MAKO Mako Surgical Corp. (MM)

If the merger agreement is adopted by the Company’s stockholders and certain other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into the Company with the Company being the surviving corporation in the merger.

Upon the consummation of the merger, each share of common stock issued and outstanding immediately before the effective time (other than shares owned by the Company, Stryker or Merger Sub or any of their subsidiaries, which will be canceled, and other than dissenting shares) will be converted into the right to receive $30 in cash, without interest, but subject to any applicable withholding taxes.

Our common stock is currently registered under the Exchange Act and is quoted on NASDAQ under the symbol “MAKO.” As a result of the merger, the Company will cease to be a publicly-traded company and will be wholly owned by Stryker. Following the consummation of the merger, our common stock will be delisted from NASDAQ and deregistered under the Exchange Act, and the Company will no longer be required to file periodic reports with the SEC, in each case in accordance with applicable law, rules and regulations.

MAKO’s management and board regularly review MAKO’s performance and prospects in light of the current business, economic, healthcare and healthcare payment and reimbursement environments, as well as developments in the medical devices and medical implants businesses and the opportunities and challenges facing participants in those businesses.

These reviews have included consideration, from time to time, of potential strategic alternatives, including strategic acquisitions, a merger with or acquisition by a larger industry participant or remaining an independent standalone company. MAKO’s board and management also have continuously reviewed MAKO’s commercial and strategic relationship with Pipeline Biomedical Holdings, Inc. (“Pipeline”). Under the terms of MAKO’s strategic alliance agreement with Pipeline, MAKO has the right to make an offer to acquire the portion of Pipeline’s business dedicated to the development, manufacture and sale of the products pertaining to MAKO’s business and covered by the strategic alliance agreement (the “Pipeline Business”) during a six-month period in 2014. During 2013, the MAKO board determined that acquiring the Pipeline Business would be advantageous to MAKO relative to continuing the commercial relationship with Pipeline under the strategic alliance agreement without an acquisition. Accordingly, in May 2013, the MAKO board instructed management to make an acquisition of the Pipeline Business a high, near-term strategic priority. Pipeline was similarly interested in an acquisition transaction involving the Pipeline Business prior to 2014. In May 2013, MAKO and Pipeline entered into a letter of intent outlining the principal terms of such a transaction, including that the consideration for the acquisition would be not less than 3,953,771 shares of common stock of MAKO, and commenced negotiations for a transaction based on such terms. The MAKO board monitored these negotiations and, in late July 2013, reaffirmed that completing the Pipeline Business acquisition substantially on the outlined terms should remain a high priority.

In early August 2013, Kevin A. Lobo, President and Chief Executive Officer of Stryker, contacted Maurice R. Ferré, M.D., MAKO’s President and Chief Executive Officer, to arrange an in-person meeting, which occurred on August 12, 2013. At this in-person meeting, Mr. Lobo expressed interest in a potential acquisition of all of the issued and outstanding common stock of MAKO by Stryker and proposed a price of $21 per share of common stock in cash. Dr. Ferré expressed doubt that MAKO would be interested in a transaction, especially in that price range, but said that he would inform the MAKO board, and requested that any further proposals should be made in writing. Following the August 12, 2013 meeting, Dr. Ferré reviewed the proposal made by Mr. Lobo with Charles W. Federico, chairman of the MAKO board.

On August 15, 2013, MAKO received a letter from Stryker proposing to acquire MAKO at a price in the range of $24 – 26 per share, in cash, with the transaction to be funded with existing cash, subject to negotiation of definitive transaction agreements and completion of customary due diligence. The letter from Stryker indicated that Stryker’s valuation of MAKO could change if Stryker learned of additional opportunities or new product capabilities during discussions with MAKO.

On August 16, 2013, and again on August 19, 2013, the MAKO board met telephonically, together with management, representatives of J.P. Morgan, MAKO’s financial advisor, and Foley & Lardner LLP (“Foley”), MAKO’s outside corporate counsel, to discuss and review the proposal from Stryker as well as MAKO’s standalone performance and prospects. As a result of these discussions, the MAKO board directed management to engage (subject to Stryker entering into a customary confidentiality and standstill agreement) in further discussions and limited initial due diligence with Stryker with a view toward demonstrating to Stryker additional opportunities and product capabilities that could enhance Stryker’s valuation of MAKO. The MAKO board also concluded that any delay or slow-down in negotiations with Pipeline would significantly jeopardize MAKO’s ability to acquire the Pipeline Business on the terms then under negotiation. Accordingly, in light of the uncertainty as to whether an acceptable transaction with Stryker would materialize and, if it did, whether it would be successfully completed, the MAKO board directed management to continue the Pipeline negotiations in parallel and with high priority.

On August 22, 2013, MAKO and Stryker executed a confidentiality and standstill agreement allowing for confidential negotiations, exchange of information and due diligence.

On August 26, 2013, representatives of MAKO and Stryker met in-person for several hours to review MAKO’s business and products, as well as attend a presentation by MAKO regarding additional opportunities and anticipated future product capabilities that might not have been apparent to Stryker. At the conclusion of these meetings, Dr. Ferré informed the Stryker representatives that the MAKO board would be meeting the following week to determine whether to enter into negotiations for a transaction with Stryker and, accordingly, if Stryker intended to increase its proposal above the $24 – $26 per share range, it should do so before the MAKO board meeting.

On August 29, 2013, Mr. Lobo informed Dr. Ferré by telephone that Stryker was willing to increase the proposed purchase price to $30 per share, in cash. The following day, MAKO received a letter from Stryker confirming in writing the proposal to acquire MAKO at a price of $30 per share of common stock, assuming satisfactory due diligence and negotiation of transaction documentation.

On September 4, 2013, the MAKO board met in-person, together with members of management and representatives of J.P. Morgan, Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), which had been retained as special counsel, and Foley, to review and discuss the Stryker proposal and MAKO’s strategic alternatives generally, including the alternative of remaining independent. At this meeting, J.P. Morgan reviewed its preliminary financial analysis of MAKO, as well as an overview of the businesses in which MAKO participates and potential transaction partners (other than Stryker). MAKO management made a presentation concerning MAKO’s business, product development and prospects, and reviewed with the MAKO board projections of future financial performance of MAKO prepared in connection with MAKO ’s regular planning process and with the merger proposal from Stryker . After discussion, the MAKO board concluded that, if it could be achieved, a transaction with Stryker at or above the price suggested by Stryker would be more favorable to MAKO’s stockholders relative to the alternative of remaining independent, and that, based upon Stryker’s complementary products and strategic positioning, Stryker would be the potential transaction partner likely to pay the highest value for MAKO. Following the MAKO board meeting, at the board’s direction, Dr. Ferré contacted Mr. Lobo to determine whether a higher price could be obtained in connection with Stryker’s proposed acquisition of MAKO. Mr. Lobo informed Dr. Ferré that Stryker’s $30 per share proposal was near or at the limit of Stryker’s willingness to pay, but Mr. Lobo said Stryker would consider the matter further internally.

On September 5, 2013, Mr. Lobo contacted Dr. Ferré by telephone to inform him that Stryker would be willing to increase its proposed acquisition price to $31 per share, assuming satisfactory due diligence and negotiation of transaction documentation, but that Dr. Ferré should assume that $31 per share would be the maximum Stryker would agree to pay, and MAKO should understand no further increases would be forthcoming, regardless of the results of further due diligence investigations, including with respect to the Pipeline Business. Stryker’s offer of $31 per share, which translated to an enterprise value (and cash cost to Stryker) of $1.6 billion, did not account for the issuance of additional shares of common stock as consideration for MAKO’s acquisition of the Pipeline Business.

On September 5, 2013, following the telephone call from Mr. Lobo, the MAKO board held a special telephonic meeting with members of management and representatives of J.P. Morgan and Wachtell Lipton present, during which Dr. Ferré informed the directors of Stryker’s increased proposal. After discussion, the

MAKO board directed management to proceed with due diligence and negotiations for a transaction at the $31 per share price, subject to final approval by the board.

From September 6 through September 20, 2013, Stryker and its representatives continued their due diligence investigations of MAKO and its business (including MAKO’s relationship with Pipeline), and the parties and their representatives negotiated the transaction documentation, including the merger agreement.

During the evening of September 19, 2013, Mr. Lobo contacted Dr. Ferré to request an in-person meeting the next morning. On September 20, 2013, Mr. Lobo met Dr. Ferré and other members of MAKO management near MAKO’s headquarters in Florida. Mr. Lobo informed Dr. Ferré that Stryker had completed its due diligence process and, as a result of its findings, proposed to acquire MAKO at a price of $29 per share of common stock, in cash, rather than $31 per share. Mr. Lobo cited several business- and performance-related issues, and also noted that Stryker had concluded that, in the context of a Stryker acquisition of MAKO, Stryker would expect MAKO to enter into and complete its planned acquisition of the Pipeline Business, which would impose additional costs on Stryker. Mr. Lobo and Dr. Ferré debated each of the asserted reasons for the Stryker’s revised proposal, and Dr. Ferré informed Mr. Lobo that $29 per share was likely to be unacceptable to the MAKO board. After the in-person meeting and through September 23, 2013, numerous conversations occurred between Dr. Ferré and Mr. Lobo, and between J.P. Morgan and Citigroup Global Markets Inc. (“Citi”), Stryker’s financial advisor, in an effort to determine whether an acceptable purchase price could be achieved. During this period, Wachtell Lipton and Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), Stryker’s outside legal counsel, continued to negotiate the merger agreement.

During the course of these negotiations, on September 21, 2013, MAKO convened a telephonic update meeting of the MAKO board, together with members of management and representatives of J.P. Morgan, Wachtell Lipton and Foley. Dr. Ferré and representatives of J.P. Morgan provided an update of discussions with Stryker, including the reduction in the proposed transaction price. After discussion, the MAKO board instructed management to continue negotiating with Stryker to see if a better price could be obtained, and that Stryker should be informed that there was significant risk to Stryker that the MAKO board would not approve a transaction below $30 per share. The board determined to meet again on the afternoon of September 23, 2013.

On September 23, 2013, during one of their several telephone conversations that day, Mr. Lobo informed Dr. Ferré that he did not have authority from the Stryker board to offer consideration in excess of $29 per share, which implied an enterprise value (and cash cost to Stryker) of $1.6 billion (taking into account a MAKO acquisition of the Pipeline Business), and that the MAKO board should make its determination on that basis. In the late afternoon of September 23, 2013, the MAKO board held a special telephonic meeting attended by members of management and representatives of J.P. Morgan, Wachtell Lipton and Foley. During the meeting, Dr. Ferré and representatives of J.P. Morgan provided an update concerning discussions with Mr. Lobo and Citi, respectively, including that Stryker was unwilling to increase the proposed transaction price. Management and representatives of J.P. Morgan and Wachtell Lipton again reviewed the history of negotiations with Stryker and the terms of the proposal by Stryker, MAKO’s recent performance, the significant risks and challenges inherent in MAKO’s standalone plans, the importance of completing the Pipeline Business acquisition, and the likelihood or unlikelihood of a third party offering to acquire MAKO at a value at or above $29 per share in the future, and discussed the certain value associated with accepting a transaction at $29 per share as compared to the potential opportunities and risks associated with rejecting the proposal and remaining a standalone entity. In addition, representatives of J.P. Morgan provided an updated financial presentation regarding the revised proposal from Stryker, and representatives of Wachtell Lipton provided a presentation regarding the terms of the draft merger agreement, including the terms that remained subject to further negotiation. Wachtell Lipton noted that, although legal negotiations were not yet fully completed, it believed that such negotiations could likely be completed on satisfactory terms in a short amount of time assuming the parties were to reach an agreement on price. Following extensive discussions, the MAKO board was unable to reach a unanimous determination to approve a transaction at a price of $29 per share. The MAKO board directed Dr. Ferré to communicate this conclusion to Mr. Lobo in advance of a meeting of the Stryker board scheduled for the morning on September 24, 2013, and to attempt again to obtain a proposal from Stryker at a price of $30 per share, or more. Following the MAKO board meeting, Dr. Ferré contacted Mr. Lobo to inform him of the board’s direction.

On September 24, 2013, Dr. Ferré received a telephone call from Mr. Lobo indicating that the Stryker board was willing to increase the proposed transaction price to $30 per share of common stock in cash and had approved the proposed transaction at that price, subject to satisfactory resolution of a small number of open legal points in the merger agreement, including that the size of the termination fee that would be payable by MAKO to Stryker in certain situations (generally involving the existence of a superior proposal to acquire MAKO from a third party) would be 3.7% of the transaction value, up from the 3.0%  –  3.25% previously under discussion.

Shortly thereafter, in the early afternoon of September 24, 2013, MAKO management convened an update call with the MAKO board, together with members of management and representatives of J.P. Morgan, Wachtell Lipton and Foley. Dr. Ferré informed the directors of his call with Mr. Lobo, including the increase in the proposed transaction price. After discussion, the directors concluded that Stryker’s revised terms were likely to be acceptable and that the minor open items in the merger agreement were readily resolvable, and the MAKO board instructed management, J.P. Morgan and Wachtell Lipton to finalize merger agreement negotiations, if possible in advance of the MAKO board meeting scheduled for that evening. During the afternoon of September 24, 2013, the parties worked to finalize negotiation of the merger agreement.

During the evening of September 24, 2013, the MAKO board held a special telephonic meeting attended by management and representatives of J.P. Morgan, Wachtell Lipton and Foley, during which Dr. Ferré provided an update regarding negotiations with Stryker. Management and representatives of J.P. Morgan and Wachtell Lipton again reviewed the terms of the proposal by Stryker. Representatives of Wachtell Lipton again reviewed with the MAKO board the terms of the proposed merger agreement and provided an update regarding negotiations with Stryker and Skadden concerning the merger agreement. Representatives of J.P. Morgan reviewed with the board J.P. Morgan’s financial analysis of the $30 per share of common stock in cash to be paid to MAKO’s stockholders in the proposed transaction and then delivered to the board J.P. Morgan’s oral opinion, subsequently confirmed in writing, that, as of such date and based upon and subject to the various limitations and assumptions set forth in the opinion, the $30 per share of common stock in cash to be paid to the holders of common stock pursuant to the merger agreement was fair from a financial point of view to such holders. See “ The Merger (Proposal 1) — Opinion of J.P. Morgan Securities LLC .” Following extensive discussion, the MAKO board unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were advisable, fair to and in the best interests of MAKO and its stockholders, to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, substantially in the form presented to the board, and to recommend that MAKO’s stockholders approve the adoption of the merger agreement. The MAKO board determination was subject, however, to confirmation that the remaining open points in the merger agreement had been satisfactorily resolved, and the board agreed to reconvene, if necessary, at 11:30 p.m. that evening to be informed of the resolution of such terms.

Following the MAKO board meeting, the parties completed negotiations on terms satisfactory to both parties. The MAKO board reconvened by telephone at 11:30 p.m. and received confirmation from MAKO’s management and advisors of the satisfactory resolution of open issues, at which time the board reconfirmed its earlier approvals and determinations.

Following the MAKO board’s approval of the merger agreement and the merger, MAKO, Stryker and Merger Sub finalized and executed the merger agreement during the early morning on September 25, 2013. That same morning, each of MAKO and Stryker issued a press release announcing entry into the merger agreement.

On October 2, 2013, MAKO announced that it had entered into a definitive agreement to acquire the Pipeline Business, and on October 8, 2013, MAKO announced that it had completed the acquisition of the Pipeline Business, substantially on the previously contemplated terms.

The MAKO board evaluated, with the assistance of its legal and financial advisors, the merger agreement and the merger and unanimously determined that the merger agreement, the merger and the other transactions contemplated thereby are advisable, fair to and in the best interests of MAKO and its stockholders and unanimously approved the merger agreement and the merger. The MAKO board has unanimously recommended that the stockholders of MAKO vote “FOR” the proposal to adopt the merger agreement.

In the course of reaching its unanimous recommendation, MAKO board considered the following positive factors relating to the merger agreement, the merger and the other transactions contemplated thereby, each of which the directors believed supported their decision:

In the course of reaching the determinations and decisions and making the recommendation described above, the MAKO board also considered the following risks and potentially negative factors relating to the merger agreement, the merger and the other transactions contemplated thereby:

Pursuant to an engagement letter dated September 4, 2013, the Company retained J.P. Morgan as its financial advisor in connection with the proposed merger and to deliver a fairness opinion in connection with the proposed merger.

At the meeting of the MAKO board on September 24, 2013, J.P. Morgan rendered its oral opinion to the MAKO board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders. J.P. Morgan has confirmed its September 24, 2013 oral opinion by delivering its written opinion to the MAKO board, dated September 24, 2013, that, as of such date, the consideration to be paid to holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders. No limitations were imposed by the MAKO board upon J.P. Morgan with respect to the investigations made or procedures followed by it in rendering its opinions.

The full text of the written opinion of J.P. Morgan, dated September 24, 2013, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The Company’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion is addressed to the MAKO board, is directed only to

the consideration to be paid in the merger and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote at the special meeting of the Company’s stockholders. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion.

In arriving at its opinion, J.P. Morgan, among other things:

J.P. Morgan also held discussions with certain members of the management of each of the Company and Stryker with respect to certain aspects of the merger, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

J.P. Morgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by the Company or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of the Company under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement and this proxy statement, and that the definitive merger agreement would not differ in any material respect from the draft thereof provided to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by the parties in the merger agreement and related agreements are and will be true in all respects material to J.P. Morgan’s analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to the Company with respect to such issues . J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the Company or on the contemplated benefits of the merger.

The projections furnished to J.P. Morgan for the Company were prepared by the Company’s management. The Company does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.

J.P. Morgan’s opinion is based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of the date of such opinion. Subsequent developments may affect J.P. Morgan’s opinion, and J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be paid to holders of the Company’s common stock in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of the merger to, or any consideration of, the holders of any other class of securities, creditors or other constituencies of the Company or the underlying decision by the Company to engage in the merger. J.P. Morgan expressed no opinion as to the price at which the Company’s common stock will trade at any future time .

J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion.

These companies were selected, among other reasons, because they share similar business characteristics with the Company based on operational characteristics and financial metrics. None of the companies utilized in the analysis were identical to the Company. Accordingly, a complete analysis of the results of the following calculations cannot be limited to a quantitative review of such results and involves complex considerations and judgments concerning the differences in the financial and operating characteristics of the companies compared to the Company’s, and other factors that could affect the public trading value of the companies and the Company.

For each comparable company, J.P. Morgan calculated the ratios of “Firm Value” (which is the value of common equity, plus book value of debt, minus cash and cash equivalents) to the Company’s estimated revenue for the years 2014 and 2015 under the Case B Projections . J.P. Morgan calculated the Company’s equity value per share implied by certain reference ranges of multiples, which were based upon the ranges of multiples calculated for comparable companies but adjusted to take into account differences between the Company and the comparable companies and such other factors as J.P. Morgan deemed appropriate. Applying a revenue multiple range of 4.0x to 7.0x to the Company’s 2014 Case B estimated revenue yielded an implied trading value range for the Company’s common stock of approximately $13.00 to $21.75 per

share, and applying a revenue multiple range of 3.5x to 6.0x to the Company’s 2015 Case B estimated revenue yielded an implied trading value range for the Company’s common stock of approximately $15.25 to $25.25 per share, compared to the merger consideration of $30 per share.

Using publicly available estimates, J.P. Morgan reviewed the Firm Values implied by the transactions as a multiple of (1) the target company’s revenue for the twelve-month period immediately preceding the announcement of the transaction (“LTM Revenue”) and (2) the target company’s revenue for the twelve-month period immediately following the announcement of the transaction (“NTM Revenue”). Based on the results of this analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan applied a firm value/LTM revenue multiple range of 4.0x to 11.0x to the Company’s Case B LTM Revenue, and a firm value/NTM revenue multiple range of 3.0x to 8.0x to the Company’s Case B NTM Revenue.

This analysis showed the following:

J.P. Morgan then compared these implied per share values to the merger consideration of $30 per share.

J.P. Morgan calculated a range of terminal asset values of the Company at the end of the 10-year period ending 2023 by applying a perpetual growth rate ranging from 2% to 4% of the unlevered free cash flow of the Company during the final year of the 10-year period. The unlevered free cash flows and the range of terminal asset values were then discounted to present values using a range of discount rates from 11% to 13%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of the Company. The present value of the unlevered free cash flows and the range of terminal asset values were then adjusted using management’s estimated 2013 fiscal year-end excess cash, option exercise proceeds and total debt. Based on the adjusted management projections and a discount rate of 11% to 13%, the discounted cash flow analysis indicated a range of equity values of between $13.25 and $20.25 per share of the Company’s common stock under Case A, and between $22.75 and $35.75 per share of the Company’s common stock under Case B, compared to the merger consideration of $30 per share.

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as described in the above summary is identical to the Company, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of the Company. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to the Company and the transactions compared to the merger.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. J.P. Morgan was selected to advise the Company with respect to the merger on the basis of such experience and its familiarity with the Company.

For services rendered in connection with the merger, the Company has agreed to pay J.P. Morgan a fee of approximately $ 19 million , payable upon completion of the merger , of which $3 million was earned upon delivery of J.P. Morgan’s opinion and was not contingent on the consummation of any transaction. In addition, the Company has agreed to reimburse J.P. Morgan for its reasonabl e expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities, including liabilities arising under the Federal securities laws.

During the two years preceding the date of the fairness opinion, neither J.P. Morgan nor any of its affiliates had any other material financial advisory or other material commercial or investment banking relationships with the Company. During the two years preceding the date of the fairness opinion, J.P. Morgan and its affiliates had commercial or investment banking relationships with Stryker, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as agent, arranger and book runner on the $1.0 billion credit facility of Stryker in

August 2013. In addition, J.P. Morgan and its affiliates maintain banking and other business relationships with the Company and its affiliates, for which they receive customary fees. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of the Company or Stryker for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities.

The Company does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods due to the unpredictability of the underlying assumptions and estimates. However, in connection with the Company’s regular planning process and with the merger, the Company’s management prepared financial projections of revenue and revenue growth for fiscal years 2014 through 2016, and prepared an extrapolation of revenue for fiscal years 2017 through 2023 based on assumed revenue growth rates for those years. These financial projections and extrapolations comprised two cases, a base case, “Case A , ” and a more aggressive case, “Case B , ” and were provided to our board and to our financial advisor, J.P. Morgan, in connection with their respective analyses of the merger. The Case B financial projections covering fiscal years 2014 through 2016 were also provided to Stryker and Merger Sub. We have included a summary of both the Case A and Case B projections below (collectively, the “Projections”) to give our stockholders access to certain nonpublic information provided to Stryker and/or our financial advisor for purposes of considering and evaluating the merger. The inclusion of the Projections should not be regarded as an indication that the board of directors, the Company, Stryker, Merger Sub, J.P. Morgan or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results. In addition, the Projections have not been updated or revised to reflect information or results after the date the Projections were prepared or as of date of this proxy statement.

The Company advised the recipients of the Projections that its internal financial forecasts upon which the Projections were based are subjective in many respects. The Projections reflect numerous assumptions with respect to company performance, industry performance, general business, economic, market and financial conditions and other matters, many of which are difficult to predict, subject to significant economic and competitive uncertainties and beyond the Company’s control. As a result, there can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than projected.

The Projections were prepared for internal use and to assist Stryker and the Company’s financial advisors with their respective due diligence investigations of the Company. The Projections were not prepared with a view toward public disclosure or toward compliance with United States generally accepted accounting principles (“GAAP”), published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this proxy statement has been prepared by, and is the responsibility of, the Company’s management. Ernst & Young LLP (“Ernst & Young”), the Company’s independent registered public accounting firm, has neither examined, compiled nor performed any procedures with respect to the accompanying prospective financial information, and accordingly, Ernst & Young does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young report incorporated by reference in this proxy statement relates to the Company’s historical financial information. It does not extend to the prospective financial information and should not be read to do so.

Projections of this type are based on estimates and assumptions that are inherently subject to factors such as company performance, industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of the Company, including the factors described under “ Cautionary Statement Concerning Forward-Looking Statements ,” which factors may cause the Projections or the underlying assumptions to be inaccurate. Since the Projections cover multiple years, such information by its nature becomes less reliable with each successive year. The Projections do not take into account any circumstances or events occurring after the date they were prepared.

The following is a summary of the Projections:

Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the Projections set forth above. No one has made or makes any representation to any stockholder regarding the information included in the Projections.

For the foregoing reasons, as well as the basis and assumptions on which the Projections were compiled, the inclusion of specific portions of the Projections in this proxy statement should not be regarded as an indication that such Projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, the Company does not intend to update or otherwise revise the Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. In addition, the Projections have not been updated or revised to reflect information or results after the date the Projections were prepared or as of date of this proxy statement.

The merger is not conditioned upon receipt of financing by Stryker. We understand that Stryker expects to use cash on hand and other funds available to it to fund the acquisition of the Company.

In considering the recommendation of the MAKO board that you vote to adopt the merger agreement, you should be aware that aside from their interests as stockholders of the Company, the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, those of other stockholders of the Company generally. Members of the MAKO board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the stockholders of the Company that the merger agreement be adopted. See the section entitled “ The Merger (Proposal 1) — Background of the Merger ” and the section entitled “ The Merger (Proposal 1) — Reasons for the Merger; Recommendation of the MAKO Board of Directors .” The Company’s stockholders should take these interests into account in deciding whether to vote “ FOR ” the proposal to adopt the merger agreement. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

Under the merger agreement, the Company’s equity-based awards held by the Company’s directors and executive officers as of the effective time will be treated at the effective time as follows:

shares of common stock subject to that option (less any amount that may be withheld with respect to any applicable withholding taxes). Each option that has an exercise price per share greater than the merger consideration of $30 per share will be canceled and terminated as of the effective time without any payment or additional consideration.

Each of the Company’s executive officers, including all of the named executive officers, are party to employment agreements that provide for severance benefits in the event of a termination of employment by the Company without cause, or by the executive officer for good reason (a “qualifying termination”). Certain of these employment agreements provide for enhanced severance in the event of a qualifying termination in anticipation of or following a change in control. The closing of the merger would constitute a change in control under the employment agreements.

In consideration of the payments and benefits under their employment agreements, each executive officer who is party to an employment agreement is restricted from engaging in competitive activities and prohibited from soliciting the Company’s clients and employees for a specified period of time after termination of employment, and all of the executive officers are prohibited from disclosing the Company’s confidential information.

The employment agreement with Maurice R. Ferré, M.D., our president and chief executive officer, provides that, in the event of a qualifying termination in anticipation of or following a change in control, Dr. Ferré will be entitled to:

In the event that Dr. Ferré would be subject to the excise taxes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), Dr. Ferré’s employment agreement provides that he would be entitled to an additional payment such that, after payment of all taxes, Dr. Ferré would be placed in the same after-tax position as if no excise tax was imposed. Dr. Ferré’s payments will be reduced so as not to trigger any excise tax under Section 4999 of the Code, however, and he will not be entitled to any additional payment, if his “parachute payments” (as determined under Section 280G of the Code) made in connection with the change in control do not exceed three times his “base amount” (as determined under Section 280G of the Code) by more than 10%.

The employment agreements with Fritz L. LaPorte, our senior vice president of finance and administration and chief financial officer and treasurer, Ivan Delevic, our senior vice president of marketing, and Menashe R. Frank, our senior vice president and general counsel and secretary, each provide that, in the event of a qualifying termination in anticipation of or following a change in control, the executive will be entitled to:

The employment agreements with Ian Dawson, our senior vice president of marketing, Lawrence T. Gibbons, our senior vice president of regulatory affairs and quality assurance, Richard Leparmentier, our senior vice president of engineering, Christopher R. Marrus, our senior vice president of sales, and Duncan H. Moffat, our senior vice president of operations, each provide that, in the event of a qualifying termination, the executive will be entitled to:

For an estimate of the value of the payments and benefits described above that would be payable to each of the Company’s named executive officers, see “—  Quantification of Payments and Benefits to the Company’s Named Executive Officers ” on page 35 . The estimated aggregate amount that would be payable to the Company’s other executive officers under their employment agreements if the merger were to be completed and they were to experience a qualifying termination on October 9 , 2013 is $ 544,501 .

The Company is party to indemnification agreements with each of its directors and executive officers that require the Company, among other things, to indemnify the directors and executive officers against certain liabilities that may arise by reason of their status or service as directors or officers. In addition, pursuant to the terms of the merger agreement, the Company’s directors and executive officers will be entitled to certain ongoing indemnification from the surviving corporation and coverage under directors’ and officers’ liability insurance policies for acts or omissions occurring before the effective time. Such indemnification and insurance coverage is further described in the section entitled “ The Merger Agreement  —  Other Covenants and Agreements  —  Indemnification of Directors and Officers; Insurance ” beginning on page 50 .

The table below sets forth the amount of payments and benefits that each of the Company’s named executive officers would receive in connection with the merger, assuming that the merger is completed and each such executive officer experiences a qualifying termination on October 9 , 2013.

The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to non-U.S. holders. This discussion is based on the provisions of the Code, applicable U.S. Treasury Regulations, judicial opinions, and administrative rulings and published positions of the Internal Revenue Service, each as in effect as of the date hereof. These authorities are subject to change, possibly on a retroactive basis, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the Internal Revenue Service or the courts and, therefore, could be subject to challenge, which could be sustained. No ruling is intended to be sought from the Internal Revenue Service with respect to the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that is:

This discussion applies only to U.S. holders of shares of common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to a U.S. holder that is subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, banks and certain other financial institutions, mutual funds, certain expatriates, partnerships, S corporations, or other pass-through entities or investors in partnerships or such other entities, U.S. holders who hold shares of common stock as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders who will hold, directly or indirectly, an equity interest in the surviving corporation, and U.S. holders who acquired their shares of common stock through the exercise of employee stock options or other compensation arrangements).

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partners and the activities of the partnership. If you are a partner in a partnership holding shares of common stock, you should consult your tax advisor.

The receipt of cash by U.S. holders in exchange for shares of common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. holder’s adjusted tax basis in such shares.

If a U.S. holder’s holding period in the shares of common stock surrendered in the merger is greater than one year as of the date of the merger, the gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized on the exchange is subject to limitations. If a U.S. holder acquired different blocks of common stock at different times and different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of common stock.

Payments made in exchange for shares of common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of 28%). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return Internal Revenue Service Form W-9, certifying that such U.S. holder is a U.S. person, that the taxpayer identification number provided is correct, and that such U.S. holder is not subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the Internal Revenue Service in a timely manner.

Under the HSR Act and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division and the FTC and all statutory waiting period requirements have been satisfied. On October 9, 2013, both the Company and Stryker filed their respective Notification and Report Forms with the Antitrust Division and the FTC. If early termination is not granted or if the Company and Stryker do not receive from the Antitrust Division or the FTC a Request for Additional Information and Documentary Material (referred to as a “Second Request”), the waiting period under the HSR Act with respect to the proposed merger will expire at 11:59 p.m., Eastern Time, on November 8, 2013. If the Company and Stryker receive a Second Request, the waiting period under the HSR Act will be extended until 11:59 p.m., Eastern Time, on the 30th day after both the Company and Stryker have certified their substantial compliance with the Second Request (or the next business day if the 30th day is a weekend or U.S. federal holiday), unless earlier terminated by the Antitrust Division or the FTC.

At any time before or after the expiration of the statutory waiting periods under the HSR Act, or before or after the effective time, the Antitrust Division or the FTC may take action under the antitrust laws, including seeking to enjoin the completion of the merger, to rescind the merger or to conditionally permit completion of the merger subject to regulatory conditions or other remedies. In addition, U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. Although neither the Company nor Stryker believes that the merger will violate federal antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Since the announcement on September 25, 2013 of the execution of the merger agreement, MAKO, Stryker, Merger Sub and the members of the MAKO board have been named as defendants in eight putative stockholder class action complaints challenging the transaction, two filed in the Court of Chancery of the State of Delaware and six filed in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The cases are captioned: Nickolas W. and Pamela J. Edwards Marital Trust UA 06/22/2007 v. MAKO Surgical Corp., et al. , C.A. No. 8958-VCG (Del. Ch. Sept. 30, 2013); Marc A. Schermer v. MAKO Surgical Corp., et al. , C.A. No. 8975-VCG (Del. Ch. Oct. 3, 2013); Martin Bertisch v.

The lawsuits generally allege that the individual defendants breached their fiduciary duties by, among other things, failing to obtain sufficient value for the MAKO stockholders in the transaction and agreeing to certain terms in the merger agreement that allegedly restrict the defendants’ ability to obtain a more favorable offer, including certain of the provisions described in the sections entitled “ The Merger Agreement — Alternative Proposals; No Solicitation ” and “ — T ermination Fee ” beginning on pages 46 and 53 . 53 . The lawsuits further allege that those breaches were aided and abetted by some combination of MAKO, Stryker, and Merger Sub. The plaintiffs seek, among other things, injunctive relief, unspecified compensatory and/or rescissory damages, attorney’s fees, other expenses, and costs. All of the plaintiffs seek a determination that their alleged claims may be asserted on a class-wide basis. We believe these lawsuits are meritless.

If the merger is completed, the common stock of the Company will be delisted from NASDAQ and deregistered under the Exchange Act. As such, we would no longer file periodic reports with the SEC.

The following summary of the merger agreement, and the copy of the merger agreement attached as Annex A to this proxy statement, are intended to provide information regarding the terms of the merger agreement and are not intended to provide any factual information about the Company or modify or supplement any factual disclosures about the Company in its public reports filed with the SEC. In particular, the merger agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. The merger agreement contains representations and warranties by the Company, Stryker and Merger Sub which were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the merger agreement were made solely for the benefit of the parties to the merger agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may apply contractual standards of materiality or material adverse effect that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Investors are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, the description of the merger agreement below does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached hereto as Annex A and is incorporated herein by reference.

Additional information about the Company may be found elsewhere in this proxy statement and the Company’s other public filings. See “ Where You Can Find Additional Information .”

At the effective time (defined below), Merger Sub will merge with and into the Company and the separate corporate existence of Merger Sub will cease. The Company will be the surviving corporation in the merger and will continue its corporate existence as a Delaware corporation after the merger. The certificate of incorporation of the Company will be amended in its entirety as set forth in Exhibit A of the merger agreement and will be the certificate of incorporation of the surviving corporation until thereafter amended. The bylaws of Merger Sub as in effect immediately before the effective time will be the bylaws of the surviving corporation until thereafter amended, except that the name of the surviving corporation will be “MAKO Surgical Corp.” The directors of Merger Sub immediately before the effective time will be the initial directors of, and the officers of the Company immediately before the effective time will be the initial officers of, the surviving corporation and, in each case, will hold office until their respective successors are duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the surviving corporation’s certificate of incorporation and bylaws.

The closing of the merger will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 155 North Wacker Drive, Chicago, Illinois 60606 at 10:00 a.m., Chicago time, on a date to be specified by the parties that will be no later than the second business day after the satisfaction or waiver of all of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions), unless another date or place is agreed to in writing by the parties.

The merger will become effective on the date and time on which the certificate of merger is duly filed with the Secretary of State of the State of Delaware, which the parties will cause to be filed at the closing of the merger, or such later time as may be agreed upon by the parties (which we refer to as the “effective time”).

As of the effective time, each share of Company common stock outstanding immediately before the effective time (other than shares owned by the Company, Stryker or Merger Sub or any of their subsidiaries, which will be canceled, and other than dissenting shares) will be converted into the right to receive $30 in cash, without interest, but subject to any applicable withholding taxes.

As of the effective time, any shares of Company common stock that are owned by the Company as treasury stock and any shares of Company common stock owned by Stryker, Merger Sub or any other direct or indirect wholly owned subsidiary of Stryker will be canceled, and no consideration will be delivered in exchange for such cancellation.

As of the effective time, each outstanding share of common stock of Merger Sub will be converted into and become one fully paid and nonassessable share of common stock of the surviving corporation and such shares will constitute the only outstanding shares of capital stock of the surviving corporation.

Under the merger agreement, the Company’s equity awards that are outstanding as of the effective time will be treated at the effective time as follows:

Under the merger agreement, from and after the effective time, each unexercised Company warrant that was outstanding immediately before the effective time will, in accordance with the terms of the applicable Company warrant, no longer be exercisable for any capital stock of the surviving corporation, but will be exercisable or canceled, only as applicable, in accordance with the terms of the applicable Company warrant in exchange for the merger consideration.

Under the merger agreement, the Company is required to take all actions necessary to cause the Company’s 2008 Employee Stock Purchase Plan to terminate on the earlier to occur of (1) the day following the last day of the offering period and purchase period in effect as of September 25, 2013 and (2) immediately before and effective as of the effective time. In the event that the plan is terminated in connection with the merger pursuant to clause (2), the offering period and purchase period then in effect will be deemed to have ended on the last trading day before the termination of the plan and any rights of participants in the plan with respect to that offering period and purchase period will be automatically exercised on that trading day.

At or before the effective time, Stryker will deposit, or cause the surviving corporation to deposit, with a paying agent (reasonably acceptable to the Company) cash in an amount sufficient to pay the aggregate merger consideration required to be paid under the merger agreement. As promptly as practicable (and in any event not later than the third business day) after the effective time, the paying agent will mail to each holder of shares of common stock that were converted under the merger agreement into the right to receive the merger consideration (1) a letter of transmittal and (2) instructions for effecting the surrender of certificates and book-entry shares formerly representing shares of the common stock in exchange for payment of the merger consideration. Upon surrender of a certificate or book-entry share, as applicable, for cancellation to the paying agent or to such other agent or agents reasonably acceptable to the Company as may be appointed by Stryker, together with the letter of transmittal, duly executed, the holder of such certificate or book-entry share will be entitled to receive the merger consideration (less any amount that may be withheld with respect to any applicable withholding taxes) for each share of common stock formerly represented by the certificate or book-entry share and the certificate or book-entry share so surrendered share will be canceled.

The merger agreement contains representations and warranties of each of the Company and of Stryker and Merger Sub, subject to certain exceptions in the merger agreement and the disclosure schedules delivered in connection with the merger agreement, as to, among other things:

The merger agreement also contains representations and warranties of the Company, subject to certain exceptions in the merger agreement and the disclosure schedules delivered in connection with the merger agreement, as to, among other things:

The merger agreement also contains representations and warranties of Stryker and Merger Sub, subject to certain exceptions in the merger agreement and the disclosure schedules delivered in connection with the merger agreement, as to, among other things:

Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a “Company material adverse effect” or a “Stryker material adverse effect” clause.

For purposes of the merger agreement, a “Company material adverse effect” means any effect, change, development, event or occurrence that has a material adverse effect on the business, condition (financial or otherwise), assets or results of operations of the Company; provided, however, that any effect, change, development, event or occurrence resulting from or arising out of the following will not in itself be deemed to constitute a Company material adverse effect and will not be taken into account in determining whether a Company material adverse effect has occurred:

For the purpose of the merger agreement, a “Stryker material adverse effect” means a fact or circumstance that, individually or in the aggregate, would or would reasonably be expected to impair in any material respect the ability of each of Stryker and Merger Sub, as the case may be, to perform its obligations under the merger agreement or to complete the merger and pay the merger consideration, or prevent or materially delay the consummation of any of the merger and the other transactions contemplated by the merger agreement.

The merger agreement provides that, subject to certain exceptions in the disclosure schedules delivered by the Company in connection with the merger agreement, and except as may be required by law, expressly provided by the merger agreement or as consented to by Stryker in writing (such consent not to be unreasonably withheld, conditioned or delayed), during the period from the signing of the merger agreement to the effective time, the Company, among other things, will conduct the business of the

Company in the ordinary course of business consistent with past practice, will use its commercially reasonable efforts to preserve its business organization intact and to maintain its existing relations and goodwill with governmental entities and others having business relationships with it and will not take the following actions:

Subject to certain exceptions and limitations, the Company must afford representatives of Stryker and Merger Sub reasonable access, during normal business hours, to all of its representatives, agents, properties, books, contracts and records (other than any such matters that relate to the negotiation and execution of the merger agreement) and must furnish promptly to Stryker and Merger Sub all other reasonably requested information concerning its business, properties and personnel.

The Company is required not to, and to cause its representatives not to, directly or indirectly, (1) solicit, initiate or knowingly encourage or facilitate (including by way of furnishing information or assistance), or knowingly take any other action designed to facilitate any inquiry with respect to, or the making, submission or announcement of, any alternative proposal (as defined below) or (2) enter into, continue or otherwise participate in any discussions or negotiations regarding an alternative proposal with, furnish any information to, or otherwise cooperate in any way with, any person (other than Stryker or any of its affiliates or representatives) relating to an alternative proposal. The Company is also required to immediately cease and cause to be terminated all existing discussions, negotiations and communications, if any, with any persons with respect to any alternative proposal and to use its reasonable best efforts to cause any such person (and its representatives) in possession of confidential information about the Company to return or destroy all such information.

As used in the merger agreement, “alternative proposal” means any proposal or offer made by any person (other than Stryker or any of its subsidiaries) for:

Notwithstanding the provisions of the merger agreement described above, if at any time after September 25, 2013 and before obtaining the required adoption of the merger agreement by the Company’s stockholders, the Company receives, on an unsolicited basis, a bona fide written alternative proposal from a third party (that did not arise from a breach of the non-solicitation provisions of the merger agreement) that (1) constitutes a superior proposal (as defined below) or (2) that the MAKO board reasonably determines (after consultation with the Company’s financial advisors and outside legal counsel) would reasonably be expected to result in a superior proposal, then the Company may take the following actions before obtaining the required adoption of the merger agreement by the Company’s stockholders:

The Company must provide to Stryker at a substantially concurrent time any nonpublic information provided to any third person which has not been previously provided to Stryker. Upon the Company’s taking of the actions described in either of the bullet points above, or upon a determination by the MAKO board that an alternative proposal constitutes a superior proposal, the standstill and any other similar provisions of the confidentiality agreement between the Company and Stryker will become null and void to the extent they would operate to prevent Stryker from proposing changes to the merger agreement.

As used in the merger agreement, “superior proposal” means a bona fide written alternative proposal from a third party that if consummated would result in the third party or its stockholders owning, directly or indirectly, (1) more than 80% of the equity securities of the Company (or of the surviving entity in such merger or the direct or indirect parent of the surviving entity in such merger) or (2) assets that constitute 80% or more of the net revenues, net income or assets of the Company that the MAKO board determines in good faith (after consultation with the Company’s financial advisors and outside legal counsel) and considering such factors as the board considers to be appropriate (including the expected timing and likelihood of consummation, any governmental or other approval requirements, conditions to consummation and availability of necessary financing) to be more favorable to the stockholders of the Company than the transactions contemplated by merger agreement.

The Company must promptly (and in any event within 24 hours) orally and in writing notify Stryker if any inquiries, proposals or offers are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with, the Company or its representatives in connection with, or which could reasonably be expected to result in, an alternative proposal. The Company’s notice is required to include the name of the person making the inquiry, proposal or request or seeking such negotiations or discussions and the material terms and conditions of the inquiry, proposal or request, and to include all written materials provided to the Company or its representatives that describe any terms and conditions of the inquiry, proposal or request and any changes thereto. The Company is required to keep Stryker reasonably informed on a reasonably current basis (and in any event within 24 hours) of any material developments, discussions or negotiations regarding any alternative proposals or any material change to the financial or other terms of any alternative proposal.

Except as discussed below, neither the MAKO board nor any committee of the board is permitted to (1) withdraw, modify or qualify in any manner adverse to Stryker or Merger Sub, or resolve to or publicly propose to withdraw, modify or qualify in a manner adverse to Stryker or Merger Sub, the board’s recommendation that the stockholders of the Company vote in favor of the adoption of the merger agreement, (2) approve, endorse or recommend, or resolve to or publicly propose to approve, endorse or recommend, any alternative proposal (any of the actions described in clause (1) or (2), a “change of recommendation”) or (3) adopt, or publicly propose to adopt, or allow the Company to execute or enter into, any binding or non-binding letter of intent, agreement in principle, memorandum of understanding, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other agreement, commitment, arrangement or understanding contemplating or otherwise in connection with, or that is intended to or would reasonably be expected to lead to, any alternative proposal (other than confidentiality agreements permitted under the provisions described unde r “ — Alternative Proposals; No Solicitation ” ).

Notwithstanding the foregoing, before obtaining the required adoption of the merger agreement by the Company’s stockholders, the MAKO board is permitted, in response to a superior proposal received by the Company after September 25, 2013 on an unsolicited basis (and that did not arise or result from a breach the non-solicitation provisions of the merger agreement), to:

However, the MAKO board is not permitted to take the actions described in the bullet points above until three full business days after providing Stryker with written notice that it intends to make a change of recommendation or terminate the merger agreement and specifying the reasons therefor, which notice must include a description of the terms and conditions of the superior proposal that is the basis for the proposed action of the board, the identity of the person making the proposal, a copy of the proposed definitive agreement for the superior proposal and any related agreements in the form to be entered into. If the superior proposal is amended, the MAKO board is not permitted to make a change of recommendation or terminate the merger agreement based on the superior proposal, as so amended, until three full business days following written notice to Stryker with respect to the superior proposal as so amended. In determining whether to terminate the merger agreement in response to a superior proposal, the MAKO board must take into account any proposals made by Stryker to amend the terms of the merger agreement

and shall not terminate the merger agreement unless, before the effectiveness of such termination, the board, after considering the results of any negotiations with and any revised proposals made by Stryker, concludes that the superior proposal giving rise to the superior proposal notice continues to constitute a superior proposal.

Notwithstanding any provision of the merger agreement to the contrary, before obtaining the required adoption of the merger agreement by the Company’s stockholders, the MAKO board may, in response to an intervening event (as defined below), make a change of recommendation if the board determines in good faith, after consultation with the Company’s outside legal counsel, that the failure of the board to take such action would be inconsistent with its fiduciary duties under applicable law.

As used in the merger agreement, “intervening event” means any material event, occurrence or development relating to the Company that (1) was unknown and not reasonably foreseeable to the MAKO board as of September 25, 2013, or if known and reasonably foreseeable to board as of September 25, 2013, the material consequences of which were not known and reasonably foreseeable to the board as of September 25, 2013 and (2) does not relate to (A) the merger agreement, the merger or the other transactions contemplated thereby or (B) any alternative proposal.

The MAKO board is not permitted to change its recommendation in response to an intervening event until three full business days after providing Stryker with written notice that it intends to effect a change of recommendation and specifying the reasons therefor, which notice must include a description of the intervening event. If a change to the facts and circumstances that are the basis of the change of recommendation in response to the intervening event occurs that is sufficiently material as to cause the MAKO board to convene a meeting to revisit its determination to make a change of recommendation, the board is not permitted to make the change of recommendation based on the intervening event until three full business days following written notice to Stryker with respect to the intervening event as so changed. In determining whether to make a change of recommendation in response to an intervening event, the MAKO board is required to take into account any proposals made by Stryker to amend the terms of the merger agreement and may not make the change of recommendation unless, before the effectiveness of the change of recommendation, the board, after considering the results of any negotiations with and any revised proposals made by Stryker, concludes that the board continues to meet the requirements set forth in the provisions of the merger agreement to make such a change of recommendation.

The merger agreement provides that nothing in the merger agreement will prohibit the Company or the MAKO board from (1) disclosing to the Company’s stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder or (2) making any disclosure to the Company’s stockholders if the board determines in good faith, after consultation with the Company’s outside legal counsel, that the failure of the board to make the disclosure would be inconsistent with its fiduciary duties under applicable law, subject to neither the board nor any committee thereof effecting a change of recommendation unless the requirements described above have been satisfied. Any disclosure (other than a “stop, look and listen” or similar communication) that addresses or relates to the approval, recommendation or declaration of advisability by the MAKO board with respect to the merger agreement or an alternative proposal will be deemed to be a change of recommendation unless the board in connection with the communication publicly states that its recommendation with respect to the merger agreement has not changed or refers to the prior recommendation of the board, without disclosing any change of recommendation.

The Company is required to, as soon as practicable following September 25, 2013, duly call, give notice of, convene and hold a special meeting of the stockholders of the Company for the purpose of obtaining the required adoption of the merger agreement by the Company’s stockholders. Unless there has been a change of recommendation in compliance with the terms of the merger agreement, the Company is required to use its reasonable best efforts to solicit from its stockholders proxies in favor of the adoption of the merger agreement. No change of recommendation will affect the obligation of the Company to duly call, give notice of, convene and hold the meeting of stockholders to obtain stockholders’ approval of the adoption of the merger agreement.