Item 1.02. Termination of a Material Definitive Agreement

In November 1997, we entered into a $3,900,000 industrial revenue bond financing with the City of Gainesville, Florida, under the terms of which the City issued industrial revenue bonds and loaned the proceeds to Exactech. The loan was payable in annual installments, and due in full November 2017. This loan was secured by an irrevocable letter of credit issued by a bank. Under the terms of the bonds and the loan, a remarketing agent was engaged who periodically set the variable rates under the bonds and attempts resales, or remarketing, of the bonds in the secondary market. During the second quarter of 2009, we were notified the remarketing agent has been unable to remarket the bonds. Under the terms of the governing indenture, if the remarketing agent is unable to remarket the bonds prior to the expiration date of the letter of credit securing them, we would be required to repay all principal and accrued interest on the bonds. The letter of credit expires in November 2009.

On August 20, 2009, prior to the expiration date of the letter of credit and any date on which we might be obligated to repay the loan, we elected to repay in full the current loan balance outstanding of $1.4 million and interest of $3,000. No prepayment penalties were assessed. We funded the payment using our current borrowing on our line of credit.

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