<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
[X] Definitive proxy statement. Commission only (as
[ ] Definitive additional materials. permitted by Rule 14a-6(e)(2)).
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
COMMISSION FILE NUMBER: 0-26538
ENCORE MEDICAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0572565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9800 METRIC BLVD.
AUSTIN, TEXAS 78758
(address of principal executive offices) (Zip code)
512-832-9500
(Registrant's telephone number including area code)
</TABLE>
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
<PAGE> 2
ENCORE LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
To our Stockholders:
The 1998 annual meeting of stockholders of Encore Medical Corporation (the
"Company") will be held at the offices of the Company, 9800 Metric Blvd.,
Austin, Texas 78758, on Tuesday, May 12, 1998, beginning at 10:00 a.m. local
time. At the meeting, stockholders will act on the following matters:
(1) Election of three directors, each for a term of three years;
(2) Ratification of the appointment of Price Waterhouse LLP as the
Company's independent accountants for 1998; and
(3) Any other matters that properly come before the meeting.
Stockholders of record of record at the close of business on April 1, 1998
are entitled to vote at the meeting or any postponement or adjournment.
By order of the Board of Directors,
/s/ HARRY L. ZIMMERMAN
HARRY L. ZIMMERMAN
Corporate Secretary
April 2, 1998
Austin, Texas
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About the Meeting........................................... 1
What is the purpose of the annual meeting?................ 1
Who is entitled to vote?.................................. 1
Who can attend the meeting?............................... 1
What constitutes a quorum?................................ 1
How do I vote?............................................ 1
Can I vote by telephone or electronically?................ 1
Can I change my vote after I return my proxy card?........ 1
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 2
Stock Ownership
Who are the largest owners of the Company's stock?........ 2
How much stock do the Company's directors and officers
own?................................................... 3
Item 1 -- Election of Directors............................. 4
Directors Standing for Election........................... 4
Directors Continuing in Office............................ 5
Certain Legal Proceedings................................. 8
Executive Officers........................................ 8
Executive Compensation.................................... 10
Report on Compensation Committee....................... 10
Compensation Committee Interlocks and Insider
Participation......................................... 11
Executive Compensation Summary Table................... 12
Option Grants for 1997................................. 12
Option Exercises and Values for 1997................... 13
Performance Graph......................................... 14
Item 2 -- Ratification of Appointment of Independent
Accounts.................................................. 15
Other Matters............................................... 15
</TABLE>
i
<PAGE> 4
ENCORE LOGO
9800 METRIC BLVD.
AUSTIN, TEXAS 78758
---------------------
PROXY STATEMENT
---------------------
This proxy statement contains information related to the annual meeting of
stockholders of Encore Medical Corporation (the "Company") to be held on
Tuesday, May 12, 1998, beginning at 10:00 a.m., at the Company's offices, 9800
Metric Blvd., Austin, Texas 78758, and at any postponements or adjournments
thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, and ratification of the Company's independent auditors. In addition,
the Company's management will report on the performance of the Company during
1997 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
April 1, 1998, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 9,091,848 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of shares considered to be present at the
meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you attend the meeting, you
may deliver your completed proxy card in person.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
You may not vote by telephone or electronically.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy
<PAGE> 5
bearing a later date. The powers of the proxy holders will be suspended if you
attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors of the Company (the "Board"). The Board's
recommendation is set forth together with the description of each item in this
proxy statement. In summary, the Board recommends a vote:
- For election of the nominated slate of directors (see pages 4-5); and
- For ratification of the appointment of Price Waterhouse LLP as the
Company's independent auditors (see page 15).
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
- Election of Directors. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of
one or more directors will not be voted with respect to the director or
directors indicated, although it will be counted for purposes of
determining whether there is a quorum.
- Other Items. For each other item, the affirmative vote of the holders of
a majority of the shares represented in person or by proxy and entitled to
vote on the item will be required for approval. A properly executed proxy
marked "ABSTAIN" with respect to any such matter will not be voted,
although it will be counted for purposes of determining whether there is a
quorum. Accordingly, an abstention will have the effect of a negative
vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
The Company knows of only 4 persons (or entities) that are the beneficial
owner of more than 5% of the Company's common stock, par value $0.001 per share
(the "Common Stock"). They are:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENT OF
OF BENEFICIAL OWNER SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Nick Cindrich(1)............................................ 1,398,900 15.4%
9800 Metric Blvd.
Austin, TX 78758
Sandor Turanyi.............................................. 888,395 9.8%
680 East Basse Road, Suite 317
San Antonio, TX 78209
Lois Turanyi................................................ 888,395 9.8%
680 East Basse Road, Suite 317
San Antonio, TX 78209
MVI AG...................................................... 533,037 5.9%
Erlenstrasse 4b
Rotkreuz 6343
Switzerland
</TABLE>
- ---------------
(1) Includes Common Stock owned by CF Holdings, Ltd., of which Mr. Cindrich is a
significant shareholder of the corporate general partner and a limited
partner. Mr. Cindrich disclaims beneficial ownership of Common Stock held by
CF Holdings, Ltd., except to the extent of his pecuniary interest therein.
2
<PAGE> 6
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND OFFICERS OWN?
The following table shows the Common Stock ownership of (i) the Company's
directors, (ii) the executive officers of the Company named in the Summary
Compensation Table below, (iii) shareholders who are the beneficial owners of
more than 5% of the Common Stock, and (iv) the directors and executive officers
of the Company as a group, in each case as of March 31, 1998.
STOCK OWNERSHIP(1)
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF ACQUIRABLE WITHIN PERCENT OF SHARES
NAME SHARES BENEFICIALLY OWNED(1) 60 DAYS(2) OUTSTANDING(3)
---- ---------------------------- ----------------- -----------------
<S> <C> <C> <C>
Nick Cindrich........................ 1,398,900 603,143 11.5%
Craig L. Smith....................... 37,312 440,666 2.7%
James Abraham........................ 13,378 184,852 1.1%
Kenneth Ludwig, Jr................... 1,000 349,181 2.0%
August Faske......................... 6,991 359,944 2.1%
Kenneth Davidson..................... -0- 15,108 *
Dennis Enright....................... 30,941 29,965 *
Lamar Laster......................... 35,532 30,654 *
John Abeles.......................... 131,250 175,000 1.8%
Jay Haft............................. 131,250 185,000 1.8%
Joel Kanter.......................... 37,500 10,000 *
Richard Relyea....................... -0- 25,324 *
Richard Martin....................... -0- 20,216 *
Sandor Turanyi....................... 888,395 133,260 5.9%
Lois Turanyi......................... 888,395 133,260 5.9%
MVI AG............................... 533,037 79,956 3.5%
CF Holdings Ltd...................... 1,269,139 -0- 7.3%
All Directors and executive officers
as a group (16 persons)............ 1,848,742 3,133,260 28.5%
</TABLE>
- ---------------
* Represents less than 1% of the Company's outstanding common stock.
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or shared
investment or voting authority. Certain of the Company's directors and
executive officers disclaim beneficial ownership of some of the shares
included in the table, as follows:
A. Mr. Cindrich is a significant owner of the corporate general partner and
is a limited partner of CF Holdings, Ltd. and disclaims beneficial
ownership of Common Stock held by CF Holdings, Ltd. except to the extent
of his pecuniary interest therein.
B. Dr. Abeles' stock is held by Northlea Partners, Ltd., a limited
partnership of which Dr. Abeles is the general partner and the Abeles
Family Trust is the sole limited partner. Dr. Abeles has sole voting and
investment power with respect to such shares.
C. Mr. Kanter's stock is owned by Windy City, Inc., a corporation of which
Mr. Kanter is the President and a member of the Board of Directors. Mr.
Kanter has sole voting and investment power with respect to such shares.
(2) Reflects the number of shares that could be purchased by exercise of options
or warrants available at March 31, 1998 or within 60 days thereafter under
the Company's stock option plans or warrants granted.
(3) Based on the number of shares outstanding at, or acquirable within 60 days
of, March 31, 1998.
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors and executive officers complied
during 1997 with the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, with the exception of two filings with respect to a sale
of shares pursuant to options exercised by Mr. Webb and by Mr. Ludwig, which
were made after the applicable deadline. The delay was the result of an
administrative error on the Company's part in processing the filings on behalf
of Mr. Webb and Mr. Ludwig.
3
<PAGE> 7
ITEM 1 -- ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors is currently divided into three classes, each having
three-year terms that expire in successive years. The term of office of
directors in Class I expires at the 1998 annual meeting. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE NOMINEES DESCRIBED BELOW, ALL OF WHOM ARE CURRENTLY SERVING
AS CLASS I DIRECTORS, BE RE-ELECTED TO CLASS I FOR A NEW TERM OF THREE YEARS AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
Each of the nominees has consented to serve a three-year term. If any of
them should become unavailable to serve as a director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board.
CLASS I DIRECTORS. The directors standing for election are:
Lamar F. Laster
Mr. Laster has been a director of Encore Orthopedics, Inc. ("Encore") since
August 1994 and became a director of the Company in March 1997. Mr. Laster is
currently Chief Executive Officer of Lamarz Interests, Inc., a Houston-based
financial consulting and investment firm, with which he has been associated
since 1994. Previously he served as Executive Vice President and Chief Operating
Officer of STAAR Surgical Company from October 1989 to February 1994, and he was
Chairman of the Board of STAAR from June 1990 to February 1994. He was also Vice
President of Finance and Chief Financial Officer of STAAR from November 1987 to
October 1989. He served as a director of STAAR beginning in 1984. From March
1978 through July 1982, Mr. Laster was associated with Intermedics, Inc., a
publicly held global manufacturer of medical devices based in Angleton, Texas.
He served as that Company's Corporate Vice President-Finance and as President of
the Intermedics Venture Capital Investment subsidiary. Mr. Laster also served as
the Corporate Treasurer and Assistant Secretary for Intermedics, Inc. and its
seventeen worldwide subsidiaries. Mr. Laster is a member of the Board of
Directors of Citizens National Bank of Houston, Texas. He holds a bachelor's
degree in Mathematics and Economics from Macalester College, St. Paul,
Minnesota, as well as a Master of Business Administration from the University of
Chicago. Mr. Laster is 47 years old.
Richard D. Relyea
Mr. Relyea has been a director of Encore since August 1994 and became a
director of the Company in March 1997. Mr. Relyea is currently Chairman of the
Board and Chief Executive Officer of Citadel Group, Inc. Citadel serves
behavioral clients in out-patient settings. Prior to joining Citadel, Mr. Relyea
was Chairman and CEO of EduCare, Inc., a company he founded in August 1987 and
sold in November 1996. Mr. Relyea was President and a Director of Pro-Health
Facilities, Inc. and Texas Health Investments, Inc. These companies acquired,
developed, operated and financed ambulatory care and surgery centers, imaging
centers and rehabilitation centers. Prior to entering the field of healthcare
management, Mr. Relyea worked as a registered professional engineer. Mr. Relyea
serves on the Boards of Avid Outdoor, Inc., Heritage Medical Corp., and Primary
Care Services, all privately held companies. Mr. Relyea received a Bachelor of
Science in Mechanical Engineering and a Master in Business Administration from
the University of Texas at Austin. Mr. Relyea is 50 years old.
John H. Abeles, M.D.
Dr. Abeles was President, Treasurer and a director of Healthcare
Acquisition Corp. ("HCAC") prior to the merger between Encore and Healthcare
Acquisition, Inc., a wholly owned subsidiary of HCAC (the "Merger") and has
served as a Director of the Company since the Merger. From 1971 to 1975, Dr.
Abeles was an executive with several major pharmaceutical companies in the
United Kingdom and the United States, including Sterling Drugs (UK), Pfizer Labs
and USV Pharmaceuticals (a division of Revlon Healthcare). From 1975 to 1980, he
was an analyst in Kidder Peabody's healthcare research department. Since 1980,
Dr. Abeles has been President of MedVest Inc., which has provided consulting
services to, and has been active
4
<PAGE> 8
in the founding and financing of, emerging companies, principally in the
healthcare industry. Dr. Abeles is currently a member of the board of directors
of Oryx Technology Corporation, DUSA Pharmaceuticals, Inc., PharmaPrint
Corporation and I-Flow Corporation. Dr. Abeles earned a M.B., Ch.B. from the
University of Birmingham (England). Dr. Abeles is 53 years old.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS. The term of office for the following Class II directors will
end at the 1999 annual meeting:
Jay M. Haft
Mr. Haft was Chairman of the Board and Secretary of HCAC prior to the
Merger and has served as a Director of the Company since the Merger. He is
Managing General Partner of Gen Am "1" Venture Fund, an international venture
capital fund. Mr. Haft is also a Director of numerous public and private
corporations, including Robotic Vision Systems, Inc. (OTC), Noise Cancellation
Technologies, Inc. (OTC), Extech, Inc. (OTC), Viragen, Inc. (OTC), PC Service
Source, Inc. (OTC), DUSA Pharmaceuticals, Inc. (OTC), Oryx Technology Corp.
(OTC), Thrift Management, Inc. (OTC) and Conserver Corporation of America (OTC).
He serves as Chairman of the Board of Noise Cancellation Technologies, Inc. and
Extech, Inc. He is currently of counsel to Parker Duryee Rosoff & Haft, in New
York, New York. He was previously a senior corporate partner of such firm
(1989-1994), and prior to that a founding partner of Wofsey, Certilman, Haft et
al. (1966-1988). He is a member of the Florida Commission for Government
Accountability to the People, a National Vice-President of the Miami Ballet and
a Director of the Concert Association of Florida. Mr. Haft earned both his B.A.
and J.D. degrees from Yale University. Mr. Haft is 62 years old.
Dennis J. Enright
Mr. Enright has been a director of Encore since August 1994 and became a
director of the Company in March 1997. Mr. Enright was employed by 3M as Staff
Vice President, Technology Development and had been with 3M since 1965 until he
retired in 1995. Mr. Enright began his career as a product development engineer
in the telecommunications area and then progressed to Technical Director,
General Manager and then Division Vice President, a position in which he served
for 12 years. His primary focus during the past several years has been
acquisitions. Mr. Enright was elected to the Carlton Society, an internal 3M
recognition for technical people. Mr. Enright has a Bachelor of Mechanical
Engineering from the University of Minnesota (1961) and a Masters of Business
Administration from the University of Minnesota (1968). He has been a board
member of Associated Electronics of Mentor, Ohio; Japan Interconnect Systems (a
joint venture with Nippon Steel), Tokyo, Japan; Precision Interconnect of
Portland, Oregon; and Raycom of Denver, Colorado. Mr. Enright is 59 years old.
Kenneth W. Davidson
Mr. Davidson has been a director of Encore since November 1996 and became a
director of the Company in March 1997. Mr. Davidson has served as Chairman,
President and CEO of Maxxim Medical, Inc. from November 1986 to the present.
Previously, Mr. Davidson held various positions with Intermedics, Inc., Baxter
Laboratories, and Merck & Co. Mr. Davidson presently serves on the Board of
Directors and is the current President of Operation Rainbow, an international
charity organization. Mr. Davidson also serves on the Board of Directors of
Henley Healthcare, Inc., a public company with a focus on physical therapy. Mr.
Davidson received a Bachelor of Science degree in Biology and Chemistry from
Laurentian University, Sudbury Ontario, Canada. Mr. Davidson is 50 years old.
CLASS III DIRECTORS. The term of office for the following Class III directors
will end at the 2000 annual meeting:
Nick Cindrich
Mr. Cindrich founded Encore in March of 1992 and served as President from
March 1992 until August 1992. From August 1992 through August 1994, Mr. Cindrich
was self-employed as a business
5
<PAGE> 9
consultant. Since August 1994, he has served as the Chief Executive Officer and
Chairman of the Board of Directors of Encore, and since March 1997, has served
as the Chief Executive Officer and Chairman of the Board of the Company. Mr.
Cindrich has over 25 years of experience in the medical device industry. He
founded Encore after leaving Intermedics Orthopedics, Inc. ("Intermedics") where
he had served as President from 1984 to 1991. From 1980 to 1984, Mr. Cindrich
was the Group Vice President -- Operations for DePuy, Inc. In that position, he
headed worldwide operations for one of the oldest full-line orthopedic
companies. From 1969 to 1980, Mr. Cindrich held a series of positions at Zimmer
Inc., the last of which was Vice President of Manufacturing. Mr. Cindrich is 67
years old.
Craig L. Smith, Ph.D.
Dr. Smith has been a director of Encore since July 1992 and President since
August 1992. He has served in these positions for the Company since March 1997.
Dr. Smith first joined Encore as its Vice President of Research and Development
in April 1992, with 10 years of experience in the medical device industry. From
1985 to April 1992, he served as Vice President -- Research and Development for
Intermedics. During this period, his responsibilities included product design,
materials development and qualification, quality assurance, clinical studies and
FDA product approval submissions. Dr. Smith also oversaw major research programs
pertaining to the characterization of hydroxyl-apatite coated implants and the
characterization of bone growth factors derived from bovine sources. Prior to
his experience with Intermedics, Dr. Smith served from 1982 to 1984 as Vice
President -- Engineering for Carbomedics, Inc., a manufacturer of pyrolytic
carbon coated heart valve components, and from 1972 to 1982 at General Atomic
Co., where he did work producing and characterizing carbon coatings. Dr. Smith
serves on the Board of Spinal Dynamics, Inc., a privately held company. Dr.
Smith has a B.S. in Metallurgical Engineering from the University of Washington
(1966) and a Ph.D. in Materials Science from Carnegie Mellon University (1971).
Dr. Smith is 54 years old.
Joel S. Kanter
Mr. Kanter was a director of HCAC prior to the Merger and has served as a
Director of the Company since the Merger. Since February 1995, Mr. Kanter has
been President and a director of Walnut Financial Services, Inc., a financial
service and consulting firm listed on the Nasdaq SmallCap Market, and Walnut
Capital Corp., a venture capital firm listed on the Nasdaq SmallCap Market that
has provided financing and consulting services to many companies in the
healthcare industry. In 1996, Mr. Kanter was also named chief executive officer
of these companies. Mr. Kanter is also currently a consultant to Universal
Partners, L.P., which specializes in the provision of bridge financing to small
and medium sized corporations. From 1988 through February 1995, Mr. Kanter was a
consultant to Walnut Capital Corp. and from 1986 through the present, Mr. Kanter
has served as the President of Windy City, Inc., and currently serves as a
director of Transglobal Services, Inc., formerly known as Concept Technologies,
Inc., GranCare, Inc., I-Flow Corporation, MEDCROSS, Inc. and Osteoimplant
Technologies, Inc. Mr. Kanter earned a B.A. degree from Tulane University. Mr.
Kanter is 41 years old.
Richard Martin, Ph.D.
Dr. Martin has been a director of Encore since February 1996 and became a
director of the Company in March 1997. Dr. Martin is currently Chairman and
Chief Executive Officer of Physio-Control International Corporation, positions
that he has held since 1991. Prior to joining Physio-Control, Dr. Martin was
Vice President, Cardiovascular Business Development for Sulzermedica, in
Angleton, Texas. He has also served as President and Chief Operating Officer of
Positron Corporation in Houston, Texas, and held a variety of positions,
culminating as President and Chief Operating Officer of Intermedics, Inc. of
Freeport, Texas. Dr. Martin is a member of the Institute of Electrical and
Electronic Engineers, the Association for Advancement of Medical
Instrumentation, and the American Society for Engineering Education. He holds a
BSEE in Electrical Engineering from Christian Brothers College (1962), a MSEE in
Electrical Engineering from Notre Dame University (1964) and a Ph.D. in
Electrical/Biomedical Engineering from Duke University (1978). Dr. Martin also
serves on the Board of Maxxim Medical, Inc., SeaMed Corporation and Cardio
Dynamics, Inc., all of which are public companies. Dr. Martin is 58 years old.
6
<PAGE> 10
HOW ARE DIRECTORS COMPENSATED?
CASH COMPENSATION. Each Director is reimbursed his travel expenses for
attending Board meetings. No other cash compensation is paid to the Directors.
OPTIONS. Each nonemployee director receives a grant, on the date of the
annual meeting for each year, of options to purchase 10,000 shares of Common
Stock. For 1997, Messrs. Abeles, Davidson, Enright, Haft, Kanter, Laster, Martin
and Relyea received grants under this plan. Each option grant, vesting in one
year and having a 5-year term, permits the holder to purchase shares at their
fair market value on the date of grant, which was $4.75 in the case of
nonemployee director options granted in 1997.
HOW OFTEN DID THE BOARD MEETING DURING 1997?
The Board of Directors met five times during 1997. Each director attended
more than 75% of the total number of meetings of the Board and Committees on
which he served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Compensation, Audit and Nominating
Committees.
BOARD COMMITTEE MEMBERSHIP
<TABLE>
<CAPTION>
COMPENSATION AUDIT NOMINATING
NAME COMMITTEE COMMITTEE COMMITTEE
---- ------------ --------- ----------
<S> <C> <C> <C>
John H. Abeles, M.D.................................... *
Nick Cindrich..........................................
Kenneth W. Davidson.................................... **
Dennis Enright......................................... ** *
Jay M. Haft............................................ *
Joel S. Kanter......................................... *
LaMar Laster........................................... *
Richard Martin......................................... **
Richard Relyea......................................... * *
Craig L. Smith.........................................
</TABLE>
- ---------------
* Member
** Chairperson
COMPENSATION COMMITTEE. The Compensation Committee is charged with
reviewing the Company's general compensation strategy; establishing salaries and
reviewing benefit programs (including pensions) for the Chief Executive Officer;
reviewing, approval, recommending and administering the Company's incentive
compensation and stock option plans and certain other compensation plans; and
approving certain employment contracts. In 1997, the Compensation Committee met
two times.
AUDIT COMMITTEE. The Audit Committee met one time during 1997. Its
functions are to recommend the appointment of independent accountants; review
the arrangements for and scope of the audit by independent accounts; review the
independence of the independent accountants; consider the adequacy of the system
of internal accounting controls and review any proposed corrective actions;
review and monitor the Company's policies relating to ethics and conflicts of
interests; and discuss with management and the independent accountants the
Company's draft annual financial statements and key accounting and/or reporting
matters.
NOMINATING COMMITTEE. The Nominating Committee is responsible for
soliciting recommendations for candidates for the Board of Directors; developing
and reviewing background information for candidates; and making recommendations
to the Board regarding such candidates. The Nominating Committee did not meet
during 1997.
7
<PAGE> 11
CERTAIN LEGAL PROCEEDINGS
During 1997, Encore was a party to the lawsuit styled Intermedics
Orthopedics, Inc. vs. Encore Orthopedics, Inc., et al, cause no. 96-14729, 98th
Judicial District Court of Travis County, Texas. In January 1998, the parties
reached an agreement settling the case that resulted in a complete dismissal of
all of the parties with prejudice. No party admitted any liability as a result
of this settlement. Encore agreed to pay Intermedics a nominal amount in
connection with the settlement and to refrain from hiring any of Intermedics'
current sales agents or employees through July 1998. As part of the settlement,
all parties fully released the other parties from all claims they may have had
against the other parties that are related to the subject matter of the lawsuit.
EXECUTIVE OFFICERS
Nick Cindrich, Chief Executive Officer
Mr. Cindrich founded Encore in March of 1992 and served as President from
March 1992 until August 1992. From August 1992 through August 1994, Mr. Cindrich
was self-employed as a business consultant. Since August 1994, he has served as
the Chief Executive Officer and Chairman of the Board of Directors of Encore and
since March 1997, has served as the Chief Executive Officer and Chairman of the
Board of the Company. Mr. Cindrich has over 25 years of experience in the
medical device industry. He founded Encore after leaving Intermedics where he
had served as President from 1984 to 1991. From 1980 to 1984, Mr. Cindrich was
the Group Vice President -- Operations for DePuy, Inc. In that position, he
headed worldwide operations for one of the oldest full-line orthopedic
companies. From 1969 to 1980, Mr. Cindrich held a series of positions at Zimmer
Inc., the last of which was Vice President of Manufacturing. Mr. Cindrich is 67
years old.
Craig L. Smith, Ph.D., President
Dr. Smith has been a director of Encore since July 1992 and President since
August 1992. He has served in these positions for the Company since March 1997.
Dr. Smith first joined Encore as its Vice President of Research and Development
in April 1992, with 10 years of experience in the medical device industry. From
1985 to April 1992, he served as Vice President -- Research and Development for
Intermedics. During this period, his responsibilities included product design,
materials development and qualification, quality assurance, clinical studies and
FDA product approval submissions. Dr. Smith also oversaw major research programs
pertaining to the characterization of hydroxyl-apatite coated implants and the
characterization of bone growth factors derived from bovine sources. Prior to
his experience with Intermedics, Dr. Smith served from 1982 to 1984 as Vice
President -- Engineering for Carbomedics, Inc., a manufacturer of pyrolytic
carbon coated heart valve components, and from 1972 to 1982 at General Atomic
Co., where he did work producing and characterizing carbon coatings. Dr. Smith
serves on the Board of Spinal Dynamics, Inc., a private company. Dr. Smith has a
B.S. in Metallurgical Engineering from the University of Washington (1966) and a
Ph.D. in Materials Science from Carnegie Mellon University (1971). Dr. Smith is
54 years old.
James P. Abraham, Vice President -- Sales
Mr. Abraham joined Encore in August 1995 with over 13 years of experience
in medical device sales and marketing experience. Prior to joining Encore, he
had been Director of Sales for Intermedics from April 1992 through August 1995.
At Intermedics, he was responsible for the domestic sales force which included 6
regional managers, a national sales development manager and 40 agencies with a
combined force of approximately 240 sales representatives. Mr. Abraham was also
responsible for corporate sales training and continuing medical education. Prior
to his employment with Intermedics, Mr. Abraham was Executive Vice President for
Sales and Marketing for Implant Technologies from 1989 to 1992 and Director of
Sales for Orthomet, Inc. from 1986 to 1989. Mr. Abraham received his BS/BA
degree in Finance from Creighton University in Omaha, Nebraska in 1981. Mr.
Abraham is 38 years old.
8
<PAGE> 12
August Faske, Vice President -- Finance and Chief Financial Officer
Mr. Faske joined Encore in April 1992 with four years experience in the
orthopedics industry and a total of 23 years experience in finance and
accounting. Prior to joining Encore, he served from 1988 to April 1992 as Vice
President -- Finance and Controller for Intermedics. Prior to joining
Intermedics, Mr. Faske was the Manager of Financial Accounting for Cooper
Industries, Inc. and Internal Staff Auditor and Factory Accounting Manager for
Hughes Tool Company. Mr. Faske has a B.B.A. in Accounting from Southwest Texas
State University (1974). He is a Certified Public Accountant and is a member of
the Texas Society of Certified Public Accountants and the American Institute of
Certified Public Accountants. Mr. Faske is 45 years old.
Gregory J. Kaseeska, CPIM: Vice President -- Operations
Mr. Kaseeska joined Encore in March 1993 as the Materials Manager, with
responsibilities for inventory control and production control. He was promoted
to Vice President -- Operations in March 1998. Prior to arriving in Texas, he
was the Materials Manager for Getner Communications Co., Inc. and HGM Medical
Laser Co. both of Salt Lake City, Utah. He had previously served 23 years in the
United States Air Force in the Logistics field. He holds an M.S. in Management
from Webster University, a B.S. in Business and Management from the University
of Maryland. He is also certified in Production and Inventory Management (CPIM)
from the American Production and Inventory Control Society (APICS). Mr. Kaseeska
is 51 years old.
Kenneth Ludwig, Jr., Vice President -- Marketing
Mr. Ludwig joined Encore in April 1992 with 11 years of medical device
industry experience and a total of 18 years experience in medical products.
Prior to joining Encore, he served as Group Product Manager, Director of
Marketing and Vice President -- Marketing for Intermedics from 1984 to April
1992. At Intermedics, he oversaw general marketing and communications, product
management, new product introduction, hospital cost containment analysis and bid
negotiations. During 1991, he owned and operated an Intermedics sales agency in
Arizona. From 1982 to 1984, he was Group Product Manager, PCA Knee at Howmedica,
Inc. From 1976 to 1982, he held positions in sales and product management at
Breon Laboratories (Sterling Drug, Inc.). From 1974 to 1976, he executed quality
control and FDA compliance related duties at Hoffman LaRoche. Mr. Ludwig has a
B.S. in Biology from St. Lawrence University (1974). Mr. Ludwig is 46 years old.
J.D. Webb, Jr., Vice President -- Research and Development
Mr. Webb joined Encore in April 1992 with nine years orthopedic industry
experience. From 1988 to April 1992, he served as Manager-Engineering,
Director -- Product Development and Director -- Regulatory and Clinical Affairs
at Intermedics. During that time, his responsibilities included product design
and testing, quality assurance, clinical studies and FDA approval to market.
Under his direction, Intermedics completed several development projects
including the APRII and Collared Revision Hip Systems, the Unicondylar Natural
Knee and the High Tibial Osteotomy System. From 1983 to 1988, Mr. Webb served as
Development Engineer, Senior Development Engineer and Group Development Manager
for Specialty Orthopedic Products at Zimmer, Inc. Mr. Webb holds a B.S. in
Mechanical Engineering and a M.S. in Bioengineering from the University of Utah
(1982 and 1983). Mr. Webb is 46 years old.
Harry L. Zimmerman, Vice President -- Legal Affairs & Investor Relations,
Secretary
Mr. Zimmerman joined Encore in April 1994 with 12 years of experience in
the private practice of corporate, real estate and tax law. From 1992 to April
1994, Mr. Zimmerman was associated with the law firm of Winstead Sechrest &
Minick, P.C., a law firm based in Texas, where he was responsible for the
corporate, tax and real estate practices. Mr. Zimmerman was a partner in the law
firm of Bissex & Hedricks, P.C. from 1991 to 1992. He has a BS in Economics from
the Wharton School of the University of Pennsylvania (1977),
9
<PAGE> 13
with honors, and a JD from the University of Texas School of Law (1982), with
honors. He has been licensed as a Certified Public Accountant in Texas since
1979. Mr. Zimmerman is 42 years old.
EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graph included elsewhere in this proxy statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report or the performance graphs by reference therein.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for 1997.
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE COMPENSATION?
The Company's compensation program for executives consists of three key
elements:
- A base salary
- A performance-based annual bonus, and
- Periodic grants of stock options
The Committee believes that this three-part approach best serves the interests
of the Company and its stockholders. It enables the Company to meet the
requirements of the highly competitive environment in which the Company operates
while ensuring that executive officers are compensated in a way that advances
both the short-and long-term interests of stockholders. Under this approach,
compensation for these officers involves a high proportion of pay that is "at
risk" -- namely, the annual bonus and stock options. The variable annual bonus
permits individual performance to be recognized on an annual basis, and is
based, in part, on an evaluation of the contribution made by the officer to
Company performance. Stock options relate a significant portion of long-term
remuneration directly to stock price appreciation realized by all of the
Company's stockholders.
BASE SALARY. Base salaries for the Company's executive officers other than
the Chief Executive Officer, as well as changes in such salaries, are set by the
Chief Executive Officer, taking into account such factors as competitive
industry salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer, and the length of the officer's
service. The Chief Executive Officer reviews any salary recommendations with the
Compensation Committee. The base salary for the Chief Executive Officer is set
by the Compensation Committee.
ANNUAL BONUS. Annual bonuses for 1997 paid to executive officers of the
Company were granted under the Company's Annual Bonus Performance Plan (the
"Bonus Plan"). The Bonus Plan provides for performance-based bonuses for all
employees of the Company who were with the Company for at least the last 3
months of 1997.
Under the Bonus Plan, every employee is entitled to a bonus if certain
preset income before taxes and extraordinary items amounts are achieved. The
base bonus is set as a percentage of an employee's salary and varies based on
the employee's position in the Company. If the targeted earnings are exceeded,
then the amount of the bonus is increased.
STOCK OPTIONS. Stock option grants may be made to executive officers upon
initial employment, upon promotion to a new, higher level position that entails
increased responsibility and accountability, in connection with the execution of
a new employment agreement, and/or whenever the Compensation Committee or Board
determines option grants are warranted. Using these guidelines, the Chief
Executive Officer and the President,
10
<PAGE> 14
recommend the number of options to be granted, within a range associated with
the individual's salary level, and presents this to the Compensation Committee
for review and approval. The Chief Executive Officer and/or the President may
make recommendations that deviate from the guidelines where they deem it
appropriate. While options typically vest over a four-year period, options
granted to certain executive officers may have shorter vesting periods, or may
vest immediately.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
As Chief Executive Officer, Mr. Cindrich was compensated during 1997
pursuant to an employment agreement entered into in August 1994. The agreement,
which extends through August 1999, subject to earlier termination under certain
circumstances, currently provides for an annual base salary of $200,000. Mr.
Cindrich's bonus for 1997 was determined under the Bonus Plan described above
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's Chief Executive Officer and four other most
highly compensated executive officers as of the end of any fiscal year. However,
the statute exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. No executive of the Company receives
compensation at a level that would invoke the provision of Section 162(m).
The Board and the Compensation Committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Company's efforts, that compensation
intended by the Company to satisfy the requirements for deductibility under
Section 162(m) does in fact do so.
MEMBERS OF THE COMPENSATION COMMITTEE:
Joel Kanter
Richard Martin
Lamar Laster
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company.
11
<PAGE> 15
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of December 31, 1997 (the "named executive officers") for services rendered to
the Company during each of the last three years.
EXECUTIVE COMPENSATION SUMMARY TABLE*
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nick Cindrich................................ 1997 $186,924 $10,000 * 48,000
Chief Executive Officer 1996 $140,000 $ 0 * 196,053
1995 $140,000 $ 0 * 129,708
Craig L. Smith............................... 1997 $155,846 $10,000 * 42,000
President 1996 $130,000 $ 0 * 60,211
1995 $130,000 $ 0 * 87,569
James Abraham................................ 1997 $141,231 $66,621 * 30,000
Vice President -- Sales 1996 $130,000 $ 6,000 * 16,500
1995 $ 43,333 $ 0 * 119,932
Kenneth Ludwig, Jr........................... 1997 $126,038 $10,000 * 30,000
Vice President -- Marketing 1996 $105,000 $ 0 * 36,474
1995 $105,000 $ 0 * 53,857
August Faske................................. 1997 $120,846 $14,900 * 30,000
Vice President -- Finance; 1996 $100,000 $ 0 * 34,737
Chief Financial Officer 1995 $100,000 $ 0 * 51,715
</TABLE>
- ---------------
* Amounts totaling less than $50,000 have been omitted and there were no awards
of restricted stock under long-term incentive plans made during the three-year
period ending December 31, 1997.
OPTION GRANTS FOR FISCAL 1997
The following table sets forth information with respect to option grants to
the named executive officers during 1997 and the potential realizable value of
such option grants:
- The number of shares of common stock underlying options granted during
the year;
- The percentage that such options represent of all options granted to
employees during the year;
- The exercise price;
- The expiration date; and
- The hypothetical present value, as of the grant date, of the options
under the option pricing model discussed below.
The hypothetical value of the options as of their date of grant has been
calculated below, using the Black-Scholes option pricing model, as permitted by
the rules of the Securities and Exchange Commission, based upon a set of
assumptions set forth in the footnote to the table. It should be noted that this
model is only one method of valuing options, and the Company's use of the model
should not be interpreted as an endorsement of its accuracy. The actual value of
the options may be significantly different, and the value actually realized, if
12
<PAGE> 16
any, will depend upon the excess of the market value of the common stock over
the option exercise price at the time of exercise.
OPTION GRANTS DURING 1997
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS HYPOTHETICAL
NUMBER OF GRANTED TO VALUE AT
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(1) DATE(2)
---- --------- ------------ -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Nick Cindrich..................... 48,000 11.6% $4.75 3-31-2002 $63,653
Craig L. Smith.................... 42,000 10.1% $4.75 3-31-2002 $55,696
James Abraham..................... 30,000 7.2% $4.75 3-31-2002 $39,783
Kenneth Ludwig, Jr................ 30,000 7.2% $4.75 3-31-2002 $39,783
August Faske...................... 30,000 7.2% $4.75 3-31-2002 $39,783
</TABLE>
- ---------------
(1) The Compensation Committee, which administers the Company's stock option and
incentive plans, has general authority to accelerate, extend or otherwise
modify benefits under option grants in certain circumstances within overall
plan limits, and, with the consent of the affected optionee, to change the
exercise price to a price not less than 100% of the market value of the
stock on the effective date of the amendment. The Committee has no current
intention to exercise that authority with respect to these options.
(2) The estimated present value at grant date of options granted during 1997 has
been calculated using the Black-Scholes option pricing model, based upon the
following assumptions: estimated time until exercise of 3 years; a risk-free
interest rate of 6.01%, representing the interest rate on a U.S. Government
zero-coupon bond on the date of grant with a maturity corresponding to the
estimated time until exercise; a volatility rate of 30.0%; and a dividend
yield of 0%. The approach used in developing the assumptions upon which the
Black-Scholes valuation was done is consistent with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
OPTION EXERCISES AND VALUES FOR 1997
The table below sets forth the following information with respect to option
exercises during 1997 by each of the named executive officers and the status of
their options at December 31, 1997:
- The number of shares of common stock acquired upon exercise of options
during 1997;
- The aggregate dollar value realized upon the exercise of such options;
- The total number of exercisable and non-exercisable stock options held at
December 31, 1997, and
- The aggregate dollar value of in-the-money exercisable options at
December 31, 1997.
13
<PAGE> 17
AGGREGATED OPTION EXERCISES DURING 1997
AND
OPTION VALUES ON DECEMBER, 1997
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED ACQUIRED
SHARES VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED DECEMBER 31, 1997 DECEMBER 31, 1997(1)
EXERCISE UPON --------------------------- ---------------------------
NAME OPTION EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nick Cindrich................. -0- -0- 397,466 -0- $530,613 -0-
Craig L. Smith................ -0- -0- 439,200 -0- $992,114 -0-
James Abraham................. -0- -0- 184,780 -0- $308,447 -0-
Kenneth Ludwig, Jr............ 15,000 $56,325 349,181 -0- $824,386 -0-
August Faske.................. -0- -0- 359,944 -0- $867,254 -0-
</TABLE>
- ---------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the underlying Common Stock. For purposes of this table, fair
market value is deemed to be $3.94, the average of the high and low common
stock price reported on the Nasdaq National Market on December 31, 1997.
PERFORMANCE GRAPH
The following chart shows a comparison of the cumulative total stockholder
return among the Company, the NASDAQ CRSP Index and a peer group comprised of
other small and micro-cap orthopedic companies (Arthrocare Corp., Bionx
Implants, Inc., Cross Medical Products, Inc., Exactech Inc., Exogen Inc.,
Innovasive Devices, Inc., Interpore International Inc., Orthofix International,
Inc., and Orthologic Corp.):(1)
<TABLE>
<CAPTION>
NASDAQ
Measurement Period ENCORE CRSP PEER
(Fiscal Year Covered) MEDICAL INDEX GROUP
<S> <C> <C> <C>
Mar 96 100 100 100
Dec 96 114 118 52
Dec 97 87 144 66
</TABLE>
(1) The total return on investment (change in year end stock price plus
reinvested dividends) assumes $100 invested on March 8, 1996 (the date of
the IPO for the Company), in the Company, in the NASDAQ CRSP Index, and in
each of the peer group companies.
14
<PAGE> 18
ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTS
The Company has appointed Price Waterhouse LLP as the Company's independent
accountants for the fiscal year ending December 31, 1998. As reported on the
Form 8-K's filed as of May 1, 1997, the Company dismissed its principal
accountant, Richard A. Eisner & Company, L.L.P., and engaged Price Waterhouse,
LLP. Price Waterhouse, LLP has been the principal accountant for Encore since
April 1, 1992. There was no adverse option or a disclaimer of opinion, nor was
the opinion qualified or modified as to uncertainty, audit scope or accounting
principle in the principal accountant's report on the financial statements for
the company for either of the past two years. The decision to change accountants
was approved by the Board of Directors. There were no disagreements with the
former accountant on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure during the Company's two
most recent fiscal years.
Services provided to the Company and its subsidiaries by Price Waterhouse
LLP in 1997 included the examination of the Company's consolidated financial
statements, limited reviews of quarterly reports, services related to filings
with the Securities and Exchange Commission, and consultations on various tax
and accounting matters.
Representatives of Price Waterhouse LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as they
may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR 1998. In the event stockholders do not ratify the appointment,
the appointment will be reconsidered by the Audit Committee and the Board of
Directors.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. In the event that any other matter is properly brought
before the meeting for action by stockholders, proxies in the enclosed form
returned to the Company will be voted in accordance with the recommendation of
the Board of Directors or, in the absence of such a recommendation, in
accordance with the judgment of the proxy holder.
PROXY SOLICITATION COSTS. The proxies being solicited hereby are being
solicited by the Company. The cost of soliciting proxies in the enclosed form
will be borne by the Company. Officers and regular employees of the Company may,
but without compensation other than their regular compensation, solicit proxies
by further mailing or personal conversations, or by telephone, telex, facsimile
or electronic means. The Company will, upon request, reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of stock.
By order of the Board of Directors
/s/ HARRY L. ZIMMERMAN
HARRY L. ZIMMERMAN
Corporate Secretary
April 2, 1998
15
<PAGE> 19
ENCORE(R) MEDICAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Nick Cindrich, Craig L. Smith, and Harry L.
Zimmerman, and each of them, as proxies, with full power of substitution and
resubstitution in each, and hereby authorizes them to represent and vote, as
designated on the other side of this Proxy, all the shares of common stock of
Encore Medical Corporation standing in the name of the undersigned with all
powers that the undersigned would possess if present in person at the Annual
Meeting of Stockholders of the Company to be held May 12, 1998 or any
adjournment or postponement thereof. In their discretion, the proxies may vote
upon such other business as may properly come before the meeting.
The Board of Directors recommends a vote "FOR" Items 1 and 2.
Item 1. Election of Class I Directors
[ ] FOR [ ] WITHHELD FOR ALL
Nominees: Richard Relyea LaMar Laster John H. Abeles, M.D.
WITHHELD FOR: (WRITE THE NAME OF ANY NOMINEE FOR WHOM YOUR VOTE IS BEING
WITHHELD IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
Item 2. Ratification of Appointment of Independent Public Accountants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please mark your votes as indicated in this example [X]
(Continued and to be marked, dated and signed, on the other side)
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BELOW BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEM 1 AND
ITEM 2.
Shareholder's Signature:
-------------------------------
-------------------------------
Date: , 1998
-----------------------------
NOTE: Please sign as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign full
corporation name and sign
authorized officer's name and
indicate title. If a
partnership, please sign in
partnership name and sign
authorized person's name and
indicate title. The person or
entity signing above hereby
revokes all proxies heretofore
given by such person or entity
to vote at such meeting or any
adjournment or postponement
thereof.
THIS PROXY CARD MUST BE RETURNED BY THE CLOSE OF BUSINESS ON MAY 11, 1998,
TO BE ELIGIBLE TO VOTE AT THE ANNUAL MEETING.
