<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended MARCH 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period From to .
Commission file number 0-26116
SPINE-TECH, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 06-1258314
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439-2029
- - -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(612) 832-5600
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(Registrant's Telephone Number, Including Area Code)
980 HENNEPIN AVENUE MINNEAPOLIS, MINNESOTA 55414-1314
- - -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. Common Stock, $.01 Par Value --
9,796,727 SHARES AS OF MAY 6, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SPINE-TECH, INC.
CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, 1996 1995
-------------- --------------
(Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 385,444 $ 1,171,034
Short-term investments 20,537,882 22,416,043
Accounts receivable 972,631 1,957,477
Inventories - Note B 3,022,933 1,821,560
Interest receivable 316,760 228,467
Prepaid expenses 10,684 57,726
-------------- --------------
Total current assets 25,246,334 27,652,307
Land and building 1,813,354 1,752,773
Furniture and fixtures 117,072 113,993
Equipment 463,621 387,640
Accumulated depreciation (267,599) (196,588)
-------------- --------------
2,126,448 2,057,818
Investments 5,329,567 2,955,748
-------------- --------------
Total assets $ 32,702,349 $ 32,665,873
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 331,207 232,270
Accrued clinical payments 293,265 329,905
Accrued royalties 179,766 198,913
Other accrued expenses 185,712 100,584
-------------- --------------
Total current liabilities 989,950 861,672
Commitments and contingencies -- --
Shareholders' equity:
Common Stock, par value $.01 per share: authorized shares - 15,000,000. Issued
and outstanding shares: December 31, 1995 - 9,653,252; March 31, 1996 -
9,751,227 97,512 96,532
Additional paid-in capital 34,286,193 34,023,971
Accumulated deficit (2,671,306) (2,316,302)
-------------- --------------
Total shareholders' equity 31,712,399 31,804,201
-------------- --------------
Total liabilities and shareholders' equity $ 32,702,349 $ 32,665,873
-------------- --------------
-------------- --------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
<PAGE>
SPINE-TECH, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
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<S> <C> <C>
Net sales $ 1,445,422 $ 1,559,723
Cost of goods sold 562,942 594,756
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Gross profit 882,480 964,967
Operating expenses:
Selling, general and administrative 1,218,886 687,115
Research and development 415,766 414,213
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Total operating expenses 1,634,652 1,101,328
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Operating loss (752,172) (136,361)
Interest income, net 397,168 37,645
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Net loss $ (355,004) $ (98,716)
------------- -------------
------------- -------------
Net loss per share:
Primary $ (0.04) $ (0.04)
Fully diluted $ (0.04) $ (0.01)
Weighted average shares outstanding:
Primary 9,706,697 2,464,992
Fully diluted 9,706,697 6,600,220
</TABLE>
See notes to condensed financial statements.
<PAGE>
SPINE-TECH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (355,004) $ (98,716)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 71,011 23,505
Common Stock and stock options issued for consulting services -- 51,500
Changes in operating assets and liabilities:
Accounts receivable 984,846 (630,912)
Inventories (1,201,373) (8,536)
Interest receivable (88,293) --
Prepaid expenses 47,042 (92,447)
Accounts payable and accrued expenses 128,278 322,197
-------------- ------------
Cash used in operating activities (413,493) (433,409)
INVESTING ACTIVITIES
Purchase of property and equipment (139,641) (30,523)
(Purchases) maturities of investments (495,658) 735,806
-------------- ------------
Cash (used in) provided by investing activities (635,299) 705,283
FINANCING ACTIVITIES
Proceeds from stock options exercised 263,202 9,000
-------------- ------------
Cash provided by financing activities 263,202 9,000
-------------- ------------
Increase (decrease) in cash and cash equivalents (785,590) 280,874
Cash and cash equivalents at beginning of period 1,171,034 419,008
-------------- ------------
Cash and cash equivalents at end of period $ 385,444 $ 699,882
-------------- ------------
-------------- ------------
</TABLE>
See notes to condensed financial statements.
<PAGE>
SPINE-TECH, INC.
Notes to Condensed Financial Statements (Unaudited)
March 31, 1996
Note A - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996.
Note B - Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw material $ 40,772 $ 8,423
Work in process 586,690 213,202
Finished products 2,395,471 1,589,934
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$3,022,933 $1,821,559
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---------- ------------
</TABLE>
Note C - Investments
The amortized cost and estimated market value of investments are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
As of December 31, 1995:
U.S. government obligations $ 4,000,110 $ -- $ -- $ 3,999,961
Corporate debt securities 6,102,249 -- 22,163 6,080,086
Commercial paper 15,269,432 142,661 -- 15,412,093
----------- ---------- ---------- -----------
$25,371,791 $ 142,661 $ 22,163 $25,492,140
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
As of March 31, 1996:
U.S. government obligations $ 7,351,453 $ 8,018 $ 3,354 $ 7,356,117
Corporate debt securities 10,155,719 191 44,468 10,111,442
Commercial paper 8,360,277 66,450 -- 8,426,727
----------- ---------- ---------- -----------
$25,867,449 $ 74,659 $ 47,822 $25,894,286
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<PAGE>
The amortized cost and estimated fair market value of investments by contractual
maturity are shown below:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------------------------------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $20,537,882 $20,580,553 $22,416,043 $22,549,909
Due after one year 5,329,567 5,313,733 2,955,748 2,946,231
----------- ----------- ----------- -----------
$25,867,449 $25,894,286 $25,371,791 $25,492,140
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Note D - Initial Public Offering
The Company completed the initial public offering ("IPO") of its Common Stock
in June 1995. The shares of Series A, B and C Preferred Stock were
automatically converted on a three-for-two basis to shares of Common Stock on
the closing date of June 27, 1995.
Note E - Net Loss Per Share
The net loss per share is computed using the weighted average number of shares
of common stock outstanding during the periods presented. The fully diluted net
loss per share assumes the conversion of preferred shares outstanding prior to
the IPO to common shares as of the beginning of the earliest period presented.
The net loss per share for periods presented prior to June 27, 1995, the closing
date of the IPO, also gives effect to the requirements of Staff Accounting
Bulletin No. 83 (SAB 83).
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since commencing full-time operations in July 1991, the Company has been
engaged in the design, development, manufacture and sale of spinal implants and
instruments for the surgical treatment of degenerative disc disease and other
spinal conditions. To date, the Company's revenues have been derived from sales
of the Company's products for clinical trials in the United States and
international sales in various countries. The clinical trial of the Company's
BAK/L-TM- device began in April 1992 under an Investigational Device Exemption
("IDE") in the United States. On October 20, 1995 the Company received
notification from the Food and Drug Administration ("FDA") that its amended
Premarket Approval ("PMA") application for the BAK/L Interbody Fusion System has
met the threshold determination that the PMA is sufficiently complete to permit
a substantive review and is, therefore, suitable for filing. Additionally, the
FDA indicated that the PMA has been granted expedited review because the lower
reoperation rate reported in the PMA for the BAK/L indicated a potential benefit
to public health. As previously announced, the Company has received
confirmation from the U.S. Food and Drug Administration that the Orthopaedic and
Rehabilitation Devices Advisory Panel is scheduled to review Spine-Tech's BAK
Lumbar Pre-Market Approval Application on May 23, 1996.
The Company has developed and is developing additional products which
address degenerative disc disease and other spinal conditions. In addition to
the BAK/L, the Company has developed the BAK/C-TM- which is used in the cervical
spine and the BAK/T-TM- which is used in the thoracic spine. Both of these
products are subject to extensive clinical trials under separate IDEs from the
FDA. The BAK/C clinical trial commenced during the first quarter of fiscal 1995.
The BAK/T clinical trial commenced during the third quarter of fiscal 1995. The
BAK/C has been introduced on a very limited basis into certain international
markets. As international approvals are received, both the BAK/C and the BAK/T
will be introduced into select international markets.
In May 1995, the Company introduced Cervi-Lok-Registered Trademark-, an
anterior cervical implantable plate and screw system for use in the cervical
spine, pursuant to a 510(k) clearance received from the FDA. The product had
been introduced on a limited basis in the United States during the second
quarter of fiscal 1995. National roll-out commenced during the third quarter of
fiscal 1995. International roll-out of Cervi-Lok began in the fourth quarter of
fiscal 1995.
In September 1993, the Company entered into an exclusive agreement with
Smith & Nephew-Richards, Inc. ("Smith & Nephew") for the distribution of the
BAK/L implant outside of the United States for a period of up to eight years
as long as quarterly minimum purchases were made by Smith & Nephew from the
Company. During the first quarter of 1996, Smith & Nephew informed the
Company that they would not make their required minimum payment under the
contract. Based upon provisions in the Agreement, the Company terminated
Smith & Nephew's exclusive distribution rights. Under terms of the Agreement,
Smith & Nephew retains non-exclusive rights to distribute the BAK/L outside
of the United States for a period of one year from notification of
termination of exclusive rights. Smith & Nephew accounted for 66% of net
sales for the first quarter ended March 31, 1995. With the termination of the
exclusive distribution Agreement, Smith & Nephew accounted for 16% of net
sales for the first quarter ended March 31, 1996. The Company is in the \
process of appointing independent international distributors on a country by
country basis to distribute the BAK/L product line. There can be no assurance
that the Company will be successful in finding and appointing independent
international distributors who will be able to successfully sell the BAK/L
product line.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Net sales decreased to $1.445 million for the three months ended March 31,
1996 from $1.560 million for the three months ended March 31, 1995. Net sales
for the period was primarily affected by a decrease in sales to Smith & Nephew
to $232,000, or 16% of net sales, as compared to $1.0 million, or 66% of net
sales for the comparable period in 1995. Domestic sales increased 90% to
$904,000 for the three months ended March 31, 1996 from $475,000 for the
comparable period in fiscal 1995. During the first half of fiscal 1995, the
Company was not able to sell BAK/L devices for clinical trials under certain
portions of its IDE because the Company had previously reached the maximum
patient enrollment allowed. On June 28, 1995, the Company received approval
from the FDA to expand patient enrollment in the U.S. clinical trial of the
BAK/L device. In addition to its sales of BAK/L devices and related BAK/L
instruments, during the three months ended March 31, 1996, the Company had both
domestic and international sales of its BAK/C, BAK/T and Cervi-Lok devices and
related instruments.
Gross profit decreased to $882,000 for the three months ended March 31,
1996 from $965,000 for the three months ended March 31, 1995. As a percentage
of net sales, gross profit was 61% for the three months ended March 31, 1996, as
compared to 62% in the comparable period in fiscal 1995 due to the change in the
mix of net sales towards a higher percentage of sales of the Company's
instruments which carry a lower margin than its implants.
Total operating expenses increased to $1.6 million for the three months
ended March 31, 1996, from $1.1 million for the three months ended March 31,
1995. Selling, general and administrative expenses increased to $1.2 million
for the three months ended March 31, 1996 from $687,000 for the three months
ended March 31, 1995, increasing as a percentage of net sales to 84%, compared
to 44% for the comparable period in 1995, primarily as a result of increased
sales and marketing expenses as the Company expands its capabilities to support
international activities and increasing domestic sales. Research and
development expenses increased slightly to $416,000 for the three months ended
March 31, 1996, from $414,000 for the three months ended March 31, 1995,
increasing as a percentage of net sales to 29%, compared to 27% for the
comparable period in 1995. Interest income totaled $397,000 for the three
months ended March 31, 1996, compared to $37,000 for the quarter ended March 31,
1995. The increase is due to additional cash available for investments
resulting from the Company's June 1995 initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
In June 1995, the Company successfully completed its initial public
offering of 3,225,000 shares of newly issued Common Stock. After selling
expenses, the Company received proceeds of just over $26 million from the
offering. The Company expects to use these proceeds for working capital
requirements, funding of clinical trials, expansion of research and development
and sales and marketing activities, and, other general corporate purposes. In
November 1995, the Company used a portion of these proceeds to acquire and
relocate to a new facility. The Company expects to undertake a renovation of
the acquired facility during 1996 and will use a portion of the initial public
offering proceeds to finance such renovation. During the quarter ended March
31, 1996, the Company used approximately $1.7 million for operating activities
and for capital asset acquisitions. Of this amount, $1.2 million was used to
increase inventory, $140,000 to purchase equipment, and $366,000 to finance
operating activities and working capital needs. Approximately $900,000 was
provided by a net reduction in the level of receivables and $263,000 in proceeds
from the exercise of stock options.
Until funds are needed for the purposes described above, they have been
invested primarily in short term U.S. government obligations and corporate debt
securities. As of March 31, 1996, the Company had $20.5 million of these
investments with a maturity of one year or less and $5.3 million with a maturity
<PAGE>
of more than one year. The Company believes that its currently available cash
and cash equivalents combined with additional cash flow from operations will be
adequate to finance ongoing operations.
The Company's future liquidity and capital requirements will depend on
numerous factors, including FDA regulatory actions and continued domestic and
international sales of its entire product line.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation related to its license of certain
technology (the "Karlin Technology") from Dr. Gary Michelson and an
affiliated company, Karlin Technology, Inc. ("Karlin"), co-owners of the
Karlin Technology. The litigation principally relates to the interpretation
of Dr. Michelson's and Karlin's right to co-license the Karlin Technology to
a third party. In December 1993, Dr. Michelson and Karlin filed a complaint
against the Company and Smith & Nephew Group, an entity under common control
with Smith & Nephew, in United States District Court for the Central District
of California. In December 1994, the plaintiffs served the defendants with a
second amended complaint (the "Complaint"). The Complaint alleged various
causes of action, including tortious interference with prospective and
contractual business relationships, unfair competition and breach of
contract, and requested various types of relief, including money damages,
injunctive relief and declaratory judgment. In addition, in the event the
Company objected to the co-license of the Karlin Technology to a third party,
the Complaint requested rescission of the license agreement. Sofamor Danek
Inc. ("Danek"), a competitor of the Company, is the other co-licensee of the
Karlin Technology. The Company is not contesting the co-license of the
Karlin Technology to Danek. Each of the claims of the Complaint was the
subject of a dispositive motion resulting in an order by the Court granting
its dismissal. On February 12, 1996, the Court entered Judgment finding that
the Company is the prevailing party on all counts of the Complaint. The
plaintiffs have filed a notice of appeal of the judgment to the Ninth Circuit
Court of Appeals.
On June 19, 1995, the Company received a purported notice of termination of
the license agreement based on alleged inadequacy in the reporting of the
royalty payments due by the Company to Karlin under the license agreement.
Karlin has claimed that the Company has therefore breached the license
agreement. However, the Company contests that it has breached the agreement.
Under the terms of the agreement, the license agreement may not be terminated
until after a final, non-appealable determination of the existence of the breach
by a court of competent jurisdiction. Spine-Tech, on September 15, 1995,
commenced a non-binding arbitration against plaintiffs in Minneapolis before the
American Arbitration Association asserting that plaintiffs' purported
termination of the License agreement is meritless and ineffective. Karlin and
Michelson have not filed an answer in the arbitration or taken a definitive
position in the arbitration of whether they intend to seek to enforce the
purported termination. Although the Company believes that the purported
termination is without merit, a determination against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company and Michelson are also in litigation in the United States
District Court for the District of Minnesota concerning inventorship of U.S.
Patent No. 5,489,307. Prior to the issuance of the patent to the Company,
Michelson in the above-referenced California action asserted that he was the
true inventor of the then pending patent application for the '307 patent. This
claim was dismissed for lack of a justifiable controversy. In the Minnesota
action brought by the Company, Michelson has filed a motion to dismiss for lack
of personal jurisdiction and stated that if the motion is denied, he will assert
as-yet-unidentified counterclaims.
Surgical Dynamics, Inc. ("Surgical Dynamics"), a competitor of the Company,
has filed a complaint for declaratory judgment in the United States District
Court for the Central District of California of patent invalidity,
unenforceability and non-infringement against Karlin and Danek regarding the
U.S. Patent No. 5,015,247, which is part of the Karlin Technology. Karlin and
Danek have counterclaimed against Surgical Dynamics claiming patent
infringement. The outcome of the litigation is uncertain. There can be no
assurances that the patent related to the Karlin Technology will be upheld or
that the Company will continue to have such patent protection for its products.
Surgical Dynamics on April 16, 1996 filed a complaint in state court in
Hawaii against the Company and Terry Corley, a former sales employee of Surgical
Dynamics who had agreed to work for the
<PAGE>
Company. The complaint alleges, among other things, that the Company aided
and abetted a breach of fiduciary duty by Corley and tortiously interfered
with Corley's employment by Surgical Dynamics. The complaint seeks injunctive
relief and unspecified compensatory and punitive damages. The Company is
moving to be dismissed from the action for lack of personal jurisdiction. The
Company intends to contest these claims vigorously.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company (1)
and Notice of Change of Registered Office/Registered Agent dated
January 19, 1996 (2)
3.2 Restated By-Laws of the Company and Amendment to Restated By-Laws
of the Company
4.1 Specimen of Common Stock certificate (3)
10.1 1994 Spine-Tech, Inc. Stock Option Plan (3)
10.2 Spine-Tech, Inc. 1993 Non-Employee Director Stock Option
Plan (3)
10.3 Spine-Tech, Inc. 1991 Stock Option Plan (3)
10.4 Stock Purchase Agreement between the Company and Smith & Nephew
Richards, Inc. dated September 30, 1993 (3)
10.5 Master Distributor Agreement between the Company and Smith &
Nephew Richards, Inc. dated September 30, 1993 (3) (4)
10.6 Stock Purchase Agreement among the Company, St. Paul Fire and
Marine Insurance Company and the other Purchasers named therein
dated June 27, 1991 (3)
10.7 Amendment dated September 15, 1993 to Stock Purchase Agreement
among the Company, St. Paul Fire and Marine Insurance Company
and the other Purchasers named therein dated June 27, 1991 (3)
10.8 Amendment dated October 21, 1991 to Stock Purchase Agreement
among the Company, St. Paul Fire and Marine Insurance Company
and the other Purchasers named therein dated June 27, 1991 (3)
10.9 Agreement between the Company and Orthomet, Inc. dated June 27,
1991 (3)
10.11 Loan Agreement between the Company and Riverside Bank dated
April 20, 1995 (3)
10.12 Collaboration Agreement between the Company and Ethicon
Endo-Surgery dated June 27, 1994 (3)
10.13 Spine-Tech, Inc. 1996 Employee Stock Purchase Plan (5)
10.14 Spine-Tech, Inc. 1996 Omnibus Stock Plan (5)
<PAGE>
10.15 Intentionally omitted.
10.16 Intentionally omitted.
10.17 License Agreement dated as of May 10, 1992, among the
Company, Karlin Technology, Inc. and Gary K. Michelson (3) (4)
10.18 License Agreement dated as of January 1, 1995 between the
Company and Dr. Ted Obenchain (3) (4)
10.19 Employment Agreement between the Company and David W.
Stassen dated June 15, 1992 (3)
10.20 Employment Letter from the Company to David W. Stassen dated
June 2, 1992 (3)
10.21 Employment Agreement between the Company and Ted K.
Schwarzrock dated November 1, 1993 (3)
10.22 Management Agreement dated as of February 1, 1996 between
the Company and David W. Stassen (5)
10.23 Management Agreement dated as of February 1, 1996 between
the Company and Keith M. Eastman (5)
10.24 Management Agreement dated as of February 1, 1996 between
the Company and Ted K. Schwarzrock (5)
10.25 Management Agreement dated as of February 1, 1996 between
the Company and Douglas W. Kohrs (5)
10.26 Management Agreement dated as of February 1, 1996 between
the Company and Richard C. Jansen (5)
10.27 Management Agreement dated as of February 1, 1996 between
the Company and David L. Shaw (5)
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule (filed electronically)
_____________________________
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1995
(File No. 0-26116).
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File
No. 0-26116).
(3) Incorporated herein by reference to the same numbered Exhibit to the
Company's Registration Statement on Form S-1 (Registration No.
33-91928).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1996.
(4) Exhibit contains portions for which confidential treatment has been
granted to the Company.
<PAGE>
(5) Incorporated herein by reference to the same numbered Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 0-26116).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SPINE-TECH, INC.
----------------
(Registrant)
Date: May 13, 1996 By: David W. Stassen
---------------------------------------
David W. Stassen,
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1996 By: Keith M. Eastman
---------------------------------------
Keith M. Eastman,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- - ------- ----------- --------------------
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of
the Company (1) and Notice of Change of
Registered Office/Registered Agent dated January
19, 1996 (2)
3.2 Restated By-Laws of the Company and Amendment to Filed Electronically
Restated By-Laws of the Company
4.1 Specimen of Common Stock certificate (3)
10.1 1994 Spine-Tech, Inc. Stock Option Plan (3)
10.2 Spine-Tech, Inc. 1993 Non-Employee Director Stock
Option Plan (3)
10.3 Spine-Tech, Inc. 1991 Stock Option Plan (3)
10.4 Stock Purchase Agreement between the Company and
Smith & Nephew Richards, Inc. dated September 30,
1993 (3)
10.5 Master Distributor Agreement between the Company
and Smith & Nephew Richards, Inc. dated September
30, 1993 (3) (4)
10.6 Stock Purchase Agreement among the Company, St.
Paul Fire and Marine Insurance Company and the
other Purchasers named therein dated June 27,
1991 (3)
10.7 Amendment dated September 15, 1993 to Stock
Purchase Agreement among the Company, St. Paul
Fire and Marine Insurance Company and the other
Purchasers named therein dated June 27, 1991 (3)
10.8 Amendment dated October 21, 1991 to Stock
Purchase Agreement among the Company, St. Paul
Fire and Marine Insurance Company and the other
Purchasers named therein dated June 27, 1991 (3)
10.9 Agreement between the Company and Orthomet, Inc.
dated June 27, 1991 (3)
10.11 Loan Agreement between the Company and Riverside
Bank dated April 20, 1995 (3)
10.12 Collaboration Agreement between the Company and
Ethicon Endo-Surgery dated June 27, 1994 (3)
10.13 Spine-Tech, Inc. Employee Stock Purchase Plan (5)
10.14 Spine-Tech, Inc. 1996 Omnibus Stock Plan (5)
10.15 Intentionally Omitted
10.16 Intentionally Omitted
10.17 License Agreement dated as of May 10, 1992, among
the Company, Karlin
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
Technology, Inc. and Gary K. Michelson (3) (4)
10.18 License Agreement dated as of January 1, 1995
between the Company and Dr. Ted Obenchain (3) (4)
10.19 Employment Agreement between the Company and
David W. Stassen dated June 15, 1992 (3)
10.20 Employment Letter from the Company to David W.
Stassen dated June 2, 1992 (3)
10.21 Employment Agreement between the Company and Ted
K. Schwarzrock dated November 1, 1993 (3)
10.22 Management Agreement dated as of February 1, 1996
between the Company and David W. Stassen (5)
10.23 Management Agreement dated as of February 1, 1996
between the Company and Keith M. Eastman (5)
10.24 Management Agreement dated as of February 1, 1996
between the Company and Ted K. Schwarzrock (5)
10.25 Management Agreement dated as of February 1, 1996
between the Company and Douglas W. Kohrs (5)
10.26 Management Agreement dated as of February 1, 1996
between the Company and Richard C. Jansen (5)
10.27 Management Agreement dated as of February 1, 1996
between the Company and David L. Shaw (5)
11 Statement of Computation of Per Share
Earnings Filed Electronically
27 Financial Data Schedule Filed Electronically
</TABLE>
- - ------------------------
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1995 (File No.
0-26116).
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 0-26116).
(3) Incorporated herein by reference to the same numbered Exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-91928).
(4) Exhibit contains portions for which confidential treatment has been granted
to the Company.
(5) Incorporated herein by reference to the same numbered Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
(File No. 0-26116).
<PAGE>
RESTATED BY-LAWS
OF
SPINE-TECH, INC.
AS OF
FEBRUARY 1, 1996
TABLE OF CONTENTS
Section Page
SHAREHOLDERS 1
- - ------------
1.01 Place of Meetings 1
1.02 Regular Meetings 1
1.03 Special Meetings 1
1.04 Meetings Held Upon Shareholder Demand 2
1.05 Adjournments 2
1.06 Notice of Meetings 2
1.07 Waiver of Notice 2
1.08 Quorum; Acts of Shareholders 2
1.09 Voting Rights 3
1.10 Proxies 3
1.11 Action Without a Meeting 3
DIRECTORS 3
- - ---------
2.01 Number; Qualifications 3
2.02 Term 3
2.03 Vacancies 4
2.04 Place of Meetings 4
2.05 Regular Meetings 4
2.06 Special Meetings 4
2.07 Waiver of Notice; Previously Scheduled
Meetings 4
2.08 Quorum; Acts of Board 4
2.09 Electronic Communications 5
2.10 Absent Directors 5
2.11 Action Without a Meeting 5
2.12 Committees 5
2.13 Special Litigation Committee 6
2.14 Compensation 6
2.15 Removal 6
OFFICERS 6
- - --------
3.01 Number and Designation 6
3.02 Chief Executive Officer 7
3.03 Chief Financial Officer 7
3.04 President 7
3.05 Vice Presidents 7
3.06 Secretary 8
3.07 Treasurer 8
3.08 Authority and Duties 8
-i-
<PAGE>
Section Page
- - -------
3.09 Term 8
3.10 Salaries 9
INDEMNIFICATION 9
- - ---------------
4.01 Indemnification 9
4.02 Insurance 9
SHARES 9
- - ------
5.01 Certificated and Uncertificated Shares 9
5.02 Declaration of Dividends and
Other Distributions 10
5.03 Transfer of Shares 10
5.04 Record Date 10
MISCELLANEOUS 10
- - -------------
6.01 Execution of Instruments 10
6.02 Advances 11
6.03 Corporate Seal 11
6.04 Fiscal Year 11
6.05 Amendments 11
This Table of Contents is not part of the By-Laws of the Corporation.
It is intended merely to aid in the utilization of the By-Laws.
-ii-
<PAGE>
RESTATED BY-LAWS
OF
SPINE-TECH, INC.
AS OF
FEBRUARY 1, 1996
SHAREHOLDERS
SECTION 1.01 PLACE OF MEETINGS. Each meeting of the shareholders
shall be held at the principal executive office of the Corporation or at such
other place as may be designated by the Board of Directors or the Chief
Executive Officer; provided, however, that any meeting called by or at the
demand of a shareholder or shareholders shall be held in the county where the
principal executive office of the Corporation is located.
SECTION 1.02 REGULAR MEETINGS. Regular meetings of the
shareholders may be held on an annual or other less frequent basis as
determined by the Board of Directors; provided, however, that if a regular
meeting has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding three percent or more of the voting power
of all shares entitled to vote may demand a regular meeting of shareholders
by written demand given to the Chief Executive Officer or Chief Financial
Officer of the Corporation. At each regular meeting the shareholders shall
elect qualified successors for directors who serve for an indefinite term or
whose terms have expired or are due to expire within six months after the
date of the meeting and may transact any other business, provided, however,
that no business with respect to which special notice is required by law
shall be transacted unless such notice shall have been given.
SECTION 1.03 SPECIAL MEETINGS. A special meeting of the
shareholders may be called for any purpose or purposes at any time by the
Chief Executive Officer; by the Chief Financial Officer; by the Board of
Directors or any two or more members thereof; or by one or more shareholders
holding not less than ten percent of the voting power of all shares of the
Corporation entitled to vote (except that a special meeting for the purpose
of considering any action to directly or indirectly effect a business
combination, including any action to change or otherwise affect the
composition of the Board of Directors for that purpose, must be called by
shareholders holding not less than twenty-five percent of all shares of the
Corporation entitled to vote), who shall demand such special meeting by
written notice given to the Chief Executive Officer or the Chief Financial
Officer of the Corporation specifying the purposes of such meeting.
<PAGE>
SECTION 1.04 MEETINGS HELD UPON SHAREHOLDER DEMAND. Within 30
days of receipt of a demand by the Chief Executive Officer or the Chief
Financial Officer from any shareholder or shareholders entitled to call a
meeting of the shareholders, it shall be the duty of the Board of Directors
of the Corporation to cause a special or regular meeting of shareholders, as
the case may be, to be duly called and held on notice no later than ninety
days after receipt of such demand. If the Board of Directors fails to cause
such a meeting to be called and held as required by this Section, the
shareholder or shareholders making the demand may call the meeting by giving
notice as provided in Section 1.06 hereof at the expense of the Corporation.
SECTION 1.05 ADJOURNMENTS. Any meeting of the shareholders may
be adjourned from time to time to another date, time and place. If any
meeting of the shareholders is so adjourned, no notice as to such adjourned
meeting need be given if the date, time and place at which the meeting will
be reconvened are announced at the time of adjournment.
SECTION 1.06 NOTICE OF MEETINGS. Except as otherwise specified
in Section 1.05 or required by law, written notice of each meeting of the
shareholders, stating the date, time and place and, in the case of a special
meeting, the purpose or purposes, shall be given at least ten days and not
more than sixty days prior to the meeting to every holder of shares entitled
to vote at such meeting. The business transacted at a special meeting of
shareholders is limited to the purposes stated in the notice of the meeting.
SECTION 1.07 WAIVER OF NOTICE. A shareholder may waive notice of
the date, time, place and purpose or purposes of a meeting of shareholders.
A waiver of notice by a shareholder entitled to notice is effective whether
given before, at or after the meeting, and whether given in writing, orally
or by attendance. Attendance by a shareholder at a meeting is a waiver of
notice of that meeting, unless the shareholder objects at the beginning of
the meeting to the transaction of business because the meeting is not
lawfully called or convened, or objects before a vote on an item of business
because the item may not lawfully be considered at that meeting and does not
participate in the consideration of the item at that meeting.
SECTION 1.08 QUORUM; ACTS OF SHAREHOLDERS. The holders of a
majority of the voting power of the shares entitled to vote at a shareholders
meeting are a quorum for the transaction of business. If a quorum is present
when a duly called or held meeting is convened, the shareholders present may
continue to transact business until adjournment, even though the withdrawal
of a number of the shareholders originally present leaves less than the
proportion or number otherwise required for a quorum. Except as otherwise
required by law or specified in
-2-
<PAGE>
the Articles of Incorporation of the Corporation, the shareholders shall take
action by the affirmative vote of the holders of a majority of the voting
power of the shares present and entitled to vote at a duly held meeting of
shareholders.
SECTION 1.09 VOTING RIGHTS. Subdivision 1. A shareholder shall
have one vote for each share held which is entitled to vote. Except as
otherwise required by law, a holder of shares entitled to vote may vote any
portion of the shares in any way the shareholder chooses. If a shareholder
votes without designating the proportion or number of shares voted in a
particular way, the shareholder is deemed to have voted all of the shares in
that way.
Subdivision 2. The Board may fix a date not more than sixty days
before the date of a meeting of shareholders as the date for the
determination of the holders of shares entitled to notice of and entitled to
vote at the meeting. When a date is so fixed, only shareholders on that date
are entitled to notice of and permitted to vote at that meeting of
shareholders.
SECTION 1.10 PROXIES. A shareholder may cast or authorize the
casting of a vote by filing a written appointment of a proxy with an officer
of the Corporation at or before the meeting at which the appointment is to be
effective.
SECTION 1.11 ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at a meeting of the shareholders of the Corporation may
be taken without a meeting by written action signed by all of the
shareholders entitled to vote on that action. The written action is
effective when it has been signed by all of those shareholders, unless a
different effective time is provided in the written action.
DIRECTORS
SECTION 2.01 NUMBER; QUALIFICATIONS. Except as authorized by the
shareholders pursuant to a shareholder control agreement or unanimous
affirmative vote, the business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors. The Board of
Directors shall consist of up to five (5) members, and shall be elected as
set forth in the Corporation's Restated Articles of Incorporation. Directors
shall be natural persons. Directors need not be shareholders.
SECTION 2.02 TERM. Each director shall serve for an indefinite
term that expires at the next regular meeting of the shareholders. A
director shall hold office until a successor is elected and has qualified or
until the earlier death, resignation, removal or disqualification of the
director.
-3-
<PAGE>
SECTION 2.03 VACANCIES. Vacancies on the Board of Directors
resulting from the death, resignation, removal or disqualification of a
director shall be filled as set forth in the Corporation's Restated Articles
of Incorporation.
SECTION 2.04 PLACE OF MEETINGS. Each meeting of the Board of
Directors shall be held at the principal executive office of the Corporation
or at such other place as may be designated from time to time by a majority
of the members of the Board.
SECTION 2.05 REGULAR MEETINGS. Regular meetings of the Board of
Directors for the election of officers and the transaction of any other
business shall be held without notice at the place of and immediately after
each regular meeting of the shareholders.
SECTION 2.06 SPECIAL MEETINGS. A special meeting of the Board of
Directors may be called for any purpose or purposes at any time by any member
of the Board by giving not less than two days' notice to all directors of the
date, time and place of the meeting, provided that when notice is mailed, at
least four days' notice shall be given. The notice need not state the
purpose of the meeting.
SECTION 2.07 WAIVER OF NOTICE; PREVIOUSLY SCHEDULED MEETINGS.
Subdivision 1. A director of the Corporation may waive notice of the date,
time and place of a meeting of the Board. A waiver of notice by a director
entitled to notice is effective whether given before, at or after the
meeting, and whether given in writing, orally or by attendance. Attendance
by a director at a meeting is a waiver of notice of that meeting, unless the
director objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and
thereafter does not participate in the meeting.
Subdivision 2. If the day or date, time and place of a Board
meeting have been provided herein or announced at a previous meeting of the
Board, no notice is required. Notice of an adjourned meeting need not be
given other than by announcement at the meeting at which adjournment is taken
of the date, time and place at which the meeting will be reconvened.
SECTION 2.08 QUORUM; ACTS OF BOARD. The presence in person of a
majority of the directors currently holding office shall be necessary to
constitute a quorum for the transaction of business. In the absence of a
quorum, a majority of the directors present may adjourn a meeting from time
to time without further notice until a quorum is present. If a quorum is
present when a duly held meeting is convened, the directors present may
continue to transact business until adjournment, even though the
-4-
<PAGE>
withdrawal of a number of the directors originally present leaves less than
the proportion or number otherwise required for a quorum. Except as
otherwise required by law or specified in the Articles of Incorporation of
the Corporation, the Board shall take action by the affirmative vote of a
majority of the directors present at a duly held meeting.
SECTION 2.09 ELECTRONIC COMMUNICATIONS. A conference among
directors by any means of communication through which the directors may
simultaneously hear each other during the conference constitutes a Board
meeting, if the same notice is given of the conference as would be required
for a meeting, and if the number of directors participating in the conference
would be sufficient to constitute a quorum at a meeting. A director may
participate in a Board meeting not described in the immediately preceding
sentence by any means of communication through which the director, other
directors so participating and all directors physically present at the
meeting may simultaneously hear each other during the meeting. Participation
in a meeting by any means referred to in this Section 2.09 constitutes
presence in person at the meeting.
SECTION 2.10 ABSENT DIRECTORS. A director of the Corporation may
give advance written consent or opposition to a proposal to be acted on at a
Board meeting. If the director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted
on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
SECTION 2.11 ACTION WITHOUT A MEETING. An action required or
permitted to be taken at a Board meeting may be taken without a meeting by
written action signed by all of the directors. Any action, other than an
action requiring shareholder approval, if the Articles of Incorporation so
provide, may be taken by written action signed by the number of directors
that would be required to take the same action at a meeting of the Board at
which all directors were present. The written action is effective when
signed by the required number of directors, unless a different effective time
is provided in the written action. When written action is permitted to be
taken by less than all directors, all directors shall be notified immediately
of its text and effective date.
SECTION 2.12 COMMITTEES. Subdivision 1. A resolution approved
by the affirmative vote of a majority of the Board may establish committees
having the authority of the Board in the management of the business of the
Corporation only to the
-5-
<PAGE>
extent provided in the resolution. Committees shall be subject at all times
to the direction and control of the Board, except as provided in Section
2.13.
Subdivision 2. A committee shall consist of one or more natural
persons, who need not be directors, appointed by affirmative vote of a
majority of the directors present at a duly held Board meeting.
Subdivision 3. Section 2.04 and Sections 2.06 to 2.11 hereof shall
apply to committees and members of committees to the same extent as those
sections apply to the Board and directors.
Subdivision 4. Minutes, if any, of committee meetings shall be
made available upon request to members of the committee and to any director.
SECTION 2.13 SPECIAL LITIGATION COMMITTEE. Pursuant to the
procedure set forth in Section 2.12, the Board may establish a committee
composed of one or more independent directors or other independent persons to
determine whether it is in the best interests of the Corporation to pursue a
particular legal right or remedy of the Corporation and whether to cause, to
the extent permitted by law, the dismissal or discontinuance of a particular
proceeding that seeks to assert a right or remedy on behalf of the
Corporation. The committee, once established, is not subject to the direction
or control of, or termination by, the Board. A vacancy on the committee may
be filled by a majority vote of the remaining committee members. The good
faith determinations of the committee are binding upon the Corporation and
its directors, officers and shareholders to the extent permitted by law. The
committee terminates when it issues a written report of its determinations to
the Board.
SECTION 2.14 COMPENSATION. The Board may fix the compensation,
if any, of directors.
SECTION 2.15 REMOVAL. A Director may be removed only in
accordance with the provisions of the Restated Articles of Incorporation.
OFFICERS
SECTION 3.01 NUMBER AND DESIGNATION. The Corporation shall have
one or more natural persons exercising the functions of the offices of Chief
Executive Officer and Chief Financial Officer. The Board of Directors may
elect or appoint such other officers or agents as it deems necessary for the
operation and management of the Corporation, with such powers, rights, duties
and responsibilities as may be determined by the Board, including, without
limitation, a President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall have
-6-
<PAGE>
the powers, rights, duties and responsibilities set forth in these By-Laws
unless otherwise determined by the Board. Any of the offices or functions of
those offices may be held by the same person.
SECTION 3.02 CHIEF EXECUTIVE OFFICER. Unless provided otherwise
by a resolution adopted by the Board of Directors, the Chief Executive
Officer (a) shall have general active management of the business of the
Corporation; (b) shall, when present, preside at all meetings of the
shareholders and Board of Directors; (c) shall see that all orders and
resolutions of the Board are carried into effect; (d) may maintain records of
and certify proceedings of the Board and shareholders; and (e) shall perform
such other duties as may from time to time be assigned by the Board of
Directors.
SECTION 3.03 CHIEF FINANCIAL OFFICER. Unless provided otherwise
by a resolution adopted by the Board of Directors, the Chief Financial
Officer (a) shall keep accurate financial records for the Corporation; (b)
shall deposit all monies, drafts and checks in the name of and to the credit
of the Corporation in such banks and depositories as the Board of Directors
shall designate from time to time; (c) shall endorse for deposit all notes,
checks and drafts received by the Corporation as ordered by the Board, making
proper vouchers therefor; (d) shall disburse corporate funds and issue checks
and drafts in the name of the Corporation, as ordered by the Board; (e) shall
render to the Chief Executive Officer and the Board of Directors, whenever
requested, an account of all of such officer's transactions as Chief
Financial Officer and of the financial condition of the Corporation; and (f)
shall perform such other duties as may be prescribed by the Board of
Directors or the Chief Executive Officer from time to time.
SECTION 3.04 PRESIDENT. Unless otherwise determined by the
Board, the President shall be the Chief Executive Officer of the Corporation.
If an officer other than the President is designated Chief Executive Officer,
the President shall perform such duties as may from time to time be assigned
by the Board of Directors.
SECTION 3.05 VICE PRESIDENTS. Any one or more Vice Presidents,
if any, may be designated by the Board of Directors as Executive Vice
Presidents or Senior Vice Presidents. During the absence or disability of
the President, it shall be the duty of the highest ranking Executive Vice
President, and, in the absence of any such Vice President, it shall be the
duty of the highest ranking Senior Vice President or other Vice President,
who shall be present at the time and able to act, to perform the duties of
the President. The determination of who is the highest ranking of two or
more persons holding the same office shall, in the absence of specific
designation of order of rank by the Board
-7-
<PAGE>
of Directors, be made on the basis of the earliest date of appointment or
election, or, in the event of simultaneous appointment or election, on the
basis of the longest continuous employment by the Corporation.
SECTION 3.06 SECRETARY. The Secretary, unless otherwise
determined by the Board, shall attend all meetings of the shareholders and
all meetings of the Board of Directors, shall record or cause to be recorded
all proceedings thereof in a book to be kept for that purpose, and may
certify such proceedings. Except as otherwise required or permitted by law or
by these By-Laws, the Secretary shall give or cause to be given notice of all
meetings of the shareholders and all meetings of the Board of Directors.
SECTION 3.07 TREASURER. Unless otherwise determined by the
Board, the Treasurer shall be the Chief Financial Officer of the Corporation.
If an officer other than the Treasurer is designated Chief Financial
Officer, the Treasurer shall perform such duties as may from time to time be
assigned by the Board of Directors.
SECTION 3.08 AUTHORITY AND DUTIES. In addition to the foregoing
authority and duties, all officers of the Corporation shall respectively have
such authority and perform such duties in the management of the business of
the Corporation as may be designated from time to time by the Board of
Directors. Unless prohibited by a resolution approved by the affirmative vote
of a majority of the directors present, an officer elected or appointed by
the Board may, without the approval of the Board, delegate some or all of the
duties and powers of an office to other persons.
SECTION 3.09 TERM. Subdivision 1. All officers of the
Corporation shall hold office until their respective successors are chosen
and have qualified or until their earlier death, resignation or removal.
Subdivision 2. An officer may resign at any time by giving written
notice to the Corporation. The resignation is effective without acceptance
when the notice is given to the Corporation, unless a later effective date is
specified in the notice.
Subdivision 3. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority
of the directors present at a duly held Board meeting.
Subdivision 4. A vacancy in an office because of death,
resignation, removal, disqualification or other cause may, or in the case of
a vacancy in the office of Chief Executive
-8-
<PAGE>
Officer or Chief Financial Officer shall, be filled for the unexpired portion
of the term by the Board.
SECTION 3.10 SALARIES. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or by the Chief
Executive Officer if authorized by the Board.
INDEMNIFICATION
SECTION 4.01 INDEMNIFICATION. The Corporation shall indemnify
such persons, for such expenses and liabilities, in such manner, under such
circumstances, and to such extent, as required or permitted by Minnesota
Statutes, Section 3O2A.521, as amended from time to time, or as required or
permitted by other provisions of law.
SECTION 4.02 INSURANCE. The Corporation may purchase and
maintain insurance on behalf of any person in such person's official capacity
against any liability asserted against and incurred by such person in or
arising from that capacity, whether or not the Corporation would otherwise be
required to indemnify the person against the liability.
SHARES
SECTION 5.01 CERTIFICATED AND UNCERTIFICATED SHARES. Subdivision
1. The shares of the Corporation shall be either certificated shares or
uncertificated shares. Each holder of duly issued certificated shares is
entitled to a certificate of shares.
Subdivision 2. Each certificate of shares of the Corporation shall
bear the corporate seal, if any, and shall be signed by the Chief Executive
Officer, or the President or any Vice President, and the Chief Financial
Officer, or the Secretary or any Assistant Secretary, but when a certificate
is signed by a transfer agent or a registrar, the signature of any such
officer and the corporate seal upon such certificate may be facsimiles,
engraved or printed. If a person signs or has a facsimile signature placed
upon a certificate while an officer, transfer agent or registrar of the
Corporation, the certificate may be issued by the Corporation, even if the
person has ceased to serve in that capacity before the certificate is issued,
with the same effect as if the person had that capacity at the date of its
issue.
Subdivision 3. A certificate representing shares issued by the
Corporation shall, if the Corporation is authorized to issue shares of more
than one class or series, set forth upon the face or back of the certificate,
or shall state that the Corporation will furnish to any shareholder upon
request and without charge, a full statement of the designations,
-9-
<PAGE>
preferences, limitations and relative rights of the shares of each class or
series authorized to be issued, so far as they have been determined, and the
authority of the Board to determine the relative rights and preferences of
subsequent classes or series.
Subdivision 4. A resolution approved by the affirmative vote of a
majority of the directors present at a duly held meeting of the Board may
provide that some or all of any or all classes and series of the shares of
the Corporation will be uncertificated shares. Any such resolution shall not
apply to shares represented by a certificate until the certificate is
surrendered to the Corporation.
SECTION 5.02 DECLARATION OF DIVIDENDS AND OTHER DISTRIBUTIONS.
The Board of Directors shall have the authority to declare dividends and
other distributions upon the shares of the Corporation to the extent
permitted by law.
SECTION 5.03 TRANSFER OF SHARES. Shares of the Corporation may
be transferred only on the books of the Corporation by the holder thereof, in
person or by such person's attorney. In the case of certificated shares,
shares shall be transferred only upon surrender and cancellation of
certificates for a like number of shares. The Board of Directors, however,
may appoint one or more transfer agents and registrars to maintain the share
records of the Corporation and to effect transfers of shares.
SECTION 5.04 RECORD DATE. The Board of Directors may fix a time,
not exceeding sixty days preceding the date fixed for the payment of any
dividend or other distribution, as a record date for the determination of the
shareholders entitled to receive payment of such dividend or other
distribution, and in such case only shareholders of record on the date so
fixed shall be entitled to receive payment of such dividend or other
distribution, notwithstanding any transfer of any shares on the books of the
Corporation after any record date so fixed.
MISCELLANEOUS
SECTION 6.01 EXECUTION OF INSTRUMENTS. Subdivision 1. All
deeds, mortgages, bonds, checks, contracts and other instruments pertaining
to the business and affairs of the Corporation shall be signed on behalf of
the Corporation by the Chief Executive Officer, or the President, or any Vice
President, or by such other person or persons as may be designated from time
to time by the Board of Directors.
Subdivision 2. If a document must be executed by persons holding
different offices or functions and one person holds such offices or exercises
such functions, that person may
-10-
<PAGE>
execute the document in more than one capacity if the document indicates each
such capacity.
SECTION 6.02 ADVANCES. The Corporation may, without a vote of
the directors, advance money to its directors, officers or employees to cover
expenses that can reasonably be anticipated to be incurred by them in the
performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
SECTION 6.03 CORPORATE SEAL. The seal of the Corporation, if
any, shall be a circular embossed seal having inscribed thereon the name of
the Corporation and the following words:
"Corporate Seal Minnesota".
SECTION 6.04 FISCAL YEAR. The fiscal year of the Corporation
shall be determined by the Board of Directors.
SECTION 6.05 AMENDMENTS. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation, subject to
the power of the shareholders to change or repeal the same, provided,
however, that the Board shall not adopt, amend or repeal any By-Law fixing a
quorum for meetings of shareholders, prescribing procedures for removing
directors or filling vacancies in the Board, or fixing the number of
directors or their classifications, qualifications or terms of office, but
may adopt or amend a By-Law that increases the number of directors.
8105R
M1:0133694.01
-11-
<PAGE>
SPINE-TECH, INC.
EXHIBIT 11--STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
-------------- ------------
<S> <C> <C>
PRIMARY LOSS PER SHARE:
Weighted average shares outstanding 9,706,697 2,111,250
SAB No. 83 shares -- for stock options granted at exercise prices less than the
initial public offering price during the 12 months preceding the initial
public offering using the treasury stock method -- 353,742
-------------- ------------
9,706,697 2,464,992
-------------- ------------
-------------- ------------
Net loss $ (355,004) $ (98,716)
-------------- ------------
-------------- ------------
Primary loss per share $ (0.04) $ (0.04)
-------------- ------------
-------------- ------------
FULLY DILUTED LOSS PER SHARE:
Weighted average shares outstanding 9,706,697 6,246,478
SAB No. 83 shares -- for stock options granted at exercise prices less than the
initial public offering price during the 12 months preceding the initial public
offering using the treasury stock method -- 353,742
-------------- ------------
9,706,697 6,600,220
-------------- ------------
-------------- ------------
-------------- ------------
Net loss $ (355,004) $ (98,716)
-------------- ------------
-------------- ------------
Fully diluted loss per share $ (0.04) $ (0.01)
-------------- ------------
-------------- ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS OF SPINE-TECH,INC., FOR THE THREE MONTHS ENDED
MARCH 31,1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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0
0
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</TABLE>
