Document:

Employment Agreement: Richard W. Mott

  
 Exhibit 10.12 
 KYPHON INC. 
  
 RICHARD MOTT EMPLOYMENT AGREEMENT 
  
 This Agreement is entered into as of September 3, 2002 (the “Effective Date”) by and between Kyphon Inc. (the “Company”) and Richard Mott
(“Executive”). 
  
 1.    Duties and Scope of Employment. 

 
         (a)    Positions and Duties.  As of the
Effective Date, Executive will serve as President and Chief Executive Officer of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the
Company, as shall reasonably be assigned to him by the Company’s Board of Directors (the “Board”). Executive shall report to the Board. The period of Executive’s employment under this Agreement is referred to herein as the
“Employment Term.” During the Employment Term, Executive will also be entitled to a voting position on the Board. Executive agrees to resign from the Board at the end of the Employment Term, if requested to do so by action of the Board.

  
         (b)    Obligations.  During
the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in
any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board. 
  
 2.    Employment Term.  The parties agree that Executive’s employment with the Company will be “at-will” employment and may be terminated by either party at any time with
or without cause, and Executive shall not be entitled to any benefits or payments upon termination, except as set forth in this Agreement. Executive understands and agrees that neither his job performance nor promotions, commendations, bonuses or
the like from the Company give rise to or in any way serve as the basis for modification, amendment or extension, by implication or otherwise, of his employment with the Company. 
  
 3.    Compensation. 
  
         (a)    Base Salary.  During the Employment Term, the Company will pay Executive as compensation for his services a base salary at a minimum
annualized rate of $310,000 (the “Base Salary”). Executive’s Base Salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. The Board will
review Executive’s performance periodically at least once per year, and Executive’s compensation may be subject to adjustment as a result of such review. 
  
         (b)    Bonus.  Executive shall be eligible to receive an annual performance bonus of
40% of the Base Salary. The performance bonus shall be earned by Executive meeting performance objectives established by the Board on an annual basis. Any bonus earned during 2002 will be pro-rated from the Effective Date. 

  
         (c)    Equity Compensation.  As soon as practicable following the Effective Date, and subject to approval of the Board, Executive shall be granted a
stock option, which shall be, to the extent possible under the $100,000 rule of Section 422(d) of the Internal Revenue Code of 1986, as amended (the “Code”), an “incentive stock option” (as defined in Section 422 of the Code), to
purchase 900,000 shares of the Company’s Common Stock at an exercise price per share equal to the fair market value on the date of grant by the Board (the “Option”). Subject to the accelerated vesting provisions set forth herein, the
Option will vest as 12/48ths of the shares subject to the Option on the first anniversary of the
Effective Date and as to 1/48th of the shares subject to the Option at the end of each full month thereafter, so that the Option will be fully vested and exercisable four (4) years from the Effective Date, subject to Executive’s continued
employment with the Company on the relevant vesting dates. The Option will be subject to the terms, definitions and provisions of the Company’s 2002 Stock Plan (the “Stock Plan”) and the Stock Option Agreement by and between Executive
and the Company (the “Option Agreement”), which documents are incorporated herein by reference. 
  
 4.    Employee Benefits. 
  
         (a)    General.  During the Employment Term, Executive will be entitled to participate in the employee benefit plans currently and hereafter
maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time. 
  
         (b)    Temporary Living Reimbursement.  For up to the
first six (6) months of the Employment Term or Executive’s earlier relocation to the San Francisco Bay Area, the Company will reimburse Executive for his reasonable temporary living expenses, including: (i) a furnished corporate apartment
(including reasonable utilities and computer line) as mutually agreed to by the Company and Executive, and (ii) Executive’s travel expenses incurred between his current primary residence and the San Francisco Bay Area. The Company shall also
provide a suitable car (whether by a long-term rental arrangement or otherwise) for the use of Executive until his personal automobile is moved to the San Francisco Bay Area. 
  
         (c)    Relocation Reimbursement and Assistance.  During the Employment Term, the
Company will reimburse Executive for reasonable moving expenses incurred by Executive and his family during their relocation from Executive’s primary residence to the San Francisco Bay Area. Such expenses shall include, but shall not be limited
to, reasonable costs associated with (i) up to three (3) “house-hunting” trips to the San Francisco Bay Area for Executive’s spouse, (ii) moving Executive’s household furnishings, automobiles and personal effects and (iii)
economy airfare for Executive’s family. The Company shall reimburse Executive for closing costs and other reasonable expenses (other than the purchase price) incurred in the Executive’s purchase of a primary residence in the San Francisco
Bay Area. Executive may elect to contract with a third-party relocation service company that, subject to the Executive’s approval, will purchase Executive’s current primary residence in the Buffalo, New York area. The Company shall
cooperate with Executive and the relocation service, as reasonably required, and shall reimburse Executive for fees and costs associated with the engagement of the relocation service and coincident sale of the house (if any) up to $75,000.

 
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         (d)    Tax
Reimbursement.  The Company shall pay the Executive within 7 (seven) days of demand therefor an amount which, after reductions for federal, state and local income and employment taxes (“Taxes”) imposed with respect to such
amount, equals the Taxes, if any, imposed on the Executive with respect to all benefits provided to him pursuant to paragraphs (b) and (c) of this Section 4. 
  
         (e)    Vacation.  Executive will be entitled to paid vacation in accordance with the Company’s vacation policy,
with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. 
  
         (f)    Expenses.  The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the
furtherance of or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time. 
  
 5.    Severance. 
  
         (a)    Termination During Employment Term.  If the Company terminates Executive other than for Cause or if Executive voluntarily terminates as a
result of a Constructive Termination (as such terms are defined below), and Executive signs and does not revoke a standard release of claims with the Company, then, subject to Executive’s compliance with Section 9, Executive shall be entitled
to enter into an exclusive consultancy arrangement (“Exclusive Consultancy Arrangement”) with the Company that provides for: (i) continued payment for twelve (12) months of Executive’s Base Salary as in effect on the date of
termination and (ii) if Executive elects to convert his health insurance benefits to individual coverage pursuant to COBRA or such similar state statute, reimbursement for health care coverage under COBRA or such similar state statute, for up to
twelve (12) months following such termination, or for such shorter period until Executive obtains new employment offering health insurance coverage. 
  
         (b)    Other Termination.  If Executive’s employment with the Company terminates at any time and for any reason
other than as described in Section 5(a), then (i) all vesting of the Option and any other equity awards made by the Company to Executive will immediately terminate, (ii) all payments of compensation by the Company to Executive hereunder will
immediately terminate (except as to amounts already earned) and (iii) Executive will only be eligible for severance benefits in accordance with the Company’s established plans, policies or programs then in effect. 
  
 6.    Change of Control Benefits.  If, following a Change of Control (as defined below), the Company
terminates Executive other than for Cause or the Executive voluntarily terminates as a result of a Constructive Termination, then, in addition to the cash severance set forth in Section 5(a), (i) the Option will have its vesting accelerated so as to
become 100% vested as of the date of such termination and (ii) Executive will be paid an amount equal to his actual paid out bonus for the previous fiscal year as set forth in Section 3(b). Thereafter, the Option will continue to be subject to the
terms, definitions and provisions of the Stock Plan and Option Agreement. 

 
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 7.    Definitions. 
  
         (a)    Cause.  For purposes of this Agreement,
“Cause” is defined as (i) a material act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee that leads to material harm to the Company, (ii) Executive’s conviction of, or plea of guilty
or nolo contendere to, a felony, (iii) a willful act by Executive which constitutes gross misconduct or fraud and which is materially injurious to the Company, or (iv) Executive’s continued, substantial violations of his employment duties after
Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties. 
  
         (b)    Change of Control.  For purposes of this
Agreement, “Change of Control” of the Company is defined as: (i) a merger or consolidation of the Company in which the stockholders of the Company immediately prior to such transaction would own, in the aggregate, less than 50% of the
total combined voting power of all classes of capital stock of the surviving entity normally entitled to vote for the election of directors of the surviving entity; (ii) the sale by the Company of all or substantially all the Company’s assets
in one transaction or in a series of transactions; (iii) a change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors (as defined below); or (iv) any
“Person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 50% of the total combined voting power of all classes of capital stock of the Company normally entitled to vote for the election of directors of the Company, other than any Person who now holds at least 20%
voting power in the Company. “Incumbent Directors” will mean directors who either (a) are directors of the Company as of the date hereof, or (b) are elected, or nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the
Company. 
  
         (c)    Constructive
Termination.  For purposes of this Agreement, “Constructive Termination” is defined as a resignation of Executive’s employment within ninety (90) days of the occurrence of any of the following events: (i) without
Executive’s written consent, a significant reduction of Executive’s duties or responsibilities relative to Executive’s duties or responsibilities in effect immediately prior to such reduction or (ii) without Executive’s written
consent, a reduction of greater than five percent (5%) by the Company of Executive’s Base Salary as in effect at any time within 12 (twelve) months immediately prior to such reduction. 
  
 8.    Confidential Information.  Executive agrees to enter into the Company’s standard Proprietary Information Agreement in
substantially the form attached hereto as Exhibit A (the “Proprietary Information Agreement”) upon commencing employment hereunder. 
  
 9.    Exclusive Consultancy Arrangement and Non-solicitation. 
  
         (a)    Exclusive Consultancy Arrangement.  If the Company terminates Executive other than for Cause or if Executive voluntarily terminates
as a result of a Constructive Termination 

 
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 pursuant to Section 5 of this Agreement, Executive shall be entitled to enter into an exclusive
consultancy arrangement (the “Exclusive Consultancy Relationship”) with the Company for twelve (12) months following termination (the “Consulting Period”). During such Consulting Period, Executive acknowledges that the nature of
the Company’s business is such that if Executive were to become employed by, or substantially involved in, the business of a competitor of the Company following the termination of Executive’s service with the Company, it would be very
difficult for the Executive not to rely on or use the Company’s trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company’s trade secrets and confidential information, Executive agrees and
acknowledges that as part of the Exclusive Consultancy Arrangement, Executive will not directly or indirectly engage in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or
otherwise), nor have any ownership interest in or participate in the financing, operation, management or control of, any person, firm, corporation or business that competes with the Company’s then current products or products under development
for the Consulting Period. The term “Exclusive Consultancy Relationship” applies only to Executive and does not prevent the Company from entering into or maintaining relationships, arrangements or agreements with other consultants.

  
         (b)    Non-Solicitation.  During Executive’s service to or employment with the Company and during the Consulting Period, Executive agrees and
acknowledges that he will not either directly or indirectly solicit, induce, attempt to hire, recruit, encourage, take away or hire any employee of the Company or cause any employee of the Company to leave his or her employment either for Executive
or for any other entity or person. 
  
         (c)    Understanding of Covenants.  The Executive represents that he (i) is familiar with the foregoing covenants not to compete and not to solicit,
and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. 
  
 10.    Assignment.  This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives
of Executive upon Executive’s death and (b) any successor or assignee of the Company. The Company shall ensure that any such successor or assignee of the Company, whether by operation of law or otherwise, shall assume and become bound by this
Agreement for all purposes. For this purpose, “successor or assignee” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.
Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void. 
  
 11.    Notices.  All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given (i) on the date of
delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the
parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing: 

 
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 If to the Company: 
  
 Kyphon Inc. 
 1350 Bordeaux Drive 
 Sunnyvale, CA 94089 
 Attn: Board of Directors 
  
 If to Executive: 
  
 At the last residential address known by the Company. 
  
 12.    Severability.  In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full
force and effect without said provision. 
  
 13.  Arbitration. 
  
         (a)    General.  In consideration of Executive’s
service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that
any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from
Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules
set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a
trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of
1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this
Agreement to arbitrate also applies to any disputes that the Company may have with Executive. 
  
         (b)    Procedure.  Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a
neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the
Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or
adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator shall issue a written decision on the merits. Executive also agrees that the arbitrator shall have the power to award any
remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except 

 
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 that Executive shall pay the first $200.00 of any filing fees associated with any arbitration Executive
initiates. Executive agrees that the arbitrator shall administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the
Rules, the Rules shall take precedence. 
  
         (c)    Remedy.  Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between Executive and the
Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. However, the arbitrator will not have the authority to disregard
or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted. 
  
         (d)    Availability of Injunctive Relief.  In addition to the right under the Rules to
petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Proprietary Information Agreement or any other
agreement between the Company and Executive regarding trade secrets, confidential information, non-solicitation or Labor Code ‘2870. In the event either party seeks injunctive relief, the prevailing party shall be entitled to recover reasonable
costs and attorneys fees. 
  
         (e)    Administrative Relief.  Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a
local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing
court action regarding any such claim. 
  
         (f)    Voluntary Nature of Agreement.  Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any
duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences
and binding effect of this Agreement and fully understands it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of
Executive’s choice before signing this Agreement. 
  
 14.    Integration.  This Agreement, together with the Stock Plan, the Option Agreement, the Proprietary Information Agreement and any other written document referred to herein, represents the
entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement
will be binding unless in writing and signed by duly authorized representatives of the parties hereto. 
  
 15.    Tax Withholding.  All payments made pursuant to this Agreement will be subject to withholding of applicable taxes. 

 
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 16.    Identification.  For purposes of
federal immigration law, Executive will be required to provide to the Company documentary evidence of Executive’s identity and eligibility for employment in the United States. Such documentation must be provided to the Company within three (3)
business days of the Effective Date, or Executive’s employment relationship with the Company may be terminated and Executive will not be entitled to any benefits provided under this Agreement. 
  
 17.    Non-Disclosure.  Executive will follow the Company’s strict policy that employees must
not disclose any information regarding salary, bonuses or stock purchase or option allocations to other employees, either directly or indirectly. 
  
 18.    Governing Law.  This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). 

 
 19.    Counterparts.  This Agreement may be executed in counterparts, each of which shall
be an original and all of which together shall constitute one instrument. 
  
 [Remainder of Page Intentionally Left Blank]

  

 
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 IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of the Effective Date. 
  
 
	 KYPHON INC.
 
	 
	 By:
 	 	 /s/ Jeffrey Kaiser        
 

	 
	 Date:
 	 	 September 3, 2002
 

	 
	 Title:
 	 	 Vice President, Finance and
Administration and Chief Financial
Officer
 

 
  
 
	 EXECUTIVE
 
	 
	 /s/ RICHARD MOTT
 

	 Richard Mott
 

 
  
 
	 Date:
 	 	 September 3, 2002
 

 

 
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 EXHIBIT A 
  
 PROPRIETARY INFORMATION AGREEMENT 
  
 As a condition of my employment with Kyphon Inc., its
subsidiaries, affiliates, successors or assigns (the “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following: 

 
 1.     At-Will Employment.  I understand and acknowledge that
my employment with the Company is for an unspecified duration and constitutes “at-will” employment. I acknowledge that this employment relationship may be terminated at any time, with or without good cause or for any or no cause, at the
option either of the Company or myself, with or without notice. 
  
 2.     Confidential
Information. 
  
 (a)     Company Information.  I agree at all times during
the term of my employment and thereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that “Confidential Information” means any of the Company’s proprietary information, technical data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but not limited to, customers of the Company on whom I called or with whom I became acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information disclosed to me by the Company either directly or indirectly in writing, orally or by
drawings or observation of parts or equipment. I further understand that Confidential Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act of mine or of others
who were under confidentiality obligations as to the item or items involved. 
  
 (b)    
Former Employer Information.  I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and
that I will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. 
  
 (c)     Third Party Information.  I recognize that the Company has received and in the future will
receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree to hold 

 
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 all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use
it except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party. 
  
 (d)     Duty to Abstain from Trading.  I agree that as a result of my relationship with the Company, I may periodically possess Confidential Information that is considered to be
“material” and “nonpublic” information. The term “material” is defined to be information that a reasonable investor would consider important in making an informed investment decision. The term “non-public”
means not made generally known by press release, conference call open to the public, or in a filing with the Securities and Exchange Commission. I also understand that the Company has adopted an insider trading policy that contains certain black-out
periods for holders of material non-public information. That black-out period starts on the first day of the last month of a fiscal quarter and ends two full days following the release of earnings or other material non-public financial information.
I agree not to buy, sell, pledge or otherwise trade, in the Company’s stock or options, or enter into any transaction having the same economic effect, while in possession of material non-public Confidential Information without preclearing my
trades with the Company’s Chief Financial Officer. I understand that this Agreement further requires that I not disclose Confidential Information to anyone until it otherwise becomes publicly available. 
  
  
 3. Inventions. 
  
 (a)     Inventions Retained and Licensed.  I have attached hereto, as Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me prior to my employment with the Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to the Company’s proposed
business, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there are no such Prior Inventions. If in the course of my employment with the Company, I
incorporate into a the Company product, process or machine a Prior Invention owned by me or in which I have an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or machine. 
  
 (b)     Assignment of Inventions.  I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to
the Company, or its designee, all my right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements or trade secrets, whether or not patentable or registrable under copyright or
similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or 

 
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 reduced to practice, during the period of time I am in the employ of the Company (collectively referred to as “Inventions”), except as
provided in Section 3(f) below. I further acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company and which are protectible by
copyright are “works made for hire,” as that term is defined in the United States Copyright Act. 
  
 (c)     Inventions Assigned to the United States.  I agree to assign to the United States government all my right, title, and interest in and to any and all Inventions whenever such full title is
required to be in the United States by a contract between the Company and the United States or any of its agencies. 
  
 (d)     Maintenance of Records.  I agree to keep and maintain adequate and current written records of all Inventions made by me (solely or jointly with others) during the term of my employment
with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property of the Company at all times. 

 
 (e)     Patent and Copyright Registrations.  I agree to assist the Company, or its
designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to
apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or
other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the
Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or
original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by me. 

 
 (f)     Exception to Assignments.  I understand that the provisions of this Agreement
requiring assignment of Inventions to the Company do not apply to any 

 
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 invention which qualifies fully under the provisions of California Labor Code Section 2870 (attached hereto as Exhibit B). I will advise
the Company promptly in writing of any inventions that I believe meet the criteria in California Labor Code Section 2870 and not otherwise disclosed on Exhibit A. 
  
 4.     Conflicting Employment.  I agree that, during the term of my employment with the Company, I will not engage in any other
employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage in any other activities that conflict with my
obligations to the Company. 
  
 5.     Returning the Company Documents.  I agree
that, at the time of leaving the employ of the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by me pursuant to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification.” 
  
 6.     Notification of New Employer.  In the event that I leave the employ of the Company, I hereby grant consent to notification by the Company to my new employer
about my rights and obligations under this Agreement. 
  
 7.     Solicitation of
Employees.  I agree that for a period of twelve (12) months immediately following the termination of my relationship with the Company for any reason, whether with or without cause, I shall not either directly or indirectly solicit,
induce, recruit or encourage any of the Company’s employees to leave their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of the Company, either for myself or for any other
person or entity. 
  
 8.     Conflict of Interest Guidelines.  I agree to
diligently adhere to the Conflict of Interest Guidelines attached as Exhibit C hereto. 
  
 9.     Representations.  I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of
this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or
written agreement in conflict herewith. 

 
 13 

 10.    Arbitration and Equitable Relief. 
  

(a)    Arbitration.  Except as provided in Section 10(b) below, I agree that any dispute or
controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in San Francisco County, California, in accordance with the rules then in effect of the
American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered
on the arbitrator’s decision in any court having jurisdiction. The Company and I shall each pay one-half of the costs and expenses of such arbitration, and each of us shall separately pay our counsel fees and expenses. 
  
 (b)    Equitable Remedies.  I agree that it would be impossible or
inadequate to measure and calculate the Company’s damages from any breach of the covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if I breach any of such Sections, the Company will have available, in addition to any
other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specific performance of any such provision of this Agreement. I further agree that no bond
or other security shall be required in obtaining such equitable relief and I hereby consent to the issuance of such injunction and to the ordering of specific performance. 
  
 11.    General Provisions. 
  
 (a)    Governing Law; Consent to Personal Jurisdiction.  This Agreement will be governed by the laws of the State of California. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in California for any lawsuit filed there against me by the Company arising from or relating to this Agreement. 
  
 (b)    Entire Agreement.  This Agreement sets forth the entire agreement and understanding between the
Company and me relating to the subject matter herein and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this agreement, will be effective unless in writing signed by the
party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement. 
  
 (c)    Severability.  If one or more of the provisions in this Agreement are deemed void by law, then the remaining
provisions will continue in full force and effect. 

 
 14 

 (d)    Successors and Assigns.  This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. 
  
 
	 
	 /s/    Richard Mott        
 
	 	  	 	 September 5, 2002    
 

	 Signature
 	 	  	 	 Date
 
	 
	 Richard Mott
 
	 	  	 	  
	 Name of Employee (typed or printed)
 	 	  	 	  

 
  
  

 
 15 

 EXHIBIT A 
  
 LIST OF PRIOR INVENTIONS 
 AND ORIGINAL WORKS OF AUTHORSHIP 
  
 
	 Identifying Number
 
	    	  
	 Title
 
	  	 Date
 
	    	 or Brief Description
 

 
  
 To be attached 
  
  
  ̈    No inventions
or improvements 
  
 x    Additional Sheets Attached 
  
  
 Signature of Employee:  Richard
Mott                             
  
 Print Name of Employee:  Richard Mott                        

  
 Date:  9-5-02                                 
                                 

 
 16 

 EXHIBIT B 
  
 CALIFORNIA LABOR CODE SECTION 2870 
 EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS 
  
 “(b)     Any provision in an employment agreement which provides that an employee shall assign, or offer to
assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret
information except for those inventions that either: 
  
 (1)     Relate at the time of conception
or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer. 
  
 (2)     Result from any work performed by the employee for the employer. 
  
 (c)     To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under
subdivision (a), the provision is against the public policy of this state and is unenforceable.” 

 
 17 

  
 EXHIBIT C 
  
 KYPHON INC. 
  
 CONFLICT OF INTEREST
GUIDELINES 
  
 It is the policy of the Company to conduct its affairs in strict compliance with the letter and
spirit of the law and to adhere to the highest principles of business ethics. Accordingly, all officers, employees and independent contractors must avoid activities which are in conflict, or give the appearance of being in conflict, with these
principles and with the interests of the Company. The following are potentially compromising situations which must be avoided. Any exceptions must be reported to the President and written approval for continuation must be obtained. 

 
 1.    Revealing confidential information to outsiders or misusing confidential information. Unauthorized
divulging of information is a violation of this policy whether or not for personal gain and whether or not harm to the Company is intended. (The Employment, Confidential Information and Invention Assignment Agreement elaborates on this principle and
is a binding agreement.) 
  
 2.    Accepting or offering substantial gifts, excessive
entertainment, favors or payments which may be deemed to constitute undue influence or otherwise be improper or embarrassing to the Company. 
  
 3.    Participating in civic or professional organizations that might involve divulging confidential information of the Company. 
  
 4.    Initiating or approving personnel actions affecting reward or punishment of employees or applicants where there
is a family relationship or is or appears to be a personal or social involvement. 
  
 5.    Initiating or approving any form of personal or social harassment of employees. 
  
 6.    Investing or holding outside directorship in suppliers, customers, or competing companies, including financial speculations, where such investment or directorship might influence in any manner a decision or
course of action of the Company. 
  
 7.    Borrowing from or lending to employees, customers or
suppliers. 
  
 8.    Acquiring real estate of interest to the Company. 

 
 18 

  
 9.    Improperly using or disclosing to the Company any
proprietary information or trade secrets of any former or concurrent employer or other person or entity with whom obligations of confidentiality exist. 
  
 10.    Unlawfully discussing prices, costs, customers, sales or markets with competing companies or their employees. 
  
 11.    Making any unlawful agreement with distributors with respect to prices. 
  
 12.    Improperly using or authorizing the use of any inventions which are the subject of patent claims of any other person or entity. 

 
 13.    Engaging in any conduct which is not in the best interest of the Company. 
  
 Each officer, employee and independent contractor must take every necessary action to ensure compliance with these guidelines and to bring
problem areas to the attention of higher management for review. Violations of this conflict of interest policy may result in discharge without warning. 

 
 19 

  
 [Table of Patents] 

 
 20Sublicense Agreement: Bonutti Research, Inc.

  
 Exhibit 10.13 
  
 KYPHON-BRI SUBLICENSE AGREEMENT 
  
 This
KYPHON-BRI Sublicense Agreement (this “Agreement”), is made and entered into as of this 19th day of August, 2002 (hereinafter “Effective Date”), by and between Bonutti Research Inc., an Illinois corporation (hereinafter
“BRI”), and KYPHON Inc., a Delaware corporation (“KYPHON”). 
  
 WITNESSETH: 
  
 WHEREAS, General Surgical Innovations, Inc. (“GSI”) was assigned, pursuant to the Apogee Agreement (as defined below), and owns
certain patents and patent applications disclosing or claiming the “Bonutti Inventions” (as defined in the Apogee Agreement and set forth on Exhibit A attached hereto and made a part hereof) (such patents, together with any continuation,
continuation-in-part, divisional, reissued or reexamined patent thereof, any patent application, or any foreign counterpart application of any such patents and applications, as well as any patents claiming priority to any of the foregoing patents,
are sometimes collectively referred to as the “Licensed Patents”); 
  
 WHEREAS, GSI and Apogee Medical
Products, Inc. (which subsequently changed its corporate name to Bonutti Research, Inc.) entered into a certain Agreement (the “Apogee Agreement”) dated March 9, 1995 (by GSI) and February 28, 1995 (by BRI); 
  
 WHEREAS, various disputes have arisen under the terms of and with respect to the Apogee Agreement, which disputes have been contested in a
certain lawsuit entitled Bonutti Research, Inc. and Peter M. Bonutti, M.D. vs. General Surgical Innovations, Inc., Civil Action 

  
 No. 99-4062-GPM, United States District Court for the Southern District of Illinois (the
“Lawsuit”); 
  
 WHEREAS, GSI, BRI and Dr. Peter M. Bonutti have entered into a certain Settlement Agreement
and Mutual General Release (the “Settlement”), part of the consideration of which is the execution and performance of a certain GSI-BRI License Agreement (the “GSI Agreement”) and the right of BRI to enter into this Agreement;
and 
  
 WHEREAS, the parties hereto desire to enter into this Agreement for their respective benefit. 

 
 NOW, THEREFORE, for and in consideration of the promises and the covenants hereinafter recited, it is understood and agreed as
follows: 
  
 1.    SUBLICENSE GRANT 
  
 1.1    Exclusive Sublicense in KYPHON Exclusive Field.  BRI hereby grants to KYPHON the exclusive, worldwide, royalty-free right and
sublicense to make, have made, use, import, export, offer to sell and sell any product and practice or promote any process or method covered by at least one valid and enforceable claim of the Licensed Patents (such products, processes and/or
methods, collectively, the “Products”) for use within the KYPHON Exclusive Field (as “KYPHON Exclusive Field” is defined on Exhibit B attached hereto and made a part hereof). KYPHON understands and agrees that BRI’s right to
grant the sublicense set forth herein and in section 1.2 derives from the Settlement and the GSI Agreement and that GSI has consented to such grant by BRI to KYPHON pursuant to the GSI Agreement. KYPHON further agrees that BRI shall not be liable or
responsible to KYPHON or any Affiliate (as defined herein) in any way 

 
 2 

  
 for any breach, default, action or inaction by GSI or any Affiliate thereof, whether under the GSI
Agreement or otherwise. As used in this Agreement, the term “Affiliate” of a party shall mean an entity that owns the majority of equity of, or the majority of its equity is owned by, or is under common ownership with, such party.

  
 1.2    Non-Exclusive Sublicense in Co-Exclusive Field.  BRI hereby grants to
KYPHON the non-exclusive, worldwide, royalty-free, right and sublicense to make, have made, use, import, export, offer to sell and sell any product and practice any process covered by at least one valid and enforceable claim of the Licensed Patents
solely in the Co-Exclusive Field (as defined on Exhibit C) (such rights and license, the “Co-Exclusive Rights”). The parties agree that any Products which do not fall within the scope of the KYPHON Exclusive Field or the Co-Exclusive Field
fall in the Field of General Surgery (as defined on Exhibit D), provided that if a party believes that such Product is in the Exclusive Field or Co-Exclusive Field, it shall notify the other party, as well as GSI. KYPHON, BRI and GSI would then meet
to resolve which field is appropriate for such Product. If the issue is not resolved in a reasonable period of time, not to exceed thirty (30) days, the matter will be resolved pursuant to Article 11. In the event of a termination of the GSI
Agreement, BRI’s rights hereunder may be assigned to GSI, subject to the exception that GSI shall have no right to further license, sublicense or assign any of BRI’s rights to a third party (except in accordance with the terms of this
Agreement) and therefore at that time there would be only GSI and KYPHON with rights in the Co-Exclusive Field. 
  
 1.3    Limitations on KYPHON’s Use of Sublicensed Patents.  KYPHON understands, acknowledges and agrees that (a) the sublicense set forth in section 1.2 is co-exclusive and the right to make,
have made, use, import, export, offer to sell and sell any product and practice any process covered by at least one valid and enforceable claim of the Licensed Patents in the Co- 

 
 3 

  
 Exclusive Field is also held by BRI and GSI subject to various restrictions enumerated in section 1.4
below, (b) KYPHON is not authorized to and will not license, sublicense or in any way sell (except for a sale by KYPHON of all of KYPHON’s Co-Exclusive Rights in a single transaction to a single entity and its Affiliate) the rights to make,
use, offer to sell or sell any product and practice any process covered by at least one valid and enforceable claim of any of the Licensed Patents granted in sections 1.1 and/or 1.2 above, (c) except for a permitted sale by KYPHON under section 1.4
hereof, or an assignment to an Affiliate of KYPHON, KYPHON may not sell, assign, mortgage, pledge, encumber, or otherwise transfer any of the rights to use the Licensed Patents individually and all such rights must be transferred together only in
connection with the sale of all or substantially all of the business and assets of KYPHON, and, in all such events, the transferee must agree to be bound by all of the terms and provisions of this Agreement and (d) KYPHON will not make, use, offer
to sell or sell any Product covered by any of the Licensed Patents in any Field except for the licenses set forth in sections 1.1 and 1.2 above, including the GSI Exclusive Field (as set forth on Exhibit D). GSI is a third party beneficiary of this
Section 1.3. 
  
 1.4    Limitations of Use of Licensed Patents by BRI and
KYPHON.  BRI understands, acknowledges and agrees, and will cause its Affiliates to agree, that (a) BRI and its Affiliates will not, directly or indirectly (including by providing any assistance, information, intellectual property or
materials), develop, manufacture, market, sell, or promote any Product which is sold for use in the KYPHON Exclusive Field and is covered by at least one valid and enforceable claim of the Licensed Patents and (b) BRI and its Affiliates shall not
mortgage, pledge or otherwise encumber or grant any further licenses to, or sell or assign ownership of, any of its rights with respect to the Licensed Patents in any Field (including any rights retained by BRI and 

 
 4 

  
 its Affiliates in the Licensed Patents). Notwithstanding the foregoing, BRI shall have the sole right to
assign ownership of its rights to use the Licensed Patents in the Co-Exclusive Field, in their entirety in a single transaction to a single entity subject to the provisions of the balance of this section. It is further understood and agreed that:

  
         (a)    Prior to any sale, transfer, license
or assignment (“Sale”) of BRI’s Co-Exclusive Rights under this Agreement, BRI shall give written notice to KYPHON and GSI (collectively, the “Other Party”) of its desire to conduct the Sale and its desired terms, price and
conditions (the “Sale Notice”). BRI and the Other Party shall, for a period of thirty (30) days after the date on which the Sale Notice is received or deemed received by the Other Party (the “Negotiation Period “), negotiate in
good faith to enter into a Sale. In the event that the parties do not enter into a definitive binding agreement regarding a Sale after the completion of the Negotiation Period, then BRI shall be free to sell, subject to section 1.4(b) below, for a
period of 180 days, the rights to the Licensed Patents as set forth in the Sale Notice (the “Ultimate Sale”). The actual consideration received by BRI from the buyer (the “Buyer”) in the Ultimate Sale shall not be lower than 95%
of the equivalent amount last negotiated in the Negotiation Period, and if not negotiated during the Negotiation Period, not lower than the amount proposed in the Sale Notice. BRI shall also comply with the provisions of section 1.4(b) below. This
section 1.4(a) shall apply to any offer made by BRI or received by BRI, whether or not such offer is solicited or unsolicited. 
  
         (b)    Prior to any sale, transfer, license or assignment of any party’s Co-Exclusive Rights under this Agreement (“Ultimate Sale”), the party wishing
to make such sale (the “Selling Party”) shall not enter into any letter of intent, indication of interest, or similar 

 
 5 

  
 preliminary agreement with respect to an Ultimate Sale, or enter into any binding agreement with respect
to an Ultimate Sale, or close any Ultimate Sale unless the Selling Party has first: 
  
         (i)    provided written notice (“Notice of Ultimate Sale”) to the other party and GSI (collectively, the “Litigation Party”) of the Ultimate Sale
and the proposed Buyer (with no obligation to disclose any salient financial terms except for the Licensed Patents desired to be part of the Sale and the Field affected by the Sale); 
  
         (ii)    provided the Litigation Party with a period of sixty (60) days after the date on which the
Notice of Ultimate Sale is received or deemed received (“Cease and Desist Period”) by the Litigation Party to contact the Buyer or any Affiliate thereof to either or both seek damages from or obtain an injunction against such Buyer or
Affiliate for any substantial infringement on one or more of the Licensed Patents in the Field in which the Litigation Party has been granted a license or otherwise retains rights in the Licensed Patents; and 
  
         (iii)    provided Litigation Party a period of thirty (30) days after
the expiration of the Cease and Desist Period (the “Litigation Period”) to institute litigation by commencing an action in a court or arbitration panel of competent jurisdiction (“Litigation”) against the Buyer or any Affiliate
thereof alleging in good faith that the Buyer or any Affiliate is substantially infringing on one or more of the Licensed Patents in the Field in which the Litigation Party has been granted a license or otherwise retains rights therein.

  
 The Litigation Party shall keep the Notice of Ultimate Sale confidential and treat it as Information pursuant to
section 4 hereof. For a period of 180 days from and after the delivery of the Notice of Ultimate Sale to the Litigation Party, the Litigation Party shall also not contact or solicit the Buyer, its Affiliates or its agents (including its financial
advisors) regarding the 

 
 6 

  
 possibility of Buyer or its Affiliates engaging in an Ultimate Sale or related transaction with the
Litigation Party, unless the Litigation Party can demonstrate that the Litigation Party (or its Affiliates or agents) have, within the period of 90 days prior to the receipt of the Notice of Ultimate Sale, either solicited, been solicited or been in
discussions with the Buyer or its Affiliates regarding an Ultimate Sale involving the Litigation Party or its Affiliates. 
  
 In the event that the Selling Party has provided the Litigation Party with the requisite Notice of Ultimate Sale: 
  
         (x)    if the Litigation Party desires to enter into the Litigation Period, then it shall furnish to (I) the Selling Party a copy of the complaint or demand letter
against Buyer or its Affiliates or its or their sales agents or distributors (the “Infringement Notice”) and (II) the Buyer or its Affiliate a letter (or actually file a suit at law or in equity) seeking damages and/or and injunction
relating to the material infringement described in the Infringement Notice; 
  
         (y)    if, prior to the expiration of the Litigation Period, no lawsuit is filed by the Litigation Party against the Buyer or its Affiliate relating to the Notice of
Infringement or an agreement to cease and desist such infringing behavior is entered into between the Buyer and the Litigation Party, then the Selling Party is free to consummate and close the Ultimate Sale to the Buyer provided that the Ultimate
Sale closes within 180 days from the expiration of the Litigation Period (even if during the period from the expiration of the Litigation Period to the date that the Ultimate Sale closes the Litigation Party changes its mind, discovers new facts or
new facts arise or conduct commences which could support a claim of substantial infringement); and 

 
 7 

  
         (z)    if the Litigation Party does
institute Litigation during the Cease and Desist Period or the Litigation Period, then the Ultimate Sale may not be closed until the Litigation is settled, resolved or dismissed with prejudice, and the period for filing all notices of appeal, or all
appeals, have elapsed, provided that the Litigation shall be prosecuted at all times by the Litigation Party diligently and in good faith. Notwithstanding anything to the contrary in section 7.2(b), the Litigation Party may control the Litigation
and recover and retain all proceeds therefrom (including proceeds from infringement relating to periods prior to the date hereof) and the Selling Party may participate in the prosecution as contemplated in section 7.2(b). As used herein, the terms
Sale and Ultimate Sale include all forms of direct or indirect sales, assignments or transfers of the Co-Exclusive Rights including a joint venture or strategic alliance involving such party(ies), or management or similar agreements whereby the
effective control over some or all of the Licensed Patents in the Co-Exclusive Field is conveyed to a person not a party to this Agreement. This section 1.4(b) shall be inapplicable to a sale of a controlling interest in the stock or ownership
interests in or a merger of KYPHON or GSI (where such merger results in a change in the effective control of such entity). Moreover, sections 1.4(a) and 1.4(b) shall be inapplicable to a sale of a controlling interest in the stock in BRI or a merger
of BRI (where such merger results in a change in the effective control of BRI), if BRI is the Selling Party, at the time of such sale or merger of BRI, the purchase price of BRI exceeds $[****] in cash or its equivalent. 
  
         (c)    This Section 1.4(b) shall not preclude the assignment of all rights under this
Agreement to an Affiliate of a party. In the event of any assignment, Sale or Ultimate Sale, the acquiror of any rights under this Agreement or assignee shall remain bound by the terms hereof. In the event of a sale of a controlling interest in the
stock or ownership interests in or a 
  
  
 ****    Confidential Treatment
Requested 

 
 8 

  
 merger of KYPHON, GSI or BRI (where such merger results in a change in the effective control of such
entity) (an “Event”), and if the entity is BRI, the aggregate consideration related to such Event exceeds $[****] or its equivalent, the assignment of rights under this agreement shall occur automatically upon the effective date of the
merger. This Agreement shall be binding upon and inure to the benefit of KYPHON, BRI and their respective legal representatives, permitted assigns and Affiliates. 
  
         1.5    Intentionally Deleted. 
  
 1.6    No Off-Label Use Permitted.  The parties understand and agree that the Licensed Patents relate to the right to make, use, offer to sell or sell Products in particular Fields and acknowledge
that the same Product may theoretically have application and utility to more than one Field but may only be made, used, offered for sale or sold for use in a specific Field as is permitted under this Agreement. In furtherance of the foregoing, the
parties understand and agree that they will only make, use, offer to sell and sell, and use their reasonable best efforts to assure that their distributors and agents only offer to sell and sell, the Products in the specific Field provided in this
Agreement. The parties further agree that they will only seek approval for indications from the Food and Drug Administration (or, if applicable, foreign counterparts) for said Products within the Fields specified under this Agreement and will not
apply to any such U.S. or foreign government agency for a specific use, application, approval right, indication, 510(K), PMA or other approval or use for such Products specifically beyond the specified Fields described herein. In the event that one
party (the “notifying party”) notifies the other party or its Affiliates (the “notified party”) of a substantial off-label promotion by the notified party or its sales agents or distributors of a Product in the notifying
party’s exclusive Field, the notified party shall immediately take commercially reasonable and necessary steps to cause such off-label 
  
  
 ****    Confidential Treatment Requested 

 
 9 

  
 promotion to cease and desist and to prevent it from occurring in the future. KYPHON understands that
BRI is in no way responsible for any conduct, actions or inactions by GSI or its Affiliates regarding the subject matter contained in this section and BRI understands that KYPHON shall have the right to pursue GSI directly for violation of this
provision as a third party beneficiary under the GSI Agreement. GSI is an intended third party beneficiary of this section 1.6. 
  
 1.7    Term.  Unless this Agreement is earlier terminated in accordance with the terms hereof, the term of this Agreement shall commence on the date first written above and shall continue and
terminate on the date of the expiration of the last of the Licensed Patents, provided that upon termination hereof, all obligations under Articles 4, 7, 11, 12, 14, 15 and 16 shall survive the termination for the applicable statute of limitations
period. 
  
 2.    REMUNERATION . 
  
 2.1    Fully-Earned Consideration.  In exchange for the license to KYPHON as specified in sections 1.1 and 1.2 hereof, which license is
being granted in connection with the Settlement, and the Consulting Agreement (as defined in section 2.2 below) KYPHON agrees to pay to BRI non-refundable (except as may be provided in section 6.1 to the contrary) and fully earned payments as
follows in this section 2. 
  
 2.2    Cash Payment.  On the date hereof, KYPHON
shall pay to BRI the total sum of Twelve Million Five Hundred Thousand Dollars ($12,500,000.00) (the “Sum”) payable by wire transfer of immediately available same day funds to an account or accounts specified by BRI. The Sum shall be
allocated as follows: (a) Twelve Million Two Hundred Fifty Thousand Dollars ($12,250,000.00) shall be allocated to and shall be in respect of the rights and privileges granted 

 
 10 

  
 to KYPHON under this Agreement and (b) Two Hundred Fifty Thousand Dollars ($250,000.00) shall be
allocated to a consulting agreement between Dr. Peter M. Bonutti and KYPHON (the “Consulting Agreement”). The Consulting Agreement shall be negotiated promptly and in good faith after the execution of this Agreement and shall provide that
Dr. Bonutti shall perform for KYPHON 15 days of consulting services per year during the two year period following the execution of the Consulting Agreement relating to the Products in the KYPHON Exclusive Field and Co-Exclusive Field. The entire
$250,000 payment allocated to the Consulting Agreement shall be paid on the date hereof and shall be deemed fully earned even though Dr. Bonutti shall render services over a two year period to KYPHON. 
  
 3.    MANUFACTURE OF PRODUCTS 
  
 Each party agrees that all Products covered by the Licensed Patents shall be manufactured, used, labeled, sold, distributed, promoted and advertised by such party in accordance with all applicable
Federal, State and local, and if appropriate, foreign laws and regulations. So long as this Agreement is in effect, and if so requested in writing by a party, each party shall legibly mark all articles sold by it and covered by any Licensed Patents
with the issued patent number of any such Licensed Patent or application as soon as reasonably possible after being notified by GSI of such issued Licensed Patent, provided that KYPHON shall include such notice, only at its option, in connection
with Products in the Exclusive Field. 
  
 4.    CONFIDENTIAL INFORMATION; NON-CIRCUMVENTION

  
 During the term of this Agreement and for a period of five (5) years thereafter, each party agrees to keep and
maintain, and cause its Affiliates to keep and maintain, all confidential aspects of the Licensed Patents and any other non-public information (collectively, the 
  

 
 11 

  
 “Information”) disclosed by one party to one or more parties under the terms of this
Agreement, confidential, including the terms of this Agreement and the GSI Agreement, provided, however, that the provisions of this section shall apply only to information which, prior to disclosure to a party, was not lawfully known or was not
subject to restricted use or disclosure by such party or an Affiliate (and thereafter shall exclude information if and after it becomes lawfully known by such party or one of its Affiliates from any entity or source other than a party to this
Agreement or GSI or its Affiliates or agents and is not subject to restricted use or disclosure), and only while the Information is not lawfully in the public domain from a source other than a party or its Affiliates or Representatives or GSI or its
Affiliates or Representatives (and then the provisions of this section will lapse only with respect to any such Information which is then lawfully in the public domain from a source other than a party or GSI or its or their Affiliates or
Representatives). Not in limitation of the foregoing, each party undertakes and agrees that it and its Representatives (as defined below) (i) will keep the Information confidential and will not (except as required by applicable law, regulation or
legal process, and only after enabling the other parties to seek a protective order), without the other parties’ prior written consent, disclose any Information in any manner whatsoever and (ii) will not use any Information other than in
connection with the Agreement; provided, however, that a party may reveal the Information to its Representatives (a) who need to know the information solely for the purpose of implementing this Agreement, (b) who are informed by such party of the
confidential nature of the Information and (c) who agree to act in accordance with the terms of this Agreement, and such party will be responsible for any breach of this agreement by any Representative. The term “Representative” includes a
party’s directors, officers, employees and agents, and directors, officers, employees and agents of its Affiliates, and such party’s and its Affiliates’ financial advisors, attorneys and 

 
 12 

  
 accountants. BRI and GSI understand and acknowledge that this Agreement may constitute a material
agreement for KYPHON within the meaning of the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”) and that this Agreement shall, to the extent legally required after taking
account of such portions thereof as legally may be redacted, be included as an exhibit to KYPHON’s SEC filings, a true and correct copy of which shall be promptly furnished to BRI and GSI. To the extent practical, copies of such exhibits
relating to this Agreement shall be provided to GSI and BRI within a reasonable period of time prior to its filing. Notwithstanding the foregoing, it shall not be a breach of this Agreement (i) for GSI, KYPHON and/or BRI to state that the Lawsuit
has been settled to the mutual satisfaction of the parties thereto, (ii) in the event of an action believed to be in breach of this Agreement, to file under seal with the court in such action such terms of this Agreement as are reasonably necessary
in order to bring or defend such action, (iii) for each party to share the terms of this Agreement with its counsel, provided such counsel is or has been made aware of the obligations of confidentiality herein, (iv) for any party to disclose such
information as may be required by law or court order, after first having given the other party at least ten (10) days written notice of such legal requirement or order of court and intent to disclose pursuant to said requirement or order and (v)
subject to and in accordance with the provisions of section 15 hereof, KYPHON may publicly state that it has concluded an agreement among GSI and BRI providing KYPHON with the rights to the Licensed Patents in accordance with the terms hereof.

  
 5.    Intentionally Deleted 
  
 6.    PATENT PROCUREMENT AND MAINTENANCE  

 
 13 

  
 6.1    Ownership.  The parties understand
and agree that, pursuant to the GSI Agreement, GSI has agreed to prosecute and maintain the Licensed Patents at its sole cost and expense, including all filing fees, extension fees and notices and all other requirements to keep the Licensed Patents,
issued or pending as of the date of this Agreement, valid and in effect. GSI has agreed to forward to BRI and KYPHON copies of all the Licensed Patents pending as of the date of this Agreement with the United States Patent and Trademark Office
(USPTO) and all related material notices from the USPTO. GSI also agrees that, unless exigent circumstances exist, it shall, prior to sending any material correspondence relating to the Licensed Patents to the USPTO, forward a copy of such
correspondence to BRI and KYPHON, granting BRI and KYPHON a reasonable opportunity, not less than 5 business days from receipt of the draft correspondence, to comment upon said correspondence before it is filed with the USPTO, provided that GSI may
accept or reject such comments in its sole reasonable judgment. GSI has agreed that BRI or KYPHON may discuss with GSI requests to make additional claims in the foregoing patent applications and, at the expense of the Party requesting it, to effect
such additions by amendment, re-issue or re-examination, divisional, continuation application but not including a continuation-in-part application (any such amendment, re-issue or re-examination, divisional or continuation which pursuant to such
request GSI files with the USPTO, a “Continued Application”). GSI has agreed to consider such requests in good faith. In the event that GSI determines in its sole discretion not to file a Continued Application which has been requested to
be filed by KYPHON or BRI (which determination may be inferred if GSI has not responded to either of said party’s written request within sixty (60) days of making said request), GSI shall grant to KYPHON or BRI (the “Requesting
Party”) the right to file and prosecute a Continued Application of the nature and scope requested by the Requesting Party, and GSI and 

 
 14 

  
 the Non-Requesting Party (as defined below) shall assist the Requesting Party, as it may reasonably
request and at its expense, in prosecuting such Continued Application, provided that (i) the Continued Application which the Requesting Party desires to file must provide a demonstrable material benefit to the Requesting Party, (ii) if the
Requesting Party is KYPHON, such Continued Application shall relate to the KYPHON Exclusive Field and/or Co-Exclusive Field, and if the Requesting Party is BRI, such Continued Application shall relate to the Co-Exclusive Field, and in both cases
shall not have any material adverse impact on any of the Licensed Patents in the GSI Exclusive Field or any rights of either KYPHON, GSI or BRI in the Co-Exclusive Field, and, if BRI is the Requesting Party, there shall be no material adverse impact
on any of the Licensed Patents in the KYPHON Exclusive Field, (iii) the Requesting Party shall give GSI and KYPHON (if it is not the Requesting Party or BRI (if it is not the Requesting Party) (the “Non-Requesting Party”) the opportunity
to comment on and object to all material correspondence with the USPTO related to the Continued Application prior to any sending of such correspondence (such right to comment to be no less than 5 business days), (iv) the reasonable costs, fees and
expenses of GSI’s and the Non-Requesting Party’s counsel who may, in GSI’s and the Non-Requesting Party’s individual discretion, participate in and assist the Requesting Party in the preparation and prosecution of the Continued
Application shall be borne by the Requesting Party and (v) the Requesting Party shall bear all costs, fees and expenses payable to the USPTO relating to the filing and maintenance of the Continued Application. Notwithstanding the foregoing, GSI has
agreed in the event GSI determinates to abandon prosecution or maintenance of any of the Licensed Patents or Continued Applications, during the term of this Agreement, it shall use its reasonable commercial efforts to provide at least thirty (30)
days prior notice of such action to BRI and KYPHON, and KYPHON, in its discretion and 

 
 15 

  
 at its sole cost and expense, may assume prosecution or maintenance of such Licensed Patents or
Continued Application (it being understood that GSI shall use its reasonable commercial efforts, sufficiently in advance of the actual date of abandonment, to permit KYPHON and/or BRI the reasonable opportunity to take steps, should either party so
choose, to preserve the validity of the Licensed Patents or Continued Application). If KYPHON decides not to pursue prosecution or maintenance of such Licensed Patents or Continued Application, KYPHON shall provide BRI and GSI with at least thirty
(30) days prior notice of such action to BRI and GSI, and BRI may assume prosecution or maintenance of such Licensed Patents or Continued Application. In such event and insofar as the same concern any Licensed Patent as to which BRI or KYPHON has
assumed responsibility for prosecution or maintenance in accordance with the foregoing, BRI will promptly provide KYPHON with copies received by BRI from GSI of all correspondence to or from the U.S. Patent and Trademark Office and foreign
counterparts regarding all examinations, inquiries, filings, renewals, extensions, fees, evidence of payment of fees and other correspondence relating to such Licensed Patents or Continued Applications. KYPHON shall not (a) initiate, or aid and abet
others to initiate, any legal proceeding or action in any court or with the United States Patent and Trademark Office or any foreign counterpart to challenge GSI’s ownership of or right to license, or the validity of the Licensed Patents,
Continued Applications or any application for issuance thereof nor (b) contest the fact that KYPHON’s rights under this Agreement are solely those of a sublicensee in the respective Fields in accordance with the terms of this Agreement. In the
event that any of the Licensed Patents or Continued Applications are declared by a court of competent jurisdiction to be invalid or unenforceable, neither party shall have any recourse against the other nor shall BRI be required to return in whole
or in part any sums paid to it under Article 2 hereunder except to the extent 

 
 16 

  
 that the Licensed Patents are invalidated based on a Third Party Action by a court of competent
jurisdiction for fraud on the Patent Office committed substantially and predominantly by BRI or Dr. Peter M. Bonutti are deemed unenforceable based on a Third Party Action because of inequitable conduct substantially and predominantly by BRI or Dr.
Peter M. Bonutti, it being understood that (a) any such invalidation or unenforceability for the reasons and subject to the limitations set forth above shall be pursuant to a final, binding and non-appealable order, (b) more than three-quarters
(3/4) of the Licensed Patents must be so invalidated and/or rendered unenforceable for the reasons and subject to the limitations set forth above before BRI may be responsible for any such damages, (c) any damages so assessed against BRI shall be
determined by a court of competent jurisdiction after considering a variety of fair and equitable considerations and factors including without limitation the remaining term of the Licensed Patents, the revenues generated by KYPHON under this
Agreement and other fair and equitable considerations and (d) no damages will be assessed (x) after the first to occur of (I) three years from the date hereof or (II) a Sale or Ultimate Sale of KYPHON or a sale of a controlling interest in the
shares of KYPHON or a merger effecting KYPHON where there is a 50% of more change in the shareholders of KYPHON, (y) in the event that KYPHON has also engaged substantially and predominantly in any inequitable conduct or otherwise breached its
representation and warranty set forth in the last sentence of section 8 hereof or (z) based on any action or inaction by GSI that is determined by a court of competent jurisdiction to be substantially and predominantly at fault for such enumerated
conduct. 
  
 7.    INFRINGEMENT 
  
 7.1    Actions By Third Parties.  In the event either party is accused of infringing any patent or
other intellectual property right of a third party, involving any claim of patent 

 
 17 

  
 infringement based upon the manufacture, use, offer for sale or sale of a Product under the Licensed
Patents, such party shall promptly notify the other party and GSI in writing of such claim. In the event that any suit, action or other proceeding is brought against any party involving any such accusation of infringement of or by the Products, the
named party shall promptly notify the other and GSI in writing. With respect to any such accusation, suit, action or other proceeding (“Third Party Action”), the party named in any such Third Party Action will promptly provide the other
party with copies of the complaint, answer or motion to dismiss and, subject to appropriate protective orders, all pleadings received from any such third party. The parties will cooperate with each other, and will, on reasonable notice, permit and
provide any of its employees, officers, directors, shareholders, agents and other representatives to testify when requested by the other party; and will, on reasonable notice, make available to each other all relevant records, papers, information,
samples, specimens and the like. Unless BRI or Dr. Peter M. Bonutti are also defendants in the Third Party Action and actually receive a monetary recovery from the Third Party Action, BRI and Dr. Peter M. Bonutti shall be entitled to reimbursement
from KYPHON of BRI’s and Dr. Peter M. Bonutti’s reasonable out of pocket costs and expenses (including without limitation court costs and reasonable attorneys’ fees and expenses) incurred in such defense of any action brought against
KYPHON and for which KYPHON has requested such person’s assistance and in the case of Dr. Bonutti, reimbursement for his lost professional time resulting from such cooperation. 
  
 7.2    Actions Against Third Parties.  KYPHON and BRI will promptly notify the other parties and GSI of any infringement of which such
party has actual knowledge with respect to any Licensed Patents, as follows: 

 
 18 

  
         (a)    With
respect to the infringement of the Licensed Patents as they are being used or applied in the Exclusive Field set forth in section 1.1 hereof, GSI has agreed that, pursuant to the terms of the GSI Agreement, KYPHON will have the exclusive right and
discretion to take or refrain from taking any action, legal or otherwise including without limitation litigation, to enforce the Licensed Patents against the third party with respect to such infringing use or application provided that KYPHON shall
bear all costs, fees and expenses incurred in any such action. Any recoveries, if any, whether by judgment, award, decree or settlement, will be enjoyed solely by KYPHON (including recoveries relating to periods prior to the date hereof). KYPHON
will exercise control over any such action; provided, however, that BRI and GSI, if either or both so desire, can be represented by counsel of its selection and at its own expense. Notwithstanding the foregoing, if GSI or BRI believe in good faith
that the potential infringement set forth in this clause (a) also affects or is related to an infringement in clause (b), then clause (b) shall apply and this clause (a) shall be inapplicable, except that to the extent (x) any portion of such
recoveries can be shown to be attributable to an infringement related to the exclusive sublicense granted by section 1.1, such portion will inure to the sole benefit of KYPHON, (y) no claim may be asserted by the Action Party (as defined in section
7.2(b) against a third party in any action brought under clause (b) with respect to an alleged infringement of the Licensed Patents in the KYPHON Exclusive Field without KYPHON’s prior consent and (z) further provided that KYPHON may contest
such good faith determination pursuant to Article 11.1. 
  
         (b)    If either party hereto becomes aware that any of the Licensed Patents are being or have been infringed by any third party in the Co-Exclusive Field, such
party shall promptly notify the other party hereto in writing describing the facts relating thereto in 

 
 19 

  
 reasonable detail. If BRI or KYPHON wishes to initiate a legal proceeding against
such infringement, BRI or KYPHON, as the case may be, shall first notify GSI and the other party hereto in writing. GSI shall have the first right, but not the obligation, to bring an action, suit or proceeding (“Action”) against the
infringer in the Co-Exclusive Field. If GSI declines or fails to bring such an action or proceeding within 90 days of receipt of the notice, then the party who so notified GSI shall have the right, at its discretion, to institute and prosecute an
action or proceeding to abate such infringement or other action and to resolve such matter by settlement or otherwise. With respect to any Action brought by GSI, KYPHON or BRI in accordance with the foregoing (such party, the “Action
Party”), the other parties hereto shall cooperate fully with the Action Party by joining as a party, if requested by the Action Party and required by applicable law, and by executing and making available such documents as the Action Party may
reasonably request. Neither BRI nor KYPHON shall enter into any settlement agreement which would make any admission relating to the validity or enforceability of the Licensed Patents without the prior written consent of GSI, which consent may not be
unreasonably be withheld or delayed but may be withheld in GSI’s sole and absolute discretion if such settlement materially impacts GSI’s rights in the GSI Exclusive Field. The Action Party agrees to promptly reimburse the other party
hereto for its reasonable costs, fees and expenses incurred in joining an Action brought by, or otherwise cooperating with and in accordance with the request of, such Action Party, and if KYPHON is the Action Party and both Dr. Peter Bonutti and BRI
are not entitled to any monetary recovery in such lawsuit, KYPHON shall promptly shall reimburse Dr. Peter Bonutti’s lost professional time as well. Any recoveries, whether by judgment, award, decree or settlement, in connection with an Action
brought by an Action Party in accordance with this Section 7.2(b), shall be enjoyed solely by such Action Party. Notwithstanding the foregoing, in 

 
 20 

  
 the event of a conflict between this section and section 1.4(b), the provisions of section 1.4(b) shall
control. 
  
         (c)  With respect to the infringement by a
third party of the Licensed Patents as they are being used or applied in any field other than the KYPHON Exclusive Field or the Co-Exclusive Field, it is understood and agreed that GSI and its affiliates shall have the exclusive right and discretion
to take or refrain from taking any action, legal or otherwise, including, without limitation, litigation, to enforce the Licensed Patents against the third party with respect to such infringing use or application, provided that GSI or its affiliate
shall bear all costs, fees and expenses incurred in any such action. Any recoveries from such litigation, if any, whether by judgment, award, decree or settlement, will be enjoyed solely by GSI. 
  

        (d)  In any action brought by an Action Party under section 7.2(b) or by GSI under section 7.2(c), the entity
or entities not instituting the action may be named as a necessary party if the party(ies) bringing the action deem it required under law or otherwise desirable, subject to the reimbursement obligations of the initiating party as set forth in the
last sentence of section 7.2(b) (which shall be applicable to actions brought by GSI under section 7.2(c)) as well. 
  
 8.    REPRESENTATIONS AND WARRANTIES 
  
 Each party represents and
warrants to the other that such representing and warranting party as of the date hereof (a) is duly organized, validly existing and in good standing in its state of incorporation, (b) this Agreement has been approved by all requisite corporate
action of such party requisite necessary to authorize the execution, delivery and performance of this Agreement and does not conflict with or contravene any charter, by-law, agreement or law or regulation binding on such party, (c) assuming the due
authorization, execution and delivery of this 

 
 21 

 Agreement by the other party, this Agreement is the legal, valid and binding obligation of such party enforceable in accordance with its terms
except as enforceability may be limited by bankruptcy or other laws for the protection of creditors or general equitable principles, (d) neither party nor GSI shall challenge the validity and/or enforceability of any claims of the Licensed Patents,
either pursuant to arbitration, litigation or a dispute between or among the parties and (e) each party is receiving adequate consideration for entering into this Agreement and such party has adequate capital and can pay its debts as they come due.
BRI represents and warrants to KYPHON that as of the date hereof (a) to BRI’s actual knowledge which KYPHON acknowledges is based solely on the representation and warranty made by GSI under the GSI Agreement, GSI has the right to grant the
rights and licenses granted herein and, as of the date hereof, BRI has no actual knowledge of any information that any such representation and warranty by GSI is materially inaccurate; (b) BRI has not previously granted, and will not grant during
the term of this Agreement, any right, sublicense or interest in and to the Licensed Patents, or any portion thereof, inconsistent with the sublicense granted to KYPHON under this Agreement; (c) neither BRI nor any Affiliate has any currently
existing plans or intentions to assign or transfer rights to the Licensed Patents to any Affiliate or third-party that has not been expressly disclosed in writing to KYPHON; (d) to the actual knowledge of Dr. Peter M. Bonutti and Boris Bonutti,
there are no threatened (in writing) or pending actions, suits, investigations, claims or proceedings in any way relating to any of the Licensed Patents and there is no knowledge of any infringement; (e) the Settlement is a resolution of all
disputes between GSI and its Affiliates and BRI relating to any of the Licensed Patents; (f) KYPHON has been provided with a true and correct copy of the BRI Agreement and any other agreement related to any of the Licensed Patents between BRI, GSI
or any of their Affiliates (subject to redaction of 

 
 22 

 payments only) and (g) BRI shall not challenge GSI’s grant of rights and licenses to KYPHON under the GSI Agreement provided that KYPHON
does not materially breach the terms of this Agreement, and (h) to BRI’s and Dr. Bonutti’s actual knowledge, which KYPHON acknowledges is based upon the representation and warranty made by GSI under the GSI Agreement, as well as any
independent knowledge of GSI and Dr. Bonutti, as of the date hereof, there is at least one patent application within the family of the License Patents, currently pending with the USPTO, having an unbroken chain of pending patent prosecution that
claims priority back to Patent application number 07-487645 with the filing date of March 2, 1990. KYPHON represents and warrants to BRI that KYPHON is not aware of any fact, event, condition or circumstance that could reasonably constitute grounds
for KYPHON or any other person to allege that the Licensed Patents should be invalidated for fraud on the Patent Office or are unenforceable because of BRI’s or GSI’s inequitable conduct. BRI and Dr. Peter M. Bonutti each agree that with
respect to any U.S. patent that, on the date of this Agreement, it owns or under which it has the right to grant licenses of the scope of the sublicenses granted in this Agreement, or any U.S. patent that may later issue on a pending application for
patent that, on the date of this Agreement, it owns or under which it has the right to grant licenses of the scope of the sublicenses granted in this Agreement, it (and any subsequent licensees) will not assert against KYPHON any claims for patent
infringement based on the manufacture, use, sale, offer for sale, export, or import of any Product and the practicing of any process under the sublicenses granted in this Agreement. This agreement of non-assertion shall apply, however, only to
inventions disclosed or claimed in the Licensed Patents. 
  
 9.    Intentionally Deleted 

 
 10.    TERMINATION 
  

 
 23 

  
 10.1  Termination.    This Agreement may be
terminated at any time prior to expiration of its term as follows: 
  
         (a)    By BRI.—BRI may terminate this Agreement upon the final adjudication of the invalidity of all of the Licensed Patents. 
  
         (b)    By KYPHON.—KYPHON may terminate this Agreement:

  
         (i)    upon the final adjudication of the
invalidity of all of the Licensed Patents; or (ii) upon thirty (30) days written notice to BRI. 
  
         (c)    By GSI—By GSI as a third party beneficiary, upon thirty (30) days written notice to KYPHON in the event that KYPHON materially breaches or
defaults in any material respect in the performance or fulfillment of any of the terms, conditions or agreements made by KYPHON to GSI and KYPHON fails to take reasonable steps to cure such breach or default within such thirty day period or upon
expiration of an extended cure period as hereafter provided, in the event that KYPHON materially defaults or breaches in any material respect in the performance of any of the other terms, conditions or agreements owed by KYPHON to GSI and KYPHON
takes such reasonable steps to cure such default or breach within such thirty (30) days but does not cure such breach or default within 180 days of being notified of such breach or default by GSI. GSI acknowledges and agrees that with respect to any
breach or default under section 4 hereof which by its nature cannot be cured within such 180 day period shall not be grounds for termination of this Agreement but shall only give rise to damages and injunctive relief against KYPHON except that GSI
may terminate this Agreement on account of such uncured breach or default if (x) KYPHON continues to engage in the same breach or default and/or (y) such breach or default was committed, authorized or condoned by directors or executive officers of
KYPHON. 
  

 
 24 

  
 10.2    Rights on Termination.  On the
expiration or termination of this Agreement pursuant to section 10.1(A)(ii), except as otherwise expressly provided herein, all rights of KYPHON hereunder shall terminate forthwith (to the extent that this Agreement is terminated with respect to
such party) and revert automatically to BRI, and neither KYPHON nor its receivers, trustees, representatives, agents, successors or assigns shall have any right to exploit or in any way make, use, offer to sell any Products, or practice any process,
under the Licensed Patents. Except as otherwise expressly provided herein, upon the termination of this Agreement in accordance with this section, (x) KYPHON shall forthwith discontinue all manufacture, use, offer of sale or sale of any Products
(until the expiration of the last of the Licensed Patents), and use of any process covered by any valid and enforceable claim of a Licensed Patent, and (y) all parties shall perform all obligations hereunder arising as of or prior to such
termination including without limitation all obligations under sections 2, 4, 11, 12, 14 and 15. Any provisions of this Agreement for which GSI is a specifically identified intended third party beneficiary shall survive any termination of this
Agreement. GSI is an intended third party beneficiary of this Article 10. 
  
 11.    DISPUTE
RESOLUTION 
  
 11.1    Arbitration.  Except as otherwise provided in section
11.2 of this Agreement, any controversy or claim as to the proper classification of a Product in a Field, the determination of good faith under sections 1.4, the determination of material infringement under section 1.4(b), the determination of
commercial reasonableness contemplated in section 1.6, the determination of good faith, materiality, reasonableness or reasonable commercial efforts under section 6.1, whether a potential infringement is in the Field as contemplated in section
7.2(a) shall be resolved by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, including Emergency Interim Relief Procedures, and judgment 

 
 25 

 on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Within fifteen days after the commencement of
arbitration, each party to the proceeding shall select a person to act as arbitrator and the two (or three) selected shall select a neutral arbitrator within ten days of their appointment. The neutral arbitrator shall be an attorney with at least
ten years experience in patent licensing, having experience with and knowledge of patent licensing in the medical instrument industry. If the arbitrators selected by the parties are unable or fail to agree upon a third arbitrator, the third
arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be Chicago, Illinois and shall be governed by Illinois law (except as federal law may apply), exclusive of its conflicts-of-laws principles. The
award shall be made within nine months of the filing of the notice of intent to arbitrate (demand), and the arbitrators shall agree to comply with this schedule before accepting appointment. However, this time limit may be extended by agreement of
the parties or by the arbitrators if necessary. In no event shall the arbitrators have any authority to award punitive damages or, other than for a party’s actual damages directly and proximately resulting from the other party’s breach of
its obligations that are the subject of arbitration hereunder, to otherwise calculate or award damages. The award shall be in writing, shall be signed by the neutral arbitrator, and shall include a statement regarding reasons for the disposition of
any claim. To the extent of any conflict between any rule or procedure of the American Arbitration Association and the express provisions of this Article 11, the terms of this Article 11 shall prevail. 
  
 11.2    Judicial Resolution.  Except as set forth in section 11.1, all other controversies or claims
relating to or arising under this Agreement shall be resolved by courts of competent jurisdiction. The appropriate forum and governing law for any such judicial action will be the same as contemplated for arbitral actions set forth in section 11.1
and each party hereby consents 

 
 26 

 to such forum and governing law regardless of any conflict of laws, jurisdiction, venue or convenience considerations. 
  
 12.    NOTICES 
  
 12.1  All notices for any and all purposes under this Agreement shall be in writing and shall be given by sending such notice by overnight courier service (fare prepaid), electronic mail or
legible facsimile transmission with a regular mail follow up, or personal delivery. The date of deemed delivery to and receipt by the party to whom notice is given is the next business day after the date such notice is sent. Notices will be
addressed in the following manner: 
  
 
	           If to BRI: 

	  	 Dr. Peter Bonutti
 
	  	  	 President
 
	  	  	 Bonutti Research, Inc.
 
	  	  	 1303 Evergreen Plaza
 
	  	  	 Effingham, IL 62401
 
	  	  	 Fax No: 217-342-3460
 
	  	  	 E-Mail address: boris@bonuttiresearch.com and
 
	  	  	 drbonutti@bonuttiresearch.com
 
	 
	 with a copy (which shall not constitute notice) to:
 
	 
	  	  	 Mr. Willam F. Shea
 
	  	  	 31 Hastings Turn
 
	  	  	 Avon, CT 06001
 
	  	  	 Fax No: 860/673-4407
 
	  	  	 E-Mail address: wmshea@aol.com
 
	 
	 and
 
	 
	  	  	 Fredric D. Tannenbaum, Esq.
 
	  	  	 Gould & Ratner
 
	  	  	 222 N. LaSalle Street
 
	  	  	 Suite 800
 
	  	  	 Chicago, Illinois 60601
 
	  	  	 Fax No: 312-236-3241
 
	  	  	 E-Mail address: ftannenbaum@gouldratner.com
 

 

 
 27 

  
 
	 If to KYPHON:
 	  	 Mr. Gary L. Grenter
 
	  	  	 President
 
	  	  	 KYPHON, Inc.
 
	  	  	 1350 Bordeaux Drive
 
	  	  	 Sunnyvale, California 94089
 
	  	  	 Fax No:
408-                        
 
	  	  	 E-Mail address: ggrenter@kyphon.com
 
	 
	 with a copy to:
 
	 
	  	  	 David Saul, Esq.
 
	  	  	 Wilson Sonsini Goodrich & Rosati
 
	  	  	 650 Page Mill Road
 
	  	  	 Palo Alto, California 94304
 
	  	  	 Fax No: (650) 493-6811
 
	  	  	 E-Mail address: dsaul@wsgr.com
 
	 
	 If to GSI:
 	  	 Mr. Steven Amelio
 
	  	  	 Vice President and Controller
 
	  	  	 United States Surgical
 
	  	  	 150 Glover Avenue
 
	  	  	 Norwalk, CT 06856
 
	  	  	 Fax No:
203-                      
 
	  	  	 E-Mail address: steven.amelio@TycoHealthcare.com
 
	  	  	  
	 
	 with a copy (which shall not constitute notice) to:
 
	 
	  	  	 Alan R. Carlton
 
	  	  	 Vice President and Chief Corporate Counsel
 
	  	  	 United States Surgical
 
	  	  	 150 Glover Avenue
 
	  	  	 Norwalk, CT 06856
 
	  	  	 Fax No: 203- 846-5988
 
	  	  	 E-Mail address: alan.carlton@TycoHealthcare.com
 

 
  
 13.    ASSIGNMENT AND SUCCESSION 

 
 13.1  Except as permitted in section 1.4 above or in connection with a sale, assignment or transfer to an Affiliate,
no party shall have the right to sell, assign or transfer any of its rights 

 
 28 

 or delegate any of its duties under this Agreement. This Agreement shall be binding on and inure to the benefit of BRI, KYPHON and their
respective successors and permitted assigns. 
  
 14.    RIGHT OF PUBLICITY 

 
 14.1  KYPHON and its appropriate Affiliates shall use its and their commercially reasonable efforts to provide to Dr.
Peter M. Bonutti (“Dr. Bonutti”) name recognition and credit (including recognition in medical journals, papers and presentations) for inventing the Licensed Patents and for any Products manufactured or sold by such party in the
Co-Exclusive Field and, with respect to the KYPHON Exclusive Field, KYPHON will reasonably consider granting similar name recognition and credit after considering the implications such name recognition and credit may have with its other inventors.
Such name recognition shall be on a basis no less than that given to any other inventor of products in the Co-Exclusive Field as is KYPHON’s custom. Name recognition and credit shall be applicable and given in all appropriate forms of sale and
promotions. This right shall be applicable regardless of whether such Products contain improvements to the Licensed Patents or other intellectual property not created by Dr. Bonutti or BRI. BRI shall have the right to request, and within a
reasonably prompt period following its receipt of any such request, KYPHON shall provide BRI with, copies of any such labels for review, provided, however, that KYPHON shall not be obligated to provide BRI with review of any label in advance of its
general dissemination. BRI shall also have full right to request and promptly receive copies of such materials created and/or distributed by KYPHON or its Affiliates. BRI shall have the right to publicize and promote Dr. Bonutti’s invention of
the Licensed Patents and their use in Products used in the KYPHON Exclusive Field or Co-Exclusive Field. This section shall apply to any Products sold by KYPHON or its Affiliates during the term of this Agreement for use in the Co-Exclusive Field,
regardless of whether the 

 
 29 

 Products also include inventions which are not covered by a claim of a Licensed Patent and even if there have been no improvements to the
Product. Nothing contained herein shall preclude or prevent BRI or Dr. Bonutti or his heirs, guardians, estate, personal representatives or affiliates from claiming and publicizing that Dr. Bonutti is the inventor of the Licensed Patents or any
component thereof including the inventor of balloon dissection, provided, however, that such claims and publicity shall not, directly or indirectly, indicate that the claims or publicity are made by, or with the endorsement of, KYPHON. 

 
 15.    PRESS RELEASES 
  
 For thirty (30) days after the effective date of this Agreement, KYPHON shall have the sole right to make a press release or other public announcement concerning the
transactions contemplated herein, subject to the five-business day review and approval by the other parties as provided below, and the other parties agree to refrain from making any press release or public announcement concerning the transactions
contemplated herein until the expiration of this thirty (30) day period, except if and insofar as GSI or BRI or its Affiliates reasonably deem it necessary to issue a press release or public announcement during such period and give KYPHON ten (10)
days prior notice regarding same and comply with the requirements for five-business day review and approval by the other parties as provided below. 
  
 After the expiration of said initial thirty (30) day period, any party may make a press release or other public announcement concerning the transactions contemplated hereby provided that the party
desiring to make such press release or public announcement (a) provides the other party the right to review and suggest reasonable modifications thereto within five business days from the date of receipt of such draft press release or public
announcement and, except to the 

 
 30 

 extent such press release or public announcement is legally required to be made, and (b) obtains the other party’s prior written approval
for the same. To the extent that a press release or public announcement is legally required to be made, no party shall have the right to approve or withhold consent to the dissemination of any such press release or public announcement but such
releases or announcements shall be available to the extent practical to the other party and GSI prior to their release or publication. BRI understands and acknowledges that KYPHON may believe that this Agreement and the GSI Agreement constitutes
material agreements for KYPHON within the meaning of the Securities Act and Exchange Act, that the material terms of this Agreement may be described in KYPHON’s public filings with the SEC, and may be included as an exhibit to those filings and
that KYPHON will promptly furnish to BRI and GSI copies of all such exhibits. GSI is an intended third party beneficiary of the last two sentences of this section 15. 
  
 16.    MISCELLANEOUS 
  
 16.1  This Agreement is to be interpreted and governed by and under the laws of the State of Illinois irrespective of any conflict of law considerations, except for matters relating to patent laws of the United States in
which case those laws shall apply, and shall be deemed to have been entered into in the State of Illinois. 
  
 16.2  This Agreement sets forth and embodies all understandings now in effect between the parties as to the subject matter hereof and merges all prior discussions and negotiations between them. The parties shall not be
bound by conditions, promises, definitions, renewals, extensions, waivers, warranties or representations other than as expressly provided herein unless 

 
 31 

 made in writing and signed by a proper and fully authorized representative of each party to be bound thereby. 
  
 16.3  If any part of this Agreement shall, for any reason, be declared to contravene or be invalid or unenforceable under the
law of a competent jurisdiction, same shall not affect the validity of the remainder of the Agreement. In such a case, the Agreement shall be construed as if it does not contain such particular part, and the rights and obligations of BRI and KYPHON
shall be construed and enforced accordingly. 
  
 16.4  The headings of this Agreement are inserted only for
convenience and are in no way to be construed as a part of this Agreement or as a limitation on the scope of any of the terms or provisions of the Agreement. 
  
 16.5  Nothing herein shall be construed to make the parties hereto partners or joint venturers, or to render either party liable for any of the debts or obligations of the other party, and
neither party shall be considered as being an agent or representative of the other party in any dealings with a third party, and neither party may act for, nor bind, the other party in any such dealings. 
  
 16.6  BRI and KYPHON each agree to execute such further documents, papers and agreements as may be necessary or desirable to
effectuate the purposes of this Agreement. 
  
 16.7  Notwithstanding any terms or provisions contained
herein, neither BRI nor KYPHON shall be liable for any failure or delay to perform any duties or obligations hereunder due to strikes, lock-outs, acts of God, acts of war, fire, flood, embargo, federal or state laws and 

 
 32 

 regulations, litigation or labor disputes, or any other cause beyond the control of either party, for the period that such causes are in effect.

  
 16.8  This Agreement is not intended to confer any benefit on any third party, and there are no third
party beneficiaries with respect to this Agreement, except for GSI who is expressly acknowledged to be a third party beneficiary with respect to all provisions of this Agreement. Any provision for which GSI is identified as an intended third party
beneficiary shall not be amended without the prior written consent of GSI. 
  
 16.9  Only the rights
expressly granted herein have been conferred and no other rights are to be implied or inferred. 
  
 The balance of
the page is intentionally left blank. 

 
 33 

  
 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals. 
  
 
	  	 	 BONUTTI RESEARCH, INC.
 
	 
	 Dated: August 19, 2002
 	 	  	 	 By:
 	 	 /s/ Peter Bonutti
 

	  	 	  	 	  	 	 President
 

 
  
 
	  	 	 KYPHON INC.
 
	 
	 Dated: August 19, 2002
 	 	  	 	 By:
 	 	 /s/ Jeffrey Kaiser
 

	  	 	  	 	  	 	 Vice President, Finance and Administration
and Chief Financial Officer
 

 

 
 34 

  
 EXHIBIT A 
  
 LIST OF PATENTS 
  
 5,163,949 
  
 5,197,971 
  
 5,295,994 
  
 5,331,975 
  
 5,345,927 
  
 5,514,153 
  

5,667,520 
  
 5,601,590 
  
 5,685,826 
  
 5,707,390 
  
 5,716,325 
  
 5,827,318 
  
 5,860,997 
  

5,888,196 

 
 35 

  
 5,954,739 
  
 6,017,305 
  
 6,042,596 
  

6,102,928 
  
 6,171,236 
  
 6,171,299 
  
 6,187,023 
  
 6,277,136 
  
 6,358,266 

 
 36 

  
 EXHIBIT B 
  
 DEFINITION OF KYPHON EXCLUSIVE FIELD 
  
 The use in humans or
animals of any invention disclosed or claimed in any of the Licensed Patents (i) partially or fully within bone for any purpose or (ii) partially, substantially or fully within joints, ligaments, tendons or cartilage comprising or attached to the
cervical, lumbar, thoracic or sacral portions of the spine, for diagnosis or treatment of spinal injuries or illnesses. 

 
 37 

  
 EXHIBIT C 
  
 DEFINITION OF CO-EXCLUSIVE FIELD 
  
 The orthopedic use,
outside of the KYPHON Exclusive Field, of any invention disclosed or claimed in any one of the Licensed Patents for the diagnosis or treatment of injuries or illnesses of joints, ligaments, cartilage, nerves or tendons, including joint
replacement/resurfacing around (but not in) the bone. 

 
 38 

  
 EXHIBIT D 
  
 DEFINITION OF GSI EXCLUSIVE FIELD 
  
 The use of any invention
described or claimed in any one of the Licensed Patents which is not within the KYPHON Exclusive Field or Co-Exclusive Field. 

 
 39

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