<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 (AMENDMENT NO. )
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 Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Encore Medical Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[ENCORE LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
To our Stockholders:
The 1999 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 18, 1999, 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 PricewaterhouseCoopers LLP as
the Company's independent accountants for fiscal 1999; and
(3) Any other matters that properly come before the meeting.
Stockholders of record of record at the close of business on April 1, 1999
are entitled to vote at the meeting or any postponement or adjournment.
By order of the Board of Directors,
[HARRY L. ZIMMERMAN SIG.]
Harry L. Zimmerman
Corporate Secretary
April 2, 1999
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?........ 2
How do I vote my 401(k) shares?........................... 2
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 2
Stock Ownership............................................. 3
Who are the largest owners of the Company's stock?........ 3
How much stock do the Company's directors and officers
own?................................................... 4
Item 1 -- Election of Directors............................. 5
Directors Standing for Election........................... 5
Directors Continuing in Office............................ 6
Certain Legal Proceedings................................. 8
Executive Officers........................................ 9
Executive Compensation.................................... 11
Report of the Compensation Committee on Executive
Compensation.......................................... 11
Compensation Committee Interlocks and Insider
Participation......................................... 12
Executive Compensation Summary Table................... 13
Option Grants during 1998.............................. 14
Option Exercises and Values for 1998................... 14
Comparison of Cumulative Total Return..................... 15
Item 2 -- Ratification of Appointment of Independent
Accountants............................................... 16
Other Matters............................................... 16
</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 18, 1999, 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
1998 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, 1999, 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, 9,077,681 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.
1
<PAGE> 5
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 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 be
itself revoke a previously granted proxy.
HOW DO I VOTE MY 401(K) SHARES?
If you participate in the Encore Orthopedics, Inc. 401(k) Plan, you may
vote shares of common stock of the Company equivalent to the value of the
interest credited to your account by instructing Wells Fargo Bank, N.A., the
trustee of the plan, pursuant to the instruction card being mailed with this
proxy statement to plan participants. The trustee will vote your shares in
accordance with your duly executed instructions received by April 30, 1999. If
you do not send instructions, the share equivalents credited to your account
will be voted by the trustee in the same proportion that it votes share
equivalents for which it did receive timely instructions.
You may also revoke previously given voting instructions by April 30, 1999
by filing with the trustee either a written notice of revocation or a properly
completed and signed voting instruction card bearing a later date.
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 page 5); and
- For ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors (see page 16).
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.
2
<PAGE> 6
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
The Company knows of only 5 persons (or entities) that are the beneficial
owner of more than 5% of the Company's common stock, par value $0.001 par 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)............................................ 1,418,930 15.3%
9800 Metric Blvd.
Austin, TX 78758
CF Holdings Ltd.(2)......................................... 1,371,177 14.8%
2628 Barton Hills Drive
Austin, TX 78704
Sandor Turanyi.............................................. 888,395 9.6%
680 East Basse Road Suite 317
San Antonio, TX 78209
Lois Turanyi................................................ 888,395 9.6%
680 East Basse Road, Suite 317
San Antonio, TX 78209
MVI AG...................................................... 533,037 5.7%
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) Includes Common Stock owned beneficially by Mr. Nick Cindrich.
3
<PAGE> 7
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 15, 1999.
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........................... 1,418,930 366,379 10.49%
Craig L. Smith.......................... 37,312 399,389 2.57%
Harry L. Zimmerman...................... 24,688 305,025 1.94%
Kenneth Ludwig, Jr. .................... 15,000 298,090 1.85%
August Faske............................ 6,991 326,905 1.96%
Kenneth Davidson........................ -- 25,775 *
Dennis Enright.......................... 30,941 33,324 *
Lamar Laster............................ 35,532 20,000 *
John Abeles............................. 133,250 185,000 1.87%
Jay Haft................................ 131,250 195,000 1.92%
Joel Kanter............................. 37,500 20,000 *
Richard Martin.......................... -- 31,549 *
Sandor Turanyi.......................... 888,395 -- *
Lois Turanyi............................ 888,395 -- *
MVI AG.................................. 533,037 -- *
CF Holdings Ltd......................... 1,371,177 251,686 9.5%
All Directors and executive officers as
a group (17 persons).................. 1,911,307 2,603,495 26.53%
</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 15, 1999 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 15, 1999.
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 1998 with the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934.
4
<PAGE> 8
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 II expires at the 1999 annual meeting. The Board of Directors
proposes that the nominees described below, all of whom are currently serving as
Class II directors, be re-elected to Class II 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 II DIRECTORS. The directors standing for election are:
JAY M. HAFT
Mr. Haft was Chairman of the Board and Secretary of Healthcare Acquisition
Corp. ("HCAC") prior to the merger between Encore Orthopedics, Inc. ("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. 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), NCT Group, Inc.
(OTC), DCAP, Inc. (OTC), PC Service Source, Inc. (OTC), DUSA Pharmaceuticals,
Inc. (OTC), Oryx Technology Corp. (OTC) and Thrift Management, Inc. He serves as
Chairman of the Board of NCT Group, 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 has served as a member of the
Florida Commission for Government Accountability to the People and is Treasurer
of the Miami Ballet. Mr. Haft earned both his B.A. and J.D. degrees from Yale
University. Mr. Haft is 63 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. 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 61 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 past 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 and
Bovie Medical Corp., a public company involved in electrosurgery. Mr. Davidson
received a Bachelor of Science degree in Biology and Chemistry from Laurentian
University, Sudbury Ontario, Canada. Mr. Davidson is 52 years old.
5
<PAGE> 9
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS. The term of office for the following Class I directors will
end at the 2001 annual meeting:
LAMAR F. LASTER
Mr. Laster has been a director of 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.
JOHN H. ABELES, M.D.
Dr. Abeles was President, Treasurer and a director of HCAC prior to 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 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.
Richard Relyea, who was a Class I Director resigned in October 1998. He resigned
for personal reasons and did not resign because of a disagreement with the
Company.
CLASS III DIRECTORS. The term of office for the following Class III directors
will end at the 2000 annual meeting:
NICHOLAS CINDRICH
Mr. Cindrich, who 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 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.
6
<PAGE> 10
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. Dr. Smith
serves on the Board of Spinal Dynamics, Inc., a private company. 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
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 55 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 venture
capital and financial service firm listed on the Nasdaq National Market. In
1996, Mr. Kanter was also named chief executive officer. 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 several publicly trading companies
including I-Flow Corporation, Magna Labs, Inc., Mariner Post Acute Network,
Inc., and a number of private concerns. Mr. Kanter earned a B.A. degree from
Tulane University. Mr. Kanter is 42 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 President of
Medtronic Physio Control, a position he has held since the merger of
Physio-Control and Medtronic in September 1998. Prior to the merger, Dr. Martin
served as Chairman and Chief Executive Officer of Physio-Control International
Corporation, positions that he held since 1991. Prior to joining Physio-Control,
Dr. Martin was Vice President, Cardiovascular Business Development for
Intermedics, Inc., 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 59 years old.
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 1998, Messrs. Abeles, Davidson, Enright, Haft, Kanter, Laster and
Martin 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 $4.69 in the case of nonemployee
director options granted in 1998.
7
<PAGE> 11
HOW OFTEN DID THE BOARD MEETING DURING 1998?
The Board of Directors met six times during 1998. Each director except
Lamar Laster 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
COMMITTEE COMMITTEE COMMITTEE
----------- --------- ----------
<S> <C> <C> <C>
John H. Abeles, M.D....................................... * *
Kenneth W. Davidson....................................... **
Dennis Enright............................................ ** *
Jay M. Haft............................................... *
Joel S. Kanter............................................ *
Lamar Laster.............................................. *
Richard Martin............................................ **
</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 1998, the Compensation Committee met
two times.
Audit Committee. The Audit Committee met two times during 1998. 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 met once during
1998.
CERTAIN LEGAL PROCEEDINGS
During 1998, Encore became party to the lawsuit styled Richard Darrell
Ledford vs. Encore Orthopedics, Inc., Civil Action No. 97; 98-218-51, United
States District Court for the District of South Carolina, Spartanburg Division.
The lawsuit currently is in the discovery phase and the Company is vigorously
defending its position. The Company product liability policy is providing
coverage of the claims in this case.
8
<PAGE> 12
EXECUTIVE OFFICERS
NICHOLAS CINDRICH, CHIEF EXECUTIVE OFFICER
Mr. Cindrich, who 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
55 years old.
ROBERT BUCKLEY, JR., VICE PRESIDENT -- SALES AND MARKETING
Mr. Buckley joined Encore in December 1997 with over 13 years of experience
within the orthopedic device industry. He began his work at Encore as a Regional
Sales Manager, then was promoted to Director of Sales in May 1998 and Vice
President -- Sales and Marketing in December 1998. He worked previously for two
of the industry's leaders -- Howmedica, then a division of Pfizer from 1985 to
1992, and Intermedics from 1992 to 1997. In 1997, he served as Director of Sales
and Marketing for Spinal Concepts, Inc., a start-up spinal implant company.
Prior to his medical industry experience, Mr. Buckley served in the United
States Navy for 20 years, retiring as a Lieutenant Commander from the Nurse
Corps in 1985. Mr. Buckley is 50 years old.
JEAN-PAUL BURTIN, VICE PRESIDENT -- INTERNATIONAL SALES.
Mr. Burtin joined Encore in July 1998 as Director of International Sales
and was promoted to Vice President -- International Sales in December 1998. With
over 25 years experience in the medical device industry, Mr. Burtin has held a
series of increasingly responsible positions including those of Vice President
and General Manager with Rhone-Poulenc Group and Group Landanger Camus, both
French, multinational medical product conglomerates. During this time, he
accepted assignments in France, Switzerland, Canada, Brazil and the U.S. Mr.
Burtin is 53 years old.
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 24 years experience in finance and
accounting. Prior to joining Encore, he served from 1988 to April 1992 as
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<PAGE> 13
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 46 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 became 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 52 years old.
KENNETH LUDWIG, JR., VICE PRESIDENT -- INVESTOR RELATIONS AND BUSINESS
DEVELOPMENT
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. Mr. Ludwig has a B.S. in Biology from St. Lawrence University (1974). Mr.
Ludwig is 47 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 47 years old.
KATHY WIEDERKEHR, VICE PRESIDENT -- HUMAN RESOURCES
Mrs. Wiederkehr joined Encore in 1995 as Director of Human Resources and
was promoted to Vice President -- Human Resources in December 1998. Mrs.
Wiederkehr has over 19 years experience in Human Resources. Prior to Encore, she
was Director, Human Resources, Code Alarm, Inc. -- Tessco Division in
Georgetown, Texas from September 1994 to December 1995 and Manager of Human
Resources for Kewaunee Scientific from May 1991 to September 1994. She has also
worked for Fortune 500 companies including Emerson Electric, Inc. and Cooper
Industries, Inc. Mrs. Wiederkehr has a BBA in Marketing from the University of
Texas at Austin (1976), with honors and an MBA from the University of Texas at
Austin (1990), with honors. Mrs. Wiederkehr is 44 years old.
10
<PAGE> 14
HARRY L. ZIMMERMAN, VICE PRESIDENT -- LEGAL AFFAIRS, 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), 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
43 years old.
EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graphs 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 1998.
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 significant 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 1998 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 1998.
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
11
<PAGE> 15
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, 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 1998
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 $224,000. Mr.
Cindrich's bonus for 1998 was determined under the Annual Bonus Performance 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 $1,000,000 paid for any
fiscal year to the corporation's Chief Executive Officer and four other most
highly compensated executive officers as of the end of any fiscal year. However,
the statute exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. No executive of the Company receives
compensation at a level that would invoke the provision of Section 162(m).
The Board and the Compensation Committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Company's efforts, that compensation
intended by the Company to satisfy the requirements for deductibility under
Section 162(m) does in fact do so.
MEMBERS OF THE COMPENSATION COMMITTEE:
Joel Kanter
Richard Martin
Lamar Laster
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of December 31, 1998 (the "named executive officers") for services rendered to
the
12
<PAGE> 16
Company during each of the last three years. In addition, it includes a former
executive officer who resigned during 1998 that would have been listed had he
been an executive officer as of December 31, 1998.
EXECUTIVE COMPENSATION SUMMARY TABLE*
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS
- --------------------------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nick Cindrich........................... 1998 $200,000 $50,000 * 44,500
Chief Executive Officer 1997 $186,924 $84,500 * 48,000
1996 $140,000 $10,000 * 196,053
Craig L. Smith.......................... 1998 $155,000 $31,000 * 37,000
President 1997 $155,000 $52,390 * 42,000
1996 $130,000 $10,000 * 60,211
James Abraham........................... 1998 $128,154 $ 0 * 10,000
Former Vice President -- Sales(1) 1997 $141,231 $88,167 * 30,000
1996 $130,000 $66,621 * 16,500
Kenneth Ludwig, Jr...................... 1998 $125,000 $18,750 * 30,000
Vice President -- Investor Relations 1997 $125,000 $31,688 * 30,000
and Business Development 1996 $105,000 $10,000 * 36,474
Harry L. Zimmerman...................... 1998 $120,000 $18,000 * 30,000
Vice President -- Legal Affairs 1997 $120,000 $30,420 * 30,000
1996 $100,000 $10,000 * 34,737
August Faske............................ 1998 $120,000 $18,000 * 30,000
Vice President -- Finance; 1997 $120,000 $30,420 * 30,000
Chief Financial Officer 1996 $100,000 $14,900 * 34,737
</TABLE>
- ---------------
* Amounts totaling less than $50,000 have been omitted and there were no
awards of restricted stock under long-term incentive plans made during the
three-year period ending December 31, 1998.
(1) Mr. Abraham resigned from the Company effective December 9, 1998.
OPTION GRANTS FOR FISCAL 1998
The following table sets forth information with respect to option grants to
the named executive officers during 1998 and the potential realizable value of
such option grants:
- The number of shares of common stock underlying options granted during
the year;
- The percentage that such options represent of all options granted to
employees during the year;
- The exercise price;
- The expiration date; and
- The hypothetical present value, as of the grant date, of the options
under the option pricing model discussed below.
The hypothetical value of the options as of their date of grant has been
calculated below, using the Black-Scholes option pricing model, as permitted by
the rules of the Securities and Exchange Commission, based upon a set of
assumptions set forth in the footnote to the table. It should be noted that this
model is only one method of valuing options, and the Company's use of the model
should not be interpreted as an endorsement of its accuracy. The actual value of
the options may be significantly different, and the value actually realized, if
13
<PAGE> 17
any, will depend upon the excess of the market value of the common stock over
the option exercise price at the time of exercise.
OPTION GRANTS DURING 1998
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS HYPOTHETICAL
NUMBER OF GRANTED TO EXERCISE VALUE AT
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(1) DATE(2)
- ---- --------- ------------ ---------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Nick Cindrich............ 44,500 6.65% $2.96-4.69 3-31-2002/12-31-2008 $40,631
Craig L. Smith........... 37,000 5.53% $2.96-4.69 3-31-2002/12-31-2008 $33,803
James Abraham............ 10,000 1.49% $ 4.69 3-31-2002 $ 6,748
Kenneth Ludwig, Jr. ..... 30,000 4.48% $2.96-4.69 3-31-2002/12-31-2008 $27,312
Harry L. Zimmerman....... 30,000 4.48% $2.96-4.69 3-31-2002/12-31-2008 $27,312
August Faske............. 30,000 4.48% $2.96-4.69 3-31-2002/12-31-2008 $27,312
</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 1998 has
been calculated using the Black-Scholes option pricing model, based upon the
following assumptions: estimated time until exercise of 1 to 2 years; a
risk-free interest rate of 4.5%, 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
65.0%; 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 1998
The table below sets forth the following information with respect to option
exercises during 1998 by each of the named executive officers and the status of
their options at December 31, 1998:
- The number of shares of common stock acquired upon exercise of options
during 1998;
- 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, 1998; and
- The aggregate dollar value of in-the-money exercisable options at
December 31, 1998.
14
<PAGE> 18
AGGREGATED OPTION EXERCISES DURING 1998
AND OPTION VALUES ON DECEMBER, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDER- ACQUIRED IN-THE-MONEY
SHARES VALUE LYING UNEXERCISED OPTIONS AT OPTIONS
ACQUIRED ON REALIZED DECEMBER 31, 1998 DECEMBER 31, 1998(1)
EXERCISE UPON ----------------------------- ---------------------------
NAME OPTION EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nick Cindrich........... -- -- 366,379 30,000 $226,734 $ --
Craig L. Smith.......... -- -- 399,389 25,000 $646,725 $ --
James Abraham........... 85,000 $171,350 109,780 -- $ 58,257 $ --
Kenneth Ludwig, Jr. .... 17,500 $ 64,575 298,090 20,000 $507,146 $ --
Harry L. Zimmerman...... -- -- 305,025 20,000 $341,997 $ --
August Faske............ -- -- 326,905 20,000 $580,349 $ --
</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 $2.94, the closing common stock price reported
on the Nasdaq National Market on December 31, 1998.
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., Biomet Inc.,
Bionx Implants, Inc., Exactech Inc., Exogen Inc., Innovasive Devices, Inc.,
Interpore International, Inc., Orthofix International, Inc., Orthologic Corp.,
Osteotech Inc., Stryker Corp., Sulzer Medica):(1)
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
3/96 1996 1997 1998
- -----------------------------------------------------
<S> <C> <C> <C> <C>
Encore Medical 100.00 113.89 87.49 62.49
NASDAQ US 100.00 117.50 144.14 202.62
Peer Group 100.00 89.65 111.44 146.18
- -----------------------------------------------------
</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.
15
<PAGE> 19
ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 1999. 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. PricewaterhouseCoopers, LLP (formerly known as 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
PricewaterhouseCoopers LLP in 1998 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 PricewaterhouseCoopers 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 PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR 1999. 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
[HARRY L. ZIMMERMAN]
Harry L. Zimmerman
Corporate Secretary
April 2, 1999
16
<PAGE> 20
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 18, 1999 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: Jay M. Haft Dennis J. Enright Kenneth Davidson
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: , 1999
-----------------------------
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 17, 1999,
TO BE ELIGIBLE TO VOTE AT THE ANNUAL MEETING.
