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 [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
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:
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<PAGE>
EXACTECH, INC.
2320 N.W. 66TH COURT
GAINESVILLE, FLORIDA 32653
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 13, 2000
-------------------
To the Shareholders of
EXACTECH, INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders
(the "Annual Meeting") of Exactech, Inc., a Florida corporation (the "Company"),
will be held at the Company's headquarters, 2320 N.W. 66th Court, Gainesville,
Florida, on Thursday, April 13, 2000, at 9:00 a.m., local time, for the
following purposes:
(1) To elect six members to the Company's Board of Directors to
hold office until the Company's 2001 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, 2000; 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 13, 2000 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 15, 2000
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>
2000 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 2000 Annual Meeting of
Shareholders of the Company to be held at the Company's headquarters, 2320 N.W.
66th Court, Gainesville, Florida, on Thursday, April 13, 2000, at 9:00 a.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 15, 2000. Shareholders
should review the information provided herein in conjunction with the Company's
1999 Annual Report, which accompanies this Proxy Statement. The Company's
principal executive offices are located at 2320 N.W. 66th Court, Gainesville,
Florida 32653, 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 six members to the Company's Board of
Directors to serve until the Company's 2001 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) Ratification of the selection of Deloitte & Touche LLP to
serve as the Company's independent auditors for the fiscal
year ending December 31, 2000; and
(3) Such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
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 six 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,
2000. 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
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<PAGE>
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 13, 2000
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 February
21 2000, there were 5,013,926 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, 2000. 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, 2320 N.W. 66th Court, Gainesville, Florida
32653, 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 February 21, 2000, 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.................................. 2,064,644(4) 39.0%
Betty Petty......................................... 2,064,644(4) 39.0%
Timothy J. Seese.................................... 127,416(5) 2.4%
Gary J. Miller, Ph.D................................ 324,817(6) 6.1%
Marc J. Olarsch..................................... 31,524(7) *
David W. Petty...................................... 28,739(8) *
Albert H. Burstein, Ph.D............................ 11,000(9) *
R. Wynn Kearney, Jr., M.D........................... 227,930(10) 4.3%
E. Ronald Pickard................................... 11,000(11) *
Paul Metts.......................................... 5,000(12) *
Petty Family Investments, Limited Partnership....... 2,004,499 37.9%
Millerworks, Limited Partnership.................... 279,697 5.3%
All directors and executive officers as a group
(11 persons)..................................... 2,774,244(13) 54.0%
</TABLE>
- ------------------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is
Exactech, Inc., 2320 N.W. 66th Court, Gainesville, Florida 32653.
(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 (i) 31,880 shares of Common Stock issuable
upon the exercise of options granted to William Petty and (ii) 28,265
shares of Common Stock issuable upon the exercise of options granted to
Betty Petty which are currently exercisable.
(5) Includes 43,120 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 32,620 shares of
Common Stock issuable upon the exercise of options granted to Dr. Miller
which are currently exercisable.
(7) Includes 26,984 shares of Common Stock issuable upon the exercise of
options granted to Mr. Olarsch which are currently exercisable.
(8) Includes 28,265 shares of Common Stock issuable upon the exercise of
options granted to Mr. Petty which are currently exercisable.
(9) Consists of 11,000 shares of Common Stock issuable upon the exercise of
options granted to Dr. Burstein which are currently exercisable.
(10) Includes (i) 24,000 shares of Common Stock issuable upon the exercise of
options granted to Dr. Kearney which are currently exercisable and (ii)
1,262 shares of Common Stock held by Dr. Kearney's spouse.
(11) Consists of 11,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Pickard which are currently exercisable.
(12) Consists of 5,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Metts which are currently exercisable.
(13) Includes (i) 278,309 shares of Common Stock issuable upon the exercise of
options which are currently exercisable.
3
<PAGE>
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors shall be six,
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 2001 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., and Paul Metts (the "Nominees") to be elected as a director at the Annual
Meeting; each of whom now serves as a director of the Company. 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 unforeseen 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............................... 57 Chairman of the Board and Chief Executive Officer
Timothy J. Seese................................. 53 President, Chief Operating Officer and Director
Gary J. Miller, Ph.D............................. 52 Vice President, Research and Development and Director
David W. Petty................................... 33 Vice President, Marketing
Marc J. Olarsch.................................. 38 Vice President, Sales
Joel C. Phillips................................. 32 Chief Financial Officer
Betty Petty...................................... 57 Secretary
Albert Burstein, Ph.D............................ 62 Director
R. Wynn Kearney, Jr., M.D........................ 56 Director
E. Ronald Pickard................................ 51 Director
Paul E. Metts.................................... 56 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 was a
Professor at the University of Florida College of Medicine from July 1975 to
September 1998. Dr. Petty also 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 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 continues a
limited practice in the field of total joint arthroplasty.
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
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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 was Associate Professor of Orthopaedic Surgery and
Director of Research and Biomechanics at the University of Florida College of
Medicine from July 1986 until August 1996. 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 from 1989 to 1992 and has served
as a consultant to such companies as Johnson & Johnson Orthopaedics, Dow-Corning
Wright and Orthogenesis.
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 ten 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.
MARC J. 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, CPA has been Chief Financial Officer of the Company
since July 1998 and Treasurer since March 1996. Mr. Phillips was Manager,
Accounting and Management Information Systems from April 1993 to June 1998. From
January 1991 to April 1993, Mr. Phillips was employed by Arthur Andersen. Mr.
Phillips received a B.S. and a Masters in Accounting from the University of
Florida and is a certified public accountant.
BETTY PETTY was a founder and 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
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. From 1976 to 1996, Dr. Burstein was 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 was
Professor of Applied Biomechanics (in surgery) at Cornell University Medical
College, New York, New York from 1978 through 1996. 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 for 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 thirteen patents for orthopaedic devices.
R. WYNN KEARNEY, JR., M.D. has been a director of the Company since
September 1989. He is the senior partner of the Orthopaedic and Fracture Clinic,
P.A. a medical group with locations in southern Minnesota. He has been a member
of the group since 1972. He received his B.S. degree and M.D. degree through the
Honors Program
5
<PAGE>
of Northwestern University Medical School in Chicago. He completed an
orthopaedic surgery post-graduate residency at the Mayo Clinic in Rochester,
Minnesota and was a member of the team that implanted the first total knee
replacement in the United States in 1970. He is also an Assistant Clinical
Professor of the University of Minnesota Medical School. Dr. Kearney has served
as President of the Minnesota Orthopaedic Society, the Southern Minnesota
Medical Association and the Orthopaedic Practice Society. He recently completed
a term as President of the Foundation Board of Minnesota State University,
Mankato. Dr. Kearney is a member of the board of directors of Hickory Tech
Corporation and is a minority owner of the Minnesota Timberwolves NBA basketball
team.
E. 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).
PAUL METTS, CPA has been a director of the Company since April 1998.
Mr. Metts was the Chief Executive Officer of Shands HealthCare at the University
of Florida from 1987 to 1997. Shands HealthCare is a 2000-bed, nine-hospital
system with approximately 12,000 employees. Mr. Metts has served as a board
member of many local civic and business organizations including Barnett Bank,
the University of Florida Foundation and University Medical Center in
Jacksonville. Mr. Metts has also chaired or served as a member on state and
national industry organizations such as the Florida Institute of CPAs Healthcare
Industry Committee, the Florida Hospital Association Board, the Association of
Voluntary Hospitals of Florida Board, the University HealthSystem Consortium
Board, and several committees for the Association of American Medical Colleges.
Mr. Metts, a Certified Public Accountant, received his undergraduate degree in
Accounting from the University of South Florida and his Masters Degree in Health
Care Administration from the University of Minnesota.
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.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999, the Company's Board of
Directors held two meetings, and took action one additional time by unanimous
written consent. Each director of the Company attended at least 100% 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, other than E. Ronald Pickard.
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, Albert
Burstein and Paul Metts. 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 two times
during the year ended December 31, 1999.
The Compensation Committee is currently comprised of Timothy J. Seese,
R. Wynn Kearney, Jr. and Albert Burstein. 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, 1999.
6
<PAGE>
ADDITIONAL INFORMATION CONCERNING DIRECTORS
The Company reimburses all directors for their expenses in connection
with their activities as directors of the Company.
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. The Directors Plan
formerly provided for the automatic grant of an option to purchase 3,000 shares
of Common Stock upon such persons reelection as a director of the Company. On
February 25, 2000, the Company's Board of Directors adopted an amendment to the
Directors Plan to remove the provision for automatic grants upon such person's
reelection. Beginning in 2000, the Company will compensate each non-employee
Director up to $10,000 annually for service based on attendance at Board of
Directors meetings.
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, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners have been timely filed.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal years ended
December 31, 1997, 1998 and 1999, 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 four most highly compensated executive officers whose total
1999 salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers"). One other executive officer had an annual salary and bonus in excess
of $100,000 during 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ -------------
OTHER ANNUAL ALL OTHER
NAME AND COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#) ($)
- ------------------------------ ---- ---------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William Petty 1999 $160,884 $23,253 $90,931(1) 16,200(2) $4,125(5)
Chairman of the Board and 1998 $143,538 $17,283 $71,410(1) -- $1,029(5)
Chief Executive Officer 1997 $ 44,417 $ 3,750 $48,657(1) -- $ 281(5)
Timothy J. Seese 1999 $160,884 $23,253 $ --(4) 3,700(3) $4,125(5)
President and Chief 1998 $152,155 $17,283 $ --(4) -- $1,093(5)
Operating Officer 1997 $147,492 $12,367 $ --(4) -- $1,199(5)
Gary J. Miller 1999 $117,366 $16,898 $91,418(1) 8,580(3) $3,010(5)
Vice President Research 1998 $107,097 $12,308 $73,102(1) -- $ 718(5)
and Development 1997 $ 82,962 $ 7,542 $58,134(1) -- --
Marc J. Olarsch 1999 $114,962 $16,616 $ --(4) 7,056(3) $2,948(5)
Vice President, Sales 1998 $108,726 $14,744 $ --(4) -- $ 778(5)
1997 $106,052 $ 8,838 $ --(4) -- $ 754(5)
David W. Petty 1999 $110,239 $16,616 $ --(4) 8,580(3) $2,944(5)
Vice President, Marketing 1998 $106,725 $12,123 $ --(4) -- $ 767(5)
1997 $103,458 $ 8,675 $ --(4) -- $ 841(5)
</TABLE>
- -----------------------------
(1) 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."
(2) Represents options granted under the Company's Employee Stock Option and
Incentive Plan on April 22, 1999 at an exercise price of $11.69 per share,
110% of the market value of the Common Stock on that date.
(3) Represents options granted under the Company's Employee Stock Option and
Incentive Plan on April 22, 1999 at an exercise price of $10.62 per share,
the market value price of the Common Stock on that date.
(4) The aggregate amount of perquisites and other personal benefits provided to
each Named Executive Officer is less than 10% of the total annual salary
and bonus of such officer.
(5) Represents matching contributions made by the Company under its 401(k)
plan.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options or SARs made during the fiscal year ended December 31, 1999 to the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT
PERCENT OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
- -------------------- ----------- ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William Petty 16,200 23.8% $ 11.69 4/22/04 $ 52,326 $115,617
Timothy J. Seese 3,700 5.4% $ 10.62 4/22/09 $ 24,712 $ 62,625
Gary J. Miller 8,580 12.6% $ 10.62 4/22/09 $ 57,305 $145,221
Marc J. Olarsch 7,056 10.4% $ 10.62 4/22/09 $ 47,126 $119,427
David W. Petty 8,580 12.6% $ 10.62 4/22/09 $ 57,305 $145,221
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table sets forth certain information concerning (i) the
exercise of stock options by the Named Executive Officers during the fiscal year
ended December 31, 1999 and (ii) unexercised stock options held by the Named
Executive Officers as of December 31, 1999. No stock appreciation rights were
granted or are outstanding.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Petty ...... -- -- 31,880 34,320 $ 90,605 $ 62,004
Timothy J. Seese ... 6,796 $ 52,969 43,120 28,700 190,917 99,725
Marc J. Olarsch .... -- -- 26,984 4,216 97,803 14,853
David W. Petty ..... -- -- 28,265 7,935 128,930 22,562
Gary J. Miller ..... -- -- 45,120 21,080 207,980 57,888
</TABLE>
- --------------------
(1) The closing sale price of the Common Stock on December 31, 1999 as
reported by Nasdaq was $11.81 per share. Value is calculated by
multiplying (a) the difference between $11.81 and the option exercise
price by (b) the number of shares of Common Stock underlying the option.
(2) Value is calculated by multiplying the difference between the market
price and exercise price on the date of the exercise of the option and
the number of shares of Common Stock acquired upon exercise of the
option.
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
9
<PAGE>
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 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 $1.00 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.
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 two outside directors, R. Wynn Kearney, Jr. and Albert Burstein.
Albert Burstein replaced E. Ronald Pickard who served on the Compensation
Committee until October 1999.
The Compensation Committee's general philosophy with respect to the
compensation of the Company's executive officers is to offer competitive
compensation programs designed to (i) attract and retain key executives critical
to the Company's long-term success, (ii) reward an individual's contribution and
personal performance and (iii) 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.
In determining the 1999 base salary of the Company's executive
officers, the Compensation Committee took 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 performances as well as competitive
conditions and Company performance.
The Company has a bonus program pursuant to which it pays its executive
officers and employees a semi-annual bonus equal to one-half of such officer's
or employee's monthly base salary. During 1998, the Company implemented a profit
sharing plan for all employees under which it distributes a portion of earnings
after the Company's financial targets are achieved.
10
<PAGE>
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 Employee Stock Option and Incentive 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 the
shareholders' return on equity.
The Company's Employee Stock Option and Incentive Plan provides for the
granting of both "incentive stock options" (as defined in Section 422A of the
Internal Revenue Code) and non-statutory stock options. Options may be granted
under the Employee Stock Option and Incentive 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 the 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 employee's position,
responsibilities and performance, the number of outstanding options held by the
employee and competitive practices of other companies generally.
Timothy J. Seese
R. Wynn Kearney, Jr.
Albert Burstein
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
- ------------------------------------------------------------------------------
5/30/96 12/31/99
- -------------------------------------------- ----------------- ---------------
Exactech, Inc. 100.0 124.3
- -------------------------------------------- ----------------- ---------------
Nasdaq Stock Index 100.0 328.3
- -------------------------------------------- ----------------- ---------------
Nasdaq Stock SIC Index 100.0 134.8
- ------------------------------------------------------------------------------
NOTES:
A. The lines represent yearly 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 5/30/96.
- ------------------------------------------------------------------------------
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, 1999, the
Company paid Drs. Petty and Miller royalties of $90,931 and $91,418,
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.
PURCHASE ARRANGEMENT WITH BRIGHTON PARTNERS
The Company has entered into a purchase agreement with Brighton
Partners, Inc. ("Brighton Partners"), to purchase raw materials used in the
ongoing production of its products. In 1998, the agreement required the purchase
of tooling dies in the amount of $159,000. An additional agreement signed in
1999 included the purchase of tooling dies in the amount of $91,250 and provided
for special purchasing terms for the Company. In addition, the agreement calls
for the purchase of testing equipment for approximately $278,000, as well as
licensing of certain technology for $187,500. Purchases associated with these
agreements totaled $418,625 in 1999. Brighton Partners is deemed to be 30%
beneficially owned by Albert H. Burstein, Ph.D., a director of the Company.
Additionally, Timothy J. Seese, the President, Chief Operating Officer and a
director of the Company, beneficially owns 10% of Brighton Partners. William
Petty, Chairman of the Board and Chief Executive Officer of the Company, and
Betty B. Petty, Secretary of the Company, jointly own 8 1/3% of Brighton
Partners. Gary J. Miller, Vice President and a director of the Company,
beneficially owns 5% of Brighton Partners. Other directors and executive
officers of the Company own less than 5% of Brighton Partners, Inc.
CONSULTING AGREEMENT WITH ALBERT BURSTEIN, PH.D.
The Company has also entered into a consulting agreement with director
Albert Burstein, Ph.D, a director of the Company. The agreement provides for the
rendering of Dr. Burstein's services with respect to many facets of the
orthopaedic industry, including product design rationale, manufacturing and
development techniques and product sales and marketing. During the year ended
December 31, 1999, the Company paid Dr. Burstein $135,000 as compensation under
the consulting agreement.
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 2001
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 13, 2000 for inclusion in the Company's proxy statement and form of
proxy relating to such meeting. Any Shareholder proposal submitted other than
for inclusion in the Company's proxy materials for that meeting must be
delivered to the Company no later than January 31, 2001, or such proposal will
be considered untimely. If a shareholder proposal is received after January 31,
2001, the Company may vote in its discretion as to the proposal all of the
shares for which it has received proxies for the 2001 Annual Meeting of
Shareholders.
By Order Of The Board of Directors
BETTY PETTY
SECRETARY
Gainesville, Florida
March 15, 2000
14
<PAGE>
EXACTECH, INC.
2320 N.W. 66TH COURT
GAINESVILLE, FLORIDA 32653
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 2000 Annual Meeting of Shareholders
of the Company, to be held on Thursday, April 13, 2000, at 9:00 a.m., local
time, at the Company's headquarters, 2320 N.W. 66th Court, 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., and Paul Metts, 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, 2000.
[ ] 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 1999 Annual Report.
Dated:________________________________, 2000
____________________________________________
(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.
2
