<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPINE-TECH, INC.
- - --------------------------------------------------------------------------------
(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/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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>
SPINE-TECH, INC.
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Spine-Tech, Inc. to be held at the Minneapolis Marriott Southwest, 5801 Opus
Parkway, Minnetonka, Minnesota, commencing at 3:30 p.m., on Thursday, May 8,
1997.
The Secretary's Notice of Annual Meeting and the Proxy Statement that
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you. Please mark, date and sign the enclosed proxy and return
it in the accompanying envelope as quickly as possible, even if you plan to
attend the meeting. If you later desire to envoke the proxy, you may do so at
any time before it is exercised.
Sincerely,
/s/ David W. Stassen
David W. Stassen
CHIEF EXECUTIVE OFFICER AND PRESIDENT
March 28, 1997
<PAGE>
SPINE-TECH, INC.
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 8, 1997
------------------------------
The Annual Meeting of Shareholders of Spine-Tech, Inc. will be held at
the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota, at
3:30 p.m., on Thursday, May 8, 1997 for the following purposes:
1. To elect five directors for the ensuing year.
2. To amend the Spine-Tech, Inc. 1996 Omnibus Stock Plan to increase
the number of shares authorized for issuance thereunder from
500,000 to 900,000.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 1997.
4. To transact such other business as may properly be brought before
the meeting.
The Board of Directors has fixed March 18, 1997 as the record date for
the meeting and only shareholders of record at the close of business on that
date are entitled to receive notice of and vote at the meeting.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF
YOU OWN ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE MARK, DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME PRIOR TO
BEING EXERCISED. RETURNING YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING AND REVOKE THE PROXY.
By Order of the Board of Directors,
/s/ Keith M. Eastman
Keith M. Eastman
SECRETARY
Minneapolis, Minnesota
March 28, 1997
<PAGE>
________________________
PROXY STATEMENT
________________________
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors of
Spine-Tech, Inc., a Minnesota corporation (the "Company"), for use in connection
with the Annual Meeting of Shareholders to be held on Thursday, May 8, 1997 at
the Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka, Minnesota
55343, commencing at 3:30 p.m., and at any adjournments thereof. Only
shareholders of record at the close of business on March 18, 1997 will be
entitled to vote at such meeting or adjournment. Proxies in the accompanying
form that are properly signed, duly returned to the Company and not revoked will
be voted in the manner specified. A shareholder executing a proxy retains the
right to revoke it at any time before it is exercised by notice in writing to
the Company's Secretary of termination of the proxy's authority, by a properly
signed and duly returned proxy bearing a later date, or by voting in person at
the meeting.
The address of the principal executive office of the Company is 7375
Bush Lake Road, Minneapolis, Minnesota 55439 and the Company's telephone number
is (612) 832-5600. The mailing of this Proxy Statement and form of proxy to
shareholders will commence on or about March 28, 1997.
Shareholder proposals intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal
executive office no later than November 25, 1997 for inclusion in the Proxy
Statement for that meeting.
The Company will pay the cost of soliciting proxies in the
accompanying form. In addition to solicitation by the use of the mails, certain
directors, officers and employees of the Company may solicit proxies by
telephone, telegram or personal contact, and have requested brokerage firms and
custodians, nominees and other record holders to forward soliciting materials to
the beneficial owners of stock of the Company and will reimburse them for their
reasonable out-of-pocket expenses in so forwarding such materials.
At the close of business on March 18, 1997, there were 10,068,812
shares of Common Stock of the Company issued and outstanding, each of which is
entitled to one vote.
1
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of February 28, 1997
(unless otherwise noted below) by each shareholder who is known by the Company
to own beneficially more than five percent of the Company's outstanding Common
Stock, each director, each executive officer named in the Summary Compensation
table on page 7, and all directors and executive officers as a group. Except as
otherwise noted below, the listed beneficial owner has sole voting and
investment power with respect to such shares and the address of the listed
beneficial owner is that of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- - --------------------------------- ------------------------- ------------------
<S> <C> <C>
Putnam Investments, Inc. 1,301,876(1) 13.1%
One Post Office Square
Boston, Massachusetts 02109
David W. Stassen 437,500(2) 4.2%
Keith M. Eastman 156,286(3) 1.5%
Ted K. Schwarzrock 102,155(4) 1.0%
Douglas W. Kohrs 157,269(5) 1.5%
David L. Shaw 87,793(6) *
Stephen D. Kuslich, M.D. 303,000(7) 3.0%
St. Croix Orthopaedics, P.A.
1701 Curve Crest Boulevard
Stillwater, Minnesota 55082
Robert J. DePasqua 40,258(8) *
James F. Lyons 47,000(9) *
Kenneth W. Anstey 11,250(10) *
All directors and executive officers
as a group (10 persons) 1,482,555(11) 13.5%
</TABLE>
_________________________________
* Less than one percent
(1) Information is based on a Schedule 13G Statement dated January 31, 1997
filed with the Securities and Exchange Commission by Putnam Investments,
Inc. ("Putnam"), a registered Investment Company and reflects Putnam's
holdings as of December 31, 1996. As to the total number of shares
listed, Putnam reports that it has no sole voting or dispositive power,
shared voting power as to 27,900 shares, and shared dispositive power as
to all such shares.
(2) Includes 3,878 shares held of record by Mr. Stassen's children, in which
shares he disclaims beneficial ownership. Also includes 368,000 shares
issuable pursuant to options exercisable within 60 days.
(3) Includes 18,300 shares held of record by H&E Investors, a partnership of
which Mr. Eastman is a general partner. Also includes 116,625 shares
issuable pursuant to options exercisable within 60 days.
(4) Includes 30 shares held of record by Mr. Schwarzrock's son, in which
shares he disclaims beneficial ownership. Also includes 100,625 shares
issuable pursuant to options exercisable within 60 days.
(5) Includes 146,000 shares issuable pursuant to options exercisable within
60 days.
(6) Includes 83,250 shares issuable pursuant to options exercisable within
60 days.
(7) Includes 42,500 shares held in Dr. Kuslich's IRA.
(8) All shares are held in joint tenancy with Mr. DePasqua's spouse, except
for 258 shares held of record by Mr. DePasqua's son, in which shares he
disclaims beneficial ownership.
(9) Includes 22,500 shares issuable pursuant to options exercisable within
60 days.
(10) Includes 11,250 shares issuable pursuant to options exercisable within
60 days.
(11) Includes 953,750 shares issuable pursuant to options exercisable within
60 days.
2
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Company's By-Laws provide that the business and affairs of the
Company shall be managed by or under the direction of a Board of Directors of up
to five members, which number shall be determined by the shareholders at their
annual meeting. Each director shall be elected at the Annual Meeting of
Shareholders and shall serve for an indefinite term that expires at the next
regular meeting of the shareholders and until a successor is elected and
qualified. The Board of Directors has recommended that the number of directors
to be elected for the ensuing year again be set at five and has nominated the
five persons named below for election as directors. Proxies solicited by the
Board of Directors will, unless otherwise directed, be voted to elect the five
nominees named below to constitute the entire Board of Directors.
All of the nominees named below are current directors of the Company.
Each nominee has indicated a willingness to serve as a director for the ensuing
year, but if any nominee is not a candidate at the meeting for any reason, the
proxies named in the enclosed form of proxy may vote for a substitute nominee in
their discretion.
The affirmative vote of the holders of a majority of the voting power of
the outstanding shares of the Common Stock of the Company entitled to vote on
the election of directors and present, in person or by proxy, is required for
election to the Board of Directors of each of the five nominees named below.
For this purpose, a shareholder voting through a proxy who abstains with respect
to the election of directors is considered to be present and entitled to vote on
the election of directors at the meeting, and is in effect a negative vote, but
a shareholder (including a broker) who does not give authority to a proxy to
vote, or withholds authority to vote, on the election of directors shall not be
considered present and entitled to vote on the election of directors.
Information regarding the nominees is set forth below.
DAVID W. STASSEN, AGE 45
Mr. Stassen has served as President and Chief Executive Officer of the
Company since June 1992 and as a director of the Company since June 1991. From
January 1990 to June 1992, he served as Executive Vice President of St. Paul
Venture Capital, Inc., a venture capital company. He is currently a director of
Avecor Cardiovascular, Inc. and RSI Systems, Inc.
STEPHEN D. KUSLICH, M.D., AGE 53
Dr. Kuslich is a co-founder and the Medical Director of the Company and
has served as a director since the inception of the Company in 1988. Dr. Kuslich
has been a practicing orthopaedic surgeon specializing in lumbar spine surgery
since 1976. From 1976 to January 1995, he served as a partner in Metropolitan
Orthopaedic Associates, a group of orthopaedic surgeons. He is currently a
partner in St. Croix Orthopaedics, P.A., a group of orthopaedic surgeons.
ROBERT J. DEPASQUA, AGE 48
Mr. DePasqua has served as a director of the Company since June 1992.
From 1989 to July 1994, he served as the President, Chief Executive Officer and
a director of Spectranetics Corp., a
3
<PAGE>
medical device company. He remained a director of Spectranetics until his
resignation in September 1996.
JAMES F. LYONS, AGE 66
Mr. Lyons has served as a director of the Company since July 1993. Mr.
Lyons is currently Chairman of the Board of Directors of Bio-Vascular, Inc., a
medical device company. Mr. Lyons is also a founder of Avecor Cardiovascular,
Inc., and served as the Chairman of its Board of Directors until April 1996.
Mr. Lyons also serves as a director of ATS Medical and Quantech Ltd.
KENNETH W. ANSTEY, AGE 50
Mr. Anstey has served as a director of the Company since May 1995. From
December 1995 until March 1997, Mr. Anstey served as President and Chief
Executive Officer of Biofield, Inc., a medical technology company. From August
1991 to December 1995, Mr. Anstey served as President and Chief Executive
Officer of Mitek Surgical Products, Inc., a supplier of minimally invasive
proprietary surgical implants, which is a subsidiary of Johnson & Johnson. From
1989 to July 1991, Mr. Anstey served as President of ConvaTec Inc., a
manufacturer and marketer of ostomy and wound care products, which is a
subsidiary of Bristol Meyers Squibb Corporation. Mr. Anstey serves as a
director of Vision-Sciences, Inc. and Cellpro, Inc.
None of the above nominees is related to each other or to any executive
officer of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Audit Committee of the Board of Directors consists of Robert J.
DePasqua and James F. Lyons. It has the responsibility to meet with the
Company's independent auditors and approve the scope and timing of the
independent auditors' audit, evaluate the independent auditors' opinions as to
internal controls and discuss the meaning and significance of the audited
financial results. The Audit Committee held one meeting in 1996.
The Compensation Committee of the Board of Directors consists of Robert
J. DePasqua and James F. Lyons. It has the responsibility to grant or make
recommendations to the Board of Directors concerning employee stock options,
bonuses and other compensation. The Compensation Committee adopted resolutions
by written action 70 times during fiscal 1996. The majority of these written
actions related to the grant of stock options under the Plan to each new
employee of the Company.
The Board of Directors does not have a nominating committee.
The Board of Directors held four meetings during 1996. All directors
attended at least 75% of the meetings of the Board of Directors during 1996.
DIRECTOR COMPENSATION
Non-employee directors of the Company received an annual retainer of
$12,000, plus $1,000 for each meeting of the Board of Directors. The
Spine-Tech, Inc. 1996 Omnibus Stock Plan (the "1996 Plan") provides for the
non-discretionary grant of a non-statutory stock option to purchase 11,250
shares of Common Stock upon election or appointment to the Board of Directors to
each non-
4
<PAGE>
employee director at a price equal to the fair market value of a share of Common
Stock on the date of grant. Of the shares covered by such initial grant, 3,750
vest immediately upon grant and 3,750 vest upon each of the next two
anniversaries of the director's election or appointment. After a non-employee
director has served the Company as a director for two full years, that director
will be granted an option to purchase 3,750 shares of Common Stock at the
conclusion of each subsequent annual meeting of shareholders of the Company, at
a price equal to the fair market value of a share of Common Stock on the date of
grant, these options to vest one year from the date of grant.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for establishing compensation policies for all executive officers
of the Company, including the five most highly compensated executive officers of
the Company named in the accompanying tables. The Committee establishes the
total compensation for the executive officers in light of these policies. The
Committee is composed entirely of non-employee directors.
The following report describes the Company's executive compensation
program and discusses the factors considered by the Committee in determining the
compensation of the Company's Chief Executive Officer and other executive
officers for 1996.
COMPENSATION OBJECTIVES
The Committee's objective is to make the compensation packages of the
executive officers of the Company sufficient to attract and retain highly
talented and productive executives and to provide effective incentives to
motivate and reward Company executives for achieving the Company's financial and
strategic goals essential to its long-term success and growth in shareholder
value. A benefits consultant provides the Committee with compensation
statistics from other companies comparable in size and industry. The Company's
current compensation levels are at the low end of the range for comparable
companies. The Company's executive compensation package consists of two main
components (in addition to the benefit plans offered to all employees) base
salary and long-term incentive compensation, consisting of grants made under the
Company's stock incentive program. Under certain circumstances, the Company's
executive compensation will include an annual bonus.
BASE SALARY
The base salary of each of the executive officers, including the
Company's Chief Executive Officer and President (the "CEO"), is determined
annually by the Committee and ratified by the Board of Directors after
considering the compensation levels of personnel with similar responsibilities
at other companies in the medical device industry, the Company's financial
performance during the prior fiscal year, and, in the case of executive officers
other than the CEO, the individual performance of each executive officer.
Salary decisions concerning executive officers are made by the Committee in
conjunction with the Board of Directors in a review process that includes the
CEO's recommendations for all executive officers other than himself.
The measures of individual performance considered in setting 1996 and
current salaries of individual executive officers, including the CEO, included a
number of quantitative and qualitative factors such as the Company's historical
and recent financial performance, the individual's progress
5
<PAGE>
toward non-financial goals within his area of responsibility, individual
performance, experience and level of responsibility and other contributions made
to the Company's success.
STOCK OPTIONS
The Company's stock option program is intended to provide a long-term
incentive for executive officers and other key employees. The purpose of the
program is to promote the interests of the Company and its shareholders by
providing the Company's personnel with an opportunity to acquire a proprietary
interest in the Company and thereby develop a stronger incentive to put forth
maximum effort for its continued success and growth and to aid the Company in
attracting and retaining personnel of outstanding ability.
The Company's stock option program is administered by the Committee and
authorizes the Committee to grant to employees, including all executive
officers, options to purchase the Company's Common Stock. Generally, options
are granted to purchase shares of Common Stock over a ten-year period at the
fair market value per share at the time the options are granted. Options
granted during 1996 generally vest over four years after the date of grant.
Potential recipients and the number of shares to be awarded to each recipient
are proposed by the CEO and the Chief Financial Officer on the basis of their
views of the overall strategic contribution of such individuals to corporate
performance. The Committee reviews and approves the final list of option
recipients and the amounts of the awards. In granting options, the Committee
considers several factors, including the position of the potential optionee, as
well as the number of options currently held by him.
ANNUAL BONUS
Except for two key milestones achieved in 1995, the Company
traditionally has not paid annual bonuses to its executive officers. In 1996,
David L. Shaw, the Company's Vice President of Manufacturing and Operations,
received a cash bonus for his work in connection with the Company achieving ISO
9001 and CE Mark certifications.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which became effective January 1, 1994, limits the tax deductibility of
compensation in excess of $1 million to each of the CEO and the four other
highest paid executive officers, unless such compensation is based on
performance in accordance with rules promulgated in connection with Section
162(m). The Committee will seek to comply with these rules to the extent
compliance is practicable and in the best interests of the Company and its
shareholders.
COMPENSATION COMMITTEE
Robert J. DePasqua, Chairman
James F. Lyons
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and each of its four other
most highly compensated executive officers for the years ended December 31,
1996, 1995 and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- - ----------------------------------- ---- -------- ------- ----------------------
<S> <C> <C> <C> <C>
$
David W. Stassen 1996 $177,396 -- 55,000
Chief Executive Officer and 1995 152,295 25,000 --
President 1994 130,166 20,000 75,000
Keith M. Eastman 1996 111,032 -- 35,000
Chief Financial Officer and 1995 101,600 20,000 --
Secretary 1994 93,533 -- 45,000
Ted K. Schwarzrock 1996 120,000 -- --
Vice President, Sales and 1995 114,167 -- 10,000
Marketing 1994 108,000 -- 60,000
Douglas W. Kohrs 1996 116,516 -- 35,000
Vice President, Research and 1995 108,563 -- --
Product Development 1994 91,688 -- 45,000
David L. Shaw 1996 99,462 10,000 15,000
Vice President, Marketing 1995 94,500 -- --
and Operations 1994 76,750 -- 75,000
</TABLE>
7
<PAGE>
STOCK OPTIONS
The following table summarizes option grants made during 1996 to the
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
OPTIONS TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED GRANTED EXERCISE EXPIRATION OPTION TERM (3)
NAME (1) (2) PRICE DATE 5% 10%
- - ---------------------- ------- ------------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
David W. Stassen 30,000 5.4% $22.25 3/18/06 $419,787 $1,063,823
25,000 4.5% 25.00 7/25/06 393,059 996,089
Keith M. Eastman 25,000 4.5% 22.25 3/18/06 349,823 886,519
10,000 1.8% 23.75 9/24/06 149,362 378,514
Ted K. Schwarzrock -- -- -- -- -- --
Douglas W. Kohrs 25,000 4.5% 22.25 3/18/06 349,823 886,519
10,000 1.8% 23.38 9/15/06 147,036 372,617
David L. Shaw 15,000 2.7% 22.25 3/18/06 209,894 531,912
</TABLE>
____________________
(1) Options granted pursuant to the Plan. Options become exercisable with
respect to one-fourth of the shares covered thereby on the first through
fourth anniversary of the date of grant. Each option has a maximum term of
ten years, subject to earlier termination in the event of the optionee's
cessation of service with the Company. The options were granted at the
fair market value of the shares subject to the options on the date of
grant.
(2) Reflects the percent of options granted to employees during 1996 under the
Plan.
(3) Potential realized values shown above represent the potential gains based
upon compound price appreciation of 5% and 10% from the date of grant
through the full option term. The actual value realized, if any, on stock
option exercises will be dependent upon overall market conditions and the
future performance of the Company and its Common Stock. There is no
assurance that the actual value will approximate the amounts reflected in
this table.
The following table summarizes option exercises during 1996 by the
executive officers named in the Summary Compensation Table, and the value of
their unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES VALUE NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (1)
--------------------------------------------------------------
NAME EXERCISE (1) EXERCISABLE UNEXECISABLE EXERCISABLE UNEXECISABLE
- - ------------------- ------------ -------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David W. Stassen 2,000 $48,000 410,500 92,500 $9,754,875 $885,375
Keith M. Eastman 17,000 540,720 112,375 63,125 2,586,924 689,781
Ted K. Schwarzrock 5,000 126,080 100,625 61,875 2,211,445 1,230,132
Douglas W. Kohrs 10,000 236,600 149,750 57,500 3,545,910 567,875
David L. Shaw 12,000 276,960 79,500 57,000 1,820,236 962,611
</TABLE>
___________________
(1) Value realized and value of unexercised options are calculated by
determining the difference between the fair market value of the shares
underlying the options at exercise or at December 31, 1996, as applicable.
8
<PAGE>
COMPENSATION ARRANGEMENTS
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with David W. Stassen
and Ted K. Schwarzrock. Each employment agreement remains in effect until it is
terminated by either party with notice, subject to the Company's right to
terminate the agreement immediately for cause or upon the employee's death.
Under each employment agreement, the employee has agreed that, during the term
of employment and for a period of one year thereafter, he will not compete with
the Company.
Mr. Stassen's base salary is $192,000 for calendar year 1997. Mr.
Stassen's agreement provides for a discretionary annual cash bonus and stock
option awards. His agreement also provides that, in the event of his
termination by the Company, the Company will pay him six months salary as a
severance benefit.
Mr. Schwarzrock's base salary is $120,000 for calendar year 1997.
MANAGEMENT AGREEMENTS
The Company has entered into five-year management agreements, which
automatically renew for one-year terms, with each of Messrs. Stassen, Eastman,
Schwarzrock, Kohrs and Shaw. The management agreements are substantially
similar. Their purpose is to encourage the executive (1) to continue to carry
out his duties in the event of a possible change in control of the Company and
(2) to remain in the service of the Company in order to facilitate an orderly
transition in the event of an actual change in control of the Company.
Under the terms of each management agreement, if, between the occurrence of
a change in control of the Company and the end of the three-year anniversary
date of such occurrence, an executive's employment is voluntarily or
involuntarily terminated for any reason (unless such termination is a voluntary
termination by the employee other than for good reason (as defined in the
management agreement) or is on account of the death or disability of the
employee or is a termination for cause (as defined in the management agreement),
he will be entitled to receive severance compensation. Severance compensation
is also payable if the termination occurs before the change in control, but
after steps to change control have been taken. Severance compensation consists
of (i) one times the executive's Average Annual Compensation for an executive
who has been employed by the Company for one year or more, but less than three
years, (ii) two times the executive's Average Annual Compensation for an
executive employed by the Company for at least three years, but less than five
years, or (iii) three times the executive's Average Annual Compensation less
$1.00 for an executive who has been employed by the Company for at least five
years or more. "Average Annual Compensation" means the average annual
compensation payable by the Company and includible in gross income for federal
income tax purposes of the executive during the shorter period consisting of the
five most recently completed taxable years of the executive ending before the
change in control or that portion of such period during which he was employed by
the Company. Each executive is also entitled to receive continuation of certain
employee benefit plans of the Company, subject to reduction for the amount of
any other severance compensation or benefits paid by the Company to the employee
under other agreements of the Company, if any. If a change in control occurred
today, Messrs. Stassen, Eastman, Schwarzrock, Kohrs and Shaw would receive
$302,835, $203,879, $227,336, $270,554 and $168,820, respectively.
9
<PAGE>
PROPOSAL TO AMEND THE SPINE-TECH, INC. 1996 OMNIBUS STOCK PLAN
(ITEM 2 ON PROXY CARD)
INTRODUCTION
The Company's Board of Directors authorized and the shareholders approved
the adoption of the Spine-Tech, Inc. 1996 Omnibus Stock Plan, effective as of
February 1, 1996. A total of 500,000 shares were initially reserved for
issuance under the Plan. The Plan replaced all prior stock option plans of the
Company. The basic features of the Plan are summarized below.
The Board of Directors believes that stock-based compensation programs are
a key element in achieving the Company's continued financial and operational
success. The Company's compensation programs have been designed to motivate key
personnel to produce a superior shareholder return. To enable the Company to
continue to grant stock options and other awards under the Plan, the Board has
approved an amendment to the Plan, increasing the number of shares reserved for
issuance thereunder from 500,000 to 900,000, subject to shareholder approval.
The shareholders are being asked to approve this amendment to the Plan at the
Annual Meeting.
PURPOSE
The purpose of the Plan is to motivate key personnel to produce a superior
return to the shareholders of the Company by providing such individuals an
opportunity to realize stock appreciation, by facilitating stock ownership, and
by rewarding them for achieving a high level of corporate performance. The Plan
is also intended to facilitate recruiting and retaining key personnel of
outstanding ability by providing an attractive capital accumulation opportunity.
ADMINISTRATION
The Compensation Committee of the Board of Directors is the Committee that
administers the Plan, all of whose members are "non-employee directors" for
purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and "outside directors" for purposes of Section 162(m) of
the Code. Subject to the provisions of the Plan, the Committee has the
exclusive power to make awards under the Plan and to determine when and to whom
awards will be granted, and the form, amount and other terms and conditions of
each award. The Committee has the authority to interpret the Plan and any award
or agreement made under the Plan, to establish, amend, waive and rescind any
rules and regulations relating to the administration of the Plan, to determine
the terms and provisions of any agreements entered into under the Plan (not
inconsistent with the Plan), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may delegate all or
part of its responsibilities under the Plan to persons who are not "non-employee
directors" within the meaning of Rule 16b-3 under the Exchange Act for purposes
of determining and administering awards solely to employees who are not then
subject to the reporting requirements of Section 16 of the Exchange Act.
Notwithstanding the foregoing, the granting, terms, conditions and
eligibility requirements of awards granted to outside directors (as defined in
the Plan) are governed solely by the provisions of the Plan pertaining thereto,
and the Committee has no discretion with respect to the granting of such awards
or to alter or amend any terms, conditions or eligibility requirements of such
awards to outside directors.
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<PAGE>
NUMBER OF SHARES AND ELIGIBILITY
As of February 1, 1996, the effective date of the Plan, the total number of
shares of Company Common Stock available for distribution under the Plan was
500,000 (subject to adjustment for future stock splits, stock dividends and
similar changes in the capitalization of the Company). No participant may
receive any combination of options and stock appreciation rights relating to
more than 250,000 shares in the aggregate pursuant to awards over a five-year
period under the Plan. No participant may receive performance units relating to
more than 100,000 shares pursuant to awards over a five-year period under the
Plan.
All employees of the Company and its affiliates are eligible to receive
awards under the Plan at the discretion of the Committee. Outside directors
receive grants of non-statutory options as set forth under "Types of
Awards--Outside Director Options" below. Awards other than incentive stock
options also may be awarded by the Committee to individuals who are not
employees or outside directors but who provide services to the Company or its
affiliates in the capacity of an independent contractor.
The Plan provides that all awards are to be evidenced by written agreements
containing the terms and conditions of the awards. Such agreements are subject
to amendment, including unilateral amendments by the Company (with the approval
of the Committee) unless such amendments are deemed by the Committee to be
materially adverse to the recipient and are not required as a matter of law.
Any shares of the Company's Common Stock subject to an award under the Plan that
are not used because the terms and conditions of the award are not met may again
be used for an award under the Plan. However, shares with respect to which a
stock appreciation right has been exercised (in cash and/or in stock) and shares
of restricted stock which have been granted with dividend or voting rights
during the term of the restricted stock may not again be awarded under the Plan.
TYPES OF AWARDS
The types of awards that may be granted under the Plan include incentive
and non-statutory stock options, stock appreciation rights, restricted stock,
performance units and other stock-based awards (awards of, or based on, stock
other than options, stock appreciation rights, restricted stock or performance
units). Subject to certain restrictions applicable to outside director options
and incentive stock options, awards will be exercisable by the recipients at
such times as are determined by the Committee, but in no event may the term of
an award be longer than ten years after the date of grant.
In addition to the general characteristics of all of the awards described
in this Proxy Statement, the basic characteristics of awards that may be granted
under the Plan are as follows:
INCENTIVE AND NON-STATUTORY STOCK OPTIONS. Options may be granted to
recipients at such exercise prices as the Committee may determine but not less
than 85% of their fair market value (as defined in the Plan) as of the date the
option is granted. Stock options may be granted and exercised at such times as
the Committee may determine, except that, unless applicable federal tax laws are
modified, (1) no incentive stock option may be granted at less than fair market
value, (2) no incentive stock option may be granted more than ten years after
the effective date of the Plan, (3) an incentive stock option shall not be
exercisable more than ten years after the date of grant, and (4) the aggregate
fair market value of the shares of Common Stock of the Company with respect to
which incentive stock options may first become exercisable in any calendar year
for any employee may not exceed $100,000
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<PAGE>
under the Plan or any other plan of the Company. Additional restrictions apply
to an incentive stock option granted to an individual who beneficially owns more
than ten percent of the combined voting power of all classes of stock of the
Company.
The purchase price payable upon exercise of options may be payable in cash,
or through a reduction of the number of shares delivered to the participant upon
exercise of the option or by delivering stock already owned by the participant
(where the fair market value of the shares withheld or delivered on the date of
exercise is equal to the option price of the stock being purchased), or in a
combination of cash and such stock, unless otherwise provided in the applicable
award agreement. The participants may simultaneously exercise options and sell
the stock purchased upon such exercise pursuant to brokerage or similar
relationships and use the sale proceeds to pay the purchase price.
OUTSIDE DIRECTOR OPTIONS. Under the Plan, each outside director will be
granted an option to purchase 11,250 shares of Common Stock upon such director's
initial election or appointment to the Board of Directors at a price equal to
the fair market value of a share of Common Stock on the date of grant. Of the
shares covered by such initial grant, 3,750 will vest immediately upon grant and
3,750 will vest upon each of the next two anniversaries of the director's
election or appointment. After each outside director has served the Company as
a director for two full years after such grant in the case of a newly elected or
appointed outside director, or after the initial election vesting date (as
defined in the Plan) in the case of an outside director serving on the Board of
Directors on or prior to the effective date of the Plan, such director will be
granted an option to purchase 3,750 shares of Common Stock at the conclusion of
each subsequent annual meeting of shareholders of the Company, at a price equal
to the fair market value of a share of Common Stock on the date of grant, such
options to vest one year from the date of grant.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS. The value of a stock
appreciation right granted to a recipient is determined by the appreciation in
the Company's Common Stock, subject to any limitations upon the amount or
percentage of total appreciation that the Committee may determine at the time
the right is granted. The recipient receives all or a portion of the amount by
which the fair market value of a specified number of shares, as of the date the
stock appreciation right is exercised, exceeds a price specified by the
Committee at the time the right is granted. The price specified by the
Committee must be at least 100% of the fair market value of the specified number
of shares of the Company's Common Stock to which the right relates determined as
of the date the stock appreciation right is granted. A stock appreciation right
may be granted in connection with a previously or contemporaneously granted
option, or independent of any option. No stock appreciation right may be
exercised less than six months from the date it is granted unless the recipient
dies or becomes disabled.
Performance units entitle the recipient to payment in amounts determined by
the Committee based upon the achievement of specified performance targets during
a specified term. With respect to recipients who are "covered employees" under
Section 162(m) of the Code, such performance targets will consist of one or any
combination of two or more of revenue, revenue per employee, earnings before
income tax (profit before taxes), earnings before interest and income tax, net
earnings (profits after taxes), earnings per employee, tangible, controllable or
total asset turnover, earnings per share, stock price, operating income, total
shareholder return, market share, return on equity, before- or after-tax return
on net assets, distribution expense, inventory turnover, or economic value
added, and any such targets may relate to one or any combination of two or more
of corporate, group, unit, division, affiliate or individual performance. The
value in dollars is determined when the award is earned based
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<PAGE>
on the average fair market value of a share over the last 20 consecutive
business days of the performance cycle (as defined in the Plan).
Payments with respect to stock appreciation rights and performance shares
may be paid in cash, shares of the Company's Common Stock or a combination of
cash and shares as determined by the Committee. The terms of the agreement may
require or permit participants to defer the issuance of shares or the settlement
of awards in cash under such rules and procedures as it may establish under the
Plan.
RESTRICTED STOCK AND OTHER STOCK-BASED AWARDS. The Company's Common Stock
granted to participants may contain such restrictions as the Committee may
determine, including provisions requiring forfeiture and imposing restrictions
upon stock transfer. Awards of restricted stock may, in the discretion of the
Committee, provide the participant with dividends and voting rights prior to
vesting. No award of restricted stock may vest earlier than one year from the
date of grant, except in the circumstances provided in the applicable agreement.
The Committee may also from time to time grant awards of unrestricted stock or
other stock-based awards such as awards denominated in stock units, securities
convertible into stock and phantom securities.
TRANSFERABILITY
During the lifetime of a participant to whom an award is granted, only such
participant (or such participant's legal representative or, if so provided in
the applicable agreement in the case of a non-statutory stock option, a
permitted transferee as hereinafter described) may exercise an option or stock
appreciation right or receive payment with respect to performance units or any
other award. No award of restricted stock (prior to the expiration of the
restrictions), options, stock appreciation rights, performance units or other
stock-based award (other than an award of stock without restrictions) may be
sold, assigned, transferred, exchanged or otherwise encumbered (other than
pursuant to a qualified domestic relations order as defined in the Code or Title
1 of ERISA or the rules thereunder), and any attempt to do so will not be
effective, except that an agreement may provide that (1) an award may be
transferable to a successor in the event of a participant's death and (2) a
non-statutory stock option may be transferable to any member of a participant's
"immediate family" (as such term is defined in Rule 16a-1(e) under the Exchange
Act) or to a trust whose beneficiaries are members of such participant's
"immediate family" or partnerships in which such family members are the only
partners, provided that the participant receives no consideration for the
transfer and such transferred non-statutory stock option will remain subject to
the same terms and conditions as were applicable to such option immediately
prior to its transfer.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS
The Committee may accelerate vesting requirements, performance cycles and
the expiration of the applicable term or restrictions, and adjust performance
targets and payments, upon such terms and conditions as are set forth in the
participant's agreement, which may include, without limitation, acceleration
resulting from a change in control, fundamental change (as those terms are
defined in the Plan), a recapitalization, a change in accounting practices of
the Company, a change in the participant's title or employment responsibilities,
or the participant's death, disability or retirement.
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<PAGE>
DURATION, ADJUSTMENTS, MODIFICATIONS, TERMINATION
The Plan will remain in effect until the earlier of (i) the date all stock
subject to it is distributed or (ii) the date all awards have expired or lapsed,
or the Plan is terminated as described below.
In the event of a fundamental change, recapitalization, stock dividend,
stock split or other relevant changes, the Committee has the discretion to
adjust the number and type of shares available for awards or the number and type
of shares and amount of cash subject to outstanding awards, the option exercise
price of outstanding options, and outstanding awards of performance shares and
payments with regard thereto. Adjustments in performance targets and payments
on performance shares are also permitted upon the occurrence of such events as
may be specified in the related agreements, which may include a change in
control.
The Plan also gives the Board of Directors the right to terminate, suspend
or modify the Plan, except that amendments to the Plan are subject to
shareholder approval if needed to comply with Exchange Act Rule 16b-3, the
incentive stock option provisions of the Code, their successor provisions, or
any other applicable law or regulation.
Under the Plan, the Committee may cancel outstanding options and stock
appreciation rights generally in exchange for cash payments to the recipients
upon the occurrence of a fundamental change.
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the Plan
generally will result in the following tax events for United States citizens
under current United States federal income tax laws.
INCENTIVE STOCK OPTIONS. A recipient will realize no taxable income, and
the Company will not be entitled to any related deduction, at the time an
incentive stock option is granted under the Plan. If certain statutory
employment and holding period conditions are satisfied before the recipient
disposes of shares acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option and the Company will
not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by a recipient will be a capital gain or loss. The
Company will not be entitled to a deduction with respect to a disposition of the
shares by a recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an incentive stock option are disposed of by such recipient before
the expiration of the statutory holding periods (a "disqualifying disposition"),
such recipient will be considered to have realized as compensation, taxable as
ordinary income in the year of disposition, an amount, not exceeding the gain
realized on such disposition, equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise of the option.
The Company will be entitled to a deduction at the same time and in the same
amount as the recipient is deemed to have realized ordinary income. Any gain
realized on the disposition in excess of the amount treated as compensation or
any loss realized on the disposition will constitute capital gain or loss,
respectively. If the recipient pays the option price with shares that were
originally acquired pursuant to the exercise of an incentive stock option and
the
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<PAGE>
statutory holding periods for such shares have not been met, the recipient will
be treated as having made a disqualifying disposition of such shares, and
the tax consequences of such disqualifying disposition will be as described
above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes an incentive stock option will be treated as if
it were a non-statutory stock option, the tax consequences of which are
discussed below.
NON-STATUTORY STOCK OPTIONS. A recipient will realize no taxable income,
and the Company will not be entitled to any related deduction, at the time a
non-statutory stock option is granted under the Plan. At the time of exercise
of a non-statutory stock option, the recipient will realize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the stock on the date of exercise over the option price. Upon
disposition of the shares, any additional gain or loss realized by the recipient
will be taxed as a capital gain or loss.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS. Generally (1) the
recipient will not realize income upon the grant of a stock appreciation right
or performance unit award, (2) the recipient will realize ordinary income, and
the Company will be entitled to a corresponding deduction, in the year cash,
shares of Common Stock or a combination of cash and shares are delivered to the
recipient upon exercise of a stock appreciation right or in payment of the
performance share award and (3) the amount of such ordinary income and deduction
will be the amount of cash received plus the fair market value of the shares of
Common Stock received on the date of issuance. The federal income tax
consequences of a disposition of unrestricted shares received by the recipient
upon exercise of a stock appreciation right or in payment of a performance share
award are the same as described below with respect to a disposition of
unrestricted shares.
RESTRICTED AND UNRESTRICTED STOCK. Unless the recipient files an election
to be taxed under Section 83(b) of the Code, (1) the recipient will not realize
income upon the grant of restricted stock, (2) the recipient will realize
ordinary income, and the Company will be entitled to a corresponding deduction,
when the restrictions have been removed or expire, and (3) the amount of such
ordinary income and deduction will be the fair market value of the restricted
stock on the date the restrictions are removed or expire. If the recipient
files an election to be taxed under Section 83(b) of the Code, the tax
consequences to the recipient and the Company will be determined as of the date
of the grant of the restricted stock rather than as of the date of the removal
or expiration of the restrictions.
With respect to awards of unrestricted stock, (1) the recipient will
realize ordinary income and the Company will be entitled to a corresponding
deduction upon the grant of the unrestricted stock, and (2) the amount of such
ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair market
value of such shares on the date the recipient realizes ordinary income will be
treated as a capital gain or loss.
WITHHOLDING. The Plan permits the Company to withhold from awards an
amount sufficient to cover any required withholding taxes. In lieu of cash, a
participant may elect to cover withholding obligations through a reduction in
the number of shares to be delivered to such participant or by delivery of
shares already owned by the participant. Unless otherwise permitted by the
Committee, the
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<PAGE>
use of stock to satisfy withholding obligations is subject to certain
restrictions if the participant is subject to the reporting requirements of
Section 16 of the Exchange Act.
VOTING REQUIREMENTS
The affirmative vote of holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company entitled to vote on this item
and present, in person or by proxy, at the Annual Meeting is required for
approval of the amendment to increase the number of shares reserved for issuance
under the Plan by 400,000. Proxies solicited by the Board will be voted for
approval of this amendment, unless shareholders specify otherwise in their
proxies. THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THIS AMENDMENT TO THE
PLAN.
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder return on the
Common Stock of the Company for the period from the date of the Company's
initial public offering (June 22, 1995) to December 31, 1996, with the total
cumulative return on the NASDAQ Stock Market-U.S. Companies Index (the
"NASDAQ-U.S. Index") and the Hambrecht & Quist Health Care-Excluding
Biotechnology Index (the "H&Q Health Care Index") over the same period. The
graph assumes that $100 was invested on June 22, 1995 in each of the Common
Stock of the Company, the NASDAQ-U.S. Index and the H&Q Health Care Index, and
that all dividends were reinvested.
[GRAPH]
SPINE-TECH, INC. NASDAQ STOCK MARKET HAMBRECHT
6/22/95 $ 100.00 $ 100.00 $ 100.00
12/95 $ 258.00 $ 113.00 $ 134.00
12/96 $ 278.00 $ 138.00 $ 149.00
* $100 INVESTED ON 6/22/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by the Securities and Exchange Commission rules under Section
16(a) of the Exchange Act, and based solely on a review of copies of forms
submitted to the Company during and with respect to 1996, the Company makes the
following disclosures. In February 1997, Mr. Kohrs amended a previously filed
Form 5 to report a grant of an incentive stock option under the Plan. In
February 1997, Mr. Stassen filed late a Form 4 to report an option exercise in
December 1996. Mr. Stassen also filed late a Form 5 in March 1997 to report a
grant of an incentive stock option under the Plan. In March 1997, Mr. Eastman
amended a previously filed Form 5 to report a grant of an incentive stock option
under the Plan.
APPOINTMENT OF AUDITORS
(ITEM 3 ON PROXY CARD)
The firm of Ernst & Young LLP has been the auditors for the Company since
1991. The Board of Directors again has selected Ernst & Young LLP to serve as
the Company's independent auditors for the year ending December 31, 1997,
subject to ratification by the shareholders. While it is not required to do so,
the Board of Directors is submitting the selection of that firm for ratification
in order to ascertain the view of the shareholders. If the selection is not
ratified, the Board of Directors will reconsider its selection.
A representative of Ernst & Young LLP will be present at the meeting and
will be afforded an opportunity to make a statement if such representative so
desires and will be available to respond to appropriate questions during the
meeting.
ADDITIONAL MATTERS
The Annual Report to Shareholders of the Company for 1996, including
financial statements, is being mailed with this Proxy Statement.
As of the date of this Proxy Statement, management knows of no matters that
will be presented for determination at the meeting other than those referred to
herein. If any other matters properly come before the meeting calling for a
vote of shareholders, it is intended that the shares represented by the proxies
solicited by the Board of Directors will be voted by the proxies named therein
in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Keith M. Eastman
Keith M. Eastman
SECRETARY
Dated: March 28, 1997
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<PAGE>
<TABLE>
<S> <C>
SPINE-TECH, INC.
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439
<CAPTION>
SPINE-TECH, INC. THIS PROXY IS SOLICITED ON BEHALF OF
MINNEAPOLIS, MINNESO The undersigned hereby appoints David W. Stassen
<CAPTION>
7375 BUSH LAKE ROAD THE BOARD OF DIRECTORS
</TABLE>
PROXY
1. ELECTION OF DIRECTORS
K. ANSTEY, R. DEPASQUA, S. KUSLICH, J. LYONS,
D. STASSEN
<TABLE>
<S> <C>
/ / FOR ALL NOMINEES LISTED ABOVE / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee, write the nominee's name in the space provided below.)
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2. AMENDMENT OF THE SPINE-TECH, INC. 1996 OMNIBUS STOCK PLAN, as described in
the accompanying proxy statement.
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP as independent auditors
of the Company for the 1997 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THE PROXIES ARE AUTHORIZED TO VOTE THIS PROXY IN
THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE MEETING.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should 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 President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
<TABLE>
<S> <C>
Signature
Signature if held jointly
Dated:
</TABLE>
<TABLE>
<S> <C>
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Annual Report (Form 10-K)
of Spine-Tech, Inc. of our report dated February 7, 1997, included in the
1996 Annual Report to Shareholders of Spine-Tech, Inc.
Our audits also included the financial statement schedule of Spine-Tech, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-99048) pertaining to the 1994 Spine-Tech, Inc.
Stock Option Plan, the Spine-Tech, Inc. Non-Employee Director Stock Option
Plan and the Spine-Tech, Inc. 1991 Stock Option Plan and Registration
Statement on Form S-8 (No. 333-07349) pertaining to the 1996 Omnibus Stock
Plan, of our report dated February 7, 1997, with respect to the financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule included
in this Annual Report (Form 10-K) of Spine-Tech, Inc.
/s/ Ernst & Young LLP
-------------------------
Ernst & Young LLP
Minneapolis, Minnesota
March 26, 1997
