry. Following the completion of the spin-off, we believe we will be able to better attract, develop and retain key employees through the use of equity-based and performance-based incentive plans and other benefit plans that more directly link employee compensation with the specific business objectives, financial goals and performance metrics of our business.

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Direct access to capital and tailored capital structure . As an independent publicly-held company, we will avoid conflicts in the allocation of capital between us and other Greatbatch businesses. Rather, we will have direct access to our cash on-hand or the capital markets to issue equity or debt securities, which we expect will increase our flexibility to invest in innovation, product development and marketing, pursue strategic partnerships and establish a capital structure tailored to our business.

There can be no assurance that, following the spin-off, these or any other benefits will be realized to the extent anticipated or at all.

Greatbatch’s board of directors also considered a number of potentially negative factors in evaluating the spin-off, including the following which it considered to be the material potentially negative factors:

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Loss of synergies and increased costs. Currently as an indirect, wholly-owned subsidiary of Greatbatch, we take advantage of certain support functions performed by Greatbatch, such as accounting, tax, legal, human resources and other general and administrative functions. After the spin-off and the termination of our transition services agreement with Greatbatch, Greatbatch will no longer perform these functions for us, and, because of our smaller scale as a standalone company, our cost of performing these functions may be higher than the amounts reflected in our combined financial statements. In addition, we take advantage of Greatbatch’s size and purchasing power in procuring goods and services. After the spin-off, we may be unable to obtain these goods and services at prices or on terms as favorable as those Greatbatch obtained prior to completion of the spin-off.

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Increased significance of some costs and liabilities . Some costs and liabilities that were less significant to Greatbatch as a whole will be more significant for us as a standalone company due to our being smaller than Greatbatch.

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One-time costs of the spin-off. We expect to incur costs in connection with the transition to being an independent publicly-traded company that may include accounting, tax, legal, and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel new to Nuvectra and costs to separate information systems, among others.

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Inability to realize anticipated benefits of the spin-off. We may not achieve the anticipated benefits of the spin-off for a variety of reasons, including, among others, that following the spin-off, we may be more susceptible to industry downturns and market fluctuations and other adverse events than if we were still a part of Greatbatch, in part, because our business will be significantly less diversified than Greatbatch’s business.

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Limitations placed upon Nuvectra as a result of the tax matters agreement . Under the terms of our tax matters agreement with Greatbatch, we will be restricted from taking certain actions that could cause the spin-off to fail to qualify as a tax-free transaction under applicable law for a period of two years following the completion of the spin-off. During this two-year period, these restrictions may limit our

ability to pursue certain strategic transactions, to issue additional equity, to repurchase shares of our common stock or to engage in other transactions that might increase the value of our business. Generally, during the two-year period following the date of the spin-off, we will be prohibited from (i) facilitating or otherwise participating in any acquisition (or deemed acquisition) of our shares of common stock that would result in the spin-off being treated as part of a plan pursuant to which a fifty percent or greater interest (by vote or value) is acquired (or deemed acquired) by any stockholder; (ii) issuing any shares of our common stock or any capital stock of any of our subsidiaries or any instrument that is convertible into shares of our common stock other than those issuances that meet certain requirements set forth in the IRS’ rules and regulations; (iii) redeeming or otherwise repurchasing shares of our common stock other than pursuant to open market stock repurchases that meet certain requirements set forth in the IRS’ rules and regulations; or (iv) transferring, selling or liquidating all or substantially all of our assets or ceasing to maintain an active business. If we take any of these actions and these actions result in tax-related losses for Greatbatch, then we would generally be required to indemnify Greatbatch for these losses. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Tax Matters Agreement” for additional information regarding our tax matters agreement with Greatbatch.

The Greatbatch board of directors, however, concluded that the potential benefits of the spin-off outweighed these negative factors.

Conversion of Nuvectra into a Corporation

Manner of Effecting the Distribution

With the assistance of Computershare, as the settlement agent and distribution agent, Greatbatch will distribute the shares of Nuvectra common stock on , 2016, the spin-off date, to all holders of Greatbatch’s common stock as of the close of business on the record date, in each case on the basis of share of Nuvectra common stock for every shares of Greatbatch common stock, or the distribution ratio, held as of the close of business on the record date. Computershare, which currently serves as the transfer agent and registrar for Greatbatch’s common stock, will serve as the settlement agent and distribution agent in connection with the spin-off and the transfer agent and registrar for Nuvectra’s common stock following the spin-off.

If you own shares of common stock of Greatbatch as of the close of business on the record date, Greatbatch, with the assistance of Computershare, will electronically distribute whole shares of Nuvectra common stock to you in book-entry form by way of registration in the “direct registration system” (if you hold Greatbatch shares in your own name as a registered stockholder) or to your bank or brokerage firm on your behalf or through the systems of DTC (if you hold Greatbatch shares through a bank or brokerage firm that uses DTC).

Direct registration form refers to a method of recording share ownership when no physical stock certificates are issued to stockholders, as is the case in this spin-off. If you are a registered stockholder, Computershare will then mail you a direct registration account statement after the completion of the spin-off that reflects the shares of common stock of Nuvectra that you own after the spin-off.

Most Greatbatch stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. For stockholders holding their shares of Greatbatch common stock through a bank or brokerage firm, such bank or brokerage firm will credit such stockholder’s account for the Nuvectra

common stock that such stockholder is entitled to receive in the spin-off. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm directly.

Each share of Nuvectra common stock that is distributed will be validly issued, fully paid and non-assessable and free of preemptive rights.

Treatment of Fractional Shares

Greatbatch will not distribute fractional shares of Nuvectra common stock in connection with the spin-off. You will receive a check, or a credit to your brokerage account, for the cash equivalent of any fractional shares you otherwise would have received in the spin-off. Computershare, as distribution agent, will aggregate and sell all of those fractional shares on the open market at the then-applicable market price and distribute the aggregate cash proceeds ratably (based on the fractional share such holder would otherwise be entitled to receive) to each Greatbatch stockholder who otherwise would have been entitled to receive a fractional share in the spin-off after making appropriate deductions of the amount required to be withheld for federal income tax purposes and an amount equal to the brokerage fees and commissions attributable to the sale of the fractional share. Neither Greatbatch nor Nuvectra will be able to guarantee any minimum sale price in connection with the sale of these fractional shares. Computershare, in its sole discretion, will determine the timing and method of selling such aggregated fractional shares in open market transactions and the selling price for such shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the payments made in lieu of fractional shares. If you own less than shares of Greatbatch common stock on the record date, you will not receive any shares of Nuvectra common stock in the spin-off, but you will receive cash in lieu of fractional shares. The receipt of cash in lieu of fractional shares will generally result in a taxable gain or loss to the recipient stockholder. See “Material U.S. Federal Income Tax Consequences” for a discussion of the U.S. federal income tax treatment of proceeds from fractional shares in the spin-off.

Treatment of Equity-Based Compensation

Generally, under our employee matters agreement with Greatbatch all outstanding awards granted under Greatbatch’s equity incentive plans (whether held by Greatbatch or Nuvectra employees or other participants) will be converted into adjusted awards for shares of both Greatbatch common stock and Nuvectra common stock. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Employee Matters Agreement” for additional information regarding the treatment of awards granted under Greatbatch’s existing equity compensation plans.

Results of the Spin-Off

After the spin-off, we will be an independent, publicly-traded company owning and operating what had previously been Greatbatch’s QiG Group subsidiary and its neuromodulation medical device business. Immediately after the spin-off, we expect to have approximately million shares of Nuvectra common stock issued and outstanding based on the distribution ratio described above and the anticipated number of outstanding shares of Greatbatch common stock on , 2016, the record date. The actual number of shares to be distributed in the spin-off will be determined based on the number of Greatbatch shares outstanding as of the close of business on the record date, which may be different from the estimated figure.

The spin-off will not affect the number of outstanding shares of Greatbatch common stock or any rights of Greatbatch stockholders, although it may affect the trading price of Greatbatch common stock. The trading price of Greatbatch common stock is expected to change as a result of the spin-off because it will no longer reflect the value of our neuromodulation medical device business. Moreover, the trading price of Greatbatch common stock may fluctuate significantly depending upon a number of factors, some of which may be beyond Greatbatch’s control. We also cannot assure you that following the spin-off the aggregate value of our common stock and Greatbatch common stock will exceed the pre-spin-off value of Greatbatch common stock.

In connection with the spin-off, we will enter into several agreements with Greatbatch to effect the spin-off and provide a framework for our relationship going forward after the spin-off. We and Greatbatch are entering into a separation and distribution agreement, a tax matters agreement, a transition services agreement and an employee matters agreement, which will provide for the allocation between us and Greatbatch of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to our business for the period prior to, at and after the spin-off. We will also enter into a supply agreement with Greatbatch in connection with the spin-off under which we will agree to purchase, exclusively from Greatbatch, fully assembled Algovita systems and most of the products, parts and components necessary for the production of Algovita. We will also enter into a product component framework agreement providing Greatbatch with the exclusive right to supply us with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. Additionally, we will enter into two license agreements with Greatbatch in connection with the spin-off pursuant to which we will license to Greatbatch rights in, subject to specified restrictions, certain intellectual property underlying our neurostimulation technology platform. For additional information regarding the separation and distribution agreement with Greatbatch and other transaction agreements, see “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us”.

Market for Nuvectra Common Stock

There is currently no public trading market for shares of Nuvectra common stock. Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR.” We also expect that a “when-issued” trading market for Nuvectra common stock will begin on or shortly before the record date and continue up to and including the spin-off date, as more fully described below under “– Trading Between the Record Date and Spin-Off Date.” We expect that “regular-way” trading of Nuvectra common stock will begin on the first trading day after the spin-off date. The initial trading price for the Nuvectra common stock will be established by the public trading markets. We cannot predict what the trading prices for Nuvectra common stock will be before or after the spin-off date. The trading price of Nuvectra common stock is likely to fluctuate significantly, particularly until an orderly market develops, and this trading price is likely to be influenced by many different factors, including many of which are beyond our control.

Trading Between the Record Date and Spin-Off Date

Beginning on or shortly before the record date and continuing up to and including the spin-off date, Greatbatch expects that there will be two markets in Greatbatch common stock: a “regular-way” market and an “ex-distribution” market. Greatbatch common stock that trades on the “regular-way” market will trade with an entitlement to Nuvectra common stock distributed pursuant to the spin-off. Greatbatch common stock that trades on the “ex-distribution” market will trade without an entitlement to Nuvectra common stock distributed pursuant to the spin-off. Therefore, if you decide to sell your Greatbatch common stock in the “regular-way” market on or prior to the time that the spin-off occurs on the spin-off date, you will be selling your right to receive Nuvectra common stock in the spin-off. If you own shares of Greatbatch common stock at the close of business on the record date and decide to sell those shares on the “ex-distribution” market on or prior to the time of spin-off on the spin-off date, you will receive the shares of Nuvectra common stock that you are entitled to receive pursuant to your ownership as of the record date of Greatbatch common stock.

Furthermore, beginning on or shortly before the record date and continuing up to and including the spin-off date, we expect that there will be a “when-issued” market in Nuvectra common stock. The term “when-issued” means that shares can be traded conditionally prior to the time shares are actually available or issued. The “when-issued” trading market will be a market for shares of Nuvectra common stock that will be distributed to Greatbatch stockholders on the spin-off date. If you own Greatbatch common stock at the close of business on the record date, you will be entitled to Nuvectra common stock distributed pursuant to the spin-off. You may trade this entitlement to shares of Nuvectra common stock, without the shares of Greatbatch common stock you own, on the “when-issued” market. On the first trading day following the spin-off date, when-issued trading in Nuvectra common stock will end and “regular-way” trading will begin.

“Ex-distribution” and “when-issued” trades generally are settled four business days after the spin-off date. If, for whatever reason, the spin-off does not occur, “when-issued” and “ex-distribution” trades will be cancelled and, therefore, will not be settled.

Spin-Off Conditions and Termination

The spin-off will be effective on the spin-off date, , 2016, provided that, among other things, the following conditions will have been satisfied:

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the receipt of an opinion from an independent valuation firm to the Greatbatch board of directors confirming the solvency of Nuvectra following the spin-off, which shall be in form and substance acceptable to Greatbatch;

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the SEC declaring effective Nuvectra’s registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of such registration statement shall be in effect and, to the knowledge of either Greatbatch or Nuvectra, no proceedings for such purpose shall be threatened by the SEC;

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the distribution of this information statement to Greatbatch’s stockholders;

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the shares of Nuvectra common stock to be distributed shall have been accepted for listing on the NASDAQ Global Market, subject to official notice of distribution;

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the actions and filings necessary or appropriate under applicable federal and state securities and blue sky laws and comparable laws under any foreign jurisdiction in connection with the spin-off have been taken and, if applicable, have become effective;

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Greatbatch shall have established a record date and shall have delivered not less than 10 days’ advance notice thereof to the New York Stock Exchange;

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the separation and distribution agreement with Greatbatch and each of the other transaction agreements shall have been executed and delivered by each of the parties thereto and no party to the separation and distribution agreement or any other transaction agreement will have materially breached its obligations under the separation and distribution agreement or any other transaction agreement;

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the separation and distribution agreement with Greatbatch and each of the other transaction agreements shall not have been terminated and will not violate, conflict with or result in any breach (with or without the passage of time) of any statute, code or other law of any governmental authority;

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all material consents, waivers, approvals, filings, including notices and reports, required to be received before the spin-off from or provided to any third party or governmental authority will have been received or provided and shall be in full force and effect;

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the secured parties under Greatbatch’s Credit Agreement, dated as of October 27, 2015, by and among Greatbatch Ltd, Greatbatch, Inc., the financial institutions identified therein as lenders, Manufacturers and Traders Trust Company, as administrative agent, Manufacturers and Traders Trust Company, Credit Suisse Securities (USA) LLC and Keybanc Capital Markets, Inc., as joint lead arrangers and joint bookrunners, and MUFG Union Bank, N.A., Fifth Third Bank, and Citibank NA, as co-documentation agents shall have released the liens and stock pledges encumbering the Nuvectra common stock;

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completion of each of the Internal Transactions (as defined in the separation and distribution agreement), which shall include, among other transactions, Greatbatch having made the cash capital contribution of $75.0 million to us and the statutory conversion of QiG Group, a Delaware limited liability company, to Nuvectra Corporation, a Delaware corporation; and

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The fulfillment of the foregoing conditions will not create any obligation on Greatbatch’s part to effect the spin-off and Greatbatch’s board of directors has reserved the right to amend, modify, abandon or terminate the spin-off at any time prior to the spin-off date. Greatbatch’s board of directors may, in its sole discretion, also waive any of these conditions, in whole or in part.

Greatbatch will have the sole and absolute discretion to determine or change the terms of, and whether to proceed with, the spin-off and, to the extent it determines to so proceed, to determine the record date and the spin-off date and the distribution ratio. Greatbatch does not intend to notify its stockholders of any modifications to the terms of the spin-off that, in the judgment of Greatbatch’s board of directors, are not material. To the extent that the Greatbatch board of directors determines that any modification materially changes the terms of the spin-off, Greatbatch will notify Greatbatch stockholders in a manner reasonably calculated to inform them about the modification as may be required by law, including by providing a supplement to this information statement.

Accounting Treatment

The spin-off will be accounted for by Greatbatch on a historical cost basis, and no gain or loss will be recorded.

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to stockholders of Greatbatch who will receive shares of Nuvectra common stock in the spin-off. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Nuvectra’s or Greatbatch’s shares of common stock or other securities. The information contained in this information statement is believed by Nuvectra to be accurate as of the date on the cover. Changes may occur after that date, and neither we nor Greatbatch will update the information except in the normal course of our and Greatbatch’s respective public disclosure practices or to the extent required pursuant to federal securities laws.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of material U.S. federal income tax consequences relating to the spin-off. This summary is based on the Code, related U.S. Treasury regulations, and interpretations of the Code and the U.S. Treasury regulations by the courts and the Internal Revenue Service, or the IRS, in effect as of the date of this information statement, and all of which are subject to change, possibly with retroactive effect. This summary does not discuss all the tax considerations that may be relevant to Greatbatch stockholders in light of their particular circumstances. Except as indicated below, this summary also does not address the consequences to Greatbatch stockholders subject to special treatment under the U.S. federal income tax laws, including, but not limited to, the following:

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non-U.S. persons;

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insurance companies;

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dealers or brokers in securities or currencies;

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tax-exempt organizations;

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financial institutions;

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mutual funds;

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pass-through entities and investors in such entities;

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holders who hold their shares of Greatbatch common stock as a hedge or as part of a hedging, straddle, wash sale, conversion, synthetic security, integrated investment or other risk-reduction transaction;

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holders who are subject to alternative minimum tax; or

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holders who acquired their shares of Greatbatch common stock upon the exercise of employee stock options or otherwise as compensation.

In addition, this summary does not address the U.S. federal income tax consequences to those Greatbatch stockholders who do not hold their Greatbatch common stock as a capital asset. Finally, this summary does not address any state, local or foreign tax consequences or the tax on certain net investment income imposed under Section 1411 of the Code.

GREATBATCH STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE SPIN-OFF TO THEM.

The spin-off is conditioned on Greatbatch’s receipt of an opinion from its third party tax advisor to the effect that the spin-off should qualify as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code.

Assuming the spin-off so qualifies as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code:

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the spin-off should not result in any income, gain or loss to Greatbatch or to us, other than to the extent required by Section 357(c) of the Code (as described below) or with respect to any intercompany items or excess loss accounts required to be taken into account under U.S. Treasury regulations relating to consolidated returns;

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except as noted below, no gain or loss should be recognized by (and no amount should be included in the taxable income of) Greatbatch stockholders on their receipt of shares of Nuvectra common stock in the spin-off;

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the holding period of shares of Nuvectra common stock received by each Greatbatch stockholder should include the holding period at the time of the spin-off for the Greatbatch common stock on which the distribution is made;

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the tax basis of the Greatbatch common stock held by each Greatbatch stockholder immediately before the spin-off should be allocated between that Greatbatch common stock and the Nuvectra common stock received (including any fractional shares of Nuvectra common stock for which cash is received) in proportion to the relative fair market value of each on the spin-off date; and

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a Greatbatch stockholder who receives cash in lieu of a fractional share of Nuvectra common stock should recognize gain or loss measured by the difference between the amount of cash received and the stockholder’s basis in the fractional share of Nuvectra common stock to which the stockholder would otherwise be entitled. That gain or loss will be long-term capital gain or loss if the stockholder’s holding period for its shares of Greatbatch common stock exceeds one year at the time of the spin-off.

Section 357(c) of the Code requires Greatbatch to recognize gain to the extent that liabilities of Greatbatch treated for U.S. federal income tax purposes as assumed by Nuvectra in connection with the spin-off exceed the adjusted tax basis of the assets treated for such purposes as contributed to us by Greatbatch. It is currently expected that no gain under Section 357(c) of the Code will be recognized by Greatbatch in connection with the spin-off.

Notwithstanding the discussion above, non-U.S. stockholders could be subject to tax on the spin-off if such holders owned more than 5% of the common stock of Greatbatch at any time during the five-year period ending on the spin-off date. As used herein, the term “non-U.S. stockholder” means a beneficial owner of Greatbatch’s stock that is not for U.S. federal income tax purposes:

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an individual citizen or resident of the United States;

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a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof;

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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and (ii) one or more United States persons have the authority to control all substantial decisions of the trust or if the trust has validly made an election to be treated as a United States person under applicable Treasury regulations.

U.S. Treasury regulations also generally provide that if a Greatbatch stockholder holds different blocks of Greatbatch common stock (generally shares of Greatbatch common stock purchased or acquired on different dates or at different prices), the aggregate basis for each block of Greatbatch common stock purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the shares of Nuvectra common stock received in the spin-off in respect of such block of Greatbatch common stock and such block of Greatbatch common stock, in proportion to their respective fair market values, and the holding period of the shares of Nuvectra common stock received in the spin-off in respect of such block of Greatbatch common stock will include the holding period of such block of Greatbatch common stock. If a Greatbatch stockholder is not able to identify which particular shares of Nuvectra common stock are received in the spin-off with respect to a particular block of Greatbatch common stock, for purposes of applying the rules described above, the stockholder may designate which shares of our common stock are received in the spin-off in respect of a particular block of Greatbatch common stock, provided that such designation is consistent with the terms of the spin-off. Holders of Greatbatch common stock are urged to consult their own tax advisors regarding the application of these rules to their particular circumstances.

Greatbatch has made it a condition to the spin-off that it receive an opinion from its third party tax advisor to the effect that the spin-off should qualify as a “reorganization” under Sections 368(a)(1)(D) and 355 of the Code. The opinion will be based on, among other things, certain assumptions and representations made by Greatbatch and Nuvectra, which if incorrect or inaccurate in any material respect would jeopardize the conclusions reached by the third party tax advisor in its opinion. The opinion will not be binding on the IRS or the courts and will be subject to other qualifications and limitations.

Notwithstanding receipt by Greatbatch of an opinion from its third party tax advisor, the IRS could assert that the spin-off does not satisfy the requirements of Sections 368(a)(1)(D) and 355 of the Code. If the IRS were successful in making any such assertion, we and Greatbatch and the initial public stockholders of Nuvectra common stock could be subject to significant tax liability. In general, with respect to the spin-off, our initial public stockholders generally would be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares of Nuvectra common stock received in the distribution. That distribution of shares of Nuvectra common stock would be a dividend to the extent of Greatbatch’s current earnings and profits as of the end of the year in which the spin-off occurs, and any accumulated earnings and profits. For each such stockholder, any amount that exceeded Greatbatch’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of Greatbatch common stock with any remaining amount generally being taxed as a capital gain.

In connection with the spin-off, we and Greatbatch will enter into a tax matters agreement pursuant to which we will agree to be responsible for certain liabilities and obligations following the spin-off. Under the terms of the tax matters agreement, we generally will be responsible for all taxes attributable to our business, whether accruing before, on or after the date of the spin-off and any taxes arising from the spin-off that are imposed on us, Greatbatch or its other subsidiaries to the extent such taxes result from certain actions or failures to act by us that occur after the effective date of the tax matters agreement. Current tax law generally creates a presumption that the spin-off would be taxable to Greatbatch, but not to its stockholders, if we or our stockholders were to engage in a transaction that would result in a 50% or greater change by vote or by value in our stock ownership during the two-year period beginning on the spin-off date, unless it is established that the spin-off and the transaction are not part of a plan or series of related transactions to effect such a change in ownership. If the spin-off were taxable to Greatbatch due to such a 50% or greater change in our stock ownership, Greatbatch would recognize a gain equal to the excess of the fair market value of Nuvectra common stock on the spin-off date over Greatbatch’s tax basis therein and we could be required to indemnify Greatbatch for the tax on such gain and related losses. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Tax Matters Agreement.”

Under U.S. Treasury regulations, each Greatbatch stockholder who, immediately before the spin-off, owns at least 5% of the total outstanding common stock of Greatbatch must attach to such stockholder’s U.S. federal income tax return for the year in which the spin-off occurs a statement setting forth certain information relating to the spin-off. In addition, all stockholders are required to retain permanent records relating to the amount, basis and fair market value of our shares of Nuvectra common stock that they receive and to make those records available to the IRS upon its request.

THE FOREGOING IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF STOCKHOLDERS. EACH GREATBATCH STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE SPIN-OFF TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

OUR RELATIONSHIP WITH GREATBATCH

AFTER THE SPIN-OFF

Historical Relationship with Greatbatch

We are currently an indirect, wholly-owned subsidiary of Greatbatch. As a result of our relationship with Greatbatch, in the ordinary course of our business, Greatbatch has provided services for us related to the following general corporate support functions: executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement and facilities. Our combined financial statements include an allocation of corporate expenses from Greatbatch for provision of these services. Our management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that we would have incurred as an independent publicly-traded company or of the costs we will incur in the future after the completion of the spin-off.

Greatbatch’s Distribution of Our Stock

Greatbatch is our indirect parent company. We were initially formed in November 2008 as a Delaware limited liability company under the name SDI Group, LLC, which was subsequently changed to QiG Group, LLC. Immediately prior to completion of the spin-off, QiG Group will convert into Nuvectra Corporation, a Delaware corporation, and all of the assets, operations and liabilities of QiG Group will become assets, operations and liabilities of Nuvectra. Our sole member is Greatbatch Ltd., which itself is a direct, wholly-owned subsidiary of Greatbatch, Inc. Our initial Board of Directors will be appointed by Greatbatch Ltd. Immediately prior to the spin-off and after the completion of our conversion to a Delaware corporation, Greatbatch Ltd. will distribute all of its shares of our common stock to Greatbatch, Inc. In the spin-off, Greatbatch, Inc. is distributing 100% of our common stock to its stockholders in a transaction that is intended to be tax-free to us and Greatbatch’s stockholders for U.S. federal income tax purposes (other than with respect to any cash received in lieu of fractional shares). The spin-off is subject to a number of conditions, which are more fully described under “The Spin-Off – Spin-Off Conditions and Termination.”

Agreements Between Greatbatch and Us

Following the spin-off, Nuvectra and Greatbatch will operate separately, each as an independent publicly-traded company. In connection with the spin-off, we will enter into several agreements with Greatbatch to effect the spin-off and provide a framework for our relationship going forward after the spin-off. The following is a summary of the terms of the material agreements that we have entered into or intend to enter into with Greatbatch prior to the spin-off. These agreements have not been finalized and changes to these agreements, some of which may be material, may be made prior to completion of the spin-off. Furthermore, the descriptions of these agreements are not complete and are qualified by reference to the terms of the agreements, the forms of which will be filed as exhibits to our registration statement on Form 10 of which this information statement is a part. We encourage you to read the full text of those agreements.

Separation and Distribution Agreement

The separation and distribution agreement to be entered into between Greatbatch and us will govern the separation of our businesses from Greatbatch, the subsequent distribution of our shares of common stock to Greatbatch stockholders and other matters related to Greatbatch’s relationship with us.

The Separation . To effect the separation, Nuvectra and Greatbatch will execute transactions that will cause us to succeed to the assets of our business, to the extent not already owned or held by Nuvectra, as those assets are described in this information statement. We will also succeed to, and have agreed to perform and fulfill, to the extent we are not already liable therefor, the liabilities associated with our business. In particular, the separation and distribution agreement will generally provide that, upon completion of the spin-off, we will directly or indirectly hold:

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all of the assets previously owned by Greatbatch or any of its subsidiaries which are reflected on our most recent unaudited condensed combined pro forma balance sheet set forth in this information statement, or subsequently acquired or created assets that would have been reflected on a later-dated balance sheet; and

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all of the assets that are expressly contributed or transferred to us pursuant to the separation and distribution agreement or our other agreements with Greatbatch described below;

and we will be subject to:

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all outstanding liabilities reflected on our most recent unaudited condensed combined pro forma balance sheet set forth in this information statement, or subsequently-incurred or accrued liabilities that would have been reflected on a later-dated balance sheet;

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liabilities to the extent relating to, arising out of, or resulting from our business on or prior to the spin-off date, or any assets owned by us or our subsidiaries as of or after the spin-off; and

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liabilities we have assumed under the separation and distribution agreement or other transaction agreements.

The separation and distribution agreement will provide that capital stock, assets or liabilities that cannot legally be transferred or assumed prior to the spin-off will be transferred or assumed as soon as practicable following receipt of all necessary consents of third parties and regulatory approvals. In any such case, the separation and distribution agreement will provide that the party retaining such capital stock, assets or liabilities will hold the capital stock or assets in trust for the use and benefit of, or retain the liabilities for the account of, the party entitled to the capital stock, assets or liabilities (at the expense of that party), until the transfer or assumption can be completed. The party retaining the capital stock, assets or liabilities will also take any action reasonably requested by the other party in order to place the other party in the same position as would have existed if the transfer or assumption had been completed. We do not anticipate that these provisions will be relied on for any material items.

The separation and distribution agreement will provide that for a period beginning on the date of the spin-off and ending on the first anniversary of the date of the spin-off, if either we or Greatbatch, in our good faith judgment, identify an asset then-owned by us or Greatbatch that should have been transferred to the other company in connection with the spin-off, we or Greatbatch, as applicable, shall convey or transfer such asset to the other company.

Except as set forth in the separation and distribution agreement, no party will make any representation or warranty as to the companies, capital stock, assets or liabilities transferred or assumed as a part of the spin-off and any assets that may be transferred will be transferred on an “as is, where is” basis. As a result, we and Greatbatch will each agree to bear the economic and legal risks that any conveyances of capital stock or assets are insufficient to vest good and marketable title to such capital stock or assets, as the case may be, in the party who should have title under the separation and distribution agreement. The separation and distribution agreement will also provide that the spin-off is subject to the conditions (or waiver, in whole or in part, by Greatbatch’s board of directors in its sole discretion) described under “The Spin-Off – Spin-Off Conditions and Termination”.

Greatbatch’s Capital Contribution to Nuvectra . The separation and distribution agreement will provide that, prior to the completion of the spin-off, Greatbatch will make a cash capital contribution of $75.0 million to us. We will use these funds for the commercialization of Algovita, advancement of our neurostimulation technology

platform and otherwise for general corporate purposes, including funding our operations. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding.

Insurance . Following the spin-off, we will be responsible for obtaining and maintaining at our own cost our own insurance coverage. Additionally, with respect to certain claims arising prior to the spin-off, we may, at the sole discretion of Greatbatch, seek coverage under certain specified Greatbatch third-party insurance policies to the extent that coverage may be available thereunder.

Access to Information . Subject to applicable confidentiality provisions and other restrictions, we and Greatbatch will each give each other any information in our possession that can be retrieved without unreasonable disruption to the business and that the requesting party reasonably needs (1) to comply with requirements imposed on the requesting party by a governmental authority, (2) for use in any judicial, regulatory or other proceeding or investigation, in satisfying audit requirements, or in connection with any accounting, insurance claim, regulatory, litigation or other similar requirement, (3) so the requesting party can comply with its obligations under the separation and distribution agreement or other transaction agreement or (4) for any other significant business need as mutually determined in good faith by the parties.

Indemnification and Release . In general, under the separation and distribution agreement, we will agree to indemnify Greatbatch and its affiliates, shareholders, directors, officers, agents or employees against liabilities to the extent relating to, arising out of or resulting from:

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our failure to pay, perform or otherwise discharge any of our liabilities or any of our agreements;

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the operation of our business, whether before or after the spin-off;

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any of our assets or our liabilities (including assets and liabilities transferred to us in connection with the spin-off), whether before or after the spin-off;

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any breach by Nuvectra of any provision of the separation and distribution agreement or any other transaction agreement, subject to any limitation of liability provision set forth therein; and

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any untrue statement or alleged untrue statement of a material fact or material omission or alleged material omission in this information statement, other than certain information relating to Greatbatch.

In general, under the separation and distribution agreement, Greatbatch will agree to indemnify us and our affiliates, shareholders, directors, officers, agents or employees against liabilities to the extent relating to, arising out of or resulting from:

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the failure of Greatbatch to pay, perform or otherwise discharge any liability of Greatbatch;

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the operation of Greatbatch’s business (other than our business), whether before or after the spin-off;

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any of Greatbatch’s assets or Greatbatch’s liabilities, whether before or after the spin-off;

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any breach by Greatbatch of any provision of the separation and distribution agreement or any other transaction agreement, subject to any limitation of liability provision set forth therein; and

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any untrue statement or alleged untrue statement of a material fact or material omission or alleged material omission in this information statement, only for certain information relating to Greatbatch.

Under the separation and distribution agreement, we will generally release Greatbatch and its affiliates, agents, successors and assigns, and Greatbatch will generally release us and our affiliates, agents, successors and assigns, from any liabilities between us or our subsidiaries on the one hand, and Greatbatch or its subsidiaries on the other hand, existing or arising from acts or events occurring on or before the spin-off, including acts or events occurring in connection with the spin-off. The general release does not apply to certain obligations, including obligations arising under the separation and distribution agreement or any other transaction agreement.

Any indemnity payment will be net of insurance proceeds and net of taxes. With respect to any indemnity claim for which it is reasonably likely that Nuvectra has a right of recovery under an insurance plan maintained by Greatbatch, then prior to asserting such indemnity claim, Nuvectra must seek recovery from insurance.

Termination . The separation and distribution agreement will provide that it may be terminated at any time before the spin-off by Greatbatch in its sole discretion. In the event of termination, neither party shall have any liability of any kind to the other party.

Tax Matters Agreement

Prior to the spin-off, we and Greatbatch will enter into a tax matters agreement that will govern our respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and certain other matters regarding taxes. References in this summary description of the tax matters agreement to the terms “tax” or “taxes” mean taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes.

As set forth in the separation and distribution agreement, we generally will be liable for and indemnify Greatbatch against all taxes attributable to our business and will be allocated all tax benefits attributable to such business. Greatbatch generally will be liable for and indemnify us against all taxes attributable to its other businesses and will be allocated all tax benefits attributable to such businesses.

Greatbatch generally will be responsible for preparing and filing all tax returns that contain both (i) taxes or tax benefits allocable to Greatbatch and (ii) taxes or tax benefits allocable to us. Greatbatch generally will be responsible for preparing and filing all tax returns that include only taxes or tax benefits allocable to Greatbatch, and we generally will be responsible for preparing and filing all tax returns that include only taxes or tax benefits allocable to us. However, we and Greatbatch will not be permitted to take a position on any such tax return that is inconsistent with our or Greatbatch’s past practice, as applicable, or that would adversely affect the other party without such other party’s prior written consent.

The party responsible for preparing and filing a tax return generally will also have the authority to control all tax proceedings, including tax audits, involving any taxes or adjustment to taxes reported on such tax return, except that we may be entitled, in Greatbatch’s discretion, to control tax proceedings relating to tax returns prepared and filed by Greatbatch to the extent that such taxes or adjustments at issue are allocable exclusively to us. The tax matters agreement further provides for cooperation between us and Greatbatch with respect to tax matters, including the exchange of information and the retention of records that may affect our respective tax liabilities.

The tax matters agreement will require that we shall not take or fail to take any action after the effective date of the tax matters agreement that (i) would be inconsistent with or cause to be untrue any material, information, covenant or representation in any tax opinion obtained by Greatbatch, (ii) would be inconsistent with the spin-off qualifying under Sections 368(a)(1)(D) and 355 of the Code as a tax-free transaction for us, Greatbatch and Greatbatch’s stockholders or (iii) could reasonably be expected to increase the amount of tax imposed on any transaction or action we or Greatbatch have taken in connection with the completion of the spin-off.

In addition, to preserve the tax-free treatment to Greatbatch of the spin-off, for two years following the spin-off, we will generally be restricted, except in specified circumstances, from:

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issuing our common stock or any capital stock of any of our subsidiaries or any instrument that is convertible into our common stock (excluding the spin-off described in this information statement);

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redeeming or otherwise repurchasing our common stock other than pursuant to open market stock repurchases that meet certain requirements set forth in the IRS’ rules and regulations; or

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transferring, selling or liquidating all or substantially all of our assets or ceasing to maintain an active business.

Moreover, Greatbatch generally will be liable for and indemnify us for any taxes arising from the spin-off or certain related transactions that are imposed on us, Greatbatch or its other subsidiaries. However, we would be liable for and indemnify Greatbatch for any such taxes to the extent such taxes result from certain actions or failures to act as described in the prior two paragraphs by us that occur after the effective date of the tax matters agreement. Our obligations under the tax matters agreement are not limited in amount or subject to any cap. If we are required to pay any liabilities under the circumstances set forth in the tax matters agreement or pursuant to applicable tax law, the amounts may be significant.

Transition Services Agreement

As a result of our relationship with Greatbatch, Greatbatch currently provides several general corporate support functions for us. In connection with the completion of the spin-off, we and Greatbatch will enter into a transition services agreement under which Greatbatch will provide or make available to us various general corporate administrative services following the spin-off. Generally, these services will be provided for periods ending years following the date of the spin-off. We have the ability to terminate the provision of any service being provided by Greatbatch prior to the scheduled termination date upon at least thirty days’ prior written notice. The services Greatbatch intends to provide us will include:

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human resources services;

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information technology services;

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tax services;

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accounting services;

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treasury services; and

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other support services specified in the transition services agreement.

We will pay Greatbatch fees in consideration for providing these services. The fees to be payable to Greatbatch under this transition services agreement have not been determined as of the date hereof.

The personnel performing services for us under the transition services agreement will be employees and/or independent contractors of Greatbatch and will not be under our direction or control.

The transition services agreement will also contain customary indemnification and confidentiality provisions.

Employee Matters Agreement

Prior to the spin-off, we and Greatbatch will enter into an employee matters agreement, which will generally provide that we and Greatbatch will each have responsibility for our own employees. The agreement will also contain provisions concerning benefit protection for both Greatbatch and Nuvectra employees, treatment of holders of Greatbatch stock options, restricted stock and restricted stock units, and cooperation between us and Greatbatch in the sharing of employee information and maintenance of confidentiality. With respect to former employees, the employee matters agreement will provide that, unless otherwise specified, Greatbatch will be responsible for liabilities associated with former employees who worked for a business that continues to be owned by Greatbatch, and we will be responsible for liabilities associated with former employees who worked for a business that is now owned by Nuvectra.

Treatment of Retirement, Health and Welfare Plans . In general, our employees currently participate in various retirement, health and welfare, and other employee benefit plans through Greatbatch. Pursuant to the employee

matters agreement, effective as of the spin-off date, we and Greatbatch will each retain responsibility for our respective current employees and compensation plans. Following the spin-off, we anticipate that our employees will participate in plans and arrangements similar in nature to those that were offered by Greatbatch, which we will establish and maintain. In general, Nuvectra will credit each employee with his or her service with Greatbatch prior to the spin-off for all purposes under the Nuvectra benefit plans, so long as such crediting does not result in a duplication of benefits. Defined contribution accounts of Nuvectra’s employees (including loans) in the Greatbatch 401(k) plan will be transferred from the applicable Greatbatch defined contribution 401(k) plan to the corresponding Nuvectra defined contribution 401(k) plan. We expect that the corresponding Nuvectra 401(k) plan will have similar terms and conditions to the Greatbatch 401(k) plan.

Treatment of Equity-Based Awards . As described in greater detail in the paragraphs below, the employee matters agreement will provide for the conversion of all outstanding awards granted under Greatbatch’s equity compensation plans (whether held by Greatbatch or Nuvectra employees or other participants) into adjusted awards based on both shares of Greatbatch common stock and Nuvectra common stock. For purposes of award vesting, continued employment or service with Greatbatch or Nuvectra, as applicable, will be treated as continued employment or service for both Greatbatch and Nuvectra awards.

With the exception of holders of performance-based restricted stock units that will become employees of Nuvectra, holders of Greatbatch restricted stock or restricted stock units will retain those awards and also will receive restricted stock or restricted stock units of Nuvectra, in an amount that reflects the spin-off to Greatbatch stockholders, which is calculated by applying the distribution ratio to the Greatbatch restricted stock or restricted stock units as though they were unrestricted Greatbatch shares. Holders of performance-based restricted stock units that will become employees of Nuvectra will have their Greatbatch performance-based restricted stock units converted into time-based restricted stock units of Greatbatch and of Nuvectra. The number of time-based restricted stock units of Greatbatch to be received will be determined based upon achievement under the applicable performance metric for the performance-based restricted stock units for the period through the spin-off date. The number of Nuvectra time-based restricted stock units to be received will then be determined by applying the distribution ratio to the Greatbatch restricted stock units as though they were unrestricted Greatbatch shares. In each case, the Greatbatch and Nuvectra awards together are intended to preserve the value of the original Greatbatch restricted stock or restricted stock units as measured immediately before and immediately after the spin-off. The original Greatbatch restricted stock and restricted stock units and the newly received Nuvectra restricted stock and restricted stock units will be subject to substantially the same terms, vesting conditions and other restrictions as applied to the original Greatbatch restricted stock and restricted stock units immediately before the spin-off. The performance metric used to determine vesting of performance-based restricted stock units of Greatbatch and Nuvectra that continue to be held by Greatbatch employees after the spin-off will continue to be total shareholder return of Greatbatch common stock versus the peer group for Greatbatch over a three-year performance period, but the calculation of total shareholder return will assume reinvestment in Greatbatch common stock of an amount of cash that is equal to the value of the Nuvectra common stock received in the spin-off.

Each Greatbatch stock option will be converted into an adjusted Greatbatch stock option and a Nuvectra stock option. Together the adjusted Greatbatch stock option and the Nuvectra stock option are intended to preserve the intrinsic value of the original Greatbatch stock option as measured immediately before and immediately after the spin-off. The adjusted Greatbatch stock option is expected to cover the same number of shares as the original Greatbatch stock option, but the exercise price will be adjusted to reflect the spin-off. The Nuvectra stock option will allow the holder to purchase a number of shares of Nuvectra common stock based upon the distribution ratio. The adjusted Greatbatch stock options and the Nuvectra stock options will be subject to substantially the same terms, vesting conditions, post-termination exercise rules, and other restrictions that applied to the original Greatbatch stock option immediately before the spin-off.

License Agreements

Prior to the completion of the spin-off, we will enter into two license agreements with Greatbatch. Under the terms of the unrestricted license agreement, we will grant Greatbatch a perpetual, non-exclusive, worldwide license to use, make, have made, offer to sell, sell, distribute and import certain intellectual property (which

includes patents, patent applications and other intellectual property rights) underlying our neurostimulation technology platform for applications within the neurostimulation fields of use. Under the terms of the restricted license agreement, we will grant Greatbatch a perpetual, non-exclusive, worldwide license to use, make, have made, offer to sell, sell, distribute and import certain other intellectual property (which includes patents, patent applications and other intellectual property rights) underlying our neurostimulation technology platform for applications outside of the neurostimulation fields of use. Under the terms of each of these license agreements, Greatbatch is required to pay us a nominal royalty fee of $100 per year and is permitted to sublicense its rights thereunder to third parties in its sole discretion. Further, pursuant to the terms of each of these license agreements, Greatbatch has agreed that it will not challenge the validity of, or take any material and documented step to support any proceeding that is intended to invalidate or otherwise limit the scope of, any of the intellectual property licensed under such agreement. Under each of these license agreements, all rights with respect to any improvements that incorporate the licensed intellectual property that were conceived of or developed solely by Greatbatch during the term of such license will be the sole and exclusive property of Greatbatch. In addition, under the terms of each of the license agreements, we will be required to indemnify Greatbatch against damages and other costs, other than any incidental, special, punitive or consequential damages (including lost profits) or any damages arising from Greatbatch’s gross negligence or willful misconduct, from any third party claims arising out of or relating to (i) our breach of any representation, warranty, covenant or obligation under such license agreement or (ii) any claim for patent or other intellectual property infringement resulting from Greatbatch’s use of such licensed intellectual property, except for certain claims that are based solely upon the combination of the licensed intellectual property with other products or equipment that do not incorporate the licensed intellectual property, customization of a product incorporating the licensed intellectual property by Greatbatch or any other third party or modification of a product incorporating the licensed intellectual property by Greatbatch that is not authorized by us. Each of these license agreements may be terminated by either party in the event of a material breach of such agreement by the other party (subject to customary cure periods) or the other party’s bankruptcy or insolvency.

Pursuant to the terms of these license agreements, Greatbatch may, at some point in the future, decide to compete with us by using some or all of the licensed intellectual property to develop complete medical devices or components for application within the permitted field of use, and, under the terms of these license agreements, Greatbatch would not be prohibited from engaging in these activities. In addition, Greatbatch is not restricted from serving as a supplier of components or complete medical devices to our competitors. We do not believe that Greatbatch’s ability to compete with us on component or complete medical device sales or to serve as a supplier to our competitors will have a material adverse impact on our business or results of operations.

In connection with the spin-off, NeuroNexus will also enter into a license agreement with Greatbatch under which NeuroNexus will grant to Greatbatch a perpetual, non-exclusive, worldwide, royalty-free license to use, make, have made, offer to sell, sell, distribute and import NeuroNexus’ patents, patent applications and other intellectual property outside of the neurostimulation fields of use. The NeuroNexus license agreement provides Greatbatch with the right to sublicense its rights thereunder to third parties upon receipt of written approval from NeuroNexus, which approval may not be unreasonably withheld. All rights to any improvements incorporating the licensed intellectual property conceived of or made solely by Greatbatch during the term of the license agreement will be the sole and exclusive property of Greatbatch. This license agreement may be terminated by NeuroNexus in the event of a material breach of the license agreement by Greatbatch (subject to customary cure periods), bankruptcy or insolvency of Greatbatch or Greatbatch taking, directly or indirectly, any material and documented steps with the effect of invalidating any of the licensed NeuroNexus intellectual property.

Supply Agreement

In connection with the spin-off, we will enter into a supply agreement with Greatbatch pursuant to which Greatbatch will manufacture and supply, and we will purchase, fully assembled Algovita systems and most of the products, parts and components necessary for the production and assembly of Algovita exclusively from Greatbatch. In addition, during the term of the supply agreement, to the extent that we desire to have a product or

component manufactured that incorporates any of the intellectual property that we are licensing to Greatbatch and such product or component will be used in the SCS field of use, we will purchase such product or component exclusively from Greatbatch. Furthermore, to the extent that the product or component will be used in the SCS field of use, but does not incorporate any of the intellectual property that we are licensing to Greatbatch, we must provide Greatbatch with a right of first refusal to match the terms of any third party supplier’s manufacturing proposal before entering into any definitive supply agreement with that third party with respect to such product or component.

The initial term of the supply agreement will run from its date of execution until the fifth anniversary of the date of FDA approval permitting sales of Algovita in the United States. The supply agreement will thereafter renew automatically for successive one year terms, unless we or Greatbatch provide notice of non-renewal at least three months prior to the end of such term. During the 180-day period prior to the expiration of the term and continuing until the date that is six months following the expiration of the term, if we intend to seek to purchase from a third party our requirements for any products, parts or components previously purchased under the supply agreement with Greatbatch, we must give Greatbatch notice of that fact prior to taking any steps towards engaging a third party, and thereafter negotiate exclusively and in good faith with Greatbatch for a period of ninety days with respect to that purchase. If these negotiations do not result in a definitive agreement, we must thereafter provide Greatbatch with a right of first refusal to match the terms of any third party supplier’s proposal before entering into any definitive supply agreement with that third party.

Our supply agreement with Greatbatch will contain general terms and provisions, including with respect to (i) part and component specifications, forecast planning and lead time requirements, (ii) delivery, payment and inspection requirements, (iii) warranty and indemnity provisions and (iv) quality requirements. Any intellectual property developed from the collaboration between us and Greatbatch under the supply agreement will be owned jointly with Greatbatch and will be subject to a joint determination by us and Greatbatch as whether to prosecute a patent with respect to such intellectual property. We believe that our supply agreement with Greatbatch will be substantially similar to prevailing industry contracts of this type, specifically as it relates to pricing, liabilities and payment terms.

Product Component Framework Agreement

In connection with the spin-off, we will also enter into a product component framework agreement providing Greatbatch with the exclusive right to supply us with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. With respect to each of our future SNS and DBS neurostimulation devices, the term during which we will be required to purchase products, parts and components exclusively from Greatbatch will run from the date of substantial completion of the development of a device until the fifth anniversary of the date of FDA approval permitting commercial sales of such device in the United States or, with respect to any product that is never to be sold in the United States, the fifth anniversary of the regulatory approval necessary to permit commercial sale of such product outside of the United States. Upon substantial completion of the development of any SNS and DBS neurostimulation device, we will negotiate exclusively and in good faith with Greatbatch for a period of 120 days regarding entry into a definitive manufacturing and supply agreement with respect to such device, which manufacturing and supply agreement will contain terms, including with respect to profit margins, warranty periods and indemnification obligations, that are substantially similar to the terms of our supply agreement with Greatbatch. If we and Greatbatch are unable to execute a manufacturing and supply agreement during the 120 day negotiation period, we will be free to negotiate a manufacturing and supply agreement with respect to such device with a third party, but will be required to provide Greatbatch with a right of first refusal to match the terms of such third party supplier’s proposal before entering into any definitive supply agreement with such third party.

Lease Agreement

In connection with the completion of the spin-off, we will enter into a sublease agreement with Greatbatch Ltd. for square feet of office space located in Plano, Texas, which we will use as our corporate headquarters. This sublease agreement will expire in .

LISTING AND TRADING OF OUR COMMON STOCK

Market for Our Common Stock

There is currently no public trading market for shares of Nuvectra common stock. Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR.” We cannot predict the trading prices for Nuvectra common stock before or after the spin-off date. The trading price of Nuvectra common stock is likely to fluctuate significantly, particularly until an orderly market develops, and is likely to be influenced by many different factors, including many of which are beyond our control. In addition, the combined trading prices of shares of Nuvectra common stock and Greatbatch common stock held by stockholders after the spin-off may be less than, equal to or greater than the trading price of the Greatbatch common stock prior to the spin-off.

Transferability of Our Shares of Common Stock

Our shares of common stock that will be distributed to Greatbatch’s stockholders in the spin-off will be freely transferable, unless the holder is considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the spin-off generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by, or are under common control with, us, and may include some or all of our executive officers and directors. As of , 2016 after giving effect to the spin-off, we estimate that our directors and executive officers will beneficially own approximately shares of our common stock. See “Security Ownership of Certain Beneficial Owners and Management.” Our affiliates may sell our shares of common stock received in the spin-off only:

•

under a registration statement that the SEC has declared effective under the Securities Act; or

•

under an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

We plan to file a registration statement on Form S-8 under the Securities Act to register shares of common stock that we expect to be authorized for issuance under our equity incentive plan. The shares covered by the S-8 registration statement will be shares of our common stock underlying outstanding stock options, restricted stock units, stock appreciation rights, restricted stock and other equity awards to be issued under our equity incentive plan. This registration statement will become effective immediately upon filing. Shares of our common stock issued pursuant to equity awards after the effective date of our registration statement on Form S-8, other than shares of our common stock issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

DIVIDEND POLICY

Following the spin-off, we do not intend to pay any cash dividends on Nuvectra common stock. The declaration and amount of any future dividends, however, will be determined by our Board of Directors and will depend on our financial condition, earnings, corporate strategy and capital requirements after the spin-off, and any other factors that our Board of Directors believes are relevant.

CAPITALIZATION

The following table sets forth our capitalization and cash and cash equivalents as of October 2, 2015 on (i) an actual basis and (ii) a pro forma basis to give effect to the following adjustments related to the spin-off:

•

the cash capital contribution by Greatbatch of $75.0 million to us;

•

the distribution of our shares of common stock in the spin-off and resulting elimination of Greatbatch’s net investment in Nuvectra; and

•

an adjustment to deferred taxes reflected on our combined financial statements to reflect Greatbatch’s prior use, in its consolidated federal income tax returns, of the net operating losses and federal research and development tax credits generated by Nuvectra.

See “Unaudited Condensed Combined Pro Forma Financial Statement” for a further description of these adjustments. Actual amounts as of October 2, 2015 have been derived from our unaudited historical condensed combined balance sheet, which is included elsewhere in this information statement. You should read this table together with “Unaudited Condensed Combined Pro Forma Financial Statement,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our combined financial statements and the related notes included elsewhere in this information statement.


	At October 2, 2015
(dollars in thousands)	Actual			Pro Forma
Cash and Cash Equivalents (1)	$	432		$

Indebtedness	$	—		$

Equity (2)(3):
Common stock, par value $0.001 per share, shares authorized and shares issued and outstanding on a pro forma basis	$	—		$
Additional paid-in capital		—
Greatbatch’s net investment		161,689
Accumulated loss		(119,403	)

Total equity		42,286

Total Capitalization	$	45,822		$

(1)

Immediately prior to the completion of the spin-off, Greatbatch will make a cash capital contribution of $75.0 million to us. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding.

(2)	Assumes shares of common stock of Nuvectra outstanding, based upon Greatbatch shares outstanding on , 2016 and an expected distribution ratio of share of common stock of Nuvectra for every shares of common stock of Greatbatch.

(3)

For purposes of our combined financial statements, our income tax expense and deferred tax balances have been prepared as if we filed income tax returns on a stand-alone basis separate from Greatbatch. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra have been utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in our combined financial statements will not be available for our use and all intercompany payables and receivables with Greatbatch related to these deferred tax assets will be effectively settled upon completion of the spin-off. For additional information regarding this adjustment, see note (b) of the notes to the Unaudited Condensed Combined Pro Forma Financial Statement.

UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENT

The following unaudited condensed combined pro forma financial statement consists of the unaudited condensed combined pro forma balance sheet as of October 2, 2015. The unaudited condensed combined pro forma financial statement reported below should be read in conjunction with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and the related notes included elsewhere in this information statement. For purposes of preparing our unaudited condensed combined pro forma financial statement, our condensed combined balance sheet has been adjusted to give effect to pro forma events that are (i) directly attributable to the spin-off transactions and (ii) factually supportable.

The unaudited condensed combined pro forma balance sheet as of October 2, 2015 has been derived from our condensed combined balance sheet, which is included elsewhere in this information statement, and prepared as if the spin-off had occurred on October 2, 2015.

The unaudited condensed combined pro forma balance sheet as of October 2, 2015 has been adjusted to give effect to the following:

•

the cash capital contribution by Greatbatch of $75.0 million to us;

•

the distribution of our shares of common stock in the spin-off and resulting elimination of Greatbatch’s net investment in Nuvectra; and

•

This unaudited condensed combined pro forma financial statement does not purport to represent what our financial condition would have been had these pro forma adjustments described above occurred on the date indicated. In addition, the unaudited condensed combined pro forma financial statement is provided for illustrative and informational purposes only and is not necessarily indicative of our financial condition as an independent publicly-traded company. The pro forma adjustments described above are factually supported based upon available information and assumptions that management believes are reasonable, but actual results may differ from these pro forma adjustments.

The combined statements of operations of Nuvectra include allocations of expenses from Greatbatch. We believe the allocation of general corporate overhead expenses from Greatbatch to Nuvectra was made on a reasonable basis. The indirect costs allocated to Nuvectra include costs related to the following support functions provided for us by Greatbatch: executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement and facilities. Following the spin-off, Greatbatch will continue to provide services related to certain of these functions for us on a transitional basis for a fee pursuant to the transition services agreement described in “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Transition Services Agreement.” These historical allocations may not be indicative of our future cost structure; however, no pro forma adjustments have been made because any potential changes associated with our being an independent publicly-traded company are estimates that are not factually supportable.

We also expect to incur additional incremental costs on a going forward basis in connection with operating as an independent publicly-traded company. We may also incur additional costs resulting from our spin-off from Greatbatch after the spin-off has been completed. These incremental costs are not included as pro forma adjustments as the total amount to be incurred by us is not estimable at this time.

Our pro forma basic and diluted loss per share for the year ended January 2, 2015 and the nine months ended October 2, 2015 was $ and $ , respectively. The number of shares of Nuvectra common stock used to

compute pro forma basic loss per share for the year ended January 2, 2015 and nine months ended October 2, 2015 is , the number of shares expected to be outstanding immediately following the completion of the spin-off. We have not adjusted the number of shares expected to be outstanding immediately following the spin-off to reflect the payment of cash in lieu of fractional shares as the impact is not estimable at this time. Pro forma diluted shares outstanding were not adjusted for the potential dilution of shares related to equity-compensation awards expected to be granted to our employees, as the impact of those shares would be antidilutive.

NUVECTRA

UNAUDITED CONDENSED COMBINED PRO FORMA

BALANCE SHEET

(in thousands except share and per share data)


	At October 2, 2015
	Actual			Pro Forma Adjustments		Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	432		$	(a)	$
Trade accounts receivable, net of allowance for doubtful accounts		477
Prepaid expenses and other current assets		195

Total current assets		1,104
Property, plant and equipment, net		4,481
Amortizing intangible assets, net		2,055
Goodwill		38,182

Total assets	$	45,822		$		$

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	569		$
Accrued bonuses		2,967

Total current liabilities		3,536
Long-term liabilities		—			(b)

Total liabilities		3,536

Equity:
Common stock, par value $0.001 per share, shares authorized and shares issued and outstanding on a pro forma basis		—			(c)
Additional paid-in capital		—			(a)(b)(c)
Greatbatch’s net investment		161,689			(c)
Accumulated loss		(119,403	)

Total equity		42,286

Total liabilities and equity	$	45,822		$		$

See the accompanying notes to Unaudited Condensed Combined Pro Forma Financial Statement

Notes to Unaudited Condensed Combined Pro Forma Financial Statement

(a)	Cash Capital Contribution

Represents the cash capital contribution of $75.0 million to us to be made by Greatbatch immediately prior to completion of the spin-off. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding.

(b)	Deferred Tax Adjustment

For purposes of our combined financial statements, our income tax expense and deferred tax balances have been prepared as if we filed income tax returns on a stand-alone basis separate from Greatbatch. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra have been utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in our combined financial statements will not be available for our use and all intercompany payables and receivables with Greatbatch related to these deferred tax assets will be effectively settled upon completion of the spin-off. After removal of the deferred tax assets utilized by Greatbatch, as well as the corresponding valuation allowance, the appropriate net deferred tax liability will be established. As an independent publicly-traded company, our deferred taxes and effective tax rate may differ significantly from those in the historical periods.

(c)	Distribution Adjustments

Reflects the reclassification of Greatbatch’s net investment in Nuvectra as additional paid-in capital with a required balancing entry to reflect the par value of our common stock being distributed in the spin-off.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis describes the factors that had a material effect on our results of operations and cash flows during the nine months ended October 2, 2015 as compared to the nine months ended October 3, 2014 and the year ended January 2, 2015 as compared to the year ended January 3, 2014. Also discussed is our financial position as of the end of those periods. You should read this discussion and analysis in conjunction with our combined financial statements and the notes to those combined financial statements and the unaudited condensed combined pro forma financial statement and the notes to the unaudited condensed combined pro forma financial statement included elsewhere in this information statement. This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, contains forward-looking statements. Actual results could differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Introduction

Our results of operations after completion of the spin-off may be different than our results of operations prior to completion of the spin-off. These differences may result from, among other things, the impact of operating as an independent publicly-traded company, and the impact of, and transactions contemplated by, the separation and distribution agreement and various other transaction agreements between us and Greatbatch summarized under “Our Relationship with Greatbatch After the Spin-Off.”

This MD&A is intended to assist you in understanding the recent pre-spin-off performance of our business, our financial condition and our future prospects. The following will be discussed and analyzed:

•

Spin-Off From Greatbatch

•

Business Overview

•

Strategic and Financial Overview

•

Cost Savings and Consolidation Efforts

•

Discussion of Financial Results

•

Liquidity and Capital Resources

•

Critical Accounting Policies and Use of Estimates

•

Impact of Recently Issued Accounting Standards

•

Inflation

•

Off-Balance Sheet Arrangements

•

Legal Matters

•

Quantitative and Qualitative Disclosures About Financial Risk

Spin-Off From Greatbatch

On July 30, 2015, Greatbatch announced that it intended to spin-off Nuvectra and its neuromodulation medical device business from the remainder of its business through a tax-free distribution of all of the issued and outstanding shares of common stock of Nuvectra to the stockholders of Greatbatch on a pro rata basis. The entity being spun-off is composed of Nuvectra and its subsidiaries, Algostim and PelviStim, and Greatbatch’s NeuroNexus subsidiary, the shares of which are being transferred to us by Greatbatch in connection with the spin-off. Immediately prior to completion of the spin-off, QiG Group will convert from a limited liability company into Nuvectra Corporation, a Delaware corporation. Following the completion of the spin-off, Greatbatch’s stockholders will own 100% of the outstanding common stock of both Greatbatch and Nuvectra.

The spin-off will not require a vote by Greatbatch stockholders. The following discussion and analysis is based upon our combined operating results and financial condition. For additional information regarding our spin-off from Greatbatch, see “The Spin-Off.”

Business Overview

We are a neuromodulation medical device company focused on the development and commercialization of our neurostimulation technology platform for treatment of various disorders through stimulation of tissues associated with the nervous system. We operate as a single reportable segment. Algovita is the first application of our neurostimulation technology platform and is indicated for the treatment of chronic pain of the trunk and limbs. We are in the process of developing additional applications for our neurostimulation technology platform. We are currently working to develop our platform into complete medical device systems for use in the SNS and DBS markets.

We submitted a premarket approval application for Algovita to the FDA in December 2013. On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita. We expect to launch Algovita commercially in the United States during the first half of 2016. Algovita obtained CE mark approval on June 17, 2014 through our notified body, TÜV SÜD America, and has been commercially available to patients in Germany and several other European countries since November 2014. Algovita is being commercialized through our Algostim subsidiary that was 89% owned by us as of October 2, 2015. Under the operating agreement governing Algostim, we funded 100% of the expenses incurred by Algostim and no distributions were to be made to minority holders until we were reimbursed for these expenses.

One of our other subsidiaries, PelviStim, is focused on the commercialization of our neurostimulation technology platform for SNS, and was also 89% owned by us as of October 2, 2015. Under the operating agreement governing PelviStim, we funded 100% of the expenses incurred by PelviStim and no distributions were to be made to minority holders until we were reimbursed for these expenses.

During the fourth quarter of 2015, we purchased the outstanding minority interests of Algostim and PelviStim for $16.7 million. Included in this amount was $6.9 million paid to Drees Holding LLC, which is a limited liability company of which Scott F. Drees, our Chief Executive Officer, is the principal owner and the sole managing director. Mr. Drees received minority membership interests in Algostim and PelviStim in connection with his entering into a long-term consulting agreement with us and prior to being appointed as our Chief Executive Officer in July 2015. Mr. Drees’ consulting agreement was terminated in connection with his agreeing to serve as our Chief Executive Officer. The purchase of the outstanding minority interests was funded by a cash contribution from Greatbatch.

Our results also include the operations of our subsidiary NeuroNexus, which was originally acquired by Greatbatch in February 2012, the shares of which are being transferred to Nuvectra in connection with the spin-off. NeuroNexus offers high-value neural interface technology and devices across a wide range of functions including neuromonitoring and recording, electrical and optical stimulation, and targeted drug delivery applications that complement our existing neurostimulation technology platform. We intend to incorporate NeuroNexus’ technologies into our neurostimulation technology platform.

Our revenues include sales of neural interface technology, components and systems to the neuroscience and clinical markets and a limited release of Algovita in Europe. We expect that our future revenues will come primarily from sales of neurostimulation medical device products, including Algovita, particularly after it is launched commercially in the United States, technology licensing and royalty fees and development and engineering service fees.

Our expenses include an allocation of general corporate overhead expenses from Greatbatch relating to the following support functions provided for us by Greatbatch: executive oversight, finance, legal, human resources,

tax, information technology, product development, corporate procurement and facilities. These expenses have been charged to us on the basis of direct usage, when identifiable, with the remainder allocated primarily on a pro rata basis of estimated hours incurred, headcount, square footage, or other measures. We consider the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if we were an independent publicly-traded company or of the costs we will incur in the future after completion of the spin-off. Following the spin-off, Greatbatch will continue to provide services related to certain of these functions for us on a transitional basis for a fee pursuant to the transition services agreement described in “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Transition Services Agreement.” At this time, we are unable to determine what our expenses would have been on a standalone basis if we had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Strategic and Financial Overview

We are a neuromodulation medical device company formed in 2008 to design and develop our neurostimulation technology platform for use in multiple different indications. Since our inception, the majority of our resources have been spent designing and developing Algovita. SCS was chosen as the first sector of the neurostimulation market to pursue as we believe that it is a high growth and established market, there is an established regulatory and reimbursement pathway, and we believe that there are significant unmet needs in the SCS market. We believe Algovita has significant competitive advantages over existing SCS systems since it is based on our differentiated neurostimulation technology platform that is user friendly and offers a broad set of capabilities.

We have a history of significant net losses and we expect to continue to incur net losses for the foreseeable future. We expect that future revenue growth will come largely from sales of Algovita in the United States market beginning in the second half of 2016.

Since submitting our premarket approval application for Algovita, we have accelerated the process of leveraging our neurostimulation technology platform for other sectors of the neurostimulation market such as DBS, SNS and other emerging indications. We also intend to pursue strategic partnerships to fund clinical and development costs of new products, expand our product distribution channels, improve our access to physicians and opinion leaders, supplement our product commercialization efforts, obtain assistance in performing clinical studies and post market studies, add specialized clinical or regulatory expertise or acquire or obtain access to complementary intellectual property.

The main factors driving the $2.1 million, or 13%, increase in our net loss from the first nine months of 2014 to the first nine months of 2015 were as follows:

•

Increase in SG&A salary and employee benefit costs as we begin to build our worldwide sales organization and hire various executive management and corporate support personnel in anticipation of and preparation for becoming an independent publicly-traded company; and

•

Lower RD&E expenses in connection with the development of Algovita, which was completed in 2014. This includes cost savings from the shutdown of our Cleveland, Ohio facility.

The main factor driving the $2.6 million, or 11%, decrease in our net loss from fiscal year 2013 to fiscal year 2014 was the $4.2 million, or 73%, decrease in DVT costs as we performed rigorous testing of Algovita during 2013 prior to our premarket approval application submission. Since submitting our premarket approval application for Algovita, we accelerated the process of leveraging our neurostimulation technology platform for other sectors of the neurostimulation market such as DBS, SNS and other emerging indications. This was the primary driver behind the $1.7 million increase in RD&E from fiscal year 2013 to fiscal year 2014.

Cost Savings and Consolidation Efforts

In 2014 and 2015, we recorded charges in Other Operating Expenses (Income), Net related to the shutdown of our Cleveland, Ohio facility. This initiative was undertaken to better align our resources and improve our operational efficiencies. Total restructuring charges expected to be incurred in connection with this initiative are between $1.1 million and $1.5 million, of which $1.1 million has been incurred through the first nine months of 2015. This initiative is expected to be completed by the end of 2015. Once completed, this initiative is expected to result in cost savings of approximately $1.0 million to $1.5 million per year. See note 5 “Other Operating Expenses (Income), Net” of the notes to our combined financial statements included elsewhere in this information statement for additional information about the timing, cash flow impact and amount of future expenditures for this initiative.

Discussion of Financial Results

We utilize a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. Fiscal years 2014 and 2013 ended on January 2, 2015 and January 3, 2014, respectively. Fiscal year 2014 contained fifty-two weeks. Fiscal year 2013 contained fifty-three weeks. The first nine months of 2015 and 2014 ended on October 2, and October 3, respectively, and each contained 39 weeks.


	Nine Months Ended						YTD 2015 vs. YTD 2014						Year Ended						2014 vs. 2013
Dollars in thousands	October 2, 2015			October 3, 2014			$ Change			% Change			January 2, 2015			January 3, 2014			$ Change			% Change
Sales
Neural interface components and systems	$	2,910		$	2,467		$	443			18	%	$	3,466		$	3,043		$	423			14	%
Algovita SCS system		1,032			—			1,032			100	%		230			—			230			100	%

Total sales		3,942			2,467			1,475			60	%		3,696			3,043			653			21	%
Cost of sales		2,475			1,187			1,288			109	%		1,769			1,231			538			44	%

Gross profit		1,467			1,280			187			15	%		1,927			1,812			115			6	%
Gross profit as a % of sales		37.2	%		51.9	%								52.1	%		59.5	%
Selling, general and administrative expenses (“SG&A”)		8,190			4,835			3,355			69	%		6,704			6,852			(148	)		-2	%
SG&A as a % of total operating expenses		40.6	%		27.0	%								28.7	%		26.5	%

Research, development, and engineering costs, net (“RD&E”)		9,483			11,669			(2,186	)		-19	%		14,984			13,311			1,673			13	%
RD&E as a % of total operating expenses		47.0	%		65.2	%								64.1	%		51.4	%
Design verification testing expenses (“DVT”)		2,259			1,441			818			57	%		1,588			5,793			(4,205	)		-73	%
DVT as a % of total operating expenses		11.2	%		8.1	%								6.8	%		22.4	%
Other operating expenses (income), net		260			(49	)		309			NA			95			(63	)		158			NA

Loss before provision for income taxes		(18,725	)		(16,616	)		(2,109	)		13	%		(21,444	)		(24,081	)		2,637			-11	%
Provision for income taxes		—			—			—			NA			—			—			—			NA
Effective tax rate		0.0	%		0.0	%								0.0	%		0.0	%

Net loss	$	(18,725	)	$	(16,616	)	$	(2,109	)		13	%	$	(21,444	)	$	(24,081	)	$	2,637			-11	%

Nine Months Ended October 2, 2015 Compared With Nine Months Ended October 3, 2014

Sales

Neural Interface Components and System. Neural interface components and systems consist of sales of neural interface technology, components, and systems to the neuroscience and clinical markets. The primary factor behind the 18% increase in sales from the first nine months of 2014 to the first nine months of 2015 was market growth as well as the introduction of the NeuroNexus SmartBox™ portable control and data streaming system,

which was launched in the first quarter of 2014. SmartBox ^™ sales increased from $153 thousand for the first nine months of 2014 to $267 thousand for the first nine months of 2015. We do not believe that price fluctuations significantly impacted sales from the first nine months of 2014 to the first nine months of 2015. We expect sales for this product line to grow by double digit percentages during 2015 as SmartBox ^™ sales continue to ramp up.

Algovita SCS System . The increase in sales from the first nine months of 2014 to the first nine months of 2015 was due to the limited release of Algovita in Europe, which began during the fourth quarter of 2014. We submitted a premarket approval application for Algovita to the FDA in December 2013. In November 2015, Greatbatch announced receipt of premarket approval for Algovita. We expect to launch Algovita commercially in the United States during the first half of 2016. We expect to continue to build our worldwide sales organization for Algovita consisting of direct sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States to support future growth.

Cost of Sales

Cost of sales consists of the costs of raw materials used in the manufacture of products, labor costs, amortization of technology intangibles, and plant and equipment depreciation and overhead. The primary factor behind the 109% increase in cost of sales from the first nine months of 2014 to the first nine months of 2015 was the increased revenue as discussed above. Cost of sales will continue to increase as our sales continue to grow.

From the first nine months of 2014 to the first nine months of 2015, our gross profit increased $187 thousand, or 15%, due to our increased sales of neural interface components and systems. Our gross profit as a percentage of sales, or Gross Margin, decreased to 37.2% in the first nine months of 2015 from 51.9% in the first nine months of 2014. This decrease was primarily due to the addition of Algovita sales in the 2015 period, which had negative Gross Margin. The Algovita units sold in the first nine months of 2015 had negative gross profit of $202 thousand as the cost of purchasing these units from Greatbatch was above their selling price given the low volume of production. The price we pay to Greatbatch for each Algovita system is governed by purchase orders with Greatbatch. Our entry into a supply agreement with Greatbatch in connection with the completion of the spin-off is not expected to materially impact the price we pay for Algovita or any of its components as compared to the price we paid for Algovita and its components prior to the spin-off. We believe that our supply agreement with Greatbatch will be substantially similar to prevailing industry contracts of this type. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Supply Agreement” included elsewhere in this information statement for additional information regarding this supply agreement. However, going forward, our Gross Margin is expected to improve as sales volume increases. These Gross Margin improvements are not expected until after Algovita is launched in the United States.

Selling, General and Administrative Expenses

SG&A expenses consist primarily of personnel costs, including salary and employee benefits for our sales and marketing personnel and a corporate allocation from Greatbatch for personnel that support our general operations, such as information technology, executive management, financial accounting and human resources personnel. SG&A expenses increased $3.4 million, or 69%, from the first nine months of 2014 to the first nine months of 2015. This increase was primarily the result of increased salary and employee benefits as we begin to build our worldwide sales organization and hire executive management and corporate support personnel in anticipation of, and preparation for, becoming an independent publicly-traded company.

will require lead time in the field to grow their network of accounts and produce sales results. We believe that successfully recruiting and training a sufficient number of productive sales representatives and independent sales agents is important in achieving our future growth objectives.

After the completion of the spin-off, our SG&A expenses will no longer include an allocation of corporate expenses from Greatbatch, but instead will reflect fees paid to Greatbatch to provide certain corporate support functions on a transitional basis under the transition services agreement as described in “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Transition Services Agreement.” These corporate allocations included charges for executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities that totaled $768 thousand and $735 thousand of SG&A expenses for the first nine months of 2015 and 2014, respectively. These expenses have been charged to us on a pro rata basis based upon estimated hours incurred, headcount, square footage, or other measures. We consider the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if we operated as an independent publicly-traded company or of the costs we will incur in the future after completion of the spin-off. At this time, we are unable to determine what our expenses would have been on a standalone basis if we had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Research, Development and Engineering Costs, Net

RD&E costs primarily include salary and employee benefits for our specialists in software engineering, mechanical engineering, electrical engineering and graphical user interface design. Many of these specialists have considerable experience in neurostimulation-related products. Partially offsetting RD&E costs were cost reimbursements from government grants that were awarded to NeuroNexus. RD&E costs were as follows (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Research, development and engineering costs	$	9,483	$	12,334
Less: cost reimbursements		—		(665	)

Total research, development and engineering costs, net	$	9,483	$	11,669

RD&E costs for the first nine months of 2015 decreased $2.2 million, or 19%, from the first nine months of 2014. This decrease was due to lower costs incurred for the development of Algovita, which was completed in 2014. These cost reductions were mainly achieved through the shutdown of our Cleveland, Ohio facility, which began during the second half of 2014. Partially offsetting these decreased costs was lower cost reimbursements due to the expiration of government grants in the second half of 2014 that were originally awarded to NeuroNexus, and which Greatbatch was not eligible to renew.

We expect to invest in product development and clinical studies to improve and further develop our existing technologies and to expand the features offered in Algovita. We also intend to pursue strategic partnerships to fund clinical and development costs, in part or in full, of new products, expand our product distribution channels, improve our access to physicians and opinion leaders, supplement our product commercialization efforts, obtain assistance in performing clinical studies, add specialized clinical or regulatory expertise or acquire or obtain access to complementary intellectual property.

Design Verification Testing Expenses

costs increased $818 thousand, or 57%, from the first nine months of 2014 to the first nine months of 2015 as a result of the costs incurred for testing PelviStim. Going forward, we will incur DVT costs for other medical devices using our neurostimulation technology platform, but we do not expect these costs to rise to the level of fiscal year 2013 as we expect to leverage our existing neurostimulation technology platform for these devices or share these costs with strategic partners.

Other Operating Expenses (Income), Net

Other operating expenses (income), net were comprised of the following (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Cleveland facility shutdown	$	228	$	660
NeuroNexus integration income		—		(750	)
Other expenses		32		41

	$	260	$	(49	)

For additional information, see note 5 “Other Operating Expenses (Income), Net” of the notes to our condensed combined financial statements included elsewhere in this information statement.

Provision for Income Taxes

For purposes of our combined financial statements, our income tax expense and deferred tax balances have been prepared as if we filed income tax returns on a stand-alone basis separate from Greatbatch. As a stand-alone entity, our deferred taxes and effective tax rate may differ significantly from those in the historical periods.

During the first nine months of 2014 and 2015, we recorded a valuation allowance for the amount of the deferred tax asset that was generated from our net losses and federal research and development tax credit earned to the extent they exceeded any deferred tax liability, as it was more likely than not that the deferred tax asset generated from those activities will not be realized. Accordingly, our provision for income taxes for the first nine months of 2014 and 2015 was $0. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra were utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in our combined financial statements will not be available to Nuvectra upon completion of the spin-off. See note 6 “Income Taxes” of the notes to our condensed combined financial statements included elsewhere in this information statement for disclosures related to our income taxes.

Year Ended January 2, 2015 Compared With Year Ended January 3, 2014

Sales

Neural Interface Components and Systems . Neural interface components and systems consist of sales of neural interface technology, components, and systems to the neuroscience and clinical markets. The primary factor behind the 14% increase in sales from fiscal year 2013 to fiscal year 2014 was market growth as well as the introduction of the NeuroNexus SmartBox™ portable control and data streaming system, which was launched in the first quarter of 2014. SmartBox ^™ sales totaled $195 thousand for 2014. We do not believe that price fluctuations significantly impacted sales from fiscal year 2013 to fiscal year 2014. We expect sales for this product line to grow by double digit percentages during fiscal year 2015 as SmartBox ^™ sales continue to ramp up.

Algovita SCS System . The increase in sales from fiscal year 2013 to fiscal year 2014 was due to the limited release in Europe of Algovita beginning in the fourth quarter of 2014 after CE mark approval was obtained in

June 2014. In November 2015, Greatbatch announced receipt of premarket approval for Algovita. We expect to launch Algovita commercially in the United States during the first half of 2016. We expect to continue to build our worldwide sales organization for Algovita consisting of direct sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States to support future growth.

Cost of Sales

Cost of sales consists of the costs of raw materials used in the manufacture of products, labor costs, amortization of technology intangibles, and plant and equipment depreciation and overhead. The primary driver behind the 44% increase in cost of sales from fiscal year 2013 to fiscal year 2014 was the increased revenue as discussed above. Cost of sales will continue to increase as our sales continue to grow.

From fiscal year 2013 to fiscal year 2014, our gross profit increased $115 thousand, or 6%, due to our increased sales of neural interface components and systems. Our Gross Margin decreased to 52.1% in fiscal year 2014 from 59.5% in fiscal year 2013 due to the addition of Algovita sales in fiscal year 2014. The Algovita units sold in fiscal year 2014 had no gross profit as the cost to purchase these units from Greatbatch was equal to their selling price given the low volume of production. Going forward, our Gross Margin is expected to improve as we grow sales volume. These Gross Margin improvements are not expected until after Algovita is launched in the United States.

Selling, General and Administrative Expenses

Going forward, we expect SG&A expenses to ramp up significantly as we build our worldwide sales organization consisting of direct sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States. We expect that this will require recruiting appropriate direct sales representatives and independent sales agents, establishing a commercial infrastructure in the United States, and training our direct sales representatives and independent sales agents, and will require a significant investment by us. Thereafter, we expect that our sales representatives and independent sales agents will require lead time in the field to grow their network of accounts and produce sales results. We believe that successfully recruiting and training a sufficient number of productive sales representatives and independent sales agents is important in achieving our future growth objectives.

In addition to our sales representatives, we will increase SG&A expenses in connection with operating as an independent publicly-traded company, including the hiring of various executive management and corporate support personnel. These SG&A expenses will continue to increase in connection with the launch of Algovita in the United States, and thus will continue to negatively impact our financial results for the foreseeable future.

After the completion of the spin-off, our SG&A expenses will no longer include an allocation of corporate expenses from Greatbatch, but instead will reflect fees paid to Greatbatch to provide certain corporate support functions on a transitional basis under the transition services agreement as described in “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Transition Services Agreement.” These corporate allocations included charges for executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities that totaled $985 thousand and $991 thousand of SG&A expenses for fiscal year 2014 and 2013, respectively. These expenses have been charged to us on a pro rata basis based upon estimated hours incurred, headcount, square footage, or other measures. We consider the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if we

operated as an independent publicly-traded company or of the costs we will incur in the future after completion of the spin-off. At this time, we are unable to determine what our expenses would have been on a standalone basis if we had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Research, Development and Engineering Costs, Net


	Year Ended
	January 2, 2015			January 3, 2014
Research, development and engineering costs	$	15,649		$	15,290
Less: cost reimbursements		(665	)		(1,979	)

Total research, development and engineering costs, net	$	14,984		$	13,311

RD&E costs for fiscal year 2014 increased $1.7 million, or 13%, from fiscal year 2013 as we began to invest resources towards developing medical device systems for other emerging indications. Additionally, $1.1 million of this increase in RD&E costs relates to the expiration of government grant cost reimbursements in the second half of fiscal year 2014 that were originally awarded to NeuroNexus, and which Greatbatch was not eligible to renew.

Design Verification Testing Expenses

DVT expenses primarily include salary and employee benefits for our engineers who test the design and materials used in our medical devices. These costs were predominantly incurred during fiscal years 2012 and 2013 as we rigorously tested Algovita prior to our premarket approval application submission in December 2013. These costs declined $4.2 million, or 73%, from fiscal year 2013 to fiscal year 2014. Going forward, we will incur DVT costs for other medical devices using our neurostimulation technology platform, but we do not expect these costs to rise to the level of fiscal year 2013 as we will leverage our neurostimulation technology platform for these medical devices or share these costs with strategic partners.

Other Operating Expenses (Income), Net

Other operating expenses (income), net were comprised of the following (in thousands):


	Year Ended
	January 2, 2015			January 3, 2014
Cleveland facility shutdown	$	860		$	—
NeuroNexus integration income		(840	)		(690	)
NeuroNexus IPR&D write-off		—			540
Other expenses		75			87

	$	95		$	(63	)

For additional information, see note 5 “Other Operating Expenses (Income), Net” of the notes to our combined financial statements included elsewhere in this information statement.

Provision for Income Taxes

For purposes of the combined financial statements, our income tax expense and deferred tax balances have been prepared as if we filed income tax returns on a stand-alone basis separate from Greatbatch. As a stand-alone entity, our deferred taxes and effective tax rate may differ significantly from those in the historical periods.

During fiscal year 2013 and fiscal year 2014, we recorded a valuation allowance for the amount of the deferred tax asset that was generated from our net losses and federal research and development tax credit earned to the extent they exceeded any deferred tax liability as it was more likely than not that the deferred tax asset generated from those activities will not be realized. Accordingly, our provision for income taxes for fiscal year 2013 and fiscal year 2014 was $0. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra were utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in our combined financial statements will not be available to Nuvectra upon completion of the spin-off. See note 6 “Income Taxes” of the notes to our combined financial statements included elsewhere in this information statement for disclosures related to our income taxes.

Liquidity and Capital Resources

Greatbatch uses a centralized approach to cash management and financing of operations. We are currently a party to Greatbatch’s cash pooling arrangements with several financial institutions to maximize the availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash is provided by Greatbatch to meet our financial obligations, which results in an increase in Greatbatch’s net investment in us as reflected in our combined balance sheets. This financing and cash pooling arrangement with Greatbatch will end in connection with the completion of the spin-off.

Greatbatch’s outstanding indebtedness owed to third parties and the related interest expense have not been allocated to us for any of the periods presented in our combined financial statements as we were not the legal obligor of the debt obligation and Greatbatch’s outstanding borrowings were not directly attributable to our operations.

We have incurred significant net losses and negative cash flows from operations since our inception and we expect to continue to incur additional net losses for the foreseeable future. We had negative cash flow from operations of $19.8 million and $24.0 million for the years ended January 2, 2015 and January 3, 2014, respectively, and an accumulated loss of $100.7 million as of January 2, 2015. In addition, we had negative cash flow from operations of $15.6 million and $14.8 million for the nine months ended October 2, 2015 and October 3, 2014, respectively, and an accumulated loss of $119.4 million as of October 2, 2015.

Immediately prior to the completion of the spin-off, Greatbatch will make a cash capital contribution of $75.0 million to us, which we will use for the development and commercialization of Algovita and otherwise for general corporate purposes. Additionally, we intend to pursue strategic partnerships with third parties to, among other things, fund clinical and development costs, in part or in full, for new product offerings. This cash capital contribution, together with our cash on hand, is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for approximately two years after the completion of the spin-off. After such time, we expect that we will either have positive cash flow from operations or we will be able to access the equity or debt capital markets for additional funding. However, pursuant to the terms of the tax matters agreement with Greatbatch, for a period of two years following the date of the spin-off, we will be prohibited from (i) facilitating or otherwise participating in any acquisition (or deemed acquisition) of our shares of common stock that would result in the spin-off being treated as part of a plan pursuant to which a fifty percent or greater interest (by vote or value) is acquired (or deemed acquired) by any stockholder; (ii) issuing any shares of our common stock or any capital stock of any of our subsidiaries or any instrument that is convertible into shares of our common stock other than those issuances that meet certain requirements set forth in the IRS’ rules and regulations; (iii) redeeming or otherwise repurchasing shares of our common stock other than pursuant to open market stock repurchases that meet certain requirements set forth in the IRS’ rules and regulations; or (iv) transferring, selling or liquidating all or substantially all of our assets or ceasing to maintain an active

business. If we take any of these actions and such actions result in tax-related losses for Greatbatch, then we would generally be required to indemnify Greatbatch for such losses. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Tax Matters Agreement” for additional information regarding our tax matters agreement with Greatbatch. If we are unable to raise or prohibited under the terms of the tax matters agreement with Greatbatch from raising additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development plans.

Currently, we expect our research and development expenses for fiscal year 2015 to be approximately $10 million to $15 million. These expenditures are primarily to continue our research and development program to enhance Algovita and develop our neurostimulation technology platform for uses in indications outside of SCS. We expect to finance our expenditures using the cash on-hand from the Greatbatch capital contribution or from internally generated funds. We may increase, decrease or re-allocate our anticipated expenditures during any period based on industry conditions, the availability of capital or other factors. We believe that nearly all of our anticipated research and development expenditures are discretionary.

Net cash used in operating activities was $15.6 million for the first nine months of 2015 compared to $14.8 million for the first nine months of 2014. Net cash used in operating activities was $19.8 million for fiscal year 2014 compared to $24.0 million for fiscal year 2013. The primary components of cash used in operating activities were our net losses (adjusted to exclude non-cash charges) and changes in working capital accounts. The primary factor behind the $4.2 million decrease in cash used in operating activities for fiscal year 2014 compared to fiscal year 2013 was lower DVT costs.

Net cash used in investing activities was $0.5 million for the first nine months of 2015 and $0.4 million for the first nine months of 2014. Net cash used in investing activities was $1.3 million for fiscal year 2014 compared to $1.8 million for fiscal year 2013. Cash used in investing activities related to the purchases of property, plant and equipment, or PP&E. During the first quarter of 2015, Greatbatch contributed a building and certain fixed assets located in Blaine, Minnesota to us for use in our operations, which had a net book value of $1.8 million as these assets were now being fully utilized by Nuvectra. Previously, these assets were shared by various Greatbatch entities and costs were allocated to each entity by Greatbatch. Additionally, during the first six months of 2015, we transferred certain machinery and equipment with a net book value of $2.0 million, which previously had been used for DVT, to Greatbatch to utilize in the production of Algovita. For purposes of the first nine months of 2015 condensed combined cash flow statement, these transfers were treated as non-cash transactions.

Net cash provided by financing activities was $16.0 million for the first nine months of 2015 compared to $15.6 million for the first nine months of 2014. Net cash provided by financing activities was $20.3 million for fiscal year 2014 compared to $26.8 million for fiscal year 2013. During each period presented, cash provided by financing activities was composed entirely of the investment provided by Greatbatch in order to fund our operations and working capital expenditures.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of financial conditions and results of operations are based upon our combined financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. Preparation of our combined financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. The methods, estimates, and judgments we use in applying our accounting policies have a significant impact on the results we report in our combined financial statements and MD&A. Management considers an accounting estimate to be critical if (1) it requires assumptions to be made that were uncertain at the time the estimate was made; and (2) changes in the estimate or different estimates that could have been selected could have a material impact on our combined financial statements. Our critical accounting policies and estimates are described below. We also have other accounting policies that we consider key accounting policies, such as our accounting policies

regarding revenue recognition; however, these accounting policies do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective at the time made and that could materially impact our combined financial statements.

Combined results of operations, financial condition and cash flows of Nuvectra

We have historically operated as part of Greatbatch and not as a separate stand-alone entity. Our combined financial statements have been prepared on a “combined” basis from the consolidated financial statements of Greatbatch to represent our financial position and performance as if we existed on a stand-alone basis during each of the fiscal years and interim periods presented in the combined financial statements; and as if Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 810, “Consolidation,” had been applied throughout. Our combined financial statements have been prepared in conformity with GAAP, by aggregating financial information from the components of Nuvectra described in note 1 “Summary of Significant Accounting Policies” of the notes to our combined financial statements, included elsewhere in this information statement. The accompanying combined financial statements only include assets and liabilities that management has determined are specifically identifiable with us and allocations of direct costs and indirect costs attributable to our operations. Indirect costs relate to certain support functions that are provided on a centralized basis within Greatbatch. The support functions provided to us by Greatbatch include executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities.

Corporate overhead allocations from Greatbatch for the year ended January 2, 2015 and January 3, 2014, amounted to $3.0 million and $2.4 million, respectively. Corporate overhead allocations for the nine months ended October 2, 2015 and October 3, 2014 amounted to $2.1 million and $2.3 million, respectively. These expenses have been charged to us on a pro rata basis based upon estimated hours incurred, headcount, square footage, or other measures. Management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if we were an independent publicly-traded company or of the costs we will incur in the future. At this time, we are unable to determine what our expenses would have been on a standalone basis if we had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Valuation of goodwill and other identifiable intangible assets

When we acquire a company, we allocate the purchase price to the tangible and intangible assets we acquire and liabilities we assume based on their fair value at the date of acquisition. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. In addition to goodwill, some of our historical intangible assets were considered non-amortizing intangible assets as they are expected to generate cash flows indefinitely. Goodwill and indefinite-lived intangible assets are not amortized but are required to be assessed for impairment on an annual basis or more frequently if certain indicators are present. Definite-lived intangible assets are amortized over their estimated useful lives and are assessed for impairment if certain indicators are present.

Greatbatch’s goodwill has resulted from multiple historical acquisitions. These acquisitions were integrated into Greatbatch including its QiG Group reporting unit. A portion of the assets acquired by Greatbatch giving rise to this goodwill (i.e., work force intangibles) will be allocated to us in connection with the spin-off. Accordingly, $38.2 million of Greatbatch’s historical Goodwill was allocated to us based upon the relative fair value method as of December 2013. This date was chosen as this was the date QiG Group became a reportable segment for Greatbatch after its corporate realignment. The following discussion of assumptions and approach used describes the methodology we used for both our annual impairment tests and the initial relative fair value allocation.

Assumptions/Approach Used . We base the fair value of identifiable intangible assets on detailed valuations that use information and assumptions provided by management. The fair values of intangible assets are determined using one of three valuation approaches: market, income or cost. The selection of a particular method depends on

the reliability of available data and the nature of the asset. The market approach values the asset based on available market pricing for comparable assets. The income approach values the asset based on the present value of risk adjusted cash flows projected to be generated by that asset. The projected cash flows for each asset considers multiple factors from the perspective of a marketplace participant, including current revenue from existing customers, attrition trends, reasonable contract renewal assumptions, royalty rates and expected profit margins giving consideration to historical and expected margins. The cost approach values the asset by determining the current cost of replacing that asset with another of equivalent economic utility. The cost to replace the asset reflects the estimated reproduction or replacement cost, less an allowance for loss in value due to depreciation or obsolescence, with specific consideration given to economic obsolescence if indicated.

We perform an annual review on the last day of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill and other indefinite-lived intangible assets are impaired. We assess goodwill for impairment by comparing the fair value of our reporting unit to its carrying value to determine if there is potential impairment. When evaluating goodwill for impairment, we may first perform an assessment of qualitative factors, referred to as the “step-zero” approach, to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. If, based on the review of the qualitative factors, we determine it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying value, the required two-step quantitative impairment test can be bypassed. If we do not perform a qualitative assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, we must perform the two-step quantitative impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Fair value for the reporting unit is determined based on the income, cost and market approaches. Indefinite-lived intangible assets are evaluated for impairment by using the income approach. Definite-lived intangible assets are reviewed at least quarterly to determine if any conditions exist or a change in circumstances has occurred that would indicate impairment or a change in their remaining useful life.

We do not believe that the goodwill allocated to us is at risk of failing step one of future annual impairment tests unless operating conditions significantly deteriorate, given the results of our 2014 step zero qualitative analysis, as well as the significant amount that our estimated fair value for these assets was in excess of their respective book values as of January 3, 2014, the date of our last step one impairment test. Examples of a significant deterioration in operating conditions for us could include the following: regulatory non-approval of new medical device systems, lack of market acceptance, discontinuation of significant development projects, technology obsolescence or failure of technology, among others.

Effect of Variation of Key Assumptions Used . The use of alternative valuation assumptions, including estimated cash flows and discount rates, and alternative estimated useful life assumptions could result in significant changes to our intangible asset fair value estimates. These changes in fair value estimates could impact the amount and timing of future intangible asset amortization expense and/or result in impairment losses.

As part of our 2014 step zero qualitative analysis, we made certain assumptions by evaluating factors including, but not limited to, macro-economic conditions, market and industry conditions, cost factors, competitive environment, parent company share price fluctuations, results of the last impairment test, and the operational stability and the overall financial performance of the reporting unit. We also made assumptions involving the projections of future revenues and expenses that impacted the results of our step-zero impairment analysis. Significant changes in these estimates and assumptions could create future impairment losses to our goodwill.

For the last step one impairment test for Nuvectra, which was performed as of January 3, 2014, and the initial relative fair value allocation, the fair value for our Nuvectra reporting unit was determined through the use of the income, cost and market approaches. The projected cash flows used to determine the fair value of the Nuvectra reporting unit were based upon internal revenue and expense projections, discount rates and probability of success factors based upon the stage of completion of the medical device projects within Nuvectra. At the time

our impairment test was performed in January 2014, our revenue projections were expected to increase as market share was garnered by Algovita and other medical devices. At the time our impairment test was performed in January 2014, as most of our products were then currently in the clinical and development stage, projected market share penetration rates were assumed to grow from low single digits in the early years up to maximum market share penetration rates that ranged between 6% and 15%. Our discounted cash flow analysis included a discount rate of 20% and probability of success factors that ranged from 75% to 90%. The fair value calculation for Nuvectra was corroborated with market data such as recent acquisitions for comparable companies, analyst reports and discussions with potential strategic partners of Nuvectra.

For our indefinite-lived intangible assets, we make estimates of future revenues and discount rates. Significant changes in these estimates could create future impairments of these assets. Estimation of the useful lives of indefinite- and definite-lived intangible assets is based upon the estimated cash flows of the respective intangible asset and requires significant management judgment. Events could occur that would materially affect our estimates of the useful lives. Significant changes in these estimates and assumptions could change the amount of future amortization expense or could create future impairments of these intangible assets. The way we allocate resources and evaluate our businesses determines the reporting unit level which goodwill is tested for impairment. Significant changes to our reporting unit could create future impairments of goodwill.

As of October 2, 2015, we have $40.2 million of intangible assets recorded on our combined balance sheet representing 88% of our total assets. This includes $2.1 million of amortizing intangible assets and $38.2 million of goodwill.

Tangible long-lived assets

Property, plant and equipment are carried at cost. The cost of property, plant and equipment is charged to depreciation expense over the estimated life of the operating assets primarily using straight-line rates. Tangible long-lived assets are subject to impairment assessment if certain indicators are present.

Assumptions/Approach Used . We assess the impairment of tangible long-lived assets when events or changes in circumstances indicate that the carrying value of the asset (asset group) may not be recoverable. Factors that we consider in deciding when to perform an impairment review include, but are not limited to: a significant decrease in the market price of the asset (asset group); a significant change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; a significant change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); or a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Recoverability potential is measured by comparing the carrying amount of the asset (asset group) to the related total future undiscounted cash flows. The projected cash flows for each asset (asset group) considers multiple factors, including current revenue from existing customers, proceeds from the sale of the asset (asset group), reasonable contract renewal assumptions, and expected profit margins giving consideration to expected margins. If an asset’s (assets group’s) carrying value is not recoverable through related undiscounted cash flows, the asset (asset group) is considered to be impaired. Impairment is measured by comparing the asset’s (asset group’s) carrying amount to its fair value. When it is determined that useful lives of assets are shorter than originally estimated, and there are sufficient cash flows to support the carrying value of the assets, we accelerate the rate of depreciation in order to fully depreciate the assets over their shorter useful lives.

Effect of Variation of Key Assumptions Used . Estimation of the cash flows and useful lives of tangible assets that are long-lived requires significant management judgment. Events could occur that would materially affect our estimates and assumptions. Unforeseen changes in operations or technology could substantially alter the

assumptions regarding the ability to realize the return of our investment in long-lived tangible assets or the useful lives, particularly with respect to the likelihood of research and development success. Significant changes in these estimates and assumptions could change the amount of future depreciation expense or could create future impairments of these long-lived tangible assets (asset groups).

As of October 2, 2015, we have $4.5 million of tangible long-lived assets recorded on our combined balance sheet representing 10% of our total assets.

Provision for income taxes

For purposes of our combined financial statements, our income tax expense and deferred tax balances have been prepared as if we filed income tax returns on a stand-alone basis separate from Greatbatch. As a stand-alone entity, our deferred taxes and effective tax rate may differ significantly from those in the historical periods. Our combined financial statements have been prepared using the asset and liability approach in accounting for income taxes, which requires the recognition of deferred income taxes for the expected future tax consequences of net operating losses, credits, and temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized.

Assumptions/Approach Used . In recording the provision for income taxes, management must estimate the future tax rates applicable to the reversal of temporary differences based upon the timing of expected reversal. Also, estimates are made as to whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. If recovery is not likely, we must increase our provision for income taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. Alternatively, we may make estimates about the potential usage of deferred tax assets that decrease our valuation allowances.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for uncertain tax positions when we believe that certain tax positions do not meet the more likely than not threshold. As of October 2, 2015, we maintained no reserve related to unrecognized tax benefits. We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or the lapse of statutes of limitations. The provision for income taxes includes the impact of reserve provisions and changes to the reserves that are considered appropriate.

Effect of Variation of Key Assumptions Used . Changes could occur that would materially affect our estimates and assumptions regarding deferred taxes. Changes in current tax laws and tax rates could affect the valuation of deferred tax assets and liabilities, thereby changing the income tax provision. Also, significant declines in taxable income could materially impact the realizable value of deferred tax assets. At January 2, 2015, we had $39.9 million of gross deferred tax assets on our Combined Balance Sheet and a valuation allowance of $38.6 million has been established for certain deferred tax assets as it is more likely than not that they will not be realized. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra have been utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in our combined financial statements will not be available to us upon completion of the spin-off.

Impact of Recently Issued Accounting Standards

In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, the SEC, the Emerging Issues Task Force, or EITF, or other authoritative accounting bodies to determine the potential impact they may have on our combined financial statements. See note 1 “Summary of Significant Accounting Policies” of the notes to our combined financial statements included elsewhere in this information statement for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. However, we are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Inflation

We do not believe that inflation and changes in prices have had a significant impact on our operating results or the geographic areas in which we operate for any of the periods presented in our combined financial statements.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Legal Matters

We are a party to various legal actions arising in the normal course of business. While management does not expect that the ultimate resolution of any of these pending actions will have a material effect on our results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which management currently believes to be immaterial, does not become material in the future.

Quantitative and Qualitative Disclosures About Financial Risk

Greatbatch uses a centralized approach to manage substantially all of its cash and to finance its operations. As a result, debt and cash maintained at Greatbatch are not included in our combined financial statements. Accordingly, our current financial risk exposures are insignificant. We are not exposed to any interest rate risk, as historically separate cash accounts were not significant and we have no outstanding indebtedness. Given that we perform ongoing credit evaluations of our customers, we do not believe that we have any significant concentrations of credit risk. Going forward upon the completion of the spin-off, we will be exposed to limited market risk related to fluctuations in interest rates and market prices. We have not and do not intend to enter into investments for trading or speculative purposes. In addition, we have not used any derivative financial instruments to manage our interest rate risk exposure.

We do not have any material foreign currency exchange rate risk as our revenues and operating expenses are predominately denominated in U.S. dollars.

We will enter into a long-term supply agreement with Greatbatch for the manufacture and supply of Algovita and its components. For most products, parts and components of Algovita, Greatbatch is our single or sole source supplier, and therefore we are dependent on Greatbatch to manufacture Algovita and its components. An inability to obtain a sufficient quantity of Algovita or any of its components could have a material adverse impact on our business, financial condition and results of operations.

As discussed in note 1 “Summary of Significant Accounting Policies” of the notes to our combined financial statements included elsewhere in this information statement, the accompanying combined financial statements have been prepared from separate records maintained by us and may not necessarily be indicative of the conditions that would have existed or our results of operations if we had been operated as an unaffiliated company. Portions of certain expenses represent allocations made from Greatbatch applicable to us as a whole.

These expenses have been charged to us on a pro rata basis based upon estimated hours incurred, headcount, square footage, or other measures. Management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if we were an independent publicly-traded company or of the costs we will incur in the future. At this time, we are unable to determine what our expenses would have been on a standalone basis if we had operated as an unaffiliated entity for each period in which a statement of operations is presented.

BUSINESS

Overview

Nuvectra is a neuromodulation medical device company initially focused on the development and commercialization of our neurostimulation technology platform for treatment of various disorders through stimulation of tissues associated with the nervous system. Our neurostimulation technology platform has the capability to provide treatment to patients in several established neurostimulation markets such as SCS, SNS or DBS, and other emerging neurostimulation markets. Algovita is the first application of our neurostimulation technology platform and is indicated for the treatment of chronic pain of the trunk and limbs. We are in the process of developing additional applications for our neurostimulation technology platform. Algovita brings to market a user friendly, robust and flexible design with a broad set of product capabilities and advanced technology. We believe Algovita is well positioned to compete in and help grow the existing SCS market, currently estimated to be approximately $1.6 billion globally. In addition, we believe our neurostimulation technology platform is well positioned to compete in the SCS, SNS and DBS portions of the worldwide neurostimulation market, which we estimate to be approximately $2.6 billion in size. We are currently working to develop our platform into complete medical device systems for use in the SNS and DBS markets. To date, we have not conducted any clinical trials with respect to the use of our neurostimulation technology platform for applications in the SNS or DBS markets. In addition, we have not yet obtained, or begun the process of obtaining, the necessary regulatory approvals needed for the sale of our neurostimulation technology platform for applications in the SNS or DBS markets.

On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita from the FDA. We expect to launch Algovita commercially in the United States during the first half of 2016. Outside of the United States, Algovita obtained CE mark approval in June 2014 and is indicated for the treatment of chronic intractable pain of the trunk or limbs. Algovita is reimbursable under existing SCS codes in the United States, the European Union and Australia, and has been commercially available to patients in Germany and several other European countries since November 2014.

We believe Algovita has significant competitive advantages over other SCS systems. Algovita uses our differentiated neurostimulation technology platform that is user friendly and offers a broad set of capabilities. We believe Algovita’s robust product design will help minimize early therapy failures. In addition, our neurostimulation technology platform is designed to be upgradeable, thereby enabling next generation treatment offerings. To drive future growth, we will expand our sales and marketing organization to promote awareness and demonstrate the value of Algovita among surgeons, referring physicians and patients.

We will own the patents and patent applications that embody the intellectual property underlying our neurostimulation technology platform.

We believe pursuing use of our neurostimulation technology platform for additional indications presents a compelling opportunity to leverage our existing technology and drive future growth. We expect to invest in product development and clinical studies to improve and further develop our existing technologies, to expand the features offered in Algovita and to enter other established markets, such as SNS and DBS. We also intend to pursue strategic partnerships to fund clinical and development costs, in part or in full, of new products, expand our product distribution channels, improve our access to physicians and opinion leaders, supplement our product commercialization efforts, obtain assistance in performing clinical studies, add specialized clinical or regulatory expertise or acquire or obtain access to complementary intellectual property.

Our NeuroNexus subsidiary is the neuroscience and clinical research portion of our business. NeuroNexus works closely with researchers to develop and refine new tools that aid and advance neuroscience research. NeuroNexus designs, manufactures and sells neural interface systems, to include high quality, high density microelectrode arrays, custom designed probes, electrode instrumentation and accessories. In addition, the NeuroNexus team has years of neuroscience research experience to help facilitate successful research projects and provide insight to minimize known challenges.

Nuvectra was initially organized as a limited liability company in Delaware on November 14, 2008, under the name SDI Group, LLC, which was subsequently changed to QiG Group, LLC. Immediately prior to completion of the spin-off, QIG Group, LLC will convert into Nuvectra Corporation, a Delaware corporation. We have a history of significant net operating losses and we expect to continue to incur net operating losses for the foreseeable future.

Market Overview

We intend to compete generally in the broad neuromodulation market, but are initially focused on the neurostimulation market. The neurostimulation market is comprised of multiple individual markets each focused on the treatment of various indications through delivery of stimulation to a targeted site of the body such as SCS, SNS and DBS. We estimate the SCS, SNS, and DBS market size at $2.6 billion in 2014, growing at an estimated 7.5% compound annual growth rate through 2018. We will compete in the spinal cord stimulation market with Algovita. We intend to compete in the SNS market and DBS market with products based on our neurostimulation technology platform that are currently in development. There are additional and emerging neurostimulation markets that we may compete in with future products.

Spinal Cord Stimulation

SCS therapy has been used to treat chronic pain for over 40 years, and is indicated as a treatment option for chronic pain patients who have not achieved relief through conventional medical management. SCS therapy operates by delivering electrical signals to the spinal cord through thin wires called leads, which are placed near the spinal cord and are energized by a small battery-powered IPG implanted under the skin. Electrodes located at the end of the leads deliver electrical signals to the spinal cord. These electrical signals “override” the pain signals being sent to the brain resulting in relief for the patient.

Approximately 1.5 billion people worldwide and 100 million adults in the United States suffer from chronic pain. Chronic pain can lead to reduced quality of life, increased incidence of depression and sleep deprivation. In the United States, chronic pain results in an estimated incremental cost of health care of approximately $300 billion per year.

According to market research and our internal estimates, in 2014, the size of the worldwide SCS market was estimated at approximately $1.6 billion, with approximately 72% of that market located in the United States. We believe the smaller market opportunity outside the United States is primarily the result of restrictions on procedure reimbursement. The worldwide size of the SCS market is projected to grow to an estimated $2.0 billion by 2018, a 6% compound annual growth rate, supported by additional penetration of the therapy in established markets, a growing base of physician implanters and increasing acceptance of SCS therapy as an effective and viable treatment option in emerging markets.

Based on our estimate of approximately 50,000 SCS systems having been implanted in the United States in 2014, and our estimate that there are approximately one million potential patients in the United States, we believe SCS therapies have penetrated less than 10% of the United States market. We believe the following factors have limited market adoption of SCS therapies in the United States:

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Challenges in sustaining long-term pain therapy . SCS therapy has historically had challenges maintaining long-term effectiveness due to the limitations of existing systems and the nature of chronic pain. Historically, SCS systems have been prone to early therapy failures as a result of device malfunction, lead and extension breakage and an inability to adjust the system to respond to changes in patient needs, such as the need to deliver additional power to cover new pain locations. For example, in the published literature, SCS systems have been found to have an aggregate 22% failure rate resulting from a 13% failure rate for lead migration, where leads move out of position after being implanted, and a 9% failure rate for lead breakage, where leads break after being implanted. SCS systems are also challenged by the dynamic nature of chronic pain, which can increase in intensity or spread to other areas in the body.

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Existing SCS devices are complicated and not user friendly . Most existing SCS systems on the market are a continuation of legacy designs. These systems, whether pre-operatively, intra-operatively or during long-term pain management, are generally difficult to use. Market research confirms that physicians and patients both want devices that are easier to use. Patients not only want effective pain relief and ease of use, but also want discreet and comfortable systems.

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Lack of market awareness of successful SCS therapies . We believe the SCS market is under-penetrated and the patient population is under-served. We believe this results from a lack of awareness by patients and physicians of SCS therapies and their potential benefits. We believe referring physicians are generally unaware of recent advances in efficacy of SCS therapies and, in many cases, are unwilling to refer patients to physicians that specialize in chronic pain and the use of SCS therapies.

Sacral Nerve Stimulation

SNS is a well-established treatment option for refractory symptoms of overactive bladder, including urinary frequency and/or urgency, with or without urge incontinence, and chronic fecal incontinence. Approved by the FDA in 1997 for initial indications of urinary frequency/urgency and urge incontinence, the American Urologic Association, or the AUA, includes the therapy in its treatment guidelines as a “third line” option along to be considered after failure of first (behavioral) and second (drug) line options. According to the International Continence Society, there are over 400 million people worldwide who suffer from symptoms of urinary and fecal incontinence. Unlike other third line therapies, SNS is also approved by the FDA for the treatment of idiopathic non-obstructive urinary retention and fecal incontinence.

SNS involves sending mild electrical pulses to the sacral nerve, typically sacral spinal nerve S3, through a lead connected to an IPG, similar to the therapy provided by a pacemaker. The impulses modulate the reflexes between the pelvic floor, urethral sphincter, bladder and bowel. SNS helps the brain and nerves to communicate so that the bladder and related muscles can function properly. An advantage of SNS as compared to other potential therapies is that it is tested and evaluated by the patient and physician prior to long-term therapeutic use. This evaluation period gives patients and physicians an opportunity to determine whether adequate symptom relief is achievable, often in as few as three to seven days. Implantation of the SNS device is a minimally invasive procedure performed on an outpatient basis under sedation or general anesthesia.

According to market research and our internal estimates, the worldwide SNS market in 2014 was estimated to be $520 million and is expected to grow to $750 million by 2018, a 9.5% compound annual growth rate. SNS is the second most commonly performed neurostimulation therapy behind SCS with over 175,000 SNS devices implanted for overactive bladder since 1994. Currently, there is only one FDA-approved implantable SNS device available on the market in the United States.

Deep Brain Stimulation

DBS uses mild electrical pulses from leads connected to an IPG to stimulate specific targets in the brain. These pulses either inhibit or stimulate nerve signals, thereby offering relief for certain neurological conditions, which include movement and psychiatric disorders. Currently, the FDA has approved DBS for the treatment of Parkinson’s disease and essential tremor. An estimated one million people in the United States and between seven to ten million people worldwide suffer from Parkinson’s disease and ten million people in the United States suffer from essential tremor. The FDA has also approved DBS for treatment of dystonia and obsessive-compulsive disorders under a humanitarian device exemption. DBS is also currently being investigated as a therapy for other neurological disorders, such as epilepsy, treatment-resistant major depression and Alzheimer’s disease.

According to market research and our internal estimates, the worldwide DBS market in 2014 was estimated to be $540 million and is expected to grow to $790 million by 2018, a 10% compound annual growth rate. DBS is the third most commonly performed neurostimulation therapy behind SCS and SNS with over 125,000 DBS devices implanted for Parkinson’s disease, essential tremor and dystonia since 1995. We expect that the DBS worldwide market will likely continue to experience double-digit growth due to an increasingly aging population and an increase in neurodegenerative disorders.

We believe our multi-current neurostimulation technology platform may provide distinct advantages in providing DBS therapies where specific electrical field control and nerve selectivity can be very important. Our neurostimulation technology platform, in combination with new concepts in DBS lead design, may provide new benefits in DBS therapy delivery.

Additional and Emerging Indications

There are other established and emerging neurostimulation indications that may be a source of potential opportunity for Nuvectra and our neurostimulation technology platform. We believe we may be able to leverage our neurostimulation technology platform to capitalize on opportunities in indications such as Vagal Nerve Stimulation, or VNS, and Peripheral Nerve Stimulation, or PNS. VNS is approved for the treatment of epilepsy, depression and eating disorders. Research is ongoing for the use of VNS in the treatment of heart failure and rheumatoid arthritis. PNS is approved outside the United States for treatment of chronic pain. PNS is also an emerging approach to treat chronic headaches and post-amputation “phantom limb” pain.

Our Competitive Strengths

We believe a number of competitive advantages distinguish us from our competitors:

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Differentiated neurostimulation technology platform. Our neurostimulation technology platform incorporates technological advances that we believe will provide us with competitive advantages in the marketplace and provide meaningful benefits to both physicians and patients as compared to existing alternatives. The IPG component of our platform is capable of delivering a broad spectrum of outputs and pulse delivery ranges through its 26 independent current sources. This allows precise control over the stimulation field and improves targeting of the therapy. The IPG features a powerful chipset that enables new waveforms, stimulation outputs and embedded features that can be activated in the future. The IPG uses the Medical Implant Communication Service, or MICS, to send and receive data from external sources through a secure communication protocol system. Our diverse lead portfolio provides additional capabilities for tailoring therapy to a wider spectrum of patients.

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Broad range of Algovita capabilities . Algovita is based on our differentiated neurostimulation technology platform and features a broad range of technical capabilities, including 26 independent current sources, algorithmic programming, broad pulse delivery ranges and a powerful chip set for targeted SCS therapy delivery. We believe these capabilities provide Algovita with greater flexibility in tailoring the therapy to a wider spectrum of SCS patients than the flexibility provided by the current generation of SCS systems that are presently available on the market.

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Algovita’s robust design helps minimize therapy failures and enables greater control and precision in providing therapy . We believe Algovita’s robust design, including its leads and advanced programming features, will help to minimize early SCS therapy failures and enable greater precision and control in targeting pain sites than the current generation of SCS systems that are presently available on the market. In addition, our advanced leads feature coil-in-coil technology, allowing for elasticity and greater flexibility than the leads of SCS systems that are presently available, which we believe results in our advanced leads having a reduced likelihood of migration, breakage or kinking. Our 12 electrode lead provides the longest span of coverage available on the market and was designed to address loss of pain relief if the stimulation target changes. Additionally, our algorithmic driven clinician programming system allows for rapid localization of pain targets and use of many different stimulation programs. The stimulation field can also be further refined using direct patient inputs gathered through our patient feedback tool.

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Algovita’s upgradeable technology enables next generation offerings . Algovita’s proprietary chip set and hardware is capable of being configured for use in next generation treatment offerings. This includes the ability to deliver significantly higher frequencies than most other SCS systems presently available on the market, as well as pulse train stimulation, including burst type stimulation, and

customized waveforms. We believe these additional capabilities provide a strong base platform and system for potential new SCS and other treatment options that can be provided via a software or firmware upgrade.

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Experienced management and engineering team with a track record of successful performance . Our management team has a strong track record of successful performance and execution in the neuromodulation field. Collectively, our management team has over 100 years of experience in the neuromodulation and chronic pain industry. In addition, we have an experienced engineering team with significant expertise in designing and developing medical devices for the neurostimulation market. We believe physicians and customers value working with a team like ours comprised of highly skilled professionals who have in-depth knowledge of the industry, strong engineering and development capabilities and an understanding of the needs of both patients and physicians.

Our Growth Strategies

To pursue our objectives and capitalize on our competitive strengths, we intend to implement the following growth strategies:

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Expand our sales and marketing organization to drive adoption of Algovita . We will continue to build our worldwide sales organization consisting of direct sales representatives and independent sales agents in the United States and a network of distributors and independent sales agents outside of the United States. Our direct sales representatives and independent sales agents in the United States will target physician specialists involved with SCS treatment decisions, including interventional pain specialists, neurosurgeons and orthopedic spine surgeons, located at strategic hospitals and outpatient surgery centers across the United States. Our marketing team will offer education programs designed to create awareness and demand among other stakeholders involved in SCS treatment decisions, including third-party payors, hospital administrators and patients and their families. Internationally, we will continue to expand our network of distributors and independent sales agents in target markets that we believe support SCS therapy and have strong reimbursement coverage.

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Our Neurostimulation Technology Platform

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Unique safety features. Our neurostimulation technology platform was designed with unique safety features. The IPG has a deep discharge recovery battery, bi-directional recharge and impedance checks to improve patient safety. The patient remote control indicates the battery status of the IPG, is paired to a single IPG, has quick “stim-off” functionality that permits immediate cessation of treatment and incorporates a patient feedback tool that was designed for ease of use to encourage greater patient input thus improving safety.

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Future offering capabilities. Our neurostimulation technology platform incorporates a proprietary chipset and hardware that is capable of being configured for use in next generation treatment offerings for Algovita and in other future neurostimulation products and systems. It is capable of delivering significantly higher frequencies than most other SCS systems presently available on the market, as well as pulse train stimulation and customized waveforms that may advance how stimulation is delivered.

The Algovita System

Algovita delivers SCS therapy for the treatment of chronic pain. Algovita is based on our neurostimulation technology platform and contains what we believe are the most innovative capabilities currently available on the market. Algovita improves on existing SCS designs and utilizes new technologies to improve user experience, system robustness and overall treatment outcomes. Algovita was designed to permit physicians to implant the leads and the IPG efficiently and patients to operate the device easily. To this end, Algovita has straightforward controls and an interactive display that includes a stimulation diagram for quick visual confirmation of stimulation coverage.

Algovita has obtained a CE mark, and is currently available for sale in Germany and several other European countries. On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita from the FDA. We expect to launch Algovita commercially in the United States during the first half of 2016.

Algovita consists of the following components:

LOGO

Implantable Pulse Generator: The IPG contains a rechargeable battery and electronics that deliver electrical pulses to the leads. The Algovita IPG has 26 output channels available in two different header configurations and can be connected to one, two or three leads. It is a programmable device and can deliver customized programs for each patient. The IPG is rechargeable and is surgically implanted under the skin, usually above the buttocks or in the abdomen.

Leads: The leads are thin, insulated wires that conduct electrical pulses to the spinal cord from the IPG. Algovita has both percutaneous and paddle leads that are inserted into the epidural space with a minimally invasive surgical procedure.

Patient Programmer: The patient programmer, called the Algovita Pocket Programmer, is a rechargeable, key fob-sized device that works like a remote control and allows patients to adjust their stimulation, change programs and monitor their stimulator battery charge levels.

Clinician Programmer: The clinician programmer contains proprietary software that allows customized programming of the IPG. It can non-invasively transmit a signal to the IPG, sending programming information and downloading diagnostic information. The Algovita programmer offers various 3D attributes, including virtual environment, pain mapping, stimulation mapping and stimulation overlap scores, which facilitate ease of use for clinicians.

Charger: The charger is a mobile device used to charge the IPG externally and to monitor the IPG battery charge levels. The patient can remain active while charging the IPG. Charging requirements depend on the patient’s power requirements.

Trial Stimulator: The trial stimulator contains electronics that deliver electrical pulses to the lead. It is a device that is worn externally during the evaluation period, which typically lasts several days.

Surgical Accessories: Algovita also contains accessories for implantation. These surgical accessories include components such as epidural needles, stylets, and lead anchors to assist the physician in the surgical procedure.

Sales and Marketing

United States

We currently have a limited sales organization in the United States. In anticipation of the commercial launch of Algovita, we expect to significantly expand our sales force in the United States. We plan to use direct sales representatives and independent sales agents in the United States. Our sales organization will target physician specialists involved in SCS treatment decisions, including neurosurgeons, interventional pain specialists and orthopedic spine surgeons, who are located at strategic hospitals and outpatient surgery centers across the United States. In addition, our marketing team will seek to increase awareness and grow demand for Algovita and SCS therapy in general by devoting significant resources to physician and staff training on the use and benefits of Algovita and educating and providing ongoing support to physicians, patients, third-party payors and hospital administrators on the use of Algovita.

International

In Europe, we currently have a limited number of distributors through which we sell Algovita. As we continue to build our international sales organization, we expect that the sale organization will consist of a network of distributors and independent sales agent. We began our sales in Germany during 2014 and, to date, have expanded our sales efforts into Luxembourg, Switzerland and Austria. We expect to expand our Algovita sales efforts into other European countries with health care systems that offer favorable reimbursement rates for SCS therapies, particularly rechargeable SCS systems, and where we believe we can successfully partner with independent sales agents or distributors that meet our qualifications.

We expect sales and marketing of other neurostimulation medical device offerings that leverage our neurostimulation technology platform will be conducted either through our sales organization or through partnerships with third parties in specific neurostimulation fields of use.

Third-Party Coverage and Reimbursement

For Algovita, the primary purchasers are expected to be hospitals and outpatient surgery centers in the United States. These purchasers typically bill various third-party payors, such as Medicare, Medicaid and private health insurance plans for the healthcare services associated with the SCS procedures. Government agencies and private payors then determine whether to provide coverage for specific procedures. We believe that SCS procedures using Algovita are adequately described by existing governmental and insurance reimbursement codes for the implantation of spinal cord stimulators and related leads performed in various sites of care. Medicare reimbursement rates for the same or similar procedures vary due to geographic location, nature of facility in which the procedure is performed, such as hospital outpatient department or outpatient surgery centers, and other factors. Although private payors’ coverage policies and reimbursement rates vary, Medicare is increasingly used as a model for how private payors and other governmental payors develop their coverage and reimbursement policies for healthcare items and services, including SCS procedures.

Outside the United States, reimbursement levels vary significantly by country, and by region within some countries. Reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans, and combinations of both. In Germany, where Algovita has been commercially available to patients since November 2014, reimbursement for SCS by Germany’s established G-DRG system, which is a government-mandated pricing system pursuant to which German hospitals are paid for services provided to patents, is substantial enough that it makes economic sense to operate within Germany. Some countries will require us to gather additional clinical data before granting broader coverage and reimbursement for Algovita. We intend to complete the requisite clinical studies and obtain coverage and reimbursement approval in those other countries where it also makes economic sense to do so.

SNS and DBS have established reimbursement pathways similar to those for SCS procedures. We will review and assess the reimbursement environment as part of our process of developing additional neurostimulation indications.

Research and Development

Our research and development team has significant experience in the design and development of medical devices, particularly in neurostimulation. The team includes specialists in software engineering, mechanical engineering, electrical engineering, graphical user interface design, clinical and regulatory expertise, as well as our NeuroNexus group. NeuroNexus specializes in neural research, micro-neural interfaces and thin-film technology. NeuroNexus offers high-value neural interface technology and devices across a wide range of functions including neuromonitoring and recording, electrical and optical stimulation, and targeted drug delivery applications. By partnering with entrepreneurs and healthcare providers, we will evaluate concepts for potential new therapies through early stage feasibility work that we expect will be completed by leveraging our NeuroNexus group. We expect that these advances will be translated into features and products that drive future growth for Algovita as well as other future indications that utilize the neurostimulation technology platform.

The primary objective of our research and development program is to enhance Algovita for use in SCS and our neurostimulation technology platform for uses in indications outside of SCS. We expect that enhancements to Algovita will include next generation IPGs and leads, expanded stimulation delivery methods and MRI compatibility.

As part of our research and development efforts, we intend to pursue strategic partnerships with third parties to, among other things, fund clinical and development costs, in part or in full, for new product offerings.

Competition

The neuromodulation medical device industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products and other market activities of industry participants. We will compete initially in the SCS market for chronic pain. In the SCS market, the main competitors are Medtronic, Boston Scientific, St. Jude Medical and Nevro Corp. In addition, SCS therapy also competes against other potential therapies, including spinal surgeries, in particular spinal reoperation. All of the major medical device competitors in the SCS market have obtained United States and European Union regulatory approvals for their SCS systems and are expected to launch new products or release additional clinical evidence supporting their product therapies within the next few years. These major competitors are publicly-traded companies or divisions of publicly-traded companies, all of whom have significantly greater market share and resources than we have. In addition, these competitors also have more established operations, longer commercial histories and more extensive relationships with physicians than we have. Some of these competitors also have wider product offerings within neuromodulation and other medical device product categories. This may provide these competitors with greater negotiating power with customers and suppliers and with more opportunities to interact with the stakeholders involved in purchasing decisions.

We believe the primary competitive factors in the neurostimulation market are:

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Technological innovation, product enhancements and speed of innovation

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Sales force experience and access

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Ease of use

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Product support and service

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Effective marketing and education

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Pricing and reimbursement rates

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Product reliability, safety and durability

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Clinical research leadership

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Company brand recognition

Intellectual Property

Protection of our intellectual property is important to our business. We rely on a combination of patent, trademark, trade secret, copyright and other intellectual property laws, non-disclosure agreements and other measures to protect our proprietary rights. We will own U.S. patents, pending U.S. patent applications, foreign patents and foreign pending patent applications. Within our patent portfolio, we will own the patents and patent applications that embody the intellectual property underlying our neurostimulation technology platform.

The term of each of our individual patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. The majority of our patents will expire between and .

We also license U.S. patents, pending U.S. patents, foreign patents and foreign pending patent applications covering the intra-spinal stimulation and SNS and DBS fields of use, which we believe are of primary use in these fields of use. However, this field of use restriction may have the effect of limiting our ability to develop new treatment indications for our neurostimulation technology platform to the extent that we incorporate this licensed intellectual property, and would require us to negotiate changes to the terms of these licenses, which may be costly, in order to pursue other indications. These licenses terminate upon our uncured material breach, including, as applicable, a failure to pay royalties due thereunder.

We cannot assure you that patents will be issued from any of our pending applications or the patent applications that we license, or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection for our technologies. Notwithstanding the scope of the patent protection available to us, a competitor could develop treatment methods or devices that are not covered by patents we own or license. Furthermore, numerous U.S. and foreign issued patents and patent applications owned by third parties exist in the fields in which we are developing products. Because patent applications can take many years to issue, there may be applications unknown to us, which applications may later result in issued patents that our existing or future products or proprietary technologies may be alleged to infringe.

In connection with the spin-off, we will enter into two license agreements with Greatbatch pursuant to which we will license to Greatbatch rights in, subject to specified restrictions, certain intellectual property underlying our neurostimulation technology platform. Under the terms of the unrestricted license agreement, we will grant Greatbatch a perpetual, non-exclusive, worldwide license to use, make, have made, offer to sell, sell, distribute and import certain intellectual property (which includes patents, patent applications and other intellectual property rights) underlying our neurostimulation technology platform for applications within the neurostimulation fields of use. Under the terms of the restricted license agreement, we will grant Greatbatch a perpetual, non-exclusive, worldwide license to use, make, have made, offer to sell, sell, distribute and import certain other intellectual property (which includes patents, patent applications and other intellectual property rights) underlying our neurostimulation technology platform for applications outside of the neurostimulation fields of use. Each of these license agreements may be terminated by either party in the event of a material breach of such agreement by the other party (subject to customary cure periods) or the other party’s bankruptcy or insolvency. In addition, NeuroNexus will also enter into a license agreement with Greatbatch under which NeuroNexus will grant to Greatbatch a perpetual, non-exclusive, worldwide, royalty-free license to use, make, have made, offer to sell, sell, distribute and import NeuroNexus’ patents, pending patents and other intellectual property outside of the neurostimulation fields of use. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – License Agreements” for additional information regarding our and NeuroNexus’ license agreements with Greatbatch.

We will own U.S. trademark registrations, pending U.S. trademark registrations, foreign trademark registrations and pending foreign trademark registrations.

In connection with our strategy to pursue partnerships to fund clinical and development costs of new products, we will likely enter into sublicenses, development agreements and related agreements that provide for the sharing of our intellectual property rights with third parties. These agreements may result in our having co-ownership with our partner of the intellectual property rights arising from the partnership.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry. In the future, we may need to engage in litigation to enforce patents issued or licensed to us, to protect our trade secrets or know-how, to defend against claims of infringement of the rights of others or to determine the scope and validity of the proprietary rights of others. Litigation could be costly and could divert our attention from other functions and responsibilities. Adverse determinations in litigation could subject us to significant liabilities to third parties, could require us to seek licenses from third parties and could potentially prevent us from selling Algovita or other medical devices using our neurostimulation technology platform, which would severely harm our business.

We also rely upon trade secrets, know-how and continuing technological innovation, and may rely upon other licensing opportunities in the future, to develop and maintain our competitive position. We seek to protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information, under which they are bound to assign to us inventions made during the term of their employment or service, as applicable.

Manufacturing and Supply

In connection with the spin-off, we will enter into a long-term supply agreement with Greatbatch for the manufacture and supply of Algovita and most of its products, parts and components. For most products, parts and components of Algovita, Greatbatch is our single or sole source supplier. In addition, we will also enter into a product component framework agreement providing Greatbatch with the exclusive right to supply us with products, parts and components necessary for production of future SNS or DBS neurostimulation devices that we may seek to commercialize. See “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Supply Agreement” for a detailed description of Algostim’s long-term supply agreement with Greatbatch and “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us – Product Component Framework Agreement” for a description of our product component framework agreement. In the event that our relationship with Greatbatch terminates in the future, we may have difficulty in maintaining sufficient production of Algovita or its products, parts or components at the standards we require. However, we believe our existing supply and manufacturing relationship with Greatbatch will be adequate to meet our current and anticipated manufacturing needs. We do not currently plan to manufacture or assemble Algovita or other neurostimulation medical devices ourselves.

We believe the manufacturing operations of our suppliers, including Greatbatch, are in compliance with FDA regulations. Manufacturing facilities that produce medical devices or their component parts intended for distribution worldwide are subject to regulation and periodic unannounced inspection by the FDA and other domestic and international regulatory agencies. In the United States, companies are required to manufacture medical device products that are for sale in compliance with the FDA’s Quality System Regulation, which covers the methods used in, and the facilities used for, the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of Algovita or other medical devices. In international markets, we are required to obtain and maintain various quality assurance and quality management certifications. Greatbatch has obtained Quality Management System ISO13485 certification for manufacturing of SCS systems and accessories. We have obtained the following certifications: Quality Management System ISO13485 and Full Quality Assurance Certification for the design and development of SCS systems and accessories and a Design

Examination certificate for IPGs and accessories. We are required to demonstrate continuing compliance with applicable regulatory requirements to maintain these certifications and will continue to be periodically inspected by international regulatory authorities for certification purposes.

Regulation of our Business

Our products, including Algovita, and our operations generally, are subject to extensive and rigorous regulation by the FDA pursuant to its authority under the Federal Food, Drug, and Cosmetic Act, or Food and Drug Act, other federal and state authorities in the United States and comparable foreign regulatory authorities. To ensure that medical products distributed domestically and internationally are safe and effective for their intended use, the FDA and comparable foreign regulatory authorities have imposed regulations that govern, among other things, the following activities:

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product design, development and testing;

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product manufacturing, labeling and storage;

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premarket clearance, approval or comparable foreign actions;

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pre-clinical testing in animals and in the laboratory;

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clinical investigations in humans;

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advertising and promotion;

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record keeping and document retention procedures;

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product marketing, sales, distribution and recalls; and

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post-market surveillance reporting, including reporting of death, serious injuries, device malfunctions or other adverse events.

FDA Clearance and Approval of Medical Devices

The FDA regulates medical devices in the United States and the export of medical devices manufactured in the United States to help ensure that these medical devices are safe and effective for their intended uses. Any violation of these laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

Under the Food and Drug Act, medical devices are classified as Class I, Class II or Class III depending on the degree of risk associated the device and the extent of control needed to ensure its safety and effectiveness.

Devices deemed to pose the lowest risk are placed in Class I and are subject to only general controls, such as establishment registration and device listing, labeling, medical device reporting, and prohibitions against adulteration and misbranding.

Moderate risk devices are placed into Class II, and generally require 510(k) pathway clearance before they may be commercially marketed in the United States. When 510(k) pathway clearance is required, the manufacturer must submit a premarket notification submission to the FDA demonstrating that the device is “substantially equivalent” to a legally marketed device, which may also require submission of clinical data. In the future, we may develop new products that are classified as Class II devices and require 510(k) pathway clearance.

Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not “substantially equivalent” to a legally marked device are classified in Class III. The safety and effectiveness of Class III devices cannot be assured solely by general controls. Submission and FDA approval of a premarket approval application is required before marketing of a Class III device can begin. The premarket approval application process is considerably more demanding than the 510(k) premarket notification process.

Premarket approval applications must be supported by, among other things, valid scientific evidence, which typically requires extensive data, including technical, preclinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. A premarket approval application must also include, among other things, a complete description of the device and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and proposed labeling. In addition, the FDA will conduct a pre-approval inspection of the applicant and/or its third-party manufacturers’ facility or facilities to ensure compliance with the FDA’s Quality System Regulations, which requires medical device companies to follow design, testing, control, documentation and other quality assurance procedures.

If the FDA evaluations of both the premarket approval application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the premarket approval application.

Algovita is a Class III device. On November 30, 2015, Greatbatch announced receipt of premarket approval for Algovita from the FDA. We expect to launch Algovita commercially in the United States during the first half of 2016.

Continuing FDA Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. These include:

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compliance with the FDA’s Quality System Regulations, which requires medical device companies to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process;

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labeling regulations;

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the FDA’s general prohibition against promoting products for unapproved or “off-label” uses;

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approval of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in the intended use of Algovita or any other medical device using our neurostimulation technology platform;

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medical device reporting regulations, which require that medical device companies comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

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post-approval restrictions or conditions, including post-approval study commitments;

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post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;

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the FDA’s recall authority, whereby it can ask, or under certain conditions order, medical device companies to recall from the market a product that is in violation of governing laws and regulations;

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regulations pertaining to voluntary recalls; and

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notices of corrections or removals.

Medical device companies are also required to register and list their devices with the FDA, based on which the FDA will conduct inspections to ensure continued compliance with applicable regulatory requirements.

The FDA has broad post-market and regulatory and enforcement powers. Failure to comply with the applicable U.S. medical device regulatory requirements could result in:

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warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

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customer notifications or repair, replacement, refund, recall, administrative detention or seizure of Algovita systems or any other medical device using our neurostimulation technology platform;

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operating restrictions or partial suspension or total shutdown of production;

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refusing or delaying requests for 510(k) clearance or approval of premarket approval applications for new or modified products;

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withdrawing 510(k) pathway clearances or premarket approval applications that have already been granted;

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refusal to grant export approval for products; or

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criminal prosecution.

Other Healthcare Regulations

We are also subject to healthcare fraud and abuse regulation in the jurisdictions in which we will conduct business. These laws include, without limitation, applicable anti-kickback, false claims, healthcare reform, patient privacy and security laws, and physician payment transparency regulations.

Anti-Kickback Statute

The U.S. federal Anti-Kickback Statute is a criminal statute that prohibits persons from knowingly and willfully soliciting, offering, paying, or receiving “remuneration”, directly or indirectly to induce or reward the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any health care items or services for which payment may be made under federal healthcare programs. The Anti-Kickback Statute prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. The Anti-Kickback Statute is broadly drafted and establishes penalties for parties on both sides of the prohibited transaction. Conviction for a single violation under the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five years and mandatory exclusion from participation in federal health care programs. The government may also assess civil money penalties with considerable potential damages. There are a number of statutory exceptions as well as regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, however, the exceptions and safe harbors are drawn narrowly, and arrangements that do not fit squarely within an exception or safe harbor may be subject to scrutiny.

Federal False Claims Act

The U.S. federal False Claims Act imposes civil liability on persons or entities who knowingly present or cause to be presented a false or fraudulent claim or knowingly use false statements to obtain payment from or approval by the federal government. Under the False Claims Act, a claim may be submitted directly to the federal government or to a recipient of federal funds, such as a federal contractor, where the funds are to be spent on the federal government’s behalf. In addition, private individuals have the ability to bring actions under the civil False Claims Act in the name of the government, known as qui tam actions, alleging false and fraudulent claims presented to or paid by the government or recipient of federal funds (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement. Medical device companies can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting an “off-label” use of a product. Penalties for a federal civil False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. In addition, penalties imposed under related statutes for submitting false or fraudulent claims include the potential for exclusion from participation in federal healthcare programs and criminal liability.

Many states also have statutes or regulations similar to the U.S. federal Anti-Kickback and False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Healthcare Reform

In March 2010, the ACA was signed into law which has the potential to substantially change healthcare financing and delivery by both governmental and private insurers, and significantly impact the medical device industry. The ACA impacted existing government healthcare programs and resulted in the development of new programs. The ACA’s provisions include a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with certain limited exceptions. On December 18, 2015, this excise tax was suspended starting on January 1, 2016 through December 31, 2017. Absent future legislative action, this excise tax will be automatically reinstated beginning on January 1, 2018.

The full impact of the ACA, as well as other laws and reform measures that may be proposed and adopted in the future, remains uncertain, but may continue the downward pressure on medical device pricing, especially under the Medicare program, and may also increase our regulatory burden and operating costs.

U.S. Privacy and Security Laws

We may be subject to data privacy and security laws and regulations of both the U.S. federal government and the individual states in which we operate. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective implementing regulations impose obligations on entities covered thereby relating to the privacy, security and transmission of protected health information. These covered entities include health plans, health care clearing houses, and certain health care providers. The HITECH amendment increased the civil and criminal penalties that may be imposed against those covered entities, and gave state attorneys general new authority to file civil actions for damages or injunctions to enforce the federal HIPAA laws. The amount of a civil monetary penalty increases with level of culpability, and can range from $100 to $50,000 per violation, with a maximum penalty of $1,500,000.

In addition, comparable state laws also govern the privacy and security of health information in certain circumstances. Many of these individual state laws differ from state to state in significant ways and may not have the same effect. In addition, certain of these state laws are more stringent than HIPAA and in such circumstances the more stringent state law must be followed.

These laws and the associated enforcement processes change often, and we cannot predict what effect, if any, these changes may have on our business. In addition, there has been a trend in recent years, both in the United States and internationally, toward more stringent regulation and enforcement of requirements applicable to medical device manufacturers and requirements regarding protection and confidentiality of personal data.

Physician Payment Transparency Laws

In recent years, federal and state regulation of payments made to physicians and other healthcare providers and entities has increased. The ACA imposes new reporting requirements on some manufacturers, including some medical device manufacturers, for payments and other transfers of value provided to physicians or teaching hospitals. In addition, the ACA also requires reporting by physicians and their immediate family members of ownership or other investment interests in some medical device manufacturers.

Failure to submit the required information timely, accurately, or completely may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an additional aggregate of $1 million per year for “knowing failure to report.”

Some states also require medical device companies to comply with the industry’s voluntary compliance guidelines and/or the compliance guidelines promulgated by the U.S. federal government, which impose restrictions on device manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to healthcare providers and entities.

Regulations in the EU

Our international sales are subject to regulatory requirements in the countries in which Algovita is sold. The regulatory review process varies from country to country and may in some cases require the submission of clinical data.

In the European Economic Area, or EEA (which is comprised of the 28 Member States of the EU plus Norway, Liechtenstein and Iceland), we must comply with the requirements of the EU Active Implantable Medical Devices Directive, or AIMDD, and appropriately affix the CE mark on Algovita to attest to such compliance. In achieving such compliance, Algovita had to comply with the “Essential Requirements” described in Annex I of the AIMDD. In addition, to affix the CE mark on Algovita, we had to undergo a conformity assessment procedure, the requirements of which vary based upon the type of medical device and its classification. Except for low risk medical devices, a conformity assessment procedure also requires a third party assessment by a Notified Body, which is an organization designated by a competent authority of an EEA country to conduct conformity assessments. The Notified Body audits and examines the technical file and the quality system for the manufacture, design and final inspection of the medical device. The Notified Body issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure and confirmation of conformity with the Essential Requirements. Receipt of this CE Certificate entitles the medical device company to affix the CE mark to its medical device after preparing and signing an EC Declaration of Conformity. The assessment of the conformity for Algovita has been certified by our Notified Body, TÜV SÜD America.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the Essential Requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a medical device company must demonstrate that its device achieves its intended performance during normal conditions of use and that the known and foreseeable risks, and that any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device (e.g., product labeling and instructions for use) are supported by suitable evidence. With respect to active implantable medical devices or Class III devices, the medical device company must conduct clinical studies to obtain the required clinical data, unless reliance on existing clinical data from equivalent devices can be justified.

Algovita is subject to continued surveillance by its Notified Body, and we are required to report any serious adverse incidents related to Algovita to the appropriate authorities. We must also comply with additional requirements of individual countries in which Algovita is marketed and the requirements of certain EU Directives.

In September 2012, the European Commission published proposals for the revision of the EU regulatory framework for medical devices, which would replace the Medical Devices Directive and the AIMDD with a new regulation (the Medical Devices Regulation). If adopted, the Medical Devices Regulation is expected to enter into force in late 2015 or 2016 and become applicable three years thereafter. In its current form it would, among other things, also impose additional reporting requirements on manufacturers of high risk medical devices, impose an obligation on medical device companies to appoint a “qualified person” responsible for regulatory compliance, and provide for stricter clinical evidence requirements.

EU Data Protection Directive

We are subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related and other personal information. EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. For example, the EU Data Protection Directive imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. Failing to comply with these laws could lead to government enforcement actions and significant penalties against us.

Anti-Bribery Laws

The federal Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions, including the UK Bribery Act of 2010, generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC. Violations of United States or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other internal or government investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence.

Facilities

Our corporate headquarters is located in Plano, Texas, and we have research and development facilities located in Blaine, Minnesota, Denver, Colorado, and Ann Arbor, Michigan. These facilities, with the exception of our Blaine facility which is owned by Nuvectra, are leased and consist of approximately 60,670 square feet of office and laboratory space. The lease for our Plano, Texas headquarters, which is with Greatbatch, expires in . The leases for our Denver, Colorado and Ann Arbor, Michigan facilities expire in April 2016 and September 2020, respectively. We are currently evaluating the adequacy and suitability of these facilities in connection with our becoming an independent publicly-traded company.

Employees

As of October 2, 2015, we had 76 employees. We believe the success of our business will depend, in part, on our ability to attract and retain qualified personnel. We are committed to developing our employees and providing them with opportunities to contribute to our growth and success. Our employees are not subject to a collective bargaining agreement, and we believe that we have good relations with our employees.

MANAGEMENT

Our Executive Officers

The following table and biographies sets forth information, as of , 2016, concerning those persons that we expect will be our executive officers following the spin-off.

Scott F. Drees will serve as President, Chief Executive Officer and as a director of Nuvectra. Prior to joining Nuvectra on a full time basis, Mr. Drees served as a consultant to Nuvectra and our subsidiaries Algostim and PelviStim since August 2009. In addition, from January 2008 to July 2015, Mr. Drees also served as President and Chief Executive Officer of Neuromodulation Ventures, LLC, which focused on incubating new neuromodulation companies. Previously in his thirty-four year career in the medical device industry, Mr. Drees served in various executive positions, including, founding division President and, later, Executive Vice President, Worldwide Sales and Marketing, at Advanced Neuromodulation Systems, Inc., or ANS, a neuromodulation company that was acquired by St. Jude Medical, Inc., or St. Jude Medical, in 2005, and also various other positions at St. Jude Medical, Boston Scientific Corporation and Johnson & Johnson’s Codman Neuro division. Mr. Drees currently serves as a director of Neuros Medical, Inc., a privately-held neuromodulation company and was a founding board member of the National Pain Foundation. Mr. Drees earned a B.S. from St. Joseph’s University in Philadelphia. Mr. Drees has been selected to serve as a director on our Board of Directors due to his in-depth knowledge of our business, extensive experience in the neuromodulation industry and role as our President and Chief Executive Officer.

Walter Z. Berger will serve as Chief Financial Officer of Nuvectra. Prior to joining Nuvectra, Mr. Berger served as Chief Financial Officer of AppDynamics Inc., a venture-backed next generation application intelligence company from October 2013 until March 2015. Prior to that, from 2012 until 2013, Mr. Berger was the Chief Financial Officer of private equity owned SoftLayer, a cloud computing company, which was acquired by IBM. From 2008 until 2012, he served as Chief Financial Officer at Leap Wireless International, Inc. Mr. Berger has also served as Executive Vice President and Chief Financial Officer for each of CBS Radio, Inc. and for Emmis Communications Corporation. From 1985 to 1999, Mr. Berger held a number of financial and operating management roles in the manufacturing, services and energy fields. Mr. Berger began his career at Arthur Anderson in 1977. Mr. Berger is a Certified Public Accountant and holds a B.A. in business administration from the University of Massachusetts, Amherst.

Our Directors

Following the spin-off and Nuvectra’s conversion to a Delaware corporation, the business and affairs of Nuvectra will be managed under the direction of its Board of Directors, which is expected to consist of directors.

Following the spin-off, our Board of Directors will be divided into three classes. The directors designated as Class I directors will have terms expiring at the first annual meeting of stockholders following the spin-off, which we expect to hold in 2016. The directors designated as Class II directors will have terms expiring at the second annual meeting of stockholders, which we expect to hold in 2017, and the directors designated as Class III directors will have terms expiring at the third annual meeting of stockholders, which we expect to hold in 2018. Nuvectra expects that Class I will be comprised of directors; Class II will be comprised of directors; and Class III will be comprised of directors. Commencing with the first annual meeting of stockholders following the spin-off, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. For more information, see “Description of Nuvectra Capital Stock – Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and By-Laws and of Delaware Law.”

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The following table and biographies sets forth information, as of , 2016, concerning those persons that we expect will be our directors following the spin-off.

Dr. Joseph A. Miller, Jr. will serve as Chairman of the Board of Nuvectra. He currently serves as a director for Greatbatch and will step down from Greatbatch’s board of directors shortly before the completion of the spin-off. Dr. Miller also currently serves as a director of Lightwave Logic, Inc., or Lightwave Logic, and previously served as a director of Corning Incorporated. Dr. Miller retired in April 2012 as Executive Vice President and Chief Technology Officer for Corning Incorporated, a position in which he had served since 2001. Before joining Corning in 2001, he served as Senior Vice President of E.I. DuPont de Nemours from 1999 to 2001 and held various executive positions with that company prior to that time. Dr. Miller has significant research and development knowledge and experience gained through his positions at Corning and E.I. DuPont. We believe that Dr. Miller is well qualified to serve on Nuvectra’s Board of Directors due to his extensive knowledge and experience gained as a corporate executive and director of Greatbatch and other public companies, which gives him valuable insight into a number of issues important to us.

Anthony P. Bihl III will serve as a director of Nuvectra. He currently serves as a director for Greatbatch and will step down from Greatbatch’s board of directors shortly before the completion of the spin-off. Mr. Bihl has been Chief Executive Officer and a member of the Board of Managers of Bioventus, LLC, a company that develops, manufactures and sells products that promote active orthopaedic healing, since December 2013. From June 2011 through June 2012, he was Group President American Medical Systems, or AMS, a subsidiary of Endo Pharmaceuticals, or Endo. Mr. Bihl was President & Chief Executive Officer and a director of AMS from April 2008 until Endo acquired AMS in June 2011. He served as Chief Executive Officer of Siemens Medical Solutions’ Diagnostics Division from January to November 2007, and as President of the Diagnostics Division of Bayer HealthCare from 2004 through 2006. Prior to that, Mr. Bihl served in a number of operations and finance roles at Bayer HealthCare and over a 20-year career at E.I. DuPont. He is a director and chairman of the board of Spectral Medical, Inc., a Canadian company that develops products for the diagnosis and treatment of severe sepsis and septic shock, and also serves as chair of its human resources and compensation committee. Mr. Bihl is a former director of SeraCare Life Sciences Inc. We believe that Mr. Bihl is well qualified to serve on Nuvectra’s Board of Directors due to his 30 years of experience in the medical device industry, in operations, finance and general management roles.

See “Our Executive Officers” above for biographical information regarding Mr. Drees, who will serve as our President, Chief Executive Officer and as a director.

We will include the biographies of our other directors in an amendment to our registration statement on Form 10, of which this information statement forms a part.

Director Independence

Our Board of Directors is expected to formally determine the independence of its directors as defined by the NASDAQ Listing Rules in connection with the spin-off. We expect that our Board of Directors following the spin-off will be consist of directors, of which will be considered independent as defined by the NASDAQ Listing Rules. Our Board of Directors is expected to annually determine the independence of the directors based on a review by the directors and the Governance and Nominating Committee.

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Committees of our Board of Directors

Pursuant to our by-laws, our Board of Directors will be permitted to establish committees from time to time as it deems appropriate. Effective upon the completion of the spin-off, our Board of Directors is expected to have the following standing committees: Audit Committee, Compensation and Organization Committee and Governance and Nominating Committee.

Our Board of Directors will adopt written charters for the Audit Committee, Compensation and Organization Committee and Governance and Nominating Committee. These charters will be available on our website following the spin-off.

Audit Committee

The initial members of the Audit Committee will be determined prior to the spin-off. We may rely on the transition rules provided in the NASDAQ Listing Rules related to the independence of our Audit Committee. To the extent we rely on these transition rules, all members of the Audit Committee will be independent and financially literate and have the necessary accounting or financial management experience by the date required by the transition provisions of the NASDAQ Listing Rules.

We expect that the core responsibilities of the Audit Committee will include:

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Reviewing our annual and quarterly financial statements;

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Overseeing management’s maintenance of the reliability and integrity of our accounting policies and financial reporting and our disclosure practices;

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Determining and approving the engagement and remuneration of the independent auditors;

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Reviewing our independent auditors’ qualifications, performance and independence;

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Overseeing the performance of the internal audit and the corporate compliance functions;

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Overseeing compliance with legal and regulatory requirements, including our code of conduct and related person transaction policy;

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Overseeing our overall framework for internal controls over financial reporting and other internal controls and processes; and

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Overseeing and discussing with management regarding our overall framework for risk management.

Compensation and Organization Committee

The initial members of the Compensation and Organization Committee will be determined prior to the spin-off. We may rely on the transition rules provided in the NASDAQ Listing Rules related to the independence of the members of our Compensation and Organization Committee. To the extent we rely on these transition rules, all members of the Compensation and Organization Committee will be independent by the date required by the transition provisions of the NASDAQ Listing Rules.

We expect that the core responsibilities of the Compensation and Organization Committee will include:

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Establishing and administering our policies governing annual compensation and long-term compensation, including equity awards, such that the policies are designed to align compensation with our overall business strategy and performance;

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Evaluating our Chief Executive Officer’s overall performance in light of relevant individual and corporate goals and, after such evaluation, setting the future objectives and compensation level of our Chief Executive Officer;

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Determining, in consultation with our Chief Executive Officer, compensation levels and performance targets for the senior management team;

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Overseeing:

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our philosophy and policies with respect to executive and director compensation, fringe benefits and other compensation matters;

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leadership development for senior management and future senior management candidates;

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a periodic review of our long-term and emergency succession planning for our Chief Executive Officer and other key officer positions, in conjunction with our Board of Directors; and

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Annually reviewing our compensation policies and practices for the purpose of mitigating risks arising from these policies and practices.

Governance and Nominating Committee

The initial members of the Governance and Nominating Committee will be determined prior to the spin-off. We may rely on the transition rules provided in the NASDAQ Listing Rules related to the independence of the members of our Governance and Nominating Committee. To the extent we rely on these transition rules, all members of the Governance and Nominating Committee will be independent by the date required by the transition provisions of the NASDAQ Listing Rules.

We expect that the core responsibilities of the Governance and Nominating Committee will include:

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Overseeing the screening and recruitment of prospective Board of Director members and making recommendations to the Board of Directors regarding specific director nominees, as well as overseeing the process for nominations to the Board of Directors;

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Overseeing corporate governance matters, including developing and recommending to the Board of Directors changes to our corporate governance policies;

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Reviewing director independence standards and making recommendations to the Board of Directors with respect to the determination of director independence;

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Monitoring and recommending improvements to the Board of Directors’ practices, performance and procedures, including with respect to committee structure and committee membership; and

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Reviewing stockholder proposals and considering how to respond to them.

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EXECUTIVE COMPENSATION

Overview

The following discussion relates to the compensation of our Chief Executive Officer, Scott F. Drees, and our Chief Financial Officer, Walter Z. Berger, (Messrs. Drees and Berger are collectively referred to herein as our Named Executive Officers). As Mr. Drees and Mr. Berger were each hired for their respective executive officer positions with Nuvectra during 2015, no compensation for services as an executive officer was paid to either Mr. Drees or Mr. Berger by Nuvectra or Greatbatch during the year ended January 2, 2015. However, Mr. Drees provided certain business and technology consulting services to Nuvectra during the year ended January 2, 2015. See “Certain Relationships and Related Person Transactions – Consulting Agreement” for additional information regarding this consulting arrangement.

Nuvectra Executive Compensation

Following the spin-off, we expect that compensation for Nuvectra’s Named Executive Officers will consist of a base salary, an annual cash incentive opportunity and equity incentive compensation.

In setting the compensation of our Named Executive Officers, we expect that our Compensation and Organization Committee will consider market median levels for all compensation elements in order to align with typical practices among publicly-traded medical device companies of a similar size, balanced with a consideration of executives’ responsibilities and individual experience. In addition, we expect that equity-based incentive awards that are awarded to the Named Executive Officers will be determined by our Compensation and Organization Committee in consideration of both the total equity pool reserved for initial and future equity awards to employees, as well as the percentage of total shares outstanding that is typically awarded to Named Executive Officers upon the initial public offering of publicly-traded medical device companies of a similar size.

Nuvectra Employment Arrangements

Scott F. Drees

We have entered into an employment offer letter with Mr. Drees that sets forth his initial base salary, short-term target bonus opportunity, a one-time equity award and provides that Mr. Drees’ employment is “at will” and may be terminated by either party at any time.

The base salary for Mr. Drees is $400,000. During 2015, Mr. Drees is eligible to receive an annual cash incentive pursuant to Greatbatch’s Growth Bonus Plan. The target bonus percentage for Mr. Drees is 60% of his annualized base salary for the year with the opportunity to receive up to 120% of his annualized base salary at the maximum payout level if certain specified achievement thresholds are met. For 2016 and thereafter, Mr. Drees is eligible to participate in any cash bonus plan that may be established by our Board of Directors.

After the completion of the spin-off, Mr. Drees will receive a one-time equity award from Nuvectra that will relate to a number of shares of Nuvectra common stock equal to at least two percent of the number of shares of Nuvectra common stock outstanding immediately following the completion of the spin-off. Subject to confirmation by our Board of Directors, this equity award is expected to be allocated with 25% of the total equity award granted as non-qualified stock options and 75% of the total equity award granted as restricted stock units. Both the non-qualified stock options and the restricted stock units will vest in equal annual installments over a three-year period and the vesting dates for each will coincide with the anniversary date of the grant date. It is currently intended that this one-time equity award grant will be in lieu of Mr. Drees’ participation in any equity incentive plan established by Nuvectra for the three-year period following the completion of the spin-off. The exact terms and conditions of this one-time equity award for Mr. Drees are subject to review and confirmation by our Board of Directors.

Mr. Drees’ employment offer letter provides that for a period of one year, beginning on his employment start date, if his employment is terminated by Greatbatch prior to the completion of the spin-off for reasons other than

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cause, he will receive a lump sum severance payment of one year’s base salary plus his current target bonus and an additional lump sum in an amount equal to the amount Greatbatch would have contributed to health, vision and dental coverage premiums during the one year period after termination, provided that he signs a general release of employment-based claims. For purposes of this provision in the employment offer letter, “cause” means (i) gross negligence or willful misconduct in the performance of duties, (ii) dishonesty to Greatbatch or (iii) the commission of a felony that results in a conviction in a court of law. After the completion of the spin-off, the employment offer letter provides that Mr. Drees will be eligible to participate in any severance program that may be established by our Board of Directors.

Walter Z. Berger

We have entered into an employment offer letter with Mr. Berger that sets forth his initial base salary, short-term target bonus opportunity, a one-time equity award and provides that Mr. Berger’s employment is “at will” and may be terminated by either party at any time.

The base salary for Mr. Berger is $350,000. Until the completion of the spin-off, Mr. Berger is eligible to receive an annual cash incentive pursuant to Greatbatch’s Growth Bonus Plan. The target bonus percentage for Mr. Berger is 50% of his annualized base salary for the year with the opportunity to receive up to 95% of his annualized base salary at the maximum payout level if certain specified achievement thresholds are met. After the completion of the spin-off, Mr. Berger is eligible to participate in any cash bonus plan that may be established by our Board of Directors.

After the completion of the spin-off, Mr. Berger will receive a one-time equity award from Nuvectra that will relate to a number of shares of Nuvectra common stock equal to at least one percent of the number of shares of Nuvectra common stock outstanding immediately following the completion of the spin-off. Subject to confirmation by our Board of Directors, this equity award is expected to be allocated with 25% of the total equity award granted as non-qualified stock options and 75% of the total equity award granted as restricted stock units. Both the non-qualified stock options and the restricted stock units will vest in equal annual installments over a three-year period and the vesting dates for each will coincide with the anniversary date of the grant date. It is currently intended that this one-time equity award grant will be in lieu of Mr. Berger’s participation in any equity incentive plan established by Nuvectra for the three-year period following the completion of the spin-off. The exact terms and conditions of this one-time equity award for Mr. Berger are subject to review and confirmation by our Board of Directors.

Mr. Berger’s employment offer letter provides that prior to August 1, 2016, if his employment is terminated by Greatbatch prior to the completion of the spin-off for reasons other than cause, he will receive (i) a lump sum severance payment in an amount equal to the sum of (A) one year’s base salary, (B) the equivalent of one year’s bonus at the target bonus percentage and (C) an amount equal to the pro-rated bonus for fiscal year 2016 that had been earned as of the date of termination, (ii) an additional lump sum in an amount equal to the amount Greatbatch would have contributed to health, vision and dental coverage premiums during the one year period after termination and (iii) if his employment is terminated as a result of a sale of Nuvectra prior to the completion of the spin-off, a special bonus in the amount of $350,000, provided that he signs a general release of employment-based claims. For purposes of this provision in the employment offer letter, “cause” means (i) gross negligence or willful misconduct in the performance of duties, (ii) dishonesty to Greatbatch or (iii) the commission of a felony that results in a conviction in a court of law. After the completion of the spin-off, the employment offer letter provides that Mr. Berger will be eligible to participate in any severance program that may be established by our Board of Directors.

Nuvectra Corporation 2016 Equity Incentive Plan

Prior to the spin-off, the board of managers of QiG Group will adopt and Greatbatch Ltd., as sole member of QiG Group, will approve, the Nuvectra Corporation 2016 Equity Incentive Plan, or the Equity Plan, under which we may grant equity incentive awards to eligible persons in order to attract, motivate and retain the talent for which

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we compete. The material terms of the Equity Plan are summarized below. This summary is qualified in its entirety by reference to the full text of the Equity Plan, which is filed as an exhibit to the registration statement of which this information statement forms a part.

Eligibility and Administration

Employees, non-employee consultants and non-employee directors of Nuvectra are eligible to receive incentive awards under the Equity Plan. In addition, any person who received an incentive award that was originally granted under a Greatbatch equity incentive award plan, which is adjusted into an incentive award covering Nuvectra common stock in accordance with the terms of the Employee Matters Agreement, each, a Spin-off Award, is eligible to participate in the Equity Plan. Following the completion of the spin-off, the Equity Plan will be administered by our Compensation and Organization Committee. The Compensation and Organization Committee will have the authority to make all determinations and interpretations under, prescribe all forms for use with, and adopt rules for the administration of the Equity Plan, subject to the express terms and conditions set forth in the Equity Plan. The Compensation and Organization Committee will also set out the terms and conditions of all incentive awards under the Equity Plan, including any vesting and vesting acceleration conditions.

Limitation on Awards and Shares Available

The aggregate number of shares that may be issued pursuant to incentive awards under the Equity Plan is the sum of (i) shares, or the Share Limit, and (ii) the number of shares subject to all of the Spin-off Awards outstanding immediately following the completion of the spin-off, subject to adjustment only to reflect stock splits or other similar type events. These shares may be authorized but unissued shares, issued shares held in Nuvectra’s treasury or shares acquired for purposes of the Equity Plan. The Share Limit will increase on an annual basis on the first day of each fiscal year, for a period of nine years after the effective date of the Equity Plan, in an amount equal to percent ( %) of the total number of shares of Nuvectra stock outstanding on the last day of the immediately preceding fiscal year. The Compensation and Organization Committee may act prior to the first day of each fiscal year to provide that there will be no increase of the Share Limit for that fiscal year or that the increase of the Share Limit for such year will be a smaller number of shares than would otherwise occur.

Other than with respect to Spin-off Awards, shares underlying incentive awards that are forfeited, expire, cancelled or lapse become available for future grants. Shares that are (i) used to pay the exercise price of a stock option, (ii) delivered or withheld to satisfy tax withholding obligations, (iii) covered by a stock-settled stock appreciation right, or SAR, that are not issued upon settlement of such SAR or (iv) not issued because cash is issued in lieu of shares will, in each case, not be available for future grants. When a stock settled SAR is exercised, the shares subject to a SAR grant agreement will be counted against the shares available for award as one share for every share subject thereto, regardless of the number of shares used to settle the stock appreciation right upon exercise.

Shares issued under the Equity Plan upon the assumption of, or in substitution for, any outstanding awards of an entity acquired in any form of business combination with Nuvectra will not be counted towards the Share Limit.

Excluding any Spin-off Awards, the maximum number of shares that may be awarded under the Equity Plan in any single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $ in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes). Excluding any Spin-off Awards, the maximum number of shares that may be awarded under the Equity Plan as incentive stock options is . Excluding any Spin-off Awards, the aggregate number of shares subject to (i) options or SARs awarded under the Equity Plan to any employee during any fiscal year shall not exceed shares and (ii) any incentive awards, other than options or SARs, awarded under the Equity Plan to any employee during any fiscal year shall not exceed shares.

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Awards

The Equity Plan provides for the grant of stock options, including incentive stock options, restricted stock, restricted stock units, or RSUs, SARs, and stock bonuses. All incentive awards under the Equity Plan will be set forth in award agreements, which will detail all terms and conditions of the incentive awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows:

(1) Non-qualified and incentive stock option – the right to purchase a certain number of shares of stock, at a certain exercise price, in the future.

(2) Restricted stock – share award conditioned upon continued employment, the passage of time or the achievement of performance objectives.

(3) RSUs – a contractual right to receive a share of stock in the future.

(4) SAR – the right to receive the net of the market price of a share of stock and the exercise price of the right, in stock, in the future.

(5) Stock bonus – a bonus payable in shares of stock.

Incentive awards granted under the Equity Plan may qualify as “performance-based compensation” under Section 162(m) of the Code and thus preserve federal income tax deductions for Nuvectra with respect to annual compensation required to be taken into account under Section 162(m) of the Code that is in excess of $1 million and paid to one of our most highly compensated executive officers. To qualify, the equity awards must be granted under the Equity Plan by a committee consisting of two or more “outside directors” (as defined under Section 162(m) of the Code) and must satisfy the Equity Plan’s limit on the total number of shares that may be awarded to any one participant during any calendar year. In addition, for equity awards to qualify, the grant, issuance, vesting or retention of the award must be contingent upon satisfying one or more of the performance criteria, as established and certified by a committee consisting solely of two or more outside directors.

For purposes of the Equity Plan, one or more of the following performance criteria will be used in setting performance goals applicable to performance-based compensation, and may be used in setting performance goals applicable to other performance awards: (i) net earnings or net income (either before or after one or more of the following: interest, taxes, depreciation, amortization and non-cash equity-based compensation expenses), (ii) economic value-added (as determined by the Compensation and Organization Committee), (iii) sales or revenue, (iv) net earnings or net income (either before or after taxes), (v) operating earnings or income, (vi) cash flow (including, but not limited to, operating cash flow and free cash flow), (vii) gross profit or gross profit growth, (viii) cash flow return on capital, (ix) return on investment, (x) return on stockholders’ equity, (xi) return on assets or net assets, (xii) return on capital, (xiii) stockholder returns, (xiv) return on sales, (xv) gross or net profit margin, (xvi) productivity, (xvii) expenses or expense targets, (xviii) margins, (xix) improvement of capital structure, (xx) operating efficiency, (xxi) cost reduction or savings, (xxii) budget and expense management, (xxiii) customer satisfaction, (xxiv) working capital, (xxv) basic or diluted earnings or loss per share (before or after taxes), (xxvi) price per share of Nuvectra’s stock (including, but not limited to growth measures or total stockholder return), (xxvii) completion of acquisitions or business expansion, (xxviii) regulatory achievements or compliance (including, without limitation, regulatory body approval for commercialization of a product), (xxix) implementation or completion of critical products, (xxx) enterprise value and (xxxi) market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group.

Award Terms

Options and SARs will have a term no longer than ten years. All incentive awards made under the Equity Plan may be subject to vesting and other contingencies as determined by the Compensation and Organization Committee and will be evidenced by award agreements which set forth the terms and conditions of each award. The Compensation and Organization Committee, in its discretion, may accelerate or extend the period for the exercise or vesting of any awards.

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In the event that a change in control (as defined in the Equity Plan) occurs, each outstanding incentive award held by a participant will become fully vested (and, as applicable, exercisable).

Vesting

Subject to certain exceptions set forth in the Equity Plan, any Restricted Stock or RSU (other than any Spin-off Awards) that vests solely on the basis of the passage of time will not fully vest more quickly than over the three-year period beginning on date of grant and any Restricted Stock or RSU that is a performance-based awards (other than any Spin-off Awards) will not vest prior to the first anniversary of the date of grant. Unless the applicable award agreement provides otherwise, no option or SAR (other than any Spin-off Award) shall be exercisable prior to the first anniversary of grant.

Foreign Participants, Claw-Back Provisions, Transferability, and Participant Payments

The Compensation and Organization Committee may modify award terms and/or adjust other terms and conditions of awards in order to facilitate grants of incentive awards to participants who are foreign nationals or employed outside of the United States. All awards will be subject to deduction or clawback as may be required pursuant to applicable law, the listing standards of the stock exchange on which our shares are listed or any clawback policy adopted by us. Incentive awards granted under the Equity Plan generally are not transferable except by will or the laws of descent and distribution. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the Equity Plan, the Compensation and Organization Committee may, in its sole discretion, accept cash or check, shares of our common stock that meet specified conditions, or such other consideration as it deems suitable.

Equity Plan Amendment and Termination

Our Board of Directors may at any time, suspend or terminate the Equity Plan or revise or amend it in any respect whatsoever; provided, however, that stockholder approval shall be required if and to the extent required by Exchange Act Rule 16b-3 or by any comparable or successor exemption under that the Board believes it is appropriate for the Equity Plan to qualify, or if and to the extent the Board determines that such approval is appropriate for purposes of satisfying Sections 162(m), 422 or 409A of the Code or any applicable rule or listing standard of any stock exchange, automated quotation system or similar organization. The Equity Plan terminates on the tenth anniversary of its initial effective date.

Retirement Benefits

In addition to the Equity Plan described immediately above, we expect to establish and maintain a defined contribution 401(k) plan that permits contributions by employees through salary deductions pursuant to Section 401(k) of the Code, and provides for a discretionary matching contribution from Nuvectra to eligible employees who contribute through such plan. We expect that our defined contribution 401(k) plan will have similar terms and conditions to Greatbatch’s defined contribution 401(k) plan. Our Named Executive Officers also are expected to be eligible to participate in this plan.

Nuvectra is not expected to maintain a deferred compensation plan for its executives following the spin-off.

Director Compensation

Following the spin-off, director compensation will be determined by our Board of Directors with the assistance of the committee responsible for executive compensation, which we expect to be the Compensation and Organization Committee. After consulting with its independent compensation consultants, Greatbatch’s board of directors approved an initial director compensation scheme for non-employee directors of Nuvectra. Initially, we expect to pay non-employee directors an annual cash retainer of $40,000, with the non-executive Chairman of the

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Board receiving a supplemental annual cash retainer of $50,000. We will provide all newly elected non-employee directors an initial equity grant in the form of option to purchase shares of Nuvectra common stock with a value of $150,000. These stock options will vest in equal annual installments over a three-year period. Each fiscal year, we also expect to grant ongoing equity compensation to non-employee directors in the form of options to purchase Nuvectra shares of common stock and restricted stock units of Nuvectra, with an aggregate value of $90,000. This annual grant of equity compensation is expected to be split such that half of the value is granted in the form of options to purchase shares of Nuvectra common stock and half is granted as restricted stock units of Nuvectra. These stock options and restricted stock units will each have a one year vesting period.

The committee chairs will receive the following additional cash retainers: Audit Committee chair — $20,000; Compensation and Organization Committee chair — $15,000 and Governance and Nominating Committee chair — $10,000. Committee members, other than the chairs of each committee, will receive the following additional cash retainers: Audit Committee member — $10,000; Compensation and Organization Committee member — $7,500 and Governance and Nominating Committee member — $5,000.

We also expect that we will pay the premiums on directors’ and officers’ liability and travel accident insurance policies insuring our directors, and expect to reimburse directors for their expenses incurred in connection with attending Board of Directors or committee meetings, but will not provide board or committee meeting fees.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Immediately prior to the spin-off, all of our outstanding shares of common stock will be owned beneficially and of record by Greatbatch. The following table sets forth the pro forma anticipated beneficial ownership of our common stock immediately following the spin-off date by (i) each beneficial owner of more than five percent of Greatbatch’s common stock, (ii) each of our directors, director nominees and Named Executive Officers, and (iii) all directors, director nominees and executive officers as a group, based upon information available to us concerning ownership of Greatbatch common stock on , 2016 (and assuming a distribution ratio of share of Nuvectra common stock for every share[s] of Greatbatch common stock). Unless indicated below, the mailing address of each of the Nuvectra directors and Named Executive Officers is c/o Nuvectra Corporation, 5700 Granite Parkway, Suite 960, Plano, Texas, 75024. As used in this information statement, “beneficial ownership” means that a person has, or may have within 60 days, the sole or shared power to vote or direct the voting of a security and/or the sole or shared investment power with respect to a security (i.e., the power to dispose or direct the disposition of a security).


Name and Address of Beneficial Owner	Shares Projected to be Beneficially Owned	Percent of Class (1)
Scott F. Drees
Walter Z. Berger
Dr. Joseph A. Miller, Jr.
Anthony P. Bihl III




Accellent Holdings LLC (2)
9 West 57th Street
New York, NY 10019
BlackRock, Inc. (3)
55 East 52nd Street
New York, NY 10022
Dimensional Fund Advisors LP (4)
Building One
6300 Bee Cave Road
Austin, TX 78746
The Vanguard Group, Inc. (5)
100 Vanguard Boulevard
Malvern, PA 19355
All directors, director nominees and executive officers as a group ( persons)

(1)	An asterisk indicates that the percentage of common stock projected to be beneficially owned by the named individual following the spin-off is less than 1% of total outstanding common stock.

(2)

The beneficial ownership information presented for Accellent Holdings LLC is derived from the Schedule 13G filed by Accellent Holdings LLC with the SEC on October 29, 2015. According to the filing, Accellent Holdings LLC had sole voting power and sole dispositive power with respect to 2,946,709 shares of Greatbatch common stock. In addition, according to the filing, each of KKR Millennium Fund L.P. (as the managing member of Accellent Holdings LLC), KKR Associates Millennium L.P. (as the general partner of KKR Millennium Fund L.P.), KKR Millennium GP LLC (as the general partner of KKR Associates Millennium L.P.), KKR Fund Holdings L.P. (as the designated member of KKR Millennium GP LLC), KKR Fund Holdings GP Limited (as a general partner of KKR Fund Holdings L.P.), KKR Group Holdings L.P. (as a general partner of KKR Fund Holdings L.P. and the sole shareholder of KKR Fund Holdings GP Limited), KKR Group Limited (as the sole general partner of KKR Group Holdings L.P.), KKR & Co. L.P. (as the sole shareholder of KKR Group Limited), KKR Management LLC (as the sole general partner of KKR & Co. L.P.),

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and Henry R. Kravis and George R. Roberts may also be deemed to share voting and dispositive power with respect to the shares of Greatbatch common stock held by Accellent Holdings LLC. The principal business address of each of the entities and persons identified in this paragraph, except Mr. Roberts, is c/o Kohlberg Kravis Roberts & Co. L.P., 9 West 57th Street, Suite 4200, New York, NY, 10019. The principal business address for Mr. Roberts is c/o Kohlberg Kravis Roberts & Co. L.P., 2800 Sand Hill Road, Suite 200, Menlo Park, CA 94025.

(3)

The beneficial ownership information presented for BlackRock, Inc. is derived from the Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 15, 2015. According to the filing, BlackRock, Inc. had sole voting power with respect to 2,374,335 shares of Greatbatch common stock, sole dispositive power with respect to 2,473,749 shares of Greatbatch common stock, and did not have shared voting or dispositive power as to any shares of Greatbatch common stock.

(4)

The beneficial ownership information presented for Dimensional Fund Advisors LP is derived from the Schedule 13G/A filed by Dimensional Fund Advisors LP with the SEC on February 5, 2015. According to the filing, Dimensional Fund Advisors LP had sole voting power with respect to 1,923,585 shares of Greatbatch common stock, sole dispositive power with respect to 1,991,724 shares of Greatbatch common stock, and did not have shared voting or dispositive power as to any shares of Greatbatch common stock.

(5)

The beneficial ownership information presented for The Vanguard Group, Inc. is derived from the Schedule 13G/A filed by The Vanguard Group, Inc. with the SEC on February 10, 2015. According to the filing, The Vanguard Group, Inc. had sole voting power with respect to 36,943 shares of Greatbatch common stock, sole dispositive power with respect to 1,674,760 shares of Greatbatch common stock, shared dispositive power with respect to 34,443 shares of Greatbatch common stock and did not have shared voting power as to any shares of Greatbatch common stock.

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DESCRIPTION OF NUVECTRA CAPITAL STOCK

The following is a summary of the material terms of our capital stock that will be contained in our certificate of incorporation and by-laws. The summaries and descriptions below do not purport to be complete statements of the relevant provisions of our certificate of incorporation or of our by-laws to be in effect as of the spin-off date and this summary is qualified in its entirety by reference to these documents. You should read the certificate of incorporation and by-laws, together with the applicable provisions of the DGCL, for additional information on our capital stock as of the spin-off date. The certificate of incorporation and by-laws that will be in effect as of the spin-off date are included as exhibits to our registration statement on Form 10, of which this information statement forms a part.

General

Our authorized capital stock will consist of shares of common stock, par value $0.001 per share, and shares of preferred stock, par value $0.001 per share. In connection with the spin-off, shares of common stock will be reserved for issuances of stock options, restricted stock units and other equity awards under our equity incentive plan. Based on approximately shares of Greatbatch common stock that we expect to be outstanding on the record date, approximately shares of Nuvectra common stock will be outstanding immediately following the spin-off, and there will be approximately holders of record of Nuvectra common stock. Immediately following the spin-off, no shares of preferred stock will be outstanding and our Board of Directors has no present plans to issue any shares of our preferred stock.

Common Stock

The holders of Nuvectra common stock will be entitled to one vote per share of common stock held on all matters voted on by our stockholders, including the election of directors, and, subject to preferences that may be applicable to any outstanding series of preferred stock as provided in any resolution adopted by our Board of Directors, the holders of Nuvectra common stock will possess all voting power. There will be no cumulative voting rights. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. Except with respect to the election of directors, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by all stockholders present in person or represented by proxy at the meeting, voting together as a single class. The election of directors will be determined by a plurality of the votes cast in respect of the shares present in person or represented by proxy at the meeting and entitled to vote, meaning that the nominees with the greatest number of votes received, even if less than a majority, will be elected.

Subject to preferences that may be applicable to any outstanding series of preferred stock, if any, the holders of Nuvectra common stock will be entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for that purpose. For more information, see “Dividend Policy.” In the event of our liquidation, dissolution or winding up, subject to preferences that may be applicable to any outstanding series of preferred stock, if any, the holders of Nuvectra common stock would be entitled to share ratably in all assets available for distribution to stockholders after the payment of all of our debts and other liabilities.

The holders of Nuvectra common stock will have no preemptive, conversion or other subscription rights, and there will be no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of Nuvectra common stock will be subject to, and may be adversely affected by, the rights of holders of shares of any outstanding series of preferred stock, if any, that may be issued from time to time in the future.

Immediately following the spin-off, all of the outstanding shares of Nuvectra common stock will be validly issued, fully paid and non-assessable.

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Preferred Stock

Our certificate of incorporation will authorize our Board of Directors, without the approval of our stockholders, to issue up to shares of preferred stock in one or more series and to fix the designation, powers, preferences and rights of one or more series of preferred stock, any or all of which may be greater than those of the Nuvectra common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation, dissolution or winding up. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of Nuvectra or other corporate action. Immediately following the spin-off, no shares of preferred stock will be outstanding, and our Board of Directors has no present plan to issue any shares of preferred stock.

Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and By-Laws and of Delaware Law

Our certificate of incorporation and by-laws will contain certain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares of common stock.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

For more complete information regarding these provisions, you should read our certificate of incorporation and by-laws, which are included as exhibits to our registration statement on Form 10, of which this information statement is a part.

Classified Board of Directors

Our certificate of incorporation and by-laws will provide that our Board of Directors, subject to the rights of holders of our preferred stock, will be divided into three classes as nearly equal in number as possible. Class I will initially be elected for a term expiring at the annual meeting of stockholders to be held in 2016, Class II will initially be elected for a term expiring at the annual meeting of stockholders to be held in 2017, and Class III will initially be elected for a term expiring at the annual meeting of stockholders to be held in 2018. Thereafter the directors in each class will serve for a three-year term, with each director to hold office until his or her successor is duly elected and qualified. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. This structure of electing directors may discourage a third party from making a tender offer or otherwise attempting to obtain control of us because the staggered terms, together with the removal and vacancy provisions that will be contained in our certificate of incorporation discussed below, would make it more difficult for a potential acquiror to gain control of our Board of Directors.

Number of Directors; Filling Vacancies; Removal of Directors

Our certificate of incorporation and by-laws will provide that, subject to the rights of holders of any series of outstanding preferred stock, if any, the number of directors on our Board of Directors will be fixed exclusively

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by the Board of Directors. Additionally, subject to the rights of holders of any series of outstanding preferred stock, if any, only our Board of Directors will be able to fill any vacancies, however occurring, including a vacancy resulting from an increase in the size of the Board of Directors.

Subject to the rights of holders of our preferred stock, our certificate of incorporation will provide that a director may only be removed from office for cause by the affirmative vote of holders of record of outstanding shares representing at least 66 ² ⁄ ₃ % of the voting power of all shares of capital stock then entitled to vote generally in the election of directors, voting together as a single class.

No Cumulative Voting

Delaware law provides that stockholders are denied the right to cumulate votes in the election of directors unless a company’s certificate of incorporation provides otherwise. Our certificate of incorporation will not provide for cumulative voting. Because our stockholders will not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors.

No Stockholder Action by Written Consent; Special Meetings

Our certificate of incorporation will provide that, subject to the rights of holders of any series of outstanding preferred stock, if any, any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such stockholders and may not be effected by any consent in writing of such stockholders. In addition, our certificate of incorporation will provide that special meetings of stockholders may be called at any time, but only by our Board of Directors pursuant to a resolution adopted by the Board of Directors, by the Chairman of our Board of Directors or by our Chief Executive Officer. These provisions may have the effect of delaying consideration of a stockholder proposal until the next annual meeting of stockholders unless a special meeting of stockholders is called by our Board of Directors, the Chairman of our Board of Directors or our Chief Executive Officer.

Advance Notice of Stockholder Nominations and Stockholder Proposals

Our by-laws will establish advance notice procedures for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of the stockholders. The business to be conducted at an annual meeting will be limited to business brought before the meeting by, or at the direction of, our Board of Directors or by a stockholder who has given timely written notice to our Corporate Secretary of that stockholder’s intention to bring such business before such meeting.

Our by-laws will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election to our Board of Directors. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Our by-laws will allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company. Nothing in the bylaws will be deemed to affect any rights of stockholders to request inclusion of proposals in our proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Undesignated Preferred Stock

Our certificate of incorporation will authorize our Board of Directors, without the approval of our stockholders, to issue and fix the designation, powers, preferences and rights of one or more series of preferred stock, which may be greater than those of our common stock.

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The issuance of shares of our preferred stock, or the issuance of rights to purchase shares of preferred stock, could be used to discourage an unsolicited acquisition proposal or have the effect of deterring hostile takeovers or delaying changes in control or management of our company. In addition, under some circumstances, the issuance of preferred stock could adversely affect the voting power of Nuvectra common stockholders.

Amendment of the Certificate of Incorporation and By-laws

Our certificate of incorporation will provide that the affirmative vote of holders of record representing at least 66 ² ⁄ ₃ % of the voting power of all shares of capital stock then entitled to vote generally in the election of directors, voting together as a single class, is required to amend, alter, change, repeal or adopt any provision of our by-laws and certain provisions of our certificate of incorporation. Our certificate of incorporation will also provide that our Board of Directors may amend our by-laws.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the DGCL, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.

Limitation of Liability and Indemnification of Our Directors and Officers

For a discussion of liability and indemnification, see “Indemnification and Limitations of Liability of Directors and Officers.”

Exclusive Forum

Our certificate of incorporation will provide that unless we consent in writing to an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Nuvectra; any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Nuvectra to Nuvectra or Nuvectra’s stockholders; any action arising pursuant to any provision of the DGCL, our certificate of incorporation or our by-laws; or any action asserting a claim governed by the internal affairs doctrine.

Listing

Nuvectra’s common stock has been approved for listing on the NASDAQ Global Market under the symbol “NVTR”.

Transfer Agent

After the spin-off, Computershare will serve as the transfer agent and registrar for Nuvectra’s common stock. The transfer agent and registrar’s address is P.O. Box 30170, College Station, TX 77842-3170.

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INDEMNIFICATION AND LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS

As permitted by Section 102 of the DGCL, we will adopt provisions in our certificate of incorporation and by-laws that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

•

any breach of the director’s duty of loyalty to us or our stockholders;

•

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•

any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or

•

any transaction from which the director derived an improper personal benefit.

These limitations of liability will not apply to liabilities under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.

Our certificate of incorporation and by-laws will require us to indemnify and hold harmless each person who is, or was a director or officer of Nuvectra, and each person who, at our request, serves or served as a director or officer at another corporation or other enterprise (including with respect to employee benefit plans), as the case may be, to the fullest extent permitted under Delaware law. Our certificate of incorporation and by-laws will also provide that we must indemnify and advance reasonable expenses to its directors and officers incurred in defending or otherwise participating in any proceeding in advance of its final disposition, subject to its receipt of an undertaking from the indemnified party as may be required under the DGCL. Our certificate of incorporation and by-laws will also provide that we may, to the extent authorized from time to time by our Board of Directors, indemnify and hold harmless each person who is, or was, an employee or agent of Nuvectra or, at our request, serves or served as an employee or agent of another corporation or other entreprise. The rights provided in our certificate of incorporation and by-laws are not exclusive.

We also intend to enter into separate indemnification agreements with each of our directors and certain of our officers, which may be broader than the specific indemnification provisions contained in the DGCL. Subject to certain exceptions, these indemnification agreements generally will require us, among other things, to indemnify our directors and those certain officers against liabilities that may arise by reason of their status or service as director or officer, as the case may be. These indemnification agreements also generally will require us to advance expenses as they are incurred by the directors or those certain officers as a result of any proceeding against them as to which they could be indemnified. In addition, we intend to obtain a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in certain specified circumstances.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Policies and Procedures for Review, Approval or Ratification of Related Person Transactions

Our Board of Directors is expected to adopt a written policy regarding the review, approval or ratification of transactions involving or between Nuvectra and any related persons, or in which a related person will have a direct or indirect material interest, and involves an amount in that exceeds $120,000. These transactions, which are commonly referred to as related person transactions, are required to be disclosed under the SEC’s rules. A related person is defined to include our directors, executive officers, a director nominee, a five percent stockholder or any immediate family member or entity of the foregoing persons. Transactions involving compensation for services provided to us by an employee or director are not covered by this policy.

This policy is also expected to provide that each director, director nominee and executive officer is required to promptly provide written notification of any material interest that he or she (or his or her immediate family member) has or will have in a transaction with Nuvectra. Based on a review of the transaction, a determination will be made whether the transaction constitutes a related person transaction under the SEC’s rules. As appropriate, our Audit Committee will then review the terms and substance of the transaction, using the method described below, to determine whether to ratify or approve the related person transaction. If the transaction involves a related person who is a director or an immediate family member of a director, such director may not participate in the deliberations or vote regarding such approval. The procedures are expected to provide that the Audit Committee may, in its sole discretion, refer consideration of these transactions to our full Board of Directors.

This policy is expected to provide that if a transaction has been identified as a related person transaction (including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation), our executive officers must present information regarding the related person transaction to our Audit Committee (or, if Audit Committee approval would be inappropriate, to another independent body of our Board of Directors) for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. In considering related person transactions, our Audit Committee (or other independent body of our Board of Directors) will take into account the relevant available facts and circumstances including, but not limited to, the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products and, if applicable the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated.

Agreements with Greatbatch

In connection with the spin-off, we will enter into various agreements with Greatbatch to define our ongoing relationship with Greatbatch after the spin-off. These agreements will define responsibility for obligations arising before and after the spin-off date, including, among others, obligations relating to our employees, certain transition services and taxes. The terms of each of these agreements have been, or will be, negotiated with Greatbatch while Nuvectra is still an indirect wholly-owned subsidiary of Greatbatch and thus, the transactions contemplated by these agreements will constitute related person transactions. For more information about these arrangements, see “Our Relationship with Greatbatch After the Spin-Off – Agreements Between Greatbatch and Us.”

Consulting Agreement with Scott F. Drees

In August 2009, we entered into a master consulting agreement with Decaf Consulting, Inc., or Decaf Consulting, which is a corporation owned by Scott F. Drees, who will serve as our President, Chief Executive Officer and a

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director on our Board of Directors. Pursuant to this consulting arrangement, Decaf Consulting provided certain business and technology consulting and leadership services for Nuvectra and our subsidiaries Algostim and PelviStim. Under the master consulting agreement, we paid consulting fees to Decaf Consulting in the amount of $300,000 per year in each of fiscal year 2014 and fiscal year 2013 and $150,000 during the nine months ended October 2, 2015. This master consulting agreement has been terminated in connection with Mr. Drees agreeing to serve as our President and Chief Executive Officer.

Purchase of Membership Interests of Algostim and PelviStim from Scott F. Drees

During the fourth quarter of 2015, we purchased five membership units of PelviStim (which represented an approximate 5% ownership interest of PelviStim) for $1.6 million and five membership units of Algostim (which represented an approximate 5% ownership interest of Algostim) for $5.2 million from Drees Holding LLC. Scott F. Drees is the sole managing director and the principal owner of Drees Holding LLC. Upon completion of the purchase, neither Drees Holding LLC nor Mr. Drees owns any memberships unit of either PelviStim or Algostim. This purchase was funded by a cash contribution from Greatbatch.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form 10, of which this information statement constitutes a part, with respect to Nuvectra common stock being received by Greatbatch stockholders in the spin-off. This information statement does not contain all of the information set forth in the registration statement or the exhibits to the registration statement. For further information with respect to us, our business and Nuvectra common stock being received by Greatbatch stockholders in the spin-off, please refer to the registration statement, including its exhibits. While we have provided a summary of the material terms of certain agreements and other documents, this summary does not describe all of the details of the agreements and other documents. Statements made in this information statement relating to any agreement or other document are not necessarily complete, and if the agreement or other document is filed as an exhibit to the registration statement, you should refer to such exhibit for a copy of the actual agreement or document.

You may review a copy of this registration statement, including its exhibits, at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 as well as on the Internet website maintained by the SEC at www.sec.gov. Information contained on any website referenced in this information statement is not incorporated by reference in this information statement.

As a result of this spin-off, we will become subject to the information and periodic reporting requirements of the Exchange Act, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for review and copying at the SEC’s Public Reference Room referenced above and the website maintained by the SEC at www.sec.gov.

We intend to furnish Nuvectra stockholders with annual reports containing consolidated financial statements prepared in accordance with GAAP and audited and reported on, with an opinion expressed, by an independent registered public accounting firm.

You should rely only on the information contained in this information statement or to which we have referred you. Neither we nor Greatbatch has authorized anyone to provide you with information that is different or to make any representation not contained in this information statement. This information statement is being furnished solely to provide information to Greatbatch stockholders who will receive Nuvectra common stock in the spin-off. It is not, and it is not to be construed as, an inducement or encouragement to buy or sell any securities of Greatbatch or Nuvectra. We and Greatbatch believe that the information presented herein is accurate as of the date hereof. Changes will occur after the date of this information statement, and neither we nor Greatbatch will update the information except to the extent required in the normal course of our or Greatbatch’s respective public disclosure practices or to the extent required pursuant to federal securities laws.

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INDEX TO COMBINED FINANCIAL STATEMENTS


	Page
Audited Combined Financial Statements for the Years Ended January 2, 2015 and January 3, 2014:

Report of Independent Registered Public Accounting Firm		F-2
Audited Combined Financial Statements		F-3
Audited Combined Balance Sheets		F-3
Audited Combined Statements of Operations and Comprehensive Loss		F-4
Audited Combined Cash Flow Statements		F-5
Audited Combined Statements of Parent Company Equity		F-6
Notes to Audited Combined Financial Statements		F-7

Unaudited Condensed Combined Financial Statements for the Nine Months Ended October 2, 2015 and October 3, 2014:

Condensed Combined Financial Statements – Unaudited		F-25
Condensed Combined Balance Sheets – Unaudited		F-25
Condensed Combined Statements of Operations and Comprehensive Loss – Unaudited		F-26
Condensed Combined Cash Flow Statements – Unaudited		F-27
Condensed Combined Statements of Parent Company Equity – Unaudited		F-28
Notes to Condensed Combined Financial Statements – Unaudited		F-29

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Greatbatch, Inc.

Frisco, Texas

We have audited the accompanying combined balance sheets of Nuvectra (the “Company”), an entity under common control and oversight of Greatbatch, Inc. (“Greatbatch”), as of January 2, 2015 and January 3, 2014, and the related combined statements of operations and comprehensive loss, cash flows, and parent company equity for each of the two years in the period ended January 2, 2015. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all material respects, the financial position of the Company as of January 2, 2015 and January 3, 2014, and the results of its operations and its cash flows for each of the two years in the period ended January 2, 2015, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the combined financial statements, the accompanying combined financial statements have been prepared from the separate records maintained by the Company and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company. Portions of certain expenses represent allocations made from Greatbatch applicable to the Company as a whole.

/s/ Deloitte & Touche LLP

Williamsville, New York

July 30, 2015

F-2

NUVECTRA

COMBINED BALANCE SHEETS

(in thousands)


	At
	January 2, 2015			January 3, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	418		$	1,173
Trade accounts receivable, net of allowance for doubtful accounts		651			832
Prepaid expenses and other current assets		335			396

Total current assets		1,404			2,401
Property, plant and equipment, net		4,680			4,224
Amortizing intangible assets, net		2,272			2,517
Goodwill		38,182			38,182

Total assets	$	46,538		$	47,324

LIABILITIES AND PARENT COMPANY EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	807		$	522
Accrued bonuses		1,243			1,102

Total current liabilities		2,050			1,624
Other long-term liabilities		—			640

Total liabilities		2,050			2,264

Commitments and contingencies (Note 7)
Parent company equity:
Greatbatch’s net investment		145,166			124,294
Accumulated loss		(100,678	)		(79,234	)

Total parent company equity		44,488			45,060

Total liabilities and parent company equity	$	46,538		$	47,324

The accompanying notes are an integral part of these combined financial statements.

F-3

NUVECTRA

COMBINED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands)


	Year Ended
	January 2, 2015			January 3, 2014
Sales	$	3,696		$	3,043
Cost of sales (including related party purchases of $0.2 million in 2014 and $0.0 million in 2013)		1,769			1,231

Gross profit		1,927			1,812
Operating expenses:
Selling, general and administrative expenses		6,704			6,852
Research, development and engineering costs, net		14,984			13,311
Design verification testing		1,588			5,793
Other operating expenses (income), net		95			(63	)

Total operating expenses		23,371			25,893

Loss before provision for income taxes		(21,444	)		(24,081	)
Provision for income taxes		—			—

Net loss	$	(21,444	)	$	(24,081	)

Comprehensive loss	$	(21,444	)	$	(24,081	)

The accompanying notes are an integral part of these combined financial statements.

F-4

NUVECTRA

COMBINED CASH FLOW STATEMENTS

(in thousands)


	Year Ended
	January 2, 2015			January 3, 2014
Cash flows from operating activities:
Net loss	$	(21,444	)	$	(24,081	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,061			646
Stock-based compensation allocated from Greatbatch		545			305
Other non-cash gains		(840	)		(199	)
Changes in operating assets and liabilities:
Trade accounts receivable		181			11
Prepaid expenses and other current assets		61			(147	)
Accounts payable and other current liabilities		485			(724	)
Accrued bonuses		141			167

Net cash used in operating activities		(19,810	)		(24,022	)

Cash flows from investing activities:
Acquisition of property, plant and equipment		(1,272	)		(1,811	)

Net cash used in investing activities		(1,272	)		(1,811	)

Cash flows from financing activities:
Net funding provided by Greatbatch		20,327			26,825

Net cash provided by financing activities		20,327			26,825

Net increase (decrease) in cash and cash equivalents		(755	)		992
Cash and cash equivalents, beginning of year		1,173			181

Cash and cash equivalents, end of year	$	418		$	1,173

The accompanying notes are an integral part of these combined financial statements.

F-5

NUVECTRA

COMBINED STATEMENTS OF PARENT COMPANY EQUITY

(in thousands)


	Greatbatch’s Net Investment		Accumulated Loss			Total Parent Company Equity
Balance, December 28, 2012	$	97,164	$	(55,153	)	$	42,011
Net loss		—		(24,081	)		(24,081	)
Parent allocation – stock-based compensation		305		—			305
Net funding provided by Greatbatch		26,825		—			26,825

Balance, January 3, 2014		124,294		(79,234	)		45,060
Net loss		—		(21,444	)		(21,444	)
Parent allocation – stock-based compensation		545		—			545
Net funding provided by Greatbatch		20,327		—			20,327

Balance, January 2, 2015	$	145,166	$	(100,678	)	$	44,488

The accompanying notes are an integral part of these combined financial statements.

F-6

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background – QiG Group, LLC (“QiG”), is a medical device company formed in 2008 to develop and commercialize a neurostimulation technology platform for treatment of various disorders by stimulating tissues associated with the nervous system. QiG is a wholly owned subsidiary of Greatbatch, Inc. (“Greatbatch” or “Parent”). On July 30, 2015, Greatbatch announced that it intended to spin-off QiG and its neuromodulation medical device business from the remainder of its business through a tax-free distribution of all of the issued and outstanding shares of common stock of QiG to the stockholders of Greatbatch on a pro rata basis (the “Spin-off”). Immediately prior to completion of the Spin-off, QiG will be converted into a corporation organized under the laws of Delaware and change its name to Nuvectra Corporation (the “Company” or “Nuvectra”). Upon completion of the Spin-off, the Company will be an independent, publicly-traded company and Greatbatch will not own any shares of Nuvectra common stock. Except as otherwise indicated or unless the context otherwise requires, the information included in these Combined Financial Statements assumes the completion of the Spin-off and the transactions occurring in connection with the Spin-off.

Basis of Presentation – Nuvectra has historically operated as part of Greatbatch and not as a separate stand-alone entity. These Combined Financial Statements of Nuvectra have been prepared on a “combined” basis from the consolidated financial statements of Greatbatch to represent the financial position and performance of Nuvectra as if it had existed on a stand-alone basis in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The entity being spun-off is composed of Nuvectra and its subsidiaries: (i) Algostim, LLC (“Algostim”), (ii) PelviStim LLC (“PelviStim”), and (iii) NeuroNexus Technologies, Inc. (“NeuroNexus”), the shares of which are being transferred to the Company by Greatbatch in connection with the Spin-off.

These Combined Financial Statements include the assets and liabilities that have historically been held at Greatbatch but which were specifically identifiable or attributable to the Company or were transferred to the Company in connection with the Spin-off. All intercompany transactions and accounts within the Company have been eliminated. All transactions between the Company and Greatbatch are considered to be effectively settled in the Combined Financial Statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Cash Flow Statements as a financing activity and in the Combined Balance Sheets as Greatbatch’s Net Investment.

These Combined Financial Statements include an allocation of expenses related to certain Greatbatch corporate functions, including executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities. These expenses have been charged to the Company on the basis of direct usage, when identifiable, with the remainder allocated primarily on a pro rata basis of estimated hours incurred, headcount, square footage, or other measures. The Company’s management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if the Company was an independent publicly-traded company or of the costs the Company will incur in the future after completion of the Spin-off. Following the Spin-off, Greatbatch will continue to provide many of these services on a transitional basis for a fee. See Note 10 “Related Party Transactions” for additional information. At this time, the Company is unable to determine what its expenses would have been on a standalone basis if the company had operated as an unaffiliated entity for each period in which a statement of operations is presented.

F-7

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

are the Company’s direct obligation, such as certain performance-based bonus plans, are reflected in the Combined Balance Sheets, as well as within the Company’s operating expenses. See Note 4 “Employee Benefit Plans” for further description of these plans.

Greatbatch’s Net Investment in these Combined Financial Statements represents the excess of total assets over total liabilities. Greatbatch’s Net Investment is primarily impacted by contributions from Greatbatch and net funding of Nuvectra’s expenses provided by Greatbatch. The Company has incurred significant net losses and negative cash flows from operations since inception and expects to incur additional net losses for the foreseeable future. The Company had negative cash flow from operations of $19.8 million and $24.0 million for the years ended January 2, 2015 and January 3, 2014, respectively, and an accumulated loss of $100.7 million as of January 2, 2015. Immediately prior to the completion of the Spin-off, Greatbatch will make a cash capital contribution to Nuvectra, which is expected to help fund the Company’s operations for approximately two to three years.

Nature of Operations – Nuvectra is a medical device company focused on the development and commercialization of a neurostimulation technology platform for treatment of various disorders through stimulation of tissues associated with the nervous system. The Company operates as a single reportable segment. The Algovita spinal cord stimulation (“SCS”) system (“Algovita”) is the first application of the Company’s neurostimulation technology platform and is indicated for the treatment of chronic pain of the trunk and limbs. The Company is also in the process of developing additional applications for its neurostimulation technology platform for other emerging indications such as sacral nerve stimulation (“SNS”), and deep brain stimulation (“DBS”), among others.

The Company submitted a premarket approval application for Algovita to the United States Food & Drug Administration (“FDA”) in December 2013. In April 2015, the Company announced receipt of a letter from the FDA informing it that its premarket approval application for Algovita is approvable subject to completion of an FDA inspection that finds that the manufacturing facilities, methods and controls used in the production of Algovita comply with the applicable requirements of the FDA’s Quality System Regulation. The Company expects to obtain final approval of its premarket approval application for Algovita during the second half of 2015 and to launch Algovita commercially in the United States shortly thereafter. Algovita obtained Conformité Européene (“CE”) mark approval on June 17, 2014 through its notified body, TÜV SÜD America, and has been commercially available to patients in Germany and several other European countries since the fourth quarter of 2014. Algovita is being commercialized through the Company’s subsidiary Algostim that is currently 89% owned by the Company. Minority interests in Algostim are owned by key opinion leaders and clinicians in the field of SCS. Under the operating agreement governing Algostim, the Company funds 100% of the expenses incurred by Algostim. No distributions are made to minority holders until the Company is reimbursed for these expenses. Thereafter, any potential future distributions will be made pro rata based upon ownership percentages.

The Company’s subsidiary PelviStim is focused on the commercialization of Nuvectra’s neurostimulation technology platform for SNS and is currently 89% owned by the Company. Minority interests in PelviStim are owned by key opinion leaders and clinicians in the field of SNS. Under the operating agreement governing PelviStim, the Company funds 100% of the expenses incurred by PelviStim. No distributions are made to minority holders until the Company is reimbursed for these expenses. Thereafter, any potential future distributions will be made pro rata based upon ownership percentages.

The Company’s results also include the operations of NeuroNexus, which was originally acquired by Greatbatch in February 2012 and the shares of which were transferred to Nuvectra in connection with the Spin-off. NeuroNexus offers high-value neural interface technology and devices across a wide range of functions including neuromonitoring and recording, electrical and optical stimulation, and targeted drug delivery applications that complement the Company’s existing neurostimulation technology platform. The Company intends to incorporate NeuroNexus’ technologies into its neurostimulation technology platform.

F-8

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

Fiscal Year End – The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31 ^st . Fiscal years 2014 and 2013 ended on January 2, 2015, and January 3, 2014, respectively. Fiscal year 2014 contained fifty-two weeks while fiscal year 2013 contained fifty-three weeks.

Fair Value Measurements – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e . the “exit price”) in an orderly transaction between market participants at the measurement date. Accounting Standards Codification (“ASC”) establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 valuations do not entail a significant degree of judgment.

Level 2 – Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

Level 3 – Valuation is based on unobservable inputs that are significant to the overall fair value measurement. The degree of judgment in determining fair value is greatest for Level 3 valuations.

The availability of observable inputs can vary and is affected by a wide variety of factors, including, the type of asset/liability, whether the asset/liability is established in the marketplace, and other characteristics particular to the valuation. To the extent that a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, assumptions are required to reflect those that market participants would use in pricing the asset or liability at the measurement date. The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, and accrued bonuses approximate fair value because of the short-term nature of these items. Note 8 “Fair Value Measurements” contains additional information on assets and liabilities recorded at fair value in the Combined Financial Statements.

Cash and Cash Equivalents – Cash and Cash Equivalents consist of cash and highly liquid, short-term investments with maturities at the time of purchase of three-months or less. The carrying amount of cash and cash equivalents approximated their fair value as of January 2, 2015 and January 3, 2014 based upon the short-term nature of these instruments.

Concentration of Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consist principally of Trade Accounts Receivable owed to the Company by its customers. The Company performs on-going credit evaluations of its customers. The Company maintains cash deposits with major banks, which from time to time may exceed insured limits. The Company performs on-going credit evaluations of its banks. See Note 9 “Business Segment, Geographic and Concentration Risk Information” for additional information.

F-9

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

Allowance for Doubtful Accounts – The Company provides credit, in the normal course of business, to its customers in the form of trade accounts receivable. Credit is extended based on evaluation of a customer’s financial condition and collateral is not required. The Company maintains an allowance for those customer receivables that it does not expect to collect. The Company accrues its estimated losses from uncollectable accounts receivable to the allowance based upon recent historical experience, the length of time the receivable has been outstanding and other specific information as it becomes available. Provisions to the allowance for doubtful accounts are charged to current operating expenses. Actual losses are charged against this allowance when incurred. The carrying amount of trade accounts receivables approximated their fair value based upon the short-term nature of these assets. The allowance for doubtful accounts was $0.06 million at the end of fiscal year 2014 and fiscal year 2013.

Property, Plant and Equipment, Net (“PP&E”) – PP&E is carried at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the assets, as follows: buildings and building improvements 7-40 years; machinery and equipment 3-8 years; office equipment 3-10 years; and leasehold improvements over the remaining lives of the improvements or the lease term, if less. The cost of repairs and maintenance are expensed as incurred; renewals and betterments are capitalized. Upon retirement or sale of an asset, its cost and related accumulated depreciation or amortization is removed from the accounts and any gain or loss is recorded in operating income or expense.

The Company is a party to various operating lease agreements for buildings, machinery, and equipment. Lease expense includes the effect of escalation clauses which are accounted for ratably over the lease term. Note 2 “Property, Plant and Equipment, Net” contains additional information on the Company’s PP&E.

Business Combinations – The Company records its business combinations under the acquisition method of accounting. Under the acquisition method of accounting, the Company allocates the purchase price of each acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition. The fair value of identifiable intangible assets is based upon detailed valuations that use various assumptions made by management. Any excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired is allocated to goodwill. All direct acquisition-related costs are expensed as incurred.

In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments it expects to make as of the acquisition date. The Company re-measures this liability each reporting period and records changes in the fair value through Other Operating Expenses (Income), Net. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing, amount of, or the likelihood of achieving the applicable contingent consideration. See Note 8 “Fair Value Measurements” for additional information on the Company’s contingent consideration.

Amortizing Intangible Assets, Net – Amortizing Intangible Assets, Net consists primarily of purchased technology and patents, and customer lists. The Company amortizes its definite-lived intangible assets over their estimated useful lives utilizing an accelerated method of amortization, which approximates the projected cash flows used to fair value those intangible assets at the time of acquisition. The amortization period for the Company’s amortizing intangible assets are as follows: purchased technology and patents 6 years; and customer lists 7 years. See Note 3 “Intangible Assets” for additional information on the Company’s amortizing intangible assets.

Impairment of Long-Lived Assets – The Company assesses the impairment of definite-lived long-lived assets or asset groups when events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that are considered in deciding when to perform an impairment review include: a significant decrease in the market price of the asset or asset group; a significant change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; a significant

F-10

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

Potential recoverability is measured by comparing the carrying amount of the asset or asset group to its related total future undiscounted cash flows. If the carrying value is not recoverable, the asset or asset group is considered to be impaired. Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined that useful lives of assets are shorter than originally estimated, and no impairment is present, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives.

Goodwill is not amortized but is periodically tested for impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above. Goodwill is evaluated for impairment through the comparison of the fair value of the Company’s reporting unit to its carrying value. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. This qualitative assessment is referred to as a “step zero ” approach. If, based on the review of the qualitative factors, the Company determines it is more-likely-than-not that the fair value of its reporting unit is greater than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a step zero assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, the Company must perform a two-step impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the two-step impairment test, it is determined that the fair value of its reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Under the two-step approach, the fair value for the Company’s reporting unit is determined based on discounted cash flows and market multiples.

The Company completed its annual goodwill impairment assessment for 2014 by performing a step zero qualitative analysis. As part of this analysis, the Company evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, cost factors, the status of the development of its medical device initiatives, the status of regulatory approvals, the competitive environment, results of the last impairment test, and the operational stability and the overall financial performance of its reporting unit. After completing the analysis, the Company determined that it was more likely than not that its reporting unit’s fair value was greater than the reporting unit’s carrying value and the two-step impairment test was not necessary.

Income Taxes – For purposes of the Combined Financial Statements, the Company’s income tax expense and deferred tax balances have been prepared as if Nuvectra filed income tax returns on a stand-alone basis separate from Greatbatch. As a stand-alone entity, the Company’s deferred taxes and effective tax rate may differ significantly from those in the historical periods.

The Combined Financial Statements of the Company have been prepared using the asset and liability approach in accounting for income taxes, which requires the recognition of deferred income taxes for the expected future tax consequences of net operating losses, credits, and temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized.

F-11

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

The Company accounts for uncertain tax positions using a more likely than not recognition threshold. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. These tax positions are evaluated on a quarterly basis. The Company recognizes interest expense related to uncertain tax positions as Provision for Income Taxes. Penalties, if incurred, are recognized as a component of Selling, General and Administrative Expenses. These tax positions are evaluated on a quarterly basis. See Note 6 “Income Taxes” for additional information.

Revenue Recognition – The Company recognizes revenue when it is realized or realizable and earned. This occurs when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, the buyer is obligated to pay us (i.e., not contingent on a future event), the risk of loss is transferred, there is no obligation of future performance, collectability is reasonably assured and the amount of future returns can reasonably be estimated.

Research, Development and Engineering Costs, Net (“RD&E”) – RD&E costs are expensed as incurred. The primary costs are salary and employee benefits for personnel, material costs used in development projects and subcontracting costs.

In-process research and development (“IPR&D”) represents research projects acquired in a business combination which are expected to generate cash flows but have not yet reached technological feasibility. The primary basis for determining the technological feasibility of these projects is whether or not regulatory approval has been obtained. The Company classifies IPR&D acquired in a business combination as an indefinite-lived intangible asset until the completion or abandonment of the associated projects. Upon completion, the Company would determine the useful life of the IPR&D and begin amortizing the assets to reflect their use over their remaining lives as part of Cost of Sales. Upon permanent abandonment, the remaining carrying amount of the associated IPR&D would be written-off. The Company tests the IPR&D acquired for impairment at least annually, and more frequently if events or changes in circumstances indicate that the assets may be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with their carrying amount. If the carrying amount exceeds its fair value, the Company would record an impairment loss in an amount equal to the excess.

Stock-Based Compensation – The Company’s employees have historically participated in the stock-based compensation programs of Greatbatch, and as such, the Company was charged a portion of the expenses associated with these programs. However, the Combined Balance Sheets do not include any equity related to the stock-based compensation programs. The compensation costs related to stock-based awards granted to employees is based upon their estimated fair value on the grant date. Compensation cost for service-based awards is recognized ratably over the applicable vesting period. Compensation cost for nonmarket-based performance awards is reassessed each period and recognized based upon the probability that the performance targets will be achieved. Compensation cost for market-based performance awards is expensed ratably over the applicable vesting period and is recognized each period whether the performance metrics are achieved or not.

The Black-Scholes option pricing model was used to estimate the fair value of stock options granted. For service-based and nonmarket-based performance restricted stock unit awards, the fair market value of the award is determined based upon the closing value of Greatbatch’s stock price on the grant date. For market-based performance restricted stock unit awards, the fair market value of the award is determined utilizing a Monte Carlo simulation model, which projects the value of Greatbatch’s stock under numerous scenarios and determines the value of the award based upon the present value of those projected outcomes.

The amount of stock-based compensation expense recognized is based on the portion of the awards that are ultimately expected to vest. Pre-vesting forfeiture estimates were estimated based upon historical data and are

F-12

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

revised if actual forfeitures differ from those estimates. The total expense recognized over the vesting period will only be for those awards that ultimately vest, excluding market and nonmarket performance award considerations. Note 4 “Employee Benefit Plans” contains additional information on stock-based compensation.

Insurance – The Company has historically participated in Greatbatch’s various insurance programs, to insure for property and casualty risks, product liability, employee health care, workers’ compensation and other casualty losses. Many of the potential losses are covered by Greatbatch under conventional insurance programs with third-party carriers with high deductible limits. In other areas, Greatbatch is self-insured with stop-loss coverage. The Company was charged a portion of the expenses associated with these programs. See Note 10 “Related Party Transactions” for additional information.

Comprehensive Loss – The Company’s comprehensive loss as reported in the Combined Statements of Operations and Comprehensive Loss is comprised of the Company’s Net Loss.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of sales and expenses during the reporting period. Actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements – In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact these accounting pronouncements may have on the Company’s Combined Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s Combined Financial Statements.

In August 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU No. 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. This ASU is effective for annual periods ending after December 15, 2016, with early adoption permitted. The Company does not expect its pending adoption of ASU 2014-15 to have a material impact on its Combined Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU will supersede existing revenue recognition guidance and is effective for annual reporting periods beginning after December 15, 2017, with early application not permitted. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. The Company is currently assessing the financial impact of adopting the new standard and the methods of adoption; however, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.

F-13

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

2.	PROPERTY, PLANT AND EQUIPMENT, NET

PP&E is comprised of the following (in thousands):


	At
	January 2, 2015			January 3, 2014
Manufacturing machinery and equipment	$	4,957		$	4,610
Information technology hardware and software		285			294
Leasehold improvements		2			13
Furniture and fixtures		113			113
Construction work in process		1,173			300

		6,530			5,330
Accumulated depreciation		(1,850	)		(1,106	)

Total	$	4,680		$	4,224

During the first quarter of 2015, Greatbatch contributed a building and certain fixed assets located in Blaine, MN to the Company for use in its operations, which had a net book value of $1.8 million as these assets were now being fully utilized by Nuvectra. Previously, these assets were shared by various Greatbatch entities and costs were allocated to each entity by Greatbatch. Additionally, during the first quarter of 2015, the Company transferred certain machinery and equipment with a net book value of $1.9 million, which previously had been used for design verification testing, to Greatbatch to utilize in the production of Algovita.

Depreciation and rent expense for PP&E were as follows (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Depreciation expense	$	816	$	436
Rent expense		506		508

Minimum future estimated annual operating lease expenses as of January 2, 2015 are as follows (in thousands):


2015	$	288
2016		165
2017		132
2018		132
2019		132
Thereafter		99

Total estimated operating lease expense	$	948

F-14

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

3.	INTANGIBLE ASSETS

Amortizing intangible assets are comprised of the following (in thousands):


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
At January 2, 2015
Technology and patents	$	1,058	$	(255	)	$	803
Customer lists		1,869		(400	)		1,469

Total amortizing intangible assets	$	2,927	$	(655	)	$	2,272

At January 3, 2014
Technology and patents	$	1,058	$	(151	)	$	907
Customer lists		1,869		(259	)		1,610

Total amortizing intangible assets	$	2,927	$	(410	)	$	2,517

Aggregate intangible asset amortization expense is classified as follows (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Cost of sales	$	104	$	86
Selling, general and administrative expenses		141		124

Total intangible asset amortization expense	$	245	$	210

Estimated future intangible asset amortization expense based on the current carrying value is as follows (in thousands):


	Estimated Amortization Expense
2015	$	289
2016		269
2017		286
2018		298
2019		293
Thereafter		837

Total estimated amortization expense	$	2,272

Greatbatch’s goodwill has resulted from multiple historical acquisitions. These acquisitions were integrated into Greatbatch including its QiG reporting unit. A portion of the assets acquired by Greatbatch giving rise to this goodwill (i.e. work force intangibles) were allocated to Nuvectra in the Spin-off. Accordingly, $38.2 million of Greatbatch’s historical Goodwill was allocated to Nuvectra based upon the relative fair value method as of December 2013. This date was chosen as this was the date QiG became a reportable segment for Greatbatch after its corporate realignment. As of January 2, 2015, no accumulated impairment loss has been recognized for goodwill. Goodwill as of January 2, 2015 and January 3, 2014 was $38.2 million, respectively.

F-15

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

4.	EMPLOYEE BENEFIT PLANS

Defined Contribution Plans – Greatbatch sponsors a defined contribution 401(k) plan for its employees, which the Company’s employees have historically participated in. The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary match. In fiscal years 2014 and 2013 this match was 35% per dollar of participant deferral, up to 6% of the total compensation for each participant. The 401(k) compensation expense recognized in these Combined Financial Statements includes all of the compensation expenses directly attributable to Nuvectra employees. Direct costs related to this defined contribution plan allocated to the Company were $145 thousand in fiscal year 2014 and $142 thousand in fiscal year 2013.

Under the terms of Greatbatch’s Growth Bonus Plan (“G2B Plan”) there is an annual discretionary defined contribution cash bonus historically awarded to employees of the Company based upon Greatbatch company-wide performance measures and individual associate performance measures that are set by Greatbatch executive management at the beginning of the year. Up to 4% of each employee’s eligible G2B Plan bonus is contributed by Greatbatch to the participant’s 401(k) plan in the form of shares of Greatbatch stock. The G2B Plan compensation expense recognized in these Combined Financial Statements includes all of the compensation expenses directly attributable to Nuvectra employees. Direct compensation costs recognized related to the G2B Plan were $1.2 million in fiscal year 2014 and $1.1 million in fiscal year 2013.

Employees of the Company have not historically participated in Greatbatch’s defined benefit plans.

Stock-Based Compensation – The Company’s employees have historically participated in the stock-based compensation programs of Greatbatch, which includes time-based stock options, and time- and performance-based restricted stock units, and typically vest over a three year period. The stock-based payment compensation expense recognized in these Combined Financial Statements includes all of the compensation expenses directly attributable to Nuvectra employees. Equity awards made by Greatbatch are settled through the issuance of shares of Greatbatch common stock. However, the Combined Balance Sheets do not include any Nuvectra equity issuances related to the stock-based compensation programs.

The components and classification of direct stock-based compensation expense allocated by Greatbatch were as follows (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Stock options	$	124	$	76
Restricted stock units		421		229

Total stock-based compensation expense	$	545	$	305

Selling, general and administrative expenses	$	373	$	292
Research, development and engineering costs, net		172		13

Total stock-based compensation expense	$	545	$	305

Algovita Bonus Plan – Historically certain employees of Nuvectra have been eligible to participate in a performance-based bonus plan. Payments under this bonus plan are based upon the ultimate commercialization value, as defined in the bonus plan, of Algovita. The maximum potential liability of this bonus plan is $3.1 million of which $0.8 million was expensed and paid in fiscal year 2014 and $0.05 million was accrued at January 2, 2015. No amounts were expensed or accrued under this program in fiscal year 2013.

F-16

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

Employee Health Plans – Greatbatch sponsors various health plans (medical, dental) for its employees, which the Company’s employees have historically participated in. The operating expenses recognized in these Combined Financial Statements includes expenses allocated by Greatbatch for Nuvectra employees based upon an average cost per employee utilized throughout Greatbatch. Costs allocated to Nuvectra related to these employee health plans were $0.5 million in 2014 and $0.6 million in 2013.

5.	OTHER OPERATING EXPENSES (INCOME), NET

Other Operating Expenses (Income), Net is comprised of the following (in thousands):


	Year Ended
	January 2, 2015			January 3, 2014
Cleveland facility shutdown	$	860		$	—
NeuroNexus integration income		(840	)		(690	)
NeuroNexus IPR&D write-off		—			540
Other expenses		75			87

	$	95		$	(63	)

Cleveland Facility Shutdown – In fiscal year 2014, the Company initiated a plan to transfer the design engineering responsibilities previously performed at its Cleveland, OH facility to the Company’s facility in Blaine, MN. This initiative is expected to be completed in the first half of 2015.

Total restructuring charges expected to be incurred in connection with this initiative are between $1.4 million and $1.8 million, of which $0.9 million has been incurred as of January 2, 2015. Expenses related to this initiative include the following:

•

Severance and retention: $0.6 million – $0.7 million;

•

Asset write-offs: $0.2 million – $0.4 million; and

•

Other: $0.6 million – $0.7 million

Other costs primarily consist of costs to relocate certain equipment and personnel and the related travel expenditures. All expenses are cash expenditures, except asset write-offs.

The change in accrued liabilities during fiscal year 2014 related to the closure of the Cleveland, OH facility is as follows (in thousands):


	Severance and Retention			Asset Write-offs			Other			Total
At January 3, 2014	$	—		$	—		$	—		$	—
Restructuring charges		499			34			327			860
Write-offs		—			(34	)		—			(34	)
Cash payments		(124	)		—			(127	)		(251	)

At January 2, 2015	$	375		$	—		$	200		$	575

NeuroNexus Integration Income – During fiscal years 2014 and 2013, the Company recorded income related to the change in fair value of the contingent consideration recorded in connection with the acquisition of NeuroNexus. See Note 8 “Fair Value Measurements” for additional information on the Company’s contingent consideration, which resulted in a gain of $0.8 million and $0.7 million in fiscal years 2014 and 2013, respectively.

F-17

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

NeuroNexus IPR&D Write-off – During fiscal year 2013, the Company recorded a $0.5 million write-off of IPR&D acquired as part of the NeuroNexus acquisition as the related projects were discontinued prior to reaching technological feasibility.

6.	INCOME TAXES

QiG was initially organized as a limited liability company (“LLC”) and immediately prior to completion of the Spin-off, will be converted into a Delaware corporation and change its name to Nuvectra Corporation.

For federal income tax purposes, QiG, as a LLC with only one member (a “single member LLC”), has historically been disregarded as an entity separate from its owner. From a federal income tax perspective, there is no substantive difference between a single-member LLC, which is treated as a disregarded entity, and a division that is included in the consolidated tax return. However, for limited liability companies that are preparing “combined” financial statements to be included in a registration statement to be filed with the U.S. Securities and Exchange Commission and subject to compliance with Staff Accounting Bulletin Topic 1B, information regarding income taxes must be provided in the “combined” financial statements regardless of whether the limited liability company was historically a disregarded entity for federal income tax purposes.

In connection with the Spin-off, certain assets and activities owned by Greatbatch, but related to the Company’s business and operations, including shares of stock of NeuroNexus, a Michigan Corporation, were transferred to Nuvectra. NeuroNexus is a taxable corporation and is subject to federal, state, and local taxes based on income.

For purposes of the Combined Financial Statements, the Company’s income tax expense and deferred tax balances have been prepared as if Nuvectra filed income tax returns on a stand-alone basis and separate from Greatbatch. Going forward, as an independent publicly-traded company after the completion of the Spin-off, the Company’s deferred taxes and effective tax rate may differ significantly from those in the historical periods as a consequence of the removal of the net operating losses and federal research and development tax credits fully utilized by Greatbatch. The provision for income taxes associated with the Company was comprised of the following (in thousands):


	Year Ended
	January 2, 2015			January 3, 2014
Current tax expense	$	—		$	—
Deferred tax benefit		(7,933	)		(9,778	)
Change in valuation allowance		7,933			9,778

Total provision for income taxes	$	—		$	—

The provision for income taxes differs from the United States statutory rate due to the following:


	Year Ended
	January 2, 2015			January 3, 2014
Statutory rate		35.0	%		35.0	%
Change in valuation allowance		-35.0	%		-35.0	%

Effective tax rate		—			—

F-18

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

Deferred tax assets (liabilities) consist of the following (in thousands):


	At
	January 2, 2015			January 3, 2014
Net operating loss carryforwards	$	36,451		$	29,163
Research & development tax credits		2,700			2,153
Other		724			1,007

Gross deferred tax assets		39,875			32,323
Less valuation allowance		(38,635	)		(30,702	)

Net deferred tax assets		1,240			1,621

Property, plant & equipment		(340	)		(621	)
Intangible assets		(900	)		(1,000	)

Gross deferred tax liabilities		(1,240	)		(1,621	)

Net deferred tax liability	$	—		$	—

Deferred income tax assets or liabilities reflect temporary differences between amounts of assets and liabilities, including net operating loss (“NOL”) carryforwards, for financial and tax reporting. A valuation allowance is established for any deferred income tax asset for which realization is uncertain.

As of January 2, 2015, calculated on a stand-alone basis, the Company had approximately $101.3 million in federal net operating loss (“NOL”) carryforwards that could be used to offset taxable income in future periods and reduce its income taxes payable in those future periods. Many of these NOL carryforwards will expire if they are not used within certain periods. The Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income and recent financial operations, to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a net deferred income tax asset. Judgment is used in considering the relative impact of negative and positive evidence. In arriving at these judgments, the weight given to the potential effect of negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. In evaluating the objective evidence that historical results provide, the Company considered the past three years of combined operating results.

Based on an assessment of the available positive and negative evidence, including the historical combined operating results, the Company determined that there are uncertainties relative to its ability to utilize the net deferred income tax assets. In recognition of these uncertainties, the Company has provided a full valuation allowance on the net deferred income tax assets as of January 2, 2015 and January 3, 2014.

For purposes of the Combined Financial Statements, the Company’s income tax expense and deferred tax balances have been prepared as if Nuvectra filed income tax returns on a stand-alone basis separate from Greatbatch. Historically, the net operating losses and federal research and development tax credits generated by Nuvectra have been fully utilized by Greatbatch, which files a consolidated federal income tax return. Thus, the deferred tax assets reflected in these Combined Financial Statements will not be available to Nuvectra upon completion of the Spin-off.

The Company files annual income tax returns in the United States and various state and local jurisdictions. As of January 2, 2015, the Company maintained no reserve related to unrecognized tax benefits.

7.	COMMITMENTS AND CONTINGENCIES

F-19

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

material effect on its results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, does not become material in the future.

Purchase Commitments – Contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company’s purchase orders are normally based on its current manufacturing needs and are fulfilled by its vendors within short time horizons. As of January 2, 2015, the total contractual obligation related to such expenditures is approximately $6.7 million and will primarily be financed by Greatbatch or cash on hand after the Spin-off.

Operating Leases – The Company is a party to various operating lease agreements. See Note 2 “Property, Plant and Equipment, Net” for information on the Company’s future lease obligations, which primarily relates to building leases.

8.	FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its accrued contingent consideration. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.

Accrued Contingent Consideration – In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments it expects to make as of the acquisition date. The Company re-measures this liability each reporting period and records changes in the fair value through Other Operating Expenses (Income), Net. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing, amount of, or the likelihood of achieving the applicable milestones.

The fair value of accrued contingent consideration recorded by the Company represents the estimated fair value of the contingent consideration that the Company expects to pay to the former shareholders of NeuroNexus based upon the achievement of certain financial and development-based milestones. The fair value of the contingent consideration liability was estimated by discounting to present value, the probability weighted contingent payments expected to be made utilizing a risk adjusted discount rate. During the first quarter of 2014, the financial milestone expired unachieved and as a result, was determined to have a fair value of zero. During the fourth quarter of 2014, the Company determined that the development milestone will expire unachieved, and as a result, was determined to have a fair value of zero. The Company’s accrued contingent consideration is categorized in Level 3 of the fair value hierarchy. Changes in accrued contingent consideration were as follows (in thousands):


At December 28, 2012	$	1,530
Fair value adjustments		(690	)

At January 3, 2014		840
Fair value adjustments		(840	)

At January 2, 2015	$	—

F-20

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

The recurring Level 3 fair value measurements of the Company’s contingent consideration liability as of January 3, 2014 include the following significant unobservable inputs (dollars in thousands):


Contingent Consideration Liability	Fair Value		Valuation Technique	Unobservable Inputs
Financial milestones	$	200	Discounted cash flow	Discount rate		12	%
				Projected year of payment		2014
				Probability weighted payment amount	$	200
Development milestones	$	640	Discounted cash flow	Discount rate		20	%
				Projected year of payment		2016
				Probability weighted payment amount	$	1,000

The following table provides information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):


	Fair Value Measurements Using
Description	At January 3, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Accrued contingent consideration	$	840	$	—	$	—	$	840

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis. A summary of the valuation methodologies for assets and liabilities measured on a nonrecurring basis is as follows:

Long-lived Assets – The Company reviews the carrying amount of its long-lived assets to be held and used for potential impairment whenever certain indicators are present as described in Note 1 “Summary of Significant Accounting Policies.” During fiscal year 2013, the Company wrote off the total balance of its IPR&D of $0.5 million as these projects were discontinued prior to reaching technological feasibility. This charge was recorded in Other Operating Expenses (Income), Net.

Goodwill – Goodwill recorded is not amortized but is periodically tested for impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if certain events occur as described in Note 1 “Summary of Significant Accounting Policies.” During fiscal years 2014 and 2013, no impairment charges were recorded related to the Company’s Goodwill.

F-21

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

9.	BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION

The Company operates as one reportable segment. Nuvectra is a medical device company focused on the development and commercialization of its neurostimulation technology platform for treatment of various disorders by stimulating tissues associated with the nervous system. Nuvectra’s revenue includes sales of neural interface technology, components and systems to the neuroscience and clinical markets and a limited release of Algovita in Europe. Future revenues of Nuvectra is expected to come primarily from sales of Algovita, particularly after it is launched commercially in the United States, technology licensing fees, development service fees and royalty fees. Product line sales for the Company were as follows (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Neural interface components and systems	$	3,466	$	3,043
Algovita SCS system		230		—

Total sales	$	3,696	$	3,043

An analysis and reconciliation of the Company’s geographic information to the respective information in the Combined Financial Statements follows. Sales by geographic area are presented by allocating sales from external customers based on where the products are shipped to (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Sales by geographic area:
United States	$	1,800	$	1,227
Non-Domestic locations:
Germany		489		423
United Kingdom		308		339
Rest of world		1,099		1,054

Total sales	$	3,696	$	3,043

All of the Company’s long-lived tangible assets are located in the United States. The Company is dependent on Greatbatch to manufacture Algovita and its components. An inability to obtain a sufficient quantity of Algovita or its components could have a material adverse impact on the Company’s business, financial condition and results of operations. See Note 10 “Related Party Transactions” for additional information regarding the Company’s relationship with Greatbatch.

10.

RELATED PARTY TRANSACTIONS

Corporate Overhead Allocations from Greatbatch – As discussed in Note 1 “Summary of Significant Accounting Policies,” the Company has historically operated as part of Greatbatch and as a result shared many overhead functions and services performed by various Greatbatch corporate departments. Costs of these departments were allocated across the Greatbatch entities that benefited from those services during the periods presented herein. The indirect costs allocated included executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities. These expenses have been charged to the Company on a pro rata basis based upon estimated hours incurred, headcount, square footage, or other measures. The Company considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if the Company was an independent publicly-traded company or of the costs the Company will incur in the future after completion of the Spin-off. At this time, the Company is unable to

F-22

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

determine what its expenses would have been on a standalone basis if the company had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Corporate overhead allocations from Greatbatch were classified as follows (in thousands):


	Year Ended
	January 2, 2015		January 3, 2014
Selling, general and administrative expenses	$	985	$	991
Research, development and engineering costs, net		2,026		1,457

	$	3,011	$	2,448

Employee Benefit Plans – The Company’s employees have historically participated in various Greatbatch defined contribution and stock-based compensation plans. Compensation expense allocated to Nuvectra for these plans from Greatbatch were based upon the costs directly attributable to Nuvectra employees. See Note 4 “Employee Benefit Plans” for additional information.

Centralized Cash Management – Greatbatch uses a centralized approach to cash management and financing of operations. The Company has historically been a party to Greatbatch’s cash pooling arrangements with several financial institutions to maximize the availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash is provided regularly to meet the financial obligations of the Company, which results in an increase in Greatbatch’s Net Investment in the Combined Balance Sheets.

Insurance – The Company has historically participated in Greatbatch’s various insurance programs, to insure for property and casualty risks, product liability, employee health care, workers’ compensation and other casualty losses. Many of the potential losses are covered under conventional insurance programs with third-party carriers with high deductible limits. In other areas, Greatbatch is self-insured with stop-loss coverage. The Company is charged a fee from Greatbatch for these insurance programs based upon square footage, headcount or a direct charge for those policies directly attributable to Nuvectra. Total insurance charges allocated by Greatbatch were $100 thousand in fiscal year 2014 and $83 thousand in fiscal year 2013.

Debt – Greatbatch’s third-party debt and the related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of the debt obligation and Greatbatch’s outstanding borrowings were not directly attributable to the Company’s operations.

Supply Agreement – The Company has a supply agreement with Greatbatch pursuant to which Greatbatch manufactures Algovita and its components. Total charges incurred under this supply agreement are included in cost of sales and totaled $0.2 million in fiscal year 2014 and $0 in fiscal year 2013.

F-23

NUVECTRA

NOTES TO COMBINED FINANCIAL STATEMENTS

11.

SUBSEQUENT EVENTS

The Company evaluated subsequent events for recognition or disclosure through July 30, 2015, the date the Combined Financial Statements were available to be issued.

F-24

NUVECTRA

CONDENSED COMBINED BALANCE SHEETS – UNAUDITED

(in thousands)


	At
	October 2, 2015			January 2, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	432		$	418
Trade accounts receivable, net of allowance for doubtful accounts		477			651
Prepaid expenses and other current assets		195			335

Total current assets		1,104			1,404
Property, plant and equipment, net		4,481			4,680
Amortizing intangible assets, net		2,055			2,272
Goodwill		38,182			38,182

Total assets	$	45,822		$	46,538

LIABILITIES AND PARENT COMPANY EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	569		$	807
Accrued bonuses		2,967			1,243

Total current liabilities		3,536			2,050
Long-term liabilities		—			—

Total liabilities		3,536			2,050

Commitments and contingencies (Note 7)
Parent company equity:
Greatbatch’s net investment		161,689			145,166
Accumulated loss		(119,403	)		(100,678	)

Total parent company equity		42,286			44,488

Total liabilities and parent company equity	$	45,822		$	46,538

The accompanying notes are an integral part of these condensed combined financial statements.

F-25

NUVECTRA

CONDENSED COMBINED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS – UNAUDITED

(in thousands)


	Nine Months Ended
	October 2, 2015			October 3, 2014
Sales	$	3,942		$	2,467
Cost of sales (including related party purchases of $1.2 million in 2015 and $0.0 million in 2014)		2,475			1,187

Gross profit		1,467			1,280
Operating expenses:
Selling, general and administrative expenses		8,190			4,835
Research, development and engineering costs, net		9,483			11,669
Design verification testing		2,259			1,441
Other operating expenses (income), net		260			(49	)

Total operating expenses		20,192			17,896

Loss before provision for income taxes		(18,725	)		(16,616	)
Provision for income taxes		—			—

Net loss	$	(18,725	)	$	(16,616	)

Comprehensive loss	$	(18,725	)	$	(16,616	)

The accompanying notes are an integral part of these condensed combined financial statements.

F-26

NUVECTRA

CONDENSED COMBINED CASH FLOW STATEMENTS – UNAUDITED

(in thousands)


	Nine Months Ended
	October 2, 2015			October 3, 2014
Cash flows from operating activities:
Net loss	$	(18,725	)	$	(16,616	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		437			706
Stock-based compensation allocated from Greatbatch		702			371
Other non-cash losses (gains)		235			(750	)
Changes in operating assets and liabilities:
Trade accounts receivable		174			247
Prepaid expenses and other current assets		140			123
Accounts payable and other current liabilities		(238	)		315
Accrued bonuses		1,724			776

Net cash used in operating activities		(15,551	)		(14,828	)

Cash flows from investing activities:
Acquisition of property, plant and equipment		(463	)		(366	)

Net cash used in investing activities		(463	)		(366	)

Cash flows from financing activities:
Net funding provided by Greatbatch		16,028			15,551

Net cash provided by financing activities		16,028			15,551

Net increase in cash and cash equivalents		14			357
Cash and cash equivalents, beginning of period		418			1,173

Cash and cash equivalents, end of period	$	432		$	1,530

The accompanying notes are an integral part of these condensed combined financial statements.

F-27

NUVECTRA

CONDENSED COMBINED STATEMENTS OF PARENT COMPANY EQUITY – UNAUDITED

(in thousands)


	Greatbatch’s Net Investment		Accumulated Loss			Total Parent Company Equity
Balance, January 2, 2015	$	145,166	$	(100,678	)	$	44,488
Net loss		—		(18,725	)		(18,725	)
Parent allocation – stock-based compensation		702		—			702
Net funding provided by Greatbatch		15,821		—			15,821

Balance, October 2, 2015	$	161,689	$	(119,403	)	$	42,286

The accompanying notes are an integral part of these condensed combined financial statements.

F-28

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background – QiG Group, LLC (“QiG”), is a medical device company formed in 2008 to develop and commercialize a neurostimulation technology platform for treatment of various disorders by stimulating tissues associated with the nervous system. QiG is a wholly owned subsidiary of Greatbatch, Inc. (“Greatbatch” or “Parent”). On July 30, 2015, Greatbatch announced that it intended to spin-off QiG and its neuromodulation medical device business from the remainder of its business through a tax-free distribution of all of the issued and outstanding shares of common stock of QiG to the stockholders of Greatbatch on a pro rata basis (the “Spin-off”). Immediately prior to completion of the Spin-off, QiG will be converted into a corporation and will change its name to Nuvectra Corporation (the “Company” or “Nuvectra”). Upon completion of the Spin-off, the Company will be an independent publicly-traded company and Greatbatch will not own any shares of Nuvectra common stock. Except as otherwise indicated or unless the context otherwise requires, the information included in these Condensed Combined Financial Statements assumes the completion of the Spin-off and the transactions occurring in connection with the Spin-off.

Basis of Presentation – Nuvectra has historically operated as part of Greatbatch and not as a separate stand-alone entity. These Condensed Combined Financial Statements of Nuvectra have been prepared on a “combined” basis from the consolidated financial statements of Greatbatch. The entity being spun-off is composed of Nuvectra and its subsidiaries: (i) Algostim, LLC (“Algostim”), (ii) PelviStim LLC (“PelviStim”), and (iii) NeuroNexus Technologies, Inc. (“NeuroNexus”), the shares of which are being transferred to the Company by Greatbatch in connection with the Spin-off.

The accompanying unaudited Condensed Combined Financial Statements have been prepared without an audit in accordance with accounting principles generally accepted in the United States of America for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. In the opinion of management, the Condensed Combined Financial Statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of Nuvectra for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates. The January 2, 2015 Condensed Combined Balance Sheet data was derived from audited Combined Financial Statements but does not include all disclosures required by GAAP. For further information, refer to the Combined Financial Statements and notes included in this information statement for the year ended January 2, 2015.

These Condensed Combined Financial Statements include the assets and liabilities that have historically been held at Greatbatch but which were specifically identifiable or attributable to the Company or were transferred to the Company in connection with the Spin-off. All intercompany transactions and accounts within the Company have been eliminated. All transactions between the Company and Greatbatch are considered to be effectively settled in the Condensed Combined Financial Statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Condensed Combined Cash Flow Statements as a financing activity and in the Condensed Combined Balance Sheet as Greatbatch’s Net Investment.

These Condensed Combined Financial Statements include an allocation of expenses related to certain Greatbatch corporate functions, including executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities. These expenses have

F-29

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

been charged to the Company on the basis of direct usage, when identifiable, with the remainder allocated primarily on a pro rata basis of estimated hours incurred, headcount, square footage, or other measures. The Company’s management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if the Company was an independent publicly-traded company or of the costs the Company will incur in the future after completion of the Spin-off. Following the Spin-off, Greatbatch will continue to provide many of these services for us on a transitional basis for a fee. See Note 10 “Related Party Transactions” for additional information. At this time, the Company is unable to determine what its expenses would have been on a standalone basis if the company had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Greatbatch maintains a number of employee benefit and stock-based compensation programs at a corporate level. Nuvectra’s employees historically participated in those programs, and as such, the Company was charged a portion of the expenses associated with these programs. However, the Condensed Combined Balance Sheets do not include any equity related to the stock-based compensation programs. Any benefit plan liabilities that are the Company’s direct obligation, such as certain performance-based bonus plans, are reflected in the Condensed Combined Balance Sheets, as well as within the Company’s operating expenses. See Note 4 “Employee Benefit Plans” for further description of these plans.

Greatbatch’s Net Investment in these Condensed Combined Financial Statements represents the excess of total assets over total liabilities. Greatbatch’s Net Investment is primarily impacted by contributions from Greatbatch and net funding of Nuvectra’s expenses provided by Greatbatch. The Company has incurred significant net losses and negative cash flows from operations since inception and expects to incur additional net losses for the foreseeable future. The Company had negative cash flow from operations of $15.6 million and $14.8 million for the nine months ended October 2, 2015 and October 3, 2014, respectively, and an accumulated loss of $119.4 million as of October 2, 2015. Immediately prior to the completion of the Spin-off, Greatbatch will make a cash capital contribution to Nuvectra of $75.0 million. This cash capital contribution, together with the Company’s cash on hand, is in an amount that the Company estimates will, based on the Company’s current plans and expectations, meet its cash needs for approximately two years after the completion of the spin-off. After such time, the Company expects that it will either have positive cash flow from operations or it will be able to access the equity or debt capital markets for additional funding.

The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. The first nine months of 2015 and 2014 each contained 39 weeks and ended on October 2, and October 3, respectively.

The Company submitted a premarket approval application (“PMA”) for Algovita to the United States Food & Drug Administration (“FDA”) in December 2013. On November 30, 2015, Greatbatch announced receipt of PMA approval for Algovita. The Company expects to launch Algovita commercially in the United States during the first half of 2016. Algovita obtained Conformité Européene (“CE”) mark approval on June 17, 2014 through its notified body, TÜV SÜD America, and has been commercially available to patients in Germany and several other European countries since the fourth quarter of 2014. Algovita is being commercialized through the Company’s subsidiary Algostim and was 89% owned by the Company as of October 2, 2015. Minority interests

F-30

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

in Algostim were owned by key opinion leaders and clinicians in the field of SCS. Under the operating agreement governing Algostim, the Company funded 100% of the expenses incurred by Algostim and no distributions were to be made to minority holders until the Company was reimbursed for these expenses.

The Company’s subsidiary PelviStim is focused on the commercialization of Nuvectra’s neurostimulation technology platform for SNS and was 89% owned by the Company as of October 2, 2015. Minority interests in PelviStim were owned by key opinion leaders and clinicians in the field of SNS. Under the operating agreement governing PelviStim, the Company funded 100% of the expenses incurred by PelviStim and no distributions were to be made to minority holders until the Company was reimbursed for these expenses.

During the fourth quarter of 2015, the Company purchased the outstanding minority interests of Algostim and PelviStim for $16.7 million. Included in this amount was $6.9 million paid to Drees Holding LLC, which is a limited liability company of which Scott F. Drees, Chief Executive Officer (“CEO”) of Nuvectra, is the principal owner and the sole managing director. Mr. Drees received minority membership interests in Algostim and PelviStim in connection with his entering into a long-term consulting agreement with Nuvectra and prior to being appointed as its CEO in July 2015. Mr. Drees’ consulting agreement was terminated in connection with his agreeing to serve in the role of Nuvectra CEO. The buyout of the minority interests was funded by a cash contribution from Greatbatch.

Recently Issued Accounting Pronouncements – In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact these accounting pronouncements may have on the Company’s Condensed Combined Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s Condensed Combined Financial Statements.

In November 2015, the FASB issued Accounting Standard Update (“ASU”) No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” This ASU requires entities that present a classified balance sheet to classify all deferred income taxes as noncurrent assets or noncurrent liabilities. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified balance sheet. This ASU is effective for the Company for annual periods beginning after December 15, 2016, and interim periods within those years. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the financial impact of adopting this ASU on its Condensed Combined Financial Statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU No. 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. This ASU is effective for annual periods ending after December 15, 2016, with early adoption permitted. The Company does not expect its pending adoption of ASU 2014-15 to have a material impact on its Condensed Combined Financial Statements.

F-31

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. The Company is currently assessing the financial impact of adopting these ASUs and the methods of adoption; however, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.

2.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net are comprised of the following (in thousands):


	At
	October 2, 2015			January 2, 2015
Machinery and equipment	$	1,654		$	4,957
Buildings and building improvements		1,563			2
Information technology hardware and software		265			285
Furniture and fixtures		143			113
Land and land improvements		390			—
Construction work in process		1,559			1,173

		5,574			6,530
Accumulated depreciation		(1,093	)		(1,850	)

Total	$	4,481		$	4,680

During the first quarter of 2015, Greatbatch contributed a building and certain fixed assets located in Blaine, MN to the Company for use in its operations, which had a net book value of $1.8 million as these assets were now being fully utilized by Nuvectra. Previously, these assets were shared by various Greatbatch entities and costs were allocated to each entity by Greatbatch. Additionally, during the first six months of 2015, the Company transferred certain machinery and equipment with a net book value of $2.0 million, which previously had been used for design verification testing, to Greatbatch to utilize in the production of Algovita. For purposes of the condensed combined cash flow statement, these transfers were treated as non-cash transactions.

Depreciation expense for property, plant and equipment and rent expense were as follows (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Depreciation expense	$	220	$	523
Rent expense		306		367

F-32

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

Minimum future estimated annual operating lease payments as of October 2, 2015 are as follows (in thousands):


Remainder of 2015	$	59
2016		174
2017		134
2018		132
2019		132
Thereafter		99

	$	730

3.	INTANGIBLE ASSETS

Amortizing intangible assets are comprised of the following (in thousands):


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
At October 2, 2015
Technology and patents	$	1,058	$	(354	)	$	704
Customer lists		1,869		(518	)		1,351

Total amortizing intangible assets	$	2,927	$	(872	)	$	2,055

At January 2, 2015
Technology and patents	$	1,058	$	(255	)	$	803
Customer lists		1,869		(400	)		1,469

Total amortizing intangible assets	$	2,927	$	(655	)	$	2,272

Total intangible asset amortization expense is classified as follows (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Cost of sales	$	99	$	78
SG&A		118		105

Total intangible asset amortization expense	$	217	$	183

Estimated future intangible asset amortization expense based on the current carrying value is as follows (in thousands):


	Estimated Amortization Expense
Remainder of 2015	$	72
2016		269
2017		286
2018		298
2019		293
Thereafter		837

Total estimated amortization expense	$	2,055

F-33

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

4.	EMPLOYEE BENEFIT PLANS

Defined Contribution Plans – Under the terms of Greatbatch’s Growth Bonus Plan (“G2B Plan”) there is an annual discretionary defined contribution bonus awarded to employees of the Company based upon Greatbatch company-wide performance measures and individual associate performance measures that are set by Greatbatch executive management at the beginning of the year. Up to 4% of each employee’s eligible G2B Plan bonus is contributed by Greatbatch to the participant’s 401(k) plan in the form of shares of Greatbatch stock. The G2B Plan compensation expense recognized in these Condensed Combined Financial Statements includes all of the compensation expenses directly attributable to Nuvectra employees. Direct compensation costs recognized related to the G2B Plan for the first nine months of 2015 and 2014 were $0.5 million and $0.9 million, respectively.

Stock-Based Compensation – The Company’s employees have historically participated in the stock-based compensation programs of Greatbatch, which includes time-based stock options, and time- and performance-based restricted stock units, and typically vest over a three year period. The stock-based payment compensation expense recognized in these Condensed Combined Financial Statements includes all of the compensation expenses directly attributable to Nuvectra employees. Equity awards made by Greatbatch are settled through the issuance of shares of Greatbatch common stock. However, the Condensed Combined Balance Sheets do not include any equity related to the stock-based compensation programs. The components and classification of direct stock-based compensation expense allocated by Greatbatch were as follows (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Stock options	$	163	$	83
Restricted stock units		539		288

Total stock-based compensation expense	$	702	$	371

Selling, general and administrative expenses	$	471	$	254
Research, development and engineering costs, net		231		117

Total stock-based compensation expense	$	702	$	371

Algovita Bonus Plan – Historically certain employees of Nuvectra have been eligible to participate in a performance-based bonus plan. Payments under this bonus plan are based upon the ultimate commercialization value, as defined in the bonus plan, of Algovita. The maximum potential liability of this bonus plan is $3.2 million of which $0.8 million was expensed and paid in 2014 and $2.4 million was accrued at October 2, 2015. Compensation costs recognized related to the Algovita Bonus Plan for the first nine months of 2015 and 2014 were $2.3 million and $0.9 million, respectively.

5.	OTHER OPERATING EXPENSES (INCOME), NET

Other Operating Expenses (Income), Net is comprised of the following (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Cleveland facility shutdown	$	228	$	660
NeuroNexus integration income		—		(750	)
Other expenses		32		41

	$	260	$	(49	)

F-34

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

Cleveland Facility Shutdown – In 2014, the Company initiated a plan to transfer the design engineering responsibilities previously performed at its Cleveland, OH facility to the Company’s facility in Blaine, MN. This initiative is expected to be completed by the end of 2015.

Total restructuring charges expected to be incurred in connection with this initiative are between $1.1 million and $1.5 million, of which $1.1 million has been incurred as of October 2, 2015. Expenses related to this initiative include the following:

•

Severance and retention: $0.4 million – $0.5 million;

•

Asset write-offs: $0.3 million – $0.5 million; and

•

Other: $0.4 million – $0.5 million

Other costs primarily consist of costs to relocate certain equipment and personnel and the related travel expenditures. All expenses are cash expenditures, except asset write-offs.

The change in accrued liabilities related to the closure of the Cleveland, OH facility is as follows (in thousands):


	Severance and Retention			Asset Write-offs			Other			Total
At January 2, 2015	$	375		$	—		$	200		$	575
Restructuring charges (income)		(120	)		235			113			228
Write-offs		—			(235	)		—			(235	)
Cash payments		(225	)		—			(313	)		(538	)

At October 2, 2015	$	30		$	—		$	—		$	30

NeuroNexus Integration Income – During the first nine months of 2014, the Company recorded income related to the change in fair value of the contingent consideration recorded in connection with the acquisition of NeuroNexus. See Note 8 “Fair Value Measurements” for additional information on the Company’s contingent consideration, which resulted in a gain of $0.8 million in the first nine months of 2014.

Other Expenses – During 2015 and 2014, the Company recorded charges in connection with various asset disposals.

6.	INCOME TAXES

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. As of October 2, 2015, the Company maintained no reserve related to unrecognized tax benefits.

7.	COMMITMENTS AND CONTINGENCIES

Litigation – The Company is a party to various legal actions arising in the normal course of business. While the Company does not expect that the ultimate resolution of any of these pending actions will have a material effect on its results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, does not become material in the future.

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NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

Purchase Commitments – Contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company’s purchase orders are normally based on its current manufacturing needs and are fulfilled by its vendors within short time horizons. As of October 2, 2015, the total contractual obligation related to such expenditures is approximately $6.5 million and will primarily be financed by Greatbatch or cash on hand after the Spin-off.

8.	FAIR VALUE MEASUREMENTS

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, and accrued bonuses approximate fair value because of the short-term nature of these items.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of October 2, 2015, the Company does not have any financial or nonfinancial assets or liabilities that are measured at fair value on a recurring basis.

The recurring Level 3 fair value measurements of the Company’s contingent consideration liability as of October 3, 2014 include the following significant unobservable inputs (dollars in thousands):


Contingent Consideration Liability	Fair Value		Valuation Technique	Unobservable Inputs
Development milestone	$	90	Discounted cash flow	Discount rate		20	%
				Projected year of payment		2015
				Probability weighted payment amount	$	100

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived Assets – The Company reviews the carrying amount of its long-lived assets to be held and used, other than goodwill, for potential impairment whenever certain indicators are present such as: a significant decrease in the market price of the asset or asset group; a significant change in the extent or manner in

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NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

which the long-lived asset or asset group is being used or in its physical condition; a significant change in legal factors or in the business climate that could affect the value of the long-lived asset or asset group, including an action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

Potential recoverability is measured by comparing the carrying amount of the asset or asset group to its related total future undiscounted cash flows. If the carrying value is not recoverable, the asset or asset group is considered to be impaired. Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined that useful lives are shorter than originally estimated, and no impairment is present, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives. During the first nine months of 2015, the Company recorded $0.2 million of impairment charges related to its long-lived assets in connection with the shut-down of its Cleveland, OH facility.

Goodwill – Goodwill recorded is not amortized but is periodically tested for impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above. Goodwill is evaluated for impairment through the comparison of the fair value of the reporting unit to its carrying value. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. This qualitative assessment is referred to as a “step zero” approach. If, based on the review of the qualitative factors, the Company determines it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a step zero assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, the Company must perform a two-step impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Under the two-step approach, fair values for reporting units are determined based on discounted cash flows and market multiples. The Company did not record any impairment charges related to goodwill during the first nine months of 2015 or 2014, respectively. See Note 3 “Intangible Assets” for additional information on the Company’s intangible assets.

F-37

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

9.	BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION


	Nine Months Ended
	October 2, 2015		October 3, 2014
Neural interface components and systems	$	2,910	$	2,467
Algovita SCS system		1,032		—

Total sales	$	3,942	$	2,467

An analysis and reconciliation of the Company’s geographic information to the respective information in the Condensed Combined Financial Statements follows. Sales by geographic area are presented by allocating sales from external customers based on where the products are shipped to (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Sales by geographic area:
United States	$	1,564	$	1,317
Non-Domestic locations:
Germany		1,240		141
Rest of world		1,138		1,009

Total sales	$	3,942	$	2,467

10.

RELATED PARTY TRANSACTIONS

F-38

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that would have been incurred if the Company was an independent publicly-traded company or of the costs the Company will incur in the future after completion of the Spin-off. At this time, the Company is unable to determine what its expenses would have been on a standalone basis if the company had operated as an unaffiliated entity for each period in which a statement of operations is presented.

Corporate overhead allocations from Greatbatch were classified as follows (in thousands):


	Nine Months Ended
	October 2, 2015		October 3, 2014
Selling, general and administrative expenses	$	768	$	735
Research, development and engineering costs, net		1,335		1,520

	$	2,103	$	2,255

In connection with the Spin-off, the Company will enter into, or amend various agreements to effect the Spin-off of Nuvectra from Greatbatch and provide a framework for the Company’s relationship with Greatbatch going forward after the Spin-off. The Company and Greatbatch are entering into a separation and distribution agreement, a tax matters agreement, a transition services agreement and an employee matters agreement, which will provide for the allocation between Nuvectra and Greatbatch of assets, employees, liabilities and obligations (including PP&E, employee benefits, and tax-related assets and liabilities) attributable to the Company’s business for the period prior to, at and after the Spin-off. The Company will also enter into a supply agreement with Greatbatch in connection with the Spin-off providing Greatbatch with the exclusive right to supply the Company with any neurostimulation products it seeks to commercialize. Additionally, the Company will enter into two license agreements with Greatbatch pursuant to which the Company will license to Greatbatch rights in, subject to specified restrictions, certain intellectual property underlying its neurostimulation technology platform. Immediately prior to the completion of the Spin-off, Greatbatch will make a cash capital contribution to Nuvectra of $75.0 million. This cash capital contribution, together with the Company’s cash on hand, is in an amount that the Company estimates will, based on its current plans and expectations, meet its cash needs for approximately two years after the completion of the spin-off. After such time, the Company expects that it will either have positive cash flow from operations or it will be able to access the equity or debt capital markets for additional funding.

F-39

NUVECTRA

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS – UNAUDITED

Supply Agreement – The Company has a supply agreement with Greatbatch pursuant to which Greatbatch manufactures Algovita and its components. Total charges incurred under this supply agreement are included in cost of sales and totaled $1.2 million for the first nine months of 2015 and $0.0 million for the first nine months of 2014.

Purchase of Minority Interests – During the fourth quarter of 2015, the Company purchased the outstanding minority interests of Algostim and PelviStim for $16.7 million. Included in this amount was $6.9 million paid to Drees Holding LLC, which is a limited liability company of which Scott F. Drees, CEO of Nuvectra, is the principal owner and the sole managing director. Mr. Drees received minority membership interests in Algostim and PelviStim in connection with his entering into a long-term consulting agreement with Nuvectra and prior to being appointed as its CEO in July 2015. Mr. Drees’ consulting agreement was terminated in connection with his agreeing to serve in the role of Nuvectra CEO. The buyout of the minority interests was funded by a cash contribution from Greatbatch.

11.

SUBSEQUENT EVENTS

The Company evaluated subsequent events for recognition or disclosure through December 30, 2015, the date the Condensed Combined Financial Statements were available to be issued.

F-40