Brighton Partners and the founders’ royalties

analysisIn 1996 Exactech paid royalties to the Hospital for Special Surgery for its licence of the Optetrak knee system, to Accumed, Inc. for a bipolar hip prosthesis, and to members of its design team, including William Petty and Gary Miller, under their employment and consulting agreements. Later product-design consulting agreements paid the two founders 1% of U.S. net sales of the products concerned (less outside the United States), capped at $300,000 a year; in 2009 they received $300,000 together. Director Albert Burstein was paid $180,000 in 2009 under a verbal consulting agreement. ^{1 2}

analysisBrighton Partners, Inc. had long supplied Exactech with raw materials, equipment and licences used in production: purchases were $1,559,000 in 2007, $2,155,000 in 2008 and $1,498,000 in 2009. The 2010 proxy deemed Burstein the beneficial owner of 24% of Brighton, William and Betty Petty jointly of 4.6% and Miller of 2.8%. By a stock purchase agreement of May 24, 2010 Exactech bought all of Brighton's shares from its shareholders, among them Burstein, Miller, Betty, David and William Petty, Joel Phillips and Timothy Seese, with Burstein and William Petty acting as the sellers' representatives; a summary gives the price as $5,500,000. The sellers were to hand over Brighton's manufacturing documentation, including tool design methods, production recipes, a list of major suppliers and the quality manual. ^{1 2}