<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
INTERPORE INTERNATIONAL
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO - INTERPORE
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 29, 1997
--------------------
The 1997 Annual Meeting of the Shareholders of Interpore International
(the "Company") will be held at 9:00 a.m. local time, on May 29, 1997, at the
Company's executive offices at 181 Technology Drive, Irvine, California 92618
for the following purposes:
1. To elect a board of five directors for the ensuing
year or until the election and qualification of their respective
successors; and
2. To transact such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on April 17, 1997
will be entitled to notice of, and to vote at, the 1997 Annual Meeting and any
adjournment thereof.
By Order of the Board of Directors,
SIG
Richard L. Harrison
Secretary
Irvine, California
April 17, 1997
<PAGE> 3
LOGO - INTERPORE
181 Technology Drive
Irvine, California 92618
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 29, 1997
--------------------
PROXY STATEMENT
--------------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of
Directors of Interpore International (the "Company") for use at the Annual
Meeting of Shareholders to be held at the Company's executive offices located
at 181 Technology Drive, Irvine, California 92618, on May 29, 1997 at 9:00 a.m.
local time, and at any and all adjournments or postponements thereof (the
"Meeting").
All shares represented by each properly executed, unrevoked proxy
received in time for the Meeting will be voted in the manner specified therein.
If the manner of voting is not specified in an executed proxy received by the
Company, the proxy will be voted FOR the election of the five nominees to the
Board of Directors listed herein.
Any shareholder has the power to revoke his or her proxy at any time
before it is voted. A proxy may be revoked by delivering a written notice of
revocation to the Secretary of the Company, by presenting a later-dated proxy
executed by the person who executed the prior proxy, or by attendance at the
Meeting and voting in person by the person who executed the proxy.
This proxy statement is being mailed to the Company's shareholders on
or about April 24, 1997. The expense of soliciting proxies will be borne by
the Company. Expenses include reimbursement paid to brokerage firms and others
for their expenses incurred in forwarding solicitation material regarding the
Meeting to beneficial owners of the Company's voting stock. Solicitation of
proxies will be made by mail. Further solicitation of proxies may be made by
telephone or oral communication by the Company's regular employees, who will
not receive additional compensation for such solicitation.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 6,956,547 shares of the Company's Common
Stock and 76,593 shares of the Company's Series E Preferred Stock outstanding
at the close of business on the record date, April 17, 1997, will be entitled
to notice of and to vote at the Meeting or any adjournment or postponement
thereof. On each matter to be considered at the Meeting, each shareholder will
be entitled to cast one vote for each share of the Company's Common Stock, and
1.0045 or 1.0058 votes (depending on issuance date) for each share of the
Company's Series E Preferred Stock, held of record by such shareholder on April
17, 1997. Accordingly, an aggregate of 7,033,502 votes may be cast on each
matter to be considered at the Meeting. For the election of directors, each
shareholder may have cumulative voting rights which entitle a shareholder to
cast that number of votes equal to the number of shares held by them multiplied
by the number of directors to be elected. Each shareholder may cast his or her
votes for a single candidate or may distribute his or her vote among any of the
candidates as he or she chooses. No shareholder may cumulate votes for a
candidate unless, prior to voting, the name of the candidate is placed in
nomination and a shareholder has given notice of his or her intention to
cumulate votes. If any shareholder has given such notice, all shareholders may
cumulate their votes.
In order to constitute a quorum for the conduct of business at the
Meeting, a majority of the outstanding shares of the Company entitled to vote
at the Meeting must be represented at the Meeting. Shares represented by
proxies that reflect abstentions or "broker non- votes" (i.e., shares held by a
broker or nominee which are represented at the meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular proposal)
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum.
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the amount and percentage of the
outstanding shares of the Company's Common Stock which, according to the
information supplied to the Company, are beneficially owned by (i) each person
who, to the knowledge of the Company, is the beneficial owner of more than 5%
of the Company's outstanding Common Stock, (ii) each person who is currently a
director of the Company (each of whom is also a nominee for election as a
director of the Company), (iii) each Named Executive Officer (as defined on
page 4 hereof) and (iv) all current directors and executive officers of the
Company as a group. Except to the extent indicated in the footnotes to the
following table, the person or entity listed has sole voting or dispositive
power with respect to the shares which are deemed beneficially owned by such
person or entity.
<TABLE>
<CAPTION>
TOTAL PERCENT OF
OPTIONS OUTSTANDING SHARES OF
OUTSTANDING EXERCISABLE COMMON STOCK COMMON STOCK
NAME AND ADDRESS COMMON WITHIN BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER STOCK(1)(2) 60 DAYS OWNED(1)(2) OWNED(1)(2)(3)
- ------------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
DIRECTORS/NOMINEES AND NAMED
EXECUTIVE OFFICERS:
William A. Eisenecher ................... 3,000 29,500 32,500 *
G. Bradford Jones ....................... 20,042 8,500 28,542 *
David C. Mercer(4) ..................... 22,000 270,750 292,750 4.0%
Guy Nohra(5) ............................ 954,759 8,500 963,259 13.7%
Maxwell R. Simmonds(4) .................. 32,000 113,000 145,000 2.0%
George W. Smyth(4) ...................... 68,000 130,212 198,212 2.8%
ALL DIRECTORS AND EXECUTIVE OFFICERS .... 1,181,422 810,962 1,992,384 25.4%
AS A GROUP (9 PERSONS)(6)
5% BENEFICIAL HOLDERS:
Heartland Advisors, Inc.(7) ............. 1,210,200 0 1,210,200 17.2%
790 North Wilwaukee Street
Milwaukee, WI
Burr, Egan, Deleage & Co(5) ............. 954,759 0 954,759 13.6%
One Post Office Square
Suite 3800
Boston, MA 02109
Hambrecht & Quist Capital
Management Incorporated (8) ............. 380,000 0 380,000 5.4%
50 Rowes Wharf
4th Floor
Boston, MA 02110-3328
</TABLE>
- ---------------
* less than 1%
(1) Except for information based on Schedules 13G, as indicated in the
footnotes hereto, beneficial ownership is stated as of April 17, 1997.
(2) Presumes conversion of the Company's Series E Preferred Stock into
shares of the Company's Common Stock.
2
<PAGE> 5
(3) Percentage of beneficial ownership as of April 17, 1997, for each
person includes shares subject to options held by such person, which
options are exercisable within 60 days after April 17, 1997, as if
such shares were outstanding on April 17, 1997.
(4) Messrs. Smyth, Mercer and Simmonds are Named Executive Officers.
(5) Based on Schedule 13G filed by Burr, Egan, Deleage & Co. ("Burr
Egan"). Represents shares held by Alta IV Limited Partnership
(807,441 shares) and by C.V. Sofinnova Partners Five (147,318 shares)
(collectively, the "Burr Egan Funds"). Burr Egan serves as an advisor
to the Burr Egan Funds. The Burr Egan Funds exercise sole voting and
investment power with respect to their respective shares. Mr. Nohra is
a partner of Burr Egan and thus may be deemed to have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares owned by Burr Egan. Burr Egan
and Mr. Nohra disclaim beneficial ownership of the shares held by the
Burr Egan Funds.
(6) Includes shares held by the Burr Egan Funds (see footnote 5).
(7) Based on Schedule 13G filed by Heartland Advisors, Inc.
(8) Based on Schedule 13G filed by Hambrecht & Quist Capital Management
Incorporated, which disclaims beneficial ownership of these shares.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of April 17, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---- --------
<S> <C> <C>
George W. Smyth, Jr. 66 Chairman of the Board
David C. Mercer 55 President, Chief Executive Officer and Director
William A. Franklin, Jr. 51 Vice President, Operations
Richard L. Harrison 40 Vice President, Finance, Chief Financial Officer and Secretary
Edwin C. Shors, Ph.D 51 Vice President, Research and Development
Maxwell R. Simmonds 41 Vice President, Sales and Marketing, Orthopaedic Division
</TABLE>
_______________________________________________________
For a description of the business background of Messrs. Smyth and
Mercer, see "Proposal 1, ELECTION OF DIRECTORS."
William A. Franklin, Jr. has served as Vice President, Operations
since August 1994 and as Vice President, Quality Assurance and Regulatory
Affairs of the Company from February 1992 to August 1994. Mr. Franklin was
Director, Quality Assurance, of Allergan Optical, a division of Allergan, Inc.,
a manufacturer of ophthalmic products, from December 1988 through October 1991,
and Vice President, Quality Assurance and Regulatory Affairs, of Quest Medical,
Inc., a medical device manufacturer, from March 1983 through October 1988.
Richard L. Harrison has served as Vice President, Finance, Chief Financial
Officer and Secretary of the Company since November 29, 1994. Prior to joining
the Company, Mr. Harrison worked for Kirschner Medical Corporation, a
manufacturer of orthopaedic devices, as Corporate Controller from February 1992
through October 1994, as Division Controller from April 1988 through February
1992, and as Manager of Financial Analysis from October 1987 through April
1988. Mr. Harrison is a Certified Public Accountant.
3
<PAGE> 6
Edwin C. Shors, Ph.D, has served as Vice President, Research and
Development of the Company since 1983. Dr. Shors was Executive Vice President
of the Company from 1978 to 1983, during which time he was responsible for
establishing the manufacturing procedures, animal evaluations and clinical
trials leading to the FDA approval and marketing of coralline hydroxyapatite.
Prior to joining the Company, he was Director of the Thoracic and
Cardiovascular Laboratory at Harbor/UCLA Medical Center. Dr. Shors obtained a
Masters in Biology and a Doctorate in Physiology and Biophysics from the
University of Southern California.
Maxwell R. Simmonds has served as Vice President, Sales and Marketing,
Orthopaedic Division of the Company since August 1991, and from December 1989
through August 1991, he served as Director of Sales and Marketing. From
September 1988 through October 1989, Mr. Simmonds served as Vice President,
Sales and Marketing for Implant Technology, Inc., a manufacturer of total hip
implants. From November 1985 through August 1988, he served as Regional
Manager, National Sales Manager and Trauma Group Marketing Manager for
Kirschner Medical Corporation.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1996, 1995 and 1994 of those persons who were
at December 31, 1996 (i) the chief executive officer of the Company, (ii) one
of the other most highly compensated executive officers of the Company whose
annual salary and bonuses exceeded $100,000 or (iii) any other executive
officer who would have qualified under sections (i) or (ii) of this paragraph
but for the fact that the individual was not serving as an executive officer of
the registrant at the end of the 1996 fiscal year (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
------------------------------------- ---------
COMPENSATION AWARDS
OTHER -------------------
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) SATION(2) OPTIONS SATION(3)
- --------------------------- ---- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
DAVID C. MERCER 1996 $160,313 $ 13,877 39,000 $ 468
President, Chief Executive Officer 1995 148,500 14,192 46,000 468
and Director 1994 148,500 10,427 100,000 556
GEORGE W. SMYTH, JR 1996 130,000 0 22,000 529
Chairman of the Board 1995 130,000 0 35,000 529
1994 130,000 0 80,000 493
MAXWELL R. SIMMONDS 1996 126,125 13,843 31,000 468
Vice President, Sales and 1995 120,800 13,844 38,000 468
Marketing, Orthopaedic Division 1994 120,800 10,162 80,000 462
</TABLE>
____________________________________________________________
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Represents the cost of Company-provided automobiles, including
reimbursement of taxes thereon.
(3) Represents payment by the Company of term-life insurance premiums.
4
<PAGE> 7
The following table sets forth certain information with respect to
grants of stock options during 1996 to the Named Executive Officers pursuant to
the Company's Amended and Restated Stock Option Plan and the Company's 1995
Stock Option Plan ("Option Plans"):
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL
OF TOTAL REALIZABLE VALUE AT
NUMBER OF OPTIONS EXERCISE ASSUMED ANNUAL
SECURITIES GRANTED TO OR BASE RATES OF STOCK PRICE
UNDERLYING EMPLOYEES PRICE APPRECIATION
OPTIONS IN FISCAL (PER EXPIRATION FOR OPTION TERM(2)
NAME GRANTED(1) YEAR SHARE) DATE 5% 10%
- ----------------------- ------------ ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David C. Mercer .............. 24,000 9.6% $ 5.125 3/27/06 $ 77,400 $196,056
15,000 6.0% 5.625 8/7/06 53,070 134,520
George W. Smyth, Jr........... 15,000 6.0% 5.125 3/27/06 48,375 122,535
7,000 2.8% 5.625 8/7/06 24,766 62,776
Maxwell R. Simmonds........... 24,000 9.6% 5.125 3/27/06 77,400 196,056
7,000 2.8% 5.625 8/7/06 24,766 62,776
</TABLE>
_______________________
(1) Represents options granted under the Option Plans. Under the terms of
the Option Plans, the Stock Option Committee retains discretion,
subject to certain restrictions, to modify the terms of outstanding
options and to reprice outstanding options. No option is exercisable
during the first year after such option is granted, and thereafter
becomes exercisable in four equal annual installments. The exercise
price of shares of Common Stock subject to options granted under the
Option Plans is set by the Stock Option Committee; provided, however,
that the price of shares of Common Stock subject to an incentive stock
option must be at least 100% of the fair market value of the shares of
Common Stock on the date the option is granted.
(2) Assumed annual rates of stock price appreciation for illustrative
purposes only. Actual stock prices will vary from time to time based
upon market factors and the Company's financial performance. No
assurance can be given that such rates will be achieved.
The following table sets forth certain information with respect to
unexercised options held by the Named Executive Officers as of December 31,
1996 pursuant to the Option Plans:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED --------------- -------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------ ---------- ---------- ------------- -------------------
<S> <C> <C> <C> <C>
David C. Mercer.................. 0 $ 0 234,500/123,500 $ 524,750 /$ 0
George W. Smyth, Jr.............. 0 0 102,712/88,250 122,877/ 0
Maxwell R. Simmonds.............. 32,000 118,000 82,500/99,500 57,750 / 0
</TABLE>
_______________________
(1) Calculated based on the closing sales price of the Company's Common
Stock on The Nasdaq Stock Market on December 31, 1996 (i.e. $4.25),
minus the exercise price of the option, multiplied by the number of
shares to which the option relates.
5
<PAGE> 8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General Philosophy. The Compensation Committee reviews and determines
salaries, bonuses and all other elements of the compensation packages offered
to the executive officers of the Company, including its Chief Executive
Officer, and establishes the general compensation policies of the Company.
The Company desires to attract, motivate and retain high quality
employees who will enable the Company to achieve its short- and long- term
strategic goals and values. The Company participates in a high-growth
environment where substantial competition exists for skilled employees. The
ability of the Company to attract, motivate and retain high caliber individuals
is dependent in large part upon the compensation packages it offers.
The Company believes that its executive compensation programs should
reflect the Company's financial and operating performance. In addition,
individual contribution to the Company's success should be supported and
rewarded.
Historically, the Company's executive compensation has been based on
two primary components, base salary and long-term incentives in the form of
stock options. Commencing with 1994, the Company expanded its traditional
executive compensation package to include an annual incentive program, a
profit-sharing plan and an executive automobile program. These changes in
executive compensation were made upon the recommendation of a national
marketing consultant hired by the Company to evaluate the Company's executive
compensation packages in light of competitive practices. The Committee
believes that these incentive programs have raised annual executive
compensation to competitive levels and have provided an effective means of
retaining, motivating and rewarding high quality management.
Under the 1993 Omnibus Budget Reconciliation Act ("OBRA"), income tax
deductions of publicly-traded companies in tax years beginning on or after
January 1, 1994 may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non- qualified benefits) for
certain executive officers exceeds $1 million (less the amount of any "excess
parachute-payments" as defined in Section 280G of the Code) in any one year.
Under OBRA, the deduction limit does not apply to payments which qualify as
"performance-based." To qualify as "performance-based," compensation payments
must be based solely upon the achievement of objective performance goals and
made under a plan that is administered by a committee of outside directors. In
addition, the material terms of the plan must be disclosed to and approved by
shareholders, and the compensation committee must certify that the performance
goals were achieved before payments can be made. The Committee attempts to
design the Company's compensation programs to conform with the OBRA legislation
and related regulations so that total compensation paid to any employee will
not exceed $1 million in any one year, except for compensation payments which
qualify as "performance- based." The Company may, however, pay compensation
which is not deductible in limited circumstances when sound management of the
Company so requires.
Base Salary. Base salary for each of the executive officers,
including the Chief Executive Officer, is targeted at the average salaries paid
for such positions by competitive medical products companies of similar size,
with additional consideration given to biotech companies for selected
positions. Industry and custom surveys are used to establish competitive
practices. Salaries for executives are reviewed by the Committee on an annual
basis and may be adjusted at that time based on the Company's performance, the
Committee's assessment of the individual's contribution to the Company's
operations and changes in competitive pay levels.
The Company began in February 1994 to provide each of its executive
officers (other than George Smyth) with an automobile on a three- or four-year,
closed-end lease. The Company believes that providing each executive with the
use of an automobile will increase the value of the after-tax compensation of
each executive to more competitive levels.
6
<PAGE> 9
Annual Incentive Plan. In an effort to encourage and reward Company
operating performance on an annual basis, executive officers and senior
management are eligible for annual bonuses. Target bonus awards for each
position, expressed as a percent of base salary ranging from 10% to 25%, were
established by surveying awards paid by competitive companies of similar size.
The target bonus awards vary by management level, with the target award for the
chief executive officer established at 25% of base salary. For fiscal year
1996, actual bonus awards could have ranged from 0% to 150% of the targeted
award, based upon actual performance against targeted objectives. Executive
officer awards are based upon the Company's actual operating results as
compared to targeted annual operating results approved by the Compensation
Committee at the beginning of each fiscal year. In the case of senior
management, 50% of the award is based upon individual performance against
personal and/or functional objectives, with the remaining 50% based upon the
Company's operating results. No bonuses were granted for fiscal year 1996
pursuant to the Company's annual incentive plan. Certain executive officers
and senior management were awarded discretionary bonuses for fiscal year 1996
with the approval of the Board of Directors.
Profit Sharing Plan. In an effort to encourage teamwork and Company
operating performance, all employees of the Company are eligible to participate
in the profit sharing plan of the Company. Under the terms of the profit
sharing plan, a percentage of earnings in excess of targeted earnings for the
fiscal year comprises the profit sharing pool. All employees not covered by
the annual incentive plan first share in this pool, up to individual maximum
profit sharing awards equal to 5% of base salary. Once the maximum awards for
these employees are reached, executive officers and senior management are
entitled to share in the remainder of the pool up to a maximum individual award
of 5% of base salary. No awards were granted under the plan for fiscal year
1996.
Long Term Incentives. The Company offers its executives and other key
employees long-term incentives primarily through stock option grants under its
stock option plans. Stock option grants are intended to motivate executives to
improve long-term stock performance, and thus are tied directly to
shareholders' interests. Stock options are granted at the prevailing market
price on the date of grant and will, thus, only have value if the Company's
stock price rises. Stock options generally vest over four years. The Stock
Option Committee, composed of Messrs. Jones and Nohra, administers the plan and
determines which employees are to receive option grants and the number of
options to be granted.
This report has been provided by the Compensation Committee:
G. Bradford Jones
David C. Mercer
Guy Nohra
Date: April 17, 1997
The above report of the Compensation Committee will not be deemed to
be incorporated by reference to any filing by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates the same by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee was composed of Messrs.
Jones, Mercer and Nohra. Mr. Mercer is the President and Chief Executive
Officer of the Company. Mr. Mercer did not participate in discussions and
decisions concerning his compensation package.
7
<PAGE> 10
COMPANY PERFORMANCE
The following line graph compares the annual cumulative total
shareholder return of the Company's Common Stock against the cumulative total
return of the S&P 500 Index and the S&P Medical Products & Supplies Index for
the period from December 20, 1993 (i.e., the date the Company's stock first
traded publicly) to December 31, 1996.
INDEXED RETURNS
YEARS ENDING
<TABLE>
<CAPTION>
BASE
PERIOD
COMPANY/INDEX 20 DEC 93 DEC 93 DEC 94 DEC 95 DEC 96
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERPORE INTERNATIONAL 100 103.57 110.71 73.21 60.71
HLTH CARE(MED PDS&SUPP)-5 100 102.11 121.09 204.65 234.88
S&P 500 INDEX 100 100.13 101.45 139.58 171.62
</TABLE>
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "SEC") and The
Nasdaq Stock Market. Such persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1996, or written representations from certain reporting
persons, the Company believes that during fiscal 1996 all of its directors and
executive officers and persons who own more than 10% of the Company's Common
Stock have complied with the reporting requirements of Section 16(a), except
that amended Forms 4 reporting the automatic grants of 2,500 options in
connection with the Company's Annual Meeting of Shareholders to each of Messrs.
Eisenecher, Jones and Nohra in May 1996 were not filed until March 1997 for
Messrs. Eisenecher and Jones and April 1997 for Mr. Nohra.
8
<PAGE> 11
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Shareholders and hold
office until their successors are duly elected and qualified at the next Annual
Meeting of Shareholders. The Company's Bylaws authorize a Board comprised of
at least five directors and no more than nine directors, with the exact number
set by resolution of the Board. Pursuant to a resolution adopted by the Board
of Directors, the authorized number of members of the Board of Directors has
been set at five. There are five nominees for election to the Board of
Directors.
Each of the Company's nominees for election to the Board of Directors
currently serves as a director of the Company and was elected to his present
term of office by the shareholders of the Company. Each nominee first became a
director of the Company in the year set forth below and has continually served
as a director of the Company since then.
<TABLE>
<CAPTION>
NAME, AGE, FIRST BECAME
PRINCIPAL OCCUPATION OR POSITION A DIRECTOR
-------------------------------- ------------
<S> <C>
GEORGE W. SMYTH, JR., 66, Chairman of the Board of the Company 1983
WILLIAM A. EISENECHER, 54, Business Consultant 1983
G. BRADFORD JONES, 42, General Partner of Brentwood Venture Capital 1983
DAVID C. MERCER, 55, President and Chief Executive Officer of the Company 1992
GUY P. NOHRA, 37, Vice President of Burr, Egan, Deleage & Co. 1994
</TABLE>
George W. Smyth, Jr. has served as Chairman of the Board of Directors
of the Company since 1983. From 1983 to March 1992, Mr. Smyth was President
and Chief Executive Officer of the Company. Prior to June 1983, Mr. Smyth was
Vice President, Sales and Marketing for the American Edwards Laboratories
division of American Hospital Supply Corporation, a manufacturer and
distributor of cardiovascular devices.
William A. Eisenecher is a business consultant. From 1987 to August
1993, Mr. Eisenecher was the President and Chief Executive Officer of
Rehabilitation Technologies, Inc. He is also a director of several
privately-held companies.
G. Bradford Jones is a general partner of Brentwood Venture Capital, a
position he has held since 1986. Mr. Jones joined Brentwood Venture Capital in
1981. He also serves on the boards of directors of Aastrom Biosciences, which
develops systems for culturing human bone marrow stem cells; ISOCOR, an
electronic mail and electronic data interchange software company; Onyx
Acceptance Corporation, which provides automobile financing through car
dealerships; and Trikon Technologies, Inc., a manufacturer of advanced etching
and deposition equipment for the semiconductor industry. Mr. Jones is also a
director of several privately-held companies.
David C. Mercer has served as President and Chief Executive Officer of
the Company since March 1992. Mr. Mercer was President, Orthopaedic Division,
of Kirschner Medical Corporation, a manufacturer of orthopaedic devices, from
October 1988 through March 1992, and Senior Vice President, Marketing,
Orthopaedic Implant Division of Zimmer, Inc., a manufacturer of orthopaedic
devices, from April 1986 through October 1988. From April 1983 to April 1986,
he was President of Aspen Labs, Inc., the arthroscopic and electrosurgical
product subsidiary of Zimmer, Inc.
Guy P. Nohra is a vice president of Burr, Egan, Deleage & Co. ("Burr
Egan"), a venture capital firm, and a general partner of certain funds
affiliated with Burr Egan, positions he has held since 1992. From 1989 to
1992, Mr. Nohra was an associate in Burr Egan's west coast office. Prior to
joining Burr Egan, Mr. Nohra was product manager of medical products with
Security Pacific Trading Corporation. Mr. Nohra also serves on the boards of
directors of Euphonix, Inc., a manufacturer of computerized audio mixing
systems and InnerDyne, Inc., a manufacturer of disposable products for use in
least-invasive surgery. Mr. Nohra is also a director of several privately-held
companies.
9
<PAGE> 12
The Board of Directors held six meetings (including three by written
consent) during the fiscal year ended December 31, 1996. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors held during such period and the total number of meetings
held during such period by all committees of the Board of Directors on which
that director served.
The Company has standing Audit and Compensation Committees, but has
not established a Nominating Committee. During fiscal 1996, Messrs.
Eisenecher, Jones and Nohra comprised the Audit Committee, which met one time.
The Audit Committee's responsibilities include (i) recommending the selection
of the Company's independent public auditors to the Board of Directors, (ii)
consulting with the independent auditors with regard to the plan and scope of
audit, (iii) reviewing in consultation with the independent auditors, their
report of audit, or proposed report of audit, and the accompanying management
letter, if any, and (iv) consulting with the independent auditors with regard
to the adequacy of internal controls, and, if need be, to consult also with
management regarding the same. During fiscal 1996, the Compensation Committee
was comprised of Messrs. Jones, Nohra and Mercer and the committee met one
time. The Compensation Committee reviews and approves executive salaries,
considers awards to be granted under the Company's officer bonus plan and
performs other related functions upon request of the Board of Directors. The
Company also has a Stock Option Committee, which administers stock option
grants under the Company's Amended and Restated Stock Option Plan and the 1996
Stock Option Plan. During fiscal 1996, the Stock Option Committee was
comprised of Messrs. Jones and Nohra, and met six times.
BOARD COMPENSATION AND BENEFITS
Effective as of May 25, 1995, each non-employee director of the
Company is entitled to be paid a fee of $1,000 per Board meeting attended in
person (the "Directors' Fees"), and is eligible to be reimbursed for expenses
actually incurred in attending Board meetings. No fees are paid for Board
meetings by telephonic conference or unanimous written consent, or for
committee meetings of the Board.
On April 4, 1995, the Board of Directors adopted the Stock Option Plan
for Non-Employee Directors (the "Non-Employee Directors Plan"), which was
approved by the Company's shareholders at the 1995 Annual Meeting of
Shareholders. The Non-Employee Directors Plan provides for the automatic grant
of non-qualified stock options to purchase shares of the Company's Common Stock
to eligible non-employee directors of the Company annually, at set times and in
set amounts. On May 25, 1995, under the terms of the Non-Employee Directors
Plan, each director of the Company who was not an employee of the Company was
automatically granted an initial option to purchase 15,000 shares of the
Company's Common Stock, effective as of May 25, 1995, at an exercise price of
$5.75 per share. Non-employee directors who are first appointed or elected to
the Board of Directors after May 25, 1995 will be automatically granted an
initial option to purchase 15,000 shares of the Company's Common Stock,
effective on the date of election or appointment to the Board of Directors. In
addition to the initial grant, non-employee directors will be automatically
granted additional options to purchase 2,500 shares on the date of the Annual
Meeting of Shareholders in every year following the initial grant to such
director, provided such director is re-elected at such meeting. Accordingly,
effective May 29, 1997, Messrs. Eisenecher, Jones and Nohra, presuming their
re-election to the Board, will each be granted options to purchase 2,500
shares. The Non-Employee Directors Plan also provides that, pursuant to an
irrevocable election made at least six months prior to the Board meeting date,
a non-employee director may elect to automatically receive non-qualified stock
options covering 500 shares of Common Stock in lieu of the Directors' Fees.
The price per share of Common Stock subject to each option granted
under the plan is 100% of the fair market value of the Company's Common Stock
on the date the option is granted, or, if such date is not a trading day on the
principal exchange on which the Company's Common Stock is then trading, then on
the trading day immediately preceding the date the option is granted. The
options become exercisable in four cumulative annual installments of 25% of the
shares covered by the option per year over four years, commencing with the
first anniversary from the date of grant.
During fiscal 1996, each non-employee director received an option to
purchase 500 shares of the Company's Common Stock, in lieu of the Directors'
Fee, for each of three personally attended meetings of the Board of Directors,
at exercise prices of $5.75, $7.625 and $5.625, and an option to purchase 2,500
shares of the Company's Common Stock, at an exercise price of $7.625, which
option was granted upon their re- election to the Board.
10
<PAGE> 13
VOTE
Directors will be elected by a favorable vote of a plurality of the
shares of voting stock present and entitled to vote, in person or by proxy, at
the Meeting, except in the case where votes are cumulated, in which case the
five nominees receiving the highest number of votes of the shares present or
represented and entitled to vote shall be elected as directors. Abstentions or
broker non-votes as to the election of directors will not affect the election
of the candidates receiving the plurality of votes. Unless instructed to the
contrary, the shares represented by the proxies will be voted FOR the election
of the five nominees named above as directors. Although it is anticipated that
each nominee will be able to serve as a director, should any nominee become
unavailable to serve, the proxies will be voted for such other person or
persons as may be designated by the Company's Board of Directors.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Ernst & Young LLP, the Company's independent accountants
for the fiscal year ended December 31, 1996, was selected by the Board of
Directors, upon recommendation of the Audit Committee, to act in the same
capacity for the fiscal year ending December 31, 1997. Neither the firm nor
any of its members has any relationship with the Company or any of its
affiliates except in the firm's capacity as the Company's auditor.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have the opportunity to make statements if they so desire and
respond to appropriate questions from the shareholders.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
All proposals of shareholders intended to be presented at the
Company's 1998 Annual Meeting of Shareholders must be directed to the attention
of the Secretary of the Company, at the address of the Company set forth on the
first page of this Proxy Statement, by December 25, 1997, if they are to be
considered for possible inclusion in the Proxy Statement and form of proxy used
in connection with such meeting.
OTHER MATTERS
As of the date of this Proxy Statement the Board of Directors knows of
no other matters which may be presented for consideration at the Meeting.
However, if any other matter is presented properly for consideration and action
at the Meeting, or any adjournment or postponement thereof, it is intended that
the Proxies will be voted with respect thereto in accordance with the best
judgment and in the discretion of the proxy holders.
By Order of the Board of Directors,
SIG
Richard L. Harrison
Secretary
Dated: April 17, 1997
11
<PAGE> 14
INTERPORE INTERNATIONAL
181 TECHNOLOGY DRIVE, IRVINE, CALIFORNIA 92618
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 29, 1997
THIS PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS OF INTERPORE INTERNATIONAL
The undersigned hereby appoints Richard L. Harrison and David C. Mercer, or
either of them, as Proxies, with full power to act and to appoint their
substitutes, and hereby authorizes the Proxies to represent and to vote, as
designated on the reverse side, all the shares of voting stock of Interpore
International held of record by the undersigned on April 17, 1997 at the 1997
Annual Meeting of Shareholders to be held on May 29, 1997, or any adjournment or
postponement thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If this proxy is executed and no
direction is made, this proxy will be voted "FOR" all nominees listed under
proposal 1.
(Continued and to be signed on reverse side)
<PAGE> 15
Please mark boxes in blue or black ink.
1. ELECTION OF DIRECTORS.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary). to vote for all nominees listed below.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, draw a
line through (or otherwise strike out) the nominee's name in the
list below.)
William A. Eisenecher, G. Bradford Jones, David C. Mercer, Guy P. Nohra, George
W. Smyth, Jr.
Please sign exactly as
name appears below. When
shares are held by joint
tenants both must sign.
When signing as
attorney, executor,
administrator, trustee
or guardian, please give
full title as such. If a
corporation, please sign
in full corporate name
by the President or
other authorized
officer. If a
partnership, please sign
in partnership name by
authorized person.
Dated: , 1997
------------------------
Signature
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Signature
