KIRSCHNER MEDICAL CORPORATION
Timonium, Maryland
November 4, 1994
_____________________________
NOTICE OF SPECIAL MEETING
_____________________________
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of
Kirschner Medical Corporation, a Delaware corporation ("Kirschner"), will be
held on the 7th floor of Kirschner's headquarters located at 9690 Deereco Road,
Timonium, Maryland 21093 on November 4, 1994, commencing at 10:00 a.m. local
time.
THE PURPOSES of the Special Meeting will be:
1. To consider and act upon a proposal to approve the
merger (the "Merger") of Kirschner with Kirschner Acquisition
Corp. ("KAC"), a Delaware corporation and wholly-owned subsidiary of
Biomet, Inc. ("Biomet"), an Indiana corporation, and the approval and
adoption of an Agreement and Plan of Merger, dated July 16, 1994, by
and among Kirschner, Biomet Acquisition Corp. and Biomet, as amended
by a First Amendment to Agreement and Plan of Merger dated September
15, 1994, by and among Biomet, Biomet Acquisition Corp., KAC and
Kirschner (collectively, the "Merger Agreement"), and to approve the
transactions contemplated by the Merger Agreement.
2. To consider and act upon any other matter which may
properly come before the meeting or any adjournment thereof.
Notice is also given that shareholders of Kirschner whose shares are
not voted in favor of the Merger Agreement have the right to demand an
appraisal of the value of their shares in the event that the Merger Agreement
is approved and the transactions contemplated thereby are consummated. The
right of any shareholder who makes such a demand to receive the value of his or
her shares through the statutory appraisal process is contingent upon strict
compliance with the procedures pertaining to appraisal rights set forth in
Section 262 of the Delaware General Corporation Law (Del. Code Section
8-1-262), a copy of which is reprinted as Appendix A to the accompanying
Proxy Statement/Prospectus.
All shareholders are cordially invited to attend the Special Meeting.
The record date for determining those shareholders entitled to vote at the
Special Meeting is September 26, 1994. The affirmative vote of the holders of
a majority of the outstanding shares of Kirschner Common Stock, or 1,803,866
shares, is necessary to approve the Merger and approve and adopt the Merger
Agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF KIRSCHNER
VOTE FOR APPROVAL OF THE MERGER AND THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
By Order of the Board of Directors,
Nicholas L. Gounaris
Secretary
Timonium, Maryland
October 3, 1994
IMPORTANT-Whether or not you plan to attend the meeting in person, you can help
in the preparation for the meeting by filling in and signing the enclosed proxy
card and promptly returning it in the enclosed envelope. If you are unable to
attend, your shares will be voted as directed by your proxy. If you do attend
the meeting, you may vote your shares even though you have sent in your proxy
card.
BIOMET, INC.
KIRSCHNER ACQUISITION CORP.
and
KIRSCHNER MEDICAL CORPORATION
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is being furnished to holders of
common stock, $.10 par value ("Kirschner Common Shares"), of Kirschner Medical
Corporation ("Kirschner"), a Delaware corporation, in connection with the
solicitation of proxies by the Kirschner Board of Directors for use at a
special meeting of Kirschner shareholders (the "Special Meeting") to be held on
November 4, 1994 at 10:00 a.m. (local time) on the 7th floor of Kirschner's
headquarters, 9690 Deereco Road, Timonium, Maryland 21093. See "The Special
Meeting."
The purpose of the Special Meeting is to vote upon the approval of the
merger (the "Merger") of Kirschner with Kirschner Acquisition Corp. ("KAC"), a
Delaware corporation and a wholly-owned subsidiary of Biomet, Inc. ("Biomet"),
an Indiana corporation, and the approval and adoption of an Agreement and Plan
of Merger dated July 16, 1994 by and among Biomet, Biomet Acquisition Corp. and
Kirschner, as amended by a First Amendment to Agreement and Plan of Merger
dated September 15, 1994 by and among Biomet, Biomet Acquisition
Corp., KAC and Kirschner (the "First Amendment"). At consummation of the
Merger, each Kirschner Common Share outstanding immediately prior to the Merger
other than Kirschner Common Stock held by Biomet or KAC (which would be
cancelled) or by a Kirschner shareholder who properly exercises appraisal
rights under Delaware law (a "Dissenting Shareholder"), would be converted into
the right to receive at the election of the holder either (a) $10.75 in cash or
(b) such number of common shares of Biomet (the "Biomet Common Shares") as
shall equal the greater of (i) $10.75 divided by the average of the last sale
prices for Biomet Common Shares as reported by the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ-NMS") for the ten consecutive trading days ending on the fifth trading
day prior to the closing of the Merger, or (ii) 0.9 Biomet Common Shares,
subject to certain limitations on the number of Biomet Common Shares to be
issued in the Merger as described herein. See "The Merger -- Terms of the
Merger Agreement."
As used in this Proxy Statement/Prospectus, unless the context
otherwise requires, (a) all references to the "Merger Agreement" shall mean the
Agreement and Plan of Merger as amended by the First Amendment; and (b)
all references to "Biomet Common Shares" or "Kirschner Common Shares" shall
mean such shares and the Common Share Purchase Rights attached thereto.
All information with respect to Biomet and KAC included in this Proxy
Statement/Prospectus has been supplied by Biomet, and all information with
respect to Kirschner has been supplied by Kirschner. This document constitutes
a prospectus of Biomet relating to the Biomet Common Shares issuable in
connection with the Merger.
This Proxy Statement/ Prospectus is accompanied by a copy of
Kirschner's Annual Report on Form 10-K for the year ended December 31, 1993,
and its Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
(collectively, the "Reports"), and the information contained in the Reports is
incorporated by reference herein.
This Proxy Statement/Prospectus and the accompanying form of proxy
were first mailed to shareholders of Kirschner on October 5, 1994.
________________________________________
THE SECURITIES OF BIOMET TO BE ISSUED IN CONNECTION WITH THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES ADMINISTRATOR NOR HAS THE COMMISSION OR ANY SUCH
ADMINISTRATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
________________________________________
No person is authorized to give any information or to make any
representation not contained herein in connection with the offering made hereby
and, if given or made, such information or representation must not be relied
upon as having been authorized by Biomet, KAC or Kirschner. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, any securities in any jurisdiction in which, or to any
person to whom, it is unlawful to make such offer or solicitation. Neither the
delivery of this Proxy Statement/Prospectus nor any distribution of the
securities made hereunder shall, under any circumstances, create any inference
that there has not been any change in the affairs of Biomet, KAC or Kirschner
since the date hereof.
________________________________________
The date of this Proxy Statement/Prospectus is October 3, 1994.
AVAILABLE INFORMATION
Biomet and Kirschner are subject to the informational requirements of
the Securities Exchange Act of 1934 as amended (the "Exchange Act"), and in
accordance therewith, each files reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and any other information filed by Biomet or
Kirschner with the Commission can be inspected and copied at reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: the New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048; and the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
Biomet has filed with the Commission a Registration Statement on Form
S-4 (including any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
securities offered by this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus, which is a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. For further information with respect to Biomet and the
Biomet Common Shares offered hereby, reference is made to the Registration
Statement and the exhibits filed as part thereof. Reference should be made to
documents filed as exhibits to the Registration Statement or otherwise filed
with the Commission for a complete statement of the provisions of those
documents. The Registration Statement and the exhibits may be inspected,
without charge, at the offices of the Commission, or copies thereof obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Biomet (File No.
0-12515) and Kirschner (File No. 0-14053) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. The Annual Report of Biomet on Form 10-K for the year ended
May 31, 1994;
2. The Current Report of Biomet on Form 8-K filed on August 23, 1994;
3. The description of Biomet Common Shares contained in a
Registration Statement on Form S-3 (Registration No. 33-6798) filed
on June 26, 1986;
4. The description of the Rights to Purchase Biomet Common Shares
contained in a Registration Statement on Form 8-A filed on December
22, 1989;
5. The Annual Report of Kirschner on Form 10-K for the year ended
December 31, 1993;
6. The Quarterly Reports of Kirschner on Form 10-Q for the quarters
ended March 31 and June 30, 1994; and
7. The Current Report of Kirschner on Form 8-K filed on July 29,
1994 (date of earliest event reported July 16, 1994), as amended on
September 19, 1994 and September 28, 1994.
All documents and reports filed by Biomet or Kirschner pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the date of the
Special Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Those documents (other
than the exhibits thereto unless such exhibits are specifically incorporated by
reference) are available to any person, including any beneficial owner of
Kirschner Common Shares, to whom this Proxy Statement/Prospectus is delivered,
on written or oral request directed to Biomet, Inc., P.O. Box 587, Airport
Industrial Park, Warsaw, Indiana 46581-0587, Attention: Daniel P. Hann,
Secretary. In order to ensure timely delivery of the documents, any request
should be made by October 28, 1994.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation Of Certain Documents By Reference . . . . . . . . . . . . . . . .
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . .
Information With Respect To Kirschner . . . . . . . . . . . . . . . . . . . . .
Information With Respect To Biomet. . . . . . . . . . . . . . . . . . . . . . .
Comparative Rights Of Holders Of Common Shares Of Biomet And Kirschner. . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
more detailed information and financial statements and notes
thereto appearing elsewhere in this Proxy Statement/Prospectus or
incorporated by reference herein.
Parties to the Merger
Biomet, Inc.
Biomet, Inc. is an Indiana corporation with its principal
executive offices at P.O. Box 587, Airport Industrial Park,
Warsaw, Indiana 46581-0587; telephone (219) 267-6639. Biomet and
its subsidiaries design, develop, manufacture and market products
used primarily by orthopedic medical specialists in both surgical
and non-surgical therapy, including reconstructive and trauma
devices, electrical bone growth stimulators, orthopedic support
devices, operating room supplies, powered surgical instruments,
general surgical instruments, arthroscopy products and oral-
maxillofacial implants and instruments. Biomet and its
subsidiaries currently distribute products in approximately 100
countries. See "Information with Respect to Biomet."
Kirschner Acquisition Corp.
Kirschner Acquisition Corp. is a Delaware corporation with
its principal executive offices at P.O. Box 587, Airport
Industrial Park, Warsaw, Indiana 46581-0587. KAC is a wholly-
owned subsidiary of Biomet and was formed for the purpose of
consummating the Merger described herein.
Kirschner Medical Corporation
Kirschner Medical Corporation is a Delaware corporation with
its principal executive offices at 9690 Deereco Road, Timonium,
Maryland 21093; telephone (410) 560-3333. Kirschner designs,
develops, manufactures and markets orthopedic reconstructive
implant devices and related instrumentation, fracture fixation
devices and musculoskeletal orthopedic support products. See
"Information with Respect to Kirschner."
The Merger Agreement
General
Pursuant to the Merger Agreement, Kirschner would be merged
with and into KAC, as a result of which the corporate existence
of KAC (the "Surviving Corporation") would continue unaffected,
the separate existence of Kirschner as a corporation would cease
and KAC and Kirschner would be a single corporation under
Delaware law and a wholly-owned subsidiary of Biomet.
The Merger will become effective at 12:01 a.m. on the date
immediately following the date of filing of a Certificate of
Merger with the Delaware Secretary of State (the "Effective
Time"). See "The Merger -- Terms of the Merger Agreement."
Biomet has delivered to Kirschner an earnest money deposit
of $2 million (the "Deposit"). If the Merger is not consummated,
the Deposit will be refunded to Biomet unless the Merger Agreement
is terminated for certain specified reasons, in which case Kirschner
will be entitled to keep all of the Deposit as liquidated damages in
consideration for Kirschner's time and expense. Kirschner will be
obligated to return all or a portion of the Deposit and/or pay Biomet
$1 million as liquidated damages in consideration for Biomet's time
and expense if certain specified events occur prior to the Effective
Time. See "The Merger -- Terms of the Merger Agreement."
Merger Consideration and Conversion of Shares
The Merger consideration will be provided by the delivery by
Biomet to an Exchange Agent for the benefit of the former holders
of Kirschner Common Shares of (a) Biomet Common Shares in
exchange for 50% of the outstanding Kirschner Common Shares
(other than Kirschner Common Shares held by Biomet or KAC) (the
"Converted Kirschner Shares") and (b) cash in exchange for the
remaining 50% of the Converted Kirschner Shares in the amount of
$10.75 per share. The number of Biomet Common Shares to be
delivered will be determined by multiplying the number of
Converted Kirschner Shares to be exchanged for Biomet Common
Shares by a fraction (the "Conversion Ratio") the numerator of
which is $10.75 and the denominator of which is the average of
the last sale prices for Biomet Common Shares (the "Average
Biomet Price") as reported by the National Association of
Securities Dealers Automated Quotation System - National Market
System ("NASDAQ-NMS") for the ten consecutive trading days ending
on the fifth trading day prior to the date of the closing of the
Merger (the "Closing"); however, in no event will the Conversion
Ratio be less than 0.9.
As of the Effective Time, the Kirschner Common Shares shall
no longer represent any interest in the equity of Kirschner, and
all certificates formerly representing Kirschner Common Shares
shall be deemed cancelled and shall represent only the right to
receive the merger consideration.
The holders of the Converted Kirschner Shares as of the
Effective Time (other than (a) Kirschner Common Shares subject, as
of the Effective Time, to restrictions imposed by the Kirschner
1994 Incentive Stock Option and Restrictive Stock Plan (the
"Kirschner Plan") and (b) Kirschner Common Shares held by
Dissenting Shareholders) will, by virtue of the Merger and without
any action on the part of Kirschner, be entitled to receive, at
the election of each Kirschner shareholder and subject to the
conditions and limitations set forth in the Merger Agreement,
either (i) all cash in the amount of $10.75 per share, or (ii)
all Biomet Common Shares, or (iii) a combination of cash and
Biomet Common Shares. Each Kirschner Common Share as to which a
valid shareholder election to receive Biomet Common Shares is
made will, subject to the limitations described below, be
converted in the Merger into the greater of (i) the number of
Biomet Common Shares determined by dividing $10.75 by the Average
Biomet Price, or (ii) 0.9 Biomet Common Shares. Except as
described below, each Kirschner Common Share as to which a
shareholder election to receive Biomet Common Shares is not
properly made will be converted into the right to receive cash in
the amount of $10.75 per share.
Kirschner Common Shares subject to restrictions imposed by
the Kirschner Plan (the "Restricted Kirschner Shares") will be
converted into Biomet Common Shares on the basis described above.
Kirschner Common Shares held by Dissenting Shareholders will not
be converted into the Merger consideration unless and until the
Dissenting Shareholders shall withdraw the demand for payment or
shall fail to establish the right to payment of the value of those
shares as provided by Delaware law. See "The Merger -- Dissenter's
Rights of Appeal."
A form of election (which will be included on the letter of
transmittal to be sent to Kirschner shareholders) (the "Form of
Election") will be mailed promptly after the Effective Time to
shareholders of Kirschner of record as of the Effective Time.
To be effective, shareholder elections must be received by the
Exchange Agent on or before the 30th day following the Effective
Time. Kirschner Common Shares as to which a shareholder election to
receive Biomet Common Shares has been properly made are referred
to herein as "Electing Shares."
If the aggregate number of Biomet Common Shares which would
be issuable in exchange for Restricted Kirschner Shares and Electing
Shares (the "Requested Shares") exceeds the number of Biomet Common
Shares to be delivered as part of the Merger consideration (the
"Delivered Shares"), then each holder of Electing Shares will be
entitled to receive Biomet Common Shares for that number of whole
Electing Shares determined by multiplying the number of Delivered
Shares (less the number of Biomet Common Shares to be exchanged for
Restricted Kirschner Shares) by a fraction, the numerator of which
is the number of Electing Shares held by the particular Kirschner
shareholder and the denominator of which is the number of all Electing
Shares. Each Electing Share not converted into Biomet Common Shares
will be converted into the right to receive cash in the amount of
$10.75 per share.
If the number of Delivered Shares exceeds the number of
Requested Shares, the Delivered Shares will be distributed first
to the holders of Restricted Kirschner Shares; then to the holders
of Electing Shares; then to the holders of Kirschner Common Shares as
to which no shareholder election is properly made, in the order
determined by random lot; and finally to the holders of Kirschner
Common Shares as to which a shareholder election to receive cash is
properly made, in the order determined by random lot, each such
holder to receive Delivered Shares with respect to one-half of the
Merger consideration to which that holder is entitled (until the
Delivered Shares are exhausted) and cash with respect to the
remainder of the Merger consideration to which that holder is
entitled. The failure of a Kirschner shareholder to make an election
to receive cash may result in the increased possibility that the
shareholder will receive some Biomet Common Shares.
To the extent the allocation of the Delivered Shares
described above would result in the creation of fractional share
interests, the holders of those fractional share interests will be
paid cash in lieu thereof. The number of whole Biomet Common Shares
representing the aggregate of such fractional share interests (the
"Unallocated Biomet Shares") will be distributed by random lot
to the holders of Kirschner Common Shares who were entitled to
receive Biomet Common Shares as a result of the allocation. No
Kirschner shareholder will receive more than one Unallocated Biomet
Share.
If the sum of (a) the amount of cash which would be payable
to holders of fractional share interests, plus (b) the amount of
cash which would be necessary to pay Dissenting Shareholders at
the rate of $10.75 per share, would exceed the amount of cash to be
delivered by Biomet as described above, the entire amount of the
Merger consideration will be paid in cash and, in such event,
Kirschner, rather than KAC, shall be the Surviving Corporation in
the Merger as a wholly-owned subsidiary of Biomet.
Agreements with Certain Members of Kirschner's Management
At the Effective Time, Biomet (a) will assume all of
Kirschner's obligations with respect to its outstanding incentive
stock options and provide for the issuance of Biomet Common
Shares upon the exercise thereof, (b) issue a non-incentive
option to purchase 30,000 restricted Biomet Common Shares to C.
Scott Harrison, and (c) issue incentive options to purchase
registered Biomet Common Shares under the Biomet Employee and
Non-Employee Director Stock Option Plan to the following members
of Kirschner's management, for the number of Biomet Common Shares
listed next to each individual's name: Roger Van Broeck, 30,000;
Lewis E. S. Parker, 30,000; Nicholas L. Gounaris, 20,000; and
Warren M. Gitt, 20,000. These management options will vest in
equal annual installments over the seven years following the date
of the grant, will be exercisable during the two-year period
following the vesting thereof and will contain such other terms
and conditions as shall be prescribed by Biomet's Stock Option
Committee. Each of the named individuals (the "Kirschner
Managers") will enter into a non-compete agreement with Biomet
(collectively, the "Non-Compete Agreements"), pursuant to which
Biomet will have the right, exercisable in the event of a termination
of the employment of any of the Kirschner Managers with Biomet during
the one-year period following the Effective Time, to prohibit the
Kirschner Managers from competing with Biomet for a period of one year
following the date of notice to the Kirschner Manager of Biomet's
election to exercise that right (the "Non-Compete Period"). If Biomet
elects to exercise this right, Biomet will be required to pay to the
Kirschner Manager his base salary during the Non-Compete Period.
It is anticipated that C. Scott Harrison, President and
Chief Executive Officer and Chairman of the Board of Kirschner,
will become a member of the Board of Directors of Biomet
following the closing of the Merger.
Conditions to the Merger
The Merger Agreement provides that consummation of the Merger is
contingent upon (1) the Expiration of a preferential right of Figgie
International Inc. ("Figgie") to purchase certain Kirschner technology,
(2) the redemption of all outstanding rights to purchase Kirschner Common
Shares under Kirschner's shareholder rights plan, or the amendment
of the shareholder rights plan so that the Kirschner Common Share
Purchase Rights do not become exercisable as a result of the Merger,
(3) the amendment of the terms of certain outstanding grants of Restricted
Kirschner Shares to impose certain additional conditions on the
elimination of the restrictions on the Biomet Common Shares to be issued
in replacement of the Restricted Kirschner Shares, (4) the assumption by
Biomet of Kirschner's obligations with respect to its outstanding
incentive stock options, and the issuance by Biomet of new options to
C. Scott Harrison and to the Kirschner Managers as described under
"The Merger -- Terms of the Merger Agreement -- Agreements with Certain
Members of Kirschner's Management", (5) the execution by the Kirschner
Managers of the Non-Compete Agreements, (6) the completion by each
party to its satisfaction of a due diligence review of the other,
(7) the absence of any material adverse change in the financial
condition of Kirschner or Biomet, (8) the expiration or termination
of the waiting period under Title II of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (9) the
continued effectiveness of the Registration Statement under applicable
federal and state securities laws and the eligibility of the
Biomet Common Shares to be issued in the Merger for quotation on
NASDAQ-NMS upon notice of issuance, (10) receipt by Kirschner of an
opinion from Dain Bosworth Incorporated ("Dain Bosworth") that the
Merger is fair to Kirschner's shareholders from a financial point of
view, (11) the approval of the Merger by Kirschner's shareholders and
by Biomet, as sole stockholder of KAC, and (12) receipt by Kirschner
and Biomet of an opinion from Manatt, Phelps & Phillips, special counsel
to Kirschner, to the effect that the Merger will be treated as a
qualifying reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"). See "The Merger -- Terms of
the Merger Agreement."
A Registration Statement on Form S-4 under the Securities
Act, which includes the information set forth in this Proxy
Statement/Prospectus, has been filed by Biomet with the
Commission with respect to the securities to be issued in
connection with the Merger, and the Registration Statement has
been declared effective. The filings required by the HSR Act have
been made and the prescribed waiting period expired on September
14, 1994. On July 15, 1994, Dain Bosworth delivered to Kirschner
its opinion, a copy of which is included as Appendix B, that the
Merger is fair to Kirschner's shareholders from a financial point
of view. See "The Merger -- Opinion of Kirschner's Financial
Advisor" and Appendix B.
Manatt, Phelps & Phillips has delivered its written opinion
to Biomet and Kirschner stating that the Merger will be treated
as a qualifying reorganization under Section 368 of the Code.
This opinion is based on certain assumptions and is subject to
various limitations and qualifications set forth therein. See
"The Merger - Federal Income Tax Consequences of the Merger."
Biomet and Kirschner each has completed its due diligence
review of the other and is satisfied as to the results thereof.
The preferential right of Figgie to purchase certain Kirschner
technology has expired. The Boards of Directors of Biomet, KAC
and Kirschner have approved the Merger. Biomet holds and is
entitled to vote all of the shares of Common Stock of KAC and
has voted those shares in favor of the Merger and of the approval
and adoption of the Merger Agreement. No vote of the shareholders
of Biomet is required to approve the Merger. If the Kirschner
shareholders approve the Merger at the Special Meeting, the
Effective Time is expected to occur at 12:01 a.m. on the day
following such meeting, assuming all other conditions have been
met or waived.
Fairness Opinion
Kirschner has retained Dain Bosworth to act as its financial
advisor in connection with the Merger and to provide an opinion
to the Board of Directors of Kirschner as to the fairness, from a
financial point of view, of the consideration to be received by
Kirschner's shareholders in connection with the Merger. For
purposes of its opinion, Dain Bosworth reviewed and analyzed
certain publicly available information relating to Kirschner, as
well as other information provided by Kirschner including certain
financial forecasts and internal management reports.
Dain Bosworth performed several analyses to determine a
range of value for the Kirschner Common Shares. Dain Bosworth
compared Kirschner's financial and stock market information to
similar information for certain publicly traded companies that
develop, manufacture and market orthopedic implants and other
orthopedic support products (the "Comparable Companies") and
calculated valuation ratios based on published stock prices for
each of the Comparable Companies. Dain Bosworth also reviewed
numerous acquisitions involving target companies engaged in the
manufacturing and/or marketing of medical devices and equipment
and summarized the terms of two selected acquisitions (the
"Comparable Acquisitions") which were selected on the basis of
the comparability of the acquired companies to Kirschner with
respect to several factors. The valuation ratios for each of the
Comparable Companies and the Comparable Acquisitions were applied
to Kirschner's historical and forecasted financial results to
determine values for Kirschner Common Shares. Dain Bosworth also
assessed the present values of future cash flows that Kirschner's
business activities could be expected to generate over a defined
time period and the residual value of Kirschner at the end of the
projected period. Dain Bosworth also reviewed and analyzed
certain publicly available information relating to Biomet and
Biomet Common Shares in order to assess the relative liquidity of
the Biomet Common Shares that Kirschner shareholders would
receive in the Merger.
On the basis of its review and analysis, Dain Bosworth
rendered its written opinion to the Board of Directors of
Kirschner that the consideration to be received in the Merger by
the holders of Kirschner Common Shares is fair, from a financial
point of view, to such holders. This opinion, which is included
in this Proxy Statement/Prospectus as Appendix B, should be read
in its entirety with respect to the assumptions made and other
matters considered by Dain Bosworth in rendering such opinion.
See "The Proposed Merger -- Opinion of Kirschner's Financial
Advisor" and Appendix B.
Dissenting Shareholders
Shareholders of Kirschner who do not vote in favor of the
Merger may dissent from the Merger and demand an appraisal of the
value of their shares in cash in accordance with Section 262 of
the Delaware General Corporation Law (the "DGCL"). A vote
against approval of the Merger (either in person or by proxy)
does not constitute such a demand. Appraisal rights are not
available unless written notice is received by Kirschner before
the shareholder vote on the Merger is taken and the other
requirements of Section 262 are satisfied. FAILURE TO COMPLY
WITH THE APPLICABLE PROVISIONS OF SECTION 262 WILL RESULT IN A
LOSS OF APPRAISAL RIGHTS. Shareholders of Biomet are not
entitled to appraisal rights in connection with the Merger. See
"The Proposed Merger -- Dissenters' Rights of Appraisal."
Federal Income Tax Consequences of the Merger
The parties to the Merger Agreement have obtained an opinion
(the "Tax Opinion") from Manatt, Phelps & Phillips, special
counsel to Kirschner, that the Merger will be treated as a
qualifying reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code. The Tax Opinion is based upon certain
assumptions and is subject to certain qualifications and
limitations set forth therein. Copies of the Tax Opinion will be
provided to interested shareholders upon request to Daniel P.
Hann at the address indicated under "Incorporation of Certain
Documents by Reference."
The Tax Opinion states that if the Merger is treated as a
qualifying reorganization, gain or loss should not be recognized
by Kirschner shareholders with respect to Biomet Common Shares
received in exchange for their Kirschner Common Shares.
Kirschner shareholders will recognize gain or loss to the extent
that they receive cash for all or a portion of their Kirschner
Common Shares. See "The Merger -- Federal Income Tax
Consequences of the Merger."
Due to the complexities of Federal, state and local income
and other tax laws, it is strongly recommended that Kirschner
shareholders consult their own tax advisors concerning the
Federal, state and local tax consequences of the Merger.
Anti-Takeover Measures
If the Merger is approved, holders of Kirschner Common
Shares who receive Biomet Common Shares in the Merger will become
shareholders of Biomet. Unlike Kirschner, which is governed by
the DGCL, Biomet is governed by the Indiana Business Corporation
Law (the "IBCL") which contains certain provisions relating to
transactions effecting a change in control which differ from
those contained in the DGCL. The change in control provisions
contained in the IBCL provide that certain accretions of voting
power will result in an acquiring shareholder losing the right to
vote the shares acquired unless those rights are granted by a vote
of a majority of the disinterested shares. Similarly to the DGCL,
the IBCL establishes a five-year period (three years under the DGCL)
beginning with the acquisition of a 10% interest (15% under the
DGCL) in a corporation during which certain business combinations
involving the acquiring shareholder are prohibited unless, prior
to the acquisition of such interest, the board of directors gives
approval to the acquisition of such interest or to the proposed
business combination. In addition, Biomet's Bylaws provide that
its Board of Directors shall be divided into three classes, with
one class elected at each annual meeting of shareholders.
Therefore, at least two annual meetings are required to elect a
majority of the Biomet Board of Directors. These provisions of
the IBCL and Biomet's Bylaws may discourage potential acquirors
and serve to entrench the current management. Biomet and
Kirschner each have a class of authorized but unissued preferred
shares the terms and conditions of which may be determined by the
Board of Directors of the company and the shares issued to such
persons as may be determined by the Board of Directors, without
the necessity of any approval by the shareholders of the company.
The Board of Directors could issue these shares as part of an
attempt to defeat or deter an attempt to acquire control of the
company. The Amended Articles of Incorporation of Biomet contain
a provision requiring the affirmative vote of the holders of not
less than 75% of the outstanding Biomet Common Shares in order to
(a) amend any provision of the Amended Articles of Incorporation,
other than the provisions dealing with the number of authorized
shares; (b) authorize any sale or other disposition of all or
substantially all of the fixed assets of the company for the
purpose of terminating or winding up its business; (c) approve
any merger or consolidation to which the company is a party.
These provisions could defeat or deter an attempt to acquire control
of Biomet. Biomet and Kirschner each have adopted shareholder
rights plans pursuant to which the outstanding shares of the
company carry a right to purchase additional shares from the
company or an acquiring company in the event of an actual or
prospective change in control of the company. These plans are
designed to protect the interests of the company's shareholders
against certain coercive tactics sometimes employed in takeover
attempts. Kirschner intends to amend its shareholder rights
plan prior to consummation of the Merger to exempt the Merger
Agreement and the transactions contemplated thereby from the
provisions of the rights plan. See "Comparative Rights of
Holders of Common Shares of Biomet and Kirschner."
The Special Meeting
The Special Meeting is scheduled to be held on November
4, 1994, at 10:00 a.m. (local time) on the 7th floor of
Kirschner's headquarters, 9690 Deereco Road, Timonium, Maryland
21093. The purpose of the Special Meeting is to consider and
vote upon the adoption and approval of the Merger Agreement and
the transactions contemplated thereby. Only shareholders of
record as of September 26, 1994 (the "Record Date") will be
entitled to vote at the Special Meeting. On the Record Date
there were 3,607,730 Kirschner Common Shares outstanding. Each
Kirschner Common Share is entitled to one vote on the adoption
and approval of the Merger Agreement. The Merger Agreement must
be approved by the holders of a majority of the outstanding
Kirschner Common Shares, or 1,803,866 shares. Of the Kirschner
Common Shares entitled to vote on the Merger, 545,920 shares
representing approximately 15.1% of the outstanding Kirschner
Common Shares entitled to vote at the Special Meeting are held by
directors and executive officers of Kirschner and their
affiliates. The executive officers and directors of Kirschner
intend to vote such shares FOR approval of the Merger Agreement.
See "The Special Meeting."
As of the Record Date, KAC beneficially owned 685,222
Kirschner Common Shares representing approximately 19.0% of the
outstanding Kirschner Common Shares entitled to vote at the
Special Meeting. These shares were acquired from Figgie on
August 12, 1994, in a transaction approved by the Board of
Directors of Kirschner. KAC intends to vote all of its Kirschner
Common Shares FOR approval of the Merger Agreement. See "The
Special Meeting."
Biomet owns all of the issued and outstanding shares of
common stock of KAC entitled to vote on the Merger and has voted
those shares in favor of adoption and approval of the Merger
Agreement. No vote of the shareholders of Biomet is required to
approve the Merger.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS OF KIRSCHNER HAS APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE MERGER AND THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Market Price and Dividend Information
Biomet Common Shares
The Biomet Common Shares are traded on NASDAQ-NMS. The
table below sets forth the quarterly range of high and low sales
prices for Biomet Common Shares as reported by NASDAQ-NMS for the
first two quarters of fiscal 1995 (through September 26, 1994) and
for each of the two most recent fiscal years ended May 31.
Amounts shown reflect inter-dealer prices, without retail mark-
up, mark-down or commission.
High Low
1995
Second (through September 26, 1994) $ 12 3/8 $ 10 5/8
First 11 7/8 9
1994
Fourth $ 11 7/8 $ 9 5/8
Third 11 7/8 9 7/8
Second 13 1/4 8 3/8
First 11 1/4 8 3/8
1993
Fourth $ 13 1/2 $ 9 3/4
Third 18 3/4 10 3/4
Second 22 1/4 13 3/4
First 22 1/4 14 3/4
Biomet has not paid a cash dividend on the Biomet Common
Shares and does not anticipate that any such dividends will be
paid in the foreseeable future. The Board of Directors of Biomet
periodically reviews its dividend policy.
The approximate number of record holders of Biomet Common
Shares as of May 31, 1994 was 14,200.
Kirschner Common Shares
The Kirschner Common Shares are traded on NASDAQ-NMS. The
table below sets forth the quarterly range of high and low sales
prices for Kirschner Common Shares as reported by NASDAQ-NMS for
the first three calendar quarters of 1994 (through September
26, 1994) and for each calendar quarter of 1993 and 1992.
Amounts shown reflect inter-dealer prices, without retail mark-
up, mark-down or commission.
High Low
1994
Third (through September 26, 1994) $11 $ 8 1/2
Second 9 7/8 5 3/8
First 8 6
1993
Fourth $ 9 $ 6 1/2
Third 9 6 1/2
Second 8 1/2 7
First 8 1/4 6 1/2
1992
Fourth $ 9 3/4 $ 6 1/4
Third 10 3/4 5 3/4
Second 13 3/4 6 1/2
First 18 1/2 11 1/2
Kirschner has not paid a cash dividend on the Kirschner
Common Shares and does not anticipate that any such dividend will
be paid in the foreseeable future.
The approximate number of record holders of Kirschner Common
Shares as of the Record Date was 1,173.
On July 15, 1994, the last full trading day preceding the
initial public announcement that Biomet had agreeg to acquire
Kirschner, the last sale prices of Biomet Common Shares and
Kirschner Common Shares as reported by NASDAQ-NMS were $9.75
and $10.50, respectively. On September 26, 1994, the last sale
prices of Biomet Common Shares and Kirschner Common Shares on
NASDAQ-NMS were $11.63 and $10.75, respectively. On May 25, 1994,
the last trading day preceding the public announcement of a
transaction between Kirschner and Orthomet, Inc., the last sale of
Kirschner Common Shares as reported by NASDAQ-NMS was $6.00. See
"The Merger -- Background of the Merger."
Comparative Per Share Data
The following table presents comparisons of historical and
pro forma income from continuing operations, book value and cash
dividends per share for the Biomet Common Shares and the
Kirschner Common Shares as of and for the year ended May 31,
1994. The pro forma information gives effect to the Merger as a
purchase. The equivalent pro forma combined information is based
on an exchange ratio of 0.977 Biomet Common Shares for each
Kirschner Common Share (assuming an Average Biomet Price of $11.00,
so that the equivalent pro forma combined column reflects the
income from continuing operations, book value and cash dividends
of 0.977 Biomet Common Shares (the number of Biomet Common Shares
that would have been received for each Kirschner Common Share) if
the Merger had occurred as of the beginning of the fiscal year
ended May 31, 1994. This table should be read in conjunction with
the consolidated financial statements incorporated by reference
herein and pro forma information appearing elsewhere herein. There
can be no assurance that actual results would have been the same as
the pro forma results.
As of and for the year ended May 31, 1994:
Biomet Kirschner
______________________ ___________________________
Equivalent
Pro Forma Pro Forma
Historical Combined(1) Historical(2) Combined(3)
__________ ___________ _____________ ___________
Per common share:
Income from
continuing operations $ .61 $ .61 $ .54 $ .60
Book value 3.12 3.22 6.89 3.15
Cash dividends None None None None
(1) Includes Biomet's historical data adjusted to reflect the
consummation of the Merger and the acquisition of Kirschner
as of the beginning of the fiscal year ended May 31, 1994
for the per share income from continuing operations and at
May 31, 1994 for the book value per share.
(2) Kirschner's fiscal year ends December 31. Kirschner
financial data are presented for the twelve-month period
ended March 31, 1994, as amounts for the twelve months
ended May 31, 1994, are not practicable to determine.
(3) Equivalent pro forma per share amounts are calculated by
multiplying pro forma per share amounts by the conversion
ratio, which is based on an $11.00 Average Biomet Price for
the Biomet Common Shares to be exchanged. An increase or
decrease of $1.00 in the Average Biomet Price would not
materially affect the pro forma results.
Selected Consolidated Financial Data of Biomet
Income Statement Data
(in thousands, except Earnings Per Share)
Years ended May 31,
----------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Net sales $373,295 $335,373 $274,795 $209,690 $162,379
Cost of sales 114,829 104,741 85,657 63,652 51,428
-------- -------- -------- -------- --------
Gross profit 258,466 230,632 189,138 146,038 110,951
Selling, general and
administrative expenses 136,191 122,170 102,695 80,212 60,945
Research and
development expense 20,521 17,995 16,620 12,872 9,890
-------- -------- -------- -------- --------
Operating income 101,754 90,467 69,823 52,954 40,116
Other income, net 5,278 3,805 6,688 5,646 3,712
-------- -------- -------- -------- --------
Income before
income taxes 107,032 94,272 76,511 58,600 43,828
Provision for
income taxes 37,214 30,311 24,702 19,126 13,895
-------- -------- -------- -------- --------
Net income $ 69,818 $ 63,961 $ 51,809 $ 39,474 $ 29,933
======== ======== ======== ======== ========
Earnings Per Share $.61 $.56 $.46 $.35 $.27
Weighted average
number of shares 115,215 114,934 113,009 111,892 111,136
Balance Sheet Data
(in thousands)
As of May 31,
------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Working capital $288,408 $224,387 $167,707 $118,512 $ 92,573
Total assets 418,077 354,409 279,234 210,660 153,548
Shareholders' equity 357,283 301,319 232,467 172,928 129,374
* The selected consolidated financial data include the
results of operations of Lorenz Surgical from June 1,
1992 and Effner GmbH from March 21, 1991.
* Earnings per share data have been adjusted to give
effect to all stock splits.
* Biomet paid no cash dividends during any of the
periods presented.
Selected Consolidated Financial Data of Kirschner
The following selected consolidated financial data for the
years ended December 31, 1989 through 1993 have been derived from
the consolidated financial statements of Kirschner, which
statements have been audited by KPMG Peat Marwick LLP,
independent auditors, and are incorporated by reference herein.
Certain amounts have been reclassified to conform to the 1993
presentation. Financial data as of June 30, 1993 and 1994 are
unaudited but, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of that data. The results of
operations for the six months ended June 30, 1994, are not
necessarily indicative of the results of operations that may be
expected for the entire year.
Income Statement Data
(in thousands, except Per Share Data)
<TABLE>
<CAPTION>
Six months
ended
June 30,
Years ended December 31, (unaudited)
---------------------------------------------------- ------------------
1993 1992 1991 1990 1989 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 67,188 $ 66,369 $ 64,948 $ 59,430 $ 53,940 $ 33,838 $34,859
Cost of sales 28,498 26,794 26,018 27,276 24,631 13,915 14,143
-------- -------- -------- -------- -------- -------- -------
Gross profit 38,690 39,575 38,930 32,154 29,309 19,923 20,716
Operating expenses 33,285 32,943 30,592 30,220 25,315 17,278 17,195
-------- -------- -------- -------- -------- -------- -------
Operating profit 5,405 6,632 8,338 1,934 3,994 2,645 3,521
Interest expense, net 3,161 5,499 6,453 4,543 3,070 972 1,891
Other income (expense), net (264) (201) 1,357 (88) (24) (186) (62)
Provision for income taxes 389 502 1,299 569 97 443 458
-------- -------- -------- -------- -------- -------- -------
Income (loss) from continuing
operations before
extraordinary item 1,591 430 1,943 (3,266) 803 1,044 1,110
Income (loss) from
discontinued operations (1,717) 124 883 (2,808) (14,980) (157) (5)
Extraordinary item 2,395 -- 1,375 -- -- -- 2,395
-------- -------- -------- -------- -------- -------- -------
Net income (loss) $ 2,269 $ 554 $ 4,201 $ (6,074) $(14,177) $ 887 $ 3,500
======== ======== ======== ======== ======== ======== =======
Per Share Data:
Income (loss) from continuing
operations before
extraordinary item $ .47 $ .17 $ .76 $ (1.34) $ .33 $ .29 $ .33
Net income (loss) $ .67 $ .22 $1.65 $ (2.48) $(5.80) $ .25 $1.05
Weighted average common and
common equivalent shares
outstanding 3,407 2,559 2,551 2,445 2,443 3,547 3,333
</TABLE>
Balance Sheet Data
(in thousands)
<TABLE>
<CAPTION>
As of
June 30,
As of December 31, (unaudited)
------------------------------------------------ -------------
1993 1992 1991 1990 1989 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital (deficit) $ 23,458 $ 24,539 $ (6,170) $(10,679) $(5,711) $ 20,039 $23,173
Total assets 56,419 68,351 74,690 75,953 78,118 55,103 62,278
Short-term debt 2,907 6,933 20,566 39,585 41,001 1,928 4,179
Long-term debt, including
current portion 18,700 26,122 26,830 13,012 12,303 15,006 18,875
Total debt 21,607 33,055 47,396 52,597 53,304 16,934 23,054
Shareholders' equity 23,786 21,372 14,894 10,667 15,139 25,491 25,786
</TABLE>
THE SPECIAL MEETING
General
This Proxy Statement/Prospectus is being mailed to all
Kirschner shareholders of record as of the record date in
connection with the Special Meeting which will be held on the
7th floor of Kirschner's headquarters, 9690 Deereco Road,
Timonium, Maryland 21093 at 10:00 a.m. (local time), on
November 4, 1994. Shareholders of record as of the close of
business on September 26, 1994, will be entitled to vote at the
Special Meeting. At such date, there were 3,607,730 Kirschner
Common Shares outstanding and entitled to vote on each matter
scheduled to come before the Special Meeting.
Vote Required to Approve Merger
The presence at the Special Meeting, in person or by proxy,
of the holders of a majority of the Kirschner Common Shares
entitled to vote will constitute a quorum. Each Kirschner Common
Share is entitled to one vote with respect to the approval of the
Merger and the approval and adoption of the Merger Agreement.
The vote in favor of the Merger by the holders of a majority of
the outstanding Kirschner Common Shares, or 1,803,866 shares, is
required for approval of the Merger on behalf of the
shareholders of Kirschner. KAC is entitled to vote 685,222
shares or approximately 19.0% of the Kirschner Common Shares
entitled to vote on the Merger and intends to vote all such shares
FOR approval of the Merger and the approval and adoption of the
Merger Agreement. The executive officers and directors of Kirschner
and their respective affiliates hold 545,920 Kirschner Common Shares
or approximately 15.1% of the Kirschner Common Shares entitled to
vote on the Merger. The executive officers and directors of
Kirschner intend to vote such shares FOR approval of the Merger
and approval and adoption of the Merger Agreement.
For quorum purposes, abstentions and broker non-votes are
counted in determining the presence or absence of a quorum for
the transaction of business at the Special Meeting. For voting
purposes, abstentions and broker non-votes will have the same
effect as votes against the Merger.
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of KAC is required for the
approval and adoption of the Merger Agreement on behalf of KAC.
Biomet holds and is entitled to vote all of the shares of Common
Stock of KAC and has voted those shares in favor of the Merger.
No vote of the shareholders of Biomet is required to approve
the Merger.
THE MERGER
Background of the Merger
For the past several years Biomet has followed a strategy of
growing its core business through internal development and
strategic acquisitions in the medical device industry. In 1992,
Biomet identified Kirschner as a possible merger candidate and at
that time a preliminary contact was made concerning a possible
combination of the companies. However, because of Biomet's
concerns as to Kirschner's high level of debt and cash flow
problems, no proposal was made.
Since 1990, in an effort to strengthen its balance sheet and
increase its profitability, Kirschner had been attempting to
obtain either an infusion of equity capital or a strategic
partner. During this period, substantive discussions were held
with various financial investors and medical companies, including
Henley International, Inc. (now Maxxim Medical, Inc. ("Maxxim"))
and Columbia Hospital Corporation. In December 1992, these
discussions culminated in the sale by Kirschner of approximately
a 20% equity interest in Kirschner to Figgie International Inc.
("Figgie") for $7.4 million. It was Kirschner's intention to
share technology with Figgie as part of a strategic venture in
orthopedic cost containment. However, in January 1994, Figgie
decided to discontinue its venture and divest its interest in
Kirschner.
In February 1994, C. Scott Harrison, President and Chief
Executive Officer of Kirschner, and Richard Nikolaev, President
and Chief Executive Officer of Orthomet, Inc. ("Orthomet"), began
informal discussions about the possibility of a business combination
between Kirschner and Orthomet. Orthomet has annual sales of
approximately $26 million and, like Kirschner, designs, manufactures
and markets orthopedic reconstructive implant devices. As the
discussions proceeded, the two companies developed a proposal for a
strategic alliance in which the synergies between the companies would
result in a combined entity with approximately $100 million in
revenue and extensive domestic and foreign sales networks. From
time to time, prior to the Orthomet proposal, Kirschner also had
discussions with other potential merger candidates, none of which
resulted in a transaction with Kirschner.
Discussions between Kirschner and Orthomet resulted in the
execution of a letter of intent on May 25, 1994 providing for the
merger of Kirschner with a newly organized subsidiary of Orthomet
and the exchange of Kirschner Common Shares for shares of
Orthomet common stock. The proposed exchange ratio represented a
price per share of approximately $7.25 to Kirschner's
shareholders as of May 25, 1994, or a premium of approximately
21% over Kirschner's then current market value. Kirschner issued
a press release announcing the proposed merger with Orthomet
after the close of trading on May 25, 1994 and commenced
negotiations with Orthomet concerning the terms of a definitive
agreement for the proposed transaction. On June 15, 1994,
Kirschner engaged Dain Bosworth to provide investment banking and
financial advisory services.
Before completion of negotiations on the definitive
agreement with Orthomet, Kirschner received an unsolicited oral
indication of interest from a third party to acquire Kirschner
for $8.25 per share in cash. A written proposal, however, was
never submitted to Kirschner. Through various published reports
Biomet also learned that Orthomet had made an offer to merge
with Kirschner and that Kirschner had signed the letter of intent
with Orthomet. Biomet thereafter began a review of Kirschner's
public filings and determined that Kirschner had improved its
financial condition since the time of the 1992 contact.
Kirschner received an unsolicited proposal from Biomet on
Saturday, June 25, 1994 to acquire all of the outstanding
Kirschner Common Shares in exchange for either cash in the amount
of $10.00 per share, or one Biomet Common Share for each
Kirschner Common Share, or a combination of cash and stock at the
election of Kirschner's shareholders. The Biomet cash offer
represented a premium of 53.8% over Kirschner's closing price on
June 24, 1994, and a premium of 66.7% over Kirschner's closing
price on May 25, 1994, the date of the Orthomet letter of intent.
In accordance with the terms of the letter of intent between
Kirschner and Orthomet, Kirschner informed Orthomet about the
Biomet offer and asked Orthomet whether it would be willing to
increase its offer. On Monday, June 27, Kirschner issued a press
release announcing the receipt and terms of Biomet's unsolicited
proposal. Also, Kirschner's Board of Directors met on June 27
and June 28 with Kirschner's legal counsel and financial advisors
to discuss the Biomet offer and its impact on the proposed merger
with Orthomet and to compare the value of the two offers. On
June 29, 1994, Orthomet increased its offer to 1.3 shares of
Orthomet common stock plus a seven year callable warrant to
purchase an additional 1.3 shares of Orthomet common stock for
$10.00 per share for each Kirschner Common Share. Following
receipt of Orthomet's revised offer, Kirschner's Board of
Directors met to continue its review of Biomet's offer and to
discuss, among other matters, Orthomet's revised offer.
Kirschner also issued a press release disclosing Orthomet's
increased offer and informed Biomet of that offer.
On July 1, 1994, Orthomet requested Kirschner to sign a
letter agreement in which Kirschner would agree, as a condition
for Orthomet to keep its offer open, to pay Orthomet $1 million
in the event Kirschner entered into a transaction with a third
party. Kirschner declined to sign such a letter, and Orthomet
withdrew its offer at 5:00 p.m. that day.
On July 6, 1994, Orthomet reopened discussions with
Kirschner and on July 7 renewed its offer to merge with Kirschner
on the same terms as contained in its June 29 revised offer.
Also on July 7, 1994, Kirschner received a written indication of
interest, without any financial terms, from another potential
acquiror, which was subsequently withdrawn.
Kirschner informed Biomet of Orthomet's renewed offer. On
July 11, 1994, Biomet amended its offer to eliminate the cash
election and to increase the exchange ratio to 1.05 Biomet Common
Shares for each Kirschner Common Share.
The Kirschner Board of Directors met on July 11, 1994 to
consider the latest Orthomet offer and the newly-revised Biomet
offer. Dain Bosworth presented a detailed analysis of Orthomet's
revised offer that included a stand-alone valuation of Orthomet's
common stock, valuation analyses under a variety of scenarios for
the warrants proposed in Orthomet's revised offer and other
information regarding the potential benefits to Kirschner's
shareholders from a combination of Kirschner with Orthomet. This
information supplemented data regarding the recent price and
volume history, institutional ownership and market making
activities in Orthomet's common stock that had been submitted
previously to Kirschner's Board of Directors. Based on public
market values for Orthomet's common stock ranging from $6.00 to
$6.50 per share, Dain Bosworth calculated that Orthomet's revised
offer represented total values ranging from $9.70 to $10.51 per
Kirschner Common Share.
Dain Bosworth also presented data regarding the recent price
and volume history, institutional ownership and market making
activities in Biomet's Common Shares. Based on an exchange ratio
of 1.05 Biomet Common Shares for each Kirschner Common Share and
the closing price of Biomet's Common Shares as of July 8, 1994,
Dain Bosworth calculated that the value of the Biomet offer was
approximately $10.37 per Kirschner Common Share.
Kirschner's Board of Directors reviewed objective criteria,
such as the number of outstanding shares, recent trading volumes,
bid/ask spreads, research coverage, the number of market makers
and the recent trading history of each company's common stock,
which indicated that the liquidity of Orthomet's common stock had
been less historically than the liquidity of Biomet's Common
Shares. Based upon this review, the Kirschner Board of Directors
and Dain Bosworth agreed that the number of shares and warrants to
be received from Orthomet by Kirschner's shareholders constituted
a large percentage of the equity interests of Orthomet; consequently,
no assurance regarding the future liquidity of Orthomet's common
stock or the Orthomet warrants could be given.
Based on the many quantitative and qualitative factors it
considered, the Kirschner Board of Directors decided to proceed
with Biomet and directed management to negotiate a definitive
agreement and continue due diligence with Biomet. A press release
to that effect was issued later that day.
On July 12, 1994, Kirschner received an unsolicited proposal
from Maxxim. Maxxim, with annual sales of about $125 million,
manufactures a variety of disposable medical products,
but is not engaged in the orthopedic reconstructive
implant business. In its July 12 offer, Maxxim proposed to
acquire all of the outstanding Kirschner Common Shares for either
$10.50 per share or two shares of Maxxim common stock for each
three Kirschner Common Shares. Upon receipt of the Maxxim offer,
Kirschner and Dain Bosworth discussed its terms and Kirschner
concluded that the potential incremental value of the offer did
not warrant a cessation of the negotiations with Biomet. The
next day, Maxxim increased its offer to either $10.85 per share
or seven shares of Maxxim common stock for each 10 Kirschner
Common Shares. Kirschner informed Biomet of Maxxim's increased
offer.
In response to Maxxim's offer, Biomet increased its offer to
$10.75 per share on July 15, 1994, to be payable either solely in
cash or in cash and Biomet Common Shares, in Biomet's sole
discretion. In no event, however, would Kirschner shareholders
receive less than 0.9 Biomet Common Shares for each Kirschner
Common Share if Biomet elected to use Biomet Common Shares for
payment of the merger consideration. Biomet's election to use
Biomet Common Shares as part of the Merger consideration was to be
made no later than the date of the mailing to Kirschner shareholders
of a proxy statement with respect to the Merger. The Kirschner Board
of Directors met that day to consider the Biomet and Maxxim offers
and to review the draft of a definitive merger agreement
presented by Biomet. Dain Bosworth informed the Board that the
two offers were approximately of equal value from a financial
point of view. Both Dain Bosworth and the Kirschner Board noted
that negotiations with Biomet were virtually completed whereas
Maxxim had entered the process at a later date. Because of
uncertainties as to the terms Maxxim would require in a
definitive agreement, both Dain Bosworth and the Kirschner Board
believed that a transaction with Maxxim was more uncertain than a
transaction with Biomet. The Kirschner Board believed that, from
a business perspective, a prompt conclusion to the process was
critical to maintain the loyalty of Kirschner's sales agents and
customers. After reviewing the Biomet draft definitive agreement
and Dain Bosworth's opinion that the consideration offered by
Biomet was fair to Kirschner shareholders from a financial point
of view, the Board of Directors approved the Proposed Merger
Agreement at the meeting on July 15, 1994. Also on that date,
the Board of Directors of Biomet approved the Merger Agreement
which was then executed on Saturday, July 16, 1994. Kirschner
issued a press release concerning this action on Monday, July
18, 1994.
On July 22, 1994, Maxxim further increased its offer to
$11.50 per share in cash or shares of Maxxim stock, to be
determined in Maxxim's sole discretion, with a pro rata reduction
in the price to account for the $1 million break-up fee contained
in the Biomet/Kirschner agreement. See "Terms of the Merger
Agreement -- The Deposit and Break-up Fee." Maxxim also stipulated
that, if the consideration were to be paid in stock, Kirschner
shareholders would receive no less than 0.6 shares of Maxxim
common stock for each Kirschner Common Share.
The Kirschner Board of Directors met on July 25, 1994 to
consider Maxxim's revised offer. Dain Bosworth calculated that
the pro rata reduction for the break-up fee amounted to
approximately $.28 per share and thus would yield Kirschner's
shareholders approximately $11.22 per share. Dain Bosworth also
calculated that if Maxxim elected to pay the merger consideration
in Maxxim common stock, there would likely be a dilutive effect
on Maxxim's expected earnings per share for its 1994 fiscal year
and a break-even to slightly positive effect on its expected 1995
earnings per share based on consensus market expectations for
Maxxim's common stock. In contrast, it was noted that
Kirschner's forecasted earnings for Biomet's fiscal years ending
May 31, 1995 and 1996 were expected to be accretive for Biomet's
projected earnings per share for both years based on consensus market
expectations for Biomet and Kirschner's internal projections.
Moreover, it was noted that the liquidity in Maxxim's stock has
historically been less than the liquidity of Biomet Common Shares
based on trading volume and other market data. Dain Bosworth
concluded that if Kirschner shareholders were to receive Maxxim
stock as consideration, the Kirschner Board should carefully consider
the likelihood that Kirschner's shareholders could realize $11.22 per
share in the near term. If Maxxim decided to pay cash, Dain
Bosworth stated that Kirschner shareholders would realize $11.22
per share, provided Maxxim did not require any additional pro
rata reductions. Dain Bosworth, therefore, advised the Board of
Directors to assess the probability that a cash transaction with
Maxxim would close at the price specified in the Maxxim offer.
Dain Bosworth noted that Maxxim had not yet provided Kirschner
with a draft of a definitive agreement, so that Maxxim's
conditions to completing the proposed transaction were unknown.
Dr. Harrison reported to the Board that the offers from
Orthomet, Biomet and Maxxim had caused considerable uncertainty
among Kirschner's sales agents. This had resulted in a reduction
of sales of orthopedic products and purchases of instrument sets
by these agents. If this situation were to continue, Dr.
Harrison believed that Kirschner's results might be seriously
impacted which could be an impediment to closing a transaction
with either Biomet or Maxxim. Dr. Harrison told the Board that
he had discussed this issue with Biomet; and to help resolve this
problem, Biomet was prepared to support expansion of Kirschner's
product offerings to Kirschner's agents to induce them to
maintain their relationships with Kirschner in light of the
contemplated strategic fit with Biomet. Dr. Harrison believed
that this would provide a strong financial incentive for the
agents to remain with Kirschner.
Dr. Harrison stated that he did not believe that a
combination with Maxxim offered a strategic alliance in the
orthopedic reconstructive implant business. Consequently, Dr.
Harrison believed that by announcing a transaction with Maxxim
and terminating the Biomet agreement, Kirschner would add to the
Kirschner sales agents' uncertainties which could, in turn, lead
to agent defections. This scenario would inevitably result in
additional financial losses for Kirschner which, in turn, could
give Maxxim a basis to terminate an agreement with Kirschner or
to renegotiate the terms, including the purchase price. The
Board also discussed its prior dealings with Maxxim, referenced
above, which were terminated in the course of negotiations.
After considering all of the above issues, the Kirschner
Board of Directors concluded that the likelihood of consummating
a transaction at the price offered by Maxxim would be subject to
considerable uncertainty due to the lack of a definitive
agreement and Maxxim's requirements for additional due diligence.
In addition, if Maxxim chose to offer only stock, the ability of
Kirschner shareholders to realize full value in the near term
would be uncertain. The Board further observed that the Biomet
transaction would remove uncertainties for Kirschner's agents,
offer important synergies for Kirschner and would likely be
consummated in accordance with the terms of the Merger Agreement.
The Board, therefore, decided to reject the Maxxim offer and to
proceed expeditiously to consummate the Biomet transaction.
On July 28, 1994, Maxxim revised its offer so that Kirschner
shareholders would receive cash only rather than cash or stock in
the amount previously offered. On July 29, 1994, the Kirschner
Board met and decided to reject the revised Maxxim offer for the
same reasons discussed by the Board at the July 25 meeting.
On August 12, 1994, KAC purchased from Figgie the Kirschner
Common Shares owned by Figgie, and a promissory note in the principal
amount of 329.5 million Spanish pesetas (approximately $2.5 million)
issued by Kirschner's Spanish subsidiary to Figgie for an aggregate
purchase price of $8.7 million. These Kirschner Common Shares
represent approximately 19.0% of the shares entitled to vote on the
Merger. See "The Special Meeting."
Reasons for the Merger
The Board of Directors of Biomet carefully considered the
terms of the Merger Agreement and has concluded that such terms
are fair and that the Merger is in the best interests of the
shareholders of Biomet. Biomet's Board of Directors viewed the
Merger with Kirschner as providing a strategic fit consistent
with Biomet's policy of growth through selective acquisitions.
The Board of Directors of Kirschner has determined that the
Merger Agreement and the Merger are in the best interests of, and
are fair to, the shareholders of Kirschner. In reaching this
determination, the directors consulted with legal counsel
concerning the duties of the Board and the terms of the Merger
Agreement. The directors also consulted with Dain Bosworth,
Kirschner's financial advisor, with respect to the financial
aspects and fairness of the transaction from a financial point of
view, as well as with senior management, and considered a number
of factors, including the following:
1. The written opinion of Dain Bosworth, that the
consideration to be offered in the Merger is fair, from a
financial point of view, to the shareholders of Kirschner. In
considering such opinion, the Board was aware that, upon delivery
thereof, Dain Bosworth became entitled to certain fees in
connection with its engagement and that additional fees would
become payable to Dain Bosworth contingent on consummation of the
Merger. See "Opinion of Kirschner's Financial Advisor."
2. The oral presentations of Dain Bosworth regarding the
various financial and other considerations deemed relevant to the
Board's evaluation of the Merger, including (a) a discounted cash
flow analysis of Kirschner; (b) a review and analysis of the
historical and current market prices of the Kirschner Common
Shares and the market prices and financial data relating to other
companies deemed by Dain Bosworth to be comparable to Kirschner;
and (c) a review and analysis of the prices and premiums paid in,
and other terms of, acquisition transactions deemed to be
relevant for purposes of Dain Bosworth's analysis. See "Opinion
of Kirschner's Financial Advisor."
3. The directors' familiarity with Kirschner's
business, financial condition, results of operations, business
strategy and prospects, current industry, economic and market
conditions, and the directors' assessment of the Merger as
compared to the benefits and risks associated with remaining
independent.
4. The fact that the Merger consideration represents a
premium of approximately 79% over the last sale price of a
Kirschner Common Share on May 25, 1994, the last trading day
prior to Kirschner's announcement that it had entered into a
letter of intent with Orthomet. See "Prospectus Summary - Market
Price and Dividend Information."
5. The likelihood that the conditions to the Merger will
be satisfied.
6. The terms and conditions of the Merger Agreement,
including the fact that, under certain conditions, Kirschner has
the right to terminate the Merger Agreement to accept an offer
more favorable to Kirschner's stockholders and that in connection
with such a termination Kirschner would be required to pay Biomet
a termination fee in the amount of $1 million. In addition, the
Merger Agreement provides for a $2 million earnest money deposit
to be posted by Biomet which would be forfeited to Kirschner if
the Merger Agreement is terminated by Kirschner because (a)
Biomet intentionally breaches or fails to perform its obligations
in any material respect under the Merger Agreement or (b) any
representation or warranty of Biomet contained in the Merger
Agreement is intentionally false in any material respect. See
"Terms of the Merger Agreement -- The Deposit and Break-up Fee."
Each of the foregoing factors was considered by the Board
during the course of its deliberations prior to entering into the
Merger Agreement in light of its knowledge of Kirschner and its
business and each directors' business judgment. In its
deliberations, the Board did not quantify or otherwise attempt to
assign relative weights to the specific factors considered in
determining to approve (and recommend that the shareholders
approve) the Merger Agreement and the Merger.
Opinion of Kirschner's Financial Advisor
Kirschner has retained Dain Bosworth to act as its financial
advisor in connection with the Merger and to provide an opinion
to the Board of Directors of Kirschner as to the fairness, from a
financial point of view, of the consideration to be received by
Kirschner's shareholders in connection with the Merger. The
amount of the consideration to be received by Kirschner's
shareholders was determined through negotiations between
Kirschner and Biomet and not by Dain Bosworth. See "Background
of the Merger."
Dain Bosworth was selected by Kirschner on the basis of its
experience in valuing securities in connection with mergers and
acquisitions, knowledge of Kirschner and other manufacturers of
orthopedic products and expertise in transactions involving
health care companies. Dain Bosworth is a nationally recognized
investment banking firm and is regularly engaged in the valuation
of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Dain
Bosworth has from time to time issued research reports and
recommendations on Biomet Common Shares, and in the ordinary
course of business makes a market in Biomet Common Shares. In
the course of its market making and other trading activities,
Dain Bosworth may, from time to time, have a long or short
position in, and buy and sell securities of, Biomet. Dain
Bosworth also periodically publishes research reports regarding
other companies that develop, manufacture, and market orthopedic
products.
Dain Bosworth has rendered to the Board of Directors of
Kirschner an opinion that the consideration to be received in the
Merger by holders of Kirschner Common Shares is fair to such
shareholders from a financial point of view. A copy of the
opinion of Dain Bosworth is attached as Appendix B to this Proxy
Statement/Prospectus.
As set forth in its opinion, Dain Bosworth relied on, and
did not independently verify, the accuracy and completeness of
the financial and other information furnished to it by Kirschner.
Dain Bosworth did not make an independent evaluation or appraisal
of the assets and liabilities of Kirschner or Biomet, and
expressed no opinion regarding the liquidation value of either
entity. Holders of Kirschner Common Shares are urged to read
Dain Bosworth's opinion in its entirety for a summary description
of the procedures followed, the factors considered and the
assumptions made by Dain Bosworth in rendering its opinion.
For purposes of its opinion, Dain Bosworth reviewed and
analyzed certain publicly available information relating to
Kirschner, as well as other information provided by Kirschner
including certain financial forecasts and internal management
reports. Dain Bosworth analyzed the historical reported market
prices and trading activity of Kirschner Common Shares, as well
as the earnings, rates of return, capitalization, dividends and
other characteristics of Kirschner and its Common Shares. Dain
Bosworth visited the corporate headquarters of Kirschner and also
held discussions with members of the senior management of
Kirschner regarding Kirschner's past and current business
operations, financial condition and future prospects.
Dain Bosworth used the foregoing information to further its
understanding of Kirschner and the market for Kirschner Common
Shares.
In conducting the review and in performing the analyses
described below, Dain Bosworth did not attribute any particular
weight to any information or analysis considered by it, but
rather made qualitative judgments as to the significance and
relevance of each factor and analysis. Accordingly, Dain
Bosworth believes that the information reviewed and the analyses
conducted must be considered as a whole and that considering any
portion of such information or analyses, without considering all
of such information and analyses, could create a misleading or
incomplete view of the process underlying its opinion.
Analysis of Selected Publicly Traded Companies. Dain
Bosworth compared Kirschner's financial and stock market
information to similar information for certain publicly traded
companies that develop, manufacture and market orthopedic
implants and other orthopedic support products. Companies
reviewed by Dain Bosworth included Biomet, Inc.; Mitek Surgical
Products, Inc.; Orthomet, Inc.; Orthofix International, N.V.;
Osteotech, Inc.; and Stryker Corporation (the "Comparable
Companies"). Of the companies that produce these items, the
Comparable Companies were those public companies determined by
Dain Bosworth to be most comparable to Kirschner based on a
number of criteria. These criteria included, but were not
limited to, the following: product offerings (with particular
focus on orthopedic implants and support products); size, as
measured by sales; sales growth rate; relative profitability as
measured by operating and net income margins; and net income
growth rate.
Dain Bosworth calculated valuation ratios based on published
stock prices for each of the Comparable Companies. The valuation
ratios were based upon several variables, including sales,
earnings before interest, taxes, depreciation and amortization
("EBITDA"), operating income, net income for the latest twelve
months, and projected net income for both the current and
following fiscal years. The projections for net income were
based upon consensus earnings estimates for the Comparable
Companies prepared by research analysts from various investment
firms.
After examining the historical performance and expectations
for Kirschner and the Comparable Companies, Dain Bosworth
determined that the lowest valuation ratios for the Comparable
Companies were the most appropriate ratios for valuing the
Kirschner Common Shares under this approach. Applying these
valuation ratios to Kirschner's historical and forecasted
financial parameters resulted in values for Kirschner Common
Shares ranging from $5.09 to $14.68 per share on a fully diluted
basis.
Analysis of Selected Merger and Acquisition Transactions.
Dain Bosworth reviewed numerous acquisitions involving target
companies engaged in the manufacturing and/or marketing of
medical devices and equipment and summarized the terms of two
selected acquisitions. The following table lists the
transactions that Dain Bosworth summarized (the "Comparable
Acquisitions"):
Effective Date of
Transactions Acquiring Company Acquired Company
December 7, 1992 Bergen Brunswig Corp. Durr-Fillauer Medical, Inc.
August 2, 1993 Bausch & Lomb, Inc. Dahlberg, Inc.
The Comparable Acquisitions were selected on the basis of
the comparability of the acquired companies to Kirschner with
respect to several factors. These factors included, but were not
limited to, sales attributable to the development, manufacture
and/or marketing of medical devices and equipment. In addition,
Dain Bosworth concentrated on transactions that occurred since
January 1, 1992, and those for which relevant financial data were
available.
For purposes of evaluating the Merger, valuation ratios were
calculated for each of the Comparable Acquisitions based upon
several variables, including sales, EBITDA, operating income and
net income. Based upon a review of the Comparable Acquisitions,
Dain Bosworth determined that the lowest valuation ratios for the
Comparable Acquisitions were the most appropriate ratios to apply
to Kirschner's historical financial results to determine values
for Kirschner Common Shares. These values ranged from $2.50 to
$19.64 per share on a fully diluted basis. In addition, the
Comparable Acquisitions were used as part of the information
reviewed to determine premiums paid for the acquisition of public
companies in relation to their respective share prices prior to
the announcement of an acquisition. In the case of the Comparable
Acquisitions, median premiums ranged from 39.1% to 47.4% based on
the acquired companies' share prices as of one day, one week and
four weeks prior to the acquisition announcements. This range of
premiums corresponds to values for Kirschner Common Shares ranging
from $8.35 to $8.84 per share based on the last sale price of
Kirschner Common Shares on May 25, 1994, the last trading day prior
to the announcement that Kirschner had entered into a letter of
intent to merge with Orthomet.
Similar data from other sources indicated that the average
control premium paid for drug, medical supply and medical
equipment companies in 1993 was approximately 34.8%. Applying
this premium to Kirschner's share price of $6.00 prior to the
announcement mentioned above corresponds to a value for Kirschner
Common Shares of $8.09 per share.
Discounted Cash Flow Analysis. Dain Bosworth assessed the
present values of future cash flows that Kirschner's business
activities could be expected to generate over a defined time
period and the residual value of Kirschner at the end of the
projected period (the "DCF Analysis"). In preparing the DCF
Analysis, Dain Bosworth used a set of projections prepared by
Kirschner management for the remainder of 1994 and all of 1995
and 1996. In conjunction with these forecasts, Dain Bosworth and
Kirschner's management mutually agreed that Kirschner's projected
revenue growth rate on a stand-alone basis could be reasonably
expected to decrease over the 1997-1998 forecast period to 5% for
periods thereafter. Operating margins for fiscal years 1997 and
1998 were estimated at the same percentage of net sales as for
1996, the last year of management's projections. The resulting
five-year projections (the "Base Case Plan") formed the basis of
the DCF Analysis.
The Base Case Plan was evaluated with respect to various
assumptions regarding discount rates and the growth rates for
residual earnings used to estimate the residual value of
Kirschner following the projection period. The discount rates
that were considered ranged from 13% to 21% and the growth rates
for residual earnings that were considered ranged from 2% to 8%.
The projected cash flows and residual value were discounted to
the present and adjusted for Kirschner's debt and cash as of the
most recent balance sheet date to determine values for Kirschner
Common Shares ranging from $3.75 to $10.70 per share on a fully
diluted basis.
Based on Kirschner's capital structure, the expected rates
of return on the shares of the Comparable Companies, current
capital market conditions, Kirschner's marginal tax rate and
other relevant factors, Dain Bosworth determined that the most
appropriate discount rate and growth rate for residual earnings
were 17% and 5%, respectively. Applying this discount rate and
growth rate for residual earnings to the projections resulted in
a value for Kirschner Common Shares of $6.27 per share on a fully
diluted basis.
Analysis of Biomet Common Shares. Dain Bosworth reviewed
and analyzed certain publicly available information relating to
Biomet and Biomet Common Shares in order to assess the relative
liquidity of the Biomet Common Shares that Kirschner's
shareholders would receive if Biomet elected to use shares rather
than cash as the Merger consideration. As part of its analysis,
Dain Bosworth analyzed the historical reported market prices,
earnings, rates of return, capitalization, dividends and other
characteristics of Biomet and Biomet Common Shares. Dain
Bosworth used the foregoing information to further its
understanding of Biomet and the market for Biomet Common Shares.
Dain Bosworth also calculated the expected incremental earnings
per share Biomet could expect to earn on the shares to be issued
to Kirschner's shareholders in the Merger and compared the
results with public market expectations for earnings on Biomet
Common Shares.
Dain Bosworth did not assign any particular weight to the
individual analyses described above, which represent a summary of
the material analyses performed by Dain Bosworth. Dain
Bosworth's determination regarding the fairness of the
transaction is not based on a mathematical model but rather a
body of information obtained from such analyses and qualitative
factors.
Kirschner has paid Dain Bosworth fixed engagement and
advisory fees totaling $50,000 for certain services performed as
Kirschner's financial advisor. In addition, Kirschner has paid
Dain Bosworth a fixed fee of $100,000 for the delivery of its
written opinion that is included in this Proxy
Statement/Prospectus. Also, Kirschner will pay a transaction fee
of $150,000 to Dain Bosworth for financial advisory services,
which is payable at the time of, and contingent upon, the
consummation of the Merger. Kirschner has also agreed to
reimburse Dain Bosworth for its reasonable out-of-pocket expenses
and to indemnify Dain Bosworth against certain liabilities
including those arising under securities laws.
Terms of the Merger Agreement
The following description of the Merger Agreement does not
purport to be comprehensive or definitive and is qualified in its
entirety by reference to the Merger Agreement which is
incorporated by reference herein. Copies of the Merger Agreement
will be provided to Kirschner shareholders, without charge, upon
request to Daniel P. Hann, Secretary of Biomet, at the address
provided herein. See "Incorporation of Certain Documents by
Reference."
The Merger
Pursuant to the Merger Agreement, Kirschner would be merged
with and into KAC, as a result of which the corporate existence
of KAC (the "Surviving Corporation") would continue unaffected,
the separate existence of Kirschner as a corporation would cease
and KAC and Kirschner would be a single corporation under
Delaware law and a wholly-owned subsidiary of Biomet. The Merger
will become effective at 12:01 a.m. on the date immediately
following the filing of a Certificate of Merger with the Delaware
Secretary of State. The name of the Surviving Corporation will
be "Kirschner Medical Corporation."
Conversion of Shares of KAC and Kirschner
The Merger Agreement provides that the Merger consideration
is to be paid solely in cash unless Biomet makes an election (the
"Stock Election") to pay the consideration in cash and Biomet Common
Shares prior to the mailing to Kirschner shareholders of a Proxy
Statement with respect to the Merger. Biomet made the Stock Election
on September 28, 1994.
The Merger consideration will be provided by the delivery by
Biomet to an Exchange Agent for the benefit of the former holders
of Kirschner Common Shares of (a) Biomet Common Shares in
exchange for 50% of the outstanding Kirschner Common Shares
(other than Kirschner Common Shares held by Biomet or KAC) (the
"Converted Kirschner Shares") and (b) cash in exchange for the
remaining 50% of the Converted Kirschner Shares in the amount of
$10.75 per share. The number of Biomet Common Shares to be
delivered will be determined by multiplying the number of
Converted Kirschner Shares to be exchanged for Biomet Common
Shares by a fraction (the "Conversion Ratio") the numerator of
which is $10.75 and the denominator of which is the average of
the last sale prices for Biomet Common Shares (the "Average
Biomet Price") as reported by NASDAQ-NMS for the ten consecutive
trading days ending on the fifth trading day prior to the date of
the closing of the Merger; however, in no event will the Conversion
Ratio be less than 0.9.
As of the Effective Time, the Kirschner Common Shares shall
no longer represent any interest in the equity of Kirschner, and
all certificates formerly representing Kirschner Common Shares
shall be deemed cancelled and shall represent only the right to
receive the Merger consideration.
Each of the Converted Kirschner Shares will, by virtue of
the Merger and without any action on the part of Kirschner, be
converted as of the Effective Time into the right to receive, at
the election of each Kirschner shareholder and subject to the
conditions and limitation set forth in the Merger Agreement,
either (i) all cash in the amount of $10.75 per share, or (ii)
all Biomet Common Shares, or (iii) a combination of cash and
Biomet Common Shares. Each Kirschner Common Share as to which a
valid shareholder election to receive Biomet Common Shares is
made will, subject to the limitations described below, be
converted in the Merger into the greater of (i) the number of
Biomet Common Shares determined by dividing $10.75 by the Average
Biomet Price, or (ii) 0.9 Biomet Common Shares. Except as
described below, each Kirschner Common Share as to which a
shareholder election to receive Biomet Common Shares is not
properly made will be converted into the right to receive cash in
the amount of $10.75 per share.
A form of election (which will be included on the letter of
transmittal to be sent to Kirschner shareholders) (the "Form of
Election") will be mailed promptly after the Effective Time to
shareholders of Kirschner of record as of the Effective Time.
To be effective, shareholder elections must be received by the
Exchange Agent on or before the 30th day following the Effective
Time. Kirschner Common Shares as to which a shareholder election
to receive Biomet Common Shares has been properly made are referred
to herein as "Electing Shares."
If the aggregate number of Biomet Common Shares which would
be issuable in exchange for Restriced Kirschner Shares and Electing
Shares (the "Requested Shares") exceeds the number of Biomet Common
Shares to be delivered as part of the Merger consideration (the
"Delivered Shares"), then each holder of Electing Shares will be
entitled to receive Biomet Common Shares for that number of whole
Electing Shares determined by multiplying the number of Delivered
Shares (less the number of Biomet Common Shares to be exchanged for
Restricted Kirschner Shares) by a fraction, the numerator of which
is the number of Electing Shares held by the particular Kirschner
shareholder and the denominator of which is the number of all
Electing Shares. Each Electing Share not converted into Biomet
Common Shares will be converted into the right to receive cash in
the amount of $10.75.
If the number of Delivered Shares exceeds the number of
Requested Shares, the Delivered Shares shall be distributed
first, to the holders of Restricted Kirschner Shares; then to the
holders of Electing Shares; then to the holders of Kirschner Common
Shares as to which no shareholder election is made, in the order
determined by random lot; and finally to the holders of Kirschner
Common Shares as to which a shareholder election to receive cash
is properly made, in the order determined by random lot, each
such holder to receive Delivered Shares with respect to one-half
of the Merger consideration to which that holder is entitled (until
the Delivered Shares are exhausted) and cash with respect to the
remainder of the Merger consideration to which that holder is entitled.
To the extent the allocations of the Delivered Shares
described above would result in the creation of fractional share
interests, the holders of remaining fractional share interests
shall be paid cash in lieu thereof. See "Fractional Share
Interests." The number of whole Biomet Common Shares representing
the aggregate of such fractional share interests (the
"Unallocated Biomet Shares") shall be distributed by random lot
to the holders of shares of Kirschner Common Shares who were
entitled to receive Biomet Common Shares as a result of the
allocation. No Kirschner shareholder will receive more than one
Unallocated Biomet Share.
Because of the limited number of Biomet Common Shares to be
delivered in the Merger, Kirschner shareholders electing to
receive Biomet Common Shares may receive cash for some or all of
their Kirschner Common Shares. Conversely, if a small number of
Kirschner shareholders elects to receive Biomet Common Shares,
shareholders who do not so elect may receive Biomet Common Shares
for some of their Kirschner Common Shares. The actual number of
Biomet Common Shares and the amount of cash to be received by each
Kirschner shareholder will vary depending on the actual Average
Biomet Price, and the number of Kirschner shareholders who elect
to receive Biomet Common Shares in the Merger. The failure of a
Kirschner shareholder to make an election to receive cash may
result in the increased possibility that the shareholder will
receive some Biomet Common Shares.
At the Effective Time, each Kirschner Common Share not held
by Biomet, KAC or a Dissenting Shareholder will be exchanged for
cash and/or Biomet Common Shares, as described above, the issued
and outstanding shares of KAC will be unaffected by the Merger
and Kirschner will be merged with and into KAC. Kirschner
Common Shares held by Biomet or KAC at the Effective Time will be
cancelled and no payment will be made therefor. Kirschner Common
Shares held by Dissenting Shareholders at the Effective Time will
be subject to the provisions of Section 262 of the DGCL. See
"Dissenters' Rights of Appraisal" and Appendix A.
If the sum of (a) the amount of cash which would be payable
to holders of fractional share interests, plus (b) the amount of
cash which would be necessary to pay the holders of Dissenting
Shares at the rate of $10.75 per Dissenting Share, would exceed
the amount of cash to be delivered by Biomet as described above,
the entire amount of the Merger consideration will be paid in
cash and, in such event, Kirschner, rather than KAC, shall be the
Surviving Corporation in the Merger as a wholly-owned subsidiary
of Biomet.
Fractional Share Interests
No certificates or scrip representing fractional Biomet
Common Shares shall be issued in the Merger and no holder of any
such fractional share interest shall be entitled to vote, to
receive any dividends or other distributions paid or declared on
Biomet Common Shares, or to exercise any other rights as a
shareholder of Biomet with respect to such fractional share
interest. Each holder of Kirschner Common Shares who would
otherwise be entitled to receive a fractional Biomet Common Share
in exchange for such holder's Kirschner Common Shares hereunder
shall be entitled upon surrender of certificates for Kirschner
Common Shares in accordance with the Merger Agreement to receive
in lieu of such fractional share an amount in cash equal to the
amount of such fraction multiplied by the Average Biomet Price.
The Deposit and Break-up Fee
Biomet has delivered to Kirschner an earnest money deposit
of $2 million (the "Deposit"). If the Merger is not consummated,
the Deposit will be refunded to Biomet, unless the Merger
Agreement is terminated (a) by Kirschner because of a Covenant
Default (as hereinafter defined) by Biomet or because of a
Representation Default (as hereinafter defined) by Biomet, in
either case as a result of a willful and intentional act or
failure to act by Biomet, or (b) by Biomet other than because of
a Covenant Default by Kirschner, a Representation Default by
Kirschner or a failure to satisfy any other material condition
precedent to Biomet's obligations set forth in the Merger
Agreement, in which case Kirschner would be entitled to keep all
of the Deposit as liquidated damages in consideration for
Kirschner's time and expense. See "Termination of the Merger
Agreement." In addition, Kirschner would be obligated to return
all or a portion of the Deposit and/or pay Biomet $1 million as
liquidated damages in consideration for Biomet's time and expense
if certain specified actions by an unrelated third-party involving
the acquisition of Kirschner or litigation against Kirschner,
Biomet or KAC should occur prior to the Effective Time.
Surrender of Kirschner Common Shares
After the Effective Time, the Exchange Agent will send a
letter of transmittal and Form of Election to each Kirschner
shareholder advising such shareholder of the terms of the exchange
effected by the Merger and the procedure for surrendering to the
Exchange Agent certificates evidencing Kirschner Common Shares in
exchange for a bank check or certificates evidencing Biomet Common
Shares or both, as the case may be. Subject to any abandoned
property or similar laws, the Exchange Agent, upon surrender to it
of a properly completed letter of transmittal and Form of Election
together with one or more certificates formerly representing
Kirschner Common Shares, will distribute to the holders of
certificates evidencing Kirschner Common Shares, as applicable,
a bank check in an amount equal to the cash for which such Kirschner
Common Shares were exchanged and/or a certificate for that number of
whole Biomet Common Shares for which such Kirschner Common Shares
were exchanged. In no event will the holder of any such surrendered
certificates be entitled to receive interest on the funds to be
received in the Merger.
After the Effective Time and until so surrendered, each
outstanding certificate formerly representing Kirschner Common
Shares (other than certificates held by Biomet or KAC or by
Dissenting Shareholders, if any) will be deemed for all corporate
purposes of Biomet to evidence ownership of the number of full
Biomet Common Shares or the right to receive the amount of cash
for which the Kirschner Common Shares represented thereby were
exchanged. However, the holder of such outstanding certificates
which are exchanged for Biomet Common Shares will not be entitled
to receive any dividend payable to holders of Biomet Common
Shares or cash payable in lieu of fractional shares until such
certificates are surrendered. Upon surrender of such
certificates, the record holder of the certificates of Biomet
Common Shares issued in exchange therefor will receive the amount
of dividends theretofore paid with respect to the full Biomet
Common Shares represented by such certificates on any date
subsequent to, and having a record date after, the Effective Time
and the amount of any cash payable to such holder in lieu of
fractional shares. No interest will be payable with respect to
the payment of such dividends or cash in lieu of fractional
shares on surrender of outstanding certificates.
Any part of the Merger consideration to which certificates
representing Kirschner Common Shares are not surrendered by the
expiration of six months from the Effective Time will, together
with any interest thereon, be paid over to Biomet by the Exchange
Agent, subject to any applicable abandoned property or similar
laws, and former shareholders of Kirschner shall thereafter be
required to surrender their certificates to Biomet for payment.
Agreements with Certain Members of Kirschner's Management
At the Effective Time, Biomet (a) will assume all of
Kirschner's obligations with respect to its outstanding incentive
stock options and provide for the issuance of Biomet Common
Shares upon the exercise thereof, (b) issue a non-incentive
option to purchase 30,000 restricted Biomet Common Shares to C.
Scott Harrison, and (c) issue incentive options to purchase
registered Biomet Common Shares under the Biomet Employee and
Non-Employee Director Stock Option Plan to the following members
of Kirschner's management, for the number of Biomet Common Shares
listed next to each individual's name: Roger Van Broeck, 30,000;
Lewis E. S. Parker, 30,000; Nicholas L. Gounaris, 20,000; and
Warren M. Gitt, 20,000. These management options shall vest in
equal annual installments over the seven years following the date
of the grant, shall be exercisable during the two-year period
following the vesting thereof and shall contain such other terms
and conditions as shall be prescribed by Biomet's Stock Option
Committee. Each of the named individuals (the "Kirschner
Managers") will enter into a non-compete agreement with Biomet
(collectively, the "Non-Compete Agreements"), pursuant to which
Biomet will have the right, exercisable in the event of a
termination of the employment of any of the Kirschner Managers
with Biomet during the one-year period following the Effective
Time, to prohibit the Kirschner Managers from competing with
Biomet for a period of one year following the date of notice to
the Kirschner Manager of Biomet's election to exercise that right
(the "Non-Compete Period"). If Biomet elects to exercise this right,
Biomet will be required to pay to the Kirschner Manager his base
salary during the Non-Compete Period.
It is anticipated that C. Scott Harrison will become a
member of the Board of Directors of Biomet following the closing
of the Merger.
Representations and Warranties
The Merger Agreement contains various representations and
warranties given by Kirschner to Biomet and KAC and by Biomet and
KAC to Kirschner relating to the organization and good standing
of the parties, their respective capitalization, the
accomplishment of all corporate procedures required for the
authorization of the Merger, pending legal matters, certain tax
and financial matters and certain other matters relating to the
business and operations of the respective entities. The Merger
Agreement also contains various covenants by Kirschner, Biomet
and KAC with respect to the conduct of their respective
businesses and certain other actions to be taken prior to the
Effective Time.
Conditions to the Merger
The Merger Agreement provides that consummation of the
Merger is contingent upon (1) the expiration of a preferential
right of Figgie to purchase certain Kirschner technology, (2)
the redemption of all outstanding rights to purchase Kirschner
Common Shares under Kirschner's shareholder rights plan, or
the amendment of the shareholder rights plan so that the
Kirschner Common Share Purchase Rights do not become exercisable
as a result of the Merger, (3) the amendment of the terms of
certain outstanding grants of Restricted Kirschner Shares to
impose certain additional conditions on the elimination of the
restrictions on the Biomet Common Shares to be issued in
replacement of the Restricted Kirschner Shares, (4) the assumption
by Biomet of Kirschner's obligation with respect to its outstanding
incentive stock options, and the issuance by Biomet of new options
to C. Scott Harrison and to the Kirschner Managers as described
under "Agreements with Certain Members of Kirschner's Management",
(5) the execution by the Kirschner Managers of the Non-Compete
Agreements, (6) the completion by each party to its satisfaction
of a due diligence review of the other, (7) the absence of any
material adverse change in the financial condition of Kirschner
or Biomet, (8) the expiration or termination of the waiting
period under Title II of the HSR Act, (9) the continued
effectiveness of the Registration Statement under applicable
federal and state securities laws and the eligibility of the
Biomet Common Shares to be issued in the Merger for quotation on
NASDAQ-NMS upon notice of issuance, (10) receipt by Kirschner of
an opinion from Dain Bosworth that the Merger is fair to
Kirschner's shareholders from a financial point of view, (11) the
approval of the Merger by Kirschner's shareholders and by Biomet,
as sole stockholder of KAC, and (12) receipt by Kirschner and
Biomet of an opinion from Manatt, Phelps & Phillips to the effect
that the Merger will be treated as a qualifying reorganization
under Section 368 of the Code. A number of these coniditions have
been fully or partially satisfies, as discussed below.
A Registration Statement on Form S-4 under the Securities
Act, which includes the information set forth in this Proxy
Statement/Prospectus, has been filed by Biomet with the
Securities and Exchange Commission with respect to the Biomet
Common Shares to be issued in connection with the Merger, and
that Registration Statement has been declared effective. The
filings required by the HSR Act have been made and the
prescribed waiting period expired on September 14, 1994.
Dain Bosworth, Kirschner's financial advisor, has rendered
its written opinion to the Board of Directors of Kirschner that
the consideration to be received in the Merger by the holders of
Kirschner Common Shares is fair, from a financial point of view,
to such holders. This opinion, which is attached to the Proxy
Statement/Prospectus as Appendix B, should be read in its
entirety with respect to the assumptions made and other matters
considered by Dain Bosworth in rendering such opinion. See
"Opinion of Kirschner's Financial Advisor."
Manatt, Phelps & Phillips has delivered its written opinion
to Biomet and Kirschner stating that the Merger will be treated
as a qualifying reorganization under Section 368 of the Code.
This opinion is based on certain assumptions and is subject to
various limitations and qualifications set forth therein. See
"Federal Income Tax Consequences of the Merger."
Biomet and Kirschner each has completed its due diligence
review of the other and is satisfied as to the results thereof.
The preferential right of Figgie to purchase certain Kirschner
technology has expired. The Boards of Directors of Biomet, KAC
and Kirschner have approved the Merger. Biomet holds and is
entitled to vote all of the shares of Common Stock of KAC and
has voted those shares in favor of the Merger and of the approval
and adoption of the Merger Agreement. No vote of the shareholders
of Biomet is required to approve the Merger. If the Kirschner
shareholders approve the Merger at the Special Meeting, the Effective
Time is expected to occur at 12:01 a.m. on the day following the
meeting, assuming all other conditions have been met or waived.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to
the Effective Time whether before or after approval by the
shareholders of Kirschner: (a) by mutual agreement of Biomet and
Kirschner; (b) by either party upon written notice to the other
party to the effect that in the judgment of the notifying party,
the other party (i) shall have breached or failed to perform in
any material respect any of its covenants or obligations under
the Merger Agreement (a "Covenant Default"), (ii) any
representation or warranty of the other party contained in the
Merger Agreement is false or misleading in any material respect
(a "Representation Default"); or (iii) if any other material
condition precedent to such party's performance of its obligations
under the Merger Agreement is not capable of being met; or (c) by
Kirschner if required by the appropriate discharge of the
fiduciary duties of its Board of Directors. The merger Agreement
will terminate automatically if the Merger has not been consummated
by December 31, 1994.
Expenses
Except as described under "The Deposit and Break-up Fee",
Biomet and Kirschner shall each be required to pay its own expenses
incident to the preparation for and the consummation of the Merger
Agreement.
Dissenters' Rights of Appraisal
Pursuant to Section 262 of the General Corporation Law of
the State of Delaware, any record holder of Kirschner Common
Shares who does not wish to accept the consideration (cash or
Biomet Common Shares) to be paid pursuant to the Merger Agreement
and who continuously holds such shares through the Effective Time
of the Merger may dissent from the Merger and elect to have the
fair value of his or her Kirschner Common Shares (exclusive of
any element of value arising from the accomplishment or
expectation of the Merger) judicially appraised and paid to him
or her in cash, provided that he or she complies with the
provisions of Section 262.
Biomet shareholders will not be entitled to dissenters'
rights in connection with the Merger.
The following is a brief summary of the statutory procedures
to be followed by a record holder of Kirschner Common Shares in
order to dissent from the Merger and perfect appraisal rights
under Delaware law. This summary is not intended to be complete
and is qualified in its entirety by reference to Section 262, the
text of which is set forth in Appendix A hereto.
If any record holder of Kirschner Common Shares elects to
exercise his or her right to dissent from the Merger and demand
appraisal, the shareholder must satisfy each of the following
conditions:
(i) the shareholder must deliver a written demand for
appraisal of his or her shares to Kirschner before the
taking of the vote with respect to the Merger (this written
demand for appraisal must be in addition to and separate
from any proxy or vote against the Merger; neither voting
against, abstaining from voting, nor failing to vote on the
Merger will constitute a demand for appraisal within the
meaning of Section 262); and
(ii) the shareholder must not vote in favor of the
Merger (a failure to vote will satisfy this requirement, but
a vote in favor of the Merger, by proxy or in person, or the
return of a signed proxy which does not specify a vote
against approval and adoption of the Merger Agreement or a
direction to abstain, will constitute a waiver of such
stockholder's right of appraisal and will nullify any
previously filed written demand for appraisal).
If any shareholder fails to comply with either of these
conditions and the Merger becomes effective, he or she will be
entitled to receive the consideration in connection with the
Merger as provided in the Merger Agreement, and will have no
appraisal rights with respect to his or her Kirschner Common
Shares.
All written demands for appraisal should be addressed to:
Kirschner Medical Corporation, 9690 Deereco Road, Timonium,
Maryland 21093, Attention: Secretary. All demands must be
received at this address before the taking of the vote on the
proposal to approve and adopt the Merger Agreement at the Special
Meeting, and should be executed by, or on behalf of, the record
holder of Kirschner Common Shares. Such demand must reasonably
inform Kirschner of the identity of the shareholder and that such
shareholder is thereby demanding appraisal of his or her shares.
To be effective, a demand for appraisal must be executed by
or for the shareholder of record, fully and correctly, as such
shareholder's name appears on his or her share certificate(s) and
cannot be made by the beneficial owner if he or she does not also
hold the shares of record. The beneficial holder must, in such
case, have the registered owner submit the required demand in
respect of such shares.
If Kirschner Common Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian,
execution of a demand for appraisal should be made in such
capacity. If Kirschner Common Shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, such
demand must be executed by or for all joint owners. An
authorized agent, including one of two or more joint owners, may
execute the demand for appraisal for a shareholder of record;
however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner,
such as a broker, who holds Kirschner Common Shares as a nominee
for others may exercise his or her right of appraisal with
respect to the shares held for one or more beneficial owners,
while not exercising such right for other beneficial owners. In
such case, the written demand should set forth the number of
shares as to which the record owner dissents. Where no number of
shares is expressly mentioned, the demand will be presumed to
cover all Kirschner Common Shares held in the name of such record
owner.
Within ten days after the Effective Time of the Merger, the
Surviving Corporation of the Merger must give written notice of
the date that the Merger has become effective to each shareholder
who has filed a written demand for appraisal and who did not vote
in favor of the Merger. Within 120 days after the Effective Time
of the Merger, but not thereafter, either the Surviving
Corporation or any holder of Kirschner Common Shares who has
complied with the requirements of Section 262 may file a petition
in the Delaware Court of Chancery demanding a determination of
the fair value of the Kirschner Common Shares held by all
shareholders entitled to appraisal. Biomet does not currently
intend to cause the Surviving Corporation to file such a
petition. Inasmuch as the Surviving Corporation has no
obligation to file such a petition, if no such shareholder does
so within the period specified, previous written demands for
appraisal of all such shareholders will be nullified. In any
event, at any time within 60 days after the Effective Time of the
Merger (or at any time thereafter with the written consent of the
Surviving Corporation), any shareholder who has demanded
appraisal has the right to withdraw that demand and to accept
payment of the consideration in connection with the Merger as
provided in the Merger Agreement. Within 120 days after the
Effective Time of the Merger, any dissenting shareholder, upon
written request, is entitled to receive from the Surviving
Corporation a statement setting forth the aggregate number of
shares not voted in favor of the Merger and with respect to which
demands for appraisal have been received and the aggregate number
of holders of such shares. That statement is to be mailed to the
shareholder within 10 days after his or her written request
therefor is received by the Surviving Corporation or within 10
days after the expiration of the period for delivery of demands
for appraisal, whichever is less.
If a petition for appraisal is duly filed by a shareholder
and a copy thereof is delivered to the Surviving Corporation, the
Surviving Corporation will then be obligated within 20 days to
provide the Court of Chancery with a duly verified list
containing the names and addresses of all shareholders who have
demanded an appraisal of their shares and with whom agreements as
to the value of their shares have not been reached by the
Surviving Corporation. After notice to such shareholders by
registered or certified mail and in a Wilmington, Delaware
newspaper, the Court of Chancery is empowered to conduct a
hearing upon the petition to determine those shareholders who
have complied with Section 262 and who have become entitled to
appraisal rights under that section. The Court may require the
shareholders who demanded appraisal of their shares to submit
their share certificates to the Register of Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
shareholder fails to comply with such direction, the court may
dismiss the proceedings as to such shareholder.
Upon application of the Surviving Corporation or any
stockholder entitled to participate in the appraisal proceeding,
the Court may permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal before the final
determination of the shareholders entitled to appraisal. Any
shareholder whose name appears on the list filed with the Court
and who has submitted his or her certificates for shares to the
Register of Chancery, if required to do so, may participate fully
in the proceedings until a final determination that he or she is
not entitled to appraisal.
After determination of the shareholders entitled to an
appraisal, the Court of Chancery will appraise the Kirschner
Common Shares determining their fair value exclusive of any
element of value arising from the accomplishment or expectation
of the Merger. When the value is so determined, the Court will
direct the payment by the Surviving Corporation of such value,
with interest thereon if the Court so determines, to the
shareholders entitled to receive the same, upon surrender to the
Surviving Corporation by such shareholders of the certificates
representing such Kirschner Common Shares. In determining the
fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the Surviving
Corporation would have had to pay to borrow money during the
pendency of the proceeding. The Court may choose whether the
interest will be simple or compound.
In determining fair value, the Court will take into account
all relevant factors. In Weinberger v. UOP, Inc., the Delaware
Supreme Court expanded the factors that could be considered in
determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court
stated that, in making this determination of fair value, the
Court of Chancery must consider market value, asset value,
dividends, earning prospects, the nature of the enterprise and
any other facts which were known or which could be ascertained as
of the date of the merger which throw any light on future
prospects of the merged corporation. In addition, the Delaware
Supreme Court stated that elements of future value "which are
known or susceptible of proof as of the date of the merger and
not the product of speculation" may be considered. The Court
also stated that "only the speculative elements of value that may
arise from the 'accomplishment or expectation' of the merger are
excluded." The value so determined could be more or less than,
or equal to, the consideration in connection with the Merger as
provided for under the Merger Agreement.
Costs of the appraisal proceeding may be determined by the
Court and may be taxed by the Court of Chancery upon the parties
thereto (i.e., the Surviving Corporation and the former Kirschner
shareholders participating in the appraisal proceeding) as the
Court deems equitable in the circumstances. Upon application of
a shareholder, the Court may order all or a portion of the
expenses incurred by any shareholder in connection with the
appraisal proceeding, including without limitation, reasonable
attorneys' fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
Any shareholder who has demanded appraisal rights will not,
from and after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or to receive payment of
dividends or any other distribution with respect to such shares
(other than dividends or distributions, if any, payable to
holders of record as of a record date prior to the Effective
Time) or to receive the payment of the consideration in
connection with the Merger as provided in the Merger Agreement;
provided, however, that if no petition for appraisal is filed
within 120 days after the Effective Time as provided above, or if
such shareholder delivers to the Surviving Corporation a written
withdrawal of such demand for appraisal and an acceptance of the
Merger, either within 60 days after the Effective Time, as
provided above, or thereafter with the written approval of the
Surviving Corporation, then the right of such shareholder to
appraisal will cease. No appraisal proceeding in the Court of
Chancery will be dismissed as to any shareholder without the
approval of the Court.
Accounting Treatment
Biomet intends to account for the Merger as a purchase.
Under the purchase method of accounting, the purchase price is
assigned to the net assets acquired based on the fair values of
the assets acquired and liabilities assumed.
Federal Income Tax Consequences of the Merger
The parties have received an opinion of Manatt, Phelps &
Phillips, special counsel to Kirschner, to the effect that the
Merger will be treated as a qualifying reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. This opinion
is based upon a number of conditions, all of which must be
satisfied for the Merger to be a tax-free reorganization. Two
conditions are that (a) at least 40% of the aggregate Merger
consideration (including the amount paid by Biomet to acquire
the Kirschner Common Shares from Figgie) must be made up of
Biomet Common Shares, and (b) Kirschner shareholders who receive
Biomet Common Shares in the Merger do not, at the Effective Time
of the Merger, have a present plan or intention to dispose of
the Biomet Common Shares received.
The following discussion summarizes the federal income tax
treatment to shareholders of Kirschner if the Merger is treated
as a qualifying reorganization.
Exchange of Kirschner Common Shares Solely for Biomet Common
Shares. A Kirschner shareholder who receives Biomet Common
Shares pursuant to the Merger will recognize no gain or loss,
except with respect to the cash received for a fractional share
interest, if any. See "Fractional Share Interests" below.
The aggregate basis of the Biomet Common Shares received by
such shareholder (including any fractional share interest to
which he or she may be entitled) will be the same as the
shareholder's aggregate basis in the shares surrendered in
exchange therefor, decreased by any cash received and increased
by the amount of gain recognized on the exchange.
The holding period of the Biomet Common Shares received by
such shareholder (including any fractional share interest to
which he or she may be entitled) will include the period during
which the shareholder's Kirschner Common Shares were held,
provided such Kirschner Common Shares were held as a capital
asset at the Effective Time of the Merger.
Exchange of Kirschner Common Shares for a Combination of
Cash and Biomet Common Shares. A Kirschner shareholder who
receives cash and Biomet Common Shares pursuant to the Merger
will recognize gain, if any, on the exchange up to the amount of
the cash received; no gain will be recognized on the portion of
the Merger consideration received in Biomet Common Shares. Any
recognized gain will be eligible for capital gain treatment
(assuming the shareholder's Kirschner Common Shares were held as
a capital asset by the shareholder at the Effective Time of the
Merger) unless such receipt of cash has the effect of the
distribution of a dividend, as provided in Section 356 of the
Code, in which case such gain will be taxable as ordinary income
to the extent of the recipient's ratable share of the accumulated
earnings and profits of Kirschner. The principles applicable
under Section 302 of the Code and the United States Supreme Court
decision in Commissioner v. Clark, 109 S. Ct. 1455, 89-1 U.S.T.C.
Paragraph 9230 (1989), will serve as guidelines in determining whether
the receipt of cash has the effect of the distribution of a
dividend under Section 356 of the Code. Under those principles,
a distribution to a shareholder will not be considered to have
the effect of the distribution of a dividend if it is
"substantially disproportionate" with respect to the shareholder
or if it is "not essentially equivalent to a dividend" to the
shareholder. For purposes of these tests and under Clark, the
Kirschner shareholder presumably is treated as if he or she
received solely Biomet Common Shares pursuant to the Merger, and
then received cash through a redemption by Biomet of a number of
such shares having a value equal to the cash amount.
Under Clark, a distribution will be "substantially
disproportionate" with respect to a Kirschner shareholder if the
shareholder's proportionate interest in the Biomet Common Shares
actually held by the shareholder after the Merger is less than
80% of the shareholders' proportionate interest in the Biomet
Common Shares that the shareholder would have held if solely
Biomet Common Shares had been distributed in the Merger. In
applying this test for purposes of Section 356 of the Code, the
constructive ownership rules of Section 318 of the Code require
that the shareholders be treated as holding not only their own
shares, but also shares held by certain related persons and
entities. In addition, shareholders electing to receive cash for
all or part of their Kirschner Common Shares should be aware
that, if the cash limitation specified in the Merger Agreement is
reached resulting in proration of the available cash to those
shareholders electing cash and the receipt by such shareholders
of Biomet Common Shares, it is possible that such shareholders
will not be able to satisfy the "substantially disproportionate"
test. Even though a distribution does not satisfy the
"substantially disproportionate" test discussed above, it still
may be "not essentially equivalent to a dividend" to a
shareholder depending upon the shareholder's particular facts and
circumstances. Under the test established by the United States
Supreme Court, a distribution is not essentially equivalent to a
dividend if it results in a meaningful reduction of the
shareholder's proportionate interest in the corporation. In
applying this test, the IRS considers the effect on the
shareholder's right to vote, right to participate in earnings and
profits, and right to share in the net assets of the corporation
upon liquidation. The IRS will also take into account such
factors as constructive stock ownership under Section 318 of the
Code, the shareholder's ability, directly or indirectly, to
control the corporation, and whether the redemption will be a pro
rata distribution among the shareholders.
The aggregate basis of the Biomet Common Shares received by
such shareholder (including any fractional share interest to
which he or she may be entitled) will be the same as the
aggregate basis of the Kirschner Common Shares exchanged,
decreased by any cash received and increased by the amount of
gain recognized on the exchange.
The holding period of the Biomet Common Shares received by
such shareholders (including any fractional share interest to
which he or she may be entitled) will include the period during
which the shareholder's Kirschner Common Shares were held,
provided such Kirschner Common Shares were held as a capital
asset at the Effective Time of the Merger.
Exchange of Kirschner Shares Solely for Cash. Cash received
by holders of shares of Kirschner Common Shares who receive
solely cash in exchange for their shares will be treated as
received by the shareholder as a distribution in redemption of
the shareholder's Kirschner Common Shares, subject to the
provisions and limitations of Section 302 of the Code. Those
shareholders who receive solely cash as a result of the Merger
and hold no Biomet Common Shares directly or indirectly through
the stock ownership attribution rules of Section 318 of the Code
will be treated as having a complete termination of interest
within the meaning of Section 302(b)(3) of the Code. As provided
in Section 1001 of the Code, gain or loss will be realized and
recognized by such shareholders in an amount equal to the
difference between the cash received and the adjusted basis of
the Kirschner Common Shares surrendered. Provided the Kirschner
Common Shares were capital assets in the hands of such
shareholders at the Effective Time of the Merger, the gain or
loss recognized will be a capital gain or loss (either short-term
or long-term depending on the holding period of the Kirschner
Common Shares) subject to the provisions and limitations of
Subchapter P of Chapter 1 of the Code, relating to the treatment
of capital gains and losses for federal income tax purposes.
Holders of Kirschner Common Shares who elect to receive cash
in the Merger should be aware that, if the number of Kirschner
shareholders who elect to receive Biomet Common Shares is not
sufficient to require the issuance of all of the Merger
consideration to be paid in the form of Biomet Common Shares,
resulting in proration of the available cash to those
shareholders electing cash and the receipt of some Biomet Common
Shares by such shareholders, such shareholders will not be
treated as having a complete termination of interest. In that
event, it is possible that such shareholders will be able to
satisfy the "substantially disproportionate" or the "not
essentially equivalent to a dividend" tests discussed above and
be eligible for capital gain treatment with respect to the cash
received. If such shareholders cannot meet either test for
capital gain treatment, the receipt of cash may be treated as
having the effect of a distribution of a dividend as provided in
Section 356 of the Code, resulting in the gain being treated as
ordinary dividend income to the extent of the recipient's ratable
share of the accumulated earnings and profits of Kirschner. See
"Exchange of Kirschner Common Shares for a Combination of Cash
and Biomet Common Shares" above.
Fractional Share Interests. No fractional shares of Biomet
Common Shares will be issued in the Merger. Cash payments received
by Kirschner shareholders in lieu of fractional Biomet Common
Shares will be treated as received by such shareholders as a
distribution in redemption by Biomet of that fractional share
interest and will be treated as a distribution in full payment in
exchange for the fractional share surrendered, resulting in
capital gain or loss assuming the Kirschner Common Shares
exchanged for cash in lieu of the fractional shares were held as
a capital asset at the Effective Time of the Merger.
Excess Dissenters. If the sum of (a) the amount of cash
which would be payable to holders of fractional share interests
plus (b) the amount of cash which would be necessary to pay the
holders of Dissenting Shares at the rate of $10.75 per Dissenting
Share, would exceed the amount of cash to be delivered by Biomet
as described under "The Merger -- Terms of the Merger Agreement,"
the entire amount of the Merger consideration will be paid in
cash and Kirschner, rather than KAC, will be the Surviving
Corporation in the Merger as a wholly-owned subsidiary of Biomet.
Under these circumstances, the Merger would fail to qualify as a
reorganization under Sections 368 (a)(1)(A) and 368 (a)(2)(D) of
the Code, and Kirschner shareholders would be taxed as described
under "Exchange of Kirschner Shares Solely for Cash" above.
Net Operating Loss. The Merger will result in an ownership
change for Kirschner within the meaning of Section 382 of the
Code. Accordingly, use of Kirschner's net operating loss
carryovers by the Biomet group after the Merger will be
restricted. Such pre-change losses are also restricted as to
their use by the Biomet group under the consolidated return
"separate return limitation year" rules.
THE FOREGOING IS INTENDED TO BE ONLY AN OVERVIEW OF CERTAIN
TAX CONSEQUENCES OF THE MERGER AND SHOULD NOT BE CONSIDERED TO BE
TAX ADVICE. THIS TAX DISCUSSION DOES NOT PURPORT TO DEAL WITH
ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO
PARTICULAR SHAREHOLDERS IN VIEW OF THEIR INDIVIDUAL
CIRCUMSTANCES. KIRSCHNER SHAREHOLDERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES WITH RESPECT TO THE FOREGOING MATTERS AND ANY OTHER
CONSIDERATIONS WHICH MAY BE APPLICABLE TO THEM.
Backup Withholding
When exchanging certificates representing Kirschner Common
Shares for certificates representing Biomet Common Shares,
holders of Kirschner Common Shares (other than certain entities
that are exempt from these requirements, such as corporations)
may be required to complete and return to the exchange agent a
Form W-9, Payor's Request for Taxpayer Identification Number and
Certification, providing their taxpayer identification number and
certifying that they are not subject to backup withholding. If a
shareholder fails to provide a completed Form W-9 to Biomet,
federal law requires Biomet to withhold 31% of any payment,
whether in cash or other property due upon the certificates
surrendered.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated
financial statements (the "Pro Forma Statements") are required
by the rules of the Securities and Exchange Commission and are
provided for comparative purposes only. The Pro Forma Statements
should not be considered indicative of the results which would
have been or will be achieved since they are based on historical
rather than prospective information and include certain
assumptions which are subject to change.
The Pro Forma Statements illustrate the effect of the
transactions between Biomet and Kirschner, and are based on
historical financial statements of Biomet as of and for the year
ended May 31, 1994 and on historical financial statements of
Kirschner as of and for the twelve-month period ended March 31,
1994. These statements reflect how Biomet's consolidated balance
sheet might have appeared if the transactions had occurred on
May 31, 1994 and how Biomet's consolidated statement of income
might have appeared if the transactions had occurred at the
beginning of the fiscal year ended May 31, 1994. Biomet will
account for the acquisition of Kirschner using the purchase
method.
The Pro Forma Statements are unaudited and should be read
in conjunction with the accompanying notes thereto and with the
historical financial statements and related notes of Biomet and
Kirschner incorporated by reference herein. The pro forma
purchase adjustments are based on assumptions and estimates made
specifically for the purpose of preparing these Pro Forma
Statements. The final purchase adjustments to the accounts of
Kirschner may vary, based upon changes in estimated values
resulting from final reports of independent appraisals and
other factors impacting the net assets of Kirschner. In the
opinion of Biomet's management, these Pro Forma Statements are
reasonable under the circumstances.
BIOMET, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
as of May 31, 1994
(in thousands)
Historical Pro-Forma
------------------ -----------------------
Biomet Kirschner Adjustment Consolidated
------ -------- ---------- ------------
ASSETS
(5)$ (8,700)
Current assets: (6) (15,892)
Cash and cash equivalents $ 70,391 $ 1,400 (7) (15,742) $ 31,457
Short-term investments 70,451 -- -- 70,451
Accounts and notes receivable, net 96,800 18,058 -- 114,858
Inventories 92,263 18,332 -- 110,595
(1) 5,700
Prepaid expenses and other 12,322 768 (3) 570 19,360
-------- ------- ------- --------
Total current assets 342,227 38,558 (34,064) 346,721
Property, plant and equipment, net 51,124 8,549 -- 59,673
(5) 2,500
(5) 6,200
(6) 31,600
(8) (2,500)
Investment in and advance to Kirschner -- -- (9)(37,800) --
Investment in and
advances to affiliates 1,678 -- -- 1,678
Other assets 2,022 895 -- 2,917
Intangible assets, net 9,599 583 -- 10,182
Excess acquisition costs over fair (2) (6,273)
value of acquired net assets 11,427 6,273 (4) 14,431 25,858
-------- -------- -------- --------
Total assets $418,077 $ 54,858 $(25,906) $447,029
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,606 $ 2,371 (7)$(2,371) $ 1,606
(7) (2,593)
Long-term debt, current -- 5,093 (8) (2,500) --
Capital leases, current -- 214 (7) (214) --
Accounts payable 18,604 3,336 -- 21,940
Accrued income tax 13,620 1,069 -- 14,689
Other accrued expenses 19,989 7,054 (3) 1,500 28,543
-------- ------- -------- --------
Total current liabilities 53,819 19,137 (6,178) 66,778
Long-term debt and capital leases -- 10,564 (7)(10,564) --
Other liabilities 6,975 285 -- 7,260
-------- ------- -------- --------
Total liabilities 60,794 29,986 (16,742) 74,038
Shareholders' equity: (6) 15,708
Common shares 47,290 344 (9) (344) 62,998
Additional paid-in-capital 13,606 37,229 (9)(37,229) 13,606
Retained earnings (deficit) 299,510 (11,642) (9) 11,642 299,510
Cumulative translation adjustment (3,123) (1,059) (9) 1,059 (3,123)
-------- ------- -------- --------
Total shareholders' equity 357,283 24,872 (9,164) 372,991
-------- ------- -------- --------
Total liabilities and
shareholders' equity $418,077 $54,858 $(25,906) $447,029
======== ======= ======== ========
The accompanying notes are part of the pro forma condensed consolidated
financial statements.
BIOMET, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
for the year ended May 31, 1994
(in thousands, except per share amounts)
Historical Pro-Forma
------------------ ------------------------
Biomet Kirschner Adjustments Consolidated
------ --------- ----------- ------------
Net sales $373,295 $ 66,728 $ -- $440,023
Cost of sales 114,829 28,406 -- 143,235
-------- -------- ------- --------
Gross profit 258,466 38,322 -- 296,788
Selling, general and (12) (182)
administrative expenses 136,191 31,308 (13) 960 168,277
Research and development expense 20,521 1,729 -- 22,250
-------- -------- ------- --------
Operating income 101,754 5,285 (778) 106,261
Other income (expense), net 5,867 (269) (10) (2,290) 3,308
Interest expense (589) (2,705) (11) 2,705 (589)
-------- -------- ------- --------
Income from continuing operations
before income taxes 107,032 2,311 (363) 108,980
Provision for income taxes 37,214 451 (14) 160 37,825
-------- -------- ------- --------
Income from continuing operations $ 69,818 $ 1,860 $ (523) $ 71,155
======== ======== ======= ========
Earnings per share
from continuing operations $ .61 $ .54 $ .61
===== ===== =====
Weighted average shares 115,215 3,463 116,643
======= ===== =======
The accompanying notes are part of the pro forma condensed consolidated
financial statements.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For purposes of the pro forma condensed consolidated
balance sheet, it is assumed that the acquisition by Biomet of
Kirschner occurred on May 31, 1994. For purposes of the pro forma
condensed consolidated statement of income, it is assumed that
the acquisition by Biomet of Kirschner occurred at the beginning
of the fiscal year ended May 31, 1994. Both pro forma condensed
financial statements reflect, on a pro forma basis, Biomet's
ownership of 100% of the issued and outstanding Kirschner Common
Shares. Kirschner's amounts are as of and for the twelve-month
period ended March 31, 1994, as amounts as of and for the year
ended May 31, 1994 are not practicable to determine.
(Amounts in thousands)
Cost of acquisition:
Purchase price of 2,922,508 shares
representing 81% of Kirschner's
issued and outstanding common shares $ 31,417
Purchase price of 685,222 shares from
Figgie International Inc. ("Figgie") on
August 12, 1994, representing 19% of
Kirschner's issued and outstanding
common shares 6,200
Estimated acquisition costs 183
--------
$ 37,800
========
Net assets acquired:
Kirschner's shareholders' equity as of
March 31, 1994 $ 24,872
Fair value adjustments to reflect
increase (decrease) in book value:
Deferred taxes 5,700 (1)
Excess acquisition cost over
estimated fair value of acquired
net assets ("Goodwill") of Kirschner (6,273) (2)
Accrued liabilities, net of deferred
tax benefit (930) (3)
Goodwill associated with the
acquisition of Kirschner by Biomet 14,431 (4)
--------
$ 37,800
========
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONCLUDED
(1) Adjustment to Kirschner's deferred tax valuation allowance.
(2) Write-off of Kirschner's Goodwill which has no continuing
value to Biomet.
(3) To record liabilities incurred in the transaction but not reflected
on Kirschner's consolidated balance sheet (for example, contingencies
that are probable and subject to reasonable estimation), net of
related tax benefit.
(4) To record Goodwill associated with the acquisition of Kirschner
by Biomet.
(5) Adjustment to record the August 12, 1994 acquisition of 685,222
Kirschner Common Shares from Figgie and the purchase of a $2.5
million promissory note held by Figgie and issued by Kirschner's
Spanish subsidiary, IQL.
(6) To record Biomet's purchase for cash of 40.5% of Kirschner's issued
and outstanding shares, the exchange of 40.5% of Kirschner's issued
and outstanding common shares for Biomet Common Shares and the
payment of estimated costs.
(7) To reflect the repayment of Kirschner's short-term borrowings and
long-term debt.
(8) Elimination of intercompany note receivable and payable.
(9) Elimination of Biomet's investment in Kirschner and the related
shareholders' equity.
(10) Decrease investment income as a result of the reduction of cash and
cash investments used for the acquisition and the payoff of debt.
(11) Elimination of interest expense relating to the payoff of debt.
(12) Elimination of amortization expense relating to Kirschner's Goodwill
written off at acquisition date.
(13) Amortization of Goodwill using the straight-line method over a 15
year period.
(14) Income tax effect of adjustments (10) and (11), assuming an effective
tax rate of 38%.
INFORMATION WITH RESPECT TO KIRSCHNER
General
Kirschner was incorporated in Delaware in June 1983 and is
the successor to a business begun in 1935 which was acquired by
Hazleton Laboratories Corporation ("Hazleton") in 1969. On
January 2, 1986, Hazleton distributed as a dividend to its
shareholders all of the outstanding common stock of Kirschner,
which resulted in Kirschner becoming an independent publicly-
owned company. Kirschner manufactures products in the United
States and Spain.
Kirschner designs, develops, manufactures and markets
orthopedic reconstructive implant devices and related instru-
mentation, fracture fixation devices and musculoskeletal
orthopedic support products. Kirschner's reconstructive implant
devices consist of titanium and cobalt chrome joint implants for
knees, hips and shoulders. Fracture fixation devices include
bone plates, pins, screws, an external fixator and bioabsorbable
pins. Kirschner's orthopedic support products are used in the
treatment and prevention of musculoskeletal injuries and include
back supports, knee immobilizers, cervical collars, wrist and
elbow supports, splints, elastic compression devices, synthetic
cast material and orthopedic traction framing equipment.
Kirschner's products are sold under a variety of trademark names,
including Performance, Neer II, Kirschner II-C, Dimension,
Integrity, K-Cast Kool Kolors and Back Booster.
In July 1988, Kirschner purchased Industrias Quirurgicas de
Levante, s.a. ("IQL") in Valencia, Spain, a manufacturer of
orthopedic reconstructive implant and fracture fixation products.
The IQL acquisition further expanded Kirschner's orthopedic
reconstructive implant and fracture fixation product lines while
providing Kirschner with a manufacturing and marketing base in
the European market.
Kirschner manufactures reconstructive implant and fracture
fixation devices at its facilities in Fair Lawn, New Jersey and
Valencia, Spain. The primary manufacturing processes consist of
casting, metal fabrication, precision machining, assembly,
inspection and packaging. The principal raw materials used by
Kirschner are special stainless steels, cobalt chrome alloys,
titanium alloys and specialty polyethylene which are currently
available from a number of domestic and foreign suppliers.
Kirschner also purchases castings, forgings, parts and components
from numerous outside sources.
Most of Kirschner's orthopedic support products are
manufactured at its facility in Marlow, Oklahoma and a leased
manufacturing facility in Delray Beach, Florida. The operation
at Marlow involves the cutting and sewing of various elastics,
webbings, straps and other materials which are supplied by
numerous vendors. The principal materials used in manufacturing
synthetic cast products at Delray Beach are fiberglass substrates
and urethane resin, both of which are readily available from a
variety of sources.
In the United States, Kirschner's products are sold through
two distinct sales organizations. Orthopedic reconstructive
implant devices are sold in the United States primarily through
an independent agency system, while orthopedic support products
are sold in the United States primarily by Kirschner's direct
sales force to hospitals and doctors' offices. IQL's products
are sold internationally in Spain by its commissioned sales force.
The international sales group manages relationships with 59
distributors in countries other than the United States and Spain.
INFORMATION WITH RESPECT TO BIOMET
Biomet is an Indiana corporation incorporated in 1977.
Biomet and its subsidiaries design, manufacture and market
products used primarily by orthopedic medical specialists in both
surgical and nonsurgical therapy.
Biomet's products can be divided into three groups:
Reconstructive Products, EBI Products and Other Products.
Biomet's Reconstructive Products (principally hips, knees and
shoulders) and its Other Products (fixation and trauma devices,
orthopedic support devices, operating room supplies, general
surgical instruments, surgical products, arthroscopy products,
oral-maxillofacial products and an ultrasonic bone cement removal
system) are designed, manufactured and marketed under the Biomet,
Arthrotek, Effner and Walter Lorenz trade names. Through
Electro-Biology, Inc., Biomet's principal domestic subsidiary,
Biomet develops, manufactures and markets non-invasive and
implantable electrical bone growth and spinal fusion stimulators
and distributes the Orthofix line of external fixation devices.
Reconstructive products are used to replace joints which
have deteriorated as a result of disease (various forms of
arthritis and osteoporosis) or injury. Reconstructive joint
surgery involves the modification of the area surrounding the
affected joint and the insertion of one or more manufactured
components. Biomet's primary reconstructive joints are the hip,
knee and shoulder, but it also has the capability of producing
other peripheral joints (including the ankle, elbow and great
toe). Biomet also produces the associated instruments required
by the orthopedic surgeon to implant Biomet's reconstructive
products.
EBI's primary product categories consist of invasive and
non-invasive electrical stimulation devices used in the treatment
of recalcitrant bone fractures (nonunions), spinal fusion
stimulation devices used as an adjunctive treatment in spinal
fusion procedures, external fixation devices and a controlled
cold therapy unit to aid in the reduction of post-operative pain,
edema and blood loss. The FDA has defined a "nonunion" as a case
in which nine months have elapsed from the date of a fracture
with no sign of healing for three months. EBI's non-invasive
devices generally provide an alternative to surgical intervention
in the treatment of recalcitrant bone fractures and failed joint
fusions.
Biomet's Other Products include bone fixation and related
trauma devices, such as nails, plates, screws, pins and wires
designed to temporarily stabilize traumatic bone injuries;
orthopedic support devices, including elbow, wrist, abdominal,
thigh and ankle supports in addition to a wide variety of knee
immobilizers and braces; operating room supplies, including
surgical suction devices, filters and drapes; general surgical
instruments; arthroscopy products, including power instruments,
manual instruments, visualization products and accessories; and
oral-maxillofacial products, including orthognathic instruments,
craniofacial instruments, rigid fixation systems, TMJ instruments
and exodontia instruments.
Biomet and its subsidiaries currently operate manufacturing
and/or office facilities in Warsaw, Indiana; Parsippany, New
Jersey; Ontario, Aliso Viejo and Redding, California;
Jacksonville, Florida; Guaynabo, Puerto Rico; Bridgend, South
Wales; Swindon, England; Milan, Italy; Berlin and Ansbach,
Germany and Ontario, Canada. Biomet markets its products in the
United States through independent commission sales
representatives, in the United Kingdom and Germany primarily
through direct factory sales representatives, and in other
international markets through both independent and direct factory
sales representatives and specialty medical product dealers. EBI
sells electrical stimulation and external fixation devices
through direct factory sales representatives in the United States
and the United Kingdom and through specialty medical product
dealers in the remainder of its markets. Biomet and its
subsidiaries currently distribute products in approximately 100
countries.
COMPARATIVE RIGHTS OF HOLDERS OF COMMON SHARES
OF BIOMET AND KIRSCHNER
The rights of holders of Biomet Common Shares are governed
by Biomet's Amended Articles of Incorporation, as amended, By-
Laws and Indiana law, while the rights of holders of Kirschner
Common Shares are governed by Kirschner's Certificate of
Incorporation, By-Laws and Delaware law. In some respects the
rights of holders of Biomet Common Shares and Kirschner Common
Shares are similar. For example, each holder is entitled to one
vote for each share held, each is entitled to receive pro rata
any assets distributed to holders of Common Shares upon
liquidation and each is subject to the rights of any preferred
stock, when issued. Neither has any preemptive rights to
subscribe for or purchase additional shares or cumulative voting
rights in the election of directors.
There are, however, some material differences between the
rights of holders of Biomet Common Shares and holders of
Kirschner Common Shares. A summary of these differences is set
forth below. This summary, however, does not purport to be
complete and is qualified in its entirety by reference to the
respective Articles of Incorporation or Certificate of
Incorporation and By-Laws of Biomet and Kirschner and the
applicable provisions of Indiana and Delaware law.
Dissenter's Rights
Under the IBCL, shareholders of Indiana corporations have
the right to object and obtain payment of the fair value of their
shares in certain business combination transactions and other
specified corporate actions. These rights are not available for
holders of shares if, on the record date fixed to determine the
shareholders entitled to receive notice of and vote at the
meeting at which the corporate action is to be acted upon, such
shares are registered on a United States securities exchange
registered under the Exchange Act or traded on NASDAQ-NMS or a
similar market. Biomet Common Shares are traded on NASDAQ-NMS.
Under the DGCL, stockholders of Delaware corporations have
the right to dissent and demand appraisal of the fair value of
their shares in certain business combination transactions. These
rights are not available for shares of stock of Delaware
corporations, such as Kirschner, which are listed on a national
securities exchange or NASDAQ-NMS unless the corporation's
stockholders are required to accept for such stock anything other
than (i) stock of the surviving corporation, (ii) stock of any
company either listed on a national securities exchange or held
by more than 2,000 stockholders, (iii) cash in lieu of fractional
shares of corporations described in (i) and (ii) above, or (iv) a
combination of the foregoing.
Limitation of Liability of Directors
The IBCL does not contain any provision permitting a
corporation to eliminate or limit a director's personal liability
for monetary damages for a breach of his or her fiduciary duty of
care to the corporation or its shareholders. However, the IBCL
enumerates certain standards which, if met, permit a director to
avoid personal liability for any action taken as a director or
any failure to take such action. The IBCL requires a director to
act in good faith, with the care an ordinarily prudent person in
a like position would exercise under similar circumstances and in
a manner the director reasonably believes to be in the best
interests of the corporation. A director may consider the
effects of any action on shareholders, employees, suppliers and
customers of the corporation and communities in which the
corporation's offices are located and any other factors the
director considers pertinent in considering the best interest of
the corporation. The IBCL permits a director to rely upon
officers and employees of the corporation he or she reasonably
believes to be reliable and competent, legal counsel, public
accountants or other experts as to matters he or she reasonably
believes are within the person's professional or expert
competence, and committees of the board of which the director is
not a member, unless the director has knowledge which makes
reliance upon such persons or committees unwarranted. The IBCL
provides that a director will not be liable for any action taken
as a director or for any failure to take any action unless the
director has failed to comply with the standards enumerated in
the statute and such failure to comply constitutes willful
misconduct or recklessness.
The DGCL permits a Delaware corporation to include in its
certificate of incorporation a provision eliminating or limiting
a director's personal liability for monetary damages for a breach
of a director's fiduciary duty to the corporation or its
stockholders, subject to certain significant exceptions.
Directors in a Delaware corporation adopting such a provision
remain fully liable for (i) breaches of their duty of loyalty,
(ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
payment of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) deriving an improper personal benefit. In
addition, the DGCL does not absolve directors from their duty of
care, but only provides directors with relief from monetary
damages. Kirschner's Certificate of Incorporation contains a
provision consistent with the DGCL limiting a director's personal
liability.
Anti-Takeover and Supermajority Provisions
Provisions of the IBCL are designed to protect minority
shareholders in the event that a person acquires, pursuant to a
tender offer or otherwise, shares giving them more than 20%, more
than 33 1/3%, or more than 50% of the outstanding voting power
("Control Shares") of a corporation having 100 or more
shareholders. Unless the corporation's articles of incorporation
or bylaws provide that these provisions do not apply to Control
Share acquisitions of shares of the corporation before the
Control Share acquisition, an acquiror who purchases Control
Shares without seeking and obtaining the prior approval of the
board of directors, cannot vote the Control Shares until each
class or series of shares entitled to vote separately on the
proposal, by a majority of all votes entitled to be cast by that
group (excluding the Control Shares and any shares held by
officers of the corporation and employees of the corporation who
are directors thereof), approve in a special or annual meeting
the rights of the acquiror to vote the Control Shares. An
Indiana corporation otherwise subject to the provisions may elect
not to be covered by the statute by so providing in its articles
of incorporation or bylaws. Biomet has not made such an election.
Among other provisions relating to transactions effecting a
change in control of Indiana corporations, the IBCL establishes a
five-year period beginning with the acquisition of a 10% interest
in the corporation during which certain business transactions
involving the acquiring shareholder are prohibited unless, prior
to the acquisition of such interest, the board of directors gives
approval to the acquisition of such interest or to the proposed
business combination. After the five-year period expires, a
business combination involving the acquiring shareholder may take
place only upon approval by a majority vote of shares not held by
the acquiring shareholder or its affiliates or if the other
shareholders receive a formula price based on the highest price
paid by the acquiring shareholder. The minimum price for voting
shares other than common shares is to be determined under
criteria similar to that for common shares, except the minimum
price as defined cannot be less than the highest preferential
amount to which the shares are entitled in the event of any
liquidation, dissolution or winding up of the corporation. In
addition, the IBCL provides that certain accretions of voting
power will result in an acquiring shareholder losing the right to
vote the shares acquired unless such voting is approved by a
majority of the disinterested shares, and may permit the
corporation to redeem the acquiring shareholder's shares.
The DGCL contains an anti-takeover provision that prevents
buyers who acquire 15% or more of a target company's stock from
completing a business combination with the target company for
three years. A business combination can, however, be completed
if the buyer, while acquiring this 15% interest, acquires at
least 85% of the outstanding stock. The 85% excludes shares
owned by directors who are also officers and certain shares held
under certain employee stock plans. The takeover can also be
completed if it is approved by the target company's board of
directors prior to the date the buyer became a 15% or more
stockholder or after the date the buyer became a 15% or more
stockholder if it is approved by the target company's board of
directors and two-thirds of the shares voting at an annual or
special meeting of stockholders, excluding shares held by the
buyer. The anti-takeover provision applies automatically to
Delaware corporations except those corporations with less than
2,000 stockholders of record or those that do not have voting
stock listed on a national securities exchange or listed for
quotation with a registered national securities association.
Such a corporation may, if it wishes, "opt in" by amending its
certificate of incorporation to adopt the provision. Any
corporation may decide to "opt out" of the statute at any time,
by action of its stockholders.
The Board of Directors of Biomet currently consists of 12
persons. Biomet's Bylaws provide that the Board of Directors
shall be divided into three classes, as equal in number as
possible, and that one of such classes shall be elected each year
for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected.
Any director may be removed with or without cause by action of
the holders of at least 75% of all votes entitled to be cast
thereon. Therefore, at least two annual meetings are required to
elect a majority of the Biomet Board of Directors. The
provisions of the IBCL and Biomet's Bylaws may discourage potential
acquirors and serve to entrench the current management. Biomet
and Kirschner each have a class of authorized but unissued
preferred shares, the terms and conditions of which may be
determined by the Board of Directors of the company and the
shares issued to such persons as may be determined by the Board
of Directors, without the necessity of any approval by the
shareholders of the company. The Board of Directors could issue
these ahares as part of an attempt to defeat or deter an attempt
to acquire control of the company. The Amended Articles of
Incorporation of Biomet contain a provision requiring the
affirmative vote of the holders of not less than 75% of the
outstanding Biomet Common Shares in order to (a) amend any
provision of the Amended Articles of Incorporation, other than
the provisions dealing with the number of authorized shares;
(b) authorize any sale or other disposition of all or
substantially all of the fixed assets of the company for the
purpose of terminating or winding up its business; or (c) approve
any merger or consolidation to which the company is a party.
These provisions could defeat or deter an attempt to acquire
control of Biomet. Biomet and Kirschner each have adopted
shareholder rights plans pursuant to which the outstanding
shares of the company carry a right to purchase additional
shares from the company or an acquiring company in the event
of an actual or prospective change in control of the company.
These plans are designed to protect the interests of the
company's shareholders against certain coercive tactics
sometimes employed in takeover attempts. Kirschner intends to
amend its shareholder rights plan prior to consumation of the
Merger to exempt the Merger Agreement and the transactions
contemplated thereby from the provisions of the rights plan.
The Board of Directors of Kirschner consists of five
directors who each serve a term of one year. According to the
DGCL, any director or the entire board may be removed with or
without cause by the holders of a majority of shares entitled to
vote.
Dividends and Other Distributions
According to the IBCL, the board of directors of an Indiana
corporation has the power to declare and pay dividends upon its
issued and outstanding shares. However, no dividends may be
declared if, after giving them effect: (i) the corporation would
not be able to pay its debts as they become due in the usual
course of business, or (ii) the corporation's total assets would
be less than the sum of its total liabilities plus the amount
that would be needed, if the corporation were to be dissolved at
the time of paying the dividends, to satisfy the rights of the
holders of any class of shares that are superior to those of
holders of the shares on which the dividend is to be paid.
The DGCL provides that, subject to any restrictions in a
corporation's Certificate of Incorporation, dividends may be
declared from the corporation's surplus or, if there is no
surplus, from its net profits for the fiscal year in which the
dividend is declared and the preceding fiscal year. However, if
the corporation's capital (generally defined in the DGCL as the
sum of the aggregate par value of all shares of the corporation's
capital stock, where all such shares have a par value and the
board of directors has not established a higher level of capital)
has been diminished to an amount less than the aggregate amount
of the capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets,
dividends may not be declared and paid out of such net profits
until the deficiency in such capital has been repaired.
EXPERTS
The consolidated financial statements of Biomet as of May
31, 1994 and 1993 and for each of the three years in the period
ended May 31, 1994 incorporated in this Proxy
Statement/Prospectus by reference to Biomet's Annual Report on
Form 10-K for the year ended May 31, 1994 have been incorporated
herein in reliance on the report of Coopers & Lybrand,
independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements of Kirschner as of
December 31, 1993 and 1992 and for each of the years in the three
year period ended December 31, 1993 incorporated in this Proxy
Statement/Prospectus by reference to Kirschner's Annual Report on
Form 10-K for the year ended December 31, 1993 have been so
incorporated in reliance upon the report of KPMG Peat Marwick
LLP, independent accountants, incorporated herein by reference
and upon the authority of that firm as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters relating to the Merger Agreement and
the issuance of the Biomet Common Shares have been passed on for
Biomet by Ice Miller Donadio & Ryan. Certain legal matters
relating to the Merger Agreement and the tax consequences of the
Merger have been passed on by Manatt, Phelps & Phillips, special
counsel for Kirschner.
APPENDIX A
SECTION 262 OF THE DELAWARE CODE
Section 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such
shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in
writing pursuant to Section 228 of this title shall be entitled
to an appraisal by the Court of Chancery of the fair value of his
shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to Sections 251,
252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under
this section shall be available for the shares of any class
or series of stock, which stock or depository receipts in
respect thereof, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of
merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national
market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or (ii)
held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the
vote of the holders of the surviving corporation as provided
in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (l) of this subsection,
appraisal rights under this section shall be available for
the shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms
of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving
or resulting from such merger or consolidation, or
depository receipts in respect thereof;
b. Shares of stock of any other corporation, or
other depository receipts in respect thereof, which
shares of stock or depository receipts at the effective
date of the merger or consolidation will be either
listed on a national securities exchange or designated
as a national market system security on an interdealer
quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or
fractional depository receipts described in the
foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock,
depository receipts and cash in lieu of fractional
shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary
Delaware corporation party to a merger effected under
Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection
(b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand
for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against
the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor
of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved
pursuant to Sections 228 or 253 of this title, the surviving
or resulting corporation, either before the effective date
of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation
and that appraisal rights are available for any or all of
the shares of the constituent corporation, and shall include
in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt
requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder
entitled to appraisal rights may, within 20 days after the
date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger
or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days
after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining their
fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest
which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive payment
of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of
the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
APPENDIX B
[Letterhead of Dain Bosworth Incorporated]
July 15, 1994
The Board of Directors
Kirschner Medical Corporation
9690 Deereco Road
Timonium, MD 21093
Gentlemen:
You have requested our opinion, as of the date hereof, as to the
fairness, from a financial point of view, to the shareholders of
Kirschner Medical Corporation ("Kirschner" or the "Company") of
the terms of the proposed merger (the "Merger") of the Company
with and into a wholly-owned subsidiary of Biomet, Inc., an
Indiana corporation ("Biomet"). The terms of the Merger are set
forth in an Agreement and Plan of Merger to be dated on or about
July 16, 1994, and include the approval of the Agreement and Plan
of Merger by shareholders representing a majority of the
outstanding shares of Kirschner common stock and the conversion
of each share of Kirschner common stock into the right to
receive, at Biomet's election, $10.75 in cash or the equivalent
in shares of Biomet common stock, subject to the limitation that
Kirschner's shareholders will not receive less than 0.90 shares
of Biomet common stock for each share of Kirschner common stock
if Biomet elects the latter option.
Dain Bosworth Incorporated ("Dain Bosworth"), as part of its
investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities,
private placements, and valuations for estate, corporate, and
other purposes. Also, Dain Bosworth has from time to time issued
research reports and recommendations on the common stock of
Biomet. In addition, in the ordinary course of business Dain
Bosworth acts as a market maker in the publicly traded common
stock of Biomet, and accordingly, may periodically have positions
in the common stock of Biomet.
In connection with this opinion we reviewed and analyzed, among
other things, certain historical and projected financial
information on the Company and Biomet. We visited the corporate
offices of the Company and have held discussions with members of
the senior management of both companies. In addition, we made
inquiries of the management of Kirschner regarding the past and
current business operations, financial condition, and future
prospects for the Company. We reviewed preliminary drafts of the
Agreement and Plan of Merger and other documents connected with
the Merger. In addition, we held discussions with senior
management of Kirschner and Biomet to understand the companies'
reasons for completing the Merger.
We analyzed the historical reported market prices and trading
activity of the common stock of Kirschner, as well as the
Company's historical and projected sales, earnings, and
capitalization. We also analyzed the historical reported market
prices and trading activity of the common stock of Biomet. We
compared financial and stock market information on Kirschner and
Biomet to similar information for certain publicly traded
companies that manufacture and distribute implantable orthopedic
joints and other orthopedic support equipment. We also reviewed,
to the extent publicly available, the terms of selected relevant
mergers and acquisitions, analyzed the general economic outlook
of companies in the above mentioned industries, and performed
other studies and analyses as we considered appropriate.
In preparing our opinion we relied upon the accuracy and
completeness of all information provided or otherwise made
available to us by the Company and Biomet, and we did not
independently verify such information. Also, we did not make an
independent appraisal of the assets of the Company or Biomet, and
we do not express an opinion regarding the liquidation value of
either company.
Based upon the foregoing, and other matters that we considered
relevant, it is our opinion that, as of the date hereof, the
consideration to be received pursuant to the terms of the Merger
is fair to the shareholders of Kirschner Medical Corporation from
a financial point of view.
Very truly yours,
DAIN BOSWORTH INCORPORATED
KIRSCHNER MEDICAL CORPORATION
Proxy for Special Meeting of Shareholders
to be held November 4, 1994
The undersigned hereby names, constitutes and appoints C. Scott Harrison
and Nicholas L. Gounaris, or either of them acting in the absence of the other,
with power of substitution, my true and lawful attorneys and Proxies for me and
in my place and stead to attend the Special Meeting of the Shareholders of
Kirschner Medical Corporation ("Kirschner") called to be held at 10:00 a.m.
on November 4, 1994, and any adjournment thereof, and to vote all the shares of
common stock held of record in the name of the undersigned on September 26,
1994, with all of the powers that the undersigned would possess if he were
personally present including the power to vote on any motion to adjourn the
meeting, as follows:
1. On the proposal to approve the merger (the "Merger") of Kirschner with
Kirschner Acquisition Corp. ("KAC"), a Delaware corporation and wholly-owned
subsidiary of Biomet, Inc. ("Biomet"), an Indiana corporation, and the approval
and adoption of an Agreement and Plan of Merger, dated July 16, 1994, by and
among Kirschner, Biomet Acquisition Corp. and Biomet, as amended by a First
Amendment to Agreement and Plan of Merger dated September 15, 1994, by and
among Biomet, Biomet Acquisition Corp., KAC and Kirschner (collectively, the
"Merger Agreement"), and to approve the transactions contemplated by the Merger
Agreement:
FOR __ AGAINST __ ABSTAIN __
(continued on reverse side)
<PAGE>
(continued from other side)
2. The Proxies are authorized to vote in their discretion on any other
matters which may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED.
IF NO SPECIFIC DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
Check this box if you plan to attend the Special Meeting of Shareholders. __
The undersigned reserves the right to revoke this Proxy at any time prior
to its exercise by written notice delivered to the Company's Secretary prior to
this meeting at the Company's corporate offices at 9690 Deereco Road, Suite
600, Timonium, Maryland 21093. The power of the Proxy holders also shall be
suspended if the undersigned shareholder appears at the Special Meeting and
elects in writing to vote in person.
Signature(s):___________________________________________ Dated_________, 1994
___________________________________________ Dated_________, 1994
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.
THIS PROXY IS SOLICITED BY THE MANAGEMENT OF THE COMPANY.
[KIRSCHNER LETTERHEAD]
October 3, 1994
To the Shareholders of Kirschner Medical Corporation:
You are cordially invited to attend a Special Meeting of the
Shareholders of Kirschner Medical Corporation ("Kirschner") to be held
at 10:00 a.m. local time on Friday, November 4, 1994 at Kirschner's
headquarters, 9690 Deereco Road, 7th floor, Timonium, Maryland.
At the Special Meeting, holders of Kirschner's common stock,
$.10 par value (the "Kirschner Common Shares"), will be asked to
consider, approve and adopt an Agreement and Plan of Merger, as
amended (the "Agreement") providing for the merger (the "Merger") of
Kirschner with a wholly owned subsidiary of Biomet, Inc. ("Biomet").
If the Agreement is approved and the Merger is consummated, each of
Kirschner's shareholders would be entitled to receive $10.75 for each
Kirschner share, payable, at the shareholder's election, either in
cash, Biomet common shares or a combination of cash and such shares,
subject to certain limitations described in the accompanying Proxy
Statement/Prospectus.
After careful consideration of the terms and conditions of the
Merger, and after receiving an opinion from Dain Bosworth
Incorporated, Kirschner's financial advisor, that the consideration to
be paid to the shareholders in the Merger is fair, from a financial
point of view, the Kirschner Board of Directors authorized and
approved the Agreement and the transactions contemplated thereby. The
Board of Directors believes that the Merger, on the terms and
conditions described in the accompanying Proxy Statement/Prospectus,
is in the best interests of the Kirschner shareholders and therefore
recommends that you vote FOR the approval of the Agreement and the
related Merger. Biomet currently owns approximately 19% of the
outstanding Kirschner Common Shares and intends to vote such shares in
favor of the Merger. The directors and officers of Kirschner also
intend to vote their shares in favor of the Merger.
Under applicable provisions of the Delaware General
Corporation Law and Kirschner's By-laws, the affirmative vote of the
holders of a majority of the outstanding Kirschner Common Shares on
the record date is required to approve and adopt the Agreement and
authorize the Merger. If the Merger is approved by the shareholders,
it is currently anticipated that the Merger will be consummated
promptly after the Special Meeting and that a Letter of Transmittal
and Form of Election will be mailed to all shareholders of record to
use in surrendering their stock certificates. Please do not send in
your stock certificates until you receive the Letter of Transmittal
which will include instructions as to the procedure to be used in
sending in your certificates.
Details concerning the Merger, including shareholders' rights
of appraisal, and other important information appear in the
accompanying Proxy Statement/Prospectus which you are urged to read
carefully.
Regardless of the number of shares you own, it is important
that you vote. Whether or not you plan to attend the Special Meeting,
please sign, date and mail your Proxy in the enclosed postage-paid
envelope. If you do attend the Special Meeting you may, of course,
withdraw your Proxy should you wish to vote in person.
Very truly yours,
C. Scott Harrison, M.D.
Chairman, President and
Chief Executive Officer
