SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
BIOMET, INC.
(Exact name of Registrant as specified in its charter)
Indiana 6022 35-1418342
- ------- ---- ----------
(State or other jurisdiction (Primary S.I.C. Code Number) (I.R.S. Employer
of incorporation or Identification
organization) No.)
P. O. Box 587
Airport Industrial Park
Warsaw, Indiana 46581-0587
(219) 267-6639
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Daniel P. Hann
Airport Industrial Park
P. O. Box 587
Warsaw, Indiana 46581-0587
(219) 267-6639
(Name, address, including Zip Code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effective date of this registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed maximum
Title of each class of Proposed maximum aggregate
securities to Amount to be offering price per offering Amount of
be registered (1) registered share price(2) registration fee(2)
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Common Shares (3) (3) $45,551,952 $12,665
Rights to Purchase (3) (3) (4) (4)
Common Shares
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<FN>
1 This Registration Statement relates to the common shares of Biomet, Inc. to
be issued in exchange for the outstanding shares of Implant Innovations
International Corporation Class A and Class B common stock pursuant to the
merger described in the proxy statement/prospectus included herein.
2 Since there is no market for the outstanding stock of Implant Innovations
International Corporation, the registration fee is based on the book value
of those shares as of August 31, 1999, pursuant to 457(f)(2).
3 Omitted pursuant to Rule 457(o).
4 Any value attributable to the Rights to Purchase Common Shares is reflected
in the value of the Common Shares.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE>
IMPLANT INNOVATIONS INTERNATIONAL CORPORATION
- ------------------------
NOTICE OF MEETING OF STOCKHOLDERS
- ------------------------
December ___, 1999
10:00 a.m.
To Implant Innovations International Corporation stockholders:
We will hold a meeting of stockholders of Implant Innovations International
Corporation on December ____, 1999 at 10:00 a.m. Eastern time, at 4555 Riverside
Drive, Palm Beach Gardens, Florida, 33410. At the meeting, you will be asked to
vote on approval of a merger of Implant Innovations International Corporation
("3i") with and into Palm Acquisition Corp., a wholly-owned subsidiary of
Biomet, Inc. ("Biomet").
If the 3i stockholders approve the merger, then you will receive Biomet
common shares for your shares of 3i. The number of Biomet common shares you will
be entitled to receive will depend upon the market prices of Biomet shares
during the 20 trading days ending three business days prior to the closing of
the merger. See "The Merger Agreement - Calculation of Shares to be Issued"
section of the accompanying proxy statement/prospectus and the merger agreement,
a copy of which is attached as Annex A to the proxy statement/prospectus.
3i's Board of Directors has found the merger to be in the best interests of
the stockholders, has approved the merger, declared its adviseability, and
recommends that you vote to approve and adopt the merger agreement, dated as of
August 28, 1999, pursuant to which 3i will become a wholly-owned subsidiary of
Biomet, and to approve the merger contemplated under that agreement.
Only holders of record of 3i Class A common stock and Series A Cumulative
Convertible Preferred Stock as of October 31, 1999 are entitled to vote at the
meeting. Persons holding shares representing an aggregate of approximately 89%
of the votes to be cast on the merger have agreed with Biomet that they will
vote in favor of the merger. As a result, approval of the merger by 3i
stockholders is assured.
Please review carefully the enclosed proxy statement/prospectus for more
complete information concerning the merger, 3i and Biomet.
A proxy card and return envelope are enclosed. You may vote on the merger
by signing, dating and mailing the proxy card. If you attend the meeting, you
may withdraw your proxy and vote in person.
By Order of the Board of Directors,
Edward G. Sabin
SECRETARY
[Date]
Palm Beach Gardens, Florida
<PAGE>
IMPLANT INNOVATIONS INTERNATIONAL CORPORATION
PROXY STATEMENT
- ------------------
BIOMET, INC.
PROSPECTUS
This proxy statement/prospectus relates to a merger in which you will
receive Biomet common shares in exchange for your 3i Class A common stock and 3i
Class B common stock. The number of Biomet common shares to be issued will
depend upon the market prices of those shares over the 20 trading days ending
three days prior to the closing of the merger.
You are receiving this proxy statement/prospectus from Implant Innovations
International Corporation ("3i") in connection with the solicitation by 3i of
proxies for use at a meeting of 3i stockholders to be held on December ___,
1999. At the meeting, 3i stockholders will vote upon the approval of a merger of
3i with and into Palm Acquisition Corp., a wholly-owned subsidiary of Biomet.
This proxy statement/prospectus also serves as a prospectus of Biomet for your
review in connection with the acquisition of Biomet common shares by the
stockholders of 3i in exchange for their 3i shares in the merger transaction.
3i's board of directors has found the merger to be in the best interests of
the stockholders, has approved the merger, declared its advisability, and
recommends that you vote to approve and adopt the merger agreement, dated as of
August 28, 1999, pursuant to which 3i will become a wholly-owned subsidiary of
Biomet, and to approve the merger contemplated under that agreement.
Biomet common shares are traded over the counter and price information is
reported by the Nasdaq National Market under the symbol "BMET."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this proxy statement/prospectus. Any representation to
the contrary is a criminal offense and should be reported immediately to the
Securities and Exchange Commission.
See "Risk Factors" on page _____ for a discussion of risks relevant to the
merger.
- ------------------------
The date of this proxy statement/prospectus is November ___, 1999, and it
was first mailed to 3i stockholders on or about November ___, 1999.
<PAGE>
This proxy statement/prospectus incorporates by reference important
business and financial information about Biomet which is not included in or
delivered with this proxy statement/prospectus. See "Where You Can Find More
Information."
You can obtain any of the documents incorporated by reference in this
document through Biomet or from the Securities and Exchange Commission through
its website at http://www.sec.gov. Documents incorporated by reference are
available from Biomet without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference as an exhibit in
this proxy statement/prospectus. You can obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or by
telephone from Biomet at the following address:
Greg W. Sasso
Vice President - Corporate Development and Communications
Biomet, Inc.
P.O. Box 587
Airport Industrial Park
Warsaw, Indiana 46581-0587
Telephone (800) 348-9500 or (219) 267-6639
[email protected]
If you would like to request documents, please do so by __________, 1999 to
receive them before the meeting. If you request any incorporated documents,
Biomet will mail them to you by first class mail, or another equally prompt
means, within one business day after Biomet receives your request.
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TABLE OF CONTENTS
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Page No.
SUMMARY.......................................................................
The Companies..........................................................
Parties To The Merger Agreement........................................
What You Will Receive in The Merger....................................
Material Federal Income Tax Consequences of the Merger.................
Accounting Treatment...................................................
Market Prices of Biomet Common Shares and
3i Common Stock on Important Dates................................
Risk Factors...........................................................
3i's Reasons For The Merger............................................
Biomet's Reasons For The Merger........................................
Appraisal Rights.......................................................
Exchange of Stock Certificates.........................................
Comparative Rights of Biomet Shareholders and 3i Stockholders..........
Approval of the Merger is Assured......................................
Hart-Scott-Rodino and Foreign Filings..................................
RISK FACTORS..................................................................
SELECTED HISTORICAL AND PRO FORMA DATA........................................
How We Prepared the Financial Information..............................
Selected Historical Financial information of Biomet....................
Selected Historical Financial Information of 3i........................
Comparative Per Share Data.............................................
THE COMPANIES.................................................................
Biomet.................................................................
3i.....................................................................
RESULTS OF OPERATIONS.........................................................
Biomet.................................................................
3i.....................................................................
3i Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................
THE MEETING...................................................................
Matters to be Considered at the Meeting................................
Date, Time and Place...................................................
Record Date............................................................
Your Voting Rights.....................................................
Voting of Proxies; Proxy Solicitation Costs............................
Appraisal Rights.......................................................
<PAGE>
THE MERGER AGREEMENT..........................................................
General Description of the Merger......................................
Background of the Merger...............................................
Reasons for the Merger.................................................
When the Merger Becomes Effective......................................
Conversion of 3i Stock.................................................
Calculation of Biomet Shares to Be Issued..............................
Distribution of Biomet Shares to 3i Stockholders.......................
Exchange of Certificates...............................................
Escrow Agreement.......................................................
Representations and Warranties.........................................
Certain Covenants......................................................
Conditions to Completion of the Merger.................................
Termination of the Merger Agreement....................................
Expenses...............................................................
Modification or Amendment to the Merger Agreement......................
Arbitration............................................................
REGULATORY REQUIREMENTS.......................................................
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......................................
ANTICIPATED ACCOUNTING TREATMENT..............................................
RESALE RESTRICTIONS...........................................................
COMPARISON OF RIGHTS OF BIOMET SHAREHOLDERS AND 3i STOCKHOLDERS...............
Voting Rights..........................................................
Number, Election, Vacancy and Removal of Directors.....................
Stockholder Action by Written Consent..................................
Special Stockholders Meetings..........................................
Advance Notice Provisions for Stockholder
Nominations of Directors..........................................
Amendments To Articles of Incorporation,
Certificate of Incorporation and Bylaws...........................
Dividends..............................................................
Limitations on Director's Liability....................................
Indemnification........................................................
Merger or Sale of Assets...............................................
Anti-Takeover Provisions...............................................
Appraisal Rights.......................................................
ADDITIONAL INFORMATION........................................................
Legal Matters..........................................................
Experts................................................................
WHERE YOU CAN FIND MORE INFORMATION...........................................
Forward-looking Statements.............................................
FINANCIAL INFORMATION.........................................................
3i's Report of its Independent Certified Public Accountants............
Annex A - Agreement and Plan of Merger........................................
Annex B - Appraisal Rights....................................................
</TABLE>
<PAGE>
SUMMARY
This summary highlights some of the information from this proxy statement/
prospectus and may not contain all of the information that is important to you.
To understand the merger fully and for a more complete description of the legal
terms of the merger, you should read carefully this entire document including
the annexes and other documents to which we have referred you. See "Where You
Can Find More Information."
The Companies
Biomet, Inc.
P.O. Box 587
Airport Industrial Park
Warsaw, Indiana 46581-0587
Telephone: (219) 267-6639
Biomet and its subsidiaries design, 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, general surgical instruments, arthroscopy products, bone
cements, bone substitutes, spinal implants and craniomaxillofacial implants
and instruments. Biomet's corporate headquarters is in Warsaw, Indiana, and
it has manufacturing and/or office facilities in more than 25 locations
worldwide. Biomet distributes its products in more than 100 countries
throughout the world.
Implant Innovations International Corporation
4555 Riverside Drive
Palm Beach Gardens, Florida 33410
Telephone: (561) 776-6700
Implant Innovations International Corporation and its subsidiaries
design, develop, manufacture, market and distribute oral reconstructive
products including a proprietary line of dental implants, healing abutments
and surgical products along with regenerative membrane products
manufactured by W. L. Gore and Associates, Inc. and synthetic bone
substitute material manufactured by Orthovita, Inc.
Parties To The Merger Agreement
Parties to the merger agreement include:
- Biomet, Inc., an Indiana corporation, and its wholly-owned subsidiary
created for the purposes of the merger, Palm Acquisition Corp., an
Indiana corporation;
- Implant Innovations International Corporation, a Delaware corporation,
which acts as a holding company and is the direct 100% owner of eight
subsidiaries and an 80% owner of a Canadian subsidiary;
- Implant Innovations, Inc., a Florida corporation, which is one of the
wholly-owned subsidiaries of Implant Innovations International
Corporation; and
<PAGE>
- Certain stockholders of 3i representing approximately 89% of the votes
to be cast on the merger.
For clarity, the parties to the merger agreement will be referred to in
the following manner in this proxy statement/prospectus:
Party: Referred to as:
- ------ ---------------
Biomet, Inc. Biomet
Palm Acquisition Corporation Acquisition
Implant Innovations International Corporation 3i
Implant Innovations, Inc. Implant Innovations, Inc.
Certain Stockholders of 3i Control Shareholders
What You Will Receive in The Merger
You will receive Biomet common shares in exchange for your shares of 3i
Class A common stock and 3i Class B common stock. The number of Biomet common
shares to be issued will depend upon the market prices of those shares over the
20 trading days ending three days prior to the closing of the merger.
- If the average of the last sale prices for a Biomet common share
during the 20-day period, as reported by the Nasdaq National Market,
is no greater than $43.45 and no less than $33.79, then the aggregate
value of Biomet shares issued in exchange for 3i common stock will be
approximately $175 million.
- If the average Biomet share price is less than $33.79, then Biomet
will issue approximately 5.2 million shares only, and the aggregate
value of the shares received by 3i stockholders will be less than $175
million.
- If the average Biomet share price is greater than $43.45, then Biomet
will issue approximately 4.0 million shares only, but the aggregate
value of the shares received by 3i stockholders will be greater than
$175 million.
- If the average Biomet share price is less than $31.86, then 3i may end
the merger.
No fractional Biomet shares will be issued, and any fractional share amounts
will be paid in cash. See "The Merger Agreement - Calculation of Biomet Shares
to be Issued."
Material Federal Income Tax Consequences of the Merger
Because the merger should be treated as a "reorganization" for federal
income tax purposes, you should not be taxed on the receipt of Biomet common
shares in the merger, but you may be taxed with respect to cash you receive in
lieu of fractional shares. See "Material Federal Income Tax Consequences."
<PAGE>
It is a condition of the merger that Biomet and 3i each receive from their
lawyers at the closing an opinion that the merger will be a tax-free
reorganization for federal income tax purposes.
Tax matters are very complicated. The tax consequences of the merger to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the merger to you.
Accounting Treatment
Biomet and 3i expect the merger to qualify for "pooling-of-interests"
accounting treatment. This means that Biomet will treat the companies as if they
had always been combined for accounting and financial reporting purposes at
their current book values.
Market Prices of Biomet Common Shares and 3i Common Stock on Important Dates
Biomet common shares are traded over the counter and price information is
reported on the Nasdaq National Market under the symbol BMET. Shares of 3i
common stock are not traded in any market. Therefore, there are no reported
market prices of 3i common stock. The following table provides the closing per
share sales prices of Biomet common shares as reported by the Nasdaq National
Market on:
- August 27, 1999, the last business day immediately before the day
Biomet and 3i announced the terms of the merger; and
- [Current Date,] 1999
Date: Biomet Common Shares:
August 27, 1999 $ 35.6875
[_______________, ______] [$___________________]
Risk Factors
In determining whether to vote for the merger you should consider the
following risk factors:
- Failure to qualify for pooling of interests accounting treatment may
adversely affect reported operating results.
- The integration of 3i into Biomet may be difficult and expensive to
achieve.
- 3i's client business could be adversely affected by the merger.
- Expenses resulting from the merger may affect Biomet's results of
operations.
See "Risk Factors" for a further discussion of the risks associated with
the merger.
<PAGE>
3i's Reasons For The Merger
In approving the merger, 3i's board of directors concluded that holding
Biomet common shares represented a more favorable investment opportunity for the
stockholders of 3i than holding shares of 3i common stock. The board of
directors of 3i believes that the merger is in the best interests of 3i and its
stockholders, and that the merger will:
- Provide 3i shareholders with greater liquidity;
- Provide opportunities for operational and other efficiencies; and
- Increase growth potential.
Biomet's Reasons For The Merger
Biomet believes that the merger will:
- Give Biomet an opportunity to expand into a market segment (dental
implants) in which it currently has no product offerings;
- Provide Biomet with a product line that complements its existing
craniomaxillofacial products;
- Allow access to technology and know-how that should allow Biomet and
3i to further expand their product offerings into new market segments;
- Provide an opportunity for revenue growth by increased penetration of
the dental implant market;
- Provide the capital needed to expand the business of 3i and take
better advantage of its opportunities; and
- Add management strength to the Biomet organization.
Appraisal Rights
If you hold 3i stock that is entitled to vote at the meeting, you are
entitled appraisal rights under Delaware corporate law if certain conditions are
met. See "The Meeting - Appraisal Rights."
Exchange of Stock Certificates
Biomet will distribute to you the number of Biomet common shares that you
are entitled under the terms of the merger agreement as soon as practicable
after the merger becomes effective. Biomet will be contacting you regarding the
method of delivering your 3i certificates in exchange for Biomet common shares.
Please do not send in your 3i stock certificates with your proxy card.
<PAGE>
Comparative Rights of Biomet Shareholders and 3i Stockholders
Even though Biomet is an Indiana corporation and 3i is a Delaware
corporation, some of your rights as a shareholder of Biomet will be the same as
your rights as a stockholder of 3i. There are, however, several important
differences. The following table summarizes some of those differences.
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Biomet 3i
Can stockholders take corporate action Yes, but this action must be in No. 3i's certificate of
without holding a meeting? writing and signed by all the incorporation specifically denies
shareholders entitled to vote on its stockholders the ability to
the action. take action by consent rather than
at a meeting.
Can stockholders call meetings? Yes, if the holders of 90% of the No. 3i's bylaws state that a
outstanding votes entitled to be meeting can only be called by a
cast on the matter for which the majority of the board of directors.
meeting is called execute and
deliver a written demand to the
secretary of Biomet.
What action is required to remove a An affirmative vote of 75% of the An affirmative vote of 80% of the
director? shares entitled to vote for a shares entitled to vote for a
director. director.
What action is required to merge or An affirmative vote of 75% of the An affirmative vote of a majority
sell substantial amounts of corporate outstanding shares entitled to vote. of the outstanding shares entitled
assets? to vote, unless the transaction is
with an "interested shareholder."
Do stockholders have appraisal rights? No. Because Biomet common shares Yes. Holders of 3i voting stock
are traded on the Nasdaq National are entitled to appraisal rights
Market, Biomet shareholders are not under Delaware corporate law.
entitled to appraisal rights.
<PAGE>
What action is required to amend the An affirmative vote of 75% of the An affirmative vote of a majority
company's charter? outstanding shares entitled to vote. of the outstanding shares of common
stock entitled to vote and, on
certain provisions, an affirmative
vote of 80% of the common stock.
On matters affecting the rights of
preferred stock, an affirmative
vote of a majority of the preferred
stockholders is required.
</TABLE>
Approval of the Merger is Assured
Only holders of record of 3i Class A common stock and Series A Cumulative
Convertible Preferred Stock outstanding as of October 31, 1999 are entitled to
vote at the meeting. Directors, officers and other affiliates of 3i hold shares
representing an aggregate of approximately 89% of the votes to be cast on the
merger. These stockholders have agreed with Biomet that they will vote in favor
of the merger. As a result, approval of the merger by 3i stockholders is
assured.
Hart-Scott-Rodino and Foreign Filings
Biomet and 3i filed notification and report forms pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with the
Federal Trade Commission and the Antitrust Division of the Department of Justice
on September 7, 1999 and received notice of early termination of the waiting
period requirement on September 21, 1999.
The parties are currently in the process of complying with the local law
requirements of foreign jurisdictions applicable to the merger. In some cases,
approvals by local competition authorities will be required to complete the
merger.
RISK FACTORS
In addition to the other information included in this proxy
statement/prospectus, you should carefully consider the following risk factors
in determining whether to vote to approve the merger. These matters should be
considered in addition to the other information included or incorporated by
reference in this proxy statement/prospectus.
Failure to qualify for pooling-of-interests accounting treatment may impact
reported operating results.
<PAGE>
If the merger does not qualify for pooling-of-interests accounting
treatment, then the purchase method of accounting will apply. Under the purchase
method, the estimated fair value of the Biomet common shares issued in the
merger would be recorded as the cost of acquiring the business of 3i. That cost
would be allocated to the individual assets acquired and liabilities assumed
according to their respective fair values. The excess of the estimated fair
value of Biomet common shares over the fair value of net assets acquired would
be recorded as goodwill and amortized on a straight-line method over a period
not to exceed 20 years.
Purchase accounting treatment would have a material adverse effect on the
reported operating results of Biomet as compared to pooling-of-interests
accounting treatment because of required charges to Biomet's earnings for
in-process research and development and amortization of goodwill required by
purchase accounting treatment.
The integration of 3i into Biomet may be difficult and expensive to
achieve.
The merger will present challenges to management, including the integration
of the operations, technologies and personnel of Biomet and 3i, and special
risks, including possible unanticipated liabilities, unanticipated costs and
diversion of management attention.
Biomet may not be able to successfully integrate or profitably manage 3i's
businesses. In addition, following the merger, 3i's businesses may not achieve
sales levels, profitability or cost savings that justify the investment made and
the acquisition may not be accretive to earnings in any future periods.
3i's client business could be adversely affected by the merger.
3i's business includes the sale of its products through both United States
and worldwide sales representatives to a variety of customers. These sales
depend, in part, upon the personal relationships that have developed between
3i's sales representatives and its customers. These relationships could be
adversely affected by the merger and, as a result, sales to these customers may
be impaired.
Expenses resulting from the merger may affect Biomet's results of
operations.
Biomet estimates that it will incur aggregate direct transaction costs of
approximately $1.3 million associated with the merger, consisting of transaction
fees for Biomet's investment banker, fees and expenses of its attorneys and
accountants and other related costs. Biomet's transaction costs will be charged
to operations upon completion of the merger. There can be no assurance that the
combined company will not incur additional charges to reflect costs associated
with the merger.
SELECTED HISTORICAL AND PRO FORMA DATA
How We Prepared the Financial Information
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived the historical
financial information from (i) the audited financial statements of Biomet for
its fiscal years ended May 31, 1995 through 1999 and the unaudited financial
statements of Biomet for the three months ended August 31, 1999 and 1998, and
(ii) the audited financial statements of 3i for its years ended December 31,1994
through 1998 and the unaudited financial statements of 3i for the six months
ended June 30, 1999 and 1998. It is Biomet's and 3i's opinion that the unaudited
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the
periods. All information is presented in accordance with generally accepted
accounting principles. The results of 3i's operations for the six months ended
June 30, 1999 and 1998 are not necessarily indicative of the results of
operations for a full year. The results of Biomet's operations for the three
months ended August 31, 1999 and 1998 are not necessarily indicative of the
results of operations for a full year.
<PAGE>
The following financial information is only a summary. You should read it
together with the historical financial statements and related notes contained in
this proxy statement/prospectus and in the annual reports and other information
that Biomet has filed with the SEC and incorporated by reference into this proxy
statement/prospectus. We have listed the documents incorporated by reference
under the heading "Where You Can Find More Information."
<PAGE>
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<CAPTION>
Selected Historical Financial Information of Biomet
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
August 31 Years Ended May 31,
----------------------------------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
Historical Consolidated Statements of
Operations Data:
Net sales $192,151 $176,664 $757,414 $651,405 $580,347 $535,159 $452,272
Operating income, excluding special
charge(1) 60,481 54,176 226,650 180,106 159,811 137,280 119,027
Income per common share, excluding
special charge(1)
Basic .35 .30 1.33 1.12 .94 .82 .69
Diluted .35 .30 1.32 1.11 .93 .81 .68
Net income per common share(1)
Basic .35 .30 1.04 1.12 .94 .82 .69
Diluted .35 .30 1.03 1.11 .93 .81 .68
Shares used in the computation of
earnings per common share
Basic 112,709 112,110 112,309 111,717 113,765 115,461 115,459
Diluted 113,799 113,562 113,382 112,852 114,617 16,750 116,798
Cash dividends paid per common share $.14 $.12 $.12 $.11 $.10 $ - $ -
======== ======== ========== ======== ======== ======== ========
August 31, May 31,
------------------------------------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
Historical Consolidated Balance Sheet Data:
Total assets $1,121,586 $876,370 $1,067,956 $848,739 $628,356 $598,469 $539,084
Total shareholders' equity 798,804 687,785 775,947 667,418 552,828 534,070 444,617
<FN>
- ---------
(1) Biomet recorded a $55 million special charge for litigation in May 1999,
which reduced operating income by $55 million and reduced basic and diluted
earnings per share by $.29. Income per common shares, excluding special
charge, is not a measurement of financial performance under generally
accepted accounting principles and should not be construed as a substitute
for earnings per common shares as a measure of performance. It is included
to provide supplemental information regarding Biomet's historical results.
(2) Amounts after January 1, 1998 include the impact of Biomet Merck. See "The
Companies." Other acquisitions during the five year period individually and
in the aggregate have not been material to Biomet's operating results or
financial position.
</FN>
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<CAPTION>
Selected Historical Financial Information of 3i
(in thousands, except per share amounts)
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Six Months Ended Years Ended December 31,
June 30,
------------------------ --------------------------------------------------------------
1999 1998 1998 1997 1996 1995(2) 1994(2)
----------- ----------- -------- ------- ------- ------- -------
Historical Consolidated (unaudited) (unaudited)
Statements of Operations
Data:
Net sales $40,908 $34,364 $70,488 $54,745 $43,383 $33,722 $25,928
Operating income 5,425 3,789 7,699 5,502 6,200 3,745 1,727
Income per
common share,
excluding special
income(1)
Basic .44 .28 .62 .43 .48 .37 .18
Diluted .38 .25 .54 .37 .42 .33 .17
Net income per
common share
Basic .44 .28 1.22 .43 .48 .37 .18
Diluted .38 .25 1.04 .37 .42 .33 .17
Shares used in the
computation of
earnings per common
share
Basic 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Diluted 8,387 8,360 8,357 8,362 8,294 8,294 8,294
June 30, December 31,
------------------------ --------------------------------------------------------------
Historical Consolidated
Balance Sheet Data: 1999 1998 1998 1997 1996 1995(2) 1994
----------- ----------- -------- ------- ------- ------- -------
(unaudited) (unaudited)
Total assets $43,052 $39,528 $42,984 $30,643 $21,875 $15,401 $12,884
Long-term
obligations and
redeemable preferred
stock 7,892 8,187 8,144 7,470 7,145 6,218 1,883
Total shareholders'
equity 22,258 12,871 19,902 10,894 8,156 4,796 4,200
<FN>
(1) 3i recorded $6.6 million in other income for the year ended December 31,
1998, which represented 3i's share of litigation proceeds and increased
basic and diluted earnings per share by $.60 and $.50, respectively. Income
per common share, excluding special income, is not a measurement of
financial performance under generally accepted accounting principles and
should not be construed as a substitute for earnings per common shares as a
measure of performance. It is included herein to provide supplemental
information regarding 3i's historical results.
<PAGE>
(2) Prior to April 1995, Implant Innovations, Inc., Latham Manufacturing
Company, Inc. ("Latham") and Innovative Surgical, Inc. ("ISI") were
separate entities operating under common control. 3i was formed on April
11, 1995 as a holding company. On April 14, 1995, the shareholders of
Implant Innovations, Inc., Latham and ISI exchanged their respective shares
for new shares of 3i. In April 1995, ISI ceased operations and transferred
all of its assets to Latham in exchange for the cancellation of debt owed
to Latham. In April 1995, Latham was merged into Implant Innovations, Inc.
On May 26, 1995, pursuant to a purchase agreement, investors purchased
Series A Cumulative Convertible Preferred Stock, Subordinated Debentures
and warrants to purchase shares of 3i's common stock. For purposes of the
presentation of net income per common share, all of these equity
transactions are assumed to have occurred effective January 1, 1994.
</FN>
</TABLE>
Comparative Per Share Data
The following table sets forth certain historical per share data of Biomet
and 3i and combined per share data on an unaudited pro forma basis after giving
effect to the merger as if it had occurred on June 1, 1996 on a
pooling-of-interests basis and assuming that .4981 Biomet common shares were
issued in exchange for each share of 3i's Class A and Class B common stock
outstanding. This data should be read in conjunction with the selected
historical audited and unaudited financial data included herein and the
historical audited and unaudited financial statements of Biomet and 3i (and the
notes thereto) that are incorporated herein by reference for Biomet and included
herein for 3i. The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the combined financial
position or results of operations of future periods or the results that actually
would have been realized had Biomet and 3i been a single entity during the
periods presented. In addition, the pro forma combined per share amounts do not
give effect to any non-recurring merger related expenses that will be incurred
in connection with the business combination and expensed following the
consummation of the pooling.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended
August 31 Years Ended May 31,
-------------------------------------------------------------
1999 1998 1999 1998 1997
---- ---- ----- ----- -----
Biomet
Historical Per Common Share:
Income per common share, excluding special
charge(1)(6)
Basic $.35 $.30 $1.33 $1.12 $ .94
Diluted .35 .30 1.32 1.11 .93
Net income per common share(1)
Basic .35 .35 1.04 1.12 .94
Diluted .35 .35 1.03 1.11 .93
Cash dividends paid .14 .12 .12 .11 .10
Book value(2) 7.07 6.04 6.89 5.96 4.97
<PAGE>
Pro Forma Combined - Per Biomet
Common Share(3)
Income per common share, excluding special
items(1)(6)
Basic $.35 $.30 $1.33 $1.11 $ .94
Diluted .35 .29 1.30 1.09 .92
Net income per common share
Basic .35 .30 1.08 1.11 .94
Diluted .35 .29 1.06 1.09 .92
Cash dividends paid .14 .12 .12 .11 .10
Book value (2) 7.08 6.13 6.86 5.87 4.89
3i
Historical per common share(4):
Income per common share, excluding
special income(5)(6)
Basic $.26 $.11 $.62 $.43 $.48
Diluted .22 .10 .54 .37 .42
Net income per common share(5)
Basic .26 .11 1.22 .43 .48
Diluted .22 .10 1.04 .37 .42
Cash dividends paid ---- ---- ---- ---- ----
Book value(2) 3.35 1.63 2.84 1.56 1.17
Pro Forma Combined - Per Equivalent 3i Common
Share(3)
Net income per common share
Basic $.18 $.15 $.54 $.55 $.47
Diluted .17 .15 .53 .54 .46
Cash dividends paid .07 .06 .06 .05 .05
Book value (2) 3.52 3.01 3.42 2.92 2.44
<PAGE>
<FN>
(1) Biomet recorded a $55 million special charge for litigation in May 1999,
which reduced operating income by $55 million and reduced basic and diluted
earnings per share by $.29.
(2) Historical Book Value Per Common Share is computed by dividing
shareholders' equity for Biomet and 3i by the number of shares of common
stock outstanding at the end of each period for Biomet and 3i respectively.
Pro Forma Book Value Per Common Share is computed by dividing pro forma
shareholders' equity by the pro forma number of common shares outstanding
at the end of the period.
(3) The pro forma combined per share data combines financial information of
Biomet for fiscal quarters ended August 31, 1999 and 1998 and for the
fiscal years ended May 31, 1999, 1998 and 1997 with the financial
information of 3i for fiscal quarters ended August 31, 1999 and March 31,
1998 and for the years ended December 31, 1998, 1997 and 1996. Biomet has a
fiscal year ending May 31 and 3i has a fiscal year ending December 31.
(4) Information is for the quarters ended August 31, 1999 and March 31, 1998
and for the years ended December 31, 1998, 1997 and 1996.
(5) 3i recorded $6.6 million in other income for the year ended December 31,
1998, which represented 3i's share of litigation proceeds and increased
basic and diluted earnings per share by $.60 and $.50, respectively.
(6) Income per common share, excluding special items, is not a measurement of
financial performance under generally accepted accounting principles and
should not be construed as a substitute for earnings per common share as a
measure of performance. It is included to provide supplemental information.
(7) The pro forma combined per share amounts are based on a pro forma exchange
ratio of .4981 Biomet common shares for each share of 3i common stock. The
pro forma financial data assume a conversion price of $38.62, the mid-point
of the conversion price range. The number of Biomet common shares issued in
the merger will not be greater than approximately 5.2 million shares or
less than approximately 4.0 million shares. The issuance of the maximum
number of shares would decrease the pro forma combined earnings per share
amounts by $.01 and decrease pro forma book value by $.03. The issuance of
the minimum number of shares has no impact on the pro forma earnings per
share amounts and increases pro forma book value by $.02.
</FN>
</TABLE>
THE COMPANIES
Biomet
Biomet and its subsidiaries design, 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, general
surgical instruments, arthroscopy products, bone cements, bone substitutes,
spinal implants and craniomaxillofacial implants and instruments. Biomet's
corporate headquarters is in Warsaw, Indiana, and it has manufacturing and/or
office facilities in more than 25 locations worldwide.
Biomet markets its products in the United States, Australia and Canada
through independent, commissioned sales representatives; in Austria, Belgium,
Chile, the Czech Republic, Denmark, France, Germany, Greece, Holland, Italy,
Mexico, New Zealand, Norway, Poland, Portugal, Spain, Switzerland and the United
Kingdom primarily through direct sales representatives; and in other
international markets through independent sales representatives and specialty
medical product dealers. EBI, L.P., a subsidiary of Biomet, sells electrical
stimulation, external fixation devices, spinal products and softgoods primarily
through direct factory sales representatives in the United States and the United
Kingdom and through specialty medical product dealers in the reminder of its
markets. Biomet and its subsidiaries currently distribute products in more than
100 countries.
On January 1, 1998, Biomet formed a joint venture with Merck KGaA,
Darmstadt, Germany (Merck KGaA). Biomet and Merck KGaA contributed their
European orthopaedic and biomaterials operations to a limited partnership named
BioMer C.V. BioMer C.V. is the parent of a holding company, Biomet Merck B.V.
("Biomet Merck"), which holds the operating entities of this joint venture.
Biomet controls the partnership and, accordingly, consolidates the partnership's
financial statements for financial reporting and reflects Merck KGaA's 50%
ownership interest as a minority interest. This joint venture has significantly
expanded Biomet's presence in the European marketplace and provides Biomet with
exclusive rights to Merck KGaA's current and future biomaterials-based products.
<PAGE>
3i
3i and its subsidiaries design, develop, manufacture, market and distribute
oral reconstruction products including a proprietary line of dental implants,
healing abutments and surgical products along with regenerative membrane
products manufactured by W. L. Gore and Associates, Inc. and synthetic bone
substitute material manufactured by Orthovita, Inc.
3i markets its products to dental professionals involved in the implant
procedure, including oral surgeons, periodontists, implantologists, general
dentists and prosthodontists. 3i currently markets and distributes it products
through a direct sales force in the United States, Germany, Canada, the United
Kingdom, Spain, Switzerland, Denmark and Mexico. The Company markets its
products in other international markets through its exclusive independent
distributors. 3i has its corporate headquarters and manufactures its products in
Palm Beach Gardens, Florida. Subsidiaries of 3i have sales offices in Germany,
Canada, the United Kingdom, Spain, Switzerland, Denmark and Mexico.
RESULTS OF OPERATIONS
Biomet
Biomet's results of operations and management's discussion and analysis of
financial condition and results of operations are included into this proxy
statement/prospectus by reference. See "Where You Can Find More Information."
3i
The following table shows the percentage relationship to net sales of items
derived from 3i's consolidated statements of income and the percentage change
from year to year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage
Percentage of Net Sales Increase
(Decrease)
----------------------------------------------------------------- -----------------
Six Months Six Months 1998 1997
Ended June Ended June Year Ended Year Ended Year Ended vs. vs.
1999 1998 1998 1997 1996 1997 1996
----------------------- -------------------------------------- -----------------
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 29% 26%
Cost of sales 39.2 45.7 42.1 40.3 35.5 35 43
----------------------- --------------------------------------
Gross margin 60.8 54.3 57.9 59.7 64.5 25 17
Selling, general and administrative
expenses 43.2 38.7 42.4 43.0 43.1 27 26
Research and development expenses 4.3 4.6 4.6 6.6 7.1 (10) 17
----------------------- --------------------------------------
Operating income 13.3 11.0 10.9 10.1 14.3 40 (11)
Other income (expense), net (1.1) (1.3) 8.2 (0.7) (1.2) (1,605) (27)
----------------------- --------------------------------------
Income before income taxes 12.2 9.7 19.1 9.4 13.1 163 (10)
Provision for income taxes 4.5 3.7 6.8 3.7 5.0 141 (8)
----------------------- --------------------------------------
Net income 7.7% 6.0% 12.3% 5.7% 8.1% 177% (11)%
======================= ======================================
</TABLE>
<PAGE>
3i Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales increased 19% to $40,908,000 for the six months ended June 30,
1999 from $34,364,000 for the six months ended June 30, 1998, primarily due to a
21% global increase in the sales of implants and screws and the commencement of
the distribution of Biogran products in May 1998. 3i's United States sales,
excluding sales to foreign distributors, increased 19% to $21,998,000 for the
six months ended June 30, 1999 from $18,481,000 for the six months ended June
30, 1998, primarily due to the 31% increase in the sales of implants in the
United States. Foreign sales, including sales to foreign distributors, increased
19% to $18,911,000 for the six months ended June 30, 1999 from $15,882,000 for
the six months ended June 30, 1998 primarily due to sales by subsidiaries in
Europe.
3i's gross margin as a percentage of net sales increased to 60.8% for the
six months ended June 30, 1999 from 54.3% for the six months ended June 30,
1998. This increase was primarily a result of increased sales of higher margin
implants in the U.S. and European subsidiary markets.
Selling, general and administrative expenses were $17,695,000 for the six
months ended June 30, 1999 compared to $13,317,000 for the six months ended June
30, 1998. This represented an increase of 33% over the corresponding period in
the prior year. As a percentage of sales, selling, general and administrative
expenses were 43.2% for the six months ended June 30, 1999 and 38.7% for the six
months ended June 30, 1998. The increase was primarily due to 3i's biannual
international symposium held in 1999, the filling of open management positions
in sales and marketing and an implant marketing program.
Research and development expenses increased for the six months ended June
30, 1999 to $1,758,000 from $1,568,000 for the six months ended June 30, 1998.
This increase resulted from increased research activities on new product
development.
Other income (expense), net decreased to $417,000 for the six months ended
June 30, 1999 compared to $459,000 for the six months ended June 30, 1998 due to
lower interest expense resulting from reduced average short-term borrowings.
Provision for income taxes increased to $1,841,000 for the six months ended
June 30, 1999, representing 36.8% of income before income taxes, compared to
$1,277,000 for the six months ended June 30, 1998, or 38.3% of income before
income taxes. The decrease in the effective rate was due to the utilization of
foreign losses in 3i's consolidated income tax provision.
Net income increased to $3,167,000 from $2,053,000 for the six months ended
June 30, 1999 as compared to the same period in 1998 as a result of the factors
described above.
<PAGE>
1998 Compared to 1997
Net sales increased 29% to $70,488,000 in 1998 from $54,745,000 in 1997.
This resulted from increasing sales in the European subsidiaries, a full year of
membrane sales and the introduction of the Biogran products in May 1998. 3i's
United States sales, excluding sales to foreign distributors, increased 16% to
$37,436,000 in 1998 from $32,386,000 due to sales of Gore membranes, Biogran
products, abutments, instruments and implants. Total foreign sales, including
sales to foreign distributors, increased 48% to $33,052,000 in 1998 from
$22,359,000 in 1997. This increase was due to the first full year of Germany and
Spain subsidiary sales as well as increased distributor sales in the existing
markets of Brazil, Italy and France.
3i's gross margin as a percentage of net sales decreased to 57.9% in 1998
compared to 59.7% in 1997. The decrease in gross profit as a percentage of sales
was due to the sales of Gore membranes and Biogran products, which have lower
profit margins than implants.
Selling, general and administrative expenses increased 27% to $29,836,000
in 1998 compared to $23,565,000 in 1997. The 1998 increase was primarily due to
the acquisition of the 3i's German distributor in January 1998. As a percentage
of sales, selling, general and administrative expenses were 42.2% in 1998 and
43.0% in 1997.
Research and development expenses decreased in 1998 to $3,251,000 from
$3,612,000 in 1997. The decrease resulted from higher 1997 prototype costs
associated with the rollout of a new transgingival implant product line.
Other income increased to $5,756,000 in 1998 compared to a net expense of
$382,000 in 1997. In 1998, other income included $6.6 million of net proceeds
relating to the final settlement of a patent infringement and antitrust claim.
Excluding this settlement, other income decreased $461,000 due primarily to
higher interest expense on line of credit borrowings to fund working capital
needs and the acquisition of 3i's Germany distributor.
Provision for income taxes increased to $4,790,000 for 1998, representing
35.6% of income before income taxes, compared to $1,987,000 for 1997, or 38.8%
of income before income taxes. The decrease in the effective rate was due to the
utilization of foreign losses in 3i's consolidated income tax provision.
<PAGE>
As a result of the increase in net sales and the approximately $6,600,000
litigation proceeds, 3i experienced an increase in net income to $8,665,000 for
1998 compared to $3,133,000 for 1997.
1997 Compared to 1996
Net sales increased 26% to $54,745,000 in 1997 from $43,383,000 in 1996.
This increase is a result of the commencement of sales of a membrane product
line in March 1997 and increased sales of implants and abutments. 3i's United
States sales, excluding sales to foreign distributors, increased 38% to
$32,386,000 from $23,413,000 in 1996. This increase was primarily related to the
rollout of Gore membranes which generated $4,408,000 in sales and a 28% increase
in implant sales. Foreign sales, including sales to foreign distributors,
increased 12% to $22,359,000 in 1997 from $19,970,000 in 1996. This increase was
due to increased sales to end user customers by European subsidiaries as well as
an increase in sales to independent distributors in Brazil, Korea and Israel.
3i's gross margin as a percentage of net sales decreased to 59.7% in 1997
compared to 64.5% in 1996. The decrease in gross profit as a percentage of sales
is due to the higher cost of goods of Gore membranes.
Selling, general and administrative expenses were $23,565,000 in 1997
compared to $18,700,000 in 1996. This represents an increase of 26% over the
prior year. As a percentage of sales, selling, general and administrative
expenses were 43.0% in 1997 and 43.1% in 1996. The 1997 increase was primarily
due to increased personnel in sales and marketing, increase in commissions on
product sales and the start up of 3i subsidiary operations in the UK, Mexico,
Spain, Scandinavia and Switzerland.
Research and development expense increased in 1997 to $3,612,000 from
$3,078,000 in 1996. The increase resulted from additional clinical research on
Osseotite implants and clinical data management consulting services.
Provision for income taxes decreased to $1,987,000 for 1997, representing
38.8% of income before income taxes, compared to $2,163,000 for 1996, or 38.1%
of income before income taxes. The increase in the effective rate was due to the
unrecognized benefit of foreign subsidiary operating losses.
As a result of the increase in cost of goods, 3i experienced a decrease in
net income for 1997 compared to 1996. Net income decreased to $3,133,000 from
$3,511,000.
Liquidity and Capital Resources
3i's net cash provided by operating activities was $3,507,000 for the six
months ended June 30, 1999 compared to $5,584,000 for the six months ended June
30, 1998. The decrease in net cash from operating activities was principally due
to the receipt of $6.2 million of the total $6.6 million in litigation proceeds
during May 1998, offset by a $3.8 million inventory increase. 3i's net cash
provided by operating activities was $4,068,000 in 1998 compared to $2,956,000
in 1997. The increase in net cash from operating activities was principally due
to net income, noncash charges for depreciation of $2,562,000, allowances for
uncollectible accounts receivable of $1,897,000 and slow moving inventory of
$1,650,000. These increases in net cash were reduced by increases in inventory
of $8,283,000 and trade accounts receivable of $2,121,000. 3i expects that
operating cash flows in the near future will be primarily determined by levels
of net income and working capital requirements and is expected to be sufficient
to fund the Company's capital requirements.
<PAGE>
Net cash used in investing activities was $965,000 for the six months ended
June 30, 1999 compared to $4,318,000 for the six months ended June 30, 1998. Net
cash used in investing activities was $5,432,000 in 1998 compared to $2,889,000
in 1997. The primary use for investing activities were purchases of property and
equipment and the acquisition of net assets of 3i's independent distributor in
Germany in January 1998. Included in property and equipment was the cost
associated with the purchase and implementation of a new 3i enterprise resource
planning computer system. Additionally, 3i entered into capital lease
obligations of $1,619,000 in 1998 primarily for the purchase of new
manufacturing machines.
Net cash used in financing activities were $1,288,000 for the six months
ended June 30, 1999 compared to $2,904,000 for the six months ended June 30,
1998. The primary use was payments on 3i's line-of-credit with a financial
institution and capital lease obligations. Net cash used in financing activities
was $119,000 in 1998. The principal use of cash from financing activities was
for payments on capital lease obligations offset by borrowings under a line-of-
credit with a financial institution.
3i expects that capital spending for the foreseeable future will continue
at levels comparable to 1999 and 1998. 3i plans to continue the development of
new and advanced products and to implement software applications and bar coding
into the manufacturing and distribution process.
Year 2000 Issues
3i believes that the Year 2000 Issue will not pose significant operational
problems for its computer systems.
3i is in the final stages of its company-wide program of preparation,
documentation and testing its computer programs and applications for the year
2000. 3i is utilizing both internal and external resources for the remediation
and testing of its systems that are undergoing Year 2000 modifications. In
addition, 3i has contacted and documented Year 2000 compliance with outside
suppliers and vendors. However, there can be no assurance that the systems and
applications of other companies on which 3i relies will be timely converted or
that any such failure to convert by another company would not have an adverse
effect on 3i.
THE MEETING
Matters to be Considered at the Meeting
At the meeting, you will be asked to consider and vote upon a proposal to
adopt the merger agreement and approve the merger. 3i's board of directors is
not aware, as of the date of this proxy statement/prospectus, of any other
matters that may properly come before the meeting. If any other matters properly
come before the meeting, or at a subsequent meeting following any adjournment or
postponement of the meeting, the persons named in 3i's proxy intend to vote
proxies in accordance with their discretion on any such matters unless other
instructions are given in the proxy.
3i's board of directors carefully reviewed and considered the terms and
conditions of the merger, determined its advisability and concluded that the
merger is in the best interests of 3i and its stockholders. Accordingly, by a
unanimous vote, 3i's board of directors has approved the merger and determined
its advisability, and recommended that you vote to adopt the merger agreement
and approve the merger.
<PAGE>
Date, Time and Place
The meeting of shareholders will be held at:
3i's Executive Offices
4555 Riverside Drive
Palm Beach Gardens, Florida 33410
December __, 1999
10:00 a.m., Eastern Time
Record Date
The 3i board of directors has fixed the close of business on October 31,
1999, as the record date for stockholders entitled to notice of and to vote at
the meeting. Only holders of record of 3i Class A common stock and 3i Series A
Cumulative Convertible Preferred Stock on that record date will be entitled to
notice of and to vote at the meeting.
A complete list of stockholders as of the record date will be available for
inspection at 3i's offices in Palm Beach Gardens, Florida, during normal
business hours upon written demand by you or your agent or attorney beginning
two business days after the date of this notice and continuing through the
meeting. You or your agent or attorney may, upon written notice and subject to
Section 220 of the Delaware General Corporation Law, copy the list of
stockholders during regular business hours during the inspection period at your
expense.
Your Voting Rights
On the record date, a total of 6,646,967 shares of 3i Class A common stock
and a total of 776,788 shares of 3i Series A Cumulative Convertible Preferred
Stock were issued and outstanding. Each of the shares of Class A common stock is
entitled to one vote and each of the shares of Series A Cumulative Convertible
Preferred Stock is entitled to one vote. The holders of the preferred stock will
be entitled to cast an aggregate of 776,788 votes.
The holders of a majority of the outstanding shares of stock entitled to
vote at the meeting, whether in person or by proxy, constitute a quorum at the
meeting. If a quorum is present at the meeting, the merger will be approved if a
majority of the votes entitled to be cast votes in favor of the merger. Holders
of Class A common stock and Series A Cumulative Convertible Preferred Stock will
vote together as a single class. Persons holding shares representing an
aggregate of approximately 89% of the votes to be cast on the merger have agreed
with Biomet that they will vote in favor of the merger. As a result, approval of
the merger by 3i stockholders is assured.
Voting of Proxies; Proxy Solicitation Costs
You may vote at the meeting either in person or by proxy. You can change a
vote by proxy if you attend the meeting and vote in person. Voting instructions
are contained on your proxy card. If you properly give your proxy and submit it
to 3i in time to vote, the persons named as your proxy will vote your shares as
you have directed. If you give no directions, your votes will be cast FOR the
adoption of the merger agreement and the approval of the merger.
<PAGE>
You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date,
- notifying the Secretary of 3i in writing before the meeting that you
have revoked your proxy, or
- voting in person at the meeting.
3i will pay the costs of soliciting proxies.
Appraisal Rights
You are entitled to appraisal rights under Delaware corporate law. To
assert those rights, you must execute a written demand for appraisal before a
vote is taken on the merger agreement and the merger. A proxy or vote against
the merger agreement and the merger will not be considered a demand for
appraisal. A demand for appraisal will be sufficient if:
- it is delivered to 3i before the vote is taken at the meeting;
- it reasonably informs 3i of your identity; and
- it reasonably informs 3i of your intention to demand the appraisal of
your 3i stock.
Biomet will not be required to fulfill its obligations under the merger
agreement if the holders of 8% or more of the outstanding 3i Class A common and
Class B common stock demand appraisal.
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement
and is qualified in its entirety by reference to the merger agreement. A copy of
the merger agreement is attached hereto as Annex A and is incorporated herein by
reference. You should read the merger agreement because it, and not this proxy
statement/prospectus, is the legal document that governs the merger.
General Description of the Merger
The merger agreement provides for the merger of 3i with and into
Acquisition, which is a wholly-owned subsidiary of Biomet. Acquisition will be
the surviving corporation in the merger and will change its name to Implant
Innovations Holding Corporation. The articles of incorporation and bylaws of
Acquisition immediately prior to the effective time of the merger will be the
articles of incorporation and bylaws of the surviving corporation at the
effective time of the merger. The directors of Acquisition at the effective time
of the merger will be the directors of the surviving corporation. The officers
of the surviving corporation will be the current officers of Implant
Innovations, Inc.
<PAGE>
You will receive Biomet common shares in exchange for your 3i Class A
common stock and 3i Class B common stock. The number of Biomet common shares to
be issued will depend upon the market prices of those shares over the 20 trading
days ending three days prior to the closing of the merger.
- If the average of the last sale prices for a Biomet common share
during the 20-day period, as reported by the Nasdaq National Market,
is no greater than $43.45 and no less than $33.79, then the aggregate
number of Biomet shares issued in exchange for 3i common stock will be
approximately $175 million.
- If the average Biomet share price is less than $33.79, then Biomet
will issue approximately 5.2 million shares only, and the aggregate
value of the shares received by 3i stockholders will be less than $175
million.
- If the average Biomet share price is greater than $43.45, then Biomet
will issue approximately 4.0 million shares only, but the aggregate
value of the shares received by 3i stockholders will be greater than
$175 million.
- If the average Biomet share price is less than $31.86, then 3i may end
the merger.
We have attached a copy of the merger agreement as Annex A to this proxy
statement/prospectus. We urge that you read the merger agreement in its entirety
as it is the legal document governing the merger.
Background of the Merger
Biomet has, on a continuing basis, considered potential acquisitions of
other businesses as a key element of its strategic plan for increasing
shareholder value. As a part of that strategy, Biomet acquired Walter Lorenz
Surgical, Inc. ("Lorenz Surgical") in 1992. Lorenz Surgical manufactures and
sells craniomaxillofacial implants and instruments. Between September 1995 and
February 1996, representatives of Biomet and 3i held preliminary exploratory
discussions regarding a possible business combination between Lorenz Surgical
and 3i, but reached no agreement with respect to any transaction and did not
have any agreement to continue those discussions.
In December 1998, U.S. Bancorp Piper Jaffray ("Piper"), an investment
banking firm, contacted Gerard Mouflett of Advent International Corporation
("Advent") to discuss 3i. Advent is the general partner of two venture capital
investors in 3i, Global Private Equity II L.P. and Advent International
Investors II L.P. (collectively, "the Advent Funds"). Piper also approached
Biomet and asked if Biomet was interested in acquiring 3i. Biomet was
interested.
In early January 1999, representatives of Piper held discussions with
Gerard Mouflett of Advent and Keith D. Beaty of 3i, indicating Biomet's interest
in entering into discussions with 3i concerning a strategic alliance or
acquisition of 3i.
On February 22, 1999, Dane A. Miller, Jerry L. Ferguson and Greg W. Sasso
of Biomet and a representative of Piper met with Keith D. Beaty and Dr. Richard
J. Lazzara of 3i and Gerard Moufflet of Advent at 3i's offices in Palm Beach
Gardens, Florida, to discuss a possible transaction. Biomet also signed an
agreement to maintain the confidentiality of the information it received from
3i.
On March 26, 1999, Biomet engaged Piper to act as its exclusive financial
advisor in connection with a possible transaction with 3i.
<PAGE>
On April 26, 1999, Dane A. Miller, Jerry L. Ferguson and Greg W. Sasso of
Biomet and a representative of Piper met with Keith D. Beaty and Dr. Richard J.
Lazzara of 3i and Gerard Moufflet of Advent in Warsaw, Indiana, to further
discuss the possible transaction.
Discussions by way of conference telephone calls continued between Biomet
and 3i during May 1999. On June 1, 1999, Biomet sent to 3i a letter outlining
terms on which Biomet would consider acquiring 3i. On June 15, 1999, 3i
responded in writing to Biomet's letter, proposing changes in some of Biomet's
terms.
Biomet's board of directors met on June 19, 1999. At that meeting, Niles L.
Noblitt, Biomet's chairman, provided a detailed report to the directors as to
the status of the discussions with 3i and an analysis of various business issues
relevant to a decision to proceed with the proposed acquisition. No action was
taken by the board of directors, but there was a consensus that management
should continue to pursue the matter.
On July 8, 1999, Dane A. Miller, Niles L. Noblitt, Daniel P. Hann, Gregory
D. Hartman and Greg W. Sasso of Biomet and a representative of Piper, and Keith
D. Beaty and Dr. Richard J. Lazzara of 3i, Gerard Mouflett of Advent and a
financial advisor of 3i, met at the Newark, New Jersey, airport. On July 21,
1999, representatives of Piper contacted Keith D. Beaty regarding valuation and
other terms and conditions of Biomet's proposal. On August 8, 1999, Dane A.
Miller, Niles L. Noblitt, Daniel P. Hann, Gregory D. Harman, Greg W. Sasso and
outside counsel of Biomet; Keith D. Beaty, Dr. Richard J. Lazzara, outside
counsel and a financial advisor of 3i; Gerard Moufflet of Advent; and a
representative of Piper met at the Cincinnati, Ohio, airport. As a result of
these meetings and conversations, on August 8, 1999 Biomet and 3i reached a
general agreement on the structure and terms of the proposed transaction,
although neither made any binding commitments. It was agreed that counsel for
Biomet would prepare a draft of a merger agreement.
On August 11, 12 and 13, 1999, representatives of Biomet and 3i met in West
Palm Beach, Florida, to discuss the terms of a draft merger agreement. Biomet
also conducted a due diligence examination of 3i.
On August 26, 1999, the board of directors of Biomet unanimously approved
the proposed transaction, subject to management's continued negotiation and
approval of the terms of the merger agreement. Negotiations continued until
August 28, 1999, when the merger agreement was signed.
On August 26, 27 and 28, the board of directors of 3i had several
discussions regarding the terms of the merger agreement and the acquisition of
3i by Biomet. On August 28, 1999, 3i's directors executed a unanimous written
consent approving the merger agreement.
The transaction was publicly announced on August 30, 1999, prior to the
opening of the stock market.
<PAGE>
Reasons for the Merger
3i's Reasons for the Merger; Recommendation of 3i's Board of Directors
In approving the merger, 3i's board of directors concluded that holding
Biomet common shares represented a more favorable investment opportunity for the
stockholders of 3i than holding shares of 3i common stock. The board of
directors of 3i believes that the merger is in the best interests of 3i and its
stockholders, and that the merger will:
- provide 3i stockholders with greater liquidity;
- provide opportunities for operational and other efficiencies
including:
- applying some of each company's proprietary and other technology
to the other company's business,
- marketing some of each company's products to some of the other
company's clients, and
- combining general and administrative functions over a larger
operational and revenue base;
- increase 3i growth potential as a result of:
- greater marketing capabilities, financial stability and strength
of the combined company including the opportunity to expand the
oral reconstruction market;
- the opportunity to raise consumer awareness of the combined
company and its reputation;
- the opportunity to invest further in new product development and
research; and
- achieve a stronger competitive position in light of the likelihood of
consolidation and increased competition in the oral reconstruction
market, including the entrance into this market by larger companies.
Biomet's Reasons for the Merger
Biomet views the merger with 3i as consistent with Biomet's policy of
growth through selected acquisitions. The board of directors of Biomet believes
that the merger is in the best interests of Biomet and its shareholders, and
that the merger will:
- give Biomet an opportunity to expand into a market segment (dental
implants) in which it currently has no product offerings;
- provide a product line that complements its existing
craniomaxillofacial products;
- allow access to technology and know-how that should allow Biomet and
3i to further expand their product offerings into new market segments;
- provide an opportunity for revenue growth by increased penetration of
the dental implant market;
- provide access to the capital needed to expand the business of 3i and
take better advantage of its opportunities; and
<PAGE>
- add management strength to the Biomet organization.
This discussion is not intended to be exhaustive, but 3i believes it includes
all material factors considered by the board. In light of the number and variety
of information and factors the board considered, the board did not find it
practicable to, and did not, assign any specific or relative weights to the
factors listed above. In addition, individual directors may have given differing
weights to different factors.
When the Merger Becomes Effective
The closing of the merger will be held no later than 30 days following the
effective date of this proxy statement/prospectus, unless the parties agree to
some other closing date.
Acquisition will execute and file articles of merger with the Secretary of
State of the State of Indiana and a certificate of merger with the Secretary of
State of the State of Delaware as soon as practicable after the closing. The
merger will become effective at 12:01 a.m. Eastern Time on the day following the
date of filing of the certificate of merger and the articles of merger with the
Secretaries of State of Delaware and Indiana. The completion of the merger is
sometimes referred to in this proxy statement/prospectus as the "effective
time."
Conversion of 3i Stock
At the effective time of the merger, all 3i Class A common stock and all 3i
Class B common stock will automatically convert to Biomet common shares. All
options, warrants, convertible securities or other rights to acquire 3i common
stock outstanding as of August 28, 1999 are to be exercised or converted into 3i
common stock before the closing.
Calculation of Biomet Shares to Be Issued
The number of Biomet common shares to be issued to 3i Class A common
stockholders and 3i Class B common stockholders will be calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
The number of Biomet common shares to = Net Purchase Price
be issued in the merger ------------------
Conversion Price
Net Purchase Price $175 million less the Net Debt, except
that if the Net Debt is a negative amount
greater than $1 million, the Net Purchase
Price will be $176 million
Net Debt Aggregate Indebtedness of 3i and its
subsidiaries less the Aggregate Cash and
Cash Equivalents of 3i and its subsidiaries.
<PAGE>
Aggregate Indebtedness of 3i and its As of the close of business on the last day
subsidiaries of the month prior to closing, with respect
to 3i and its subsidiaries, the sum of:
- obligations for borrowed money;
- obligations for any capital leases;
- interest payable or accrued with
respect to obligations for borrowed
money or obligations for any capital
leases; and
- all declared and unpaid dividends on
the Series A Cumulative Convertible
Preferred Stock of 3i
However, Aggregate Indebtedness will not
include indebtedness incurred after
August 28, 1999 that was used for certain
acquisitions by 3i specified in the merger
agreement.
Aggregate Cash and Cash Equivalents of 3i As of the close of business on the last day
and its subsidiaries of the month prior to closing, with respect
to 3i and its subsidiaries, the sum of:
- all cash and deposits in bank and on hand;
- all cash equivalents; and
- cash received by 3i and/or its
subsidiaries as a result of the
exercise of 3i options and warrants
outstanding as of August 28, 1999
less:
- all transaction expenses incurred in
connection with the merger but not
yet paid by 3i on the date the
Aggregate Cash and Cash
Equivalents is determined.
<PAGE>
Conversion Price The average of the last sale price for a
Biomet common share as reported by the
Nasdaq National Market for the 20
consecutive trading days ending with the
third trading day before the day of closing.
However, the conversion price shall not be
greater than $43.45 or less than $33.79,
and the number of Biomet common shares
issued in the merger will not be greater
than approximately 5.2 million shares or
less than approximately 4.0 million shares.
As of the date of this proxy statement/
prospectus, the conversion price determined
in accordance with the merger agreement would
have been $____________________.
</TABLE>
Distribution of Biomet Shares to 3i Stockholders
You will receive a percentage of the Biomet common shares issued in the
merger equal to your percentage ownership of the combined 3i Class A and 3i
Class B common stock outstanding at the closing. Some of the Biomet common
shares issued in the merger will be deposited at the closing in an escrow
account pending the outcome of certain events. The escrow account deposit will
be equal to:
- 10% of the number of Biomet common shares issued in the merger plus
- the number of Biomet common shares that, when multiplied by the
conversion price, equals $10 million.
These shares will be distributed to you and the other 3i shareholders at the
times and subject to the conditions described in the escrow agreement. See "The
Merger Agreement - Escrow Agreement."
<PAGE>
No fractional Biomet common shares will be issued in the merger. If any
fraction of a Biomet common share is due to you, you will receive a cash payment
for that fraction determined by multiplying the fraction by the Conversion
Price.
Exchange of Certificates
At the closing, Biomet will deliver its stock certificates for all 3i stock
certificates delivered to Biomet at the closing, and Biomet will thereafter
exchange Biomet certificates for 3i certificates when the 3i certificates are
delivered to Biomet. We will send further instructions to you for the exchange
of your 3i stock certificates for certificates representing Biomet common
shares.
Escrow Agreement
At the Closing, the parties to the merger will enter into an Escrow
Agreement. The Escrow Agent will be Wilmington Trust Company. The Biomet common
shares deposited in the escrow account are to be held by the Escrow Agent for
the purpose of indemnifying Biomet against losses it may incur as a result of a
breach by 3i or the Control Shareholders of their representations and
warranties, or as a result of their failure to perform their obligations, set
forth in the merger agreement, or as a result of contingencies identified in the
merger agreement. Your interests in the escrow account will be managed by Keith
D. Beaty as your Shareholder Representative.
You will have the right to vote your Biomet shares held in the escrow
account and will be entitled to all dividends paid on those shares during the
term of the escrow. You may sell the Biomet shares held for your account if the
proceeds of the sale are deposited in the escrow account. All cash held in the
escrow account will be invested in short term government obligations or
commercial paper.
Biomet's only recourse if it has claims against 3i or the Control
Shareholders will be its right to make a claim against the escrow. Biomet shares
having a value equal to $10 million at the Conversion Price will be held in the
escrow account as a separate fund for the specific contingencies identified in
the merger agreement, and the balance of the Biomet shares deposited in the
escrow account, equal to 10% of the shares issued in the merger, will be held as
a general contingencies fund.
Biomet will be entitled to reimbursement of indemnified losses with respect
to the specific contingencies fund only to the extent that those losses exceed
$1.25 million, and will be entitled to reimbursement of indemnified losses with
respect to the general contingencies fund only to the extent that those losses
exceed $250,000. Biomet must give notice to the Shareholder Representative of
any claim for indemnification from the escrow account. If the Shareholder
Representative objects to the claim, the dispute will be submitted to
arbitration and the decision of the arbitrators will be final.
Any distributions to Biomet from the escrow account will be charged against
the former stockholders of 3i in proportion to their interests in 3i. The
balance remaining in the escrow account after any distributions to Biomet will
be made to you promptly after the termination of Biomet's rights to assert
claims.
<PAGE>
Biomet's rights to assert claims against the general contingencies fund
will terminate no later than the close of business on the first anniversary of
the closing. Biomet's rights to assert claims with respect to the specific
contingencies fund will terminate on the 40th day prior to the fifth anniversary
of the closing.
Representations and Warranties
The merger agreement contains a number of representations and warranties
made by 3i to Biomet. The more significant of these relate to:
- corporate organization and existence;
- capitalization;
- corporate authority to enter into the merger;
- absence of any breach of organizational documents, law or other
agreements as a result of the merger;
- regulatory approvals required in connection with the merger;
- accuracy and completeness of corporate records;
- financial statements;
- absence of undisclosed liabilities;
- tax matters;
- the absence of certain changes in 3i's business since December 31,
1998;
- compliance with laws including regulatory requirements;
- properties owned and title thereto;
- leased properties;
- zoning, land use and environmental matters;
- inventory;
- availability of pooling-of-interests accounting treatment for the
merger;
- employment relationships;
- intellectual property; and
- Year 2000 compliance.
The merger agreement contains representations and warranties made by the
Advent Funds to Biomet as to:
<PAGE>
- organization and existence;
- authority to enter into the merger;
- title to the 3i shares owned by them;
- absence of any breach of their organizational documents, law or other
agreements as a result of the merger; and
- absence of any violation of law or court orders as a result of the
merger.
The merger agreement contains representations and warranties made by Biomet
and Acquisition to 3i and to the Control Shareholders as to:
- corporate organization and existence;
- capitalization;
- corporate authority to enter into the merger;
- absence of any breach of organizational documents, law or other
agreements as a result of the merger;
- regulatory approvals required in connection with the merger;
- filing of required regulatory reports and compliance with applicable
federal securities laws and regulations;
- absence of certain changes in their businesses since May 31, 1999;
- authorization and issuance of Biomet common shares in connection with
the merger;
- availability of pooling-of-interests accounting treatment for the
merger; and
- absence of any violation of law or court orders as a result of the
merger.
Many of the representations and warranties are qualified by materiality.
For a complete statement of the representations and warranties, see Articles IV,
IVA and V of the merger agreement which appears as Annex A to this proxy
statement/prospectus. All of the representations and warranties by all of the
parties were made as of August 28, 1999, the date of the merger agreement,
unless expressly stated otherwise.
Certain Covenants
In the merger agreement, 3i agreed to certain restrictions on its
activities until the merger is completed or terminated. The following is a
summary of the more significant of those activity restrictions:
- changing its corporate status;
<PAGE>
- conducting its business other than in the ordinary course;
- splitting or otherwise changing its outstanding capital stock;
- declaring any dividend, except to pay accrued and unpaid dividends on
the Series A Cumulative Convertible Preferred Stock;
- taking any action that would prevent the merger from qualifying for
pooling-of-interests accounting treatment or as a tax-free
reorganization;
- taking any action that would cause a breach of the merger agreement;
- entering into any material contract or making any capital expenditures
other than in the ordinary course of our business;
- entering into any business combination agreement with any other
company;
- incurring any indebtedness or paying any compensation other than in
the ordinary course of our business;
- failing to file tax returns on time or to pay taxes owed;
- failing to maintain its insurance policies at their current levels;
- extending credit to any person or assuming any contingent liabilities
other than in the ordinary course of business; or
- purchasing or selling any real property other than in the ordinary
course of business.
3i, its subsidiaries and the Control Shareholders have agreed that, prior
to the closing, they will:
- comply with the Hart-Scott-Rodino Antitrust Improvements Act;
- use reasonable efforts to obtain all consents and approvals needed to
consummate the merger;
- take any action required by governmental authorities necessary to
complete the merger;
- give any notices to third parties necessary to complete the merger;
- use reasonable efforts to satisfy the conditions to the merger to be
met by 3i;
- cooperate with Biomet to complete the merger;
- provide Biomet access to 3i upon reasonable request;
- deliver to Biomet monthly financial data;
<PAGE>
- provide the information needed by Biomet to prepare the Form S-4
Registration Statement of which this proxy statement/prospectus is a
part;
- distribute this proxy statement/prospectus to 3i stockholders and
option holders;
- terminate all stockholder agreements relating to voting or transfer of
3i stock; and
- pay all dividends owing on the 3i Series A Cumulative Convertible
Preferred Stock.
The merger agreement also provides that, prior to closing, Biomet will:
- take no action that would prevent the merger from qualifying for
pooling-of-interests accounting treatment or as a tax-free
reorganization;
- use reasonable efforts to obtain all consents and approvals needed to
complete the merger;
- comply with the Hart-Scott-Rodino Antitrust Improvements Act;
- cooperate with 3i to complete the merger;
- prepare and file the Form S-4 Registration Statement of which this
proxy statement/prospectus is a part;
- comply with all applicable state securities laws and regulations;
- qualify the Biomet shares to be issued in the merger for quotation on
the Nasdaq National Market;
- cause Acquisition to approve the merger;
- take any action required by governmental authorities necessary to
complete the merger;
- give any notices to third parties necessary to complete the merger;
and
- use its reasonable efforts to satisfy the conditions of the merger
agreement to be met by Biomet and Acquisition.
Conditions to Completion of the Merger
Mutual Closing Conditions. The obligations of the parties to complete the
merger are subject to the satisfaction of the following conditions:
- no order, decree or ruling restricting the merger is outstanding;
- Biomet has received from its independent accountants a
pooling-of-interests accounting letter to the effect that they concur
with the conclusions of Biomet's and 3i's management that no
conditions exist with respect to each company which would preclude
accounting for the merger of Biomet and 3i as a pooling-of-interests;
<PAGE>
- 3i has received from its independent accountants a
pooling-of-interests accounting letter to the effect that they concur
with the conclusions of 3i's management that no conditions exist with
respect to 3i which would preclude 3i from being a party to a merger
accounted for as a pooling-of-interests; and
- 3i has received from its "affiliates" their agreement relating to
treatment of the merger as a tax free reorganization and a
pooling-of-interests transaction.
Conditions to Biomet's Obligation to Complete the Merger. The obligation of
Biomet to complete the merger is subject to the satisfaction of the following
conditions:
- the representations and warranties of 3i and the Control Shareholders
continue to be accurate;
- 3i and the Control Shareholders have complied with their obligations
under the merger agreement and met the conditions required to complete
the merger in all material respects;
- the merger agreement has been authorized by all required corporate
action on the part of 3i;
- all material consents, approvals and authorizations needed for 3i to
complete the merger have been obtained;
- Biomet has obtained current UCC 11 financing statements with respect
to 3i;
- Biomet has received from 3i all instruments, documents and
considerations required by the merger agreement;
- Biomet has received from U.S. Bancorp Piper Jaffray its opinion letter
to the effect that the consideration paid by Biomet pursuant to the
merger agreement is fair to Biomet, and that letter has not been
modified or withdrawn;
- Richard J. Lazzara and Keith D. Beaty have entered into
non-competition agreements with Biomet;
- the employment agreements between 3i and Keith D. Beaty and Richard J.
Lazzara have been terminated for no consideration;
- Biomet has received from Ice Miller Donadio & Ryan, attorneys for
Biomet, its opinion to the effect that the merger will be treated as a
tax-free reorganization as defined in Section 368 of the Internal
Revenue Code;
- all options, warrants and other rights to acquire 3i stock have been
exercised or terminated;
- holders of less than 8% of the outstanding 3i Class A common and Class
B common stock outstanding as of August 28, 1999 have made a demand
for appraisal under Delaware corporate law;
<PAGE>
- all of the 9.5% subordinated debentures of 3i outstanding as of August
28, 1999 have been paid; and
- Biomet has received from 3i a statement meeting certain requirements
of the Internal Revenue Code to the effect that 3i is not a "United
States real property holding corporation."
Conditions to 3i's Obligation to Complete the Merger. The obligations of 3i
and the Control Shareholders to complete the merger are subject to the
satisfaction of the following conditions:
- the representations and warranties of Biomet continue to be accurate;
- Biomet has complied with its obligations under the merger agreement
and met the conditions required to complete the merger in all material
respects;
- the merger agreement has been authorized by all required corporate
action on the part of Biomet and Acquisition;
- all material consents, approvals and authorizations needed for Biomet
to complete the merger have been obtained;
- 3i has received from Biomet all instruments, documents and
considerations required by the merger agreement;
- 3i has received from Steel Hector & Davis LLP, attorneys for 3i, its
opinion to the effect that the merger will be treated as a tax-free
reorganization as defined in Section 368 of the Internal Revenue Code;
and
- as to the obligations of the Advent Funds, 3i shall have paid its 9.5%
subordinated debentures and all dividends due and owing on its Series
A Cumulative Convertible Preferred Stock.
Termination of the Merger Agreement
Biomet and 3i can agree to end the merger agreement at any time prior to
closing.
Either Biomet or 3i can, without the consent of the other, end the merger
agreement if the merger is not completed by January 29, 2000, unless the company
seeking to end the merger agreement has breached the agreement and that breach
has had a material adverse effect on the ability to close the transaction by
that date.
3i can end the merger agreement if:
- certain conditions specified in the merger agreement have not been
satisfied by closing (see Sections 9.1, 9.2, 9.3 and 9.6 of the merger
agreement);
- Biomet fails to make certain specified deliveries at closing; or
- the conversion price is less than $31.86 at the time the conversion
price is to be determined.
<PAGE>
If 3i ends the merger agreement for either of the first two of these three
reasons, then Biomet will be required to immediatly pay 3i $5.25 million as
liquidated damages. Biomet will not be required to pay liquidated damages to 3i
if the merger agreement ends because the merger fails to qualify for
pooling-of-interests accounting treatment, unless the failure to qualify is the
result of action by Biomet.
Biomet can end the merger agreement if an event occurs that:
- prevents the completion of the merger in the manner described in the
merger agreement;
- has a materially adverse effect on the business, financial condition,
assets, liabilities or the results of operations of 3i and its
subsidiaries considered as a whole; or
- could be expected to effect the operations of the merged business in a
materially adverse way.
If Biomet ends the merger agreement for any of the three reasons listed
above, 3i will be required to immediately pay Biomet $5.25 million as liquidated
damages. 3i will not be required to pay liquidated damages to Biomet if the
merger agreement ends because the merger fails to qualify for
pooling-of-interests accounting treatment unless the failure to qualify is the
result of action by 3i.
Expenses
Each of the parties will pay its own expenses in connection with the
merger.
Modification or Amendment to the Merger Agreement
Biomet and 3i can modify or amend the merger agreement, if they both agree
to do so in writing. Each can waive its right to require the other to comply
with the merger agreement, if the law allows.
Arbitration
Any dispute between the parties arising from the merger agreement would not
be resolved in a civil court action but would instead be submitted to binding
arbitration.
<PAGE>
REGULATORY REQUIREMENTS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
(the "HSR Act") and the rules promulgated thereunder by the Federal Trade
Commission, the merger cannot be completed until notifications have been given
and certain information has been furnished to the Federal Trade Commission and
the Antitrust Division of the Department of Justice and specified waiting period
requirements have been satisfied. Biomet and 3i filed notification and report
forms pursuant to the HSR Act with the Federal Trade Commission and the
Antitrust Division of the Department of Justice on September 7, 1999 and
received notice of early termination of the waiting period requirement on
September 21, 1999.
At any time before or after completion of the merger, the Antitrust
Division of the Department of Justice or the Federal Trade Commission, or any
state, could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the completion of
the merger or seeking divestiture of particular assets of Biomet or 3i. Private
parties also may seek to take legal action under the antitrust laws under
certain circumstances. In addition, non-United States governmental and
regulatory authorities may seek to take action under applicable antitrust laws.
A challenge to the merger on antitrust grounds may be made and, if such a
challenge is made, Biomet and 3i may not prevail.
The parties are currently in the process of complying with the local law
requirements of foreign jurisdictions applicable to the merger. In some cases,
approvals by local competition authorities will be required to close the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the merger that are applicable to you as a 3i stockholder. This
summary is based on the Internal Revenue Code, applicable U.S. Treasury
Regulations, judicial authority, and administrative rulings and practice, all as
of the date of this proxy statement/prospectus. These are all subject to change,
possibly with retroactive effect. This summary does not purport to be a complete
discussion of all U.S. federal income tax consequences of the merger. The
discussion below does not address any state, local or foreign tax consequences
of the merger. In addition, this discussion may not apply, in whole or in part,
to stockholders who acquired 3i common stock pursuant to the exercise of options
or warrants or under other employment-related arrangements, or to insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
persons who are neither citizens nor residents of the United States, and persons
who hold 3i common stock as part of a hedge, straddle or conversion transaction.
The following discussion assumes that 3i common stock is held as a capital asset
at the effective time of the merger.
<PAGE>
3i stockholders are urged to consult their own tax advisors as to the
particular tax consequences of the merger to them, including the applicability
and effect of any state, local or foreign laws, and the effect of possible
changes in applicable tax laws. This discussion does not apply to ancillary
transactions, if any, between the parties, such as any adjustment of
intercorporate indebtedness.
General. Neither 3i nor Biomet will be obligated to consummate the merger
unless each receives certain opinions from their respective counsel. These
opinions are expected to state that, for U.S. federal income tax purposes:
- the merger will qualify as a tax-deferred reorganization under Section
368(a) of the Internal Revenue Code, and
- Biomet, Acquisition and 3i will each be a party to the reorganization
within the meaning of 368(b) of the Internal Revenue Code.
Neither Biomet nor 3i has requested or will request an advance ruling from
the Internal Revenue Service as to the tax consequences of the merger, and there
can be no assurance that the Internal Revenue Service will agree with the
conclusions set forth herein. Moreover, the tax opinions are based upon certain
facts, representations and assumptions set forth or referred to in these
opinions and the continued accuracy and completeness of certain representations
made by Biomet, Acquisition and 3i, including representations in certificates to
be delivered to counsel at the effective time by the management of each of
Biomet and 3i. If these facts, representations or assumptions are incorrect in
certain material respects, the conclusions reached by counsel in their opinions
would be jeopardized. These opinions are not binding on the Internal Revenue
Service or any court. The discussion below assumes that the merger qualifies as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
Tax Treatment to 3i, Biomet and Acquisition. No gain or loss will be
recognized by 3i, Biomet or Acquisition as a result of the merger.
Tax Treatment to Holders of 3i Common Stock. Except for any cash received
in lieu of fractional shares, you will not recognize any gain or loss from
receiving Biomet common shares pursuant to the merger. Your aggregate tax basis
in the Biomet common shares you receive pursuant to the merger will equal your
aggregate tax basis in the shares of 3i common stock you held immediately before
the merger, less the basis of any fractional share interest for which you
receive cash. Your holding period for the Biomet common shares you receive
pursuant to the merger will include the period during which you held the shares
of 3i common stock.
If you receive cash in lieu of a fractional Biomet common share, you will
be treated as having received the fractional share pursuant to the merger and
then as having exchanged the fractional share for cash in a redemption by Biomet
subject to Section 302 of the Internal Revenue Code. As a result, you will
generally recognize gain or loss equal to the difference between the amount of
cash received and the portion of the basis of the Biomet common shares allocable
to the fractional interest. This gain or loss will generally be capital gain or
loss, and will be long-term capital gain or loss if, as of the date of the
exchange, your holding period for 3i shares is greater than one year. Long-term
capital gain of a non-corporate holder is generally subject to tax at a maximum
federal income tax rate of 20%.
<PAGE>
A successful Internal Revenue Service challenge to the reorganization
status of the merger would result in your recognizing gain or loss with respect
to each share of 3i common stock you surrendered. This gain or loss would equal
the difference between your basis in that 3i share and the fair market value, as
of the effective time of the merger, of the Biomet common shares you received in
exchange. In such event, your aggregate basis in the Biomet common shares you
received would equal the fair market value of the Biomet shares, and your
holding period for these shares would begin the day after the merger.
Backup Withholding and Information Reporting. You will be subject to
information reporting and backup withholding at a 31% rate on cash payments
received in exchange for 3i common stock unless you provide your taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certify that the number is correct, certify as to no loss of
exemption from backup withholding and meet other conditions. Any amounts
withheld under the backup withholding rules will be allowed as a refund or
credit against your U.S. federal income tax liability, provided the required
information is furnished to the Internal Revenue Service.
ANTICIPATED ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling-of-interests for accounting
purposes. Under this method of accounting, the recorded historical cost basis of
the assets and liabilities of Biomet and 3i will be carried forward to the
operations of the combined company at their historical recorded amounts. Results
of operations of the combined company will include income of Biomet and 3i for
the entire fiscal period in which the combination occurs, and the historical
results of operations of the separate companies for fiscal years prior to the
merger will be combined and reported as the results of operations of the
combined company. For information concerning certain restrictions to be imposed
on the transferability of Biomet common shares to be received by affiliates in
order, among other things, to ensure the availability of pooling-of-interests
accounting treatment, see "Resale Restrictions."
Completion of the merger is conditioned upon receipt by Biomet and 3i of
pooling-of-interests accounting letters from their respective independent
accountants. 3i's independent accountants must concur with the conclusions of
3i's management that no conditions exist with respect to 3i which would preclude
3i from being a party to a merger accounted for as a pooling-of-interests.
Biomet's independent accountants must concur with the conclusions of Biomet's
and 3i's management that no conditions exist with respect to each company which
would preclude accounting for the merger of Biomet and 3i as a pooling of
interests. See "The Merger Agreement - Conditions to Completion of the Merger."
However, qualification for pooling-of-interests accounting treatment cannot be
finally determined at the effective time of the merger because it depends in
part on subsequent events. For example, transactions in Biomet common shares or
3i common stock by affiliates of Biomet or 3i, respectively, could prevent the
merger from qualifying as a pooling-of-interests.
If, after completion of the merger, the merger fails to qualify for
pooling-of-interests accounting treatment, the purchase method of accounting
would be applied. Purchase accounting treatment would have a material adverse
effect on the reported operating results of Biomet as compared to
pooling-of-interests accounting treatment because of required charges to
Biomet's earnings for in-process research and development and the amortization
of goodwill required by purchase accounting treatment.
<PAGE>
RESALE RESTRICTIONS
This proxy statement/prospectus does not cover resales of the Biomet common
shares to be received by the stockholders of 3i upon completion of the merger,
and no person is authorized to make any use of this proxy statement/prospectus
in connection with any such resale.
All Biomet common shares received by 3i stockholders in the merger will be
freely transferable, except that Biomet common shares received by persons who
are deemed to be "affiliates" (as such term is defined under the Securities Act
of 1933) of 3i may be resold by them only in transactions permitted by the
resale provisions of Rule 145 promulgated under the Securities Act of 1933 or as
otherwise permitted under the Securities Act of 1933. Persons who may be deemed
to be affiliates of 3i generally include individuals or entities that control,
are controlled by, or are under common control with, 3i and may include certain
officers and directors of 3i as well as significant stockholders. Biomet has
agreed that, following the closing, it will file a registration statement under
the Securities Act of 1933 for use by the affiliates of 3i in disposing of their
Biomet common shares.
Securities and Exchange Commission guidelines regarding qualification for
the use of the pooling-of-interests method of accounting also limit sales by
affiliates of the shares of the acquiring and acquired companies in a business
combination. These guidelines indicate further that the pooling-of-interests
method of accounting generally will not be challenged on the basis of sales by
affiliates of shares of the acquiring or acquired company if they do not dispose
of any of the shares they own or shares they receive in connection with a merger
during the period beginning 30 days before the merger and ending when financial
results covering at least 30 days of combined operations of the merged companies
have been published. See "Anticipated Accounting Treatment."
Pursuant to the merger agreement, 3i has caused each of its affiliates to
execute a written agreement restricting the disposition by those persons of the
Biomet common shares to be received in the merger.
COMPARISON OF RIGHTS OF BIOMET SHAREHOLDERS AND 3i STOCKHOLDERS
The rights of 3i stockholders are currently governed by Delaware corporate
law and 3i's certificate of incorporation and bylaws. Upon completion of the
merger, 3i stockholders will become shareholders of Biomet and their rights as
Biomet shareholders will be governed by Indiana corporate law and Biomet's
articles of incorporation and bylaws. There are a number of differences between
the rights of Biomet shareholders and 3i stockholders. The following is a brief
summary of the material differences between the rights of Biomet shareholders
and the rights of 3i stockholders, and is qualified in its entirety by reference
to the relevant provisions of Delaware corporate law and Indiana corporate law
and by Biomet's articles of incorporation and bylaws and 3i's certificate of
incorporation and bylaws. Biomet's articles of incorporation and bylaws are
incorporated by reference as exhibits to the registration statement of which
this proxy statement/prospectus is a part.
Voting Rights
Biomet. The holders of Biomet common shares are entitled to one vote per
share on each matter submitted to a vote at a meeting of shareholders. Biomet's
articles of incorporation do not provide for cumulative voting in the election
of directors. The absence of cumulative voting rights effectively means that the
holders of a majority of the shares voted at a meeting of stockholders may, if
they so choose, elect all directors to be selected at that meeting, thereby
precluding minority stockholder representation on Biomet's board of directors.
<PAGE>
3i. The holders of shares of 3i Class A common stock are entitled to one
vote per share on each matter submitted to a vote at a meeting of stockholders.
The holders of 3i Class B common stock have no right to vote upon any matter
relating to 3i. The holders of 3i Series A Cumulative Convertible Preferred
Stock are entitled to the number of votes the holder would be entitled to cast
if the holder had converted its Series A Cumulative Convertible Preferred Stock
into 3i Class A common stock at the record date relating to the meeting at which
the shares are to be voted. 3i's certificate of incorporation does not provide
for cumulative voting in the election of directors. The absence of cumulative
voting rights effectively means that the holders of a majority of the shares
voted at a meeting of stockholders may, if they so choose, elect all directors
to be selected at that meeting, thereby precluding minority stockholder
representation on 3i's board of directors.
Number, Election, Vacancy and Removal of Directors
Biomet. Biomet's board of directors currently has 13 members. The number of
directors may be changed by a resolution adopted by Biomet's board of directors
but the number of directors may not be less than 10 nor greater than 14 persons
without an amendment to Biomet's bylaws. Each director of Biomet serves until
the annual meeting of shareholders in the year in which his or her term expires
and his or her successor is duly elected and qualified.
Biomet's bylaws provide that vacancies and newly-created directorships
shall be filled by a majority of directors then in office, even if less than a
quorum. Each director that is elected to fill a vacancy serves in office until
the term of the director which he or she replaced has expired and his or her
successor is duly elected and qualified.
Biomet's bylaws state that any director may be removed with or without
cause by the affirmative vote of at least 75% of all votes entitled to be cast
at a shareholders' meeting. The shareholders must have been given prior notice
that one purpose of this meeting is the removal of a director.
3i. 3i's board of directors currently has three members. The number of
directors may be changed by a resolution adopted by 3i's board of directors.
Each director of 3i serves until the annual meeting of stockholders in the year
in which his or her term expires and his or her successor is duly elected and
qualified.
3i's bylaws provide that vacancies and newly-created directorships shall be
filled by a majority of directors then in office, even if less than a quorum.
Each director that is elected to fill a vacancy serves in office until the term
of the director which he or she replaced has expired.
3i's bylaws provide that stockholders may only remove a director for cause
and only by the affirmative vote of at least 80% of the then outstanding shares
of capital stock entitled to vote in the election of directors, voting together
as a single class.
<PAGE>
Stockholder Action by Written Consent
Biomet. Under Indiana corporate law, any action required or permitted to be
taken by the corporation's shareholders at a meeting of shareholders may be
taken without a meeting and without a vote if a written consent is signed by all
the shareholders entitled to vote on the action. The corporation must give all
non-voting shareholders written notice of the action at least 10 days before the
action is to be taken.
3i. Under Delaware corporate law, unless otherwise provided in a
corporation's certificate of incorporation, any action required or permitted to
be taken by the corporation's stockholders may be effected by less than
unanimous consent without prior notice and without a vote. However, 3i's
certificate of incorporation provides that any action required or permitted to
be taken by the stockholders of the corporation must be taken at a duly called
annual or special meeting of such holders and may not be taken by consent.
Special Stockholders Meetings
Biomet. Biomet's bylaws provide that meetings of the shareholders of the
corporation may be called only by:
- the board of directors;
- the chief executive officer; or
- the holders of shares having at least 90% of all outstanding votes
entitled to be cast on the matter for which the meeting is called.
These shareholders must deliver a signed and dated written notice to
the secretary of Biomet demanding the meeting and describing the
purpose of the meeting.
3i. 3i's bylaws provide that meetings of the stockholders of the
corporation may be called only by a majority of the board of directors. This
majority must be a majority of the total number of director positions which have
been authorized and not just a majority of currently filled directorships.
Advance Notice Provisions for Stockholder Nominations of Directors
Biomet. Biomet's bylaws require advance notice from shareholders who want
to nominate candidates for election as directors. Biomet's bylaws provide that a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of Biomet:
- not less than 60 days before the meeting but not more than 90 days
before the meeting; but
- if less than 70 days' prior notice or public disclosure of the meeting
date is given or made by Biomet, then shareholders may nominate
directors up to the close of business on the 10th day following the
day the notice was mailed or the public disclosure was made by Biomet.
Biomet's bylaws require that, to be in proper form, a shareholder's notice
must contain:
- as to each person whom the shareholder proposes to nominate for
election or re-election as a director:
<PAGE>
- the nominee's name, age, business address and residence address;
- the nominee's principal occupation or employment;
- the class and number of Biomet shares that the nominee
beneficially owns;
- all other information relating to the nominee that is required to
be disclosed in solicitations for proxies for election of
directors pursuant to Securities and Exchange Commission rules;
and
- as to the shareholder giving the notice:
- the shareholder's name and record address; and
- the class and number of Biomet shares that the shareholder
beneficially owns.
3i. 3i's bylaws also require advance notice from stockholders who want to
nominate candidates for election as directors. 3i's bylaws provide that a
written stockholder's notice must be delivered to the secretary of 3i:
- not less than 90 days prior to the date of the meeting; but
- if less than 90 days prior notice or public disclosure is given or
made by 3i, then stockholders may nominate directors up to the close
of business on the 10th day following the day the notice was mailed or
public disclosure was made by 3i.
3i's bylaws require that, to be in proper form, a stockholder's notice must
contain:
- as to each person whom the shareholder proposes to nominate for
election or re-election as a director, all information relating to the
nominee that is required to be disclosed in solicitations for proxies
for election of directors pursuant to Securities and Exchange
Commission rules; and
- as to the stockholder giving the notice:
- the stockholder's name and record address; and
- the class and number of shares of capital stock of 3i that the
stockholder beneficially owns.
Amendments To Articles of Incorporation, Certificate of Incorporation and Bylaws
Biomet. Under Indiana corporate law, amendments to a corporation's articles
of incorporation must be recommended to the shareholders by the board of
directors and approved by a majority of all votes entitled to be cast on that
amendment. Proper notice to both voting and non-voting shareholders also must be
provided. Additionally, if any class or series of shares is entitled to vote as
a group, the proposed amendment must be approved by at least a majority of the
votes of the shares of each class or series of shares entitled to vote as a
group. Indiana corporate law permits a corporation to alter the voting
requirements. Biomet's articles of incorporation provides that approval by at
least 75% of the shares entitled to vote is required to alter, amend or repeal
its articles of incorporation. However, Biomet's articles of incorporation
permit an increase in the number of authorized shares to be made upon the
affirmative vote of a majority of the outstanding common shares entitled to
vote. Indiana corporate law also permits certain non-economic changes to be made
to a corporation's articles of incorporation with the approval of a majority of
the entire board of directors, without shareholder approval.
<PAGE>
Biomet's bylaws provide that the bylaws may be amended or repealed only by
Biomet's board of directors by a majority vote of the directors.
3i. Under Delaware corporate law, amendments to a corporation's certificate
of incorporation must be approved by the board of directors, the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote for
the amendment, and the affirmative vote of the holders of a majority of the
outstanding stock of each class entitled to vote for the amendment, unless a
higher vote is required by the corporation's certificate of incorporation.
3i's bylaws require the affirmative vote of at least 80% of the then
outstanding shares of 3i stock entitled to vote in the election of directors,
voting together as a single class, to amend or repeal certain sections or
articles in its certificate of incorporation. These sections and articles are as
follows:
- Section 2 of Article VI, relating to the election and term of
directors;
- Article VIII, relating to indemnification of officers and directors;
- Article X, relating to corporate action by stockholders; and
- Article XII, relating to amendment of certificate of incorporation.
All other provisions of 3i's certificate of incorporation may be altered or
amended, or provisions may be added in accordance with Delaware corporate law
described above.
3i's bylaws empower its board of directors to adopt, amend or repeal its
bylaws by the affirmative vote of a majority of its board of directors. This
majority must be a majority of the total number of director positions which have
been authorized and not just a majority of the currently filled directorships.
3i's bylaws also empower its shareholders to adopt, amend or repeal its
bylaws but requires the affirmative vote of at least 80% of the then outstanding
shares of 3i stock entitled to vote in the election of directors, voting
together as a single class, to effect the change.
Dividends
Biomet. Under Indiana corporate law, the board of directors of an Indiana
corporation has the power to declare and pay dividends upon its issued and
outstanding shares. However, no dividends may be declared if, after giving them
effect:
- the corporation would not be able to pay its debts as they become due
in the usual course of business; or
- the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation
were to be dissolved at the time of paying the dividends, to satisfy
the rights of the holders of any class of shares that are superior to
those of holders of the shares on which the dividend is to be paid.
<PAGE>
Biomet has one class of common shares authorized and outstanding. All
common shares participate equally in dividends. While Biomet has authorized its
board of directors to issue preferred shares, none have been issued or are
outstanding.
3i. Under Delaware corporate law, a corporation's board of directors may
declare and pay dividends upon the shares of its capital stock either:
- out of its surplus; or
- in case there is no surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal
year.
3i's certificate of incorporation states that both the 3i Class A common
stock and the 3i Class B common stock will participate equally in any dividend
declared by its board of directors. The holders of 3i Series A Cumulative
Convertible Preferred Stock are entitled to receive dividends at a fixed annual
rate of 6% of the original per share price. These dividends are cumulative from
the date of original issue.
Limitations on Director's Liability
Biomet. Indiana corporate law does not contain any provision permitting a
corporation to eliminate or limit a director's personal liability for monetary
damages for a breach of his or her fiduciary duty of care to the corporation or
its shareholders. However, the Indiana corporate law enumerates certain
standards that, if met, permit a director to avoid personal liability for any
action taken as a director or any failure to take such action. Indiana corporate
law requires a director to act:
- in good faith;
- with the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
- in a manner the director reasonably believes to be in the best
interests of the corporation.
A director may consider the effects of any action on shareholders, employees,
suppliers and customers of the corporation and communities in which the
corporation's offices are located and any other factors the director considers
pertinent in considering the best interest of the corporation. Indiana corporate
law permits a director to rely upon the corporation's officers and employees he
or she reasonably believes to be reliable and competent, legal counsel, public
accountants or other experts as to matters he or she believes are within the
person's professional or expert competence, and committees of the board of which
the director is not a member, unless the director has knowledge which makes
reliance upon such persons or committees unwarranted. Indiana corporate law
provides that a director will not be liable for any action taken as a director
or for any failure to take any action unless the director has failed to comply
with the standards enumerated in the statute and such failure to comply
constitutes willful misconduct or recklessness.
<PAGE>
3i. The Delaware corporate law permits a Delaware corporation to include in
its certificate of incorporation a provision eliminating or limiting a
director's personal liability for monetary damages for a breach of a director's
fiduciary duty to the corporation or its stockholders, subject to certain
significant exceptions. Directors in a Delaware corporation adopting such a
provision remain fully liable for:
- breaches of their duty of loyalty;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- payment of unlawful dividends or unlawful stock repurchases or
redemptions; or
- deriving an improper personal benefit.
In addition, the Delaware corporate law does not remove the directors' duty
of care, but only provides directors with relief from monetary damages. 3i's
certificate of incorporation contains a provision consistent with Delaware
corporate law limiting a director's personal liability.
Indemnification
Biomet. Indiana corporate law permits a corporation to indemnify any person
who is a party or is threatened to be made a party to any action, suit or
proceeding brought or threatened by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation, or is or was serving
as such with respect to another corporation at the request of the corporation,
if:
- that person acted in good faith;
- in the case of conduct in his or her official capacity, he or she
reasonably believed his or her conduct to be in the best interests of
the corporation, or in the case of all other conduct, he or she
reasonably believed his or her conduct was not opposed to the best
interests of the corporation; and
- with respect to any criminal action, had reasonable cause to believe
the individual's conduct was lawful or had no reasonable cause to
believe his or her actions were unlawful.
Biomet's articles of incorporation provide for mandatory indemnification of
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, because he or she
is or was a director, officer, employee or agent of Biomet, or is or was serving
at the request of Biomet as a director, officer, employee or agent of another
corporation or other enterprise, if the person has been wholly successful on the
merits of the proceeding. Biomet may advance expenses, which include attorney's
fees, to any director, officer, employee or agent of Biomet. Amounts to be
indemnified include judgments, penalties, fines, settlements and reasonable
expenses that were actually incurred by the person. However, if the proceeding
was by or in the right of Biomet, the person will be indemnified only against
reasonable expenses incurred and indemnification will not be provided if the
individual is adjudged liable to Biomet in the proceeding.
<PAGE>
3i. Delaware corporate law permits a corporation to indemnify officers,
directors, employees and agents for certain actions. The provisions of Delaware
corporate law are substantially the same as the provisions of Indiana corporate
law with respect to such indemnification.
3i's certificate of incorporation provides that any person who was or is
made a party or is threatened to be made a party to any action, suit or
proceeding because he or she is or was a director, officer or employee of 3i, or
is or was serving at the request of 3i as a director, officer, employee, agent
or trustee of another corporation or other enterprise, must be indemnified and
held harmless by 3i against all expense reasonably incurred or suffered by such
person in connection therewith to the fullest extent authorized by Delaware
corporate law. Therefore, 3i may indemnify a person only if that person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of 3i. Moreover, in a criminal proceeding, that
person must have had no reasonable cause to believe his or her actions were
unlawful. 3i must indemnify any such person seeking indemnification in
connection with a proceeding initiated by that person only if the proceeding was
authorized by 3i's board of directors. 3i's certificate of incorporation further
provides that the right to indemnification includes the right to have 3i pay the
expenses incurred in defending any such proceeding in advance of its final
disposition if that director or officer undertakes to repay all amounts so
advanced if ultimately it is determined that such director or officer is not
entitled to be indemnified. 3i may also indemnify, to the same extent officers
and directors are indemnified, any employee or agent of 3i.
Merger or Sale of Assets
Biomet. Biomet's articles of incorporation state that no merger,
consolidation or sale of substantially all of Biomet's assets may be completed
without the affirmative vote of the holders of at least 75% of the outstanding
common shares entitled to vote on the action.
3i. 3i's certificate of incorporation states that, when the board of
directors is considering a tender or exchange offer, a merger or consolidation
or a sale of substantially all of 3i's assets, it may consider all relevant
factors including the social and economic effect of accepting the offer on 3i's
and its subsidiaries, present and future customers and employees, the effect on
the communities in which 3i and its subsidiaries operate, and the ability of 3i
to fulfill its corporate objectives. Delaware corporate law requires such
transactions to be approved by holders of a simple majority of the outstanding
stock entitled to vote thereon.
Anti-Takeover Provisions
Biomet. Certain provisions of Indiana corporate law are designed to protect
minority shareholders in the event a person acquires, pursuant to a tender offer
or otherwise, the number of shares which exceed certain threshold percentages of
the outstanding voting power of the corporation. Once these thresholds are
exceeded, these shares are referred to as "Control Shares." A person will be
deemed the holder of Control Shares if he or she owns securities of the
corporation conveying more than:
- 20% of all voting power;
- 33 1/3% of all voting power; or
<PAGE>
- 50% of all voting power.
An acquiror who purchases Control Shares without seeking and obtaining the
prior approval of the board of directors cannot vote the Control Shares until
each class or series of shares entitled to vote separately on the proposal, by a
majority of all votes entitled to be cast by that group (excluding the Control
Shares and any shares held by officers of the corporation and employees of the
corporation who are directors thereof), approve in a special or annual meeting
the rights of the acquiror to vote the Control Shares.
These provisions of Indiana corporate law only apply to an Indiana
corporation that has:
- 100 or more shareholders;
- its principal place of business, its principal office, or substantial
assets within Indiana; and
- either:
- more than 10% of its shareholders resident in Indiana;
- more than 10% of its shares owned by Indiana residents; or
- 10,000 shareholders resident in Indiana
An Indiana corporation otherwise subject to these provisions may elect not to be
covered by the statute by so providing in its articles of incorporation or
bylaws. Biomet meets the above requirements and is governed by these provisions.
Among other provisions relating to transactions effecting a change in
control in Indiana corporations, Indiana corporate law establishes a 5-year
period beginning with the acquisition of a 10% interest in the corporation
during which certain business transactions involving the acquiring shareholder
are prohibited unless, prior to the acquisition of such interest, the board of
directors gives approval to the acquisition of such interest or to the proposed
business combination. After the 5-year period expires, a business combination
involving the acquiring shareholder may take place only upon approval by a
majority vote of shares not held by the acquiring shareholder or its affiliates
or if the other shareholders receive a formula price based on the highest price
paid by the acquiring shareholder. The minimum price for voting shares other
than common shares is to be determined under criteria similar to that for common
shares, except the minimum price as defined cannot be less than the highest
preferential amount to which the shares are entitled in the event of any
liquidation, dissolution or winding up of the corporation.
3i. Delaware corporate law provides that a merger, consolidation or
disposition of assets or securities involving an "interested shareholder,"
defined as a person beneficially owning 15% or more of a corporation's voting
stock, would be prohibited for 3 years following the date such person became an
interested shareholder unless:
- before such person became an interested shareholder, the board of
directors of the corporation approved the transaction in which the
interested shareholder became an interested shareholder;
<PAGE>
- upon consummation of the transaction that resulted in the interested
shareholder becoming an interested shareholder, the interested
shareholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or
- following the transaction in which such person became an interested
shareholder, the transaction is approved by the board of directors and
authorized at a meeting of shareholders by the affirmative vote of the
holders of two-thirds of the outstanding voting stock not owned by the
interested shareholder.
The anti-takeover provision applies automatically to Delaware corporations
except those corporations with less than 2,000 stockholders of record or those
that do not have voting stock listed on a national securities exchange or listed
for quotation on the Nasdaq Stock Market. Such a corporation may, if it wishes,
"opt in" by amending its certificate of incorporation to adopt the provision.
Any corporation may decide to "opt out" of the statute at any time, by action of
its stockholders. 3i has not "opted in" to this statute.
Appraisal Rights
Biomet. Under Indiana corporate law, shareholders of Indiana corporations
have the right to object and obtain payment of the fair value of their shares in
certain business combination transactions and other specified corporate actions.
These rights are not available for holders of shares if, on the record date
fixed to determine the shareholders entitled to receive notice of and vote at
the meeting at which the corporate action is to be acted upon, such shares are
traded on a registered United States securities exchange or on the Nasdaq
National Market or a similar market. Biomet common shares are traded on the
Nasdaq National Market. Therefore, as shareholders of Biomet, the former 3i
stockholders will not have appraisal rights in future transactions to which
Biomet is a party.
3i. Under Delaware law, appraisal rights may be available in connection
with a statutory merger or consolidation in certain specific situations.
Appraisal rights are not available when a corporation is to be the surviving
corporation and no vote of its stockholders is required to approve the merger or
consolidation. In addition, no appraisal rights are available to holders of
shares of any class of stock that is either: (i) listed on a national securities
exchange or on the Nasdaq National Market or (ii) held of record by more than
2,000 stockholders, unless such stockholders are required by the terms of the
merger or consolidation to accept anything other than:
- shares of the surviving corporation;
- shares of stock that are listed on a national securities exchange or
designated as a national market system security on the Nasdaq National
Market or held of record by more than 2,000 stockholders;
- cash in lieu of fractional shares; or
- any combination of the foregoing.
Stockholders do not have appraisal rights with respect to any transaction
involving the sale, lease or exchange of all or substantially all of the assets
of the corporation, but do have those rights in a merger.
<PAGE>
Stockholders who perfect their appraisal rights are entitled to receive
cash from the corporation equal to the value of their shares as established by
judicial appraisal. Corporations may enlarge these statutory rights by including
in their certificate of incorporation a provision allowing the appraisal rights
in any merger or consolidation in which the corporation is a constituent
corporation. 3i's certificate of incorporation does not enlarge these rights.
ADDITIONAL INFORMATION
Legal Matters
Certain legal matters relating to the validity of the Biomet common shares
to be issued in connection with the merger will be passed upon by Ice Miller
Donadio & Ryan, Box 82001, One American Square, Indianapolis, Indiana 46282. It
is a condition to the completion of the merger that Biomet and 3i receive
opinions from Ice Miller Donadio & Ryan and Steel Hector & Davis LLP, 1900
Phillips Point West, 777 South Flagler Drive, West Palm Beach, Florida 33401,
respectively, with respect to the tax consequences of the merger, and that 3i
and Biomet receive from Ice Miller Donadio & Ryan and Steel Hector & Davis LLP,
respectively, their opinions as to various other legal matters.
Experts
The consolidated financial statements of Biomet, Inc. incorporated in this
proxy statement/prospectus by reference to Biomet's Annual Report on Form 10-K
for the year ended May 31, 1999, have been so incorporated in reliance of the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in auditing and accounting.
Ernst & Young LLP, independent certified public accountants, have audited
3i's consolidated financial statements at December 31, 1998 and 1997, and for
each of the three years in the period ended December 31, 1998, as set forth in
their report. We have included 3i's financial statements in this proxy
statement/prospectus and elsewhere in the registration statement in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Biomet has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 that registers the distribution of
the Biomet common shares to be issued to 3i stockholders in connection with the
merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Biomet and Biomet
common shares. The rules and regulations of the Securities and Exchange
Commission allow Biomet to omit certain information included in the registration
statement from this proxy statement/prospectus.
In addition, Biomet files reports, proxy statements and other information
with the Securities and Exchange Commission under the Securities Exchange Act of
1934. You may read and copy this information at the following locations of the
Securities and Exchange Commission:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Suite 1400
1-800-SEC-0330 Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world
wide web site that contains reports, proxy statements and other information
about issuers, like Biomet, that file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
The Securities and Exchange Commission allows Biomet to "incorporate by
reference" information into this proxy statement/prospectus. This means that it
can disclose important information to you by referring you to another document
filed separately with the Securities and Exchange Commission. The information
incorporated by reference is considered to be a part of this proxy
statement/prospectus, except for any information that is superseded by
information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that Biomet (File No. 0-12515) has previously filed with the
Securities and Exchange Commission. They contain important information about
Biomet and its financial condition.
1) Annual Report on Form 10-K for the year ended May 31, 1999.
2) Quarterly Report on Form 10-Q for the quarter ended August 31, 1999.
3) The description of Biomet common shares set forth in Biomet's
registration statement (Registration No. 33-6798) filed on Form S-3 on
June 26, 1986; including any amendment or report filed with the
Securities and Exchange Commission for the purpose of updating that
description.
In addition, all documents and reports filed by Biomet pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the date of this proxy statement/prospectus and prior to the date of the meeting
shall be deemed to be incorporated by reference in this proxy
statement/prospectus and to be a part hereof from the date of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this proxy statement/prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
proxy statement/prospectus.
You can obtain any of the documents incorporated by reference in this
document through Biomet or from the Securities and Exchange Commission through
its web site at the address described above. Documents incorporated by reference
are available from Biomet without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by reference as a
exhibit in this proxy statement/prospectus. You can obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from Biomet at the following address:
<PAGE>
Greg W. Sasso
Vice President - Corporate Development and Communications
Biomet, Inc.
P.O. Box 587
Airport Industrial Park
Warsaw, Indiana 46581-0587
Telephone (800) 348-9500 or (219) 267-6639
[email protected]
If you would like to request documents, please do so by
___________________, 1999 to receive them before the meeting. If you request any
incorporated documents, Biomet will mail them to you by first class mail, or
another equally prompt means, within one business day after it receives your
request.
Neither Biomet nor 3i has authorized anyone to give any information or make
any representation about the merger, Biomet or 3i that is different from, or in
addition to, the information contained in this proxy statement/prospectus or in
any of the materials that we have incorporated into this document. Therefore, if
anyone does give you information of this sort, you should not rely on it. If you
are in a jurisdiction where offers to exchange or sell, or solicitations of
offers to exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
Forward-looking Statements
This proxy statement/prospectus, including information included or
incorporated by reference herein, contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of each of Biomet and 3i, as well as
certain information relating to the merger, including, without limitation,
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates" or similar expressions. These
forward-looking statements involve certain risks and uncertainties. For those
statements, Biomet and 3i claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual results may differ materially from those contemplated by
such forward-looking statements due to, among others, the factors described
under "Risk Factors" in this proxy statement/prospectus and the following
factors:
- competitive pressures among health care products manufacturers and
service providers may increase significantly;
- general economic or business conditions, either internationally,
nationally or in the states in which Biomet or 3i are doing business,
may be less favorable than expected resulting in, among other things,
a reduced demand for health care products and services;
<PAGE>
- legislative or regulatory changes may adversely affect the business in
which Biomet and 3i are engaged;
- technological changes, including "Year 2000" data systems compliance
issues, may be more difficult or expensive than anticipated; and
- changes may occur in the securities markets.
FINANCIAL INFORMATION
Set forth below is certain financial information of 3i including, among
other things, its audited annual financial statements and certain unaudited
interim financial data. Similar information for Biomet is incorporated by
reference into this proxy statement/prospectus from filings it has made with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934. 3i is not subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, and therefore, has not incorporated its information by
reference.
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Implant Innovations International
Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Implant
Innovations International Corporation and Subsidiaries (the Company) as of
December 31, 1998 and 1997, and the related statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Implant
Innovations International Corporation and Subsidiaries at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
West Palm Beach, Florida
February 24, 1999
<PAGE>
<TABLE>
<CAPTION>
Implant Innovations International
Corporation and Subsidiaries
Consolidated Balance Sheets
<S> <C> <C> <C>
June 30 December 31
------------ ------------------------------
1999 1998 1997
------------ ----------- ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,243,030 $ 2,722,249 $ 3,687,036
Trade accounts receivable, net 10,488,474 8,578,771 8,354,654
Inventories 13,096,764 15,349,430 7,913,914
Deferred income taxes 3,123,455 3,060,923 1,355,747
Prepaid expenses and other current assets 1,333,258 1,408,690 816,651
------------ ----------- ------------
Total current assets 31,284,981 31,120,063 22,128,002
Property and equipment, net 8,292,056 8,509,758 6,567,209
Intangible assets, net of accumulated amortization of
$624,198 in 1999, $526,007 in 1998 and $206,700 in 1997 3,140,357 3,043,768 1,558,480
Other assets 334,148 310,043 389,463
------------ ----------- ------------
Total assets $43,051,542 $42,983,632 $30,643,154
============ =========== ============
Liabilities and common shareholders' equity
Current liabilities:
Accounts payable $ 1,428,593 $ 3,216,038 $ 2,988,989
Other accrued expenses 7,120,971 6,659,678 5,527,768
Current obligations under capital leases 922,924 1,040,313 817,566
Short-term borrowings 2,739,782 3,471,943 2,503,157
------------ ----------- ------------
Total current liabilities 12,212,270 14,387,972 11,837,480
Long-term debt 3,010,937 2,901,901 2,711,699
Obligations under capital leases 1,698,170 2,134,423 1,729,593
Deferred income taxes 550,285 550,285 443,305
Other liabilities 70,000 70,000 140,000
Minority interest 139,769 -- --
Redeemable convertible cumulative preferred stock - at
redemption value 3,112,500 3,037,500 2,887,500
Commitments and contingencies
Common shareholders' equity:
Class A common stock - $.001 par value, 20,000,000
shares authorized; 6,646,967 shares issued and
outstanding 6,647 6,647 6,647
Class B common stock - $.001 par value, 5,000,000
shares authorized; 353,032 shares issued and
outstanding 353 353 353
Additional paid-in capital 1,348,801 1,350,687 1,376,705
Accumulated other comprehensive income (loss) (456,034) 277,558 (241,438)
Retained earnings 21,357,844 18,266,306 9,751,310
------------ ----------- ------------
Total common shareholders' equity 22,257,611 19,901,551 10,893,577
------------ ----------- ------------
Total liabilities and common shareholders' equity $43,051,542 $42,983,632 $30,643,154
============ =========== ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Implant Innovations International
Corporation and Subsidiaries
Consolidated Statements of Income
<S> <C> <C> <C> <C> <C>
Six months ended
June 30 Years Ended
--------------------------- --------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited)
Net sales $40,908,259 $34,363,616 $70,487,795 $54,744,753 $43,382,754
Cost of goods 16,030,611 15,690,057 29,701,468 22,066,038 15,405,057
------------ ------------ ------------ ------------ ------------
Gross margin 24,877,648 18,673,559 40,786,327 32,678,715 27,977,697
Other operating expenses:
Selling and marketing 12,737,105 9,430,024 21,472,255 15,891,184 11,502,252
General and administrative 4,957,751 3,887,319 8,363,838 7,673,464 7,197,524
Research and development 1,758,210 1,567,688 3,251,480 3,611,924 3,078,334
------------ ------------ ------------ ------------ ------------
19,453,066 14,885,031 33,087,573 27,176,572 21,778,110
------------ ------------ ------------ ------------ ------------
Operating income 5,424,582 3,788,528 7,698,754 5,502,143 6,199,587
Other income (expense):
Interest expense (444,820) (454,552) (796,471) (507,574) (496,192)
Other 27,916 (4,321) 6,552,681 125,191 (29,429)
------------ ------------ ------------ ------------ ------------
(416,904) (458,873) 5,756,210 (382,383) (525,621)
------------ ------------ ------------ ------------ ------------
Income before income taxes 5,007,678 3,329,655 13,454,964 5,119,760 5,673,966
Income taxes 1,841,140 1,276,710 4,789,968 1,986,846 2,163,461
------------ ------------ ------------ ------------ ------------
Net income 3,166,538 2,052,945 8,664,996 3,132,914 3,510,505
Preferred stock dividends (75,000) (75,000) (150,000) (150,000) (150,000)
------------ ------------ ------------ ------------ ------------
Net income available to
common shareholders $ 3,091,538 $ 1,977,945 $ 8,514,996 $ 2,982,914 $ 3,360,505
============ ============ ============ ============ ============
Earnings per share:
Basic $ .44 $ .28 $ 1.22 $ .43 $ .48
============ ============ ============ ============ ============
Assuming full dilution $ .38 $ .25 $ 1.04 $ .37 $ .42
============ ============ ============ ============ ============
Shares used in the
computation of earnings
per share:
Basic 6,999,999 6,999,999 6,999,999 6,999,999 6,999,999
============ ============ ============ ============ ============
Assuming full dilution 8,387,130 8,360,200 8,356,988 8,362,016 8,293,610
============ ============ ============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Implant Innovations International
Corporation and Subsidiaries
Consolidated Statements of Common Shareholders' Equity
<S> <C> <C> <C> <C> <C> <C>
Additional Accumulated Other Total Common
Common Stock Paid-In Comprehensive Retained Shareholders'
Class A Class B Capital Income (Loss) Earnings Equity
--------------------- ----------- ----------------- ------------ -------------
Balance, January 1, 1996 $6,647 $353 $1,380,904 $ - $ 3,407,891 $ 4,795,795
Accrued dividends on redeemable
preferred stock - - - - (150,000) (150,000)
Net income - - - - 3,510,505 3,510,505
------ ---- ----------- ---------- ------------ ------------
Balance, December 31, 1996 6,647 353 1,380,904 - 6,768,396 8,156,300
Accrued dividends on redeemable
preferred stock - - - - (150,000) (150,000)
Foreign currency translation
adjustment - - - (241,438) - (241,438)
Other - - (4,199) - - (4,199)
Net income - - - - 3,132,914 3,132,914
------ ---- ----------- ---------- ------------ ------------
Balance, December 31, 1997 6,647 353 1,376,705 (241,438) 9,751,310 10,893,577
Accrued dividends on redeemable
preferred stock - - - - (150,000) (150,000)
Foreign currency translation
adjustment - - - 518,996 - 518,996
Other - - (26,018) - - (26,018)
Net income - - - - 8,664,996 8,664,996
------ ---- ----------- ---------- ------------ ------------
Balance, December 31, 1998 6,647 353 1,350,687 277,558 18,266,306 19,901,551
Accrued dividends on redeemable
preferred stock (unaudited) - - - - (75,000) (75,000)
Foreign currency translation
adjustment (unaudited) - - - (733,592) - (733,592)
Other (unaudited) - - (1,886) - - (1,886)
Net income (unaudited) - - - - 3,166,538 3,166,538
------ ---- ----------- ---------- ------------ ------------
Balance, June 30, 1999 (unaudited) $6,647 $353 $1,348,801 $(456,034) $21,357,844 $22,257,611
====== ==== =========== ========== ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Implant Innovations International
Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<S> <C> <C> <C> <C> <C>
Six months ended
June 30 Years ended
-------------------------- --------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited)
Operating activities
Net income $ 3,166,538 $ 2,052,945 $ 8,664,996 $ 3,132,914 $ 3,510,505
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,484,534 1,090,485 2,561,621 1,859,737 1,304,229
Write-down of license agreement - - - - 300,000
Loss on disposal of property and
equipment - - - 13,471 108,398
Deferred income taxes (62,532) 14,346 (1,598,196) 202,349 (691,929)
Accretion of debenture discount 109,036 90,736 190,202 158,281 108,130
Allowance for trade accounts
receivable (212,532) 454,692 1,896,921 (21,366) 399,825
Allowance for inventories 880,519 325,487 1,650,144 326,917 481,062
Changes in operating assets and
liabilities:
Trade accounts receivable (2,007,835) (2,438,299) (2,121,038) (4,418,839) (1,334,208)
Inventories 1,563,344 (3,834,449) (8,282,660) (606,508) (2,453,163)
Prepaid expenses and other current
assets 123,909 (513,543) (382,217) (343,397) (42,888)
Other assets (24,105) 110,694 128,833 (221,358) (93,559)
Accounts payable (1,975,273) 1,607,965 227,049 1,191,051 756,559
Other accrued expenses 461,292 6,622,837 1,131,910 1,682,565 1,468,416
------------ ------------ ------------ ------------ ------------
Net cash provided by operating activities 3,506,895 5,583,896 4,067,565 2,955,817 3,821,377
Investing activities
Purchases of property and equipment (1,006,162) (1,577,660) (2,460,966) (1,631,638) (3,020,854)
Investments in patents and license
agreements 41,317 (328,877) (559,719) (681,913) (52,737)
Cash paid to acquire distributors' net
assets - (2,411,635) (2,411,635) (575,854) (157,500)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (964,845) (4,318,172) (5,432,320) (2,889,405) (3,231,091)
(continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Implant Innovations International
Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<S> <C> <C> <C> <C> <C>
Six months ended
June 30 Years ended
----------------------------- ---------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited)
Financing activities
Principal payments on capital lease
obligations (553,643) (452,717) (1,061,796) (701,755) (673,414)
Proceeds from short-term borrowings, net (732,161) (2,426,688) 968,786 2,503,157 -
Other (1,873) (24,605) (26,018) (4,199) -
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by financing
activities (1,287,677) (2,904,010) (119,028) 1,797,203 (673,414)
------------ ------------ ------------ ------------ ------------
Effect of exchange rate changes on cash and
cash equivalents (733,592) 23,676 518,996 (241,438) -
(Decrease) increase in cash and cash
equivalents 520,781 (1,614,610) (964,787) 1,622,177 (83,128)
Cash and cash equivalents at beginning of
period 2,722,249 3,687,036 3,687,036 2,064,859 2,147,987
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 3,243,030 $ 2,072,426 $ 2,722,249 $ 3,687,036 $ 2,064,859
============ ============ ============ ============ ============
Supplemental schedule of noncash investing
and financing activities
Capital leases entered into for the
acquisition of property and equipment $ - $ 1,268,727 $ 1,619,373 $ 928,968 $ 1,317,435
============ ============ ============ ============ ============
Cumulative dividends accrued on redeemable
preferred stock $ 75,000 $ 75,000 $ 150,000 $ 150,000 $ 150,000
============ ============ ============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Information pertaining to the six month periods ended June 30, 1999 and
1998 are unaudited.
1. Summary of Significant Accounting Policies
Nature of Business
Implant Innovations International Corporation and Subsidiaries (the Company)
markets, manufactures and distributes a complete line of dental implants,
components and related products known as the 3i System. The Company also offers
continuing education courses on oral health care treatment planning and proper
use of the 3i System.
The Company's worldwide customer base includes oral surgeons, prosthodontists,
periodontists, general dentists and laboratories that primarily handle surgical
and restorative dental implant cases. The majority of the Company's
international revenues are derived through wholly-owned subsidiaries and
distributors.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Interim Financial Statements
The accompanying unaudited interim consolidated financial statements as of June
30, 1999 and for the six month periods ended June 30, 1999 and 1998 include all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the Company's consolidated financial position and results of
operations and cash flows for the periods presented. All such adjustments are of
a normal recurring nature. The results of the Company's operations for the six
months ended June 30, 1999 and 1998 are not necessarily indicative of the
results of operations for a full fiscal year.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment. The
Company permits its customers to return products under certain circumstances.
The effect of these programs is estimated and recorded in the consolidated
financial statements.
Long-Lived Assets
The Company accounts for long-lived assets pursuant to Statement of Financial
Accounting Standards (SFAS) No 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operations when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Management reviews long-lived assets and the related intangible
assets for impairment whenever events or changes in circumstances indicate the
assets may be impaired. The Company, based on current circumstances, does not
believe that any long-lived assets were impaired at June 30, 1999 or December
31, 1998.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. The credit risk associated with
cash and cash equivalents is considered low due to the credit quality of the
issuers of the financial instruments.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Concentration of Credit Risk and other Business Risk
Trade accounts receivable include amounts due from distributors located in
various countries within Europe, Latin America, and the Far East, along with
amounts due from customers in the United States, Canada, Mexico and various
European countries. The Company performs ongoing evaluations of its significant
customers and generally does not require collateral. The Company's allowance for
doubtful accounts is maintained at a level which management believes is
sufficient to cover potential credit losses. Trade accounts receivable are
stated net of allowances for doubtful accounts and provisions for sales returns
of $2,985,000 at June 30, 1999, $3,198,000 in 1998 and $1,300,000 in 1997.
The Company has entered into distribution agreements with two manufacturers
whereby the Company has exclusive rights to market, distribute and sell certain
products within exclusive territories. The sale of these products amounted to
17% of total revenue in 1998.
Inventories
Inventories, primarily consisting of implants and related components, are valued
at the lower of cost (first-in, first-out) or market.
Intangible Assets
Intangible assets consist of patents, trademarks, license agreements, goodwill
and noncompete agreements. These assets are recorded at cost and amortized using
the straight-line method over their estimated useful lives ranging from 3 to 40
years. The Company continually reviews the recoverability of the carrying value
of these assets.
Advertising Costs
The Company expenses advertising costs as incurred. During 1998, 1997 and 1996,
the Company incurred approximately $1,623,000, $1,267,000 and $806,000 of
advertising expenses, respectively.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Startup and Organizational Costs
Startup and organizational costs expended by the Company in establishing
operations at its subsidiaries are expensed as incurred.
Earnings Per Share
The Company computes earnings per share pursuant to SFAS No. 128, Earnings Per
Share. The dilutive effect of options, warrants and convertible preferred stock
has been considered in the calculation of earnings per share (see Note 13).
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Amortization of
leasehold improvements and property and equipment under capital leases is
provided using the straight-line method over the shorter of the estimated useful
lives of the assets or the lease term.
Minority Interest
Minority interest represents the minority interest's 20% share of equity of
Implant Innovations Canada, Inc. which is accounted for by the Company on a
consolidated basis (see Note 2).
Foreign Currency Translation
Assets and liabilities of foreign operations are translated from local
currency to U.S. dollars at the exchange rates in effect on the balance sheet
date. Income statement items are translated at the average exchange rates for
the period. With the exception of Mexico, which is classified as a highly
inflationary economy for periods prior to January 1, 1999, changes in exchange
rates and the related impact of currency fluctuation is included in accumulated
other comprehensive income (loss) as a separate component of shareholders'
equity. Financial statements for Mexico are translated at the appropriate
current or historical exchange rates, and the effect of these adjustments are
included in the consolidated statements of income. During the six months ended
June 30, 1999 and the year ended December 31, 1998, the Company realized foreign
exchange losses of approximately $99,000 and $121,000, respectively.
Effective January 1, 1999, Mexico was no longer considered a highly inflationary
economy. The impact of Mexico's currency fluctuation beginning in 1999 was
included with the Company's other foreign operations, in accumulated other
comprehensive income (loss) as a separate component of shareholders' equity.
Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, Reporting Comprehensive Income. This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income is defined as the
change in equity arising from non-owner sources. It includes net income as well
as foreign currency items, minimum pension liability adjustments, and unrealized
gains and losses on certain investments in debt and equity securities. The
Company adopted SFAS No. 130 in 1998. The Company does not have any components
of comprehensive income except for net income and foreign currency translation
(see above).
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Regulation
The Company is subject to regulations by the United States Food and Drug
Administration and by various overseas regulatory bodies.
Reclassifications
Certain reclassifications have been made to prior period financial statements to
conform to the current period presentation.
2. Acquisitions
In May 1999, the Company completed the acquisition of 80% of its previously
independent distributor in Canada for approximately $699,000. The acquisition
was accounted for as a purchase and accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed based on fair value.
The cost in excess of net assets acquired was approximately $427,000 and is
being amortized over 40 years. The consolidated financial statements reflect the
results of operations of the acquired distributor from the date of acquisition.
The Company entered into an option agreement with the 20% shareholder to
purchase its shares for approximately $136,000 at anytime through May 2004, and
at fair market value thereafter. The Company has been notified by the 20%
shareholder that it wishes to exercise its option to sell the 20% minority
interest to the Company for $136,000. No minority interest amounts have been
recorded in the statement of income for the six months ended June 30, 1999 since
such amounts are not significant.
In January 1998, the Company completed the acquisition of its previously
independent distributor in Germany for approximately $2,412,000. The acquisition
was accounted for as a purchase and, accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed based on fair value.
The cost in excess of net assets acquired was $885,000 and is being amortized
over 40 years. The consolidated financial statements reflect the results of
operations of the acquired distributor from the date of acquisition.
In July 1997, the Company completed the acquisition of its previously
independent distributor in Spain for approximately $786,000. The acquisition was
accounted for as a purchase and, accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on fair value. The cost in
excess of net assets acquired was $532,000 and is being amortized over 40 years.
The consolidated financial statements reflect the results of operations of the
acquired distributor from the date of acquisition.
The purchase agreement with the United Kingdom's distributor in 1996 provides
for contingent payments based on net sales (as defined) through 1999. Such
contingent payments are recorded as additional cost of the acquisition.
Contingent payments of $16,000 and $15,000 were earned for the years ended
December 31, 1998 and 1997, respectively.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Inventories
Inventories consisted of the following:
June 30, December 31,
1999 1998 1997
------------ ------------ ------------
Finished products $ 8,809,707 $10,592,278 $ 4,367,998
Work-in-process 7,077,488 6,628,304 3,906,514
Raw materials 1,078,140 996,971 857,381
------------ ------------ ------------
16,965,335 18,217,553 9,131,893
Less allowances (3,868,571) (2,868,123) (1,217,979)
------------ ------------ ------------
$13,096,764 $15,349,430 $ 7,913,914
============ ============ ============
4. Property and Equipment
At December 31, 1998 and 1997, property and equipment, including property and
equipment pursuant to capital lease agreements, consisted of the following:
1998 1997
------------ ------------
Equipment $10,622,864 $ 8,699,786
Computer software 2,510,882 525,559
Furniture and fixtures 2,117,763 1,876,795
Leasehold 688,007 664,358
------------ ------------
15,939,516 11,766,498
Less accumulated
depreciation and
amortization (7,429,758) (5,199,289)
------------ ------------
$ 8,509,758 $ 6,567,209
============ ============
Depreciation expense for the six months ended June 30, 1999 and 1998 and the
years ended December 31, 1998, 1997 and 1996 was $1,244,218, $1,003,611, and
$2,230,010, $1,643,637 and $1,272,733, respectively.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Accrued Liabilities
Accrued liabilities consisted of the following:
June 30 December 31
1999 1998 1997
---------- ---------- ----------
Payroll, commission and benefits $1,986,455 $1,463,554 $1,633,548
Income and sales tax payable 1,436,240 1,542,113 1,252,054
Other 3,698,276 3,654,011 2,642,166
---------- ---------- ----------
Total accrued liabilities $7,120,971 $6,659,678 $5,527,768
========== ========== ==========
6. Short-Term Borrowings
The Company has a $10 million ($5 million at December 31, 1997) line-of-credit
(the Line) with a financial institution. The Line bears interest at 2.15% (2.65%
at December 31, 1997) above the 30-day Commercial paper rate, as reported in the
Wall Street Journal, for an effective interest rate of 7.05% at December 31,
1998. The Line is collateralized by all of the Company's assets and matures on
September 30, 2001. The terms of the agreement require among other things, the
Company to maintain a minimum level of tangible net worth and debt to tangible
net worth as defined. At December 31, 1998 and 1997, the Company had $6,528,057
and $2,496,843 available under the Line, respectively.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Long-Term Debt
In 1995, the Company issued $3,500,000 face amount of subordinated debentures
with detachable common stock purchase warrants (see Note 9) at a discount of
$1,147,000. Interest under the debentures is payable quarterly at 9.5%. The
discount is being accreted over the term of the debentures using the effective
interest method (accretion of $190,202 and $158,281 in 1998 and 1997,
respectively). Repayment of the debentures is subordinated to amounts
outstanding under the Line (see Note 6). The debentures may be prepaid, in whole
or in part, at any time. Upon the closing of a Qualified Public Offering, as
defined, or a sale of the Company, the entire outstanding principal amount plus
all accrued and unpaid interest shall be paid in whole. The terms of the
agreement restrict, among other things, the Company's ability to declare or pay
any distribution on its capital stock, enter into new commitments or borrowings
over specified amounts and dispose of assets outside the ordinary course of
business. In addition, the Company is required to maintain a minimum level of
tangible net worth, as defined, along with certain other financial covenants.
The subordinated debentures mature in equal annual amounts of $1,166,667 in the
years 2000 through 2002.
The Company paid interest on short-term borrowings, long-term debt and capital
leases of approximately $428,000 and $477,000 for the six month periods ended
June 30, 1999 and 1998, and $607,000, $511,000 and $552,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
8. Capital Leases
The Company leases equipment under long-term capital leases. The following is a
schedule of future minimum lease payments under all capitalized leases together
with the present value of the net minimum lease payments as of December 31,
1998:
Year ended December 31,
1999 $1,262,584
2000 996,193
2001 675,390
2002 578,873
2003 134,695
-----------
Total 3,647,735
Less amount representing unamortized interest (472,999)
-----------
Present value of net minimum lease payments (including
current portion of $1,040,313 at December 31, 1998) $3,174,736
===========
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Capital Leases (continued)
At December 31, 1998 and 1997, included in property and equipment (see Note 4),
is equipment under capital lease obligations of $6,101,271 and $4,576,999, net
of accumulated amortization of $2,772,217 and $2,101,400, respectively.
9. Redeemable Preferred Stock and Common Stock Purchase Warrants
In 1995, the Company issued 776,788 shares of its Series A Cumulative
Convertible Preferred Stock for $2,500,000. Cumulative dividends are payable at
a fixed annual rate of 6%. Each share of preferred stock has voting rights equal
to the Class A Common Stock. The preferred stock and its cumulative accrued and
unpaid dividends ($537,500 and $387,500 at December 31, 1998 and 1997,
respectively) are redeemable at the option of the holder upon a Qualified Public
Offering (as defined) through December 1999. If a Qualified Public Offering has
not occurred by that date, commencing March 2000, the Company will begin
redeeming the preferred stock by making 16 quarterly payments in the amount of
$156,250 plus cumulative dividends. In the event of any liquidation, dissolution
or winding up of the Company, the holders of outstanding Series A Preferred
Stock shall be entitled to receive an amount equal to the original purchase
price paid plus all cumulative accrued and unpaid dividends. The terms of the
preferred stock agreement restrict, among other things, the Company's ability to
authorize or issue equity securities, enter into new commitments or borrowings
over specified amounts or make certain expenditures over specified amounts not
provided for in the Company's budget.
As discussed in Note 7, the Company also issued subordinated debentures with
detachable warrants to the holders of the redeemable preferred stock. The
warrants give the holders the right to purchase up to 517,859 shares of Class A
Common Stock of the Company at a purchase price of $.01 per share. The warrants
were recorded at $1,077,290, which represents their estimated fair value at the
date of issuance, net of issuance costs of $69,710. The warrants may be
exercised in full, in part or by surrender of the debentures on or before May
26, 2002.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
financial instruments included in the following categories:
- Cash and Cash Equivalents, Accounts Receivable, Capital Lease
Obligations and Accounts Payable - The carrying amounts reported in
the consolidated balance sheets approximate fair value because of the
short maturities of such instruments.
- Short-Term Financing - The carrying amount of short-term borrowings
approximates fair value because the interest rate is tied to a quoted
variable rate.
- Long-Term Debt and Redeemable Preferred Stock - Amounts outstanding
for long-term debt bear interest at 9.5%. Redeemable preferred stock
provides for cumulative dividends at 6%. The carrying amounts reported
in the consolidated balance sheets approximate fair value using a
discounted cash flow analysis at estimated market rates.
11. Stock Options and Benefit Plan
The Company has elected to account for stock-based employee compensation awards
under Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock
Issued to Employees, and related interpretations. Under APB No. 25, because the
exercise price of the Company's employee stock options equals or exceeds the
market price of the underlying stock at the date of grant, no compensation
expense is recognized.
In 1995, the Company granted 352,832 options to a major shareholder for the
right to purchase an equivalent number of shares of Class B Common Stock at an
exercise price of $5 per share. The options are fully vested, immediately
exercisable and expire in 2005.
In 1995, the Board of Directors approved the 1995 Stock Option Plan (the Plan).
Awards under the Plan may be granted as incentive stock options, nonqualified
stock options, or stock appreciation rights. The Plan provides for the granting
of a maximum of 600,000 options to purchase Class B Common Stock to key
employees and consultants of the Company. The option price per share shall not
be less than 100% (110% if the optionee is granted ISOs and owns more than 10%
of the total combined voting power of all classes of stock of the Company) of
the fair market value of the underlying shares on the date of grant. The maximum
term of an option may not exceed ten years (five years for any 10% stockholder).
The options generally have a ten year term and vest ratably over a five-year
period. During 1998 and 1997, the Company granted 79,500 and 139,500 options,
respectively, at an exercise price of $5 or $6 per share.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Stock Options and Benefit Plan (continued)
Pro forma information regarding net income is required by SFAS No. 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that statement. The fair value of outstanding
options was estimated at the date of grant using the minimum value method using
the following assumptions: risk-free interest rate of 6% for 1998 and 1997; no
expected dividends; and weighted average expected life of the options of five
years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Based on the
assumptions utilized above, the pro forma impact on net income for 1998 and 1997
is not materially different from amounts reported.
The following is a summary of stock option activity for the years ended December
31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Stock Option Plan Other
1998 1997 1996 1998 1997 1996
--------- -------- -------- ------- ------- -------
Shares under option:
Outstanding 509,170 401,770 388,070 352,832 352,832 352,832
Granted 79,500 139,500 28,500 - - -
Canceled or
repurchased (125,800) (32,100) (14,800) - - -
--------- -------- -------- ------- ------- -------
Outstanding
December 31 462,870 509,170 401,770 352,832 352,832 352,832
========= ======== ======== ======= ======= =======
Exercisable at
December 31 183,722 143,968 74,654 352,832 352,832 352,832
========= ======== ======== ======= ======= =======
Available for future
grant at
December 31 137,130 90,830 198,230 - - -
========= ======== ======== ======= ======= =======
Weighted-average
remaining
contractual life
in years 7 8 9 6 7 8
========= ======== ======== ======= ======= =======
<FN>
For the six months ended June 30, 1999, the Company granted 41,700 employee
stock options with and exercise price of $6 per share and a term of ten years.
</FN>
</TABLE>
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Stock Options and Benefit Plan (continued)
At June 30, 1999, shares of Class A and B Common Stock issuable upon the
exercise of warrants and employee stock options and upon conversion of the
redeemable preferred stock have been reserved for issuance as follows:
Warrants 517,859
Employee stock options 952,832
Redeemable preferred stock 776,788
---------
Total shares reserved 2,247,479
=========
The Company has established a 401(k) plan covering substantially all full-time
hourly and salaried employees. Company contributions to the plan are based on
employee contributions and the level of company match. The Company's
contribution to the plan totaled approximately $69,300 and $64,600 for the years
ended December 31, 1998 and 1997, respectively.
12. Income Taxes
The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
The U.S. and foreign components of income (loss) before income taxes consisted
of the following:
1998 1997 1996
------------ ----------- -----------
U.S. $17,459,780 $6,534,519 $5,679,389
Foreign (4,004,816) (1,414,759) (5,423)
------------ ----------- -----------
Total $13,454,964 $5,119,760 $5,673,966
============ =========== ===========
As of December 31, 1998, the Company had net operating loss carryforwards of
$642,422 in foreign tax jurisdictions that expire in 2002 through 2004. These
net operating loss carryforwards may only be used to offset future income in tax
filings in the foreign jurisdiction in which they were incurred. The Company has
provided a 100% valuation allowance against the deferred tax assets related to
these carryforwards as management believes that it is more likely than not that
they will expire unused.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Income Taxes (continued)
The components of the provision for income taxes in 1998, 1997 and 1996 are as
follows:
1998 1997 1996
----------- ---------- -----------
Current:
Federal $5,574,607 $1,504,905 $2,458,227
State 810,651 279,592 397,163
----------- ---------- -----------
6,385,258 1,784,497 2,855,390
Deferred:
Federal (1,416,776) 186,874 (595,687)
State (178,514) 15,475 (96,242)
----------- ---------- -----------
(1,595,290) 202,349 (691,929)
----------- ---------- -----------
Total $4,789,968 $1,986,846 $2,163,461
=========== ========== ===========
A reconciliation of the federal statutory tax rate to the effective tax rate is
as follows:
1998 1997 1996
----- ----- -----
Statutory rate 35.0% 34.0% 34.0%
State income taxes, net of federal
benefit 2.9 2.9 5.5
Research and development tax
credit (0.2) (2.9) (1.6)
Permanent items 0.9 2.8 1.2
Benefit from foreign sales
corporation (3.9) (4.7) (4.6)
Unrecognized benefit of foreign
net operating losses 0.7 2.9 -
Other, net 0.2 3.8 3.6
----- ----- -----
Effective tax rate 35.6% 38.8% 38.1%
===== ===== =====
The income tax provisions recorded by the Company for the periods ended June 30,
1999 and 1998 are based on the Company's estimated annual effective tax rates.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Income Taxes (continued)
The significant components of deferred income tax assets and liabilities as of
December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
------------ -----------
Deferred tax assets:
Allowances for inventories and
receivables $2,259,815 $ 860,081
Other reserves 785,602 480,676
Foreign operating loss carryforwards 239,190 149,442
Capital loss carryforwards 73,468 -
Other items 15,506 14,990
Valuation allowance (312,658) (149,442)
----------- -----------
Total deferred tax assets 3,060,923 1,355,747
Deferred tax liability:
Property and equipment basis differences 322,704 268,119
Other items 227,581 175,186
----------- -----------
Total deferred tax liabilities 550,285 443,305
----------- -----------
Net deferred income tax asset $2,510,638 $ 912,442
=========== ===========
</TABLE>
Income taxes paid for the six month periods ended June 30, 1999 and 1998 and the
years ended December 31, 1998, 1997, 1996, were $2,170,660 and $1,274,365, and
$5,642,562, $1,587,600, and $2,336,700, respectively.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. Earnings Per Share
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Six Months Ended
June 30, Years Ended December 31,
------------------------------ ---------------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
Numerator:
Net income $3,166,538 $2,052,945 $8,664,996 $3,132,914 $3,510,505
Less: Preferred stock dividends (75,000) (75,000) (150,000) (150,000) (150,000)
----------- ----------- ----------- ----------- -----------
Numerator for basic earnings per
share-income available to common
shareholders 3,091,538 1,977,945 8,514,996 2,982,914 3,360,505
Effect of dilutive securities:
Dividends on convertible preferred
securities 75,000 75,000 150,000 150,000 150,000
----------- ----------- ----------- ----------- -----------
Numerator for diluted earnings per share -
income available to common shareholders
after assumed conversions $3,166,538 $2,052,945 $8,664,996 $3,132,914 $3,510,505
=========== =========== =========== =========== ===========
Denominator:
Denominator for basic earnings per share-
weighted average shares 6,999,999 6,999,999 6,999,999 6,999,999 6,999,999
Effect of dilutive securities:
Warrants 517,064 516,996 516,996 516,974 516,823
Convertible preferred securities 776,788 776,788 776,788 776,788 776,788
Stock options 93,279 66,417 63,205 68,255 -
----------- ----------- ----------- ----------- -----------
Dilutive potential common shares 1,387,131 1,360,201 1,356,989 1,362,017 1,293,611
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 8,387,130 8,360,200 8,356,988 8,362,016 8,293,610
=========== =========== =========== =========== ===========
Earnings per share - basic $.44 $.28 $1.22 $.43 $.48
=========== =========== =========== =========== ===========
Earnings per share - diluted $.38 $.25 $1.04 $.37 $.42
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. Commitments and Contingencies
Operating Leases
The Company and its subsidiaries lease office, manufacturing and warehouse space
under noncancelable operating lease agreements which expire through 2011. The
Company has an option to purchase its U.S. Corporate facility on or before
November 2002.
Rent expense for operating leases for the six month periods ended June 30, 1999
and 1998, and the years ended December 31, 1998, 1997, 1996, was approximately
$623,000 and $560,000, and $1,195,000, $953,000, and $506,000, respectively.
Future minimum annual rentals due under noncancelable leases with remaining
terms in excess of one year are as follows:
Year ended December 31,
1999 $ 1,202,669
2000 1,148,985
2001 1,086,686
2002 1,086,873
2003 1,105,051
Thereafter 10,825,445
-----------
$16,455,709
===========
Other Commitments
The Company has contracted with various universities and surgical centers to
perform clinical research studies. The future annual contractual obligations are
as follows:
Year ended December 31,
1999 $ 742,154
2000 551,823
2001 301,189
2002 132,689
2003 52,000
----------
$1,779,855
==========
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. Commitments and Contingencies (continued)
Legal Matters
In 1991, a competitor commenced a patent infringement action against the
Company. The Company denied the allegations and filed an antitrust counterclaim
against the competitor. During 1994 and 1995, the court entered judgments in
favor of the Company with respect to both the patent infringement and antitrust
claims, which were subject to appeal.
During 1995, in conjunction with a corporate reorganization, the Company
assigned the rights to 50% of any potential proceeds of the above mentioned
actions, net of legal fees, to certain shareholders of the Company. During 1996
through 1998, the claims progressed through a series of motions and appeals and
in October 1998, the U.S. Supreme Court denied the competitor's petition for a
final review of the decision, upholding the previous judgments in favor of the
Company. Of the total $15.7 million proceeds, the Company recorded in 1998
approximately $6.6 million in other income which represents the Company's share
of the net proceeds, after reducing the total proceeds by the previously
assigned shareholders' portion, and $4.7 million in applicable legal fees and
expenses.
From time to time, the Company is subject to various legal proceedings and
claims which have arisen in the ordinary course of its business and which are
pending. In the opinion of management, such matters will not result in any
material liability to the Company.
15. Segment Analysis
The Company operates in one significant business segment, oral reconstructive
products, which includes the design, development, manufacturing and marketing of
dental implants and components, membranes and bone substitute materials. The
Company manages its business segments primarily on a geographic basis. These
geographic segments are comprised of the United States, Europe and Other. Other
geographic segments include Canada and Mexico. The Company evaluates performance
based on operating income of each geographic segment. Identifiable assets are
those assets used exclusively in the operations of each business segment.
Revenues attributable to each geographic area are based on the location in which
the sale originated.
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
15. Segment Analysis (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Six Months ended June 30 Year ended December 31
1999 1998 1998 1997 1996
----------- ------------ ------------ ------------ ------------
Information by geographic areas
is as follows:
Net sales to customers:
United States $31,185,828 $28,880,526 $58,456,203 $51,997,682 $43,297,463
Europe 8,803,317 5,105,553 11,241,369 2,226,146 81,291
Other 919,114 377,537 790,223 520,925 4,000
----------- ------------ ------------ ------------ ------------
$40,908,259 $34,363,616 $70,487,795 $54,744,753 $43,382,754
=========== ============ ============ ============ ============
Operating income (loss):
United States $ 2,954,743 $ 4,091,810 $ 7,927,304 $ 6,015,610 $ 6,204,278
Europe 2,173,612 (346,939) (223,860) (461,778) (3,482)
Other 296,227 43,657 (4,690) (51,689) (1,209)
----------- ------------ ------------ ------------ ------------
$ 5,424,582 $ 3,788,528 $ 7,698,754 $ 5,502,143 $ 6,199,587
=========== ============ ============ ============ ============
June 30, December 31,
1999 1998 1998 1997 1996
----------- ------------ ------------ ------------ ------------
Long-lived assets:
United States $ 8,774,075 $ 8,469,392 $ 8,802,305 $ 6,915,580 $ 5,935,009
Europe 2,076,757 2,515,248 2,580,781 1,111,633 94,902
Other 441,826 219,054 170,439 98,477 16,469
----------- ------------ ------------ ------------ ------------
$11,292,658 $11,203,694 $11,553,525 $ 8,125,690 $ 6,046,380
=========== ============ ============ ============ ============
</TABLE>
<PAGE>
Implant Innovations International
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
15. Segment Analysis (continued)
United States export sales, primarily to European and South American
countries, aggregated $9,166,165 and $10,404,468 for the six months ended June
30, 1999 and 1998 and $21,017,786, $20,670,631 and $19,884,709 for the years
ended December 31, 1998, 1997 and 1996. These sales are included in United
States sales to customers above. The increase in European sales and operating
income is primarily due to the acquisition of foreign distributors in Spain
(June 1997) and Germany (January 1998). Sales to these entities and resulting
operating income were classified as United States export sales and operating
income prior to the acquisitions.
16. Subsequent Events (Unaudited)
On August 28, 1999, the Company entered into an agreement and plan of merger
("Agreement") pursuant to which the Company will become a wholly owned
subsidiary of Biomet, Inc. The Agreement is subject to the approval of the
Company's shareholders.
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") dated as of August 28,
1999, is by and among Biomet, Inc., an Indiana corporation ("Biomet"); Palm
Acquisition Corp., an Indiana corporation ("Acquisition"); Implant Innovations
International Corporation, a Delaware corporation (the "Parent") (Parent and all
of its subsidiaries (individually, a "Subsidiary," and collectively, the
"Subsidiaries") being referred to hereinafter as the "Company"); Implant
Innovations, Inc., a Florida corporation ("Implant"); and those shareholders of
Parent whose names appear on the signature pages of this Agreement
(individually, a "Control Shareholder," and collectively, the "Control
Shareholders").
Preliminary Statements
1. Biomet and its subsidiaries design, 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 implants, general surgical instruments, arthroscopy
products, bone cements, bone substitutes and craniomaxillofacial implants
and instruments. Acquisition is a wholly-owned subsidiary of Biomet, formed
solely to effectuate the transactions described in this Agreement.
2. Parent, through its Subsidiaries, is engaged principally in the business of
designing, manufacturing and marketing of dental implants and related
products. The sole business of Parent consists of ownership of all of the
outstanding shares of the Subsidiaries.
3. The Boards of Directors of Biomet and Acquisition deem a merger of Parent
with and into Acquisition pursuant to the terms of this Agreement (the
"Merger") desirable and in the best interests of Biomet and Acquisition,
respectively. The Boards of Directors of Acquisition and Biomet have, by
resolutions duly adopted, approved this Agreement. Approval of the Merger
by the shareholders of Biomet is not required under the Indiana Business
Corporation Law, as amended (the "BCL").
4. The Board of Directors of Parent and the Control Shareholders deem a merger
of Parent with and into Acquisition pursuant to the terms of this Agreement
desirable and in the best interests of Parent, the Subsidiaries and the
shareholders of Parent. The Board of Directors of Parent has, by
resolutions duly adopted, approved this Agreement on behalf of Parent and
has recommended approval of this Agreement by the shareholders of Parent.
5. The parties intend, by executing and delivering this Agreement, to adopt a
plan of reorganization withing the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and to cause the Merger to
qualify as a "reorganization" as therein defined.
<PAGE>
6. For financial accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling-of-interests" in accordance with the
requirements of Opinion No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified Public Accountants,
as amended and/or interpreted by the rules and regulations of the
Securities and Exchange Commission (the "SEC") and applicable
pronouncements by the Financial Accounting Standards Board, the Emerging
Issues Task Force and the American Institute of Certified Public
Accountants (the "Pooling Requirements").
Terms and Conditions
In consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, and intending to be legally bound
thereby, Biomet, Acquisition, Parent and the Control Shareholders agree to the
following terms and conditions.
ARTICLE I
The Merger
Section 1.1. Merger. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, Parent shall be merged with and into
Acquisition pursuant to the provisions of and with the effect provided in the
BCL and the Delaware Business Corporation Act. Upon the consummation of the
Merger, the separate existence of Parent shall cease, and the corporate
existence of Acquisition, with all its purposes, powers and objects shall
continue unaffected and unimpaired by the Merger, and Acquisition and Parent
shall be a single surviving corporation which shall be Acquisition (sometimes
referred to herein as the "Surviving Corporation").
Section 1.2. Effective Time of Merger. If (a) all of the conditions
precedent to the Merger as set forth in Articles VIII and IX of this Agreement
are satisfied or waived, and (b) this Agreement is not terminated prior to the
Closing (as defined in Section 11.1) as permitted by the provisions of this
Agreement, then at the Closing a Certificate of Merger in substantially the form
of Exhibit 1.2(a) and Articles of Merger in substantially the form of Exhibit
1.2(b) (collectively, the "Merger Documents") shall be executed by Acquisition.
As soon as practicable following the Closing, Biomet shall cause the Merger
Documents to be filed with the Secretary of State of the State of Delaware
("Delaware Secretary of State") and with the Secretary of State of the State of
Indiana ("Indiana Secretary of State"), in the manner provided under Delaware
and Indiana laws relative thereto. The Merger shall become effective as of 12:01
a.m. Eastern Standard Time on the date following the date on which the Merger
Documents have been filed with both the Delaware Secretary of State and the
Indiana Secretary of State ("Effective Time").
<PAGE>
Section 1.3. Legal Effect. At and after the Effective Time, the Surviving
Corporation shall possess all of the rights, privileges, immunities, powers and
franchises of Acquisition and Parent and shall be subject to and shall assume
all the duties and liabilities of Acquisition and Parent as a corporation
existing under the BCL.
Section 1.4. Change of Name. As of and after the Effective Time, the name
of the Surviving Corporation shall be "Implant Innovations Holding Corporation."
Section 1.5. Other Actions. Biomet, Acquisition, the Company and the
Control Shareholders agree to take all action necessary or appropriate to
effectuate the transactions contemplated by this Agreement. If after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or the Merger Documents, the officers and directors
of Acquisition shall have the authority to take all such action.
ARTICLE II
Corporate Governance
Section 2.1. Articles of Incorporation; Bylaws. The Articles of
Incorporation of Acquisition as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation. The
Bylaws of Acquisition as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation, until amended or repealed as
provided by law.
Section 2.2. Officers and Directors. The directors of Acquisition at the
Effective Time shall continue as the directors of the Surviving Corporation, and
at the Effective Time the officers of the Surviving Corporation shall be as set
forth in Exhibit 2.2, to serve, in each case, until their successors shall have
been elected or appointed and qualify in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation or as otherwise provided
by law.
ARTICLE III
Conversion of Shares;
Issuance of Biomet Common Shares
Section 3.1. Conversion. At the Effective Time, all of the shares of Class
A Common Stock and Class B Common Stock of Parent issued and outstanding
immediately prior to the Closing (the "Parent Stock") shall, by virtue of the
Merger and without any action on the part of the Company or its shareholders, be
converted into Common Shares of Biomet ("Biomet Common Shares"), as provided in
Section 3.2. No Biomet Common Shares shall be issuable with respect to any
options, warrants, convertible securities or other rights to acquire Parent
Stock outstanding as of the date hereof, all of which shall be exercised or
otherwise converted into Parent Stock immediately prior to the Closing, or
terminated effective as of the Closing. All certificates formerly representing
Parent Stock shall be deemed canceled and of no further effect in representing
an equity interest in the Surviving Corporation, and from and after the Closing
shall represent only the right to receive the Biomet Common Shares to which the
holders thereof are entitled in accordance with the terms of this Agreement. All
shares of Parent Stock held as treasury shares at the Closing shall be canceled.
<PAGE>
Section 3.2. Issuance of Biomet Common Shares. Biomet shall issue to the
holders of Parent Stock, in proportion to their ownership of Parent Stock and in
the manner described in Section 3.3, that aggregate number of Biomet Common
Shares equal to the quotient obtained by dividing the "Net Purchase Price,"
calculated in the manner described herein, by the Conversion Price (as defined
below). The Net Purchase Price shall be obtained by subtracting from
$175,000,000 the "Net Debt" of the Company (as defined below); provided,
however, that if Net Debt as defined below is a negative amount greater than
$1,000,000, then the Net Purchase Price shall be $176,000,000. For purposes of
this Agreement, "Net Debt" of the Company shall mean the difference obtained by
subtracting the Aggregate Cash and Cash Equivalents of the Company (as defined
below) from the Aggregate Indebtedness of Palm (as defined below). The
"Aggregate Indebtedness of the Company" shall mean the aggregate of the
following with respect to Parent and its Subsidiaries, determined as of the
close of business on the last day of the last month immediately preceding the
Closing Date: (i) any obligation for borrowed money (and any notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money) or any obligation (current and long-term) under
any capital lease, plus (ii) interest payable or accrued with respect to any
obligation identified in (i) and all declared and unpaid dividends on the Series
A Cumulative Convertible Preferred Stock of Parent (the "Preferred Stock");
provided, however that Aggregate Indebtedness of the Company shall not include
any indebtedness incurred subsequent to the date of this Agreement to the extent
that the proceeds thereof are applied to the acquisition of (a) Carena France,
S.A., the French distributor of the Company, or (b) the Biogran product line
from Orthovita, Inc. The "Aggregate Cash and Cash Equivalents of the Company"
shall mean the aggregate of the following with respect to Parent and its
Subsidiaries: (w) all cash and deposits in banks and on hand, plus (x) all cash
equivalents as so classified in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis, determined in each
case as of the close of business on the last day of the last month immediately
preceding the Closing Date, plus (y) cash received by the Company at the Closing
as a result of the exercise of options and warrants to purchase Parent Stock
outstanding on the date hereof, and minus (z) the amount of all transaction
expenses to be paid by Parent pursuant to Section 14.7, to the extent such
expenses shall not have been paid prior to the date of determination of
Aggregate Cash and Cash Equivalents of the Company. The "Conversion Price" shall
be equal to the average of the last sale price for a Biomet Common Share as
reported by the National Association of Securities Dealers Automated Quotation
System - National Market System ("Nasdaq-NMS") for the twenty consecutive
trading days ending with the third trading day immediately preceding the Closing
Date, provided, however, that the Conversion Price shall not be greater than
$43.45 and shall not be less than $33.79. Neither Biomet, Acquisition, the
Company or the Control Shareholders shall have the right to terminate this
Agreement or to refuse to close the transactions contemplated hereby as a result
of the Conversion Price being either greater or less than the amounts set forth
in the foregoing sentence, except that Parent shall have the right to terminate
this Agreement in the manner specified in Article X if the Conversion Price is
less than $31.86.
<PAGE>
Section 3.3. Distribution of Biomet Common Shares. The Biomet Common Shares
issuable pursuant to Section 3.2 shall be distributed to the holders of Parent
Stock, pro rata in proportion to their interests, provided, however, that an
aggregate number of Biomet Common Shares equal to (i) ten percent (10%) of the
aggregate number of Biomet Common Shares issuable pursuant to Section 3.2 (as
the General Contingency Fund defined in Section 8.B. of the Escrow Agreement),
plus (ii) that number of Biomet Common Shares that, at the Conversion Price, has
a value equal to $10,000,000 (as the Specified Contingency Fund defined in
Section 8.B. of the Escrow Agreement), shall be deposited on behalf of the
holders of Parent Stock, at the Closing, in accordance with the terms of an
Escrow Agreement in the form set forth in Exhibit 3.3 (the "Escrow Agreement")
and thereafter distributed by the Escrow Agent named in the Escrow Agreement
(the "Escrow Agent") at the times and in accordance with the terms of the Escrow
Agreement. No fractional Biomet Common Share shall be issued in connection with
this transaction. Any fraction of a Biomet Common Share resulting from any
calculations made pursuant to Section 3.2 or Section 3.3 shall be paid in cash
at the Conversion Price.
Section 3.4. Exchange Procedure. To the extent that certificates
representing the Parent Stock (the "Certificates") are delivered to Biomet, duly
endorsed, at the Closing, Biomet shall as soon as practicable following the
Effective Time deliver to each holder of Parent Stock the Biomet Common Shares
to which holders of the Certificates are entitled under the terms of this
Agreement. If any Certificates are not delivered to Biomet at the Closing, as
soon as practicable following the Effective Time Biomet shall deliver to each
holder of each Certificate not delivered (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Parent Stock shall pass, only upon delivery of the Certificates to Biomet and
shall be in a form and have such other provisions as Biomet may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Biomet Common Shares to which holders of the
Certificates are entitled. Upon surrender of the Certificates together with the
letter of transmittal, duly executed, and such other documents as Biomet may
reasonably require, the holders of the Certificates shall be entitled to receive
in exchange therefor the number of Biomet Common Shares to which they are
entitled under the terms of this Agreement. Neither Biomet nor the Surviving
Corporation shall have any liability to the holder of any Certificate for any
deliveries made to a public official pursuant to applicable abandoned property,
escheat or similar laws.
Section 3.5. Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, Parent Stock issued and outstanding immediately prior
to the Closing and held by any holder entitled to appraisal rights pursuant to
the Delaware General Corporation Law (the "DGCL") who, on a timely basis, makes
and perfects a demand for appraisal of such shares in accordance with all
requirements and provisions of the DGCL, and who does not effectively withdraw
or lose the right to such appraisal (collectively, "Dissenting Shares"), shall
not be converted as described in Section 3.2, but shall, from and after the
Effective Time, represent only the right to receive the consideration determined
to be due to the holder with respect to the Dissenting Shares pursuant to the
DGCL; provided, however, that Dissenting Shares held by any shareholder who,
after the Effective Time, withdraws his demand for appraisal or loses his right
of appraisal with respect to the shares, in either case pursuant to the DGCL,
shall be deemed to have been converted, as of the Effective Time, into the right
to receive Biomet Common Shares as described in Section 3.2. Parent shall give
to Biomet (i) prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other similar instruments served pursuant to the
DGCL received by Parent and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. Parent will
not voluntarily make any payment with respect to any demands for appraisal and
will not, except with the prior written consent of Biomet, settle or offer to
settle any such demands.
<PAGE>
ARTICLE IV
Representations and Warranties
of the Company and the Control Shareholders
As a material inducement to Biomet and Acquisition to enter into this
Agreement and the Merger Documents and to consummate the transactions
contemplated hereby and thereby, (i) the Company represents and warrants to
Biomet and Acquisition, as to itself, and (ii) Keith D. Beaty ("Beaty") and
Richard J. Lazzara ("Lazzara") each represents and warrants to Biomet and
Acquisition, as to the Company and as to himself, that:
Section 4.1. Organization; Power. Parent and each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Parent and each Subsidiary is qualified to
transact business and is in good standing in each jurisdiction, if any, in which
the conduct of its business or the ownership or leasing of its properties
requires it to be so qualified. The names of each Subsidiary and the
jurisdictions in which Parent and each Subsidiary is qualified as a foreign
entity are listed on Schedule 4.1. Parent and each Subsidiary has all requisite
power and authority to own, lease and operate its business as it is now being
conducted, and, in the case of Parent and Implant, to enter into, execute and
deliver this Agreement, the Escrow Agreement and the Merger Documents, to
consummate the transactions contemplated hereby and thereby and to comply with
and fulfill the terms and conditions of this Agreement and the Merger Documents.
Parent and each Subsidiary has delivered to Biomet true and complete copies of
its organizational documents, including all amendments thereto.
Section 4.2. Capital Stock. The authorized capital stock of Parent and each
of the Subsidiaries, and the names of the shareholders of record and the number
of outstanding shares of each class held by each shareholder as of the date
hereof, are as set forth on Schedule 4.2. All issued and outstanding shares or
other ownership interests of Parent and each Subsidiary are validly issued and
outstanding, fully paid and nonassessable. Except as set forth on Schedule 4.2,
there are no outstanding warrants, options, agreements, convertible securities
or other commitments pursuant to which either Parent or any Subsidiary is or may
become obligated to issue any shares or other securities. As of the Closing, all
warrants, options, convertible securities or other commitments to issue
securities of Parent shall have been converted into Parent Stock. Except as set
forth on Schedule 4.2, there are no outstanding agreements or commitments
pursuant to which Parent is or may become obligated to purchase or redeem any
shares of Parent or other securities. Each of the Control Shareholders has good
and marketable title to the shares of the Company owned by him or it, and none
of the outstanding shares of Parent are subject to any lien, claim or
encumbrance of any kind.
Section 4.3. Authority; No Violation.
(a) The execution and delivery of this Agreement and the Merger
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action on the part of Parent and Implant. This Agreement and the Merger
Documents are valid and binding obligations of Parent, Implant and the
Control Shareholders, enforceable against Parent, Implant and the Control
Shareholders in accordance with their respective terms and conditions,
except as the enforcement hereof and thereof may be limited by bankruptcy,
insolvency, moratorium or other laws relating to or limiting creditors'
rights generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or law.
(b) Except as set forth in Schedule 4.3, neither the execution and
delivery of this Agreement or of the Merger Documents, nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by
Parent, Implant or the Control Shareholders with any of the provisions
hereof or thereof, will:
<PAGE>
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under or give rise to any right of termination,
cancellation or acceleration under any provision of their
organizational documents, any of the terms, conditions or provisions
of any note, lien, bond, mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement,
restriction or other instrument or obligation to which Parent, any
Subsidiary or any of the Control Shareholders is a party or by which
they may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body or any judgment, order, writ, injunction
or decree of any court or any foreign, federal, state or local
administrative agency, commission, board, bureau or other governmental
agency or other instrumentality (a "Governmental Authority")
applicable to Parent, any Subsidiary or any of the Control
Shareholders; or
(iii) constitute an event that, with or without notice, lapse of
time or action by a third party, could result in the creation of any
lien, charge or incumbrance upon any of the assets of Parent, any
Subsidiary or any of the Control Shareholders or cause the maturity of
any liability, obligation or debt of Parent, any Subsidiary or any of
the Control Shareholders to be accelerated or increased.
Section 4.4. Consents and Approvals. Except in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act") and
the regulations promulgated thereunder, the Securities Act of 1933, as amended
("1933 Act") and the Securities Exchange Act of 1934, as amended ("1934 Act"),
and as set forth on Schedule 4.4, the execution, delivery and performance of
this Agreement, the Escrow Agreement and the Merger Documents by the Parent,
Implant and by the Control Shareholders, and the consummation of the
transactions contemplated hereby or thereby, will not require any notice to,
action of, filing with or consent, authorization, order or approval from any
Governmental Authority or any individual, corporation, partnership, joint
venture, association, firm, organization, group or any other entity or
enterprise. Except as set forth on Schedule 4.4, any and all notices, actions,
filings, consents, authorizations, orders and approvals set forth on Schedule
4.4 have been made and obtained
Section 4.5. Transactions with Certain Persons. Except as set forth in
Schedule 4.5, since June 1, 1995 the Company has not, directly or indirectly, in
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or obtained any services from or sold, leased or otherwise
disposed of any property or furnished any services (except with respect to
remuneration for services rendered as a director, officer or employee of the
Company in the ordinary course of business) to, the Control Shareholders, any
former shareholders of the Company or any current or former director or officer
of the Company (individually a "Person"). The Company does not owe any amount
to, or have any contract with or commitment to any Person (other than
compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business), and no such Person owes
any amount to the Company. Except as set forth in Schedule 4.5, no properties or
assets owned by any Person or by any subsidiary or affiliate of any Person is
used by the Company in connection with its business. No Person is or during the
past three years has been the direct or indirect owner of any interest in any
entity that is a competitor or supplier of the Company (other than passive
investments representing not more than 5% of the equity of the entity), nor does
any Person receive or has any Person received income from any source other than
the Company that should properly accrue to it.
Section 4.6. Books and Records. The minute books of the Parent and of
Implant as previously made available to Biomet contain accurate records of all
meetings of and corporate actions or written consents by their Boards of
Directors, any committee thereof and their shareholders held or taken since
April 1, 1995. There have been no transactions involving the Company's business
that should have been set forth in the books of account, minute books, stock
record books or stock transfer ledgers, as appropriate, but which have not been
accurately set forth therein.
<PAGE>
Section 4.7. Financial Statements.
(a) Exhibit 4.7(a) consists of true and complete copies of the
consolidated balance sheets, statements of income, statements of common
shareholders' equity and statements of cash flows of the Company as audited
by Ernst & Young LLP, as of and for the years ended December 31 in each of
the years 1996, 1997 and 1998 (the "Audited Financial Statements"). Exhibit
4.7(b) consists of the unaudited consolidated balance sheets, statements of
income and statements of cash flows of the Company as of and for the seven
months ended July 31, 1999 ("Unaudited Financial Statements").
Collectively, the Audited Financial Statements and the Unaudited Financial
Statements are referred to as the "Financial Statements."
(b) The Financial Statements are true and correct in all material
respects (subject, in the case of the Unaudited Financial Statements, to
normal year-end and audit adjustments), have been prepared from the books
and records of the Company in accordance with GAAP consistently applied
throughout the period involved except as may be indicated in the notes
thereto, and show all liabilities, direct and contingent, of the Company
required to be shown in accordance with such principles. The balance sheets
included in the Financial Statements fairly present the financial condition
of the Company as of the dates indicated therein, and the statements of
income, common shareholders' equity and cash flows present fairly the
results of operations and cash flows of the Company for the periods
indicated (subject, in the case of such balance sheets and statements
included in the Unaudited Financial Statements, to normal, recurring
year-end and audit adjustments). Except as disclosed in the Financial
Statements, the statements of income included in the Financial Statements
do not reflect any items of special or non-recurring income or any other
income not earned in the ordinary course of business and consistent with
applicable industry standards and practices.
Section 4.8. Absence of Undisclosed Liabilities. Except as set forth in
Schedule 4.8, as of the date of the balance sheet of the Company included in the
Unaudited Financial Statements ("Balance Sheet") the Company had no debts,
liabilities or obligations of any nature whatsoever (known or unknown, matured
or unmatured, absolute, accrued, fixed, contingent or otherwise, including
without limitation any foreign or domestic tax liabilities or deferred tax
liabilities incurred in respect of or measured by the Company's income, and
products liability or any other liability attributable to defects in products,
materials or workmanship), that are not set forth or reserved against on the
face of the Balance Sheet and that are greater than $50,000 as to any single
liability. All reserves established by the Company and set forth on the Balance
Sheet are adequate and have been established in accordance with GAAP. The
Company has no loss contingencies (as such term is used in Paragraph 5 of the
American Bar Association Statement of Policy Regarding Lawyers' Response to
Auditors' Request for Information) that are not adequately provided for on the
face of the Balance Sheet or as set forth in Schedule 4.8.
<PAGE>
Section 4.9. Tax Matters. Except as set forth in Schedule 4.9:
(a) All federal, state, county, local, foreign and other taxes,
including without limitation income (including gross, adjusted gross and
supplemental net income taxes), receipts, sales, use, franchise, value
added, excise, recording, filing, real and personal property, employees'
income, unemployment, social security taxes (including withholding
obligations for trust fund taxes) and all other taxes, due and payable by
or on behalf of the Company ("Taxes"), and all interest and penalties
thereon, have been timely paid in full or timely and fully withheld and
paid, as the case may be, except for Taxes being contested in good faith by
appropriate proceedings as described in Schedule 4.9. The Company has
timely filed with the Internal Revenue Service or other appropriate
governmental authority, and has provided to its employees, shareholders,
consultants or other persons, all Tax returns, statements, forms or reports
("Returns") required to be filed or provided by it and all Returns are
true, correct and complete in all respects and reflect all income,
deductions, credits, liability for Taxes and information required therein.
Since June 1, 1995, the Company has not been delinquent in the payment of
any Tax or deposit in excess of $10,000 per item.
(b) All accrued but unpaid Taxes (including interest and penalties
thereon) accrued for Tax periods or portions thereof ending on or prior to
the date thereof are duly reflected as a liability or reserved against on
the Balance Sheet and the Company has set up and maintained adequate
reserves for Taxes for all prior Tax periods.
(c) The Company (i) is not now delinquent in the payment of any Tax,
assessment (whether proposed or final) or governmental charge or deposit of
any kind or character; (ii) has no Tax deficiency or claim outstanding,
proposed or assessed against it and there is no basis for any such
deficiency or claim; (iii) has no audit, action, suit, proceeding or
investigation for Taxes pending or threatened against it; and (iv) has not
received any notice that any deficiency, claim, audit, action, suit,
proceeding or investigation may be made against or with respect to it.
(d) Since June 1, 1995, the Company has not received any notice of any
deficiency or other adjustment from the Internal Revenue Service or any
other Governmental Authority with respect to Taxes, and neither the Company
nor any of the Returns has been audited by the Internal Revenue Service or
any other Governmental Authority.
(e) There is not now in force any extension of time with respect to
the date on which any Return was or is due to be filed or provided by or on
behalf of or with respect to the Company or any waiver or agreement by the
Company for an extension of time for the assessment of any Tax.
(f) No election has been made to treat the Company as a "collapsible
corporation" under Section 341(f) of the Code.
<PAGE>
(g) The Company is not subject to any penalty by reason of a violation
of any order, rule or regulation of, or a default with respect to any
Return required to be filed with, any Governmental Authority.
(h) The Company has no pending requests with any Governmental
Authority for rulings as to payment of any Tax.
(i) All leases have been properly reported as either "capital" leases
or "operating" leases, as those terms are commonly used for federal income
tax purposes.
(j) There are no liens for Taxes upon any of the Company's assets,
except liens for current Taxes not yet due.
(k) The Company is not currently under any contractual, statutory,
regulatory or other legal obligation to indemnify any other person with
respect to Taxes and is not a party to any agreement providing for payments
with respect to Taxes.
(l) The Company will not be required, as a result of a change in
method of accounting, to include any adjustment under Section 481(c) of the
Code in any period ending after the Closing Date.
(m) None of the property owned or used by the Company is subject to a
tax benefit transfer lease executed in accordance with Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended by the Economic Recovery Tax
Act of 1981.
(n) No agreement exists that may cause any payment by the Company to
be nondeductible in full or in part under Section 280G of the Code.
(o) The Company has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code or similar
rules of any other Governmental Authority, has never been a member of any
unitary group of corporations or otherwise responsible for the Taxes of any
other person.
The representations set forth in Exhibit 4.9 are incorporated by reference
herein.
Section 4.10. Absence of Changes or Events. Except as set forth in Schedule
4.10, since December 31, 1998 and to the date of this Agreement the business of
the Company has been conducted only in the ordinary course and the Company has
not:
(a) Incurred any obligation or liability, known or unknown, matured or
unmatured, absolute, accrued, fixed, contingent or otherwise, except
current liabilities for trade or business obligations incurred in the
ordinary course of business consistent with its prior practice none of
which, in any case or in the aggregate, materially adversely affects the
business, liabilities or financial condition of the Company;
<PAGE>
(b) Discharged or satisfied any lien, mortgage, pledge, claim,
security interest, charge, encumbrance or restriction or paid any
obligation or liability, whether absolute, accrued, fixed, contingent or
otherwise and whether due or to become due, other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the date
of the Balance Sheet and to the date of this Agreement in the ordinary
course of business and consistent with its prior practice;
(c) Declared, set aside or made any payment of dividends or other
distributions to its shareholders upon or in respect of any shares of the
Company, or purchased, retired or redeemed any shares of the Company or
other securities issued by it;
(d) Mortgaged, pledged or subjected to lien, mortgage, pledge, claim,
security interest, charge, encumbrance or restriction any of its tangible
or intangible property, business or assets other than in the ordinary
course of business;
(e) Other than in the ordinary course of business, sold, transferred,
leased to others or otherwise disposed of any of its tangible or intangible
assets or properties;
(f) Canceled or compromised any debt or claim, other than in the
ordinary course of business;
(g) Waived or released any right of substantial value, including
without limitation any contractual rights, amounting to or having a value
of more than $10,000 in the aggregate;
(h) Received any notice of termination of any contract, lease or other
agreement or suffered any damage, destruction or loss (whether or not
covered by insurance) which, in any case or in the aggregate, has had or
may have an adverse effect on the assets, operations or prospects of the
Company, its assets or its business;
(i) Defaulted in lease or mortgage payments;
(j) Received notification that it has violated any federal, state,
local or municipal law, rule or regulation;
(k) Experienced a decline in revenues (i) from the 100 largest U.S.
customers (based on dollar value) for the period from January 1, 1999 to
July 31, 1999 or any distributor (collectively, a "significant customer"),
or (ii) of any Subsidiary, in either case in an amount greater than 25% as
compared to the same period in the prior calendar year, or received notice
from any significant customer or Subsidiary that such a decline in revenues
from that customer will occur in the future;
<PAGE>
(l) Encountered any actual or threatened labor union organizing
activity or collective bargaining agreement negotiation, had any actual or
threatened employee strikes, work stoppages, slow-downs or lock-outs, or
had any material adverse change in its relationship with its employees,
agents, consultants, salespersons, distributors or independent contractors;
(m) Transferred or granted any concessions, leases, licenses,
agreements or other rights with respect to or under, or entered into any
settlement regarding the breach or infringement of, any United States or
foreign license, patent, copyright, trademark, service mark, trade name,
invention or similar rights, or modified any existing rights with respect
thereto;
(n) Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable or paid or agreed to pay,
conditionally or otherwise, any bonus, extra compensation, pension,
severance or vacation pay to any Person or, other than in the ordinary
course of business, to any employee, consultant, sales representative,
distributor or independent contractor of the Company; entered into any
employment contract with any officer or salaried employee, instituted any
employee welfare, bonus, stock option, profit-sharing, retirement or
similar plan or arrangement; or made any loan or advance to any third party
except those made pursuant to normal trade terms extended to customers;
(o) Issued or sold any shares of its capital stock, bonds, notes or
other securities or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities of
any corporation or any interest in any business enterprise, or otherwise
made any loan or advance to or investment in any third party;
(p) Made any capital expenditures or capital additions or betterments
in excess of an aggregate of $25,000;
(q) Changed its banking or safe deposit arrangements;
(r) Changed its accounting methods or practices, including without
limitation changes in depreciation or amortization policies or rates and in
the method of accounting for inventory;
(s) Revalued any of its assets;
(t) Instituted, settled or agreed to settle any litigation, action,
proceeding or arbitration related in any way to the Company, its assets or
its business;
(u) Failed to replenish its inventories or supplies in a normal and
customary manner consistent with its prior practice and prudent business
practices prevailing in the industry, or made any purchase commitment in
excess of the normal, ordinary and usual requirements of its businesses or
at any price in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry, or
made any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice and prudent business practices
prevailing in the industry;
<PAGE>
(v) Suffered any change, event or condition that, in any case or in
the aggregate, is reasonably expected to have a material adverse effect on
the condition (financial or otherwise), properties, assets, liabilities or
operations of the Company, including without limitation any change in its
revenues, costs, backlog or relations with its customers or suppliers;
(w) Entered into any transaction, contract or commitment (other than
this Agreement), other than in the ordinary course of business;
(x) Except as otherwise set forth in this Agreement, paid or agreed to
pay any legal, accounting, brokerage or finder's fees, Taxes or other
expenses in connection with, or incurred any severance pay obligations by
reason of, this Agreement, the Merger Documents, or the transactions
contemplated hereby or thereby;
(y) Except in the ordinary course of business, entered into, or agreed
to enter into, any agreement or arrangement granting any preferential right
to purchase any of its assets, properties or rights, or requiring the
consent of any party to the transfer and assignment of any such assets,
properties or rights;
(z) Merged into, consolidated with or sold a substantial part of its
assets to any other corporation or person, or permitted any other
corporation to be merged or consolidated with it;
(aa) Acquired or sold any real estate, real estate options, leaseholds
or leasehold improvements, except in the ordinary course of business and
for fair value;
(bb) Terminated, discontinued, closed or disposed of any facility or
business operation; or
(cc) Entered into any agreement or contract, made any commitment or
otherwise obligated itself to take any of the types of action described in
Subsections (a) through (bb) of this Section 4.10.
<PAGE>
Section 4.11. Compliance with Laws; No Default or Litigation. Except as set
forth in Schedule 4.11:
(a) Neither the Company nor, to the Knowledge of the Company, any
predecessor in title or interest to the assets of the Company, is in
material default of or has violated (nor is there any event or condition
which, with notice or lapse of time or both, would constitute a material
default or violation) in any respect (i) any contract, agreement, lease,
consent order or other written commitment or instrument to which it is a
party or by which the assets or business of the Company is subject or
bound, (ii) any law, rule, regulation, ordinance, writ, injunction,
development order, permit, resolution, approval, order, decree, policy or
guideline of any Governmental Authority (including without limitation
applicable laws, rules and regulations relating to environmental
protection, antitrust, civil rights, health and occupational health and
safety), or (iii) any covenants, conditions, restrictions and easements and
any other matters of record involving the Leased Premises (as defined in
Section 4.13);
(b) There are no actions, suits, claims or investigations, or legal,
arbitration or administrative proceedings in progress, pending or, to the
Knowledge of the Company, threatened (including but not limited to matters
of which the Company has received notice) against the Company or involving
any of its directors, officers, employees, assets or its business, or the
transactions contemplated by this Agreement, the Escrow Agreement or the
Merger Documents, whether at law or in equity, whether civil or criminal in
nature, or whether before or by a Governmental Authority. Schedule 4.11
also contains an indication as to whether or not such claims and other
matters are insured or uninsured.
(c) No action, suit or proceeding has been instituted or, to the
Knowledge of the Company, threatened to restrain or prohibit or otherwise
challenge the legality or validity of the transactions contemplated by this
Agreement; and
(d) To the Knowledge of the Company, there are no proposed laws,
rules, regulations, ordinances, orders, judgments, decrees, governmental
takings, condemnations or other proceeding that if adopted or issued is
reasonably expected to have a material adverse effect on the Company, its
assets or its business
"Knowledge of the Company" as that term is used in this Agreement means the
knowledge of the following individuals: Gerard Moufflet, Keith D. Beaty, Richard
J. Lazzara, Edward G. Sabin, Bareld J. Doedens, Steven F. Schiess, Glenn L.
Criser and James W. Scott. An individual is deemed to have knowledge of a
particular fact or matter if (a) such individual is actually aware of the fact
or matter; or (b) a prudent individual could be expected to discover or
otherwise become aware of the fact or matter in the course of performing his
duties in a competent manner.
Section 4.12. Real Property - Owned. The Company owns no real property.
Section 4.13. Real Property - Leased. Schedule 4.13 contains (a) a true and
complete list of all real property currently leased by the Company including all
buildings, structures and improvements located thereon, fixtures contained
therein and appurtenances attached thereto ("Leased Premises") and (b) a brief
description of the use to which each parcel of the Leased Premises is being
employed and/or the use for which it is currently intended.
<PAGE>
Section 4.14. Conformity of the Leased Premises. Except as set forth in
Schedule 4.14 all buildings, structures and improvements located on, fixtures
contained in and appurtenances attached to the Leased Premises conform in all
material respects to applicable federal, state, county, local and foreign laws,
regulations and ordinances, including without limitation those related to
zoning, use or construction, and the Leased Premises are zoned for the purposes
for which they are presently used. All buildings, structures, improvements,
fixtures and appurtenances are in good condition and repair, subject to normal
wear and tear, and there does not exist any condition that interferes
significantly with the economic value or use thereof. Adequate access is
available to the Leased Premises to and from public rights of way. All utilities
necessary for the operation of the buildings, structures and improvements on the
Leased Premises are available to and serving those buildings, structures and
improvements.
Section 4.15. Personal Property - Owned. Schedule 4.15 contains a true and
complete list and brief description of all tools, furniture, machinery, computer
hardware, supplies, vehicles, equipment and other items of tangible personal
property owned by the Company having an original cost in excess of $25,000
("Personal Property"). Except as set forth in Schedule 4.15, each item of the
Personal Property conforms in all material respects to applicable federal,
state, county, local and foreign laws, regulations and ordinances. Each item of
the Personal property is in good operating condition and repair, subject to
normal wear and tear, and there does not exist any condition that interferes
significantly with the economic value or use thereof.
Section 4.16. Personal Property - Leased. Schedule 4.16 contains a true and
complete list and brief description of all leases and other agreements under
which the Company is a lessee of, or holds, uses or operates any tools,
furniture, machinery, computer hardware, supplies, vehicles, equipment, or other
tangible personal property owned by any other person and under which payments
exceed $10,000 per annum ("Leased Personal Property"). The Company has delivered
to Biomet true and complete copies of the leases listed in Schedule 4.16. Except
as set forth in Schedule 4.16, the Company is the owner and holder of the entire
interest in the leasehold estates purported to be granted by the leases or
agreements identified in Schedule 4.16, and each of which is in full force and
effect and constitutes a legal, valid and binding obligation of the respective
parties thereto, enforceable in accordance with its terms. No consent of any
lessor of the Leased Personal Property is required in connection with the
transactions contemplated by this Agreement, except as set forth in Schedule
4.16. Each item of the Leased Personal Property conforms in all material
respects to applicable federal, state, county, local and foreign laws and
regulations, and each item of the Leased Personal Property is in good operating
condition and repair, subject to normal wear and tear and there does not exist
any condition that interferes significantly with the economic value or use
thereof.
Section 4.17. Inventory. Except as set forth in Schedule 4.17, each item of
the Company's inventory, raw materials, components, repair parts,
work-in-process and finished goods ("Inventory") is merchantable, or suitable
and usable for the production or completion of merchantable products, for sale
within a reasonable period of time in the ordinary course of business as first
quality goods at customary mark-ups, and none of the Inventory consists of any
items that are slow-moving, obsolete, or of below-standard quality, subject to
customary obsolescence or shelf-life limitations not material to the Inventory
or its usefulness in the Company's business.
<PAGE>
Section 4.18. Contracts.
(a) Schedule 4.18(a) lists all contracts, leases (other than those
described in Schedules 4.13 and 4.16), commitments, purchase orders, work
orders, agreements, consent orders and other arrangements, including all
amendments thereto, to which the Company is a party or is subject or by
which the Company, its assets or its business is bound, which are valued
individually at $10,000 or more and that fall into one or more of the
following categories ("Contracts"):
(i) Collective bargaining agreements and all other material
agreements with employees as a group;
(ii) Loans, lines of credit, security agreements or other payment
obligations;
(iii) Contracts relating to employment, and policies and
commitments with or between the Company and any of its employees,
directors or officers including without limitation those relating to
severance;
(iv) Contracts of guaranty or indemnification;
(v) Contracts containing any covenant limiting the right of the
Company to engage in any line of business or compete with any person;
(vi) Contracts relating to capital expenditures;
(vii) Contracts related to the purchase, sale or lease of
equipment, services or supplies or related to the sale of services or
distribution of products;
(viii) All Contracts not listed on any other Schedule to this
Agreement and not in the ordinary course of business;
(ix) Contracts relating to the payment or receipt of royalties;
(x) Contracts relating to the grant or receipt of any license;
<PAGE>
(xi) Contracts that require consent by any other person in
connection with the consummation of the transactions contemplated by
this Agreement either to prevent a breach or to continue the
effectiveness thereof; and
(xii) Contracts with any person described in Section 4.5 of this
Agreement.
(b) All of the Contracts are valid and binding obligations of the
respective parties thereto, enforceable in accordance with their respective
terms, are in full force and effect, and, except as set forth in Schedule
4.18(b), the Surviving Corporation will be entitled to the full benefits
thereof. Except as set forth in Schedule 4.18(b), none of the payments
required to be made by the Company under any of the Contracts has been
prepaid more than 30 days prior to the due date of such payment thereunder,
and there is not thereunder any existing default or event which, after
notice or lapse of time or both, would constitute a default or result in a
right to accelerate or a loss of rights. None of the Contracts is
significantly disadvantageous to the Company or its business. None of the
Contracts is subject to renegotiation with any governmental body. True and
complete copies of all of the Contracts have been delivered to Biomet.
Section 4.19. Accounts, Notes and Other Receivables. Schedule 4.19 contains
a true and complete list of the amounts and aging of all unpaid accounts, notes
and other receivables owing to the Company as of July 31, 1999. Except as set
forth in Schedule 4.19, all of the foregoing constitute valid claims which arose
in the ordinary course of business and, as of July 31, 1999 individually
exceeded $10,000, there is:
(a) no account or note receivable that has been outstanding for more
than 90 days;
(b) no account or note receivable debtor who has refused or threatened
to refuse to pay its obligations to the Company for any reason;
(c) no account or note receivable debtor who is insolvent or in
bankruptcy;
(d) no account or note receivable pledged to any third party;
(e) no account or note receivable that, to the Knowledge of the
Company, will be uncollectible in the ordinary course of business; and
(f) no account or note receivable subject to any defense, counterclaim
or set-off, that individually exceeds $10,000.
Section 4.20. Prepaid Expenses. Schedule 4.20 contains a true and complete
list of all liabilities, obligations and expenses prepaid by the Company, and
all deposits and other similar items of the Company in each case in excess of
$10,000 and existing as of July 31, 1999. Except as set forth in Schedule 4.20,
all of the foregoing arose in the ordinary course of business.
<PAGE>
Section 4.21. Accounts and Notes Payable. Except as set forth in Schedule
4.21, all of the unpaid accounts and notes payable owing by the Company to other
persons as of July 31, 1999, foregoing arose in the ordinary course of business,
and as of such date there was no account or note payable that had been
outstanding for more than 60 days.
Section 4.22. Licenses and Permits.
(a) Schedule 4.22 contains a true and complete list of all franchises,
licenses, permits, certificates, approvals, clearances, resolutions,
development orders, consents and other authorizations necessary to own,
lease or operate the Company's assets or to conduct its business
("Permits") and, with respect to each Permit, the name of the licensor or
grantor, a description of the subject matter, the termination date and the
terms of any renewal options. The Company has delivered to Biomet true and
complete copies of all of the Permits.
(b) The Company lawfully obtained and currently possesses the Permits
and has fulfilled and substantially performed its obligations under each of
the Permits. No event has occurred and no condition or state of facts
exists which constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any of the Permits which would allow
revocation or termination of any of the Permits or damages resulting from
such breach or default or which might adversely affect the rights of the
Company under any of the Permits. No notice of cancellation, of default or
of any dispute concerning any of the Permits or of any event, condition or
state of facts described in the preceding sentence, has been received by or
is, to the Knowledge of the Company, threatened. Each of the Permits is
valid, subsisting and in full force and effect, and will continue in full
force and effect after the Merger, in each case without (i) the occurrence
of any breach, default or forfeiture of rights thereunder, or (ii) the
consent, approval or act of, or the making of any filing with, any
Governmental Authority.
(c) To the Knowledge of the Company, there are no pending or proposed
federal, state, county, local or foreign statutory or regulatory changes
that will or is reasonably likely to affect the terms of any of the Permits
or otherwise have an adverse effect on the ability of Surviving Corporation
to use the assets or conduct the business of the Company after the Closing
in accordance with the Permits.
(d) The Permits include all environmental, land use and growth
management obligations required by any Governmental Authority in connection
with the operation of the business of the Company.
<PAGE>
Section 4.23. Proprietary Information.
(a) Set forth in Schedule 4.23 is a list and brief description of all
patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names and
copyrights and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company or of which the
Company is a licensor or licensee or in which the Company has any right.
The Company owns or possesses adequate licenses to use, free and clear of
claims or rights of any other person, all domestic and foreign patents,
patent applications, trademarks, trademark applications, service marks,
service mark applications (including continuations, continuations-in-part,
divisional reissues and reexaminations thereof), trade names, copyrights,
copyright applications, manufacturing processes, programming processes and
software, algorithms, inventions, trade secrets, shop rights, know-how,
business plans and strategies, proprietary processes and formulae, data
bases, telephone numbers and all other proprietary technical information,
whether patentable or unpatentable, necessary to the conduct of its
business as presently conducted and as proposed to be conducted
(collectively "Intellectual Property"). Except as set forth in Schedule
4.23, all Intellectual Property that is used or incorporated into the
Company's products or contemplated products and that is unique or
proprietary to the Company was developed by or for the Company by the
employees or consultant of the Company and is owned exclusively by the
Company, free and clear of claims or rights of any other person. Except as
set forth in Schedule 4.23, the Company is not aware of any infringement by
any other person of any rights of the Company under any Intellectual
Property. Except as set forth in Schedule 4.23, no claim is pending or
threatened against the Company, nor has the Company received any notice
from any third parties, to the effect that any Intellectual Property owned
or licensed by the Company, or which the Company otherwise has the right to
use, or the operation or products or services of the Company infringe upon
or conflict with the asserted rights of any other person under any
Intellectual Property and, to the Knowledge of the Company, there is no
basis for any such claim (whether or not pending or threatened). Except as
set forth in Schedule 4.23, no claim is pending or threatened against the
Company, nor has the Company received any notice from any third parties, to
the effect that any Intellectual Property owned or licensed by the Company,
or which the Company otherwise has the right to use, is invalid or
unenforceable by the Company and, to the Knowledge of the Company, there is
no basis for any such claim (whether or not pending or threatened).
(b) All technical information developed by or belonging to the Company
and which is material to the business of the Company which has not been
patented has been kept confidential. To the Knowledge of the Company, the
Company is not making unlawful use of any Intellectual Property of any
other person, including without limitation any former employer of any past
or present employees of the Company. Except as disclosed in Schedule 4.23,
neither the Company nor, to the Knowledge of the Company, any of the
Company's employees or consultants has any agreements or arrangements with
former employers of such employees or consultants relating to any
Intellectual Property of such employers which interfere or conflict with
the performance of such employee's or consultant's duties for the Company
or results in any former employers of such employees and consultants having
any rights in, or claims on, the Company's Intellectual Property. The
activities of the Company's employees and consultants on behalf of the
Company do not, to the Knowledge of the Company, violate any agreements or
arrangements which any such employees or consultants have with former
employers. The Company has taken all commercially reasonable steps required
to establish and preserve its ownership of all of its Intellectual
Property; each current and former employee of the Company, and each of the
Company's consultants and independent contractors involved in development
of any of the Company's Intellectual Property, has executed an agreement
regarding confidentiality, proprietary information and assignment of
inventions to the Company substantially in the form of Exhibit 4.23 hereto
and, to the Knowledge of the Company, all such employees, consultants and
independent contractors are not in violation of such agreements.
<PAGE>
(c) Without limitation of any of the foregoing and except as otherwise
expressly disclosed in Schedule 4.23 and except where the failure of any of
the following would not have a material adverse effect on the Company or
its operations: (i) no part of any software belonging to any third parties
was included in the Company's products, whether pursuant to any license
arrangement or otherwise, and no use was made of any trade secrets or
proprietary information of any third party in developing such products;
(ii) the Company has not at any time licensed or otherwise authorized any
person to manufacture, have manufactured, assemble, reproduce, sell or
otherwise distribute or modify the Company's products or any part or
modified version thereof; (iii) the Company has not at any time provided to
any person the specific parameters, system architecture and information
which defines the scope, objectives and processes of operations for the
Company's products or any part thereof; (iv) the Company has affixed
appropriate copyright notices and notices prohibiting unlicenced use to all
copies of its products and related documentation which the Company has
distributed to any person; (v) the Company has taken reasonable security
measures to guard against unauthorized disclosure or use any of its
Intellectual Property; and (vi) the Company has no reason to believe that
any person (including without limitation any former employee of the
Company) has unauthorized possession of any of its Intellectual Property,
or any part thereof, or that any person has obtained unauthorized access to
any of its Intellectual Property.
Section 4.24. Rights Under Warranties. To the Knowledge of the Company,
Schedule 4.24 contains a list and brief description of all rights in, to and
under all representations, warranties, covenants and guarantees having a value
as of the date of this Agreement of $10,000 or more, with respect to the
Company's assets or any portion thereof purchased or obtained by or assigned or
transferred to the Company from any other person.
Section 4.25. Title to Assets and Related Matters. The Company has good,
marketable and insurable title to all of the assets owned by it, free and clear
of all mortgages, liens, pledges, charges, claims, security interests,
encumbrances, easements, encroachments, limitations, restrictions, rights of
third parties, or other interests of any kind or character, except as set forth
in Schedule 4.25 and except for liens for Taxes not yet due and payable. All
consents necessary to consummate the transactions contemplated by this Agreement
and the Merger Documents are or will be when obtained valid and binding upon the
persons giving them.
<PAGE>
Section 4.26. Environmental, Land Use and Growth Management Matters.
(a) The Company holds all permits, and is in compliance with all
regulatory plans and compliance schedules, if any, necessary under all
federal, state and local environmental land use and growth management laws.
(b) All of the Leased Premises and all operations conducted thereon,
including without limitation the Company's use of its assets and the Leased
Premises are currently, and have been for the past three years (or for the
period of the Company's occupancy, if less than three years), in compliance
with all applicable federal, state and local environmental, land use and
growth management laws, regulations, rules ordinances, permits, development
orders, approvals, resolutions and orders, including all consent orders.
(c) With respect to the Leased Premises, there exists no state of
affairs and there has occurred no event that currently requires, or is
currently expected to require in the future, reporting or disclosure (other
than routine reporting required as a condition of permits or licenses held
by the Company) by the Surviving Corporation to any federal, state or local
agency concerned with environmental protection and management or land use
control or growth management.
(d) All real property or leased premises previously owned or operated
by the Company and to the extent applicable, its predecessors in interest,
were in compliance with all applicable federal, state, local environmental,
land use and growth management laws, regulations, rules, ordinances,
permits, development orders, approvals, resolutions and orders, including
all consent orders, when those Properties were sold, transferred or
vacated.
(e) The Company has utilized, handled, stored, delivered for disposal,
disposed of and transported all wastes in compliance with all environmental
laws and so as not to contaminate any of the Leased Premises. To the
Knowledge of the Company, the Company's wastes have not been stored,
treated or disposed at any property that has been or is listed on the
federal CERCLIS list or any state equivalent.
(f) The Leased Premises have not been, and all real property or leased
premises previously owned or operated by the Company when sold, transferred
or vacated were not, contaminated, tainted or polluted in violation of
applicable Federal, state or local environmental laws, rules, regulations,
ordinances, permits or orders as a result of activities conducted by the
Company or the migration of contaminants from any adjacent property.
(g) There are not pending or, to the Knowledge of the Company,
threatened, claims by any private parties or Governmental Authority, and
there are no pending or threatened judicial or administrative actions,
alleging violations of any federal, state or local environmental, land use
or growth management laws, regulations, rules ordinances, permits,
development orders, approvals, resolutions or orders on or connected with
the Properties, the assets, or the operations conducted thereon or at any
time prior to the Closing Date.
<PAGE>
(h) Schedule 4.26 contains a list and brief description of all
material written and oral communications between the Company and any
federal, state or local Governmental Authority with respect to any removal,
remediation or clean-up required to be undertaken, the results of any
inspection or compliance review, potential liability arising under, or
potential violations of the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act
and the Comprehensive Environmental Response, Compensation and Liability
Act and equivalent state, local and foreign laws, regulations, rules,
ordinances and all court and administrative orders issued pursuant thereto,
in the last five years.
(i) Wetlands. No part of the Leased Premises is within an area that
is, or to the Knowledge of the Company could be, designated by the U.S.
Army Corps of Engineers as a wetlands.
Section 4.27. Labor Relations; Employees.
(a) The Company employs approximately 400 persons. Except as set forth
in Schedule 4.27(a):
(i) the Company generally enjoys a stable and harmonious
employer-employee relationship with its employees;
(ii) the Company has paid in full to all its employees all due
and owing wages, salaries, commissions, bonuses, fringe benefit
payments and all other direct and indirect compensation of any kind
owed for all services performed by them and each of them to the date
hereof,
(iii) the Company is in compliance with (A) all federal, state,
local and foreign laws, regulations, rules, ordinances and court and
administrative orders dealing with employment and employment practices
of any kind, (B) all of the terms and conditions of employment of any
kind with respect to its business, and (C) all wages and hours
requirements and regulations;
(iv) there is no unfair labor practice, safety, health, breach of
contract, wrongful discharge, discrimination or wage claim, charge,
citation, complaint, suit, arbitration, action and/or proceeding
pending, or to the Knowledge of the Company threatened (and to the
Knowledge of the Company there is no reasonable basis therefor),
against or involving the Company before the National Labor Relations
Board, Occupational Safety and Health Administration, Equal Employment
Opportunity Commission, the United States Department of Labor or any
other Governmental Authority;
<PAGE>
(v) there is no labor dispute, strike, work stoppage,
interference with production or slowdown in progress, or to the
Knowledge of the Company threatened, against or involving the Company;
(vi) there is no question of representation under the National
Labor Relations Act, as amended, or any similar state statute,
pending, or to the Knowledge of the Company threatened, with respect
to the employees of the Company, and to the Knowledge of the Company
there has been no attempt to organize any group or all of the
employees of the Company in the last five years;
(vii) there is no grievance pending or to the Knowledge of the
Company threatened which is reasonably likely to have a material
adverse effect on the Company or on the conduct of its business;
(viii) there is no collective bargaining agreement currently
being negotiated or subject to negotiation or renegotiation by the
Company; and
(ix) the Company is not a party to any agreement of any kind,
including, but not limited to, any agreement with a Governmental
Authority, which restricts the Company from relocating, closing or
terminating any of its operations or facilities.
(b) Schedule 4.27(b) contains a true and complete description of (i)
all collective bargaining agreements or obligations of any kind to which
the Company is a party or by which it is bound, and their respective
effective and expiration dates, which have been entered into within the
last five years, and the status thereof and (ii) all work stoppages,
interference with production, and/or slowdown by employees of the Company
within the last five years.
Section 4.28. Compensation. Schedule 4.28 contains a true and complete list
of all directors, officers and employees of the Company who (i) earned direct
remuneration from the Company in excess of $150,000 during the year ended
December 31, 1998, or (ii) are currently receiving direct remuneration from the
Company at an annualized rate in excess of $150,000.
Section 4.29. Employee Benefit Plans.
(a) "Pension Benefit Plan" means an "employee pension benefit plan"
(as defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and any other employee pension, deferred
compensation or profit sharing plan, program arrangement or agreement,
whether insured or uninsured, funded or unfunded, including without
limitation each deferred compensation plan, bonus plan, stock option plan,
employee stock purchase plan, severance plan or policy and any other
employee benefit plan, agreement, arrangement or commitment maintained by,
or promised by, the Company or to which the Company contributes, or is
legally obligated to contribute, for its employees.
<PAGE>
(b) "Welfare Benefit Plan" means an "employee welfare benefit plan"
(as defined in Section 3 of ERISA) and any other employee benefit plan,
program, arrangement or agreement whether insured or uninsured, funded or
unfunded, maintained by the Company or to which the Company contributes, or
is legally obligated to contribute, for its employees.
(c) Schedule 4.29(c) contains a list of each Welfare Benefit Plan and
each Pension Benefit Plan (hereafter the "Employee Benefit Plans").
(d) The funding method used in connection with each Pension Benefit
Plan has at all times satisfied and will as of the Closing Date satisfy any
and all requirements under ERISA and the Code. Except as set forth in
Schedule 4.29(d), there is no "accumulated funding deficiency" as defined
in Section 302(a)(2) of ERISA or Code Section 412(a) (whether or not
waived) which exists, asserted or unasserted, with respect to any plan year
of any Pension Benefit Plan.
(e) Except as set forth in Schedule 4.29(e), there are no material
liabilities of the Company, contingent or otherwise, accrued or unaccrued,
asserted or unasserted, with respect to any of the Employee Benefit Plans.
(f) With respect to each Employee Benefit Plan, Schedule 4.29(f) sets
forth the amount of any contribution made in 1998 and the amount of any
contribution made in the period between December 31, 1998 and July 31,
1999, and the amount of any contribution payable in accordance with the
contribution formula set forth in any Pension Benefit Plan, authorized by
the Board of Directors of the Company, or otherwise due and owing or
promised by the Company, with respect to the period between the close of
any appropriate plan year for any such plan and the date of this Agreement.
(g) Except as set forth in Schedule 4.29(g), each Pension Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has at
all times qualified under Section 401(a) of the Code and been tax exempt
under Section 501(a) of the Code, and the Internal Revenue Service has made
a favorable determination as to the qualification under the Code of each
Pension Benefit Plans and each amendment thereto. Except as set forth in
Schedule 4.29(g), at all times prior to the date hereof, each Pension
Benefit Plan has been operated and administered in compliance with any and
all requirements of the Uruguay Round Agreements Act, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Small Business
Job Protection Act of 1996 and the Taxpayer Relief Act of 1997, each, as
amended, without regard to when the plan is required to be amended to
comply with that act.
<PAGE>
(h) Schedule 4.29(h) contains a list of each separate trust agreement,
custodial agreement, investment management agreement, administrative
services agreement and insurance policy or annuity contract associated with
or related to each Employee Benefit Plans.
(i) Each Employee Benefit Plan has been administered at all times in
material compliance with the requirements of ERISA and the Code and all
other applicable laws, rules and regulations. All reports and disclosures
required by any governmental agency with respect to each Employee Benefit
Plans have been timely filed with each appropriate Governmental Authority
and distributed to all required persons in an appropriate and timely manner
and in material compliance with all applicable laws, rules and regulations.
(j) No plan fiduciary of any Employee Benefit Plan has engaged in or
authorized any non-exempt transaction in violation of Section 406(a) or (b)
of ERISA or any "prohibited transaction" (as defined in Section 4975(c)(1)
of the Code). Except as set forth in Schedule 4.29(j), neither the Company
nor any entity under common control with it ("Common Control Entity") has
incurred any penalty or tax under Section 502(i) of ERISA or Section 4975
of the Code. Schedule 4.29(j) sets forth the name and business address of
each Common Control Entity other than the Company.
(k) All contributions to and payments from the Employee Benefit Plans
which may have been required to be made in accordance with the plans, ERISA
or the Code have been timely made.
(l) There are no pending investigations by any Governmental Authority
involving the Employee Benefit Plan and, except with respect to this
transaction, no termination proceedings involving any of the Employee
Benefit Plans and no pending or, to the Knowledge of the Company,
threatened claims (except for claims for benefits payable in the normal
operation of the Employee Benefit Plans), suits or proceedings against any
of the Employee Benefit Plans or assertion of any rights or claims to
benefits under any of the Employee Benefit Plans.
(m) Except as set forth in Schedule 4.29(k), no Pension Benefit Plan
has ever acquired or held any "employer security" or "employer real
property" each as defined in Section 407(d) of ERISA, and any such
acquisition or holding as so set forth has at all times been in compliance
with ERISA, the Code and all other applicable laws, rules and regulations.
(n) There are no premiums due to the Pension Benefit Guaranty
Corporation ("PBGC") for any Pension Benefit Plan and neither the Company
nor any Common Control Entity has incurred any liability to the PBGC or
otherwise under Sections 4062, 4063 or 4064 of ERISA and neither the
Company nor any Common Control Entity is a "substantial employer" under
Section 4063 of ERISA.
<PAGE>
(o) Except as set forth in Schedule 4.29(m), no filing has been made
by the Company or any Common Control Entity with the PBGC (and no
proceeding has been commenced by the PBGC) to terminate any Pension Benefit
Plan maintained, or wholly or partially funded, by the Company or any
Common Control Entity.
(p) At no time has the Company or any Common Control Entity
contributed to a multiemployer plan (as defined in Section 3(37) of ERISA).
(q) The Company has delivered to Biomet true and complete copies of
the Employee Benefit Plans listed in Schedule 4.29(c), related trust
agreements, custodial agreements, insurance policies or annuity contracts
(or any other funding instruments), the most recent determination letter
issued by the Internal Revenue Service with respect to each Pension Benefit
Plan and the Annual Reports on the Form 5500 Series required to be filed
with any Governmental Authority for each Employee Benefit Plans for the two
most recent plan years.
(r) All Employee Benefit Plans, related trust agreements, custodial
agreements, insurance policies or annuity contracts (or any other funding
instruments), are legally valid and binding and in full force and effect.
(s) The Company is not a member of an affiliated service group within
the meaning of Code Section 414(m).
(t) The Company does not have any leased employees within the meaning
of Code Section 414(n).
(u) The Company does not have any employees within the meaning of the
regulations under Code Section 414(o).
(v) None of the employees of the Company is a member of any voluntary
employees' beneficiary association within the meaning of Code Section
501(c)(9), and the Company has not (A) contributed to a voluntary
employees' beneficiary association in any year, (B) claimed a deduction
under Section 419(a)(2) of the Code for any taxable year in excess of any
welfare benefit funds qualified cost for the taxable year as determined
under Section 419(c) of the Code, or (C) made any additions to any
qualified asset account in excess of the account limit as determined under
Section 419A(c) of the Code.
(w) Except as set forth in Schedule 4.29(w), neither the Company nor
any Common Control Entity has any obligation to provide any medical or
health benefits to any former employees, retired employees, or their
dependents except to the extent required by Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA").
<PAGE>
(x) The Company and each Common Control Entity has complied with the
requirements of Title X of COBRA and the rules and regulations thereunder.
(y) There is no contract, agreement, plan, promise or arrangement
covering any current or former employee of the Company that could give rise
to any other payments, benefits, obligations or liabilities other than as
disclosed on the schedules to this Section 4.29.
(z) No condition or circumstance exists that would prevent the
Company, Biomet or Acquisition from amending or terminating any Employee
Benefit Plans.
(aa) Schedule 4.29(aa) contains a true and complete list of any other
plans, programs or arrangements that benefit employees that are not shown
in Schedule 4.29(c).
Section 4.30. Insurance.
(a) Schedule 4.30 contains (i) a true and complete list of all
policies of liability, theft, fidelity, life, fire, product liability,
workers' compensation, health and other forms of insurance held by the
Company and specifies the insurer, amount of coverage, type of insurance
and policy number; and (ii) for the past three fiscal years, an accurate
description of any prior claims (other than health claims not exceeding
stop loss limits), any cancellation or significant increase in premiums and
any pending claims under those or predecessor policies.
(b) The policies listed in Schedule 4.30 are outstanding, in full
force and effect and all premiums billed with respect to those policies
have been paid. The insurance coverage provided by the policies listed in
Schedule 4.30 satisfies all contractual and statutory requirements
applicable to the Company, its assets or its business and is in such
amounts and insures against such liabilities and hazards as is consistent
with past practice. During the past five years, the Company has not had any
policy of insurance revoked or rescinded by a carrier.
Section 4.31. No Guaranties. Except as set forth in Schedule 4.31, none of
the obligations or liabilities of the Parent or any Subsidiary is guaranteed by
the Parent or any Subsidiary, or by any other person, nor has the Parent or
Subsidiary guaranteed the obligations or liabilities of any other person in an
amount greater than $10,000 in any one instance.
Section 4.32. Bank Accounts. Schedule 4.32 contains a list of all bank
accounts, escrow deposit accounts, money market accounts, brokerage accounts and
similar accounts and safe deposit boxes of the Company, including all accounts
or other locations at which the Company holds cash, cash equivalents or
securities, with an identification of the name of the bank or brokerage firm,
account number and the signatories thereunder.
<PAGE>
Section 4.33. Powers of Attorney. Schedule 4.33 describes all general or
special powers of attorney from the Company and summarizes the terms thereof.
Section 4.34. Suppliers and Customers. Schedule 4.34 sets forth, with
respect to 1997, 1998 and 1999 (through July 31), (i) a list of the ten largest
suppliers (in dollar value) of the Company, and (ii) a list of the ten largest
customers (in dollar value) (excluding distributors) of the Company. The
relationship of the Company with suppliers, customers and creditors is good and
the Company has not received notice from any of the suppliers or customers
listed on Schedule 4.34 of its intention to terminate or modify any of those
relationships in any manner that would be materially adverse to the Company.
Section 4.35. FDA Licenses. Except as set forth in Schedule 4.35, the
Company holds all material licenses, permits, approvals, clearances and
authorizations required for and/or used in the ownership and operation of its
business as presently operated or as presently anticipated to be operated,
including all licenses, permits, approvals, clearances, authorizations and other
certificates required by the United States Food and Drug Administration (the
"FDA") or any other Governmental Authority responsible for regulating the
medical devices industry (collectively, the "FDA Licenses"). To the extent
necessary, the Company has timely filed all applications in connection with the
FDA Licenses, including, without limitation, all 510(k) applications, and all
such applications have been granted without conditions. No petition, action,
investigation, notice of violation or apparent liability, complaint or
proceeding is pending or, to the Knowledge of the Company, threatened before the
FDA or any other forum or agency seeking to revoke, cancel, suspend or modify
any of the FDA Licenses. To the Knowledge of the Company, there is no fact that
is likely to result in the revocation, modification or suspension of any of the
FDA Licenses, or the imposition of any administrative or judicial sanction with
respect to the Company which may materially adversely affect the rights under
any of the FDA Licenses or which may have a materially adverse effect on the
Company. The Company is in material compliance with the terms of the FDA
Licenses and all applicable filing and operating requirements and all applicable
regulations and policies of the FDA.
Section 4.36. Brokers' or Finders' Fees. No agent, broker, investment
banker or other person or firm acting on behalf of the Company, any of its
directors or executive officers, or the Control Shareholders, or under the
authority of any of them, is or will be entitled to any broker's or finder's fee
or any other commission or similar fee, directly or indirectly, from any of the
parties hereto in connection with any of the transactions contemplated hereby.
Section 4.37. Absence of Obligations to Certain Persons. Neither the
Control Shareholders nor any of the Persons specified in Section 4.5 has any
claims against the Company for money or other property loaned, services rendered
or otherwise, other than for current salary, bonus, pension benefits,
reimbursement of expenses and fringe benefits payable in accordance with the
Company's normal practices, which have not been fully paid and discharged.
<PAGE>
Section 4.38. Not a Foreign Person. Except as set forth in Schedule 4.38,
neither the Parent nor any of its shareholders is, or at the Closing will be, a
"Foreign Person" as that term is defined in Code Section 1445(f)(3) and the
Treasury regulations promulgated thereunder.
Section 4.39. Certain Accounting and Tax Matters. Neither the Company nor
any of its Subsidiaries, nor any of the Control Shareholders, has taken or
agreed to take any action, nor to the Knowledge of the Company are there any
facts or circumstances, that would (i) prevent Biomet from accounting for the
Merger as a "pooling-of-interests" in accordance with the Pooling Requirements,
or (ii) prevent the Merger from qualifying as a "reorganization" within the
meaning of Section 368 of the Code.
Section 4.40. Absence of Certain Commercial Practices. Except as set forth
in Schedule 4.40, the directors and officers of the Company and, to the
Knowledge of the Company, the employees, other agents and other persons acting
on the Company's behalf have not (a) given or agreed to give any gift or similar
benefit of more than nominal value to any customer, supplier or governmental
employee or official or any other person who is or may be in a position to help
or hinder the Company or assist the Company in connection with any proposed
transaction, which gift or similar benefit, if not given in the past, might have
materially and adversely affected the business of the Company, or which, if not
continued in the future, might materially and adversely affect the business of
the Company, (b) used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds which would be in violation of
Section 30A of the Exchange Act were that provision applicable, or (c) accepted
or received any unlawful contributions, payments, gifts or expenditures.
Section 4.41. Year 2000. The Company has conducted a review of its systems,
processes, products, equipment and services (the "Systems and Services") and, to
the Knowledge of the Company, the Company has no reason to believe that the
Systems and Services are not or will not be Year 2000 ready.
Section 4.42. Certain Health Regulatory Matters. Neither the Company, nor
the officers, directors, managing employees or agents (as those terms are
defined in 42 C.F.R. Section 1001.1001 and in their capacities as such with the
Company) of the Company: (i) have engaged in any activities which are prohibited
under, or are cause for civil penalties or mandatory or permissive exclusion
from, any Federal Health Care Program under SSA Sections 1128, 1128A, 1128B or
1877, or the regulations promulgated pursuant to such statutes or related state
or local statutes, including but not limited to knowingly and willfully
offering, paying, soliciting or receiving any remuneration (including any
kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash
or in kind in return for, or to induce, the purchase, lease or order, or the
arranging for or recommending of the purchase, lease, or order of any item or
service for which payment may be made in whole or in part under any such
program; (ii) have had a civil monetary penalty assessed against them under SSA
ss.1128A; (iii) have been excluded from participation under any Federal Health
Care Program; (iv) have been convicted (as defined in 42 C.F.R. ss.1001.2) of
any of the categories of offenses described in SSA Sections 1128(a) or
1128(b)(1), (b)(2) or (b)(3).
<PAGE>
Section 4.43. Disclosure. No statement in the representations or warranties
of the Company or the Control Shareholders in this Agreement or in the Schedules
thereto contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make those representations and warranties
not misleading. No statement of the Company or the Control Shareholders in the
Merger Documents or in any certificate or other document to be delivered in
connection with the transactions contemplated hereby or thereby will contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading. All information in any
Schedule, Exhibit or any contract delivered on behalf of the Company pursuant
hereto or in connection with the transactions contemplated by this Agreement or
the Merger Documents shall be deemed to have been relied upon by Biomet and
Acquisition and constitute representations and warranties by the Company, Beaty
and Lazzara herein.
Section 4.44. Representations and Warranties as of Date Hereof. The
representations and warranties contained in the foregoing Sections 4.1 through
4.43 inclusive are made as of the date hereof, except as otherwise expressly
indicated therein.
ARTICLE IVA
Representations and Warranties of the Advent Funds
As a material inducement to Biomet and Acquisition to enter into this
Agreement and the Merger Documents and to consummate the transactions
contemplated hereby and thereby, each of Global Private Equity II L.P. and
Advent International Investors II L.P. (the "Advent Funds") represents and
warrants to Biomet and Acquisition, as to itself only, that:
Section 4A.1. Organization; Power. Each of the Advent Funds is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their organization, has all requisite power and authority to
own, lease and operate its business as it is now being conducted, to enter into,
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to comply with and fulfill the terms and conditions of this
Agreement.
Section 4A.2 Title to Parent Stock. At the Closing, each of the Advent
Funds will have good and marketable title to the shares of the Company owned by
it, and none of those shares will be subject to any lien, claim or encumbrance
of any kind.
Section 4A.3. Authority; No Violation.
(a) This Agreement is the valid and binding obligation of each of the
Advent Funds, enforceable against them in accordance with its terms and
conditions, except as the enforcement hereof and thereof may be limited by
bankruptcy, insolvency, moratorium or other laws relating to or limiting
creditors' rights generally or by general principles of equity, regardless
of whether such enforceability is considered in equity or law.
<PAGE>
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by the
Advent Funds with any of the provisions hereof or thereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under or give rise to any right of termination,
cancellation or acceleration under any provision of their
organizational documents, any of the terms, conditions or provisions
of any note, lien, bond, mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement,
restriction or other instrument or obligation to which the Advent
Funds are a party or by which they may be bound;
(i) violate any law, rule or regulation of any government or
governmental agency or body or any judgment, order, writ, injunction
or decree of any court or any foreign, federal, state or local
administrative agency, commission, board, bureau or other governmental
agency or other instrumentality (a "Governmental Authority")
applicable to the Advent Funds.
Section 4A.4. Consents and Approvals. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary entity action on the part of the
Advent Funds.
ARTICLE V
Representations and Warranties of Biomet and Acquisition
As a material inducement to the Company and the Control Shareholders to
enter into this Agreement and the Merger Documents and to consummate the
transactions contemplated hereby and thereby, Biomet and Acquisition jointly and
severally represent and warrant to the Company and the Control Shareholders
that:
Section 5.1. Organization; Power. Each of Biomet and Acquisition is a
corporation duly organized and validly existing under the laws of the State of
Indiana, for which all required annual reports have been filed with the Indiana
Secretary of State and for which no Articles of Dissolution appear as having
been filed with the Indiana Secretary of State. Each of Biomet and Acquisition
has all the requisite corporate power and authority to own, lease and operate
its business as it is now being conducted and to enter into this Agreement and
the Merger Documents, to consummate the transactions contemplated thereby and to
comply with and fulfill the terms and conditions of this Agreement and the
Merger Documents. Biomet and Acquisition have delivered to the Company and the
Control Shareholders (a) true and complete copies of their Articles of
Incorporation, including all amendments thereto, and (b) copies of their
respective Bylaws, as currently in effect.
<PAGE>
Section 5.2. Capital Stock. The authorized shares of Biomet consist of
500,000,000 Common Shares, of which approximately 112,745,000 shares were issued
and outstanding as of July 9, 1999, and 5,250 Preferred Shares, none of which
have been issued. The authorized shares of Acquisition consist of 10,000 Common
Shares, of which 100 shares are issued and outstanding and owned by Biomet. All
issued and outstanding Biomet Common Shares are validly issued and outstanding,
fully paid and nonassessable.
Section 5.3. Authority; No Violation; Etc.
(a) The execution and delivery of this Agreement and the Merger
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action on the part of Biomet and Acquisition. This Agreement and the Merger
Documents are valid and binding obligations of Biomet and Acquisition,
enforceable against Biomet and Acquisition in accordance with their
respective terms and conditions, except as the enforcement hereof and
thereof may be affected by bankruptcy, insolvency, moratorium or other laws
relating to or limiting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is
considered in equity or law.
(b) Neither the execution and delivery of this Agreement or of the
Merger Documents, nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by Biomet or Acquisition with any of the
provisions hereof or thereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under or give rise to any right of termination,
cancellation or acceleration under any provision of their
organizational documents, any of the terms, conditions or provisions
of any note, lien, bond, mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement,
restriction or other instrument or obligation to which Biomet or
Acquisition is a party or by which they may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body or any judgment, order, writ, injunction
or decree of any Governmental Authority applicable to Biomet or
Acquisition; or
(iii) constitute an event that, with or without notice, lapse of
time or action by a third party, could result in the creation of any
lien, charge or incumbrance upon any of the assets of Biomet or
Acquisition or cause the maturity of any liability, obligation or debt
of Biomet or Acquisition to be accelerated or increased.
<PAGE>
Section 5.4. Consents and Approvals. Except in connection with the HSR Act,
the 1933 Act, and the 1934 Act, the execution, delivery and performance of this
Agreement and the Merger Documents by Biomet and Acquisition and the
consummation of the transactions contemplated hereby or thereby will not require
any notice to, action of, filing with, or consent, authorization, order or
approval from any Governmental Authority, or any individual, corporation,
partnership, joint venture, association, firm, organization, group or any other
entity or enterprise.
Section 5.5. SEC Documents; Undisclosed Liabilities. Biomet has filed all
required reports, schedules, forms, statements and other documents with the SEC
since May 31, 1999 (the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "1933 Act") or the Securities Exchange
Act of 1934, as amended (the "1934 Act"), as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
Biomet included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP (except, in the case of unaudited financial statements, as permitted by SEC
Form 10-Q) applied on a consistent basis during the periods presented (except as
may be indicated in the notes thereto) and the consolidated financial statements
present fairly the consolidated financial position of Biomet and its
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set forth
in the SEC Documents, to the knowledge of the executive officers of Biomet
primarily responsible for financial, accounting and legal matters, neither
Biomet nor any of its subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a consolidated balance sheet of Biomet and its subsidiaries or
in the notes thereto, other than liabilities and obligations incurred in the
ordinary course of business consistent with past practice and experience since
May 31, 1999.
Section 5.6. Absence of Certain Changes or Events. Except as set forth in
the SEC Documents, since May 31, 1999 Biomet has conducted its business only in
the ordinary course, and there has not been (i) any material adverse change in
Biomet, (ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, shares or property) with respect to Biomet Common
Shares, (iii) any split, combination or reclassification of Biomet Common Shares
or any issuance or the authorization of any issuance of any other securities in
lieu or in substitution for Biomet Common Shares, (iv) any damage, destruction
or loss, whether or not covered by insurance, that has had or could reasonably
be expected to have a material adverse effect on Biomet, or (v) any change in
accounting methods, principles or practices by Biomet materially affecting its
assets, liabilities or business, except insofar as may be required by a change
in GAAP.
<PAGE>
Section 5.7. Due Authorization of Shares. The Biomet Common Shares to be
issued at the Closing will, when issued, be duly authorized Biomet Common Shares
and, when delivered will be duly and validly issued, fully paid and
nonassessable.
Section 5.8. Brokers' or Finders' Fees. Except with respect to U.S. Bancorp
Piper Jaffray Inc., no agent, broker, investment banker or other person or firm
acting on behalf of Biomet or Acquisition or under Biomet's authority is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee directly or indirectly from any of the parties hereto in connection with any
of the transactions contemplated hereby.
Section 5.9. Certain Accounting and Tax Matters. Biomet has not taken or
agreed to take any action, nor to the knowledge of the executive officers of
Biomet primarily responsible for financial, accounting and legal matters, are
there any facts or circumstances, that would (i) prevent Biomet from accounting
for the Merger as a "pooling-of-interests" in accordance with the Pooling
Requirements, or (ii) prevent the Merger from qualifying as a "reorganization"
within the meaning of Section 368 of the Code. The representation set forth in
Exhibit 5.9 are incorporated by reference herein.
Section 5.10. Disclosure. No statement in the representations or warranties
of Biomet or Acquisition in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make those
representations and warranties not misleading. No statement of Biomet or
Acquisition in the Merger Documents or in any certificate or other document to
be delivered in connection with the transactions contemplated hereby or thereby
will contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading.
Section 5.11. Representations and Warranties as of the Date Hereof. The
representations and warranties contained in the foregoing Sections 5.1 through
5.10 inclusive are made as of the date hereof, except as otherwise expressly
indicated therein.
ARTICLE VI
Certain Pre-Closing Covenants of
the Company and the Control Shareholders
The Company covenants and agrees and each of the Control Shareholders, as
to himself or itself, covenants and agrees that between the date hereof and the
Closing:
Section 6.1. Maintenance of Corporate Status. Parent and each Subsidiary
shall be maintained at all times as entities validly existing and in good
standing under the laws of the jurisdictions of their organization and in good
standing as a foreign entity in all jurisdictions in which they are currently
qualified to do business.
<PAGE>
Section 6.2. No Structural Changes. Except as otherwise provided in this
Agreement, no amendment shall be made to the governing documents of Parent or
any Subsidiary without the prior written consent of Biomet. Neither Parent nor
any Subsidiary shall merge, consolidate with, enter into a share exchange or
similar transaction with, or sell any of its assets (other than in the ordinary
course of business) to any other person or acquire any other business or change
the character of its business, or enter into any agreement with respect thereto;
provided, however that with the prior written consent of Biomet as to the terms
thereof, the Company may acquire for cash (a) Carena France, S.A., its French
distributor, and (b) the Biogran product line from Orthovita, Inc.
Section 6.3. No Change in Capitalization. Except as provided for in this
Agreement, no change will be made in the number of issued and outstanding shares
of Parent and Parent will not subdivide or in any way reclassify any of its
shares. No option, warrant or any other right to purchase or to convert any
obligation or security into shares of Parent or any Subsidiary will be sold,
issued or granted, and no agreement of whatever description will be entered into
under or in connection with any shares of Parent or any Subsidiary.
Section 6.4. Dividends and Other Payments. Without the prior written
consent of Biomet, neither Parent nor any Subsidiary shall declare, set aside or
pay any dividends or other distributions or payments on or in respect of its
outstanding shares, or purchase, redeem or otherwise acquire, or agree to
purchase, redeem or otherwise acquire any of its outstanding shares, provided,
however that Parent may pay all accrued and unpaid dividends on its Preferred
Stock.
Section 6.5. Operation of the Company Business. Parent and each Subsidiary
shall operate its business diligently and only in the regular and ordinary
course and manner as it has previously been operated, and shall use commercially
reasonable efforts to (a) preserve its present business organization intact and
conserve its goodwill; (b) keep available and maintain the services of all
officers, employees, agents and representatives on the same or substantially the
same terms; (c) continue and preserve good relationships with suppliers,
customers, lenders and others having business dealings or relationships with it;
(d) maintain in full force and effect all Permits required for the operation of
the business as presently conducted; (e) maintain and keep in good order,
consistent with past practice, all of its buildings, offices, shops and other
structures and, consistent with past practice, keep all machinery, tools,
equipment, fixtures and other property in good condition, repair and working
order, ordinary wear and tear excepted; (f) not do any act or omit any act or
permit any omission to act within its control, which will cause a breach or
default in any of its contracts, commitments or obligations; and (g) comply with
its obligations under in this Agreement.
Section 6.6. Indebtedness. Except as provided in Schedule 6.6, from the
date of this Agreement through the Closing, neither Parent nor any Subsidiary
shall incur any indebtedness to any third party, except that the Company may
incur trade payables and other operating liabilities and draw on its existing
line of credit (or any renewal or extension thereof) in the ordinary course of
business on terms and to the extent consistent with historical practices of the
entity incurring the same.
<PAGE>
Section 6.7. Other Charges. No charges, salaries or other compensation for
services shall be paid by the Company except in the ordinary course of business
and in accordance with past practices, and the Company shall not, except in the
ordinary course of business and in accordance with past practices or with the
prior written consent of Biomet, (a) change or increase the rate of compensation
paid by the Company to any of its directors, officers, employees or agents,
including without limitation the payment of bonuses and arrangements for
severance pay, or (b) enter into any agreement to do any of the foregoing.
Section 6.8. Taxes. The Company shall timely file (including any extensions
granted) all Tax Returns required to be filed with the United States government
and with each state or other jurisdiction identified in Schedule 6.8, and shall
promptly pay, when due, all Taxes owed by the Company or lawfully levied or
assessed upon it or its properties.
Section 6.9. Access; Review. Biomet, its attorneys, accountants, appraisers
and other authorized representatives or retained experts shall have full access
upon reasonable notice to all the premises, books, records, personnel and income
tax returns of or relating to the Company during normal business hours and shall
be furnished such financial and operating data and other information as Biomet
may from time to time reasonably request. In addition, the Company shall
authorize and instruct its independent certified public accountants to give
Biomet's independent certified public accountants access to books and records
and work papers regarding the Financial Statements. The Company shall make
available to Biomet, its counsel, accountants, appraisers and other authorized
representatives or retained experts all work papers in the Company's possession
(or that of a representative thereof) related to any audits of the Company. The
Company shall also make available any work papers in the Company's possession
(or that of any representative thereof) pertaining to any tax returns of the
Company. The Company shall deliver to Biomet all internal reports relating to
the operations of its business as such reports are made available to the
management of the Company. No investigation, test, examination or inquiry by
Biomet shall affect the representations and warranties contained in this
Agreement or their survival at the Closing.
Section 6.10. Insurance. The Company shall continue to maintain the types
and levels of insurance currently in effect to insure its assets and its
business.
Section 6.11. Monthly Financial Statement. The Company shall deliver to
Biomet copies (initialed by the Company's chief financial officer and identified
with a reference to this Section 6.11) of unaudited monthly balance sheets of
the Company and unaudited statements of income for the month then ended (the
"monthly statements"), prepared in a manner consistent with that used in
preparing the Unaudited Financial Statements, all of which when delivered, shall
be materially complete and correct, prepared from the books and records of the
Company in accordance with GAAP (except for the omission of notes thereto)
consistently applied and maintained throughout such months, and shall present
fairly the financial condition of the Company as at their respective dates and
the results of the operations of its business for the months covered thereby.
The monthly statements shall be delivered in accordance with the following
schedule: the statements for August, 1999 shall be delivered on or before
September 15, 1999, and statements for subsequent months shall be delivered on
the fifteenth day of the following month.
<PAGE>
Section 6.12. Premerger Notification. The Company shall file with the
proper authorities all forms and other documents necessary to be filed pursuant
to the HSR Act, and regulations promulgated thereunder, as promptly as possible
and shall cooperate with Biomet in promptly producing such additional
information as those authorities may require to allow early termination of the
notice period provided by the HSR Act or as otherwise necessary to comply with
statutory requirements and requests of the Federal Trade Commission or the
Department of Justice. Biomet shall pay the filing fee associated with the
filing of the notification.
Section 6.13. Additional Approvals and Notices. As soon as practicable
after the execution of this Agreement, the Company shall file all applications
and reports and take such other action (in addition to filings required under
the HSR Act) which is required to be taken or filed with any governmental agency
or authority in connection with the transactions contemplated by this Agreement.
The Company shall give all additional notices to third parties and take such
other action required to be given or taken by it under any authorization, lease,
note, mortgage, indenture, agreement or other instrument or any law, rule,
regulation, demand or court or administrative order in connection with the
transactions contemplated by this Agreement.
Section 6.14. Consents. The Company, Beaty and Lazzara shall use all
reasonable efforts to obtain all consents and approvals necessary to enable it
to consummate the transactions contemplated by this Agreement and the Merger
Documents and the Company shall deliver to Biomet at or prior to the Closing a
duly executed copy of each such consent or approval.
Section 6.15. Fire or Casualty. If any of the Company's material assets are
damaged or destroyed prior to the Closing as a result of fire, casualty or other
occurrence, no settlement shall be made with any insurance company and no
decision with regard to restoration or rebuilding of any such assets shall be
made without prior written consent of Biomet, which consent shall not be
unreasonably withheld.
Section 6.16. Actions of the Company. The Company shall not take any action
or omit to take any action within its reasonable control to the extent such
action or omission might result in a breach of any term or condition of this
Agreement or the Merger Documents or in any representation or warranty contained
in this Agreement or the Merger Documents being inaccurate, incorrect or
misleading in any material respect on and as of the Closing Date. The Company,
Beaty and Lazzara shall deliver to Biomet, as soon as possible after discovery
thereof, but not later than at the Closing, a complete description of any
Material Adverse Event (as defined in Section 10.2) including, but not limited
to, any Event (as defined in Section 10.2) that, had it occurred prior to the
date of this Agreement, would have caused any representation or warranty
contained in Article IV to have been inaccurate, incorrect or misleading at the
date hereof; provided, however, that the foregoing shall not affect Biomet's
right to terminate this Agreement as set forth in Section 10.2.
<PAGE>
Section 6.17. Material Contracts and Capital Expenditures. The Company
shall not enter into any material contract or make any capital expenditures or
other commitments, other than in the ordinary course of business.
Section 6.18. Loans or Contingent Liabilities. Other than in the ordinary
course of business, the Company shall not extend credit to any person and shall
not guarantee, insure or assume any contingent liability with respect to the
obligations of any other person.
Section 6.19. Performance of Obligations Under Agreements. The Company
shall perform, in all material respects, all of the obligations and covenants
set forth in its various contracts and loan agreements, promissory notes,
indentures, supply agreements, leases and other agreements and contracts.
Section 6.20. Real Estate. The Company shall not purchase or sell any real
property or any interest therein, other than in the ordinary course of business.
Section 6.21. Efforts to Satisfy Conditions. The Company, Beaty and Lazzara
shall use all reasonable efforts to cause the conditions to the obligations of
the Company and the Control Shareholders set forth in Article IX to be satisfied
to the extent that the satisfaction of such conditions is within the control of
the Company and the Control Shareholders; provided, however, the foregoing shall
not constitute a limitation upon the covenants and obligations of the Company
and the Control Shareholders otherwise set forth in this Agreement. The Control
Shareholders shall vote for or consent to the adoption and approval of this
Agreement and the Merger transaction contemplated hereby.
Section 6.22. Cooperation. The Company and the Control Shareholders shall
generally cooperate with Biomet and its officers, employees, attorneys,
accountants and other agents, and, generally, do such other acts and things in
good faith as may be reasonable, necessary or appropriate to timely effectuate
the intents and purposes of this Agreement and the Merger Documents and the
consummation of the transactions contemplated hereby and thereby.
Section 6.23. Pooling and Tax-Free Reorganization Requirements.
(a) The Company shall use its reasonable efforts to cause each person
who is an "affiliate" of the Company for purposes of the Pooling
Requirements, and to each person who is an "affiliate" of the Company for
purposes of SEC Rule 145 (collectively, the "Affiliates" and singly, an
"Affiliate"), to deliver to the Company promptly after the execution of
this Agreement a written agreement in the form of Exhibit 6.23.
(b) Neither the Company nor any of the Control Shareholders shall take
any other action that would prevent the Merger from qualifying for
pooling-of-interests accounting treatment.
<PAGE>
Section 6.24. Preparation of Registration Statement; Delivery to Holders of
Parent Stock and Options. The information provided by the Company to Biomet for
use in the preparation and filing of the Registration Statement described in
Section 7.4(a) will not, on the date on which approval of the Merger by the
holders of Parent Stock is obtained, contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. Parent shall promptly correct and provide to
Biomet any information provided by it that shall have become false or misleading
in any material respect. Parent shall cause the proxy/information statement
included in the Registration Statement, in the form in which it becomes
effective, to be provided to the holders of Parent Stock entitled to vote on the
Merger and to the holders of any other outstanding securities of Parent
(including stock options) as soon as practicable following the effective date of
the Registration Statement.
Section 6.25. Conversion of Preferred Stock; Exercise of Warrants.
Immediately prior to the Closing, Global Private Equity II L.P. and Advent
International Investors II L.P. shall (a) take all action required by the terms
of the Series A Cumulative Convertible Preferred Stock of the Parent (the
"Preferred Stock") to cause the conversion of all of the outstanding Preferred
Stock to Parent Stock, and (b) exercise in full all Common Stock Purchase
Warrants held by them for the acquisition of Parent Stock.
Section 6.26. Exercise of Lazzara Options. Immediately prior to the
Closing, Lazzara shall exercise in full the outstanding options held by him to
purchase Class B Common Stock of the Parent pursuant to the Stock Option
Agreement between Parent and Lazzara dated April 14, 1995.
Section 6.27. Repayment of Loans to Hygiene Systems, Inc.. Prior to the
Closing, Lazzara and Beaty shall cause the repayment to the Company of the loans
made by the Company to Hygiene Systems, Inc. in the principal amount of
$86,379.14, together with all interest due with respect thereto.
Section 6.28. Termination of Shareholder Agreements. At or prior to the
Closing, the Company and the Control Shareholders shall terminate all
outstanding agreements among them relating to the voting, ownership or transfer
of the capital stock of the Company.
Section 6.29. Payment of Preferred Stock Dividend. The Company shall pay
all dividends due and owing on the Preferred Stock.
ARTICLE VII
Certain Pre-Closing Covenants of Biomet and Acquisition
Biomet and Acquisition covenant and agree that between the date hereof and
the Closing:
<PAGE>
Section 7.1. Required Consents and Approvals. They shall use all reasonable
efforts to obtain all consents and approvals necessary to enable them to
consummate the transactions contemplated by this Agreement and the Merger
Documents.
Section 7.2. Premerger Notification. They shall file with the proper
authorities all forms and other documents necessary to be filed pursuant to the
HSR Act and regulations issued thereunder as promptly as possible and shall
cooperate with the Company in promptly producing such additional information as
such authorities may require to allow early termination of the notice period
provided by the HSR Act or as otherwise necessary to comply with statutory
requirements and requests of the Federal Trade Commission or the Department of
Justice.
Section 7.3. Cooperation. Biomet shall generally cooperate with the Control
Shareholders and the Company and its officers, employees, attorneys, accountants
and other agents, and, generally, do such other acts and things in good faith as
may be reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the Merger Documents and the consummation of the
transactions contemplated hereby and thereby.
Section 7.4. Registration Statement; Nasdaq-NMS Listing.
(a) As soon as practicable after the date of this Agreement, Biomet
shall file with the SEC a Registration Statement on Form S-4 for the
purpose of registering under the 1933 Act the Biomet Common Shares to be
issued to the holders of Parent Stock pursuant to the Merger (the
"Registration Statement").
(b) Biomet shall take such action as is reasonably necessary to comply
with applicable state securities or Blue Sky laws in connection with the
issuance of Biomet Common Shares in the Merger.
(c) Biomet shall take such action as is reasonably necessary to
qualify the Biomet Common Shares to be issued in the Merger for quotation
on Nasdaq-NMS, effective upon notice of issuance.
(d) The Registration Statement shall comply as to form, in all
material respects, with the provisions of the 1933 Act. The information
provided by Biomet for use in the preparation and filing of the
Registration Statement will not contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading. Biomet will use all reasonable
efforts to respond to the comments of the SEC staff with respect to the
Registration Statement and to have the Registration Statement declared
effective by the SEC as soon as practicable.
Section 7.5. Approval by Acquisition. Biomet as the sole shareholder of
Acquisition shall vote to approve or consent in writing to the approval of this
Agreement and the Merger. Subject to the satisfaction of the conditions to
Biomet's obligations set forth in Article VIII, Biomet shall cause Acquisition
to execute and deliver all documents reasonably considered necessary for the
consummation of the transactions contemplated hereby.
<PAGE>
Section 7.6. Additional Approvals and Notices. As soon as practicable after
the execution of this Agreement, Biomet shall file all applications and reports
and take such other action (in addition to filings required under the HSR Act)
which is required to be taken or filed with any governmental agency or authority
in connection with the transactions contemplated by this Agreement. Biomet shall
give all additional notices to third parties and take such other action required
to be given or taken by it under any authorization, lease, note, mortgage,
indenture, agreement or other instrument or any law, rule, regulation, demand or
court or administrative order in connection with the transactions contemplated
by this Agreement.
Section 7.7. Consents. Biomet shall use all reasonable efforts to obtain
all consents and approvals necessary to enable it to consummate the transactions
contemplated by this Agreement and the Merger Documents and shall deliver to
Parent at or prior to the Closing a duly executed copy of each such consent or
approval.
Section 7.8. Pooling. Neither Biomet nor Acquisition shall take any action
that would prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a tax-free reorganization under Section 368 of the
Code.
Section 7.9. Efforts to Satisfy Conditions. Biomet shall use all reasonable
efforts to cause the conditions to the obligations of Biomet set forth in
Article VIII to be satisfied to the extent that the satisfaction of such
conditions is within the control of Biomet; provided, however, the foregoing
shall not constitute a limitation upon the covenants and obligations of Biomet
otherwise set forth in this Agreement.
ARTICLE VIII
Conditions Precedent to the Performance of Biomet and Acquisition
The obligations of Biomet and Acquisition pursuant to the terms of this
Agreement are subject to the satisfaction, at the Closing, of each of the
following conditions:
Section 8.1. Accuracy of Representations and Warranties of the Company and
the Control Shareholders. Each of the representations and warranties of the
Company and the Control Shareholders contained in Article IV and Article IVA of
this Agreement, the Schedules and Exhibits attached hereto shall, as of the
Closing, remain true and correct as of the date of this Agreement.
Section 8.2. Compliance. The Company and the Control Shareholders shall
have performed, complied with and fulfilled in all material respects the
covenants, agreements, obligations and conditions required by this Agreement and
the Merger Documents to be performed, complied with or fulfilled by each of them
as of the Closing.
<PAGE>
Section 8.3. Corporate Approval. The execution and delivery of this
Agreement and the Merger Documents by the Company, and the performance of the
Company's covenants and obligations hereunder and thereunder, shall have been
duly authorized by all necessary corporate action on the part of the Company.
Section 8.4. Consents and Approvals. All consents, approvals, orders and
authorizations necessary to the consummation by the Company of the transactions
contemplated by this Agreement and the Merger Documents, or necessary or
appropriate or otherwise pertaining to the matters covered by this Agreement and
the Merger Documents (other than such matters as would not constitute a Material
Adverse Event), shall have been obtained on terms and conditions reasonably
satisfactory to Biomet.
Section 8.5. Authorizations. All permits, authorizations, approvals and
consents of and notices to any Governmental Authority which may be required by
law, regulation, rule, ordinance, order or decree in connection with the
transactions contemplated by this Agreement or the Merger Documents (other than
such matters as would not constitute a Material Adverse Event) shall have been
obtained and made by the Company.
Section 8.6. Financing Statements. Biomet shall have obtained certified
copies of Requests for Information or Copies (Form UCC-11), or equivalent
reports, as of a date which is not more than seven business days prior to the
Closing, listing the effective financing statements or other notices of
assignment, filings or recordations which name the Company as debtor and which
are filed in the State of Florida or elsewhere, together with copies, where
available, of such financing statements and other notices of assignment, filings
or other recordations.
Section 8.7. Litigation. No order, decree or ruling of any Governmental
Authority shall have been entered preventing or restricting the transactions
contemplated by this Agreement or the Merger Documents.
Section 8.8. Closing Deliveries. Biomet shall have received from the
Company and the Control Shareholders all of the instruments, documents and
considerations described in Section 11.2, and the form and substance of all such
deliveries shall be reasonably satisfactory in all material respects to Biomet.
Section 8.9. Pooling-of-Interests Deliveries.
(a) Biomet shall have received a pooling-of-interests accounting
letter from PricewaterhouseCoopers LLP to the effect that the Merger may be
treated by the Surviving Corporation and by Biomet as a
pooling-of-interests transaction under GAAP.
<PAGE>
(b) The Company shall have received a pooling-of-interests accounting
letter from Ernst & Young LLP to the effect that the Company meets the
requirements under GAAP for the treatment of the Merger as a
pooling-of-interests transaction.
(c) The Company shall have received from the Affiliates the agreements
described in Section 6.23.
Section 8.10. Fairness Opinion. Biomet shall have received a letter from
U.S. Bancorp Piper Jaffray ("Piper") addressed to the Board of Directors of
Biomet and Acquisition, substantially in the form of Exhibit 8.10, confirming
that, in the opinion of Piper, the consideration proposed to be paid by Biomet
in the Merger is fair to Biomet, and that letter shall not have been modified or
withdrawn.
Section 8.11. Other Agreements.
(a) Beaty and Lazzara each shall have entered into agreements not to
compete with Biomet (the "Non-Competition Agreements") in the form attached
hereto as Exhibits 8.11(a).
(b) Beaty and Lazzara each shall have entered into agreements
terminating, for no separate consideration, their Employment Agreements
with the Company dated as of May 26, 1995, including but not limited to any
rights they may have under Section 7 thereof.
Section 8.12. Registration Statement Effective. The Registration Statement
shall have been declared effective by the SEC and no stop order shall have been
issued or threatened with respect thereto.
Section 8.13. Tax Opinion. Biomet shall have received from Ice Miller
Donadio & Ryan, counsel to Biomet, its opinion to the effect that the Merger
will be treated for U.S. Tax purposes as a reorganization within the meaning of
Section 368 of the Code.
Section 8.14. Conversion of Parent Stock Equivalents. All outstanding
options, warrants or other rights for the acquisition from the Company of Parent
Stock shall have been exercised, canceled or otherwise terminated.
Section 8.15. Number of Dissenting Shares. Fewer than eight percent of the
Parent Stock outstanding as of the date of this Agreement shall be Dissenting
Shares.
<PAGE>
Section 8.16. Cancellation of Debentures. All of the 9.5% Subordinated
Debentures of Parent (the "Debentures") outstanding on the date hereof shall
have canceled upon the payment of the principal and accrued interest thereon
owing as of the Closing Date, and the holders of those Debentures shall have no
further rights thereunder.
Section 8.17. Foreign Person Statement. Biomet shall have received from
Parent a statement, which meets the requirements set forth in Sections 1445 and
897 of the Code and the Treasury Regulations thereunder, to the effect that
Parent is not a United States real property holding corporation within the
meaning of Sections 1445 and 897 of the Code and the Treasury Regulations
thereunder.
ARTICLE IX
Conditions Precedent to Performance
of Parent and of the Control Shareholders
The obligations of the Parent and the Control Shareholders pursuant to the
terms of this Agreement are subject to the satisfaction, at the Closing, of each
of the following conditions:
Section 9.1. Accuracy of Representations and Warranties of Biomet. Each of
the representations and warranties of Biomet and Acquisition contained in
Article V of this Agreement shall, as of the Closing, remain true and correct in
all material respects as of the date of this Agreement.
Section 9.2. Compliance. Biomet and Acquisition shall have performed,
complied with and fulfilled in all material respects all of the covenants,
agreements, obligations and conditions required by this Agreement and the Merger
Documents to be performed, complied with or fulfilled by each of them as of the
Closing.
Section 9.3. Corporate Approval. The execution and delivery of this
Agreement and the Merger Documents by Biomet and Acquisition, and the
performance of their respective covenants and obligations hereunder and
thereunder, shall have been duly authorized by all necessary corporate action on
the part of Biomet and Acquisition.
Section 9.4. Consents and Approvals. All material consents, approvals,
orders and authorizations necessary to the consummation by Biomet and
Acquisition of the transactions contemplated by this Agreement and the Merger
Documents shall have been obtained on terms and conditions reasonably
satisfactory to the Company.
Section 9.5. Litigation. No order, decree or ruling of any Governmental
Authority shall have been entered pertaining to the transactions contemplated by
this Agreement or the Merger Documents.
Section 9.6. Closing Deliveries. The Company and the Control Shareholders
shall have received from Biomet and Acquisition all of the documents described
in Section 11.3.
Section 9.7. Registration Statement Effective. The Registration Statement
described in Section 7.4(a) shall have been declared effective by the SEC and no
stop order shall have been issued or threatened with respect thereto.
Section 9.8. Tax Opinion. Parent shall have received from Steel Hector &
Davis LLP, counsel to Parent, its opinion to the effect that the Merger will be
treated for U.S. Tax purposes as a reorganization within the meaning of Section
368 of the Code.
<PAGE>
Section 9.9. Pooling-of-Interests Deliveries.
(a) Biomet shall have received a pooling-of-interests accounting
letter from PricewaterhouseCoopers LLP to the effect that the Merger may be
treated by the Surviving Corporation and by Biomet as a
pooling-of-interests transaction under GAAP.
(b) The Company shall have received a pooling-of-interests accounting
letter from Ernst & Young LLP to the effect that the Company meets the
requirements under GAAP for the treatment of the Merger as a
pooling-of-interests transaction.
(c) The Company shall have received from the Affiliates the agreements
described in Section 6.23.
Section 9.10. Registration Rights Agreement. Biomet shall have executed and
delivered a Registration Rights Agreement in the form of Exhibit 9.10.
Section 9.11. Payment of Debentures and Preferred Stock Dividend. As to the
obligations of the Advent Funds, the Company shall have paid the principal and
all accrued interest on the Debentures and all dividends due and owing on the
Preferred Stock.
ARTICLE X
Termination
Section 10.1. Termination by Mutual Agreement. This Agreement may be
terminated by the mutual agreement of Biomet and Parent at any time prior to the
Closing.
Section 10.2. Termination by Biomet. This Agreement and any obligations of
Biomet hereunder (other than its obligations under Section 14.2 and Section
14.7) may be terminated by Biomet at any time prior to or at the Closing, by
notice to Parent, only if there shall have been a Material Adverse Event.
"Material Adverse Event" means any event, effect, change, circumstance,
inaccuracy, breach, condition or other matter (an "Event") that, either
separately or when considered together with any other Event (including Events
that would constitute exceptions to the representations and warranties set forth
in Article IV or a breach of the covenants contained in Article VI but for the
presence of materiality qualifiers in those representations and warranties or
covenants), (i) would prevent the consummation of the Merger in the manner
contemplated by this Agreement, (ii) had a materially adverse effect on the
business, financial condition, assets, liabilities or results of operations of
the Parent and the Subsidiaries considered as a single business unit or (iii)
reasonably could be expected to have a material adverse effect on the operations
of the merged businesses following the consummation of the Merger; provided,
however, that a Material Adverse Event will not be deemed to have occurred if
the Event results primarily from (i) changes in general business conditions in
the dental implant industry, (ii) the public announcement or the pendency of the
Merger that would reasonably be expected to have only a temporary effect on the
Company or (iii) any act of Biomet or its majority-owned subsidiaries; and,
provided further, that Biomet shall not have the right to terminate this
Agreement due to a Material Adverse Event resulting primarily from an adverse
change in the relationship between the Company and either W. L. Gore &
Associates, Inc. ("Gore") or Orthovita, Inc. ("Orthovita") if (A) the
representation contained in Schedule 10.2 is inaccurate in any material respect
as of the date of this Agreement as to either Gore or Orthovita, as the case may
be, or both, or (B) the adverse change is the result of any act of Biomet that
reasonably could be expected to adversely affect the relationship. The
circumstances described in the two foregoing provisos are collectively referred
to herein as Exculpating Events. Biomet shall have the burden of proof, by a
preponderance of the evidence, in all disputes as to whether an Event (either
alone or when considered together with other Events) constitutes a Material
Adverse Event. The Company shall have the burden of proof, by a preponderance of
the evidence, in all disputes as to whether a Material Adverse Event resulted
primarily from an Exculpating Event.
<PAGE>
Section 10.3. Termination by the Parent. This Agreement and any obligations
of the Parent and the Control Shareholders hereunder (other than their
obligations under Section 14.2 and Section 14.7) may be terminated by Parent, by
notice to Biomet, if (a) at the Closing, any condition to Closing specified in
Section 9.1, Section 9.2, Section 9.3, or Section 9.6 shall not have been met;
(b) at the Closing, Biomet fails to make any delivery specified in Section 11.3;
or (c) if, at the time for the determination thereof specified in Section 3.2,
the Conversion Price is less than $31.86.
Section 10.4. Drop Dead Date. Either Biomet or Parent shall have the right
to terminate this Agreement and the obligations of all parties hereunder (other
than their obligations under Sections 14.2 and 14.7) if the Closing shall not
have occurred by the close of business on January 29, 2000, by notice to the
other parties; provided, however, that the right to terminate this Agreement
hereunder shall not be available to any party that has breached its obligations
under this Agreement if that breach had a material adverse effect on the ability
of the parties to close the transactions contemplated by this Agreement by
January 29, 2000.
Section 10.5. Liquidated Damages.
(a) In Favor of Biomet. In the event that Biomet terminates this
Agreement under the provisions of Section 10.2, and the Material Adverse
Event is the result of a breach (or series of breaches) by Parent or the
Control Shareholders of any representation, warranty or covenant given or
made by it or them in this Agreement, then Parent and/or Implant shall
immediately pay to Biomet as liquidated damages and not as a penalty the
sum of $5,250,000, which Parent and Implant stipulate to be reasonable and
appropriate to the harm suffered by Biomet as a result of the termination
of this Agreement. The obligations of Parent and Implant described in this
paragraph shall be joint and several.
(b) In Favor of Parent. In the event that Parent terminates this
Agreement under the provisions of Section 10.3 as a result of an event
described in Section 10.3(a) or Section 10.3(b), then Biomet shall
immediately pay to Parent as liquidated damages and not as a penalty the
sum of $5,250,000, which Biomet stipulates to be reasonable and appropriate
to the harm suffered by the Company as a result thereof.
<PAGE>
(c) Limitation. In no event shall either Biomet or Parent have any
liability to the other under this Section 10.5 if this Agreement is
terminated as a result of the failure of the Merger to qualify for
pooling-of-interests accounting treatment unless Biomet or Parent has
breached its covenant contained in Section 6.23(b) or Section 7.8,
respectively.
(d) Interest. Interest on the liquidated damages payable hereunder
shall accrue and be payable from and after the date of termination of this
Agreement to the date on which payment thereof is made, at the "Prime Rate"
of interest as last published by The Wall Street Journal prior to the date
of termination, plus two percent per annum.
(e) Preservation of Rights. A termination of this Agreement shall not
extinguish the rights of a party under this Section until all obligations
of the other party under the Section have been discharged.
ARTICLE XI
The Closing
Section 11.1. Time and Place. The closing of the transactions contemplated
by this Agreement (the "Closing") shall held (a) no later than the thirtieth day
following the date of the last of occur of (i) the termination of the last to
expire of all periods within which the Federal Trade Commission and/or
Department of Justice are required to act in order to object to the consummation
of the Merger under the HSR Act, and (ii) the effective date of the Registration
Statement (or the next business day, if that date is a Saturday, Sunday or
holiday), or (b) on such other date as the parties hereafter agree (the "Closing
Date"). The Closing shall commence at 9:00 a.m. local time at the offices of Ice
Miller Donadio & Ryan, Suite 3400, One American Square, Indianapolis, Indiana.
Section 11.2. Deliveries to Biomet at the Closing. At the Closing, and
simultaneously with the deliveries to the Company specified in Section 11.3, the
Company and the Control Shareholders shall deliver or cause to be delivered to
Biomet the following:
(a) Certificates of the President and Chief Financial Officer of
Parent and of the Control Shareholders as to the accuracy of their
representations and warranties contained in this Agreement as of the date
of this Agreement and as to their compliance with and fulfillment of all
covenants, agreements, obligations and conditions required by this
Agreement.
<PAGE>
(b) Copies of all resolutions adopted by the Board of Directors and
the shareholders of Parent authorizing the execution and delivery of this
Agreement and the Merger Documents and the consummation of the transactions
contemplated hereby, together with a certificate, duly executed by the
Secretary of Parent, stating that such copies are true, complete and
correct, and that the resolutions have been duly adopted by the Board of
Directors and shareholders, as the case may be, have not been amended since
adoption and remain in full force and effect.
(c) Copies of all consents and approvals required pursuant to Section
8.4 and Section 8.5.
(d) The schedule of UCC filings described in Section 8.6.
(e) The pooling-of-interests accounting letters described in Section
8.9(b).
(f) Executed counterparts of the Non-Competition Agreements and
termination agreements described in Section 8.11.
(g) An opinion of Steel Hector & Davis LLP, counsel to the Company,
dated the Closing Date, in the form of Exhibit 11.2(g).
(h) Executed counterparts of the Escrow Agreement in the form of
Exhibit 3.3.
(i) A certificate signed by Parent and each of the Control
Shareholders confirming the continued accuracy, as of the Closing, of the
representations and warranties contained in Exhibit 4.9.
(j) The statement described in Section 8.17.
(k) The tax opinion of Ice Miller Donadio & Ryan described in Section
8.13.
(l) The Registration Rights Agreement described in Section 9.10,
executed by Biomet.
Section 11.3. Deliveries to the Company at the Closing. At the Closing, and
simultaneously with the deliveries to Biomet specified in Section 11.2, Biomet
and Acquisition shall deliver or cause to be delivered to the Company the
following:
(a) Certificates of the Chief Executive Officer and Chief Financial
Officer of Biomet and of Acquisition (i) as to the accuracy of their
representations and warranties contained in this Agreement and as to their
compliance with and fulfillment of all covenants, agreements, obligations
and conditions required by this Agreement, and (ii) confirming the
continued accuracy, as of the Closing, of the representations and
warranties contained in Exhibit 5.9.
<PAGE>
(b) An opinion of Ice Miller Donadio & Ryan, counsel to Biomet, dated
the Closing Date, in the form of Exhibit 11.3(b).
(c) Executed counterparts of the Escrow Agreement in the form of
Exhibit 3.3.
(d) The pooling-of-interests accounting letter described in Section
9.9(a).
(e) The tax opinion of Steel Hector & Davis LLP described in Section
9.8.
Section 11.4. Delivery to Escrow Agent. At the Closing, and simultaneously
with the deliveries specified in Section 11.2 and Section 11.3, Biomet and
Acquisition shall deliver or cause to be delivered to the Escrow Agent
certificates representing that number of Biomet Common Shares specified in
Section 3.3 for delivery to the Escrow Agent.
ARTICLE XII
Additional Agreements
Section 12.1. Press Releases. Parent and Biomet shall consult with each
other with respect to the form and substance of any press release or other
public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
Section 12.2. Employee Benefit Plans.
(a) The Company shall take all steps necessary or advisable to
terminate its Section 401(k) plan as of the Effective Time, and to
terminate any and all other Pension Benefit Plans of the Company effective
as of the Effective Time or as soon as practicable thereafter.
(b) Biomet agrees that, effective as of the Effective Time or as soon
as practicable thereafter, the employees of the Surviving Corporation shall
be covered by the employee pension and other benefit plans of Biomet as
provided in those plans, but taking into account the service of each
employee with the Company and Biomet.
Section 12.3. Access to Records by the Control Shareholders. For a period
of three years after the Closing Date, Biomet shall retain, and the Control
Shareholders, their representatives and the Shareholder Representative (as that
term is defined in the Escrow Agreement) shall have reasonable access to
(including the right to make copies of), all of the books and records of the
Company to the extent that such access may reasonably be required by the Control
Shareholders or the Shareholder Representative in connection with matters
relating to or affected by the operation of the business of the Company as it is
operated as of the Closing Date. The Control Shareholders and the Shareholder
Representative shall be solely responsible for any costs or expenses incurred
pursuant to this Section. After the three-year period, all records may be
destroyed, except those books or records which the Control Shareholders or the
Shareholder Representative specifically request be retained; the cost of storing
or delivering books or records retained at the request of the Control
Shareholders or the Shareholder Representative shall be borne by the Control
Shareholders or the Shareholder Representative, as appropriate.
<PAGE>
ARTICLE XIII
Indemnification
From and after the Closing, Biomet and the Surviving Corporation and their
respective officers, directors, employees and shareholders ("Biomet Persons"),
shall be indemnified and held harmless, in accordance with the terms and
conditions specified in the Escrow Agreement, from and against any and all
demands, suits, claims, actions or causes of action, assessments, losses,
damages, liabilities, settlements, penalties or forfeitures of any kind or
character, and all costs and expenses incident thereto (including without
limitation attorneys' and accountants' fees, legal expenses, consultants' fees
and court costs) ("Losses") asserted against, suffered or incurred by Biomet,
Surviving Corporation or any Biomet Person as a direct or indirect result of:
(i) any misrepresentation in or breach of the representations and
warranties of the Company or the Control Shareholders or the failure of the
Company, the Control Shareholders, or any of them, to perform any of their
respective covenants or obligations contained in this Agreement or in the
Merger Documents or in any exhibit, schedule, certificate or other
instrument or document furnished or to be furnished by the Company, the
Control Shareholders or any of them pursuant to this Agreement or the
Merger Documents or in connection with the transactions contemplated hereby
or thereby; or
(ii) the matters described in Schedule 13.
The election of Biomet to close the Merger transactions and to waive any right
it might have to terminate this Agreement under the provisions of Section 10.2
shall have no effect upon the indemnification obligations described in this
Article.
ARTICLE XIV
Miscellaneous Provisions
Section 14.1. Arbitration. No civil action concerning any dispute arising
under this Agreement shall be instituted before any court and all such disputes
shall be submitted to final and binding arbitration under the auspices of the
American Arbitration Association (the "Association"). The arbitration shall be
conducted in Chicago, Illinois, in accordance with the Commercial Arbitration
Rules of the Association before a panel of three arbitrators. One arbitrator
shall be selected by the Company and/or the Control Shareholders, as the case
may be, and one arbitrator shall be selected by Biomet, and the two arbitrators
so selected shall select the third arbitrator. Each party shall pay its own
costs and expenses of the arbitration, including attorneys' fees. The
arbitrators' award resulting from the arbitration may be confirmed and entered
as a final judgment in any court of competent jurisdiction and enforced
accordingly, and the parties to this Agreement hereby waive all right to appeal
that final judgment.
<PAGE>
Section 14.2. Confidential Nature of Information. Subject to compliance by
Biomet with its disclosure obligations under the federal securities laws, prior
to the Closing each party agrees that it will treat in confidence all documents,
materials and other information regarding the other party obtained during the
course of the negotiations leading to the consummation of the transactions
contemplated by this Agreement (whether obtained before or after the date
hereof), the investigation provided for herein, or the preparation of this
Agreement and other related documents. The obligation of each party to treat
such documents, materials and other information in confidence shall not apply to
any information that (a) the party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by another party, (b) is known to the
public and did not become so known through any violation of a legal obligation,
(c) became known to the public through no fault of the party, (d) is later
lawfully acquired by the party from other sources, (e) is required to be
disclosed under the provisions of any state or United States statute or
regulation issued by a duly authorized agency, board or commission thereof, or
(f) is required to be disclosed by a rule or order of any court of competent
jurisdiction.
Section 14.3. Cooperation. After the Closing, the Control Shareholders
shall execute, acknowledge and deliver any documents reasonably requested by
Biomet, and will take any other action consistent with the terms of this
Agreement that Biomet may reasonably request, without further consideration.
Section 14.4. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 14.5. Entire Agreement. This Agreement and the Schedules and
Exhibits hereto, and the confidentiality agreements entered into between the
parties dated February 22, 1999 and August 11, 1999, constitute the entire
agreement among the parties pertaining to the subject matter contained herein
and therein and supersede all prior and contemporaneous agreements,
representations and understandings of the parties.
Section 14.6. Schedules and Exhibits. All Schedules and Exhibits to this
Agreement are incorporated herein by reference and made a part hereof in the
same manner as if those Schedules and Exhibits were set forth at length herein.
<PAGE>
Section 14.7. Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement and the Merger Documents, except as otherwise expressly provided for
herein.
Section 14.8. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
Section 14.9. Governing Law. This Agreement and all transactions
contemplated hereby shall be governed, construed and enforced in accordance with
the laws of the State of Indiana, notwithstanding any state's choice of law
rules to the contrary.
Section 14.10. Headings. The subject headings of the articles and sections
of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
Section 14.11. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
the parties. The party for whose benefit a warranty, representation, covenant or
condition is intended may in writing waive any inaccuracies in the warranties
and representations contained in this Agreement or waive compliance with any of
the covenants or conditions contained herein and thereby waive performance of
any of the obligations of the other party hereto and any defaults hereunder;
provided, however, that such waiver shall not affect or impair the waiving
party's rights with respect to any other warranty, representation or covenant or
any default hereunder, nor shall any waiver constitute a continuing waiver.
Section 14.12. Survival of Representations and Warranties. The
representations and warranties of the parties made in this Agreement shall
survive the Closing, notwithstanding any investigation made by or on behalf of
any other party or any disclosure in the Schedules or Exhibits or otherwise, and
shall terminate at the dates specified in the Escrow Agreement.
Section 14.13. Notices. All notices, requests, demands, waivers and other
communications required to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service if served
personally on the party to whom notice is to be given, or on the third day after
mailing if mailed to the party to whom notice is to be given by certified mail,
return receipt requested, and properly addressed as follows:
<PAGE>
If to Biomet Daniel P. Hann
or Acquisition: Senior Vice President,
General Counsel & Secretary
Biomet, Inc.
Airport Industrial Park
P.O. Box 587
Warsaw, Indiana 46580
Fax: (219) 372-1960
With a copy to: Berkley W. Duck
Ice Miller Donadio & Ryan
One American Square
Box 82001
Indianapolis, Indiana 46282
Fax: (317) 236-2219
If to the Parent, Implant,
Beaty or Lazzara: Keith D. Beaty, President
Implant Innovations, Inc.
4555 Riverside Drive
Palm Beach Gardens, Florida 33410
Fax: (561) 776-6833
If to Parent, Implant,
Beaty or Lazzara, then a copy to: Thomas G. O'Brien III
Steel Hector & Davis LLP
1900 Phillips Point West
777 South Flagler Drive
West Palm Beach, Florida 33401-6198
Fax: (561) 655-1509
If to the Advent Funds: Gerard Moufflet
Advent International Corporation
75 State Street
Boston, Massachusetts 02109
Fax: (617) 951-0566
Section 14.14. Rights of Parties. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
<PAGE>
Section 14.15. Risk of Loss. Any loss or damage from fire, theft or other
casualty or cause, reasonable wear and tear excepted, prior to the Closing,
shall be the responsibility of the Company.
Section 14.16. Successors. This Agreement shall be binding on, and shall
inure to the benefit of, the parties and their respective successors and
assigns, including without limitation the parties' respective heir(s), donee(s),
personal representative(s), executor(s) and trustee(s) to whom or which any
interest or property acquired pursuant to this Agreement may be transferred,
assigned or given.
IN WITNESS WHEREOF, the parties have executed this Agreement as the day and
year first above written.
BIOMET, INC.
By: /s/ Dane A. Miller
--------------------------------------------
Dane A. Miller,
President and Chief Executive Officer
PALM ACQUISITION CORP.
By: /s/ Dane A. Miller
--------------------------------------------
Dane A. Miller,
President
IMPLANT INNOVATIONS INTERNATIONAL CORPORATION
By: /s/ Keith D. Beaty
--------------------------------------------
Keith D. Beaty,
President
IMPLANT INNOVATIONS, INC.
By: /s/ Keith D. Beaty
--------------------------------------------
Keith D. Beaty,
President
<PAGE>
"SHAREHOLDERS"
/s/ Keith D. Beaty
--------------------------------------------
Keith D. Beaty
/s/ Richard D. Lazzara
--------------------------------------------
Richard J. Lazzara
GLOBAL PRIVATE EQUITY II L.P.
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By: /s/ Gerard Moufflet
-----------------------------------
ADVENT INTERNATIONAL INVESTORS II L.P.
By: Advent International Corporation,
its General Partner
By: /s/ Gerard Moufflet
----------------------------------------
<PAGE>
ANNEX B
Section 262 of the Delaware General Corporation Law
APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to the
effected pursuant to '251 (other than a merger effected pursuant to Section
251(g) of this title), Section 252, Section 254, Section 257, Section 258,
Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
<PAGE>
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and case in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
<PAGE>
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsections (b) or
(c) hereof that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identify of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger
or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent
corporation, either before the effective date of the merger or
consolidation or within ten days thereafter, shall notify each of the
holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporations, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective
date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is
given.
<PAGE>
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have who have demanded payment for
their shares and with whom agreements as to the value of their shares have not
been reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charge pro rata against the value of all the
shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distribution payable to stockholders of record at a date which is prior to
the effective date of the merger or consolidation); provided, however, that if
no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulted corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 339, L.
'98, eff. 7-1-98).
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF IMPLANT INNOVATIONS INTERNATIONAL CORPORATION
MEETING OF STOCKHOLDERS
The undersigned stockholder of Implant Innovation International
Corporation, a Delaware corporation (the "3i"), hereby acknowledges receipt of
the Notice of Meeting of Stockholders and Proxy Statement/Prospectus, each dated
_______________, 1999, and hereby appoints Keith D. Beaty and Richard J.
Lazarra, or either of them, proxies and attorneys-in-fact, with full power to
each of substitution, on behalf and in the name of the undersigned to represent
the undersigned at the meeting of Stockholders of 3i to be held on December
____, 1999, at 10:00 a.m., Eastern time, at 3i's executive offices located at
4555 Riverside Drive, Palm Beach Gardens, Florida, 33410 and at any postponement
or adjournment thereof, and to vote all shares of 3i stock which the undersigned
would be entitled to vote if then and there personally present, on the matter
set forth below and, in their discretion, upon all matters incident to the
conduct of the meeting and all matters presented at the meeting but which were
not known to 3i's Board of Directors a reasonable time before the solicitation
of this proxy:
/ X / Please mark your votes as in this example.
3i's BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. Approval and adoption of the merger agreement dated as of August 28,
1999 pursuant to which 3i will become a wholly-owned subsidiary of Biomet, Inc.
and to approve the merger contemplated under that agreement.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business related to matters as may properly come
before the meeting or any adjournments or postponements thereof.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
This proxy, when properly executed, will be voted as directed or, if no
contrary direction is indicated, will be voted as follows: For approval and
adoption of the merger agreement, to approve the merger contemplated under the
agreement, and in the discretion of the proxy holders on such other matters as
may properly come before the meeting.
Please sign exactly as your name appears hereon. If the stock is registered
in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and have a
duly authorized officer sign, stating title. If signer is a partnership, please
sign in partnership name by authorized person.
Dated:______________________, 1999 __________________________
Signature
__________________________
Signature if held jointly
Please sign, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
NOTE: (This Proxy should be marked, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.
If shares are held by joint tenants or as community property, both
should sign.)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Indiana corporate law, the provisions of which govern Biomet, empowers an
Indiana corporation to indemnify present and former directors, officers,
employees, or agents or any person who may have served at the request of the
corporation as a director, officer, employee, or agent of another corporation
("Eligible Persons") against liability incurred in any proceeding, civil or
criminal, in which the Eligible Person is made a party by reason of being or
having been in any such capacity, or arising out of his status as such, if the
individual acted in good faith and reasonably believed that (a) the individual
was acting in the best interests of the corporation, or (b) if the challenged
action was taken other than in the individual's official capacity as an officer,
director, employee or agent, the individual's conduct was at least not opposed
to the corporation's best interests, or (c) if in a criminal proceeding, either
the individual had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful.
Indiana corporate law further empowers a corporation to pay or reimburse
the reasonable expenses incurred by an Eligible Person in connection with the
defense of any such claim, including counsel fees; and, unless limited by its
articles of incorporation, the corporation is required to indemnify an Eligible
Person against reasonable expenses if he is wholly successful in any such
proceeding, on the merits or otherwise. Under certain circumstances, a
corporation may pay or reimburse an Eligible Person for reasonable expenses
prior to final disposition of the matter. Unless a corporation's articles of
incorporation otherwise provide, an Eligible Person may apply for
indemnification to a court which may order indemnification upon a determination
that the Eligible Person is entitled to mandatory indemnification for reasonable
expense or that the Eligible Person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances without regard to
whether his actions satisfied the appropriate standard of conduct.
Before a corporation may indemnify any Eligible Person against liability or
reasonable expenses under Indiana corporate law, a quorum consisting of
directors who are not parties to the proceeding must (1) determine that
indemnification is permissible in the specific circumstances because the
Eligible Person met the requisite standard of conduct (2) authorize the
corporation to indemnify the Eligible Person and (3) if appropriate, evaluate
the reasonableness of expenses for which indemnification is sought. If it is not
possible to obtain a quorum of uninvolved directors, the foregoing action may be
taken by a committee of two or more directors who are not parties to the
proceeding, special legal counsel selected by the Board or such a committee, or
by the shareholders of the corporation.
In addition to the foregoing, Indiana corporate law states that the
indemnification it provides shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any provision of the articles of
incorporation or bylaws, resolution of the board of directors or shareholders,
or any other authorization adopted after notice by a majority vote of all the
voting shares then issued and outstanding.
<PAGE>
Indiana corporate law also empowers an Indiana corporation to purchase and
maintain insurance on behalf of any Eligible Person against any liability
asserted against or incurred by him in any capacity as such, or arising out of
his status as such, whether or not the corporation would have had the power to
indemnify him against such liability. Biomet's directors and officers are
insured under a directors and officers liability insurance policy maintained by
Biomet.
See Article IX, Section 9.3 of Biomet's Amended Articles of Incorporation
incorporated by reference with this Registration Statement as Exhibit 3.1 and
the "Comparison of Rights of Biomet Shareholders and 3i Stockholders -
Indemnification" section of the proxy statement/prospectus for a further
description of Biomet's rights and obligations to indemnify its officers and
directors.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. See Index to Exhibits.
(b) Financial Statement Schedules.
21(b).1 - The Registrant. Schedule II - Qualifying Valuation
and Qualifying Accounts.
21(b).2 - The company being acquired. Not Applicable.
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
- to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or
13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request.
- to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
- that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of
the applicable form.
<PAGE>
- that every prospectus (i) that is filed pursuant to the
immediately preceding paragraph, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
- that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
- to deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
- insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Biomet, Inc.
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Warsaw, Indiana,
November 12, 1999.
BIOMET, INC.
By: /s/ Dane A. Miller
-------------------------------------
Dane A. Miller,
President And Chief Executive Officer
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Dane A. Miller and Daniel P. Hann, and each of
them, with full power to act without the other, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (unless revoked in writing), to sign any and all amendments to the
Registrant's Form S-4 Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might and could do in person,
hereby ratifying and confirming all that such attorney-in-fact and agents or any
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on November 12, 1999.
/s/Dane A. Miller* /s/Gregory D. Hartman*
- ---------------------------------- ------------------------------
Dane A. Miller, Director Gregory D. Hartman, Senior Vice
(Principal Executive Officer) President, Finance
(Principal Financial Officer)
/s/Niles L. Noblitt* /s/Jerry L. Ferguson*
- ---------------------------------- ------------------------------
Niles L. Noblitt, Director Jerry L. Ferguson, Director
/s/M. Ray Harroff* /s/Kenneth V. Miller*
- ---------------------------------- ------------------------------
M. Ray Harroff, Director Kenneth V. Miller, Director
<PAGE>
/s/Jerry L. Miller* /s/L. Gene Tanner*
- ---------------------------------- ------------------------------
Jerry L. Miller, Director L. Gene Tanner, Director
/s/Thomas F. Kearns* /s/Daniel P.Hann*
- ---------------------------------- ------------------------------
Thomas F. Kearns, Jr., Director Daniel P. Hann, Director
/s/Charles E. Niemier* /s/ Marilyn Tucker Quayle*
- ---------------------------------- ------------------------------
Charles E. Niemier, Director Marilyn Tucker Quayle, Director
/s/C. Scott Harrison* /s/Bernard Scheuble*
- ---------------------------------- ------------------------------
C. Scott Harrison, Director Prof. Dr. Bernhard Scheuble,
Director
/s/James W. Haller*
- ----------------------------------
James W. Haller, Controller
(Principal Accounting Officer)
By:/s/Daniel P. Hahn
-------------------------------
Daniel P. Hahn
Attorney-in-fact
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C>
Number
Assigned In Sequential Numbering
Regulation S-K System Page Number of
Item 601 Description of Exhibit Exhibit
(1) No Exhibit.
(2) 2.1 Agreement and Plan of Merger, dated
August 28, 1999, by and among Biomet,
Inc., Palm Acquisition Corp., Implant
Innovations, Inc. and those shareholders
of Implant Innovations, Inc. whose names
appear on the signature pages of this
Agreement. (Included herein as Annex A
to the Proxy Statement/Prospectus). The
Registrant agrees that the Exhibits and
Schedules to the Agreement and Plan of
Merger, a list of which is filed as
Exhibit 2.1, will be furnished
supplementally to the Commission upon
request.
(3) 3.1 Amended Articles of Incorporation filed
July 23, 1982. (Incorporated by
reference to Exhibit 3(a) to Biomet,
Inc. Form S-18 Registration Statement,
File No. 2-78589C).
3.2 Articles of Amendment to Amended Articles of
Incorporation filed July 11, 1983.
(Incorporated by reference to Exhibit 3.2 to
Biomet, Inc. form 10-K Report for the year
ended May 31, 1983, File No. 0-12515).
<PAGE>
3.3 Articles of Amendment to Amended Articles of
Incorporation filed August 22, 1987.
(Incorporated by reference to Exhibit 3.3 to
Biomet, Inc. Form 10-K Report for the year
ended May 31, 1987, File No. 0-12515).
3.4 Articles of Amendment to Amended Articles of
Incorporation filed September 18, 1989.
(Incorporated by reference to Exhibit 3.4 to
Biomet, Inc. Form 10-K Report for the year
ended May 31, 1990, File No. 0-12515).
3.5 Amended and Restated Bylaws.
(Incorporated by reference to
Exhibit 4.2 to Biomet , Inc. Form S-3
Registration Statement, File No.
33-33376).
3.6 Amended and Restated Bylaws as Amended
December 13, 1997. (Incorporated by
reference to Exhibit 3.6 to Biomet, Inc.
Form 10-K Report for the year ended May 31,
1998, File No. 0-12515).
(4) 4.1 Specimen certificate for Common Shares.
(Incorporated by reference to
Exhibit 4.1 to Biomet, Inc. Form 10-K
Report for the year ended May 31, 1985,
File No. 0-12515).
<PAGE>
4.2 Rights Agreement between Biomet, Inc.
and Lake City Bank as Rights Agent,
dated as of December 2, 1989.
(Incorporated by reference to
Exhibit 4.1 to Biomet, Inc. Form 8-K
Current Report dated December 22, 1989,
File No. 0-12515).
(5) 5.1 Opinion of Ice Miller Donadio & Ryan.
(8) 8.1 Form of Tax Opinion of Ice Miller Donadio &
Ryan.*
8.2 Form of Tax Opinion of Steel Hector & Davis
LLP.*
(9) No Exhibit.
(10) 10.1 Employee Stock Option Plan, as last
amended December 14, 1991.
(Incorporated by reference to
Exhibit 10.1 to Biomet, Inc. Form 10-K
Report for the year ended May 31, 1992,
File No. 0-12515).
10.2 Form of Employee Stock Option Agreement.
(Incorporated by reference to Exhibit 10.2
to Biomet, Inc. Form 10-K Report for the
year ended May 31, 1991, File No. 0-12515).
10.3 Employee and Non-Employee Director Stock
Option Plan, dated September 18, 1992.
(Incorporated by reference to Exhibit 19.1
to Biomet, Inc. Form 10-K Report for the
year ended May 31, 1993, File No. 0-12515).
<PAGE>
10.4 Form of Stock Option Agreement under the
Employee and Non-Employee Stock Option
Plan dated September 18, 1992.
(Incorporated by reference to
Exhibit 4.03 to Biomet, Inc. Form S-8
Registration Statement, File
No.333-00331).
10.5 401(k) Profit Sharing Plan filed January 19,
1996. (Incorporated by reference to Exhibit
10.2 to Biomet, Inc. Form S-8 Registration
Statement, File No.333-00331).
10.6 Biomet, Inc. 1998 Qualified and
Non-Qualified Stock Option Plan adopted
August 3, 1998. (Incorporated by
reference to Exhibit 10.6 to Biomet,
Inc. Form 10-K Report for the year ended
May 31, 1998, File No. 0-12515).
(11) No Exhibit.
(12) No Exhibit.
(13) 13.1 Biomet's Annual Report on Form 10-K for
the year ended May 31, 1999.
(15) No Exhibit.
(16) No Exhibit.
(21) 21.1 Subsidiaries of the Registrant.
(Incorporated by reference to
Exhibit 21.1 to Biomet, Inc.
Form 10-K Report for the year
ended May 31, 1999, File No.
0-12515).
<PAGE>
(23) 23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ice Miller Donadio & Ryan
(included in Exhibit 5.1).
(24) 24.1 See the signature page of this
Registration Statement.
(25) No Exhibit.
(26) No Exhibit.
(27) Financial Data Schedule.
(Incorporated by reference to Exhibit
27.1 to Biomet, Inc. Form 10-K Report
for the year ended May 31, 1999, File
No. 12515).
(99) No Exhibit.
<FN>
*Filed as part of this amendment.
</FN>
</TABLE>
______________, 1999
Board of Directors
Biomet, Inc.
Airport Industrial Park
P.O. Box 587
Warsaw, Indiana 46580
Ladies and Gentlemen:
We have acted as counsel to Biomet, Inc., an Indiana corporation
("Biomet"), in connection with the proposed exchange of Biomet Common Shares for
shares of Implant Innovations International Corporation ("Parent"), a Delaware
corporation, pursuant to the Agreement and Plan of Merger by and among Biomet,
Palm Acquisition Corp., an Indiana corporation ("Acquisition"), Parent, Implant
Innovations, Inc., a Florida corporation ("3i"), and the Control Shareholders,
dated as of August 28, 1999 (the "Agreement"), and the documents executed and
delivered in connection therewith (collectively with the Agreement, the
"Transaction Documents"). Pursuant to the Agreement, the holders of Parent Stock
will exchange Parent Stock solely for Biomet Common Shares (the "Share
Exchange"). Our opinions hereinafter set forth are given pursuant to Section
8.13 of the Agreement. Terms which are not defined herein and are used with
initial capitalization when the rules of grammar would not otherwise so require
and which are defined in the Transaction Documents shall have the meanings
assigned to such terms in the Transaction Documents.
Representations of the Facts
In connection with our opinions hereinafter set forth, the parties to the
Agreement have represented to us and advised us of the following facts:
Parent's capital structure consists solely of Parent Stock. No one owns any
stock of the Parent other than the owners of Parent Stock identified in the
Agreement or who held options or warrants to purchase Parent Stock as identified
in the Agreement. As of the Closing, there are no outstanding options or
warrants to purchase stock of the Parent or outstanding securities or other
instruments convertible into stock of the Parent or which constitute equity
under general principles of federal tax law, and no options, warrants,
securities, instruments or rights of any kind have been or will be issued in
contemplation of the Share Exchange. No such options have been cancelled in
contemplation of the Share Exchange except for options identified in the
Agreement which were not exercised.
<PAGE>
There have been and will be no distributions to any of the Parent
shareholders with respect to their stock of Parent in contemplation of the Share
Exchange, and no stock of Parent has been or will be sold, redeemed or otherwise
disposed of in contemplation of the Share Exchange.
On the Closing Date, all of the outstanding Parent Stock will be exchanged
for Biomet Common Shares as determined in accordance with the Agreement, rounded
to the nearest whole share. Any fraction of a Biomet Common Share resulting from
the calculations provided in the Agreement shall be paid in cash at the
Conversion Price as defined in the Agreement. Other than Biomet Common Shares
and cash paid in lieu of the issuance of fractional Biomet Common Shares, there
will be no cash or other property exchanged in the Share Exchange.
Scope of Investigation
In connection with our opinions hereinafter set forth, we have investigated
such questions of law as we have deemed necessary or appropriate for purposes of
this opinion. We have also examined the following documents:
1. The Transaction Documents;
2. The Certificate executed by Biomet and Acquisition of even date
herewith and delivered by Biomet and Acquisition to us (the "Biomet
Certificate"); and
3. The Certificate executed by Parent and the Control Shareholders of
even date herewith and delivered by Parent and the Control
Shareholders to us (the "Parent Certificate").
As to questions of fact material to our opinion, we have relied
exclusively, without independent investigation, upon the statements and
representations of Biomet, Acquisition, Parent, and the Control Shareholders,
and our opinions are limited by the facts and circumstances as represented to
and understood by us.
Additional Assumptions and Representations
For purposes of our opinions hereinafter set forth, we have assumed and you
have represented that: (l) all of the terms of the Share Exchange are contained
in the Transaction Documents, and the Share Exchange will be consummated in
accordance with the terms, conditions and other provisions of the Transaction
Documents; and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the "Representations of the Facts"
as previously set forth in this document, the Transaction Documents and the
certificates identified above are accurate and complete in all respects as of
the Closing Date.
<PAGE>
In our examinations, we have assumed the genuineness of all documents
submitted to us as originals and the conformity with the original documents of
all documents submitted to us as copies. In addition, we have assumed: (l) the
genuineness of all signatures; (2) the legal capacity of all natural persons and
the power and authority of all parties to execute and deliver such documents;
(3) the due authorization, execution and delivery of the documents by all
parties thereto; and (4) that the documents are legal, valid and binding as
against all parties. We have also assumed that the certificates identified above
were executed and delivered in good faith by Biomet, Acquisition, Parent and the
Control Shareholders.
You have represented and we have assumed the following with your permission
without independent investigation:
1. The fair market value of the Biomet Common Shares and other
consideration received by each holder of Parent Stock will be
approximately equal to the fair market value of the Parent Stock
surrendered in exchange therefor.
2. Acquisition will acquire at least 90 percent of the fair market value
of the net assets and at least 70 percent of the fair market value of
the gross assets held by Parent immediately prior to the transaction.
For purposes of this representation, amounts paid by Parent to
dissenters, amounts paid by Parent to holders of Parent Stock who
receive cash or other property, Parent assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by Parent immediately preceding
the transfer, will be included as assets of Parent held immediately
prior to the transaction.
3. Prior to the transaction, Biomet will be in control of Acquisition
within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code").
4. Following the transaction, Acquisition will not issue additional
shares of its stock that would result in Biomet losing control of
Acquisition within the meaning of Code Section 368(c).
5. Neither Biomet, Acquisition nor any persons or entities related to
Biomet within the meaning of Treasury Regulationss.1.368-1(e)(3) has
any plan or intention to reacquire any of its Common Shares issued in
the transaction. Furthermore, there is no plan or intention by Biomet,
Acquisition or any persons or entities related to Biomet within the
meaning of Treasury Regulationss. 1.368-1(e)(3) to acquire from any
holders of Parent Stock any Parent Stock prior to the reorganization
for consideration other than Biomet Common Shares. In addition, Parent
has no plan or intention to redeem any shares of Parent Stock or to
make any distributions with respect to any shares of Parent Stock
prior to or in connection with the reorganization within the meaning
of Temporary Treasury Regulationss.1.368-1T(e). No third party is
acting as an agent for or on behalf of Biomet or Acquisition to
purchase Parent Stock, nor is Biomet or Acquisition a party to any
agreement with a third party to purchase Parent Stock.
<PAGE>
6. Biomet has no plan or intention to liquidate Acquisition; to merge
Acquisition with and into another corporation; to sell or otherwise
dispose of the stock of Acquisition; or to cause Acquisition to sell
or otherwise dispose of any of the assets of Parent acquired in the
transaction, except for dispositions made in the ordinary course of
business or transfers described in Code Section 368(a)(2)(C) or
Treasury Regulation ss. 1.368-1(d)(4)(iii).
7. Following the transaction, Acquisition will continue the historic
business of Parent or use a significant portion of Parent's business
assets in a business.
8. The liabilities of Parent assumed by Acquisition and the liabilities
to which the transferred assets of Parent are subject were incurred by
Parent in the ordinary course of business.
9. Biomet, Acquisition, Parent and the holders of Parent Stock will pay
their respective expenses, if any, incurred in connection with the
transaction.
10. There is no intercorporate indebtedness existing between Biomet and
Parent or between Acquisition and Parent that was issued, acquired, or
will be settled at a discount.
11. Neither Biomet, Acquisition nor Parent is an investment company as
defined in Code Sections 368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
12. Neither Biomet, Acquisition nor Parent is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Code Section
368(a)(3)(A).
13. The fair market value of the assets of Parent transferred to
Acquisition will equal or exceed the sum of the liabilities assumed by
Acquisition, plus the amount of liabilities, if any, to which the
transferred assets are subject.
14. No stock of Acquisition will be issued in the transaction.
15. The payment of cash in lieu of fractional Biomet Common Shares is
solely for the purpose of avoiding the expense and inconvenience to
Biomet of issuing fractional Biomet Common Shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the holders of
Parent Stock instead of issuing fractional Biomet Common Shares will
not exceed one percent of the total consideration that will be issued
in the transaction to the holders of Parent Stock in exchange for
their shares of Parent Stock. The fractional share interests of each
holder of Parent Stock will be aggregated, and no holder of Parent
Stock will receive cash in an amount equal to or greater than the
value of one full Biomet Common Share.
<PAGE>
16. None of the compensation received by any shareholder-employees of
Parent will be separate consideration for, or allocable to, any of
their shares of Parent Stock; none of the Biomet Common Shares
received by any shareholder-employees will be separate consideration
for, or allocable to, any employment agreement; and the compensation
paid to any shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
17. Biomet will pay or assume only those expenses of Parent that are
solely and directly related to the transaction in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
18. To the extent that a portion of the Biomet Common Shares issued in
exchange for Parent Stock will be placed in escrow by the holders of
Parent Stock and will be made subject to a condition pursuant to the
Agreement and the Escrow Agreement, for possible return to Biomet
under specified conditions: (1) there is a valid business reason for
establishing the arrangement; (2) the Biomet Common Shares subject to
such arrangement will appear as issued and outstanding on the balance
sheet of Biomet and such Biomet Common Shares will be legally
outstanding under applicable state law; (3) all dividends paid on such
Biomet Common Shares will be distributed currently to the holders of
Parent Stock and contributed by such holders to the escrow; (4) all
voting rights of such Biomet Common Shares will be exercisable by or
on behalf of the holders of Parent Stock or their authorized agent;
(5) no such Biomet Common Shares will be subject to restrictions
requiring their return to Biomet because of death, failure to continue
employment, or similar restrictions; (6) all such Biomet Common Shares
will be released from the arrangement within 5 years from the date of
consummation of the transaction (except where there is a bona fide
dispute as to whom the Biomet Common Shares should be released); (7)
at least 50 percent of the number of Biomet Common Shares issued
initially to the holders of Parent Stock will not be subject to the
arrangement; (8) the return of such Biomet Common Shares will not be
triggered by an event the occurrence or nonoccurrence of which is
within the control of the holders of Parent Stock; (9) the return of
Biomet Common Shares will not be triggered by the payment of
additional tax or reduction in tax paid as a result of an Internal
Revenue Service audit of the holders of Parent Stock or the
corporations either (a) with respect to the Merger in which the
escrowed Biomet Common Shares will be issued, or (b) when the Merger
in which the escrowed Biomet Common Shares will be issued involves
persons related within the meaning of Section 267(c)(4) of the Code;
and (10) the mechanism for the calculation of the number of Biomet
Common Shares to be returned is objective and will be readily
ascertainable.
<PAGE>
Opinion
Based upon and subject to the foregoing, and subject to the qualifications,
limitations and assumptions set forth in this letter, we are of the opinion
that:
(a) The Share Exchange will constitute a reorganization within the meaning
of Code Sections 368(a)(1)(A) and 368(a)(2)(D), in which Biomet,
Acquisition and Parent will each be a "party to a reorganization"
within the meaning of Code Section 368(b).
(b) No gain or loss will be recognized by Biomet pursuant to the Share
Exchange. Code Section 354(a)(1).
(c) No gain or loss will be recognized by Acquisition pursuant to the
Share Exchange. Code Section 354(a)(1).
The opinions set forth in this letter are limited to the foregoing United
States federal income tax consequences of the Share Exchange and are based
solely on, and are limited to, the federal income tax laws of the United States
of America. We express no opinion as to any other federal laws, or any foreign,
state or local laws, and we express no opinion as to any federal, state or other
tax consequences of any other aspects of the Share Exchange.
The opinions expressed in this letter speak as to the documents, facts and
the law in existence as of the date hereof and at no time subsequent hereto. No
opinion is expressed in this letter concerning the tax treatment of the Share
Exchange under other provisions of the Code and regulations adopted thereunder
or under foreign, state or local law, or as to the tax treatment of any
conditions existing at the time of, or the effects resulting from, the Share
Exchange that are not specifically covered above.
We assume no obligation to update our opinions for any deletions, additions
or modifications to any laws applicable to the Share Exchange subsequent to the
date hereof. The opinions expressed herein are matters of professional judgment
and are not a guarantee of results.
The opinions expressed in this letter are solely for the benefit of the
addressee hereof in connection with the transactions provided for in, or
contemplated by, the Transaction Documents. The opinions expressed in this
letter may not be used for any other purpose or otherwise distributed or relied
upon by any person. Except for reproductions for inclusion in transcripts of the
documentation relating to the Transaction Documents, this opinion may not be
quoted or reproduced, in whole or in part, in any other document without our
prior written consent.
Very truly yours,
_____________, 1999
Board of Directors
Implant Innovations International Corporation
4555 Riverside Drive
Palm Beach Gardens, Florida 33410
Re: Merger of Implant Innovations International Corporation with and into Palm
Acquisition Corp.
To the Members of the Board of Directors:
You have requested our opinion as to certain federal income tax
consequences of the merger (the "Merger") of Implant Innovations International
Corporation, a Delaware corporation ("3i") with and into Palm Acquisition Corp.,
an Indiana corporation ("Acquisition") and wholly-owned subsidiary of Biomet,
Inc., an Indiana corporation ("Biomet") with Acquisition continuing as the
surviving corporation, pursuant to the Agreement and Plan of Merger among 3i,
Acquisition and Biomet, dated as of August 28, 1999 (the "Agreement"). At the
Effective Time, (i) all of the outstanding shares of Class A common stock of 3i,
par value $0.001 per share (ii) all of the outstanding shares of Class B common
stock of 3i, par value $0.001 per share, (collectively, the "3i Common Stock")
and (iii) all of the outstanding shares of Series A Cumulative Convertible
Preferred Stock of 3i, par value $0.001, (the "3i Preferred Stock"), will be
converted into a number of shares of common stock of Biomet, no par value,
("Biomet Common Stock") in an amount equal to the exchange ratio set forth in
the Agreement. Fractional shares will be exchanged for cash pursuant to the
Agreement.
For purposes of our opinion, we have examined the Agreement, the
Registration Statement on Form S-4, including the Joint Proxy
Statement/Prospectus, filed by Biomet with the Securities and Exchange
Commission (the "Registration Statement"), which was declared effective on
___________, __ 1999, and such other records, documents, and instruments, and
have considered such matters of law, as in our judgement were necessary or
appropriate. In addition, in rendering our opinion, we have relied upon certain
representations (attached hereto) made to us by the management of Biomet and the
management of 3i, without having independently confirmed the accuracy thereof.
Any change in the Agreement, the facts set forth in the Registration Statement,
or the law applicable to the Merger as of the date hereof, or any failure of the
representations to be accurate, could adversely affect our opinion. Terms not
otherwise defined herein have the meanings given to them in the Agreement.
<PAGE>
Based upon and subject to the foregoing, and provided that the Merger
qualifies as a statutory merger under applicable law, it is our opinion that:
1. The Merger will constitute a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended, for United
States federal income tax purposes, and Biomet, Acquisition and 3i will
each be a party to a reorganization within the meaning of Section 368(b) of
the Code.
2. No gain or loss will be recognized by the Biomet, Acquisition or 3i as a
result of the Merger.
3. No income, gain or loss will be recognized by the stockholders of 3i upon
the exchange of their stock solely for shares of Biomet Common Stock
pursuant to the Merger, except with respect to cash, if any, received in
lieu of fractional shares of Biomet Common Stock and any cash received by
holders of 3i Preferred Stock pursuant to Section 6.29 of the Agreement in
payment of accrued but unpaid dividends.
4. The aggregate tax basis of the shares of Biomet Common Stock received
solely in exchange for 3i stock pursuant to the Merger (including
fractional shares for which cash is received as described in 6, below) will
be the same as the aggregate tax basis of the 3i stock exchanged therefor
increased, in the case of holders of 3i Preferred Stock, by the amount of
gain or income recognized on account of cash received in payment of accrued
but unpaid dividends and decreased, in the case of holders of 3i Preferred
Stock, by the amount of cash received in payment of accrued but unpaid
dividends.
5. The holding period for shares of Biomet Common Stock, received solely in
exchange for 3i stock pursuant to the Merger, will include the holding
period of the 3i stock exchanged therefor, provided such 3i stock was held
as a capital asset by the stockholder at the effective time of the Merger.
6. A stockholder of 3i who receives cash in lieu of a fractional share of
Biomet Common Stock will recognize gain or loss equal to the difference, if
any, between such stockholder's tax basis in such fractional share (as
described in 4, above) and the amount of cash received.
<PAGE>
Our opinion does not address all aspects of taxation that may be relevant
to particular stockholders in light of their personal investment or tax
circumstances or to certain types of stockholders subject to special treatment
under certain federal income tax laws, such as dealers in securities, financial
institutions, insurance companies, tax-exempt organizations, foreign
corporations and persons who are not citizens or residents of the United States.
In particular, this opinion does not address the tax consequences to
stockholders who acquired 3i Common Stock pursuant the exercise of options or
warrants or who have provided or will provide services to 3i, Biomet or
Acquisition. This opinion does not address any consequences arising under the
laws of any state, locality or foreign jurisdiction or any non-income tax
consequences. We express no opinion as to any tax consequences of the Merger
other than those expressly discussed herein.
This opinion is intended for the sole benefit of 3i and is not to be relied
upon by any other person without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement filed by
Biomet in connection with the Merger and to the reference to us in the Proxy
Statement/Prospectus included in the Registration Statement.
Very truly yours,
STEEL HECTOR & DAVIS LLP
