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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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The Netherlands
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98-0509600
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Prins Bernhardplein 200
1097 JB Amsterdam, The Netherlands
(Address of principal executive offices)
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None
(Zip Code)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Page
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•
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future actions of the SEC, the United States Attorney’s office, the U.S. Food and Drug Administration (FDA), the Department of Health and Human Services, or other U.S. or foreign government authorities, including those resulting from increased scrutiny under the U.S. Foreign Corrupt Practices Act and similar laws, that could delay, limit, or suspend our development, manufacturing, commercialization, and sale of products, or result in seizures, injunctions, monetary sanctions, or criminal or civil liabilities;
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•
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risks associated with the merger between Tornier N.V. (Tornier or legacy Tornier) and Wright Medical Group, Inc. (WMG or legacy Wright), including the failure to realize intended benefits and anticipated synergies and cost-savings from the transaction or delay in realization thereof; our businesses may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; and business disruption after the transaction, including adverse effects on employee retention, our sales and distribution channel, especially in light of territory transitions, and business relationships with third parties;
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•
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risks associated with the divestiture of the U.S. rights to certain of legacy Tornier's ankle and silastic toe replacement products;
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•
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liability for product liability claims on hip/knee (OrthoRecon) products sold by legacy Wright prior to the divestiture of the OrthoRecon business;
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•
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risks and uncertainties associated with the recent metal-on-metal master settlement agreement and the settlement agreement with the three insurance companies, including without limitation, the final settlement amount and the final number of claims settled under the master settlement agreement, the possibility that the 95% opt-in requirement may not be achieved, the resolution of the remaining unresolved claims, the effect of the broad release of certain insurance coverage for present and future claims, and the resolution of WMT’s dispute with the remaining carriers;
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failure to realize the anticipated benefits from previous acquisitions and dispositions;
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•
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adverse outcomes in existing product liability litigation;
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•
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new product liability claims;
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•
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inadequate insurance coverage;
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•
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copycat claims against our modular hip systems resulting from a competitor’s recall of its modular hip product;
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•
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the ability of a creditor of any one particular entity within our corporate structure to reach the assets of the other entities within our corporate structure not liable for the underlying claims of the one particular entity, despite our corporate structure which is intended to ring-fence liabilities;
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•
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failure to obtain anticipated commercial sales of our AUGMENT
®
Bone Graft in the United States;
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•
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challenges to our intellectual property rights or inability to defend our products against the intellectual property rights of others;
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•
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adverse effects of diverting resources and attention to transition services provided to the purchaser of our large joints business;
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•
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failures of, interruptions to, or unauthorized tampering with, our information technology systems;
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•
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failure or delay in obtaining FDA or other regulatory approvals for our products;
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•
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the potentially negative effect of our ongoing compliance efforts on our relationships with customers and on our ability to deliver timely and effective medical education, clinical studies, and new products;
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•
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the possibility of private securities litigation or shareholder derivative suits;
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insufficient demand for and market acceptance of our new and existing products;
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recently enacted healthcare laws and changes in product reimbursements, which could generate downward pressure on our product pricing;
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potentially burdensome tax measures;
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•
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lack of suitable business development opportunities;
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•
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inability to capitalize on business development opportunities;
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•
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product quality or patient safety issues;
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geographic and product mix impact on our sales;
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•
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inability to retain key sales representatives, independent distributors, and other personnel or to attract new talent;
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•
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inventory reductions or fluctuations in buying patterns by wholesalers or distributors;
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•
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inability to generate sufficient cash flow to satisfy our capital requirements, including future milestone payments, and existing debt, including the conversion features of our convertible senior notes, or refinance our existing debt as it matures;
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inability to raise additional financing when needed and on favorable terms;
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the negative impact of the commercial and credit environment on us, our customers, and our suppliers;
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deriving a significant portion of our revenues from operations in certain geographic markets that are subject to political, economic, and social instability, including in particular France, and risks and uncertainties involved in launching our products in certain new geographic markets;
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fluctuations in foreign currency exchange rates;
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not successfully developing and marketing new products and technologies and implementing our business strategy;
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not successfully competing against our existing or potential competitors and the effect of significant recent consolidations amongst our competitors;
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the reliance of our business plan on certain market assumptions;
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our private label manufacturers failing to provide us with sufficient supply of their products, or failing to meet appropriate quality requirements;
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our inability to timely manufacture products or instrument sets to meet demand;
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our plans to bring the manufacturing of certain of our products in-house and possible disruptions we may experience in connection with such transition;
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•
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our plans to increase our gross margins by taking certain actions designed to do so;
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•
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the loss of key suppliers, which may result in our inability to meet customer orders for our products in a timely manner or within our budget;
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the incurrence of significant expenditures of resources to maintain relatively high levels of inventory, which could reduce our cash flows and increase the risk of inventory obsolescence, which could harm our operating results;
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consolidation in the healthcare industry that could lead to demands for price concessions or the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, financial condition, or operating results;
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our clinical trials and their results and our reliance on third parties to conduct them;
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the compliance of our products and activities with the laws and regulations of the countries in which they are marketed, which compliance may be costly and time-consuming;
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the use, misuse or off-label use of our products that may harm our image in the marketplace or result in injuries that may lead to product liability suits, which could be costly to our business or result in governmental sanctions; and
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pending and future other litigation, which could have an adverse effect on our business, financial condition, or operating results.
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Wright Medical Group N.V.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
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|||||||
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September 25, 2016
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December 27, 2015
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||||
Assets:
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||||
Current assets:
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||||
Cash and cash equivalents
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$
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314,314
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$
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139,804
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Accounts receivable, net
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121,794
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|
131,050
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||
Inventories
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170,819
|
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|
210,701
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Prepaid expenses
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10,533
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|
14,923
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||
Other current assets
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100,169
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44,919
|
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||
Current assets held for sale
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21,805
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18,487
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Total current assets
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739,434
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559,884
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Property, plant and equipment, net
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211,096
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224,256
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Goodwill
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855,800
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866,989
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Intangible assets, net
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247,771
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250,928
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Deferred income taxes
|
2,777
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|
2,580
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||
Other assets
1
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259,448
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137,174
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Non-current assets held for sale
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—
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31,683
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Total assets
1
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$
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2,316,326
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$
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2,073,494
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Liabilities and Shareholders’ Equity:
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Current liabilities:
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||||
Accounts payable
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$
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25,181
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$
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30,904
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Accrued expenses and other current liabilities
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399,985
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|
171,171
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Current portion of long-term obligations
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4,117
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|
2,171
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Current liabilities held for sale
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2,049
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|
2,692
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Total current liabilities
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431,332
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|
206,938
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||||
Long-term debt and capital lease obligations
1
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769,333
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561,201
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Deferred income taxes
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28,611
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|
41,755
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Other liabilities
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341,945
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|
208,574
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Total liabilities
1
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1,571,221
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|
1,018,468
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Commitments and contingencies (
Note 13
)
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Shareholders’ equity:
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||||
Ordinary shares, €0.03 par value, authorized: 320,000,000 shares; issued and outstanding: 103,225,384 shares at September 25, 2016 and 102,672,678 shares at December 27, 2015
|
3,809
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|
|
3,790
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Additional paid-in capital
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1,901,386
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1,835,586
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Accumulated other comprehensive income (loss)
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1,279
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(10,484
|
)
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||
Accumulated deficit
|
(1,161,369
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)
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(773,866
|
)
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||
Total shareholders’ equity
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745,105
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|
|
1,055,026
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||
Total liabilities and shareholders’ equity
1
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$
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2,316,326
|
|
|
$
|
2,073,494
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1
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The prior period debt issuance costs were reclassified to account for adoption of ASU 2015-03 and ASU 2015-15 (See
Note 2
).
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Wright Medical Group N.V.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
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|||||||||||||||
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Three months ended
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Nine months ended
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||||||||||||
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September 25, 2016
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September 30, 2015
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September 25, 2016
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September 30, 2015
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||||||||
Net sales
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$
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157,332
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|
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$
|
80,139
|
|
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$
|
497,339
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$
|
238,493
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|
Cost of sales
1, 2
|
46,149
|
|
|
23,052
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|
|
141,824
|
|
|
63,812
|
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||||
Gross profit
|
111,183
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|
57,087
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|
355,515
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|
174,681
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|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
1
|
129,840
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|
|
85,997
|
|
|
401,069
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|
|
250,801
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|
||||
Research and development
1
|
12,481
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|
|
9,570
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|
36,705
|
|
|
24,644
|
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||||
Amortization of intangible assets
|
7,466
|
|
|
2,562
|
|
|
21,407
|
|
|
7,741
|
|
||||
Total operating expenses
|
149,787
|
|
|
98,129
|
|
|
459,181
|
|
|
283,186
|
|
||||
Operating loss
|
(38,604
|
)
|
|
(41,042
|
)
|
|
(103,666
|
)
|
|
(108,505
|
)
|
||||
Interest expense, net
|
16,795
|
|
|
11,185
|
|
|
41,673
|
|
|
29,793
|
|
||||
Other (income) expense, net
|
(365
|
)
|
|
10,236
|
|
|
(3,494
|
)
|
|
7,395
|
|
||||
Loss from continuing operations before income taxes
|
(55,034
|
)
|
|
(62,463
|
)
|
|
(141,845
|
)
|
|
(145,693
|
)
|
||||
(Benefit) provision for income taxes
|
(2,325
|
)
|
|
187
|
|
|
(6,913
|
)
|
|
511
|
|
||||
Net loss from continuing operations
|
$
|
(52,709
|
)
|
|
$
|
(62,650
|
)
|
|
$
|
(134,932
|
)
|
|
$
|
(146,204
|
)
|
Loss from discontinued operations, net of tax
|
$
|
(57,436
|
)
|
|
$
|
(36,211
|
)
|
|
$
|
(252,571
|
)
|
|
$
|
(46,720
|
)
|
Net loss
|
$
|
(110,145
|
)
|
|
$
|
(98,861
|
)
|
|
$
|
(387,503
|
)
|
|
$
|
(192,924
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations per share (Note 12):
3
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.51
|
)
|
|
$
|
(1.19
|
)
|
|
$
|
(1.31
|
)
|
|
$
|
(2.78
|
)
|
Diluted
|
$
|
(0.51
|
)
|
|
$
|
(1.19
|
)
|
|
$
|
(1.31
|
)
|
|
$
|
(2.78
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share (
Note 12
):
3
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.07
|
)
|
|
$
|
(1.87
|
)
|
|
$
|
(3.77
|
)
|
|
$
|
(3.67
|
)
|
Diluted
|
$
|
(1.07
|
)
|
|
$
|
(1.87
|
)
|
|
$
|
(3.77
|
)
|
|
$
|
(3.67
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of ordinary shares outstanding-basic
3
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
||||
Weighted-average number of ordinary shares outstanding-diluted
3
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
1
|
These line items include the following amounts of non-cash, share-based compensation expense for the periods indicated:
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Three months ended
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Nine months ended
|
||||||||||||
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September 25, 2016
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|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
Cost of sales
|
$
|
146
|
|
|
$
|
17
|
|
|
$
|
321
|
|
|
$
|
28
|
|
Selling, general and administrative
|
3,168
|
|
|
1,777
|
|
|
9,070
|
|
|
6,895
|
|
||||
Research and development
|
214
|
|
|
231
|
|
|
510
|
|
|
783
|
|
2
|
Cost of sales includes amortization of inventory step-up adjustment of
$10.3 million
and
$30.9 million
for the
three and nine
months ended
September 25, 2016
, respectively.
|
3
|
The prior period weighted-average shares outstanding and net loss per share amounts were converted to meet post-merger valuations as described within
Note 12
.
|
|
Three months ended
|
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Nine months ended
|
||||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
Net loss
|
$
|
(110,145
|
)
|
|
$
|
(98,861
|
)
|
|
$
|
(387,503
|
)
|
|
$
|
(192,924
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Changes in foreign currency translation
|
4,480
|
|
|
(1,581
|
)
|
|
11,763
|
|
|
(7,293
|
)
|
||||
Other comprehensive income (loss)
|
4,480
|
|
|
(1,581
|
)
|
|
11,763
|
|
|
(7,293
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive loss
|
$
|
(105,665
|
)
|
|
$
|
(100,442
|
)
|
|
$
|
(375,740
|
)
|
|
$
|
(200,217
|
)
|
Wright Medical Group N.V.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
|
|||||||
|
Nine months ended
|
||||||
|
September 25, 2016
|
|
September 30, 2015
|
||||
Operating activities:
|
|
|
|
||||
Net loss
|
$
|
(387,503
|
)
|
|
$
|
(192,924
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation
|
42,066
|
|
|
16,966
|
|
||
Share-based compensation expense
|
9,901
|
|
|
7,706
|
|
||
Amortization of intangible assets
|
21,746
|
|
|
7,741
|
|
||
Amortization of deferred financing costs and debt discount
|
28,676
|
|
|
20,175
|
|
||
Deferred income taxes
|
(9,534
|
)
|
|
2
|
|
||
Provision for excess and obsolete inventory
1
|
16,171
|
|
|
10,926
|
|
||
Non-cash loss on extinguishment of debt
|
12,343
|
|
|
24,746
|
|
||
Amortization of inventory step-up adjustment
1
|
34,346
|
|
|
69
|
|
||
Non-cash adjustment to derivative fair values
|
(26,460
|
)
|
|
(12,022
|
)
|
||
Impairment loss on large joints assets held for sale (
Note 4
)
|
21,876
|
|
|
—
|
|
||
Mark-to-market adjustment for CVRs (
Note 6
)
|
8,968
|
|
|
(7,290
|
)
|
||
Reduction of insurance receivable
|
—
|
|
|
25,000
|
|
||
Provision for metal-on-metal product liability loss (
Note 13
)
|
188,732
|
|
|
—
|
|
||
Other
|
3,494
|
|
|
4,765
|
|
||
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
||||
Accounts receivable
|
9,900
|
|
|
2,878
|
|
||
Inventories
1
|
(3,662
|
)
|
|
(33,779
|
)
|
||
Prepaid expenses and other current assets
|
20,066
|
|
|
(2,872
|
)
|
||
Accounts payable
|
(6,659
|
)
|
|
1,866
|
|
||
Accrued expenses and other liabilities
|
(9,820
|
)
|
|
12,191
|
|
||
CVR payment in excess of value assigned as part of PPA
|
—
|
|
|
(27,983
|
)
|
||
Net cash used in operating activities
|
(25,353
|
)
|
|
(141,839
|
)
|
||
Investing activities:
|
|
|
|
||||
Capital expenditures
|
(37,800
|
)
|
|
(34,013
|
)
|
||
Acquisition of businesses
|
—
|
|
|
(4,905
|
)
|
||
Purchase of intangible assets
|
(4,761
|
)
|
|
(82
|
)
|
||
Sales and maturities of available-for-sale marketable securities
|
—
|
|
|
2,566
|
|
||
Net cash used in investing activities
|
(42,561
|
)
|
|
(36,434
|
)
|
||
Financing activities:
|
|
|
|
||||
Issuance of ordinary shares
|
5,654
|
|
|
3,084
|
|
||
Proceeds from convertible senior notes
|
395,000
|
|
|
632,500
|
|
||
Redemption of convertible senior notes
|
(102,974
|
)
|
|
(240,000
|
)
|
||
Payment of notes premium
|
(1,619
|
)
|
|
(49,152
|
)
|
||
Proceeds from stock warrants
|
54,629
|
|
|
86,400
|
|
||
Payment of notes hedge option
|
(99,816
|
)
|
|
(144,843
|
)
|
||
Repurchase of stock warrants
|
(3,319
|
)
|
|
(59,803
|
)
|
||
Proceeds from notes hedge option
|
3,892
|
|
|
69,764
|
|
||
Payments of deferred financing costs and equity issuance costs
|
(8,318
|
)
|
|
(20,081
|
)
|
||
Proceeds from issuance of other long-term debt
|
821
|
|
|
—
|
|
||
Payment of contingent consideration
|
(664
|
)
|
|
(70,120
|
)
|
||
Payments of capital lease obligations and other borrowings
|
(1,822
|
)
|
|
(530
|
)
|
||
Net cash provided by financing activities
|
241,464
|
|
|
207,219
|
|
||
|
|
|
|
||||
Effect of exchange rates on cash and cash equivalents
|
960
|
|
|
(1,837
|
)
|
||
|
|
|
|
Wright Medical Group N.V.
Consolidated Statements of Cash Flows (Continued)
(In thousands)
|
|||||||
|
Nine months ended
|
||||||
|
September 25, 2016
|
|
September 30, 2015
|
||||
Net increase in cash and cash equivalents
|
174,510
|
|
|
27,109
|
|
||
|
|
|
|
||||
Cash and cash equivalents, beginning of period
|
139,804
|
|
|
227,326
|
|
||
|
|
|
|
||||
Cash and cash equivalents, end of period
|
$
|
314,314
|
|
|
$
|
254,435
|
|
1
|
The prior period balances were revised to show separate presentation related to provision for excess and obsolete inventory and amortization of inventory step-up adjustment.
|
Fair value of ordinary shares effectively transferred to Tornier shareholders
|
$
|
1,005,468
|
|
Fair value of ordinary shares effectively transferred to Tornier share award holders
|
8,091
|
|
|
Fair value of ordinary shares effectively issued to Tornier stock option holders
|
20,676
|
|
|
Fair value of total consideration
|
$
|
1,034,235
|
|
Cash and cash equivalents
|
$
|
30,117
|
|
Accounts receivable
|
63,797
|
|
|
Inventories
|
138,659
|
|
|
Other current assets
|
9,256
|
|
|
Property, plant and equipment, net
|
122,927
|
|
|
Intangible assets, net
|
213,600
|
|
|
Deferred income taxes
|
1,399
|
|
|
Other assets
|
8,658
|
|
|
Total assets acquired
|
588,413
|
|
|
Current liabilities
|
(101,623
|
)
|
|
Long-term debt
|
(79,554
|
)
|
|
Deferred income taxes
|
(31,878
|
)
|
|
Other non-current liabilities
|
(8,434
|
)
|
|
Total liabilities assumed
|
(221,489
|
)
|
|
Net assets acquired
|
366,924
|
|
|
|
|
||
Goodwill
|
667,311
|
|
|
|
|
||
Total purchase consideration
|
$
|
1,034,235
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
Net sales
|
$
|
157,332
|
|
|
$
|
144,795
|
|
|
$
|
497,339
|
|
|
$
|
444,978
|
|
Net loss from continuing operations
|
(43,648
|
)
|
|
(89,380
|
)
|
|
(110,828
|
)
|
|
(217,653
|
)
|
|
Three months ended
|
|
Nine months ended
|
||||
|
September 25, 2016
|
|
September 25, 2016
|
||||
Net sales
|
$
|
7,320
|
|
|
$
|
29,220
|
|
Cost of sales
|
4,348
|
|
|
15,708
|
|
||
Selling, general and administrative
|
4,897
|
|
|
15,069
|
|
||
Other
|
396
|
|
|
1,630
|
|
||
Loss from discontinued operations before income taxes
|
(2,321
|
)
|
|
(3,187
|
)
|
||
Impairment loss on assets held for sale, before income taxes
|
—
|
|
|
(21,876
|
)
|
||
Total loss from discontinued operations before income taxes
|
(2,321
|
)
|
|
(25,063
|
)
|
||
Benefit for income taxes
|
(759
|
)
|
|
(5,529
|
)
|
||
Total loss from discontinued operations, net of tax
|
$
|
(1,562
|
)
|
|
$
|
(19,534
|
)
|
Net loss from discontinued operations per share (
Note 12
):
|
|
|
|
||||
Basic
|
$
|
(0.02
|
)
|
|
$
|
(0.19
|
)
|
Diluted
|
$
|
(0.02
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
||||
Weighted-average number of ordinary shares outstanding-basic
|
103,072
|
|
|
102,854
|
|
||
Weighted-average number of ordinary shares outstanding-diluted
|
103,072
|
|
|
102,854
|
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Assets:
|
|
|
|
||||
Inventories, net
|
$
|
13,836
|
|
|
$
|
18,408
|
|
Prepaid expenses
|
81
|
|
|
79
|
|
||
Property, plant and equipment, net
|
15,060
|
|
|
16,513
|
|
||
Goodwill
|
8,466
|
|
|
9,355
|
|
||
Intangible assets, net
|
6,238
|
|
|
5,815
|
|
||
Impairment loss on assets held for sale
|
(21,876
|
)
|
|
—
|
|
||
Total assets held for sale
|
$
|
21,805
|
|
|
$
|
50,170
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Other current liabilities
|
$
|
2,049
|
|
|
$
|
2,692
|
|
Total liabilities held for sale
|
$
|
2,049
|
|
|
$
|
2,692
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Selling, general and administrative
|
55,874
|
|
|
36,211
|
|
|
233,037
|
|
|
46,720
|
|
||||
Loss from discontinued operations before income taxes
|
(55,874
|
)
|
|
(36,211
|
)
|
|
(233,037
|
)
|
|
(46,720
|
)
|
||||
Provision for income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total loss from discontinued operations, net of tax
|
$
|
(55,874
|
)
|
|
$
|
(36,211
|
)
|
|
$
|
(233,037
|
)
|
|
$
|
(46,720
|
)
|
Net loss from discontinued operations per share (
Note 12
):
|
|
|
|
|
|
|
|
||||||||
Basic
1
|
$
|
(0.54
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(2.27
|
)
|
|
$
|
(0.89
|
)
|
Diluted
1
|
$
|
(0.54
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(2.27
|
)
|
|
$
|
(0.89
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of ordinary shares outstanding-basic
1
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
||||
Weighted-average number of ordinary shares outstanding-diluted
1
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
1
|
The prior period weighted-average shares outstanding and net loss per share amounts were converted to meet post-merger valuations as described within
Note 12
.
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Raw materials
|
$
|
19,792
|
|
|
$
|
18,057
|
|
Work-in-process
|
25,004
|
|
|
27,946
|
|
||
Finished goods
|
126,023
|
|
|
164,698
|
|
||
|
$
|
170,819
|
|
|
$
|
210,701
|
|
Level 1:
|
Financial instruments with unadjusted, quoted prices listed on active market exchanges.
|
Level 2:
|
Financial instruments determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
|
Level 3:
|
Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.
|
|
Location on condensed consolidated balance sheet
|
September 25, 2016
|
||
2021 Notes Hedges
|
Other assets
|
$
|
169,488
|
|
2021 Notes Conversion Derivative
|
Other liabilities
|
$
|
172,702
|
|
|
Three months ended
|
Nine months ended
|
||||||
|
September 25, 2016
|
|
September 25, 2016
|
|||||
2021 Notes Hedges
|
$
|
85,182
|
|
|
$
|
69,671
|
|
|
2021 Notes Conversion Derivative
|
(86,275
|
)
|
|
(55,478
|
)
|
|||
Net (loss)/gain on changes in fair value
|
$
|
(1,093
|
)
|
|
$
|
14,193
|
|
|
Location on condensed consolidated balance sheet
|
September 25, 2016
|
December 27, 2015
|
||||
2020 Notes Hedges
|
Other assets
|
$
|
83,308
|
|
$
|
127,758
|
|
2020 Notes Conversion Derivative
|
Other liabilities
|
$
|
84,856
|
|
$
|
129,107
|
|
|
Three months ended
|
|
Nine months ended
|
|||||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
|||||||||
2020 Notes Hedges
|
$
|
49,887
|
|
|
$
|
(21,512
|
)
|
|
$
|
(40,558
|
)
|
|
$
|
(42,617
|
)
|
|
2020 Notes Conversion Derivative
|
(45,421
|
)
|
|
21,757
|
|
|
44,701
|
|
|
46,169
|
|
|||||
Net gain on changes in fair value
|
$
|
4,466
|
|
|
$
|
245
|
|
|
$
|
4,143
|
|
|
$
|
3,552
|
|
|
Location on condensed consolidated balance sheet
|
September 25, 2016
|
December 27, 2015
|
||||
2017 Notes Conversion Derivative
|
Other liabilities
|
$
|
247
|
|
$
|
10,440
|
|
|
Three months ended
|
|
Nine months ended
|
|||||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
|||||||||
2017 Notes Hedges
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(10,236
|
)
|
|
2017 Notes Conversion Derivative
|
(186
|
)
|
|
4,407
|
|
|
8,124
|
|
|
18,705
|
|
|||||
Net (loss)/gain on changes in fair value
|
$
|
(186
|
)
|
|
$
|
4,407
|
|
|
$
|
8,124
|
|
|
$
|
8,469
|
|
|
2017 Notes Conversion Derivative
|
2020 Notes Conversion Derivative
|
2020 Notes
Hedge |
2021 Notes Conversion Derivative
|
2021 Notes
Hedge
|
Stock Price Volatility (1)
|
35.12%
|
33.34%
|
33.34%
|
36.63%
|
36.63%
|
Credit Spread for Wright (2)
|
10.35%
|
3.26%
|
N/A
|
4.11%
|
N/A
|
Credit Spread for Deutsche Bank AG (3)
|
N/A
|
N/A
|
1.96%
|
N/A
|
N/A
|
Credit Spread for Wells Fargo Securities, LLC (3)
|
N/A
|
N/A
|
0.34%
|
N/A
|
N/A
|
Credit Spread for JPMorgan Chase Bank (3)
|
N/A
|
N/A
|
0.38%
|
N/A
|
0.61%
|
Credit Spread for Bank of America (3)
|
N/A
|
N/A
|
N/A
|
N/A
|
0.78%
|
(1)
|
Volatility selected based on historical and implied volatility of ordinary shares of Wright Medical Group N.V.
|
(2)
|
Credit spread implied from traded price.
|
(3)
|
Credit spread of each bank is estimated using CDS curves. Source: Bloomberg.
|
|
Total
|
Quoted prices
in active
markets
(Level 1)
|
Prices with
other
observable
inputs
(Level 2)
|
Prices with
unobservable
inputs
(Level 3)
|
||||||||
At September 25, 2016
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
314,314
|
|
$
|
314,314
|
|
$
|
—
|
|
$
|
—
|
|
2020 Notes Hedges
|
83,308
|
|
—
|
|
—
|
|
83,308
|
|
||||
2021 Notes Hedges
|
169,488
|
|
—
|
|
—
|
|
169,488
|
|
||||
Total
|
$
|
567,110
|
|
$
|
314,314
|
|
$
|
—
|
|
$
|
252,796
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
2017 Notes Conversion Derivative
|
$
|
247
|
|
$
|
—
|
|
$
|
—
|
|
$
|
247
|
|
2020 Notes Conversion Derivative
|
84,856
|
|
—
|
|
—
|
|
84,856
|
|
||||
2021 Notes Conversion Derivative
|
172,702
|
|
—
|
|
—
|
|
172,702
|
|
||||
Contingent consideration
|
2,640
|
|
—
|
|
—
|
|
2,640
|
|
||||
Contingent consideration (CVRs)
|
37,279
|
|
37,279
|
|
—
|
|
—
|
|
||||
Total
|
$
|
297,724
|
|
$
|
37,279
|
|
$
|
—
|
|
$
|
260,445
|
|
|
Total
|
Quoted prices
in active markets (Level 1) |
Prices with
other observable inputs (Level 2) |
Prices with
unobservable inputs (Level 3) |
||||||||
At December 27, 2015
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
139,804
|
|
$
|
139,804
|
|
$
|
—
|
|
$
|
—
|
|
2020 Notes Hedges
|
127,758
|
|
—
|
|
—
|
|
127,758
|
|
||||
Total
|
$
|
267,562
|
|
$
|
139,804
|
|
$
|
—
|
|
$
|
127,758
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
||||
2017 Notes Conversion Derivative
|
$
|
10,440
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,440
|
|
2020 Notes Conversion Derivative
|
129,107
|
|
—
|
|
—
|
|
129,107
|
|
||||
Contingent consideration
|
2,340
|
|
—
|
|
—
|
|
2,340
|
|
||||
Contingent consideration (CVRs)
|
28,310
|
|
28,310
|
|
—
|
|
—
|
|
||||
Total
|
$
|
170,197
|
|
$
|
28,310
|
|
$
|
—
|
|
$
|
141,887
|
|
|
|
Balance at December 27, 2015
|
Additions
|
Transfers into Level 3
|
Gain/(loss) included in earnings
|
Settlements
|
Currency
|
Balance at September 25, 2016
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
2017 Notes Conversion Derivative
|
|
$
|
(10,440
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
8,124
|
|
$
|
2,069
|
|
$
|
—
|
|
$
|
(247
|
)
|
2020 Notes Hedges
|
|
127,758
|
|
—
|
|
—
|
|
(40,558
|
)
|
(3,892
|
)
|
—
|
|
83,308
|
|
|||||||
2020 Notes Conversion Derivative
|
|
(129,107
|
)
|
—
|
|
—
|
|
44,701
|
|
(450
|
)
|
—
|
|
(84,856
|
)
|
|||||||
2021 Notes Hedges
|
|
—
|
|
99,817
|
|
—
|
|
69,671
|
|
—
|
|
—
|
|
169,488
|
|
|||||||
2021 Notes Conversion Derivative
|
|
—
|
|
(117,224
|
)
|
—
|
|
(55,478
|
)
|
—
|
|
—
|
|
(172,702
|
)
|
|||||||
Contingent consideration
|
|
(2,340
|
)
|
—
|
|
—
|
|
(555
|
)
|
297
|
|
(42
|
)
|
(2,640
|
)
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Property, plant and equipment, at cost
|
$
|
364,034
|
|
|
$
|
331,416
|
|
Less: Accumulated depreciation
|
(152,938
|
)
|
|
(107,160
|
)
|
||
|
$
|
211,096
|
|
|
$
|
224,256
|
|
|
U.S. Lower Extremities
& Biologics
|
U.S. Upper Extremities
|
International Extremities
& Biologics
|
Total
|
||||||||
Goodwill at December 27, 2015
|
$
|
221,327
|
|
$
|
555,312
|
|
$
|
90,350
|
|
$
|
866,989
|
|
Goodwill adjustment associated with Wright/Tornier merger
|
(2,802
|
)
|
3,357
|
|
(14,223
|
)
|
(13,668
|
)
|
||||
Foreign currency translation
|
—
|
|
—
|
|
2,479
|
|
2,479
|
|
||||
Goodwill at September 25, 2016
|
$
|
218,525
|
|
$
|
558,669
|
|
$
|
78,606
|
|
$
|
855,800
|
|
|
September 25, 2016
|
|
December 27, 2015
|
||||||||||||
|
Cost
|
|
Accumulated
amortization
|
|
Cost
|
|
Accumulated
amortization
|
||||||||
Indefinite life intangibles:
|
|
|
|
|
|
|
|
||||||||
In-process research and development (IPRD) technology
|
$
|
15,523
|
|
|
|
|
$
|
15,290
|
|
|
|
||||
Total indefinite life intangibles
|
15,523
|
|
|
|
|
15,290
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||||
Finite life intangibles:
|
|
|
|
|
|
|
|
||||||||
Distribution channels
|
900
|
|
|
$
|
302
|
|
|
250
|
|
|
$
|
219
|
|
||
Completed technology
|
124,904
|
|
|
23,907
|
|
|
122,604
|
|
|
14,828
|
|
||||
Licenses
|
4,868
|
|
|
1,015
|
|
|
4,868
|
|
|
703
|
|
||||
Customer relationships
|
126,351
|
|
|
13,523
|
|
|
115,457
|
|
|
7,918
|
|
||||
Trademarks
|
14,032
|
|
|
5,997
|
|
|
14,440
|
|
|
3,393
|
|
||||
Non-compete agreements
|
11,969
|
|
|
6,372
|
|
|
7,521
|
|
|
2,917
|
|
||||
Other
|
556
|
|
|
216
|
|
|
527
|
|
|
51
|
|
||||
Total finite life intangibles
|
283,580
|
|
|
$
|
51,332
|
|
|
265,667
|
|
|
$
|
30,029
|
|
||
|
|
|
|
|
|
|
|
||||||||
Total intangibles
|
299,103
|
|
|
|
|
280,957
|
|
|
|
||||||
Less: Accumulated amortization
|
(51,332
|
)
|
|
|
|
(30,029
|
)
|
|
|
||||||
Intangible assets, net
|
$
|
247,771
|
|
|
|
|
$
|
250,928
|
|
|
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Capital lease obligations
|
$
|
14,919
|
|
|
$
|
13,763
|
|
|
|
|
|
||||
2021 Notes
|
276,580
|
|
|
—
|
|
||
2020 Notes
1
|
475,100
|
|
|
489,006
|
|
||
2017 Notes
1
|
1,949
|
|
|
55,865
|
|
||
|
|
|
|
||||
Mortgages/other
|
3,008
|
|
|
2,740
|
|
||
Shareholder debt
|
1,894
|
|
|
1,998
|
|
||
|
773,450
|
|
|
563,372
|
|
||
Less: current portion
|
(4,117
|
)
|
|
(2,171
|
)
|
||
|
$
|
769,333
|
|
|
$
|
561,201
|
|
1
|
The prior period debt issuance costs were reclassified to account for adoption of ASU 2015-03 and ASU 2015-15 (See
Note 2
).
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Principal amount of 2021 Notes
|
$
|
395,000
|
|
|
$
|
—
|
|
Unamortized debt discount
|
(111,702
|
)
|
|
—
|
|
||
Unamortized debt issuance costs
|
(6,718
|
)
|
|
—
|
|
||
Net carrying amount of 2021 Notes
|
$
|
276,580
|
|
|
$
|
—
|
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Principal amount of 2020 Notes
|
$
|
587,500
|
|
|
$
|
632,500
|
|
Unamortized debt discount
|
(100,226
|
)
|
|
(127,953
|
)
|
||
Unamortized debt issuance costs
|
(12,174
|
)
|
|
(15,541
|
)
|
||
Net carrying amount of 2020 Notes
1
|
$
|
475,100
|
|
|
$
|
489,006
|
|
1
|
The prior period debt issuance costs were reclassified to account for adoption of ASU 2015-03 and ASU 2015-15 (See
Note 2
).
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Principal amount of 2017 Notes
|
$
|
2,026
|
|
|
$
|
60,000
|
|
Unamortized debt discount
|
(66
|
)
|
|
(3,495
|
)
|
||
Unamortized debt issuance costs
|
(11
|
)
|
|
(640
|
)
|
||
Net carrying amount of 2017 Notes
1
|
$
|
1,949
|
|
|
$
|
55,865
|
|
1
|
The prior period debt issuance costs were reclassified to account for adoption of ASU 2015-03 and 2015-15 (See
Note 2
).
|
|
Nine months ended September 25, 2016
|
||
|
Currency translation adjustment
|
||
Balance at December 27, 2015
|
$
|
(10,484
|
)
|
Other comprehensive income
|
11,763
|
|
|
Balance at September 25, 2016
|
$
|
1,279
|
|
|
Nine months ended September 30, 2015
|
||
|
Currency translation adjustment
|
||
Balance at December 31, 2014
|
$
|
2,398
|
|
Other comprehensive loss
|
(7,293
|
)
|
|
Balance at September 30, 2015
|
$
|
(4,895
|
)
|
|
Nine Months Ended September 25, 2016
|
|||||||||||||||||||||
|
Ordinary shares
|
|
Additional paid-in capital
1
|
|
Accumulated deficit
|
|
Accumulated other comprehensive income (loss)
|
|
Total shareholders' equity
|
|||||||||||||
|
Number of shares
1
|
|
Amount
1
|
|
||||||||||||||||||
Balance at December 27, 2015
|
102,672,678
|
|
|
$
|
3,790
|
|
|
$
|
1,835,586
|
|
|
$
|
(773,866
|
)
|
|
$
|
(10,484
|
)
|
|
$
|
1,055,026
|
|
2016 Activity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(387,503
|
)
|
|
—
|
|
|
(387,503
|
)
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,763
|
|
|
11,763
|
|
|||||
Issuances of ordinary shares
|
287,328
|
|
|
10
|
|
|
5,654
|
|
|
—
|
|
|
—
|
|
|
5,664
|
|
|||||
Vesting of restricted stock units
|
265,378
|
|
|
9
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
9,843
|
|
|
—
|
|
|
—
|
|
|
9,843
|
|
|||||
Issuance of stock warrants, net of repurchases and equity issuance costs
|
—
|
|
|
—
|
|
|
50,312
|
|
|
—
|
|
|
—
|
|
|
50,312
|
|
|||||
Balance at September 25, 2016
|
103,225,384
|
|
|
$
|
3,809
|
|
|
$
|
1,901,386
|
|
|
$
|
(1,161,369
|
)
|
|
$
|
1,279
|
|
|
$
|
745,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Nine Months Ended September 30, 2015
|
|||||||||||||||||||||
|
Ordinary shares
|
|
Additional paid-in capital
1
|
|
Accumulated deficit
|
|
Accumulated other comprehensive income (loss)
|
|
Total shareholders' equity
|
|||||||||||||
|
Number of shares
1
|
|
Amount
1
|
|
||||||||||||||||||
Balance at December 31, 2014
|
52,913,093
|
|
|
$
|
2,101
|
|
|
$
|
749,469
|
|
|
$
|
(475,165
|
)
|
|
$
|
2,398
|
|
|
$
|
278,803
|
|
2015 Activity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(192,924
|
)
|
|
—
|
|
|
(192,924
|
)
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,293
|
)
|
|
(7,293
|
)
|
|||||
Issuances of ordinary shares
|
137,944
|
|
|
5
|
|
|
3,085
|
|
|
—
|
|
|
—
|
|
|
3,090
|
|
|||||
Grant of non-vested ordinary shares
|
5,246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Forfeitures of non-vested ordinary shares
|
(5,869
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Vesting of restricted stock units
|
12,534
|
|
|
7
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Share-based compensation
|
—
|
|
|
—
|
|
|
7,720
|
|
|
—
|
|
|
—
|
|
|
7,720
|
|
|||||
Issuance of stock warrants, net of repurchases and equity issuance costs
|
—
|
|
|
—
|
|
|
24,575
|
|
|
—
|
|
|
—
|
|
|
24,575
|
|
|||||
Balance at September 30, 2015
|
53,062,948
|
|
|
$
|
2,113
|
|
|
$
|
784,842
|
|
|
$
|
(668,089
|
)
|
|
$
|
(4,895
|
)
|
|
$
|
113,971
|
|
1
|
The prior period balances of ordinary shares and additional paid-in capital were restated to meet post-merger conversion values as further described within
Note 12
.
|
•
|
ordinary shares and additional paid-in capital balances for the
three and nine
months ended
September 30, 2015
included in
Note 11
;
|
•
|
September 30, 2015
earnings per share and weighted-average ordinary shares outstanding on the statements of operations; and
|
•
|
September 30, 2015
weighted-average ordinary shares outstanding below.
|
|
Three months ended
|
|
Nine months ended
|
||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
September 25, 2016
|
|
September 30, 2015
|
||||
Weighted-average number of ordinary shares outstanding — basic
1
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
Weighted-average number of ordinary shares outstanding — diluted
1
|
103,072
|
|
|
52,750
|
|
|
102,854
|
|
|
52,607
|
|
1
|
The prior period balances were converted to meet post-merger valuations as described above.
|
|
Three months ended September 25, 2016
|
||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
1
|
Total
|
||||||||||
Net sales from external customers
|
$
|
70,654
|
|
$
|
47,411
|
|
$
|
39,267
|
|
$
|
—
|
|
$
|
157,332
|
|
Depreciation expense
|
3,494
|
|
3,181
|
|
3,086
|
|
5,124
|
|
14,885
|
|
|||||
Amortization expense
|
—
|
|
—
|
|
—
|
|
7,466
|
|
7,466
|
|
|||||
Segment operating income (loss)
|
$
|
17,980
|
|
$
|
12,594
|
|
$
|
(2,945
|
)
|
$
|
(47,822
|
)
|
$
|
(20,193
|
)
|
Other:
|
|
|
|
|
|
||||||||||
Inventory step-up amortization
|
|
|
|
|
10,306
|
|
|||||||||
Transaction and transition expenses
|
|
|
|
|
6,532
|
|
|||||||||
Product rationalization
|
|
|
|
|
1,573
|
|
|||||||||
Operating loss
|
|
|
|
|
(38,604
|
)
|
|||||||||
Interest expense, net
|
|
|
|
|
16,795
|
|
|||||||||
Other income, net
|
|
|
|
|
(365
|
)
|
|||||||||
Loss before income taxes
|
|
|
|
|
$
|
(55,034
|
)
|
|
Three months ended September 30, 2015
|
||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
1
|
Total
|
||||||||||
Net sales from external customers
|
$
|
56,740
|
|
$
|
3,654
|
|
$
|
19,745
|
|
$
|
—
|
|
$
|
80,139
|
|
Depreciation expense
|
3,288
|
|
212
|
|
827
|
|
1,941
|
|
6,268
|
|
|||||
Amortization expense
|
—
|
|
—
|
|
—
|
|
2,546
|
|
2,546
|
|
|||||
Segment operating income (loss)
|
$
|
7,716
|
|
$
|
1,526
|
|
$
|
(2,158
|
)
|
$
|
(28,203
|
)
|
$
|
(21,119
|
)
|
Other:
|
|
|
|
|
|
||||||||||
Inventory step-up amortization
|
|
|
|
|
20
|
|
|||||||||
Distributor conversion and non-compete charges
|
|
|
|
|
16
|
|
|||||||||
Due diligence, transaction and transition expenses
|
|
|
|
|
19,887
|
|
|||||||||
Operating loss
|
|
|
|
|
(41,042
|
)
|
|||||||||
Interest expense, net
|
|
|
|
|
11,185
|
|
|||||||||
Other income, net
|
|
|
|
|
10,236
|
|
|||||||||
Loss before income taxes
|
|
|
|
|
$
|
(62,463
|
)
|
|
Nine months ended September 25, 2016
|
||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
1
|
Total
|
||||||||||
Net sales from external customers
|
$
|
214,559
|
|
$
|
149,923
|
|
$
|
132,857
|
|
$
|
—
|
|
$
|
497,339
|
|
Depreciation expense
|
9,183
|
|
8,400
|
|
8,541
|
|
14,881
|
|
41,005
|
|
|||||
Amortization expense
|
—
|
|
—
|
|
—
|
|
21,407
|
|
21,407
|
|
|||||
Segment operating income (loss)
|
$
|
57,813
|
|
$
|
46,729
|
|
$
|
840
|
|
$
|
(146,792
|
)
|
$
|
(41,410
|
)
|
Other:
|
|
|
|
|
|
||||||||||
Inventory step-up amortization
|
|
|
|
|
30,922
|
|
|||||||||
Transaction and transition expenses
|
|
|
|
|
24,425
|
|
|||||||||
Product rationalization
|
|
|
|
|
3,527
|
|
|||||||||
Legal settlement
|
|
|
|
|
1,800
|
|
|||||||||
Management changes
|
|
|
|
|
1,348
|
|
|||||||||
Costs associated with new convertible debt
|
|
|
|
|
234
|
|
|||||||||
Operating loss
|
|
|
|
|
(103,666
|
)
|
|||||||||
Interest expense, net
|
|
|
|
|
41,673
|
|
|||||||||
Other expense, net
|
|
|
|
|
(3,494
|
)
|
|||||||||
Loss before income taxes
|
|
|
|
|
$
|
(141,845
|
)
|
|
Nine months ended September 25, 2015
|
||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
1
|
Total
|
||||||||||
Net sales from external customers
|
$
|
164,448
|
|
$
|
11,702
|
|
$
|
62,343
|
|
$
|
—
|
|
$
|
238,493
|
|
Depreciation expense
|
9,050
|
|
643
|
|
2,330
|
|
4,943
|
|
16,966
|
|
|||||
Amortization expense
|
—
|
|
—
|
|
—
|
|
7,676
|
|
7,676
|
|
|||||
Segment operating income (loss)
|
$
|
19,666
|
|
$
|
4,902
|
|
$
|
(7,256
|
)
|
$
|
(82,643
|
)
|
$
|
(65,331
|
)
|
Other:
|
|
|
|
|
|
||||||||||
Inventory step-up amortization
|
|
|
|
|
69
|
|
|||||||||
Distributor conversion and non-compete charges
|
|
|
|
|
65
|
|
|||||||||
Due diligence, transaction and transition expenses
|
|
|
|
|
43,040
|
|
|||||||||
Operating loss
|
|
|
|
|
(108,505
|
)
|
|||||||||
Interest expense, net
|
|
|
|
|
29,793
|
|
|||||||||
Other income, net
|
|
|
|
|
7,395
|
|
|||||||||
Loss before income taxes
|
|
|
|
|
$
|
(145,693
|
)
|
1
|
The Corporate category primarily reflects general and administrative expenses not specifically associated with the U.S. Lower Extremities & Biologics, U.S. Upper Extremities, and International Extremities & Biologics segments. These non-allocated corporate expenses relate to global administrative expenses that support all segments, including salaries and benefits of certain executive officers and expenses such as: information technology administration and support; corporate headquarters; legal, compliance, and corporate finance functions; insurance; and all share-based compensation.
|
|
Three months ended
|
||||||
Net sales by geographic region:
|
September 25, 2016
|
|
September 30, 2015
|
||||
United States
|
$
|
118,065
|
|
|
$
|
60,394
|
|
EMEA
|
23,693
|
|
|
10,718
|
|
||
Other
|
15,574
|
|
|
9,027
|
|
||
Total
|
$
|
157,332
|
|
|
$
|
80,139
|
|
|
Nine months ended
|
||||||
Net sales by geographic region:
|
September 25, 2016
|
|
September 30, 2015
|
||||
United States
|
$
|
364,482
|
|
|
$
|
176,150
|
|
EMEA
|
87,040
|
|
|
34,951
|
|
||
Other
|
45,817
|
|
|
27,392
|
|
||
Total
|
$
|
497,339
|
|
|
$
|
238,493
|
|
|
September 25, 2016
|
|||||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
|
Assets held for sale
|
Total
|
||||||||||||
Total assets
|
$
|
464,451
|
|
$
|
811,318
|
|
$
|
316,372
|
|
$
|
702,380
|
|
$
|
21,805
|
|
$
|
2,316,326
|
|
|
December 27, 2015
|
|||||||||||||||||
|
U.S. Lower Extremities & Biologics
|
U.S. Upper Extremities
|
International Extremities & Biologics
|
Corporate
|
Assets held for sale
|
Total
|
||||||||||||
Total assets
|
$
|
490,798
|
|
$
|
833,432
|
|
$
|
365,621
|
|
$
|
333,473
|
|
$
|
50,170
|
|
$
|
2,073,494
|
|
•
|
Upper extremities, which include joint implants and bone fixation devices for the shoulder, elbow, wrist, and hand;
|
•
|
Lower extremities, which include joint implants and bone fixation devices for the foot and ankle;
|
•
|
Biologics, which include products used to support treatment of damaged or diseased bone, tendons, and soft tissues or to stimulate bone growth; and
|
•
|
Sports medicine and other, which include products used across several anatomic sites to mechanically repair tissue-to-tissue or tissue-to-bone injuries and other ancillary products
|
•
|
$11.1 million
increase in profitability of our U.S. Upper Extremities segment driven almost entirely by the acquired Tornier business;
|
•
|
$10.3 million
increase in profitability of our U.S. Lower Extremities and Biologics segment driven by leverage on increased sales, as operating expenses grew at a lower rate than net sales;
|
•
|
$10.6 million
increase in other income, net, primarily driven by changes in fair value adjustments associated with derivative assets and liabilities and CVRs; and
|
•
|
$13.4 million decrease in transaction and transition expenses.
|
•
|
$19.6 million
of incremental Corporate expenses, primarily due to expenses from the acquired Tornier business;
|
•
|
$10.3 million
of amortization of the inventory step-up fair value adjustment associated with the Wright/Tornier merger; and
|
•
|
$5.6 million of incremental interest expense, primarily due to cash interest and non-cash amortization of debt discount and deferred financing charges associated with the 2021 Notes that were issued in the second quarter of 2016.
|
|
Three months ended
|
||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
|
Amount
|
% of net sales
|
|
Amount
|
% of net sales
|
||||||
Net sales
|
$
|
157,332
|
|
100.0
|
%
|
|
$
|
80,139
|
|
100.0
|
%
|
Cost of sales
1,2
|
46,149
|
|
29.3
|
%
|
|
23,052
|
|
28.8
|
%
|
||
Gross profit
|
111,183
|
|
70.7
|
%
|
|
57,087
|
|
71.2
|
%
|
||
Operating expenses:
|
|
|
|
|
|
|
|
||||
Selling, general and administrative
1
|
129,840
|
|
82.5
|
%
|
|
85,997
|
|
107.3
|
%
|
||
Research and development
1
|
12,481
|
|
7.9
|
%
|
|
9,570
|
|
11.9
|
%
|
||
Amortization of intangible assets
|
7,466
|
|
4.7
|
%
|
|
2,562
|
|
3.2
|
%
|
||
Total operating expenses
|
149,787
|
|
95.2
|
%
|
|
98,129
|
|
122.4
|
%
|
||
Operating loss
|
(38,604
|
)
|
(24.5
|
)%
|
|
(41,042
|
)
|
(51.2
|
)%
|
||
Interest expense, net
|
16,795
|
|
10.7
|
%
|
|
11,185
|
|
14.0
|
%
|
||
Other (income) expense, net
|
(365
|
)
|
(0.2
|
)%
|
|
10,236
|
|
12.8
|
%
|
||
Loss from continuing operations before income taxes
|
(55,034
|
)
|
(35.0
|
)%
|
|
(62,463
|
)
|
(77.9
|
)%
|
||
(Benefit) provision for income taxes
|
(2,325
|
)
|
(1.5
|
)%
|
|
187
|
|
0.2
|
%
|
||
Net loss from continuing operations
|
$
|
(52,709
|
)
|
(33.5
|
)%
|
|
$
|
(62,650
|
)
|
(78.2
|
)%
|
Loss from discontinued operations, net of tax
|
(57,436
|
)
|
|
|
(36,211
|
)
|
|
||||
Net loss
|
$
|
(110,145
|
)
|
|
|
$
|
(98,861
|
)
|
|
|
Three months ended
|
||||||||||
|
September 25, 2016
|
% of net sales
|
|
September 30, 2015
|
% of net sales
|
||||||
Cost of sales
|
$
|
146
|
|
0.1
|
%
|
|
$
|
17
|
|
—
|
%
|
Selling, general and administrative
|
3,168
|
|
2.0
|
%
|
|
1,777
|
|
2.2
|
%
|
||
Research and development
|
214
|
|
0.1
|
%
|
|
231
|
|
0.3
|
%
|
|
Three months ended
|
|||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
% change
|
|||||
U.S.
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
51,586
|
|
|
$
|
43,929
|
|
|
17.4
|
%
|
Upper extremities
|
46,207
|
|
|
3,654
|
|
|
1,164.6
|
%
|
||
Biologics
|
18,247
|
|
|
12,198
|
|
|
49.6
|
%
|
||
Sports med & other
|
2,025
|
|
|
613
|
|
|
230.3
|
%
|
||
Total U.S.
|
$
|
118,065
|
|
|
$
|
60,394
|
|
|
95.5
|
%
|
|
|
|
|
|
|
|||||
International
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
14,201
|
|
|
$
|
10,917
|
|
|
30.1
|
%
|
Upper extremities
|
17,326
|
|
|
1,764
|
|
|
882.2
|
%
|
||
Biologics
|
4,739
|
|
|
5,260
|
|
|
(9.9
|
)%
|
||
Sports med & other
|
3,001
|
|
|
1,804
|
|
|
66.4
|
%
|
||
Total International
|
$
|
39,267
|
|
|
$
|
19,745
|
|
|
98.9
|
%
|
|
|
|
|
|
|
|||||
Total net sales
|
$
|
157,332
|
|
|
$
|
80,139
|
|
|
96.3
|
%
|
|
Three months ended September 30, 2015
|
||||||||||||||
|
|||||||||||||||
|
Standalone Wright Medical Group, Inc.
|
|
Standalone Tornier N.V., recast
1
|
|
Discontinued
net sales
2
|
|
Non-GAAP
combined pro forma
net sales
|
||||||||
U.S.
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
43,929
|
|
|
$
|
8,675
|
|
|
$
|
(2,905
|
)
|
|
$
|
49,699
|
|
Upper extremities
|
3,654
|
|
|
37,908
|
|
|
—
|
|
|
41,562
|
|
||||
Biologics
|
12,198
|
|
|
412
|
|
|
—
|
|
|
12,610
|
|
||||
Sports med & other
|
613
|
|
|
1,810
|
|
|
—
|
|
|
2,423
|
|
||||
Total extremities & biologics
|
60,394
|
|
|
48,805
|
|
|
(2,905
|
)
|
|
106,294
|
|
||||
Large joint
|
—
|
|
|
33
|
|
|
(33
|
)
|
|
—
|
|
||||
Total U.S.
|
$
|
60,394
|
|
|
$
|
48,838
|
|
|
$
|
(2,938
|
)
|
|
$
|
106,294
|
|
|
|
|
|
|
|
|
|
||||||||
International
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
10,917
|
|
|
$
|
2,275
|
|
|
$
|
—
|
|
|
$
|
13,192
|
|
Upper extremities
|
1,764
|
|
|
14,862
|
|
|
—
|
|
|
16,626
|
|
||||
Biologics
|
5,260
|
|
|
114
|
|
|
—
|
|
|
5,374
|
|
||||
Sports med & other
|
1,804
|
|
|
1,505
|
|
|
—
|
|
|
3,309
|
|
||||
Total extremities & biologics
|
19,745
|
|
|
18,756
|
|
|
—
|
|
|
38,501
|
|
||||
Large joint
|
—
|
|
|
7,350
|
|
|
(7,350
|
)
|
|
—
|
|
||||
Total International
|
$
|
19,745
|
|
|
$
|
26,106
|
|
|
$
|
(7,350
|
)
|
|
$
|
38,501
|
|
|
|
|
|
|
|
|
|
||||||||
Global
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
54,846
|
|
|
$
|
10,950
|
|
|
$
|
(2,905
|
)
|
|
$
|
62,891
|
|
Upper extremities
|
5,418
|
|
|
52,770
|
|
|
—
|
|
|
58,188
|
|
||||
Biologics
|
17,458
|
|
|
526
|
|
|
—
|
|
|
17,984
|
|
||||
Sports med & other
|
2,417
|
|
|
3,315
|
|
|
—
|
|
|
5,732
|
|
||||
Total extremities & biologics
|
80,139
|
|
|
67,561
|
|
|
(2,905
|
)
|
|
144,795
|
|
||||
Large joint
|
—
|
|
|
7,383
|
|
|
(7,383
|
)
|
|
—
|
|
||||
Total sales
|
$
|
80,139
|
|
|
$
|
74,944
|
|
|
$
|
(10,288
|
)
|
|
$
|
144,795
|
|
1
|
Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.
|
2
|
To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement products and the global sales associated with Tornier's Large Joints business.
|
|
Net sales
|
|
Non-GAAP combined pro forma net sales
|
|
%
change
|
|||||
Three months ended
September 25, 2016
|
|
Three months ended
September 30, 2015
|
|
|||||||
U.S.
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
51,586
|
|
|
$
|
49,699
|
|
|
3.8
|
%
|
Upper extremities
|
46,207
|
|
|
41,562
|
|
|
11.2
|
%
|
||
Biologics
|
18,247
|
|
|
12,610
|
|
|
44.7
|
%
|
||
Sports med & other
|
2,025
|
|
|
2,423
|
|
|
(16.4
|
)%
|
||
Total U.S.
|
$
|
118,065
|
|
|
$
|
106,294
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|||||
International
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
14,201
|
|
|
$
|
13,192
|
|
|
7.6
|
%
|
Upper extremities
|
17,326
|
|
|
16,626
|
|
|
4.2
|
%
|
||
Biologics
|
4,739
|
|
|
5,374
|
|
|
(11.8
|
)%
|
||
Sports med & other
|
3,001
|
|
|
3,309
|
|
|
(9.3
|
)%
|
||
Total International
|
$
|
39,267
|
|
|
$
|
38,501
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|||||
Global
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
65,787
|
|
|
$
|
62,891
|
|
|
4.6
|
%
|
Upper extremities
|
63,533
|
|
|
58,188
|
|
|
9.2
|
%
|
||
Biologics
|
22,986
|
|
|
17,984
|
|
|
27.8
|
%
|
||
Sports med & other
|
5,026
|
|
|
5,732
|
|
|
(12.3
|
)%
|
||
Total sales
|
$
|
157,332
|
|
|
$
|
144,795
|
|
|
8.7
|
%
|
|
Nine months ended
|
||||||||||
|
September 25, 2016
|
|
September 30, 2015
|
||||||||
|
Amount
|
% of net sales
|
|
Amount
|
% of net sales
|
||||||
Net sales
|
$
|
497,339
|
|
100.0
|
%
|
|
$
|
238,493
|
|
100.0
|
%
|
Cost of sales
1,2
|
141,824
|
|
28.5
|
%
|
|
63,812
|
|
26.8
|
%
|
||
Gross profit
|
355,515
|
|
71.5
|
%
|
|
174,681
|
|
73.2
|
%
|
||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative
1
|
401,069
|
|
80.6
|
%
|
|
250,801
|
|
105.2
|
%
|
||
Research and development
1
|
36,705
|
|
7.4
|
%
|
|
24,644
|
|
10.3
|
%
|
||
Amortization of intangible assets
|
21,407
|
|
4.3
|
%
|
|
7,741
|
|
3.2
|
%
|
||
Total operating expenses
|
459,181
|
|
92.3
|
%
|
|
283,186
|
|
118.7
|
%
|
||
Operating loss
|
(103,666
|
)
|
(20.8
|
)%
|
|
(108,505
|
)
|
(45.5
|
)%
|
||
Interest expense, net
|
41,673
|
|
8.4
|
%
|
|
29,793
|
|
12.5
|
%
|
||
Other (income) expense, net
|
(3,494
|
)
|
(0.7
|
)%
|
|
7,395
|
|
3.1
|
%
|
||
Loss from continuing operations before income taxes
|
(141,845
|
)
|
(28.5
|
)%
|
|
(145,693
|
)
|
(61.1
|
)%
|
||
(Benefit) provision for income taxes
|
(6,913
|
)
|
(1.4
|
)%
|
|
511
|
|
0.2
|
%
|
||
Net loss from continuing operations
|
$
|
(134,932
|
)
|
(27.1
|
)%
|
|
$
|
(146,204
|
)
|
(61.3
|
)%
|
Loss from discontinued operations, net of tax
|
(252,571
|
)
|
|
|
(46,720
|
)
|
|
||||
Net loss
|
$
|
(387,503
|
)
|
|
|
$
|
(192,924
|
)
|
|
1
|
These line items include the following amounts of non-cash, share-based compensation expense for the periods indicated:
|
|
Nine months ended
|
||||||||||
|
September 25, 2016
|
% of net sales
|
|
September 30, 2015
|
% of net sales
|
||||||
Cost of sales
|
$
|
321
|
|
0.1
|
%
|
|
$
|
28
|
|
—
|
%
|
Selling, general and administrative
|
9,070
|
|
1.8
|
%
|
|
6,895
|
|
2.9
|
%
|
||
Research and development
|
510
|
|
0.1
|
%
|
|
783
|
|
0.3
|
%
|
|
Nine months ended
|
|||||||||
|
September 25, 2016
|
|
September 30, 2015
|
|
% change
|
|||||
U.S.
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
158,872
|
|
|
$
|
128,277
|
|
|
23.9
|
%
|
Upper extremities
|
146,117
|
|
|
11,703
|
|
|
1,148.5
|
%
|
||
Biologics
|
53,167
|
|
|
34,612
|
|
|
53.6
|
%
|
||
Sports med & other
|
6,326
|
|
|
1,558
|
|
|
306.0
|
%
|
||
Total U.S.
|
$
|
364,482
|
|
|
$
|
176,150
|
|
|
106.9
|
%
|
|
|
|
|
|
|
|||||
International
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
45,984
|
|
|
$
|
35,313
|
|
|
30.2
|
%
|
Upper extremities
|
62,241
|
|
|
5,723
|
|
|
987.6
|
%
|
||
Biologics
|
13,804
|
|
|
15,070
|
|
|
(8.4
|
)%
|
||
Sports med & other
|
10,828
|
|
|
6,237
|
|
|
73.6
|
%
|
||
Total International
|
$
|
132,857
|
|
|
$
|
62,343
|
|
|
113.1
|
%
|
|
|
|
|
|
|
|
||||
Total net sales
|
$
|
497,339
|
|
|
$
|
238,493
|
|
|
108.5
|
%
|
|
Nine months ended September 30, 2015
|
||||||||||||||
|
|||||||||||||||
|
Standalone Wright Medical Group, Inc.
|
|
Standalone Tornier N.V., recast
1
|
|
Discontinued
net sales
2
|
|
Non-GAAP
combined pro forma
net sales
|
||||||||
U.S.
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
128,277
|
|
|
$
|
29,636
|
|
|
$
|
(9,732
|
)
|
|
$
|
148,181
|
|
Upper extremities
|
11,703
|
|
|
115,846
|
|
|
—
|
|
|
127,549
|
|
||||
Biologics
|
34,612
|
|
|
1,290
|
|
|
—
|
|
|
35,902
|
|
||||
Sports med & other
|
1,558
|
|
|
5,021
|
|
|
—
|
|
|
6,579
|
|
||||
Total extremities & biologics
|
176,150
|
|
|
151,793
|
|
|
(9,732
|
)
|
|
318,211
|
|
||||
Large joint
|
—
|
|
|
119
|
|
|
(119
|
)
|
|
—
|
|
||||
Total U.S.
|
$
|
176,150
|
|
|
$
|
151,912
|
|
|
$
|
(9,851
|
)
|
|
$
|
318,211
|
|
|
|
|
|
|
|
|
|
||||||||
International
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
35,313
|
|
|
$
|
7,402
|
|
|
$
|
—
|
|
|
$
|
42,715
|
|
Upper extremities
|
5,723
|
|
|
51,293
|
|
|
—
|
|
|
57,016
|
|
||||
Biologics
|
15,070
|
|
|
357
|
|
|
—
|
|
|
15,427
|
|
||||
Sports med & other
|
6,237
|
|
|
5,372
|
|
|
—
|
|
|
11,609
|
|
||||
Total extremities & biologics
|
62,343
|
|
|
64,424
|
|
|
—
|
|
|
126,767
|
|
||||
Large joint
|
—
|
|
|
29,921
|
|
|
(29,921
|
)
|
|
—
|
|
||||
Total International
|
$
|
62,343
|
|
|
$
|
94,345
|
|
|
$
|
(29,921
|
)
|
|
$
|
126,767
|
|
|
|
|
|
|
|
|
|
||||||||
Global
|
|
|
|
|
|
|
|
||||||||
Lower extremities
|
$
|
163,590
|
|
|
$
|
37,038
|
|
|
$
|
(9,732
|
)
|
|
$
|
190,896
|
|
Upper extremities
|
17,426
|
|
|
167,139
|
|
|
—
|
|
|
184,565
|
|
||||
Biologics
|
49,682
|
|
|
1,647
|
|
|
—
|
|
|
51,329
|
|
||||
Sports med & other
|
7,795
|
|
|
10,393
|
|
|
—
|
|
|
18,188
|
|
||||
Total extremities & biologics
|
238,493
|
|
|
216,217
|
|
|
(9,732
|
)
|
|
444,978
|
|
||||
Large joint
|
—
|
|
|
30,040
|
|
|
(30,040
|
)
|
|
—
|
|
||||
Total sales
|
$
|
238,493
|
|
|
$
|
246,257
|
|
|
$
|
(39,772
|
)
|
|
$
|
444,978
|
|
1
|
Legacy Tornier product line sales have been recast to reflect the reclassification of cement, instruments and freight from the historical Tornier product line "Large Joints and Other" to the product line associated with those revenues that will be utilized for future revenue reporting.
|
2
|
To reduce from Tornier’s historical sales the U.S. sales associated with Tornier’s Salto Talaris and Salto XT ankle replacement products and silastic toe replacement product and the global sales associated with Tornier's Large Joints Business.
|
|
Net sales
|
|
Non-GAAP combined pro forma net sales
|
|
%
change
|
|||||
Nine months ended
September 25, 2016
|
|
Nine months ended
September 30, 2015
|
|
|||||||
U.S.
|
|
|
|
|
|
|||||
Lower extremities
|
$
|
158,872
|
|
|
$
|
148,181
|
|
|
7.2
|
%
|
Upper extremities
|
146,117
|
|
|
127,549
|
|
|
14.6
|
%
|
||
Biologics
|
53,167
|
|
|
35,902
|
|
|
48.1
|
%
|
||
Sports med & other
|
6,326
|
|
|
6,579
|
|
|
(3.8
|
)%
|
||
Total U.S.
|
$
|
364,482
|
|
|
$
|
318,211
|
|
|
14.5
|
%
|
|
|
|
|
|
|
|
||||
International
|
|
|
|
|
|
|
||||
Lower extremities
|
$
|
45,984
|
|
|
$
|
42,715
|
|
|
7.7
|
%
|
Upper extremities
|
62,241
|
|
|
57,016
|
|
|
9.2
|
%
|
||
Biologics
|
13,804
|
|
|
15,427
|
|
|
(10.5
|
)%
|
||
Sports med & other
|
10,828
|
|
|
11,609
|
|
|
(6.7
|
)%
|
||
Total international
|
$
|
132,857
|
|
|
$
|
126,767
|
|
|
4.8
|
%
|
|
|
|
|
|
|
|
||||
Global
|
|
|
|
|
|
|
||||
Lower extremities
|
$
|
204,856
|
|
|
$
|
190,896
|
|
|
7.3
|
%
|
Upper extremities
|
208,358
|
|
|
184,565
|
|
|
12.9
|
%
|
||
Biologics
|
66,971
|
|
|
51,329
|
|
|
30.5
|
%
|
||
Sports med & other
|
17,154
|
|
|
18,188
|
|
|
(5.7
|
)%
|
||
Total sales
|
$
|
497,339
|
|
|
$
|
444,978
|
|
|
11.8
|
%
|
|
Three months ended
September 25, 2016 |
||||||||||
|
U.S. Lower Extremities
& Biologics
|
|
U.S. Upper Extremities
|
|
International Extremities
& Biologics
|
||||||
Net sales
|
$
|
70,654
|
|
|
$
|
47,411
|
|
|
$
|
39,267
|
|
Operating income (loss)
|
$
|
17,980
|
|
|
$
|
12,594
|
|
|
$
|
(2,945
|
)
|
Operating income (loss) as a percent of net sales
|
25.4
|
%
|
|
26.6
|
%
|
|
(7.5
|
)%
|
|
Three months ended
September 30, 2015 |
||||||||||
|
U.S. Lower Extremities
& Biologics |
|
U.S. Upper Extremities
|
|
International Extremities
& Biologics |
||||||
Net sales
|
$
|
56,740
|
|
|
$
|
3,654
|
|
|
$
|
19,745
|
|
Operating income (loss)
|
$
|
7,716
|
|
|
$
|
1,526
|
|
|
$
|
(2,158
|
)
|
Operating income (loss) as a percent of net sales
|
13.6
|
%
|
|
41.8
|
%
|
|
(10.9
|
)%
|
|
Nine months ended
September 25, 2016 |
||||||||||
|
U.S. Lower Extremities
& Biologics |
|
U.S. Upper Extremities
|
|
International Extremities
& Biologics |
||||||
Net sales
|
$
|
214,559
|
|
|
$
|
149,923
|
|
|
$
|
132,857
|
|
Operating income
|
$
|
57,813
|
|
|
$
|
46,729
|
|
|
$
|
840
|
|
Operating income as a percent of net sales
|
26.9
|
%
|
|
31.2
|
%
|
|
0.6
|
%
|
|
Nine months ended
September 30, 2015 |
||||||||||
|
U.S. Lower Extremities
& Biologics |
|
U.S. Upper Extremities
|
|
International Extremities
& Biologics |
||||||
Net sales
|
$
|
164,448
|
|
|
$
|
11,702
|
|
|
$
|
62,343
|
|
Operating income (loss)
|
$
|
19,666
|
|
|
$
|
4,902
|
|
|
$
|
(7,256
|
)
|
Operating income (loss) as a percent of net sales
|
12.0
|
%
|
|
41.9
|
%
|
|
(11.6
|
)%
|
|
September 25, 2016
|
|
December 27, 2015
|
||||
Cash and cash equivalents
|
$
|
314,314
|
|
|
$
|
139,804
|
|
Working capital
|
308,102
|
|
|
352,946
|
|
•
|
AUGMENT
®
Injectable Bone Graft (Augment Injectable) combines rhPDGF-BB with an injectable bone matrix, and is targeted to be used in either open (surgical) treatment of fusions and fractures or closed (non-surgical) or minimally invasive treatment of fractures. AUGMENT
®
Injectable can be injected into a fusion or fracture site during an open surgical procedure, or it can be injected through the skin into a fracture site, in either case locally delivering rhPDGF-BB to promote fusion or fracture repair. Our initial clinical development program for AUGMENT
®
Injectable has focused on securing regulatory approval for open indications in the United States and in several markets outside the United States. We currently estimate it could take one to three years to complete this project. We have incurred expenses of approximately $4.6 million for AUGMENT
®
Injectable since the date of acquisition and $0.3 million in the quarter ended
September 25, 2016
. We are currently evaluating future costs related to AUGMENT
®
Injectable following the recent FDA approval of AUGMENT
®
.
|
•
|
PerFORM Rev/Rev+ is a next-generation reverse construct which replaces the existing Reverse II Glenoid Product. PerFORM Reverse consists of new baseplate options, with various backside angles and thicknesses to address additional glenoid deformities, and also includes a new central fixation technology that is different than any other system in the market. Development of this product is in manufacturing validation stage. Pre-market release trials began in the first quarter of 2016. We achieved CE marking for PerFORM Reverse in the first quarter of 2016, and 510(k) clearance is anticipated to occur later in 2016. We have an anticipated completion date in 2017 and the cost to complete the project is estimated to be less than $1 million. However, the risks and uncertainties associated with completion are dependent upon FDA clearance.
|
•
|
AEQUALIS
®
Flex Revive (previously AEQUALIS
®
Adjustable Reversed Ext (AARE)) will ultimately be our second-generation revision product, with an improved implant that is convertible and addresses more indications, and a revamped instrument set that includes universal extraction instrumentation. The implants in this system are complete from a design standpoint, have regulatory approval, and are being sold using a previous generation of instrumentation in a limited capacity. The instruments for the new revision system are currently in design phase. We have an anticipated completion date in 2017 and project cost to complete is estimated to be less than $1 million. However, the risks and uncertainties associated with completion are dependent upon testing validations and FDA clearance.
|
Share price
|
|
Cash payment in excess of principal
(in thousands)
|
||
$27.98
|
(10% greater than conversion price)
|
$
|
203
|
|
$30.53
|
(20% greater than conversion price)
|
$
|
405
|
|
$33.07
|
(30% greater than conversion price)
|
$
|
608
|
|
$35.62
|
(40% greater than conversion price)
|
$
|
811
|
|
$38.16
|
(50% greater than conversion price)
|
$
|
1,013
|
|
Share price
|
|
Shares (in thousands)
|
$42.68
|
(10% greater than strike price)
|
1,784
|
$46.56
|
(20% greater than strike price)
|
3,270
|
$50.44
|
(30% greater than strike price)
|
4,528
|
$54.32
|
(40% greater than strike price)
|
5,606
|
$58.20
|
(50% greater than strike price)
|
6,540
|
Share price
|
|
Shares (in thousands)
|
$33.00
|
(10% greater than strike price)
|
1,681
|
$36.00
|
(20% greater than strike price)
|
3,082
|
$39.00
|
(30% greater than strike price)
|
4,268
|
$42.00
|
(40% greater than strike price)
|
5,284
|
$45.00
|
(50% greater than strike price)
|
6,164
|
•
|
the imposition of additional U.S. and foreign governmental controls or regulations on orthopaedic implants and biologic products;
|
•
|
new export license requirements;
|
•
|
the imposition of U.S. or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibit continued business with that country, company, person, or entity;
|
•
|
economic instability, including currency risk between the U.S. dollar and foreign currencies, in our target markets;
|
•
|
the imposition of restrictions on the activities of foreign agents, representatives, and distributors;
|
•
|
scrutiny of foreign tax authorities, which could result in significant fines, penalties, and additional taxes being imposed upon us;
|
•
|
a shortage of high-quality international salespeople and distributors;
|
•
|
loss of any key personnel who possess proprietary knowledge or are otherwise important to our success in international markets;
|
•
|
changes in third-party reimbursement policy that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate our reducing selling prices for our products;
|
•
|
unexpected changes in foreign regulatory requirements;
|
•
|
differing local product preferences and product requirements;
|
•
|
changes in tariffs and other trade restrictions, particularly related to the exportation of our biologic products;
|
•
|
work stoppages or strikes in the healthcare industry, such as those that have affected our operations in France, Canada, Korea, and Finland in the past;
|
•
|
difficulties in enforcing and defending intellectual property rights;
|
•
|
foreign currency exchange controls that might prevent us from repatriating cash earned in countries outside the Netherlands;
|
•
|
complex data privacy requirements and labor relations laws; and
|
•
|
exposure to different legal and political standards due to our conducting business in over 50 countries.
|
•
|
make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
•
|
restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities;
|
•
|
place us at a competitive disadvantage compared to our competitors who have less debt; and
|
•
|
limit our ability to borrow additional amounts for working capital, capital expenditures, contractual obligations, research and development efforts, acquisitions, debt service requirements, execution of our business strategy, or other purposes.
|
(a)
|
Exhibits.
|
WRIGHT MEDICAL GROUP N.V.
|
|
By:
|
/s/ Robert J. Palmisano
|
|
Robert J. Palmisano
|
|
President and Chief Executive Officer
|
|
(principal executive officer)
|
|
|
By:
|
/s/ Lance A. Berry
|
|
Lance A. Berry
|
|
Senior Vice President and Chief Financial Officer
|
|
(principal financial officer)
|
Exhibit No.
|
|
Exhibit
|
|
Method of Filing
|
2.1*
|
|
Business Sale Agreement dated October 21, 2016 between Tornier SAS, Corin France SAS, Corin Orthopaedics Holdings Limited and Certain Related Entities Party Thereto
|
|
Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 24, 2016 (File No. 001-35065)
|
3.1
|
|
Articles of Association of Wright Medical Group N.V.
|
|
Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 1, 2016 (File No. 001-35065)
|
4.1
|
|
Indenture dated as of May 20, 2016 between Wright Medical Group N.V. and The Bank of New York Mellon Trust Company, N.A. (including the form of the 2.25% Cash Convertible Senior Note due 2021)
|
|
Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 25, 2016 (File No. 001-35065)
|
10.1
|
|
Settlement Agreement dated as of November 1, 2016 between Wright Medical Technology, Inc. and the Counsel Listed on the Signature Pages Thereto
|
|
Filed herewith
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
|
Filed herewith
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
|
Filed herewith
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
|
|
Furnished herewith
|
101
|
|
The following materials from Wright Medical Group N.V.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of September 25, 2016 and December 27, 2015, (ii) the Consolidated Statements of Operations for the three and nine months ended September 25, 2016 and September 30, 2015, (iii) the Consolidated Statements of Comprehensive Loss for the three and nine months ended September 25, 2016 and September 30, 2015, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 25, 2016 and September 30, 2015, and (v) Notes to Consolidated Financial Statements
|
|
Filed herewith
|
*
|
The schedules to the Business Sale Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. Wright will furnish copies of any such schedules to the SEC upon request.
|
|
|
Page
|
|
PREAMBLE
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1
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1.
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SETTLEMENT ELIGIBILITY AND EXCLUSIONS
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2
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2.
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TOTAL AMOUNT OF SETTLEMENT
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3
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3.
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INDIVIDUAL SETTLEMENTS
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4
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4.
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PROOF OF CLAIM
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12
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5.
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SETTLEMENT ACCEPTANCE REQUIREMENT AND OPT-OUTS
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13
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6.
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COMMON BENEFIT FUND ASSESSMENTS
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14
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7.
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LIENS
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15
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8.
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DOCUMENTS REQUIRED FOR INDIVIDUAL SETTLEMENTS
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17
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9.
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TRACKING OF SETTLEMENT PROGRESS
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17
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10.
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FUNDING OF SETTLEMENT
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19
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11.
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RISK OF LOSS
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24
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12.
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CONFIDENTIALITY AND PUBLIC STATEMENT
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24
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13.
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MISCELLANEOUS
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26
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1.
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SETTLEMENT ELIGIBILITY AND EXCLUSIONS
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1.1
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Eligibility Requirements
: To be eligible for settlement hereunder, a claim must meet all of the following requirements:
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1.1.1
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The claimant must have a claim filed and pending in either the MDL or JCCP, or be subject to a fully executed tolling agreement between the parties whether entered arising from the MDL or the JCCP which was approved by the MDL Court.
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1.1.2
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The claimant must have received, and undergone the revision of the cup, the head, the liner, or some combination thereof, of one of the following metal-on-metal articulating bearing surface product configurations:
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(a)
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A CONSERVE® acetabular cup paired with a CONSERVE® cobalt chromium femoral head (a “CONSERVE® Claim”);
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(b)
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A DYNASTY® acetabular cup and metal liner paired with a CONSERVE® cobalt chromium femoral head (a “DYNASTY® Claim”); or
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(c)
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A LINEAGE® acetabular cup and metal liner paired with a LINEAGE® or CONSERVE® cobalt chromium femoral head (a “LINEAGE® Claim”).
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1.1.3
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The claimant must have undergone a revision of the cup, the head, the liner, or some combination thereof, of the CONSERVE®, DYNASTY® or LINEAGE® metal-on-metal products no earlier than 150 days after the date of the surgery during which the CONSERVE®, DYNASTY® or
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1.1.4
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Each “Eligible Claim” is identified on the final list of claims agreed upon by the Parties (the “Eligible Claims List”). The Eligible Claims List is derived from the 1,292 prospective claims identified on a list provided by Wright Medical to Plaintiffs’ Counsel on July 8, 2016 (the “July 8 List”), as adjusted per the steps set forth in the Term Sheet (“Eligibility Adjustments”), incorporated herein by reference, to account for a determination by Wright Medical that one or more of the claims on the July 8, 2016 List is not an Eligible Claim pursuant to sections 1.1.1, 1.1.2 or 1.1.3 of this Settlement Agreement.
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1.2
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Exclusions from Settlement
: Claims meeting the above eligibility requirements are nevertheless not included in this settlement if:
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1.2.1
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The claim is identified by Wright Medical as potentially barred by an applicable statute of limitations or repose;
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1.2.2
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The claimant underwent a revision of the CONSERVE®, DYNASTY® or LINEAGE® metal-on-metal products later than 8 years after the date of the original implantation surgery; or
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1.2.3
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The claim is not identified on the Eligible Claims List described in section 1.1.4 of this Settlement Agreement. To be clear, the settlement is not open for general enrollment, and is limited to the specifically identified Eligible Claims.
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2.
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TOTAL AMOUNT OF SETTLEMENT
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2.1
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Wright Medical agrees to pay a total sum of two hundred and forty million dollars ($240,000,000) to settle the 1,292 Claims identified by Wright Medical as of July 8, 2016 (the “July 8 List”), subject to the Eligibility Adjustments. The total settlement sum of $240 million for the 1,292 Claims is based on the following product mix contained in Wright Medical’s July 8 List, as follows:
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(a)
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193 DYNASTY® Claims and/or LINEAGE® Claims;
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(b)
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1,066 CONSERVE® Claims; and
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(c)
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33 claims involving to be determined product configurations (each an “Unknown Claim”).
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2.2
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The total amount of all Eligibility Adjustments will be confirmed and agreed to by the Parties, however under no circumstance will the total amount of the settlement exceed $240,000,000.
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3.
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INDIVIDUAL SETTLEMENTS
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3.1
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General Provisions
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3.1.1
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No settlement payments under either the standard settlement (“Standard Settlement Option”) or the extraordinary injury fund (“EIF Option”), as both are described below, will be made to any claimant with an Eligible Claim (each such claimant an “Eligible Claimant” or “EC”) pursuant to this Settlement Agreement until Wright Medical’s Walk Away Rights under the 95% Acceptance Requirement, set forth in Section 5, have expired without having been exercised or waived pursuant to Section 5.
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3.1.2
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By participating in this Settlement Agreement, the Parties and ECs acknowledge that all settlement awards paid pursuant to the Settlement Agreement constitute damages on account of personal injuries or physical injuries or physical sickness within the meaning of Section 104 of the Internal Revenue Code of 1986, as amended, arising from the physical injuries alleged to have resulted from the implantation, use, and/or removal of CONSERVE®, DYNASTY®, or LINEAGE® hip implants. The Parties and ECs further acknowledge that no portion of the proceeds paid under the Settlement Agreement represents punitive or exemplary damages, prejudgment or postjudgment interest, any amount for lost income or wages, or payment for any other non-physical injury. Each EC participating in this Settlement Agreement waives and releases any and all claims for punitive or exemplary damages, prejudgment or postjudgment interest, any amount for lost income or wages, or payment for any other non-physical injuries.
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3.2
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Two Alternative Settlement Options
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3.2.1
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Two alternative settlement options are available for ECs under this Settlement Agreement to achieve individual settlements of claims (an “Individual Settlement”). The two options are mutually exclusive.
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3.2.2
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The first is the Standard Settlement Option. It is a simple settlement process designed to be completed on an expedited basis. Once it has been established that a claimant is an EC under the terms of this Settlement Agreement, no further proof will be necessary, beyond a claim election form used to identify which settlement an EC is choosing (“Claim Election Form”), in order to receive the Standard Settlement compensation.
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3.2.3
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The second alternative settlement option is the EIF Option. Under it, an EC may receive an enhanced award as set forth below. The EIF Option will take several months longer to complete and will require additional evidence, proof, and review beyond the initial eligibility requirements under this Settlement Agreement.
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3.2.4
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An EC’s election between the Standard Settlement and EIF Option must be made by January 31, 2017, by submitting a Claim Election Form via electronic portal, as established by the Claims Administrator. The Release, defined below, will include a verification for signature by the EC confirming EC’s election, and that revision surgery has occurred that qualifies for this settlement. Contemporaneously with this election, each EC must also submit via the electronic portal established by the Claims Administrator an identification of all health insurance providers that s/he had between the date of the Qualified Revision Surgery through the Effective Date of this Settlement Agreement.
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3.2.5
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By submitting a Claim Election Form, each EC expressly agrees that any settlement award, either under the Standard Settlement Option or EIF Option, is final and binding once set under the below procedures. To be clear, EC’s electing the EIF Option expressly agree that any settlement award will be final and binding, even though the EC will not know the exact amount of the EIF Option award at the time of submitting a Claim Election Form.
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3.2.6
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Each EC that submits a Claim Election Form consents to the exclusive jurisdiction of the MDL Court and the Hon. William S. Duffey for the purposes of enforcement of each EC’s Individual Settlement.
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3.2.7
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There will be no deductions from settlement awards under either settlement option, except for payment of liens as set forth in Section 7 and common benefit attorney fees and expenses as set forth in Section 6. This Settlement Agreement does not negate, amend or revise any representation agreements that may exist by and between individual ECs and their respective counsel.
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3.3
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Standard Settlement Option
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3.3.1
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Standard Settlement Compensation. With respect to the Standard Settlement Option, each EC with a CONSERVE® Claim will receive $170,000.00 and each EC with a DYNASTY® or LINEAGE® Claim will receive $120,000.00. These gross settlement amounts are subject to deductions per Section 3.2.7.
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3.3.2
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The mechanics and timing of Wright Medical’s payments to fund the Standard Settlement Option are set forth in Section 10.
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3.4
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EIF Settlement Option
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3.4.1
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EIF Accounting
. The total potential fund available to pay enhanced awards under the EIF Option (the “EIF Award Pool”) is expected to be approximately $50,000,000. However, the total amount of EIF Award Pool is based on the number of ECs that claim compensation under the EIF Option, and therefore will not be known or fixed until after all Claim Election Forms have been received. The final amount of the EIF Award Pool will be confirmed between Wright Medical and Plaintiffs’ Counsel. Regardless of the amount of the EIF Award Pool, under no circumstances will the total amount of the settlement, including all Standard Settlement Option awards and the EIF Award Pool, exceed $240,000,000, and under no circumstances will availability of the EIF Option cause Wright Medical to be required to pay any amounts other than as explicitly agreed to in this Settlement Agreement and the Term Sheet, incorporated herein by reference. To be clear, no amounts attributable to 1) Opt-Out Claims, as defined and discussed in Section 5 below, or 2) amounts attributable to claims that are determined not to be Eligible Claims, or involve product misidentifications, will be repurposed or reallocated to fund the EIF Award Pool.
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3.4.2
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The mechanics and timing of Wright Medical’s payments to fund the EIF Option are set forth in Section 10.
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3.4.3
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Determinations of EIF Awards
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(a)
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Plaintiffs’ Counsel will create a Settlement Oversight Committee (or “SOC”), to consist of select counsel representing ECs.
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(b)
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The EIF Option is designed to evaluate enhancement claims on their merits pursuant to the terms of this Settlement Agreement and the contemporaneous medical records of the ECs making a claim under the EIF Option. A claims administrator will be engaged by the SOC (the “Claims Administrator”), and the Claims Administrator will be solely responsible for the evaluation of EIF Option claims and the determination of EIF Option awards.
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3.4.4
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The Claims Administrator may seek information to assist in its impartial allocation of EIF Option awards, including from Wright Medical’s counsel. In addition to each EC’s tabbed and highlighted medical records, the Claims Administrator will have access to all documents produced by each EC in the MDL, the JCCP, or pursuant to any tolling agreement (
e.g.
, preliminary disclosures, fact sheets, documents, interrogatory answers). The Claims Administrator may demand, at its sole discretion and at the EC’s expense, additional medical records necessary to properly evaluate an EIF Option claim. The Claims Administrator has the right, if it deems necessary, to obtain authorizations for the release of medical records, which will be obtained at the EC’s sole expense. The procedures for obtaining additional medical records will be determined in coordination with the Claims Administrator and the SOC.
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(a)
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The Claims Administrator and SOC will work together to ensure that the EIF Option procedures are conducted fairly, efficiently and economically.
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(b)
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The initial determination of eligibility for, and amount of, an EIF Option award will be made by the Claims Administrator pursuant to Section 3.6 below. The initial determination will be based on the tabbed and highlighted medical records provided with the Proof of Claim (Section 4) and the terms of this Settlement Agreement.
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(c)
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If an EIF Option award is denied, the EC may elect to appeal the award to a special master who will be retained by the SOC, and granted exclusive authority to decide appeals of denials of EIF Option awards (the “Special Master”). Appeals will be addressed by the Special Master through written submission by EC or counsel for the EC within 30 days of electronic notification of an
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(d)
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For the avoidance of doubt, there is no discovery process involved in the evaluation or determination of EIF Option awards. There will be no new depositions, written discovery, expert reports, affidavits, hearings or trials in connection with the submission of EIF Option claims or the evaluation or determination of any EIF Option award. ECs have the burdens of proof and production of medical records to establish that the criteria for an EIF Option award has been met.
To be clear, in connection with an EIF Option claim, ECs must submit specific medical records appropriately tabbed and highlighted to demonstrate the information that establishes eligibility for an EIF Option award. ECs who submit entire sets of medical records without specific tabbing and highlighting may be assessed a fee set by the SOC.
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3.5
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Bilateral Hip Implants Revised
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3.5.1
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ECs who had bilateral hip implants of CONSERVE®, DYNASTY® and/or LINEAGE® products and who have undergone a Qualified Revision Surgery in which only one hip implant was revised may receive compensation under either of the two alternative settlement options, but only for the revised hip. All rights will be reserved with respect to the unrevised hip implant outside of this Settlement Agreement, by limited release in a form to be agreed to by the Parties.
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3.5.2
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ECs who had bilateral hip implants of CONSERVE®, DYNASTY®, and/or LINEAGE® products who have undergone Qualified Revision Surgeries on both hips may make a claim for each hip. ECs under this category may elect a Standard Settlement for one of the qualifying hips, but the other qualifying hip must be processed under the EIF Option, subject to priority payment as stated in Section 10.8.6. Claimants may elect the EIF Option for both hips, but will qualify for only one priority payment under Section 10.8.6. All other EIF Option claims and/or amounts are subject to the EIF Option process. The following chart illustrates the award options for ECs with bilateral hip implants:
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# of Sides Revised
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Status
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Eligible for Standard Settlement Option?
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Eligible for EIF Option?
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0
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Both Sides Remain Implanted
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No
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No.
Claimant is not an EC.
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1
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1 Side That Had Revision
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Yes
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Yes,
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Surgery
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if claimant is an EC.
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1 Side That
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No
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No. All Legal Rights Reserved.
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Remains Implanted
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Both Sides Underwent
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Only Eligible for One Standard Settlement
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Other Hip is Under EIF
Option with Priority
Payment Under Section
10.8.6
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Revision Surgery and EC
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Wants Standard
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Settlement for Both
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2
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Both Sides Underwent
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One Hip Eligible for
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Other Hip Subject to
Priority Payment and Any Other and Further EIF Payments For Which EC Qualifies For That Hip.
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Revision Surgery and EC
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Standard Settlement
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Elects Standard
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Option.
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Settlement for One Hip,
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EIF Option For Other Hip
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Both Sides Underwent
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Yes, With A Single Priority Payment Under Section
10.8.6 and All Remaining Payments Made Under EIF Schedule.
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Revision Surgery and EC
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Elects EIF Option For
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No
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Both Hips
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13.6
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EIF Award Categories
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3.6.1
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For purposes of qualifying for EIF Option award categories for those ECs who demonstrate their eligibility to receive such awards, the following are categories of extraordinary medical conditions relating to a Qualified Revision Surgery:(1) Covered Re-Revision Surgery, as defined below, (2) Dislocation, (3) Foot Drop, (4) Infection, and (5) Extended Trochanteric Osteotomy.
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3.6.2
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All EIF Option awards pursuant to Section 3.6 will be governed by an award schedule to be issued by the SOC in its sole discretion, following consultation with Wright Medical (the “EIF Award Schedule”).
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3.6.3
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Covered Re-Revision Surgery
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(a)
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“Covered Re-Revision Surgery”
means a revision surgery to remove the cup of a hip implant device after his/her Qualified Revision Surgery on the same hip (“Re-Revision Surgery”), or during subsequent Re-Revision Surgeries on the same hip after the
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(b)
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Eligibility
. ECs who underwent a Covered Re-Revision Surgery will be entitled to additional compensation under the EIF Option (subject to all reductions herein) per Covered Re-Revision Surgery. The following are excluded:
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(i)
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A Re-Revision Surgery that was necessitated by an infection will be governed by the provision for infection-related treatment described in Section 3.6.6 and not this Section; and
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(ii)
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A claim for a Re-Revision Surgery that was necessitated by dislocation will be governed by the provisions for dislocations in Section 3.6.4 and not this Section.
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(c)
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The aggregate total of all awards for Covered Re-Revision Surgeries under Sections 3.6.3 will not exceed a maximum amount to be set forth on the EIF Award Schedule.
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3.6.4
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Dislocation
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(a)
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Eligibility
. An EC who required medical treatment for a dislocation event of the femoral head of the hip after a Qualified Revision Surgery that is documented by diagnosis in contemporary medical records and which dislocation event necessitated (i) a closed reduction in a hospital, (ii) an open reduction in a hospital, or (iii) a Covered Re-Revision Surgery, will be entitled to an EIF Option award under this Section. The following are excluded:
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(i)
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Dislocation events that occurred before the Qualified Revision Surgery do not qualify for an EIF Option award, and
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(ii)
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A dislocation event after a Qualified Revision Surgery or Covered Re-Revision Surgery that is caused or precipitated by trauma is not entitled to any EIF Option Award under this Section.
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(b)
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The aggregate total of all awards for dislocation under Section 3.6.4 will not exceed a maximum amount to be set forth on the EIF Award Schedule.
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(c)
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Dislocation and Covered Re-Revision Surgery
. If a dislocation event was one of the causes of a Covered Re-Revision Surgery, an
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3.6.5
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Foot Drop
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(a)
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Eligibility
. An EC who has suffered injury to the peroneal or sciatic nerve as a result of a Qualified Revision Surgery or Covered Re-Revision Surgery, resulting in the inability to lift the front part of the foot, diagnosed during the hospitalization for the Qualified Revision Surgery or Covered Re-Revision Surgery, and that is documented in contemporaneous medical records as existing more than 365 days after the date of the Qualified Revision Surgery or Covered Re-Revision Surgery shall be entitled to an EIF Option award under this Section.
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3.6.6
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Infection
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(a)
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Eligibility
. An EC who underwent treatment for an infection after a Qualified Revision Surgery, (i) where the infection was not the cause of the Qualified Revision Surgery as documented in the contemporaneous medical records, and (ii) which required (a) surgical debridement, (b) a Covered Re-Revision Surgery in either a one or two-step procedure, (c) arthrodesis, or (d) extended intravenous antibiotic treatment of at least eight (8) consecutive weeks in length, shall be entitled to an EIF Option award under this Section.
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(i)
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An EC can receive only one EIF Award due to infection, regardless of the length or number of infections that occurred.
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(ii)
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An EC whose infection was revealed by pathology or microbiology contemporaneous with the Qualified Revision Surgery, meaning s/he had an infection prior to the Qualified Revision Surgery, is not eligible for compensation under this Section.
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(b)
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Infection and Covered Re-Revision Surgery
. If infection was one of the causes, or the sole cause, for a Covered Re-Revision Surgery, then the EC will be eligible to receive compensation for infection under this Section 3.6.6, but will not be eligible to receive an EIF Option award under Section 3.6.3 (Covered Re-Revision Surgery).
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3.6.7
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Extended Trochanteric Osteotomy
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(a)
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Eligibility
. An EC who as part of a Qualified Revision Surgery or Covered Re-Revision Surgery underwent an extended trochanteric osteotomy to remove the femoral stem, and required the placement of cerclage wiring as part of that procedure, will be entitled to an EIF Option award under this Section.
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4.
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PROOF OF CLAIM
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4.1
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As part of each Individual Settlement, Eligible Claimants have provided or will be required to provide, by January 31, 2017, proof of each Eligible Claim, including, but not limited to:
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4.1.1
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A fully completed Preliminary Disclosure Form, as required under case management orders in the MDL and JCCP, or per the terms of an applicable court-approved tolling agreement. If a Preliminary Disclosure Form was provided prior to an EC undergoing a revision surgery, then the EC will provide an updated Preliminary Disclosure Form with the complete information for the revision surgery.
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4.1.2
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If not already provided with the Preliminary Disclosure Form or a Plaintiff Fact Sheet, EC will provide specific and discreet: 1) product identification sticker sheets or similar medical records from the EC’s original implant surgery medical records, or information derived from the explanted, revised components thereof, that specifically identify, at a minimum, the cup and head products, by product and lot numbers, that satisfy settlement eligibility requirements; and 2) operative reports from the original and revision surgeries. To be clear, ECs must submit only the specific medical records identified to demonstrate the information that establishes eligibility. Submissions of entire sets of medical records, or submissions that require Wright Medical or Plaintiffs’ Counsel to locate the required information, are deficient and will be rejected. The Eligible Claims list will identify those claimants who have not yet provided the information required under this Section 4.1.2 to qualify for a Standard Settlement. Only in the event that the medical records specified in this Section have been destroyed or are otherwise no longer available, other records sufficient, in the sole discretion of Wright Medical, exercised in good faith, to identify the products, and the original and revision surgeries, will be accepted as proof that a claim is an Eligible Claim. In the event that there is an impasse as to the sufficiency of the documents required by this section, the SOC and counsel for Wright Medical will meet and confer in an effort to resolve the issue.
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4.1.3
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Unless in the sole discretion of Wright Medical, exercised in good faith, strict compliance is expressly waived as to any Individual Settlement, no
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4.2
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EIF Option Claim - In the event that an EC elects the EIF Option, evidence sufficient to demonstrate entitlement to an EIF Option award is described in Section 3.4. Such information must be uploaded to the Claims Administrator’s web portal per instructions from Plaintiffs’ Counsel by no later than May 2, 2017.
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5.
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SETTLEMENT ACCEPTANCE REQUIREMENT AND OPT-OUTS
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5.1
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This Settlement Agreement may be terminated, without penalty and in the sole discretion of Wright Medical (“Walk Away Rights”), if claimants holding greater than five percent (5%) of the Eligible Claims in the Final Settlement Pool elect to Opt-Out of the settlement (the “95% Acceptance Requirement”).
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5.2
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If the 95% Acceptance Requirement is not met, Wright Medical, in its sole discretion, may elect to waive the 95% Acceptance Requirement and proceed with the settlement with less than 95% acceptance, and enforce all Individual Settlements accepted pursuant to this Settlement Agreement, rather than terminate the entire Settlement Agreement.
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5.3
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The 95% Acceptance Requirement is to be calculated by counting only the Eligible Claims for which Wright Medical has received 1) an election to participate, 2) all required documentation under Section 4.1.2, and 3) all required documentation under Section 8 (Documents Required For Individual Settlements).
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5.4
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Claimants with Eligible Claims must elect to participate in this settlement on or before January 31, 2017. Wright Medical’s Walk Away Rights will be exercised by written notice to Plaintiffs’ Counsel, served on or before March 3, 2017, provided that Plaintiffs’ Counsel has delivered the 95% Acceptance Report described below.
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5.4.1
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On or before February 3, 2017, Plaintiffs’ Counsel will provide notice to Wright Medical when Plaintiffs’ Counsel believes that the 95% Acceptance Requirement has been satisfied. Such notice (the “95% Acceptance Report”) will include a then-current Acceptance Report, as described in Section 9.1. Plaintiffs’ Counsel will provide a Funding Request Report as described in Section 10.7 by no later than February 6, 2017.
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5.4.2
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By March 3, 2017, Wright Medical will provide notice to Plaintiffs’ Counsel of whether it agrees that the 95% Acceptance Requirement has been met.
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(a)
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If Wright Medical asserts that the 95% Acceptance Requirement has not been met, or that it is unable to confirm that the 95% Acceptance Requirement has been met, then Wright Medical’s notice will include a full explanation of why Wright Medical believes that the 95% Acceptance Requirement has not been met, or why Wright Medical is unable to confirm that the 95% Acceptance Requirement has been met, and Wright Medical may exercise its Walk Away Rights.
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(b)
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If Wright Medical agrees that the 95% Acceptance Requirement has been met, or if Wright Medical waives the 95% Acceptance Requirement pursuant to Section 5.2, then funding of Individual Settlements will proceed under Section 10.
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5.5
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Should Wright Medical exercise its Walk Away Rights, then 1) this Settlement Agreement will be terminated and void, and the Parties and Eligible Claimants will return to their respective positions held prior to the Settlement Agreement, with all releases and dismissal stipulations deemed void, and either returned to Plaintiffs’ Counsel or destroyed, and 2) all funds held in escrow pursuant to Section 10 below will be returned in full to Wright Medical.
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5.6
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The Eligible Claim of any claimant who elects
not
to accept an Individual Settlement will be deemed an “Opt-Out Claim.” Regardless of the actual percentage of Opt-Out Claims, Wright Medical’s payments under this Settlement Agreement will be reduced with respect to each Opt-Out Claim in the manner and amounts set forth in the Term Sheet, incorporated herein by reference.
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5.7
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Under no circumstances will settlement funds allocated to an Opt-Out Claim be redistributed, assigned, or otherwise paid, in whole or part, to settle any other Eligible Claim, including but not limited to funding any portion of the EIF Award Pool, but rather will reduce Wright Medical’s total settlement payments.
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6.
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COMMON BENEFIT FUND ASSESSMENTS
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6.1
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By accepting an Individual Settlement under this Settlement Agreement, all claimants and counsel for claimants with Eligible Claims, regardless of whether their claim is pending in the MDL, JCCP or under a tolling agreement, agree to abide by MDL Case Management Order No. 4, Common Benefit Assessment Order (“CMO 4”), and all provisions of this Section 6. The assessments under CMO 4,
inter alia
, will in part be used to fund the administration of Individual
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6.2
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All claimants and counsel for claimants with Eligible Claims consent to the holdback by Wright Medical of 3.5% for attorneys’ fees and 3.5% for expenses (for a total of 7%) from each total settlement amount under each Individual Settlement, pursuant to CMO 4 (the “Common Benefit Assessments”). Wright Medical will pay each holdback for Common Benefit expenses directly into the Common Benefit Expense Funds account, and each holdback for Common Benefit attorneys’ fees directly into the Common Benefit Legal Fees Funds account, with both accounts to be established by Plaintiffs’ Counsel (the “Common Benefit Fund Accounts”), as credits against the applicable Individual Settlement. For the avoidance of doubt, Wright Medical’s obligation to fund Common Benefit Assessments will not be an additional payment obligation of Wright Medical, but rather will be credited against Wright Medical’s settlement payment obligation and subtracted from the amount otherwise due each claimant from Wright Medical.
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6.3
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No Common Benefit Assessment will be imposed until all requirements for an Individual Settlement have been satisfied, including: 1) to the extent not previously provided, delivery to Wright Medical of the required documents pursuant to Section 4.1.2; 2) delivery to Wright Medical of documentation from the Lien Resolution Administrator, identified below, that confirms the final negotiated amount of all liens or the appropriate holdback amounts for all liens, pursuant to Section 7 below; and 3) delivery to Wright Medical of a Release and Dismissal pursuant to Section 8 below. As to ECs who elect the EIF Option, no Common Benefit Assessment will be imposed until any and all appeals from all ECs have been resolved, pursuant to Section 3.4.4 (c), at which time all EIF Option awards will be final.
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6.4
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All claimants and counsel for claimants with Eligible Claims agree to (1) comply with any Orders entered by the Court in the MDL in the furtherance of CMO 4, and (2) consent to the jurisdiction of the Court in the MDL for that purpose.
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7.
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LIENS
.
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7.1
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Any and all liens related to each Eligible Claim will be identified and satisfied as set forth below.
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7.1.1
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Any and all health insurance plan lien resolutions will be processed and supervised exclusively by Providio Lien Counsel, LLC (the “Lien Resolution Administrator” or “LRA”), at the sole expense of Eligible Claimants or their counsel.
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7.1.2
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Each Eligible Claimant who receives a payment pursuant to an Individual Settlement under this Settlement Agreement, agrees to pay or have paid
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7.1.3
|
Each Eligible Claimant must by December 16, 2016, provide HIPAA releases and a Medicare Proof of Representation form to LRA (via submission to the electronic portal established by Claims Administrator) to facilitate lien identification and resolution; provided, however, that if the MDL court issues a qualified protective order on or before December 16, 2016 authorizing the LRA to identify, process and finalize liens on each EC’s behalf then such individual HIPAA and Medicare Proof of Representation submissions shall not be needed. Each Eligible Claimant will identify to LRA all group health plans s/he had at the time of injury through the Effective Date of this Settlement Agreement (via submission to the electronic portal established by Claims Administrator as described in section 3.2.4 above). Plaintiffs’ Counsel will direct LRA to proactively verify entitlement with Medicare (Parts A & B) and Medicaid for all Eligible Claimants, and will combine those results with the group health plan information submitted by each Eligible Claimant, to investigate and negotiate any applicable liens on each Eligible Claimant’s behalf. As part of its investigation and negotiation of liens, LRA will comply with and/or seek extensions of any reporting requirements that may be required by any lien holder on behalf of both Eligible Claimants and Wright Medical. As a precondition to funding of any portion of an Individual Settlement, Plaintiffs’ Counsel will cause LRA to deliver in writing to Wright Medical final lien clearance information within each Funding Request Report (as defined in Section 10.7), detailing the final negotiated lien amount (including a lien amount pursuant to pre-negotiated lien resolution programs, if applicable) or the appropriate full lien holdback amounts for all liens for each Eligible Claimant included on the respective Funding Request Report. When LRA reports a final negotiated lien amount, or the appropriate full lien holdback amounts for all liens, the balance (
i.e.
, the non-lien holdback amount) will be eligible for disbursement pursuant to the funding steps described in Section 10 below. LRA will submit further clearance information for the lien holdback amount in a future Funding Request Report when the applicable liens have been finally negotiated.
|
7.1.4
|
Plaintiffs’ Counsel will cause LRA to provide to Wright Medical a written confirmation certifying that all liens related to each claimant's injuries
|
7.1.5
|
Plaintiffs’ Counsel will require and cause the LRA to provide complete indemnity and defense of Wright Medical and Plaintiffs’ Counsel against all liens related to each claimant's injuries and/or treatment that are or may be asserted against settlement proceeds of each Individual Settlement.
|
7.1.6
|
This Settlement Agreement does not alter, expand or relieve any notice obligations relating to any liens that any claimant or their counsel has by law or by contract. Likewise, this Settlement Agreement does not establish a right to a lien where none exists.
|
8.
|
DOCUMENTS REQUIRED FOR INDIVIDUAL SETTLEMENTS
.
|
8.1
|
Attached hereto as Exhibit A is the form individual settlement agreement and release (“Release”) that will be used to document settlements with each individual claimant under an Individual Settlement.
|
8.1.1
|
The Release will be executed by the claimant, and any spouse and legal representative of any claimant or claimant’s estate, as applicable. If a claimant is divorced, separated or estranged from his/her spouse, the claimant will provide indemnity in a form agreed by the Parties.
|
8.1.2
|
The Release in any Individual Settlement may contain added state-specific provisions determined to be necessary by Wright Medical.
|
8.1.3
|
The form Release will not be altered, edited, amended, or in any way changed by a claimant or their counsel, except by the express written agreement of Wright Medical.
|
8.2
|
Attached hereto as Exhibit B is the form of litigation dismissal, with prejudice, to be used to dismiss pending litigation, with prejudice and all costs to be borne by the incurring party (a “Dismissal”).
|
9.
|
TRACKING OF SETTLEMENT PROGRESS
.
|
9.1
|
Plaintiffs’ Counsel will, on both the 15
th
and last day of each month, beginning after execution of this Settlement Agreement by all Parties, provide to Wright Medical a report, in Excel electronic format, that contains an identification, to the date of the report, of all claimants, and their Eligible Claims, who have agreed to accept an Individual Settlement (each an “Acceptance Report”). A printed form of the Acceptance Report is attached hereto as Exhibit C.
|
9.2.1
|
Each Acceptance Report will:
|
(a)
|
Identify the name of the claimant;
|
(b)
|
Identify the Eligible Claim(s);
|
(c)
|
State the actual accepted settlement amount of the claimant’s Individual Settlement, set pursuant to Section 3 (Individual Settlements);
|
(d)
|
Provide confirmation that all required documentation and claim proof required has been provided to Wright Medical, pursuant to Section 4.1.2;
|
(e)
|
State the amount of the Common Benefit Assessment on each Eligible Claim, pursuant to Section 6 (Common Benefit Fund Assessments);
|
(f)
|
State the total amount of liens on each Individual Settlement, pursuant to Section 7 (Liens);
|
(g)
|
State, if available, the total final negotiated amount of all liens on each Individual Settlement, pursuant to Section 7 (Liens);
|
(h)
|
Provide confirmation that the required Release and Dismissal have been received by Plaintiffs’ Counsel and provided to Wright Medical, pursuant to Section 8 (Documents Required For Individual Settlements);
|
(i)
|
State a calculation of the then-current sum of the amounts of all Individual Settlements;
|
(j)
|
State a calculation of the then-current total number of settlement acceptances as a percentage of all Eligible Claims; and
|
(k)
|
Contain confirmations of payments made under Individual Settlements.
|
9.2.2
|
Plaintiffs’ Counsel will deliver to Wright Medical with each Acceptance Report, all final negotiated lien documentation, pursuant to Section 7.1, and all fully executed Releases and Dismissals, pursuant to Section 8.1, received since the last produced Acceptance Report.
|
9.2
|
Plaintiffs’ Counsel will, on both the 15
th
and last day of each month, also provide to Wright Medical a separate report, in Excel electronic format, that contains an identification, to the date of the report, of all known Opt-Out Claims (the “Opt-Out Report”). A printed form of the Opt-Out Report is attached hereto as Exhibit D.
|
9.2.1
|
Each Opt-Out Report will:
|
(a)
|
Identify the name of the claimant;
|
(b)
|
Identify the Eligible Claim that is an Opt-Out Claim;
|
(c)
|
State the amount of reduction attributable to the Opt-Out Claim, pursuant to Section 5.6;
|
(d)
|
State the then-current sum of all reductions pursuant to Section 5.6; and
|
(e)
|
State a calculation of the then-current total number of Opt-Out Claims as a percentage of all Eligible Claims.
|
9.3
|
Cumulative Acceptance Reports and Opt-Out Reports will continue to be prepared, by adding onto the immediately prior report, until all Eligible Claims appear on either an Acceptance Report or an Opt-Out Report.
|
10.
|
FUNDING OF SETTLEMENT
.
|
10.1
|
Within thirty (30) calendar days of the full execution of this Settlement Agreement, Wright Medical will deposit or cause to be deposited into an escrow account (the “Escrow Settlement Fund”), One Hundred And Fifty Million Dollars ($150,000,000.00), provided however that under no circumstance will this escrow deposit be made by Wright Medical until an escrow agreement mutually agreeable to the Parties which sets forth the details of the escrow account (the “Settlement Escrow Agreement”) has been fully executed.
Wright Medical further represents and warrants that it will have sufficient access to operating funds, over and above the maximum settlement balance of $90 Million, to fund continuing operations.
|
10.2
|
Concurrent with the execution of the Settlement Escrow Agreement, an escrow agent (“Escrow Agent”) will be appointed by mutual agreement between Plaintiffs’ Counsel and Wright Medical. Plaintiffs’ Counsel shall be solely and exclusively liable for the payment, on a current basis, of all fees and expenses (the “Escrow Fees and Expenses”) due and payable to the Escrow Agent under the Settlement Escrow Agreement. Plaintiffs’ Counsel will obtain approval from the MDL Court, pursuant to CMO 4, for payment of Escrow Fees and Expenses from the Common Benefit Fund.
|
10.3
|
At the end of each month, the Escrow Agent will submit to Wright Medical, the SOC and the Claims Administrator a report, in such form and in such detail as Wright Medical reasonably may specify (each an “Escrow Settlement Fund Report”) itemizing and certifying all payments or transfers during the preceding month and the balance remaining in the Escrow Settlement Fund.
|
10.4
|
All funding of Individual Settlements pursuant to this Section 10 will be funded first from the Escrow Settlement Fund, and then, once all funds held in the Escrow Settlement Fund have been dispersed, by Wright Medical.
|
10.5
|
No funding of any Individual Settlement, or any part thereof, by Wright Medical or the Escrow Agent will occur until the 95% Acceptance Requirement has been satisfied or waived by Wright Medical, a fully executed Release and Dismissal have been delivered to Wright Medical pursuant to Sections 8.1 and 9.1.2, and lien amounts have been confirmed by the LRA in writing to Wright Medical pursuant to Sections 7.1 and 9.1.2.
|
10.6
|
Plaintiffs’ Counsel will create and seek to obtain an order from the Court in the MDL designating one or more interest-bearing qualified settlement fund accounts (“QSFA”s) within the meaning of Treas. Reg. § 1.468B-1, to receive payments
|
10.7
|
Procedures for Funding Requests and Payments
: Amounts of funding at each step below will be requested by itemization in a “Funding Request Report” in the form attached hereto as Exhibit E, provided to Wright Medical by Plaintiffs’ Counsel. A Funding Request Report will identify Eligible Claims that have satisfied requirements for payment of any or all of 1) final negotiated lien amounts, and/or appropriate full lien holdback amounts for all liens, 2) Common Benefit Assessments, or 3) the balance of an Individual Settlement (each a “Payment Item”).
|
(a)
|
Objections to Funding Request Reports
: If Wright Medical, in good faith, objects to the accuracy of any Payment Item in any Funding Request Report, that Payment Item will be deemed removed from the Funding Request Report. Payment Items removed from any Funding Request Report may be placed on a subsequent Funding Request Report, as discussed below; however, under no circumstances will a Payment Item be placed on more than one open and pending Funding Request Report.
|
(b)
|
The first Funding Request Report will be provided to Wright Medical by February 6, 2017.
|
(c)
|
Subsequent Funding Request Reports
: On both the 15th and last day of each month, beginning March 31, 2017, the Claims Administrator will deliver to Wright Medical a Funding Request Report that identifies all new Payment Items that have not already appeared on a prior Funding Request Report, and Payment Items removed from any prior Funding Request Report, that are then ready for payment.
|
(d)
|
Funding to QSFAs and Common Benefit Fund:
Within thirty (30) calendar days of the receipt of each Funding Request Report (other than the first Funding Report which is separately addressed below) Wright Medical will instruct the Escrow Agent to transfer funds into a QSFA designated by Plaintiffs’ Counsel or the Common Benefit Fund Accounts, as applicable, the sum total of all Payment Item amounts listed in the Funding Request Report, minus any removed Payment Items. In the event that no balance remains in the Escrow Settlement Fund, Wright Medical will directly fund amounts due into the QSFA designated by Plaintiffs’ Counsel or the Common Benefit Fund Accounts, as applicable.
|
(e)
|
Payment Report
: After each payment is made by the Escrow Agent or Wright Medical in response to a Funding Request Report,
|
(f)
|
Plaintiffs’ Counsel will be solely responsible for authorizing and arranging disbursements from any QSFA, and the Common Benefit Fund Accounts in compliance with MDL CMO 4. Any disbursement will be made only for the specific amount and purpose of each Payment Item, identified in a Payment Report. Under no circumstances will payments be disbursed, used, or credited other than as set forth in a Payment Report.
|
10.8
|
Timing Of Funding
: Individual Settlements will be funded pursuant to, and in the order of, the following steps:
|
10.8.1
|
By January 31, 2017, all Eligible Claimants that elect to participate must have uploaded to the Claims Administrator’s electronic portal (1) a Claim Election Form, (2) the documents required by Sections 4.1 and 8, and (3) all health insurance provider information and HIPAA/Proof of Representation Releases (as applicable) for purposes of lien resolution pursuant to Section 7. By February 3, 2017, Plaintiffs’ Counsel will provide to Wright Medical a 95% Acceptance Report. By February 6, 2017, Plaintiff’s Counsel will provide to Wright Medical a first Funding Request Report,
|
10.8.2
|
By March 3, 2017, Wright Medical will either 1) confirm that the 95% Acceptance Requirement has been met or waive the 95% Acceptance Requirement, in which case funding will proceed pursuant to the steps below, or 2) terminate the entire Settlement Agreement as provided in Section 5.
|
10.8.3
|
By March 10, 2017, Wright Medical will instruct the Escrow Agent to transfer from the Escrow Settlement Account into a QSFA designated by Plaintiffs’ Counsel or the Common Benefit Fund Accounts, as applicable, the sum total of all Payment Item amounts listed in the first Funding Request Report, minus any removed Payment Items.
|
10.8.4
|
By March 24, 2017, the Claims Administrator, through the electronic portal, will notify counsel for Eligible Claimants of the amount of each
|
10.8.5
|
On March 31, 2017, the Claims Administrator will issue payments of Individual Settlements to Eligible Claimants’ counsel in accordance with the first Payment Report. For all subsequent Payment Reports, the Claims Administrator will issue payments of individual settlements to Eligible Claimants’ counsel on the 15th day of each month in accordance with the applicable Payment Report; provided, however, that if the 15th day of a given month is a Saturday, Sunday or Monday, the disbursement will be the following Tuesday.
|
10.8.6
|
On or before May 1, 2017, those Eligible Claimants who elected to participate in the EIF Option must upload their supporting documents (
see
Section 3.4) to the Claims Administrator’s electronic portal.
|
(a)
|
Bilateral Priority Payment:
On July 18, 2017, a single priority payment will be made by the Claims Administrator to any EC asserting claims based on revisions of both bilateral hip implants pursuant to Section 3.5.2, in the amount of $170,000.00 for a CONSERVE® Claim and $120,000.00 for a DYNASTY® or LINEAGE® Claim (a “Bilateral Priority Payment”). To the extent not already withheld from a Standard Settlement Payment, lien holdback amounts will be withheld from the Bilateral Priority Payment pursuant to Section 7. To be clear, a Bilateral Priority Payment is 1) only for ECs who underwent revisions of both bilateral hip implants, and 2) only one Bilateral Priority Payment will be made even if an EC elects the EIF Option for both hips.
|
(b)
|
To fund the Bilateral Priority Payments, Plaintiffs’ Counsel will provide a Funding Request Report to Wright Medical that specifically identifies all and only such priority payments (“Bilateral Funding Request Report”) by June 6, 2017. By July 7, 2017, Wright Medical will instruct the Escrow Agent to transfer, or will itself deposit, into a QSFA designated by Plaintiffs’ Counsel the sum total of all Bilateral Priority Payments listed in the Bilateral Funding Request Report.
|
10.8.7
|
On or before July 31, 2017, the Claims Administrator will complete its review and issue determination reports on all EIF Option claims. Eligible Claimants will have thirty (30) calendar days from the issuance of their
|
10.8.8
|
Other than as
set forth for Bilateral Priority Payments, no funding by Wright Medical of any EIF Option award will take place until rulings on all appeals have been issued pursuant to Section 3.3.4 (c), at which time funding and payment of EIF Option awards will be made pursuant to the procedures in Section 10.7 above.
|
10.9
|
Return of Escrow Funds:
Any and all funds that remain in the Escrow Settlement Fund following full funding of all Individual Settlements will be returned to Wright Medical.
|
10.10
|
Dismissals
:
Upon payment by or on behalf of Wright Medical of the full amount of any Individual Settlement into a QSFA and the Common Benefit Fund Account, the Dismissal pursuant to Section 8.2 will be filed by Wright Medical.
|
10.11
|
Guaranty of Wright Medical Group, N.V.
In partial consideration for this Settlement Agreement, Wright Medical Group, N.V. (“Guarantor”) has executed and delivered a Guaranty Agreement (the “Guaranty”) that provides, subject to the express provisions of the Guaranty and the full enforcement by the MDL Court, for the monetary performance of Wright Medical under this Settlement Agreement. The Guaranty is incorporated by reference as if fully set forth in this Settlement Agreement. In furtherance of the foregoing, the Parties to this Settlement Agreement stipulate, agree, and acknowledge that Guarantor is providing the Guaranty solely as an accommodation to its independent affiliate, Wright Medical, and that nothing contained in this Settlement Agreement shall be deemed or admissible in any way to contradict the distinct corporate identities as and between Guarantor and Wright Medical.
|
10.12
|
No Eligible Claimant is entitled to seek payment under an Individual Settlement in any manner, or under any timing, other than as set forth in this Settlement Agreement.
|
10.13
|
Plaintiffs’ Counsel shall have sole and exclusive authority to enforce this Settlement Agreement and the Guaranty. No Eligible Claimant may bring any lawsuit, claim or other adversarial proceeding of any type to enforce the terms and conditions of this Settlement Agreement against Wright Medical or, in the case of the Guaranty, against Guarantor (an “EC Adversary Proceeding,” and, collectively, “EC Adversary Proceedings”). By filing a Claim Election Form, each Eligible Claimant will be deemed expressly to have waived any and all right or ability to bring or pursue, except through Plaintiffs’ Counsel, any and all EC Adversary Proceedings against Wright Medical and, in the case of the Guaranty, Adversary Proceedings against Guarantor, including any EC Adversary
|
11.
|
RISK OF LOSS.
|
11.1
|
All risk of loss, for any reason and from any cause whatsoever, except as to the Escrow Agent and Escrow Settlement Fund, as specified in Section 11.2 of this Settlement Agreement, relating to the handling, investment, administration, or disposition of funds deposited and/or paid by Wright Medical pursuant to this Settlement Agreement lies exclusively with Plaintiffs’ Counsel and each Eligible Claimant. Except as specified in Section 11.2, Wright Medical will under no circumstance be liable to pay additional sums under this Settlement Agreement due to any action, inaction, or default by another person or entity (including but not limited to the Claims Administrator, the LRA, any entity establishing or holding a QSFA, Plaintiffs’ Counsel or Eligible Claimant’s counsel).
|
11.2
|
Notwithstanding the foregoing, Wright Medical shall bear any risk of loss accruing to the Escrow Settlement Fund due to any action, inaction, or default by the Escrow Agent or any insolvency or other financial incapacity of the Escrow Agent.
|
12.
|
CONFIDENTIALITY AND PUBLIC STATEMENT
.
|
12.1
|
Claimants, claimants’ counsel, Plaintiffs’ Counsel, and Wright Medical understand, acknowledge, and agree that the terms and conditions of this Settlement Agreement, and any Individual Settlement under this Settlement Agreement, including amounts to be paid, history, background and related negotiations, are to be kept strictly confidential, and are not to be disclosed by claimants, claimants’ counsel, Plaintiffs’ Counsel or Wright Medical, except as required by law, or as hereinafter set forth or as set forth in a Release, to any person, firm, association, corporation or entity at any time, including, but not limited to, legal trade journals, reporting services, the press or media, and/or on any posting on the Internet.
|
12.2
|
Notwithstanding the foregoing, claimants, claimants’ counsel, Plaintiffs’ Counsel, and Wright Medical may provide this Settlement Agreement, and/or information concerning the nature, negotiations, amount and terms of this Settlement Agreement and/or any Individual Settlement to the following persons or for the following purposes: a) accountants, tax, legal or financial advisors; b) parent companies, affiliates or subsidiaries; c) insurers, retrocessionaires, or reinsurers; d) as absolutely necessary to resolve any outstanding liens; e) when required by
|
12.3
|
If claimants, claimants’ counsel, or Plaintiffs’ Counsel receive notice of any proceeding in which a court, party, or other entity or person seeks to require the disclosure of this Settlement Agreement, or any matter covered by this Settlement Agreement, or any Individual Settlement, immediate notice will be given to Wright Medical. If any court or other legal entity orders or is requested to order the disclosure of the amount, terms, conditions, history, or background of this Settlement Agreement, or of any Individual Settlement, then claimants’ counsel and Plaintiffs’ Counsel agree to join and support any motion for a Protective Order by Wright Medical seeking to protect the confidentiality of these matters.
|
12.4
|
Notwithstanding the foregoing, the Parties may make public statements summarizing this Settlement Agreement. The Parties will coordinate the substance and timing of any such public statement(s), provided however that the timing and substance of any required regulatory or other governmental or accounting disclosure is within the exclusive control of Wright Medical. In the event that Wright Medical determines that any required regulatory or other governmental or accounting disclosure must be made prior to the time agreed by the Parties for coordinated public statements summarizing this Settlement Agreement, Wright Medical will notify Plaintiffs’ Counsel to enable the Parties to issue contemporaneous public statements summarizing this Settlement Agreement, as intended by this Section.
|
12.5
|
Wright Medical and the SOC shall be entitled to review all proof of claim documents, Claim Election Forms, EIF Option submissions, and all other documents submitted by any EC in connection with this Settlement Agreement (including all exhibits and attachments thereto), and all related materials. The representatives of Wright Medical and the SOC shall, at any time, be afforded complete access to and permitted to inspect all of the records or other documentation submitted in connection with each Eligible Claim. For the avoidance of doubt, by accepting an Individual Settlement under this Settlement Agreement, each EC consents to granting access to Wright Medical, the SOC, the Special Master and Claims Administrator, and each of their respective representatives, to the documents that s/he executes and submits as part of the required submissions, including personal information, medical records and lien
|
13.
|
MISCELLANEOUS
|
13.1
|
Contacts For Parties
: Any notice, request, instruction or other document required under this Settlement Agreement shall be in writing and delivered by Federal Express (overnight delivery), and/or e-mail to the following persons, unless otherwise instructed in writing by notice pursuant to this Section 13.1:
|
13.12.1
|
If to Plaintiffs’ Counsel, to each of the following:
|
13.12.2
|
If to Wright Medical, to each of the following:
|
13.2
|
No Admissibility Or Admission
: This Settlement Agreement and the Individual Settlements contemplated hereunder are not evidence that any claim alleged by any claimant has merit, nor does it constitute an admission of any wrongdoing or liability by any entity.
|
13.3
|
Authority To Bind
: The undersigned Plaintiffs’ Counsel represent that they have authority to negotiate and enter into this Settlement Agreement, on behalf of all claimants with Eligible Claims.
|
13.4
|
Inadmissibility of Settlement Agreement
: Neither this Settlement Agreement, nor any Individual Settlement, will be admissible or offered as evidence in any proceeding of any type, except in an action to enforce the terms of this Settlement Agreement or an Individual Settlement, and in such instance will be submitted under seal and pursuant to the greatest confidentiality protections possible.
|
13.5
|
Fees and Costs
: Each side shall bear their own attorneys’ fees and costs under this Settlement Agreement and any Individual Settlement. Neither Wright Medical nor any other released party shall have any responsibility whatsoever for the payment of a claimant’s attorneys’ fees or costs, beyond the withholding and funding of Common Benefit Assessments as set forth in Sections 6.
|
13.6
|
Governing Law and Jurisdiction
: This Settlement Agreement shall be governed by and construed in accordance with the law of the State of Georgia, without regard to any choice-of-law rules that would require the application of the law of another jurisdiction. The Parties agree to submit all disputes arising hereunder to the jurisdiction of the Hon. William S. Duffey in the United States District Court for the Northern District of Georgia, multi-district litigation No. 12-2329.
|
13.7
|
Construction
: This Settlement Agreement, including all exhibits, is the product of arm’s length negotiations between counsel and/or Parties represented by counsel. No Party shall be deemed to be the drafter of this Settlement Agreement or its exhibits, or any specific provisions hereof. No presumption shall be deemed to exist in favor of or against any Party as a result of the preparation of this Settlement Agreement or its exhibits.
|
13.8
|
Survival of Indemnifications.
The provisions of this Settlement Agreement and each Release provided hereunder providing indemnification or releases from liability shall survive the modification, termination and full performance of this Settlement Agreement.
|
13.9
|
Entire Agreement
: This Settlement Agreement, including all exhibits and the Term Sheet and Guaranty incorporated by reference, contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes and cancels all previous agreements, negotiations, and commitments, whether in writing or otherwise. Claimants, their counsel and Plaintiffs’ Counsel agree that
|
13.12.1
|
To be clear, the Term Sheet is incorporated herein by reference in its entirety, and to the extent any inconsistency or lack of clarity exists in this Settlement Agreement, the provisions of the Term Sheet will control. The Term Sheet will be filed with the court, under seal, in any dispute submitted for resolution by the MDL Court under Section 13.6.
|
13.10
|
Amendments
: This Settlement Agreement may be amended by (and only by) a writing signed on behalf of Wright Medical, on the one hand, and Plaintiffs’ Counsel, on the other hand.
|
13.11
|
Waiver of Inconsistent Provisions of Law; Severability
:
|
13.12.1
|
To the fullest extent permitted by applicable law, each Party, each EC and his/her attorney waives any provision of law (including the common law), which renders any provision of this Settlement Agreement invalid, illegal, or unenforceable in any respect.
|
13.12.2
|
In case any provision contained in this Settlement Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Settlement Agreement, but this Settlement Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein, but only to the extent it is invalid, illegal, or unenforceable; provided, however, that if the invalid, illegal or unenforceable provision materially changes the equities or overall intent of the Parties, including but not limited to the scope of any release, indemnity or other right or protection, then the Settlement Agreement will be voided in its entirety. Any dispute regarding the materiality of any provision held to be invalid, illegal or unenforceable will be submitted to the MDL Court, pursuant to Section 13.6.
|
13.12
|
No Third Party Beneficiaries; Assignment
:
|
13.12.1
|
No provision of this Settlement Agreement or any exhibit thereto is intended to create any third-party beneficiary to this Agreement. For the avoidance of doubt, nothing in this Section 13.12 limits or modifies the third-party beneficiary provisions of any Claim Election Form, Release or Dismissal. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns;
provided, however
, that neither this Settlement Agreement nor any of the rights, interests, or obligations hereunder may be assigned, at any time, including but not limited to prior to the execution of this Settlement Agreement, by any
|
13.12.2
|
No EC shall have any right to institute any proceeding, judicial or otherwise, against Wright Medical, the SOC, the Special Master, or any Claims Administrator to enforce or otherwise take any action under this Settlement Agreement.
|
13.13
|
Tax Matters
: The Parties agree to characterize the Escrow Settlement Fund for federal, state and local income tax purposes in such manner as is reasonably determined by Wright Medical. The Escrow Agent, the SOC, and Wright Medical shall timely provide each other with such material and relevant information as and to the extent reasonably requested by the other party in connection with any tax filing or the payment of any taxes or any private letter ruling regarding the tax status of these escrow funds. Within a reasonable time after the execution of this Settlement Agreement, the SOC will seek an order from the MDL Court indicating that further escrow accounts that may be established pursuant to this Settlement Agreement are qualified settlement fund accounts within the meaning of Treasury Regulation Section 1.468B-1. To the extent any settlement award constitutes a tax liability of the EC, it is the EC’s responsibility to pay such tax.
|
13.14
|
Further Assurances
: Following the execution of this Settlement Agreement, (i) each Party will take reasonable actions consistent with the terms of this Settlement Agreement as may reasonably be requested by the other Party, and otherwise reasonably cooperate with the other Party in a manner consistent with the terms of this Settlement Agreement, and (ii) each EC and their attorney shall take such reasonable actions consistent with the terms of this Settlement Agreement as may reasonably be requested by Wright Medical or the SOC, and otherwise reasonably cooperate with Wright Medical and the SOC in a manner consistent with the terms of this Settlement Agreement as necessary in order to carry out the intent and purposes of this Settlement Agreement.
|
13.15
|
Facsimile Signatures
: This Settlement Agreement, and any future amendments hereto, may be signed and delivered by means of a facsimile machine or electronic scan (including in the form of an Adobe Acrobat PDF file format), and in such case shall be treated in all respects as an original document.
|
13.16
|
Counterparts
: This Settlement Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall together constitute one and the same instrument. It shall not be necessary for any counterpart to bear the signature of all Parties hereto.
|
PLAINTIFFS’ MDL AND JCCP CO-LEAD COUNSEL
|
||||
/s/ Michael L. McGlamry
|
|
/s/ Raymond P. Boucher
|
||
Michael L. McGlamry
Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C.
|
|
Raymond P. Boucher
Boucher LLP
|
||
Dated:
|
November 1, 2016
|
|
Dated:
|
November 1, 2016
|
WRIGHT MEDICAL TECHNOLOGY, INC.
|
||||
/s/ James Lightman
|
|
|
||
James Lightman
Sr. Vice President and General Counsel
Wright Medical Technology, Inc.
|
|
|
||
Dated:
|
November 1, 2016
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended
September 25, 2016
, of Wright Medical Group N.V.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Robert J. Palmisano
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Robert J. Palmisano
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President and Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended
September 25, 2016
, of Wright Medical Group N.V.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Lance A. Berry
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Lance A. Berry
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Senior Vice President and Chief Financial Officer
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/s/ Robert J. Palmisano
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Robert J. Palmisano
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President and Chief Executive Officer
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/s/ Lance A. Berry
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Lance A. Berry
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Senior Vice President and Chief Financial Officer
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