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Form 10-Q WRIGHT MEDICAL GROUP For: Sep 30

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November 6, 2014 6:04 AM EST

�
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September�30, 2014
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from �������������������� to ��������������������

Commission file number: 001-35823
WRIGHT MEDICAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
�
13-4088127
(State or Other Jurisdiction
�
(IRS Employer
of Incorporation or Organization)
�
Identification Number)
�
�
�
1023 Cherry Road
�
�
Memphis, Tennessee
�
38117
(Address of Principal Executive Offices)
�
(Zip Code)

(901)�867-9971
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1)�has filed all reports required to be filed by Section�13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12�months (or for such shorter period that the registrant was required to file such reports), and (2)�has been subject to such filing requirements for the past 90�days. Yes T���� No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule�405 of Regulation�S-T (�232.405 of this chapter) during the preceding 12�months (or for such shorter period that the registrant was required to submit and post such files). Yes T���� No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule�12b-2 of the Exchange Act.
Large accelerated filer T
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
�
�
(Do not check if a smaller reporting company)
�

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

As of October�29, 2014, there were 51,069,847 shares of common stock outstanding.
�


WRIGHT MEDICAL GROUP, INC.

TABLE OF CONTENTS

�
Page Number
�
�
�
�
�
�
�
�
�
�
�
�

�EX-10.97
�EX-10.98
�EX-10.99
�EX-10.100
�EX-10.101
�EX-31.1
�EX-31.2
�EX-32
�EX-101 INSTANCE DOCUMENT
�EX-101 SCHEMA DOCUMENT
�EX-101 CALCULATION LINKBASE DOCUMENT
�EX-101 LABELS LINKBASE DOCUMENT
�EX-101 PRESENTATION LINKBASE DOCUMENT
�EX-101 DEFINITION LINKBASE DOCUMENT


SAFE-HARBOR STATEMENT
Table of Contents
This Quarterly Report may contain forward-looking statements as defined under U.S. federal securities laws. These statements reflect management's current knowledge, assumptions, beliefs, estimates, and expectations and express management's current view of future performance, results, and trends. Forward-looking statements may be identified by their use of terms such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, and other similar terms. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements. The reader should not place undue reliance on forward-looking statements. Such statements are made as of the date of this Quarterly Report, and we undertake no obligation to update such statements after this date. Risks and uncertainties that could cause our actual results to materially differ from those described in forward-looking statements are discussed in our filings with the Securities and Exchange Commission (including in our Annual Report on Form 10-K for the year ended December�31, 2013 and in our Quarterly Reports on Form 10-Q, including this Quarterly Report for the quarter ended September�30, 2014, in each case under the heading Risk Factors and elsewhere in such filings). By way of example and without implied limitation, such risks and uncertainties include:

"
future actions of the SEC, the United States Attorney's office, the FDA, the Department of Health and Human Services or other U.S. or foreign government authorities, including those resulting from increased scrutiny under the 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;
"
completion of our proposed combination with Tornier is subject to several closing conditions, the failure of which could delay or prevent completion or reduce anticipated benefits;
"
cash costs associated with our proposed business combination with Tornier may negatively impact our financial condition, operating results, and cash flow;
"
the proposed merger with Tornier may not achieve the intended benefits or may disrupt our operations;
"
continued liability for product liability claims on OrthoRecon products sold prior to the divestiture of our OrthoRecon business or for post-market regulatory obligations on such products;
"
disruptions resulting from loss of personnel, systems and infrastructure changes and transition services arrangements in connection with our OrthoRecon divestiture;
"
failure to realize the anticipated benefits from our acquisitions or from the divestiture of our OrthoRecon business;
"
adverse outcomes in existing product liability litigation;
"
new product liability claims;
"
inadequate insurance coverage;
"
copycat claims against our modular hip systems resulting from a competitor's recall of its modular hip product;
"
failure or delay in obtaining FDA approval of Augment� Bone Graft for commercial sale in the United States;
"
challenges to our intellectual property rights or inability to defend our products against the intellectual property rights of others;
"
loss of key suppliers;
"
failures of, interruptions to, or unauthorized tampering with our information technology systems;
"
failure or delay in obtaining FDA or other regulatory approvals for our products;
"
any actual or alleged breach of the Corporate Integrity Agreement to which we are subject through September 2015, which could expose us to significant liability, including exclusion from Medicare, Medicaid and other federal healthcare programs, potential criminal prosecution, and civil and criminal fines or penalties;
"
the potentially negative effect of our ongoing compliance enhancements on our relationships with customers and on our ability to deliver timely and effective medical education, clinical studies, and new products;
"
the possibility of private securities litigation or shareholder derivative suits;
"
insufficient demand for and market acceptance of our new and existing products;
"
recently enacted healthcare laws and changes in product reimbursements, which could generate downward pressure on our product pricing;
"
potentially burdensome tax measures;
"
lack of suitable business development opportunities;
"
inability to capitalize on business development opportunities;
"
product quality or patient safety issues;
"
geographic and product mix impact on our sales;
"
inability to retain key sales representatives, independent distributors and other personnel or to attract new talent;
"
inventory reductions or fluctuations in buying patterns by wholesalers or distributors; and
"
the negative impact of the commercial and credit environment on us, our customers and our suppliers.



PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited).

WRIGHT MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)

�
September�30,
2014
�
December�31,
2013
Assets:
�
�
�
Current assets:
�
�
�
Cash and cash equivalents
$
273,031

�
$
168,534

Marketable securities
3,146

�
6,898

Accounts receivable, net
56,706

�
45,817

Inventories
85,446

�
72,443

Prepaid expenses
12,178

�
6,508

Deferred income taxes
2,559

�
10,749

Other current assets
56,669

�
52,351

Current assets held for sale (Note 3)


�
142,015

Total current assets
489,735

�
505,315

Property, plant and equipment, net
95,276

�
70,515

Goodwill
192,902

�
118,263

Intangible assets, net
68,401

�
39,420

Marketable securities


�
7,650

Deferred income taxes
549

�
1,632

Other assets
119,838

�
132,213

Other assets held for sale (Note 3)


�
132,443

Total assets
$
966,701

�
$
1,007,451

Liabilities and Stockholders Equity:
�
�
�
Current liabilities:
�
�
�
Accounts payable
$
22,601

�
$
3,913

Accrued expenses and other current liabilities
131,387

�
80,117

Current portion of long-term obligations
4,482

�
4,174

Current liabilities held for sale (Note 3)


�
31,221

Total current liabilities
158,470

�
119,425

Long-term debt and capital lease obligations
278,427

�
271,227

Deferred income taxes
14,060

�
20,620

Other liabilities
132,837

�
135,066

Other liabilities held for sale (Note 3)


�
1,399

Total liabilities
583,794

�
547,737

Commitments and contingencies (Note 12)

�

Stockholders equity:
�
�
�
Common stock, $.01 par value, authorized: 100,000,000 shares; issued and outstanding: 50,844,255 shares at September 30, 2014 and 47,993,765 shares at December�31, 2013
504

�
473

Additional paid-in capital
737,732

�
656,770

Accumulated other comprehensive income
8,603

�
17,953

Accumulated deficit

(363,932
)
�
(215,482
)
Total stockholders equity
382,907

�
459,714

Total liabilities and stockholders equity
$
966,701

�
$
1,007,451


The accompanying notes are an integral part of these condensed consolidated financial statements.

1

WRIGHT MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)

�
Three Months Ended
�
Nine Months Ended
�
September�30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
Net sales
$
71,307

�
$
57,641

�
$
214,733

�
$
174,506

Cost of sales 1
16,703

�
14,037

�
54,126

�
42,298

Gross profit
54,604

�
43,604

�
160,607

�
132,208

Operating expenses:
�
�
�
�
�
�
�
Selling, general and administrative�1
66,926

�
63,054

�
207,629

�
164,306

Research and development 1
5,948

�
5,518

�
18,603

�
14,893

Amortization of intangible assets
2,379

�
1,342

�
7,241

�
5,726

BioMimetic impairment charges


�
206,249

�


�
206,249

Total operating expenses
75,253

�
276,163

�
233,473

�
391,174

Operating loss
(20,649
)
�
(232,559
)
�
(72,866
)
�
(258,966
)
Interest expense, net
4,565

�
4,044

�
12,873

�
11,979

Other expense (income), net
21,430

�
(64,019
)
�
54,986

�
(65,291
)
Net loss from continuing operations before income taxes
(46,644
)
�
(172,584
)
�
(140,725
)
�
(205,654
)
�Provision (benefit) for income taxes
3,003

�
(48,084
)
�
(7,197
)
�
(60,697
)
Net loss from continuing operations
$
(49,647
)
�
$
(124,500
)
�
$
(133,528
)
�
$
(144,957
)
(Loss) income from discontinued operations, net tax 1�(Note 3)
(12,160
)
�
(5,520
)
�
(14,925
)
�
6,041

Net loss
$
(61,807
)
�
$
(130,020
)
�
$
(148,453
)
�
$
(138,916
)
Net loss from continuing operations per share (Note11):
�
�
�
�
�
�
�
Basic
$
(0.99
)
�
$
(2.68
)
�
$
(2.70
)
�
$
(3.24
)
Diluted
$
(0.99
)
�
$
(2.68
)
�
$
(2.70
)
�
$
(3.24
)
Net loss per share (Note11):
�
�
�
�
�
�
�
Basic
$
(1.24
)
�
$
(2.80
)
�
$
(3.00
)
�
$
(3.11
)
Diluted
$
(1.24
)
�
$
(2.80
)
�
$
(3.00
)
�
$
(3.11
)
�
�
�
�
�
�
�
�
Weighted-average number of shares outstanding-basic
50,043

�
46,418

�
49,441

�
44,721

Weighted-average number of shares outstanding-diluted
50,043

�
46,418

�
49,441

�
44,721

___________________________
1�
These line items include the following amounts of non-cash, stock-based compensation expense for the periods indicated:
�
Three Months Ended
�
Nine Months Ended
�
September�30,
�
September�30,
�
2014
�
2013
�
2014
�
2013
Cost of sales
$
43

�
$
100

�
$
231

�
$
390

Selling, general and administrative
2,522

�
2,357

�
7,932

�
8,504

Research and development
304

�
215

�
805

�
583

Discontinued operations


�
837

�


�
2,553


The accompanying notes are an integral part of these condensed consolidated financial statements.

2

WRIGHT MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(unaudited)

�
Three Months Ended
�
Nine Months Ended
�
September 30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
Net loss
$
(61,807
)
�
$
(130,020
)
�
$
(148,453
)
�
$
(138,916
)
�
�
�
�
�
�
�
�
Other comprehensive (loss) income, net of tax:
�
�
�
�
�
�
�
Changes in foreign currency translation
(11,034
)
�
2,818

�
(11,636
)
�
(1,873
)
Reclassification of gain on equity securities, net of taxes of $3,041


�


�


�
(4,757
)
Unrealized gain on marketable securities, net of taxes of $1, $12, $1 and $984, respectively
(1
)
�
17

�
2

�
1,540

Reclassification of currency translation adjustment (CTA) write-off to earnings related to liquidation of Japanese subsidiary


�


�
2,628

�


Reclassification of minimum pension liability to earnings


�
(8
)
�
(344
)
�
(23
)
Other comprehensive (loss) income
(11,035
)
�
2,827

�
(9,350
)
�
(5,113
)
�
�
�
�
�
�
�
�
Comprehensive loss
$
(72,842
)
�
$
(127,193
)
�
$
(157,803
)
�
$
(144,029
)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WRIGHT MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

�
Nine Months Ended
�
September�30,
�
2014
�
2013
Operating activities:
�
�
�
Net loss
$
(148,453
)
�
$
(138,916
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
�
�
�
Depreciation
13,617

�
26,035

Stock-based compensation expense
8,968

�
12,030

Amortization of intangible assets
7,241

�
7,001

Amortization of deferred financing costs and debt discount
8,162

�
7,651

Deferred income taxes
2,268

�
(35,339
)
Excess tax benefit from stock-based compensation arrangements
(59
)
�
(746
)
Non-cash adjustments to derivative fair value
2,000

�
3,000

Non-cash realized gain on BioMimetic stock


�
(7,798
)
BioMimetic goodwill and intangible impairment charge


�
203,081

Gain on sale of OrthoRecon business
(24,277
)
�


Mark-to-market adjustment for CVRs (Note 1)
51,294

�
(60,310
)
Other
1,537

�
(1,271
)
Changes in assets and liabilities (net of acquisitions and dispositions):
�
�
�
Accounts receivable
(8,475
)
�
4,111

Inventories
(12,472
)
�
4,152

Prepaid expenses and other assets
(13,825
)
�
(40,187
)
Accounts payable
18,594

�
6,610

Accrued expenses and other liabilities
7,728

�
16,617

Net cash (used in) provided by operating activities
(86,152
)
�
5,721

Investing activities:
�
�
�
Capital expenditures
(35,706
)
�
(22,512
)
Acquisition of businesses (Note 2)
(80,556
)
�
(40,407
)
Purchase of intangible assets
(2,761
)
�
(3,273
)
Sales and maturities of available-for-sale marketable securities
11,245

�
22,352

Investment in available-for-sale marketable securities


�
(20,719
)
Proceeds from sale of assets
274,687

�
8,500

Net cash provided by (used in) investing activities
166,909

�
(56,059
)
Financing activities:
�
�
�
Issuance of common stock
26,376

�
2,801

Payments of deferred financing and equity issuance costs


�
(16
)
Payments of capital leases
(260
)
�
(781
)
Excess tax benefit from stock-based compensation arrangements
59

�
746

Net cash provided by financing activities
26,175

�
2,750

Effect of exchange rates on cash and cash equivalents
(2,636
)
�
21

Net increase (decrease) in cash and cash equivalents
104,296

�
(47,567
)
Cash and cash equivalents, beginning of period
168,735

�
320,360

Cash and cash equivalents, end of period
$
273,031

�
$
272,793


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. Summary of Significant Accounting Policies
Basis of Presentation. The unaudited condensed consolidated interim financial statements of Wright Medical Group, Inc. have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States (U.S.) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule�10-01 of Regulation�S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted pursuant to these rules and regulations. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December�31, 2013, as filed with the U.S. Securities and Exchange Commission (SEC).
In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments necessary for a fair presentation of our interim financial results. All such adjustments are of a normal and recurring nature. The results of operations for any interim period are not indicative of results for the full fiscal year. Certain prior year amounts have been reclassified to conform with the current year presentation, including amounts related to discontinued operations.
The accompanying unaudited condensed consolidated interim financial statements include our accounts and those of our domestic and international subsidiaries, all of which are wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.
Income Taxes. In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exist (ASU 2013-11). ASU 2013-11 reduces diversity in practice by providing guidance on the presentation of unrecognized tax benefits and is intended to better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. We adopted ASU 2013-11 effective January 1, 2014, which resulted in an immaterial balance sheet reclassification to conform to the required net presentation.
Fair Value of Financial Instruments. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate the fair values of these financial instruments as of September�30, 2014 and December�31, 2013 due to their short maturities or variable rates.
The remaining outstanding $3.8 million of our 2.625% Convertible Senior Notes maturing on December 1, 2014 (2014 Notes) are carried at cost. The estimated fair value of the 2014 Notes was approximately $3.7 million�at September�30, 2014, based on a limited number of trades (Level 1) and does not necessarily represent the value at which the entire 2014 Note portfolio can be retired.
The outstanding $300 million of our 2.00% Convertible Senior Notes maturing in 2017 (2017 Notes) are carried at cost, net of unamortized discount. The estimated fair value of the 2017 Notes was approximately $399.8 million at September�30, 2014, based on a quoted price in an active market (Level 1).
FASB Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement, requires fair value measurements be classified and disclosed in one of the following three categories:
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.
We use a third-party provider to determine fair values of our available-for-sale debt securities. The third-party provider receives market prices for each marketable security from a variety of industry standard data providers, security master files from large

5
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




financial institutions and other third-party sources with reasonable levels of price transparency. The third-party provider uses these multiple prices as inputs into a pricing model to determine a weighted average price for each security. We have controls in place to review the third party provider's qualifications and procedures used to determine fair values and to validate the prices used in their determination of fair value. We classify our investment in U.S. Treasury bills and bonds and corporate equity securities as Level 1 based upon quoted prices in active markets. All other marketable securities are classified as Level 2 based upon the other than quoted prices with observable market data. These include U.S. agency debt securities, certificates of deposit, commercial paper, and corporate debt securities.
During the third quarter of 2012, we issued $300 million of our 2017 Notes, and we have recorded a derivative liability for the conversion feature (2017 Notes Conversion Derivative) of such 2017 Notes. Additionally, we entered into convertible notes hedging transactions (2017 Notes Hedges) in connection with the issuance of our 2017 Notes. The 2017 Notes Hedges and the 2017 Notes Conversion Derivative are measured at fair value using Level 3 inputs. These instruments are not actively traded and are valued using an option pricing model that uses observable and unobservable market data for inputs.
To determine the fair value of the embedded conversion option in the 2017 Notes Conversion Derivative, a binomial lattice model was used. A binomial stock price lattice generates two probable outcomes of stock price - one up and another down. This lattice generates a distribution of stock price at the maturity date. Using this stock price lattice, a conversion option lattice was created where the value of the embedded conversion option was estimated. The conversion option lattice first calculates the possible conversion option values at the maturity date using the distribution of stock price, which equals to the maximum of (x) zero, if stock price is below the strike price, or (y) stock price less the strike price, if the stock price is higher than the strike price. The value of the 2017 Notes Conversion Derivative at the valuation date was estimated using the conversion option values at the maturity date by moving back in time on the lattice. Specifically, at each node, if our 2017 Notes are eligible for early conversion, the value at this node is the maximum of (i) the early conversion value, which is the stock price less the strike price, and (ii) the discounted and probability-weighted value from the two probable outcomes in the future. If our 2017 Notes are not eligible for early conversion, the value of the conversion option at this node equals to (ii). In the conversion option lattice, credit adjustment was applied in the model as the embedded conversion option is settled with cash instead of shares.

To estimate the fair value of the 2017 Notes Hedges, we used the Black-Scholes formula combined with credit adjustments, as the bank counterparties have credit risk and the call options are cash settled. We assumed that the call options will be exercised at the maturity since our common stock does not pay any dividends and management does not expect to declare dividends in the near term.

The following assumptions were used in the fair market valuations of the 2017 Notes Conversion Derivative and 2017 Notes Hedges as of September�30, 2014:
�
2017 Notes Conversion Derivative
2017 Notes Hedge
Stock Price Volatility (1)
35
%
35
%
Credit Spread for Wright (2)
1.8
%
N/A

Credit Spread for Bank of America, N.A. (3)
N/A

0.5
%
Credit Spread for Deutsche Bank AG (3)
N/A

0.5
%
Credit Spread for Wells Fargo Securities, LLC (3)
N/A

0.3
%

(1)
Volatility selected based on historical and implied volatility of common shares of Wright Medical Group, Inc.
(2)
Credit spread was estimated based on BVAL price from Bloomberg as of valuation date.
(3)
Credit spread of each bank is estimated using CDS curves. Source: Bloomberg.
As part of the acquisitions of EZ Concepts Surgical Device Corporation, d/b/a EZ FrameTM and CCI� Evolution Mobile Bearing Total Ankle Replacement system (CCI acquisition), completed in 2010 and 2011, respectively, we have recorded $0.3 million of contingent liabilities for potential future cash payments related to these transactions as of September�30, 2014. The fair value of the contingent consideration associated with each of the acquisitions noted above as of September�30, 2014, was determined using a discounted cash flow model and probability adjusted estimates of the future earnings and is classified in Level 3. Changes in the fair value of contingent consideration are recorded in "Other expense (income), net" in our condensed consolidated statements of operations.
As part of the acquisition of WG Healthcare in 2013, we have recorded contingent consideration of approximately $2.8 million as of September�30, 2014. The fair value of the contingent consideration associated with this acquisition as of September�30, 2014,

6
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




was determined using a discounted cash flow model, utilizing a 12% discount rate and probability adjusted estimates of the future earnings and is classified in Level 3. For the three months ended September 30, 2014, the change in the value of the contingent consideration resulted in $1.7 million of expense, which was recorded in Other expense (income), net in the condensed consolidated statements of operations.
On March 1, 2013, as part of the acquisition of BioMimetic Therapeutics, Inc. (BioMimetic), we issued Contingent Value Rights (CVRs) as part of the merger consideration. Each CVR entitles its holder to receive additional cash payments of up to $6.50 per share, which are payable upon receipt of FDA approval of Augment� Bone Graft and upon achieving certain revenue milestones. The fair value of the CVRs outstanding at September�30, 2014 of $60.3 million was determined using the closing price of the security in the active market (Level 1). For the three and nine months ended September 30, 2014, the change in the value of the CVR resulted in an $18.5 million and $51.3 million of expense, which was recorded in Other expense (income) in the condensed consolidated statements of operations.
The following table summarizes the valuation of our financial instruments measured at fair value on a recurring basis (in thousands):
�
Total
Quoted Prices
in Active
Markets
(Level 1)
Prices with
Other
Observable
Inputs
(Level 2)
Prices with
Unobservable
Inputs
(Level 3)
At September 30, 2014
�
�
�
�
Assets
�
�
�
�
Cash and cash equivalents
$
273,031

$
273,031

$


$


Available-for-sale marketable securities
�
�
�
�
Corporate debt securities
1,117



1,117



U.S. government debt securities
2,029

2,029





Total available-for-sale marketable securities
3,146

2,029

1,117



�
�
�
�
�
2017 Notes Hedges
112,000





112,000

�
�
�
�
�
�Total
$
388,177

$
275,060

$
1,117

$
112,000

�
�
�
�
�
Liabilities
�
�
�
�
2017 Notes Conversion Derivative
$
108,000

$


$


$
108,000

Contingent consideration
3,019





3,019

Contingent consideration (CVR)
60,263

60,263





�
�
�
�
�
�Total
$
171,282

$
60,263

$


$
111,019


7
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




�
Total
Quoted Prices
in Active
Markets
(Level 1)
Prices with
Other
Observable
Inputs
(Level 2)
Prices with
Unobservable
Inputs
(Level 3)
At December 31, 2013
�
�
�
�
Assets
�
�
�
�
Cash and cash equivalents
$
168,534

$
168,534

$


$


Available-for-sale marketable securities
�
�
�
�
U.S. agency debt securities
$
4,998

$


$
4,998

$


Certificate of deposit
245



245



Corporate debt securities
5,188



5,188



U.S. Government debt securities
4,117

4,117





Total available-for-sale marketable securities
14,548

4,117

10,431



�
�
�
�
�
2017 Notes Hedges
118,000





118,000

�
�
�
�
�
�Total
$
301,082

$
172,651

$
10,431

$
118,000

�
�
�
�
�
Liabilities
�
�
�
�
2017 Notes Conversion Derivative
$
112,000

$


$


$
112,000

Contingent consideration
6,237





6,237

Contingent consideration (CVR)
$
8,969

8,969

$


$


�Total
$
127,206

$
8,969

$


$
118,237

On October 27, 2014, we announced that we had received an Approvable Letter from the U.S. Food and Drug Administration (FDA) for our Premarket Approval Application (PMA) for Augment� Bone Graft. Following this announcement, the fair value of the CVR's increased significantly and traded at an average value of approximately $125 million in the four days following announcement. Approximately $98 million of the liability associated with the CVR's will be payable shortly after receipt of final approval from the FDA for Augment� bone graft.

The following is a roll forward of our assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3):
�
�
Balance at December 31, 2013
Transfers into Level 3
Gain/(Losses) included in Earnings
Currency
Settlements
Acquisition Measurement Period Adjustment
Balance at September 30, 2014
�
�
�
�
�
�
�
�
�
2017 Notes Hedges
�
$
118,000



(6,000
)






$
112,000

�
�
�
�
�
�
�
�
�
2017 Notes Conversion Derivative
�
$
(112,000
)


4,000







$
(108,000
)
�
�
�
�
�
�
�
�
�
Contingent Consideration
�
$
(6,236
)


(1,975
)
391

840

3,961

$
(3,019
)


2. Acquisitions
Solana Surgical, LLC
On January�30, 2014, we acquired 100% of the outstanding equity of Solana Surgical, LLC (Solana), a privately held Memphis, Tennessee orthopaedic company, for approximately $48.0 million in cash and $41.4 million of our common stock. The transaction enables us to add Solana's complementary extremity product portfolio to further accelerate growth opportunities in our global extremities business. The operating results from this acquisition are included in the condensed consolidated financial statements from the acquisition date.

8
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




The acquisition was recorded by allocating the costs of the assets acquired based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the fair value of the assets acquired is recorded as goodwill. The following is a summary of the estimated fair values of the assets acquired (in thousands):
Cash and cash equivalents
�
$
416

Accounts receivable
�
2,366

Inventory
�
2,244

Prepaid and other current assets
�
372

Property, plant and equipment
�
360

Intangible assets
�
21,584

Accounts payable and accrued liabilities
�
(2,196
)
Total net assets acquired
�
$
25,146

�
�
�
Goodwill
�
64,326

�
�
�
Total purchase consideration
�
$
89,472

The purchase price allocation was adjusted in the second quarter of 2014 for the finalization of the valuation of the acquired intangible assets. Intangible assets decreased $0.5 million during the second quarter of 2014. During the third quarter of 2014 the purchase price allocation was adjusted to record certain tax related liabilities existing at the date of acquisition. Accrued liabilities increased $0.2 million during the third quarter of 2014.
The goodwill is primarily attributable to strategic opportunities that arose from the acquisition of Solana. The goodwill is expected to be deductible for tax purposes.
Of the $21.6 million of acquired intangible assets, $11.7 million was assigned to purchased technology (10 year life), $9.3 million was assigned to customer relationships (12 year life), and $0.6 million was assigned to trademarks (2 year life).
The acquired business contributed revenues of $9.7 million and operating income of $0.4 million, which excludes transaction and transition costs, to our consolidated results from the date of acquisition through September 30, 2014.
Our consolidated results of operations would not have been materially different than reported results had the Solana acquisition occurred at the beginning of 2013 and therefore, pro forma financial information has not been presented.
OrthoPro, L.L.C.
On February�5, 2014, we acquired 100% of the outstanding equity of OrthoPro, a privately held Salt Lake City, Utah orthopaedic company, for approximately $32.5 million in cash at closing. The transaction enables us to add OrthoPro's complementary extremity product portfolio to further accelerate growth opportunities in our global extremities business. The operating results from this acquisition are included in the condensed consolidated financial statements from the acquisition date.
During the quarter ended June 30, 2014, we finalized the calculation of the acquisition date fair value of contingent consideration, which was reduced by $2.9 million at that time.
The acquisition was recorded by allocating the costs of the assets acquired based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the fair value of the assets acquired is recorded as goodwill. The following is a summary of the estimated fair values of the assets acquired (in thousands):

9
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




Cash and cash equivalents
�
$
98

Accounts receivable
�
1,308

Inventory
�
2,156

Prepaid and other current assets
�
49

Property, plant and equipment
�
1,801

Intangible assets
�
7,772

Accounts payable and accrued liabilities
�
(949
)
Total net assets acquired
�
$
12,235

�
�
�
Goodwill
�
20,801

�
�
�
Total purchase consideration
�
$
33,036

The purchase price allocation was adjusted in the second quarter of 2014 for the finalization of the valuation of acquired intangible assets. Intangible assets decreased $1.8 million during the second quarter of 2014. The purchase price allocation was adjusted in the third quarter of 2014 to record certain tax related liabilities that existed at the date of acquisition. Accrued liabilities increased $0.4 million during the third quarter of 2014.
The goodwill is primarily attributable to strategic opportunities that arose from the acquisition of OrthoPro. The goodwill is expected to be deductible for tax purposes.
Of the $7.8 million of acquired intangible assets, $4.2 million was assigned to customer relationships (12 year life), $3.4 million was assigned to purchased technology (10 year life), and $0.2 million was assigned to trademarks (2 year life).
The acquired business contributed revenues of $5.1 million and operating income of $0.2 million, which excludes transaction and transition costs, to our consolidated results from the date of acquisition through September 30, 2014.
Our consolidated results of operations would not have been materially different than reported results had the OrthoPro acquisition occurred at the beginning of 2013 and therefore, pro forma financial information has not been presented.

Biotech International
On November�15, 2013, we acquired 100% of the outstanding equity of Biotech, a leading, privately held French orthopaedic extremities company, for approximately $55.0 million in cash and $21.0 million of our common stock. All of our common stock issued in connection with the transaction is subject to a lockup period of one year. The transaction significantly expands our direct sales channel in France and international distribution network and adds Biotechs complementary extremity product portfolio to further accelerate growth opportunities in our global extremities business. The operating results from this acquisition are included in the condensed consolidated financial statements from the acquisition date.

10
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




The acquisition was recorded by allocating the costs of the assets and liabilities acquired based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the fair value of the net assets and liabilities acquired is recorded as goodwill. The following is a summary of the estimated fair values of the assets acquired (in thousands):
Cash and cash equivalents
�
$
252

Accounts receivable
�
5,400

Inventory
�
5,814

Prepaid and other current assets
�
303

Property, plant and equipment
�
2,573

Intangible assets
�
17,800

Accounts payable and accrued liabilities
�
(2,552
)
Deferred tax liability - current
�
(52
)
Deferred tax liability - noncurrent
�
(4,705
)
�������Net assets acquired
�
$
24,833

�
�
�
Goodwill
�
51,204

�
�
�
Total purchase consideration
�
$
76,037

The purchase price allocation was adjusted in the first quarter of 2014 to the preliminary valuation of acquired intangible assets. Intangible assets, net of tax, increased $1.5 million during the first quarter of 2014. The purchase price allocation was adjusted in the third quarter of 2014 to record $0.5 million of tax related liabilities that existed as of the date of acquisition, and to reduce the acquisition date fair value of contingent consideration by $4.2 million. These adjustments were not considered material to previously reported balances and, accordingly, such balances have not been updated.
The goodwill is attributable to the workforce of the acquired business and strategic opportunities that arose from the acquisition of Biotech. The goodwill is not expected to be deductible for tax purposes.
Of the estimated $17.8 million of acquired intangible assets, $10.1 million was assigned to customer relationships (12 year life), $7.1 million was assigned to purchased technology (10 year life), and $0.6 million was assigned to trademarks (2 year life).
The acquired business contributed revenues of $10.5 million and operating loss of $3.7 million, which excludes transaction and transition costs, to our consolidated results during 2014. Our consolidated results of operations would not have been materially different than reported results had the Biotech acquisition occurred at the beginning of 2013 and therefore, pro forma financial information has not been presented.

3. Discontinued Operations
On January 9, 2014, pursuant to the previously disclosed Asset Purchase Agreement, dated as of June 18, 2013 (the Purchase Agreement), by and among us, MicroPort Scientific Corporation, a corporation formed under the laws of the Cayman Islands (MicroPort), and MicroPort Medical B.V., a besloten vennootschap formed under the laws of the Netherlands, we completed our divesture and sale of our business operations operating under the OrthoRecon operating segment (the OrthoRecon Business) to MicroPort. Pursuant to the terms of the Purchase Agreement, the purchase price (as defined in the Purchase Agreement) for the OrthoRecon Business was approximately $285 million (including an estimated working capital adjustment), which MicroPort paid in cash. As a result of the transaction, we recognized approximately $24.3 million as the gain on disposal of the OrthoRecon business, before the effect of income taxes.

11

All current and historical operating results for the OrthoRecon segment are reflected within discontinued operations in the condensed consolidated financial statements. In addition, costs within historical operating results associated with corporate employees and infrastructure transferred as a part of the sale were included in discontinued operations. The following table summarizes the results of discontinued operations (in thousands):
�
Three Months Ended
�
Nine Months Ended
�
September 30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
Revenue
$


�
$
48,986

�
$
3,056

�
$
173,252

(Loss) income before tax (including $24.3 million gain from disposal)
(18,137
)
�
(8,611
)
�
(7,121
)
�
9,872

Income tax (benefit) provision
(5,977
)
�
(3,091
)
�
7,804

�
3,831

(Loss) income from discontinued operations, net of tax
(12,160
)
�
(5,520
)
�
(14,925
)
�
6,041

The nine-months ended September 30, 2014 effective tax rate within the results of discontinued operations reflects the sale of non-deductible goodwill of $25.8 million associated with the OrthoRecon segment. The 2014 tax provision reflects an estimated purchase price allocation by tax jurisdiction for the sale of the OrthoRecon business, which is not anticipated to change materially upon finalization.
Certain liabilities associated with the OrthoRecon business, including product liability claims associated with hip and knee products sold prior to the closing, were not assumed by MicroPort. Charges associated with these product liability claims, including legal defense, settlements and judgments, income associated with product liability insurance recoveries, and changes to any contingent liabilities associated with the OrthoRecon business have been reflected within results of discontinued operations, and we will continue to reflect these within results of discontinued operations in future periods. We will incur continuing cash outflows associated with legal defense costs and the ultimate resolution of these contingent liabilities, net of insurance proceeds, until these liabilities are resolved. During the three months ended September 30, 2014, we recorded expense of $13.8 million in discontinued operations in connection to the reported settlement associated with the ConforMIS matter. See Note 12 of the condensed consolidated financial statements for additional information regarding the ConforMIS matter.
MicroPort is responsible for product liability claims associated with products it sells after the closing.

4. Inventories
Inventories consist of the following (in thousands):
�
September�30,
2014
December�31,
2013
Raw materials
$
5,936

$
2,693

Work-in-process
11,418

6,950

Finished goods
68,092

62,800

�
$
85,446

$
72,443


5. Marketable Securities
Our investments in marketable securities are classified as available-for-sale securities in accordance with FASB ASC Topic 320, Investments  Debt and Equity Securities. These securities are carried at their fair value, and all unrealized gains and losses are recorded within other comprehensive income. Marketable securities are classified as current for those expected to mature or be sold within 12�months and the remaining portion is classified as non-current. The cost of investment securities sold is determined by the specific identification method.
As of September�30, 2014 and December�31, 2013, we had current marketable securities totaling $3.1 million and $6.9 million, respectively, consisting of investments in corporate and government bonds, all of which are valued at fair value using a market approach. In addition, we had non-current marketable securities totaling $7.7 million as of December 31, 2013, consisting of investments in corporate, government, and agency bonds, all of which are valued at fair value using a market approach.

12
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




The following tables present a summary of our marketable securities (in thousands):
�
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
At September 30, 2014
�
�
�
�
Available-for-sale marketable securities
�
�
�
�
Corporate debt securities
1,117





1,117

U.S. government debt securities
2,028

1



2,029

Total available-for-sale marketable securities
$
3,145

$
1

$


$
3,146


�
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
At December 31, 2013
�
�
�
�
Available-for-sale marketable securities
�
�
�
�
U.S. agency debt securities
$
5,002

$


$
(4
)
$
4,998

Certificate of deposit
245





245

Corporate debt securities
5,186

2



5,188

U.S. government debt securities
4,116

1



4,117

Total available-for-sale marketable securities
$
14,549

$
3

$
(4
)
$
14,548


The maturities of available-for-sale debt securities at September�30, 2014 are as follows:
�
Available-for-Sale
�
Cost Basis
Fair Value
Due in one year or less
$
3,145

$
3,146

Due after one year




�
$
3,145

$
3,146


6. Property, Plant and Equipment, Net
Property, plant and equipment consist of the following (in thousands):
�
September�30,
2014
December�31,
2013
Property, plant and equipment, at cost
$
180,472

$
141,585

Less: Accumulated depreciation
(85,196
)
(71,070
)
�
$
95,276

$
70,515



7. Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consist of the following (in thousands):
�
September�30,
2014
December�31,
2013
Capital lease obligations
$
8,859

$
8,238

2017 Notes
270,282

263,395

2014 Notes
3,768

3,768

�
282,909

275,401

Less: current portion
(4,482
)
(4,174
)
�
$
278,427

$
271,227

2017 Notes
On August 31, 2012, we issued $300 million aggregate principal amount of the 2017 Notes pursuant to an indenture, dated as of August 31, 2012 between us and The Bank of New York Mellon Trust Company, N.A., as Trustee. The 2017 Notes will mature on August 15, 2017, and we pay interest on the 2017 Notes semi-annually on each February 15 and August 15 at an annual rate

13
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




of 2.00%. We may not redeem the 2017 Notes prior to the maturity date, and no sinking fund is available for the 2017 Notes, which means that we are not required to redeem or retire the 2017 Notes periodically. The 2017 Notes are convertible at the option of the holder, during certain periods and subject to certain conditions as described below, solely into cash at an initial conversion rate of 39.3140 shares per $1,000 principal amount of the 2017 Notes, subject to adjustment upon the occurrence of specified events, which represents an initial conversion price of $25.44 per share. The holder of the 2017 Notes may convert their notes at any time prior to February 15, 2017 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending December 31, 2012 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events, including during the period beginning 35 scheduled trading days prior to the anticipated effective date of our proposed merger with Tornier N.V. and ending 35 trading days after the actual effective date of such merger. While we currently do not expect significant conversions because the notes currently trade at a premium to the as-converted value, and a converting holder would forego future interest payments, any conversions would reduce our cash resources. On or after February 15, 2017 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2017 Notes solely into cash, regardless of the foregoing circumstances. Upon conversion, a holder will receive an amount in cash, per $1,000 principal amount of the 2017 Notes, equal to the settlement amount as calculated under the indenture relating to the 2017 Notes. If we undergo a fundamental change, as defined in the indenture relating to the 2017 Notes, subject to certain conditions, holders of the 2017 Notes will have the option to require us to repurchase for cash all or a portion of their notes at a purchase price equal to 100% of the principal amount of the 2017 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date, as defined in the indenture relating to the 2017 Notes. In addition, following certain corporate transactions, we, under certain circumstances, will pay a cash make-whole premium by increasing the applicable conversion rate for a holder that elects to convert its 2017 Notes in connection with such corporate transaction. The 2017 Notes are senior unsecured obligations that rank: (i) senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2017 Notes; (ii) equal in right of payment to any of our unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. As a result of this transaction, we recognized deferred financing charges of approximately $8.8 million, which are being amortized over the term of the 2017 Notes using the effective interest method.
The 2017 Notes Conversion Derivative requires bifurcation from the 2017 Notes in accordance with ASC Topic 815, Derivatives and Hedging, and is accounted for as a derivative liability. The fair value of the 2017 Notes Conversion Derivative at the time of issuance of the 2017 Notes was $48.1 million and was recorded as original debt discount for purposes of accounting for the debt component of the 2017 Notes. This discount is amortized as interest expense using the effective interest method over the term of the 2017 Notes. For the three and nine months ended September�30, 2014, the Company recorded $2.3 million and $6.9 million, respectively, of interest expense related to the amortization of the debt discount based upon an effective rate of 6.47%.
The components of the 2017 Notes were as follows (in thousands):
�
September�30, 2014
December�31, 2013
Principal amount of 2017 Notes
$
300,000

$
300,000

Unamortized debt discount
(29,718
)
(36,605
)
Net carrying amount of 2017 Notes
$
270,282

$
263,395

We entered into 2017 Notes Hedges in connection with the issuance of the 2017 Notes with three counterparties (the Option Counterparties). The 2017 Notes Hedges, which are cash-settled, are intended to reduce our exposure to potential cash payments that we would be required to make if holders elect to convert the 2017 Notes at a time when our stock price exceeds the conversion price. However, in connection with certain events, including a merger such as our proposed merger with Tornier N.V., the Option Counterparties have the discretion to make certain adjustments to the 2017 Note Hedges and warrant transactions, which may reduce the effectiveness of the 2017 Note Hedges or increase our obligations under the warrant transactions. The aggregate cost of the 2017 Notes Hedges was $56.2 million and is accounted for as a derivative asset in accordance with ASC Topic 815. See Note 8 of the condensed consolidated financial statements for additional information regarding the 2017 Notes Hedges and the 2017 Notes Conversion Derivative.
We also entered into warrant transactions in which we sold warrants for an aggregate of 11.8 million shares of our common stock to the Option Counterparties, subject to adjustment. The strike price of the warrants was initially $29.925 per share, which was

14
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




50% above the last reported sale price of our common stock on August 22, 2012.�The warrants are net-share settled and are exercisable over the 100 trading day period beginning on November 15, 2017. The warrant transactions will have a dilutive effect to the extent that the market value per share of our common stock during such period exceeds the applicable strike price of the warrants.
Aside from the initial payment of the $56.2 million premium to the Option Counterparties, we do expect to be required to make any cash payments to the Option Counterparties under the 2017 Notes Hedges and expect to be entitled to receive from the Option Counterparties cash, generally equal to the amount by which the market price per share of common stock exceeds the strike price of the convertible note hedging transactions during the relevant valuation period, subject to the discretion of the Option Counterparties to make adjustments in connection with our proposed merger as described above. The strike price under the 2017 Notes Hedges is equal to the conversion price of the 2017 Notes. Additionally, if the market value per share of our common stock exceeds the strike price on any day during the 100 trading day measurement period under the warrant transaction, we will be obligated to issue to the Option Counterparties a number of shares equal in value to one percent of the amount by which the then-current market value of one share of our common stock exceeds the then-effective strike price of each warrant, multiplied by the number of shares of common stock into which the 2017 Notes are then convertible at or following maturity. We will not receive any additional proceeds if warrants are exercised. If the 2017 Note Hedges and warrant transactions are terminated in connection with our proposed merger with Tornier N.V. and we do not enter into new hedging and warrant transactions with respect to the 2017 Notes, we would have exposure to potential cash payments that we would be required to make if holders elect to convert the 2017 Notes at a time when our stock price exceeds the conversion price. In such event, the amount of cash payments that we could be required to make to holders of the 2017 Notes could be significantly in excess of the amount of any cash received by us from the Option Counterparties in connection with the termination of the 2017 Note Hedges and warrant transactions.

2014 Notes
In November�2007, we issued $200 million of 2.625% Convertible Senior Notes maturing on December�1, 2014 (2014 Notes). The 2014 Notes pay interest semi-annually at an annual rate of 2.625% and are convertible into shares of our common stock at an initial conversion rate of 30.6279 shares per $1,000 principal amount of the notes subject to adjustment upon the occurrence of specified events, which represents an initial conversion price of $32.65 per share. The holder of the 2014 Notes may convert at any time on or prior to the close of business on the business day immediately preceding the maturity date. We may redeem the 2014 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2014 Notes, plus accrued and unpaid interest, if the closing price of our common stock has exceeded 140% of the conversion price for at least 20 days during any consecutive 30-day trading period. Additionally, if we experience a fundamental change event, as defined in the indenture governing the 2014 Notes (Indenture), the holders may require us to repurchase for cash all or a portion of the 2014 Notes, for 100% of the principal amount of the notes, plus accrued and unpaid interest. If upon a fundamental change event, a holder elects to convert its 2014 Notes, we may, under certain circumstances, increase the conversion rate for the 2014 Notes surrendered. The 2014 Notes are unsecured obligations and are effectively subordinated to (i)�all of our existing and future secured debt, including our obligations under our credit agreement, to the extent of the value of the assets securing such debt, and (ii)�because the 2014 Notes are not guaranteed by any of our subsidiaries, to all liabilities of our subsidiaries.
On February�10, 2011, we announced the commencement of a tender offer to purchase for cash any and all of our outstanding 2014 Notes. Upon expiration on March�11, 2011, we purchased $170.9 million aggregate principal amount of the 2014 Notes.
On August 22, 2012, we purchased $25.3 million aggregate principal amount of the 2014 Notes. As a result of this transaction, we recognized approximately $0.2 million for the write off of related pro-rata unamortized deferred financing fees. As of September�30, 2014, $3.8 million aggregate principal amount of the 2014 Notes remain outstanding and is classified in the current portion of long-term obligations line on the condensed consolidated balance sheet.

8. Derivative Instruments and Hedging Activities
We account for derivatives in accordance with FASB ASC Topic 815, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. Additionally, changes in the derivatives fair value shall be recognized currently in earnings unless specific hedge accounting criteria are met.
Conversion Derivative and Notes Hedging
On August 31, 2012, we issued the 2017 Notes. The 2017 Notes Conversion Derivative requires bifurcation from the 2017 Notes in accordance with ASC Topic 815, and is accounted for as a derivative liability. The fair value of the 2017 Notes Conversion Derivative at the time of issuance of the 2017 Notes was $48.1 million. See Note 7 of the condensed consolidated financial statements for additional information regarding the 2017 Notes.

15
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




We also entered into the 2017 Notes Hedges in connection with the issuance of the 2017 Notes with the Option Counterparties. The 2017 Notes Hedges, which are cash-settled, are intended to reduce our exposure to potential cash payments that we are required to make upon conversion of the 2017 Notes in excess of the principal amount of converted notes if our common stock price exceeds the conversion price. The aggregate cost of the 2017 Notes Hedges was $56.2 million and is accounted for as a derivative asset in accordance with ASC Topic 815.
The following table summarizes the fair value and the presentation in the condensed consolidated balance sheet (in thousands):
�
Location on condensed consolidated balance sheet
September�30, 2014
December 31, 2013
2017 Notes Hedges
Other assets
$
112,000

$
118,000

2017 Notes Conversion Derivative
Other liabilities
$
108,000

$
112,000

Neither the 2017 Notes Conversion Derivative nor the 2017 Notes Hedges qualify for hedge accounting, thus any change in the fair value of the derivatives is recognized immediately in the condensed consolidated statements of operations. The following table summarizes the gain (loss) on changes in fair value (in thousands):
�
Three Months Ended
�
Nine Months Ended
�
September 30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
2017 Notes Hedges
$
(12,000
)
�
$
(4,000
)
�
$
(6,000
)
�
$
25,000

2017 Notes Conversion Derivative
11,000

�
2,000

�
4,000

�
(28,000
)
Net loss on changes in fair value
$
(1,000
)
�
$
(2,000
)
�
$
(2,000
)
�
$
(3,000
)
Derivatives not Designated as Hedging Instruments
We employ a derivative program using 30-day foreign currency forward contracts to mitigate the risk of currency fluctuations on our intercompany receivable and payable balances that are denominated in foreign currencies. These forward contracts are expected to offset the transactional gains and losses on the related intercompany balances. These forward contracts are not designated as hedging instruments under FASB ASC Topic 815. Accordingly, the changes in the fair value and the settlement of the contracts are recognized in the period incurred in the accompanying condensed consolidated statements of operations. At September�30, 2014, we had no foreign currency contracts outstanding.

9. Goodwill and Intangible Assets
Changes in the carrying amount of goodwill occurring during the nine months ended September�30, 2014, are as follows (in thousands):
�
U.S.
International
BioMimetic
Total
Goodwill at December�31, 2013
$
92,134

$
24,746

$
1,383

$
118,263

Biotech purchase price allocation adjustment
(3,927
)
(1,057
)
(50
)
(5,034
)
Goodwill associated with 2014 acquisitions (see Note 2)
85,127





85,127

Foreign currency translation


(5,454
)


(5,454
)
Goodwill at September 30, 2014
$
173,334

$
18,235

$
1,333

$
192,902

Goodwill is recognized for the excess of the purchase price over the fair value of net assets of businesses acquired. Goodwill is required to be tested for impairment at least annually. Unless circumstances otherwise dictate, the annual impairment test is performed in the fourth quarter.
During the first quarter of 2014, our management, including our chief executive officer, who is our chief operating decision maker, began managing our operations as three operating segments: U.S., International and BioMimetic, based on management's change to the way it monitors performance, aligns strategies, and allocates resources. We determined that each of these operating segments represented a reportable segment. This change in segment reporting has also resulted in a change in reporting units for goodwill impairment measurement purposes. We determined that each operating segment represents a reporting unit, and we subsequently performed a goodwill impairment analysis as of January 1, 2014. We allocated�$92.1 million,�$24.7 million�and�$1.4 million�of goodwill to the U.S., International and BioMimetic reporting units, respectively, as of January 1, 2014. The goodwill allocated to each reporting unit was based on the relative fair value of each of our reporting units as of the date of impairment analysis. Upon

16
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




completion of this analysis, we determined that the fair value of our reporting units exceeded their carrying values and, therefore, no impairment charge was necessary.
During 2014, the purchase price allocation for Biotech was adjusted for the finalization of acquisition date fair value of intangible assets and contingent consideration and the recognition of certain tax-related liabilities existing at the date of acquisition, which resulted in a change to the preliminary value of goodwill determined as of December 31, 2013. These adjustments to goodwill were allocated to each of the reporting units based on the relative fair value of each reporting unit as of the date of impairment analysis.

The components of our identifiable intangible assets are as follows (in thousands):
�
September�30, 2014
December�31, 2013
�
Cost
Accumulated Amortization
Cost
Accumulated Amortization
Indefinite life intangibles
�
�
�
�
In-process research and development technology
$
4,266

�
$
4,266

�
Tradename
4,079

�
4,121

�
Total indefinite life intangibles
8,345

�
8,387

�
�
�
�
�
�
Finite life intangibles
�
�
�
�
�Distribution channels
250

187

250

233

�Completed technology
33,566

8,309

16,714

5,702

�Licenses
8,234

1,506

3,633

1,303

�Customer relationships
28,411

4,083

15,578

2,371

�Trademarks
2,821

1,656

2,364

1,098

�Non-compete agreements
5,336

3,482

5,660

3,155

�Other
771

110

771

75

Total finite life intangibles
79,389

$
19,333

44,970

$
13,937

�
�
�
�
�
Total intangibles
87,734

�
53,357

�
Less: Accumulated amortization
(19,333
)
�
(13,937
)
�
Intangible assets, net
$
68,401

�
$
39,420

�
Based on total finite life intangible assets held at September�30, 2014, we expect to amortize approximately $9.8 million for the full year of 2014, $8.2 million�in 2015, $6.8 million in 2016, $6.3 million in 2017, and $5.6 million in 2018.

10. Accumulated Other Comprehensive Income (AOCI)
Other comprehensive income (OCI) includes certain gains and losses that under GAAP are included in comprehensive income but are excluded from net income as these amounts are initially recorded as an adjustment to stockholders equity. Amounts in OCI may be reclassified to net income upon the occurrence of certain events.
Our OCI is comprised of foreign currency translation adjustments, unrealized gains and losses on available-for-sale securities, and adjustments to our minimum pension liability. Foreign currency translation adjustments are reclassified to net income upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on available-for-sale securities are reclassified to net income if we sell the security before maturity or if the unrealized loss in a security is considered to be other-than-temporary.

17
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




Changes in and reclassifications out of AOCI, net of tax, for the nine months ended September 30, 2014 were as follows (in thousands):
�
Currency Translation Adjustment (CTA)
�
Unrealized
Gain(Loss) on
Marketable Securities
�
Minimum
Pension
Liability
Adjustment
�
Total
Balance December 31, 2013
$
17,610

�
$
(1
)
�
$
344

�
$
17,953

Other comprehensive income (loss), net of tax
(11,636
)
�
2

�


�
(11,634
)
Reclassification of CTA and minimum pension liability adjustment 1
2,628

�


�
(344
)
�
2,284

Balance September 30, 2014
$
8,602

�
$
1

�
$


�
$
8,603

������������

1�
The balances of CTA and minimum pension liability adjustment within AOCI were written-off following the liquidation of our former Japanese subsidiary as part of the sale of our OrthoRecon business. This was recorded within the gain on the sale of the OrthoRecon business within results of discontinued operations.

11. Earnings Per Share
FASB ASC Topic 260, Earnings Per Share, requires the presentation of basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated to include any dilutive effect of our common stock equivalents. Our common stock equivalents consist of stock options, non-vested shares of common stock, stock-settled phantom stock units, restricted stock units, 2014 Notes, and warrants. The dilutive effect of the stock options, non-vested shares of common stock, stock-settled phantom stock units, restricted stock units and warrants is calculated using the treasury-stock method. The dilutive effect of 2014 Notes is calculated by applying the if-converted method. This assumes an add-back of interest, net of income taxes, to net income as if the securities were converted at the beginning of the period. During the three- and nine- month periods ended September�30, 2014 and 2013, the 2014 Notes had an anti-dilutive effect on earnings per share and we therefore excluded them from the dilutive shares calculation. In addition, approximately 1.6 million and 1.5 million common stock equivalents have been excluded from the computation of diluted net loss from continuing operations per share for the three- and nine- month periods ended September 30, 2014, respectively, because their effect is anti-dilutive as a result of our net loss in that period. In addition, approximately 870,000 and 705,000 common stock equivalents have been excluded from the computation of diluted net loss from continuing operations per share for the three- and nine- month periods ended September 30, 2013, respectively, because their effect is anti-dilutive as a result of our net loss in that period.
The weighted-average number of shares outstanding for basic and diluted earnings per share is as follows (in thousands):
�
Three Months Ended
�
Nine Months Ended
�
September 30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
Weighted-average number of shares outstanding, basic
50,043

�
46,418

�
49,441

�
44,721

Common stock equivalents


�


�


�


Weighted-average number of shares outstanding, diluted
50,043

�
46,418

�
49,441

�
44,721



18
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




The following potential common shares were excluded from common stock equivalents as their effect would have been anti-dilutive (in thousands):
�
Three Months Ended
�
Nine Months Ended
�
September 30,
�
September 30,
�
2014
�
2013
�
2014
�
2013
Stock options
843

�
2,402

�
566

�
3,300

Non-vested shares, restricted stock units, and stock-settled phantom stock units
1

�


�
12

�
305

2014 Notes
115

�
115

�
115

�
115

Warrants


�
11,794

�


�
11,794


12. Commitments and Contingencies
Legal Contingencies
As described below, our business is subject to various contingencies, including patent and other litigation, product liability claims and a government inquiry.� These contingencies could result in losses, including damages, fines, or penalties, any of which could be substantial, as well as criminal charges.�Although such matters are inherently unpredictable, and negative outcomes or verdicts can occur, we believe we have significant defenses in all of them, are vigorously defending all of them, and do not believe any of them will have a material adverse effect on our financial position. However, we could incur judgments, pay settlements, or revise our expectations regarding the outcome of any matter. Such developments, if any, could have a material adverse effect on our results of operations in the period in which applicable amounts are accrued, or on our cash flows in the period in which amounts are paid.
Our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss or the measurement of a loss can be complex. We have accrued for losses that are both probable and reasonably estimable. Unless otherwise indicated, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. �Our assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate. Unanticipated events and circumstances may occur that could cause us to change our estimates and assumptions.
Governmental Inquiries
On September 29, 2010, we entered into a five year Corporate Integrity Agreement (CIA)�with the Office of the Inspector General of the United States Department of Health and Human Services (OIG-HHS). The CIA was filed as Exhibit 10.2 to our current report on Form 8-K filed on September�30, 2010. The CIA will expire on September 29, 2015.
The CIA imposes on us certain obligations to maintain compliance with U.S. healthcare laws, regulations and other requirements. Our failure to do so could expose us to significant liability, including, but not limited to, exclusion from federal healthcare program participation, including Medicaid and Medicare, potential prosecution, civil and criminal fines or penalties, as well as additional litigation cost and expense.
Both we and MicroPort, who purchased our OrthoRecon business in January 2014, will continue to be subject to the CIA.
In addition to the U.S. Attorney's Office (USAO) and OIG-HHS, other governmental agencies, including state authorities, could conduct investigations or institute proceedings that are not precluded by the CIA. In addition, the matters that gave rise to the CIA could increase our exposure to lawsuits by potential whistleblowers, including under the federal false claims acts, based on new theories or allegations arising from these matters.
On August 3, 2012, we received a subpoena from the USAO for the Western District of Tennessee requesting records and documentation relating to our PROFEMUR� series of hip replacement devices. The subpoena covers the period from January 1, 2000 to August 2, 2012. We continue to respond to the subpoena.
Patent Litigation.
In 2011, Howmedica Osteonics Corp. and Stryker Ireland, Ltd. (collectively, Stryker), each a subsidiary of Stryker Corporation, filed a lawsuit against Wright Medical Technology, Inc. (WMT) in the United States District Court for the District of New Jersey alleging that we infringed Stryker's U.S. Patent No. 6,475,243 related to our LINEAGE� Acetabular Cup System and DYNASTY� Acetabular Cup System. The lawsuit seeks an order of infringement, injunctive relief, unspecified damages, and various other costs and relief. On July 9, 2013, the Court issued a claim construction ruling. Under the Court's claim construction ruling, we do not believe these hip products infringe the asserted patents. In filings with the Court, Stryker has conceded that under the courts

19
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




claim construction rulings it can no longer pursue its infringement claims. Stryker has asked the court to dismiss the case so it may pursue an appeal.
In 2012, Bonutti Skeletal Innovations, LLC (Bonutti) filed a patent infringement lawsuit against us in the United States Court for the District of Delaware. In January 2014, we filed a request with the U.S. Patent and Trademark Office for Inter Partes Review (IPR) of the Bonutti patents. On April 7, 2014, the Court stayed the case pending outcome of the IPR. Bonutti originally alleged that the Link Sled Prosthesis infringes U.S. Patent 6,702,821. The Link Sled Prosthesis is a product we distributed under a distribution agreement with LinkBio Corp, which expired on December 31, 2013. In January 2013, Bonutti amended its complaint, alleging that the ADVANCE� knee system, including ODYSSEY� instrumentation, infringes U.S. Patent 8,133,229, and that the ADVANCE� knee system, including ODYSSEY� instrumentation and PROPHECY� guides, infringes U.S. Patent 7,806,896, which was issued on October 5, 2010. All of the claims of the asserted patents are directed to surgical methods for minimally invasive surgery.
In June 2013, Orthophoenix filed a patent lawsuit against us in the United States District Court for the District of Delaware alleging that surgical methods using the X-REAM� product infringe two patents. In June 2014, we filed a request for IPR with the U.S. Patent and Trademark Office. In October 2014, the Court stayed the case pending outcome of the IPR.
In June 2013, Anglefix filed suit in the United States District Court for the Western District of Tennessee, alleging that our ORTHOLOC� products infringe Anglefixs asserted patent. On April 14, 2014, we filed a request for IPR with the U.S. Patent and Trademark Office. In October 2014, the Court stayed the case pending outcome of the IPR.
In September 2013, ConforMIS, Inc. filed suit against us in the United States District Court for the District of Massachusetts, alleging that our PROPHECY� knee and ankle systems infringe four ConforMIS patents. On February 19, 2014, ConforMIS filed an amended complaint asserting four additional patents against us relating to alleged infringement by our PROPHECY� knee and ankle systems and naming MicroPort Orthopedics as an additional defendant. On October 9, 2014, the parties jointly advised the Court that they had reached an agreement in principle to settle the matter. In connection with the reported settlement, we recorded expenses of $0.9 million in continuing operations and $13.8 million in discontinued operations.�In addition we recorded a $4.6 million asset in connection with the fully paid non-exclusive foot and ankle license contemplated by the reported settlement. $10.7 million of the $13.8 million recorded in discontinued operations reflects estimated royalty payments based on future sales by MicroPort Orthopedics, which will be paid through 2026.
In February 2014, Biomedical Enterprises, Inc. filed suit against Solana Surgical, LLC in the United States District Court for the Western District of Texas alleging Solana's FuseForce Fixation system infringes U.S. Patent No. 8,584,853 entitled Method and Apparatus for an Orthopedic Fixation System.
On September 23, 2014, Spineology filed a patent infringement lawsuit, Case No. 0:14-cv-03767, in the U.S. District Court in Minnesota, alleging that Wrights X-REAM� bone reamer infringes U.S. Patent No. RE42,757 entitled EXPANDABLE REAMER.� Plaintiff has not yet served the complaint.
Subject to the provisions of the asset purchase agreement with MicroPort for the sale of our OrthoRecon business, we will continue to be responsible for defense of pre-existing patent infringement cases relating to our OrthoRecon business, and for resulting liabilities, if any.
Product Liability
We have received claims for personal injury against us associated with fractures of our PROFEMUR� long titanium modular neck product (PROFEMUR� Claims). The overall fracture rate for the product is low and the fractures appear, at least in part, to relate to patient demographics. Beginning in 2009, we began offering a cobalt-chrome version of our PROFEMUR� modular neck, which has greater strength characteristics than the alternative titanium version. Historically, we have reflected our liability for these claims as part of our standard product liability accruals on a case-by-case basis. However, during the quarter ended September 30, 2011, as a result of an increase in the number and monetary amount of these claims, management estimated our liability to patients in North America who have previously required a revision following a fracture of a PROFEMUR� long titanium modular neck, or who may require a revision in the future. Management has estimated that this aggregate liability ranges from approximately $16 million to $21 million. Any claims associated with this product outside of North America, or for any other products, will be managed as part of our standard product liability accruals.
Due to the uncertainty within our aggregate range of loss resulting from the estimation of the number of claims and related monetary payments, we have recorded a liability of $16 million, which represents the low-end of our estimated aggregate range of loss. We have classified $10 million of this liability as current in Accrued expenses and other current liabilities and $6 million as non-current in Other liabilities on our consolidated balance sheet. We expect to pay the majority of these claims within the next 3 years.

20
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




We have maintained product liability insurance coverage on a claims-made basis. During the quarter ended March 31, 2013, we received a customary reservation of rights from our primary product liability insurance carrier asserting that present and future claims related to fractures of our PROFEMUR� titanium modular neck hip products and which allege certain types of injury (Modular Neck Claims) would be covered as a single occurrence under the policy year the first such claim was asserted. The effect of this coverage position would be to place Modular Neck Claims into a single prior policy year in which applicable claims-made coverage was available, subject to the overall policy limits then in effect. Management agrees with the assertion that the Modular Neck Claims should be treated as a single occurrence, but�notified the carrier that it disputed the carrier's selection of available policy years. During the second quarter of 2013, we received confirmation from the primary carrier confirming their agreement with our policy year determination. Based on our insurer's treatment of Modular Neck Claims as a single occurrence, we increased our estimate of the total probable insurance recovery related to Modular Neck Claims by $19.4 million, and recognized such additional recovery as a reduction to our selling, general and administrative expenses for the three-months ended March 31, 2013, within results of discontinued operations. In the quarter ended June 30, 2013, we received payment from the primary insurance carrier of $5 million. In the quarter ended September 30, 2013, we received payment of $10 million from the next insurance carrier in the tower. As of September�30, 2014, our insurance receivable related to Modular Neck Claims totals $25 million, which consists of $4.4 million associated with our recorded liability for current and future Modular Neck Claims outstanding, and $20.6 million for cash spending to date associated with defense and settlement costs. We have classified $25 million within current receivables.
During the quarter ended September 30, 2013, we reached the maximum insurance coverage for Modular Neck Claims of $40 million, when previous spending on legal defense costs and claim settlements are combined with our estimated product liability for future settlements. As a result, we recognized approximately $8.1 million of expense within results from discontinued operations for 2014 for legal expenses and adjustments to our estimated liabilities for future settlements recognized in excess of the $40 million insurance recovery limit. Future expenses associated with defense costs and revisions to our estimated product liability will be recognized as incurred within results of discontinued operations. As noted above, our insurance receivable for cash spending is $20.6 million out of the remaining $25 million insurance receivable. We anticipate actual cash spending may exceed this maximum within the next year.
Claims for personal injury have also been made against us associated with our metal-on-metal hip products (primarily our CONSERVE� product line). The pre-trial management of certain of these claims has been consolidated in the federal court system under multi-district litigation, and certain other claims in state courts in California, collectively the Consolidated Metal-on-Metal Claims, as further discussed in Part II Item 1 of this Quarterly Report. The number of these lawsuits, presently in excess of 900, continues to increase, we believe due to the increasing negative publicity in the industry regarding metal-on-metal hip products. We have also entered into an excess of 600 so called "tolling agreements" with potential claimants who have not yet filed suit. We believe we have data that supports the efficacy and safety of our metal-on-metal hip products. While continuing to dispute liability, we are participating in court supervised non-binding mediation in the multi-district federal court litigation. This mediation is continuing. The supervising judges in the federal and California state consolidated proceedings have set bellwether trial dates in March and November 2015 respectively.
Every metal-on-metal hip case involves fundamental issues of science and medicine that often are uncertain, that continue to evolve, and which present contested facts and issues that can differ significantly from case to case. Such contested facts and issues include medical causation, individual patient characteristics, surgery specific factors, and the existence of actual, provable injury.�Given these complexities, we are unable to reasonably estimate a possible loss or range of possible losses for the Consolidated Metal-on-Metal Claims until we know, at a minimum, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential pool of potential claimants, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation, and (v) any other factors that may have a material effect on the litigation or on a partys litigation strategy.
We have maintained product liability insurance coverage on a claims-made basis. During the quarter ended September 30, 2012, we received a customary reservation of rights from our primary product liability insurance carrier asserting that certain present and future claims which allege certain types of injury related to our CONSERVE��metal-on-metal hip products (CONSERVE��Claims) would be covered as a single occurrence under the policy year the first such claim was asserted. The effect of this coverage position would be to place CONSERVE��Claims into a single prior policy year in which applicable claims-made coverage was available, subject to the overall policy limits then in effect. Management agrees that there is insurance coverage for the CONSERVE��Claims, but�has notified the carrier that it disputes the carrier's characterization of the CONSERVE��Claims as a single occurrence.
Management has recorded an insurance receivable for the probable recovery�of spending in excess of our retention for a single occurrence. As of September 30, 2014, this receivable totaled $11.7 million, and is solely related to defense costs incurred through

21
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




September 30, 2014. However, the amount we ultimately receive may differ depending on the final conclusion of the insurance policy year or years and the number of occurrences. We believe our contracts with the insurance carriers are enforceable for these claims and, therefore, we believe it is probable that we will receive recoveries from our insurance carriers. However, our insurance carriers could still ultimately deny coverage for some or all of our insurance claims. Based on the information we have available at this time, we do not believe our liabilities, if any, in connection with these matters will exceed our available insurance. As circumstances continue to develop, our belief that we will be able to resolve the Consolidated Metal-on-Metal Claims within our available insurance coverage could change, which could materially impact our results of operations and financial position.
In June 2014, St. Paul Surplus Lines Insurance Company (Travelers), which was an excess carrier in our coverage towers across multiple policy years, filed a declaratory judgment action in Tennessee state court naming us and certain of our other insurance carriers as defendants and asking the court to rule on the rights and responsibilities of the parties with regard to the CONSERVE��Claims. Among other things, Travelers appears to dispute our contention that the CONSERVE��Claims arise out of more than a single occurrence thereby triggering multiple policy periods of coverage.� Travelers further seeks a determination as to the applicable policy period triggered by the alleged single occurrence.��We filed a separate lawsuit in state court in California for declaratory judgment against certain carriers and breach of contract against the primary carrier, and have moved to dismiss or stay the Tennessee action on a number of grounds, including that California is the most appropriate jurisdiction. During the third quarter of 2014, the California Court granted Travelers' motion to stay our California action.
In February 2014, Biomet, Inc. (Biomet) announced it had reached a settlement in the multi-district litigation involving its own metal-on-metal hip products. The terms announced by Biomet include: (i) an expected base settlement amount of $200,000; (ii) an expected minimum settlement amount of $20,000; (iii) no payments to plaintiffs who did not undergo a revision surgery; and (iv) a total settlement amount expected to be within Biomets aggregate insurance coverage. We believe our situation involves facts and circumstances that differ significantly from the Biomet cases. We therefore do not consider the Biomet situation sufficiently analogous to provide a reasonable basis for estimate, and deem it unlikely that any settlement of our cases will occur at a base settlement level as high as Biomets expected average settlement amount. As circumstances continue to develop, our belief that a base settlement level as high as Biomets expected average settlement amount could change.
In addition to the Consolidated Metal-on-Metal Claims discussed above, there are currently certain other pending claims related to our metal-on-metal hip products for which we are accounting in accordance with our standard product liability accrual methodology on a case by case basis.
Certain liabilities associated with the OrthoRecon business, including product liability claims associated with hip and knee products sold prior to the closing, were not assumed by MicroPort. Liabilities associated with these product liability claims, including legal defense, settlements and judgments, income associated with product liability insurance recoveries, and changes to any contingent liabilities associated with the OrthoRecon business have been reflected within results of discontinued operations, and we will continue to reflect these within results of discontinued operations in future periods. MicroPort is responsible for product liability claims associated with products it sells after the closing.
Employment Litigation
In 2012, two former employees, Frank Bono and Alicia Napoli, each filed separate lawsuits against WMT in the Chancery Court of Shelby County, Tennessee, which asserted claims for retaliatory discharge and breach of contract based upon his or her respective separation pay agreement. In addition, Mr. Bono and Ms. Napoli each asserted a claim for defamation related to the press release issued at the time of their terminations and a wrongful discharge claim alleging violation of the Tennessee Public Protection Act. Mr. Bono and Ms. Napoli each claimed that he or she was entitled to attorney fees in addition to other unspecified damages. On October 23, 2013, Ms. Napoli moved to voluntary dismiss her lawsuit, without prejudice. On April 4, 2014, Ms. Napoli refiled her case in the United States District Court for the Eastern District of Missouri. In July 2014, we were successful in having the case that was refiled in Missouri transferred to the U.S. District Court for the Western District of Tennessee.
Other
In addition to those noted above, we are subject to various other legal proceedings, product liability claims, corporate governance, and other matters which arise in the ordinary course of business.

13. Segment Information
During the first quarter of 2014, our management, including our chief executive officer, who is our chief operating decision maker, began managing our operations as three operating business segments: U.S., International and BioMimetic, based on management's change to the way it monitors performance, aligns strategies, and allocates resources results in a change in our reportable segments. We determined that each of these operating segments represented a reportable segment.

22
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




Our U.S. and International segments represent the commercial, administrative and research & development activities dedicated to the respective geographies. The BioMimetic segment represents the administrative and research & development activities of the acquired BioMimetic business (international sales and associated expenses for Augment� products are included within the International segment). The Corporate category shown in the table below primarily reflects general and administrative expenses not specifically associated with the U.S., International or BioMimetic segments. These non-allocated corporate expenses relate to global administrative expenses that support all segments, including salaries and benefits of executive officers and expenses such as: information technology administration and support; corporate headquarters; legal, compliance, and corporate finance functions; insurance; and all stock-based compensation.
Management measures segment profitability using an internal operating performance measure that excludes the impact of inventory step-up amortization, charges associated with distributor conversions and related non-competes, and due diligence, transaction and transition costs associated with acquisitions.
Selected financial information related to our segments is presented below for the three months ended September�30, 2014 and 2013 (in thousands):
�
Three Months Ended September 30, 2014
�
U.S.
International
BioMimetic
Corporate
Total
Sales
$
51,297

$
20,010

$


$


$
71,307

Depreciation expense
2,414

841

108

1,291

4,654

Amortization expense
1,293

547

77



1,917

Segment operating income (loss)
$
6,448

$
(3,213
)
$
(2,601
)
$
(15,660
)
$
(15,026
)
Other:
�
�
�
�
�
Inventory step-up amortization
�
�
�
�
(302
)
Distributor conversion and non-compete charges
�
�
�
�
(478
)
Patent dispute settlement
�
�
�
�
(900
)
Management Changes
�
�
�
�
(1,203
)
Acquisition due diligence, transaction and transition expenses
�
�
�
�
(2,740
)
Operating loss
�
�
�
�
(20,649
)
Interest expense, net
�
�
�
�
4,565

Other (income) expense, net
�
�
�
�
21,430

Loss before income taxes
�
�
�
�
$
(46,644
)
Capital expenditures
$
4,267

$
3,290

$


$
3,865

$
11,422



23
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




�
Three Months Ended September 30, 2013
�
U.S.
International
BioMimetic
Corporate
Total
Sales
$
42,998

$
14,643

$


$


$
57,641

Depreciation expense
2,030

561

119

605

3,315

Amortization expense
442

84

191



717

Segment operating income (loss)
$
6,310

$
34

$
(3,494
)
$
(14,323
)
$
(11,473
)
Other:
�
�
�
�
�
Inventory step-up amortization
�
�
�
�
(197
)
Distributor conversion and non-compete charges
�
�
�
�
(737
)
BioMimetic Impairment
�
�
�
�
(207,228
)
Acquisition due diligence, transaction and transition expenses
�
�
�
�
(12,924
)
Operating loss
�
�
�
�
(232,559
)
Interest expense, net
�
�
�
�
4,044

Other (income) expense, net
�
�
�
�
(64,019
)
Loss before income taxes
�
�
�
�
$
(172,584
)
Capital expenditures
$
4,234

$
216

$


$
3,302

$
7,752

Total capital expenditures for the three months ended September�30, 2013, does not include $5 million related to discontinued operations and the OrthoRecon divestiture.

Selected financial information related to our segments is presented below for the nine months ended September�30, 2014 and 2013 (in thousands):
�
Nine Months Ended September 30, 2014
�
U.S.
International
BioMimetic
Corporate
Total
Sales
$
149,591

$
65,142

$


$


$
214,733

Depreciation expense
7,093

2,246

324

3,831

13,494

Amortization expense
3,820

1,663

231

1

5,715

Segment operating income
$
12,914

$
(2,385
)
$
(9,385
)
$
(52,658
)
$
(51,514
)
Other:
�
�
�
�
�
Inventory step-up amortization
�
�
�
�
(1,521
)
Distributor conversion and non-compete charges
�
�
�
�
(1,698
)
Patent dispute settlement
�
�
�
�
(900
)
Management Changes
�
�
�
�
(1,203
)
Acquisition due diligence, transaction and transition expenses
�
�
�
�
(16,030
)
Operating loss
�
�
�
�
(72,866
)
Interest expense, net
�
�
�
�
12,873

Other (income) expense, net
�
�
�
�
54,986

Income before income taxes
�
�
�
�
$
(140,725
)
Capital expenditures
$
13,464

$
7,597

$
39

$
14,606

$
35,706



24
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




�
Nine Months Ended September 30, 2013
�
U.S.
International
BioMimetic
Corporate
Total
Sales
$
128,399

$
46,107

$


$


$
174,506

Depreciation expense
6,371

1,726

275

1,892

10,264

Amortization expense
2,860

248

446



3,554

Segment operating income (loss)
$
19,395

$
5,548

$
(8,667
)
$
(40,050
)
$
(23,774
)
Other:
�
�
�
�
�
Inventory step-up amortization
�
�
�
�
(499
)
Distributor conversion and non-compete charges
�
�
�
�
(2,975
)
BioMimetic Impairment
�
�
�
�
(207,228
)
Acquisition due diligence, transaction and transition expenses
�
�
�
�
(24,490
)
Operating loss
�
�
�
�
(258,966
)
Interest expense, net
�
�
�
�
11,979

Other (income) expense, net
�
�
�
�
(65,291
)
Loss before income taxes
�
�
�
�
$
(205,654
)
Capital expenditures
$
8,230

$
758

$


$
6,123

$
15,111

Total capital expenditures for the nine months ended September 30, 2013, does not include $7.4 million related to discontinued operations and the OrthoRecon divestiture.
Assets in the U.S., International and BioMimetic segments are those assets used exclusively in the operations of each business segment or allocated when used jointly. Assets in the Corporate category are principally cash and cash equivalents, marketable securities, derivative asset, property, plant and equipment associated with our corporate headquarters, assets associated with OrthoRecon insurance receivables, and assets associated with income taxes. Total assets by business segment as of September�30, 2014 are as follows (in thousands):
�
September 30, 2014
�
U.S.
International
BioMimetic
Corporate
Total
Total assets
$
430,810

$
100,289

$
19,790

$
415,812

$
966,701


Our principal geographic regions consist of the United States, Europe (which includes the Middle East and Africa), and Other (which principally represents Asia, Australia, Canada, and Latin America). The following table presents net sales by geographic area for the three and nine months ended September�30, 2014 and 2013 (in thousands):
�
Three Months Ended
�
Nine Months Ended
Geographic
September�30, 2014
�
September�30, 2013
�
% change
�
September 30, 2014
�
September 30, 2013
�
% change
United States
$
51,297

�
$
42,998

�
19.3
%
�
$
149,591

�
$
128,399

�
16.5
%
Europe
11,180

�
6,889

�
62.3
%
�
36,615

�
21,213

�
72.6
%
Other
8,830

�
7,754

�
13.9
%
�
28,527

�
24,894

�
14.6
%
Total net sales
$
71,307

�
$
57,641

�
23.7
%
�
$
214,733

�
$
174,506

�
23.1
%

14. Subsequent Event

On October�27, 2014, we entered into an Agreement and Plan of Merger by and among Tornier N.V., a Dutch public limited company (naamloze vennootschap) (Tornier), Trooper Holdings Inc., a Delaware corporation and a direct wholly-owned subsidiary of Tornier (Holdco), Trooper Merger Sub Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Tornier (Merger Sub), pursuant to which Merger Sub will merge with and into Wright, with Wright as the surviving corporation and an indirect wholly-owned subsidiary of Tornier (the Merger). As a result of the Merger, Tornier will be renamed Wright Medical Group N.V. Upon completion of the Merger, Wright shareholders will own approximately 52% of the combined company on a fully diluted basis and Tornier stockholders will own approximately 48%.

25
WRIGHT MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)




Each partys obligation to implement the Merger is subject to certain customary conditions, including (1) the adoption of the Merger Agreement by Wright shareholders holding a majority of the outstanding shares of Wrights common stock, (2) the approval of the Merger Agreement and issuance of Tornier ordinary shares in connection with the Merger by Tornier shareholders holding a majority of the outstanding shares of Tornier common stock, (3) all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or applicable antitrust or competition laws of other jurisdictions in connection with the Merger having expired or having been terminated, (4) there shall be no action pending against Tornier, Holdco, Merger Sub or Wright seeking to enjoin the Merger, seeking material damages in connection with the Merger, seeking to compel Wright or Tornier of any material assets as a result of the Merger or seeking to impose criminal liability on Tornier, Holdco, Merger Sub or Wright in connection with the Merger, (5) the truth and accuracy of the other partys representations and warranties in the Merger Agreement, generally subject to a Material Adverse Effect (as defined in the Merger Agreement) standard and (6) the performance by the other party of all of its obligations and compliance with all of its covenants under the Merger Agreement in all material respects.
The Merger is expected to close in the first half of 2015.



26

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General
The following managements discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition for the three and nine month periods ended September�30, 2014. This discussion should be read in conjunction with the accompanying unaudited financial statements, our Annual Report on Form 10-K for the year ended December�31, 2013, which includes additional information about our critical accounting policies and practices and risk factors, and Note 1 of Part�I of this Quarterly Report and Part�II, Item�1A of this Quarterly Report.
Executive Overview
Company Description. We are a global orthopaedic company that provides solutions that enable clinicians to alleviate pain and restore their patients' lifestyles.�We are a recognized leader of surgical solutions for the foot and ankle market and market our products in over 60 countries worldwide.�
Our business includes products that are used primarily in foot and ankle repair, upper extremity products, and biologics products, which are used to replace damaged or diseased bone, to stimulate bone growth and to provide other biological solutions for surgeons and their patients. Extremity hardware includes implants and other devices to replace or reconstruct injured or diseased joints and bones of the foot, ankle, hand, wrist, elbow and shoulder, which we generally refer to as either foot and ankle or upper extremity products. Our extensive foot and ankle product portfolio, our approximately 200 specialized foot and ankle sales representatives, and our increasing level of training of foot and ankle surgeons has resulted in us being a recognized leader of surgical solutions for the foot and ankle market.
We have been in business for over 60 years and have built a well-known and respected brand name.
Our corporate headquarters and U.S. operations are located in Memphis, Tennessee, where we conduct research and development, sales and marketing administration and administrative activities. Our manufacturing and warehousing activities are located in Arlington, Tennessee. Our products are sold primarily through a network of employee sales representatives and independent sales representatives in the U.S. and by a combination of employee sales representatives, independent sales representatives and stocking distributors outside the U.S. We promote our products in approximately 60 countries with principal markets in the U.S., Europe, the Middle East, Africa, Asia, Canada, Australia and Latin America.
Principal Products. We specialize in foot and ankle and other extremity and biologic products used by extremity focused surgeon specialists for the reconstruction, trauma, and arthroscopy markets. Our biologics sales encompass a broad portfolio of products designed to stimulate and augment the natural regenerative capabilities of the human body.
Significant Quarterly Business Developments. On October 27, 2014, we entered into a definitive merger agreement with Tornier N.V. under which Wright and Tornier will combine in an all stock transaction with a combined equity value of approximately $3.3 billion. Under the terms of the agreement each outstanding share of our common stock will be exchanged for 1.0309 ordinary shares of Tornier. Upon completion of the merger, Wright shareholders will own approximately 52% of the shares of the combined company on a fully diluted basis and Tornier shareholders will own approximately 48%. The transaction is subject to the customary closing conditions, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as Wright and Tornier shareholder approval.
Following the closing of the transaction, the combined company will conduct business as Wright Medical Group N.V. and will leverage the global strengths of both product brands as a pure play Extremities-Biologics business. The combined company will have its U.S. headquarters in Memphis, Tennessee, where Wrights current headquarters is located. Wright Medical Group N.V. will be led by Robert Palmisano, who will become president and chief executive officer of the combined company. David Mowry, Torniers president and chief executive officer, will become executive vice president and chief operating officer of the combined company. Wright Medical Group N.V.s board of directors will be comprised of five representatives from Wrights existing board and five representatives from Torniers existing board, including Robert Palmisano and David Mowry. The merger of Wright and Tornier will create a mid-sized growth company uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopaedics  Upper Extremities, Lower Extremities and Biologics. The highly complementary nature of the two businesses will give the combined company significant diversity and scale across a range of geographies and product categories.
On October 27, 2014, we received an Approvable Letter from the U.S. Food & Drug Administration (FDA) for our Premarket Approval Application (PMA) for Augment� Bone Graft. The approvable letter indicates the FDA determined Augment� Bone Graft to be safe and effective as an alternative to autograft for ankle and/or hindfoot fusion indications and is approvable subject

27

to customary preapproval facilities inspections. We currently anticipate that we will be able to sell Augment� Bone Graft in the United States beginning in the first half of 2015.
During the quarter ended September 30, 2014, we made the following executive management changes:
"
Chief Compliance Officer: On September 26, 2014, Daniel Garen, Senior Vice President and Chief Compliance Officer resigned. Mr. Garen's resignation was not a result of any compliance issues or concerns. On September 30, 2014, Wesley Porter was appointed Senior Vice President and Chief Compliance Officer, effective October 1, 2014.
"
President U.S. Extremities: On August 20, 2014, we announced the departure of Eric Stookey, President, U.S. Extremities/Biologics. Subsequently, Kevin Cordell was appointed President, U.S. Extremities, effective September 29, 2014.
Net sales increased 24% in the quarter ended September 30, 2014 to $71.3 million, compared to net sales of $57.6 million in the quarter ended September 30, 2013, driven primarily by a 30% increase in global foot and ankle sales.
Our U.S. sales increased 19% in the third quarter of 2014, as a 28% increase in foot and ankle sales and a 4% increase in biologics sales were partially offset by a 7% decrease in upper extremity sales.
Our international sales increased 37% to $20.0 million in the third quarter of 2014, compared to $14.6 million in the third quarter of 2013, primarily due to the Biotech acquisition in the fourth quarter of 2013. The remaining growth was driven primarily by our market focus in Asia and the United Kingdom.
In the third quarter of 2014, we recorded a net loss from continuing operations of $49.6 million, compared to a net loss from continuing operations of $124.5 million for the third quarter of 2013. The decrease in pre-tax net loss from continuing operations was driven by:
"
$207.2 million ($171.3 million net of taxes) of impairment and other charges related to assets acquired from BioMimetic, including $1.0 million of charges recorded within Cost of Sales to write down inventory to its estimated net realizable value, recorded in the third quarter of 2013; and
"
$10.4 million ($6.0 million net of taxes) decrease in transition costs associated with the sale of our OrthoRecon business.
These favorable impacts were partially offset by pre-tax items unfavorably impacting the net loss in the third quarter of 2014 that included:
"
$84.6 million ($84.6 million net of taxes) year-over-year unfavorability from mark-to-market adjustments on the Contingent Value Rights (CVRs) issued in connection with the acquisition of BioMimetic;
"
$1.2 million ($1.2 million net of taxes) of expenses associated with executive management changes in the third quarter of 2014;
"
$1.7 million ($1.7 million net of taxes) of charges due to the fair value adjustment to contingent consideration associated with our acquisition of WG Healthcare; and
"
decreased profitability, primarily driven by expense dis-synergies following the sale of our OrthoRecon business.
Opportunities and Challenges. Following the sale of the OrthoRecon business, we are well positioned and committed to accelerating growth in our foot and ankle business and increasing U.S. foot and ankle sales productivity. We have made changes to attempt to realize these opportunities, including aggressively converting a portion of our U.S. independent distributor foot and ankle territories to direct employee sales representation, and substantially increasing our investment in foot and ankle medical education to drive market adoption of new products and technologies.
Business continuity, investments in innovation, and a seamless customer experience are top priorities, and we are highly focused on ensuring that no business momentum is lost during the transition period. As such, we have had inefficiencies post the transaction but will have an excellent opportunity to improve efficiency and leverage fixed costs in the business going forward. Additionally, there have been, and continue to be, expense dis-synergies as a result of the transaction, and we have had, and continue to expect, short-term revenue dis-synergies as we work through the separation of some of the remaining full-line distribution both in the U.S. and outside the U.S.
Following the sale of the OrthoRecon business, we are a high growth business. However, we do anticipate having operating losses until we are able to grow our revenue to a sufficient level to support our current cost structure, including the inherent infrastructure costs of our industry.
Significant Industry Factors. Our industry is affected by numerous competitive, regulatory, and other significant factors. The growth of our business relies on our ability to continue to develop new products and innovative technologies, obtain regulatory clearance and maintain compliance for our products, protect the proprietary technology of our products and our manufacturing processes, manufacture our products cost-effectively, respond to competitive pressures specific to each of our geographic markets, including our ability to enforce non-compete agreements, and successfully market and distribute our products in a profitable

28

manner. We, and the entire industry, are subject to extensive governmental regulation, primarily by the FDA. Failure to comply with regulatory requirements could have a material adverse effect on our business.

Results of Operations
On January 9, 2014, we completed the sale of the OrthoRecon business to MicroPort. The financial results of the OrthoRecon business, along with on-going expenses associated with that business, have been reflected within discontinued operations for all periods presented.
Comparison of three months ended September�30, 2014 to three months ended September�30, 2013
The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts (in thousands) and as percentages of net sales:
�
Three Months Ended September 30,
�
2014
�
2013
�
Amount
�
% of Sales
�
Amount
�
% of Sales
Net sales
$
71,307

�
100.0
%
�
$
57,641

�
100.0
%
Cost of sales 1
16,703

�
23.4
%
�
14,037

�
24.4
%
Gross profit
54,604

�
76.6
%
�
43,604

�
75.6
%
Operating expenses:
�
�
�

�
�
�
�
Selling, general and administrative 1
66,926

�
93.9
%
�
63,054

�
109.4
%
Research and development 1
5,948

�
8.3
%
�
5,518

�
9.6
%
Amortization of intangible assets
2,379

�
3.3
%
�
1,342

�
2.3
%
BioMimetic impairment charges


�

%
�
206,249

�
357.8
%
Total operating expenses
75,253

�
105.5
%
�
276,163

�
479.1
%
Operating loss
(20,649
)
�
(29.0
%)
�
(232,559
)
�
(403.5
%)
Interest expense, net
4,565

�
6.4
%
�
4,044

�
7.0
%
Other expense, net
21,430

�
30.1
%
�
(64,019
)
�
(111.1
%)
Loss from continuing operations before income taxes
(46,644
)
�
(65.4
%)
�
(172,584
)
�
(299.4
%)
Provision (benefit) from income taxes
3,003

�
4.2
%
�
(48,084
)
�
(83.4
%)
Net loss from continuing operations
(49,647
)
�
(69.6
%)
�
(124,500
)
�
(216.0
%)
Loss from discontinued operations, net of tax 1
(12,160
)
�
�
�
(5,520
)
�
�
Net loss
$
(61,807
)
�
�
�
$
(130,020
)
�
�
__________________________
(1)�
These line items include the following amounts of non-cash, stock-based compensation expense for the periods indicated:
�
Three Months Ended September 30,
�
2014
�
% of Sales
�
2013
�
% of Sales
Cost of sales
$
43

�
0.1
%
�
$
100

�
0.2
%
Selling, general and administrative
2,522

�
3.5
%
�
2,357

�
4.1
%
Research and development
304

�
0.4
%
�
215

�
0.4
%
Loss from discontinued operations, net of tax


�
n/a

�
837

�
n/a



29

The following table sets forth our net sales by product line for the periods indicated (in thousands) and the percentage of year-over-year change:
�
Three Months Ended
�
September�30, 2014
�
September�30, 2013
�
%
change
U.S.
�
�
�
�
�
Foot and Ankle
35,560

�
27,727

�
28.3
%
Upper Extremity
4,016

�
4,317

�
(7.0
%)
Biologics
11,162

�
10,685

�
4.5
%
Other
559

�
269

�
107.0
%
Total U.S.
$
51,297

�
$
42,998

�
19.3
%
�
�
�
�
�
�
International
�
�
�
�
�
Foot and Ankle
10,068

�
7,506

�
34.1
%
Upper Extremity
2,351

�
1,616

�
45.6
%
Biologics
5,860

�
4,499

�
30.2
%
Other
1,731

�
1,022

�
69.5
%
Total International
$
20,010

�
$
14,643

�
36.7
%
�
�
�
�
�
�
Total Sales
$
71,307

�
$
57,641

�
23.7
%
�
�
�
�
�
�

Net Sales
U.S. Segment. Net sales in our U.S. segment totaled $51.3 million in the third quarter of 2014, as compared to $43.0 million in the third quarter of 2013, a 19% increase. Sales from products acquired from Solana and OrthoPro contributed sales of $6 million in the third quarter of 2014.
Our U.S. foot and ankle net sales increased to $35.6 million in the third quarter of 2014, representing growth of 28% over the third quarter of 2013. This increase was driven by sales from products acquired from Solana and OrthoPro, as well as continued growth of our Total Ankle Replacement products. The U.S. foot and ankle sales growth includes the impact of the addition of Solana and OrthoPro's products into our existing direct sales force, offset by some cannibalization of product sales.
Our U.S. biologics sales totaled $11.2 million in the third quarter of 2014, representing a 4% increase from the third quarter of 2013, driven primarily by an increase in the sales of our PRO-DENSE� and ALLOPURE� line of products.
Our U.S. upper extremities sales were impacted by dis-synergies in our U.S. sales channel following the sale of our OrthoRecon business.
International Segment. Net sales in our International segment totaled $20.0 million in the third quarter of 2014, as compared to $14.6 million in the third quarter of 2013, a 37% increase. Sales from products acquired from Biotech contributed sales of $2.4 million in the third quarter of 2014.
Our international foot and ankle sales increased 34% to $10.1 million in the third quarter of 2014, driven by sales from foot and ankle products acquired from Biotech and increases in other geographic regions as a result of our focus on international market expansion focus.
Our international upper extremities sales growth of 45.6% was primarily attributable to sales from products acquired from Biotech.
Our international biologics sales growth of 30.2% was primarily attributable to market expansion focus in Asia.
Cost of Sales
Our cost of sales as a percentage of net sales decreased to 23.4% in the third quarter of 2014, as compared to 24.4% in the third quarter of 2013. Cost of sales for the third quarter of 2013 included $1.0 million (1.7% of net sales) of charges to write down inventory acquired from BioMimetic to its estimated net realizable value. The remaining cost of sales increased as a percentage of net sales, primarily due to dis-synergies associated with fixed overhead manufacturing costs following the sale of our OrthoRecon business. Our cost of sales and corresponding gross profit percentages can be expected to fluctuate in future periods depending upon changes in our product sales mix and prices, distribution channels and geographies, manufacturing yields, period expenses, levels of production volume, cost of raw materials, and currency exchange rates.

30

Selling, General and Administrative
Our selling, general and administrative expenses as a percentage of net sales totaled 93.9% in the third quarter of 2014, compared to 109.4% in the third quarter of 2013. Selling, general and administrative expense for the third quarter of 2014 included $1.9 million of transition and transaction costs related to our recent acquisitions (2.7% of net sales), $1.2 million of costs connected to management changes (1.7% of net sales), $0.9 million of costs related to a patent dispute settlement (1.2% of net sales) and $0.9 million of transition costs associated with the sale of the OrthoRecon business (1.2% of net sales). Selling, general and administrative expense for the third quarter of 2013 included $11.2 million of transition costs associated with the sale of our OrthoRecon business (19.5% of net sales), $1.7 million of due diligence, transition and transaction costs related to our acquisitions of BioMimetic and Biotech (3.0% of net sales), and $0.1 million of cost related to distributor transition agreements (0.2% of net sales). The remaining selling, general and administrative expenses were relatively flat as a percentage of sales, as continued investment in international growth opportunities and dis-synergies as a result of the sale of the OrthoRecon business in certain corporate and international expenses were mostly offset by lower levels of expense for cash incentive compensation. These dis-synergies include expenses associated with our information technology support, a new corporate headquarters, and international employees and facilities. Additionally, we are incurring short-term expense dis-synergies associated with the acquired Solana and OrthoPro businesses, and we expect such dis-synergies to continue until they are fully integrated in late 2014.
Research and Development
Our investment in research and development activities represented approximately 8.3% of net sales in the third quarter of 2014, as compared to 9.6% of net sales in the third quarter of 2013. Research and development costs decreased as a percentage of net sales as incremental expenses associated with the acquired Biotech business and dis-synergies in certain shared functions as a result of the sale of the OrthoRecon business were more than offset by increased sales.
Amortization of Intangible Assets
Charges associated with the amortization of intangible assets were $2.4 million in the third quarter of 2014 compared to $1.3 million in the third quarter of 2013. The increase is primarily due to the amortization of intangible assets acquired in our recent Solana and OrthoPro acquisitions over the past year.
Based on the intangible assets held as of September�30, 2014, we expect to recognize amortization expense of approximately $9.8 million for the full year of 2014, $8.2 million in 2015, $6.8 million in 2016, $6.3 million in 2017, and $5.6 million in 2018.
BioMimetic Impairment Charges
During the third quarter of 2013, we recorded charges of approximately $206.2 million associated with the BioMimetic business acquired in the first quarter of 2013. On August 7, 2013, we received a not approvable letter from the FDA in response to our Pre-PMA application for Augment� Bone Graft for use as an alternative to autograft in hindfoot and ankle fusion procedures, and we were required to evaluate assets associated with the BioMimetic acquisition for impairment. As a result of this evaluation, we recorded an intangible impairment charge of approximately $88.1 million and a goodwill impairment charge of $115.0 million, as well as the recognition of a $3.2 million charge for noncancelable inventory commitments for the raw materials used in the manufacture of Augment� Bone Graft, which we estimated would expire unused.
Interest Expense, Net
Interest expense, net, consists of interest expense of $4.6 million during the third quarter of 2014 and $4.2 million during the third quarter of 2013, offset by interest income of $0.1 million during the third quarter of 2014 and 2013. Our interest expense relates primarily to non-cash interest expense associated with the amortization of the discount on our 2017 Notes of $2.3 million and $2.2 million in 2014 and 2013, respectively, as well as interest expense on our 2017 Notes totaling $1.5 million in both 2014 and 2013. Our interest income is generated by our invested cash balances and investments in marketable securities. The amounts of interest income we expect to realize in 2014 and beyond are subject to variability, dependent upon both the rate of invested returns we realize and the amount of excess cash balances on hand.
Other (Income) Expense, Net
Other (income) expense, net was $21.4 million of expense in the third quarter of 2014, compared to $64.0 million of income in the third quarter of 2013. For the third quarter of 2014, other (income) expense, net includes an unrealized loss of $18.5 million for the mark-to-market adjustment on CVRs issued in connection with the acquisition of BioMimetic, $1.7 million of expense for the fair value adjustment for contingent consideration associated with the WG Healthcare acquisition and an unrealized loss of $1.0 million for the net mark-to-market adjustments on our derivative asset and liability. For the third quarter of 2013, other (income) expense, net includes an unrealized gain of $66.1 million on CVRs issued in connection with the acquisition of BioMimetic, partially offset by an unrealized loss of $2.0 million for mark-to-market adjustments on our derivative asset and liability.


31

Provision from Income Taxes
We recorded an income tax provision of $3.0 million in the third quarter of 2014, compared to a tax benefit of $48.1 million in the third quarter of 2013. During the third quarter of 2014, our effective tax rate was approximately 6.5% as compared to 27.9% in the third quarter of 2013. The decrease in the effective tax benefit rate is primarily related to the valuation allowance on our U.S. net deferred tax assets, resulting in the inability to recognize a tax benefit for pre-tax losses in the U.S., except to the extent to which we recognize a gain in discontinued operations.
Loss from Discontinued Operations, Net of Tax
Loss from discontinued operations, net of tax, consists of the operations of the OrthoRecon business that was sold to MicroPort. For 2014, net loss results from costs associated with legal defense and changes to any contingent liabilities associated with the OrthoRecon business. The effective tax rate within results of discontinued operations for the quarter ended September 30, 2014 was approximately 33.0%.
For 2013, income from discontinued operations includes a full quarter of activity of the OrthoRecon business.
Reportable Segments
The following table sets forth, for the periods indicated, sales, gross profit and operating income of our reportable segments expressed as dollar amounts (in thousands) and as a percentage of net sales:
�
U.S.
�
International
�
BioMimetic
�
Three Months Ended September 30,
�
2014
2013
�
2014
2013
�
2014
2013
Net Sales
$
51,297

$
42,998

�
$
20,010

$
14,643

�
$


$


Gross Profit
42,939

36,599

�
12,010

8,281

�




Gross Profit as a percent of net sales
83.7
%
85.1
%
�
60.0
�%
56.6
%
�
N/A

N/A

Operating Income (Loss)
$
6,448

$
6,310

�
$
(3,213
)
$
34

�
$
(2,601
)
$
(3,494
)
Operating Income as a percent of net sales
12.6
%
14.7
%
�
(16.1
)%
0.2
%
�
N/A

N/A

U.S. Segment - Gross profit as a percent of net sales decreased primarily due to dis-synergies associated with fixed overhead manufacturing costs following the sale of our OrthoRecon business and increased inventory step-up amortization associated with recent acquisitions. Operating income was relatively flat as increased gross profit due to higher sales was mostly offset by investments in sales and marketing and distribution initiatives and short-term expense dis-synergies associated with the acquired Solana and OrthoPro businesses.
International Segment - The increase in gross profit as a percent of net sales is due to favorable geographic and product mix. The decline in operating profitability is due to dis-synergies for the replacement of certain employee-related and facility expenses as a result of the sale of the OrthoRecon business.
BioMimetic Segment - The decrease in operating loss for the quarter is the result of decreased expenses as a result of integration of certain administrative functions from the BioMimetic business to the U.S. business.


32

Comparison of nine months ended September�30, 2014 to nine months ended September�30, 2013
The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts (in thousands) and as percentages of net sales:
�
Nine Months Ended September 30,
�
2014
�
2013
�
Amount
�
% of Sales
�
Amount
�
% of Sales
Net sales
$
214,733

�
100.0
%
�
$
174,506

�
100.0
%
Cost of sales 1
54,126

�
25.2
%
�
42,298

�
24.2
%
Gross profit
160,607

�
74.8
%
�
132,208

�
75.8
%
Operating expenses:
�
�
�
�
�
�
�
Selling, general and administrative 1
207,629

�
96.7
%
�
164,306

�
94.2
%
Research and development 1
18,603

�
8.7
%
�
14,893

�
8.5
%
Amortization of intangible assets
7,241

�
3.4
%
�
5,726

�
3.3
%
BioMimetic impairment charges



�

%
�
206,249

�
118.2
%
Total operating expenses
233,473

�
108.7
%
�
391,174

�
224.2
%
Operating loss
(72,866
)
�
(33.9
%)
�
(258,966
)
�
(148.4
%)
Interest expense, net
12,873

�
6.0
%
�
11,979

�
6.9
%
Other expense (income), net
54,986

�
25.6
%
�
(65,291
)
�
(37.4
%)
Loss from continuing operations before income taxes
(140,725
)
�
(65.5
%)
�
(205,654
)
�
(117.8
%)
Benefit from income taxes
(7,197
)
�
(3.4
%)
�
(60,697
)
�
(34.8
%)
Net loss from continuing operations
(133,528
)
�
(62.2
%)
�
(144,957
)
�
(83.1
%)
Loss (income) from discontinued operations, net of tax 1
(14,925
)
�
�
�
6,041

�
�
Net loss
$
(148,453
)
�
�
�
$
(138,916
)
�
�
__________________________
(1)�
These line items include the following amounts of non-cash, stock-based compensation expense for the periods indicated:
�
Nine Months Ended September 30,
�
2014
�
% of Sales
�
2013
�
% of Sales
Cost of sales
$
231

�
0.1
%
�
$
390

�
0.2
%
Selling, general and administrative
7,932

�
3.7
%
�
8,504

�
4.9
%
Research and development
805

�
0.4
%
�
583

�
0.3
%
Loss from discontinued operations, net of tax


�
N/A

�
2,553

�
N/A


The following table sets forth our net sales by product line for the periods indicated (in thousands) and the percentage of year-over-year change:
�
Nine Months Ended
�
�
�
September�30, 2014
�
September�30, 2013
�
%
change
U.S.
�
�
�
�
�
Foot and Ankle
102,599

�
82,447

�
24.4
%
Upper Extremity
11,420

�
12,904

�
(11.5
%)
Biologics
33,376

�
31,519

�
5.9
%
Other
2,196

�
1,529

�
43.6
%
Total U.S.
$
149,591

�
$
128,399

�
16.5
%
�
�
�
�
�
�
International
�
�
�
�
�
Foot and Ankle
35,882

�
25,179

�
42.5
%
Upper Extremity
8,875

�
5,178

�
71.4
%
Biologics
15,437

�
12,413

�
24.4
%
Other
4,948

�
3,337

�
48.3
%
Total International
$
65,142

�
$
46,107

�
41.3
%
�
�
�
�
�
�
Total Sales
$
214,733

�
$
174,506

�
23.1
%
�
�
�
�
�
�

33


Net Sales
U.S. Segment. Net sales in our U.S. segment totaled $149.6 million in the first nine months of 2014, as compared to $128.4 million in the first nine months of 2013, a 17% increase. Sales from products acquired from Solana and OrthoPro contributed sales of $14.8 million in the first nine months of 2014.
Our U.S. foot and ankle net sales increased to $102.6 million in the first nine months of 2014, representing growth of 24% over the first nine months of 2013. The increase was driven by sales from products acquired from Solana and OrthoPro, as well as continued growth of our Total Ankle Replacement products. The U.S. foot and ankle sales growth includes the impact of the addition of Solana and OrthoPro's products into our existing direct sales force, offset by some cannibalization of product sales.
Our U.S. biologics sales totaled $33.4 million in the first nine months of 2014, representing a 6% increase from the first nine months of 2013, driven primarily by an increase in the sales of our PRO-DENSE� and ALLOPURE� line of products.
Our U.S. upper extremities sales were impacted by dis-synergies in our U.S. sales channel following the sale of our OrthoRecon business.
International Segment. Net sales in our International segment totaled $65.1 million in the first nine months of 2014, as compared to $46.1 million in the first nine months of 2013, a 41% increase. Sales from products acquired from Biotech contributed sales of $10.5 million in the first nine months of 2014.
Our international foot and ankle sales increased 43% to $35.9 million in the first nine months of 2014, driven by sales from foot and ankle products acquired from Biotech and increases in other geographic regions as a result of our focus on international market expansion focus.
Our international biologics sales increased 24% as the result of a 49% increase in Asia as the result of the addition of a new distribution partner in China in the second quarter of 2013, and a 19% increase of sales in Australia, primarily related to sales of Augment� Bone Graft acquired from the BioMimetic acquisition in the first quarter of 2013.
Cost of Sales
Our cost of sales as a percentage of net sales increased to 25.2% in the first nine months of 2014, as compared to 24.2% in the first nine months of 2013. The increase as a percentage of net sales is due to dis-synergies associated with fixed overhead manufacturing costs following the sale of our OrthoRecon business and increased inventory step-up amortization associated with recent acquisitions, partially offset by lower levels of provisions for excess and obsolete inventory.
Operating Expenses
As a percentage of net sales, operating expenses decreased to 108.7% in the first nine months of 2014, compared to 224.2% in the first nine months of 2013. The decrease is driven by the impairment charges recorded in the third quarter of 2013 of approximately $206.2 million (118.2% of sales) associated with the BioMimetic business acquired in the first quarter of 2013. The remaining increase in operating expenses as a percentage of net sales was driven primarily by increased transition and transaction costs associated with acquired businesses, increased transition costs in associated with the sale of the OrthoRecon business, dis-synergies as a result of the sale of the OrthoRecon business in certain corporate and international expenses, continued investment in international growth opportunities and short-term expense dis-synergies associated with the acquired Solana and OrthoPro businesses until they are fully integrated in late 2014, partially offset by lower levels of expense associated with cash incentive compensation.
Other Expense (Income), Net
Other expense (income), net was $55.0 million of expense in the first nine months of 2014, compared to $65.3 million of income in the first nine months of 2013. For the first nine months of 2014, other expense, net includes an unrealized loss of $51.3 million for the mark-to-market adjustment on CVRs issued in connection with the acquisition of BioMimetic, $1.7 million for the fair value adjustment for contingent consideration associated with the WG Healthcare acquisition and an unrealized loss of $2.0 million for mark-to-market adjustments on our derivative asset and liability. For the first nine months of 2013, other expense (income), net includes a�$60.3 million�unrealized gain on CVRs issued in connection with the acquisition of BioMimetic, a $7.8 million realized gain on our previously held investment in BioMimetic, partially offset by an unrealized loss of $3.0 million for mark-to-market adjustments on our derivative asset and liability.
Benefit from Income Taxes
We recorded an income tax benefit of $7.2 million in the first nine months of 2014, compared to a tax benefit of $60.7 million in the first nine months of 2013. During the first nine months of 2014, our effective tax rate was approximately 5.1% as compared to 29.5% in the first nine months of 2013. The decrease in the effective tax rate is primarily related to the valuation allowance on our U.S. net deferred tax assets, resulting in the inability to recognize a tax benefit for pre-tax losses in the U.S., except to the

34

extent to which we recognize a gain in discontinued operations. Additionally, our 2013 income tax benefit included the effect of non-deductible goodwill impairment charges and mark-to-market adjustment on CVRs issued in connection with the acquisition of BioMimetic on our taxable income (net unfavorable impact of 11.0% to effective tax benefit rate).
Loss (Income) from Discontinued Operations, Net of Tax
Loss (income) from discontinued operations, net of tax, consists of the operations of the OrthoRecon business that was sold to MicroPort. For 2014, net income includes operations from January 1 through January 9, 2014, which was the closing date of the transaction,�costs associated with legal defense and changes to any contingent liabilities associated with the OrthoRecon business, as well as the after tax impact of the $24.3 million gain on the sale of the OrthoRecon business. The 2014 effective tax rate of (109.5)% within results of discontinued operations reflects the sale of non-deductible goodwill of $25.8 million associated with the OrthoRecon segment.
For 2013, income from discontinued operations includes nine months of activity of the OrthoRecon business.
Reportable Segments
The following table sets forth, for the periods indicated, sales, gross profit and operating income of our reportable segments expressed as dollar amounts (in thousands) and as a percentage of net sales:
�
U.S.
�
International
�
BioMimetic
�
Nine Months Ended September 30,
�
2014
2013
�
2014
2013
�
2014
2013
Net Sales
$
149,591

$
128,399

�
$
65,142

$
46,107

�
$


$


Gross Profit
120,717

105,725

�
41,642

28,351

�




Gross Profit as a percent of net sales
80.7
%
82.3
%
�
63.9
�%
61.5
%

N/A

N/A

Operating Income (Loss)
$
12,914

$
19,395

�
$
(2,385
)
$
5,548

�
$
(9,385
)
$
(8,667
)
Operating Income as a percent of net sales
8.6
%
15.1
%
�
(3.7
)%
12.0
%
�
N/A

N/A

U.S. Segment - Gross profit as a percent of net sales decreased primarily due to dis-synergies associated with fixed overhead manufacturing costs following the sale of our OrthoRecon business and increased inventory step-up amortization associated with recent acquisitions. Operating income decreased due to investments in sales and marketing and distribution initiatives, as well as short-term expense dis-synergies associated with the acquired Solana and OrthoPro businesses, partially offset by increased gross profit from the increase in revenue.
International Segment - The increase in gross profit as a percent of net sales is due to favorable geographic mix. The decrease in operating income is due to dis-synergies for the replacement of certain employee-related and facility expenses as a result of the sale of the OrthoRecon business.
BioMimetic Segment - The increase in operating loss is the result of nine months of operations in 2014 and expenses associated with our appeal of the not approvable letter received from the FDA, whereas there was only four months of operations in 2013 based on the timing of the acquisition of the business.
��
Liquidity and Capital Resources
The following table sets forth, for the periods indicated, certain liquidity measures (in thousands):
�
As of September 30, 2014
�
As of December 31, 2013
Cash and cash equivalents
$
273,031

�
$
168,534

Short-term marketable securities
3,146

�
6,898

Long-term marketable securities


�
7,650

Working capital
331,265

�
385,890

We have historically invested in certain long-term marketable securities with original maturity dates ranging up to 36 months, consisting of investments in government, agency, and corporate bonds. As of September 30, 2014, these investments will mature within the next 12 months.

35

Operating Activities. Cash used in operating activities was $86.2 million for the first nine months of 2014 as compared to cash provided by operating activities of $5.7 million�for the first nine months of 2013. The decrease is primarily driven by lower profitability, as well as unfavorable changes in working capital.
Investing Activities. Our capital expenditures totaled approximately $35.7 million and $22.5 million in the first nine months of 2014 and 2013, respectively. The increase is primarily related to spending related to the move of our corporate headquarters and expansion of our manufacturing and distribution facility. Our industry is capital intensive, particularly as it relates to surgical instrumentation. Historically, our capital expenditures have consisted of purchased surgical instruments, manufacturing equipment, research and testing equipment, computer systems, and office furniture and equipment. We expect to incur capital expenditures of approximately $50�million in 2014.
In connection with our 2014 acquisitions of Solana and OrthoPro, we paid $80.6 million cash, net of cash acquired, for these businesses. Refer to Note 2 of our condensed consolidated financial statements for additional information regarding these acquisitions. In connection with our 2013 acquisitions of BioMimetic and WG Healthcare, we paid $40.4 million cash, net of cash acquired, for these businesses.
Financing Activities. During the first nine months of 2014, cash provided by financing activities totaled $26.2 million compared to the first nine months of 2013 when cash provided in financing activities totaled $2.8 million. The change is primarily attributable to cash received for stock option exercises in 2014.
As of September�30, 2014, we had less than 15% of our consolidated cash and cash equivalents held in jurisdictions outside of the U.S., which are expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the U.S. would have negative tax consequences. We do not intend to repatriate these funds.
Discontinued Operations. Cash flows from discontinued operations are combined with cash flows from continuing operations in the Condensed Consolidated Statement of Cash Flows. During the first nine months of 2014, cash inflows from discontinued operations was approximately $259 million, driven by the cash received from the sale of the OrthoRecon business, compared to cash used of approximately $41 million in the nine months of 2013. We do not expect that the absence of cash flows from discontinued operations will have an impact on our ability to meet contractual cash obligations, fund our working capital requirements, operations, and anticipated capital expenditures.

In-process research and development. In connection with our BioMimetic acquisition, we acquired in-process research and development (IPRD) technology related to projects that had not yet reached technological feasibility as of the acquisition date, which included Augment� Bone Graft, which was undergoing the FDA approval process, and Augment� Injectable Bone Graft. The acquisition date fair values of the IPRD technology was $61.2 million for Augment� Bone Graft and $27.1 million for Augment� Injectable Bone Graft. The fair value of the IPRD technology was $4.3 million as of September 30, 2014, which reflects the impairment charges recognized in 2013 after receipt of the not approvable letter from the FDA in response to our PMA application for Augment� Bone Graft for use as an alternative to autograft in hindfoot and ankle fusion procedures. The fair value of the research and development projects was determined using the income approach, which discounts expected future cash flows from the acquired in-process technology to present value. The discount rate applied to the expected future cash flows included a premium to the base required rate of return, in consideration of the risks associated with the FDA approval process.
On March 10, 2014, we reached an agreement with the Office of Device Evaluation (ODE) of the U.S. Food and Drug Administration (FDA) under which ODE will accept a further amendment to the Pre-Market Approval application (PMA) for Augment� Bone Graft in lieu of proceeding with the Dispute Resolution Panel (DRP) that was scheduled for the week of May 19, 2014.
On October 27, 2014, we received an Approvable Letter from the FDA for its PMA for Augment� Bone Graft. The approvable letter indicates that FDA determined Augment� Bone Graft to be safe and effective as an alternative to autograft for ankle and/or hindfoot fusion indications and is approvable subject to customary preapproval facilities inspections.
The IPRD projects acquired are as follows:
"
Augment� Bone Graft (Augment) is based on our platform regenerative technology, which combines an engineered version of recombinant human platelet-derived growth factor BB (rhPDGF-BB), one of the principal wound healing and tissue repair stimulators in the body, with tissue specific matrices, when appropriate. This product is intended to offer physicians advanced biological solutions to actively stimulate the bodys natural tissue regenerative process. Augment is targeted to be used in the open (surgical)�treatment of fusions. Additionally, Augment may be useful in the future to be used in open fractures. We have evaluated Augment in several open clinical applications, including foot and ankle fusions and distal radius fractures. We believe we have demonstrated that our technology is safe and effective in stimulating bone regeneration with the Canadian regulatory approval of Augment in 2009 and the Australian and New Zealand regulatory clearance of Augment in 2011. A PMA application for the use of Augment in the U.S. as an alternative to autograft in hindfoot and ankle fusion procedures was submitted to the FDA prior to this acquisition. In October 2014, we received an Approvable Letter from the FDA in regard to our Augment PMA. The approvable letter indicates the FDA determined Augment to be safe and effective as an alternative to autograft for ankle and/or hindfoot fusion indications

36

and is approvable subject to customary preapproval facilities inspections. Weve incurred expenses of approximately $12.1 million for Augment since the date of acquisition and approximately $6.8 million in the nine months ended September 30, 2014. We do not expect material additional spending to obtain FDA approval for Augment.

"
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 U.S. Recently, we have focused our efforts on securing FDA approval of Augment. The amount of time and cost to complete the Augment Injectable project depends upon the nature of the approval we ultimately receive for Augment, but we currently estimate it could take one to three years. Weve incurred expenses of approximately $2.3 million for Augment Injectable since the date of acquisition and approximately $0.5 million in the nine months ended September 30, 2014. We are currently evaluating future costs related to Augment Injectable following the recent Approvable Letter from the FDA on the Augment PMA.

Other Liquidity Information
We have funded our cash needs since 2000 through various equity and debt issuances and through cash flow from operations. Although it is difficult for us to predict our future liquidity requirements, we believe that our current cash balance of approximately $273.0 million and our marketable securities balances totaling $3.1 million will be sufficient for the foreseeable future to fund our working capital requirements, operations, and anticipated remaining capital expenditures in 2014 of approximately $13�million, and to meet our contractual cash obligations in 2014. Furthermore, we intend to use our cash and marketable securities balance to fund estimated remaining divestiture and transition costs associated with 2014 acquisitions of $5 million to $8 million, and the remainder to meet our contractual cash obligations underlying the CVRs associated with the Biomimetic acquisition (including approximately $98 million which will be payable shortly after receipt of final approval from the FDA for Augment� bone graft), fund growth opportunities for our Extremities and Biologics business and pay certain retained liabilities of the OrthoRecon business. In anticipation of the merger with Tornier, we may obtain additional financing to fund the growth of the future combined business.
Critical Accounting Policies and Estimates
Information on judgments related to our most critical accounting policies and estimates is discussed in Item�7 of our Annual Report on Form 10-K for the year ended December�31, 2013. Certain of our more critical accounting estimates require the application of significant judgment by management in selecting the appropriate assumptions in determining the estimate. By their nature, these judgments are subject to an inherent degree of uncertainty. We develop these judgments based on our historical experience, terms of existing contracts, our observance of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate. Actual results may differ from these judgments under different assumptions or conditions. Different, reasonable estimates could have been used for the current period. Additionally, changes in accounting estimates are reasonably likely to occur from period to period. Both of these factors could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. All of our significant accounting policies are more fully described in Note 2 to our consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December�31, 2013.

37

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes from the information reported under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2013.


38

ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We have established disclosure controls and procedures, as such term is defined in Rule�13a-15(e) under the Securities Exchange Act of 1934. Our disclosure controls and procedures are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our principal executive officer and principal financial officer by others within our organization. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September�30, 2014 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September�30, 2014.
Changes in Internal Control Over Financial Reporting
During the three month period ended September�30, 2014, there were no changes in our internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.



39

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.
From time to time, we are subject to lawsuits and claims that arise out of our operations in the normal course of business. We are the plaintiff or defendant in various litigation matters in the ordinary course of business, some of which involve claims for damages that are substantial in amount.
Governmental Inquiries
On September 29, 2010, we entered into a five year Corporate Integrity Agreement (CIA)�with the Office of the Inspector General of the United States Department of Health and Human Services (OIG-HHS). The CIA was filed as Exhibit 10.2 to our current report on Form 8-K filed on September�30, 2010. The CIA will expire on September 29, 2015.
The CIA imposes on us certain obligations to maintain compliance with U.S. healthcare laws, regulations and other requirements. Our failure to do so could expose us to significant liability, including, but not limited to, exclusion from federal healthcare program participation, including Medicaid and Medicare, potential prosecution, civil and criminal fines or penalties, as well as additional litigation cost and expense.
Both we and MicroPort, which completed the purchase of our OrthoRecon business in January 2014, will continue to be subject to the CIA.
In addition to the U.S. Attorney's Office (USAO) and OIG-HHS, other governmental agencies, including state authorities, could conduct investigations or institute proceedings that are not precluded by the CIA. In addition, the matters which gave rise to the CIA could increase our exposure to lawsuits by potential whistleblowers, including under the federal false claims acts, based on new theories or allegations arising from these matters.
On August 3, 2012, we received a subpoena from the USAO for the Western District of Tennessee requesting records and documentation relating to our PROFEMUR� series of hip replacement devices. The subpoena covers the period from January 1, 2000 to August 2, 2012. We continue to respond to the subpoena.
Patent Litigation
In 2011, Howmedica Osteonics Corp. and Stryker Ireland, Ltd. (collectively, Stryker), each a subsidiary of Stryker Corporation, filed a lawsuit against WMT in the United States District Court for the District of New Jersey (District Court) alleging that we infringed Stryker's U.S. Patent No. 6,475,243 related to our LINEAGE� Acetabular Cup System and DYNASTY� Acetabular Cup System. The lawsuit seeks an order of infringement, injunctive relief, unspecified damages, and various other costs and relief. On July 9, 2013, the Court issued a claim construction ruling. Under the court's claim construction ruling, we do not believe these hip products infringe the asserted patents. In filings with the Court, Stryker has conceded that under the Courts claim construction rulings it can no longer pursue its infringement claims. Stryker has asked the Court to dismiss the case so it may pursue an appeal.
In 2012, Bonutti Skeletal Innovations, LLC (Bonutti) filed a patent infringement lawsuit against us in the United States Court for the District of Delaware. In January 2014, we filed a request with the U.S. Patent and Trademark Office for Inter Partes Review (IPR) of the Bonutti patents. On April 7, 2014, the Court stayed the case pending outcome of the IPR. Bonutti originally alleged that the Link Sled Prosthesis infringes U.S. Patent 6,702,821. The Link Sled Prosthesis is a product we distributed under a distribution agreement with LinkBio Corp, which expired on December 31, 2013. In January 2013, Bonutti amended its complaint, alleging that the ADVANCE� knee system, including ODYSSEY� instrumentation, infringes U.S. Patent 8,133,229, and that the ADVANCE� knee system, including ODYSSEY� instrumentation and PROPHECY� guides, infringes U.S. Patent 7,806,896, which was issued on October 5, 2010. All of the claims of the asserted patents are directed to surgical methods for minimally invasive surgery.
In June 2013, Orthophoenix filed a patent lawsuit against us in the United States District Court for the District of Delaware alleging that surgical methods using the X-REAM� product infringe two patents. In June 2014, we filed a request for IPR with the U.S. Patent and Trademark Office. In October 2014, the Court stayed the case pending outcome of the IPR.
In June 2013, Anglefix filed suit in the United States District Court for the Western District of Tennessee, alleging that our ORTHOLOC� products infringe Anglefixs asserted patent. On April 14, 2014 we filed a request for IPR with the U.S. Patent and Trademark Office. In October 2014, the Court stayed the case pending outcome of the IPR.
In September 2013, ConforMIS, Inc. filed suit against us in the United States District Court for the District of Massachusetts, alleging that our PROPHECY� knee and ankle systems infringe four ConforMIS patents. On February 19, 2014, ConforMIS filed an amended complaint asserting four additional patents against us relating to alleged infringement by our PROPHECY� knee and ankle systems and naming MicroPort Orthopedics as an additional defendant. On October 9, 2014, the parties jointly advised the Court that they had reached an agreement in principle to resolve the matter. In connection with the reported settlement, we recorded expenses of $0.9 million in continuing operations and $13.8 million in discontinued operations.�In addition we recorded a $4.6

40

million asset in connection with the fully paid non-exclusive foot and ankle license contemplated by the reported settlement. $10.7 million of the $13.8 million recorded in discontinued operations reflects estimated royalty payments based on future sales by MicroPort Orthopedics, which will be paid through 2026.
In February 2014, Biomedical Enterprises, Inc. filed suit against Solana Surgical, LLC in the United States District Court for the Western District of Texas alleging Solana's FuseForce Fixation system infringes U.S. Patent No. 8,584,853 entitled Method and Apparatus for an Orthopedic Fixation System.
On September 23, 2014, Spineology filed a patent infringement lawsuit, Case No. 0:14-cv-03767, in the U.S. District Court in Minnesota, alleging that Wrights X-REAM� bone reamer infringes U.S. Patent No. RE42,757 entitled EXPANDABLE REAMER.� Plaintiff has not yet served the complaint.
Subject to the provisions of the asset purchase agreement with MicroPort for the sale of our OrthoRecon business, we will continue to be responsible for defense of pre-existing patent infringement cases relating to our OrthoRecon business, and for resulting liabilities, if any.
Product Liability
WMT has been named as a defendant, in some cases with multiple other defendants, in lawsuits in which it is alleged that as yet unspecified defects in the design, manufacture or labeling of certain metal-on-metal hip replacement products rendered the products defective. The lawsuits generally employ similar allegations that use of the products resulted in excessive metal ions and particulate in the patients into whom the devices were implanted, in most cases resulting in revision surgery. We anticipate that additional lawsuits relating to metal on metal hip replacement products may be brought.�
Because of the similar nature of the allegations made by several plaintiffs whose cases were pending in federal courts, upon motion of one plaintiff, Danny L. James, Sr., the United States Judicial Panel on Multidistrict Litigation in February 2012 transferred certain actions pending in the federal court system related to metal on metal hip replacement products to the United States District Court for the Northern District of Georgia, for consolidated pre-trial management of the cases before a single United States District Court Judge (the MDL). The consolidated matter is known as In re: Wright Medical Technology, Inc. Conserve Hip Implant Products Liability Litigation.� �
Certain plaintiffs have elected to file their lawsuits in state courts in California.�In doing so, most of those plaintiffs have named a surgeon involved in the design of the allegedly defective products as a defendant in the actions, along with his personal corporation. Pursuant to contractual obligations, Wright Medical has agreed to indemnify and defend the surgeon in those actions.�Similar to the MDL proceeding in federal court, because the lawsuits generally employ similar allegations, certain of those pending lawsuits in California were consolidated for pretrial handling on May 14, 2012 pursuant to procedures of California state Judicial Counsel Coordinated Proceedings. The consolidated matter is known as In re: Wright Hip Systems Cases, Judicial Counsel Coordination Proceeding No. 4710.
There are other individual lawsuits related to metal on metal hip products pending in various state courts.
Additionally, as of October 31, 2014, we are a defendant in 38 lawsuits in various state and federal courts involving claims for damages for personal injury associated with fractures of our PROFEMUR� long titanium modular neck product.
Insurance Litigation
In June 2014, St. Paul Surplus Lines Insurance Company (Travelers), which was an excess carrier in our coverage towers across multiple policy years, filed a declaratory judgment action in Tennessee state court naming us and certain of our other insurance carriers as defendants and asking the court to rule on the rights and responsibilities of the parties with regard to the CONSERVE��Claims. Among other things, Travelers appears to dispute our contention that the CONSERVE��Claims arise out of more than a single occurrence thereby triggering multiple policy periods of coverage.� Travelers further seeks a determination as to the applicable policy period triggered by the alleged single occurrence.��We filed a separate lawsuit in state court in California for declaratory judgment against certain carriers and breach of contract against the primary carrier, and have moved to dismiss or stay the Tennessee action on a number of grounds, including that California is the most appropriate jurisdiction. During the third quarter of 2014, the California Court granted Travelers' motion to stay our California action.
Employment Litigation
In 2012, two former employees, Frank Bono and Alicia Napoli, each filed separate lawsuits against WMT in the Chancery Court of Shelby County, Tennessee, which asserted claims for retaliatory discharge and breach of contract based upon his or her respective separation pay agreement. In addition, Mr. Bono and Ms. Napoli each asserted a claim for defamation related to the press release issued at the time of their terminations and a wrongful discharge claim alleging violation of the Tennessee Public Protection Act. Mr. Bono and Ms. Napoli each claimed that he or she was entitled to attorney fees in addition to other unspecified damages. On

41

October 23, 2013, Ms. Napoli moved to voluntary dismiss her lawsuit, without prejudice. On April 4, 2014, Ms. Napoli refiled her case in the United States District Court for the Eastern District of Missouri. In July 2014, we were successful in having the case that was refiled in Missouri transferred to the U.S. District Court for the Western District of Tennessee.
ITEM 1A. RISK FACTORS.
Completion of our proposed combination with Tornier is subject to several closing conditions, the failure of which could delay or prevent completion or reduce anticipated benefits.
Our merger with Tornier is subject to several closing conditions. If those conditions are not satisfied or waived, the transaction will not be completed. The market price of our common stock may reflect assumptions regarding completion of the transaction and its potential benefits. Accordingly, a delay in completing the transaction or uncertainty about the closing may negatively impact our share price. Closing conditions include the approval of the merger agreement by stockholders of both Wright and Tornier and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. If clearance under the HSR Act is conditioned on divestitures or restrictions on operations, anticipated benefits from the transaction may not be achieved.
Cash costs associated with our proposed business combination with Tornier may negatively impact our financial condition, operating results, and cash flow.
We have incurred significant costs related to the proposed transaction that are payable whether or not the merger closes. In addition, if the merger closes, significant additional fees will be payable to advisors. If the merger agreement is terminated under specified circumstances, we would be required to pay to Tornier a termination fee equal to $46�million. In addition, holders of our 2017 convertible notes would be entitled to convert notes during a 70 trading day window around a merger closing; a holder would be entitled to a cash payment equal to the market value of 39.3140 shares of our common stock per $1,000 principal amount of notes. While we currently do not expect significant conversions because the notes currently trade at a premium to the as-converted value, and a converting holder would forego future interest payments, any conversions would reduce our cash resources.
The proposed merger with Tornier may not achieve the intended benefits or may disrupt our operations.
We may fail to successfully integrate the businesses of Wright and Tornier or otherwise fail to realize the expected benefits of the proposed transaction.� Anticipated synergies may not be achieved, integration may result in unforeseen expenses, and anticipated benefits of the integration plan may not be realized. Our business may be negatively impacted following the merger if we are unable to effectively manage our expanded operations.� The integration will require significant time and focus from management and may disrupt achievement of our strategic objectives.
The pendency of the merger could cause:
"
our employees to experience uncertainty about their future roles, which might adversely affect our ability to retain and hire key personnel;
"
the attention of our management to be diverted from the day-to-day operations; and
"
distributors, independent sales agents, vendors, or suppliers may seek to modify or terminate their business relationships with us.
These disruptions could be exacerbated by a delay in the completion of the merger and could have an adverse effect on our business, operating results or prospects.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

42


None.

ITEM 6. EXHIBITS.

(a)
Exhibits.
The following exhibits are filed as a part of this quarterly report on Form 10-Q or are incorporated herein by reference:
Exhibit
No.
Description
3.1
Fourth Amended and Restated Certificate of Incorporation of Wright Medical Group, Inc., (1)�as amended by Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Wright Medical Group, Inc. (2)�and Certificate of Amendment for Fourth Amended and Restated Certificate of Incorporation of Wright Medical Group, Inc. (3)
�
�
3.2
Third Amended and Restated By-laws of Wright Medical Group, Inc. (4)
�
�
4.1
Form of Common Stock certificate. (1)
�
�
4.2
Indenture, dated as of November�26, 2007, between Wright Medical Group, Inc. and The Bank of New York as trustee (including form of 2.625% Convertible Senior Notes due 2014). (5)
�
�
4.3
Underwriting Agreement, dated as of November�19, 2007, among Wright Medical Group, Inc. and J.P. Morgan Securities Inc., Piper Jaffray & Co. and Wachovia Capital Markets, LLC. (5)
�
�
4.4
Indenture, dated as of August 31, 2012, between Wright Medical Group, Inc. and The Bank of New York, as trustee (including form of 2.000% Cash Convertible Senior Notes due 2017).(23)
�
�
4.5
Purchase Agreement, dated as of August 22, 2012, among Wright Medical Group, Inc. and J.P. Morgan Securities LLC, as Representative of the Initial Purchasers. (22)
�
�
10.1
Credit Agreement dated as of February�10, 2011, among Wright Medical Group, Inc., as the Borrower; the U.S. subsidiaries of the Borrower, as the Guarantors; the Lenders named therein; Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer; SunTrust Bank and Wells Fargo Bank, N.A., as Co-Syndication Agents; and US Bank National Association, as Documentation Agent. (17)
�
�
10.2*
Fifth Amended and Restated 1999 Equity Incentive Plan (the 1999 Plan), (7)�as amended by First Amendment to the 1999 Plan. (8)
�
�
10.3*
Second Amended and Restated 2009 Equity Incentive Plan (2009 Plan) (9)
�
�
10.4*
Form of Executive Stock Option Agreement pursuant to the 2009 Plan.(26)
�
�
10.5*
Form of Non-US Employee Stock Option Agreement pursuant to the 2009 Plan.(26)
�
�
10.6*
Form of Non-Employee Director Stock Option Agreement (one year vesting) pursuant to the 2009 Plan.(26)
�
�
10.7*
Form of Non-Employee Director Stock Option Agreement (four year vesting) pursuant to the 2009 Plan.(26)
�
�
10.8*
Form of Executive Restricted Stock Grant Agreement pursuant to the 2009 Plan.(44)
�
�
10.9*
Form of Non-Employee Director Restricted Stock Grant Agreement (one year vesting) pursuant to the 2009 Plan.(26)
�
�
10.10*
Form of Non-Employee Director Restricted Stock Grant Agreement (four year vesting) pursuant to the 2009 Plan.(26)
�
�
10.11*
Form of Non-US Employee Restricted Stock Unit Grant Agreement pursuant to the 2009 Plan.(26)
�
�
10.12*
Form of Executive Stock Option Agreement pursuant to the 1999 Plan. (10)
�
�
10.13*
Form of Non-US Employee Stock Option Agreement pursuant to the 1999 Plan. (10)
�
�
10.14*
Form of Non-Employee Director Stock Option Agreement (one year vesting) pursuant to the 1999 Plan. (10)
�
�

43

10.15*
Form of Non-Employee Director Stock Option Agreement (four year vesting) pursuant to the 1999 Plan. (10)
�
�
10.16*
Form of Executive Restricted Stock Grant Agreement pursuant to the 1999 Plan. (10)
�
�
10.17*
Form of Non-US Employee Phantom Stock Unit Grant Agreement pursuant to the 1999 Plan. (10)
�
�
10.18*
Form of Non-Employee Director Restricted Stock Grant Agreement (four year vesting) pursuant to the 1999 Plan.(11)
�
�
10.19*
Wright Medical Group, Inc. Executive Performance Incentive Plan. (12)
�
�
10.20*
Wright Medical Group, Inc. 2010 Executive Performance Incentive Plan. (13)
�
�
10.21*
Form of Indemnification Agreement between Wright Medical Group, Inc. and its directors and executive officers. (14)
�
�
10.22*
Separation Pay Agreement dated as of November 6, 2012 between Wright Medical Technology, Inc. and Lance A. Berry. (15)
�
�
10.23*
Separation Pay Agreement dated as of November 6, 2012 between Wright Medical Technology, Inc. and William L. Griffin, Jr. (15)
�
�
10.24*
Separation Pay Agreement dated as of November 6, 2012 between Wright Medical Technology, Inc. and Eric A. Stookey.(15)
�
�
10.25*
Separation Pay Agreement dated as of November 6, 2012 between Wright Medical Technology, Inc. and Daniel J. Garen.(26)
�
�
10.26*
Employment Agreement dated as of September 17, 2011 between Wright Medical Technology, Inc. and Robert J. Palmisano. (20)
�
�
10.27
Separation Pay Agreement dated as of January 1, 2014 between Wright Medical Technology, Inc. and Peter S. Cooke.�(45)
�
�
10.28*
Separation Pay Agreement dated as of November 29, 2012 between Wright Medical Technology, Inc. and Pascal E.R. Girin.(26)
�
�
10.29*
Inducement Stock Option Grant Agreement dated as of September 17, 2011 between Wright Medical Technology, Inc. and Robert J. Palmisano. (20)
�
�
10.30*
Inducement Stock Option Grant Agreement between the Registrant and Julie D. Tracy dated October 17, 2011. (21)
�
�
10.31*
Inducement Stock Option Grant Agreement between Registrant and James A. Lightman dated December 29, 2011(21)
�
�
10.32*
Inducement Stock Option Grant Agreement between Registrant and Daniel Garen dated January 30, 2012. (21)
�
�
10.33*
Inducement Stock Option Grant Agreement between Registrant and Pascal E.R. Girin dated November 26, 2012.(26)
�
�
10.34
Settlement Agreement dated September�29, 2010, among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, and Wright Medical Technology, Inc. (16)
�
�
10.35
Corporate Integrity Agreement dated September�29, 2010, between Wright Medical Technology, Inc. and the Office of Inspector General of the Department of Health and Human Services. (16)
�
�
10.36
Deferred Prosecution Agreement dated September�29, 2010, between Wright Medical Technology, Inc. and the United States Attorney's Office for the District of New Jersey. (16)
�
�
10.37
Amendment to the Corporate Integrity Agreement dated September 14, 2011, between Wright Medical Technology, Inc. and the Office of Inspector General of the Department of Health and Human Services. (19)
�
�
10.38
Addendum and Amendment to the Deferred Prosecution Agreement dated September 15, 2011, between Wright Medical Technology, Inc. and the United States Attorney's Office for the District of New Jersey. (19)
�
�

44

10.39
Amended and Restated Supply and Development Agreement dated January�28, 2011 between Wright Medical Technology, Inc. and LifeCell Corporation. (18)
�
�
10.40
Trademark License Agreement dated January�28, 2011 between Wright Medical Technology, Inc. and KCI Medical Records. (18)
�
�
10.41
Base Call Option Transaction Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc. and Bank of America, N.A. (22)
�
�
10.42
Base Call Option Transaction Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc. and Deutsche Bank AG, London Branch, through its agent Deutsche Bank Securities Inc.�(22)
�
�
10.43
Base Call Option Transaction Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc., and Wells Fargo Bank, National Association through its agent Wells Fargo Securities, LLC (22)
�
�
10.44
Base Warrants Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc. and Bank of America, N.A. (22)
�
�
10.45
Base Warrants Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc. and Deutsche Bank AG, London Branch, through its agent Deutsche Bank Securities Inc. (22)
�
�
10.46
Base Warrants Confirmation, dated as of August 23, 2012, between Wright Medical Group, Inc. and Wells Fargo Bank, National Association through its agent Wells Fargo Securities, LLC (22)
�
�
10.47
Additional Call Option Transaction Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Bank of America, N.A. (23)
�
�
10.48
Additional Call Option Transaction Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Deutsche Bank AG, London Branch, through its agent Deutsche Bank Securities Inc. (23)
�
�
10.49
Additional Call Option Transaction Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Wells Fargo Bank, National Association through its agent Wells Fargo Securities, LLC (23)
�
�
10.50
Additional Warrants Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Bank of America, N.A. (23)
�
�
10.51
Additional Warrants Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Deutsche Bank AG, London Branch, through its agent Deutsche Bank Securities Inc. (23)
�
�
10.52
Additional Warrants Confirmation, dated as of August 28, 2012, between Wright Medical Group, Inc. and Wells Fargo Bank, National Association through its agent Wells Fargo Securities, LLC (23)
�
�
10.53
Agreement and Plan of Merger by and among BioMimetic Therapeutics, Inc., Wright Medical Group, Inc., Achilles Merger Subsidiary, Inc. and Achilles Acquisition Subsidiary, LLC, dated as of November 19, 2012 (24)
�
�
10.54
Contingent Value Rights Agreement by and between Wright Medical Group, Inc. and American Stock Transfer & Trust Company, LLC, dated as of March 1, 2013 (25)
�
�
10.55
Supply Agreement, dated as of November 2, 2012, by and between Wright Medical Technologies, Inc. and Orchid MPS Holdings, LLC.(23)
�
�
10.56
Asset Purchase Agreement by and among MicroPort Medical B.V., MicroPort Scientific Corporation and Wright Medical Group, Inc., dated as of June 18, 2013 (27)
�
�
10.57
License Agreement between BioMimetic Therapeutics, Inc. and President and Fellows of Harvard College, dated as of April 10, 2001. (28)
�
�
10.58
Exclusive Patent License Agreement between BioMimetic Therapeutics, Inc. and ZymoGenetics, Inc., dated as of March 28, 2001. (28)
�
�
10.59
Second Exclusive Patent License Agreement between BioMimetic Therapeutics, Inc. and ZymoGenetics, Inc., dated as of January 21, 2003. (28)
�
�

45

10.60
Letter Agreement between BioMimetic Therapeutics, Inc. and ZymoGenetics, Inc., dated October 17, 2005. (28)
�
�
10.61
Supply Agreement between BioMimetic Therapeutics, Inc. and Orthovita, Inc. dated as of August 2, 2002. (28)
�
�
10.62
Development, Manufacturing and Supply Agreement between BioMimetic Therapeutics, Inc. and Kensey Nash Corporation, dated as of June 28, 2005. (28)
�
�
10.63
Patent Purchase Agreement by and among BioMimetic Therapeutics, Inc. and Institute of Molecular Biology, Inc. dated November 4, 2005. (28)
�
�
10.64
Amendment No. 1 to Exclusive Sublicense Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated as of December 21, 2005. (28)
�
�
10.65
Amendment No. 1 to Manufacturing and Supply Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated as of December 21, 2005. (28)
�
�
10.66
Letter Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated as of December 21, 2005. (28)
�
�
10.67
Lease Agreement between BioMimetic Therapeutics, Inc. and Noblegene Development, LLC effective January 1, 2007. (29)
�
�
10.68
Lease Agreement between BioMimetic Therapeutics, Inc. and Noblegene Development, LLC dated August 17, 2007. (30)
�
�
10.69
Asset Purchase Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated December 14, 2007. (31)
�
�
10.70
Amended and Restated Exclusive Sublicense Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.71
Exclusive License Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.72
Supply Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.73
Agreement Terminating Research, Development and Marketing Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.74
Agreement Terminating Manufacturing and Supply Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.75
Amendment and Waiver Agreement with respect to Asset Purchase Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated January 4, 2008. (31)
�
�
10.76
Amendment to Lease Agreement between BioMimetic Therapeutics, Inc. and Noblegene Development, LLC dated January 22, 2008. (32)
�
�
10.77
Distribution Agreement between BioMimetic Therapeutics, Inc. and Joint Solutions Alliance Corporation dated April 18, 2008. (33)
�
�
10.78
Second Amendment to Lease Agreement between BioMimetic Therapeutics, Inc. and Noblegene Development, LLC dated January 9, 2009. (34)
�
�
10.79
Release and Settlement Agreement, effective as of December 21, 2009, between BioMimetic Therapeutics, Inc. and Deutsche Bank Securities, Inc. (35)
�
�
10.80
Amended and Restated Manufacturing and Supply Agreement, effective as of December 1, 2009, between BioMimetic Therapeutics, Inc. and Novartis Vaccines and Diagnostics, Inc. (35)
�
�
10.81
First Amendment to Development, Manufacturing and Supply Agreement, effective August 15, 2006, between BioMimetic Therapeutics, Inc. and Kensey Nash Corporation. (36)

46

�
�
10.82
Second Amendment to Development, Manufacturing and Supply Agreement, effective November 1, 2006, between BioMimetic Therapeutics, Inc. and Kensey Nash Corporation. (36)
�
�
10.83
Third Amendment to Development, Manufacturing and Supply Agreement, effective April 2, 2008, between BioMimetic Therapeutics, Inc. and Kensey Nash Corporation. (36)
�
�
10.84
Fourth Amendment to Development, Manufacturing and Supply Agreement, effective September 30, 2010, between BioMimetic Therapeutics, Inc. and Kensey Nash Corporation. (37)
�
�
10.85
Amendment No. 1 to Amended and Restated Exclusive Sublicense Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated November 1, 2010. (38)
�
�
10.86
Amendment No. 1 to Asset Purchase Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated November 1, 2010. (38)
�
�
10.87
Amendment No. 1 to Agreement Terminating Research, Development and Marketing Agreement between BioMimetic Therapeutics, Inc. and Luitpold Pharmaceuticals, Inc. dated November 1, 2010. (38)
�
�
10.88
Logistical Support Agreement between BioMimetic Therapeutics, Inc. and Joint Solutions Alliance Corporation dated November 3, 2010. (37)
�
�
10.89
Supply Agreement between BioMimetic Therapeutics, Inc. and Integra LifeSciences Corporation dated July 15, 2010. (37)
�
�
10.90
Third Amendment to Lease Agreement between BioMimetic Therapeutics, Inc. and Noblegene Development, LLC dated April 8, 2011. (39)
�
�
10.91
Amendment to Patent License Agreements between BioMimetic Therapeutics, Inc. and Bristol-Myers Squibb Company dated June 30, 2011. (40)
�
�
10.92
Amendment to Amended and Restated Manufacturing and Supply Agreement, effective as of January 1, 2012, between BioMimetic Therapeutics, Inc. and Novartis Vaccines and Diagnostics, Inc. (41)
�
�
10.93
Sales and Purchase Agreement between Upperside SA, Naxicap Rendement 2018, and Banque Populaire Developpement as Sellers and Wright Medical Group, Inc. as Purchaser, dated as of October 16, 2013.(42)
�
�
10.94
Agreement of Lease, dated December 28, 2013, by and between Wright Medical Technology, Inc. and RBM Cherry Road Partners. (44)
�
�
10.95
Agreement and Plan of Merger, dated as of January 30, 2014, by and among Wright Medical Group, Inc., WMMS, LLC, OrthoPro, L.L.C. and OP CHA, Inc., as Company Holders Agent. (43)
�
�
10.96
Agreement and Plan of Merger, dated as of January 30, 2014, by and among Wright Medical Group, Inc., Winter Solstice LLC, Solana Surgical, LLC, and Alan Taylor, as Members Representative. (43)
�
�
10.97
Consulting Agreement, dated as of August 20, 2014, by and between Wright Medical Group, Inc. and Eric Stookey
�
�
10.98
Third Amendment to Amended and Restated Manufacturing and Supply Agreement, dated as of September 1, 2014, by and between Novartis Vaccines and Diagnostics, Inc. and BioMimetic Therapeutics, LCC
�
�
10.99
Technology Transfer Agreement, dated as of September 1, 2014, by and between Novartis Vaccines and Diagnostics, Inc. and BioMimetic Therapeutics, LLC
�
�
10.100
Amendment No. 2 to the Supply Agreement, dated as of September 1, 2014, by and between Luitpold Pharmaceuticals, Inc. and BioMimetic Therapeutics, LLC
�
�
10.101
Amendment No. 3 to the Supply Agreement, dated as of September 1, 2014, by and between Luitpold Pharmaceuticals, Inc. and BioMimetic Therapeutics, LLC
�
�
11
Computation of earnings per share (included in Note 11�of the Notes to Consolidated Financial Statements in Financial Statements and Supplementary Data).
�
�
14
Code of Business Conduct(6)
�
�

47

31.1
Certification of Chief Executive Officer Pursuant to Rule�13a-14(a) Under the Securities Exchange Act of 1934.
�
�
31.2
Certification of Chief Financial Officer Pursuant to Rule�13a-14(a) Under the Securities Exchange Act of 1934.
�
�
32
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) Under the Securities Exchange Act of 1934 and Section�1350 of Chapter�63 of Title 18 of the United States Code.
�
�
101
The following materials from Wright Medical Group, Inc. Quarterly Report on Form�10-Q for the quarter ended September 30, 2014 formatted in XBRL (Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets; (2)�Parenthetical Data to the Condensed Consolidated Balance Sheets; (3)�the Condensed Consolidated Statements of Operations; (4) Parenthetical Data to the Condensed Consolidated Statements of Operations; (5)�the Condensed Consolidated Statements of Comprehensive Income; (6) Parenthetical Data to the Condensed Consolidated Statements of Comprehensive Income; (7) the Condensed Consolidated Statements of Cash Flows; and (8)�Notes to Condensed Consolidated Financial Statements.
___________________________

(1)
Incorporated by reference to our Registration Statement on Form S-1 (Registration No. 333-59732), as amended.
(2)
Incorporated by reference to our Registration Statement on Form S-8 (Registration No. 333-115541) filed on May�14, 2004.
(3)
Incorporated by reference to our current report on Form 8-K filed on May 17, 2013 (Commission file number 001-35823).
(4)
Incorporated by reference to our current report on Form 8-K filed on February�20, 2014 (Commission file number 000-32883).
(5)
Incorporated by reference to our current report on Form 8-K filed on November�26, 2007 (Commission file number 000-32883).
(6)
Incorporated by reference to our current report on Form 8-K filed July 8, 2011 (Commission file number 000-32883).
(7)
Incorporated by reference to our definitive Proxy Statement filed on April�14, 2008 (Commission file number 000-32883).
(8)
Incorporated by reference to our quarterly report on Form 10-Q for the quarter ended September�30, 2008 (Commission file number 000-32883).
(9)
Incorporated by reference to our definitive Proxy Statement filed on April�4, 2013 (Commission file number 000-335823).
(10)
Incorporated by reference to our quarterly report on Form 10-Q for the quarter ended June 30, 2009 (Commission file number 000-32883).
(11)
Incorporated by reference to our Registration Statement on Form S-8 (Registration No. 333-151756) filed on June�18, 2008.
(12)
Incorporated by reference to our current report on Form 8-K filed on February�10, 2005 (Commission file number 000-32883).
(13)
Incorporated by reference to our current report on Form 8-K filed on March�25, 2010 (Commission file number 000-32883).
(14)
Incorporated by reference to our current report on Form 8-K filed on April�7, 2009 (Commission file number 000-32883).
(15)
Incorporated by reference to our current report on Form 8-K filed on November�6, 2012 (Commission file number 000-32883).
(16)
Incorporated by reference to our current report on Form 8-K filed on September�30, 2010 (Commission file number 000-32883).
(17)
Incorporated by reference to our annual report on Form 10-K for the fiscal year ended December 31, 2010 (Commission file number 000-32883).
(18)
Incorporated by reference to our current report on Form 8-K/A filed on May�18, 2011 (Commission file number 000-32883).
(19)
Incorporated by reference to our current report on Form 8-K filed September 15, 2011 (Commission file number 000-32883).
(20)
Incorporated by reference to our current report on Form 8-K filed on September 22, 2011 (Commission file number 000-32883).
(21)
Incorporated by reference to our annual report on Form 10-K for the fiscal year ended December 31, 2011 (Commission file number 000-32883).
(22)
Incorporated by reference to our current report on Form 8-K filed on August 28, 2012 (Commission file number 000-32883).
(23)
Incorporated by reference to our current report on Form 8-K filed on September 4, 2012 (Commission file number 000-32883).

48

(24)
Incorporated by reference to our current report on Form 8-K filed on November 19, 2012 (Commission file number 000-32883).
(25)
Incorporated by reference to our current report on Form 8-K filed on March 1, 2013 (Commission file number 000-32883).
(26)
Incorporated by reference to our annual report on Form 10-K for the fiscal year ended December 31, 2012 (Commission file number 000-32883).
(27)
Incorporated by reference to our current report on Form 8-K filed on June 21, 2013 (Commission file number 001-35823).
(28)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s Registration Statement on Form S-1 (Registration No. 333-131718), as amended.
(29)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on May 7, 2007 (Commission file number 000-51934).
(30)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on August 21, 2007 (Commission file number 000-51934).
(31)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2007 (Commission file number 000-51934).
(32)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K file on January 25, 2008 (Commission file number 000-51934).
(33)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s quarterly report on Form 10-Q for the quarter ended June 30, 2008 (Commission file number 000-51934).
(34)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2008 (Commission file number 000-51934).
(35)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2009 (Commission file number 000-51934).
(36)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s annual report on Form 10-K/A for the fiscal year ended December 31, 2009 (Commission file number 000-51934).
(37)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2010 (Commission file number 000-51934).
(38)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on November 19, 2010 (Commission file number 000-51934).
(39)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on April 14, 2011 (Commission file number 000-51934).
(40)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on July 1, 2011 (Commission file number 000-51934).
(41)
Incorporated by reference to BioMimetic Therapeutics, Inc.'s current report on Form 8-K filed on February 27, 2012 (Commission file number 000-51934).
(42)
Incorporated by reference to our current report on Form 8-K filed October 18, 2013 (Commission file number 001-35823).
(43)
Incorporated by reference to our current report on Form 8-K filed January 31, 2014 (Commission file number 001-35823).
(44)
Incorporated by reference to our annual report on Form 10-K filed February 26, 2014 (Commission file number 001-35823).
(45)
Incorporated by reference to our quarterly report on Form 10-Q filed April 30, 2014 (Commission file number 001-35823).
*
Denotes management contract or compensatory plan or arrangement.
Confidential treatment granted under 17 CFR 24b-2. The confidential portions of this exhibit have been omitted and are marked accordingly. The confidential portions have been filed separately with the Securities and Exchange Commission pursuant to the Confidential Treatment Request.
Confidential treatment requested under 17 CFR 24b-2. The confidential portions of this exhibit have been omitted and are marked accordingly. The confidential portions have been filed separately with the Securities and Exchange Commission pursuant to the Confidential Treatment Request.

49

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November�5, 2014
�
�
WRIGHT MEDICAL GROUP, INC.
�
�
�
�
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)�

50

EXHIBIT INDEX
Exhibit
No.
�
Description
�
�
�
10.97
�
Consulting Agreement, dated as of August 20, 2014, by and between Wright Medical Group, Inc. and Eric Stookey
�
�
�
10.98
�
Third Amendment to Amended and Restated Manufacturing and Supply Agreement, dated as of September 1, 2014, by and between Novartis Vaccines and Diagnostics, Inc. and BioMimetic Therapeutics, LCC
�
�
�
10.99
�
Technology Transfer Agreement, dated as of September 1, 2014, by and between Novartis Vaccines and Diagnostics, Inc. and BioMimetic Therapeutics, LLC
�
�
�
10.100
�
Amendment No. 2 to the Supply Agreement, dated as of September 1, 2014, by and between Luitpold Pharmaceuticals, Inc. and BioMimetic Therapeutics, LLC
�
�
�
10.101
�
Amendment No. 3 to the Supply Agreement, dated as of September 1, 2014, by and between Luitpold Pharmaceuticals, Inc. and BioMimetic Therapeutics, LLC
�
�
�
31.1
�
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934.
�
�
�
31.2
�
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934.
�
�
�
32
�
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule�13a-14(b) Under the Securities Exchange Act of 1934 and Section�1350 of Chapter�63 of Title 18 of the United States Code.
�
�
�
101
�
The following materials from Wright Medical Group, Inc. Quarterly Report on Form�10-Q for the quarter ended September 30, 2014 formatted in XBRL (Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets; (2)�Parenthetical Data to the Condensed Consolidated Balance Sheets; (3)�the Condensed Consolidated Statements of Operations; (4) Parenthetical Data to the Condensed Consolidated Statements of Operations; (5)�the Condensed Consolidated Statements of Comprehensive Income; (6) Parenthetical Data to the Condensed Consolidated Statements of Comprehensive Income; (7) the Condensed Consolidated Statements of Cash Flows; and (8)�Notes to Condensed Consolidated Financial Statements.
___________________________

Confidential treatment requested under 17 CFR 24b-2. The confidential portions of this exhibit have been omitted and are marked accordingly. The confidential portions have been filed separately with the Securities and Exchange Commission pursuant to the Confidential Treatment Request.

51






CONSULTING AGREEMENT


THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of August 20, 2014, by and between Eric A. Stookey (the "Consultant") and Wright Medical Technology, Inc. (the "Company").

WHEREAS, the Consultant 's employment as the Company's President, Extremities/Biologics terminated on August 20, 2014 (the "Effective Date");

WHEREAS, the Consultant is a party to that certain Separation Pay Agreement (the "Separation Pay Agreement ") by and between the Consultant and the Company dated November 6, 2012; and

WHEREAS, the Company and the Consultant agree that for a period of time following the Effective Date, the Consultant shall be available to provide the Company with consulting services as described herein and shall cooperate with the Company regarding certain transition matters described herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth in this Agreement, the parties hereby agree as follows:

1.Effective Date. This Agreement shall become effective as of the Effective Date; provided that the Consultant has executed the general release of claims
in favor of the Company required by the Separation Pay Agreement and that such release has become effective within 52 days of the Effective Date. In the event that such release has not become effective (either because the Consultant has failed to execute such
release or because he has revoked it prior to it becoming fully effective) by such deadline, this Agreement shall be rendered void ab initio.

2.Term. The Company hereby engages the Consultant to provide the consulting services specified hereunder, and to cooperate with the Company on certain transition matters described herein, during the period from the Effective Date through December 31, 2015 (the "Consulting Period"). At the expiration or other termination of the Consulting Period, this Agreement shall terminate immediately and the Company shall have no further obligation to the Consultant hereunder, other than as expressly set forth herein.

3.Services. The Consultant shall perform such transition services (the "Services") as may be specified from time to time by the Company at such times as the Company may specify, which may include making himself available for questions to the Company's personnel from time to time. The parties hereby acknowledge and agree that, although the need for the Services may fluctuate during the Consulting Period, the Services to be provided during the Consulting Period are expected to involve not more than a limited, part-time commitment of the Consultant's time and that the Consultant shall not be required to be present in the Company's offices on a regular basis. The Consultant is free to accept employment or other engagements from others during the Consulting Period, subject to Section 9 below, and further provided that any such engagements do not prevent the Consultant from performing the Services.

4.Consulting Fee. As compensation for the Services, subject to Sections 7, 8, 9 and 11 below, the Company shall pay to the Consultant a single lump sum payment in cash on December 31, 2015 in an amount equal to $126,461 (the "Consulting Fee"). Except as provided in this Section 4 or Section 5 below, the Consultant will not be entitled to any other compensation and will not be entitled to participate in or receive benefits under any benefit plan, program or arrangement of any kind maintained by the Company, regardless




of how the Services are characterized by any other person (including any governmental agency).

5.Treatment of Stock Options and Restricted Shares. The parties hereby acknowledge that, as of the date hereof, the Consultant holds 54,575 unvested options (the "Options") to acquire shares of common stock of the Company and 20,883 restricted shares (the "Restricted Shares") of the common stock of the Company that, in each case, were granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan"). Subject to Sections 7, 8 and 9 below, the Consultant shall continue to vest in the Options and the Restricted Shares during such time as this Agreement remains in effect and he shall be entitled to exercise any Options that become vested during the Consulting Period until the earlier of (i) the expiration date of such Options and (ii) the date that is 90 days following the date that this Agreement terminates.

6.Change in Control. In the event of a Change in Control (as defined in the Separation Pay Agreement) that is also a "change in control event" as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and that occurs prior to December 31, 2015, subject to Sections 7, 8 and 9 below, the Consulting Fee shall become payable not later than 30 days following such Change in Control. For the avoidance of doubt, in the event of a Change in Control (as defined in the Separation Pay Agreement) occurring prior to December 31, 2015 that is not a "change in control event" as defined in Section 409A of the Code, subject to Sections 7, 8 and 9 below, the Consulting Fee shall be paid on December 31, 20 I 5. In connection with a Change of Control (as defined in the applicable stock option and restricted stock agreements), subject to Sections 7, 8 and 9 below, any Options and Restricted Shares that have not yet become vested during the Consulting Period shall become fully vested in accordance with their terms.

7.Termination of Services. This Agreement is not terminable by either party, except that (a) the Company may terminate this Agreement in the event that the Consultant breaches Section 9 below or materially breaches Section 3 above and has not cured such material breach within 10 days of the Company's written notice to him, (b) this Agreement will terminate upon the Consultant 's death, and (c) the parties may terminate this Agreement by mutual wntten agreement. In the event that this Agreement is terminated prior to its expiration, the Consultant shall immediately forfeit all payments and benefits that would otherwise be provided hereunder following such termination; provided that in the event that this Agreement is terminated under clause (a) above, the Consultant shall immediately forfeit all Options that have vested since the Effective Date and shall reimburse the Company for the aggregate spread value of any such Options
that have been exercised, and the aggregate fair market value (determined as of their vesting date) of Restricted Shares that have vested, since the Effective Date; and .further provided that in the event that this Agreement under clause (b) above, the Consultant shall, upon the date of his death, become vested in the Options and Restricted Shares that would have become vested had this Agreement remained in effect through the earlier of
(i) December 31, 2015 and (ii) the date on which the next tranche of Options or Restricted Shares, as applicable, would have become vested. Notwithstanding anything herein to the contrary, the provisions of Sections 8, 9 and 10 shall survive the termination of this Agreement.





8.
Confidential Information.
a.The Consultant acknowledges that the Company and its affiliates continually develop Confidential Information; that the Consultant learned of Confidential Information during his former employment with the Company; that the Consultant may develop Confidential Information for the Company or its affiliates; and that the Consultant may learn of Confidential Information during the Consulting Period. The Consultant shall comply with the policies and procedures of the Company and its affiliates for protecting Confidential Information and shall not disclose to any person or use, other than as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its affiliates, any Confidential Information obtained by the Consultant incident to his former employment or any other association with the Company or any of its affiliates. The Consultant understands that this restriction shall continue to apply after the Consulting Period, regardless of the reason such Consulting Period terminates. The confidentiality obligation under this Section 8 shall not apply to information which is generally known or readily available to the public at the time of disclosure or that becomes generally known through no wrongful act on the part of the Consultant or any other person having an obligation of confidentiality to the Company or any of its affiliates.
b.All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company or its affiliates and any copies, in whole or in part, thereof (the "Documents"), whether or not prepared by the Consultant, shall be the sole and exclusive property of the Company and its affiliates. The Consultant shall safeguard all Documents and shall surrender to the Company at the time the Consulting Period terminates, or at such earlier time or times as the Board or its designee may specify, all Documents then in the Consultant's possession or control.
c."Confidential Information" means any and all information of the Company and its affiliates that is not generally known by those with whom the Company or any of its affiliates competes or does business, or with whom the Company or any of its affiliates plans to compete or do business and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its affiliates would assist in competition against them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its affiliates, (ii) the Products, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its affiliates, (iv) the identity and special needs of the customers of the Company and its affiliates and (v) the people and organizations with whom the Company and its affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes any information that the Company or any of its affiliates has received, or may receive hereafter, belonging to customers or others with any understanding, express or implied, that the information would not be disclosed.
d."Products" mean all products planned, researched, developed, tested, manufactured, sold, licensed, leased or otherwise distributed or put into use by the Company or any of its affiliates, together with all services provided or planned by the Company or any of its affiliates, during the Consultant 's former employment or during the Consulting Period.

9.
Other Restrictive Covenants.
a.Restricted Activities. The Consultant agrees that some restrictions on his activities from the Effective Date through December 3 I , 2015 are necessary to protect the goodwill, Confidential Information and other egitimate interests of the Company and its affiliates; and the Consultant further agrees that he is subject to these restrictions on his activities in consideration of the payment and benefits described in Sections 4 and 5 above and other valuable consideration provided for in this Agreement and to which he would not otherwise be entitled:

i.From the Effective Date through December 31, 2015, the Consultant shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete with the Company or any of its affiliates within the United States or undertake any planning for any business competitive with the Company or any of its affiliates. Specifically, but without l imiting the foregoing, the Consultant agrees not to engage in any manner in any activity that is directly or indirectly competitive or potentially competitive with the business of the Company or




any of its affiliates as conducted or under consideration at any time during the Consultant's former employment with the Company or during the Consulting Period and further agrees not to work or provide services, in any capacity, whether as an employee, independent contractor or otherwise, whether with or without compensation, to any person who is engaged in any business that is competitive with the business of the Company or any of its affiliates for which the Consultant has provided services, as conducted or in planning during the Consultant's former employment with the Company or during the Consulting Period. For the purposes of this Section 9, the business of the Company and its affiliates shall include, without limitation, all Products and shall encompass all items, products and services that may be used in substitution for Products. The foregoing, however, shall not prevent the Consultant's passive ownership of two percent (2%) or less of the equity securities of any publicly-traded company.

ii.����The Consultant agrees that, from the Effective Date through December 31, 2015, he will not undertake any outside activity, whether or not competitive with the business of the Company or its affiliates, that could reasonably give rise to a conflict of interest or otherwise interfere with his duties and obligations to the Company or any of its affiliates.

iii.����The Consultant agrees that, from the Effective Date through December 31, 2015, the Consultant will not directly or indirectly (a) solicit or encourage any customer of the Company or any of its affiliates to terminate or diminish its relationship with them; or (b) seek to persuade any such customer of the Company or any of its affiliates to conduct with anyone else any business or activity which such customer or prospective customer conducts or could conduct with the Company or any of its affiliates; provided that these restrictions shall apply (y) only with respect to those persons who are customers of the Company or any of its affiliates during the Consulting Period and (z) only if the Consultant performs or performed work for such person during the Consulting Period or during the his former employment with the Company or one of its affiliates or been introduced to, or otherwise had contact with, such person as a result of his employment or other associations with the Company or one of its affiliates or has had access to Confidential Information which would assist in the Consultant's solicitation of such person.

iv.����The Consultant agrees that from the Effective Date through December 31, 2015, the Consultant will not, and will not assist any other person to, (a) hire or solicit for hiring any employee of the Company or any of its affiliates or seek to persuade any employee of the Company or any of its
affiliates to discontinue employment or (b) solicit or encourage any independent contractor providing services to the Company or any of its affiliates to terminate or diminish its relationship with them. For the purposes of this Agreement, an "employee" of the Company or any of its affiliates is any person who was such at any time during the Consulting Period or within the two years prior to the Effective Date.

b.Notification Requirement. Until December 31, 2015, the Consultant shall give notice to the Company of each new business activity he plans to undertake , at least 30 days prior to beginning any such activity. Such notice shall state the name and address of the person for whom such activity is undertaken and the nature of the Consultant's business relationship(s) and position(s) with such person. The Consultant shall provide the Company with such other pertinent information concerning such business activity as the Company may reasonably request in order to determine the Consultant's continued compliance with his obligations under this Section 9.

c.Non-Disparagement. The Consultant agrees that he will not disparage the Company or any of its affiliates, or any of their respective management, products or services and will not do or say anything that could reasonably be expected to disrupt the good morale of the employees of the Company or any of its affiliates or otherwise harm the business interests or reputation of the Company or any of its affiliates. The Consultant understands and agrees that this restriction shall continue to apply after the termination of the Services, howsoever caused.





10.Enforcement of Covenants. The Consultant acknowledges that he has carefully read and considered all the terms and conditions of this Agreement , including the restraints imposed upon him pursuant to Sections 8 and 9 above. The Consultant agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information and other legitimate interests of the Company and its affiliates; that each and every one of those restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent him from obtaining other suitable employment or engagement during the period in which the Consultant is bound by these restraints. The Consultant further agrees that he will never assert, or permit to be asserted on his behalf, in any forum, any position contrary to the foregoing. The Consultant further acknowledges that, were he to breach any of the covenants contained in Sections 8 or 9 above, the damage to the Company and/or one or more of its affiliates would be irreparable. The Consultant therefore agrees that the Company and any such affiliate, in addition to any other remedies available to them,
shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Consultant of any of said covenants, without having to post bond. The parties further agree that, in the event that any provision of Section 8 or 9 above shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. For the avoidance of doubt, the restrictive covenants set forth in Section 8 and 9 above are in addition to, and not in lieu of, the restrictive covenants set forth in the Separation Pay Agreement and in the event any conflict between such covenants, the covenants that are more restrictive upon the activities of the Consultant shall control.

11.Release. The Consultant acknowledges and agrees that the payment of the Consulting Fee is contingent upon the Consultant (or an authorized representative of the Consultant in the event of the Consultant's death or incapacity) signing a general release of claims in (or, if determined by the Company, substantially in) the form attached as Exhibit A not earlier than Decem ber 15, 2015 and the release becoming effective not later than December 31, 2015 or, in the event Section 6 or Section 7(b) above applies, at such earlier time as is specified by the Company.

12.Business Expenses. The Company shall pay or reimburse the Consultant for reasonable, customary and necessary business expenses incurred or paid by the Consultant in the performance of his duties and responsibilities hereunder, subject to such reasonable substantiation, pre-approval and documentation requirements as may be specified by the Company's policies from time to time. Any reimbursement under this Agreement that would constitute nonqualified deferred compensation subject to Section 409A of the Code shall be subject to the following additional rules:(i) no reimbursement of any such expense shall affect the Consultant's right to reimbursement of any such expense in any other taxable year; (ii) reimbursement of the expense shall be made, if at all, promptly, but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit.

13.Relationship of the Parties; Limitations on Authority. The Company and the Consultant acknowledge and agree that the Consultant is an independent contractor in the performance of Services under this Agreement and that nothing contained in this Agreement is intended to create or continue an employment
relationship, partnership orjoint venture between the Company and the Consultant. As an independent contractor, the Consultant will work independently and will not receive training or direction from the Company or its affiliates, other than as to the goals to be achieved through the Services. The Consultant shall have no right, power or authority to bind the Company or any of its affil iates to the fulfillment of any condition, contract or obligation or to create any liability binding on the Company or any of its affiliates at any time during the Consulting Period or thereafter.

14.Section 409A. Payments under this Agreement are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules, and this Agreement shall be construed accordingly; provided that notwithstanding anything to the contrary in this Agreement, neither the Company, nor any of its




affiliates, nor the board of directors of the Company, nor any person acting on behalf of the Company, any of its affiliates or the board of directors of the Company, shall be liable to the Consultant or
his estate or beneficiary by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of any payment or benefit to satisfy the requirements of Section 409A of the Code. Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. For purposes of this Agreement, all references to ''termination of employment" and correlative phrases shall be construed to require a "separation from service" (as defined in Section l.409A�
l (h) of the Treasury regulations after giving effect to the presumptions contained therein).

15.Taxes. As an independent contractor, the Consultant shall be solely responsible for the payment of any and all federal, state and local income and other taxes on any sums received from the Company or its affiliates under this Agreement. The Consultant shall indemnify the Company and hold it harmless from and against any obligation imposed on the Company or its affiliates to pay withholding taxes, social security, unemployment, or other taxes, fees or penalties in connection with any payments made to the Consultant pursuant to this Agreement.
16.Miscellaneous. This Agreement contains the entire agreement between the Consultant and the Company and its affiliates with respect to, and replaces all prior agreements, whether written or oral, with respect to the Services to be provided by the Consultant under this Agreement; provided that, for the avoidance of doubt, that nothing herein shall be construed as replacing, superseding or otherwise limiting the Company's or the Consultant's rights or obligations under the Separation Pay Agreement. This Agreement may not be amended and no breach will be waived unless agreed in writing by the Consultant and an authorized officer of the Company. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by personal delivery, by a nationally recognized overnight courier (provided a written acknowledgement of receipt is obtained) or by certified or express mail to the Consultant at his home address as set forth in the records of the Company or to the Company at Wright Medical Technology, Inc., Attention: General Counsel, 1023 Cherry Road,
Memphis, Tennessee 381 17, or to such other address as either party shall notify the other. Notices and communications shall be effective when actually received by the addressee. This Agreement shall be governed by, construed under and enforced in accordance with the laws of the State of Tennessee without regard to conflicts-of-laws principles that would require the application of any other law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. Any action to enforce the terms of this Agreement shall be brought in the state or federal courts located in Shelby County, Tennessee and both parties agree to submit to and not contest such jurisdiction and venue in such courts.

[Remainder of Page Intentionally Left Blank]








IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly authorized representative, and by the Consultant, as of the date first above written.

THE CONSULTANT:
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WRIGHT MEDICAL
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TECHNOLOGY INC.
�
�
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By: /s/ Eric Stookey
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By: /s/ Pascal E.R. Girin
Eric A. Stookey
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Pascal E.R.
�
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Chief Operating Officer




THIRD AMENDMENT TO AMENDED AND RESTATED
MANUFACTURING AND SUPPLY AGREEMENT


This Third Amendment to Amended and Restated Manufacturing and Supply Agreement (the Third Amendment) is entered into as of the 1st day of September, 2014 (the Amendment Effective Date), by and among Novartis Vaccines and Diagnostics, Inc., with its principal place of business located at 350 Massachusetts Avenue, Cambridge, MA 02139 USA (hereinafter Novartis), and BioMimetic Therapeutics, LLC a Delaware limited liability company, with its principal place of business located at 389 Nichol Mill Lane, Franklin, Tennessee 37067 (hereinafter BMTI).

BACKGROUND

WHEREAS, Novartis and BioMimetic Therapeutics, Inc. (BioMimetic) entered into that certain Amended and Restated Manufacturing and Supply Agreement, dated as of December 1, 2009 (as amended, the Supply Agreement), as amended by that certain Amendment to Amended and Restated Manufacturing and Supply Agreement, dated as of February 2, 2012, and that certain Second Amendment to Amended and Restated Manufacturing and Supply Agreement, dated as of April 19, 2013;
WHEREAS, BMTI is the successor by merger to BioMimetic;
WHEREAS, under the Supply Agreement, Novartis manufactures and provides the Product (as defined in the Supply Agreement) to BMTI for use in the Exclusive Fields, as more particularly described in the Supply Agreement;
WHEREAS, Novartis and its Affiliates have ceased production of the Product, and in connection with the determination to cease production of the Product, Novartis purported to terminate the Supply Agreement effective as of December 1, 2015 pursuant to a letter acknowledged by BioMimetic on December 20, 2013 (the Original Termination Notice);
WHEREAS, Novartis and BMTI subsequently agreed to amend the Supply Agreement to provide that BMTI will agree to purchase, and Novartis will agree to supply, certain additional quantities of Product under terms and conditions to be agreed upon, following which the Supply Agreement shall terminate;
WHEREAS, simultaneously with the execution of this Third Amendment, Novartis and BMTI are entering into that certain Technology Transfer Agreement (the Technology Transfer Agreement) providing for the transfer to BMTI of certain information and materials relating to the production process required for Product manufacture; and
WHEREAS, BMTI and Novartis now desire to enter into this Third Amendment to set forth the terms and conditions under which BMTI will purchase additional quantities of Product and to terminate the Supply Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:






1.
Definitions.

Unless otherwise defined herein, capitalized terms used in this Second Amendment shall have the meanings set forth in the Supply Agreement.

2.
Purchase of Additional Product

(a) The Supply Agreement is hereby amended to provide that BMTI will purchase from Novartis, and Novartis will sell to BMTI, [***] ([***]) grams of Product manufactured by Novartis at Novartis Emeryville, California facility (the Additional Product) under the terms and conditions of the Supply Agreement and this Third Amendment.

(b) The purchase price of the Additional Product is [***] Dollars ($[***]) per gram, for a total purchase price of [***] Dollars ($[***]) (the Purchase Price).

(c) The Additional Product will be delivered by Novartis to BMTI under the terms of the Supply Agreement by no later than thirty (30) days after the Amendment Effective Date.

(d) The Purchase Price will be paid by BMTI to Novartis under the terms of the Supply Agreement by no later than thirty (30) days after the delivery of the Additional Product to BMTI and acceptance of the Additional Product by BMTI under the Supply Agreement.

(e) Except as expressly provided in this Third Amendment, the purchase of the Additional Product by BMTI will be covered by the terms of the Supply Agreement in all respects and for all purposes, and the Additional Product will be considered Product under the Supply Agreement in all respects and for all purposes.

(f) Notwithstanding anything to the contrary contained in the Supply Agreement, the parties agree that upon completion of the sale of the Additional Product, Novartis shall have no further obligation to manufacture and supply Product to BMTI and BMTI shall have no obligation to purchase Product from Novartis.

3.
Termination of Supply Agreement

(a) Following (i) the delivery of the Additional Product to BMTI, the acceptance of the Additional Product by BMTI and the payment of the Purchase Price to Novartis, all in accordance with the Supply Agreement and this Third Amendment, and (ii) the execution of the Technology Transfer Agreement by Novartis and BMTI, and subject to Section 3(b) below, the Supply Agreement shall automatically terminate.

(b) Notwithstanding the termination of the Supply Agreement:

(i) The termination of the Supply Agreement shall not release either party from any liability, obligation or agreement that has already accrued or preclude either party from pursuing all rights and remedies it may have hereunder at law or in equity with respect to any breach of the Supply Agreement prior to such expiration or termination; and

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.







(ii) The provisions of Articles 7 and 8 and Sections 4.4, 5.2, 5.3, 6.2, 6.3, 6.4 6.5, 14.5, 14.8 and 14.9 of the Supply Agreement and this Section 3(b)(ii) shall survive expiration or termination of the Supply Agreement; provided that Section 6.2 shall survive only until the BLA Transfer Date, as such term is defined in the Technology Transfer Agreement.

4.
Conforming Changes. In order to give effect to this Third Amendment, the parties agree that, as of the Amendment Effective Date, and following the execution of the Technology Transfer Agreement by Novartis and BMTI, the terms of the Supply Agreement are amended and modified as set forth in this Section 4:

(a) Sections 2.3.4, 3.1, 5.1, 10.1, 10.2.2, 10.2.3, 10.3, and 11.1 through 11.4 inclusive, Items 1, 3, 6, 7 and 8 on Annex 2 and Annex 5 are hereby deleted in their entirety and replaced with the following:

Removed and reserved.

(b) The first sentence of Section 4.1 is hereby deleted in its entirety.

(c) Section 4.4 is hereby amended by adding the following after the last sentence:

Notwithstanding the foregoing, if any Additional Products received by BMTI are Nonconforming, Novartis shall refund the portion of the Purchase Price attributable to such Nonconforming Additional Products and such refund shall be Novartis sole liability and BMTIs sole remedy with respect to any Additional Products that are Nonconforming.

(d) Section 6.4 is hereby amended by deleting the final sentence thereof and replacing it with the following:

Costs related to a Product recall or return shall be borne by BMTI; provided that if the recalled or returned Product is Nonconforming, such costs shall be borne by Novartis.


(e) Section 10.4 of the Supply Agreement is hereby amended by deleting the final sentence of thereof and replacing it with the following:

The provisions of Articles 6, 7 and 8 and Sections 4.4, 5.2, 5.3, 6.2, 6.3, 6.4 6.5, 10.4, 14.5, 14.8 and 14.9 of the Supply Agreement shall survive expiration or termination of the Supply Agreement; provided that Section 6.2 shall survive only until the BLA Transfer Date, as such term is defined in the Technology Transfer Agreement between Novartis and BMTI.

5.
Integration. The parties agree that except as otherwise expressly amended herein, all terms and conditions of the Supply Agreement as amended remain and shall remain in full force and effect. This Third Amendment shall hereafter be incorporated and be deemed part of the Supply Agreement and any future reference to the Supply Agreement shall include the terms and conditions of this Third Amendment.

6.
Applicable Law & Jurisdiction. This Third Amendment shall be governed by, and construed in accordance with the laws which govern the Supply Agreement, and the parties submit to the jurisdiction and dispute resolution provisions as set forth in the Supply Agreement.

[Signatures page follows]




IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their duly authorized representatives, as of the date first written above.


BIOMIMETIC THERAPEUTICS, LLC



By:����__/s/ William L. Griffin________________
Name:����William L. Griffin
Title: SVP & GM



NOVARTIS VACCINES AND DIAGNOSTICS, INC.


By:����_/s/ Maureen A. Rogers_________________
Name: Maureen A. Rogers
Title: VP, General Counsel




TECHNOLOGY TRANSFER AGREEMENT
TECHNOLOGY TRANSFER AGREEMENT (Agreement), dated as of September 1, 2014 (the Execution Date), between BioMimetic Therapeutics, LLC, a Delaware limited liability company (BMT), and Novartis Vaccines and Diagnostics, Inc., a Delaware corporation (Novartis). BMT and Novartis are each referred to herein, individually, as a Party and, collectively, as the Parties.
W I T N E S S E T H:
WHEREAS, Novartis and BioMimetic Therapeutics, Inc., (BioMimetic) entered into that certain Amended and Restated Manufacturing and Supply Agreement dated as of December 1, 2009 (as amended, the Supply Agreement), a copy of which (including amendments thereto) is attached hereto as Exhibit A;
WHEREAS, BMT is the successor by merger to BioMimetic;
WHEREAS, under the Supply Agreement, Novartis manufactures and provides the Product (as defined the in Supply Agreement) to BMT for use in the Exclusive Fields, as more particularly described in the Supply Agreement;
WHEREAS, Novartis and its Affiliates have ceased production of the Product at the facility in Emeryville, CA, USA where Product was previously manufactured (the Emeryville Facility) and determined to cease production of the Product at the facility in Vacaville, CA, USA where the Product is currently manufactured (the Vacaville Facility), the Vacaville Facility may be transferred to an Affiliate of Novartis and/or a Third Party, and in connection with the determination to cease production of the Product at the Vacaville Facility, Novartis purported to terminate the Supply Agreement effective as of December 1, 2015 pursuant to a letter acknowledged by BioMimetic December 20, 2013 (the Original Termination Notice);
WHEREAS, Novartis and BMT subsequently agreed to amend the Supply Agreement pursuant to a Third Amendment to Amended and Restated Manufacturing and Supply Agreement dated as of the date hereof, a copy of which is attached hereto in Exhibit A (the Termination Amendment), pursuant to which BMT agreed to purchase and Novartis agreed to supply certain additional quantities of Product on the terms and conditions set forth therein, following which the Supply Agreement shall terminate in accordance with terms and conditions more specifically described in the Termination Amendment, and such Termination Amendment shall amend and supersede the terms and conditions of the Original Termination Notice in all respects;
WHEREAS, pursuant to Sections 11.3 and 11.4 of the Supply Agreement, in connection with the exercise by Novartis of certain termination rights under the Supply Agreement, Novartis agreed to transfer to a new Third Party manufacturer selected by BMT certain information and materials relating to the production process, including all process improvements, required for Product manufacture (a Technology Transfer), as more particularly set forth in said Sections�11.3 and 11.4;
WHEREAS, in connection with the execution and delivery of the Termination Amendment, Novartis has agreed to undertake the Technology Transfer on the terms and conditions set forth in this Agreement, which shall amend and supersede the terms and conditions of the Supply Agreement with respect to Technology Transfer in all respects; and
WHEREAS, BMT and Novartis now desire to enter into this Agreement to set forth the terms and conditions of the Technology Transfer, including the terms and conditions under which BMT may directly



or indirectly manufacture Product for itself, its Affiliates and certain Third Parties following the Execution Date.
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I


DEFINITIONS

Section 1.1Certain Definitions. Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the Supply Agreement. As used in this Agreement, the following terms have the meanings set forth below:

Affiliate means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with, such other Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For purposes of this definition, the term control (including the correlative meanings of the terms controlled by and under common control with), as used with respect to any Person, means (i) the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise, or (ii) the ownership, directly or indirectly, of no less than 50% of the voting securities of such Person.
Ancillary Agreements means, with respect to a Party, each agreement or instrument to be executed and delivered by such Party pursuant to this Agreement.
BLA Transfer Date means the date upon which FDA approves the transfer of the Product BLA (hereinafter defined) to BMT.
Control, Controls, Controlled and Controlling mean possession of the ability to grant the rights as provided herein without violating the terms of any agreement or other arrangement with any Third Party. Novartis shall be deemed to Control Know-How to the extent of its individual or joint interest therein, as applicable.
Encumbrance means any lien, pledge, charge, claim, security interest, option, mortgage or easement, in each case, except for Permitted Encumbrances.
Exclusive Field(s) means the treatment of: (1) periodontal and dental diseases, (2) craniomaxillofacial applications and, (3) other skeletal applications including the healing of bone, cartilage, tendon and ligaments of the skeletal systems. The Exclusive Fields shall include treatments in humans and animals. For the avoidance of doubt, the Parties agree that the treatment of [***] will be specifically excluded from the Exclusive Field(s).
FDA means the U.S. Food and Drug Administration.
����
[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




Governmental Authority means any U.S. or foreign, federal, state or local court, administrative body or other governmental or quasi-governmental authority or self-regulatory organization with competent jurisdiction.
Intellectual Property Rights means all rights in patents, patent applications (whether provisional or non-provisional), trademarks (whether registered or not), trademark applications, service mark registrations and service mark applications, trade names, trade dress, logos, slogans, copyrights, copyright applications, Know-How, and other intellectual property and proprietary rights, other than off-the-shelf computer programs.
Know-How means any proprietary data, results, technology, and nonpublic information, in any tangible or intangible form, including: information, techniques, technology, practices, specifications, trade secrets, discoveries, developments, inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, data, results (including assay development, compound screening, chemical, pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms, reports and study reports. Notwithstanding the foregoing, Know-How does not include compositions of matter, cells, cell lines, or physical, biological or chemical materials.
Law means any law, statute, ordinance, rule, regulation, code, order, judgment, injunction or decree enacted, issued, promulgated, enforced or entered by a Governmental Authority.
Novartis Know-How means any Know-How Controlled by Novartis or its Affiliates as of the Execution Date to the extent relating to the Product and the Process.
Original BLA and Process means, collectively, (a) the Product BLA used and maintained by Novartis prior to the BLA Transfer Date, but not after, and (b) the Process used and maintained by Novartis prior to the BLA Transfer Date, but not after.
Outside Date means the later of (a) November 30, 2017 (such date representing the latest expiration date of Product supplied to BMT by Novartis under the Supply Agreement) or (b) in the event BMT purchases Product manufactured by Novartis at the Vacaville Facility, the latest expiration date of such Product supplied to BMT by Novartis.
Permitted CMO means any Third Party manufacturer designated by BMT (or its successors or permitted assigns) utilizing the Process to manufacture Permitted Products for BMT or Smith & Nephew, or their respective Affiliates, or their respective successors and permitted assigns, in each case, for use in the Permitted Field.
Permitted Encumbrance means any lien, pledge, charge, claim, encumbrance, security interest, option, mortgage, easement, or other restriction or Third Party right of any kind (a) under agreements between Novartis and/or its Affiliates and Third Parties existing as of the date hereof, (b) incurred in the ordinary course of business of Novartis and its Affiliates, or (c)�that would not have a material adverse effect on the ability of BMT or its Third Party manufacturer to manufacture Products following the Technology Transfer contemplated hereby.
Permitted Field means the manufacturing and commercialization of Permitted Products, in each case, (a) in the Exclusive Fields by or on behalf of BMT, or its Affiliates, or its successors and permitted assigns or (b) in the Smith & Nephew Field by Smith & Nephew and/or BMT or a Permitted CMO, in each case, on behalf of Smith & Nephew, or its Affiliates, or its permitted assigns. For the avoidance of doubt, the Permitted Field includes the manufacture of the Product by Permitted CMOs for BMT or Smith & Nephew,



or their respective Affiliates, or their respective successors and permitted assigns, in each case, for commercialization by any such Person of Permitted Products in the Exclusive Fields or the Smith & Nephew Field, as applicable, but, for clarity, does not include such manufacture for commercialization of Permitted Products by any Person other than BMT or Smith & Nephew, or their respective Affiliates, or their respective successors and permitted assigns.
Permitted Products means the Product and any product or therapy incorporating or derived from the Product.
Person means an individual, a corporation, a partnership, an association, a limited liability company, a Governmental Authority, a trust or other entity or organization.
Process means the production process required for the manufacture of the Product by BMT or a Permitted CMO.
Product has the meaning ascribed thereto in the Supply Agreement, but as used with respect to rights and obligations under this Agreement, includes such Product in any packaging form or container permitted by applicable Law.
Quality Agreement has the meaning ascribed thereto in the Supply Agreement.
Regulatory Materials means, with respect to the Product, all regulatory applications, submissions, notifications, communications, correspondence, registrations, approvals and/or other filings made to, received from or otherwise conducted with a Governmental Authority to the extent related to the Product or the manufacturing thereof, in each case, for use in the Exclusive Fields or the Smith & Nephew Field, and all records and data required to be maintained by the holder of the Product BLA under applicable Law; [***].
Smith & Nephew means Smith & Nephew, Inc., a Delaware corporation together with its permitted assigns. The term permitted assigns means, with respect to Smith & Nephew, (a) any successor to substantially all of the business and operations of Smith & Nephew, (b) an assignee of all of Smith & Nephews rights with respect to the Product in the Smith & Nephew Field (including any right or interest of Smith & Nephew under or pursuant to this Agreement), or (c) an Affiliate of Smith & Nephew.
Smith & Nephew Field means [***].
Technology Transfer Term means the period beginning on the Execution Date and expiring on the earlier of: (a) the delivery of the documents and deliverables described on Schedule 2.1 to be provided by Novartis hereunder and the completion of the Technology Transfer Support Services; (b) December 31, 2015; or (c) the termination of this Agreement in accordance with Section 10.1.
Third Party means any Person other than a Party or their respective Affiliates.



[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




Section1.2Other Definitional and Construction Provisions. Unless the express context otherwise requires:
(a)the words hereof, herein, and hereunder and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
(b)the terms defined in the singular have a comparable meaning when used in the plural, and vice versa;
(c)the terms Dollars and $ mean United States Dollars;
(d)references herein to a specific Section, Subsection, Schedule or Exhibit shall refer, respectively, to Sections, Subsections, Schedules or Exhibits of this Agreement;
(e)wherever the word include, includes, or including is used in this Agreement, it shall be deemed to be followed by the words without limitation;
(f)references herein to any gender includes each other gender;
(g)The term permitted assigns means, with respect to BMT, any party to which BMT is permitted to assign this Agreement under Section 11.3 below.

ARTICLE II

TECHNOLOGY TRANSFER

Section 2.1Transfer of Technology. On the terms and subject to the conditions set forth herein, Novartis hereby agrees to transfer or cause to be transferred, , the Process to BMT or its Permitted CMO; provided, that Novartiss obligations hereunder shall be limited to (i) supplying or causing to be supplied the documents and deliverables described in Sections 2.1(a)-(c) below that relate to the Product and the Exclusive Fields or the Smith & Nephew Field, in each case, to the extent covering the current production Process and to the extent such documents and deliverables are not already in the possession of BMT or its Affiliates (collectively, the Transferred Technology), (ii) delivering the Cell Banks as provided in Article III pursuant to the terms and conditions contained therein, and making the other covenants contained in Article�III, and (iii) providing or causing to be provided the Technology Transfer support services described in Article IV. Without limiting the foregoing, the Transferred Technology shall include:

(a)Novartis Know-How. Tangible embodiments of Novartis Know-How and other information and technology related to the Product and the Process, and necessary for the clinical and/or commercial manufacture of the Product, in each case, for use in the Permitted Field, as more fully set forth on Schedule 2.1.

(b)Process Records and Deliverables. All books and records including working papers and files, all purchase order-based arrangements, supplier lists, manuals, instructions, labeling (including electronic files), design drawings, sales literature, clinical trial data, and manufacturing and quality control records and procedures, in each case, as more particularly described on Schedule 2.1 and that relate to the Product and the Exclusive Fields or the Smith & Nephew Field and which cover the then-current Process enabling BMT and/or a Permitted CMO skilled in the art to run the Process (collectively, the Process Records and Deliverables).

(c)Product BLA. All of Novartis and its Affiliates right, title and interest in and to the Biologics License Application and Regulatory Materials for the Product held by Novartis as of the Execution Date (the Product BLA). Notwithstanding anything contained herein to the contrary, Novartis agrees to



assign and transfer or cause to be assigned and transferred the Product BLA to BMT and shall provide Technology Transfer Support Services in accordance with Article IV to assist BMT in the transfer of the Product BLA to BMT, but Novartis shall have no obligations with respect to transferring the Product BLA to a Permitted CMO or any other Third Party, or any new applications, submissions or filings with Governmental Authorities made by or on behalf of BMT, its Affiliates or any such new Third Party.

Section 2.2Delivery of Transferred Technology. On the terms and subject to the conditions set forth herein, as soon as practicable following the Execution Date and during the Technology Transfer Term, Novartis will deliver or cause to be delivered to BMT copies of tangible embodiments of all Transferred Technology in the possession or Control of Novartis or its Affiliates, including physical or electronic copies of all Process Records and Deliverables included therein. For the avoidance of doubt, Novartis will be permitted to retain copies of tangible embodiments of Transferred Technology and Regulatory Materials, including as may be necessary for Novartis and its Affiliates to comply with applicable Law.

Section 2.3Transfer of Product BLA. Subject to Section 4.5, as soon as practicable following the Execution Date, the Parties shall file or submit to the FDA all such duly executed filings and submissions, in form and substance mutually agreed by the Parties, as are necessary to transfer and assign the Product BLA to BMT in accordance with applicable Law. The Parties shall reasonably cooperate in the preparation of such filings and submissions.

Section 2.4Use of Transferred Technology and Product BLA by BMT. Notwithstanding anything else herein to the contrary, BMT shall ensure that the use of the Transferred Technology, including the Product BLA and the data included or referenced therein, by BMT and its Affiliates, and their respective successors and permitted assigns, and any Permitted CMO or other Third Party agent or representative of BMT or any such Person, shall, in each case, be limited to the Permitted Field. In the event BMT learns of any such use outside of the Permitted Field, then without limiting any other obligations of BMT hereunder nor any rights or remedies available to Novartis hereunder, BMT shall promptly so notify Novartis in writing and shall assist Novartis in terminating such use outside of the Permitted Field.

Section 2.5Acknowledgment. BMT hereby acknowledges and agrees, on its own behalf and on behalf of its Affiliates and any successor or permitted assign, that except as expressly stated in Section 2.8: (a) the rights granted hereunder to the Transferred Technology are not exclusive, (b) Novartis and/or its Affiliates may, in their sole discretion, following the BLA Transfer Date, file or submit to the FDA a Biologics License Application for the Product or a similar product or therapy, or file or submit a similar application for the Product or a similar product or therapy with any other Governmental Authority, (c) Novartis and/or its Affiliates may grant the right to make any such filing, submission or application to any Third Party, and (d) any such filing, submission or application may include some or all of the data and information contained in the Product BLA or any Novartis Know-How.

Section 2.6Right of Reference. Subject to Section 2.8, BMT hereby grants, and shall cause any future holder of the Product BLA to grant, Novartis and its Affiliates, and their respective designees, the right to cross-reference the Product BLA in connection any Biologics License Application or any similar filing, submission or application with any Governmental Authority. Upon the request of Novartis or its Affiliates, BMT or any future holder of the Product BLA agrees to promptly file appropriate letters and other documentation with the FDA or any other Governmental Authority enabling the use and reference by Novartis or its Affiliates, or their respective designees, of the Product BLA in connection with any such filing, submission or application, including in connection with the research, development, manufacturing or commercialization of the Product or any similar product or therapy; provided that Novartis (or its Affiliates)



shall reimburse (on a pass-through basis without any mark-up) BMT for any third party costs incurred in connection with such filings.

Section 2.7Novartis Intellectual Property. Novartis hereby covenants that neither Novartis nor its Affiliates shall bring any action against BMT or Smith & Nephew, or their respective Affiliates, or their respective successors or permitted assigns, or any Permitted CMO, in each case, claiming that the manufacture of Product utilizing the Process for use in the Permitted Field infringes any Intellectual Property Right of Novartis or its Affiliates. If any Intellectual Property Right of Novartis covering in any way the manufacture of Product utilizing the Process for use in the Permitted Field is assigned, sold, licensed or otherwise transferred by Novartis or its Affiliate(s) to a Third Party, such assignment, sale, license or transfer will be made subject to the provisions of this Section 2.7 in all respects.
Section 2.8Use of Transferred Technology by Novartis. Notwithstanding anything else herein to the contrary, but subject to the terms and conditions of this Agreement, during the period commencing on the Execution Date and ending on the Outside Date, Novartis and its Affiliates will not, either directly or on behalf of a Third Party, manufacture or commercialize the Product or any product or therapy manufactured using the Cell Banks, in each case, for use in the Exclusive Fields, except for Product manufactured at the Vacaville Facility and supplied by Novartis, directly or indirectly, to BMT or Smith & Nephew, or their respective Affiliates, or their respective successors and permitted assigns or to a Permitted CMO.
��
Section 2.9 Smith & Nephew Purchase of Product. For clarity, it is acknowledged and agreed that Smith & Nephew may purchase Product from BMT and/or directly from a Permitted CMO for use in the Smith & Nephew Field.

ARTICLE III

CELL BANKS

Section 3.1Transfer of Cell Banks. On the terms and subject to the conditions set forth herein, Novartis will deliver or cause to be delivered to BMT or its designee the quantity of master cell bank and working cell bank used in the manufacturing of Product as set forth on Schedule�3.1 (collectively, Cell Banks) Novartis will use commercially reasonable efforts to complete such delivery within thirty (30) days after the Execution Date. As used herein, the Cell Banks include the original Cell Banks transferred to BMT or its designee hereunder as well as any [***] thereof, developed by or on behalf of BMT or its Affiliates, or their respective successors or permitted assigns, or any Permitted CMO or other Third Party after the Execution Date (collectively, Recipient). Novartis will allow BMT personnel to reasonably participate in the packing and shipment of the Cell Banks to BMT, and Novartis will follow procedures mutually agreed to by Novartis and BMT in connection with such packing and shipment.

Section 3.2Use of Cell Banks. During the Term, Recipient may use and expend the Cell Banks in the Permitted Field, subject to the following:
(a)Recipient may transfer or distribute the Cell Banks to Third Parties (including to a Permitted CMO) but only for use in the Permitted Field, and shall not use or transfer or distribute the Cell Banks for use outside the Permitted Field;
(b)Recipient shall use the Cell Banks in compliance with all applicable Laws;
(c)Recipient shall ensure that the Cell Banks are used only in the Permitted Field, and not for any other purpose or in any other field of use;

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




(d)Recipient shall be responsible for all costs and expenses incurred in using handling, storing, transporting, maintaining, containing, and disposing of the Cell Banks;
(e)BMT shall indemnify and hold harmless Novartis and its Affiliates from any loss, claim or liability (including reasonable attorneys fees) of any kind which arises out of, in connection with, or as a result of, Recipients use, handling, storage, transportation, containment, or disposition of the Cell Banks, or the commercialization of any Permitted Product;
(f)Recipient shall not file for any protective rights, including, without limitation, any Intellectual Property Rights, with respect to the Cell Banks; and
(g)Recipient shall have no obligation to return the Cell Banks to Novartis or its Affiliates except as provided in Section 10.2 below.
(h)[***].

Section 3.3Representations and Warranties Regarding Cell Banks.

(a)Novartis represents and warrants to BMT that it has the right to deliver the Cell Banks to BMT or its designee as contemplated hereby.
(b)Novartis represents and warrants that except as would not reasonably be expected to have a material adverse effect on BMT, the Cell Banks have been stored and maintained by Novartis in accordance with the BLA, and will be stored and maintained by Novartis in accordance with the BLA until delivery to BMT.
(c)EXCEPT AS EXPRESSLY PROVIDED IN SECTION 3.3(a)-(b), THE CELL BANKS ARE BEING SUPPLIED TO RECIPIENT AS IS, WITH NO WARRANTIES, EXPRESS OR IMPLIED, AND NOVARTIS EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. NOVARTIS ALSO DISCLAIMS ALL REPRESENTATIONS WITH RESPECT TO THE UTILITY OR EFFICACY OF THE CELL BANKS, OR THAT THE CELL BANKS WILL BE USEFUL FOR OR ACHIEVE ANY PARTICULAR RESULTS.

Section 3.4Inventions. If the use of the Cell Banks by Recipient results in an invention, discovery, improvement or enhancement of the Cell Banks, or any methods to maintain, store or propagate the Cell Banks, whether patentable or not (an Invention), [***]. It is understood that neither Novartis or its Affiliates nor any other Person shall have any obligation to obtain any approval of, nor pay a share of the proceeds to, the other Person to practice or otherwise exploit such jointly owned Inventions, and each Party hereby waives, on its own behalf and on behalf of its Affiliates, successors, permitted assigns and any other Third Party using the Cell Banks, any right it may have under the applicable Laws of any jurisdiction to require such approval or accounting. The Parties shall reasonably cooperate with each other and take any actions reasonably necessary to effect the purposes of this Section 3.4 (including the execution of appropriate assignment documents). In addition, each employee or agent of Recipient using the Cell Banks shall be subject to a written agreement assigning to Recipient its entire right, title, and interest in any and all Inventions. BMT shall promptly disclose all Inventions to Novartis in writing, and shall provide Novartis with copies of all records and documentation regarding any such Invention reasonably requested by Novartis. In the event of any Invention, the Party who is considered the Inventor under U.S. patent law will be responsible for the preparation, filing, prosecution and maintenance of any patent application covering any such Invention.


[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.





No Implied License. Nothing in this Agreement is intended to confer or grant, or shall be construed to confer or grant, to Recipient any implied license, right or other proprietary interest in the Cell Banks or the Transferred Technology, or the use thereof, whether by implication, estoppel or otherwise, and Recipients rights to the Cell Banks and Transferred Technology are only as expressly provided herein.


ARTICLE IV
TECHNOLOGY TRANSFER SUPPORT SERVICES
Section 4.1Third Party Manufacturer. Prior to the Execution Date, Novartis assisted BMT in identifying a Third Party manufacturer for the Product, but the Parties acknowledge that any decision, and consequences thereof, as to the identity of such Third Party manufacturer was made, and shall be borne, solely by BMT. Without limiting the foregoing, and without limiting any obligation of Novartis to comply with its express obligations under this Agreement, Novartis shall have no responsibility for the ultimate success of the Technology Transfer or the performance of any future Third Party manufacturer of the Product, nor will Novartis provide any regulatory support to any such Third Party manufacturer.

Section 4.2Services. On the terms and subject to the conditions set forth herein, prior to the Execution Date Novartis has provided, and during the Technology Transfer Term Novartis will provide or cause to be provided, the following services to BMT in connection with the transfer of the Transferred Technology to BMT and BMTs Third Party manufacturer as contemplated hereunder (Technology Transfer Support Services):

(a) ����BMT shall have access to [***] qualified scientists as follows: [***] in each case, to the extent reasonably necessary to effectuate the transfer of the Process as contemplated hereby and to the extent Novartis has access to such scientists either as Novartis employees. For the avoidance of doubt, Novartiss obligation hereunder to provide access to individuals experienced in the manufacture of the Product is limited to the extent such individuals remain employed or engaged by Novartis or its Affiliates, Novartis shall have no liability on account of such individuals voluntarily terminating their employment or engagement by Novartis or its Affiliates, and neither Novartis nor its Affiliates shall be obligated to maintain the employment or engagement of any particular individual on account of Novartiss obligation to provide Technology Transfer Support Services under this Section 4.2(a).
(b) ����Representatives of BMT, Smith & Nephew and any Permitted CMO shall be entitled to: (i) visit the Vacaville Facility so long as Product is manufactured there using the Process; provided, that in the event such Permitted CMO is a direct competitor of Novartis or its Affiliates in the reasonable opinion of Novartis, such Permitted CMO shall not be permitted to visit the shop floors of the Vacaville Facility and such shop floors may only be accessed by BMT or an independent consultant selected by BMT or the Permitted CMO, subject to Novartiss approval of the independent consultant, which may only be withheld if Novartis has reasonable doubts as to the qualifications or independence of such consultant; (ii) discuss the Process with appropriately qualified experts of Novartis and its Affiliates; and (iii) view any data relating to the Process that may be required to enable a Permitted CMO [***] to perform the production Process.
[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




Such visits may include participation of qualified individuals in the Process to facilitate the Process transfer. It is expressly agreed by Novartis that [***] is not a direct competitor of Novartis and will be allowed access to the shop floors of the Vacaville Facility in accordance with this Section 4.2(b).
(c) ����Provision of such Technology Transfer Support Services prior to the Execution Date and during the Technology Transfer Term shall be limited to an aggregate of [***] man hours, and Novartis shall have no obligation to provide or cause to be provided Technology Transfer Support Services following the expiration or termination of the Technology Transfer Term. Unless otherwise mutually agreed by the Parties, BMT shall provide Novartis with prior written notice of any request for Technology Transfer Support Services which notice shall be delivered at least thirty (30) days prior to the requested date of service.
(d) ����BMT will pay (i) USD$[***] per hour of Technology Transfer Support Services provided by or on behalf of Novartis, with a maximum cost of $[***], plus (ii) any reasonable and documented Third Party costs and expenses incurred by Novartis or its Affiliates in connection with the provision of Technology Transfer Support Services or the transfer of the Transferred Technology to the extent approved by BMT in advance (which approval shall not be unreasonably withheld), including but not limited to travel expenses, for any of such Technology Transfer Support Services provided by or on behalf of Novartis according to this Article IV. For the avoidance of doubt, to the extent BMT does not approve any such reasonable Third Party costs and expenses, Novartis and its Affiliates shall be excused from any obligations to provide Technology Transfer Support Services or transfer the Transferred Technology which directly correspond to the costs and expenses which BMT does not approve for payment.
(e) ����BMT acknowledges that Novartis Confidential Information relating to Novartis proposals, prices, scope of work, and timeline details exchanged and/or discussed between the Parties, as well as Novartis or its Affiliates capacity and facility details are of a sensitive nature. Hence, BMT shall not disclose any such Confidential Information to any Third Party, including BMTs Permitted CMO of the Product, unless the disclosure is necessary to achieve Technology Transfer of the Process pursuant to this Agreement and permitted pursuant to Section 8.2. Subject to Section 8.2 and confidentiality restrictions no less restrictive than those contained herein binding on Smith & Nephew and its Affiliates, BMT may disclose such Confidential Information to Smith & Nephew and its Affiliates. Any Permitted CMO or other Third Party receiving Confidential Information of Novartis must agree in writing to treat all Confidential Information as confidential, under terms no less restrictive than those in Section�8.2 and the Supply Agreement.
(f) ����Without limiting any obligation of Novartis to comply with its express obligations under this Agreement, BMT acknowledges that Novartis and its Affiliates shall have no liability in relation to performance of the Process following the transfer contemplated hereunder.
Section 4.3Governmental Authorities. Commencing on the BLA Transfer Date, each of BMT and Novartis shall (i) promptly notify the other Party of any written communication to that Party or its Affiliates, or its Permitted CMO, from any Governmental Authority that could be reasonably expected to impact the Original BLA and Process and, subject to applicable Law, permit the other Party to review in advance any proposed written communication to any Governmental Authority relating to the Original BLA and Process, (ii) not agree to participate in any substantive meeting or discussion with any Governmental Authority in respect of any filings, investigation or inquiry concerning the Original BLA and Process unless it consults with the other Party in advance and, to the extent permitted by such Governmental Authority, gives the other Party the opportunity to attend and participate thereat, and (iii) to the extent permitted under

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.



applicable Law, furnish the other Party with copies of all correspondence, filings, and written communications between such Party and any Governmental Authority with respect to the Original BLA and Process (unless the furnishing of such information would (1) violate the provisions of any applicable Law or (2)�cause the loss of the attorney-client privilege with respect thereto; provided, that each such Party shall use its commercially reasonable efforts to promptly communicate to the other Party the substance of any such communication, whether by redacting parts of such communication or otherwise, so that such communication would not violate applicable Law or cause the loss of the attorney-client privilege with respect thereto).

Section 4.4Assistance. During the Technology Transfer Term, Novartis shall provide BMT with reasonable assistance (i) in connection with any action required of BMT by, or any filing by BMT with, any Governmental Authority in connection with the consummation of the transactions contemplated hereby or in connection with the manufacture of the Product for use in the Permitted Field, and (ii) in taking such actions or making any filings or furnishing any information in Novartis possession as may be reasonably necessary to meet BMTs regulatory obligations under applicable Law in connection with the Product. Unless otherwise mutually agreed by the Parties, Novartiss obligations under this Section 4.4 shall be subject to the limitations set forth in Section 4.2(c).

Section 4.5Transfer of Product BLA. During the Technology Transfer Term, Novartis shall cooperate with BMT to effect the transfer of the Product BLA to BMT as reasonably requested by BMT in connection with the transactions contemplated hereunder.

Section 4.6Third Party Suppliers. Upon BMTs reasonable request, during the Technology Transfer Term Novartis shall introduce BMT to any requested Third Party suppliers, vendors, researchers and consultants used by Novartis or its Affiliates in connection with the Process or manufacture of Product. For the avoidance of doubt, Novartis shall have no obligation under this Agreement or otherwise to assign or otherwise transfer to BMT, its Affiliates or any Third Party any agreements between or among Novartis, its Affiliates and any such Third Party.

Section 4.7Additional Costs and Expenses Payable by BMT. In addition to the amounts payable for the Technology Transfer Support Services under Section 4.2(d) above, BMT will also pay all reasonable direct out-of-pocket Third Party costs and expenses incurred by Novartis, and approved by BMT in advance (which approval shall not be unreasonably withheld), in connection with the transfer of the Transferred Technology, Process, Product BLA and Cell Banks to BMT including, but not limited to, shipping costs and filing fees. To the extent BMT does not approve any such reasonable Third Party costs and expenses, Novartis and its Affiliates shall be excused from any obligations in connection with the transfer of the Transferred Technology, Process, Product BLA and Cell Banks which directly correspond to the costs and expenses which BMT does not approve for payment.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF NOVARTIS

Novartis hereby represents and warrants to BMT that the statements contained in this Article V are true and correct as of the date hereof:
Section 5.1Organization and Qualification. Novartis is duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, lease and operate its assets, and to carry on its business as currently conducted. Novartis is duly qualified or licensed to do business as a foreign corporation where required and is in good standing in every



jurisdiction in which the character or location of its properties and assets owned, leased or operated by Novartis or the nature of the business conducted by Novartis requires such qualification or licensing.

Section 5.2Authorization. Novartis has the full corporate power and authority to enter into this Agreement and the Ancillary Agreements and to carry out the transactions contemplated herein and therein. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by Novartis and constitute the legal, valid and binding obligations of Novartis, enforceable against it in accordance with their respective terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity.

Section 5.3Non-Contravention. Neither the execution, delivery or performance by Novartis of this Agreement or the Ancillary Agreements nor the consummation of the transactions contemplated herein and therein will (a) violate Novartiss certificate of incorporation or bylaws, (b) violate any provision of applicable Law in any material respect, (c)�result in the creation or imposition of any Encumbrance on any of the Transferred Technology or the Cell Banks, or (d) constitute a default under (with or without due notice or lapse of time or both), result in the loss of any material benefit under, or give rise to any right of termination or cancellation under, any terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, contract, franchise, permit, instrument or other agreement or obligation to which Novartis is a party, or by which any of Novartis properties or assets may be bound, in each case under this clause (d), that would materially and adversely affect the rights of BMT hereunder.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BMT

BMT represents and warrants to Novartis as of the date hereof as follows:
Section 6.1Organization. BMT is duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite corporate power and authority required to carry on its business as now conducted. BMT is duly qualified or licensed to do business as a foreign corporation where required and is in good standing in every jurisdiction in which the character or location of its properties and assets owned, leased or operated by BMT or the nature of the business conducted by BMT requires such qualification or licensing.

Section 6.2Authorization. BMT has the full corporate power and authority to enter into this Agreement and the Ancillary Agreements and to carry out the transactions contemplated herein and therein. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by BMT and constitute the legal, valid and binding obligations of BMT, enforceable against it in accordance with their respective terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity.

Section 6.3Non-Contravention. Neither the execution, delivery or performance by BMT of this Agreement or the Ancillary Agreements nor the consummation of the transactions contemplated herein and therein will (a) violate BMTs certificate of incorporation or bylaws, (b) violate any provision of applicable Law, (c) result in the creation or imposition of any Encumbrance on any of the Transferred Technology or the Cell Banks, or (d) constitute a default under (with or without due notice or lapse of time or both), result in the loss of any material benefit under, or give rise to any right of termination or cancellation under, any terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, contract, franchise, permit, instrument or other agreement or obligation to which BMT is a party, or by which any of BMTs



properties or assets may be bound, in each case under this clause (d), that would materially and adversely affect the exercise by Novartis or its Affiliates of any right contemplated hereunder.

ARTICLE VII

REGULATORY MATTERS

Section 7.1Qualification. During the Technology Transfer Term until the BLA Transfer Date Novartis shall comply with all reasonable requests of BMT for assistance in its efforts to qualify its manufacturing operation for the Product with the FDA and equivalent agencies in other countries and to transfer the Product BLA to BMT. Unless otherwise mutually agreed by the Parties, Novartiss obligations under this Section 7.1 shall be subject to the limitations set forth in Section�4.2(c).

Section 7.2Regulatory Responsibilities Prior to BLA Transfer Date. Prior to the BLA Transfer Date, Novartis shall have all obligations with respect to regulatory activities related to (a) the Product and the manufacturing thereof by or on behalf of Novartis and its Affiliates, and (b) the preparation, submission and maintenance of all Regulatory Materials in accordance with applicable Law, in each case, as contemplated by the Supply Agreement and the Quality Agreement, and as required by applicable Law.

Section 7.3Regulatory Responsibilities Following BLA Transfer Date. Without limiting Novartiss obligations under Section 8.4 of the Supply Agreement with respect to Product manufactured by Novartis or its Affiliates and supplied to BMT under the Supply Agreement, from and after the BLA Transfer Date, BMT shall be solely responsible for all regulatory activities related to (a) the Product or any other Permitted Product and the manufacturing thereof, including the Process transferred in accordance with this Agreement, and (b) the preparation, submission and maintenance of all Regulatory Materials relating to the Product or any other Permitted Product in accordance with applicable Law (and shall own all right, title and interest in and to such Regulatory Materials).

Section 7.4Product Complaints. Without limiting Section 7.2, from and after the BLA Transfer Date, BMT shall be responsible for handling all complaints regarding the Product and any Permitted Products in accordance with applicable Law, whether manufactured by BMT or a Permitted CMO, or by Novartis or its Affiliates; provided, however, that BMTs obligations hereunder as to Products or Permitted Products manufactured by Novartis or its Affiliates will apply only to Products or Permitted Products manufactured by Novartis or its Affiliates at Novartis Vacaville or Emeryville facilities prior to the Execution Date (notwithstanding the release of Products or Permitted Products thereafter). Novartis will notify BMT of any Product, quality, or manufacturing complaints it receives and will provide, at BMTs expense, such assistance in investigating such complaints as provided in the Quality Agreement. The Parties shall in good faith freely exchange information that will enable them to determine the nature and cause of such complaints. Subject to Section 9.1, BMT shall have the authority to resolve any outstanding complaints with respect to the Product or Permitted Products. BMT shall notify Novartis if such a complaint is based upon an alleged defect in the manufacture of the Product. Nothing in this Agreement shall affect the Parties respective obligations prior to the BLA Transfer Date regarding product complaints under the Supply Agreement or the Quality Agreement.

Section 7.5Stability Testing. Without limiting Section 7.2, Novartis or its Affiliates will perform stability testing with respect to the Product and the Process as required by applicable Law prior to the BLA Transfer Date. Thereafter, BMT will be solely responsible for all stability testing for the Product and the Process as required by applicable Law.




Section 7.6Annual Reports. BMT shall be solely responsible for completing the Annual Product Review (APR/PQR) and Annual Report for the Product for year 2014 and subsequent years. In addition to the Regulatory Materials and other documents required to be provided by Novartis hereunder, Novartis agrees to provide to BMT access to all original Annual Review Product files and data including, but not limited to, trending charts and raw data.

Section 7.7Novartis [***]. Notwithstanding anything herein to the contrary, in the event that Novartis or its Affiliates, or any of their respective designees, files a [***], the provisions of Sections 7.3, 7.4 and 7.5 regarding BMTs obligations shall not apply to any such [***] or activities undertaken by or on behalf of Novartis or its Affiliates, or their respective designees, under or related solely to such [***], which shall be the responsibility of Novartis or its Affiliates, or their respective designee.


ARTICLE VIII

ADDITIONAL COVENANTS
Section 8.1Further Assurances. Subject to the other terms and conditions of this Agreement, each Party shall promptly execute, acknowledge and deliver any documents or instruments of transfer reasonably requested by the other Party and necessary for the requesting Party to satisfy its obligations hereunder or to obtain the benefits of the transactions contemplated hereby, all at the cost and expense of the requesting Party. Without limiting the generality of the foregoing, to the extent that BMT or Novartis discovers that any document or deliverable that was intended to be delivered by Novartis to BMT pursuant to this Agreement was not delivered in accordance with the terms hereof, Novartis shall promptly deliver such document or deliverable to BMT.

Section 8.2Confidentiality.

(a) ����Definition. During the Term of this Agreement, the Parties may provide to one another confidential information, including, but not limited to, each Partys proprietary materials and/or technologies, economic information, business or research strategies, trade secrets and material embodiments thereof, which may be disclosed by such Party and/or its Affiliates to the other Party and/or its Affiliates which (a) if in written form, is clearly marked confidential, (b) if in oral form, is summarized in writing and marked confidential delivered to the recipient within thirty (30) days after the oral disclosure, (c) if in any form, if further disclosed, could reasonably be expected to result in competitive harm to the disclosing Party, (d) if in any form, if the disclosing Party would reasonably expect the information to be kept confidential, or (e) if in any form, consists of or relates to any unpublished patent application (herein defined as Confidential Information).

(b) ����Exclusions. Confidential Information shall not include information that (a) is shown by contemporaneous documentation of the recipient to have been in its possession prior to receipt from the disclosing Party, (b) is or becomes, through no fault of the recipient, publicly known, (c) is furnished to the recipient by a Third Party without breach of an obligation of confidentiality, (d) is independently developed by the recipient without use of the disclosing Party's Confidential Information or (e) is required to be disclosed by Law; provided, that the recipient gives the disclosing Party as much advance notice of the requirement as is reasonably possible and cooperates with the disclosing Party in lawful efforts to restrict the disclosure thereof.

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment




(c) ����Obligations. During the Term and for [***] years thereafter, the recipient shall maintain the disclosing Partys Confidential Information in confidence and not disclose the same to any Person, except that (i) each Party may disclose this Agreement in its entirety to parties evaluating or entering into a business relationship with such Party or its Affiliates and (ii) upon the transfer to BMT of the Novartis Know-How pursuant to the Technology Transfer, BMT may disclose the Novartis Know-How to a Permitted CMO for use in connection with the Permitted Field; provided, that, in each case, such parties or Permitted CMO are under written obligations of confidentiality and non-use with respect to this Agreement and such Novartis Know-How at least as restrictive as those set forth herein with respect to the disclosing Partys Confidential Information. The recipient shall use the disclosing Partys Confidential Information solely to exercise its rights and perform its obligations under this Agreement as required or permitted hereunder, unless otherwise mutually agreed by the Parties in writing, and shall at all times protect the disclosing Partys Confidential Information with at least the same degree of care it uses to protect its own Confidential Information, such care to be of the type and degree that would be used by a reasonable and prudent business person. For the avoidance of doubt, the Novartis Know-How shall remain Confidential Information of Novartis and its Affiliates and may be disclosed by Novartis or its Affiliates for any purpose (subject to Section 2.8). The recipient acknowledges that breach of confidentiality may result in irreparable financial harm to the disclosing Party and that the disclosing Party may seek all remedies in law or equity for such a breach.

(d) ����Return of Confidential Information. In the event of a termination of this Agreement under Section 10.1(a) or Section 10.1(b), upon request by the disclosing Party, the recipient shall return or destroy (as evidenced by a written certificate of destruction) all Confidential Information of the disclosing Party in its possession; provided, however, that one copy of such Confidential Information may be retained in the recipient's legal files for purposes of monitoring compliance with the provisions hereof.

Section 8.3Invoicing and Payment.

(a)����With respect to any amounts to be paid to Novartis or reimbursed by BMT under this Agreement, Novartis shall render to BMT an invoice which invoice shall set forth in reasonable detail a computation of the amounts payable for the relevant period.
(b)����BMT shall pay or cause to be paid to Novartis any amount referred to in an invoice within thirty (30) days after the date the invoice was rendered. All amounts due to Novartis under this Agreement shall be paid in U.S. dollars by wire transfer of immediately available funds into the bank account indicated on the invoice or as otherwise set forth in the invoice.
(c)����The service fees and other amounts payable under this Agreement are exclusive of any applicable sales, goods and services and other similar taxes to be paid in relation to the provision of the services under this Agreement, which, if required by applicable Law, shall be added to the invoices at the appropriate rate.

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment




ARTICLE IX

INDEMNIFICATION

Section 9.1Indemnification by BMT. BMT shall indemnify and hold Novartis, its Affiliates and their respective directors, officers, employees and agents (collectively, Novartis Indemnitees), harmless from and against all claims, damages, demands, proceedings, liabilities, losses, costs and expenses, including reasonable attorneys' fees (collectively, Claims), to the extent arising from or attributable to (a) the development, manufacture, use or sale of the Product (except for the manufacture of Product by Novartis or its Affiliates) or any other Permitted Product, including any such Claim for product liability (whether based on strict liability, inherent design defect, negligence, failure to warn, breach of contract or any other theory of liability), and any Claim alleging that the manufacture, use or sale of the Product (except for the manufacture of Product by Novartis or its Affiliates) or any other Permitted Product infringes any Intellectual Property Rights of a Third Party, (b) any acts or omissions of BMT or any of its directors, officers, employees or agents, or (c) the gross negligence or intentional misconduct of BMT or its directors, officers, agents or employees, contractors or consultants; provided, however, that BMT shall have no liability or responsibility to indemnify Novartis Indemnitees to the extent a Claim is subject to indemnification by Novartis under Section 9.2 or Section 8.4 of the Supply Agreement.

Section 9.2Indemnification by Novartis. Novartis agrees to indemnify and hold BMT, its Affiliates and their respective directors, officers, employees and agents (collectively, BMT Indemnitees), harmless from and against all Claims arising from or are attributable to the gross negligence or intentional misconduct of Novartis or its directors, officers, agents or employees, permitted contractors, or consultants; provided, however, Novartis shall have no liability or responsibility to indemnify BMT Indemnitees to the extent a Claim is subject to indemnification by BMT under Section 9.1 or Section 8.3 of the Supply Agreement. For the avoidance of doubt, the indemnification obligations of Novartis under this Section 9.2 are in addition to the indemnification obligations of Novartis under Section 8.4 of the Supply Agreement with respect to Product manufactured by Novartis or its Affiliates and supplied to BMT under the Supply Agreement.

ARTICLE X

TERMINATION; LIMITATION OF LIABILITY

Section 10.1Term and Termination. The term of this Agreement (Term) will begin on the Execution Date and shall continue as long as the Cell Banks, including any derivatives, progeny, or modifications thereof, remain in existence and in the possession or control of BMT or its Affiliates, or any of their respective successors or permitted assigns, any Permitted CMO, or any other Third Party, unless earlier terminated as provided by this Section 10.1. This Agreement may be terminated at any time:

(a)by BMT, if Novartis has committed a material breach of any provision of this Agreement and, to the extent such breach is capable of being cured, not cured such breach within thirty (30) Business Days of notice of such breach from BMT; or

(b)by Novartis if BMT has committed a material breach of any provision of this Agreement and, to the extent such breach is capable of being cured, not cured such breach within thirty (30) Business Days of notice of such breach from Novartis.

Section 10.2Effect of Termination. In the event of the termination of this Agreement in accordance with Section�10.1, all rights and obligations of the Parties hereunder shall immediately terminate, except as



provided in Section 10.3 and for any obligation of BMT to make payments on account of services provided or costs incurred by Novartis or its Affiliates prior to the termination date, and the terminating Party will also have all other rights and remedies available at law or in equity. Additionally, in the event of a termination of this Agreement by either BMT or Novartis as permitted under this Agreement, BMT shall return to Novartis or its designee, or at Novartiss election destroy, all Cell Banks remaining (if any) upon such termination.

Section 10.3Survival. In the event of any expiration of termination of this Agreement, Sections 2.5, 2.6, 3.4 and 3.5 and Articles VIII-XI shall survive indefinitely. In addition, (a)�in the event of a termination of this Agreement by BMT pursuant to Section 10.1(a), Sections�2.4, 2.7 and Article VII shall also survive indefinitely, and (b) in the event of a termination of this Agreement by Novartis pursuant to Section 10.1(b), Sections 3.2 (e)-(i), 7.3, 7.4.and 7.5 shall also survive indefinitely.

Section 10.4Specific Performance. The Parties acknowledge that there may be no adequate remedy at law for a breach of this Agreement and that money damages may not be an appropriate remedy for breach of this Agreement. Therefore, the Parties agree that each Party has the right to injunctive relief and specific performance of this Agreement in the event of any breach hereof in addition to any rights it may have for damages. The remedies set forth in this Section�10.3 are cumulative and shall in no way limit any other remedy any Party has at law, in equity or pursuant hereto.

Section 10.5Limitation of Liability. EXCEPT IN THE CASE OF FRAUD OR INTENTIONAL MISCONDUCT, OR IN THE EVENT OF A BREACH OF SECTION 2.8, SECTION 3.2 OR ARTICLE VIII OR THE USE OF THE TRANSFERRED TECHNOLOGY OUTSIDE THE PERMITTED FIELD, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER UNDER THIS AGREEMENT, OR OTHERWISE, FOR ANY LOST PROFITS OR OTHER SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY, ARISING FROM THE PERFORMANCE OF, OR RELATING TO, THIS AGREEMENT REGARDLESS OF WHETHER SUCH PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY OF, OR THE FORESEEABILITY OF, SUCH DAMAGES.

Section 10.6Disclaimer of Warranties. THE TRANSFERRED TECHNOLOGY AND ANY OTHER INFORMATION OR TECHNOLOGY PROVIDED UNDER THIS AGREEMENT IS PROVIDED ON AN AS IS BASIS. NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE V AND ARTICLE VI, INCLUDING ANY WARRANTY OF ACCURACY, COMPLETENESS, PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMMERCIAL UTILITY, NON-INFRINGEMENT OR TITLE. FURTHER, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, THAT EITHER PARTY WILL BE ABLE TO SUCCESSFULLY MANUFACTURE OR COMMERCIALIZE ANY PRODUCT, REGARDING THE LIKELIHOOD OF SUCCESS OF ANY APPLICATION FOR REGULATORY APPROVAL RELATING TO ANY PRODUCT OR, IF COMMERCIALIZED, THAT ANY PARTICULAR SALES LEVEL OF SUCH PRODUCT WILL BE ACHIEVED.

ARTICLE XI

MISCELLANEOUS

Section 11.1Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile followed by overnight mail, by overnight mail or by registered or certified mail



(postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.1):

To BMT:

BioMimetic Therapeutics, Inc.
389-A Nichol Mill Lane
Franklin, TN 37067
Attention:����General Manager
����
With a copy to:����

Wright Medical Technology, Inc.
1023 Cherry Road
Memphis, Tennessee 38117
Attention:����General Counsel

To Novartis:

Novartis Pharma AG
Global TechOps
CHBS, WSJ-210.5.30
Novartis Campus
CH-4056 Basel
Switzerland
Attention:� Legal Department

and

Novartis Pharmaceuticals Corporation
59 Route 10
East Hanover, NJ 07936
Attention:� Legal Department

Section 11.2Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by BMT and Novartis, or in the case of a waiver, by the Party against whom the waiver is to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 11.3Assignment; Third Parties. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than BMT, Novartis, the Indemnified Parties and their respective successors, legal representatives and permitted assigns, any rights or remedies under or by reason of this Agreement. Neither BMT nor Novartis may assign this Agreement in whole or in part without the prior written consent of the other Party, and such attempted assignment shall





be deemed null and void; provided, that (a) either Party may assign this Agreement without prior written consent to an Affiliate upon delivery of notice to the other Party (provided that the assignor shall remain obligated hereunder) and (b) [***], and (c) BMT may assign this Agreement, as a whole, to [***] upon thirty (30) days prior written notice to Novartis. For the avoidance of doubt, Novartis and BMT may satisfy its obligations hereunder either directly or indirectly through its Affiliates and other Third Parties. It is expressly agreed by Novartis that BMT may transfer all deliverables provided to BMT under this Agreement (including, but not limited to, the Cell Banks, Novartis Know-How, Process Records and Deliverables and the Product BLA) to a permitted assign of BMT under this Agreement in connection with an assignment by BMT which is permitted by this Section 11.3; provided, that such permitted assign and the use of such deliverables shall be subject to the terms and conditions of this Agreement.

Section 11.4Entire Agreement. This Agreement (including all Schedules and Exhibits hereto) and the Ancillary Agreements, if any, contain the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior representations, warranties, agreements and understandings, oral or written, with respect to such matters, except for the Supply Agreement, as amended by the Termination Amendment, which shall remain in full force and effect in accordance with its terms. Notwithstanding the foregoing, the terms and conditions of this Agreement governing the Technology Transfer and the transactions and other matters contemplated hereby shall be deemed to amend and replace the corresponding terms and conditions of the Supply Agreement related to the Technology Transfer, and in the event of any conflict or disagreement between the terms and conditions of this Agreement and the terms and conditions of the Supply Agreement, the terms and conditions of this Agreement shall govern and control as to the Technology Transfer.

Section 11.5Announcements and Disclosures.
(a)����Except to the extent permitted under Section 11.5(b) below, neither Party shall issue any press release or other public disclosure concerning this Agreement, the subject matter hereof or the Parties activities hereunder, or any information arising hereunder, except with the other Partys prior written consent.
(b)����If a Party is required by Law or the rules of any applicable securities exchange or national market system to make any public announcement or other disclosure with respect to the transactions contemplated hereby, such Party shall use all commercially reasonable efforts to preserve the confidentiality of the transactions, including the terms hereof, and shall give the other Party as much advance written notice of such required disclosure as is reasonably practicable. If a Party is required by Law or the rules of any applicable securities exchange or national market system to file this Agreement or any Ancillary Agreement with the U.S. Securities and Exchange Commission or any other Governmental Authority, such Party shall seek confidential treatment thereof to the fullest extent permitted by Law, shall provide the other Party a copy of the confidential treatment request far enough in advance of its filing to give the other Party a meaningful opportunity to comment thereon, and shall incorporate in such confidential treatment request any reasonable comments of the other Party.
Section 11.6Expenses. Except as otherwise expressly provided in this Agreement (including BMTs obligations to pay or reimburse Novartis for the services provided by or on behalf of Novartis hereunder, without markup, including costs and expenses incurred by Novartis or its Affiliates in connection therewith), each Party shall bear all costs and expenses incurred in connection with performing its obligations under, and otherwise in connection with, this Agreement.


[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment



Section 11.7Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York without regard to any principles of conflicts of Law that would result in the application of any other Law. Each Party agrees that it shall bring any action or proceeding in respect of any claim arising out of this Agreement (except for claims for violation of any restrictive covenants contained herein) exclusively in the United States District Court for the Southern District of New York or any New York State court sitting in New York County (the Chosen Courts), and in connection with such claims (i)�irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii)�waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii)�waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any Party hereto and (iv)�agrees that service of process upon such Party in any such action or proceeding shall be effective if notice is given in accordance with Section�11.1. Each Party irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 11.8Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or e-mail with scan attachment) in two or more counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

Section 11.9Headings. The heading references herein are for convenience purposes only, and shall not be deemed to limit or affect any of the provisions hereof.

Section 11.10No Drafting Presumption. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any Party, whether under any rule of construction or otherwise. No Party shall be considered the draftsman.

Section 11.11Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a)�a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b)�the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
[signature page follows]




IN WITNESS WHEREOF, the Parties have executed and delivered this Technology Transfer Agreement as of the date first written above.


BIOMIMETIC THERAPEUTICS, LLC



By:���� /s/ William L. Griffin_______________________
Name:����William L. Griffin
Title: SVP & GM



NOVARTIS VACCINES AND DIAGNOSTICS, INC.


By:���� /s/ Maureen A. Rogers______________________
Name: Maureen A. Rogers
Title: VP & General Counsel





Schedule 2.1
Process Records and Deliverables


To the extent the following relate to the Product or the Process in the Exclusive Fields or the Smith & Nephew Field:

[***]













































[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




Schedule 3.1
Cell Banks



To the extent the following relate to the Product or the Process in the Exclusive Fields:

[***]












































[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.




Exhibit A
Supply Agreement


Exhibit A has been intentionally omitted as the Supply Agreement has been previously filed with the SEC as follows:
1.
Amended and Restated Manufacturing and Supply Agreement, effective as of December 1, 2009, between BioMimetic Therapeutics, Inc. and Novartis Vaccines and Diagnostics, Inc., filed with the SEC on BioMimetic Therapeutics, Inc.s annual report on Form 10-K for the fiscal year ended December 31, 2009 (Commission file number 000-51934).
2.
Amendment to Amended and Restated Manufacturing and Supply Agreement, effective as of January 1, 2012, between BioMimetic Therapeutics, Inc. and Novartis Vaccines and Diagnostics, Inc., filed in BioMimetic Therapeutics, Inc.s current report on Form 8-K filed on February 27, 2012 (Commission file number 000-51934).

3.
Third Amendment to Amended and Restated Manufacturing and Supply Agreement, entered into as of September 1, 2013, between BioMimetic Therapeutics, LLC and Novartis Vaccines and Diagnostics, Inc., filed in Wright Medical Group, Inc.s quarterly report on Form 10-Q for the quarter ended September 30, 2014 (Commission file number 001-35823).





Amendment No. 2 to Supply Agreement

THIS AMENDMENT NO. 2 TO SUPPLY AGREEMENT (Amendment) is made and entered into as of 01 September, 2014 (the Amendment Effective Date) by and between BioMimetic Therapeutics, LLC, a Delaware limited liability company (BMT) and Luitpold Pharmaceuticals, Inc., a New York corporation (Luitpold).

RECITALS

1. Luitpold and BioMimetic Therapeutics, Inc., a Delaware corporation (BMTI) entered into a Supply Agreement dated as of January 4, 2008 (the Supply Agreement), as amended by Amendment No. 1 dated April 10, 2013. BMT is the successor by merger to BMTI.

2. Novartis has provided BMT with notice that it no longer intends to supply Product, as defined in Section 1.14 of the Supply Agreement, to BMT under the Novartis Agreement and BMT is in the process of retaining an alternative source of Product. In connection with retaining an alternative source, BMT will purchase [***] grams of Product from Novartis for use by BMT and Luitpold.

3. Luitpold has agreed to purchase [***] ([***]) grams of such Product (the [***] Grams) from BMT under the terms of the Supply Agreement and this Amendment, and at the same price which BMT is paying Novartis for such [***] Grams.

4. BMT and Luitpold now desire to amend the Supply Agreement as provided herein to provide for additional terms under which Luitpold will purchase the [***] Grams from BMT.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, BMT and Luitpold hereby agree as follows:

AGREEMENT

1.����Definitions. Unless otherwise defined herein, all capitalized terms used in this Amendment shall have the same meaning ascribed thereto in the Supply Agreement.
2.����Purchase of [***] Grams and Purchase Price. Luitpold hereby agrees to purchase the [***] Grams from BMT. The purchase price of the [***] Grams will be [***] Dollars ($[***]) (the Purchase Price).

3.����Shipment of [***] Grams and Payment of Purchase Price. (a) [***] ([***]) grams of the [***] Grams (the Delivered Product) will be shipped directly by Novartis to Luitpold under the terms and conditions of Exhibit B, Section 1.1(d)(iii), to the Supply Agreement.

(b) The remaining [***] ([***]) grams of the [***] Grams (the BMT Repurchase Product) will be shipped by Novartis to BMT and will be stored by BMT for Luitpold in accordance with the terms of this Amendment No. 2.

(c) The Purchase Price will be paid by Luitpold to BMT within thirty (30) days following the delivery of the Delivered Product to Luitpold, and confirmation by BMT of receipt by it of the BMT Repurchase Product.
[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.






4.����Repurchase of BMT Repurchase Product. (a) BMT hereby agrees to repurchase the BMT Repurchase Product from Luitpold within thirty (30) days following BMTs receipt of approval from the U.S. Food & Drug Administration of BMTs Augment� Bone Graft product which is sufficient to allow BMT to market and sell Augment� Bone Graft in the United States for the indications requested by BMT (the FDA Approval). The purchase price for the BMT Repurchase Product will be [***] Dollars ($[***]) (Repurchase Product Purchase Price), which Repurchase Product Purchase Price will be payable to Luitpold by BMT within thirty (30) days following the date of the FDA Approval.

(b) BMT will have no obligation to purchase the BMT Repurchase Product from Luitpold, or pay the Repurchase Product Purchase Price to Luitpold, unless and until BMT has received the FDA Approval.

(c) If BMT has not received the FDA Approval by December 31, 2016, then BMT will have no further obligation to repurchase the BMT Repurchase Product from Luitpold or pay the Repurchase Product Purchase Price to Luitpold and BMT will promptly ship the BMT Repurchase Product to Luitpold, or its designee.

5. Option to Repurchase BMT Repurchase Product. Luitpold hereby grants BMT the option to purchase the BMT Repurchase Product from Luitpold at any time for a purchase price equal to the Repurchase Product Purchase Price (Option). BMT may exercise the Option at any time by written notice to Luitpold. If BMT exercises the Option, BMT will pay Luitpold the Repurchase Product Purchase Price within thirty (30) days following the exercise of the Option. The Option will expire at the time of shipment of the BMT Repurchase Product to Luitpold under Section 4(c) above.

6. Storage and Risk of Loss of BMT Repurchase Product. BMT will store the BMT Repurchase Product under the same conditions and using the same standard of care as BMT stores Product which it owns. Risk of loss of the BMT Repurchase Product will remain with BMT until such time as such BMT Repurchase Product is delivered to Luitpold under Section 4(c) above. In the event of (a) the loss or destruction of the BMT Repurchase Product prior to delivery to Luitpold, or (b) deterioration of the BMT Repurchase Product prior to delivery to Luitpold due to the failure of BMT to store the BMT Repurchase Product under the same conditions and using the same standard of care as BMT stores Product which it owns, such that the BMT Repurchase Product no longer complies with the specifications of the Product, then, and in either of such events, BMT will pay the Repurchase Product Purchase Price to Luitpold, or a prorated portion thereof in the event of a partial loss or destruction. Luitpold will have rights to accept or reject the BMT Repurchase Product per Section 3.2 of the Supply Agreement.

7. Title to BMT Repurchase Product. (a) Title to the BMT Repurchase Product will remain with Luitpold at all times unless and until BMT purchases the BMT Repurchase Product under Section 4 above.

(b) Luitpold represents and warrants that upon delivery to BMT it will own an undivided right, title and interest in the BMT Repurchase Product free and clear of any and all liens, encumbrances, pledges, security interests, claims, or rights of any third party except those of BMT set forth herein. Luitpold further represents and warrants that the BMT Repurchase Product will remain free and clear of any and all liens, encumbrances, pledges, security interests, claims, or rights of any third party except those of BMT set forth herein, at all times until the expiration of the Option.

(c) Luitpold covenants and agrees that it will not sell, convey or otherwise transfer any right in, or grant a security interest in, pledge or otherwise encumber, the BMT Repurchase Product in any way, or take any other action that would result in the representations of Section 7(b) being false or inaccurate.

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.






8. Applicability of Supply Agreement and this Amendment. (a) Except as expressly provided in this Amendment, the terms contained in the Supply Agreement will apply to the purchase of the [***] Grams by Luitpold from BMT in all respects and the [***] Grams will be consider Product under the Supply Agreement in all respects and for all purposes. Notwithstanding the foregoing, in the event of a conflict between the terms of this Amendment and the Supply Agreement, the terms of this Amendment will govern and control in all respects as to the [***] Grams.

(b) Luitpold and BMT agree that this Amendment does not apply to any Product purchased under the Supply Agreement except for the [***] Grams. Specifically, and without limiting the foregoing, Luitpold and BMT agree that the Purchase Price of the [***] Grams will not be used in calculating the purchase price of any other Product purchased by Luitpold under the Supply Agreement.

9. No Further Amendment. All other terms of the Supply Agreement remain in full force and effect and, as amended hereby, the Supply Agreement is hereby ratified and confirmed in all respects.

10. Counterparts. This Agreement shall become binding when any one or more counterparts hereof whether received in original or by PDF, individually or taken together, shall bear the signatures of each of the parties. This Agreement may be executed in any number of counterparts, each of which shall be deemed binding on the party on whose behalf it was executed, but all of which taken together shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of the Effective Date.


BioMimetic Therapeutics, LLC

By:___/s/ William L. Griffin______________

Name: ___William L. Griffin�_____________

Title:____SVP & GM____________________

Date:___04 Sept. 2014___________________
Luitpold Pharmaceuticals, Inc.

By:__/s/ Mary Jane Helenek______________

Name: Mary Jane Helenek

Title: President and CEO

Date:__Aug. 29, 2014____________________
�
�














[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.






Amendment No. 3 to Supply Agreement

THIS AMENDMENT NO. 3 TO SUPPLY AGREEMENT (Amendment) is made and entered into as of 01 September, 2014 (the Amendment Effective Date) by and between BioMimetic Therapeutics, LLC, a Delaware limited liability company (BMT) and Luitpold Pharmaceuticals, Inc., a New York corporation (Luitpold).

RECITALS

1. Luitpold and BioMimetic Therapeutics, Inc., a Delaware corporation (BMTI) entered into a Supply Agreement dated as of January 4, 2008 (as amended by Amendment No. 1 dated April 10, 2013, and Amendment No. 2 of even date herewith, the Supply Agreement). BMT is the successor by merger to BMTI.

2. Novartis has provided BMT with notice that it no longer intends to supply Product, as defined in Section 1.14 of the Supply Agreement, to BMT under the Novartis Agreement and BMT is in the process of retaining an alternative supplier of Product (CMO). In connection with retaining the CMO, the technology required to produce the Product (the Transferred Technology) will be transferred by Novartis to BMT and the CMO.

3. Luitpold has agreed to pay a portion of the cost of transferring the Transferred Technology to BMT and the CMO under the terms and conditions of this Amendment.

4. BMT and Luitpold now desire to amend the Supply Agreement to provide for the terms under which Luitpold will pay a portion of the cost of transferring the Transferred Technology to BMT and the CMO.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, BMT and Luitpold hereby agree as follows:

AGREEMENT

1.����Definitions. Unless otherwise defined herein, all capitalized terms used in this Amendment shall have the same meaning ascribed thereto in the Supply Agreement.
2.����Payment of Transfer Costs. (a) Luitpold hereby agrees to reimburse BMT for [***] percent ([***]%), up to a maximum of $[***], of all costs and expenses incurred by BMT related to the transfer of the Transferred Technology from Novartis to BMT and the CMO (the Transfer Costs) including, but not limited to, the following:

(i)��������all costs associated with transfer of the manufacturing process for the Product to the CMO,
(ii)����all costs to transfer and ship the master cell bank (MCB) and working cell bank (WCB) from Novartis to BMT;
[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.





(iii)����All costs associated with all qualification or requalification of the MCB and WCB;
(iv)����All costs of retaining consultants engaged in the transfer of the Transferred Technology and all activities related to the regulatory approval of the CMO;
(v)��������All amounts charged by Novartis and the CMO in connection with the transfer of the Transferred Technology to BMT and the CMO; and
(vi)����All costs related to the transfer and qualification of all test methods and reference standards or other materials necessary to perform all in process testing, final product testing and cell bank testing.
(b) When BMT incurs Transfer Costs, BMT will invoice Luitpold for Luitpolds pro rata share of such Transfer Costs. Such invoices will be payable within thirty (30) days of the receipt by Luitpold. Invoices not paid when due will bear interest as provided in Section 4.3 of the Supply Agreement.
3. ����Reports. BMT will provide Luitpold with reasonable reports as to the technology transfer to the CMO on a calendar quarterly basis (with fifteen (15) days of the end of each calendar quarter), detailing the progress that has been made, what activities have been undertaken, and a schedule as to submission for completion and regulatory approval. All such reports shall be forwarded to Marc Tokars at [email protected].
4.����Regulatory Approval. BMT agrees to provide Luitpold with all information and assistance reasonably requested by Luitpold to assist Luitpold in obtaining regulatory approval for use of the Product manufactured by the new CMO in Luitpolds GEM 21S� product in any country. This assistance will include (a) using commercially reasonable efforts to obtain all assistance from the CMO with regard to same, (b) providing a right of reference to all data in the Augment IDE and/or PMA or any comparable foreign regulatory submission with regard to the Product manufactured by the new CMO, (c) providing, or using commercially reasonable efforts to cause the CMO to provide, all information relating to the manufacture of the Product directly to any regulatory authority in a country �where a right of reference is not available, (d) answering all inquiries relating to the manufacture of the Product received from any regulatory authority, and (e) meeting, or using commercially reasonable efforts to cause the CMO to meet, with any regulatory authority by phone or where required in person �(upon payment to the BMT and/or CMO for its time and expenses.)
5. ����No Further Amendment. All other terms of the Supply Agreement remain in full force and effect and, as amended hereby, the Supply Agreement is hereby ratified and confirmed in all respects.

6. ����Counterparts. This Agreement shall become binding when any one or more counterparts hereof whether received in original or by PDF, individually or taken together, shall bear the signatures of each of the parties. This Agreement may be executed in any number of counterparts, each of which shall be deemed binding on the party on whose behalf it was executed, but all of which taken together shall constitute but one and the same instrument.

[Signatures on Following Page]





IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 as of the Effective Date.


BioMimetic Therapeutics, LLC

By:��/s/ William L. Griffin________________

Name: ��William L. Griffin_______________

Title:��SVP & GM______________________

Date:��04 Sept., 2014____________________
Luitpold Pharmaceuticals, Inc.

By:��/s/ Mary Jane Helenek___________________

Name: Mary Jane Helenek

Title: President and CEO

Date:��Aug. 29, 2014________________________





EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
I, Robert J. Palmisano, certify that:
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended September�30, 2014, of Wright Medical Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules�13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November�5, 2014

�
/s/ Robert J. Palmisano �
�
Robert J. Palmisano�
�
President and Chief Executive Officer�




EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
I, Lance A. Berry, certify that:
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended September�30, 2014, of Wright Medical Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules�13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November�5, 2014

�
/s/ Lance A. Berry �
�
Lance A. Berry�
�
Senior Vice President and
Chief Financial Officer�





EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) UNDER
THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF
CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE
Each of the undersigned, Robert J. Palmisano and Lance A. Berry, certifies pursuant to Rule�13a-14(b) under the Securities Exchange Act of 1934 (the Exchange Act) and Section�1350 of Chapter�63 of Title 18 of the United States Code, that (1)�this quarterly report on Form 10-Q for the quarter ended September�30, 2014 (the Report) of Wright Medical Group, Inc. (the Company) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, and (2)�the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November�5, 2014

�
/s/ Robert J. Palmisano �
�
Robert J. Palmisano�
�
President and Chief Executive Officer
�
�
�
/s/ Lance A. Berry �
�
Lance A. Berry�
�
Senior Vice President and
Chief Financial Officer�




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