IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

L-5 Healthcare Partners, LLC,

Plaintiff,

Counterclaim Defendant,

v.

Alphatec Holdings, Inc.,

Defendant,

Counterclaim Plaintiff.

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C.A. No. 2019-0412-KSJM

MEMORANDUM OPINION

Date Submitted: July 14, 2020

Date Decided: October 12, 2020

William M. Lafferty, D. McKinley Measley, Thomas P. Will, MORRIS NICHOLS 

ARSHT & TUNNELL LLP, Wilmington, Delaware; Antonio Yanez, Jr., Alexander 

L. Cheney, WILLKIE FARR & GALLAGHER LLP, New York, New York; 

Counsel for L-5 Healthcare Partners, LLC.

Philip A. Rovner, Jonathan A. Choa, Jaclyn C. Levy, POTTER ANDERSON & 

CORROON LLP, Wilmington, Delaware; Counsel for Alphatec Holdings, Inc.

McCORMICK, V.C.
This action arises out of a March 2018 share purchase agreement between 

Plaintiff L-5 Healthcare Partners, LLC (“L-5”) and Defendant Alphatec Holdings, 

Inc. (“Alphatec”). The purchase agreement requires that whenever Alphatec 

authorizes the issuance and sale of common stock equivalents to a third-party buyer, 

Alphatec must first offer L-5 a pro-rata opportunity to participate in that issuance at 

the same price and on the same terms as the third-party. 

In November 2018, Alphatec issued warrants convertible into Alphatec 

common stock to nonparty Squadron Medical Finance Solutions LLC (“Squadron”) 

pursuant to a credit agreement. In March 2019, Alphatec again agreed to issue (and 

in June 2019 issued) warrants convertible to Alphatec common stock at a price and 

on terms that differed from the first transaction. Later, Alphatec made a proposal to 

L-5 to acquire warrants based on a blended version of the prices and terms in the 

2018 agreement and the 2019 agreement. Alphatec’s proposal to L-5 was subject to 

approval by Alphatec’s board and further negotiations with Squadron.

L-5 filed this lawsuit to enforce its preemption rights. L-5 first claims that the 

2019 agreement and subsequent issuance constituted an authorization that triggered

L-5’s preemption rights. L-5 next claims that the blended-terms proposal did not 

satisfy L-5’s preemption rights because it did not constitute an offer to sell and

because the blended terms were not the same price or the same terms. L-5 also 
2

claims that it is entitled to fee-shifting and indemnification for its fees and costs 

incurred in this litigation. 

L-5 has moved for partial judgment on the pleadings, and this decision grants 

that motion in part. L-5 is entitled to a declaration that the 2019 agreement with

Squadron triggered L-5’s preemption rights and that Alphatec’s contingent proposal 

did not constitute an “offer to sell” sufficient to satisfy L-5’s preemption rights. Yet, 

factual issues foreclose judgment on the pleadings on Alphatec’s affirmative 

defenses and on the question of whether Alphatec’s blended-terms proposal 

complied with the price and term requirements of the purchase agreement. The 

motion is denied as to those issues and as to L-5’s claims for fee-shifting and

indemnification, which are more appropriately resolved at a later stage of this action.

I. FACTUAL BACKGROUND

This statement of facts is drawn from the pleadings, and the documents 

attached to and incorporated by reference in the pleadings. 

A. The Purchase Agreement

L-5 and Alphatec are parties to a Securities Purchase Agreement (“Purchase 

Agreement”)1 dated March 8, 2018, under which L-5 purchased 25,000 shares of 

 

1 C.A. No. 2019-0412-KSJM Docket (“Dkt.”) 1, Verified Compl. (“Compl.”) Ex. A

(“Purchase Agreement”).
3

Alphatec preferred stock for $25 million.

2 The Purchase Agreement grants L-5 

preemption rights in the event that L-5 achieved an ownership level of at least 12.5% 

of Alphatec’s outstanding stock.3 L-5 converted its preferred stock such that, at all 

times relevant to this parties’ dispute, L-5’s ownership interest has exceeded the 

12.5% threshold.

4

L-5’s preemption rights are set forth in Section 4.18(a) of the Purchase 

Agreement, which provides that prior to authorizing “the issuance and sale of any 

Common Stock or Common Stock Equivalents,” Alphatec “will first offer to sell to 

[L-5] a pro rata portion of such securities . . . at the same price and on the same 

terms” as those offered to another party.5 Section 4.18(a) reads in its entirety:

Immediately following the Closing, and for so long as the 

LI Group beneficially owns such number of shares of 

Common Stock on a fully diluted basis (calculated in 

accordance with Section 4.11(h)) equal to or greater than 

the Threshold Ownership Percentage, if [Alphatec] 

authorizes the issuance and sale of any Common Stock or 

Common Stock Equivalents (other than any Exempt 

Issuance),[6] [Alphatec] will first offer to sell to [L-5], a 

 

2 Compl. ¶ 1, 9.

3 Purchase Agreement § 4.18(a).

4 Compl. ¶ 9.

5 Purchase Agreement § 4.18(a).

6

“Exempt Issuance” is defined to include the issuance of securities in connection with 

specified transactions and the filing of a universal shelf registration statement, none of 

which are at issue here. See id. § 1.1.
4

pro rata portion of such securities equal to the percentage 

determined by dividing (i) the number of shares of 

Common Stock held by the LI Group (determined on a 

fully-diluted basis (calculated in accordance with Section 

4.11(h)), by (ii) the total number of shares of Common 

Stock then outstanding (determined on a fully-diluted 

basis (calculated in accordance with Section 4.11(h)). The 

members of the LI Group (as determined by [L-5]) will be 

entitled to purchase all or part of such stock or securities 

at the same price and on the same terms as such stock or 

securities are to be offered to any other Person.7

“Common Stock Equivalents” is defined to include warrants convertible into 

Alphatec common stock.8

Section 4.8 imposes indemnification obligations on Alphatec for all “losses, 

liabilities, obligations, claims, contingencies, damages, costs and expenses, 

including . . . reasonable attorneys’ fees and costs of investigation that [L-5] may 

suffer or incur as a result of or relating to . . . any breach of” the Purchase Agreement, 

including violations of Section 4.18.9In the event of a dispute resulting in an action 

to enforce a provision of the Purchase Agreement by either party, Section 5.9

additionally requires that “the prevailing party in such Action or Proceeding shall be 

reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other 

 

7

Id. § 4.18(a).

8

Id. § 1.1.

9

Id. § 4.8.
5

costs and expenses incurred with the investigation, preparation and prosecution of 

such Action or Proceeding.”10

B. The 2018 Agreement

On November 6, 2018, Alphatec executed a Credit, Security and Guaranty 

Agreement (“2018 Agreement”)11 with Squadron.12 Under the 2018 Agreement, 

Squadron provided Alphatec with a $35 million term loan facility,

13 and Alphatec 

granted Squadron warrants entitling Squadron “to purchase 845,000 shares of 

common stock of [Alphatec] at $3.15 per share.”14 L-5 did not assert and does not 

seek to enforce its preemption rights in connection with the 2018 Agreement.

15

C. The 2019 Agreement

Several months later, Alphatec sought additional capital and contacted both 

L-5 and Squadron to determine their interest in a debt financing arrangement.16 L-5 

declined. Squadron agreed. On March 27, 2019, Alphatec and Squadron executed 

 

10 Id. § 5.9.

11 Compl. Ex. B.

12 Compl. ¶16.

13 2018 Agreement § 2.1(a).

14 Id. §§ 2.1(e), 1.1.

15 Compl. ¶ 17.

16 Dkt. 11, Def.’s Answer to Verified Compl. and Verified Countercls. (“Answer” or 

“Countercls.”) ¶¶ 16–17, 19.
6

the First Amendment to Credit, Security and Guaranty Agreement (the “2019 

Agreement”).17

Under the 2019 Agreement, Squadron provided Alphatec an additional term 

loan of $30 million (the “Additional Term Loan”).

18

 The 2019 Agreement required 

that Alphatec grant Squadron warrants to purchase 4,838,710 shares of common 

stock of Alphatec.19 This additional grant of warrants would not become due until 

Alphatec drew from the Additional Term Loan.

20

 The 2019 Agreement alters and 

restates the 2018 Agreement’s definition of Warrants to establish a new price of 

$2.17.

21

 

17 Compl. Ex. C.

18 Compl. ¶¶ 17, 19; see also 2019 Agreement ¶ 3(B) (amending § 2.1(a) of the 2018

Agreement).

19 2019 Agreement ¶ 3(A) (amending § 1.1 of the 2018 Agreement).

20 Id.

21 Id. (defining “Warrants” as “(i) the warrants granted to [Squadron] (including any 

designee of [Squadron]) in connection with the Initial Term Loan on the Closing Date to 

purchase 845,000 shares of common stock of [Alphatec] at $3.15 per share and (ii) the 

warrants to be granted to [Squadron] (including any designee of [Squadron]) on the date of 

the initial drawing by [Alphatec] under the Additional Term Loan to purchase 4,838,710 

shares of common stock of Holdings at $2.17 per share, such Warrant shall be substantially 

in the form of Exhibit B”).
7

D. The Proposal

Alphatec and L-5 had been in communication during Alphatec’s negotiations 

with Squadron regarding the 2019 Agreement.

22 On March 7, 2019, in response to 

a letter from L-5’s counsel, Alphatec provided L-5 a copy of the binding 

commitment letter and attached term sheet that Squadron had executed earlier that 

day.23 After some back-and-forth between Alphatec and L-5 as to whether the 2019 

Agreement triggered L-5’s preemption rights, Alphatec made a proposal pursuant to 

Section 4.18 on May 17, 2019 (the “Proposal”).

24 The Proposal took the form of a 

term sheet that purported to reflect the terms of Alphatec’s agreement with 

Squadron.25 

Noting the ongoing disagreement as to L-5’s preemption rights, the Proposal

referenced the protections of “Fed. Rule of Evid. 408 and Cal. Evid. Code 1152” and 

was labeled with the heading: “For Mediation Purposes Only.”26 

The Proposal sought to replicate the price and terms of the 2018 Agreement 

and the 2019 Agreement together. To that end, it required that L-5 initially make a

 

22 Countercls. ¶¶ 33–36.

23 Id. ¶¶ 37–39.

24 Countercls. Ex. C; accord Countercls. ¶ 62.

25 Proposal; Countercls. ¶ 62.

26 Proposal at 1. 
8

first term loan of $11,550,137 in exchange for warrants to purchase 256,839 

Alphatec common shares at $3.15 per share27—the exercise price set forth in the 

2018 Agreement.

28

 It then required that L-5 commit to make a second term loan of 

$9,118,529.29 Upon Alphatec’s draw on the second term loan, L-5 would receive 

warrants to purchase 1,470,731 shares of Alphatec common stock at $2.17 per 

share30—the exercise price set forth in the 2019 Agreement.

31

 L-5 calculates the 

weighted average of the exercise price of L-5’s warrants as $2.32, or around 7% 

more than the $2.17 exercise price available to Squadron in the 2019 Amendment.32 

The Proposal was contingent. It contemplated that L-5 would provide 

Alphatec with a credit facility representing a pro rata portion of the loans Alphatec 

obtained from Squadron.33 The Proposal additionally provided that it was “subject 

 

27 Id. at 1–2.

28 2019 Agreement ¶ 3(A).

29 Proposal at 1.

30 Id. at 2.

31 2019 Agreement ¶ 3(A).

32 L-5 calculates the weighted average by “(i) taking the sum of the exercise price of the 

warrants multiplied by the number of corresponding shares that could be acquired with 

those warrants, and (ii) dividing that sum by the total number of shares L-5 could acquire 

with its warrants. In this instance, the formula is: (($3.15 x 256,839) + ($2.17 x 

1,470,731)) / (256,839 + 1,470,731) = $2.32.” Dkt. 17, Pl.’s-Countercl. Def.’s Mem. of 

Law in Supp. of Its Mot. for J. on the Pleadings (“Pl.’s Opening Brief”) at 8–9 n.2.

33 Proposal at 1.
9

to final approval” by Alphatec’s Board of Directors.

34 As Alphatec clarified in a 

May 23, 2019 letter, execution of the Proposal also depended on Squadron agreeing

to retroactively carve out a pro rata portion of the warrants it received under the 2018 

and 2019 Agreements.

35

 The letter stated: 

[T]he [Proposal], if accepted by L-5, requires Squadron to 

carve out a pro rata portion of its pre-existing security 

position .... [Alphatec] is unwilling to disrupt, potentially 

significantly, its relationship with its largest lender, 

without L-5 first making a binding commitment to execute 

the resulting deal.36

Squadron had no obligation to allow a carve-out, and would have been well within 

its rights under the 2019 Agreement to reject L-5’s involvement.37

The Proposal made explicit that Alphatec was “under no obligation to draw” 

from the L-5 loan.

38

 The deal contemplated by the Proposal thus created a scenario 

 

34 Id. at 1 n.1.

35 Countercls. Ex. D, Letter from Craig Hunsaker, General Counsel, Alphatec Spine, Inc., 

to John Staikos, attorney, LS Power and John Wade, Chief Compliance Officer, LS Power 

(May 23, 2019) (“May 23, 2019 Letter”).

36 Id.

37 The 2019 Agreement explicitly restricted third-party participation: “The terms and 

provisions of this Amendment shall be for the sole benefit of the parties hereto and their 

respective successors and assigns; no other person, firm, entity or corporation shall have 

any right, benefit or interest under this Amendment.” 2019 Agreement ¶ 13.

38 Proposal at 1.
10

where if Alphatec chose to draw from the Squadron loan but not the L-5 loan, 

Squadron would obtain additional warrants and L-5 would not.39

E. The 2019 Issuance

On June 13, 2019, the Board approved a draw on the Additional Term Loan 

and issue the corresponding warrants to Squadron (the “2019 Issuance”).

40 The 

Board resolution also approved a warrant issuance to L-5 in the event it accepted the 

Proposal.41

F. This Litigation

L-5 filed this litigation on June 4, 2019, to enforce its preemption rights. L-5’s 

Complaint asserts three causes of action. In Count I, L-5 seeks a declaration that the 

2019 Agreement triggered L-5’s preemption rights. In Count II, L-5 seeks a 

declaration that Alphatec breached the Purchase Agreement by failing to offer L-5 

the opportunity to participate in the 2019 Amendment at the same price and on the 

 

39 Section 5.1 of the 2018 Agreement restricted Alphatec’s ability to incur additional 

subsequent debt without Squadron’s permission, effectively giving Squadron veto power 

over Alphatec’s ability to draw down on the L-5 loan in the Proposal and on Alphatec’s 

issuance of warrants to L-5 pursuant to that loan. See 2018 Agreement, § 5.1 (“No 

Borrower will . . . create, incur, assume, guarantee or otherwise become or remain directly 

or indirectly liable with respect to, any Debt, except for Permitted Debt.”); see also id. § 

1.1 (defining “Debt” and “Permitted Debt”).

40 Countercls. ¶¶ 70–71.

41 Id.
11

terms as Squadron. In Count III, L-5 seeks indemnification under Sections 4.8 and 

5.9 of the Purchase Agreement for its reasonable attorneys’ fees and other costs and 

expenses incurred in connection with this action. 

On July 30, 2019, Alphatec filed its answer and asserted two counterclaims 

seeking declarations that mirror the relief sought in Counts I and II of the 

Complaint.42 L-5 answered the counterclaims on September 18, 2019.43

On January 31, 2020, L-5 moved for partial judgment on the pleadings as to 

all questions of liability, leaving only the remedy to be determined.

44

 The parties 

completed briefing on the motion on May 6, 2020,45 and the court held oral argument 

on July 14, 2020.46

II. LEGAL ANALYSIS

A motion for judgment on the pleadings under Court of Chancery Rule 12(c) 

may be granted “where the movant is entitled to judgment as a matter of law and 

 

42 Answer and Countercls.

43 Dkt. 14, Pl.-Countercl. Def. L-5 Healthcare P’rs. LLC’s Ans. and Affirmative Defenses.

44 Pl.’s Opening Br. at 2.

45 See Dkt. 27, Def.-Countercl. Pl.’s Answering Br. in Opp’n to Pl.-Countercl. Def.’s Mot. 

for Partial J. on the Pleadings (“Def.’s Ans. Br.”); Dkt. 29, Pl.-Countercl. Def.’s Reply Br. 

in Supp. of Its Mot. for Partial J. on the Pleadings (“Pl.’s Reply Br.”).

46 Dkt. 38, Oral Argument and Partial Rulings of the Ct. Via Zoom on L-5 Healthcare P’rs., 

LLC’s Mot. for Partial J. on the Pleadings and Mot. for Stay of Disc. (“Oral Argument 

Tr.”).
12

there are no disputed material facts.”47 Judgment on the pleadings “is a proper 

framework for enforcing unambiguous contracts because there is no need to resolve 

material disputes of fact.”48 The court “must draw all reasonable inferences from 

those facts in the light most favorable to the nonmoving party” and “may consider 

the agreements attached to the pleadings in making its determination.”49 The court 

also may take judicial notice of a corporation’s public filings.50 

L-5 moves for judgment on the pleadings as to the following issues:

(i) whether the 2019 Amendment triggered L-5’s preemption rights; (ii) whether 

Alphatec breached the Purchase Agreement by failing to offer L-5 the opportunity 

to participate in the 2019 Amendment “at the same price and on the same terms” as 

offered to Squadron; and (iii) whether Alphatec is required to indemnify L-5 under 

Section 4.8 and reimburse L-5 under Section 5.9 of the Purchase Agreement.

51

 This 

decision tackles the issues in that order.

 

47 Cantor Fitzgerald, L.P. v. Cantor, 2001 WL 1456494, at *4 (Del. Ch. Nov. 5, 2001). 

48 Chicago Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC, 166 A.3d 912, 925 

(Del. 2017) (citation omitted); accord Fortis Advisors LLC v. Meds. Co., 2019 WL 

7290945, at *1 (Del. Ch. Dec. 18, 2019) (ORDER). 

49 CorVel Enter. Comp, Inc. v. Schaffer, 2010 WL 2091212, at *1 (Del. Ch. May 19, 2010).

50 Tyson Foods, 2007 WL 2351071, at *2 (Del. Ch. Aug. 15, 2007).

51 Pl.’s Opening Brief at 22.
13

A. L-5’s Preemption Rights Were Triggered.

Under Section 4.18 of the Purchase Agreement, L-5 is entitled to exercise its 

preemption rights if Alphatec “authorizes the issuance and sale of any . . . Common 

Stock Equivalents” to a third-party.52 The parties agree that the warrants were

Common Stock Equivalents.53 They dispute whether the issuance and sale of 

warrants were “authorized” so as to trigger L-5’s preemption rights. 

L-5’s primary argument is that its preemption rights were triggered by the 

2019 Issuance. This is a good argument, as the 2019 Issuance was unequivocally an 

“issuance and sale” that Alphatec “authoriz[ed].” Alphatec does not respond to this

argument on its merits. Instead, Alphatec argues that the court should ignore the 

2019 Issuance because it occurred after L-5 filed the Verified Complaint. Alphatec, 

however, admitted the fact of the 2019 Issuance in its Counterclaims.

54 Consistent 

with the purpose of Rule 12(c),55 the court can take judicial notice of Alphatec’s 

 

52 Purchase Agreement § 4.18(a) (emphasis added).

53 Answer ¶ 9.

54 Countercls. ¶¶ 70–71.

55 See 5C Federal Practice and Procedure § 1367 (3d ed. 2020) (describing the purpose of 

the analogous Federal Rule of Civil Procedure as “to provide a means of disposing of cases 

when the material facts are not in dispute between the parties and a judgment on the merits 

can be achieved by focusing on the content of the competing pleadings, exhibits thereto, 

matters incorporated by reference in the pleadings, whatever is central or integral to the 

claim for relief or defense, and any facts of which the district court will take judicial 

notice”).
14

admission for the purpose of this motion.

56

 The 2019 Issuance, therefore, triggered 

L-5’s preemption rights under Section 4.18. 

For completeness, this decision addresses L-5’s alternative argument, which 

is that 2019 Agreement, standing alone, constituted the requisite “authorization” of 

the issuance and sale of warrants that triggered L-5’s preemption rights. This too is 

a good argument. “Authorize” means “to formally approve,”57 or to “give official 

permission for or approval to.”

58

 The 2019 Agreement did just that, setting forth the 

terms and conditions under which the issuance and sale of warrants would occur.

Alphatec responds that under the 2019 Agreement, no warrants were due until 

Alphatec drew on the Additional Term Loan,

59 and the 2019 Amendment did not 

 

56 See Merrill v. United Parcel Serv., 956 A.2d 1196, 1201–02 (Del. 2008) (“Voluntary 

and knowing concessions of fact made by a party during judicial proceedings (e.g., 

statements contained in pleadings . . .) are . . . . traditionally considered conclusive and 

binding upon both the party against whom they operate, and upon the court.”); Airborne 

Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 130 (Del. Ch. 2009) (reiterating permissible 

sources of facts on a motion for judgment on the pleadings, including defendant’s “answer 

and counterclaims.”).

57 Authorize, Black’s Law Dictionary (11th ed. 2019).

58 PWP Xerion Hldgs. III LLC v. Red Leaf Res., Inc. 2019 WL 5424778, at *12 (Del. Ch. 

Oct. 23, 2019) (citations omitted).

59 Def.’s Ans. Br. at 18; see 2019 Agreement ¶ 3(A).
15

mandate that Alphatec ever draw on the loan.

60 Alphatec thus argues that the 2019 

Agreement alone did not constitute an authorization of the issuance or sale of 

warrants because an intervening event—Alphatec’s decision to draw on the loan—

was required. 

Alphatec’s interpretation does not work. Many agreements authorize the 

payment or issuance of consideration upon the completion of a condition, and the 

presence of a condition in the 2019 Agreement did not render that consideration—

the issuance of warrants—somehow less “authorized.” In essence, Alphatec’s 

interpretation confuses the authorization of an issuance and sale with the distinct act 

of satisfying the conditions of that issuance and sale. It further conflates the 

authorization of the issuance and sale of warrants with the distinct act of authorizing 

a draw on the Additional Term Loan.

B. The Proposal Was Not an “Offer to Sell.”

Having determined that the 2019 Amendment and subsequent issuance

triggered L-5’s preemption rights, the analysis next turns to the question of whether 

Alphatec complied with its obligations under Section 4.18 of the Purchase 

 

60 The 2019 Agreement, however, imposes a fine of $300,000 “in the event Borrowers have 

not completed an initial drawing under the Additional Term Loan on or before June 30, 

2019.” 2019 Agreement ¶ 3(B).
16

Agreement to “offer to sell” to L-5 a pro rata portion of the warrants “at the same 

price and on the same terms.”

61

 Alphatec argues that the Proposal contained the 

“same price” and “same terms” in compliance with this obligation. In response, L5 raises a threshold issue, arguing that the Proposal was not in fact an “offer to sell” 

as required by Section 4.18.

An offer “is a manifestation of assent that empowers another to enter into a 

contract by manifesting assent in return.”62 A valid offer “confers upon the offeree 

the power to create a contract.”63 The validity of an offer thus requires that “one 

making an offer assent[] in advance to the proposed bargain, after which all that is 

required to complete the mutual assent necessary is the assent of the offeree.”64 A 

valid offer contains sufficient finality such that an offeree’s acceptance of an offer 

constitutes the last step in forming a contract.65 Provisions that allow the proponent 

 

61 Purchase Agreement § 4.18(a).

62 E. Allan Farnsworth & Zachary Wolfe, 1 Farnsworth on Contracts § 3.13 at 3-77 (4th 

ed. 2019).

63 Id. § 3.03 at 3-7.

64 1 Williston on Contracts § 4:3 (4th ed. 2020).

65 Restatement (Second) of Contracts § 24 cmt. a (Am. L. Inst. 2020) (“[T]he key concept 

involves giving the addressee the apparent power to conclude a contract without further 

action by the other party.”); see also Id. § 35 cmt. c (“Exercise of the power of acceptance 

concludes an agreement and a bargain, and thus satisfies one of the requirements for 

formation...”).
17

of a proposal to unilaterally withdraw it or withhold assent pending approval are 

typically an indication that a proposal is not an offer.66 

In light of its contingent nature, L-5 is correct that the Proposal does not 

constitute an “offer” as required by Section 4.18. The Proposal was contingent on

Board approval.67 The Proposal was also contingent on further negotiations with 

Squadron. As clarified by the May 23 Letter, if L-5 had accepted the Proposal, 

Alphatec would then “approach Squadron to negotiate L-5’s pro rata security 

interest.”68 Squadron, through restrictive covenants on Alphatec’s ability to take on 

more debt69 and the explicit exclusion of third parties to the 2019 Agreement,70 had 

 

66 Farnsworth on Contracts § 3.13 at 3-86 (“[T]he insertion into a proposal of a clause that 

reserves to its maker the power to close the deal is a compelling indication that the proposal 

is not an offer. A common example provides that the agreement is not binding until it has 

been approved at the home office of the maker of the proposal.”); Restatement (Second) of 

Contracts § 24 (“An offer is the manifestation of willingness to enter into a bargain, so 

made as to justify another person in understanding that his assent to that bargain is invited 

and will conclude it.” (emphasis added)); see also Wilgus v. Salt Pond Inv. Co., 498 A.2d 

151, 156 (Del. Ch. 1985) (finding an offer pursuant to a right of first refusal contingent 

because it required investor approval and holding that, “[a]lthough Short signed the 

document it remained unenforceable as to the investors and until such time as the investors 

approved its terms it was merely an offer to further negotiate.”), superseded by statute on 

other grounds, as recognized in Wilm. & N. Ry. Co. v. Del. Valley Ry. Co., 1999 WL 

463705, at *6 (Del. Super. Mar. 30, 1999).

67 Proposal at 1 n.1.

68 May 23, 2019 Letter at 1. 

69 2018 Agreement § 5.1.

70 2019 Agreement ¶ 13 (“The terms and provisions of this Amendment shall be for the 

sole benefit of the parties hereto and their respective successors and assigns; no other 
18

functional veto power over L-5’s receipt of warrants. Squadron thus had no 

obligation to revise the 2019 Agreement, to permit L-5’s participation, or to allow 

Alphatec to draw down on an L-5 loan. L-5’s acceptance of the Proposal as the 

offeree would not have been the final step in establishing a contract for these 

reasons.71

Because the Proposal was contingent on approval by both Alphatec’s Board

and Squadron, it lacked sufficient finality to constitute an offer. The Proposal was

thus a promise to further negotiate and not an “offer to sell” as required by Section 

4.18 of the Purchase Agreement.72

 

person, firm, entity or corporation shall have any right, benefit or interest under this 

Amendment.”).

71 One way Alphatec could have avoided conditioning the Proposal on further negotiations 

with Squadron was to first make the “offer to sell” to L-5 before entering into a final

agreement with Squadron, as the Purchase Agreement seems to contemplate. Purchase 

Agreement § 4.18(a) (providing that Alphatec “first offer to sell to [L-5] a pro rata portion 

of such securities . . . at the same price and on the same terms” as those offered to another 

party (emphasis added)).

72 L-5 also argues that the Proposal is a settlement offer and not an “offer to sell.” Alphatec 

labeled the Proposal “For Mediation Purposes Only” and “Subject to Fed. Rule of Evid.

408 and Cal. Evid. Code 1152,” Proposal at 1, designations that L-5 asks the court to 

uphold. Generally, Rule 408 prohibits parties for relying on settlement communications to 

prove or disprove liability. D.R.E. 408; see also Grunstein v. Silva, 2011 WL 378782, at 

*6 (Del. Ch. Jan. 31, 2011) (noting that, under Delaware Rule of Evidence 408, “evidence 

of an offer in compromise is inadmissible if offered for the purpose of proving or 

disproving liability”). This decision considers the substance of the Proposal because doing 

so does not prejudice L-5. 
19

Because the Proposal was not an “offer” as required by Section 4.18(a) of the 

Purchase Agreement, this decision does not reach the question of whether the 

blended terms of the Proposal complied with Section 4.18(a).73 

C. Reimbursement and Indemnification

Section 5.9 provides that Alphatec must reimburse L-5 for its “reasonable 

attorneys’ fees and other costs and expenses incurred with the investigation, 

preparation and prosecution” of this litigation if L-5 prevails in this action.74 Section 

4.8 of the Purchase Agreement further provides that Alphatec must indemnify L-5 

for all “losses, liabilities, obligations, claims, contingencies, damages, costs and 

expenses, including all judgments, amounts paid in settlements, court costs and 

reasonable attorneys’ fees and costs of investigation that [L-5] may suffer or incur 

as a result of or relating to . . . any breach of . . . [the Purchase Agreement].”75 

 

73 It bears noting that this question is not one that lends itself to resolution on the pleadings 

because evaluating the scope of L-5’s preemptive rights raises inherently factual issues. 

See HUMC Holdco, LLC v. MPT of Hoboken TRS, LLC, 2020 WL 3620220, at *8 (Del. 

Ch. July 2, 2020) (denying judgment on the pleading where scope of preemptive rights 

raised factual issues). If L-5 defeats Alphatec’s affirmative defenses, it seems likely that 

this issue will be pertinent to the remedy analysis, and development of the factual record 

will be necessary to determine the relationship of the 2019 Agreement to the 2018 

Agreement, among other things.

74 Purchase Agreement § 5.9.

75 Id. § 4.8.
20

Claims for reimbursement for legal expenses under a prevailing-party 

provision are premature in that judicial fee-shifting is awarded “in relation to the 

results obtained” in the underlying litigation.76 Claims for indemnification like those 

at issue here are not ripe for adjudication until the underlying breach has been 

properly resolved and the breaching party has refused to honor its obligations.

77

 L5’s claims for contractual fee-shifting and indemnification are thus premature, 

unripe.

D. Alphatec’s Affirmative Defenses

Alphatec argues that its affirmative defenses of acquiescence and estoppel are 

sufficient to defeat L-5’s motion for judgment on the pleadings. Alphatec argues in 

briefing that L-5 goaded Alphatec into triggering its preemption rights by remaining 

silent after the 2018 Agreement was executed and that such conduct gives rise to 

estoppel and acquiescence defenses.78 L-5 responds that these defenses are 

conclusory and unsupported by the facts as plead in Alphatec’s answer.79 

 

76 Mooney v. Echo Therapeutics, Inc., 2015 WL 3413272, at *12 (Del. Ch. May 28, 2015).

77 See, e.g., LaPoint v. AmerisourceBergen Corp., 970 A.2d 185, 194 (Del. 2009) (holding 

that claims stemming from a “right to indemnification did not ripen until [defendant] was 

judged to be in breach of the Merger Agreement and [defendant] refused to honor its 

indemnification obligation”). 

78 Def.’s Answering Br. at 27–29.

79 Pl.’s Reply Br. at 14–16.
21

Generally speaking, affirmative defenses that amount to “rhythmic 

incantation[s]” of the menu options of defenses set forth in Court of Chancery 

Rule 12 will not suffice to defeat a motion for judgment on the pleadings.80 A party 

must plead or otherwise support the basis for those defenses when faced with a Rule 

12(c) motion. 

In this case, Alphatec has asserted counterclaims, and Alphatec is entitled to 

inferences that may be drawn from the factual assertions plead in its counterclaims.

81

 

Accepting those assertions as true, the court finds non-frivolous bases for Alphatec’s 

affirmative defenses which, if proven, could entitle Alphatec to relief from its 

contractual obligations. The facts as presented warrant further discovery and 

preclude judgment on the pleadings in L-5’s favor.

 

80 GreenStar IH Rep, LLC v. Tutor Perini Corp., 2017 WL 5035567, at *8 & nn.73–74 

(Del. Ch. Oct. 31, 2017) (collecting cases).

81 See, e.g., Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 

A.2d 1199, 1206 (Del. 1993) (a party moving for judgment on the pleadings “concede[s] 

all well-pleaded allegations to be true”); Airborne Health 984 A.2d at 130 (including 

counterclaims as pleadings to be considered on a motion for judgment on the pleadings); 

see also Ct. Ch. R. 12(c) (“[A]ny party may move for judgment on the pleadings”); Ct. Ch. 

R. 13(a) (“A pleading shall state as a counterclaim any claim, which at the time of serving 

the pleading the pleader has against any opposing party, if it arises out of the transaction 

or occurrence that is the subject matter of the opposing party’s claim . . . .”). Alphatec’s 

counterclaim is part and parcel of its pleading answering L-5’s Complaint and asserts facts 

arising from the same transaction that is the subject matter of L-5’s claim. It is thus a 

pleading to be considered on this 12(c) motion for judgment on the pleadings.
22

III. CONCLUSION

For the foregoing reasons, L-5 is entitled to a declaration that the 2019 

Agreement and 2019 Issuance triggered L-5’s preemption rights and that the 

Proposal did not constitute an “offer” compliant with Section 4.18(a) of the Purchase 

Agreement. This decision does not resolve Alphatec’s affirmative defenses, what 

terms and conditions would be required to match Alphatec’s 2019 Agreement with 

Squadron, or whether L-5 is entitled to its reasonable attorneys’ fees and other costs. 

The motion for partial judgment on the pleadings is GRANTED in part and DENIED 

in part.