<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Orthovita, Inc.
-----------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state how
it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Dated Filed:
- --------------------------------------------------------------------------------
<PAGE>
Orthovita, Inc.
45 Great Valley Parkway
Malvern, PA 19355
April 12, 1999
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Orthovita, Inc. (the "Company")
Annual Meeting Proxy Statement
---------------------------------------
Dear Sir or Madam:
Pursuant to Rule 14a-6(b) under the Exchange Act, filed herewith via EDGAR,
are the definitive Notice of 1999 Annual Meeting of Stockholders, Proxy
Statement and form of Proxy Card being furnished to stockholders in connection
with the 1999 Annual Meeting of Stockholders of the Company to be held on May
26, 1999.
No fee is being paid because pursuant to Rule 14a-6(i)(2), no fee is
required.
Please contact the undersigned at (610) 407-5205 if you should have any
questions or comments regarding the enclosed materials.
Sincerely,
/s/Lisa Casel
<PAGE>
ORTHOVITA, INC.
45 GREAT VALLEY PARKWAY
MALVERN, PENNSYLVANIA 19355
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 26, 1999
TO THE SHAREHOLDERS OF ORTHOVITA, INC.:
Notice is hereby given that the annual meeting of shareholders of ORTHOVITA,
INC., a Pennsylvania corporation (the "Company" or "Orthovita"), will be held at
the Desmond Hotel, One Liberty Boulevard, Malvern, Pennsylvania, USA, on May 26,
1999, at 9:00 am, Eastern standard time, for the following purposes:
1. To elect seven directors to serve until the next annual meeting of
shareholders;
2. To approve an amendment to the 1997 Equity Compensation Plan;
3. To approve an amendment to the Employee Stock Purchase Plan;
4. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors; and
5. To transact such other business as may properly come before the meeting or
at any adjournments thereof.
Only shareholders of record as of the close of business on April 1, 1999 will be
entitled to notice of the Annual Meeting and to vote at the Annual Meeting and
any adjournments thereof. A list of shareholders of the Company entitled to
vote at the Annual Meeting will be available for inspection by any shareholders
of the Company at the Company's office, for the ten days prior to the Annual
Meeting during normal business hours.
By Order of the Board of Directors
JOSEPH M. PAIVA
Corporate Secretary
Malvern, Pennsylvania, USA
April 5, 1999
EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD
IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A SHAREHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO
DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
ORTHOVITA, INC.
45 GREAT VALLEY PARKWAY
MALVERN, PENNSYLVANIA 19355
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 26, 1999
The Board of Directors of Orthovita, Inc. (the "Company" or "Orthovita") is
soliciting the accompanying proxy for the 1999 Annual Meeting of Shareholders of
Orthovita to be held on Wednesday, May 26, 1999 at 9:00 am, Eastern standard
time and any adjournment thereof (the "Annual Meeting"). This proxy statement
and the accompanying proxy card are expected to be distributed to shareholders
on or about April 15, 1999.
The cost of solicitation of proxies will be borne by the Company. In addition
to the use of the mail, proxies may be solicited by telephone by officers,
directors and a small number of regular employees of the Company who will not be
specially compensated for such services. The Company also will request banks,
brokers and other custodians, nominees and fiduciaries to solicit proxies from
beneficial owners, where appropriate, and will reimburse such persons for
reasonable expenses incurred in that regard. Orthovita has retained its
transfer agent, StockTrans, Inc., to aid in the solicitation of proxies for a
fee of approximately $2,000 plus reimbursement of certain out-of-pocket
expenses.
The Company's annual report to shareholders for the fiscal year ended December
31, 1998, including financial statements, is being mailed to shareholders with
this proxy statement but does not constitute a part of this proxy statement.
VOTING AT THE MEETING
Holders of shares of common stock of the Company, par value $.01 per share
("Common Stock"), of record at the close of business on April 1, 1999 are
entitled to vote at the Annual Meeting and any adjournments thereof. As of that
date, there were 11,419,828 shares of Common Stock outstanding. Each
shareholder entitled to vote shall have the right to one vote for each share
outstanding in such shareholder's name.
The Company presently has no other class of stock outstanding and entitled to be
voted at the Annual Meeting. The presence in person or by proxy of shareholders
entitled to cast a majority of all votes entitled to be cast at the meeting
constitutes a quorum. A plurality of the votes cast is required for the
election of directors and a majority of the votes cast at the meeting, a quorum
being present, is required to approve the amendment to both the 1997 Equity
Compensation Plan and the Employee Stock Purchase Plan and to ratify the
appointment of independent auditors. With respect to any other matter that may
properly be brought before the meeting, an affirmative vote of a majority of the
votes cast by shareholders entitled to vote thereon is required to take action,
unless a greater percentage is required either by law or by the Company's
Amended and Restated Articles of Incorporation or Bylaws. For determining the
number of votes cast with respect to any voting matter, only those cast "for" or
"against" are included.
Shares cannot be voted at the Annual Meeting unless the holder of record is
present in person or by proxy. The enclosed proxy card is a means by which a
shareholder may authorize the voting of his or her shares at
<PAGE>
the Annual Meeting. The shares of Common Stock represented by each properly
executed proxy card will be voted at the Annual Meeting in accordance with each
shareholder's directions. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no choice has been
specified, the shares will be voted as recommended by the board of directors. If
any other matters are properly presented to the Annual Meeting for action, the
proxy holders will vote the proxies (which confer discretionary authority to
vote on such matters) in accordance with their judgment. Execution of the
accompanying proxy will not affect a shareholder's right to attend the Annual
Meeting and vote in person. Any shareholder giving a proxy has the right to
revoke it by giving written or oral notice of revocation to the Secretary of the
Company, or by delivering a subsequent executed proxy card, at any time before
the proxy is voted.
Your vote is important. Accordingly, you are asked to complete, sign and return
the accompanying proxy card whether or not you plan to attend the Annual
Meeting. If you plan to attend the Annual Meeting to vote in person and your
shares are registered with the Company's transfer agent in the name of a broker
or bank, you must secure a proxy card from the broker or bank assigning voting
rights to you for your shares.
<PAGE>
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The board of directors currently consists of seven members all of which are
nominees for election at the 1999 Annual Meeting. The term of each director
expires at the next annual meeting of shareholders and each person shall hold
office until the election and qualification of his respective successor or until
his earlier death, removal or resignation.
The nominees for election as directors of the Company are Messrs. Joseph,
Bennett, Garvey and Horowitz and Drs. Ducheyne, Peeters and Salasin. All
nominees are presently directors of the Company whose current term expire at the
time of the Annual Meeting of shareholders. All nominees have consented to be
named and to serve if elected.
The seven directors are to be elected by a plurality of the votes cast. Unless
otherwise instructed by the shareholders, the persons named in the proxies will
vote the shares represented thereby for the election of all such nominees. The
board of directors knows of no reason why any of the nominees will be unable to
serve as directors. If this should not be the case, however, the proxies may be
voted for a substitute nominee to be designated by the board of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
NOMINEES FOR ELECTION
Name of Director Age Principal Occupation and Certain Directorships
- ---------------------- ------- ----------------------------------------------
Paul Ducheyne, Ph.D 49 Dr. Ducheyne founded Orthovita and has served
as the Chairman of the Board since its
inception and Chief Science and Technology
Officer since March 1998. Since 1997, Dr.
Ducheyne has been the Director of the Center
for Bioactive Materials and Tissue Engineering
at the University of Pennsylvania, where he has
been a professor of Bioengineering and
Orthopaedic Surgery Research since 1983.
David S. Joseph 56 Mr. Joseph has been President, CEO and a
Director of Orthovita since 1993. Mr. Joseph
co-founded Surgical Laser Technologies, Inc. in
1985, a company that became publicly-traded in
1989, and served as its Chairman from 1985 to
1993 and as its as Chief Executive Officer from
1985 until 1991. Mr. Joseph currently serves on
the Board of Directors of King's College in
Pennsylvania and is a member of the Corporation
of The Jackson Laboratory, a leading genetic
research institute.
Lew Bennett 72 Mr. Bennett has been a Director since September
1997 and active in the health care industry
since 1956. Mr. Bennett formerly served as
Senior Vice President of Sofamor Danek Group,
Inc., Memphis, Tennessee, a manufacturer of
spinal implants. Mr. Bennett lectures
internationally to business and professional
groups working in the medical field.
<PAGE>
James M. Garvey 52 Mr. Garvey has been a Director since April
1997. Mr. Garvey has been the Chief Executive
Officer and Managing Partner of Schroder
Ventures Life Sciences, a private venture
capital firm and significant shareholder of the
Company, since May 1995. Prior to joining
Schroder Ventures, Mr. Garvey was Director of
the US$600 million Venture Capital Division of
Allstate Corp. Mr. Garvey is currently a
director of J.C.N. Health Services, LaserVision
Centers and Mednova.
Richard M. Horowitz, 37 Mr. Horowitz has been a Director since May
Esquire 1995. Mr. Horowitz has been employed by R.A.F.
Industries, Inc., a private venture capital and
acquisition firm, as Vice President and General
Counsel since 1991. R.A.F. Ventures IV, L.P.,
an affiliate of the R.A.F. companies, is a
significant shareholder of the Company.
Jos B. Peeters, Ph.D. 51 Dr. Peeters has been a Director since March
1996. Dr. Peeters is a Partner with Baring
Private Equity Partners Ltd., and the founder
and a Managing Director of Capricorn Venture
Partners n.v., a Belgian-based venture capital
firm specializing in early-stage, technology-
based companies since January 1995. Dr. Peeters
has been the Chairman of Quartz Capital
Partners Limited, a London based investment
bank, since July 1996. Dr. Peeters was Chairman
of the Working Group that founded the European
Association of Securities Dealers (EASD) and
developed EASDAQ, for which he serves as Vice-
Chairman. Since April 1998, Dr. Peeters has
been Co-founder and Chairman of Quest for
Growth n.v., a quoted investment company
specializing in quoted and later stage unquoted
technology based growth companies.
Howard Salasin, Ph.D. 64 Dr. Salasin has been a Director since May 1995.
Dr. Salasin was President, Chief Executive
Officer and owner of Martin Industries, a
manufacturing company, from 1977 to 1996. He is
a private investor and financial advisor to a
private investment fund, and has been a general
management consultant since 1975. Dr. Salasin
has been a director of Genometrix, Incorporated
since July 1997.
COMMITTEES AND MEETINGS
The Board of Directors has an Executive and Nomination Committee, Audit
Committee and a Compensation Committee. During fiscal year 1998, the Board of
Directors held seven meetings, the Executive and Nomination Committee and Audit
Committee held one meeting and the Compensation Committee held two meetings.
Each director attended 100% of the aggregate of the meetings of the Board of
Directors held during fiscal year 1998 and of the committee on which he served
during the year.
The Executive and Nomination Committee is empowered to exercise all powers of
the Board, except action on matters which cannot by law be delegated by the
Board, during the periods between regular Board meetings. This Committee's
duties also include evaluating Board performance, recommending to the Board
nominees for election as directors and recommending to the Board the membership
of all Board committees. The Audit Committee is responsible for recommending to
the Board the firm to be employed by the Company as its independent accountants
and auditors, consulting with such firm as to the annual audit and the adequacy
of internal controls, reviewing the accounting controls, practices and policies
of the Company and reviewing budgets, cash and debt management and financial
matters generally. The Compensation Committee recommends to the Board the
compensation of the Company's chief executive officer, reviews and takes action
on the chief executive officer's recommendations regarding the appropriate
compensation of the Company's other officers and key personnel, approves the
granting of any bonuses to officers, reviews other compensation and personnel
development matters generally and recommends to the Board the compensation of
non-employee directors.
<PAGE>
The current members of the Executive and Nomination Committee are Dr. Ducheyne,
Mr. Joseph and Dr. Peeters. The Audit Committee members are Messrs. Bennett and
Horowitz, and the Compensation Committee is comprised of Dr. Salasin and Mr.
Garvey.
STANDARD COMPENSATION ARRANGEMENTS
The Company currently reimburses its directors for out-of-pocket expenses
incurred in connection with their rendering of services as directors, but does
not pay cash fees to directors for attendance at meetings, although it may
decide to do so in the future. Directors who are not currently receiving
compensation as officers or employees of the Company are eligible to receive
options under the 1997 Equity Compensation Plan in consideration for their
service as directors.
APPROVAL OF AMENDMENT TO THE COMPANY'S 1997 EQUITY COMPENSATION PLAN
On March 17, 1999, the Board of Directors adopted an amendment to the Company's
1997 Equity Compensation Plan to increase the number of shares of Common Stock
authorized to be issued thereunder from 850,000 shares to 1,350,000 shares. The
amendment was adopted subject to shareholder approval at the Annual Meeting.
PROPOSED AMENDMENT TO THE COMPANY'S 1997 EQUITY COMPENSATION PLAN.
The proposed amendment to the Company's 1997 Equity Compensation Plan (the
"Plan") will be effected by amending and restating in its entirety Section 3(a)
of the Company's 1997 Equity Compensation Plan to provide as follows:
(a) Subject to the adjustment specified below, the aggregate
number of shares of common stock of the Company ("Company Stock") that
may be issued under the Plan is 1,350,000 shares. After the effective
date of a Public Offering, the maximum aggregate number of shares of
Company Stock that shall be subject to Grants made under the Plan to
any individual during any calendar year shall be 300,000 shares. The
shares may be authorized but unissued shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the
extent Options or SARs granted under the Plan terminate, expire, or
are canceled, forfeited, exchanged or surrendered without having been
exercised, or if any shares of Restricted Stock are forfeited, the
shares subject to such Grants shall again be available for purposes of
the Plan.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the best interest of the Company
to increase the number of shares authorized to be issued under the Company's
1997 Equity Compensation Plan. The 1997 Equity Compensation Plan, as amended by
the amendment is intended to encourage participants to contribute to the long-
term growth of the Company, to align their interests with those of the Company's
shareholders and to aid the Company and its subsidiaries in attracting and
retaining officers, employees, consultants and directors of outstanding ability.
<PAGE>
The purpose of the Company's 1997 Equity Compensation Plan, as amended and
restated is to provide (i) designated key employees of the Company, (ii)
consultants who perform valuable services for the Company and (iii) non-employee
members of the Board with the opportunity to receive grants of incentive stock
options, nonqualified stock options, stock appreciation rights and restricted
stock.
The aggregate number of shares of Common Stock of the Company that may be issued
under the Plan is 1,350,000 shares. As of April 1, 1999, options to purchase
515,400 shares were outstanding under the Plan and no shares of restricted stock
or stock appreciation rights ("SARs") have been issued. If options or SARs
terminate or expire, or if restricted stock is forfeited, the shares
attributable to such grants may again be subject to grants under the Plan. The
maximum aggregate number of shares of the Company's Common Stock that shall be
subject to grants made under the Plan to any individual during any calendar year
shall be 300,000 shares. The Plan will terminate on January 21, 2007, unless
sooner terminated pursuant to its terms.
The Plan is administered by the Board or by a committee consisting of two or
more persons appointed by the Board; provided however, that the full Board must
approve all grants made to members of the Board who are not employees of the
Company. The plan is administered by a committee (the "Committee") which has
full power and authority to administer and interpret the Plan.
The Committee shall select the key employees, consultants and non-employee
directors to receive grants and shall determine the number of shares of Common
Stock that will be subject to each grant. Employees may receive incentive stock
options, nonqualified stock options, restricted stock or SARs under the Plan.
Non-employee directors and consultants may receive nonqualified stock options,
restricted stock or SARs.
The option price of an option may be equal to, greater than or less than the
fair market value of a share of Common Stock on the date of grant, provided that
(i) the option price of an incentive stock option may not be less than the fair
market value of a share of Common Stock on the date of grant and (ii) an
incentive stock option that is granted to a 10% shareholder must have an option
price of not less than 110% of the fair market of the Common Stock on the date
of grant.
The Committee shall determine the term of each option, which shall not exceed
ten years from the date of grant. However, an incentive stock option granted to
a 10% shareholder may not have a term longer than five years from the date of
grant. The grantee may pay the option price (i) in cash, (ii) with the consent
of the Committee, by tendering shares of Common Stock owned by the grantee or
(iii) by a combination of the two. After the Company becomes a public company,
a grantee may exercise options through a broker. Options may be exercised while
the grantee is an employee, consultant or member of the Board or within a
special time after termination of employment or service.
The Committee may grant restricted stock to key employees, consultants or non-
employee directors as it deems appropriate. The Committee will establish the
amount and terms of each restricted stock grant.
The Committee may grant SARs to a key employee, consultant or member of the
Board separately or in tandem with any stock option. Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the option
price of the related option or, if there is no related option, the fair market
value of a share of Common Stock on the date of grant of the SAR. When an SAR
is exercised, the grantee will receive an amount equal to the difference between
the fair market value of the Common Stock on the date of exercise and the base
price of the SAR. Payments shall be made in cash, Common Stock or a combination
of the two in such proportion as the Committee determines.
Grants under the Plan may not be transferred except upon the grantee's death or,
with respect to grants other than incentive stock options, if permitted by the
Committee pursuant to a domestic relations order. The Committee may permit a
grantee to transfer nonqualified stock options to family members or other
persons or entities on such terms as the Committee deems appropriate.
The Plan provides that, unless the Committee determines otherwise, outstanding
options, SARs and restricted stock will automatically vest in full in the event
of a Change of Control. A "Change of Control" will be deemed to occur if (i)
any person (other than the Company or certain related entities or persons)
acquires securities of the Company representing more than 50% of the voting
power of the then outstanding
<PAGE>
securities of the Company or (ii) the shareholders approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (x) the
merger or consolidation of the Company where the shareholders immediately before
the transaction will not hold, immediately after the transaction, a majority of
the stock of the surviving corporation, (y) a sale of substantially all of the
assets of the Company or (z) a liquidation or dissolution of the Company.
In the event of a Change of Control, the Committee may require that grantees
surrender their outstanding options and SARs in exchange for payment by the
Company, in cash or common stock, of an amount equal to the amount by which the
fair market value of the Common stock exceeds the option price or base price of
the options or SARS, and the Committee may terminate unexercised options and
SARs. Unless the Committee determines otherwise, upon a Change of Control where
the Company is not the surviving corporation (or survives only as a subsidiary
of another corporation), outstanding grants shall be assumed by the surviving
corporation.
In the event of certain changes in the corporate stock, the Committee may adjust
the number and type of shares of Common Stock and the option price subject to
outstanding options, SARs and restricted stock, and the number and type of
shares of Common Stock that may be issued under the Plan.
A majority of the votes cast during the Annual Meeting, a quorum being present,
is required to approve the amendment to the Company's 1997 Equity Compensation
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1997 EQUITY COMPENSATION PLAN.
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
On March 17, 1999, the Board of Directors adopted an amendment to the Company's
Employee Stock Purchase Plan (the "ESP Plan") to modify the definition of an
"eligible employee" from one who has completed at least two years of continuous
service with the Company to one who has completed at least six months of
continuous service with the Company. The amendment was adopted subject to
shareholder approval at the Annual Meeting.
PROPOSED AMENDMENT TO THE COMPANY'S ESP PLAN
The proposed amendment to the Company's ESP Plan will be affected by amending
and restating in its entirety Section 2.08 of the Company's ESP Plan to provide
as follows:
"Eligible Employee" means each employee of the Employer (i) who
is classified by the Employer as a full or part-time employee (and not
as an independent contractor), (ii) whose customary employment is for
more than twenty (20) hours per week and for more than five (5) months
per year, (iii) who is not deemed for purposes of section 423(b)(3) of
the Code to own stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Company or any subsidiary, and (iv) who has completed at least six
months of Continuous Service with the Employer.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the best interest of the Company
to modify the definition of an "eligible employee" under the ESP Plan. The ESP
Plan, as amended by the amendment (the "Amended
<PAGE>
ESP Plan") would provide eligible employees of the Company an opportunity to
purchase Common Stock of the Company.
The purpose of the Company's Amended ESP Plan is to provide eligible employees
of the Company an opportunity to purchase Common Stock of the Company. The
Company believes that employee participation in stock ownership will be to the
mutual benefit of both the employee and the Company. The Amended ESP Plan is
intended to comply with the requirements of Section 423 of the tax code which
permit the difference between the exercise price and fair market value to be
excluded from income. The aggregate number of shares of Common Stock of the
Company that may be issued under the Amended ESP Plan is 300,000 shares (subject
to adjustment in the event of certain changes in the Common Stock). The Amended
ESP Plan will terminate on November 10, 2007, unless sooner terminated pursuant
to its terms.
Any employee who (i) is employed by the Company for at least 20 hours per week
and for more than five months per year, (ii) has completed at least six months
of continuous service with the Company and (iii) is not deemed for purposes of
Section 423(b)(3) of the tax code to own stock possessing five percent or more
of the total combined voting power of all classes of stock of the Company, will
be eligible to participate in the Amended ESP Plan. Under the Amended ESP Plan,
the Company will withhold a specified percentage (not to exceed 10%) of the
compensation paid to each participant, and the amount withhold will be used to
purchase Common Stock from the Company on the last day of each purchase period.
The price at which Common Stock will be purchased under the Amended ESP Plan
will be equal to 85% of the fair market value of the Common Stock on the first
day of the applicable purchase period, or the last day of the applicable
purchase period, whichever is lower. The length of each purchase period shall
be a calendar quarter.
Employees may end their participation in a purchase period at any time, and
participation ends automatically on termination of employment with the Company.
The maximum number of shares that a participant may purchase during any purchase
period will be equal to US$25,000 divided by the purchase price. In addition,
no participant may purchase shares under the Amended ESP Plan (i) to the extent
that such participant would own five percent or more of the total combined
voting power or value of all classes of the capital stock of the Company, or
(ii) to the extent that such participant's right to purchase stock under the
Amended ESP Plan accrues at a rate that exceeds US$25,000 worth of stock during
any calendar year. In the event of a dissolution or liquidation of the Company
or of a merger or consolidation in which the Company is not the surviving
corporation, the Amended ESP Plan and any purchase periods then in progress will
terminate upon the effective date of such event.
A majority of the votes case during the Annual Meeting, a quorum being present,
is required to approve the amendment to the Company's Employee Stock Purchase
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
Upon recommendation of its Audit Committee, the Board of Directors has continued
the engagement of Arthur Andersen LLP, certified public accountants, as
independent auditors for the fiscal year ending December 31, 1999. The firm has
acted as independent auditors for the Company since inception. A formal
statement by Arthur Andersen LLP is not planned for the Annual Meeting; however,
representatives of Arthur Andersen LLP will be present at the Annual Meeting and
will be available to respond to appropriate questions. A majority of the votes
cast during the Annual Meeting, a quorum being present, is required to ratify
the selection of independent auditors.
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION.
<PAGE>
EXECUTIVE COMPENSATION. The following table summarizes the compensation earned
by the Company's Chief Executive Officer and five of the Company's other
executive officers (collectively, the "Named Officers"), whose salary and bonus
from the Company or any subsidiary exceeded $100,000 in fiscal year 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
-------------------------------------------- Compensation
-----------------
Other Annual Securities All Other
Executive Officer Compensation Underlying Compensation
Principal Position Year Salary (US$) Bonus (US$) ($US) Options (#) (US$)(1)
- ------------------------- ---- ------------ ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David S. Joseph, 1998 225,000 99,000 19,800 --- ---
President and Chief 1997 210,577 --- 7,900 --- ---
Executive Officer
Erik M. Erbe, Ph.D., 1998 130,000 26,000 8,500 17,000 3,816
Vice President, 1997 123,423 22,500 4,400 100,000 2,254
Research and Development
Samuel A. Nalbone, Jr., 1998 175,000 24,000 10,600 --- 2,019
Former Senior Vice 1997 167,308 50,000 5,900 140,000 2,375
President, Operations (2)
Joseph M. Paiva, Vice 1998 140,000 24,500 9,600 17,000 2,380
President and Chief 1997 8,077 --- --- 50,000 ---
Financial Officer (3)
Thomas L. Parker, Jr., 1998 125,000 12,500 11,100 5,000 2,058
Vice President, 1997 115,827 --- 7,200 --- 1,845
Professional Relations
K. Vasanth Prabhu, 1998 135,000 28,500 10,800 17,000 4,416
Ph.D., Vice President, 1997 119,035 12,000 7,400 --- 2,097
Clinical and Technical
Services
</TABLE>
(1) The amounts disclosed consist of the Company's 401(k) savings plan matching
contributions.
(2) Mr. Nalbone terminated his employment with the Company on August 17, 1998.
(3) On December 1, 1997, Mr. Paiva joined the Company as a Vice President and
its Chief Financial Officer; therefore, only his compensation for the
period December 1, 1997 through December 31, 1997 is required to be
disclosed.
<PAGE>
OPTION GRANTS. The following table summarizes stock options granted to the
Named Officers during the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> Number of % of Total
Securities Options Potential Realizable Value at
Underlying Granted to Exercise or Assumed Annual Rates of Stock
Options Employees Base Price Expiration Price Appreciation for
Name Granted(3) in Fiscal Year (US$ / share) Date Option Term
- ------------- ---------- -------------- --------------- ----------------- --------------------------------
5% (US$) 10% (US$)
-------------- -----------
<S> <C> <C> <C> <C> <C> <C>
David S. Joseph --- --- --- --- --- ---
Samuel A. Nalbone, Jr. --- --- --- --- --- ---
Erik M. Erbe, Ph.D. 17,000 (1) 8.8% US $4.75 12/30/2008 US $131,533 US $209,445
Joseph M. Paiva 17,000 (1) 8.8% $4.75 12/30/2008 131,533 209,445
Thomas L. Parker, Jr. 5,000 (2) 2.6% $4.75 12/30/2008 38,686 61,601
K. Vasanth Prabhu, Ph.D. 17,000 (1) 8.8% $4.75 12/30/2008 131,533 209,445
</TABLE>
(1) These options have a ten-year term, are exercisable in cumulative 25%
annual installments with the first installment exercisable one year from
date of grant.
(2) These options have a ten-year term, are exercisable in cumulative 20%
annual installments with the first installment exercisable on date of
grant.
(3) The exercise price per share of the options was equal to the closing price
of the Common Stock on the date of grant.
The following table summarizes the value of unexercised options for the Named
Officers at December 31, 1998.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Shares Value at December 31, 1998 (#) at December 31, 1998 (US$)(1)
Acquired on Realized ------------------------------ -----------------------------
Name Exercise (#) (US$) Exercisable Unexercisable Exercisable Unexercisable
- ------------ ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David S. Joseph --- --- --- --- --- ---
Erik M. Erbe, Ph.D. --- --- 87,500 64,500 US $70,000 US $23,750
Samuel A. Nalbone, Jr. 176,000 US$598,000 --- --- --- ---
Joseph M. Paiva --- --- 20,000 47,000 10,000 15,000
Thomas L. Parker, Jr. --- --- 37,000 --- 18,500 ---
K. Vasanth Prabhu, Ph.D. --- --- 18,000 29,000 22,500 15,000
</TABLE>
(1) Value presented is based upon the difference between (i) the US $4.75 per
share closing price of the Company's Common Stock on the European
Association of Securities Dealers' Automated Quotation System ("EASDAQ") on
December 31, 1998 and (ii) the exercise price of unexercised-in-the-money
options.
<PAGE>
EMPLOYMENT AGREEMENTS
Both David S. Joseph and Erik M. Erbe, Ph.D. have an employment agreement with
the Company, under which, in the event of involuntary termination without cause
by the Company, the Company will pay 24 months salary as a severance benefit.
The receipt of this severance benefit is conditioned upon the employee executing
a release in favor of the Company. Additionally, each employment agreement
entitles the employee to participate in any short-term or long-term incentive
compensation programs established by the Company for its senior level executives
generally. Mr. Joseph's employment agreement provides for his employment as the
Company's President through December 31, 1999 at an annual salary of US$225,000.
Dr. Erbe's employment agreement provides for his employment as the Company's
Vice President of Research and Development through June 30, 2000 at a minimum
annual salary of US$130,000. Dr. Erbe's employment agreement also provides that,
for the 1997 fiscal year, he will receive a minimum US$13,000 bonus and that all
prior option grants earned by Dr. Erbe vested upon execution of his employment
agreement. On July 1, 1997, Dr. Erbe also received a 100,000 share incentive
stock option grant priced at $4.25 per share, with 32,500 shares vesting
immediately and the balance vesting at a rate of 20,000 shares per year for
three years and 7,500 shares vesting July 1, 2001. In addition, each employment
agreement contains other terms customarily found in executive officer employment
agreements, including provisions relating to the reimbursement of certain
business expenses, participation in employee benefit plans generally available
to the other executive officers of the Company, life insurance, severance,
confidentiality and noncompetition.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee annually reviews the performance and total
compensation package for all executive officers, considers the modification of
existing compensation and employee benefit programs and the adoption of new
plans and administers the Company's 1997 Equity Compensation Plan.
Among its responsibilities, the Compensation Committee reviews the compensation
of the officers of the company and makes recommendations to the Board concerning
executive compensation matters. The members of the Compensation Committee are
all non-employee directors.
In its deliberations the Compensation Committee is guided by certain fundamental
considerations, including the need to attract and retain talented key
executives, the need to provide between short-and long-term incentives and the
need to focus executive performance on the achievement of Company objectives.
In addition, the Compensation Committee develops and implements compensation
policies, plans and programs which seek to enhance the profitability and
shareholder value of the Company by closely aligning the financial interests of
the Company's senior management with those of its shareholders.
The Compensation Committee's compensation program for senior management is
comprised of base salary, annual performance bonuses, longer term incentive
compensation in the form of stock options and benefits available generally to
the Company's employees. Once during the fiscal year 1998, the Compensation
Committee (i) recommended increased base salary levels in the range of 0% to 12%
of base salary for the Named Officers and other executive positions, (ii)
established bonus parameters based upon performance against pre-determined
targets and (iii) recommended long-term incentives under the 1997 Equity
Compensation Plan.
<PAGE>
Base Salary. Executive salaries are reviewed by the Compensation Committee at
the end of each year, with any adjustments to base salary becoming effective on
January 1 of the succeeding year. During this review, the Compensation
Committee considers (i) base salary levels of employees of biotechnology and
medical related companies of comparable size, (ii) the individual executive's
contribution to the Company's achievements and (iii) changes in role and
responsibilities of the executive during the year.
Annual Incentive Bonus. The granting of an annual incentive bonus is
discretionary. Company and individual goals and milestones are established at
the beginning of the year, and include targets for progress in the Company's
research and development, clinical activities, development of sales, marketing
and investor relations programs and organizational developments. The
Compensation Committee provides bonus incentives for achievements of these goals
because it believes that attainment of these goals will be in the best long-term
interests of the Company's shareholders. Bonus amounts for each executive are
dependent upon the level of achievement of the company as well as the
individual.
Long-term Incentives. Long-term incentives have been provided by means of
periodic grants of stock options under the Equity Compensation Plan. The
Compensation Committee considers stock options to be a valuable and necessary
compensation tool that align the long-term financial interests of the Company's
executives with the financial interests of its shareholders. The vesting
provisions of the Equity Compensation Plan serve to retain qualified employees
and thus provide continuing benefits to the Company beyond those achieved in the
year of grant. See "Summary Compensation Table" and "Aggregated Fiscal Year End
Option Values."
Payments during 1998 to the Company's executives under the various programs
discussed above were made with regard to the provisions of Section 162(m) of the
Internal Revenue Code. Section 162(m) limits the deduction that may be claimed
by a "public company" for compensation paid to certain individuals to US$1
million except to the extent that any excess compensation is "performance-based
compensation". It is the Compensation Committee's intention that no
compensation will be limited as to its deductibility under Section 162(m).
Respectively submitted,
Compensation Committee:
Mr. James Garvey
Dr. Howard Salasin
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 1999 regarding
the beneficial ownership of shares of Common Stock of (i) each person known by
Orthovita to beneficially own more than five percent of the outstanding shares
of Common Stock, (ii) each director of Orthovita, (iii) each "Named Officer"
identified in the Summary Compensation Table on page 10 and (iv) all directors
and executive officers of Orthovita, as a group. Unless otherwise noted, each
person has sole voting and investment power over the shares listed as
beneficially owned.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Percentage of
Name Number of Shares Outstanding Shares
- ------------------------------------------------------ -------------------------- -----------------------
<S> <C> <C>
Five Percent (5%) Shareholders:
- ------------------------------------------------------
Schroder Ventures International Life Science Funds: 788,143 6.9%
L.P.I., L.P.II., Trust and Co-Investment Scheme (1)
Electra Fleming Equity Partners and EF Nominees 785,648 6.9
Limited (2)
R.A.F. Ventures IV, L.P. (3) 577,135 5.1
DIRECTORS AND EXECUTIVE OFFICERS
- ------------------------------------------------------
Paul Ducheyne, Ph.D. (4) 1,471,393 12.9
David S. Joseph (5) 840,587 7.4
Howard Salasin, Ph.D. (6) 151,834 1.3
Erik M. Erbe, Ph.D. (7) 87,500 *
Gert Eussen (8) 53,000 *
Thomas L. Parker, Jr. (9) 48,500 *
Richard M. Horowitz, Esquire (10) 43,950 *
K. Vasanth Prabhu, Ph.D. (11) 24,000 *
Joseph M. Paiva (12) 20,000 *
Lew Bennett (13) 10,000 *
James M. Garvey (13) 10,000 *
Jos. B. Peeters, Ph.D. (13) 10,000 *
Craig A. Parenzan -- *
Directors and executive officers as a group 2,711,764 23.7
(13 persons) (14)
</TABLE>
* Less than 1%.
(1) Includes 82,260 shares of common stock obtainable upon the exercise of
presently exercisable warrants. Schroder Life Sciences Funds disclaim
ownership of any shares beneficially owned by Mr. Garvey.
(2) Includes 79,765 shares of common stock obtainable upon the exercise of
presently exercisable warrants.
(3) Includes (i) 35,645 shares of common stock obtainable from trusts
established by Dr. Ducheyne upon the exercise of a presently exercisable
warrant and (ii) 55,776 shares of common stock obtainable from the Company
upon the exercise of a presently exercisable warrant.
(4) Includes (i) 200,000 shares held in trust by Dr. Ducheyne's spouse and (ii)
712,647 shares held in trust for the benefit of Dr. Ducheyne's children, of
which 63,573 shares are obtainable upon the exercise of
<PAGE>
warrants granted to certain shareholders. Dr. Ducheyne disclaims beneficial
ownership of the shares held by the foregoing trusts.
(5) Includes (i) 100,000 shares held by Mr. Joseph's daughter in a revocable
trust and (ii) 13,250 shares underlying a warrant granted by Mr. Joseph to
a shareholder and excludes 18,529 shares of common stock held by Mr.
Joseph's spouse and for which Mr. Joseph disclaims beneficial ownership.
(6) Includes (i) 39,908 shares of common stock obtainable from the Company upon
the exercise of presently exercisable warrants, (ii) 4,194 shares of common
stock obtainable from trusts established by Dr. Ducheyne upon the exercise
of a presently exercisable warrant and (iii) 10,000 shares of common stock
obtainable upon the exercise of presently exercisable options.
(7) Includes 87,500 shares of common stock obtainable upon the exercise of
presently exercisable options.
(8) Includes 53,000 shares of common stock obtainable from the Company upon the
exercise of presently exercisable options.
(9) Includes 37,000 shares of common stock obtainable upon the exercise of
presently exercisable options.
(10) Includes (i) 3,281 shares of common stock obtainable from the Company upon
the exercise of presently exercisable warrants, (ii) 2,097 shares of common
stock obtainable from trusts established by Dr. Ducheyne upon the exercise
of a presently exercisable warrant and (iii) 10,000 shares of common stock
obtainable upon the exercise of presently exercisable options.
(11) Includes 24,000 shares of common stock obtainable upon the exercise of
presently exercisable options.
(12) Includes 20,000 shares of common stock obtainable upon the exercise of
presently exercisable options.
(13) Includes 10,000 shares of common stock obtainable upon the exercise of
presently exercisable options.
(14) Includes an aggregate of shares subject to options that are exercisable (or
will become exercisable by May 31, 1999) to acquire 304,689 shares of
common stock by all directors and executive officers, as a group.
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return (assuming
reinvestment of dividends, if any) assuming an investment of US$100 in shares of
Common Stock on June 25, 1998, the first date the Company's Common Stock was
traded on the EASDAQ Exchange. The index shown below is included for
comparative purposes only and does not necessarily reflect Orthovita's opinion
that such index is an appropriate measure of relative performance of the Common
Stock.
<TABLE>
<CAPTION>
Measurement Period June 25, 1998 June 30, 1998 September 30, 1998 December 31, 1998
- -------------------- ------------------- -------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Orthovita, Inc. 100 106 90 45
EASDAQ Stock
Market Index 100 102 77 82
</TABLE>
[STOCK PERFORMANCE GRAPH APPEARS HERE]
<PAGE>
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
directors and certain officers of the Company, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Such directors, officers and more than ten percent
shareholders are required by regulation to furnish the Company with copies of
all Section 169a) forms 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 of such directors
and officers that no other reports were required, all fiscal year 1998 Section
16(a) filing requirements applicable to its directors, officers and more than
ten percent shareholders were complied with except for Mr. Joseph who filed a
Form 5 late.
OTHER MATTERS
The board of directors does not know of any matters not set forth herein that
may come before the meeting. If, however, further business properly comes
before the meeting, it is intended that the persons named in the proxies will
vote in accordance with their judgment with respect to such matters.
SHAREHOLDERS PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder action
at annual meetings in accordance with regulations adopted by the Securities and
Exchange Commission governing the solicitation of proxies. To be considered for
inclusion in the proxy statement and form of proxy card relating to the 2000
annual meeting, such proposals must be received by the Company not later than
Friday, December 3, 1999. Proposals should be directed to the attention of the
Secretary of the Company.
By Order of the Board of Directors,
JOSEPH M. PAIVA
Corporate Secretary
<PAGE>
PROXY PROXY
ORTHOVITA, INC.
Proxy for 1999 Annual Meeting of Shareholders
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Joseph M. Paiva, as proxy, with
full power of substitution, to vote all of the undersigned's shares
of Common Stock held of record on April 1, 1999, at the 1999 Annual
Meeting of Shareholders or at any adjournments thereof.
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed below (except as marked below to the contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
(Paul Ducheyne, Ph.D., David S. Joseph, Lew Bennett, James M. Garvey, Richard
M. Horowitz, Jos B. Peeters, Ph.D. and Howard Salasin, Ph.D.)
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name above.
2. APPROVAL OF AMENDMENT TO THE 1997 EQUITY COMPENSATION PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
4. RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
[_] FOR [_] AGAINST [_] ABSTAIN
5. IN THEIR DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR AT ANY ADJOURNMENTS THEREOF.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
<PAGE>
This proxy, when properly executed, will be voted in accordance with the
directions made on the reverse side. If no direction is made, this Proxy will
be voted FOR the first three proposals. The proxies will vote with respect to
the fourth proposal according to their best judgment.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
Date: ___________________, 1999
_______________________________
Signature
_______________________________
Signature if shares held in more
than one name
Please sign exactly as name appears
below. When shares are held in more
than one name, all parties 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 an
authorized officer. If a
partnership, please sign in
partnership name by an authorized
person.
