NuVasive files complaint against former board member who resigned for Alphatec post: 7 things to know

Spinal Tech

NuVasive filed a lawsuit against former President, COO and Vice Chairman Patrick Miles for breach of fiduciary duties and contract violation after the executive resigned from the company to become Alphatec's executive chairman.


Here are seven things to know:


1. Before resigning, Mr. Miles had spent the past 17 years with NuVasive, serving the company in several leadership and product development roles. He eventually became president and COO. While in that role Mr. Miles conducted research into Alphatec as a possible acquisition for NuVasive, but recommended against it. He advised an acquisition would be a "waste of time" and described Alphatec's portfolio as aged and undifferentiated.


Globus Medical later purchased Alphatec's international operations.


2. Shortly after Mr. Miles was appointed to NuVasive's board in August 2016, he told the company he was considering an employment offer from Alphatec and reportedly used the offer to negotiate a new compensation package with NuVasive that included a $500,000 per year salary, an equity award valued at more than $3.7 million and continued vesting of earlier grants, according to the complaint. He also became the company's vice chairman, remaining involved in high-level business strategy, product development and key customer and partner relationships.


3. Despite his report to NuVasive, Mr. Miles executed a securities purchase agreement of $500,000 of Alphatec stock in a private placement this past March. He concealed the investment through an entity called "MOM" and didn't disclose himself as the beneficial owner. Mr. Miles then negotiated an offer to become as Alphatec's executive chairman while still serving on NuVasive's board.


4. Alphatec agreed to grant Mr. Miles 1 million restricted stock units, a $3.2 million value, and Mr. Miles purchased 1.3 million shares at $2.26 per share, a $2.9 million investment in the company. He also received warrants to purchase an additional 1.3 million Alphatec shares upon the closing of his purchase, which would give him ownership of around 15 to 23 percent of Alphatec's outstanding shares. On the day Alphatec announced his hiring, Mr. Miles' equity investment appreciated more than 40 percent.


5. On Oct. 1, Mr. Miles resigned as vice chairman and board member of NuVasive, effective immediately, and planned to begin employment at Alphatec the next day. He also told NuVasive he wouldn't honor contractual obligations to refrain from:


• Working for a competitor
• Soliciting NuVasive customers
• Recruiting NuVasive employees


"To maximize the damage to NuVasive, Miles began soliciting NuVasive's employees and customers while an employee and a board member of NuVasive," states the complaint, despite the terms of his letter agreement, which outline specific restrictive covenants, including non-competition and non-solicitation provisions. Mr. Miles has been in contact with more than 24 current and former NuVasive employees and customers since resigning, and at least one employee has resigned to join him at Alphatec.


6. NuVasive's complaint states, "Miles has overseen the spread [of] false threats to NuVasive's distributors in an effort to convince them to terminate their relationships with NuVasive; and one distributor representative already terminated her relationship with NuVasive to accept a position with Alphatec."


7. NuVasive plans to continue investigating the issue and file further claims if warranted. The company "seeks to disgorge all compensation paid to Mr. Miles," according to the complaint. DLA Piper is legal counsel to NuVasive on this matter.


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