SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1998
BIOMET, INC.
(Exact name of registrant as specified in its charter)
Indiana
(State or other jurisdiction of incorporation or organization)
0-12515
(Commission File Number)
35-1418342
(I.R.S. Employer Identification No.)
Airport Industrial Park, P.O. Box 587, Warsaw, Indiana 46581-0587
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219)267-6639
Item 2. Acquisition or Disposition of Assets.
On February 2, 1998, Biomet, Inc. ("Biomet") and Merck KGaA, Darmstadt,
Germany, ("Merck") announced the closing of a joint venture (the "Joint
Venture") to manufacture, market and sell orthopedic and biomaterials products
in Europe and elsewhere under the name "Biomet Merck". Merck KGaA is a global
pharmaceutical company headquartered in Darmstadt, Germany, and is not
affiliated with Merck & Co., Inc. of Whitehouse Station, New Jersey, U.S.A.
The Joint Venture was formed through the organization of a new Dutch
commanditaire vennootschap, or closed limited partnership (the "CV"). Biomet
is the general partner of the CV with a 50% partnership interest, and Merck KGaA
is the limited partner of the CV with a 50% partnership interest. Each party
contributed or is in the process of contributing its European operations within
the Joint Venture's field of operation to the CV. The business entities
already contributed or being contributed to the Joint Venture by each partner,
their respective countries of organization and the percentage owned by the CV
are set forth below.
Country of
Company Organization Percent Owned
Contributions by Biomet:
Biomet Ltd. United Kingdom 100%
Biomet SpA Italy 100%
Biomet Deutschland GmbH Germany 100%
Industrias Quirurgicas de Levante, SA Spain 100%
Biomet SA France 100%
Biomet Polska Sp. z.o.o. Poland 51%
Mediplant NV/SA Belgium 100%
Ortomed B.V. The Netherlands 100%
Orthopaedics Holdings C.V. The Netherlands 100%
Biomet A/S Denmark 30%
Biomet Norge Norway 40%
Ortra Holdings SA Switzerland 100%
Canzek AG Switzerland 100%
CDO Ltd. United Kingdom 100%
Kirschner Hellas Greece 30%
Contributions by Merck KGaA:
Merck Biomaterial France France 100%
Merck Biomaterial Espana S.L. Spain 100%
Artos Medizinische Produkte GmbH Germany 100%
Merck Biomaterial GmbH Germany 100%
In addition, the assets constituting the biomaterials divisions of Merck KGaA's
subsidiaries in the United Kingdom, Portugal, Belgium, The Netherlands and
Austria will be contributed to the CV.
The Joint Venture Agreement includes provisions providing for the governance of
the Joint Venture and establishing certain economic arrangements between the
parties. Generally speaking, the day-to-day operations of the Joint Venture
will be conducted under the authority of a board of directors composed of two
representatives of each party. Biomet's representatives will have a deciding
vote on general operational matters. Extraordinary decisions, such as
significant acquisitions or dispositions of businesses or assets, amendments to
the charter documents of the Joint Venture, liquidation or dissolution of the
Joint Venture, borrowings outside the ordinary course of business, issuances of
additional equity interests in the JV and certain related party transactions
between the Joint Venture entities and Biomet or its affiliates, will require
the vote of a majority of the board of directors, including one member nominated
by each party. The Joint Venture Agreement further provides for Merck KGaA to
receive certain preferential distributions of cash flow with respect to fiscal
years 1999, 2000 and 2001 based upon the level of after-tax profit achieved by
the Joint Venture, and for Biomet to receive an annual preferential distribution
of approximately $4.4 million in each of the first seven years of the Joint
Venture. Merck KGaA also has the right, beginning in fiscal 2002 and ending in
fiscal 2008, to require Biomet to purchase Merck KGaA's interest in the Joint
Venture at a formula price based on a multiple of the Joint Venture's earnings
before interest and taxes. This right may also be exercised following any
"change in control" of Biomet (as defined in the Joint Venture Agreement) prior
to the end of fiscal 2023.
The Joint Venture will enter into license, supply and distribution agreements
with Biomet providing for the manufacture and sale by certain of the Joint
Venture companies of Biomet's orthopedic products and by Biomet of certain
biomaterials and orthopedic products of the Joint Venture companies.
Based on the balance sheets of the contributed entities as of October 31, 1997,
the total assets of the Joint Venture are approximately $190 million. The Joint
Venture will continue to use the assets of the various business entities
contributed to it to manufacture, market and sell orthopedic and biomaterials
products primarily in Europe and in certain other countries throughout the
world.
Item 7. Financial Statements and Exhibits.
(a)-(b) The financial statements of the acquired businesses and the pro forma
financial information required to be filed as part of this report are not
included herewith, but will be filed by amendment not later than 60 days after
the filing hereof.
(c) See Index to Exhibits. The schedules and exhibits to the Joint Venture
Agreement filed as Exhibit 2.01 hereto are not included in reliance upon Item
601(b)(2) of Regulation S-K. The undersigned registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Joint Venture
Agreement to the Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Biomet, Inc.
Date: February 16, 1998 By: /s/ Gregory D. Hartman
Gregory D. Hartman
(Vice President - Finance)
EXHIBIT INDEX
Number Assigned
In Regulation
S-K Item 601 Description of Exhibit
(2) 2.01 Joint Venture Agreement
(20) 20.01 Press Release issued on February 2, 1998
Exhibit 2.01
TABLE OF CONTENTS
Section Page
1. INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 10
1.3 References to Biomet 10
2. BUSINESS OF THE JOINT VENTURE 11
3. IMPLEMENTATION 11
3.1 Implementation Steps 11
3.2 Names 12
4. ESTABLISHMENT OF THE JOINT VENTURE 12
4.1 Biomet Closing Contribution 12
4.2 Merck Closing Contribution 12
4.3 Joint Venture Structure 12
5. CLOSING 12
5.1 Closing 12
5.2 Obligations 12
6. CONDITIONS AND UNDERTAKINGS 13
6.1 Mutual Closing Conditions 13
6.2 Closing Conditions to the Obligations of Biomet 14
6.3 Closing Conditions to the Obligations of Merck 14
7. OBLIGATIONS POST-CLOSING 15
7.1 Biomet Post-Closing Undertakings 15
7.2 Merck Post-Closing Undertakings 15
7.3 Biomet Post-Closing Cash, Receivables and Debt Adjustment 15
7.4 Merck Post-Closing Cash, Receivables and Debt Adjustment 18
7.5 Post-Closing Biomet Real Estate Adjustment 20
7.6 Royalties To Be Paid on Completed and Uncompleted Projects 20
7.7 Names of JV Entities 21
7.8 Dutch Permanent Establishment 21
7.9 Subsidiaries of Biomet Ltd 22
8. FINANCIAL MATTERS 22
8.1 Financing by Parties 22
8.2 Shareholders' Rights 23
8.3 Accounting 23
8.4 Financial Statements 23
8.5 Auditors 23
9. MANAGEMENT AND PERSONNEL MATTERS 24
9.1 Board of Directors 24
9.2 Composition of Board of Directors 24
9.3 Quorum 24
9.4 Ordinary Issues 25
9.5 Fundamental Issues 25
9.6 Officers 25
10. PROMOTION OF THE INTERESTS OF THE JOINT VENTURE 26
10.1 Non-Competition in JV Territory 26
10.2 Distribution in the Export Territory 26
10.3 No Poaching 27
11. JV PRODUCTS 27
11.1 JV Products; Offer to Biomet 27
11.2 JV Products; Offer to Merck 28
11.3 Products Developed by Biomet; Offer to Joint Venture and Merck 29
11.4 Products Developed by Merck; Offer to Joint Venture and Biomet 30
11.5 Specific Terms 32
11.6 Intellectual Property for Completed Projects 32
11.7 Lorenz Products 33
12. PROFITS OF THE JOINT VENTURE 33
12.1 Dividend Policy 33
12.2 Preferential Distribution of Cumulative 10% After Tax Profit 34
12.3 4,388,000 Preferential Distribution 35
12.4 No Reduction of Determined Distribution 35
12.5 Payment of Distributions 35
13. TRANSFERS OF SHARES 35
13.1 Restriction 35
13.2 Transfer to an Affiliate 35
13.3 Put Option of Merck 35
13.4 Merck Right to Transfer to Unaffiliated Third Party 37
14. REPRESENTATIONS AND WARRANTIES 38
14.1 Representations and Warranties of the Parties 38
14.2 Representation and Warranties of Biomet 39
14.3 Representations and Warranties of Merck 39
14.4 Reliance 39
14.5 Survival of Representations and Warranties 39
15. PRE-CLOSING OBLIGATIONS 39
15.1 Obligations of the Parties 39
15.2 Conduct of Business Prior to Closing 39
15.3 Access and Information 41
15.4 [Confidential information omitted and filed separately
with the Commission] 41
16. TRANSITIONAL MATTERS 41
16.1 JV Entities' Funds 41
16.2 Maintenance of Books and Records 42
16.3 Provision of Services 42
17. INDEMNIFICATION 42
17.1 Indemnification By Party 42
17.2 Biomet Tax Indemnity 43
17.3 Merck Tax Indemnity 44
17.4 Further Taxation Matters 45
17.5 Notification of Claims 47
17.6 Payments Treated as Capital Contributions 48
18. FURTHER COVENANTS AND INDEMNITIES 48
18.1 Merck Biomaterial GmbH Pension Liabilities 48
18.2 [Confidential information omitted and filed separately
with the Commission] 49
18.3 [Confidential information omitted and filed separately
with the Commission] 49
19. MISCELLANEOUS 49
19.1 Relationship of Parties 49
19.2 Corporate Affairs 50
19.3 Necessary Measures 50
19.4 Term of Agreement 50
19.5 Survival and Assignment 50
19.6 Governing Law and Severability 51
19.7 Arbitration 51
19.8 Notices 52
19.9 Attorneys', Financial Advisers' and Finders' Fees,
Brokers Commissions 54
19.10 Waivers and Amendments 54
19.11 Conflict with Charter Documents 54
19.12 Termination of Letter of Intent 54
19.13 Additional Capital Contributions. 54
19.14 Standstill 54
19.15 Business of Biomet Europe 55
SCHEDULES
Schedule 1.1A. . . . Export Territory
Schedule 1.1B. . . . JV Business Field
Schedule 1.1C. . . . JV Territory
Schedule 1.1D. . . . Biomet JV Entities
Schedule 1.1E. . . . Merck JV Entities
Schedule 1.1.F . . . Uncompleted Projects
Schedule 3.1 . . . . Implementation Steps
Schedule 4.1(a). . . The Biomet Shares
Schedule 4.2(a). . . The Merck Shares
Schedule 4.2(b). . . The Merck JV Assets
Schedule 4.3 . . . . Joint Venture Structure
Schedule 4.4(a)(i) . Biomet Liabilities
Schedule 4.4(a)(ii). Merck Liabilities
Schedule 5.2(a). . . Biomet Actions
Schedule 5.2(b). . . Merck Actions
Schedule 7.1 . . . . Biomet Post-Closing Undertakings
Schedule 7.2 . . . . Merck Post-Closing Undertakings
Schedule 7.2(5). . . Merck Biomaterial GmbH Contracts
Schedule 7.5 . . . . Transfer of Biomet Joint Venture Entities Real
Estate Assets
Schedule 8.4(b). . . Monthly Management Financial Statements and Reports
Schedule 9.5 . . . . Fundamental Issues
Schedule 13.3. . . . Put Exercise Price
Schedule 14.2. . . . Representations, Warranties and Undertakings of Biomet
Schedule 14.2.5. . . Loan or Credit Agreements or Instruments of Indebtedness
of Biomet Controlled JV Entities
Schedule 14.2.7. . . Shares and Assets not Owned by Biomet or an Affiliate
Schedule 14.2.13 . . Biomet Intellectual Property
Schedule 14.2.16 . . Loans to Biomet JV Employees; Employee Benefit Plans
Schedule 14.2.19 . . Biomet Outstanding Judgments
Schedule 14.2.22 . . Biomet Contracts
Schedule 14.2.23 . . Biomet Pending Litigation or Proceedings
Schedule 14.2.24 . . Biomet Compliance with Laws
Schedule 14.3. . . . Representations, Warranties and Undertakings of Merck
Schedule 14.3.5. . . Loan or Credit Agreements or Instruments of Indebtedness
of Merck JV Entities
Schedule 14.3.7. . . Shares and Assets not Owned by Merck or an Affiliate
Schedule 14.3.13 . . Merck Intellectual Property
Schedule 14.3.16 . . Loans to Merck JV Employees; Employee Benefit Plans
Schedule 14.3.19 . . Merck Outstanding Judgments
Schedule 14.3.22 . . Merck Contracts
Schedule 14.3.23 . . Merck Pending Litigation or Proceedings
Schedule 14.3.24 . . Merck Compliance with Laws
Schedule 17.1(d)(i). Biomet JV Entities' Actions, etc. Excluded from
Biomet Indemnification
Schedule 17.1(d)(ii) Merck JV Entities' Actions, etc. Excluded from
Merck Indemnification
EXHIBITS
Exhibit A . . . Form of Supply and Distribution Agreement for Existing
Products supplied by Biomet to the JV Entities
Exhibit B . . . License Agreement regarding Biomet Intellectual Property
to be used by the JV Partnership
Exhibit C . . . Form of Supply and Distribution Agreement for Completed
Projects
Exhibit D . . . Form of Supply and Distribution Agreement for Existing
Products supplied by the JV Entities to Biomet
Exhibit E . . . Form of License Agreement for products manufactured by
Biomet based on Intellectual Property of the Joint Venture
Exhibit 8.4 . . Form of Monthly Financial Statements and Reports
Exhibit 14.2.5 Biomet Balance Sheets
Exhibit 14.3.5A Merck Balance Sheets
Exhibit 14.3.5B Merck Income Statements
THIS AGREEMENT is made as of the 24th day of November, 1997 by and
between Biomet, Inc., a corporation organized under the laws of the State of
Indiana, United States of America, whose principal offices are located at
Airport Industrial Park, Warsaw, Indiana, United States of America ("Biomet"),
and Merck KGaA, a Kommanditgesellschaft auf Aktien organized under the laws of
Germany, whose principal offices are located at Frankfurter Strasse 250, 64271
Darmstadt, Germany ("Merck"), Biomet and Merck being hereinafter from time to
time referred to each separately as a "Party" or both collectively as the
"Parties".
WITNESSETH:
WHEREAS, Merck and its affiliates have extensive know-how and experience
in the development, manufacture and sale in Europe and elsewhere of certain
technologically advanced products in the orthopedic and biomaterial fields and
own certain intellectual property relating to such products; and
WHEREAS, Biomet and its affiliates have extensive know-how and experience
in the development, manufacture and sale in the United States of America,
Europe and elsewhere of certain technologically advanced products in the
orthopedic and biomaterial fields and own certain intellectual property
relating to such products; and
WHEREAS, Biomet and Merck wish to make optimum use of their respective
resources by establishing a joint venture (the "Joint Venture") to develop,
manufacture and sell a full range of products within a certain field of
business in Europe, to export these products for sale to certain export
markets and, under certain conditions, to license these products for
manufacture and sale outside of Europe; and
WHEREAS, to implement the Joint Venture Biomet and Merck will cause to be
formed the legal entities specified herein with each of the Parties holding
the percentage ownership interest in such entities set forth herein; and
WHEREAS, this Agreement sets out the terms and conditions under which the
Parties will establish the Joint Venture to engage in the business described
below;
NOW, THEREFORE, the Parties agree as follows:
1. INTERPRETATION
1.1 Definitions. In this Agreement, unless otherwise specifically
stated:
"Actual Biomet Berlin Debt" has the meaning set forth in Section
7.3;
"Actual Biomet Third Party Debt" has the meaning set forth in
Section 7.3;
"Actual Biomet Intercompany Indebtedness" has, in respect of each JV
Entity, the meaning set forth in Section 7.3;
"Actual Merck Intercompany Indebtedness" has, in respect of each JV
Entity, the meaning set forth in Section 7.4;
"Actual Merck Third Party Debt" has the meaning set forth in Section
7.4;
"Affiliate" means, with respect to any Party, an organization
controlled by, controlling or under common control with such Party;
"Ancillary Agreements" means the following agreements:
(a) a supply and distribution agreement between Biomet and the
JV Partnership in respect of products manufactured in the United States and to
be supplied to the JV Entities, substantially in the form of Exhibit A, except
that the list of products to be subject to such agreement is to be agreed;
(b) a license agreement between the JV Partnership and Biomet in
respect of products manufactured by the JV Entities, the manufacture and
supply of such products being part of the Biomet JV Business and based on
Biomet Intellectual Property, substantially in the form of Exhibit B, except
that the list of products to be subject to such agreement is to be agreed;
(c) a supply and distribution agreement between the JV
Partnership and Biomet in respect of Endobon manufactured by the JV Entities
and to be supplied to Biomet, substantially in the form of Exhibit C, except
that the list of countries in which Biomet may resell such product pursuant to
such agreement and the royalty payable to Merck are to be agreed;
(d) a supply and distribution agreement between the JV
Partnership and Biomet in respect of Palacos without antibiotic to be supplied
by the JV Entities to Biomet, substantially in the form of Exhibit C, except
that the list of countries where Biomet may resell such product pursuant to
such agreement and the royalty payable to Merck are to be agreed;
(e) a supply and distribution agreement between the JV
Partnership and Biomet in respect of Palacos with antibiotic to be supplied by
the JV Entities to Biomet, substantially in the form of Exhibit C, except that
the list of countries in which Biomet may resell such product pursuant to such
agreement, and the royalty payable to Merck are to be agreed;
(f) a supply and distribution agreement between the JV
Partnership and Biomet in respect of Septopal manufactured by the JV Entities
and to be supplied to Biomet, substantially in the form of Exhibit C, except
that the list of countries in which Biomet may resell such product pursuant to
such agreement and the royalty payable to Merck are to be agreed;
(g) a supply and distribution agreement between the JV
Partnership and Biomet in respect of products manufactured by the JV Entities
and to be supplied to Biomet, substantially in the form of Exhibit D, except
that the list of products to be subject to such agreement and the list of
countries in which Biomet may resell each such product pursuant to such
agreement are to be agreed;
(h) a license agreement between Biomet and the JV Partnership in
respect of products manufactured by Biomet, the manufacture and supply of such
products being part of the JV Business Field and based on Intellectual
Property owned by, or licensed to, the JV Partnership or any of the JV
Entities, substantially in the form of Exhibit E except that the list of
products to be subject to such agreement is to be agreed;
(i) a tradename and trademark license agreement in respect of
the name "Biomet" between Biomet and the JV Partnership to be agreed;
(j) a tradename and trademark license agreement in respect the
name "Merck" between Merck and the JV Partnership to be agreed;
"Base After Tax Profit" has the meaning set forth in Schedule 12.2;
"Biomet Balance Date" means, in respect of each Biomet Balance
Sheet, the date on and as of which such balance sheet purports to present the
financial condition of the relevant Biomet JV Entity;
"Biomet Balance Sheets" means the balance sheets of each of the
Biomet JV Entities (other than non-controlled entities) annexed as Exhibit
14.2.5;
"Biomet Berlin Debt" means a debt owed by Biomet Deutschland GmbH to
Deutsche Bank AG, Berlin, in respect of the purchase of land and the
construction of a building, located at Gustav-Kron-Str.2, 14167 Berlin,
Germany, and the investment in distribution center equipment for such
facility;
"Biomet Contributed Berlin Debt" has the meaning set forth in
Section 7.3;
"Biomet Contributed Intercompany Indebtedness" has the meaning set
forth in Section 7.3;
"Biomet Contributed Third Party Debt" has the meaning set forth in
Section 7.3;
"Biomet Contribution" has the meaning set forth in Section 17.2;
"Biomet Europe" means Biomet Europe, Ltd., a wholly-owned direct
subsidiary of Biomet organized and existing under the laws of Delaware, United
States of America;
"Biomet Intercompany Indebtedness" means, in respect of each Biomet
JV Entity, the amounts owed by such Biomet JV Entity to Biomet and its
Affiliates (other than the Biomet JV Entities);
"Biomet JV Business" means the businesses carried on by the Biomet
JV Entities prior to the date of this Agreement;
"Biomet JV Employee Benefit Plans" means all Employee Benefit Plans
that have been maintained by Biomet or any of its Affiliates for the benefit
of or relating to any of the Biomet JV Employees or to any Biomet JV Former
Employees or their dependents, survivors or beneficiaries;
"Biomet JV Employees" means the employees of Biomet and its
Affiliates who will be employed by the JV Entities after the Closing;
"Biomet JV Entities" means each entity listed as a 'Biomet JV
Entity' in Schedule 1.1D;
"Biomet JV Entities' Assets" means the assets owned by the Biomet JV
Entities as of the date of this Agreement and as of the Closing;
"Biomet JV Former Employees" means former employees of Biomet JV
Entities and former employees of Biomet and its Affiliates involved in the
Biomet JV Business;
"Biomet JV Intellectual Property" has the meaning set forth in
Schedule 14.2, Section 14.2.13;
"Biomet JV Leases" has the meaning set forth in Schedule 14.2,
Section 14.2.10;
"Biomet JV Real Properties" has the meaning set forth in Schedule
14.2, Section 14.2.9;
"Biomet Shares" has the meaning set forth in Section 4.1;
"Biomet Third Party Debt" means debts owed by Biomet JV Entities to
persons other than Biomet JV Entities, Biomet or its Affiliates;
"Board of Directors" has the meaning set forth in Section 9.1;
"Business Day" means a day on which banks are open for business in
the State of Indiana, in The Netherlands and in Germany;
"Change of Control of Biomet" means (a) any acquisition of voting
securities of Biomet by any person (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) if (i) immediately following
such acquisition, any such person is the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more
than thirty percent (30%) of the outstanding voting securities of Biomet, and
(ii) such acquisition was not approved in advance by the board of directors of
Biomet, and (b) any liquidation, dissolution, termination or winding up of the
affairs of Biomet;
"Closing" means the closing of this Agreement, as provided in
Section 5;
"Closing Date" means January 1, 1998, or such other date as the
parties agree.
"Completed Projects" means Endobon, Palacos without antibiotic,
Palacos with Gentamicin, and Septopal;
"Conditions Precedent" means the conditions set forth in Section 6;
"Consolidated Income Tax Expense" means the consolidated income tax
expense (net of income tax refunds) of the JV Entities, excluding income tax
expense attributable solely to any extraordinary and non-recurring items, as
determined in accordance with accounting principles generally accepted in the
United States consistently applied, as certified by the external auditor of
the JV Partnership in respect of any fiscal quarter or year during such period
for which such certification is available and as determined by the external
auditors of the JV Partnership in respect of any other fiscal quarter during
such period;
"Consolidated Interest Expense" means the consolidated interest
expense (net of interest income) of the JV Entities, excluding any interest
expense attributable solely to extraordinary and non-recurring items, as
determined in accordance with accounting principles generally accepted in the
United States consistently applied, as certified by the external auditor of
the JV Partnership in respect of any fiscal quarter or year during such period
for which such certification is available and as determined by the external
auditors of the JV Partnership in respect of any other fiscal quarter during
such period;
"Consolidated Net After Tax Profit of the JV Entities" with respect
to a period:
(a) for the purpose of Section 12.1 shall mean the consolidated
net after tax profit of the JV Entities for such period (reduced by the amount
of any preferential distribution under Section 12.3 to the extent not
otherwise deducted in arriving at consolidated net after tax profit) as
determined in accordance with accounting principles generally accepted in the
United States consistently applied, as certified by the external auditor of
the JV Partnership; or
(b) for the purposes of Section 12.2 (including Schedule 12.2)
and Section 13.3 (including Schedule 13.3) shall mean the consolidated net
after tax profit of the JV Entities for such period (excluding any
extraordinary and non-recurring items of income or expense and not reduced by
(i) any distribution of amounts accrued in accordance with Section 12.2, or
(ii) any preferential distribution under Section 12.3) as determined in
accordance with accounting principles generally accepted in the United States
consistently applied, as certified by the external auditor of the JV
Partnership in respect of any fiscal quarter or year during such period for
which such certification is available and as determined by the external
auditors of the JV Partnership in respect of any other fiscal quarter during
such period;
"Determined Distribution" has the meaning set forth in Section 12.1;
"EBI Products" means electrical stimulation devices of the type
currently marketed, sold and distributed by Electro-Biology, Inc. and related
products and any other products developed from or based on such products;
"Employee Benefit Plan" means any employee benefit plan, including
any defined benefit and defined contribution plan, stock ownership plan,
consulting or employment agreement, executive compensation program or
arrangement, bonus plan, incentive compensation plan or arrangement, deferred
compensation agreement or arrangement, supplemental retirement plan or
arrangement, agreement with respect to temporary employees or leased
employees, vacation pay, sickness, disability or death benefit plan (whether
provided through insurance, on a funded or unfunded basis or otherwise),
nursing insurance, retiree medical or life insurance plan, employee stock
option or stock purchase plan, severance pay, termination or salary
continuation plan, arrangement or practice, employee relations policy,
practice or arrangement, and each other employee benefit plan, program,
arrangement or practice, whether written or oral or whether express or
implied;
"Export Territory" means, subject to Section 10.2, in respect of a
particular JV Product line, the countries and areas listed in Schedule 1.1A;
"Fiscal Year" means the fiscal year of the JV Entities, which shall
be the fiscal year ending April 30;
"Intellectual Property" means any patent application, patent,
trademark, tradename, service mark, copyright, software or trade secret and
such other proprietary rights that are or may be subject to protection in each
applicable jurisdiction;
"Joint Venture" has the meaning set forth in the preamble to this
Agreement;
"JV Business Field" means the field of business described in
Schedule 1.1B;
"JV Entities" means the JV Partnership and the JV Holding Company
and any entity controlled by either of them or by the Board of Directors;
"JV Holding Company" has the meaning set forth in Section 3.1;
"JV Partnership" has the meaning set forth in Section 3.1;
"JV Products" means all present and future products in the JV
Business Field;
"JV Territory" means the countries and areas listed in Schedule
1.1C;
"Kirschner France" means Kirschner France SA, a French company,
whose entire share capital was purchased by Biomet SA, a French company, on or
about January 23, 1996, and which was merged with and into Biomet SA, Biomet
SA being the surviving entity, on or about October 30, 1996;
"Kulzer Contract" means that certain agreement by and between
Heraeus Kulzer GmbH and Merck concerning the supply of Palacos without
antibiotic and Palacos with antibiotic and derivatives thereof, dated as of
January 1, 1993;
"Lorenz" means Walter Lorenz Surgical, Inc., a Florida corporation
and an Affiliate of Biomet;
"Merck Balance Date" means, in respect of each Merck Balance Sheet,
the date on and as of which such balance sheet purports to present the
financial condition of the relevant Merck Transferor or Merck JV Entity;
"Merck Balance Sheets" means the balance sheets annexed as Exhibit
14.3.5A of each of the Merck JV Entities;
"Merck Contributed Third Party Debt" has the meaning set forth in
Section 7.4;
"Merck Contribution" has the meaning set forth in Section 17.3;
"Merck Intercompany Indebtedness" means, in respect of each JV
Entity, the amounts owed by such JV Entity to Merck and its Affiliates (other
than the JV Entities);
"Merck JV Assets" means the assets to be transferred pursuant to
Section 7.2 and set forth in paragraph (2) of Schedule 7.2;
"Merck JV Business" means the businesses carried on by the Merck
Transferors in the JV Territory and the Export Territories in the JV Business
Field and the Merck JV Entities in the JV Business Field prior to the date of
this Agreement;
"Merck JV Employee Benefit Plans" means all Employee Benefit Plans
that have been maintained by Merck or any of its Affiliates for the benefit of
or relating to any of the Merck JV Employees or to any Merck JV Former
Employees or their dependents, survivors or beneficiaries;
"Merck JV Employees" means the employees of Merck and its Affiliates
who will be employed by the JV Entities after the Closing;
"Merck JV Entities" means each entity listed as a 'Merck JV Entity'
in Schedule 1.1E;
"Merck JV Entities' Assets" means the assets owned by the Merck JV
Entities as of the date of this Agreement and as of the Closing;
"Merck JV Former Employees" means former employees of Merck JV
Entities and former employees of Merck and its Affiliates involved in the
Merck JV Business;
"Merck JV Intellectual Property" has the meaning set forth in
Schedule 14.3, Section 14.3.13;
"Merck JV Leases" has the meaning set forth in Schedule 14.3,
Section 14.3.10;
"Merck JV Real Properties" has the meaning set forth in Schedule
14.3, Section 14.3.9;
"Merck Shares" has the meaning set forth in Section 4.2;
"Merck Third Party Debt" means debts owed by Merck JV Entities to
persons other than Merck JV Entities, Merck or its Affiliates;
"Merck Transferors" means each transferor, referred to in paragraph
(2) of Schedule 7.2;
"Merck's Core Business" means any business carried on by Merck or
any of its Affiliates, anywhere in the world, from time to time, in any of the
fields of pharmaceuticals, laboratory items (including diagnostic equipment),
or specialty chemicals excluding the Merck JV Business, in which Merck or any
Merck Affiliate has invested more than $10 million;
"Name Use Licenses" means the Ancillary Agreements referred to in
paragraphs (i) and (j) of the definition of "Ancillary Agreement" in this
Section 1.1;
"Non-Controlled Biomet JV Entities" has the meaning set forth in
Schedule 14.2;
"Ortomed Debt" means the indebtedness in the aggregate amount of
$11.5 million to Biomet which, at the time of this Agreement is owed by
Orthopaedics Holdings C.V., but which after the Closing may be owed by the JV
Partnership);
"Parent Payable" means an amount owed by any Biomet JV Entity to
Biomet or one of its Affiliates (other than a JV Entity) or owed by any Merck
JV Entity to Merck or one of its Affiliates (other than a JV Entity) in
respect of purchases of products in the ordinary course of business prior to
the Closing Date;
"Permits" means licenses, permits, orders, certificates,
authorizations, consents and approvals of any governmental and/or regulatory
authority, body or agency in any jurisdiction;
"Put Determination Period" means, as of any date of determination,
the twelve (12) most recently completed fiscal quarters of the JV Partnership
ending on or prior to the date of exercise by Merck of the Put Option as
provided in Section 13.3(c);
"Put Closing Date" has the meaning set forth in Section 13.3;
"Put Exercise Price" has the meaning set forth in Section 13.3;
"Put Option" has the meaning set forth in Section 13.3;
"Related Party Transaction" has the meaning set forth in Schedule
9.5;
"Smith & Nephew" has the meaning set forth in Schedule 3.1;
"Tax" (and the correlative meaning, "Taxes" and "Taxable") means all
taxes and governmental impositions of any kind, imposed by or payable to any
taxing authority, including income, gross receipts, gains, sales, use,
payroll, employment, social security, workers' compensation, unemployment
compensation, net worth, franchise, profits, excise, ad valorem, withholding,
property, severance, production, utility, windfall profits, minimum, value
added, transfer, registration, recording or other taxes, fees, stamp taxes and
duties, customs duties, levies, tariffs, assessments or similar charges of any
kind whatsoever (whether payable directly or by withholding), together with
any interest and penalties, additions to tax or additional amounts with
respect thereto;
"Tax Returns" means Tax returns or reports;
"Transfer Taxes" means excise, stamp, customs duties, franchise,
real property, personal property, sales, transfer, registration, value added
or other similar tax of any jurisdiction, including any interest, penalty,
deficiency or addition thereto, whether disputed or not;
"Uncollected Biomet Receivables" means any accounts receivable that
are included in the Biomet JV Entities' Assets on the Closing Date and are not
collected by the JV Partnership or a JV Entity on or prior to the first
anniversary of the Closing Date;
"Uncollected Merck Receivables" means any accounts receivable that
are included in the Merck JV Entities' Assets on the Closing Date and are not
collected by the JV Partnership or a JV Entity on or prior to the first
anniversary of the Closing Date;
"Uncompleted Projects" means any product developed by the Joint
Venture based on any of the research projects and products set forth in
Schedule 1.1F; and
"Uncompleted Projects Royalties" has the meaning set forth in
Section 12.1.
1.2 Interpretation. When interpreting this Agreement, unless the
context otherwise requires:
(a) words denoting the singular number include the plural and
vice versa;
(b) words denoting any gender include all genders;
(c) where a word or phrase is defined, other parts of speech and
grammatical forms of that word or phrase have corresponding meanings;
(d) words denoting natural persons include bodies corporate and
unincorporated and vice versa;
(e) references to Sections, Exhibits and Schedules are to the
sections of and exhibits and schedules to this Agreement and references to
this Agreement include its exhibits and schedules;
(f) headings are for convenience only and shall not affect
interpretation;
(g) references to any party to this Agreement or any other
agreement or instrument include the party's successors and permitted assigns;
(h) "including" means including, but not limited to; and
(i) references to a fiscal year of a person in respect of a
calendar year are references to the fiscal year of such person ending on a
date during such calendar year.
1.3 References to Biomet. When interpreting this Agreement,
unless the context otherwise requires, references to "Biomet" and references
to the "Parties" where such reference includes Biomet shall include Biomet
Europe, provided that Biomet shall remain liable for all obligations of Biomet
Europe under this Agreement and Biomet shall be obligated to cause Biomet
Europe to perform its obligations under this Agreement.
2. BUSINESS OF THE JOINT VENTURE
The JV Entities will engage solely and exclusively in the business of:
(a) developing, manufacturing, importing, purchasing, marketing
and selling the JV Products within the JV Territory;
(b) exporting, marketing and selling JV Products to markets
within the Export Territory;
(c) selling JV Products to Biomet and its Affiliates, and
licensing Biomet and others, to manufacture, use and sell the JV Products in
the JV Business Field outside of the JV Territory and licensing Merck and
others to manufacture, use and sell technology and products outside the JV
Business Field throughout the world;
(d) undertaking research and development with respect to JV
Products;
(e) importing, purchasing, marketing and selling within the JV
Territory for a period of two (2) years after the Closing Date any EBI
Products that any JV Entity marketed or sold in the JV Territory as part of
the Biomet JV Business on the date of this Agreement and thereafter, for such
period and on such terms agreed by both Parties;
(f) undertaking other activities that are related to the
foregoing and have been approved by the Board of Directors pursuant to this
Agreement; and
(g) undertaking any actions as may be necessary or appropriate
to implement and undertake any of the foregoing.
3. IMPLEMENTATION
3.1 Implementation Steps. In order to implement the Joint Venture,
as soon as practicable following the Closing:
(a) the Parties will form a closed limited partnership to be
organized under the laws of The Netherlands (a closed "commanditaire
vennootschap" or "C.V.") (the "JV Partnership"), in which Biomet Europe and
Biomet Affiliates, Biomet Holdings Ltd. and Kirschner Medical Corp. Ltd.,
shall be the general partners with an aggregate 50% interest, and Merck shall
be a limited partner with a 50% interest;
(b) a limited liability company to be organized under the laws
of The Netherlands (a "besloten vennootschap met beperkte aansprakelijkheid"
or "B.V.") (the "JV Holding Company") will be formed, which (i) has authorized
one class of shares of capital stock, and (ii) all of the capital stock of
which will be owned by the JV Partnership; and
(c) the Parties will take the steps set forth in Schedule 3.1.
3.2 Names. Subject to the Name Use Licenses, the Parties agree that
the JV Partnership shall be named "BioMer C.V." and the JV Holding Company
shall be named "Biomet Merck B.V.".
4. ESTABLISHMENT OF THE JOINT VENTURE
4.1 Biomet Closing Contribution. Upon the terms and subject to the
conditions of this Agreement, as soon as practicable following the Closing,
Biomet will assign, transfer, convey and deliver, and shall cause its
Affiliates to assign, transfer, convey and deliver the shares set forth in
Schedule 4.1 (the "Biomet Shares") to the JV Entities set forth in Schedule
4.1 or as otherwise agreed by the Parties.
4.2 Merck Closing Contribution. Upon the terms and subject to the
conditions of this Agreement, as soon as practicable following the Closing,
Merck will assign, transfer, convey and deliver, and shall cause its
Affiliates to assign, transfer, convey and deliver the shares set forth in
Schedule 4.2 (the "Merck Shares") to the JV Entities set forth in Schedule 4.2
or as otherwise agreed by the Parties.
4.3 Joint Venture Structure. The equity interests in each JV Entity
as soon as practicable following the Closing shall be owned as set forth in
the structure diagrammed in Schedule 4.3.
5. CLOSING
5.1 Closing. The Closing shall be effective on January 30, 1998 at
5.00 pm United States Eastern Standard Time, subject to the fulfilment of the
Conditions Precedent.
5.2 Obligations . At or as soon as practicable following the
Closing:
(a) Biomet shall ensure that the transactions listed in Schedule
5.2(a) are completed;
(b) Merck shall ensure that the transactions listed in Schedule
5.2(b) are completed;
(c) in respect of each Ancillary Agreement, if the Parties and
any relevant JV Entities have reached agreement by March 1, 1998 with respect
thereto or with respect to the outstanding items referred to in the definition
of "Ancillary Agreement" with respect thereto, the Parties shall execute and
deliver and will cause each JV Entity to execute and deliver such Ancillary
Agreement to which it is a party, all such licenses and agreements to be dated
as of the Closing Date;
(d) the Parties shall cause the JV Partnership and the JV
Holding Company, and Biomet shall cause Biomet Europe, to execute and deliver
a consent to be bound by the terms of this Agreement;
(e) the Parties and the JV Partnership shall agree on the terms
of the Name Use Licenses;
(f) Merck shall provide Biomet with satisfactory evidence that
the representatives of Merck executing and delivering this Agreement and each
of the Ancillary Agreements to be delivered as of Closing Date are authorized
to do so; and
(g) Biomet shall provide Merck with satisfactory evidence that
the representatives of Biomet executing and delivering this Agreement and each
of the Ancillary Agreements to be delivered as of the Closing Date are
authorized to do so.
6. CONDITIONS AND UNDERTAKINGS
6.1 Mutual Closing Conditions. The Closing shall be subject to the
fulfillment, as determined by each of the Parties to its reasonable
satisfaction, of each of the conditions specified below:
(a) Biomet and Merck and their Affiliates shall have each
received all necessary governmental or regulatory approvals or consents of
third parties that may be required for the consummation of the transactions
contemplated by this Agreement and to ensure that the JV Entities will
continue to have substantially the same rights in respect of the Biomet JV
Entities' Assets and the Merck JV Entities' Assets as Biomet and its
Affiliates and Merck and its Affiliates, respectively, had immediately prior
to the Closing, and all required filings shall have been made, and all
applicable waiting periods (including any extensions thereof) shall have
expired, under the applicable laws and regulations of any governmental or
regulatory body, agency or department of competent jurisdiction;
(b) the Parties shall have obtained all required rulings or
consents of the appropriate tax authorities in order to implement the Joint
Venture as contemplated herein;
(c) the Parties shall have agreed on the form of the Articles of
Association of the JV Partnership and the JV Partnership shall be organized
under the laws of The Netherlands and shall have partnership interests held as
set forth in Section 3.1(a);
(d) the Parties shall have agreed on the form of the Deed of
Incorporation of the JV Holding Company; and
(e) neither Biomet nor Merck nor any of their Affiliates shall
be subject to any writ, directive, prohibition, restriction, order, decree or
injunction of any governmental agency or a court or tribunal of competent
jurisdiction which prevents or delays any of the transactions contemplated by
this Agreement, and no suit, action or other proceeding or investigation or
review shall be threatened or pending before any court or governmental agency
(i) concerning this Agreement or the consummation of the transactions
contemplated hereby or (ii) in connection with any claim against Biomet or its
Affiliates in connection with the Biomet JV Business or Merck or its
Affiliates in connection with the Merck JV Business, as it is presently
conducted by each of them, which claim, in the reasonable judgment of either
Party, would, if adversely determined, have a material adverse effect on the
Joint Venture.
6.2 Closing Conditions to the Obligations of Biomet. The obligations
of Biomet to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment, as reasonably determined by Biomet, of the
following conditions subsequent:
(a) Merck shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement
required to be performed by Merck at or prior to the Closing;
(b) the representations and warranties of Merck set forth in
this Agreement shall be true and correct in all material respects when made
and as of the Closing with the same effect as though made at and as of the
Closing;
(c) there shall not have taken place after the date of this
Agreement and prior to the Closing any material adverse change in the business
or financial condition of Merck or any of its Affiliates or the Merck JV
Business; and
(d) Biomet shall have received from Merck:
(i) a certificate, duly executed by an authorized officer
of Merck, certifying that the representations and warranties of Merck set
forth in this Agreement are true and correct in all material respects when
made and as of the Closing with the same effect as though made at and as of
the Closing; and
(ii) such further instruments and documents as are
reasonably required to carry out the transactions contemplated by, and to
evidence the fulfillment of the agreements contained in, this Agreement and
the performance of all conditions for the consummation of such transactions.
6.3 Closing Conditions to the Obligations of Merck. The obligations
of Merck to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment, as reasonably determined by Merck, of the
following conditions:
(a) Biomet shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement
required to be performed by Biomet at or prior to the Closing;
(b) the representations and warranties of Biomet set forth in
this Agreement shall be true and correct in all material respects when made
and as of the Closing with the same effect as though made at and as of the
Closing;
(c) there shall not have taken place after the date of this
Agreement and prior to the Closing any material adverse change in the business
or financial condition of Biomet or any of its Affiliates or the Biomet JV
Business; and
(d) Merck shall have received from Biomet:
(i) a certificate, duly executed by an authorized officer
of Biomet, certifying that the representations and warranties of Biomet set
forth in this Agreement are true and correct in all material respects when
made and as of the Closing with the same effect as though made at and as of
the Closing; and
(ii) such further instruments and documents as are
reasonably required to carry out the transactions contemplated by, and to
evidence the fulfillment of the agreements contained in, this Agreement and
the performance of all conditions for the consummation of such transactions.
7. OBLIGATIONS POST-CLOSING
7.1 Biomet Post-Closing Undertakings. As soon as practicable after
the Closing, for no net additional consideration, Biomet shall cause to be
completed the transactions set forth in Schedule 7.1.
7.2 Merck Post-Closing Undertakings. As soon as practicable after
the Closing, for no net additional consideration, Merck shall cause to be
completed the transactions set forth in Schedule 7.2.
7.3 Biomet Post-Closing Cash, Receivables and Debt Adjustment. (a)
The Biomet JV Entities' Assets being contributed to the Joint Venture shall
include cash and receivables (after reduction for doubtful accounts) in the
aggregate equal to the greater of (i) $15 million, of which at least $2
million shall be cash, or (ii) another amount agreed by the Parties. If, as
of the Closing Date, the aggregate of cash and such receivables included in
the Biomet JV Entities' Assets is less than $15 million, or if the cash
component is less than $2 million (or less than such greater amount agreed by
the Parties), Biomet shall provide cash or receivables, as required, to the JV
Partnership as additional capital contributions equal to such deficiency in
accordance with this Section 7.3. If, as of the Closing Date, aggregate of
cash and such receivables included in the Biomet JV Entities' Assets exceeds
$15 million with at least $2 million in cash (or exceeds such greater amount
agreed by the Parties), the Parties will cause such excess to be paid to
Biomet in accordance with this Section 7.3.
(b) Biomet shall provide funds to the JV Partnership as
additional capital contributions and the Parties shall cause the JV
Partnership to apply such funds and to cause the JV Entities to repay certain
indebtedness, in accordance with this Section 7.3, so that as of the Closing
Date the Biomet JV Entities shall have no accrued liabilities, except:
(i) an aggregate principal amount outstanding of $23.9
million of Biomet Third Party Debt (or another amount agreed by the Parties),
such debt being substantially as set forth in Schedule 7.3 or as amended by
Biomet with the consent of Merck, such consent not to be unreasonably withheld
(the "Biomet Contributed Third Party Debt");
(ii) in addition to the Biomet Contributed Third Party
Debt, the Biomet Berlin Debt up to a maximum of DM 8 million (the "Biomet
Contributed Berlin Debt"); and
(iii) Biomet Intercompany Indebtedness in an aggregate
principal amount outstanding of $21.5 million, of which $10 million shall be
Parent Payables and $11.5 million shall be the Ortomed Debt, (provided that,
if the Ortomed Debt is refinanced as provided in Schedule 7.1 prior to or at
Closing (even though Biomet is under no obligation to do so prior to the
Closing), such maximum amount of Biomet Intercompany Indebtedness shall not
exceed $10 million in Parent Payables) (the "Biomet Contributed Intercompany
Indebtedness").
(c) Biomet may cause the Biomet JV Entities to repay
indebtedness and/or distribute cash and receivables prior to or on the
Closing, subject to Section 15.2, so that as of the Closing Date the aggregate
accrued liabilities of the Biomet JV Entities will not exceed the amounts
specified in Section 7.3(b) and the aggregate of cash and receivables (after
reduction for doubtful accounts) included in the Biomet JV Entities' Assets is
at least the greater of (i) $15 million, of which at least $2 million shall be
cash, or (ii) such other amount agreed in accordance with Section 7.3(a).
(d) Prior to April 1, 1998, the JV Partnership shall determine,
on advice of Biomet's auditors, and notify the Parties of (i) the amount of
the liabilities, including the amounts of the Biomet Third Party Debt, Biomet
Berlin Debt and Biomet Intercompany Indebtedness, of each Biomet JV Entity as
of the Closing Date (the "Actual Biomet Third Party Debt", the "Actual Biomet
Berlin Debt" and the "Actual Biomet Intercompany Indebtedness", respectively),
(ii) the amounts of cash and receivables included in each Biomet JV Entity's
Assets as of the Closing Date and (iii) the amount of each JV Entity's reserve
for doubtful accounts as of the Closing Date.
(e) Within five (5) Business Days after receipt by Biomet of the
notice referred to in Section 7.3(d):
(i) if as of the Closing Date the Actual Biomet Third Party
Debt of all Biomet JV Entities, in the aggregate, exceeds the Biomet
Contributed Third Party Debt, or the Actual Biomet Berlin Debt of all Biomet
JV Entities, in the aggregate, exceeds the Biomet Contributed Berlin Debt, or
the Actual Biomet Intercompany Indebtedness of all Biomet JV Entities, in the
aggregate, exceeds the Biomet Contributed Intercompany Indebtedness, in each
case:
(1) Biomet shall pay to the JV Partnership (as an
additional capital contribution) an amount equal to such excess; and
(2) the JV Partnership shall provide loans or capital
contributions to the Biomet JV Entities to enable them to repay such excess
and shall cause such Biomet JV Entities to repay such excess, as soon as
possible; or
(ii) if as of the Closing Date the Biomet Contributed Third
Party Debt exceeds the Actual Biomet Third Party Debt of all Biomet JV
Entities, in the aggregate, or the Biomet Contributed Berlin Debt exceeds the
Actual Biomet Berlin Debt of all Biomet JV Entities, in the aggregate, or the
Biomet Contributed Intercompany Indebtedness exceeds the Actual Biomet
Intercompany Indebtedness of all Biomet JV Entities, in the aggregate, in each
case:
(1) the JV Partnership shall pay to Biomet (as a
return of its capital contribution) an amount equal to such excess; and
(2) Biomet shall advance such excess to the Biomet JV
Entities on the same terms as any such indebtedness that was repaid.
(f) Within five (5) Business Days after receipt by Biomet of the
notice referred to in Section 7.3(d), if the aggregate of cash and receivables
(after reduction for doubtful accounts) included in the Biomet JV Entities'
Assets as of the Closing Date:
(i) exceeds $15 million with at least $2 million in cash or
such other amount determined in accordance with Section 7.3(a), whichever is
applicable, the JV Partnership will cause an amount equal to such excess to be
paid to Biomet by way of a preferential distribution; or
(ii) is less than $15 million or includes less than $2
million in cash or such other amount determined in accordance with Section
7.3(a), whichever is applicable, Biomet agrees to provide cash or receivables,
as required, equal to such deficiency to the JV Partnership as an additional
capital contribution.
(g) Within twenty (20) Business Days after the first anniversary
of the Closing Date, the JV Partnership shall determine and notify the Parties
of the amount of any Uncollected Biomet Receivables as of such anniversary.
If the amount of Uncollected Biomet Receivables as of the first anniversary of
the Closing Date exceeds the amount of the reserve for doubtful accounts, in
the aggregate, included as part of the Biomet JV Entities' Assets as of the
Closing Date, Biomet shall, within ten (10) Business Days after receipt by
Biomet of such notice, purchase from the JV Partnership or a JV Entity, as the
case may be, Uncollected Biomet Receivables in an amount equal to such excess,
for a purchase price equal to the unpaid balance of such Uncollected Biomet
Receivables.
(h) In the event any person (other than Biomet or one of its
Affiliates) or Biomet Deutschland GmbH on behalf of such person makes a claim
against Biomet or any of its Affiliates (other than a JV Entity) for
reimbursement of any amounts paid to Biomet or such Affiliate by Biomet
Deutschland GmbH as repayment of certain indebtedness in accordance with this
Section 7.3, the JV Partnership agrees to indemnify Biomet or such Affiliate
for any reimbursement paid by Biomet or such Affiliate in respect of such
claim.
7.4 Merck Post-Closing Cash, Receivables and Debt Adjustment. (a)
The Merck JV Entities' Assets being contributed to the Joint Venture shall
include cash and receivables (after reduction for doubtful accounts) in the
aggregate equal to $15 million, of which at least $2 million shall be cash.
If, as of the Closing Date, the aggregate of cash and such receivables
included in the Merck JV Entities' Assets is less than $15 million, or if the
cash component is less than $2 million, Merck shall provide cash or
receivables, as required, to the JV Partnership as additional capital
contributions equal to such deficiency in accordance with this Section 7.4.
If, as of the Closing Date, the aggregate of cash and such receivables
included in the Merck JV Entities' Assets exceeds $15 million with at least $2
million in cash, the Parties will cause such excess to be paid to Merck in
accordance with this Section 7.4.
(b) Merck shall provide funds to the JV Partnership as
additional capital contributions and the Parties shall cause the JV
Partnership to apply such funds and to cause the JV Entities to repay certain
indebtedness, in accordance with this Section 7.4, so that as of the Closing
Date the Merck JV Entities shall have no accrued liabilities, except up to a
maximum aggregate principal amount outstanding of $6.9 million of Merck Third
Party Debt, such debt being substantially as set forth in Schedule 7.4 or as
amended by Merck with the consent of Biomet, such consent not to be
unreasonably withheld (the "Merck Contributed Third Party Debt").
(c) Merck may cause the Merck JV Entities to repay indebtedness
and/or distribute cash and receivables prior to or on the Closing, subject to
Section 15.2, so that as of the Closing Date the aggregate accrued liabilities
of the Merck JV Entities will not exceed the amounts specified in Section
7.4(b) and the aggregate of cash and receivables (after reduction for doubtful
accounts) included in the Merck JV Entities' Assets is at least $15 million,
of which at least $2 million shall be cash.
(d) Prior to April 1, 1998, the JV Partnership shall determine,
on the advice of Merck's auditors, and notify the Parties of (i) the amount of
the liabilities, including the amounts of the Merck Third Party Debt and Merck
Intercompany Indebtedness, of each Merck JV Entity as of the Closing (the
"Actual Merck Third Party Debt" and the "Actual Merck Intercompany
Indebtedness", respectively); (ii) the amounts of cash and such receivables
included in each Merck JV Entity's Assets as of the Closing and (iii) the
amount of each Merck JV Entity's reserve for doubtful accounts as of the
Closing.
(e) Within five (5) Business Days after receipt by Merck of the
notice referred to in Section 7.4(d):
(i) if as of the Closing Date the Actual Merck Third Party
Debt of all JV Entities, in the aggregate, exceeds the Merck Contributed Third
Party Debt, or the Actual Merck Intercompany Indebtedness of all JV Entities,
in the aggregate, exceeds $0, in each case:
(1) Merck shall pay to the JV Partnership (as an
additional capital contribution) an amount equal to such excess; and
(2) the JV Partnership shall provide loans or capital
contributions to the Merck JV Entities to enable them to repay such excess and
shall cause such Merck JV Entities to repay such excess, as soon as possible;
or
(ii) if as of the Closing Date the Merck Contributed Third
Party Debt exceeds the Actual Merck Third Party Debt of all JV Entities, in
aggregate, or the Actual Contributed Intercompany Indebtedness is less than
$0, in each case:
(1) the JV Partnership shall pay to Merck (as a return
of its capital contribution) an amount equal to such excess; and
(2) Merck shall repay such excess to the JV Entities.
(f) Within five (5) Business Days after receipt by Merck of the
notice referred to in Section 7.4(d), if the aggregate of cash and receivables
(after reduction for doubtful accounts) included in the Merck JV Entities'
Assets as of the Closing Date:
(i) exceeds $15 million with at least $2 million in cash,
or such other amount determined in accordance with Section 7.4(a), whichever
is applicable, the JV Partnership will cause an amount equal to such excess to
be paid to Merck by way of a preferential distribution; or
(ii) is less than $15 million or includes less than $2
million in cash, or such other amount determined in accordance with Section
7.4(a), whichever is applicable, Merck agrees to provide cash or receivables,
as required, equal to such deficiency to the JV Partnership as an additional
capital contribution.
(g) Within twenty (20) Business Days after the first anniversary
of the Closing Date, the JV Partnership shall determine and notify the Parties
of the amount of any Uncollected Merck Receivables as of such anniversary. If
the amount of Uncollected Merck Receivables as of the first anniversary of the
Closing Date exceeds the amount of the reserve for doubtful accounts, in the
aggregate, included as part of the Merck JV Entities' Assets as of the
Closing, Merck shall, within ten (10) Business Days after receipt by Merck of
such notice, purchase from the JV Partnership or a JV Entity, as the case may
be, Uncollected Merck Receivables in an amount equal to such excess, for a
purchase price equal to the unpaid balance of such Uncollected Merck
Receivables.
(h) In the event any person (other than Merck or one of its
Affiliates) or Merck Biomaterial GmbH or Artos Medizinische Produkte GmbH on
behalf of such person makes a claim against Merck or any of its Affiliates
(other than a JV Entity) for reimbursement of any amounts paid to Merck or
such Affiliate by Merck Biomaterial GmbH or Artos Medizinische Produkte GmbH
as repayment of certain indebtedness in accordance with Section 7.4 of the JV
Partnership agrees to indemnify Merck or such Affiliate any reimbursement paid
by Merck or such Affiliate in respect of such claim.
7.5 Post-Closing Biomet Real Estate Adjustment. At any time after
the Closing, Biomet shall have the right to cause the JV Entities to convey or
assign to Biomet or its nominee such JV Entity's entire interest in the real
properties, and the rights to acquire real property, listed on Schedule 7.5,
provided that upon such conveyance Biomet or such nominee shall enter into a
binding lease pursuant to which Biomet or such nominee shall lease to such JV
Entity the real property conveyed by it for an initial term of five (5) years
from the Closing Date (and, upon Biomet or a nominee acquiring any real
property that is the subject of such rights to acquire real property, Biomet
or such nominee shall enter into a binding lease, pursuant to which Biomet or
such Affiliate shall lease to such JV Entity such real property for an initial
term equal to the remainder of the five (5) year period from the Closing Date)
with the right on the part of the JV Entities to sublease or assign any such
lease (provided the JV Entity remains liable for all payments thereunder) or
to renew the initial lease for additional one (1) year periods thereafter or
to renew, sublease, assign, or cancel any renewal lease. The amount payable
by the JV Entities under all such leases for the first five (5) years shall be
as set forth in Schedule 7.5 and thereafter shall be at commercial rates and
provided further that such conveyances and leases shall otherwise be at no
transaction cost to any JV Entity and any costs and expenses in relation to
such transfers and the establishment of such leases shall be paid or
reimbursed by Biomet. Biomet shall be entitled to a preferential distribution
from the JV Partnership equal to any amount that Biomet or such nominee is
required to pay to a JV Entity as consideration for the conveyance of any real
property pursuant to this Section 7.5, which distribution shall be reduced by
all applicable withholding taxes.
7.6 Royalties To Be Paid on Completed and Uncompleted Projects. (a)
At such time as any JV Entity shall sell or license any rights to a Completed
Project outside the JV Territory to any person, including Biomet or its
Affiliates, or shall supply any Completed Project either directly or through
another person, including Biomet and its Affiliates, or enter into any
agreement or understanding to do any of the foregoing including an Ancillary
Agreement, the JV Partnership shall require as a condition of such grant or
supply that Merck be paid a commercially reasonable royalty which shall be
acceptable to Merck and Biomet. The Parties estimate that for the Completed
Projects the royalty will be [confidential information omitted and filed
separately with the Commission], provided that with respect to the grant of
rights to Biomet for Palacos without antibiotic in the United States and
Canada, the total consideration payable to the Joint Venture and Merck shall
not exceed the total consideration payable by Smith & Nephew to Merck pursuant
to the existing license from Merck to Smith & Nephew for such product. No
license for Completed Projects shall be granted or supply shall occur or be
agreed to without the agreement of Merck to such royalty. Such royalty shall
be payable irrespective of the maintenance by the JV Entities of the
Intellectual Property protection related thereto.
(b) At such time as any JV Entity shall sell or license any rights to
an Uncompleted Project outside the JV Territory to any person, including
Biomet or its Affiliates, or shall supply any Uncompleted Project either
directly or through another person, including Biomet and its Affiliates, or
enter into any agreement or understanding to do any of the foregoing, the JV
Partnership shall require as a condition of such grant or supply that the
Joint Venture be paid a commercially reasonable return (including any
royalties). The Uncompleted Projects are expected to be innovative,
high-margin [confidential information omitted and filed separately with the
Commission]products with Intellectual Property protection sufficient to obtain
a competitive advantage in the market. The Parties presently estimate that
for the Uncompleted Projects the Joint Venture would receive a return
(including any royalties) equal to its manufacturing cost plus an amount equal
to approximately [confidential information omitted and filed separately with
the Commission].
7.7 Names of JV Entities. As soon as practicable after the Closing,
unless otherwise agreed by the Parties and subject to the Name Use Licenses,
the names of each JV Entity shall be changed to a name that includes "Biomet
Merck" (other than the JV Partnership, the JV Holding Company, Merck
Biomaterial GmbH (Germany), Ortomed B.V. (Netherlands) and Mediplant N.V.
(Belgium), any Non-Controlled Biomet JV Entities and, for only so long as the
name "Biomet" is not available in Spain, Industrias Quir rgicas de Levante,
S.A. (Spain)).
7.8 Dutch Permanent Establishment. (a)The JV Partnership shall use
its reasonable best efforts (i) to prosecute the ruling requests filed with,
and to obtain definitive rulings from, Dutch tax authorities in respect of (A)
its head office, holding company and finance activities, and (B) an exemption
from the imposition of the Dutch capital tax in respect of its transfer of
certain assets to the JV Holding Company, and (ii) to file and prosecute a
ruling request with, and to obtain a definitive ruling from, Dutch tax
authorities permitting it to qualify for the Dutch finance company regime
permitting the creation of a special "financial risk reserve" in respect of
its financing, licensing and other qualified activities.
(b) The JV Partnership shall use its reasonable best efforts to
establish and maintain, in a manner consistent with the purpose and scope of
the Joint Venture, a substantive presence in The Netherlands so as to remain
at all times in compliance in all material respects with the factual
representations set forth in the ruling request filed with Dutch tax
authorities regarding its head office, holding company and finance activities.
(c) The JV Partnership shall use its reasonable best efforts to
establish and maintain, in a manner consistent with the purpose and scope of
the Joint Venture, personnel or operations in The Netherlands in addition to
that required under Section 7.8(a) or Section 7.8(b), if requested by Merck,
provided that:
(i) such additional personnel or operations are reasonably
required in order for Merck to obtain a ruling from German tax authorities
that Merck's interest in the JV Partnership constitutes a Dutch permanent
establishment for the purposes of the Tax Convention (Art. 2(1)2.a) between
The Netherlands and Germany;
(ii) such steps or actions are not likely to have a
material adverse effect on the business or operations of the Joint Venture;
and
(iii) Merck agrees to pay any costs in transferring such
personnel or operations to The Netherlands, and, if requested by Biomet, any
substantial incremental cost of maintaining such personnel or operations in
The Netherlands after any such transfer.
(d) Notwithstanding the foregoing, neither the JV Partnership
nor either Party shall have any liability to the JV Partnership or to the
other Party (i) in respect of any failure by the Dutch or German tax
authorities to issue any of the requested rulings described in this Section
7.8, or (ii) as a result of any change in applicable law or the interpretation
or application thereof after issuance of any such ruling.
7.9 Subsidiaries of Biomet Ltd. As soon as practicable after the
Closing, all shares owned by Biomet Ltd., directly or indirectly, in Biomet SA
(France), Biomet Norge (Norway), Biomet Polska Ltd. (Poland), Biomet SpA
(Italy) and CDO Ltd. (United Kingdom) shall be transferred and assigned to the
JV Holding Company and any costs and expenses in relation to such transfers
and assignments shall be paid or reimbursed by Biomet.
8. FINANCIAL MATTERS
8.1 Financing by Parties.
(a) If the Board of Directors determines that the business of
the JV Entities requires additional working capital or other funds, the
Parties may agree to provide such funds in the form of capital contributions
or loans to one or more of the JV Entities, but, unless otherwise expressly
agreed by the Parties, only if such contributions or loans are in proportion
to the Parties' respective interests in the JV Partnership on terms agreed by
the Parties; however, no such contributions or loans by the Parties will
change any Party's proportionate interest in the JV Partnership. In the
absence of such agreement, the JV Partnership may attempt to obtain funds
through borrowing on the basis of the credit standing of the JV Entities from
commercial banks or other institutional lenders. Although the Parties will
not be required to guarantee any such borrowing, they will use their
commercially reasonable best efforts to assist the JV Partnership in obtaining
such funds on the best available terms.
(b) In order to provide a source of working capital for the JV
Entities following the Closing and until sufficient JV Entities' working
capital is reestablished, to the extent working capital is not available from
Merck or any third party on more favorable terms, Biomet shall make loans to
the JV Partnership in United States dollars, as requested from time to time
after the Closing Date and prior to the first anniversary of the Closing Date
in increments of $1 million each. The outstanding balance of such loans shall
bear interest from the date advanced to the date of repayment at a rate of
five percent (5%) per annum. Interest shall be payable quarterly in arrears
based on a 360-day year consisting of twelve (12) 30-day months and the number
of days elapsed. Principal shall be payable as agreed by the Parties at the
time of the loan.
8.2 Shareholders' Rights. All books and records of each JV Entity
will be open to inspection and copying by either Party or its representatives,
including its auditors, at all reasonable times without prior notice.
8.3 Accounting. Each JV Entity will keep its books of account and
records in accordance with local generally accepted accounting principles and
practices. The JV Partnership shall provide the Parties on a timely basis
with the necessary financial reports of the JV Entities as required by the
Parties to fulfil their tax, legal and financial reporting requirements,
including appropriate audit certifications necessary for consolidation of the
financial results of the JV Entities with those of Biomet. The consolidated
accounts of the JV Entities shall be restated in accordance with United States
generally accepted accounting principles and practices.
8.4 Financial Statements. The JV Partnership will cause to be
prepared and distributed to the Parties:
(a) as promptly as possible, but in any event within forty-five
(45) days following the close of each Fiscal Year, annual financial statements
of the JV Entities reflecting any audit adjustments;
(b) annual audited consolidated financial statements, including
the auditor's reports, within forty-five (45) days following the close of the
Fiscal Year; and
(c) as promptly as possible, but in any event within twenty-one
(21) days following the end of each calendar month, monthly unaudited
management financial statements and reports as set forth in Schedule 8.4.
8.5 Auditors. (a) The initial auditors of the JV Partnership and
the JV Holding Company shall be Coopers & Lybrand and the initial auditors of
the other JV Entities will be affiliates of Coopers & Lybrand.
(b) At any time after the completion of the audit of Fiscal Year
1998, if one Party requests that an auditor of any JV Entity or all JV
Entities be removed, by notice to the other Party, the Parties shall cause the
JV Partnership and the JV Holding Company to remove such auditor as the
auditor of such JV Entity or of all the JV Entities as soon as practicable.
(c) Any vacancies in the office of auditor of any JV Entity
shall be filled by a reputable international accounting firm nominated by
Merck and approved by Biomet, which approval shall not be unreasonably
withheld.
(d) The Parties shall cause the JV Partnership to instruct the
auditors of the JV Entities to make all of the auditors' work papers available
for review by the external auditors of either Party at all reasonable times
upon request by such Party.
9. MANAGEMENT AND PERSONNEL MATTERS
9.1 Board of Directors. Subject to this Agreement, the JV
Partnership shall be responsible for the overall management of the Joint
Venture and the JV Holding Company shall only operate as a holding company for
the Joint Venture. The Parties shall ensure that, subject to this Agreement,
the JV Partnership, the JV Holding Company and each JV Entity is, to the
maximum extent permitted by law, subject to the direction and control of the
board of directors (the "Board of Directors") that is hereby established by
the Parties as of the Closing Date.
9.2 Composition of Board of Directors. At all times during the term
of this Agreement, the Board of Directors shall consist of four (4) members.
Two (2) members of the Board of Directors shall be persons nominated by Biomet
and two (2) members shall be persons nominated by Merck. In the event that a
vacancy on the Board of Directors occurs for any reason, such vacancy shall be
filled by a person nominated by the Party that nominated the person whose
departure caused such vacancy. The initial members of the Board of Directors
will consist of the following:
Nominated by Biomet:
Mr. Niles L. Noblitt
Mr. Roger Van Broeck
Nominated by Merck:
Prof. Dr. Bernhard Scheuble
Herr Hans Reimer
9.3 Quorum. A quorum for a meeting of the Board of Directors shall
be four (4) members of the Board of Directors, including two (2) members
nominated by Biomet and two (2) members nominated by Merck.
9.4 Ordinary Issues. Subject to this Agreement, ordinary decisions
of the Board of Directors shall require the vote of a majority of its members,
except in the case of a tied vote, in which case one (1) of the members
nominated by Biomet shall have the power to cast a tie breaking vote.
9.5 Fundamental Issues. Notwithstanding any other provisions of this
Agreement, none of the actions listed in Schedule 9.5 shall be taken by any of
the JV Entities without the affirmative vote of at least a majority of the
members of the Board of Directors including at least one (1) member of the
Board of Directors nominated by each Party.
9.6 Officers. (a) The officers of the JV Partnership shall be
elected by the Board of Directors. Such officers shall include the following:
one (1) Chief Executive Officer, one (1) Chief Financial Officer, at least one
(1), and initially two (2), Chief Operating Officers (Regional), and one (1)
Export Manager. Additionally, the officers of the JV Partnership shall include
such other officers as shall from time to time be elected by the Board of
Directors. The Parties shall ensure that the officers of the JV Holding
Company are the same as the officers of the JV Partnership.
(b) The initial officers of the JV Partnership and the JV
Holding Company shall be:
(i) Chief Executive Officer Niles L. Noblitt;
(ii) Chief Financial Officer (To be elected);
(iii) Chief Operating Officer, Hans Reimer;
Regional, including France, Germany
and Austria
(iv) Chief Operating Officer, Roger Van Broeck;
Regional, including the U.K.
and Spain
(v) Export Manager (To be elected).
(c) The initial two (2) Chief Operating Officers shall only be
removable by the Board of Directors provided that the members of the Board of
Directors nominated by Biomet shall have no power to cast a tie breaking vote
in respect of any resolution to remove either such initial Chief Operating
Officer.
(d) France, Germany and Austria shall be included in the regions
for which Hans Reimer is responsible as a Chief Operating Officer (except that
Roger Van Broeck may be responsible for negotiations on behalf of the Joint
Venture to acquire an interest in J.H. Schulte Medizintechnik). The inclusion
of France, Germany and Austria in the regions for which Hans Reimer is
responsible as a Chief Operating Officer shall only be changeable by the Board
of Directors provided that the members of the Board of Directors nominated by
Biomet shall have no power to cast a tie breaking vote in respect of any
resolution to change such regions.
10. PROMOTION OF THE INTERESTS OF THE JOINT VENTURE
10.1 Non-Competition in JV Territory. Except as specifically
authorized by this Agreement or by written agreement of the Parties, after the
Closing, neither Party nor any of their respective Affiliates will during the
term of this Agreement or during five (5) years following the date on which
such Party ceases to have a direct or indirect interest in the JV Partnership,
to the maximum extent permitted by law, engage directly or indirectly (other
than through the JV Entities) within the JV Territory in any business in or
competitive with the JV Business Field.
10.2 Distribution in the Export Territory. Subject to the terms of
any license or supply and distribution agreement between the JV Entities and
the Parties and their respective Affiliates:
(a) The JV Entities may sell JV Products in the Export Territory,
directly or through distributors. No JV Entity will market or sell any
products in the JV Business Field in any country outside the JV Territory that
is not part of the Export Territory for that product without Biomet's prior
written approval.
(b) Where a JV Entity is marketing or selling a particular JV
Product in a particular market in the Export Territory, directly or through
distributors, and a Party or an Affiliate of a Party is marketing or selling
the same or a similar product in such market, directly or through
distributors, such JV Entity and such Party shall, subject to applicable laws,
co-ordinate their marketing, distribution and sales arrangements to minimize
duplicative costs.
(c) Subject to any agreement binding on any JV Entity, Biomet
(or any of its Affiliates) may at any time after the Closing Date by written
notice to the JV Partnership, undertake the distribution of any JV Product in
any country outside of the JV Territory on terms that are no less favorable to
the JV Partnership than those available from unrelated distributors of such
product in such country.
(d) If, at any time after the Closing Date, Merck (or any of its
Affiliates) desires to sell and distribute a JV Product in a country outside
of the JV Territory and outside of the Export Territory for such JV Product,
Merck (or such Affiliate) may submit to the JV Partnership a detailed
marketing proposal for the sale and distribution of such product in such
country, provided that the price to be paid by Merck (or such Affiliate) for
such product in such country shall be no less favorable to the JV Partnership
than the price that would be paid by an unrelated dealer in such country. The
JV Partnership shall respond to any such proposal within ninety (90) days of
receipt and, subject to Biomet's approval which shall not be unreasonably
withheld, the Parties will cause the JV Entities to implement such proposal.
(e) Subject to this Section 10.2, this Agreement shall not limit
or restrict Biomet's right to manufacture, market and sell, directly or
through distributors or Affiliates, products in the JV Business Field (i) in
the Export Territory concurrently with the JV Entities, and (ii) anywhere else
in the world outside the JV Territory and the Export Territory.
10.3 No Poaching. Neither Party nor any of its respective Affiliates
(other than a JV Entity) will, during the period commencing on the date of
this Agreement and ending on the later of the date five (5) years following
the date of this Agreement or the date five (5) years following the date on
which such Party ceases to have a direct or indirect interest in the JV
Partnership, employ, hire or engage any person who was during the preceding
one (1) year period employed by the other Party or its Affiliates or any of
the JV Entities, without the written consent of such other Party.
11. JV PRODUCTS
11.1 JV Products; Offer to Biomet. (a) If during the term of this
Agreement any JV Entity develops any technology or products within the JV
Business Field or obtains any rights to use any technology or to manufacture
or sell any products within the JV Business Field in either case outside of
the JV Territory, or desires to exploit a JV Product in a country where an
offer has not previously been made to Biomet under this Section 11.1 in
respect of such product and such country, and such JV Product and such country
are not the subjects of an existing license or supply agreement between a JV
Entity and Biomet or one of its Affiliates, the JV Partnership shall offer
such technology and products to Biomet in accordance with this Section 11.1
and Section 11.5.
(b) When the Board of Directors determines that it is in the
interest of the JV Entities to commercially exploit such technology or
products in any country or countries outside the JV Territory and a JV Entity
is prepared to so exploit or to enter into an agreement with a third party to
so exploit such technology or products, the JV Partnership shall offer, to the
extent it is permitted to do so, to enter into a license or supply agreement
with Biomet (or any Affiliate nominated by Biomet) that will enable Biomet or
its Affiliate to manufacture and/or sell such products and use such technology
on an exclusive basis within the JV Business Field in such country or
countries, provided that Biomet shall have agreed to pay a commercially
reasonable royalty or return, including, if applicable, as provided in Section
7.6. The JV Partnership shall make such offer by sending a written notice to
Biomet (with a copy to Merck) containing the terms and conditions of the
offer.
(c) Biomet's right to accept such offer shall be exercisable by
written notice of its acceptance given within one hundred eighty (180) days
after receipt of the JV Partnership's offer. The failure of Biomet to give
such notice of acceptance in accordance with this Section 11.1(c) shall be
deemed to be an election by Biomet not to enter a license or supply agreement
on such terms in respect of such technology or products.
(d) If Biomet does not elect to enter a license or supply
agreement in respect of such technology or products offered in accordance with
Section 11.1(b), except as provided below, the JV Partnership shall be under
no obligation to enter any license or supply agreement in respect of such
technology or products with Biomet, and at any time after the notice period
referred to in Section 11.1(c) the JV Partnership may enter into a license or
supply agreement with any bona fide third party to manufacture and sell such
products and use such technology outside the JV Territory, provided that such
party shall have agreed to pay a commercially reasonable royalty or return,
including, if applicable, as provided in Section 7.6, and further provided
that if the terms of such license or supply agreement, in the aggregate, are
materially less favorable to the JV Partnership than those offered to Biomet
in accordance with Section 11.1(b), the JV Partnership shall, before entering
such agreement, offer, in the manner set forth in this Section 11.1, to enter
into such license or such supply agreement on such new terms with Biomet,
except that Biomet's right to accept such an offer shall be exercisable for a
period of thirty (30) days.
11.2 JV Products; Offer to Merck. (a) If during the term of this
Agreement, any JV Entity develops any technology or products with applications
outside the JV Business Field but within Merck's Core Business or obtains any
rights to use any technology or manufacture or sell any products with
applications outside of the JV Business Field but within Merck's Core
Business, the JV Partnership shall offer such technology and products to Merck
in accordance with this Section 11.2 and Section 11.5.
(b) When the Board of Directors determines that it is in the
interest of the JV Entities to commercially exploit such technology or
products in any country or countries outside the JV Territory, the JV
Partnership shall offer, to the extent it is permitted to do so, to enter into
a license or supply agreement with Merck (or any Affiliate nominated by Merck)
that will enable Merck or its Affiliate to manufacture and/or sell such
products and use such technology on an exclusive basis in such country or
countries. The JV Partnership shall make such offer by sending a written
notice to Merck containing the terms and conditions of the offer.
(c) Merck's right to accept such offer shall be exercisable by
written notice of its acceptance given within one hundred eighty (180) days
after receipt of the JV Partnership's offer. The failure of Merck to give
such notice of acceptance in accordance with this Section 11.2(c) shall be
deemed to be an election by Merck not to enter a license or supply agreement
on such terms in respect of such technology or products.
(d) If Merck does not elect to enter a license or supply
agreement in respect of such technology or products offered in accordance with
Section 11.2(b), except as provided below, the JV Partnership shall be under
no obligation to enter any license or supply agreement in respect of such
technology or products with Merck, and at any time after the notice period
referred to in Section 11.2(c) the JV Partnership may enter a license or
supply agreement with any bona fide third party to manufacture and/or sell
such products and use such technology (provided that if the terms of such
license or supply agreement, in the aggregate, are materially less favorable
to the JV Partnership than those offered to Merck in accordance with Section
11.2(b), the JV Partnership shall, before entering such agreement, offer, in
the manner set forth in this Section 11.2, to enter into such license or such
supply agreement on such new terms with Merck, except that Merck's right to
accept such an offer shall be exercisable for a period of thirty (30) days).
11.3 Products Developed by Biomet; Offer to Joint Venture and Merck.
(a) If after the Closing and during the term of this Agreement, Biomet or any
of its Affiliates (other than a JV Entity) develops any technology or products
within the JV Business Field or obtains any rights to use any technology or to
manufacture or sell any products within the JV Business Field within the JV
Territory and Biomet, in its sole discretion, determines that such product or
technology should be marketed or sold in the JV Territory, Biomet shall offer
such technology and products to the JV Partnership (or any JV Entity nominated
by the JV Partnership) in accordance with this Section 11.3 and Section 11.5.
(b) When Biomet, in its sole discretion, determines that it is
in the interest of Biomet to have such technology or products commercially
exploited in the JV Territory, Biomet shall offer, to the extent it is
permitted to do so, to enter a license or supply agreement with the JV
Partnership (or any JV Entity nominated by the JV Partnership) that will
enable the JV Entities to manufacture and/or sell such products and use such
technology on an exclusive basis within the JV Business Field and within the
JV Territory. Biomet shall make such offer by sending a written notice to the
JV Partnership containing the terms and conditions of the offer.
(c) As an alternative to making the offer in accordance with
Section 11.3(b), Biomet may, at its election, offer to transfer all of
Biomet's (and its Affiliates') interests in such technology and products to
the JV Partnership (or any JV Entity nominated by the JV Partnership). Biomet
shall make such offer by sending a written notice to the JV Partnership
containing the terms and conditions of the offer, including terms setting
forth a commercially reasonable compensation for such transfer.
(d) The JV Partnership's right to accept an offer made pursuant
to Section 11.3(b) or Section 11.3(c) shall be exercisable by written notice
of its acceptance given within one hundred eighty (180) days after receipt of
Biomet's offer. The failure of the JV Partnership to give such notice of
acceptance in accordance with this Section 11.3(d) shall be deemed to be an
election by the JV Partnership not to enter a license or supply agreement or
to accept such transfer, as the case may be, on such terms in respect of such
technology or products.
(e) If Biomet makes an offer in accordance with Section 11.3(b)
or Section 11.3(c) and the JV Partnership does not elect to enter a license or
supply agreement or accept a transfer in respect of such technology or
products, except as provided below in Section 11.3(g), Biomet shall be under
no obligation to enter any license or supply agreement or transfer agreement
in respect of such technology or products with the JV Partnership, and Biomet
shall offer such technology and products to Merck (or any Affiliate nominated
by Merck) on substantially the same terms as were offered to the JV
Partnership in accordance with Section 11.3(b) or Section 11.3(c), as the case
may be. Biomet shall make such offer by sending a written notice to Merck
containing the terms and conditions of the offer.
(f) Merck's right to accept such offer shall be exercisable by
written notice of its acceptance given within one hundred eighty (180) days
after receipt of Biomet's offer. The failure of Merck to give such notice of
acceptance in accordance with this Section 11.3(f) shall be deemed to be an
election by Merck not to enter a license or supply agreement or to accept such
transfer, as the case may be, on such terms in respect of such technology or
products. If, following an offer made in accordance with Section 11.3(e),
Merck or an Affiliate of Merck enters a license or supply agreement or a
transfer agreement in respect of such technology or products, Section 10.1
shall not apply to the exploitation of such technology or products by Merck or
its Affiliates.
(g) If Biomet makes an offer to Merck in accordance with Section
11.3(e) and Merck does not elect to enter a license or supply agreement or
accept a transfer in respect of such technology or products, except as
provided below, Biomet shall be under no obligation to enter any license or
supply agreement or transfer agreement in respect of such technology or
products with Merck, and at any time after the notice period referred to in
Section 11.3(f) Biomet may enter a license or supply agreement with any bona
fide third party to manufacture and sell such products and use such technology
outside the JV Territory or an agreement to transfer all of Biomet's (and its
Affiliates') interests in such technology and products (provided that if the
terms of such license or supply agreement or agreement to transfer, in the
aggregate, are materially less favorable to Biomet than those offered to the
JV Partnership in accordance with Section 11.3(b) or Section 11.3(c), as the
case may be, Biomet shall, before entering such agreement, offer, in the
manner set forth in this Section 11.3, to enter into such license or supply
agreement on such new terms first with the JV Partnership and, if the JV
Partnership declines, with Merck, except that the JV Partnership's and Merck's
right to accept such an offer shall be exercisable for a period of thirty (30)
days.
11.4 Products Developed by Merck; Offer to Joint Venture and Biomet.
(a) If after the Closing and during the term of this Agreement, Merck or any
Affiliate (other than a JV Entity) develops any technology or products within
the JV Business Field, Merck may in its sole discretion offer such technology
and products to, and Merck shall not use such technology or products in direct
or indirect competition with the JV Entities or Biomet without having first
offered such technology and products to, the JV Partnership (or any JV Entity
nominated by the JV Partnership) or Biomet in accordance with this Section
11.4 and Section 11.5.
(b) Merck may in its sole discretion offer, to the extent it is
permitted to do so, to enter a license or supply agreement with the JV
Partnership (or any JV Entity nominated by the JV Partnership) that will
enable the JV Entities to manufacture and/or sell such products and use such
technology on an exclusive basis within the JV Business Field and within the
JV Territory. Merck shall make such offer by sending a written notice to the
JV Partnership containing the terms and conditions of the offer.
(c) As an alternative to making the offer in accordance with
Section 11.4(b), Merck may in its sole discretion offer to transfer all of
Merck's (and its Affiliates') interests in such technology and products to the
JV Partnership (or any JV Entity nominated by the JV Partnership). Merck
shall make such offer by sending a written notice to the JV Partnership
containing the terms and conditions of the offer, including terms setting
forth a commercially reasonable compensation for such transfer.
(d) The JV Partnership's right to accept an offer made pursuant
to Section 11.3(b) or Section 11.3(c) shall be exercisable by written notice
of its acceptance given within one hundred eighty (180) days after receipt of
Merck's offer. The failure of the JV Partnership to give such notice of
acceptance in accordance with this Section 11.4(d) shall be deemed to be an
election by the JV Partnership not to enter a license or supply agreement or
to accept such transfer, as the case may be, on such terms in respect of such
technology or products.
(e) If Merck makes an offer in accordance with Section 11.4(b)
or Section 11.4(c) and the JV Partnership does not elect to enter a license or
supply agreement or accept a transfer in respect of such technology or
products, except as provided below, Merck shall be under no obligation to
enter any license or supply agreement or transfer agreement in respect of such
technology or products with the JV Partnership, and Merck shall offer such
technology and products to Biomet (or any Affiliate nominated by Biomet) on
substantially the same terms as were offered to the JV Partnership in
accordance with Section 11.4(b) or Section 11.4(c), as the case may be. Merck
shall make such offer by sending a written notice to Biomet containing the
terms and conditions of the offer provided that if the terms of such license
or supply agreement in aggregate are materially less favorable to Merck than
those offered to the JV Partnership in accordance with Section 11.4(b) and
Section 11.4(c), Merck shall, before entering such agreement with Biomet,
offer in the manner set forth in Section 11.4 to enter into such license or
supply agreement or such terms with the JV Partnership, except that the JV
Partnership's right to accept such an offer shall be exercisable for a period
of thirty (30) days.
(f) Biomet's right to accept such offer shall be exercisable by
written notice of its acceptance given within one hundred eighty (180) days
after receipt of Merck's offer. The failure of Biomet to give such notice of
acceptance in accordance with this Section 11.4(f) shall be deemed to be an
election by Biomet not to enter a license or supply agreement or to accept
such transfer, as the case may be, on such terms in respect of such technology
or products. If, following an offer made in accordance with this Section
11.4, the JV Partnership, Biomet or an Affiliate of Biomet enters a license or
supply agreement or a transfer agreement in respect of such technology or
products, Section 10.1 shall not apply to the exploitation of such technology
or products by Biomet or its Affiliates.
(g) If Merck makes an offer to Biomet in accordance with Section
11.4(e) and Biomet does not elect to enter a license or supply agreement or
accept a transfer in respect of such technology or products, except as
provided below, Merck shall be under no further obligation to enter any
license or supply agreement or transfer agreement in respect of such
technology or products with Biomet, and at any time after the notice period
referred to in Section 11.4(f) Merck may enter a license or supply agreement
with any bona fide third party to manufacture and sell such products and use
such technology within the JV Territory or an agreement to transfer all of
Merck's (and its Affiliates') interests in such technology and products
(provided that if the terms of such license or supply agreement or agreement
to transfer, in aggregate, are materially less favorable to Merck than those
offered to the JV Partnership in accordance with Section 11.4(b) or Section
11.4(c), as the case may be, Merck shall offer, in the manner set forth in
this Section 11.4 to enter into such license or such supply agreement on such
new terms with Biomet, except that Biomet's right to accept such an offer
shall be exercisable for a period of thirty (30) days).
11.5 Specific Terms. Any offers made in accordance with Sections
11.1(b), 11.2(b), 11.3(b) or 11.4(b) shall include terms setting forth: a
commercially reasonable royalty on net sales or return, the transfer price,
the territory or countries to which the agreement relates, whether the
agreement contains a license to manufacture the products, requirements for the
obtaining of regulatory approvals and the conduct of clinical trials,
requirements for resources to be available for exploitation and investments to
made by the parties to market the products in the territory, requirements for
quality control, minimum quantity requirements with respect of the territory
or country to which the offer relates, indemnifications, the term of the
agreement and provisions for renewal, requirements for insurance, requirements
for record keeping, requirements for trademark use, how ownership of
technology and trademarks and improvements thereon will be treated, and other
provisions customary in such agreements.
11.6 Intellectual Property for Completed Projects. After the Closing
and for the term of this Agreement, the JV Entities shall register where
appropriate, and maintain all Intellectual Property relating to Completed
Projects (including ensuring that any Permits in respect of such Intellectual
Property are current and paid up) at no expense to Merck in the JV Territory
and the Export Territory and every jurisdiction in the world where such
Intellectual Property is registered or has current applications as of the
Closing Date so long as the same shall enable the Completed Projects to be
distributed and sold in the JV Territory and the Export Territory and anywhere
in the world exclusively by the JV Entities or by a licensee or sublicensee or
a distributor of the JV Entities. Notwithstanding the foregoing, in the event
the Board of Directors determines that it is in the interest of the Joint
Venture to discontinue the maintenance of any such Intellectual Property in
any jurisdiction, the JV Partnership shall give Merck notice that it intends
to discontinue such maintenance, which notice shall identify the particular
Intellectual Property and the jurisdiction(s) involved. At any time after
receipt of such notice, Merck shall be entitled to assume the obligation and
responsibility to maintain such Intellectual Property in such jurisdiction at
Merck's expense. If Merck elects to assume such obligation and responsibility
from the JV Entities, the JV Entities shall promptly provide to Merck all
documents and other information relating to such Intellectual Property as is
reasonably necessary to maintain such Intellectual Property in such
jurisdiction(s) and, if the JV Entities have ceased to sell any product
covered by such Intellectual Property in such jurisdiction(s), the JV Entities
shall promptly offer to assign all rights to such Intellectual Property in
such jurisdiction(s) to Merck for no consideration and the provisions of
Section 10.1 shall cease to apply to Merck and its Affiliates in respect of
such Intellectual Property, and any products related to such Intellectual
Property, in such jurisdiction(s). Provided reasonable notice of the
expiration of any registration with respect to such Intellectual Property in
such jurisdiction(s) has been given to Merck, no JV Entity shall have any
further obligation or responsibility with respect to the maintenance of such
Intellectual Property in such jurisdiction(s), from and after the sixtieth
(60th) day after receipt by Merck of notice under this Section 11.6.
11.7 Lorenz Products. If, as of the date of this Agreement, any JV
Entity markets or sells in the JV Territory any product manufactured or sold
by Lorenz, such JV Entity may continue to market or sell such product in the
JV Territory for a period of two (2) years after the Closing Date. After such
two (2) year period if a JV Entity desires to market or sell such products, or
at any time after the Closing Date a JV Entity desires to market or sell any
other product manufactured and/or sold by Lorenz, in all or part of the JV
Territory, and has the ability to do so, such JV Entity may submit to Lorenz a
detailed proposal for distributing such products in the JV Territory, provided
that the price to be paid by such JV Entity shall be no less favorable to
Lorenz than the price that would be paid by an unrelated dealer in the JV
Territory. Biomet shall cause Lorenz to respond to such proposal within
ninety (90) days of receipt of such proposal and Biomet shall cause Lorenz to
accept such proposal unless Lorenz has reasonable objections thereto. For
only as long as a JV Entity does not distribute any such Lorenz products in a
part of the JV Territory or ceases to do so, Lorenz shall be free to market,
sell and distribute such products directly or through distributors in such
part of the JV Territory and Section 10.1 shall not apply to Lorenz marketing
or selling such products.
12. PROFITS OF THE JOINT VENTURE
12.1 Dividend Policy. (a) The Consolidated Net After Tax Profit of
the JV Entities for each Fiscal Year shall be determined at the end of each
Fiscal Year of the JV Partnership.
(b) Unless the Board of Directors determines otherwise by
unanimous vote of its members, the Board of Directors shall determine an
amount equal to at least thirty-three percent (33%) of the amount of the
Consolidated Net After Tax Profit of the JV Entities for each Fiscal Year (the
"Determined Distribution") which shall be distributed to the partners of the
JV Partnership by the JV Partnership on or before the ninetieth (90th) day
after the end of such Fiscal Year, in accordance with Section 12.1(d).
(c) The return (including royalties) received by all JV Entities
in respect of sales, or the licensing of manufacture or sales, of any
Uncompleted Projects outside the JV Territory (the "Uncompleted Projects
Royalties") in respect of each of Fiscal Years 2002 through 2008 (inclusive)
shall be determined, and shall accrue for payment as a distribution to the
partners of the JV Partnership in accordance with Section 12.1 and sixty
percent (60%) of such amount shall accrue for distribution to Merck and forty
percent (40%) of such amount shall accrue for distribution to Biomet. Twenty
percent (20%) of any Uncompleted Projects Royalties received by the JV
Entities in any Fiscal Year and not distributed within ninety (90) days after
the end of the Fiscal Year shall accrue an interest factor at LIBOR per annum
(calculated daily) from the end of such ninety (90) day period for
distribution to Merck in the subsequent Fiscal Years in accordance with
Section 12.1.
(d) The Determined Distribution in respect of a Fiscal Year
shall be distributed:
(i) first, to Merck up to an amount equal to the interest
factor accrued to Merck pursuant to Section 12.1(c), but not previously
distributed;
(ii) second, to the partners of the JV Partnership up to an
amount equal to the Uncompleted Projects Royalties in proportion to the
amounts accrued to each, but not previously distributed;
(iii) third, fifty percent (50%) of the remainder, if any,
to Merck; and
(iv) fourth, the remainder shall be distributed:
(1) first, to Merck up to an amount equal to the
amount, if any, accrued to Merck in accordance with Section 12.2, but not
previously distributed to Merck in accordance with this Section 12.1(d)(iv) or
Section 12.3(a); and
(2) second, the remainder, if any, to Biomet.
(e) Any amounts accrued to the partners of the JV Partnership as
provided in Section 12.2 or in respect of Uncompleted Project Royalties,
including the interest factor thereon, and not distributed in accordance with
this Section 12.1 in respect of the Fiscal Year in which such amounts accrued,
will carry forward for distribution in future years in accordance with this
Section 12.1.
12.2 Preferential Distribution of Cumulative 10% After Tax Profit.
The following amounts in respect of the following fiscal years, shall accrue
for payment to Merck in accordance with Section 12.1 or 12.3:
(a) in respect of Fiscal Year 1999, an amount, if any,
equal to one half of the amount by which the Consolidated Net After Tax Profit
of the JV Entities for Fiscal Year 1999 is less than the Base After Tax
Profit;
(b) in respect of Fiscal Year 2000, an amount, if any,
equal to one half of the amount by which the Consolidated Net After Tax Profit
of the JV Entities for Fiscal Year 2000 is less than 110% of the Base After
Tax Profit; and
(c) in respect of Fiscal Year 2001, an amount, if any,
equal to one half of the amount by which the Consolidated Net After Tax Profit
of the JV Entities for Fiscal Year 2001 is less than 121% of the Base After
Tax Profit.
12.3 $4,388,000 Preferential Distribution. The JV Partnership shall
pay to the Parties, as a preferential distribution, an amount of $4,388,000 on
each of the first seven (7) anniversaries of the Closing, such amount to be
distributed:
(a) first, to Merck, up to an amount equal to the amount, if
any, accrued to Merck in accordance with Section 12.2, but not previously
distributed to Merck under Section 12.1(d)(iv) or this Section 12.3(a); and
(b) second, the remainder, if any, to Biomet.
12.4 No Reduction of Determined Distribution. No preferential
distributions permitted by this Agreement (other than as provided in Section
12.1(d) or in paragraph (a) of the definition of Consolidated Net After Tax
Profit in Section 1.1) shall reduce the Determined Distribution payable to the
partners of the JV Partnership in respect of any Fiscal Year.
12.5 Payment of Distributions. All distributions by the JV
Partnership pursuant to Sections 12.1 or 12.3 shall be paid in United States
dollars in immediately available cleared funds on or before the date set forth
in such Section, or if such date is not a Business Day, on the next succeeding
Business Day and shall be distributed less any applicable withholding taxes.
13. TRANSFERS OF SHARES
13.1 Restriction. Except as provided in this Section 13 and Schedule
13.3, neither Party shall (and Biomet shall ensure that Biomet Europe shall
not), directly or indirectly, assign, transfer, pledge, hypothecate, or
otherwise dispose of or alienate in any manner any of its interest in the JV
Partnership.
13.2 Transfer to an Affiliate. Either Party may (and Biomet may
permit Biomet Europe to) in whole or in part transfer its interest in the JV
Partnership to an Affiliate with the prior written consent of the other Party,
which consent will not be unreasonably withheld provided such transferee
carries on no business other than holding such interest in the JV Partnership.
It is a condition of any such transfer that the transferee become a signatory
to this Agreement and agree to perform all of the obligations of the
transferor hereunder, but the transferor (or, in the case of a transfer by
Biomet Europe, Biomet) will remain fully liable for the performance by the
transferee of the obligations hereunder of both the transferor and the
transferee.
13.3 Put Option of Merck. (a) Biomet hereby grants to Merck a put
option whereby Merck has the right to elect to require Biomet to purchase all,
but not less than all, of Merck's interest in the JV Partnership (the "Put
Option") for the amount in cash calculated in accordance with Schedule 13.3
(the "Put Exercise Price"), subject to the terms and conditions specified in
this Section 13.3 and Schedule 13.3.
(b) Biomet agrees that it shall purchase from Merck all of
Merck's interest in the JV Partnership at the Put Exercise Price upon delivery
of the notice referred to in Section 13.3(c), subject only to the terms and
conditions specified in this Section 13.3 and Schedule 13.3.
(c) Merck may exercise the Put Option by delivering a notice to
Biomet to that effect specifying a closing date in respect of the Put Option
(the "Put Closing Date"), provided that the Put Closing Date is a Business Day
not less than one hundred eighty (180) days after receipt of such notice by
Biomet, and provided that such notice is only delivered during the periods:
(i) commencing on the first day of Fiscal Year 2002 and
ending on the date that is ten (10) days after the last day of Fiscal Year
2008; or
(ii) commencing upon the date on which a Change of Control
of Biomet occurs and ending on the earlier of the last day of Fiscal Year 2023
or one hundred eighty (180) days after receipt by Merck of the notice referred
to in Section 13.3(g).
(d) Upon the receipt by Biomet of the notice referred to in
Section 13.3(c), Merck and Biomet shall be deemed to have entered into an
agreement for the sale and purchase of all of Merck's interest in the JV
Partnership upon the terms and conditions specified in this Section 13.3 and
Schedule 13.3 without the need for execution or delivery of any further
agreement or other instrument by either Party and such agreement shall be
binding on Biomet and Merck. The completion of such sale and purchase shall
occur on the Put Closing Date at 10:00 a.m., at the offices of Merck in
Darmstadt, or at such other time and place as the Parties may agree. At the
completion of such sale and purchase on the Put Closing Date, Merck shall
deliver a duly executed instrument of assignment in favor of Biomet or its
nominee of all of Merck's interest in the JV Partnership in form reasonably
satisfactory to Biomet's counsel and Biomet shall deliver to Merck in
immediately available funds the Put Exercise Price. It is expressly
acknowledged that no interest in Merck's interest in the JV Partnership passes
to Biomet upon entry into this Agreement and such interest will not pass until
the occurrence of the Put Closing Date.
(e) All Transfer Taxes assessed on or applicable to the exercise
of the Put Option or the sale and purchase or the assignment, transfer,
conveyance and delivery of Merck's interest in the JV Partnership pursuant to
the Put Option shall be paid by Biomet and Merck equally.
(f) Notwithstanding any other provision of this Agreement,
Biomet may assign to one of its Affiliates its rights to acquire all of
Merck's interest in the JV Partnership pursuant to the Put Option, provided
that Biomet shall remain liable for all obligations of Biomet and such
assignee hereunder.
(g) Upon the occurrence of a Change of Control of Biomet, Biomet
shall promptly give a notice to Merck specifying the identity of the
beneficial owner of the acquired voting securities of Biomet and the number
and percentage of outstanding voting securities of Biomet beneficially owned
by such person.
(h) In the event that Biomet receives an offer from, or enters
into discussions with, any person (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) to acquire voting securities
of Biomet from Biomet or in the event that Biomet learns that such a person
has offered to acquire or has acquired voting securities of Biomet from any
person or persons, then Biomet shall give Merck a notice specifying the
identity of the purchaser or prospective purchaser of such voting securities
and the terms or proposed terms of such acquisition, if immediately following
such acquisition, any such person is or would be the beneficial owner (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of more than thirty percent (30%) of the outstanding voting
securities of Biomet, provided nothing in this Section will require Biomet to
breach any obligation under the law or any legal or fiduciary obligation owed
by Biomet or Biomet's board of directors to its shareholders.
13.4 Merck Right to Transfer to Unaffiliated Third Party. (a) At
any time after the third (3rd) anniversary of the Closing Date, Merck may
sell, transfer, assign or otherwise dispose of all, but not less than all, of
its interest in the JV Partnership pursuant to this Section 13.4.
(b) If Merck desires to sell, transfer, assign or otherwise
dispose of all, but not less than all, of Merck's interest in the JV
Partnership (other than to an Affiliate), Merck shall first make an offer to
sell, transfer, or assign all of such interest to Biomet. Merck shall make
such offer by sending a written notice of such offer to Biomet stating the
proposed purchase price therefor and the terms and conditions of the offer.
(c) Biomet's right to purchase Merck's interest in the JV
Partnership shall be exercisable by written notice of its acceptance of
Merck's offer under Section 13.4(b) given within ninety (90) days after
receipt of such offer. The failure of Biomet to give such notice of
acceptance in accordance with this Section 13.4(c) shall be deemed to be an
election by Biomet not to purchase Merck's interest in the JV Partnership.
(d) If Biomet does not elect to purchase all of Merck's interest
in the JV Partnership offered in accordance with Section 13.4(b), Merck shall
be under no obligation to sell such interest in the JV Partnership to Biomet,
and at any time after the ninety (90) day notice period referred to in Section
13.4(b) Merck may sell, transfer, assign or otherwise dispose of its interest
in the JV Partnership offered in accordance with Section 13.4(b) to a bona
fide third party purchaser for a purchase price that is no lower than that
stated in such offer and upon terms that, in the aggregate, are not materially
less favorable to Merck than those stated in such offer.
(e) The completion of any purchase by Biomet of Merck's interest
in the JV Partnership offered in accordance with Section 13.4(b) shall occur
at 10:00 a.m. at the offices of Merck in Darmstadt one hundred eighty (180)
days after the receipt of the notice referred to in Section 13.4(b), or at
such other time and place as the Parties may agree. At the completion of such
sale and purchase, Merck shall deliver a duly executed instrument of
assignment in favor of Biomet or its nominee of all of Merck's interest in the
JV Partnership offered in accordance with Section 13.4(b) in form reasonably
satisfactory to Biomet's counsel and Biomet shall deliver to Merck in
immediately available funds the purchase price. It is expressly acknowledged
that no interest in Merck's interest in the JV Partnership passes to Biomet
upon entry into this Agreement and such interest will not pass until the
occurrence of the completion of the sale and purchase.
(f) Notwithstanding any other provision of this Agreement,
Biomet may assign to one of its Affiliates its rights to acquire Merck's
interest in the JV Partnership offered in accordance with Section 13.4(b),
provided that Biomet shall remain liable for all obligations of Biomet and
such assignee hereunder.
14. REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of the Parties. Each of the
Parties represents and warrants to the other that:
(a) Such Party is duly organized and validly existing under the
laws of the jurisdiction in which it has been organized and is duly qualified
to do business and in good standing in each jurisdiction where such
qualification is required by virtue of the nature of such Party's business or
nature of the properties owned, leased or used by such Party;
(b) The copies of the charter documents of such Party, as
amended to date, which have been delivered to the other Party, are correct and
complete and in full force and effect, and no action has been taken by such
Party with respect to the amendment of its charter documents; and
(c) The execution, delivery and performance by such Party of
this Agreement and the Ancillary Agreements to which it will be or is a party
have been duly and effectively authorized by all requisite corporate action,
and this Agreement and the Ancillary Agreements to which it will be or is a
party do not and will not violate the provisions of such Party's charter
documents, the provisions of any note of which such Party is the maker or of
any indenture, agreement or other instrument to which such Party is a party,
or by which it is bound, or, to the best of such Party's knowledge, of any
law, regulation or order of the United States or of any jurisdiction in the JV
Territory, including any law, regulation or order relating to antitrust or
securities matters; and this Agreement has been and, as of the Closing, the
Ancillary Agreements to which it is or will be a party will be duly and
validly executed and delivered by such Party and constitute binding
obligations of such Party enforceable in accordance with their terms.
14.2 Representation and Warranties of Biomet. Biomet hereby
represents, warrants and undertakes to Merck in the terms set forth in
Schedule 14.2.
14.3 Representations and Warranties of Merck. Merck hereby
represents, warrants and undertakes to Biomet in the terms set forth in
Schedule 14.3.
14.4 Reliance. Except as otherwise provided herein, the
representations, warranties, covenants and agreements made in this Agreement,
the Ancillary Agreements and certificates delivered pursuant to Section 6 by
each Party shall survive investigation by the other Party and the execution
and delivery of this Agreement, the Ancillary Agreements and such certificates
and are made with the knowledge and expectation that the other Party is
placing complete reliance thereon in entering into this Agreement and the
Ancillary Agreements and the same shall not be deemed waived by any
investigation conducted or knowledge gained by the other Party or its
employees, advisers, consultants or representatives.
14.5 Survival of Representations and Warranties. The representations
and warranties of the Parties contained in this Agreement shall survive
indefinitely, except that the representations and warranties set forth in
Schedule 14.2, Sections 14.2.5-14.2.16 (inclusive), Sections 14.2.18-14.2.20
(inclusive) and Sections 14.2.22-14.2.25 (inclusive) and Schedule 14.3,
Sections 14.3.5-14.3.16 (inclusive), Sections 14.3.18-14.3.20 (inclusive) and
Sections 14.3.22-14.3.25 (inclusive) shall survive until the fifth (5th)
anniversary of the Closing Date.
15. PRE-CLOSING OBLIGATIONS
15.1 Obligations of the Parties. The Parties shall apply for and
diligently prosecute all applications for, and shall use commercially
reasonable efforts promptly to obtain, such consents, authorizations and
approvals from such governmental authorities as shall be necessary to permit
the consummation of the transactions contemplated by this Agreement, and shall
use commercially reasonable efforts to bring about the satisfaction as soon as
practicable of all the conditions contained in Section 6 and to effect the
consummation of the transactions contemplated by this Agreement.
15.2 Conduct of Business Prior to Closing. From the date of this
Agreement until the Closing, except as set forth in Schedule 3.1, as
contemplated by this Agreement or as otherwise consented to by the Parties in
writing, such consent not to be unreasonably withheld, Biomet shall cause each
of the Biomet JV Entities and Merck shall cause each of the Merck Transferors
and each of the Merck JV Entities to:
(a) carry on its business only in the ordinary course and in
substantially the same manner in which it previously has been conducted and
use commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its executive officers and key
employees and preserve its relationships with customers, clients and others
having material business dealings with it;
(b) not amend its charter documents or by-laws;
(c) not merge or consolidate with, or agree to merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire any business of, or enter into any joint venture or partnership with,
any corporation, partnership, association or other business organization or
division thereof;
(d) not take any action or omit to take any action, which action
or omission would result in a breach or inaccuracy of any of the
representations and warranties set forth in this Agreement at, or as of any
time prior to, the Closing;
(e) not sell or otherwise transfer any of its own assets outside
the ordinary course of business;
(f) not maintain its books of account and records in other than
its usual, regular and ordinary manner, consistent with its past practice;
(g) not amend or modify any material agreement, except for (i)
amendments or modifications required by any applicable law, (ii) renewals,
(iii) non-material amendments, and (iv) amendments in the ordinary course of
business;
(h) not grant any increase in compensation to any officer or
employee except for normal annual increases consistent with past practices and
for, in the case of Merck Transferors, officers and employees not included in
the Merck JV Business;
(i) not declare or otherwise pay any dividend or other
distribution in respect of its capital stock;
(j) not prepay or repay any liabilities to Biomet or Merck
except in accordance with past practice as contemplated by Schedule 3.1 or as
otherwise contemplated by this Agreement;
(k) not agree or commit to do any of the foregoing; and
(l) promptly advise the other Party in writing of any fact,
condition, occurrence or change known to the Party that would reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on the financial condition, results of operations or business of the Biomet JV
Entities, in the case of Biomet, or the Merck Transferors or the Merck JV
Entities, in the case of Merck or cause a material breach of this Section
15.2.
15.3 Access and Information. From the date of this Agreement until
the Closing, the Parties shall cause each of the Biomet JV Entities or the
Merck Transferors and the Merck JV Entities, as the case may be, to give to
the other Party and its representatives full access at all reasonable times to
its officers and employees, its properties, books and records, and its legal,
accounting and actuarial advisors, and shall furnish such information and
documents in its possession relating thereto.
15.4 [confidential information omitted and filed separately with the
Commission]
16. TRANSITIONAL MATTERS
16.1 JV Entities' Funds. Biomet and Merck covenant and agree that
any funds of the JV Entities, including, without limitation, funds received in
respect of uncollected amounts receivable that are included in the Biomet JV
Entities' Assets or the Merck JV Entities' Assets as of the Closing Date and
funds attributable to the Biomet JV Business or the Merck JV Business (to the
extent contributed to the Joint Venture), which may be received by Biomet and
its Affiliates (other than JV Entities) or Merck and its Affiliates (other
than JV Entities) after the Closing Date shall be promptly remitted to the JV
Entities and shall be held in trust for the JV Entities until so remitted.
Biomet and Merck shall submit weekly reports of any funds of the JV Entities
received by Biomet and its Affiliates and Merck and its Affiliates,
respectively, for one hundred eighty (180) days following the Closing Date.
16.2 Maintenance of Books and Records. The Merck Transferors shall
preserve until the sixth (6th) anniversary of the Closing Date all records
possessed by such persons relating to any of the assets, liabilities or
business of the Merck JV Business prior to the date hereof. After the Closing
Date, the Merck Transferors shall provide the JV Entities and their
representatives with access, upon reasonable written request, during regular
business hours, to such records, and the JV Entities and their representatives
shall have the right to make copies and extracts of such records.
16.3 Provision of Services. The JV Entities shall be permitted to
engage Biomet and Merck and their Affiliates (other than JV Entities) to
provide services (such as accounting, billing and collection, payroll,
research and development and legal services) to the JV Entities, provided
that:
(a) services of that kind were provided to the Biomet JV
Entities by Biomet or its Affiliates or to the Merck JV Entities by Merck or
its Affiliates, as the case may be, prior to the Closing;
(b) such engagement is terminable by the JV Entities at any time
upon three (3) months' notice;
(c) such engagement is terminable by Biomet or Merck at any time
after sixteen (16) months after the Closing Date upon three (3) months'
notice; and
(d) the terms of engagement are no less favorable to the JV
Entities than the terms typically provided to the Biomet JV Entities by Biomet
and its Affiliates or the Merck JV Entities by Merck and its Affiliates, as
the case may be, prior to the Closing.
17. INDEMNIFICATION
17.1 Indemnification By Party. Each of Biomet and Merck (in either
case, an "indemnitor") shall indemnify and hold harmless the other Party, any
entity which directly or indirectly controls the other Party and each of the
JV Entities and their respective officers, directors, employees, agents and
representatives (each an "indemnified person") from and against:
(a) any loss, liability, claim, obligation, damage or deficiency
incurred by the indemnified person arising out of or resulting from a breach
of any representation or warranty or nonfulfillment of any covenant or
agreement on the part of the indemnitor contained in this Agreement or in any
agreement, instrument, document, statement or certificate furnished to the
indemnified person pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement;
(b) any and all liabilities and obligations of the indemnitor or
its Affiliates (other than the JV Entities) of any nature whatsoever, except
for those liabilities and obligations of the indemnitor or its Affiliates
which are specifically assumed by a JV Entity pursuant to this Agreement;
(c) any and all actions, suits, claims, demands, proceedings
(including arbitral proceedings) or investigations against or involving the
indemnitor or its Affiliates, in which the principal event giving rise thereto
occurred prior to the Closing Date or which results from or arises out of any
action or inaction prior to the Closing Date of the indemnitor, or its
Affiliates or any director, officer, employee, agent, representative or
subcontractor thereof, except for those which are specifically assumed by a JV
Entity pursuant to this Agreement;
(d) any and all liabilities and obligations of, or any and all
actions, suits, claims, demands, proceedings (including arbitral proceedings)
or investigations against or involving, the Biomet JV Entities, in the case
where Biomet is the indemnitor, or the Merck JV Entities, in the case where
Merck is the indemnitor, in which the principal event giving rise thereto
occurred prior to the Closing Date or arises out of any action or inaction of
the indemnitor or its Affiliates or any director, officer, employee, agent,
representative or subcontractor thereof prior to the Closing Date,
notwithstanding any disclosure in any other schedule to this Agreement, except
for those specifically set forth (i) in the case where Biomet is the
indemnitor, in Schedule 17.1(d)(i), and (ii) in the case where Merck is the
indemnitor, in Schedule 17.1(d)(ii);
(e) all claims of creditors asserted against the indemnified
person by reason of the agreement of the indemnified person to waive
compliance by the indemnitor or its Affiliates (other than the JV Entities)
with the provisions of any applicable law in respect of sale of goods in bulk,
fraudulent conveyance or other law for the protection of creditors to the
extent liability for any such claims has not been expressly assumed by a JV
Entity pursuant to this Agreement; and
(f) any actions, judgments, costs and expenses (including
reasonable attorneys' fees) incurred in investigating, preparing or defending
any litigation or proceeding (commenced or threatened) incident to any of the
foregoing or the enforcement of this Section 17.1.
17.2 Biomet Tax Indemnity. (a) Notwithstanding any disclosure
contained in this Agreement, Biomet agrees to indemnify the JV Partnership and
each of the JV Entities (each an "indemnified person"):
(i) against (x) all Taxes payable in respect of the
ownership or operation of the Biomet Contribution which are attributable to
any period or portion thereof that ends on or before the Closing Date in
excess of Taxes accrued for such period or portion thereof and listed on
Schedule 7.3 (as amended in accordance with Section 7.3(b)) and (y) all Taxes
imposed in respect of the Biomet Contribution resulting directly or indirectly
from the transfer of the Biomet Contribution pursuant to this Agreement; and
(ii) for any and all claims, losses, liabilities, damages,
costs and expenses (including court costs and reasonable professional fees and
disbursements incurred in the investigation, defense or settlement of any
claims covered by this indemnity) and other obligations of any nature
whatsoever related to or arising out of Taxes for which Biomet or its
Affiliates or the JV Entities are responsible pursuant to this Section 17.2.
(b) "Biomet Contribution" means all contributions to the Joint
Venture by Biomet, including the Biomet Shares, Biomet JV Entities, Biomet JV
Entities' Assets, Biomet JV Business, Biomet Contributed Intercompany
Indebtedness, Biomet Intercompany Indebtedness, Biomet Berlin Debt, Biomet
Contributed Berlin Debt, Biomet Third Party Debt and Biomet Contributed Third
Party Debt, including post-Closing adjustments to cash, receivables and
indebtedness of the Biomet JV Entities and the post-Closing real estate
adjustment provided in Section 7.5, and also including any post-Closing
transfers and assignments provided for in Section 7.9 and any conversion of JV
Entities into entities that Biomet may elect to disregard as separate entities
for U.S. tax purposes.
(c) Biomet agrees to indemnify the JV Partnership and each of
the JV Entities (each an "indemnified person") for the amount of any Tax
incurred by a JV Entity by reason of the application of arm's length or
transfer pricing principles by any jurisdiction resulting from, arising out
of, relating to, or caused by:
(i) loans, product sales, leases and licenses of tangible
or intangible property, the provision of services, or any other direct or
indirect arrangement between Biomet or any of its Affiliates and a JV Entity
prior to the Closing; or
(ii) any transaction contemplated by those Ancillary
Agreements substantially in the form annexed as Exhibits A - E (inclusive),
provided the relevant JV Entity has received notification in writing from a
tax authority to the effect that such authority has a concern that such
transaction may result in a JV Entity incurring a Tax by reason of such
principles and such JV Entity does not amend the terms of such transaction to
avoid such Tax.
17.3 Merck Tax Indemnity. Notwithstanding any disclosure contained
in this Agreement, Merck agrees to indemnify the JV Partnership and each of
the JV Entities (each an "indemnified person"):
(a) against (i) all Taxes payable in respect of the ownership or
operation of the Merck Contribution which are attributable to any period or
portion thereof that ends on or before the Closing Date in excess of Taxes
accrued for such period or portion thereof and listed on Schedule 7.4 (as
amended in accordance with Section 7.4(b)) and (ii) all Taxes imposed in
respect of the Merck Contribution resulting directly or indirectly from the
transfer of the Merck Contribution pursuant to this Agreement; and
(b) for any and all claims, losses, liabilities, damages, costs
and expenses (including court costs and reasonable professional fees and
disbursements incurred in the investigation, defense or settlement of any
claims covered by this indemnity) and other obligations of any nature
whatsoever related to or arising out of Taxes for which Merck or its
Affiliates or the JV Entities are responsible pursuant to this Section 17.3.
"Merck Contribution" means all contributions to the Joint Venture by
Merck, including the Merck Shares, Merck JV Assets, Merck JV Entities, Merck
JV Entities' Assets, Merck JV Business, Merck Intercompany Indebtedness, Merck
Third Party Debt and Merck Contributed Third Party Debt, including
post-Closing adjustments to cash, receivables and indebtedness of the Merck JV
Entities.
17.4 Further Taxation Matters. (a) For the purposes of Section 17.2
and Section 17.3, in the case of Taxes payable in respect of the ownership or
operation of the Biomet Contribution or the Merck Contribution, as the case
may be, that are attributable to any taxable period that begins before the
Closing Date and ends after the Closing Date, the portion of any such Tax that
is allocable to the portion of the period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible), deemed equal to the amount which would be payable if the taxable
year ended on the Closing Date; and
(ii) in the case of Taxes not described in Section
17.4(a)(i) (e.g., those imposed on a periodic basis and measured by the level
or amount of any item), deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the portion
of such period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period.
(b) With respect to any Tax Return required to be filed by a JV
Entity after the Closing Date and as to which an amount of Tax is allocable to
Biomet or Merck, as the case may be, under Section 17.4(a), the JV Partnership
shall cause such JV Entity to provide such Party with a copy of such Tax
Return completed in draft form (with supporting schedules and information and,
in the case of a Tax Return for any taxable period that includes the Closing
Date, a statement certifying the amount of Tax shown on such Tax Return that
is allocable to such Party pursuant to Section 17.4(a)) at least thirty (30)
days prior to the due date (including any extension thereof) for the filing of
such Tax Return, and such Party and its respective representatives shall have
the right to review such Tax Return and statement prior to the filing of such
Tax Return. Biomet and Merck agree to consult and to attempt in good faith to
resolve any issues arising as a result of such review. Biomet or Merck, as
the case may be, shall pay the amount shown on such statement or determined to
be due to the JV Partnership prior to the due date of the applicable Tax
Return.
(c) All Taxes incurred in connection with the transfer of the
Biomet Contribution under this Agreement (including contributions of funds to
the JV Partnership under Section 7.3 or (ii) any other transaction,
distribution, reorganization or restructuring of, or relating to, the Biomet
Contribution following such transfer necessary to bring about the Joint
Venture structure depicted in Schedule 4.3, including the undertakings
pursuant to Section 7.1, shall be paid by Biomet when due, and Biomet will, at
its own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes and, if required by applicable law, the JV
Partnership shall, and shall cause any JV Entity to, join in the execution of
any such Tax Returns and other documentation. All Taxes incurred in
connection with the transfer of the Merck Contribution under this Agreement
(including contributions of funds to the JV Partnership under Section 7.4) or
(ii) any other transaction, distribution, reorganization or restructuring of,
or relating to, the Merck Contribution following such transfer necessary to
bring about the Joint Venture structure depicted in Schedule 4.3, including
the undertakings pursuant to Section 7.2, shall be paid by Merck when due, and
Merck will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes and, if required by applicable
law, the JV Partnership shall, and shall cause any JV Entity to, join in the
execution of any such Tax Returns and other documentation.
(d) Any refunds received by a JV Entity or any successor thereto
(and any equivalent benefit to any such JV Entity or successor through a
reduction in tax liability for a post-Closing Date period) of Taxes (net of
any associated Tax detriment) in respect of the Biomet Contribution or the
Merck Contribution, as the case may be, relating to taxable periods ending on
or before the Closing Date (or the portion of the taxable period including
such date that precedes such date in accordance with Section 17.4(a)), except
for the portion of any such refund reflected as an asset on the Biomet Balance
Sheets or the Merck Balance Sheet, as the case may be, shall be for the
account of Biomet or Merck, as the case may be, and the relevant JV Entity
(through the JV Partnership) shall pay over to such Party any such refund or
the amount of any such benefit within five (5) Business Days of receipt. The
JV Partnership shall, if Biomet or Merck, as the case may be, shall so request
and at such Party's expense, shall cause the relevant JV Entity to file for
and obtain any refunds or equivalent amounts to which such Party is entitled
under this Section 17.4(d).
(e) After the Closing, the JV Partnership shall promptly notify
Biomet or Merck, as the case may be, in writing upon the commencement of any
Tax audit or administrative or judicial proceeding that could affect such
Party or its Affiliates (other than the JV Entities) and also shall separately
notify such Party in writing of any proposed or final demand or claim on a JV
Entity which, if determined adversely to the taxpayer or after the lapse of
time, would be grounds for indemnification by such Party under Section 17.2,
in the case of Biomet, or Section 17.3, in the case of Merck. Each such
notice shall contain factual information (to the extent known to the JV
Partnership and relevant JV Entity) describing the asserted Tax liability in
reasonable detail and shall include copies of any notice or other document
received from any taxing authority in respect of any such asserted Tax
liability.
(f) The Parties agree that, with respect to any payment or
indemnity made under Section 17.2 or Section 17.3, such payment or indemnity
shall include the net amount necessary to hold the recipient of the payment or
indemnity harmless on an after-tax basis from all Taxes required to be paid or
credited by such recipient with respect to such payment or indemnity under the
laws of any Tax authority.
(g) The indemnity obligations under Sections 17.2 to 17.4
(inclusive) shall survive and shall be in full force and effect until one
month following the expiration of the statute of limitations for the relevant
Tax.
17.5 Notification of Claims. (a) Except as provided in Section
17.5(b) and Section 17.5(c), in the event of the occurrence of an event which
an indemnified person asserts constitutes an event in respect of which
indemnification may be sought from the indemnitor, such indemnified person
shall provide the indemnitor with prompt notice of such event and shall
otherwise make available to the indemnitor all relevant information which is
material to the claim and which is in the possession of the indemnified
person. If such event involves a claim brought by any third party (a
"third-party claim"), the indemnitor shall have the right to elect to join in
the defense, settlement, adjustment or compromise of any such third-party
claim, and to employ counsel to assist such indemnitor in connection with the
handling of such claim, at the sole expense of the indemnitor, and no such
claim shall be settled, adjusted or compromised, or the defense thereof
terminated, without the prior written consent of the indemnitor unless and
until the indemnitor shall have failed, after the lapse of a reasonable period
of time, but in no event more than thirty (30) days after notice of such
claim, to join in the defense, settlement, adjustment or compromise of the
same. An indemnified person's failure to give timely notice or to furnish the
indemnitor with any relevant data and documents in connection with any
third-party claim shall not constitute a defense (in part or in whole) to any
claim for indemnification by such person, except and only to the extent that
such failure shall result in any material prejudice to the indemnitor. If so
desired by any indemnitor, such indemnitor may elect, at such indemnitor's
sole expense, to assume control of the defense, settlement, adjustment or
compromise of any third-party claim, provided that before entering into any
settlement, adjustment or compromise of such claim, or ceasing to defend
against such claim, if as a result thereof, or pursuant thereto, there would
be imposed on any indemnified person any liability or obligation not covered
by the indemnification obligations of the indemnitor under this Agreement
(including, without limitation, any injunctive relief or other remedy), such
indemnitor shall obtain the consent of such indemnified persons. After an
indemnitor assumes control of the defense, settlement, adjustment or
compromise of a claim, any indemnified party shall be entitled to participate
in such defense, settlement, adjustment or compromise through counsel of its
own choosing; provided that the fees and expenses of such counsel shall be
borne by such indemnified party.
(b) The Parties hereby acknowledge and agree that,
notwithstanding the procedures established in Section 17.5(a), a JV Entity, as
an indemnified person, shall be entitled to make payments to persons, and to
treat such payments as subject to indemnification under Section 17.1, without
complying with the procedures set forth in Section 17.5(a), to the extent that
such payments relate to liabilities and obligations owed to persons or
entities with whom or with which the indemnified person has an ongoing
business relationship, where such liabilities and obligations relate to the
Biomet JV Business or the Merck JV Business, but do not constitute obligations
or liabilities assumed by the JV Entities pursuant to this Agreement and where
the indemnified Party in good faith has reasonably determined that such
amounts continue to be due and payable.
(c) Each of Biomet and Merck may direct, through counsel of its
own choosing and at its own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability with
respect to which indemnity may be sought from such Party under Section 17.2,
in the case of Biomet, and Section 17.3, in the case of Merck, (any such
audit, claim for refund or proceeding relating to an asserted Tax liability
are referred to herein collectively as a "tax contest"). If such Party elects
to direct the tax contest of an asserted Tax liability, the JV Partnership
shall cooperate and shall cause the relevant JV Entity or any successor
thereto to cooperate in each phase of such tax contest, and the JV Partnership
shall promptly empower and shall cause the relevant JV Entity or any successor
thereto promptly to empower (by power of attorney and such other documentation
as may be appropriate) such representatives of such Party as it may designate
to represent the relevant JV Entity or its successor in the tax contest
insofar as the tax contest involves an asserted Tax liability for which such
Party would be liable under Section 17.2, in the case of Biomet, and Section
17.3, in the case of Merck. Biomet and Merck (and the JV Partnership) shall
consult with respect to, and a reasonable amount of time in advance of, the
settlement of any tax contest controlled by Biomet or Merck pursuant to this
Section 17.5(c) that might affect any JV Entity with respect to any Tax for
which such Party is not responsible hereunder, and such Party may not settle
any such tax contest without the consent of the other Party (which consent
shall not be unreasonably withheld).
17.6 Payments Treated as Capital Contributions. Merck and Biomet
agree to treat all payments made to the JV Partnership or any other JV Entity
under Section 17, under other indemnity provisions of this Agreement and for
any misrepresentations or breach of warranties or covenants as capital
contributions to the JV Partnership for Tax purposes (or in such other manner
as the Parties shall mutually agree) and that such treatment shall govern for
purposes hereof, provided that no such payments will affect either Party's
proportionate interest in the JV Partnership.
18. FURTHER COVENANTS AND INDEMNITIES
18.1 Merck Biomaterial GmbH Pension Liabilities. (a) In order to
provide funding for pension benefits of employees of Merck Biomaterial GmbH
earned and accumulated but not payable as of the Closing, whether vested or
not, Merck shall make a cash contribution to Merck Biomaterial GmbH (or, if
the Parties otherwise agree, the JV Partnership) in accordance with this
Section 18.1 in an amount equal to the aggregate projected benefit obligation
(within the meaning of International Accounting Standards 19 ("IAS 19")) for
all employees of Merck Biomaterial GmbH as of the Closing Date, such
obligation being hereby deemed to arise immediately prior to the Closing, but
shall be payable in accordance with Section 18.1(c).
(b) Promptly, but in any event within ninety (90) days after the
Closing Date, the JV Partnership shall cause Bode & Grabner, Munich, Germany,
to make an actuarial evaluation of the aggregate projected benefit obligation
as of the Closing Date for all employees of Merck Biomaterial GmbH employed on
the Closing Date in accordance with IAS 19. The assumptions used in such
evaluation shall be determined by the actuarial firm based upon its experience
with similarly situated companies in Germany and the requirements of IAS 19.
Merck Biomaterial GmbH shall notify the Parties of the amount of such
aggregate projected benefit obligation promptly upon receipt of the report of
the actuarial firm.
(c) Within five (5) Business Days after receipt by Merck of the
notice referred to in Section 18(b), Merck shall make an additional cash
payment to Merck Biomaterial GmbH (or, if the Parties otherwise agree, the JV
Partnership) in the amount of the aggregate projected benefit obligation so
determined.
18.2 [Confidential information omitted and filed separately
with the Commission]
18.3 [Confidential information omitted and filed separately
with the Commission]
19. MISCELLANEOUS
19.1 Relationship of Parties. Except as may otherwise be explicitly
agreed in writing, neither Party will have the authority to act on behalf of
the other Party, nor will any of the JV Entities have authority to act on
behalf of either Party. Neither Party nor any of the JV Entities will incur
or accept any liability or enter into commitments or contracts on behalf of
any party other than itself without the express prior written approval of the
party to be bound.
19.2 Corporate Affairs. The Parties and the JV Entities will make
every reasonable effort to keep confidential any information obtained by any
of them concerning any of the others, including its internal organization,
finances, procedures and customers. No JV Entity will make any public
announcement or release any publicity naming a Party and neither Party will
make any public announcement or release any publicity regarding the other
Party other than routine oral communications with analysts, shareholders and
prospective investors without the prior written consent (which shall not be
unreasonably withheld or delayed) of the Party being named, unless, in the
good faith opinion of counsel, such disclosure is required by law and time
does not permit the obtaining of such consent or such disclosure may otherwise
be necessary in connection with the filing of Tax Returns or claims for
refunds or in conducting a Tax audit or other proceedings. This Section 19.2
shall survive termination of the Agreement.
19.3 Necessary Measures. (a) The Parties will, in a timely manner
and as required from time to time, take all such actions as may be necessary
or appropriate to cause their Affiliates and the JV Entities to implement the
transactions contemplated by this Agreement and to assure that such
organizations take all such actions as may be necessary to give full effect to
the provisions of this Agreement and to abstain from taking any actions which
would contravene the intent of the provisions of this Agreement.
(b) Biomet and Merck will provide each other with such full and
unconditional cooperation and information as either of them reasonably may
request of the other in filing any Tax Return, amended Tax Return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities.
19.4 Term of Agreement. Except as provided in Section 10.1, Section
10.3, Section 17.4(g), Section 19.2 and Section 19.14, this Agreement will
continue in full force and effect until the earlier of (i) termination by
mutual consent, (ii) with respect to Merck, the transfer of all of its
interests in the JV Partnership under Section 13.3 or Section 13.4, (iii)
dissolution of the JV Partnership, or the JV Holding Company (iv) sale by the
JV Partnership of all its interest in the JV Holding Company; or (v) in case
the Closing has not occurred by February 1, 1998, receipt of notice by a Party
from the other Party that the Agreement is terminated.
19.5 Survival and Assignment. This Agreement will be binding on the
Parties and their Affiliates and the successors and permitted assigns of each
of them. Neither Party may assign its rights, duties or interests hereunder
in whole or in part without the prior express written permission of the other
Party, except as specifically provided in Section 13.
19.6 Governing Law and Severability. This Agreement will be governed
by and construed in accordance with the substantive laws of The Netherlands,
notwithstanding any country's or state's conflict of law rules to the
contrary. The provisions hereof will, to the greatest extent possible, be
interpreted in such a manner as to comply with applicable law, but if any
provision hereof is, notwithstanding such interpretation, determined to be
invalid, void or unenforceable, the remaining provisions of this Agreement
will not be affected thereby but will remain in full force and effect and be
binding upon the Parties.
19.7 Arbitration. (a) All disputes arising in connection with this
Agreement shall be finally settled by binding arbitration in accordance with
the English text of the Rules of Conciliation and Arbitration of the
International Chamber of Commerce in effect on the Closing Date (the "Rules").
The arbitration shall be carried out by a panel composed of three (3)
arbitrators experienced in business and commercial affairs (the "Arbitral
Tribunal", and each arbitrator an "Arbitrator"). Each Party shall nominate in
the request for arbitration and the answer thereto, respectively, one
Arbitrator for confirmation by the International Court of Arbitration (the
"Court"). Such person shall be independent of the nominating party. If a
Party fails to nominate an Arbitrator, the Court shall nominate one. The
third Arbitrator, who will chair the Arbitral Tribunal, shall be nominated by
the two Arbitrators nominated by the Parties within twenty (20) calendar days
after the Court's confirmation of the first two Arbitrators. The nomination
of the third Arbitrator is also subject to confirmation by the Court. Should
the first two Arbitrators fail, within said twenty (20) day period, to reach
agreement on a third Arbitrator, the Court shall appoint one.
(b) The language to be used in the arbitration proceedings shall
be English. The place of the proceedings shall be The Netherlands. The
substantive law governing any controversy or claim arbitrated in such
proceedings shall be as provided in Section 19.6.
(c) Upon the appointment of the Arbitral Tribunal, the Parties
shall be entitled to a reasonable scope and schedule for the production of
documents and other information that is relevant to the subject matter of the
arbitration and to a reasonable number of and schedule for depositions. The
scope and schedule of discovery shall be determined by the Arbitral Tribunal
after consultation with the Parties. The Arbitral Tribunal shall have the
power to enforce any discovery agreed upon by the Parties or ordered by the
Arbitral Tribunal by imposing the same terms, conditions, sanctions and
penalties as can or may be imposed in like circumstances in a civil action in
The Netherlands; except that the Arbitral Tribunal shall not have the power to
order the arrest or imprisonment of a person.
(d) No provision in this Section 19.7 shall be construed as
preventing either Party from applying to a competent judicial authority for
interim or conservatory measures as provided for in the Rules.
(e) Judgment upon an award rendered by the Arbitral Tribunal may
be entered by any court having jurisdiction thereof. The Arbitral Tribunal's
award may, inter alia, include specific performance. Any court having
jurisdiction shall enforce as a binding and final arbitral award any interim
measures ordered by the Arbitral Tribunal.
(f) Nothing in this Section 19.7 shall prevent either Party from
enforcing in a court having jurisdiction thereover any other agreement between
the Parties, including the Ancillary Agreements.
19.8 Notices. Any notice required or permitted to be given by or
under this Agreement shall be in writing and shall be given by delivering it
to the Party concerned or the JV Partnership:
(a) in the case of Biomet or Biomet Europe to:
Biomet, Inc.
Airport Industrial Park
Warsaw, Indiana 46581-0587
United States of America
Attn: Dane A. Miller, Ph.D
President & Chief Executive Officer
Facsimile: (219) 267-8137
with a copy to:
Daniel P. Hann, Esq.
Vice President & General Counsel
Biomet, Inc.
Airport Industrial Park
Warsaw, Indiana 46581-0587
United States of America
Facsimile: (219) 372-1960
and
Stephen J. Hackman, Esq.
Ice Miller Donadio & Ryan
One American Square
Box 82001
Indianapolis, Indiana 46282-0002
United States of America
Facsimile: (317) 236-2219
(b) in the case of Merck to:
Merck KGaA
Frankfurter Strasse 250
D-64271 Darmstadt
Germany
Attn: Prof. Dr. Bernhard Scheuble
Deputy Member of the Executive Board
Facsimile: 49 61 51 72 59 62
with a copy to:
Klaus-Peter Brandis, Esq.
Head of Legal Department
Merck KGaA
Frankfurter Strasse 250
D-64271 Darmstadt
Germany
Facsimile: 49 61 51 72 77 73
and
Edwin S. Matthews, Jr., Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036-7703
United States of America
Facsimile: (212) 626-4120
(c) in the case of the JV Partnership or the JV Holding Company to:
BioMer C.V.
Postbus 1081
Fruiteniensstraat 23
NL-3330 CB Zwijndrecht
The Netherlands
Facsimile: (31) (0) 78 610 42 65
with copies to each of Biomet and Merck.
and may be given by hand delivery, by registered post or by facsimile to such
address or (in each case) to such other address as the person concerned may
have notified to the others in accordance with this section and any such
notice shall be deemed to be served (i) if delivered by hand, at the time of
delivery, (ii) if delivered by post, on the seventh (7th) day after posting,
or (iii) if delivered by facsimile, when dispatched with electronic or other
confirmation of receipt, or in each case, if sooner, upon acknowledgement of
receipt by or on behalf of the person to which it is addressed.
19.9 Attorneys', Financial Advisers' and Finders' Fees, Brokerage
Commissions. Each Party will pay its own attorneys' fees and financial
advisers' fees in connection with this Agreement and all related transactions.
Neither Party has incurred any liability for finder's fees, brokerage
commissions or the like, and each Party indemnifies the other against
liability for any such fees or commissions attributable to any act or failure
to act of the indemnifying Party.
19.10 Waivers and Amendments. Except where time limitations are
specifically provided, no failure or delay by either Party in the exercise of
any right hereunder will operate as a waiver thereof, nor will any single or
partial exercise of any right preclude an additional or further exercise
thereof or the exercise of any other right. To be effective, each waiver of
any right hereunder must be in writing and signed by the Party waiving its
right, and such waiver may be made subject to any conditions specified
therein. Each amendment to this Agreement will be in writing and signed by
both Parties.
19.11 Conflict with Charter Documents. In the event of any conflict
between this Agreement and the charter documents of the JV Partnership or any
other JV Entity or any of the Ancillary Agreements, the Parties will take such
action as may be necessary and appropriate, consistent with applicable law, to
ensure that the provisions of this Agreement will prevail.
19.12 Termination of Letter of Intent. The letter of intent dated
May 17, 1997, as amended, between the Parties is hereby terminated.
19.13 Additional Capital Contributions. Any additional capital
contributions by or refunds of capital contributions to either Party required
under this Agreement will not change either Party's proportionate interest in
the JV Partnership.
19.14 Standstill. During the term of this Agreement and during the
five (5) year period following the earliest of the date of termination of this
Agreement or the date Merck ceases to have, or the date Biomet ceases to have,
a direct or indirect interest in the JV Partnership:
(a) Neither Merck nor any Affiliate (as such term is defined in
Rule 405 under the Securities Act of 1933 as amended) of Merck will: (i)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct rights or options to
acquire any voting securities of Biomet, (ii) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" to vote as such
terms are used in the proxy rules of the Securities and Exchange Commission,
or seek to advise or influence any person or entity with respect to the voting
of any voting securities of Biomet, (iii) form, join, or in any way
participate in a "group" within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, with respect to any voting
securities of Biomet, or (iv) otherwise act, alone or in concert with others,
to seek to control or influence the management, Board of Directors, or
policies of Biomet, or initiate, induce or attempt to induce or give
encouragement to any other person to initiate, any tender or exchange offer
for securities of Biomet or for a change of control of Biomet. Merck
acknowledges that Biomet would not have an adequate remedy at law for money
damages in the event that this covenant were not performed in accordance with
its terms and therefore agrees that Biomet shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it
may be entitled, at law or in equity.
(b) Merck hereby irrevocably appoints Dane A. Miller and Niles
L. Noblitt, and each of them, or any other person designated by the Board of
Directors of Biomet, the attorneys and proxies of Merck, each with full power
of substitution, to vote in such manner as each such attorney and proxy or his
substitute shall in his sole discretion deem proper, and otherwise act,
including action pursuant to written consent, with respect to all securities
of Biomet owned (beneficially or of record) by Merck and with respect to which
Merck is entitled to vote or act at any meeting of shareholders or otherwise.
This proxy is irrevocable. This appointment is coupled with an interest,
having been granted in consideration of the covenants and agreements of Biomet
set forth in this Agreement.
19.15 Business of Biomet Europe. During the period from the Closing
until Biomet Europe ceases to hold a direct interest in the JV Partnership,
Biomet Europe shall not, and Biomet shall ensure that Biomet Europe does not
carry on any business other than the holding of such interest in and
performing the functions of a general partner of the JV Partnership.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers as of the date first above
written.
BIOMET, INC.
By: /s/ Dane A. Miller
Dane A. Miller, Ph.D.
President and Chief Executive Officer
By: /s/ Niles L. Noblitt
Niles L. Noblitt
Chairman of the Board
MERCK KGaA
By: /s/ Prof. Dr. Bernhard Scheuble
Prof. Dr. Bernhard Scheuble
Deputy Member of the Executive Board
By: /s/ Klaus-Peter Brandis
Klaus-Peter Brandis
Head of Legal Department
EXHIBIT 20.01
BIOMET
PRESS RELEASE
P.O. Box 587, Warsaw, IN 46581-0587 219-267-6639
Biomet, Inc., and Merck KgaA, Darmstadt, Germany
Announce Formation of Joint Venture
Warsaw, Indiana/Darmstadt, Germany - - February 2, 1998 - - Biomet, Inc.
(NASDAQ:BMET) and Merck KgaA, Darmstadt, Germany, announced today the successful
closing of the agreement providing for the 50/50 joint venture to manufacture,
market and sell orthopedic and biomaterials products in Europe originally
announced in May 1997 and the commencement of combined operations under the
name "Biomet Merck". Biomet and Merck KgaA each are contributing their existing
European orthopedic operations to the venture, which is anticipated to have pro
forma sales for the next fiscal year in excess of $200 million. All of the
joint venture's revenues and Biomet's pro-rata share of the joint venture's
earnings will be consolidated in Biomet's financial results. Merck KgaA brings
to the venture an extensive array of chemical, biological, pharmaceutical and
orthopedic technologies and products, while Biomet brings its orthopedic
products and technologies especially concentrated in total joint replacement.
Formation of the joint venture creates a market-leading European orthopedic
company and will provide Biomet with the exclusive right to license Merck KgaA's
existing biomaterials-based orthopedic products and future products developed by
the joint venture for sale outside of Europe. Biomet's Chairman of the Board,
Niles L. Noblitt, who assumes the additional role of CEO and Managing Director
of the joint venture, stated "We are pleased to have formed this partnership
with Merck KgaA. The combination of Merck KgaA's innovative biomaterials
product line with Biomet's strong reputation in orthopedics will enable Biomet
Merck to provide a full range of products to orthopedic surgeons in Europe and
throughout the world."
Dane A. Miller, Ph.D., Biomet's President and CEO, stated that, "We have formed
one of the strongest developed and marketing groups in the European orthopedic
market. Access to Merck KgaA's superior biomaterials technologies will provide
the Biomet group with a wide array of new products flowing well into the next
century."
Prof. Dr. Bernhard Scheuble, Deputy Member of the Execute Board of Merck KgaA
said "The strategic fit between Biomet's European operations and Merck KgaA's
Biomaterials Division is complementary in terms of product lines, geography and
core competencies. Our partnership with Biomet will provide strong access to
the important U.S.market for Biomet Merck's comprehensive line of existing and
future biomaterial products. In Biomet, we have a partner with whom we share
common values and vision who will leverage our strong development capability
both in Europe and internationally."
Merck KgaA is a global pharmaceutical company headquartered in Darmstadt,
Germany. Merck KgaA's total revenues were in excess of 8 billion deutsche
marks in 1997.
Biomet, Inc. 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 fixation devices, electrical
bone growth stimulators, orthopedic support devices, operating room supplies,
spinal implant systems, general surgical instruments, arthroscopy products and
cranlomaxillofacial implants and instruments. Headquartered in Warsaw,
Indiana, Biomet and its subsidiaries currently distribute products in
approximately 100 countries.
For further information contact Greg W. Sasso, Vice President, Corporate
Development and Communications, at (219) 372-1528 or Sheila Warren, Manager,
Corporate Communications at (219) 372-1514.
Web site: www.biomet.com or e-mail [email protected]
