Exactech, Inc.

2320 NorthWest 66th Court

Gainesville, FL 32653

LETTER AGREEMENT

Gentlemen:

This Letter Agreement given by Merrill Lynch Business Financial Services Inc. (MLBFS), and agreed and accepted by Exactech, Inc. (the Customer) memorializes certain modifications to a certain WCMA Loan and Security Agreement No. 2BN-07R53, by and between Customer and MLBFS dated as of June 25, 2004 (the Loan Agreement).

Accordingly, for good and valuable consideration (the receipt and sufficiency being hereby acknowledged), the parties hereto acknowledge and agree, that subject to the satisfaction of the conditions to effectiveness set forth below and, in any event, further subject to the terms and agreements of this Letter Agreement, the Loan Agreement shall be modified as follows:

Definitions

Unless otherwise defined herein, capitalized terms used in this Letter Agreement shall have the meanings set forth in the Loan Agreement.

Increase of Line of Credit

The WCMA Line of Credit provided to Exactech, Inc. pursuant to the Loan Agreement is hereby increased to $24,000,000. As a result of and to give effect to said increase, the defined term Maximum WCMA Line of Credit set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

Maximum WCMA Line of Credit shall mean $24,000,000.00 or the Available Borrowing Base, when applicable pursuant to Section 2.3.

Amendments to Loan Agreement

1. The definition of Applicable Margin contained in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

Applicable Margin shall mean initially 200 basis points (2.00%) per annum until such time as Customer has provided to MLBFS the financial statements and compliance certificates required pursuant to Section 3.2(a)(ii) of this Loan Agreement for the fiscal quarter ending December 31, 2005, at which time the Applicable Margin shall be determined in accordance with the pricing grid set forth below based on the ratio of Funded Debt to EBITDA (determined in accordance with this Loan Agreement) calculated based upon the financial information reported in the most recently received financial statement required pursuant to Section 3.2(a)(i) or (ii) of this Loan Agreement, as the case may be:

The Applicable Margin shall be adjusted quarterly and said adjustment shall take effect five (5) Business Days after receipt of the financial statements required pursuant to Section 3.2(a)(i) or (ii) of this Loan Agreement, as the case may be. The foregoing notwithstanding, the Applicable Margin shall be equal to the Default Rate upon the occurrence and during the continuance of any Default under this Loan Agreement or any Loan Document.

2. There shall be inserted a new definition of Asset Disposition in Section 1.1 of the Loan Agreement, which shall read as follows:

Asset Disposition shall mean any sale, lease, license, transfer, assignment or other consensual disposition by any Credit Party of any asset, but excluding dispositions permitted under Section 3.4(d) hereof.

3. The definition of Borrowing Base contained in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

Borrowing Base shall mean, on any date, the sum of (i) 80% of Eligible Accounts and (ii) the lesser of (a) 50% of Eligible Inventory (excluding surgical instrumentation held as inventory as included on Customers books and records)

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or (b) $17,000,000; less in all cases (i) any reserves imposed by MLBFS from to time in its reasonable discretion and (ii) the maximum amount of Customers obligations under that certain Guaranty (the Guaranty) dated of even date herewith, made by Customer in favor of MLBFS, guarantying certain obligations owing to MLBFS by Altiva Corporation (said maximum amount currently being $4,500,000, to be increased to $6,000,000 beginning July 1, 2006).

4. The definition of Collateral contained in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

Collateral shall mean the Note, dated October 29, 2003, made by Altiva Corporation in favor of Customer in the amount of up to $5,000,000, the WCMA Account, all Accounts, Chattel Paper, Contract Rights, Inventory, all Trademarks, Patents, Copyrights and all other intellectual property, Equipment, General Intangibles, Deposit Accounts, Documents, Instruments, Investment Property and Financial Assets of Customer, howsoever arising, whether now owned or existing or hereafter acquired or arising, and wherever located; together with all parts thereof (including spare parts), all accessories and accessions thereto, all books and records (including computer records) directly related thereto, all proceeds thereof (including, without limitation, proceeds in the form of Accounts and insurance proceeds), and the collateral described in Section 3.6 (b) hereof; provided that Collateral shall be limited to the above items of personal property and shall not include any interest in real property of the Borrower or any buildings, structures and improvements now and hereinafter located on such real property, or the fixtures attached thereto, including, without limitation, any gas, steam, electric, water and other heating, cooking, refrigerating, plumbing, ventilating, irrigating and power extensions, appliances, fixtures and appurtenances, including air-conditioning ducts, machinery and equipment (for the avoidance of doubt, any such machinery and equipment that do not constitute fixtures shall be included in the Collateral), which are now or may hereinafter pertain to or be used with, in or on the real property, though they be either detached or detachable.

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