SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
EXACTECH, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
EXACTECH, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the 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:
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[ ] 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>
EXACTECH, INC.
4613 N.W. 6TH STREET
GAINESVILLE, FLORIDA 32609
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1997
-------------------
To the Shareholders of
EXACTECH, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
(the "Annual Meeting") of Exactech, Inc., a Florida corporation (the "Company"),
will be held at The Heritage Club, 408 West University Avenue, Gainesville,
Florida, on Thursday, April 17, 1997, at 1:00 p.m., local time, for the
following purposes:
(1) To elect seven members to the Company's Board of Directors to
hold office until the Company's 1998 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To ratify the selection of Deloitte & Touche LLP to serve as
the Company's independent auditors for the fiscal year ending
December 31, 1997; and
(3) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
All shareholders are cordially invited to attend; however, only
shareholders of record at the close of business on March 18, 1997 are entitled
to vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
BETTY PETTY
SECRETARY
Gainesville, Florida
March 20, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
<PAGE>
1997 ANNUAL MEETING OF SHAREHOLDERS
OF
EXACTECH, INC.
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Exactech, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), for use at the 1997 Annual Meeting of
Shareholders of the Company to be held at The Heritage Club, 408 West University
Avenue, Gainesville, Florida, on Thursday, April 17, 1997, at 1:00 p.m., local
time, or at any adjournment(s) or postponement(s) thereof (the "Annual
Meeting"), pursuant to the foregoing Notice of Annual Meeting of Shareholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is March 20, 1997. Shareholders
should review the information provided herein in conjunction with the Company's
1996 Annual Report on Form 10-K, which accompanies this Proxy Statement. The
Company's principal executive offices are located at 4613 N.W. 6th Street,
Gainesville, Florida 32609, and its telephone number is (352) 377-1140.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of seven members to the Company's Board of
Directors to serve until the Company's 1998 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To ratify the selection of Deloitte & Touche LLP to serve as
the Company's independent auditors for the fiscal year ending
December 31, 1997; and
(3) Such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
<PAGE>
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the seven nominees for director named
below and (b) FOR the ratification of the selection of Deloitte & Touche LLP to
serve as the Company's independent auditors for the fiscal year ending December
31, 1997. In the event a shareholder specifies a different choice by means of
the enclosed proxy, his shares will be voted in accordance with the
specification so made. The Board does not know of any other matters that may be
brought before the Annual Meeting nor does it foresee or have reason to believe
that proxy holders will have to vote for substitute or alternate nominees. In
the event that any other matter should come before the Annual Meeting or any
nominee is not available for election, the persons named in the enclosed Proxy
will have discretionary authority to vote all proxies not marked to the contrary
with respect to such matters in accordance with their best judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 18, 1997
as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 4,860,434 shares of Common Stock issued and outstanding,
all of which are entitled to be voted at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter submitted to shareholders
for approval at the Annual Meeting. Shareholders do not have the right to
cumulate their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The affirmative vote of a majority of the shares of
Common Stock present and voting at the Annual Meeting is required to ratify the
selection of Deloitte & Touche LLP to serve as the Company's independent
auditors for the fiscal year ending December 31, 1997. If less than a majority
of outstanding shares entitled to vote are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to another
date, time or place, and notice need not be given of the new date, time or place
if the new date, time or place is announced at the meeting before an adjournment
is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
Pursuant to Florida law, abstentions and broker non-votes are counted
as present for purposes of determining the presence of a quorum. However,
abstentions are treated as present and entitled to vote, but are not counted as
votes cast "for" or "against" any matter. A broker non-vote on a matter is
considered not entitled to vote on that matter and thus is not counted in
determining whether a matter requiring approval of a majority of the shares
present and entitled to vote has been approved or whether a plurality of the
shares present and entitled to vote has been voted.
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 4613 N.W. 6th Street, Gainesville, Florida
32609, for a period of ten days prior to the Annual Meeting and at the Annual
Meeting itself for examination by any shareholder.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth, as of March 1, 1997, the number of
shares of Common Stock of the Company which were owned beneficially by (i) each
person who is known by the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and nominee for director, (iii) the Named
Executive Officers (as defined in "Executive Compensation") and (iv) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF OUTSTANDING
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2)(3) SHARES OWNED(2)
- ----------------------------------------------------- -------------------------- -------------------------
<S> <C> <C>
William Petty, M.D................................... 2,010,595(4) 41.3%
Betty Petty.......................................... 2,010,595(4) 41.3%
Timothy J. Seese..................................... 88,392(5) 1.8%
Gary J. Miller, Ph.D................................. 286,525(6) 5.9%
Marc Olarsch......................................... 10,027(7) *
David W. Petty....................................... 6,096(8) *
Albert H. Burstein, Ph.D............................. 5,000(9) *
R. Wynn Kearney, Jr., M.D............................ 206,930(10) 4.2%
Ronald Pickard....................................... 5,000(11) *
P. Michael Prince.................................... 27,461(12) *
Petty Family Investments, Limited Partnership........ 2,004,499 41.2%
Millerworks, Limited Partnership..................... 279,697 5.8%
All directors and executive officers as a 2,650,849(13) 53.1%
group (12 persons)...................................
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is
Exactech, Inc., 4613 N.W. 6th Street, Gainesville, Florida 32609.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon exercise
of options, warrants and convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants and
convertible securities that are held by such person (but not those held by
any other person) and that are exercisable within 60 days from the date
hereof have been exercised.
(3) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(4) Includes 2,004,499 shares of Common Stock held by Petty Family Investments,
Limited Partnership, a Nevada limited partnership (the "Petty
Partnership"). Petty Investments, Inc., a Nevada corporation wholly-owned
by Dr. and Mrs. Petty, is the general partner of Petty Partnership. Dr. and
Mrs. Petty along with their children hold limited partnership interests in
Petty Partnership. Also includes 6,096 shares of Common Stock issuable upon
the exercise of options granted to Betty Petty which are currently
exercisable.
(5) Includes 57,171 shares of Common Stock issuable upon the exercise of
options granted to Mr. Seese which are currently exercisable.
(6) Includes 279,697 shares of Common Stock held by Millerworks, Limited
Partnership, a Nevada limited partnership ("Miller Partnership").
Millerworks, Inc., a Nevada corporation wholly-owned by Dr. Miller, is the
general partner of Miller Partnership. Dr. Miller along with is wife hold
partnership interests in Miller Partnership. Also includes 6,828 shares of
Common Stock issuable upon the exercise of options granted to Dr. Miller
which are currently exercisable.
(7) Includes 5,487 shares of Common Stock issuable upon the exercise of options
granted to Mr. Olarsch which are currently exercisable.
(8) Includes 6,096 shares of Common Stock issuable upon the exercise of options
granted to Mr. Petty which are currently exercisable.
(9) Consists of 5,000 shares of Common Stock issuable upon the exercise of
options granted to Dr. Burstein which are currently exercisable.
(10) Includes (i) 3,000 shares of Common Stock issuable upon the exercise of
options granted to Dr. Kearney which are currently exercisable, (ii) 25,755
shares of Common Stock issuable upon the exercise of warrants held by Dr.
Kearney and (iii) 1,262 shares of Common Stock held by Dr. Kearney's
spouse. See "Certain Transactions."
(11) Consists of 5,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Pickard which are currently exercisable.
(12) Includes 21,810 shares of Common Stock issuable upon the exercise of
options granted to Mr. Prince which are currently exercisable.
(13) Includes (i) 110,392 shares of Common Stock issuable upon the exercise of
options which are currently exercisable and (ii) 25,755 shares of Common
Stock issuable upon the exercise of outstanding warrants.
3
<PAGE>
ELECTION OF DIRECTORS; NOMINEES
The Company's Bylaws provide that the number of directors shall be
seven, which number may be increased or decreased only by amendment to the
Bylaws duly adopted by the Board of Directors. Each director elected at the
Annual Meeting will serve for a term expiring at the Company's 1998 Annual
Meeting of Shareholders or when his successor has been duly elected and
qualified.
The Company has nominated each of William Petty, M.D., Timothy J.
Seese, Gary J. Miller, Ph.D., Albert Burstein, Ph.D., R. Wynn Kearney, Jr.,
M.D., Ronald Pickard and P. Michael Prince to be elected as a director at the
Annual Meeting. The Board of Directors has no reason to believe that any nominee
will refuse or be unable to accept election; however, in the event that one or
more nominees are unable to accept election or if any other unforseen
contingencies should arise, each proxy that does not direct otherwise will be
voted for the remaining nominees, if any, and for such other persons as may be
designated by the Board of Directors.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ----------------------------------------------------------
<S> <C> <C>
William Petty, M.D............. 54 Chairman of the Board and Chief Executive Officer
Timothy J. Seese............... 50 President, Chief Operating Officer and Director
Gary J. Miller, Ph.D........... 49 Vice President, Research and Development and Director
David W. Petty................. 30 Vice President, Marketing
Martha Miller.................. 51 Vice President, Regulatory Affairs
Marc Olarsch................... 35 Vice President, Sales
Joel C. Phillips............... 29 Treasurer
Betty Petty.................... 54 Secretary
Albert Burstein, Ph.D.......... 59 Director
R. Wynn Kearney, Jr., M.D...... 53 Director
Ronald Pickard................. 49 Director
P. Michael Prince.............. 40 Director
</TABLE>
WILLIAM PETTY, M.D. was a founder and has been Chairman of the Board
and Chief Executive Officer of the Company since its inception. Dr. Petty has
been a Professor at the University of Florida College of Medicine since July
1975 and served as Chairman of the Department of Orthopaedic Surgery at the
University of Florida College of Medicine from July 1981 to January 1996. Dr.
Petty has also served as a member of the Hospital Board of Shands Hospital,
Gainesville, Florida, as an examiner for the American Board of Orthopaedic
Surgery, as a member of the Orthopaedic Residency Review Committee of the
American Medical Association, on the Editorial Board of the JOURNAL OF BONE AND
JOINT SURGERY, and on the Executive Board of the American Academy of Orthopaedic
Surgeons. He holds the Kappa Delta Award for Outstanding Research from the
American Academy
4
<PAGE>
of Orthopaedic Surgeons. His book, TOTAL JOINT REPLACEMENT, was published in
1991. Dr. Petty received his B.S., M.S., and M.D. from the University of
Arkansas. He completed his residency in Orthopaedic Surgery at the Mayo Clinic
in Rochester, Minnesota. Dr. Petty does not devote his full business time to the
affairs of the Company and currently devotes approximately 50% of his business
time to the affairs of the Company.
TIMOTHY J. SEESE has been President and Chief Operating Officer of the
Company since March 1991 and a Director since April 1991. From October 1987 to
December 1990, Mr. Seese served as President and Chief Executive Officer of
Meritech, Inc., a development stage company involved with infection control
products. From December 1986 to October 1987, he served as President of the
Critical Care Monitoring Division of Becton Dickinson and Company, a
manufacturer and marketer of medical devices, upon the acquisition of Deseret
Medical, Inc. by Becton Dickinson and Company. From January 1983 to December
1986, he served as Business Unit Director and Director, Marketing and Sales for
the Critical Care Business of Deseret Medical, Inc. Division of Warner Lambert,
a medical device, pharmaceutical and consumer products company. He received his
B.S. in Metallurgical Engineering from the University of Cincinnati and his
M.B.A. from Harvard University.
GARY J. MILLER, PH.D. was a founder and has been the Vice President,
Research and Development of the Company since October 1986 and a Director since
March 1989. Dr. Miller has been Associate Professor of Orthopaedic Surgery and
Director of Research and Biomechanics at the University of Florida College of
Medicine since July 1986. Dr. Miller received his B.S. from the University of
Florida, his M.S. (Biomechanics) from Massachusetts Institute of Technology, and
his Ph.D. in Mechanical Engineering (Biomechanics) from the University of
Florida. He has held an Adjunct Associate Professorship in the College of
Veterinary Medicine's Small Animal Surgical Sciences Division since 1982 and was
appointed as an Adjunct Associate Professor in the Department of Aerospace,
Mechanics and Engineering Sciences in 1995. He was a consultant to the United
States Food and Drug Administration ("FDA") from 1989 to 1992 and has served as
a consultant to such companies as Johnson & Johnson Orthopaedics, Dow-Corning
Wright and Orthogenesis. Dr. Miller does not devote his full business time to
the affairs of the Company and currently devotes approximately 70% of his
business time to the affairs of the Company.
DAVID W. PETTY has been Vice President, Marketing of the Company since
April 1993. He has been employed by the Company in successive capacities in the
area of Operations and Sales and Marketing for the past approximately nine
years, including as Vice President, Operations from April 1991 until April 1993.
Mr. Petty received his B.A. from the University of Virginia in 1988. Mr. Petty
is the son of Dr. and Ms. Petty.
MARTHA MILLER has been Vice President, Regulatory Affairs of the
Company since March 1996 and served as Director of Regulatory Affairs from April
1994 until March 1996. Ms. Miller joined the Company after fifteen years at
Smith & Nephew and Bristol-Myers Squibb, where she specialized in FDA compliance
and other governmental regulations. Ms. Miller received her degree in nursing
from Methodist Hospital School of Nursing.
MARC OLARSCH has been Vice President, Sales since July 1993. From 1984
to July 1993, he was employed by Carapace, the United States subsidiary of
Lohmann GmbH & Co., KB, Neuwied, Germany, a manufacturer of orthopaedic casting
material, surgical wound dressings and bandages. During his tenure with
Carapace, he held the positions of Regional Sales Manager and National Sales
Manager. He has extensive experience with group purchasing organizations,
independent manufacturers' representatives, as well as company-employed
territory managers and sales representatives.
JOEL C. PHILLIPS has been Treasurer of the Company since March 1996 and
Manager, Accounting and Management Information Systems since April 1993. From
January 1991 to April 1993, Mr. Phillips was employed by Arthur Andersen &
Company. He is responsible for the Company's accounting and control function, as
well as the computer-based operating and management information systems. Mr.
Phillips received a B.S. and a Masters in Accounting from the University of
Florida and is a certified public accountant.
BETTY PETTY has been Secretary of the Company since its inception and
served as Treasurer and a Director from its inception until March 1996. Ms.
Petty is responsible for the development of all of the Company's
5
<PAGE>
literature, advertising and corporate events and also serves as Human Resources
Coordinator for the Company. Ms. Petty received her B.A. from the University of
Arkansas at Little Rock and her M.A. in English from Vanderbilt University. Ms.
Petty is the wife of Dr. Petty.
ALBERT BURSTEIN, PH.D. has been a director of the Company since March
1996. Since 1976, Dr. Burstein has been Senior Scientist, Department of Research
and Associate Attending Orthopaedic Surgeon (Biomechanical Engineering) at the
Hospital for Special Surgery, New York, New York and Adjunct Associate Professor
of Mechanical Engineering at the Sibley School of Mechanical and Aerospace
Engineering, Cornell University, Ithaca, New York. In addition, he has been
Professor of Applied Biomechanics (in surgery) at Cornell University Medical
College, New York, New York since 1978. From 1976 until 1992, he served as
Director, Department of Biomechanics, Research Division, at the Hospital for
Special Surgery. Since 1980, he has served as Deputy Editor for Research, THE
JOURNAL OF BONE AND JOINT SURGERY. Dr. Burstein is an author of six textbooks on
Orthopaedic Biomechanics. He holds the Shands Award of the Orthopaedic Research
Society for outstanding career contributions to Orthopaedic Research and is a
Past President of the American Society of Biomechanics. Dr. Burstein holds
twelve patents for orthopaedic devices.
R. WYNN KEARNEY, JR., M.D. has been a Director of the Company since
September 1989. Dr. Kearney has been in private practice of orthopaedic surgery
in Mankato, Minnesota since 1972. He serves as clinical Assistant Professor of
the University of Minnesota Medical School, is a member of the Medical Services
Review Board of the Minnesota Department of Labor & Industry, and is
President-elect of the Minnesota Orthopaedic Society. He received his B.S. and
M.D. from Northwestern University and completed his residency in orthopaedic
surgery at the Mayo Clinic. Dr. Kearney, a minority owner of the Minnesota
Timberwolves, is also a director of Hickory Tech Corporation of Mankato,
Minnesota.
RONALD PICKARD has been a director of the Company since March 1996. He
has served as Chairman of the Board and Chief Executive Officer of Sofamor Danek
Group, Inc. since May 1994. He was President and Chief Operating Officer of that
company from August 1991 until April 1994 when he became President and Chief
Executive Officer and a director. From 1986 until joining Sofamor Danek, he was
employed by Richards Medical Company in various capacities including Director of
Manufacturing (1975-78), Group Director of Manufacturing (1979-81), Vice
President, Manufacturing (1982-85), and President, Orthopedics Division
(1986-90).
P. MICHAEL PRINCE has been a Director of the Company since April 1989.
Mr. Prince has been President of Prince Medical, Inc., a medical sales
representative organization, since June 1989. From October 1989 until December
1994, Mr. Prince was associated with the Company as Regional Sales Manager for
the eastern United States. For the prior 11 years he was a sales associate with
Zimmer Inc., manufacturer of orthopaedic implants.
ELECTION OF EXECUTIVE OFFICERS AND DIRECTORS
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors. The Company's directors
hold office until the next annual meeting of shareholders and until their
successors have been duly elected and qualified.
In connection with the Company's initial public offering (the "IPO"),
the Company agreed with First Equity Corporation, who acted as the
representative of the underwriters (the "Representative"), for a period of three
years, to nominate and use its best efforts to elect a designee of the
Representative as a director of the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Company's Board of
Directors held five meetings, and took action three additional times by
unanimous written consent. Each director of the Company attended at least 75% of
the aggregate of (i) the number of the meetings of the Board which were held
during the period that such person served on the Board and (ii) the number of
meetings of committees of the Board of Directors held during the period that
such person served on such committee.
6
<PAGE>
The Company has two committees: the Audit Committee and the
Compensation and Stock Option and Incentive Plan Committee (the "Compensation
Committee"). The Company does not have a nominating committee.
The Audit Committee is currently composed of William Petty, R. Wynn
Kearney, Jr. and Ronald Pickard. The Audit Committee's functions include
reviewing with the Company's independent public accountants their reports and
audits, and reporting their findings to the full Board. The Audit Committee met
one time during the year ended December 31, 1996.
The Compensation Committee is currently comprised of Timothy J. Seese,
Ronald Pickard, Albert Burstein and P. Michael Prince. The Compensation
Committee's functions consist of administering the Company's Employee Stock
Option and Incentive Plan (the "Stock Option Plan"), recommending and approving
grants of stock options under the Stock Option Plan, and recommending, reviewing
and approving the salary and fringe benefits policies of the Company, including
compensation of executive officers of the Company. The Compensation Committee
met one time during the year ended December 31, 1996.
ADDITIONAL INFORMATION CONCERNING DIRECTORS
The Company reimburses all directors for their expenses in connection
with their activities as directors of the Company. Directors of the Company do
not receive additional compensation for their services as directors.
Non-employee directors are eligible to receive options under the
Company's Directors Stock Option Plan (the "Directors Plan"). The Directors Plan
provides for an automatic grant of an option to purchase 5,000 shares of Common
Stock upon a person's election as a director of the Company and an automatic
grant of an option to purchase 3,000 shares of Common Stock upon such persons
re-election as a director of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports are required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners have been complied with, except for
the failure by R. Wynn Kearney, Jr. to file six Form 4s with respect to 15
purchases of shares of Common Stock.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal years ended
December 31, 1995 and 1996, the cash and certain other compensation paid or
accrued by the Company to the Company's Chief Executive Officer, and each of the
Company's other executive officers whose total 1996 salary and bonus exceeded
$100,000 (collectively, the "Named Executive Officers"). No other executive
officer had an annual salary and bonus in excess of $100,000 during 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------------------------------- ------------
OTHER ANNUAL
COMPENSATION OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#)
- ---------------------------------- ---- ---------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
William Petty 1996 $ 28,500 $ -- $ 28,796 50,000(4)
Chairman of the Board and Chief 1995 $ -- $ -- $ 15,965(3) --
Executive Officer(2)
Timothy J. Seese 1996 $141,868 $11,451 $ -- 62,500(5)
President and Chief Operating 1995 $127,236 $10,603 $ -- --
Officer
Gary J. Miller 1996 $ 69,170 $ -- $ 31,909(3) 50,000(5)
Vice President Research and 1995 $ 42,000 $ -- $ 17,645(3) --
Development
Marc Olarsch 1996 $ 95,298 $17,680 $ -- 15,000(5)
Vice President, Sales 1995 $ 89,904 $14,333 $ -- --
David W. Petty 1996 $ 94,783 $ 8,088 $ -- 20,000(5)
Vice President, Marketing 1995 $ 77,112 $ 6,426 $ -- --
</TABLE>
- ------------
(1) The aggregate amount of perquisites and other personal benefits provided to
each Named Executive Officer is less than 10% of the total annual salary and
bonus of such officer.
(2) Dr. Petty does not devote his full business time to the affairs of the
Company.
(3) Consists of royalties paid pursuant to consulting agreements between the
Company and Drs. Petty and Miller which were superseded by their employment
agreements which provide for the continuation of such royalties. See
"Certain Transactions."
(4) Represents options granted under the Company's Stock Option Plan at an
exercise price of $8.80 per share, 110% of the initial public offering price
of the Common Stock.
(5) Represents options granted under the Company's Stock Option Plan at an
exercise price of $8.00 per share, the initial public offering price of the
Common Stock.
8
<PAGE>
OPTIONS GRANTS TABLE
The following table sets forth information concerning grants of stock
options made during the year ended December 31, 1996 to the Named Executive
Officers. All stock options were granted pursuant to the Company's Stock Option
Plan. No stock appreciation rights were granted.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 1996
% OF TOTAL OPTIONS
GRANTED TO
EMPLOYEES IN THE
NUMBER OF YEAR ENDED EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED DECEMBER 31, 1996 PER SHARE(1) DATE
- ------------------------------ --------------- ------------------- -------------- ----------
<S> <C> <C> <C> <C>
William Petty................. 50,000 18.7% $8.80 5/30/2001
Timothy J. Seese.............. 62,500 23.4% $8.00 5/30/2006
Marc Olarsch.................. 15,000 5.6% $8.00 5/30/2006
David W. Petty................ 20,000 7.5% $8.00 5/30/2006
Gary J. Miller................ 50,000 18.7% $8.00 5/30/2006
</TABLE>
- ------------
(1) The public offering price for the Common Stock on the grant date was $8.00
per share.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1996. No stock options were exercised by the Named Executive Officers during
the year ended December 31, 1996. No stock appreciation rights were granted or
are outstanding.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS HELD VALUE OF UNEXERCISED IN-THE-MONEY
AT DECEMBER 31, 1996 OPTIONS AT DECEMBER 31, 1996(1)
---------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William Petty....................... -- 50,000 $ -- $ 10,000
Timothy J. Seese.................... 57,171 64,024 377,072 71,217
Marc Olarsch........................ 5,487 18,657 12,785 23,521
David W. Petty...................... 6,096 21,524 34,869 28,717
Gary J. Miller...................... 6,828 50,792 18,132 54,530
</TABLE>
- ------------
(1) The closing sale price of the Common Stock on December 31, 1996 as reported
by NASDAQ was $9.00 per share. Value is calculated by multiplying (a) the
difference between $9.00 and the option exercise price by (b) the number of
shares of Common Stock underlying the option.
9
<PAGE>
EMPLOYMENT AGREEMENTS
In May 1996, the Company entered into five-year employment agreements
with each of William Petty, Timothy J. Seese and Gary J. Miller, which provide
for initial annual base salaries of $38,000, $137,415 and $66,000, respectively,
and, in the case of Timothy J. Seese, an annual bonus of $11,451. The employment
agreements with Dr. Petty and Dr. Miller provide for the termination of their
consulting agreements with the Company and the continuation by the Company of
the royalty payments required under such consulting agreements. Pursuant to the
terms of their employment agreements, Dr. Petty and Dr. Miller are not required
to devote their full business time to the affairs of the Company. If any of
these executives is terminated for cause, as defined in his employment
agreement, the executive is not entitled to receive severance pay. If the
executive is terminated without cause, he is entitled to receive his then
current salary for the remaining term of the employment agreement. The
employment agreements contain a provision that the executive will not compete or
engage in a business competitive with the current or anticipated business of the
Company for the term of the agreement and for one year thereafter if the
executive is terminated for cause or the executive terminates his employment. In
addition, pursuant to the employment agreements, each executive agreed not to
disclose confidential information of the Company during the term of his
employment or thereafter and agreed that all work, research and results thereof,
including inventions, processes or formulas conceived or developed by the
executive during the term of employment which are related to the business,
research and development work, or field of operation of the Company is the
property of the Company, other than in the case of Drs. Petty and Miller to the
extent that such rights belong to the University of Florida by virtue of their
relationship with such University.
401(K) PLAN
Effective January 1, 1996, the Company implemented a 401(k) pension
plan. The Company currently intends to match employee contributions at the rate
of $.25 for each dollar of employee contributions up to 3% of the employee's
salary subject to the availability of funds. The Company is not required to
match employee contributions in the future. The plan is administered by and
offers the funds of a national mutual fund company. The Company match may be
made in the Company's Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for officers of the Company. Timothy
J. Seese, President of the Company, is a member of such committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is generally responsible for determining the
compensation of the Company's executive officers. The Compensation Committee is
comprised of the Company's President and Chief Operating Officer, Timothy J.
Seese, and three outside directors, Ronald Pickard, Albert Burstein and P.
Michael Prince.
The Compensation Committee's general philosophy with respect to the
compensation of the Company's executive officers is to offer competitive
compensation programs designed (i) to attract and retain key executives critical
to the Company's long-term success, (ii) to reward an individual's contribution
and personal performance and (iii) to align the interests of the Company's
executives with the Company's shareholders. The three components of the
Company's executive compensation program are base salary, bonus and stock
options.
William Petty, the Company's Chairman of the Board and Chief Executive
Officer, Timothy J. Seese and Gary J. Miller, the Company's Vice President of
Research and Development, receive compensation pursuant to employment agreements
which have been approved by the Company's Board of Directors. See "Employment
Agreements." The Compensation Committee may also grant discretionary salary
increases and bonuses to Dr. Petty, Mr. Seese and Dr. Miller.
10
<PAGE>
In determining the base salary of the Company's executives, the
Compensation Committee takes into account a number of factors, including the
executive's position and responsibilities, compensation levels at other
companies generally and the Company's performance. Increases in base salary are
based primarily on individual performance as well as competitive conditions and
Company performance.
The Company has a bonus program pursuant to which it pays its executive
officers, other than Marc Olarsch, the Company's Vice President of Sales, a
semi-annual bonus equal to one-half of such officer's monthly base salary. Mr.
Olarsch, the Company's Vice President of Sales, receives a formula bonus based
on increases in the Company's sales.
The Company believes that stock options are an important long-term
incentive to its executive officers to remain with the Company and to improve
performance. The Company maintains the Stock Option Plan which is designed to
attract and retain executive officers and other employees of the Company and to
reward them for delivering long-term value to the Company. Stock options permit
executive officers to share, to a certain extent, in shareholders' return on
equity.
The Company's Stock Option Plan provides for the granting of both
"incentive stock options" (as defined in Section 422A of the Internal Revenue
Code) and nonstatutory stock options. Options may be granted under the Stock
Option Plan at such prices as the Committee may determine, provided that the per
share exercise price of incentive stock options may not be less than the fair
market value of the Common Stock on the date of grant. Options typically vest in
staggered amounts over a period of five years. In determining grants of stock
options, the Compensation Committee considers a number of factors, including the
executive's position, responsibilities and performance, the number of
outstanding options held by the executive and competitive practices of other
companies generally.
Timothy J. Seese
Ronald Pickard
Albert Burstein
P. Michael Prince
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock since May 30, 1996, the date the Common Stock began
trading on the NASDAQ National Market, with (i) the NASDAQ Stock Market index
prepared by the Center for Research in Security Prices ("CRSP"), and (ii) CRSP's
index for companies with similar Standard Industry Codes ("SIC") as the Company.
[GRAPHIC OMITTED]
5/30/96 12/31/96
------- --------
EXACTECH, INC. 100.0 94.7
NASDAQ STOCK INDEX 100.0 104.6
NASDAQ STOCK SIC INDEX 100.0 87.8
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous tracking day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 05/30/96.
12
<PAGE>
CERTAIN TRANSACTIONS
CONSULTING AGREEMENTS WITH PRINCIPALS OF THE COMPANY
The Company had entered into seven-year consulting agreements with each
of William Petty, M.D., the Chairman of the Board, Chief Executive Officer and a
principal shareholder of the Company, and Gary J. Miller, Ph.D., a Vice
President, director and principal shareholder of the Company, pursuant to which
Drs. Petty and Miller agreed to provide consulting services to the Company in
connection with the design of knee implantation systems and associated
instrumentation to be utilized by the Company. The consulting agreements were
terminated pursuant to the employment agreements entered into in May 1996 by the
Company and each of Drs. Petty and Miller. The employment agreements provide for
the continuation by the Company of the royalty payments required under such
consulting agreements. As compensation for the consulting services provided to
the Company by Drs. Petty and Miller, during the term of the agreements, Drs.
Petty and Miller were each entitled to receive royalties equal to one-half of
one percent of the Company's net sales of implanted knee prostheses in the
United States and one-quarter of one percent of the Company's sales of such
products outside of the United States. For the year ended December 31, 1996, the
Company paid Drs. Petty and Miller royalties of $28,796 and $31,909,
respectively. The Company believes that the terms of the consulting agreements
were no less favorable to the Company than those available from unaffiliated
third parties.
ISSUANCES OF SECURITIES
The Company had issued an aggregate of $500,000 of its 8% subordinated
debentures (the "8% Debentures") to Michael M. Kearney, M.D., a shareholder of
the Company, and R. Wynn Kearney, Jr., M.D., a director and shareholder of the
Company. Interest on the 8% Debentures accrued at the rate of 8% per annum and
was payable quarterly. For the year ended December 31, 1996, aggregate interest
paid to Dr. Michael Kearney and to Dr. R. Wynn Kearney was $3,756 and $13,728,
respectively. In June 1996, the Company redeemed the outstanding $450,000 of the
8% Debentures held by Drs. Kearney in full with a portion of the net proceeds of
the IPO. In connection with the issuance of the 8% Debentures, the Company also
issued to Dr. Michael Kearney and Dr. R. Wynn Kearney, Jr. warrants to purchase
a number of shares of Common Stock equal to two-thirds of 1% of the number of
shares of the Company's Common Stock outstanding upon consummation of the IPO,
at an exercise price of $6.00 per share, 75% of the initial public offering
price of the Common Stock. In addition, in May 1996, the Company issued to Dr.
R. Wynn Kearney, Jr. options to purchase 20,000 shares of Common Stock at an
exercise price of $8.00 per share, the initial public offering price of the
Common Stock.
COMMISSION PAYMENTS TO PRINCE MEDICAL
The Company has entered into a sales agency agreement with Prince
Medical, Inc. ("Prince Medical"), a medical product sales agency of which
Michael Prince, a director of the Company, is President and sole shareholder.
Pursuant to this agreement, Prince Medical serves as the Company's sales agent
in the State of Florida. As compensation for its services, the Company pays
Prince Medical a commission based on Prince Medical's sales of the Company's
products. For the year ended December 31, 1996, the Company paid commissions to
Prince Medical of approximately $157,307. Such commissions are comparable to
those commissions paid to the Company's other sales agencies. In addition, in
May 1996, the Company granted options to Michael Prince to purchase 10,000
shares of Common Stock at an exercise price of $8.00 per share.
SHAREHOLDERS AGREEMENT
The Company had entered into a shareholders agreement with William
Petty, M.D., Betty Petty, David Petty, Julie Petty and Mark Petty, principal
shareholders of the Company. Pursuant to the shareholders agreement, William
Petty, M.D. and Betty Petty had the first right to purchase the shares of Common
Stock owned by such shareholders. If William Petty, M.D. and Betty Petty did not
exercise such right, then the Company had the right to purchase the shares of
Common Stock owned by such shareholder. This shareholders agreement was
terminated in December 1996.
13
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has recommended the firm of
Deloitte & Touche LLP as the independent auditors of the Company for the current
fiscal year. Although the appointment of Deloitte & Touche LLP as the
independent auditor of the Company does not require ratification by the
Company's shareholders, the Board of Directors considers it appropriate to
obtain such ratification. Accordingly, the vote of the Company's shareholders on
this matter is advisory in nature and has no effect upon the Board of Directors'
appointment of an independent auditor, and the Board of Directors may change the
Company's auditor at any time without the approval or consent of the
shareholders. The Board proposes and unanimously recommends that the
shareholders ratify the selection of Deloitte & Touche LLP.
If the shareholders do not ratify the selection of Deloitte & Touche
LLP by the affirmative vote of the holders of a majority of the shares of Common
Stock represented in person or by proxy at the Annual Meeting, the selection of
another independent auditor will be considered by the Board of Directors.
Representatives of Deloitte & Touche LLP are expected to be present at
the Annual Meeting and will be afforded the opportunity to make a statement if
they so desire and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the Company's 1998
Annual Meeting of Shareholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, must be received by the Company at its executive offices by
November 20, 1997 for inclusion in the Company's proxy statement and form of
proxy relating to such meeting.
By Order Of The Board of Directors
BETTY PETTY
SECRETARY
Gainesville, Florida
March 20, 1997
14
<PAGE>
EXACTECH, INC.
4613 N.W. 6TH STREET
GAINESVILLE, FLORIDA 32609
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
The undersigned hereby appoints William Petty and Timothy J. Seese, and
each of them, as proxies for the undersigned, each with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated below, all of the shares of Common Stock, $.01 par
value per share, of Exactech, Inc., a Florida corporation (the "Company"), that
the undersigned is entitled to vote at the 1997 Annual Meeting of Shareholders
of the Company, to be held on Thursday, April 17, 1997, at 1:00 p.m., local
time, at The Heritage Club, 408 West University Avenue, Gainesville, Florida,
and at any adjournment(s) or postponement(s) thereof.
PROPOSAL 1. Election of William Petty, Timothy J. Seese, Gary J. Miller,
Albert Burstein, R. Wynn Kearney, Jr., Ronald Pickard and
P. Michael Prince, as directors of the Company.
[ ] VOTE FOR all nominees listed above, except vote
withheld from the following nominee(s) (if any).
____________________________________________________
[ ] VOTE WITHHELD from all nominees.
PROPOSAL 2. To ratify the selection of Deloitte & Touche LLP to serve
as the Company's independent auditors for the fiscal year
ending December 31, 1997.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting, and any adjournments or
postponements thereof.
(SEE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED IN
PROPOSAL (1) ABOVE AND "FOR" PROPOSAL (2) ABOVE.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement and (iii) the Company's 1996 Annual Report on
Form 10-K.
Dated:________________________, 1997
______________________________________
(Signature)
______________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your
name appears hereon and mail it promptly
even though you may plan to attend the
meeting. 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.
PLEASE MARK, SIGN AND DATE THIS PROXY
CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY
IF MAILED IN THE UNITED STATES.
