1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
BIOMET, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BIOMET, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
2
[BIOMET LOGO]
To the Shareholders of Biomet, Inc.:
You are cordially invited to attend our Annual Meeting of Shareholders on
Saturday, September 29, 2001, at 1:30 p.m., local time, at Biomet's Corporate
Headquarters located at 56 East Bell Drive, Warsaw, Indiana.
At the meeting, you will vote on the election of four persons to the Board
of Directors. Details can be found in the accompanying Notice and Proxy
Statement.
We hope you are planning to attend the Annual Meeting and look forward to
seeing as many of you as possible. Please check the appropriate "attendance" box
on your proxy card. The vote of each shareholder is of utmost importance. For
that reason, we kindly request that you complete, date and sign your proxy card
and return it to us promptly in the enclosed envelope, whether or not you plan
to attend the Annual Meeting. You may revoke your proxy at any time before it is
voted by providing written notice to the Secretary of Biomet or by filing a
properly executed proxy bearing a later date.
On behalf of the Board of Directors and management of Biomet, Inc., I would
like to extend our appreciation for your continued support and confidence.
Sincerely,
BIOMET, INC.
/s/ Dane A. Miller
----------------------------------
Dane A. Miller, Ph.D.
President and Chief
Executive Officer
3
[BIOMET LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 29,2001
TO THE SHAREHOLDERS OF BIOMET, INC.:
The Annual Meeting of Shareholders of Biomet, Inc. will be held on
Saturday, September 29, 2001, at 1:30 p.m., local time, at Biomet's Corporate
Headquarters located at 56 East Bell Drive, Warsaw, Indiana, for the following
purposes:
(1) To elect four directors to serve for terms of three years each.
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Shareholders of record as of the close of business on July 20, 2001 are
entitled to receive notice of and to vote at the Annual Meeting.
We urge you to complete, date and sign the enclosed proxy and return it to
us promptly in the envelope provided, even if you hold only a few shares and
regardless of whether or not you expect to be present at the Annual Meeting in
person. You may revoke your proxy at any time before it is voted or by providing
written notice to the Secretary of Biomet or by filing a properly executed proxy
bearing a later date.
By Order of the Board of Directors,
/s/ Daniel P. Hann
-----------------------------------
Daniel P. Hann, Secretary
August 21, 2001
Warsaw, Indiana
YOUR VOTE IS VERY IMPORTANT. PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
4
[BIOMET LOGO]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 29,2001
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of Biomet, Inc. in
connection with the solicitation by the Board of Directors of Biomet of proxies
to be voted at the Annual Meeting of Shareholders to be held at Biomet's
Corporate Headquarters located at 56 East Bell Drive, Warsaw, Indiana, on
Saturday, September 29, 2001, at 1:30 p.m., local time, or any adjournment
thereof. This Proxy Statement and the accompanying form of proxy were first
mailed to shareholders on or about August 21, 2001. The following is important
information in a question-and-answer format regarding the Annual Meeting and
this Proxy Statement.
WHAT AM I VOTING ON?
You are voting on the election of four directors (M. Ray Harroff, Jerry L.
Miller, Charles E. Niemier and Prof. Dr. Bernhard Scheuble) for three-year
terms.
WHO IS ENTITLED TO VOTE?
Only those persons who own Biomet Common Shares at the close of business on
the record date, July 20, 2001, are entitled to receive notice of and to vote at
the Annual Meeting, or any adjournment of the meeting. Each shareholder is
entitled to one vote for each Biomet Common Share owned as of the close of
business on July 20, 2001.
HOW DO I VOTE?
Please complete, sign and return each proxy you receive. If your signed
proxy does not indicate your voting preference, we will vote FOR the proposal on
your behalf. You may revoke your proxy at any time prior to the Annual Meeting
by (1) notifying the Secretary of Biomet in writing, or (2) returning a
later-dated proxy.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
It means you have shares registered in more than one account. Please
complete, sign and return ALL proxies to ensure that all of your shares are
voted.
WHO CAN ATTEND THE ANNUAL MEETING?
All shareholders as of the close of business on July 20, 2001, or their
duly appointed proxy holders, may attend the Annual Meeting. Each shareholder
may be accompanied by one guest. However, seating will be limited. Admission to
the Annual Meeting will be on a first-come, first-served basis. Registration
will begin at 1:00 p.m.
5
WHAT TIME IS THE ANNUAL MEETING?
The Annual Meeting will begin at 1:30 p.m., local time. Please note that
local time is Eastern Standard Time, NOT Eastern Daylight Savings Time (i.e.,
during this time of year, Warsaw is on the same time as Chicago). THERE WILL BE
TOURS OF BIOMET'S FACILITY FROM 12:00 NOON TO 1:00 P.M. PRIOR TO THE ANNUAL
MEETING.
WHAT CONSTITUTES A QUORUM?
A quorum is represented by the holders of a majority of the Common Shares
outstanding on the record date and present, in person or by proxy, at the Annual
Meeting. As of the record date, there were 269,518,156 Common Shares of Biomet
issued and outstanding. Proxies submitted by brokers that do not indicate a vote
for the proposal are called "broker non-votes." Broker non-votes and abstentions
will be included in the number of shares considered to be present at the Annual
Meeting. All share information contained in this Proxy Statement has been
adjusted to reflect the 3-for-2 split of the Company's Common Shares announced
on July 9, 2001, payable to shareholders of record on July 30, 2001.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You may change your vote at any time before the proxy is voted at the
Annual Meeting. To change your vote, you must deliver to the Secretary of Biomet
either a written notice of revocation or a properly executed proxy bearing a
later date. Any proxy will be suspended if you attend the Annual Meeting and
elect to vote in person.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The four nominees receiving the greatest number of votes
will be elected as directors. Abstentions and broker non-votes will not be
counted as votes in favor of any nominee.
OTHER MATTERS. The approval of any other matter that properly comes before the
Annual Meeting requires that the number of votes cast "for" exceed those cast
"against." Abstentions and broker non-votes will not be counted as votes for or
against any such matters.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you instruct otherwise on your proxy card, the proxy holders will
vote in accordance with the recommendations of the Board of Directors. The
Board's recommendations are set forth with the discussion of each matter. In
summary, the Board recommends the following voting action:
- FOR the election of the nominees for directors.
With respect to any other matter that properly comes before the Annual Meeting,
the proxy holders will vote as recommended by the Board of Directors, or in
their own discretion if no recommendation is given.
WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE 2002 ANNUAL MEETING?
To be considered for inclusion in next year's Proxy Statement, shareholder
proposals must be submitted in writing by April 23, 2002, to the Secretary of
Biomet, P.O. Box 587, Warsaw, IN 46581-0587.
WHO PAYS FOR THE COSTS ASSOCIATED WITH THIS PROXY STATEMENT?
Biomet will pay for all expenses in connection with the solicitation of
proxies. We will also provide to all brokers, dealers, banks and voting
trustees, and their nominees, copies of this Proxy Statement, the accompanying
form of proxy and the Annual Report for mailing to beneficial owners and, upon
request, will reimburse such record holders for their reasonable expenses in
connection with such activities. Biomet expects to solicit proxies primarily by
mail; but directors, officers and employees of Biomet may also solicit proxies
in person or by telephone.
2
6
STOCK OWNERSHIP
WHO ARE THE OWNERS OF THE GREATEST AMOUNT OF BIOMET'S COMMON SHARES?
The following table sets forth certain data with respect to those persons
known by Biomet to be the beneficial owners of more than 5% of the issued and
outstanding Common Shares of Biomet as of July 20, 2001. Except as otherwise
indicated in the notes to the table, each shareholder has sole voting and
investment power with respect to the shares indicated.
NAME AND ADDRESS AMOUNT(1) AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
State Farm Mutual Automobile 18,846,970(2) 7.0%
Insurance Company and
related entities
One State Farm Plaza
Bloomington, Illinois 61710
FMR Corp. 16,763,230(3) 6.2%
82 Devonshire Street
Boston, Massachusetts 02109
(1) These amounts have been adjusted to reflect the 3-for-2 split of the
Company's Common Shares announced July 9, 2001
(2) According to information contained in a Schedule 13G filing made by State
Farm Mutual Automobile Insurance Company and related entities ("State
Farm") dated February 15, 2001, State Farm acquired these shares for
investment purposes in the ordinary course of its business.
(3) According to information obtained in a Schedule 13G filing made by
FMR Corp. ("FMR"), dated February 14, 2001, FMR acquired these shares
for investment purposes in the ordinary course of its business.
3
7
HOW MANY COMMON SHARES DO BIOMET'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table sets forth the beneficial ownership of Common Shares as
of July 20, 2001 by each director, each executive officer named in the Summary
Compensation Table herein, and by all directors and executive officers of Biomet
as a group. Unless otherwise stated, the beneficial owners exercise sole voting
and/or investment power over their shares. These amounts have been adjusted to
reflect the 3-for-2 split of the Company's Common Shares announced on July 9,
2001.
NUMBER SHARES TOTAL NUMBER
OF SHARES BIOMET'S 401(K) PROFIT EXERCISABLE OF SHARES
NAME OF BENEFICIALLY EMPLOYEE STOCK SHARING AND WITHIN BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED (1) BONUS PLAN(2) TRUST(3) 60 DAYS(4) OWNED OF CLASS
- ----------------- --------- ------------ -------- ---------- ----- --------
Garry L. England 183,801 22,497 31,969 45,562 282,645 0.1%
Jerry L. Ferguson 3,291,094 3,106 - - 3,291,094 1.2%
Daniel P. Hann 56,454 10,018 1,657 48,375 107,590 *
C. Scott Harrison, M.D. 718,380 - - 35,037 753,416 0.3%
M. Ray Harroff 48,723 - - 15,750 64,472 *
Thomas F. Kearns, Jr. 9,394 - - 4,500 13,894 *
Dane A. Miller, Ph.D. 8,322,732 31,306 21,997 - 8,359,394 3.1%
Jerry L. Miller 4,117,824 - - 15,750 4,133,573 1.5%
Kenneth V. Miller 14,251 - - 15,750 30,001 *
Charles E. Niemier 741,022 26,994 35,334 45,562 845,474 0.3%
Niles L. Noblitt 5,042,787 31,906 51,334 - 5,128,344 1.9%
James R. Pastena 98,814 11,508 10,482 32,647 148,930 *
Marilyn Tucker Quayle - - - 15,750 15,750 *
Prof. Dr. Bernhard Scheuble 11,250 - - 15,750 26,999 *
L. Gene Tanner 130,500 - - - 130,500 *
Other Executive Officers 404,325 40,968 51,583 150,808 641,105 0.2%
- --------------------------------------------------------------------------------------------------------------
All Directors and Executive
Officers as a Group
(19 persons, including
the foregoing) 24,014,397(5) 8.9%
*Represents less than 0.1% of Biomet's issued and outstanding Common Shares.
(1) The number of shares shown includes shares that are owned individually or
jointly, as well as shares to which the individual has shared voting
and/or investment power. Certain Biomet directors and executive officers
disclaim beneficial ownership of some of the shares included in the
table, as follows:
- Mr. Garry England--4,050 shares held in an individual retirement
account ("IRA") for Mr. England's benefit as to which he has investment
power but no voting power and 5,512 shares owned of record by Mr.
England's minor children, as to which Mr. England has no voting or
investment power and disclaims beneficial ownership.
- Mr. Jerry Ferguson--278,754 shares owned of record by Mr. Ferguson's
wife and 38,880 shares held in an IRA for her benefit, as to which Mr.
Ferguson has no voting or investment power and disclaims beneficial
ownership; and 58,806 shares held in an IRA for his benefit as to which
Mr. Ferguson has investment power but no voting power.
4
8
- Dr. Dane Miller--2,581,357 shares owned of record by Dr. Miller's wife
and 44,973 shares held in an IRA for her benefit, as to which Dr.
Miller has no voting or investment power and disclaims beneficial
ownership; and 103,473 shares held in an IRA for the benefit of Dr.
Miller, as to which he has investment power but no voting power.
- Mr. Jerry Miller--86,250 shares held in trust for the benefit of Mr.
Miller's minor child, as to which Mr. Miller has shared voting and
investment power and disclaims beneficial ownership; and 3,937,209
shares held in an Estate Planning trust for the benefit of Mr. Miller,
as to which Mr. Miller has shared voting and investment power.
- Mr. Charles Niemier--143,675 shares owned of record by Mr. Niemier's
wife and 30,573 shares held in an IRA for her benefit, as to which Mr.
Niemier has no voting or investment power and disclaims beneficial
ownership; 71,082 shares held in an IRA for Mr. Niemier's benefit, as
to which he has investment power but no voting power; and 300,348
shares held in trust for the benefit of Mr. Niemier's children as to
which he has no voting or investment power and disclaims beneficial
ownership.
- Mr. Niles Noblitt--2,416,385 shares owned of record by Mr. Noblitt's
wife, as to which Mr. Noblitt holds no voting or investment power and
disclaims beneficial ownership; 41,058 shares owned of record by his
children, as to which Mr. Noblitt has no voting or investment power and
disclaims beneficial ownership; and 20,529 shares owned of record by
his children, as to which he has voting and investment power but
disclaims beneficial ownership.
- Other Executive Officers--72,755 shares held by the spouses of these
executive officers, as to which they have no voting power or investment
power and disclaim beneficial ownership; 4,212 shares held in an IRA
for the benefit of the wife of one of these executive officers, as to
which he has no voting or investment power and disclaims beneficial
ownership; and 4,653 shares held in an IRA for the benefit of one of
the executive officers, as to which he has investment power but no
voting power.
(2) Biomet's executive officers have accounts in Biomet's Employee Stock Bonus
Plan qualified under section 401(a) of the Internal Revenue Code. The
executive officers who hold shares pursuant to the Employee Stock Bonus
Plan have voting power but do not have investment power for these shares.
(3) Biomet's executive officers may elect to participate in Biomet's Profit
Sharing Plan and Trust qualified under Section 401(k) of the Internal
Revenue Code. The officers have no voting or investment power for the
shares held in their accounts in the 401(k) plan.
(4) Reflects the number of shares that could be purchased by the exercise of
options available at July 20, 2001, or within 60 days thereafter.
(5) Does not include unexercised option shares.
5
9
ITEM I--ELECTION OF DIRECTORS
Biomet's Bylaws divide the Board of Directors into three classes, with one
class to be elected at each Annual Meeting of Shareholders. At the Annual
Meeting, the shareholders will vote to elect four directors in Class III to
serve for a three-year term expiring in 2004, and until their successors are
elected and qualified. Class I Directors and Class II Directors will not be
elected at the Annual Meeting and will continue in office until the Annual
Meetings of Shareholders to be held in 2002 and 2003, respectively. The Board of
Directors has nominated the persons named below for election as Class III
Directors. The name, age, business background and tenure as a director of Biomet
of each nominee and each director continuing in office are set forth below.
Jerry L. Miller and Kenneth V. Miller are brothers. No other family relationship
exists among any of the nominees or continuing directors. Except as otherwise
indicated, the principal occupations of the nominees and continuing directors
have not changed during the last five years. The nominees for director have
consented to serve, if elected, and Biomet has no reason to believe that any of
the nominees will be unable to serve. Should any nominee become unavailable for
any reason, proxies may be voted for an alternate candidate chosen by the Board
of Directors. The four nominees for director receiving the greatest number of
votes will be elected as directors. Withheld votes and broker non-votes (which
are treated as "withheld" votes) are not counted as votes in favor of any
nominee. Unless authority to vote for a nominee is withheld, the accompanying
proxy will be voted FOR the nominees named.
DIRECTORS STANDING FOR ELECTION
NAME, AGE AND BUSINESS EXPERIENCE
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
CLASS III: TERM EXPIRES AT THE 2004 ANNUAL MEETING OF SHAREHOLDERS
M. RAY HARROFF, age 61 ............................... ......Director since 1977
Mr. Harroff is one of the four founders of Biomet and is President of Stonehenge
Links Village Development (real estate development company). Mr. Harroff was
also President of Stonehenge Golf Club, Inc. (golf country club) until February
1998. On September 2, 1997, Mr. Harroff filed for protection under Federal
Bankruptcy laws. Also on September 2, 1997, Stonehenge Golf Club and Stonehenge
Links Village Development filed a petition for reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code.
JERRY L. MILLER, age 55 .....................................Director since 1979
Member: Executive, Nominating, Compensation and Stock Option Committees. Mr.
Miller is a self-employed attorney, venture capitalist and a principal in
Havirco, Inc. (private investment management firm). Mr. Miller is a director and
a member of the Compensation Committee of the board of directors of AvTech
Laboratories, Inc. (pharmaceutical laboratory) and TEAM Industries, Inc.
(manufacturer of expanded polystyrene products).
CHARLES E. NIEMIER, age 45 ..................................Director since 1987
Mr. Niemier is the Senior Vice President - International Operations of Biomet.
Mr. Niemier is a trustee of Valparaiso University, a member of the Board of
Directors of Lakeland Financial Corporation (Lake City Bank), and a member of
the Board of Directors of Kosciusko 21st Century Foundation, Inc. (non-profit
organization).
PROF. DR. BERNHARD SCHEUBLE, age 47 .........................Director since 1998
Prof. Scheuble is Chairman and Chief Executive Officer of Merck KGaA
(pharmaceutical company) and has been CEO Pharma, and a General Partner and
Member of the Executive Board of Merck KGaA since April, 1998. From 1996 until
1998, Prof. Scheuble was Head of Pharma Ethicals, Merck KGaA. Prof. Scheuble is
a director of certain subsidiaries of Merck KGaA.
6
10
DIRECTORS CONTINUING IN OFFICE
NAME, AGE AND BUSINESS EXPERIENCE
CLASS 1: TERM EXPIRES AT THE 2002 ANNUAL MEETING OF SHAREHOLDERS
C. SCOTT HARRISON, M.D., age 64 .............................Director since 1994
Member: Executive, Audit and Compensation Committees. Dr. Harrison is the
founder and President of Crippled Children's United Rehabilitation Effort
(CCURE) (non-profit organization).
NILES L. NOBLITT, age 50 ....................................Director since 1977
Member: Executive and Stock Option Committees. Mr. Noblitt is one of the four
founders of Biomet and is the Chairman of the Board. Mr. Noblitt is also a
trustee of Rose Hulman Institute of Technology.
KENNETH V. MILLER, age 53 ...................................Director since 1979
Member: Executive, Nominating, Audit, Compensation and Stock Option Committees.
Mr. Miller is a self-employed attorney, venture capitalist and a principal in
Havirco, Inc. (private investment management firm). Mr. Miller is a director and
a member of the Compensation Committee of the Board of Directors of AvTech
Laboratories, Inc. (pharmaceutical laboratory) and TEAM Industries, Inc.
(manufacturer of expanded polystyrene products). Mr. Miller is also a director
of Keystone Community Bank.
L. GENE TANNER, age 68 ......................................Director since 1985
Member: Audit Committee. Mr. Tanner is Vice Chairman of the Board of NatCity
Investments, Inc. (investment banking firm) and a director of the Indiana
Chamber of Commerce.
MARILYN TACKER QUAYLE, age 52 ...............................Director since 1993
Ms. Quayle is President and Chief Executive Officer of BTC, Inc., a private
consulting firm. Prior to 2001, she was also an attorney engaged in private
practice as a partner in the Indianapolis, Indiana law firm of Krieg, DeVault,
Alexander & Capehart.
CLASS 11: FOR A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING OF
SHAREHOLDERS
DANE A. MILLER, PH.D., age 55 ...............................Director since 1977
Member: Executive and Stock Option Committees. Dr. Miller is one of the four
founders of Biomet and is the President and Chief Executive Officer. Dr. Miller
is a director of lst Source Corporation (bank holding company), a trustee of
Kettering University (formerly General Motors Institute), a member of the board
of the University of Chicago Health Systems and serves on the Engineering
Advisory Committee of the University of Cincinnati.
JERRY L. FERGUSON, age 60 ...................................Director since 1978
Member: Executive and Nominating Committees. Mr. Ferguson is one of the four
founders of Biomet and has served as Vice Chairman of the Board since December
1997. Prior thereto he served as Biomet's Senior Vice President.
THOMAS F. KEARNS, JR., age 64 ....... .......................Director since 1983
Mr. Kearns is a retired partner of Bear, Steams & Co., Inc. (investment banking
firm). Mr. Kearns is a director of PharmaKinetics Laboratories, Inc. (contract
research organization), a trustee of the University of North Carolina Foundation
and a director of Fibrogen Corporation (a biotechnology company).
DANIEL P. HANN, age 46 ......................................Director since 1989
Mr. Hann has served as the Senior Vice President, General Counsel and Secretary
of Biomet since June 1999. Prior thereto, he was Vice President, General Counsel
and Secretary of Biomet.
7
11
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
HOW OFTEN DID THE BOARD MEET DURING FISCAL YEAR 2001?
The Board of Directors met five times during fiscal year 2001. Each director
attended more than 75% of the total number of meetings of the Board and
committees on which he or she served during fiscal year 2001.
BOARD COMMITTEE MEMBERSHIP
Name Executive Nominating Audit Compensation Stock Option
Committee Committee Committee Committee Committee
Jerry L. Ferguson X X
Daniel R Hann
C. Scott Harrison, M.D. X X X
M. Ray Harroff
Thomas F. Kearns
Dane A. Miller, Ph.D. X X
Jerry. L. Miller, X X X X
Kenneth V. Miller X X X X
Charles E. Niemier
Niles L. Noblitt X X
Marilyn Tucker Quayle
Prof. Dr. Bernhard Scheuble X
L. Gene Tanner
The EXECUTIVE COMMITTEE has full authority from the Board of Directors to
conduct business within the limits prescribed by Indiana law. The Executive
Committee met five times during fiscal year 2001.
The NOMINATING COMMITTEE is responsible for, among other things, receiving
and reviewing recommendations for nominations to the Board of Directors,
establishing eligibility criteria and procedures for identifying potential
nominees to the Board of Directors, and recommending individuals as nominees for
election to the Board of Directors. The Nominating Committee will consider for
nomination as directors persons recommended by shareholders provided that such
recommendations are in writing and delivered to: Attn: Secretary, Biomet, Inc.,
P.O. Box 587, Warsaw, Indiana 46581-0587, and delivered to, or mailed and
received at, such address not less than 60 days nor more than 90 days prior to
the Annual Meeting of Shareholders. In the event that less than 70 days' notice
or prior public disclosure of the date of the Annual Meeting is given or made to
shareholders, any notice of nomination by a shareholder must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. The Nominating Committee met once during fiscal year 2001.
The function of the AUDIT COMMITTEE is to monitor the internal controls and
financial reporting of Biomet and its subsidiaries; to review these matters with
the President and Chief Executive Officer and Biomet's independent accountants;
to review the scope and parameters of the independent accountants'
8
12
audit of Biomet's consolidated financial statements; to review the scope and
parameters of the findings of Biomet's internal auditors; to establish policies
and make recommendations to the Board of Directors with respect to approval of
transactions between Biomet and its directors, officers and employees; and to
make recommendations to the Board of Directors concerning the annual appointment
of Biomet's independent accountants. The Audit Committee also reviews Biomet's
compliance with applicable laws, regulations and internal procedures. The Audit
Committee met five times during fiscal year 2001.
The COMPENSATION COMMITTEE is responsible for administering the
compensation programs for Biomet's executive officers and employees. The
Compensation Committee met twice during fiscal year 2001.
The STOCK OPTION COMMITTEE administers Biomet's stock option plans.
Presently, no member of the Stock Option Committee participates in any of these
plans with the exception that each of the two nonemployee director members,
Jerry L. Miller and Kenneth V. Miller, automatically receives an option to
purchase 2,000 Common Shares every year during his service as a non-employee
director of Biomet pursuant to the terms of the Biomet, Inc. 1998 Qualified and
Non-Qualified Stock Option Plan. The Stock Option Committee met five times
during fiscal year 2001.
COMPENSATION OF DIRECTORS
Each director of Biomet who is not an employee receives an annual fee of
$16,000, plus a fee of $1,000 and reimbursement for travel expenses for each
meeting of the Board of Directors attended in person and a fee of $500 for
attending a meeting of the Board of Directors by telephone. Directors who are
employees receive a fee of $750 for each meeting of the Board of Directors
attended in person and a fee of $375 for each meeting of the Board of Directors
attended by telephone. Each member of the Executive Committee of the Board of
Directors who is not a Biomet employee receives an additional annual fee of
$16,000, plus a fee of $1,000 and reimbursement for travel expenses for each
Executive Committee meeting attended in person and a fee of $500 for each
Executive Committee meeting attended by telephone. Each member of the Audit
Committee of the Board of Directors receives an additional annual fee of $7,500,
plus a fee of $1,000 and reimbursement for travel expenses for each Audit
Committee meeting attended in person and a fee of $500 for each Audit Committee
meeting attended by telephone. Each member of the Nominating and Compensation
Committees of the Board of Directors receives a fee of $1,000 for each committee
meeting attended in person and a fee of $500 for attending a committee meeting
by telephone, unless such meetings are held in conjunction with a meeting of the
Board of Directors or Executive Committee. No fees are paid for attending
meetings of the Stock Option Committee.
Each director who is not a Biomet employee is automatically granted an
option to purchase 2,000 Common Shares every year during his or her service on
the Board of Directors pursuant to the terms of the Biomet, Inc. 1998 Qualified
and Non-Qualified Stock Option Plan (the "1998 Plan"). The 1998 Plan provides
that the purchase price of option shares may not be less than the fair market
value per Common Share on the date of grant and the term of the option may not
exceed ten years from the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2001, the Compensation Committee was comprised of Jerry
L. Miller; Kenneth V. Miller; and C. Scott Harrison, M.D. None of the members of
the Compensation Committee is now serving or previously has served as an officer
of Biomet or any of its subsidiaries. None of Biomet's executive officers serve
as directors of, or in any compensation-related capacity for, other companies
with which members of Biomet's Compensation Committee are affiliated.
9
13
EXECUTIVE COMPENSATION
GENERAL
The following Summary Compensation Table sets forth, for the three years
ended May 31, 2001, certain information with respect to the compensation of
Biomet's President and Chief Executive Officer and the four other most highly
compensated executive officers who served in such capacities as of May 31, 2001.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
ANNUAL INCENTIVE ALL OTHER
FISCAL YEAR COMPENSATION AWARDS COMPENSATION(2)
NAME AND PRINCIPAL POSITION ENDED MAY 31 SALARY ($) BONUS ($) STOCK OPTIONS(1)(#) ($)
- ----------------------------------------------------------------------------------------------------------------------
Dane A. Miller, Ph.D. 2001 244,700 207,000 -- 14,850
President and 2000 230,300 158,500 -- 14,850
Chief Executive Officer 1999 217,700 160,300 -- 13,400
Niles L. Noblitt 2001 243,000 210,000 -- 14,850
Chairman of the Board 2000 230,300 162,000 -- 14,850
1999 217,700 160,300 -- 13,400
James R. Pastena 2001 248,900 175,000 15,000 11,475
Vice President of Biomet 2000 242,800 150,000 22,500 11,475
and President of EBI, L.P. 1999 235,100 138,000 45,000 9,600
Charles E. Niemier 2001 242,600 170,000 7,500 14,850
Senior Vice President - 2000 228,400 144,000 22,500 14,850
International Operations 1999 216,000 125,000 -- 13,400
Garry L. England 2001 227,200 175,000 7,500 11,475
Senior Vice President - 2000 214,000 152,000 22,500 11,475
Warsaw Operations 1999 202,300 147,000 -- 9,600
</Table>
(1) Adjusted to reflect the 3-for-2 split of the Company's Common Shares
announced July 9, 2001.
(2) Represents the value of Biomet's contribution to the Employee Stock Bonus
Plan and the 401(k), and director fees paid to Dr. Miller, Mr. Noblitt and
Mr. Niemier.
10
14
STOCK OPTIONS
Options were granted in fiscal year 2001 to the following executive
officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF TOTAL AT ASSUMED ANNUAL
UNDERLYING OPTIONS GRANTED EXERCISE RATES OF STOCK PRICE
OPTIONS GRANTED(1) TO EMPLOYEES IN PRICE(2) EXPIRATION APPRECIATION FOR OPTION TERM(3)
NAME (#) FISCAL YEAR 2001 ($/SH) DATE 5%($) 10%($)
- ---- --- ---------------- ------ ---- ----- ------
James R. Pastena 1,875 0.1% $20.83 January 6, 2004 $ 6,157 $12,930
1,875 0.1% 20.83 January 6, 2005 8,418 18,129
1,875 0.1% 20.83 January 6, 2006 10,792 23,848
1,875 0.1% 20.83 January 6, 2007 13,285 30,139
1,875 0.1% 20.83 January 6, 2008 15,902 37,059
1,875 0.1% 20.83 January 6, 2009 18,651 44,671
1,875 0.1% 20.83 January 6, 2010 21,536 53,045
1,875 0.1% 20.83 January 6, 2011 28,867 30,019
Charles E. Niernier 937 * $20.83 January 6, 2004 $ 3,079 $ 6,465
938 * 20.83 January 6, 2005 4,209 9,064
937 * 20.83 January 6, 2006 5,396 11,924
938 * 20.83 January 6, 2007 6,642 15,070
937 * 20.83 January 6, 2008 7,951 18,530
938 * 20.83 January 6, 2009 9,325 22,336
937 * 20.83 January 6, 2010 10,768 26,522
938 * 20.83 January 6, 2011 12,283 31,128
Garry L. England 937 * $20.83 January 6, 2004 $ 3,079 $ 6,465
938 * 20.83 January 6, 2005 4,209 9,064
937 * 20.83 January 6, 2006 5,396 11,924
938 * 20.83 January 6, 2007 6,642 15,070
937 * 20.83 January 6, 2008 7,951 18,530
938 * 20.83 January 6, 2009 9,325 22,336
937 * 20.83 January 6, 2010 10,768 26,522
938 * 20.83 January 6, 2011 12,283 31,128
</Table>
*Represents less than 0.1% of the total options granted to employees in fiscal
year 2001.
(1) These options were granted under the Biomet, Inc. 1998 Qualified and
Non-Qualified Stock Option Plan. They were granted at fair market value at the
time of the grant, do not become exercisable until one year from the date of
grant and carry with them the right to deliver previously owned shares in
payment of the option price and to satisfy tax withholding requirements. The
number of shares has been adjusted to reflect the 3-for-2 split of the Company's
Common Shares announced July 9, 2001.
(2) The exercise price has been adjusted to reflect the 3-for-2 split of the
Company's Common Shares announced July 9, 2001.
(3) The dollar amounts shown in these columns are the result of calculations at
the 5% and 10% appreciation rates set by the Securities and Exchange Commission
and are not intended to forecast the actual appreciation, if any, of the
Company's stock price. The Company did not use an alternate formula to determine
potential realizable value because it is not aware of any formula that is able
to determine with reasonable accuracy the potential realizable value based on
future unknown or volatile factors.
11
15
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gain realized on exercise in fiscal year 2001 by
Biomet's executive officers named in the Summary Compensation Table. Dr. Miller
and Mr. Noblitt do not receive stock options from Biomet.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<Table>
<Caption>
NUMBER(1) OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE REALIZED(2) AT MAY 31, 2001 (#) OPTIONS AT MAY 31,2001 ($)(3)
NAME ON EXERCISE(#)(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------------- --- ----------- ------------- ----------- -------------
James R. Pastena 33,232 $456,112 25,615 72,701 $ 511,303 $1,197,452
Charles E. Niemier 0 0 45,561 55,031 1,054,797 1,086,654
Garry L. England 20,530 412,493 25,030 55,031 569,329 1,086,654
</Table>
(1) The number of shares has been adjusted to reflect the 3-for-2 split of the
Company's Common Shares announced July 9, 2001.
(2) An individual, upon exercise of an option, does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead, the
"Value Realized" represents the difference between the base (or exercise) price
of the option shares and the market price of the option shares on the date the
option was exercised. It does not include any taxes which may have been owed. No
cash is received until or unless the shares received upon exercise of an option
are sold.
(3) Represents the difference between the base (or exercise) price of the option
shares and a market price of $29.78, which was the closing price of the Common
Shares reported by the Nasdaq Stock Market on May 31, 2001, as adjusted to
reflect the 3-for-2 split of the Company's Common Shares announced July 9, 2001.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
The Compensation Committee and the Stock Option Committee of the Board of
Directors (collectively referred to herein as the "Committee") are responsible
for administering the compensation and benefit programs for Biomet's employees,
including the executive officers. The Committee annually reviews and evaluates
cash compensation and stock option grant recommendations made by the President
and Chief Executive Officer for the executive officers (other than for himself)
along with the rationale for such recommendations. The Committee examines these
recommendations in relation to Biomet's overall objectives and makes
compensation recommendations to the Board of Directors for final approval. The
Committee also sends to the Board of Directors for approval its recommendations
on compensation for the President and Chief Executive Officer, who does not
participate in the decisions of the Board as to his compensation package. The
President and Chief Executive Officer is not a member of the Compensation
Committee. He is a member of the Stock Option Committee, but does not
participate in the Biomet stock option program and has never received a stock
option from Biomet.
WHAT IS BIOMET'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
Biomet's current executive compensation policies and practices reflect the
compensation philosophies of Biomet's four founders - Dane A. Miller, Ph.D.,
Niles L. Noblitt, Jerry L. Ferguson and M. Ray Harroff. Biomet is committed to
maximizing shareholder value through performance. The Committee believes that
superior performance by Biomet's executive and management team is an essential
element to reaching that goal. Biomet's practices and policies are designed to
help achieve this objective by accomplishing the following goals:
- Attracting, retaining and rewarding highly qualified and productive
persons.
- Relating compensation to both company and individual performance.
12
16
- Establishing compensation levels that are internally equitable and
externally competitive.
- Encouraging an ownership interest and instilling a sense of pride in
Biomet, consistent with the interests of Biomet's shareholders.
The Committee firmly believes that all Team Members (Biomet refers to its
employees as Team Members) play a critical role in Biomet's success and,
therefore, all Team Members are eligible to participate in Biomet's cash and
equity compensation plans. The Committee continues to believe in one of Biomet's
founding philosophies: that equity incentives in the form of stock options are
an excellent motivation for all Team Members, including executive officers, and
serve to align the interests of Team Members, management and shareholders.
Based on these objectives, the compensation package of the executive
officers consists of four primary elements:
- base salary
- incentive bonuses
- stock options
- participation in employee benefit plans
BASE SALARY. A base salary is set for each executive officer at the
beginning of each calendar year by the Board of Directors, after receiving a
recommendation from the Committee. The Committee recommends to the Board of
Directors what it believes to be an appropriate base salary for each executive
officer based on Biomet's performance, the executive officer's performance,
Biomet's future objectives and challenges, and the current competitive
environment. Base salaries are intended to be relatively moderate, but
competitive. During fiscal year 2001, the base salary of the executive officers
as a group increased approximately 6%.
INCENTIVE BONUSES. A significant portion of each executive officer's annual
compensation is based on the financial performance of Biomet. Approximately
one-half of each executive officer's potential annual cash compensation is based
upon an incentive bonus, which is accrued and paid at the mid-point and the
conclusion of each fiscal year. The potential bonus is determined at the
discretion of the Committee and approved by the Board of Directors at the
beginning of each fiscal year. In exercising its discretion, the Committee takes
into account the growth in revenues and earnings of the operations for which the
executive officer is responsible or plays a significant role, as well as the
goals, objectives, responsibilities and length of service of each officer.
STOCK OPTIONS. Stock options have always been a key element in Biomet's
long-term incentives program. The primary purpose of stock options is to
provide executive officers and other Team Members with a personal and financial
interest in Biomet's success through stock ownership, thereby aligning the
interests of such persons with those of Biomet's shareholders. This broad-based
program is a vital element of Biomet's goal to empower and motivate outstanding
long-term contributions by Team Members within all levels of Biomet. The
Committee believes that stock options help to create an entrepreneurial
environment within Biomet and instill the spirit of a small company.
Additionally, the Committee believes stock options provide broad incentives for
the day-to-day achievements of all Team Members in order to sustain and enhance
Biomet's long-term performance.
The Committee believes that the value of stock options will reflect
Biomet's financial performance over the long term. Because Biomet's employee
stock option program provides for a one-year waiting period before options may
be exercised and an exercise price at fair market value as of the date of grant,
executive officers and other Team Members benefit from stock options only when
the market value of The Common Shares increases over time. Individual executive
officer stock option awards are based on level of responsibility, individual
contribution, length of service and total number of Common Shares owned in
relation to other
13
17
executive officers. All Team Members are eligible to receive stock options. The
current plan provides that all hourly Team Members of Biomet and its
subsidiaries receive a stock option after just two years of service with Biomet
or one of its subsidiaries.
BENEFIT PLANS. The executive officers may also participate in Biomet's
401(k) and the Employee Stock Bonus Plan ("ESBP"). All Team Members who are at
least 18 years of age and have at least 90 days of service are also eligible to
participate in both plans. With respect to the 401(k), each year Biomet, in its
sole discretion, may match 75% of each Team Member's contributions, up to a
maximum amount equal to 5% of the Team Member's compensation, either in cash or
in Common Shares. All contributions to the 401(k) are allocated to accounts
maintained on behalf of each participating Team Member and, to the extent
vested, are distributed to the Team Member upon retirement, death, disability or
termination of service. Historically, the 401(k) has purchased Common Shares
with Biomet's matching contribution. Biomet may make contributions to the ESBP
in the form of Common Shares or cash in such amounts, if any, as it may
determine in its sole discretion, and participating Team Members may make
voluntary contributions to the ESBP in amounts up to 10% of their annual
compensation. The funds accumulated under the ESBP are invested by the trustee
primarily in Biomet Common Shares. Distributions are made to Team Members at
retirement, death, disability or termination of service, in Common Shares or, at
the Team Member's option, in cash. Because a significant portion of the assets
of both of these plans is invested in Biomet's Common Shares, they serve to
further align the interests of Team Members, management and shareholders.
HOW IS BIOMET'S PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATED?
The compensation for Biomet's President and Chief Executive Officer, Dane
A. Miller, Ph.D., is established by the Compensation Committee and approved by
the Board of Directors. Dr. Miller is not a member of the Compensation Committee
and does not participate in decisions of the Board of Directors with respect to
his compensation. Over the years, Dr. Miller has received modest increases in
his cash compensation, notwithstanding Biomet's strong financial results. These
modest increases reflect his cost-conscious management style and belief that the
financial success of management should be closely aligned with shareholder
interests through appreciation in the value of Biomet's stock. Dr. Miller has
never received a stock option and he does not participate in Biomet's stock
option program. Notwithstanding an increase in Biomet's net income, before
non-recurring items (as discussed in the Company's Fiscal Year 2001 Annual
Report), of 19% for fiscal year 2001, the total compensation paid to Dr. Miller
increased approximately 16% during fiscal year 2001.
The Committee believes that the executive compensation programs and
practices described above are conservative and fair to Biomet's shareholders.
The Committee further believes that these programs and practices serve the best
interests of Biomet and its shareholders.
Respectfully submitted,
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Kenneth V. Miller, Chairman Kenneth V. Miller, Chairman
C. Scott Harrison, M.D. Dane A. Miller, Ph.D.
Jerry L. Miller Jerry L. Miller
Niles L. Noblitt
14
18
REPORT OF AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that Biomet specifically incorporates
this Report by reference therein.
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities as they relate to the
Company's accounting policies, internal controls and financial reporting
practices. The Audit Committee fulfills this responsibility by reviewing the
financial reporting process, the systems of internal control, the audit process
and the Company's process for monitoring compliance with laws and regulations
and with its code of conduct. In performing its duties, the Audit Committee will
maintain effective working relationships with the Board of Directors, management
and the internal and external auditors. To effectively perform his or her role,
each committee member will obtain an understanding of the detailed
responsibilities of committee membership as well as the Company's business,
operations and risks. During Fiscal Year 2001 Biomet's Board of Directors
adopted the Biomet, Inc. Audit Committee Charter, a copy of which is attached to
this Proxy Statement as Appendix A. Members of the Audit Committee are
independent non-executive directors and fall within the definition of
"independent director" as set forth by the Nasdaq Market Rules.
The Audit Committee fulfills its responsibilities through periodic meetings
with the Company's independent auditors, internal auditors and members of
Biomet's management. During fiscal year 2001, the Audit Committee met five
times. In addition, the chairman of the Audit Committee, as a representative of
the Audit Committee, discussed the interim financial information contained in
each quarterly earnings announcement with management prior to public release.
The Audit Committee has discussed with management, the internal auditors
and the independent auditors the quality and adequacy of the Company's internal
controls. The Audit Committee has considered and reviewed with the internal and
independent auditors their audit plans, the scope of the audit, the
identification of audit risks and the results of the internal audit
examinations.
The Audit Committee has reviewed Biomet's audited financial statements for
the fiscal year ended May 31, 2001, and discussed them with management and the
Company's independent auditors. Management has the responsibility for the
preparation and integrity of the Company's financial statements and the
independent auditors have the responsibility for the examination of those
statements. The Audit Committee's review included discussion with the
independent auditors of matters required to be discussed pursuant to Statement
on Auditing Standards No. 61 (Communication With Audit Committees).
Based upon the review of the financial statements and discussions with
management and the independent auditors, the Audit Committee recommended to the
Board that Biomet's audited financial statements be included in its Annual
Report on Form 10-K for the fiscal year ended May 31, 2001 for filing with the
Securities and Exchange Commission.
The Audit Committee also recommended that the Board of Directors make no
recommendation to the shareholders with respect to the appointment of
independent accountants for Biomet's fiscal year 2002. The Audit Committee
intends to consider the alternatives available to Biomet.
15
19
The Audit Committee has received and reviewed written disclosures and a
letter from the independent accountants required by the Independence Standards
Board Standard No. 1, entitled "Independence Discussions with Audit Committee,"
as amended to date, and has discussed with the independent accountants their
independence from management. The Audit Committee has determined that the
provision of non-audit services to Biomet during the most recently ended fiscal
year by the independent accountants is compatible with maintaining their
independence.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that Biomet's financial statements are complete and accurate and in
accordance with accounting principles generally accepted in the United States.
Those responsibilities belong to management and Biomet's independent auditors.
In giving its recommendations to the Board of Directors, the Audit Committee has
relied on (a) management's representation that such financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States, and (b) the report of
Biomet's independent auditors with respect to such financial statements.
Respectfully submitted,
Kenneth V. Miller, Chairman
C. Scott Harrison, M.D.
L. Gene Tanner
16
20
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Biomet's Common Shares with the cumulative total return of the Standard & Poor's
500 Stock Index (the "S&P 500 Index") and the Standard & Poor's Health Care and
Supplies Industry Group Index (the "S&P Health Care Index") for the five most
recent fiscal years ended May 31. The comparison assumes $100 invested on May
31, 1996, in Biomet's Common Shares and in each of the indices.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG BIOMET, INC., THE S&P 500 INDEX AND THE
S&P HEALTH CARE INDEX
[PERFORMANCE GRAPH]
<Table>
<Caption>
BASE INDEX RETURNS
PERIOD YEARS ENDING
COMPANY/INDEX MAY96 MAY97 MAY98 MAY99 MAY00 MAY01
- --------------------------------------------------------------------------------------------------
BIOMET INC 100 134.31 208.67 289.73 262.62 489.71
S&P 500 INDEX 100 129.41 169.13 204.68 226.13 202.27
HLTH CARE (MED PDS&SUPP)-500 100 123.90 164.50 205.80 229.60 223.18
</Table>
17
21
CERTAIN TRANSACTIONS
Dane A. Miller, Ph.D., President and Chief Executive Officer and a member
of the Board of Directors of Biomet, is a majority shareholder in a corporation
which provides the use of an aircraft to Biomet on an as-needed basis. Biomet
pays a flat monthly fee of $41,737, plus sales tax, to that corporation for the
use of the aircraft. During the last fiscal year, Biomet made payments to that
corporation of approximately $569,850 in rental fees and scheduled maintenance
on the aircraft. The Board of Directors believes the rental rate and other terms
of this arrangement to be no less favorable to Biomet than would have been
available in the absence of the relationship described.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Biomet's
directors and executive officers and persons who own more than 10 percent of a
registered class of Biomet's equity securities to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Biomet Common Shares and other equity securities. Officers,
directors and greater-than-ten percent shareholders are required by SEC
regulations to furnish Biomet with copies of all Section 16(a) forms filed by
them.
During fiscal year 2000, a Form 5 report was filed on behalf of C. Scott
Harrison, M.D. incorrectly indicating that an option to purchase 4,286 Biomet
Common Shares had expired unexercised. That report has since been amended to
accurately reflect the exercise of that option and the resulting acquisition of
the subject shares. A Form 4 report was filed on August 9, 2000 on behalf of
Joel P. Pratt, which contained an inadvertent clerical error reporting the sale
of 43,875 shares at a price of $43.875. An amended Form 4 has been filed
correctly indicating that Mr. Pratt actually sold only 23,000 shares. During
fiscal year 2000, Kent E. Williams failed to timely report an exempt
discretionary transaction involving the acquisition of 2,126 shares of Biomet
Common Shares in his account in the Biomet 401(k) plan.
Except for the transactions referenced above, to Biomet's knowledge, based
solely on review of the copies of such reports furnished to Biomet and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-ten percent
beneficial owners were complied with on a timely basis during the fiscal year
ended May 31, 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP ("PwC") served as the independent public
accountants for Biomet for the fiscal year ended May 31, 2001. The Board of
Directors was recently notified by PwC that it is closing the local office that
has historically served Biomet. As a result of this recent development, no
independent accountant is being recommended to the shareholders for fiscal year
2002. PwC has neither been dismissed, resigned, nor indicated that it has
declined to stand for re-election after the completion of the current audit.
Biomet is pleased with the services of PwC and has not engaged the services of
new independent accountants; however, in view of the recent decision of PwC to
close its local office, the Audit Committee of the Board of Directors intends to
consider the alternatives available to Biomet. Representatives of PwC are
expected to be present at the Annual Meeting and will be available to respond to
appropriate shareholder questions, if any, and will have the opportunity to make
a statement if they desire to do so.
18
22
FEES PAID TO INDEPENDENT AUDITORS
During fiscal year 2001, Biomet retained PwC to provide services in the
following categories and amounts:
Audit related fees(1)............................................. $520,000
Financial information systems design or implementation fees ...... $ 0
All other fees(2)................................................. $730,000
(1) Audit related services of PwC during fiscal year 2001 consisted of
professional services rendered in connection with the audit of Biomet's annual
financial statements set forth in the Biomet, Inc. Annual Report on Form 10-K
for the year ended May 31, 2001 and the review of Biomet's Quarterly Reports on
Form 10-Q for the quarters ended August 31, 2000, November 30, 2000 and
February 28, 2001.
(2) Other fees include non-audit related professional services consisting
primarily of tax compliance services, business acquisitions, certain foreign
statutory audits and other consultations. The Audit Committee has advised the
Board of Directors that in its opinion the non-audit services rendered by PwC
during the fiscal year ended May 31, 2001 are compatible with maintaining the
independence of such auditors.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of Biomet
has no knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If (a) any matters of which Biomet
did not have notice by June 27, 2001 (45 days prior to August 11, the date of
mailing of proxy materials for last year's Annual Meeting) should properly come
before the meeting; (b) a person not named herein is nominated at the meeting
for election as a director because a nominee named herein is unable to serve or
for good cause will not serve; or (c) any matters should arise incident to the
conduct of the meeting, then the proxies will be voted in accordance with the
recommendations of the Board of Directors of Biomet.
By Order of the Board of Directors,
/s/ Daniel P. Hann, Secretary
-----------------------------------------
Daniel P. Hann, Secretary
August 21, 2001
19
23
APPENDIX A
BIOMET, INC. AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Audit Committee will review the financial
reporting process, the system of internal control, the audit process, and the
Company's process for monitoring compliance with laws and regulations and with
the code of conduct. In performing its duties, the Committee will maintain
effective working relationships with the Board of Directors, management, and the
internal and external auditors. To effectively perform his or her role, each
committee member will obtain an understanding of the detailed responsibilities
of committee membership as well as the Company's business, operations and risks.
ORGANIZATION
- - Audit Committee members shall meet the requirements of the Nasdaq Exchange.
- - The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent non-executive
directors, free from any relationship that would interfere with the exercise
of his or her independent judgment.
- - All members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise.
- - Audit Committee members shall be appointed by the Board on recommendation of
the Nominating Committee.
- - If an audit committee chair is not designated or present, the members of the
Committee may designate a chair by majority vote of the Committee membership.
- - The Committee shall convene at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
director of the internal auditing department, the independent auditors, and
as a committee to discuss any matters that the Committee or each of these
groups believe should be discussed. In addition, the Committee, or at least
its Chair, should communicate with management and the independent auditors
quarterly to review the Company's financial statements and significant
findings based upon the auditors' limited review procedures.
ROLES AND RESPONSIBILITIES
Internal Control
- - Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of internal control and ensuring that all
individuals possess an understanding of their roles and responsibilities;
- - Focus on the extent to which internal and external auditors review computer
systems and applications, the security of such systems and applications, and
the contingency plan for processing financial information in the event of a
systems breakdown;
- - Gain an understanding of whether internal control recommendations made by
internal and external auditors have been implemented by management; and
20
24
- - Ensure that the external auditors keep the Audit Committee informed about
fraud, illegal acts, deficiencies in internal control, and certain other
matters.
FINANCIAL REPORTING
GENERAL
- - Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact on
the financial statements; and
- - Ask management and the internal and external auditors about significant risks
and exposures and the plans to minimize such risks.
ANNUAL FINANCIAL STATEMENTS
- - Review the annual financial statements and determine whether they are
complete and consistent with the information known to committee members and
assess whether the financial statements reflect appropriate accounting
principles;
- - Pay particular attention to complex and/or unusual transactions such as
restructuring charges and derivative disclosures;
- - Focus on judgmental areas such as those involving valuation of assets and
liabilities, including, for example, the accounting for and disclosure of
obsolete or slow-moving inventory; loan losses; warranty, product and
environmental liability; litigation reserves; and other commitments and
contingencies;
- - Meet with management and the external auditors to review the financial
statements and the results of the audit;
- - Consider management's handling of proposed audit adjustments identified by
the external auditors;
- - Review the Management's Discussion & Analysis (MD&A) and other sections of
the annual report before its release and consider whether the information is
adequate and consistent with members' knowledge about the Company and its
operations; and
- - Ensure that the external auditors communicate certain required matters to the
Committee.
INTERIM FINANCIAL STATEMENTS
- - Be briefed on how management develops and summarizes quarterly financial
information, the extent of internal audit involvement, the extent to which
the external auditors review quarterly financial information, and whether
that review is performed on a pre or post-issuance basis;
- - Meet with management and, if a pre-issuance review was completed, with the
external auditors, either telephonically or in person, to review the interim
financial statements and the results of the review. (This may be done by the
committee chairperson or the entire committee);
- - To gain insight into the fairness of the interim statements and disclosures,
obtain explanations from management and from the internal and external
auditors on whether:
- Actual financial results for the quarter or interim period varied
significantly from budgeted or projected results;
- Changes in financial ratios and relationships in the interim financial
statements are consistent with changes in the Company's operations and
financing practices;
21
25
- Generally accepted accounting principles have been consistently applied;
- There are any actual or proposed changes in accounting or financial
reporting practices;
- There are any significant or unusual events or transactions;
- The Company's financial and operating controls are functioning effectively;
- The Company has complied with the terms of loan agreements or security
indentures; and
- The interim financial statements contain adequate and appropriate
disclosures.
- - Ensure that the external auditors communicate certain required matters to the
Committee.
COMPLIANCE WITH LAWS AND REGULATIONS
- - Review the effectiveness of the system for monitoring compliance with laws
and regulations and the results of management's investigation and follow-up
(including disciplinary action) on any fraudulent acts or accounting
irregularities;
- - Periodically obtain updates from management, the General Counsel and tax
director regarding compliance;
- - Be satisfied that all regulatory compliance matters have been considered in
the preparation of the financial statements; and
- - Review the findings of any examinations by regulatory agencies such as the
Securities and Exchange Commission.
COMPLIANCE WITH CODE OF CONDUCT
- - Ensure that a code of conduct is formalized in writing and that all
employees are aware of it;
- - Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of the code of conduct and the guidelines for
acceptable business practices;
- - Review the program for monitoring compliance with the code of conduct; and
- - Periodically obtain updates from management and the General Counsel regarding
compliance.
INTERNAL AUDIT
- - Review the activities and organizational structure of the internal audit
function;
- - Review the qualifications of the internal audit function and concur in the
appointment, replacement, reassignment or dismissal of the director of
internal audit; and
- - Review the effectiveness of the internal audit function.
EXTERNAL AUDIT
- - Review the external auditors' proposed audit scope and approach;
- - Review the performance of the external auditors and recommend to the Board of
Directors the appointment or discharge of the external auditors; and
- - Review and confirm the independence of the external auditors by reviewing the
non-audit services provided and the auditors' assertion of their independence
in accordance with professional standards.
22
26
OTHER RESPONSIBILITIES
- - Meet with the external auditors, director of internal audit, and management
in separate executive sessions to discuss any matters that the Committee or
these groups believe should be discussed privately;
- - Ensure that significant findings and recommendations made by the internal and
external auditors are received and discussed on a timely basis;
- - Review, with the Company's counsel, any legal matters that could have a
significant impact on the company's financial statements;
- - Review the policies and procedures in effect for considering officers'
expenses and perquisites;
- - If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist;
- - Perform other oversight functions as requested by the full Board; and
- - Review and update the charter; receive approval of changes from
the Board.
REPORTING RESPONSIBILITIES
- - Regularly update the Board of Directors about committee activities and make
appropriate recommendations.
27
PROXY BIOMET, INC.
ANNUAL MEETING OF SHAREHOLDERS - SEPTEMBER 29, 2001, at 1:30 P.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dane A. Miller, Ph.D., and Niles L. Noblitt as proxies, each with the power to act alone
and of substitution, and hereby authorizes them to represent and to vote, as designated below, all the Common Shares of the Company
that the undersigned is entitled to vote at the annual meeting of shareholders to be held on Saturday, September 29, 2001, or any
adjournment thereof.
1. ELECTION OF DIRECTORS.
Nominees: M. Ray Harroff; Jerry L. Miller; Charles E. Niemier; and Prof. Dr. Bernhard Scheuble
[ ] VOTE FOR all nominees listed above except vote withheld from the following nominees (if any):
--------------------------------------------------------------------------------
[ ] VOTE WITHHELD from all nominees listed above
2. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" MATTER 1 ABOVE.
PLEASE SIGN ON THE REVERSE SIDE.
28
Please sign exactly as your name appears below. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name
by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS Dated , 2001
PROXY CARD PROMPTLY USING THE ---------------------------------------------------------------
ENCLOSED ENVELOPE.
Please indicate below whether you will Signature
or will not attend the annual meeting. ------------------------------------------------------------------
[ ] WILL ATTEND [ ] WILL NOT ATTEND Signature, if held jointly
-------------------------------------------------