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FORM 10-KBIOMET INC - bmetFiled: July 30, 2007 (period: May 31, 2007)

Annual report which provides a comprehensive overview of the company for the past year

Table of Contents

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K(Mark One)

� ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2007.

OR

� TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file No. 0-12515.

(Exact name of registrant as specified in its charter)

Indiana 35-1418342(State of incorporation) (IRS Employer Identification No.)

56 East Bell Drive, Warsaw, Indiana 46582(Address of principal executive offices) (Zip Code)

(574) 267-6639(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on which registeredCommon Shares The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes � No �

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes � No �

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes � No �

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. �

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filers andlarge accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer � Accelerated filer � Non-accelerated filer �

Indicate by checkmark whether the registered is a shell company (as defined in Rule 12b-2 of the Act). Yes � No �

The aggregate market value of the Common Shares held by non-affiliates of the registrant, based on the closing price of the Common Shares on November 30,2006, as reported by The Nasdaq Stock Market, was approximately $8,777,842,305. As of July 24, 2007, there were 245,836,352 Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCENot applicable.

Source: BIOMET INC, 10-K, July 30, 2007 Powered by Morningstar® Document Research℠

Table of ContentsFORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. Statements that are not historical facts, includingstatements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements include statements generally precededby, followed by or that include the words “believe,” “could,” “expect,” “intend,” “may,” “anticipate,” “plan,” “predict,” “potential,” “estimate” or similarexpressions. These statements include, but are not limited to, statements related to: the timing and number of planned new product introductions; the effect ofanticipated changes in the size, health and activities of population on demand for the Company’s products; assumptions and estimates regarding the size andgrowth of certain market segments; the Company’s ability and intent to expand in key international markets; the timing and anticipated outcome of clinicalstudies; assumptions concerning anticipated product developments and emerging technologies; the future availability of raw materials; the anticipated adequacyof the Company’s capital resources to meet the needs of the Company’s business; the Company’s continued investment in new products and technologies; theultimate marketability of products currently being developed; the ability to implement successfully new technologies; future declarations of cash dividends; theCompany’s ability to sustain sales and earnings growth; the Company’s goals for sales and earnings growth; the Company’s success in achieving timelyapproval or clearance of the Company’s products with domestic and foreign regulatory entities; the stability of certain foreign economic markets; the impact ofanticipated changes in the musculoskeletal industry and the Company’s ability to react to and capitalize on those changes; the Company’s ability to takeadvantage of technological advancements; the Company’s ability to successfully implement desired organizational changes; and the impact of the Company’smanagerial changes.

Forward-looking statements reflect the Company’s current expectations and are not guarantees of performance. These statements are based on the Company’smanagement’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to these forward-lookingstatements include, among others, assumptions regarding demand for the Company’s products, expected pricing levels, raw material costs, the timing and cost ofplanned capital expenditures, expected outcomes of pending litigation, the solvency of the Company’s insurers and the ultimate resolution of allocation andcoverage issues with those insurers, competitive conditions and general economic conditions. Readers of this report are cautioned that reliance on anyforward-looking statement involves risks and uncertainties. Although the Company believes that the assumptions on which the forward-looking statementscontained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence ornonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this report will prove to be accurate. The inclusionof a forward-looking statement herein should not be regarded as a representation by the Company that the Company’s objectives will be achieved.

Forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in anyforward-looking statement. Many of these factors are beyond the Company’s ability to control or predict and could, among other things, cause actual results todiffer from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Such factors, amongothers, may have a material adverse effect upon the Company’s business, financial condition and results of operations and may include, but are not limited to,factors discussed under the heading “Risk Factors” and the following: changes in general economic conditions and interest rates; changes in the availability ofcapital and financing sources; changes in competitive conditions and prices in the Company’s markets; changes in the relationship between supply of anddemand for the Company’s products; fluctuations in costs of raw materials and labor; changes in other significant operating expenses; decreases in sales of theCompany’s principal product lines; slow downs or inefficiencies in the Company’s product research and development efforts; increases in expenditures relatedto increased government regulation of the Company’s business; developments adversely affecting the Company’s sales activities outside the United States;decreases in reimbursement levels by the Company’s customers; increases in cost-containment efforts by group purchasing organizations; loss of the Company’skey management and other personnel or inability to attract such management and other personnel; increases in costs of retaining existing independent salesagents of the Company’s products; and unanticipated expenditures related to litigation, including litigation related to the Merger (as defined below) and thestock option issues and investigations by the U.S. Department of Justice. The Company cautions you not to place undue reliance on these forward-lookingstatements that speak only as of the date they were made. The Company does not undertake any obligation to publicly release any revisions to theseforward-looking statements to reflect events or circumstances after the date of this offering memorandum or to reflect the occurrence of unanticipated events.


Table of ContentsTABLE OF CONTENTS

PART I

Item 1. Business 2Item 1A. Risk Factors 18Item 1B. Unresolved Staff Comments 23Item 2. Properties 24Item 3. Legal Proceedings 25Item 4. Submission of Matters to a Vote of Security Holders 27

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29Item 6. Selected Financial Data 30Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38Item 8. Financial Statements and Supplementary Data 39Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 67Item 9A. Controls and Procedures 67Item 9B. Other Information 68

PART III

Item 10. Directors and Executive Officers of the Registrant 69Item 11. Executive Compensation 71Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 91Item 13. Certain Relationships and Related Transactions 93Item 14. Principal Accounting Fees and Services 94

PART IV

Item 15. Exhibits and Financial Statement Schedules 95

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Table of ContentsPART I

Item 1. Business.

General

Biomet, Inc. (“Biomet” or the “Company”), an Indiana corporation incorporated in 1977, and its subsidiaries design, manufacture and market products usedprimarily by musculoskeletal medical specialists in both surgical and non-surgical therapy. The Company’s product portfolio encompasses reconstructiveproducts, fixation devices, spinal products and other products. Biomet has corporate headquarters in Warsaw, Indiana, and manufacturing and/or office facilitiesin more than 50 locations worldwide.

The Company’s principal subsidiaries include Biomet Orthopedics, Inc.; Biomet Manufacturing Corp.; EBI, L.P. (operating under the assumed names BiometTrauma and Biomet Spine (“BTBS”)); Biomet Europe B.V.; Biomet 3i, Inc. (“Biomet 3i”); Biomet Microfixation, Inc.; Biomet Sports Medicine, Inc.; andBiomet Biologics, Inc. Unless the context requires otherwise, the term “Company” as used herein refers to Biomet and all of its subsidiaries.

The Company’s annual reports on Form 10-K (for the five most recent fiscal years), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K andamendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge in, or maybe accessed through, the Investors Section of the Company’s Internet website at www.biomet.com as soon as reasonably practicable after the Company files orfurnishes such material with or to the Securities and Exchange Commission (the “SEC”). In addition, copies of these reports will be made available free ofcharge, upon written request to the Company’s Investor Relations Department.

The information on Biomet’s website is not included as part of, nor incorporated by reference into, this Form 10-K.

Transaction with the Sponsor Group

On December 18, 2006, Biomet entered into an Agreement and Plan of Merger with LVB Acquisition, LLC, a Delaware limited liability company (“LVB”), andLVB Acquisition Merger Sub, Inc., an Indiana corporation and a wholly-owned subsidiary of LVB (“Purchaser”), which agreement was amended and restatedas of June 7, 2007 (as may be amended and restated, supplemented or otherwise modified from time to time, the “Merger Agreement”), pursuant to which, aftercompletion of the Offer (as defined below) and the satisfaction or waiver of certain conditions, Purchaser will be merged with and into Biomet, with Biometcontinuing as the surviving corporation (the “Merger”). LVB is controlled by a consortium of private equity funds: Blackstone Capital Partners V L.P., GoldmanSachs Investments Ltd., KKR 2006 Fund L.P. and Texas Pacific Group (each a “Sponsor” and collectively, the “Sponsor Group”).

Pursuant to the Merger Agreement, on June 13, 2007, Purchaser commenced a cash tender offer, or the Offer, to purchase all of Biomet’s outstanding commonshares, without par value (the “Common Shares” or the “Shares”), at a price of $46.00 per Share (the “Offer Price”), without interest and less any requiredwithholding taxes. The Offer was made pursuant to Purchaser’s offer to purchase dated June 13, 2007 and the related letter of transmittal, each of which was filedwith the SEC on June 13, 2007. The Offer expired at 12:00 midnight, New York City time, on July 11, 2007, with approximately 82.41% of the outstandingShares having been tendered to Purchaser. On July 17, 2007, Purchaser completed its purchase of the tendered Shares.

In connection with the closing of the Offer, all outstanding options, each an Option, to purchase Shares under Biomet’s stock plans, vested or unvested, werecancelled and each Option holder was paid an amount in cash equal to the excess, if any, of the Offer Price over the applicable option exercise price for eachShare subject to an Option, less any required withholding taxes.

In connection with the Offer, Purchaser entered into a credit agreement dated as of July 11, 2007 for a $6,165 million senior secured term loan facility, or theTender Facility, maturing on June 6, 2008, and pursuant to which it borrowed approximately $4,181 million to finance a portion of the Offer and pay related feesand expenses. Biomet expects to refinance all amounts borrowed under the Tender Facility concurrently with the closing of its new senior secured creditfacilities. Additional financing for the Offer was provided in the form of indirect equity contributions from the Sponsor Group, who collectively causedapproximately $5,197 million to be contributed as equity to LVB Acquisition Holding, LLC, or Holding, concurrently with the funding of the Tender Facility.Holding, which owned 100% of the outstanding equity interests in LVB at the time of the Offer, contributed such funds to LVB, which in turn contributed suchfunds to Purchaser.

As a result of Purchaser having acquired approximately 82.41% of the outstanding Shares pursuant to the Offer, Biomet will call a special meeting ofshareholders to vote upon the Merger, at which meeting Biomet expects that LVB and Purchaser will vote all of their Shares to approve the Merger. At theeffective time of the Merger, or the Effective Time, each Share, other than the Shares owned by LVB or Purchaser immediately prior to the Effective Time, willbe cancelled automatically and will cease to exist and will be converted into the right to receive the Offer Price, without interest and less any requiredwithholding taxes. Additional funds necessary to complete the Merger are expected to be funded using equity contributions by certain of Biomet’s directors andequity contribution or rollover of existing equity interests by certain of Biomet’s executive officers and members of Biomet’s senior management (the“Management Participants”), an offering of high yield debt securities, initial borrowings under Biomet’s new senior secured credit facilities, its cash on handand, if necessary, additional equity contributions by the Sponsor Group.

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Table of ContentsPursuant to the Merger Agreement, LVB obtained pro rata representation on and control of the Board of Directors.

The closing of the Merger is subject to various conditions as described in the Merger Agreement, including to customary conditions such as the absence of anygovernmental orders preventing the Merger or any other transaction contemplated by the Merger Agreement, Biomet’s provision to LVB of certain financialinformation and certificates described in the Merger Agreement, and the receipt of certain regulatory approvals. Biomet has agreed with LVB and Purchaser toeach use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicablelaw to consummate the Merger, including with respect to obtaining the necessary consents, approvals and authorizations from governmental authorities.

Completion of the transactions contemplated by the Merger Agreement is subject to various regulatory approvals or consents, including those required by (1) theHart-Scott-Rodino Antitrust Improvement Act of 1976, or the HSR Act, and (2) the antitrust laws of the European Union. On February 15, 2007, the parties weregranted early termination of the waiting period under the HSR Act for the Merger Agreement and related transactions. No approval of the antitrust authorities inthe European Union is required in connection with the Merger, and none of the parties is aware of any other required approvals. The Company has been informedby the Sponsor Group that, in accordance with the provisions of the Merger Agreement, the Sponsor Group currently expects to complete the Merger no earlierthan September 2007, subject to the satisfaction of the conditions contained therein.

Review of historical stock option grant practices

In December 2006, following the publication of an analyst report suggesting that certain historical grants of stock options by Biomet took place on dates whenBiomet’s stock price was trading at relatively low prices and the filing of two shareholder derivative lawsuits alleging improper “backdating” of stock options,Biomet formed a special committee of the Board of Directors (the “Special Committee”), to conduct an independent investigation of Biomet’s stock optiongrants for the period from March 1996 to May 2006 and to determine whether Biomet had any claims arising out of any inappropriate stock option backdatingand, if so, whether it was in the best interest of Biomet and its shareholders to pursue any such claim.

Based on an analysis of the preliminary reports of the Special Committee and relevant accounting literature, the Audit Committee determined on March 30, 2007that Biomet should amend its Annual Report on Form 10-K for the fiscal year ended May 31, 2006 and Quarterly Report on Form 10-Q for the fiscal quarterended August 31, 2006 to reflect the restatement of Biomet’s consolidated financial statements (fiscal years ended May 31, 2006, 2005 and 2004 and periodsended August 31, 2006 and 2005) and related disclosures reflected therein. On May 25, 2007, the Board of Directors received and discussed the updated findingscontained in the Special Committee’s final report.

In light of the Special Committee’s findings, on March 30, 2007 Gregory D. Hartman retired as Senior Vice President–Finance, Chief Financial Officer andTreasurer, and Daniel P. Hann retired as Executive Vice President of Administration and as a Director of the Company. On February 26, 2007, Biometannounced the appointment of Jeffrey R. Binder as President and Chief Executive Officer and a member of the Board of Directors. On March 30, 2007, Biometannounced the appointment of J. Pat Richardson as Vice President–Finance and Interim Chief Financial Officer and Treasurer, and on May 14, 2007, Biometannounced the appointment of Daniel P. Florin as Senior Vice President and Chief Financial Officer, effective June 5, 2007.

On May 29, 2007, Biomet filed its amended annual report on Form 10-K/A for the fiscal year ended May 31, 2006. On June 4, 2007, Biomet filed its amendedquarterly report on Form 10-Q/A for the period ended August 31, 2006 and its quarterly reports on Form 10-Q for the periods ended November 30, 2006 andFebruary 28, 2007. Biomet has not amended and does not intend to amend any of its previously filed annual reports on Form 10-K or quarterly reports on Form10-Q for the periods affected by the restatement other than its amended annual report on Form 10-K/A for the fiscal year ended May 31, 2006 and its amendedquarterly report on Form 10-Q/A for the period ended August 31, 2006. Accordingly, Biomet’s previously issued financial statements affected by the restatementand any related reports of its independent registered public accounting firm should not be relied upon.

Products

The Company operates in one business segment, musculoskeletal products, which includes the design, manufacture and marketing of four major marketsegments: reconstructive products, fixation devices, spinal products and other products. The Company has three reportable geographic markets: United States,Europe and Rest of World. Reconstructive products include knee, hip and extremity joint replacement systems, as well as dental reconstructive devices, bonecements and accessories, autologous therapy products and the procedure-specific instrumentation required to implant the Company’s reconstructive systems.Fixation devices include internal and external fixation devices, craniomaxillofacial fixation systems and electrical stimulation devices that do not address thespine. Spinal products include electrical stimulation devices addressing the spine, spinal fixation systems and orthobiologics. The other product sales categoryincludes, arthroscopy products, softgoods and bracing products, casting materials, general surgical instruments, operating room supplies and other surgicalproducts. Depending on the intended application, the Company reports sales of its bone substitute materials in the reconstructive product, fixation device orspinal product segment.

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Table of ContentsThe following table shows the net sales and percentages of total net sales contributed by each of the Company’s product segments for each of the three mostrecent fiscal years ended May 31, 2007.

Years Ended May 31,

(Dollar amounts in thousands) 2007 2006 2005

Net

Sales

Percentof Total

Net Sales Net

Sales

Percentof Total

Net Sales Net

Sales

Percentof Total

Net Sales Reconstructive Products $ 1,503,874 71% $ 1,379,420 68% $ 1,254,234 67%Fixation Devices 224,694 11% 251,360 12% 246,730 13%Spinal Products 205,862 10% 221,964 11% 214,039 11%Other Products 172,998 8% 172,995 9% 164,947 9%

Total $ 2,107,428 100% $ 2,025,739 100% $ 1,879,950 100%

Reconstructive Products

Orthopedic reconstructive implants are used to replace joints that have deteriorated as a result of disease (principally osteoarthritis) or injury. Reconstructive jointsurgery involves the modification of the area surrounding the affected joint and the implantation of one or more manufactured components, and may involve theuse of bone cement. The Company’s primary orthopedic reconstructive joints are knees, hips and shoulders, but it produces other joints as well. The Companyalso produces the associated instruments required by orthopedic surgeons to implant the Company’s reconstructive devices, as well as bone cements and cementdelivery systems. Additionally, dental reconstructive implants and associated instrumentation are used for oral rehabilitation through the replacement of teeth andrepair of hard and soft tissues.

Knee Systems. A total knee replacement typically includes a femoral component, a patellar component, a tibial component and an articulating surface.Total knee replacement may occur as an initial joint replacement procedure, or as a revision procedure, which may be required to replace, repair or enhance theinitial implant. Partial, or unicondylar, knee replacement is an option when only a portion of the knee requires replacement.

Biomet’s newest and most comprehensive total knee system, the Vanguard™ Complete Knee System, accommodates up to 145 degrees of flexion. The launch ofthe Vanguard™ System, in conjunction with Biomet’s Microplasty ® Minimally Invasive Total Knee Instrumentation, continued throughout fiscal year 2007. TheMicroplasty® Instrumentation is designed to reduce incision size and surrounding soft tissue disruption, which may provide reduced blood loss, a shortenedhospital stay, reduced postoperative pain and less time spent in rehabilitation, as compared to a conventional procedure.

During fiscal year 2007, the Company continued the development efforts for the rotating platform and revision options of the Vanguard™ Complete KneeSystem, as well as the expansion of the Microplasty® Minimally Invasive Instrument Platform to include less invasive posterior referencing, anterior referencingand image-guided options. In addition, the launch of the Premier™ Instrumentation and the Vanguard™ Revision SSK (Super Stabilized Knee) System whichbegan during fiscal year 2006, continued during fiscal year 2007.

The Company continues to be a market leader in addressing the increasing demand from practitioners and patients for procedures and products accommodatingminimally-invasive knee techniques. The Oxford® Partial Knee, which is a mobile-bearing unicondylar knee that utilizes a minimally-invasive technique,continues to experience strong global sales. The Oxford® Knee, which was introduced in the United States during fiscal year 2005, is currently the onlyfree-floating meniscal bearing unicompartmental system approved for use in the United States. The Company’s offering of minimally-invasive partial kneesystems also includes the Alpina® Unicompartmental Knee (which is not currently available in the United States), the Vanguard M™ Series UnicompartmentalKnee System and the Repicci II® Unicondylar Knee System. The Vanguard M™ System is a modified version of the Oxford ® Knee that incorporates afixed-bearing tibial component as opposed to a free floating tibial bearing. The Repicci II® System is specifically designed to accommodate a minimally-invasiveknee arthroplasty procedure that can often be performed on an outpatient basis, requiring a smaller incision, minimal bone removal, and may result in shorterrecovery time and reduced blood loss. The Repicci II® System incorporates self-aligning metal and polyethylene components.

Hip Systems. A total hip replacement involves the replacement of the head of the femur and the acetabulum, and may occur as an initial joint replacementprocedure, or as a revision procedure, which may be required to replace, repair or enhance the initial implant. A femoral hip prosthesis consists of a femoral headand stem, which can be cast, forged or wrought, depending on the design and material used. Acetabular components include a prosthetic replacement of thesocket portion, or acetabulum, of the pelvic bone. Because of variations

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Table of Contentsin human anatomy and differing design preferences among surgeons, femoral and acetabular prostheses are manufactured by the Company in a variety of sizesand configurations. The Company offers a broad array of total hip systems, most of which utilize titanium or cobalt chromium alloy femoral components and theCompany’s patented ArCom ® or ArComXL® polyethylene-lined, metal-on-metal or ceramic-on-ceramic acetabular components. Many of the femoral prosthesesutilize the Company’s proprietary PPS® porous plasma spray coating, which enables cementless fixation.

The Alliance® family of hip systems is designed to address the demand from hospitals and surgeon groups toward standardization of total hip systems. TheAlliance® Hip family provides the largest selection in the marketplace of primary and revision stems available for implantation with a single set of instruments.The Alliance® family of hip systems includes the Answer®, Bi-Metric®, Generation 4®, Hip Fracture, Integral®, Intrigue™, Progressive®, Reach® and Rx 90®

Hip Systems. The Alliance® family was further augmented by introducing Exact™ Instrumentation, an integrated instrument set developed to promoteintraoperative flexibility and increase the efficiency, simplicity and consolidation of instrument use.

The Taperloc® Hip System is marketed for non-cemented use in patients undergoing primary or revision hip replacement surgery as a result of noninflammatorydegenerative joint disease. The Taperloc ® femoral component is a collarless, flat, wedge-shaped implant designed to provide excellent durability and stability in adesign that is relatively simple to implant. The incorporation of standard and lateralized offset options provides the surgeon with the ability to reconstruct a stablejoint with proper leg length in virtually all patient anatomies.

The Mallory-Head® Hip System is designed for both primary and revision total hip arthroplasty procedures. The primary femoral components feature a specificproximal geometry for cementless indications and a slightly different proximal ribbed geometry for those patients requiring fixation with bone cement. TheMallory-Head® Revision Calcar components provide innovative solutions for difficult revision cases. The Mallory-Head® Calcar replacement prosthesis isoffered in both a one-piece and a modular version, which allows for individual customization at the time of surgical intervention, even in cases of severe bonedeficiency. The modular version of the Mallory-Head® System incorporates the Company’s patented roller hardened technology, which increases the strength ofthe modular connection.

The Company continues to explore the development of innovative articulation technologies and materials. Biomet’s M2a-Taper™ Acetabular System combines acobalt chromium head with a cobalt chromium liner and has demonstrated a 20- to 100-fold reduction in volumetric wear in simulator studies compared totraditional metal-polyethylene articulation systems. The M2a-Taper™ Acetabular System may be utilized on all of Biomet’s femoral components and hascontinued to evolve with the introduction of the M2a-Magnum™ Articulation System, which incorporates larger diameter metal-on-metal components designedto more closely resemble the natural anatomy, offering improved range of motion and joint stability. The Company introduced the C 2 a-Taper™ AcetabularSystem during fiscal year 2006, which provides an additional alternative bearing option featuring ceramic-on-ceramic articulation. In addition, the Company ispursuing the development of a diamond-on-diamond hip articulation system through its relationship with Diamicron, Inc., a global leader in the research,development and manufacture of polycrystalline diamond composite technology for biomedical applications. The Company continues to market ArComXL®,which is a second-generation highly crosslinked polyethylene bearing material based on the Company’s proven ArCom ® polyethylene. ArComXL® polyethylenehas demonstrated excellent wear characteristics without measurable oxidation after accelerated aging. During the fourth quarter of fiscal year 2007, Biometreceived FDA clearance to market acetabular hip liners manufactured from E-Poly™ Highly Crosslinked Polyethylene. Biomet’s E-Poly™ liners are the world’sfirst Vitamin E stabilized highly crosslinked polyethylene products to be introduced to the market. Vitamin E is a natural antioxidant and is expected to provideoptimal oxidation resistance for the implant bearings used in the Company’s total joint replacements.

Biomet’s comprehensive Microplasty™ Minimally Invasive Hip Program includes proprietary products from Biomet’s broad array of hip products, as well as adistinctive training program and uniquely-designed instruments for a minimally-invasive approach. The Company continues to enhance the development of theMicroplasty® Minimally Invasive Hip Instruments. Biomet’s minimally-invasive hip development efforts have been focused on various surgical approaches,including an anterior supine approach, which is an intramuscular surgical approach. Instruments relating to the anterior supine approach were first introducedduring fiscal year 2006.

The ReCap® Total Resurfacing System is a bone-conserving product currently used outside the United States for patients in the early stages of degenerative jointdisease, including osteoarthritis, rheumatoid arthritis and avascular necrosis. The Company commenced a clinical study for the ReCap® Total ResurfacingSystem in the United States during fiscal year 2006, and there are approximately 140 patients enrolled in the study as of May 31, 2007.

The Company also provides constrained hip liners, which are indicated for patients with a high risk of hip dislocation. While the percentage of patients requiringa constrained liner is relatively small, surgeons often prefer to utilize a primary and revision system that includes this option.

The Company introduced the Regenerex™ Porous Titanium Construct Acetabular System during the third quarter of fiscal year 2007. The Regenerex™Construct provides design flexibility and solutions for difficult primary and revision cases. The advanced titanium scaffold structure of the Regenerex™Construct is a continuous three-dimensional matrix comprised of industry-standard Ti-6AL-4V. Titanium is a clinically proven material in the orthopedic market,with optimal biological fixation, and Regenerex™ is expected to be the material of choice for porous metal constructs.

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Table of ContentsExtremity Systems. The Company offers a variety of shoulder systems including the Absolute ® Bi-Polar, Bi-Angular®, Bio-Modular®, Comprehensive®,

Copeland™, Integrated™ and Mosaic™ Shoulder Systems, as well as uniquely-designed elbow replacement systems.

The Copeland™ Humeral Resurfacing Head was developed to minimize bone removal in shoulder procedures and has more than 19 years of positive clinicalresults in the United Kingdom. During fiscal year 2007, this system was expanded to include the Copeland™ EAS™ (Extended Articular Surface) HumeralResurfacing Head designed to address rotator cuff arthropathy.

The first Comprehensive® Primary Shoulder was released at the end of fiscal year 2007. This initial release of the new Primary System included the Standard andMini length Comprehensive® Primary Stems and the Versa-Dial™ Heads, as well as the Hybrid Glenoids. The Comprehensive ® Primary System is scheduled tohave full release by the third quarter of fiscal year 2008.

The ExploR® Radial Head Replacement System, a two-piece hemi-elbow comprised of a tapered stem paired with a head designed to articulate with the patient’snatural bone, continued to receive excellent market acceptance during fiscal year 2007.

The Company plans to continue the introduction of T.E.S.S.™ Total Evolutive Shoulder System in selected European markets. The T.E.S.S.™ System is acomplete shoulder system that can be used in all indications of shoulder arthroplasty. The Company plans to begin distribution of the T.E.S.S.™ System in theUnited States during the second half of fiscal year 2008, pending FDA clearance.

Dental Reconstructive Implants. Through its subsidiary, Biomet 3i, the Company develops, manufactures and markets products designed to enhance oralrehabilitation through the replacement of teeth and the repair of hard and soft tissues. These products include dental reconstructive implants and relatedinstrumentation, bone substitute materials and regenerative products and materials. A dental implant is a small screw or cylinder, normally constructed oftitanium or titanium alloy, that is surgically placed in the bone of the jaw to replace the root of a missing tooth and provide an anchor for an artificial tooth.

Biomet 3i’s historical flagship product, the OSSEOTITE® product line, features a patented micro-roughened surface technology, which allows for early loadingand improved bone integration to the surface of the implant. During fiscal year 2007, Biomet 3i further enhanced implant surface technology with theintroduction of the NanoTite™ Implant. The surface features the application of nanometer scale crystals of calcium phosphate to the existing OSSEOTITE®

surface. This enhancement has been demonstrated to increase the rate and extent of bone integration and results in a mechanical bonding of the host bone to thesurface of the implant. The NanoTite™ Implant was initially introduced in Certain® Implant configurations, which is an internal connection system that, throughthe use of the QuickSeat® connection, provides audible and tactile feedback when abutments and ancillary components are seated into the implant. In addition,the 6/12 point connection design of the Certain® Implant System offers enhanced flexibility in placing the implant and abutment. During fiscal year 2007, Biomet3i continued to build on the strength of the Certain® product line by introducing line extensions to the Certain® PREVAIL ® Implant System. This implant isdesigned to enhance crestal bone preservation as a result of its integration of Platform Switching,™ a medialized Implant-Abutment-Junction that appears tolimit the reformation of soft and hard tissue at the bone crest. In addition, the PREVAIL ® Implants are acid-etched with a Full OSSEOTITE® Surface (FOSS)and are now available in NanoTite™ configurations.

During fiscal year 2007, Biomet 3i continued with developments to its tapered implant system. Building upon the fiscal year 2006 introduction of new QuadShaping Drills and dedicated Depth Indicators, modifications to the implant body were incorporated during fiscal year 2007. These enhancements served toincrease surface area and improve implant stability, particularly in less dense bone. The new surface was applied to the modified implant body during the secondhalf of fiscal year 2007 with the introduction of the NanoTite™ Tapered Implant.

In the site preparation segment of the product portfolio, Biomet 3i engaged in alpha and beta evaluations of its CT Guidance Instrumentation Kits. This openarchitecture instrumentation is designed to interface with the software and surgical guide solutions offered by existing entities in the marketplace. As planningand guide fabrication are based upon computed tomography scans, this can result in more precise implant placement when combined with the depth and rotationcontrol offered by the Biomet 3i instrumentation. As implant position can be replicated as planned, this can also provide the opportunity for fabrication of aprovisional prosthesis in advance of surgery thereby allowing for a complete implant restoration in one patient visit. On the regenerative side of the sitepreparation portfolio, Biomet 3i introduced the OsseoGuard™ Membrane during fiscal year 2007. The OsseoGuard™ Membrane is a resorbable collagen basedproduct that offers a resorption profile, strength and handling characteristics suitable for guided bone regeneration procedures in implant dentistry.

Several line extensions were launched during fiscal year 2007 in the restorative segment of the product portfolio including PreFormance™ ProvisionalComponents for external hex implants, Locator® Attachments for Microminiplant™ Implants, and straight Healing Abutments and Impression Copings for theCertain® System. Additional efforts were directed at development of enhancements and line extensions for the Patient Specific Restoration (PSR) segment of therestorative product portfolio. Copy milling of laboratory created bar designs and a next generation of Encode® Abutments were among the development projects.The Encode® enhancement will allow Biomet 3i to fabricate an abutment and orient implant body analogs in the proper position in a stone model. This can allowfor the complete fabrication or a restoration from one supragingival impression – significantly easier than present techniques and a potential opportunity to getmore general dentists involved in implant therapy.

Locator® is a registered trademark of Zest Anchors, Inc.

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Table of ContentsOther Reconstructive Devices. Biomet’s PMI® Patient-Matched Implant services group expeditiously designs, manufactures and delivers one-of-a-kind

reconstructive devices to orthopedic specialists. The Company believes this service continues to enhance Biomet’s reconstructive sales by strengthening itsrelationships with orthopedic surgeons and augmenting its reputation as a responsive company committed to excellent product design. In order to assistorthopedic surgeons and their surgical teams in preoperative planning, Biomet’s PMI® group utilizes a three-dimensional (“3-D”) bone reconstruction imagingsystem. The Company uses computed tomography (“CT”) data to produce 3-D reconstructions for the design and manufacture of patient-matched implants. Withthis imaging and model-making technology, Biomet’s PMI ® group is able to assist the physician prior to surgery by creating 3-D models. Within strict deadlines,the model is used by engineers, working closely with the surgeon, to create a PMI® design for the actual manufacturing of the custom implant for the patient.

The Company is involved in the ongoing development of bone cements and delivery systems. The Company has broadened the range of its internally developedand manufactured bone cement product offerings. Cobalt™ HV (High Viscosity) Bone Cement, which was introduced in the United States during fiscal year2006, is particularly well suited for use in minimally-invasive surgery, but may be used in all applicable joint replacement procedures. The excellent handlingcharacteristics and high optical contrast of Cobalt™ HV Bone Cement are well suited to the current trends in orthopedic surgery. The patented SoftPac™monomer packaging offers the only alternative to glass vial packaging, which is inherently less safe due to the necessity to break the glass vial to deliver themonomer. The Company offers its internally developed and manufactured bone cements with and without antibiotics. In conjunction with antibiotic loaded bonecement is the use of StageOne™ Cement Spacer Molds. The molds are used in revision surgery following infection as the first stage of a two stage treatmentplan. A new product planned for fiscal year 2008 release is Cobalt™ MV (Medium Viscosity) Bone Cement. This new introduction is expected to greatly expandBiomet’s opportunity to further penetrate the bone cement market. Cobalt™ Bone Cement is marketed in conjunction with Biomet’s patented Optivac ® VacuumMixing System. During fiscal year 2007, the Fusion™ Vacuum Mixing Bowl was launched to address the open bowl mixing market. New for fiscal year 2008 isthe OptiPac™ preloaded bone cement mixing and delivery system. It is anticipated that the OptiPac™ system will be launched in the United States following theinitial European launch.

Additional products and services for reconstructive indications include bone substitute materials and services related to allograft material. The Company alsoprovides services related to the supply of allograft material procured through several tissue bank alliances. Markets addressed by the Company’s allograftservices include the orthopedic and dental reconstructive market segments, as well as the spinal, craniomaxillofacial and arthroscopy segments.

The GPS® III Gravitational Platelet Separation System is a unique device that collects platelet concentrate from a small volume of the patient’s blood using afast, single spin process, offering a high-quality platelet concentrate that has broad potential applications in the reconstructive and spine markets. The GPS® IIISystem is marketed in conjunction with the Biomet® Rapid Recovery Program, a comprehensive approach to patient education, a minimally-invasive surgicalapproach and pain management that was developed in conjunction with leading orthopedic surgeons in the United States.

Fixation Devices

The Company’s fixation products include electrical stimulation devices (that do not address the spine), external fixation devices, craniomaxillofacial fixationsystems, internal fixation devices and bone substitute materials utilized in fracture fixation applications. The Company’s craniomaxillofacial fixation products aremarketed by its subsidiary, Biomet Microfixation, Inc. All other fixation products are marketed primarily by Biomet Trauma.

Electrical Stimulation Systems. The Company is the market leader in the electrical stimulation segment of the fixation market. The U.S. Food and DrugAdministration (“FDA”) has acknowledged the Company’s extensive preclinical research documenting the Mechanism of Action for its pulsed electromagneticfield (“PEMF”), capacitative coupling and direct current technologies. The Mechanism of Action for these technologies involves the stimulation of a cascade ofbone morphogenic proteins (“BMPs”), as well as angiogenesis, chondrogenesis and osteogenesis.

The EBI Bone Healing System® unit is a non-invasive bone growth stimulation device indicated for the treatment of recalcitrant bone fractures (nonunions),failed fusions and congenital pseudarthrosis that have not healed with conventional surgical and/or non-surgical methods. The non-invasive bone growthstimulation devices sold by the Company generally provide an alternative to surgical intervention in the management of these bony applications. The EBI BoneHealing System® units produce low-energy PEMF signals that induce weak pulsing currents in living tissues that are exposed to the signals. These pulses, whensuitably configured in amplitude, repetition and duration, affect living bone cells to differentiate, migrate and proliferate. The Mechanism of Action behind thePEMF technology involves the stimulation of growth factors involved in normal bone healing. Biomet Trauma’s preclinical research demonstrates that PEMFsignals increase a number of growth factors, such as TGF-ß, BMP-2 and BMP-4, which are normal physiological regulators of the various stages of bone healing,including angiogenesis, chondrogenesis and osteogenesis. The EBI Bone Healing System® unit may be utilized over a patient’s cast, incorporated into the cast orworn over the skin.

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Table of ContentsThe OrthoPak® 2 Bone Growth Stimulator, which is indicated for the treatment of recalcitrant (nonunion) fractures, offers a small, lightweight, non-invasivedevice using capacitive coupling technology. The OrthoPak® 2 device delivers bone growth stimulation through wafer-thin electrodes that add virtually no extraweight on the nonunion site. The Mechanism of Action behind the Company’s capacitive coupling stimulation technology involves the stimulation ofosteopromotive factors involved in normal bone healing, such as TGF-ß1 and PGE2. The OrthoPak® 2 product provides greater ease of use and enhances accessto fracture sites that are normally hard to treat.

The Company also offers an implantable option when bone growth stimulation is required in conjunction with or subsequent to surgical intervention. TheBiomet® OsteoGen® surgically implanted bone growth stimulator is an adjunct treatment when bone grafting and surgical intervention are required to treatrecalcitrant (nonunion) fractures in long bones. The Mechanism of Action behind the Company’s direct current stimulation technology involves the stimulationof a number of osteoinductive growth factors including BMP-2, -6 and -7 and the BMP-2 receptor ALK2, which are normal physiological regulators of variousstages of bone healing, including chondrogenesis and osteogenesis. In addition, electrochemical reactions at the cathode lower oxygen concentrations andincrease pH.

During fiscal year 2005, a private company petitioned the FDA to reclassify noninvasive bone growth stimulators from Class III to Class II medical devices. Thepetition was directed at products, like those described above, that utilize electromagnetic fields to stimulate bone growth. In June 2006, the FDA Advisory Panelrecommended that the bone growth stimulator devices remain Class III devices. On January 17, 2007, the FDA published its agreement and sought publiccomment on the Advisory Panel’s recommendation that bone growth stimulators remain Class III devices. The private company that had petitioned for thedown-classification of bone growth stimulators has since formally withdrawn that request. It is Biomet’s understanding that bone growth stimulators will remainClass III devices.

External Fixation Devices. External fixation is utilized for stabilization of fractures when alternative methods of fixation are not suitable. The Companyoffers a complete line of systems that address the various segments of the trauma and reconstructive external fixation marketplace. The DynaFix® and DynaFix®

Vision™ Systems are patented, modular external fixation devices intended for use in complex trauma situations involving upper extremities, the pelvis and lowerextremities. The recently introduced Biomet® Vision™ FootRing System is a comprehensive external fixation system designed for the treatment of osteotomies,arthrodesis and fracture fixation indications. This system offers a simplified, snap-fit application of all fixation components to the Vision ™ Ring and can beconfigured into a multitude of constructs ranging from simple fractures to complex construction. The Biomet® Vision™ FootRing System is made of lightweight,carbon fiber, which is radiolucent and also provides for increased patient comfort. Biomet Trauma also has a full line of external fixation products for certainreconstructive procedures involving limb lengthening, fusion, articulated fixation and deformity correction applications.

Internal Fixation Devices. The Company’s internal fixation devices include products such as nails, plates, screws, pins and wires designed to stabilizetraumatic bone injuries. These devices are used by orthopedic surgeons to provide an accurate means of setting and stabilizing fractures and for otherreconstructive procedures. They are intended to aid in the healing process and may be removed when healing is complete. Internal fixation devices are notintended to replace normal body structures.

The Company develops, manufactures and/or distributes innovative products that fit into key segments of the fixation marketplace. The VHS® Vari-Angle HipFixation System is used primarily in the treatment of hip fractures. The components of the VHS® Vari-Angle Hip Fixation System can be adjustedintraoperatively, allowing the hospital to carry less inventory, while providing greater intraoperative flexibility to achieve the optimum fixation angle.

Biomet Trauma markets several nail systems including the Holland™ Nail System, which is a single, universal trochanteric nail designed to treat all types offemoral (hip or thigh) fractures. One of Biomet Trauma’s premier products, the Biomet ® Peritrochanteric Nail System, incorporates an innovative single lagscrew concept and utilizes a trochanteric entry point. In conjunction with the VHS® System and the Holland™ Nail System, the Biomet® Peritrochanteric NailSystem further augments the Company’s product portfolio for hip fracture fixation treatment.

The Biomet® Low Profile Tibial Nail, used to treat fractures between the knee and ankle, is primarily indicated in the treatment of unstable or nonunion fractures.The Biomet® Ankle Arthrodesis Nail is designed for reconstructive procedures where internal fixation is desired for fusion of the ankle joint. Nailing productsintroduced during fiscal year 2007 were the Biomet® Pediatric Locking Nail (PLN) and the Biomet® WIN™ Flexible Nail to complement Biomet Trauma’spediatric product line. The PLN customizable locking nail was designed to provide stable fixation of femur fractures in children. The WIN™ Nail ismanufactured of titanium alloy and is intended to treat a variety of long bone fractures.

The Company has also implemented several projects in the area of locked plating designs. The OptiLock® Distal Radius Plating System was designed usingstate-of-the-art locking technology and incorporates plates and screws that address volar, radial and dorsal plating applications. The OptiLock® PeriarticularPlating System is a unique, pre-contoured plating system designed for fixation of periarticular lower extremity fractures. The system incorporates patent-pendingSphereLock™ technology that allows the surgeon to utilize locked or unlocked screws in various diameters through any hole in the plate, while incorporatingminimally-invasive techniques. Biomet Trauma continued to rollout the OptiLock® Proximal Tibial Plating System throughout fiscal year 2007. The Companycontinues to receive positive feedback from surgeons regarding this system, which was initially introduced during the first quarter of fiscal year 2007. During thefirst quarter of fiscal year 2008, the Company plans to introduce the OptiLock® Distal Femoral Plating System and the Distal Tibial Plating System to completeits offering of periarticular plates, addressing a variety of simple and complex fractures.

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Table of ContentsDuring the first quarter of fiscal year 2008, Biomet Trauma plans to introduce the VPC™ (Variable Pitch Compression) Screw System. This system featuresheadless stainless steel implants with a variable pitch designed to provide compression and stable fixation of small bone fragments. The VPC™ System isprimarily used for the fixation of scaphoid fractures and has proved useful in a variety of other applications, including small joint arthrodesis and intra-articularfracture fixation of other small bones in the wrist, hand and forefoot.

During fiscal year 2008, the Company intends to continue to make innovative improvements in hip fracture, locked plating, external fixation and intramedullaryfixation devices to enhance the Company’s portfolio of fixation implants for the trauma marketplace.

Craniomaxillofacial Fixation Systems. The Company manufactures and distributes craniomaxillofacial, neurosurgical, and thoracic titanium andresorbable implants, along with associated surgical instrumentation, principally marketed to craniomaxillofacial, neurosurgical, plastic, ear/nose/throat, pediatricand cardiothoracic surgeons through its subsidiary, Biomet Microfixation, Inc. The Company also offers specialty craniomaxillofacial surgical instruments,HTR-PMI® Hard Tissue Replacement for repair of severe cranial defects, and the Mimix® Bone Substitute Material for use in craniomaxillofacial andneurosurgical applications.

Biomet Microfixation manufactures and markets the LactoSorb® Fixation System of resorbable plates and screws comprised of a copolymer of poly-L-lactic acidand polyglycolic acid. As a result of its innovative design, the LactoSorb® System is comparable in strength to titanium plating systems at its initial placementand is resorbed within 9 to 15 months after implantation. The LactoSorb® System is especially beneficial in pediatric reconstruction cases by eliminating the needfor additional surgery to remove the plates and screws.

Biomet Microfixation plans to introduce Allogenix™ Plus bone graft material during fiscal year 2008. This biomaterial combines the lecithin-based Allogenix™

Demineralized Bone Matrix with ProOsteon® granules, resulting in an improved bone graft material. By combining a scaffold with an osteoinductive source intoone product, there will not be a need to subject the patient to a second procedure in order to harvest bone chips for use as a scaffold. This also results in aneconomic benefit due to the reduction in operating room time that can be realized.

Bone Substitute Materials. When presented with a patient demonstrating a bone defect, such as a fractured bone or bone loss due to removal of a tumor,the treating surgeon may remove a portion of bone from the patient at a second site to use as a graft to induce healing at the site of the defect. Bone substitutematerials eliminate the pain created at a graft site, as well as the costs associated with this additional surgical procedure. Depending on the specific use of thebone substitute material, it can have reconstructive, fixation or spinal applications.

Spinal Products

The Company’s spinal products include electrical stimulation devices for spinal applications, spinal fixation systems, bone substitute materials and motionpreservation systems, as well as allograft services for spinal applications. These products and services are primarily marketed in the United States under theBiomet Spine tradename.

Spinal Fusion Stimulation Systems. Spinal fusions are surgical procedures undertaken to establish bony union between adjacent vertebrae. The Companydistributes both non-invasive and implantable electrical stimulation units that surgeons can use as options to provide an appropriate adjunct to surgicalintervention in the treatment of spinal fusion applications. The Company has assembled extensive preclinical research documenting the Mechanism of Action forthe technology utilized in its spinal fusion stimulation systems.

The SpinalPak® II Spine Fusion Stimulator utilizes capacitive coupling technology to encourage fusion incorporation. The Mechanism of Action behind thecapacitive coupling stimulation technology involves the stimulation of osteopromotive factors that modulate normal bone healing, such as TGF-ß1 and PGE2.The unit consists of a small, lightweight generator worn outside the body that is connected to wafer-thin electrodes applied over the fusion site. The SpinalPak®

II System is patient friendly, enhancing comfort whether the patient is standing, sitting or reclining, and optimizes compliance with the treatment regimen toenhance fusion success.

The surgically implanted SpF® Spinal Fusion Stimulator consists of a generator that provides a constant direct current to titanium cathodes placed where bonegrowth is required. The Mechanism of Action behind the Company’s direct current stimulation technology involves the stimulation of a number ofosteoinductive growth factors including BMP-2, -6 and -7 and the BMP-2 receptor ALK2, which are normal physiological regulators of various stages of bonehealing, including chondrogenesis and osteogenesis. The SpF® Stimulator has exhibited a 50% increase in fusion success rates over fusions with autograft alone.The SpF® MINI is a smaller SpF® Stimulator, designed to enhance patient comfort and physician pre-implant testing and implantation.

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Table of ContentsSpinal Fixation Systems. The Company markets spinal fixation products for various spinal fusion applications. The Company’s Synergy ™ System, which

has been on the market since 1992, is a complete system capable of addressing both degenerative and deformity indications. It is available in both stainless steeland titanium versions, offering 4.75mm and 6.35mm rod diameters, as well as a full complement of screws ranging from 4.0mm to 8.0mm in both fixed andpolyaxial styles. The Synergy™ System also contains a full offering of hooks in a wide variety of styles and sizes. A more recent introduction in this market is theArray® Spinal System, which has a single locking setscrew featuring V-Force ™ Thread Technology designed to enhance the intraoperative ease of use for thesurgeon. During fiscal year 2006, the Company launched the Array® Deformity Spine System, which includes various styles of screws, hooks and rods forscoliosis correction. The most recent product offering in this area is the Polaris™ System, which is a top-loading, inner tightening thoracolumbar system utilizinga patented closing mechanism known as a Helical Flange™. This feature helps prevent cross threading and seat splay, simplifying the implant closing procedurefor the surgeon. Currently, the Polaris™ System is available in titanium, in 6.35mm and 5.5mm rod diameters, with both fixed and polyaxial screws ranging insize from 4.0 to 7.0mm. The Company also markets the Structure System, which utilizes various kinds of fixation washers used to secure screws to the vertebralbody for an anterior screw/rod construct. In the thoracolumbar fusion area, the Company markets the Biomet® Omega 21™ Spine System. This system features aunique multidirectional coupler and expandable screw. The Company also markets the SpineLink®-II Spinal Fixation System, which addresses many of theinherent limitations of traditional rod and plate systems by linking each spine segment individually for intrasegmental control. Through the use of a modulartitanium link and polydirectional screw, this unique system provides an intrasegmental option for spine fixation, enabling the surgeon to tailor the segmentalconstruction to the patient’s anatomy.

The Company offers a variety of spacer products for the thoracolumbar market segment. The Ionic® Spine Spacer System, for use with the Omega 21™ SpineSystem or SpineLink®-II Spinal Fixation System, features an open design that allows for optimal bone graft placement and bone ingrowth, along with theadditional benefit of excellent postoperative x-ray visualization. The GEO Structure® family features various sizes and shapes, including ovals, straightrectangles and bent rectangles. The Geo Structure® family of products are produced from cast titanium, offering a maximum amount of space inside the implant,with a minimum amount of material, resulting in excellent strength characteristics and imaging capabilities. The Solitaire™ System is a stand-alone device foranterior indications. The TPS™ Telescopic Plate Spacer is a unique implant indicated for trauma and tumor pathologies of the thoracolumbar spine. This implantis designed as a combination of a plate and spacer that is expandable, allowing the surgeon to fit the implant to the defect. The Company also offers the ESL®

(Elliptically Shaped Lumbar) and Ibex™ thoracolumbar spacers. Both of these spacers are endplate-sparing designs, reducing the risk of subsidence. In addition,both the ESL® and Ibex™ Systems are open to permit ample space for bone graft placement and growth. The ESL® System features an elliptical shape offeringoptimal surface contact with the vertebral body endplates. The Ibex™ implant is curved to conform to the anatomical shape of the vertebral body. Additionally,the beveled corners of the Ibex™ implant facilitate ease of use for the surgeon during implantation. The ESL® and Ibex™ thoracolumbar spacers are bothavailable with a PEEK-OPTIMA® implant option for increased radiographic fusion assessment.

For cervical applications, the VueLock® Anterior Cervical Plate System offers surgeons several important benefits. The open design of the VueLock ® Systemprovides surgeons with enhanced visualization of the bone graft both during the actual surgical procedure and postoperatively on x-ray. The Company also offersthe C-TEK® Anterior Cervical Plate System, which offers a constrained, semi-constrained or a completely rigid construct, depending on the surgeon’spreference. Made from titanium, the C-TEK® Anterior Cervical Plate System offers both fixed and variable screws in a wide variety of diameters and lengths.This system also features a unique locking mechanism to prevent screw back out. For posterior cervical procedures, the Company offers the Altius M-INI™

System, which offers top loading, inner tightening, polyaxial screws as well as hooks for the cervico-thoracic spine. The Altius M-INI™ System features a 3.5mmrod and a wide variety of screws ranging in diameter from 3.5mm to 4.5mm. Occipital fixation is also available with the Altius M-INI™ System, featuring a lowprofile plate that is placed independently from the rod, allowing for easier assembly and less rod contouring.

Minimally-invasive spine surgery is of growing interest in the practice of many spine surgeons. Traditional, open surgical approaches to the spine for discectomy,fusion and fixation have brought with them lengthy postoperative healing and rehabilitation issues. A minimally-invasive approach to spine surgery hasdemonstrated less morbidity, minimal blood loss and further benefits such as a shorter hospital stay. In the minimally-invasive surgery market, the Companymarkets the VuePASS ™ Portal Access Surgical System, which offers spine surgeons an optimized balance between the current limitations of competitivepercutaneous systems and traditional successful open techniques. Under direct visualization for a posterior lumbar approach, the VuePASS ™ System allows fortraditional open techniques through a minimally-invasive cannula access system.

To address the vertebral body compression fracture market, the Company offers two systems designed for the delivery of materials to weakened bony structures,including the CDV™ and LP2™ Delivery Systems. Through a series of dilating cannulae and various instruments, the systems allow the surgeon to access theanatomy through a percutaneous approach and safely deliver high viscosity material under low, controlled pressure. The CDV™ Delivery System offers theability to biopsy before delivery. During fiscal year 2008, the Company expects to introduce Cobalt™ V Bone Cement for vertebroplasty applications.

Bone Substitute Materials. Traditional spinal fixation surgery includes the use of a spinal fixation device in conjunction with a bone substitute or bonegraft material to increase the likelihood of successful bone fusion. Pro Osteon® 200R and Pro Osteon® 500R are bone graft substitutes made from marine coral.Both are a resorbable combination of hydroxyapatite and calcium carbonate that is resorbed and replaced with natural bone during the healing process. ProOsteon® 200R is available as granules. Pro Osteon® 500R is available in granules and blocks.

Helical Flange™ is a trademark of the Jackson Group.

PEEK-OPTIMA® is a registered trademark of Invibio, Ltd.

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Table of ContentsThe Biomet® DBM (Demineralized Bone Matrix) Putty, derived exclusively from human bone, can be used with a variety of substances, such as bone substitutematerial, machined allograft, autograft and platelet rich plasma, to enhance the surgeon’s treatment options. The Company also has available the InterGro® lineof DBM products (InterGro® Paste, InterGro® Putty and InterGro® Plus). The InterGro® DBM products use lecithin as a carrier, which is a natural lipid carrierthat is resistant to breakdown by bodily fluids, temperature or aggressive irrigation.

During fiscal year 2007, Biomet Spine launched PlatFORM DBM, an osteoconductive, osteoinductive and osteogenic matrix. This material consists offreeze-dried, highly flexible and pliable sheets of demineralized bone matrix putty for use as a bone void filler. PlatFORM DBM can be utilized alone or incombination with autologous bone or other forms of allograft and can be rehydrated with bone marrow aspirate for use in posterolateral spine fusions. Thismatrix has no synthetic additives, eliminating any surgeon concern regarding toxicity of certain carriers currently used in other DBMs.

Precision Machined Allograft. Many spinal fusion procedures, in both the lumbar and cervical spine, involve interbody spinal fusion. Surgeons oftenutilize precision machined allograft spacers to fuse the interbody space. The Company provides services related to the OsteoStim® Cervical Allograft Spacer foranterior cervical interbody fusions, the OsteoStim9 ALIF Allograft Spacer for anterior lumbar interbody fusions and the OsteoStim ® PLIF Allograft Spacer forposterior lumbar interbody fusions, depending on the surgical approach. All three systems are lordotic in shape, have serrated teeth on the top and bottom foradded stability, are offered in various heights and have specific instrumentation to facilitate implantation.

Motion Preservation Products. An IDE study for the Regain® Disc began in the United States during fiscal year 2007. The Regain® Lumbar ArtificialDisc is a one-piece pyrocarbon artificial disc nucleus replacement. The pyrocarbon material has a high level of strength, is biocompatible and extremely resistantto wear. In addition, Biomet Spine is developing the Rescue™ Cervical Disc Replacement product and the Min-T™ Lumbar Artificial Disc for total lumbar discreplacement procedures.

Other Products

The Company also manufactures and distributes several other products, including orthopedic support products (also referred to as softgoods and bracingproducts), arthroscopy products, operating room supplies, casting materials, general surgical instruments, wound care products and other surgical products. TheCompany manufactures and markets a line of arthroscopy products through its Biomet Sports Medicine, Inc. subsidiary.

Arthroscopy Products. Arthroscopy is a minimally-invasive orthopedic surgical procedure in which an arthroscope is inserted through a small incision toallow the surgeon direct visualization of the joint. This market is comprised of five product categories: power instruments, manual instruments, visualizationproducts, soft tissue anchors, and procedure-specific instruments and implants. The Company’s principal products consist of the EZLoc™ Femoral FixationDevice, the WasherLoc™ Tibial Fixation Device, LactoSorb® resorbable arthroscopic fixation products, the ALLThread ™ Suture Anchor and theInnerVue™ Diagnostic Scope System, which utilizes a needle scope to diagnose knee and shoulder conditions in a physician’s office.

During fiscal year 2007, Biomet Sports Medicine signed an agreement with Marc Tec to license more than 45 patents with applications in sports medicine andarthroscopy. This agreement is expected to lead to the improvement of existing products and allow the Company to introduce unique, innovative products intothe sports medicine market.

Biomet Sports Medicine also signed an exclusive marketing and distribution agreement with Kensey Nash for OrthoFill™, a proprietary resorbable bone voidfiller during fiscal year 2007. Further, Biomet Sports Medicine and Kensey Nash have agreed to work together to advance the research and development ofKensey Nash’s cartilage repair matrix to produce an improved clinical solution for articular cartilage defects.

Orthopedic Support Products. The Company distributes a line of orthopedic support products under the Biomet Bracing name, including back braces,knee braces and immobilizers, wrist and forearm splints, cervical collars, shoulder immobilizers, slings, abdominal braces, ankle supports and a variety of otherorthopedic splints. Sales of these softgoods and bracing products are assisted by the S.O.S.SM Support-on-Site stock and bill program, which handles the detailsof product delivery for the healthcare provider.

Product Development

The Company’s research and development efforts are essentially divided into two categories: innovative new technology and evolutionary developments. Mostof the innovative new technology development efforts are focused on biomaterial products, and are managed at the corporate level and take place primarily inWarsaw, Indiana. Evolutionary developments are driven primarily by the individual subsidiaries and include product line extensions and improvements.

The Company continues to aggressively conduct internal research and development efforts to generate new marketable products, technologies and materials. Inaddition, the Company is well positioned to take advantage of external acquisition and development opportunities. An important component of the Company’sstrategy has been the formation of strategic alliances to enhance the development of new musculoskeletal products.

OrthoFill™ is a trademark of Kensey Nash Corporation.

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Table of ContentsFor the years ended May 31, 2007, 2006 and 2005, the Company expended approximately $94,416,000, $84,988,000, and $80,213,000, respectively, on researchand development. It is expected that ongoing research and development expenses will continue to increase. The Company’s principal research and developmentefforts relate to its orthopedic reconstructive devices, spinal fixation products, revision orthopedic reconstructive devices, dental reconstructive devices,arthroscopy products, resorbable technology, biomaterial products and autologous therapies.

The Company’s research and development efforts have produced more than 700 new products and services during the last eight fiscal years. During fiscal year2008, the Company intends to release numerous new products, product line extensions and improvements.

Government Regulation

Most aspects of the Company’s business are subject to some degree of government regulation in the countries in which its operations are conducted. It hasalways been the practice of the Company to comply with all regulatory requirements governing its products and operations and to conduct its affairs in an ethicalmanner. This practice is reflected in the Company’s Code of Business Conduct and Ethics and through the responsibility of the Audit Committee of the Board ofDirectors to review the Company’s systems of internal control, its process for monitoring compliance with laws and regulations and its process for monitoringcompliance with its Code of Business Conduct and Ethics. For some products, and in some areas of the world such as the United States, Canada, Japan andEurope, government regulation is significant and, in general, there appears to be a trend toward more stringent regulation throughout the world, as well as globalharmonization of various regulatory requirements. The Company devotes significant time, effort and expense to addressing the extensive government andregulatory requirements applicable to its business. Governmental regulatory actions can result in the recall or seizure of products, suspension or revocation of theauthority necessary for the production or sale of a product, and other civil and criminal sanctions. The Company believes that it is no more or less adverselyaffected by existing government regulations than are its competitors.

In the United States, the development, testing, marketing and manufacturing of medical devices are regulated under the Medical Device Amendments of 1976 tothe Federal Food, Drug and Cosmetic Act, the Safe Medical Devices Act of 1990, the FDA Modernization Act of 1997, the Medical Device User Fee andModernization Act of 2002 and additional regulations promulgated by the FDA and various other federal, state and local agencies. In general, these statutes andregulations require that manufacturers adhere to certain standards designed to ensure the safety and efficacy of medical devices and related medical products.

The Company believes it is well positioned to face the changing international regulatory environment. The International Standards Organization (“ISO”) has aninternationally recognized set of standards aimed at ensuring the design and manufacture of quality products. A company that has passed an ISO audit andobtained ISO certification applicable to its activity sector is internationally recognized as having quality manufacturing processes. The European Unionlegislation requires that medical devices bear a CE mark. The CE mark is a European Union and European Free Trade Association symbol, which indicates thatthe product adheres to European Medical Device Directives. Compliance with ISO quality systems standards is one of the requirements for placing the CE markon the Company’s products. Each of the Company’s principal manufacturing facilities has been certified to ISO 13485:2003. Each of the Company’s productssold in Europe bears the CE mark, with the exception of custom-made implants that do not require a CE mark. The EU has recently reclassified Biomet’s totaljoint products to Class III via Directive 2005/50/EC and the Company is in the process of complying with this Directive.

In addition, governmental bodies in the United States and throughout the world have expressed concern about the costs relating to healthcare and, in some cases,have focused attention on the pricing of medical devices. Government regulation regarding pricing of medical devices already exists in some countries and maybe expanded in the United States and other countries in the future. The Company is subject to increasing pricing pressures worldwide as a result of growingregulatory pressures, as well as the expanding predominance of managed care groups and institutional and governmental purchasers. Under Title VI of the SocialSecurity Amendments of 1983, hospitals receive a predetermined amount of Medicare reimbursement for treating a particular patient based upon the patient’stype of illness identified with reference to the patient’s diagnosis under one or more of several hundred diagnosis-related groups (“DRGs”). Other factorsaffecting a specific hospital’s reimbursement rate include the size of the hospital, its teaching status and its geographic location.

While the Company is unable to predict the extent to which its business may be affected by future regulatory developments, it believes that its substantialexperience in dealing with governmental regulatory requirements and restrictions throughout the world, its emphasis on efficient means of distribution and itsongoing development of new and technologically-advanced products should enable it to continue to compete effectively within this increasingly regulatedenvironment.

Sales and Marketing

The Company believes that sales of its products are currently affected and will continue to be positively affected by favorable demographic trends and a shifttoward a preference for technologically-advanced products. The demand for musculoskeletal products continues to grow, in part, as a result of the aging of thebaby boomer population in the United States. The U.S. Census Bureau projections indicate that the population aged 55 to 75 years is expected to grow 36% toapproximately 70 million people by the year 2017. Moreover, the age range of potential patients is expanding outside the traditional 55 to 75 year range, asprocedures are now being recommended for younger patients and as elderly patients are remaining healthier and more active than in past generations. TheCompany has also observed a trend toward a demand

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Table of Contentsfor technologically-advanced products that are simple to use and cost effective, while applying state-of-the-art solutions to the demands of the increasingly activepatient. The Company believes it has firmly positioned itself as a surgeon advocate and has worked to promote the right of the surgeon to prescribe the medicaltreatment best suited to the needs of the individual patient.

The Company has diligently worked to attract and retain qualified, well-trained and motivated sales representatives. The breadth of the Company’s productoffering and the quality of its salesforces collaborate to create synergies that uniquely position the Company to continue to efficiently penetrate themusculoskeletal market. In the United States, the Company’s products are marketed by a combination of independent commissioned sales agents and direct salesrepresentatives, based on the specific product group being represented. In an effort to ensure the continuity of its relationships with the independent third-partydistributors who represent Biomet Orthopedics, Inc., the Company incurred expenses of $39,200,000 and approximately $33,000,000 in fiscal year 2007 and thefirst quarter of fiscal year 2008, respectively, which negatively affected its results of operations for these periods. The Company does not expect to incuradditional significant expenses related to modifying these relationships subsequent to the first quarter of fiscal year 2008. In Europe, the Company’s products arepromoted by sales representatives employed by subsidiaries, independent third-party distributors, and some independent commissioned sales agents, basedprimarily on the geographic location. In the rest of the world, the Company maintains direct selling organizations in ten countries, as well as independentcommissioned sales agents and independent third-party distributors in other key markets. In aggregate, the Company’s products are marketed by more than 2,700sales representatives throughout the world.

Elective surgery-related products appear to be influenced to some degree by seasonal factors, as the number of elective procedures declines during the summermonths and the winter holiday season.

The Company’s customers are the hospitals, surgeons, other physicians and healthcare providers who use its products in the course of their practices. Thebusiness of the Company is dependent upon the relationships maintained by its distributors and salespersons with these customers, as well as the Company’sability to design and manufacture products that meet the physicians’ technical requirements at a competitive price.

For the fiscal years ended May 31, 2007, 2006 and 2005, the Company’s foreign sales aggregated $800,953,000, $700,626,000 and $641,223,000, respectively,or 38%, 35% and 34% of net sales, respectively. Major international markets for the Company’s products are Western Europe, Asia Pacific, Australia, Canadaand Latin America. The Company’s business in these markets is subject to pricing pressures and currency fluctuation risks. During fiscal year 2007, foreign saleswere positively impacted by $38 million due to foreign currency translations. As the Company continues to expand in key international markets, it facesobstacles created by competition, governmental regulations and regulatory requirements. Additional data concerning net sales to customers, operating income,long-lived assets, capital expenditures and depreciation and amortization by geographic areas are set forth in Note L of the Notes to Consolidated FinancialStatements included in Item 8 of this report and are incorporated herein by reference.

The Company has inventory located throughout the world with its customers, its distributors and direct salespersons for their use in marketing its products and infilling customer orders. As of May 31, 2007, inventory of approximately $177,506,000 was located with these distributors, salespersons and customers.

Competition

The business of the Company is highly competitive. Competition within the industry is primarily based on service, clinical results and product design, althoughprice competition is an important factor as healthcare providers continue to be concerned with costs. Major competitors in the Company’s four major marketsegments are set forth below by market segment.

Reconstructive Products

The Company’s orthopedic reconstructive devices compete with those offered by DePuy, Inc. (a subsidiary of Johnson & Johnson), Smith & Nephew plc,Stryker Orthopaedics (a division of Stryker Corp.) and Zimmer, Inc. (a subsidiary of Zimmer Holdings, Inc.). Management believes these four companies,together with Biomet, have the predominant share of the global orthopedic reconstructive device market. The Company believes that its prices for orthopedicreconstructive devices are competitive with those in the industry. The Company believes its future success will depend upon, among other things, its service andresponsiveness to its distributors and orthopedic specialists, the continued excellent clinical results of its products, and upon its ability to design and marketinnovative and technologically-advanced products that meet the needs of the marketplace.

The Company’s dental reconstructive products compete in the areas of dental reconstructive implants and related products. The primary competitors in the dentalimplant market include Nobel Biocare AB, Straumann AG, Zimmer Dental (a subsidiary of Zimmer Holdings, Inc.) and Astra Tech (part of the AstraZenecaGroup).

Fixation Devices

The Company’s electrical stimulation devices primarily compete with those offered by Orthofix, Inc. (a subsidiary of Orthofix International N.V.), DJO Inc.(formerly dj Orthopedics, Inc.) and Smith & Nephew plc. Competition in the electrical stimulation market is on the basis of product design, service, price andsuccess rates of various treatment alternatives.

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Table of ContentsThe Company’s external and internal fixation devices compete with other such devices primarily on the basis of price, ease of application and clinical results.The principal competitors in the external fixation market are Smith & Nephew plc, Stryker Trauma (a division of Stryker Corp.), Synthes, Inc. and Orthofix, Inc.(a subsidiary of Orthofix International N.V.). The Company’s internal fixation product lines compete with those of Synthes, Inc., DePuy, Inc. (a Johnson &Johnson Company), Zimmer, Inc. (a subsidiary of Zimmer Holdings, Inc.), Smith & Nephew plc and Stryker Trauma (a division of Stryker Corp.).

Spinal Products

The Company’s spinal fixation systems compete with other spinal fixation systems primarily on the basis of breadth of product line, product recognition andprice. The principal competitors in this area are Medtronic Sofamor Danek, Inc. (a subsidiary of Medtronic, Inc.), DePuy Spine (a Johnson & Johnson Company),Synthes, Inc., Stryker Spine (a division of Stryker Corp.), Zimmer Spine (a subsidiary of Zimmer Holdings, Inc.) and others.

Other Products

The Company’s craniomaxillofacial fixation products, specialty surgical instrumentation and neurosurgical cranial flap fixation products compete with thoseoffered by Synthes, Inc., Stryker Leibinger Micro Implants (a division of Stryker Corp.), KLS-Martin, L.P., Osteomed Corp., Aesculap, Inc., Medtronic, Inc. andCodman (a Johnson & Johnson Company).

The Company’s arthroscopy products compete primarily in the areas of procedure-specific implants and instruments, manual instruments and power instruments.Competitors include Smith & Nephew Endoscopy (a division of Smith & Nephew plc, Stryker Corp, Linvatec Corp. (a subsidiary of CONMED Corporation),Mitek (a division of Ethicon, a Johnson & Johnson Company), Arthrocare Corp., and Arthrex, Inc.

The Company’s orthopedic support products consist primarily of back braces, knee braces and immobilizers, wrist and forearm splints, cervical collars, shoulderimmobilizers, slings, abdominal braces and ankle supports that compete with those offered by Orthofix, Inc. (a subsidiary of Orthofix International N.V.), DJOInc. (formerly dj Orthopedics, Inc.) and Ossur. Competition in the bracing market is on the basis of product design, service and price.

Raw Materials and Supplies

The raw materials used in the manufacture of the Company’s orthopedic reconstructive devices are principally nonferrous metallic alloys, stainless steel andpolyethylene powder. With the exception of limitations on the supply of polyethylene powder, none of the Company’s raw material requirements are limited toany material extent by critical supply or single origins. The demand for certain raw materials used by the Company, such as cobalt-chromium alloy and titaniummay vary. The primary buyers of these metallic alloys are in the aerospace industry. If the demands of the aerospace industry should increase dramatically, theCompany could experience complications in obtaining these raw materials. However, based on its current relationship with its suppliers, the Company does notanticipate a material shortage in the foreseeable future. Further, the Company believes that its inventory of raw materials is sufficient to meet any short-termsupply shortages of metallic alloys. The results of the Company’s operations are not materially dependent on raw material costs.

The Company purchases all components of its electrical stimulators from approximately 190 outside suppliers, approximately 15 of whom are the single sourceof supply for the particular product. In most cases, the Company believes that all components are replaceable with similar components. In the event of a shortage,there are alternative sources of supply available for all components, but some time would likely elapse before the Company’s orders could be filled.

Coral is the primary raw material utilized to manufacture certain of the Company’s Pro Osteon® products. The coral used in Pro Osteon® products is sourcedfrom two genera located in a variety of geographic locations. The Company’s primary source of coral has historically been the tropical areas of the Pacific andIndian Oceans. Although the Company obtains its coral from a single source supplier, for which an alternate supplier has not been identified, the Companybelieves that it has an adequate supply of coral for the foreseeable future.

The Company purchases all materials to produce its dental products from approximately 95 suppliers, approximately 87 of whom are the single source of supplyfor the particular product. The Company believes that, in the event of a shortage, there are readily available alternative sources of supply for single-sourceproducts, and maintains an inventory of materials sufficient to meet any short-term shortages of supply.

Employees

As of May 31, 2007, the Company’s domestic operations (including Puerto Rico) employed approximately 4,254 persons, of whom approximately 2,215 wereengaged in production and approximately 2,039 in research and development, sales, marketing, administrative and clerical efforts. The Company’s internationalsubsidiaries employed approximately 2,252 persons, of whom approximately 1,132 were engaged in production and approximately 1,120 in research anddevelopment, sales, marketing, administrative and clerical efforts. None of the Company’s principal domestic manufacturing employees is represented by a laborunion. The production employees at its Bridgend, South Wales facility are organized. Employees working at the facilities in Germany; Valence, France; andValencia, Spain are represented by statutory Workers’ Councils which negotiate labor hours and termination rights. The Workers’ Councils do not directlyrepresent such employees with regard to collective bargaining of wages or benefits. The Company believes that its relationship with all of its employees issatisfactory.

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Table of ContentsThe establishment of Biomet’s domestic orthopedic reconstructive manufacturing operations in north central Indiana, near other members of the orthopedicindustry, provides access to the highly skilled machine operators required for the manufacture of Biomet® products. The Company’s European manufacturinglocations in South Wales, England, France, Spain, Sweden and Germany also provide good sources for skilled manufacturing labor. The Company’s PuertoRican operations principally involve the assembly of purchased components into finished products using a skilled labor force.

Patents and Trademarks

The Company believes that patents and other intellectual property will continue to be of importance in the musculoskeletal industry. Accordingly, managementcontinues to protect technology developed internally and to acquire intellectual property rights associated with technology developed outside the Company.Management enforces its intellectual property rights consistent with the Company’s strategic business objectives. The Company does not believe that it has anysingle patent or license (or series of patents or licenses) that is material to its operations. The Company is not aware of any single patent that, if lost orinvalidated, would be material to its consolidated revenues or earnings. The Company currently has more than 1,200 patents and in excess of 650 pending patentapplications.

BIOMET is the Company’s principal registered trademark throughout the world, and registrations have been obtained or are in process with respect to variousother trademarks associated with the Company’s products. Unless otherwise noted in this report, all trademarks contained herein are owned by BiometManufacturing Corp. or one of its affiliates.

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Table of ContentsEXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, business background, positions held with the Company and tenure as an executive officer of each of the Company’s executive officers as ofJuly 17, 2007 are set forth below. No family relationship exists among any of the executive officers. Except as otherwise stated, each executive officer has heldthe position indicated during the last five years. Executive officers are elected annually by the Board to serve for one year and until their successors are elected,subject to resignation, retirement or removal.

Name, Age and Business Experience Served as Executive

Officer Since Current Position(s)with the Company

Jeffrey R. Binder, 44President and Chief Executive Officer since February 2007.Prior thereto, he served as Senior Vice President of Diagnostic Operations of AbbottLaboratories from January 2006 to February 2007. He previously served as President ofAbbott Spine from June 2003 to January 2006, and President and Chief Executive Officer ofSpinal Concepts from 2000 until June 2003.

2007

President and ChiefExecutive Officer of Biomet,Inc.

Daniel P. Florin, 43 Senior Vice President and Chief Financial Officer since June 5, 2007.Prior thereto, he served as Vice President and Corporate Controller for Boston ScientificCorporation since 2001. Prior to being appointed as Corporate Controller in 2001, he served infinancial leadership positions within Boston Scientific Corporation and various business unitssince July 1995.

2007

Senior Vice President andChief Financial Officer

J. Pat Richardson, 47Corporate Vice President – Finance since June 7, 2007.Prior thereto, he served as Vice President – Finance, Interim Chief Financial Officer andTreasurer of Biomet, Inc. since April 2007. Prior thereto, Mr. Richardson served in financialleadership positions within various Johnson & Johnson business units (Cordis: Vice President,Finance – Cardiology from August 2000 to April 2007 and Group Controller–Cardiology fromApril 2004 to August 2006; DePuy Orthopaedics: Vice President, Finance – Orthopaedicsfrom June 1997 to April 2004.

2007

Corporate Vice President –Finance

James W. Haller, 50Controller and Vice President – Finance of Biomet Orthopedics, Inc. since June 2001.

1991

Controller of Biomet, Inc.and Vice President – Finance ofBiomet Orthopedics, Inc.

Roger P. van Broeck, 58Senior Vice President of Biomet, Inc. since June 7, 2007.Prior thereto, he served as Vice President since July 2004, and President of Biomet Europesince March 2004. Prior thereto Chief Executive Officer of BioMer C.V. and Biomet MerckB.V.

2004

Senior Vice President ofBiomet, Inc. and President ofBiomet Europe

Steven F. Schiess, 47Senior Vice President of Biomet, Inc. since June 7, 2007.Prior thereto, he served as Vice President and President of Implant Innovations, Inc. sinceJune 2005. Prior thereto, Senior Vice President, Sales and Marketing of Implant Innovations,Inc.

2005

Senior Vice President ofBiomet, Inc. and President ofBiomet 3i, Inc. (formerlyImplant Innovations, Inc.)

Bradley J. Tandy, 48Senior Vice President, General Counsel and Secretary since April 2007.Prior thereto, he served as Senior Vice President, Acting General Counsel and Secretary fromJanuary 2007 to April 2007 and Senior Vice President, Acting General Counsel, Secretary andCorporate Compliance Officer from March 2006 to January 2007. He previously served asVice President, Assistant General Counsel and Corporate Compliance Officer.

2006

Senior Vice President, GeneralCounsel and Secretary ofBiomet, Inc.

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Table of ContentsEXECUTIVE OFFICERS OF THE REGISTRANT, continued

Name, Age and Business Experience Served as Executive

Officer Since Current Position(s)with the Company

Thomas R. Allen, 54President of Biomet International since June 2006.Prior thereto, he served as Vice President - The Americas and Asia Pacific for BiometOrthopedics, Inc.

2006

President of BiometInternational

Richard J. Borror, 48Senior Vice President, Operations since June 7, 2007.Prior thereto, he served as Chief Information Officer and Corporate Vice President forManufacturing since April 2006. Corporate Vice President for Manufacturing from December2005 to April 2006. Prior thereto, Vice President - Manufacturing for Biomet ManufacturingCorp.

2006

Senior Vice President,Operations

Gregory W. Sasso, 45Senior Vice President, Biomet and President, Biomet SBU Operations since June 7, 2007.Prior thereto, he served as Senior Vice President – Corporate Development andCommunications since June 2006. Prior thereto, Vice President – Corporate Development andCommunications of Biomet, Inc.

2006

Senior Vice President, Biometand President, Biomet SBUOperations

Darlene Whaley, 50Senior Vice President – Human Resources since June 2006.Prior thereto, Vice President – Human Resources.

2006

Senior Vice President –Human Resources of Biomet,Inc.

William C. Kolter, 49Senior Vice President, Biomet Orthopedics Commercial Operations since June 7, 2007.Prior thereto, he served as President, Biomet Orthopedics, Inc. since December 2005. Priorthereto, Vice President – Marketing of Biomet Orthopedics, Inc.

2006

Senior Vice President, BiometOrthopedics CommercialOperations

Glen A. Kashuba, 44Senior Vice President and President of Biomet Trauma & Biomet Spine since April 2007.Prior thereto, Mr. Kashuba served as Worldwide President of Cordis Endovascular, a divisionof Johnson & Johnson. Mr. Kashuba had been with Johnson & Johnson since 1998, alsoholding the positions of Worldwide President of Codman Neuro Science (from December 2002to November 2005) and U.S. President of DePuy AcroMed, now known as DePuy Spine.

2007

Senior Vice President ofBiomet, Inc. and President ofBiomet Trauma & BiometSpine

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Table of Contents

Item 1A. Risk Factors.

The following factors, among others, could cause the Company’s future results to differ from those contained in forward-looking statements made in this reportand presented elsewhere by management from time to time. Such factors, among others, may have a material adverse effect on the Company’s business, financialcondition and results of operations. The risks identified in this section are not exhaustive. The Company operates in a dynamic and competitive environment.New risk factors affecting the Company emerge from time to time and it is not possible for management to predict all such risk factors. Further, it is not possibleto assess the impact of all risk factors on the Company’s business or the extent to which any single factor or combination of factors may cause actual results todiffer materially from those contained in any forward-looking statements. Given these inherent risks and uncertainties, investors are cautioned not to place unduereliance on forward-looking statements as a prediction of actual results. In addition, the Company undertakes no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise. The following discussion of the Company’s risk factors speaksonly as of the date on which they were made and should be read in conjunction with the consolidated financial statements and related notes included herein.Because of these and other factors, past financial performance should not be considered an indication of future performance.

The Company’s future profitability depends on the success of the Company’s principal product lines.

Sales of the Company’s reconstructive products accounted for approximately 71% of the Company’s net sales for fiscal 2007 and approximately 68% of theCompany’s net sales for fiscal 2006. The Company expects sales of reconstructive products to continue to account for a significant portion of the Company’saggregate sales. Any event adversely affecting the sale of reconstructive products may, as a result, adversely affect the Company’s business, results of operationsand financial condition.

If the Company is unable to continue to develop and market new products and technologies in a timely manner, the demand for the Company’s products maydecrease or the Company’s products could become obsolete, and the Company’s revenue and profitability may decline.

The market for the Company’s products is highly competitive and dominated by a small number of large companies. The Company is continually engaged inproduct development, research and improvement efforts. New products and line extensions of existing products represent a significant component of theCompany’s growth rate. The Company’s ability to continue to grow sales effectively depends on the Company’s capacity to keep up with existing or newproducts and technologies in the musculoskeletal products market. The process of obtaining regulatory approvals to market a medical device, particularly fromthe FDA and certain foreign governmental authorities, can be costly and time consuming and approvals and clearances might not be granted for future productson a timely basis, if at all. Delays in receipt of, or failure to obtain, approvals and clearances for future products could result in delayed realization of productrevenues or in substantial additional costs that could have a material adverse effect on the Company’s business or results of operations. In addition, if theCompany’s competitors’ new products and technologies reach the market before the Company’s products, they may gain a competitive advantage or render theCompany’s products obsolete. The ultimate success of the Company’s product development efforts will depend on many factors, including, but not limited to, theCompany’s ability to create innovative designs and materials, provide innovative surgical techniques, accurately anticipate and meet customers’ needs,commercialize new products in a timely manner and manufacture and deliver products and instrumentation in sufficient volumes on time.

Moreover, research and development efforts may require a substantial investment of time and resources before the Company are adequately able to determine thecommercial viability of a new product, technology, material or other innovation. Even in the event that the Company is able to successfully develop innovations,they may not produce revenue in excess of the costs of development and may be quickly rendered obsolete as a result of changing customer preferences or theintroduction by the Company’s competitors of products embodying new technologies or features.

The Company and the Company’s customers are subject to substantial government regulation and compliance with these regulations can have a materialadverse effect on the Company’s business.

The medical devices the Company design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other federal, state andforeign governmental authorities. Overall, there appears to be a trend toward more stringent regulation throughout the world, and the Company does notanticipate this trend to dissipate in the near future.

In general, the development, testing, manufacture and marketing of the Company’s products are subject to extensive regulation and review by numerousgovernmental authorities both in the United States and abroad. The regulatory process requires the expenditure of significant time, effort and expense to bringnew products to market. In addition, the Company is required to implement and maintain stringent reporting, labeling and record keeping procedures. Themedical device industry also is subject to a myriad of complex laws governing Medicare and Medicaid reimbursement and health care fraud and abuse laws, withthese laws and regulations being very complex and subject to interpretation. In many instances, the industry does not have the benefit of significant regulatory orjudicial interpretation of these laws and regulations. In certain public statements, governmental authorities have taken positions on issues for which little officialinterpretation was previously available. Some of these positions appear to be inconsistent with common practices within the industry but have not previouslybeen challenged.

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Table of ContentsVarious federal and state agencies have become increasingly vigilant in recent years in their investigation of various business practices. Governmental andregulatory actions against the Company can result in various actions that could adversely impact the Company’s operations, including:

• the recall or seizure of products;

• the suspension or revocation of the authority necessary for the production or sale of a product;

• the suspension of shipments from particular manufacturing facilities;

• the imposition of fines and penalties;

• the delay of the Company’s ability to introduce new products into the market;

• the exclusion of the Company’s products from being reimbursed by federal and state health care programs (such as Medicare, Medicaid, VeteransAdministration health programs and Civilian Health and Medical Program Uniformed Service, or CHAMPUS); and

• other civil or criminal sanctions against the Company.

Any of these actions, in combination or alone, or even a public announcement that the Company are being investigated for possible violations of these laws,could have a material adverse effect on the Company’s business, results of operations and financial condition.

In many of the foreign countries in which the Company markets its products, the Company is subject to regulations affecting, among other things: clinicalefficacy, product standards, packaging requirements, labeling requirements, import/export restrictions, tariff regulations, duties and tax requirements. Many ofthe regulations applicable to the Company’s devices and products in these countries, such as the European Medical Devices Directive, are similar to those of theFDA. In addition, in many countries the national health or social security organizations require the Company’s products to be qualified before they can bemarketed with the benefit of reimbursement eligibility. Failure to receive or delays in the receipt of, relevant foreign qualifications also could have a materialadverse effect on the Company’s business, results of operations and financial condition.

As both the U.S. and foreign government regulators have become increasingly stringent, the Company may be subject to more rigorous regulation bygovernmental authorities in the future. The Company’s products and operations are also often subject to the rules of industrial standards bodies, such as theInternational Standards Organization. If the Company fails to adequately address any of these regulations, the Company’s business will be harmed.

The Company, like other companies in the orthopedic industry, is involved in ongoing investigations by the U.S. Department of Justice, the results of whichmay adversely impact the Company’s business and results of operations.

On March 30, 2005 the Company announced that it had received a subpoena from the U.S. Department of Justice through the U.S. Attorney for the District ofNew Jersey requesting documents related to any consulting and professional service agreements with orthopedic surgeons using or considering the use of theCompany’s hip or knee implants for the period January 2002 through March 29, 2005. The Company is aware that similar inquiries were directed to othercompanies in the orthopedics industry. On July 19, 2006 the Company received a letter from the U.S. Department of Justice through the U.S. Attorney for theDistrict of New Jersey requesting additional documents further to the subpoena issued in March 2005. This letter requested additional documents related toconsulting and service agreements for the time period January 1998 through the present, as well as research and other grant agreements for that same time period.Further, the letter requested that the Company provide copies of the agreements identified in the supplemental request on an on-going basis. In addition, therequested information related to Company-sponsored training events, the selection process used by the Company to identify consultants and researchers, theCompany’s product design process for hip and knee implants and information on the Company’s orthopedic sales force. The Company has subsequently receivedadditional requests for information, both informally and by subpoena.

The U.S. Attorney’s Office and the Company have recently begun discussions regarding a potential resolution of this matter. The results of any resolution remainuncertain at this time, but could, among other things, require monetary payments, cause the Company to significantly change some of its existing businesspractices, and include the potential for additional governmental oversight. Although the Company has cooperated and intends to continue to cooperate fully withthe Department of Justice inquiry, discussions are still in preliminary stages with respect to the terms of any proposed resolution and there can be no assurancethat the Company will enter into a consensual resolution of this matter with the U.S. Attorney’s Office.

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Table of ContentsFrom time to time, the Company has been, and may be in the future, the subject of additional investigations. If, as a result of these investigations, the Company isfound to have violated one or more applicable laws, the Company’s business, results of operations and financial condition could be materially adversely affected.If some of the Company’s existing business practices are challenged as unlawful, the Company may have to change those practices, which could have a materialadverse effect on the Company’s business, results of operations and financial condition.

The Company conducts a significant amount of the Company’s sales activity outside of the United States, which subjects the Company to additional businessrisks and may cause the Company’s profitability to decline due to increased costs.

During fiscal 2007, the Company derived approximately $801 million, or 38% of the Company’s net sales, from sales of the Company’s products outside of theUnited States. The Company intends to continue to pursue growth opportunities in sales internationally, which could expose the Company to additional risksassociated with international sales and operations. The Company’s international operations are, and will continue to be, subject to a number of risks and potentialcosts, including:

• changes in foreign medical reimbursement policies and programs;

• unexpected changes in foreign regulatory requirements;

• differing local product preferences and product requirements;

• diminished protection of intellectual property in some countries outside of the United States;

• trade protection measures and import or export licensing requirements;

• difficulty in staffing, training and managing foreign operations;

• differing legal and labor regulations;

• potentially negative consequences from changes in tax laws; and

• political and economic instability.

In addition, the Company is subject to risks arising from currency exchange rate fluctuations, which could increase the Company’s costs and may cause theCompany’s profitability to decline. The U.S. dollar value of the Company’s foreign-generated revenues varies with currency exchange rate fluctuations.Measured in local currency, the majority of the Company’s foreign-generated revenues were generated in Europe. Significant increases in the value of the U.S.dollar relative to foreign currencies could have a material adverse effect on the Company’s results of operations. The Company’s consolidated net sales werepositively affected by approximately 2% during fiscal 2007, as a result of the impact of foreign currency translations. At the present time, the Company does notengage in hedging transactions to protect against uncertainty in future exchange rates between any particular foreign currency and the U.S. dollar.

Any of these factors may, individually or as a group, have a material adverse effect on the Company’s business, results of operations and financial condition.

Sales may decline if the Company’s customers do not receive adequate levels of reimbursement from third-party payors for the Company’s products and ifcertain types of healthcare programs are adopted in the Company’s key markets.

In the United States, healthcare providers that purchase the Company’s products (e.g., hospitals, physicians, dentists and other health care providers) generallyrely on payments from third-party payors (principally federal Medicare, state Medicaid and private health insurance plans) to cover all or a portion of the cost ofthe Company’s musculoskeletal products. These third-party payors may deny reimbursement if they determine that a device used in a procedure was not inaccordance with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication. Third-party payors may alsodecline to reimburse for experimental procedures and devices. In the event that third-party payors deny coverage or reduce their current levels of reimbursement,the Company may be unable to sell certain products on a profitable basis, thereby materially adversely impacting the Company’s results of operations. Further,third-party payors are continuing to carefully review their coverage policies with respect to existing and new therapies and can, without notice, deny coverage fortreatments that may include the use of the Company’s products.

In addition, some healthcare providers in the United States have adopted, or are considering the adoption of, a managed care system in which the providerscontract to provide comprehensive healthcare for a fixed cost per person. Healthcare providers in a managed care system may attempt to control costs byauthorizing fewer elective surgical procedures, including joint reconstructive surgeries, or by requiring the use of the least expensive implant available. Inresponse to these and other pricing pressures, the Company’s competitors may lower the prices for their products. The Company may not be able to match theprices offered by the Company’s competitors, thereby adversely impacting the Company’s results of operations and future prospects. Further, in the event that theUnited States considers the adoption of a national healthcare system in which prices are controlled and patient care is managed by the government, suchregulation could have a material adverse effect on the Company’s business, results of operations and financial condition.

Outside of the United States, reimbursement systems vary significantly from country to country. In the majority of the international markets in which theCompany’s products are sold, government-managed healthcare systems mandate the reimbursement rates and methods for medical devices and procedures. Ifadequate levels of reimbursement from third-party payors outside of the United States are not obtained, international sales of the Company’s products maydecline. Many foreign markets, including Canada, and some European and Asian countries,

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Table of Contentshave tightened reimbursement rates. The Company’s ability to continue to sell certain products profitably in these markets may diminish if thegovernment-managed healthcare systems continue to reduce reimbursement rates.

The Company is subject to cost-containment efforts of group purchasing organizations, which may have a material adverse effect on the Company’s resultsof operations and financial condition.

Many customers of the Company’s products have joined group purchasing organizations in an effort to contain costs. Group purchasing organizations negotiatepricing arrangements with medical supply manufacturers and distributors, and these negotiated prices are made available to a group purchasing organization’saffiliated hospitals and other members. If the Company is not one of the providers selected by a group purchasing organization, affiliated hospitals and othermembers may be less likely to purchase the Company’s products, and if the group purchasing organization has negotiated a strict compliance contract for anothermanufacturer’s products, the Company may be precluded from making sales to members of the group purchasing organization for the duration of the contractualarrangement. The Company’s failure to respond to the cost-containment efforts of group purchasing organizations may cause the Company to lose market shareto the Company’s competitors and could have a material adverse effect on the Company’s sales, results of operations and financial condition.

Loss of the Company’s key management and other personnel, or an inability to attract such management and other personnel, could impact the Company’sbusiness.

The Company depends on the Company’s senior managers and other key personnel to run the Company’s business and on technical experts to develop newproducts and technologies. The loss of any of these senior managers or other key personnel could adversely affect the Company’s operations. Competition forqualified employees is intense, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required forthe management, operation and expansion of the Company’s business could hinder the Company’s ability to expand, conduct research and development activitiessuccessfully and develop marketable products.

Increased costs of retaining existing independent sales agents of the Company’s products have negatively affected the Company’s results of operations and ifthe Company fails to retain the Company’s existing relationships with these independent sales agents or establish relationships with different agents, theCompany’s results of operations may be negatively impacted.

The Company’s revenues and profitability depend largely on the ability of independent sales agents to sell the Company’s products to customers. Typically, theseagents have developed long-standing relationships with the Company’s customers and provide the Company’s customers with the necessary training and productsupport relating to the Company’s products. The average tenure of the Company’s independent sales agents within Biomet Orthopedics, Inc. is 9 years.

Following the announcement of the Merger Agreement, in an attempt to exploit the uncertainty related to the pending transaction, the Company’s directcompetitors approached the independent sales agents the Company works with and offered them incentives to discontinue their existing relationships with theCompany. In an effort to ensure the continuity of its relationships with the independent third-party distributors who represent Biomet Orthopedics, Inc., theCompany incurred expenses of $39,200,000 and approximately $33,000,000 in fiscal year 2007 and the first quarter of fiscal year 2008, respectively, whichnegatively affected its results of operations for these periods. The Company does not currently expect to incur additional significant expenses related tomodifying these relationships subsequent to the first quarter of fiscal year 2008. In addition, the Company and its subsidiary, Biomet Orthopedics, Inc., recentlyinitiated legal proceedings in Marion County, Indiana against a direct competitor and certain former independent sales agents related to the foregoing. For furtherinformation on this proceeding see “Item 3. Legal Proceedings - Other Litigation.” If the Company fails to retain it’s existing relationships with these agents orestablish relationships with different agents, the Company’s results of operations may be negatively impacted.

The Company’s business may be harmed as a result of litigation.

The Company’s involvement in the manufacture and sale of medical devices creates exposure to significant risk of product liability claims, particularly in theUnited States. In the past, the Company has received product liability claims relating to the Company’s products and anticipate that it will continue to receiveclaims in the future, some of which could have a material adverse impact on the Company’s business. In addition, the Company could experience a materialdesign or manufacturing failure in the Company’s products, a quality system failure, other safety issues or heightened regulatory scrutiny that would warrant arecall of some of the Company’s products. The Company’s existing product liability insurance coverage may be inadequate to satisfy liabilities the Companymight incur. If a product liability claim or series of claims is brought against the Company for uninsured liabilities or is in excess of the Company’s insurancecoverage limits, the Company’s business could suffer and the Company’s results could be materially adversely impacted.

In addition, the musculoskeletal products industry is highly litigious with respect to the enforcement of patents and other intellectual property rights. In somecases, intellectual property litigation may be used to gain a competitive advantage. The Company has in the past and may in the future become a party to lawsuitsinvolving patents or other intellectual property. A legal proceeding, regardless of the outcome, could put pressure on the Company’s financial resources anddivert the time, energy and efforts of the Company’s management.

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Table of ContentsA natural or man-made disaster could have a material adverse effect on the Company’s business.

The Company has approximately 20 manufacturing operations located throughout the world. However, a significant portion of the Company’s products areproduced at and shipped from the Company’s facility in Warsaw, Indiana. In the event that this facility is severely damaged or destroyed as a result of a naturalor man-made disaster, the Company would be forced to shift production to the Company’s other facilities and/or rely on third-party manufacturers. Such an eventcould have a material adverse effect on the Company’s business prospects, results of operations and financial condition.

Risks Relating to the Stock Options Investigation and the Merger

The Company’s review of historical stock option granting practices and restatement of consolidated financial statements may result in future litigation orregulatory inquiries, which could harm the Company’s financial results.

On December 18, 2006 and March 30, 2007, the Company announced preliminary and updated reports from the Special Committee following the publication ofan analyst report suggesting that certain historical stock option grants took place on dates when the Company’s stock price was trading at relatively low pricesand the filing of two shareholder derivative lawsuits alleging improper “backdating” of stock options. Based upon the analysis of these reports and relevantaccounting literature, including Staff Accounting Bulletin No. 99, the Company’s Audit Committee determined on March 30, 2007 that the Company shouldamend the Company’s annual report on Form 10-K for the fiscal year ended May 31, 2006 and the Quarterly Report on Form 10-Q for the period endedAugust 31, 2006 to reflect the restatement of the consolidated financial statements reflected therein (fiscal years 2006, 2005 and 2004 and periods endedAugust 31, 2006 and 2005) and related disclosures reflected therein.

On May 25, 2007, the Company’s Board of Directors received and discussed the updated findings contained in the Special Committee’s final report, whichconcluded that:

• the Company’s written stock option plans were treated by the Company’s management, and the stock option committee, as formalities concerningthe manner in which individual stock option grants were to be approved, resulting in a failure to abide by the terms of the plans;

• the Company failed to receive appropriate legal or accounting advice from the Company’s former general counsel and the chief financial officerrelated to the Company’s stock option program and, as a result, relevant legal and accounting rules were not followed;

• the Company failed to put in place and implement internal controls to manage the Company’s stock option program, including failing to devotesufficient resources to the administration of the Company’s stock option program;

• the Company failed to prepare and maintain appropriate books and records documenting the administration of the Company’s stock option program,specifically with regard to the approval of individual stock option grants;

• most stock options issued by the Company were dated on dates other than the date of grant of those options, as that date was defined by the stockoption plans;

• the Company engaged in purposeful “opportunistic” dating (and, therefore, pricing) of stock options; and

• as a result of these deficiencies, certain of the Company’s proxy statements were inaccurate.

The Company’s review of historical stock option granting practices has required it to incur additional expenses for legal, accounting, tax and other professionalservices, and could in the future adversely affect the Company’s business, results of operations, financial condition and cash flows, including by virtue ofexposing the Company to greater risks associated with litigation, regulatory and other governmental proceedings. The Company has also incurred (or expects toincur) expenses in connection with certain corrective actions approved by its Compensation and Stock Option Committee with respect to misdated or mispricedstock options, including (a) payments to compensate certain former option holders whose option exercise prices the Company increased to the fair market valueof the shares underlying such options on the “measurement date” (as that term is defined in Statement of Financial Accounting Standards No. 123 (“SFAS123(R)”) for the options and (b) payments to the IRS on behalf of certain option holders (and reimbursement of one of the Company’s executive officers) tocover taxes and penalties payable by such individuals as a result of their exercise of misdated or mispriced stock options prior to the date the Company amendedsuch options to bring them into compliance with (and thereby avoid the taxes and penalties imposed under) section 409A of the Internal Revenue Code of 1986,as amended, or the Code, as well as gross-up payments to such individuals for any taxes they incur as a result of such payments. In connection with the closing ofthe Offer, all outstanding options, each an Option, to purchase Shares under Biomet’s stock plans, vested or unvested, were cancelled and each Option holder waspaid an amount in cash equal to the excess, if any, of the Offer Price over the applicable option exercise price for each Share subject to an Option, less anyrequired withholding taxes. While the Company believes that it has made appropriate judgments in determining the correct measurement dates for theapproximately 17,000 stock option awards in question, the SEC or other governmental agencies may disagree with the manner in which the Company hasaccounted for and reported, or not reported, the financial and other impacts of past stock option grant measurement date errors, and there is a risk that any suchinquiry could lead to circumstances in which the Company may have to further restate the Company’s prior financial statements, amend prior SEC filings, orotherwise take other actions not currently contemplated by the Company. Any such circumstance could also lead to future delays in filing the Company’ssubsequent SEC reports and delisting of the Company’s Shares from The NASDAQ Global Select Market. The Company cannot give assurance that any futurelitigation

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Table of Contentsor regulatory action will result in the same conclusions as those reached by the Audit Committee. The conduct and resolution of these matters may be timeconsuming, expensive and distracting from the conduct of the Company’s business. Furthermore, if the Company is subject to adverse findings in any of thesematters, the Company could be required to pay damages, penalties or additional taxes or have other remedies imposed upon it, which could harm the Company’sbusiness, results of operations, financial condition and cash flows.

The Company has been named as a party to a number of shareholder derivative lawsuits relating to the Company’s historical stock option grant practices,and the Company may be named in additional lawsuits in the future. This litigation could become time consuming and expensive and could result in thepayment of significant judgments and settlements, which could have a material adverse effect on the Company’s results of operations and financialcondition.

In connection with the Company’s historical stock option granting practices and resulting restatements, a number of derivative actions were filed against certainof the Company’s current and former directors and officers, purporting to assert claims on the Company’s behalf. On May 25, 2007, the Board received anddiscussed an updated report from its Special Committee, which concluded that pursuing these shareholder derivative lawsuits was not in the Company’s bestinterests. Under Indiana law, the Special Committee’s determination may be binding on the pending shareholder derivative lawsuits and result in dismissal ofthese lawsuits. The Company cannot, however, predict the outcome of these current lawsuits, nor can the Company predict the amount of time and expense thatwill be required to resolve them. There may also be additional lawsuits of this nature filed in the future. Defending the current lawsuits and any additionalshareholder derivative lawsuits may become time consuming and expensive, and an unfavorable outcome in any of these cases could have a material adverseeffect on the Company’s business, results of operations and financial condition.

In addition, the issues arising from the Company’s previous retroactive pricing of stock options may make it more difficult to obtain director and officerinsurance coverage in the future. If the Company is able to obtain this coverage, it could be significantly more costly than in the past, which could have anadverse effect on the Company’s financial results and cash flows. As a result of this and related factors, the Company’s directors and officers could faceincreased risks of personal liability in connection with the performance of their duties. Consequently, the Company may have difficulty attracting and retainingqualified directors and officers, which could adversely affect the Company’s business.

The Company is subject to litigation related to the Merger.

On December 20, 2006, a purported class-action lawsuit captioned Long, et al. v. Hann, et al., was filed in Indiana State court in the County of Kosciusko. TheLong action names as defendants each member of the Company’s Board of Directors at the time, Blackstone Capital Partners V L.P., Goldman SachsInvestments Ltd., KKR 2006 Fund L.P., and TPG Partners V, L.P. In March, 2007, the defendants filed motions to dismiss the plaintiff’s complaint, and thesemotions are currently pending before the court. On January 2, 2007, a purported class-action lawsuit captioned Gervasio v. Biomet, Inc., et al., was filed inSupreme Court for the State of New York, New York County. The Gervasio complaint named as defendants the Company, each member of the Company’sBoard of Directors at the time, The Blackstone Group L.P. and Kohlberg Kravis Roberts & Co. The Gervasio complaint also purported to name as defendantsGoldman Sachs Capital Partners and Texas Pacific Group, neither of which is a legally existing entity. On March 26, 2007, the court granted defendants’ motionto dismiss the Gervasio action. A third purported class-action lawsuit captioned Corry v. Biomet, Inc., et al., was filed in New York state court in the County ofNew York on January 9, 2007, and was voluntarily discontinued on February 14, 2007. On May 31, 2007, the Company entered into a memorandum ofunderstanding regarding the settlement of these purported class action lawsuits relating to the Merger. However, additional lawsuits pertaining to the Mergercould be filed in the future.

Any conclusion of this litigation in a manner adverse to the Company could have a material adverse effect on the Company’s business, results of operations,financial condition and cash flows. In addition, the cost to the Company of defending the litigation, even if resolved in the Company’s favor, could be substantial.Such litigation could also substantially divert the attention of the Company’s management and the Company’s resources in general. Uncertainties resulting fromthe initiation and continuation of this litigation could harm the Company’s ability to compete in the marketplace.

Biomet’s controlling shareholder may have interests that conflict with the interests of other stakeholders.

LVB beneficially owns over 80% of Biomet’s Common Shares. Subject to the terms of the Merger Agreement, LVB generally will have the ability to electsubstantially all of the members of Biomet’s Board of Directors and will generally be able to select its management team, determine its corporate andmanagement policies and make decisions relating to fundamental corporate actions. The directors elected by LVB generally will have the authority to makedecisions affecting Biomet’s capital structure, including the issuance of debt and declaration of dividends, and to authorize transactions. These decisions couldenhance LVB’s equity investment while involving risks to the interests of other stakeholders.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

The Company’s principal executive offices are at 56 East Bell Drive, Warsaw, Indiana. In addition, the Company maintains more than 30 other manufacturingfacilities, offices and warehouse facilities in various countries, including Canada, Europe, Asia Pacific and Latin America. The Company believes that all of itsfacilities are adequate, well-maintained and suitable for the development, manufacture, distribution and marketing of all its products. As of May 31, 2007, theCompany owned 17 facilities and leased five facilities. The following are the Company’s principal properties as of May 31, 2007:

FACILITY LOCATION SQUARE

FEET OWNED/LEASED

Corporate headquarters of Biomet, Inc.; manufacturing, storage and research and developmentfacilities of Biomet Manufacturing Corp.; distribution center and offices of Biomet Orthopedics,Inc.

Warsaw, Indiana

517,200

Owned

Administrative, manufacturing and distribution facility of EBI, L.P. and administrative offices ofElectro-Biology, Inc.

(1) Parsippany, New Jersey1

(2) Parsippany, New Jersey 63,000

209,700 OwnedOwned

Administrative, manufacturing and distribution facility of Biomet Microfixation, Inc. Jacksonville, Florida 82,500 Owned

Office, manufacturing and distribution facility of Biomet 3i, Inc.

(1) Palm Beach Gardens, FL(2) Palm Beach Gardens, FL2

117,00069,000

OwnedOwned

Office and manufacturing facilities of Biomet Sports Medicine, Inc.

(1) Ontario, California(2) Redding, California

35,40014,400

OwnedLeased

Office and manufacturing facility of Electro-Biology, Inc. Guaynabo, Puerto Rico 34,700 Owned

Office, manufacturing and warehouse facility of Biomet France Sarl Valence, France 86,100 Owned

Office, manufacturing and warehouse facilities of Biomet Deutschland GmbH Berlin, Germany 49,900 Owned

Administrative offices of Biomet Europe B.V. and office and warehouse facility of BiometNederland BV, Walter Lorenz Surgical Europe B.V. and Biomet 3i Netherlands B.V.

Dordrecht, The Netherlands

37,700

Owned

Office and manufacturing facility of Biomet Spain Orthopedics S.L. Valencia, Spain 83,517 Owned

Office, manufacturing and warehouse facilities of Biomet Cementing Technologies AB Sjöbo, Sweden 24,200 Owned

Manufacturing and administrative facilities of Biomet UK Ltd.

(1) Bridgend, South Wales(2) Swindon, England

105,20053,400

OwnedOwned

1 Includes 42,000 square feet of space in this facility that is leased to other parties.

2 Includes 23,000 square feet of space in this facility that is leased to other parties.

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Item 3. Legal Proceedings.

U.S. Department of Justice Investigations.


The U.S. Attorney’s Office and the Company have recently begun discussions regarding a potential resolution of this matter. The results of any resolution remainuncertain at this time, but could, among other things, require monetary payments, cause the Company to significantly change some of its existing businesspractices, and include the potential for additional governmental oversight. Although the Company has cooperated and intends to continue to cooperate fully withthe Department of Justice inquiry, discussions are still in preliminary stages with respect to the terms of any proposed resolution and there can be no assurancethat the Company will enter into a consensual resolution of this matter with the U.S. Attorney’s Office. Given the preliminary nature of these discussions, theCompany does not believe that a range of loss is estimable; therefore, the Company has not accrued for any losses with regard to this inquiry.

In June 2006, the Company received a federal grand jury subpoena issued at the request of the U.S. Department of Justice, Antitrust Division, requestingdocuments from January 2001 through June 2006 regarding possible violations of federal criminal law, including possible violations of the antitrust laws, relatingto the manufacture and sale of orthopedic implant devices, or the subpoena. The Company is aware of similar subpoenas directed to other companies in theorthopedic industry. The Company has cooperated and intends to continue to fully cooperate with the Department of Justice investigation. The result of thisinvestigation may not be known for several years. However, the scope of the subpoena has currently been narrowed to a specific geographic region and specificproduct lines. It is the Company’s belief that the other orthopedic companies that received similar subpoenas have received similar guidance. It is the Company’sbelief that the investigation was prompted by an unsolicited e-mail sent by a representative of one of the Company’s competitors that proposed a common pricingstrategy in connection with a particular hospital. This e-mail was received by an independent sales representative of an independent distributor for BiometOrthopedics, but it was never transmitted to the Company. Neither the Company, the Company’s independent distributor, nor the Company’s independent salesrepresentative took any action in response to the e-mail, and the Company believes that no anticompetitive activity took place as a result of it. The Companyrequires compliance by the Company’s employees and the Company’s independent distributors with the Company’s Code of Business Conduct and Ethics andwith applicable antitrust laws. The information provided herein is limited to the information available to the Company at the present time and the Companycannot offer any assurances as to the scope and final outcome of this investigation. On an issue related to the subpoena the Company has received two complaintsin class action lawsuits alleging violations of the Sherman Antitrust Act. In addition, the Company is aware of other complaints that have been filed, but notserved on the Company. The complaints also named various other companies in the orthopedic industry as defendants. The Company intends to vigorouslydefend this matter and believes that it has meritorious defenses to the claims being asserted.

In May 2007, the Company received a subpoena from the U.S. Department of Justice through the U.S. Attorney for the Southern District of West Virginiarequesting documents generally relating to a certain number of products manufactured, marketed and sold by the Company’s subsidiary EBI, L.P. for the timeperiod from January 1999 through the present. In June 2007, the Company received a second administrative subpoena from the U.S. Attorney for the SouthernDistrict of West Virginia requesting documents relating to a specific physician’s assistant. The Company intends to fully cooperate with the request of theDepartment of Justice. Further, the Company can make no assurances as to the time or resources that will be needed to devote to this inquiry or its final outcome.

Litigation Relating to Past Stock Option Grant Practices.

On September 21, 2006, two shareholder-derivative complaints were filed against certain of the Company’s current and former officers and directors inKosciusko Superior Court I in Kosciusko Country, in the State of Indiana. The complaints, captioned Long v. Hann, et al., and Thorson v. Hann, et al., allegedviolations of state law relating to the issuance of certain stock option awards by the Company dating back to 1996. Both complaints sought unspecified moneydamages as well as other equitable and injunctive relief. These two cases were consolidated under the caption In re Biomet, Inc. Derivative Litigation, and onJanuary 19, 2007, plaintiffs filed an amended complaint that made additional allegations based on the Company’s December 18, 2006 disclosures related to stockoption awards, including allegations that the defendants sought to sell the company in order to escape liability for their conduct, and that they did so at a devaluedprice, thus further breaching their fiduciary duties to shareholders. On February 16, 2007, defendants filed a motion to dismiss plaintiffs’ amended complaint,which is currently pending with the court.

On December 11, 2006, a third shareholder-derivative complaint captioned International Brotherhood of Electrical Workers Local 98 Pension Fund v. Hann, etal., No. 06 CV 14312, was filed in federal court in the Southern District of New York. The IBEW case makes allegations and claims similar to those made in theIndiana litigation, in addition to purporting to state three derivative claims for violations of the federal securities laws. On February 15, 2007, defendants filed amotion to dismiss the plaintiff’s complaint. On April 11, 2007, plaintiffs filed a

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Table of Contentsmotion for partial summary judgment claiming that the disclosures in the Company’s April 2, 2007 Form 8-K filing and press release regarding the Company’shistorical stock options granting practices constitute admissions sufficient to establish defendants’ liability on certain of plaintiffs’ claims. Both motions arecurrently pending with the court.

Pursuant to Indiana law and provisions of the Company’s article of incorporation, the Company is advancing reasonable expenses, including attorneys’ fees,incurred by the Company’s current and former directors and officers in defending these lawsuits.

On May 25, 2007, the Board received and discussed an updated report from its Special Committee, which concluded that pursuing these threeshareholder-derivative complaints was not in the Company’s best interests. Under Indiana law, the Special Committee’s determination may be binding on thepending shareholder-derivative claims and result in the dismissal of these complaints.

Litigation Relating to the Merger.

On December 20, 2006, a purported class-action lawsuit captioned Long, et al. v. Hann, et al., was filed in Indiana State court in the County of Kosciusko. Thelawsuit names as defendants each member of the Company’s Board of Directors at the time, Dane Miller, Ph.D., and Blackstone Capital Partners V L.P., KKR2006 Fund L.P., Goldman Sachs Investments Ltd., and TPG Partners V, L.P. The complaint alleges, among other things, that the defendants breached, or aidedand abetted the breach of, fiduciary duties owed to the Company’s shareholders by the Company’s directors in connection with the Company’s entry into theMerger Agreement. Among the purported fiduciary breaches alleged in the complaint is that the Company’s director defendants “knew that the only way theycould escape liability for their stock option granting improprieties would be to sell the Company, thus eliminating their liability.” The complaint seeks, amongother relief, class certification of the lawsuit, a declaration that the Merger Agreement was entered into in breach of the fiduciary duties of the defendants, aninjunction preventing the defendants from proceeding with the Merger unless and until the defendants implement procedures to obtain the highest possible saleprice, an order directing the defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of the Company’s shareholders untilthe process for a sale of Biomet is completed and the highest price is obtained, an order directing the defendants to exercise their fiduciary duty to disclose allmaterial information in their possession concerning the Merger prior to the shareholder vote, including the Company’s fiscal 2007 second quarter financialresults, imposition of a constructive trust upon any benefits improperly received by the defendants, an award of attorneys’ fees and expenses, and such otherrelief as the court might find just and proper. On March 29 and 30, 2007, the defendants filed motions to dismiss the plaintiffs’ complaint, and these motions arecurrently pending before the court.

On January 2, 2007, a purported class action lawsuit captioned Gervasio v. Biomet, Inc., et al., was filed in the Supreme Court for the State of New York, NewYork County. A virtually identical action was filed on January 9, 2007, captioned Corry v. Biomet, Inc., etal., in the same court. Both of these lawsuits named asdefendants Biomet, each member of its Board of Directors at the time, Dane Miller, Ph.D., The Blackstone Group L.P., Kohlberg Kravis Roberts & Co.,Goldman Sachs Capital Partners, and Texas Pacific Group. The lawsuits made essentially the same claims and sought the same relief as in the Long actiondescribed above. On January 29, 2007, defendants filed a joint motion to dismiss Gervasio. On February 14, 2007, the plaintiff in Corry voluntarily discontinuedhis lawsuit and informed defendants that he intended to intervene in Gervasio. On March 26, 2007, the court granted defendants’ motion to dismiss Gervasio.

Pursuant to Indiana law and provisions of the Company’s articles of incorporation, the Company is advancing reasonable expenses, including attorneys’ fees,incurred by the Company’s current and former directors and officers in defending these lawsuits, with the exception of Dane Miller, Ph.D., whose status as adefendant does not arise from his status as a former director or officer.

On May 31, 2007, the Company entered into a memorandum of understanding regarding the settlement of class action lawsuits that were filed on behalf of theCompany’s shareholders following the announcement of the proposed Merger. Each of Biomet and the other defendants denies all of the allegations in theselawsuits, including any allegation that its current disclosures with regard to the pending Merger are false, misleading or incomplete in any way. Nevertheless,without admitting any liability or wrongdoing, the Company and other defendants in these cases have agreed in principle to settle them in order to avoid thepotential cost and distraction of continued litigation and to eliminate any risk of any delay to the closing of the Merger posed by these lawsuits. Such settlementis subject to execution and delivery of definitive documentation, the closing of the Merger and court approval. If the settlement becomes effective, the lawsuitswill be dismissed with prejudice.

Pursuant to the terms of the settlement, the Company has agreed to make available meaningful additional information, including financial information, to itsshareholders. Such additional information is contained in the Company’s Current Report on Form 8-K filed on May 31, 2007. In addition, the Sponsor Group hasagreed to cause the Company (or the Company’s successors) to pay the legal fees and expenses of plaintiffs’ counsel, in an amount of $600,000 in the aggregate,subject to the approval by the court and the closing of the Merger. This payment will not affect the amount of consideration to be paid in the Merger. The detailsof the settlement will be set forth in a notice to be sent to the Company’s shareholders prior to a hearing before the court to consider the settlement. Thesettlement will not affect the consideration to be paid in the Merger to the Company’s shareholders in connection with the proposed Merger.

Additional lawsuits pertaining to the Merger could be filed in the future.

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Table of ContentsNasdaq Delisting Proceedings.

The Company’s common shares are currently traded on the NASDAQ Global Select Market under the symbol “BMET.” On January 9, 2007, the Company fileda Form 12b-25 with the SEC stating that it did not anticipate filing its quarterly report on Form 10-Q for the second quarter of fiscal year 2007 on or before thefifth calendar day following the prescribed due date. On January 11, 2007, the Company received a Staff Determination letter from The Nasdaq Stock Marketindicating that the Company is not in compliance with the filing requirements for continued listing under Marketplace Rule 4310(c)(14). The letter was issued inaccordance with NASDAQ procedures due to the Company’s inability to file its quarterly report on Form 10-Q for the second quarter of fiscal year 2007 by theprescribed due date.

A hearing was held on March 1, 2007, at which the Company requested an exception within which to regain compliance with the NASDAQ’s filingrequirements. On April 11, 2007, a NASDAQ Listing Qualifications Panel (the “Panel”) granted the Company’s request for an exception and continued listingon the NASDAQ Global Select Market, notwithstanding the Company’s inability to timely file its quarterly report on Form 10-Q for the second quarter of fiscal2007. On May 22, 2007, the Company requested an extension of the May 29, 2007 deadline until June 12, 2007.

On April 12, 2007, the Company announced that it received an additional notice of non-compliance from The Nasdaq Stock Market, pursuant to MarketplaceRule 4310(c)(14), due to the previously announced delay in filing its quarterly report on Form 10-Q for the third quarter of fiscal 2007. In the notice, theCompany was invited to make an additional submission to the Panel addressing its plans for making the third quarter filing. On April 19, 2007, the Companyrequested an exception until June 12, 2007 to file its quarterly report on Form 10-Q for the third quarter of fiscal 2007.

On May 29, 2007, the Panel made a determination with respect to the Company’s April 19, 2007 and May 22, 2007 requests. In its May 29, 2007 determination,the Panel granted the Company’s request to extend the time to file the Company’s reports on Form 10-Q for the second and third quarters of fiscal 2007, and tocomplete all required restatements, to on or before July 11, 2007. The Panel added that notwithstanding this extension it expects the Company to comply with theterms of the exception by the June 12, 2007 date referenced in the Company’s April 19, 2007 and May 22, 2007 requests. On June 7, 2007, the Companyreceived a letter from the Panel stating that Biomet has evidenced compliance with the Panel’s prior decisions and all applicable Nasdaq Marketplace Rules, andthat the Panel has determined to continue the listing of Biomets’ common shares on the NASDAQ Global Select Market.

Other Litigation.

In February 2006, SDGI Holdings, Inc. and Medtronic Sofamor Danek, Inc. (collectively referred to herein as “Medtronic”) brought an action against EBI andBiomet alleging infringement of seven patents. Specifically, Medtronic alleges that the patents are infringed by certain components of the Company’s Vuelock ®

Anterior Cervical Plate System, as well as instruments and surgical implantation methods associated with the Company’s Array ® Spinal System. Medtronic’scomplaint did not seek a specific amount of damages, but does seek to enjoin the Company from manufacturing, selling and/or distributing the allegedlyinfringing products. The Company filed a counterclaim seeking a finding of noninfringement of the patents at issue and a finding that certain of the patents areinvalid and unenforceable. The litigation is in the early stages of discovery. The Company is vigorously defending this matter and intends to continue to do so.

The Company and its subsidiary, Biomet Orthopedics, Inc., recently initiated legal proceedings against Zimmer US, Inc. (“Zimmer”), certain former Biometdistributors, and David Montgomery, a former employee of the Company who currently works for Zimmer. The thirteen count lawsuit filed in Marion County,Indiana alleges, among other things, that Zimmer and Mr. Montgomery attempted to create an unfair market advantage by engaging in a campaign tomisappropriate Biomet confidential information, to interfere with Biomet’s contractual relations with distributors and to attempt to buy the assets of most ofBiomet’s distributors (including the Company’s surgical instruments) throughout the United States. Further, the lawsuit alleges that the limited number ofdistributors who accepted Zimmer’s offer are in violation of their contractual obligations to the Company. Although nearly all of the Company’s distributorsrejected Zimmer’s offers and have remained with the Company, and although no amount of money damages can completely compensate the Company for thelosses it has sustained as a result of defendants’ conduct, the Company is nonetheless seeking to recover compensatory damages that are attributable to financialand other resources spent on signing new agreements with its sales force. To the extent the Company sustained damages as a result of its former distributorsagreeing to purportedly sell their assets to Zimmer, the Company is seeking to recover lost profits and other damages as well. In addition, the Company isseeking to recover punitive damages from the defendants.

In a related matter, the Company brought suit against a former distributor for Biomet Orthopedics who, in violation of his contractual and other obligations to theCompany under agreements stretching back to 1994, sold the assets of his distributorship to Zimmer in an apparent effort to avoid his contractual obligations tothe Company. The complaint, now pending in federal district court in Indiana, asserts five causes of action that include breach of contract, unjust enrichment, andstatutory wrongs. Among other things, the complaint seeks injunctive relief and compensatory and punitive damages. On July 16, 2007 a temporary restrainingorder was entered against the former Biomet distributor. Prior to the filing of the suit described above, that former Biomet distributor sued one of his formeremployees, who decided to continue to represent Biomet products in the future as he has for nearly ten years. The suit brought against this employee by theformer Biomet distributor who sold his assets to Zimmer claims, among other things, that the former employee is violating his non-competition agreement withthe former Biomet distributor by continuing to sell the same Biomet products he sold while employed by the former Biomet distributor. The suit also seeks,among other forms of relief, an injunction and compensatory and punitive damages.

There are various other claims, lawsuits, disputes with third parties, investigations and pending actions involving various allegations against the Companyincident to the operation of its business, principally product liability and intellectual property cases. Each of these matters is subject to various uncertainties, andit is possible that some of these matters may be resolved unfavorably to the Company. The Company accrues for losses that are deemed to be probable andsubject to reasonable estimate. Based on the advice of the Company’s counsel in these matters, management believes that the ultimate outcome of these mattersand any liabilities in excess of amounts provided will not have a material adverse impact on the Company’s consolidated financial statements taken as a whole.

Item 4. Submission of Matters to a Vote of Security Holders.

Not Applicable.

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Table of ContentsPART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The following table shows the quarterly range of high and low sales prices for the Company’s Common Shares as reported by The Nasdaq Stock Market for eachof the three most recent fiscal years ended May 31. The approximate number of shareholders of record as of July 25, 2007, was 3,150.

High Low2007

Fourth $ 43.75 $ 41.94 Third 42.67 37.40 Second 39.25 32.00 First 36.07 30.22

2006 Fourth $ 39.45 $ 33.64 Third 38.66 34.90 Second 39.09 32.50 First 39.11 33.64

2005 Fourth $ 43.32 $ 34.90 Third 49.64 40.53 Second 49.50 43.13 First 49.60 39.69

The Company paid cash dividends of $0.30, $0.25 and $0.20 per share during fiscal years ending May 31, 2007, 2006 and 2005, respectively.

During the year ended May 31, 2007, the Company had two publicly-announced share repurchase programs outstanding. The first, announced June 30, 2005,approved the purchase of 2,500,000 shares to be automatically purchased daily in equal increments over a twelve-month period. The remaining shares availableunder this plan were purchased during the three months ended August 31, 2006. The second, announced December 21, 2005, approved the purchase of shares upto $100 million in open market or privately negotiated transactions expiring December 20, 2006. The Company did not repurchase any shares during the fiscalquarter ended May 31, 2007. When the plan expired on December 20, 2006, $45,861,743 remained available to purchase additional shares under theDecember 21, 2005 share repurchase plan.

Information regarding securities authorized for issuance under Biomet’s equity compensation plans is included in Part III, Item 12 of this Annual Report on Form10-K under the caption “Securities Authorized for Issuance Under Equity Compensation Plans.”

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Table of Contents

Item 6. Selected Financial Data.

Income Statement Data(1)

Years ended May 31,(in thousands, except per share amounts)

2007 2006 2005 2004 2003 Net sales $ 2,107,428 $ 2,025,739 $ 1,879,950 $ 1,615,253 $ 1,390,300 Cost of sales 642,270 582,106 533,355 462,166 408,091

Gross profit 1,465,158 1,443,633 1,346,595 1,153,087 982,209 Selling, general and administrative expenses 881,140 750,259 696,302 600,208 501,972 Research and development expense 94,416 84,988 80,213 64,964 56,901 In-process research and development — — 26,020 1,250 — Other charges/(credits) — — — — (5,800)

Operating income 489,602 608,386 544,060 486,665 429,136 Other income, net 11,970 2,609 2,409 14,052 12,675

Income before income taxes and minority interest 501,572 610,995 546,469 500,717 441,811 Provision for income taxes 165,680 205,087 197,096 173,322 153,641

Income before minority interest 335,892 405,908 349,373 327,395 288,170 Minority interest — — — 7,071 8,081

Net income $ 335,892 $ 405,908 $ 349,373 $ 320,324 $ 280,089

Earnings per share: Basic $ 1.37 $ 1.64 $ 1.38 $ 1.25 $ 1.08 Diluted 1.37 1.63 1.37 1.25 1.07

Shares used in the computation of earnings per share: Basic 245,217 247,576 252,387 255,512 259,493 Diluted 245,217 248,430 254,148 257,204 261,394

Cash dividends paid per common share $ .30 $ .25 $ .20 $ .15 $ .10

Balance Sheet Data(1)

At May 31,(in thousands) 2007 2006 2005 2004 2003 Working capital $ 1,105,976 $ 816,566 $ 677,438 $ 810,718 $ 848,709 Total assets 2,457,861 2,282,647 2,114,945 1,790,120 1,681,403 Shareholders’ equity 2,049,224 1,720,194 1,568,844 1,451,669 1,289,742

(1) The selected financial data includes the operations of Interpore International, Inc. from its date of acquisition (June 18, 2004).

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Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion should be read in conjunction with the Company’s consolidated financial statements and the corresponding notes contained herein. TheManagement’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are subject to certain riskfactors, as discussed elsewhere in this report under the caption Forward-Looking Statements.

Overview

Biomet, Inc. (the “Company”) is engaged in the research, development, manufacturing and marketing of products used primarily by musculoskeletal medicalspecialists. The Company operates in one business segment, musculoskeletal products, which includes the design, manufacture and marketing of products in fourmajor market segments: reconstructive products, fixation devices, spinal products and other products. Reconstructive products, which represented 71% of theCompany’s net sales for fiscal year 2007, include knee, hip and extremity joint replacement systems, as well as dental reconstructive implants, bone cements andaccessories, the GPS® System and the procedure-specific instrumentation required to implant the Company’s reconstructive systems. Fixation devices, whichrepresented 11% of the Company’s net sales for fiscal year 2007, include internal and external fixation devices, craniomaxillofacial fixation systems andelectrical stimulation devices that do not address the spine. Spinal products, which represented 10% of the Company’s net sales for fiscal year 2007, includeelectrical stimulation devices addressing the spine, spinal fixation systems and orthobiologics. The other product sales category, which represented 8% of theCompany’s net sales for fiscal year 2007, includes arthroscopy products, softgoods and bracing products, casting materials, general surgical instruments,operating room supplies and other surgical products. Depending on the intended application, the Company reports sales of bone substitute materials in thereconstructive product, fixation device or spinal product segment.

The Company has operations at over 50 locations and distributes its products in over 100 countries throughout the world and manages its operations throughthree reportable geographic markets: United States, Europe and Rest of World. The Company experienced solid net sales growth in its reconstructive productlines during fiscal year 2007 in both domestic and international markets, which is attributable to the Company’s emphasis on technological advances throughproduct line extensions and new product introductions. In addition, growth in the patient population (as a result of increases in both the size of the elderlypopulation and the expansion of the traditional age bracket of musculoskeletal patients) has contributed to this growth. Sales for fixation and spinal productsdecreased during fiscal 2007 reflecting performance below market and management objectives. Sales of other products were flat in fiscal 2007 as compared tofiscal 2006.

On May 29, 2007, Biomet restated its previously issued audited consolidated financial statements and related disclosures for the three years ended May 31, 2006,its consolidated statements of operations for the five years ended May 31, 2006, included in “Selected Financial Data” in Part II, Item 6, and its first quarter offiscal 2007 to correct errors related to accounting for share-based compensation expense. The Company’s decision to restate its financial results described in theCompany’s amended annual report on Form 10-K/A was based on the results of an independent investigation of the Company’s stock option grants for the periodMarch 1996 through May 2006 by the Special Committee.

The Special Committee’s investigation was based upon the review of an extensive collection of information, interviews with more than two dozen individuals,and analysis of approximately 17,000 grants to purchase approximately 17,000,000 Biomet common shares on over 500 grant dates over the 11-year period. TheSpecial Committee concluded that pursuant to APB 25 and related interpretations, the accounting measurement dates for most of the stock option grants awardedduring this period differed from the measurement dates previously used for such awards. As a result, revised measurement dates were applied to the affectedoption grants and the Company recorded a total of $38.2 million in additional share-based compensation expense for the 11-year period. This is afterconsideration of vesting and forfeitures through May 31, 2006.

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Table of ContentsManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table shows the percentage relationship to net sales of items derived from the Consolidated Statements of Income and the percentage change fromyear to year.

Percentage of Net Sales Percentage

Increase(Decrease)

2007 2006 2005 2007

vs. 2006 2006

vs.2005 Net sales 100.0% 100.0% 100.0% 4% 8%Cost of sales 30.5 28.7 28.4 10 9

Gross profit 69.5 71.3 71.6 1 7 Selling, general and administrative expenses 41.8 37.1 37.0 17 8 Research and development expense 4.5 4.2 4.2 11 6 In-process research and development — — 1.4 — n/m

Operating income 23.2 30.0 29.0 (20) 12 Other income, net 0.6 0.1 0.1 359 8

Income before income taxes 23.8 30.1 29.1 (18) 12 Provision for income taxes 7.9 10.1 10.5 (19) 4

Net income 15.9% 20.0% 18.6% (17)% 16%

n/m – Not Meaningful

Net sales in fiscal year 2007 were $2,107,428,000, an increase of 4% from the prior fiscal year. Excluding the positive impact of foreign currency translation, netsales increased 2%.

Operating income for fiscal year 2007 was $489,602,000 compared to $608,386,000 for fiscal year 2006. Net income for fiscal year 2007 was $335,892,000, or$1.37 per share compared to $405,908,000 or $1.63 per share for fiscal year 2006. Reported results for fiscal year 2007 included special charges (pre-tax) of$119.3 million and stock compensation related expenses of $13.2 million, or $0.34 per share. The special charges (pre-tax) consisted of $39.2 million related tothe renewal and re-negotiation of distribution agreements with existing distributors; $57.3 million related primarily to inventory write-downs and accountsreceivable reserves related to its BTBS operations; $17.5 million in expenses related to the Merger Agreement and retirement/employment costs associated withchanges in executive management; and $5.3 million in legal and accounting fees related to the previously announced stock option investigation.

Fiscal 2007 Compared to Fiscal 2006*

Net Sales – Worldwide sales of reconstructive devices increased 9% to $1,503,874,000 in fiscal 2007 compared to $1,379,420,000 in fiscal 2006. Factorscontributing to this increase include incremental volume as a result of an increase in the overall market size for reconstructive devices and favorable product mix(7%) and currency translation (2%). During the current year, worldwide dental reconstructive product sales increased 15%, extremity sales increased 14%, kneesales increased 8%, hip sales increased 7% and bone cement and accessory sales were flat.

Fixation sales decreased 11% during fiscal 2007 to $224,694,000 from $251,360,000 in 2006. Decreased volume and product mix accounted for this decrease.Worldwide sales of craniomaxillofacial products, including bone substitutes, increased 2%. Internal fixation devices increased 2%, external fixation devicesdecreased 13% and electrical stimulation devices decreased 25%.

Spinal sales decreased 7% to $205,862,000 in fiscal 2007 compared to $221,964,000 in 2006. Decreased volume and product mix accounted for this decrease.Worldwide sales of spinal hardware, including orthobiologics, increased 2% while spinal stimulation product sales decreased 21%. During fiscal year 2007,BTBS has underperformed against the market and management’s objectives. Results have also been negatively impacted by the implementation of a newcomputer system. However, management changes have been made and progress has been achieved in the computer system implementation, sales support system,the in-sourcing of the manufacture of spinal hardware products and expanding the research and development team. The Company believes that the newmanagement team and infrastructure changes will allow for greater focus on the spine and trauma markets and its customers.

Sales of the Company’s other products were flat at $172,998,000 in fiscal 2007 and $172,995,000 in 2006. Decreased volume and product mix (1%), were offsetby currency translation (1%). Worldwide sales of arthroscopy products increased 10%, general surgical instrumentation increased 3%, while softgoods andbracing products decreased 5%.

Sales in the United States decreased 1% to $1,306,475,000 during the current fiscal year compared to $1,325,113,000 last year. Components of this change wereincremental volume and product mix of reconstructive products (5%) offset by decreases in volume of fixation and spinal products (14%). The pricingenvironment was neutral for fiscal 2007. European sales increased 14% to $595,899,000 during the current fiscal year from $520,660,000 in 2006. Componentsof this increase were incremental volume and product mix (8%), and currency translation (6%). The Company anticipates foreign currency translation willpositively influence sales for the first half of fiscal 2008. Sales in Rest of

* For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the fiscal period is June 1 - May 31.

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World increased 14% to $205,054,000 this year from $179,966,000 last year. Components of this increase were incremental volume and product mix (13%), andcurrency translation (1%). The Company commenced direct sales of its products in Japan during fiscal 2002 and continues to experience good productacceptance with growth at approximately 22% for the current fiscal year in local currency.

Gross Profit – The Company’s gross profit increased 1.5% to $1,465,158,000 in fiscal 2007 from $1,443,633,000 in 2006. The gross profit margin decreased to69.5% of sales in fiscal 2007 compared to 71.3% in 2006. The components of this change are additional expenses of 1.4% related to inventory write-downs at itsBTBS operations and 0.4% from higher growth rates in foreign sales, where gross margins are lower as compared to gross margins on products sold in the UnitedStates.

Selling, General and Administrative Expenses – Selling, general and administrative expenses increased 17% in fiscal 2007 to $881,140,000 compared to$750,259,000 last year. This increase results from the renewal and re-negotiation of distribution agreements with existing distributors (5.2%), accounts receivablereserves related to its BTBS operations (3.6%), expenses related to the proposed Merger Agreement and retirement/employment costs associated with changes inexecutive management (2.3%), the adoption of SFAS 123(R) (1.5%), increased commission expense on higher sales (4.0%), and an increase in other marketingand general and administrative expenses (1.4%). These increases were offset by decreased direct to consumer advertising (1.0%). As a percent of sales, selling,general and administrative expenses were 41.8% in fiscal 2007 and 37.1% in 2006. During the first quarter of fiscal 2008, the Company expects to incurapproximately $33,000,000 in expenses related to the completion of the renewal and re-negotiation of distribution agreements for Biomet Orthopedics, Inc. TheCompany does not expect to incur additional significant expenses related to modifying these relationships subsequent to the first quarter of fiscal 2008.

Research and Development Expense – Research and development expense increased 11% during the current year to $94,416,000 compared to $84,988,000 in2006. The increase reflects the Company’s continued emphasis on new product development and enhancements and additions to its existing product lines andtechnologies. Also included in the increase is the impact of adopting SFAS 123(R) (2.7%). As a percent of sales, research and development expenses were 4.5%in fiscal 2007 and 4.2% in 2006.

Operating Income – Operating income decreased 20% during fiscal 2007 to $489,602,000 from $608,386,000 in 2006. U.S. operating income decreased 26% to$383,565,000 from $519,953,000 reflecting a slight decrease in sales and the additional expenses discussed above. European operating income increased 25% to$97,192,000 compared to $77,666,000 in 2006. The growth in Europe operating income reflects solid sales growth and favorable foreign currency exchange ratesduring fiscal year 2007 as compared to fiscal year 2006. Rest of World operating income decreased 18% to $8,845,000 in fiscal 2007 from $10,767,000 in 2006.This decline reflects higher selling expenses due to increased sales and expanding sales forces.

Other Income, Net – Other income, net increased 49% to $21,310,000 from $14,274,000, while interest expense decreased 20% to $9,340,000 from $11,665,000.During fiscal 2007, interest expense decreased as borrowings were reduced and investment income increased as the Company’s cash and investments increased.To reduce the risk of exchange rate gains and losses on transfer of inventory from domestic sites to international sites, the Company has lines of credit in bothEurope and Japan in local currencies. (See Note G in the Notes to Consolidated Financial Statements). These lines of credit are used solely to fund inventorypurchases and acquisitions in those local currencies.

Provision for Income Taxes – The provision for income taxes decreased $39,407,000 to $165,680,000, or 33.0% of income before income taxes for fiscal 2007compared to $205,087,000 or 33.6% of income before income taxes last year. The effective income tax rate decreased primarily as a result of a higherproportionate share of taxable income in countries where tax rates are lower and the continued benefit from the Qualified Production Activities Deduction in theU.S.

Net Income – The factors mentioned above resulted in a 17% decrease in net income to $335,892,000 for fiscal 2007 from $405,908,000 in 2006 and a 16%decrease in basic earnings per share for 2007 to $1.37 compared to $1.64 in 2006.

Fiscal 2006 Compared to Fiscal 2005

Net Sales – Net sales increased 8% during fiscal 2006 to $2,025,739,000 from $1,879,950,000 in 2005. Excluding the negative impact of foreign currencytranslations (1%), net sales increased 9%.

Worldwide sales of reconstructive devices increased 10% to $1,379,420,000 in fiscal 2006 compared to $1,254,234,000 in 2005. Factors contributing to thisincrease include incremental volume and product mix (11%), offset by currency translation (1 %). During fiscal 2006, worldwide dental reconstructive productsales increased 14%, knee and extremity sales increased 12%, hip sales increased 9% and bone cement and accessory sales decreased 5%. Bone cement andaccessory sales were negatively impacted by the loss of the Company’s primary bone cement supplier during fiscal 2006. The Company introduced its own bonecement during fiscal 2006 and anticipates recapturing some of its lost market share.

Fixation sales increased 2% during fiscal 2006 to $251,360,000 from $246,730,000 in 2005. Increased volume and product mix (3%) offset by pricing decreases(1%), accounted for this increase. Worldwide sales of craniomaxillofacial products, including bone substitutes, increased 12%, internal fixation devices increased6%, electrical stimulation devices decreased 2% and external fixation devices decreased 7%. The combination and management of the Interpore and EBIsalesforces continues to have a negative impact on sales in the fixation, spinal and softgoods and bracing market segments.

Spinal sales increased 4% to $221,964,000 in fiscal 2006 compared to $214,039,000 in 2005. Incremental volume and product mix accounted for this increase.Worldwide sales of spinal hardware, including orthobiologics, increased 6%, while spinal stimulation product sales decreased 3%.

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Sales of the Company’s other products increased 5% to $172,995,000 in fiscal 2006 from $164,947,000 in 2005. Factors contributing to this increase includedpricing increases (1%) and incremental volume and product mix (5%), offset by currency translation (1%). Worldwide sales of arthroscopy products increased12%, general surgical instrumentation increased 4%, while softgoods and bracing products decreased 3%.

Sales in the United States increased 7% to $1,325,113,000 during fiscal 2006 compared to $1,238,727,000 in 2005. Components of this increase wereincremental volume and product mix (6%) and positive pricing environment (1%). European sales increased 7% to $520,660,000 during the current fiscal yearfrom $487,991,000 in 2005. Components of this increase were incremental volume and product mix (12%), offset by pricing decreases (mainly in bone cements)(1%) and currency translation (4%). Sales in Rest of World increased 17% to $179,966,000 in 2006 from $153,232,000 in 2005. Components of this increasewere incremental volume and product mix (19%), offset by pricing decreases (1%) and currency translation (1%). The Company commenced direct sales of itsproducts in Japan during fiscal 2002 and continues to experience good product acceptance with growth at approximately 39% for fiscal 2006 in local currency.

Gross Profit – The Company’s gross profit increased 7% to $1,443,633,000 in fiscal 2006 from $1,346,595,000 in 2005. The gross profit margin decreased to71.3% of sales in fiscal 2006 compared to 71.6% in 2005. The components of this change are an increase of 1.3% relating to the impact of inventory step-upfrom acquisitions on last year’s cost of goods sold, offset by a decrease of 0.3% due to an unanticipated, retroactive price increase from the supplier of Biomet’santibiotic delivery system in Europe, additional expenses of 0.2% related to the Company’s review and reorganization of its EBI operations and discontinuationof the Acumen Surgical Navigation product line, 0.5% from average selling price decreases in Japan, Australia and Korea and 0.6% from higher growth rates inforeign sales, where gross margins are lower, versus domestic sales.

Selling, General and Administrative Expenses – Selling, general and administrative expenses increased 8% in fiscal 2006 to $750,259,000 compared to$696,302,000 in 2005. This increase results from increased commission expense on higher sales (2.8%), the direct to consumer advertising that commencedduring the second quarter of fiscal year 2006 (1.4%), additional expenses in connection with the separation package payable to former President and CEO DaneA. Miller, Ph.D. (1.3%), additional expenses related to the Company’s review and reorganization of its EBI operations, discontinuation of the Acumen SurgicalNavigation product line and the write-off of its investment in Z-KAT, Inc. (0.9%) and an increase in marketing and general and administrative expenses (1.6%).As a percent of sales, selling, general and administrative expenses were 37.1% in fiscal 2006 and 37.0% in fiscal 2005.

Research and Development Expense – Research and development expense increased 6% during fiscal 2006 to $84,988,000 compared to $80,213,000 in 2005.The increase includes the $2.6 million paid for a cross-licensing and settlement agreement between Biomet Biologics, Inc. and Cytomedix, Inc. In addition, theincrease reflects the Company’s continued emphasis on new product development and enhancements and additions to its existing product lines and technologies.As a percent of sales, research and development expenses were 4.2% in fiscal 2006 and 2005.

Operating Income – Operating income increased 12% during fiscal 2006 to $608,386,000 from $544,060,000 in 2005. U.S. operating income increased 3% to$519,953,000 from $505,799,000, reflecting solid sales growth for higher-margin product lines, offset by the additional expenses discussed above. Europeanoperating income increased 3% to $77,666,000 compared to $75,769,000 in 2005. The growth in Europe operating income was negatively affected by a reductionin gross margins and higher selling expenses for the Company’s dental products, but reflects solid sales growth, higher gross margins (primarily related to theelimination in fiscal 2006 of inventory step-up costs recognized in fiscal 2005) and lower selling expenses for the rest of the Company’s products. Rest of Worldoperating income decreased 16% to $10,767,000 in fiscal 2006 from $12,762,000 in 2005. This decline reflects higher selling expenses due to expandingsalesforces and increased expenses to meet additional regulatory requirements in Japan, including support of new product introductions.

Other Income, Net – Other income, net increased 23% to $14,274,000 from $11,566,000, while interest expense increased 27% to $11,665,000 from $9,157,000.As interest rates increased during fiscal 2006, investment income, as well as interest expense increased. In addition, during fiscal 2006, investment incomeincreased as the Company’s cash and investments increased. To reduce the risk of exchange rate gains and losses on transfer of inventory from domestic sites tointernational sites, the Company has lines of credit in both Europe and Japan in local currencies. (See Note G in the Notes to Consolidated Financial Statements).These lines of credit are used solely to fund inventory purchases and acquisitions in those local currencies.

Provision for Income Taxes – The provision for income taxes increased to $205,087,000, or 33.6% of income before income taxes for fiscal 2006 compared to$197,096,000 or 36.1% of income before income taxes in 2005. The effective income tax rate decreased primarily as a result of a $26 million write-off ofin-process research and development last year, in connection with the Interpore acquisition not being tax affected. In addition, the tax rate benefited from the newQualified Production Activities Deduction in the U.S. and continued expansion of operations in lower tax jurisdictions.

Net Income – The factors mentioned above resulted in a 16% increase in net income to $405,908,000 for fiscal 2006 from $349,373,000 in 2005. These factorsand the reduction in the shares used in the computation of earnings per share through the Company’s share repurchase programs resulted in an 19% increase inbasic earnings per share for 2006 to $1.64 compared to $1.38 in 2005.

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Liquidity and Capital Resources

The Company’s cash and investments increased to $273,827,000 at May 31, 2007, from $225,471,000 at May 31, 2006. Net cash from operating activities was$439,753,000 in fiscal 2007 compared to $413,470,000 in 2006. The principal sources of cash from operating activities were net income of $335,892,000 andnon-cash charges of depreciation and amortization of $97,005,000. The principal use of cash includes an increase in the deferred income tax net asset due to thetiming of tax deductions related to expenses for renewal and re-negotiation of distribution agreements and accounts receivable reserves and inventorywrite-downs at BTBS. Accounts receivable and inventory did not have a significant impact in net cash from operating activities after giving effect to thenon-cash charges included in net income related to BTBS operations.

Cash flows used in investing activities were $125,061,000 in fiscal 2007 compared to $99,065,000 in 2006. The primary uses of cash for investing activities infiscal 2007 and 2006 were purchases of investments and capital expenditures, offset by sales and maturities of investments. Capital expenditures in 2007 includepurchases of instruments in the United States of $36,654,000, which were sold to distributors in prior years. Major capital expenditures for fiscal 2006 wereexpansion of manufacturing facilities in New Jersey and Florida, and purchases of instruments outside the United States to support new product launches andsales growth.

Cash flows used in financing activities were $251,240,000 in fiscal 2007 compared to $257,594,000 in 2006. The primary uses of funds during 2007 was a cashdividend of $0.30 per share paid on July 21, 2006, to shareholders of record on July 14, 2006 and the paydown of short-term borrowings of $196,871,000. Theprimary uses of funds during fiscal 2006 was the share repurchase programs, in which $215,430,000 was used to purchase 5,986,000 Common Shares of theCompany, and the primary source of funds from financing activities was proceeds on the exercise of stock options.

At May 31, 2007, the Company has two lines of credit outstanding: 1) a European line of credit in the amount of EUR 100 million ($136 million); and 2) aJapanese line of credit in the amount of YEN 6.0 billion ($50.2 million). The total amount available under these lines of credit at May 31, 2007, is approximately$105 million.

The Company maintains its cash and investments in money market funds, certificates of deposit, corporate bonds, debt instruments, mortgage-backed securitiesand equity securities. The Company’s investments are generally liquid and investment grade. The Company is exposed to interest rate risk on its corporate bonds,debt instruments, fixed rate preferred equity securities and mortgage-backed securities. The Company is confident about the growth prospects in its markets andintends to invest in an effort to improve its worldwide market position. The Company expects to spend in excess of $400 million over the next two fiscal yearsfor capital expenditures and research and development costs in an effort to develop products and technologies that further enhance musculoskeletal procedures.Funding of these and other activities is expected to come from currently available funds, cash flows generated from future operations, and increased bank creditlines. The Company has no off-balance sheet financial arrangements and no material long-term contractual financial obligations.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial position and results of operations are based upon the Company’s consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingentassets and liabilities. The Company’s significant accounting policies are discussed in Note B of the Notes to Consolidated Financial Statements. In management’sopinion, the Company’s critical accounting policies include revenue recognition, excess and obsolete inventory, goodwill and intangible assets, accruedinsurance, and stock-based compensation expense.

Revenue Recognition – For the majority of the Company’s products in a country where the Company has a direct distribution operation, revenue is recognizedupon notification to the Company that the product has been implanted in or applied to the patient. For other products or services, and in countries where theCompany does not have a direct distribution operation, the Company recognizes revenue when title passes to the customer and there are no remaining obligationsthat will affect the customer’s final acceptance of the sale. For its insurance billings in the United States, the Company records anticipated price adjustments,which can occur subsequent to invoicing, based on estimates derived from past experience, as a reduction of net sales in the same period that revenue isrecognized. The Company also records estimated sales returns and other adjustments as a reduction of net sales in the same period that revenue is recognized. Inaddition, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.If the assumptions used in estimating pricing adjustments or the financial condition of the Company’s customers were to deteriorate, resulting in an impairmentof the Company’s ability to collect its net receivables, additional allowances may be required which would affect its future operating results.

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Table of ContentsManagement’s Discussion and Analysis of Financial Condition and Results of Operations (concluded).

Excess and Obsolete Inventory – In Biomet’s industry, inventory is routinely placed at hospitals to provide the healthcare provider with the appropriate productwhen needed. Because product usage tends to follow a bell curve, larger and smaller sizes of inventory are provided, but infrequently used. In addition, themusculoskeletal market is highly competitive, with new products, raw materials and procedures being introduced continually, which may obsolete productscurrently on the market. The Company must make estimates regarding the future use of these products and provide a provision for excess and obsolete inventory.If actual product life-cycles, product demand or market conditions are less favorable than those projected by management, additional inventory write-downs maybe required which would affect future operating results.

Goodwill and Other Intangible Assets – In assessing the recoverability of the Company’s intangibles, the Company must make assumptions regarding estimatedfuture cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, theCompany may be required to record impairment charges for these assets.

Accrued Insurance – As noted in Note M of the Notes to Consolidated Financial Statements, the Company has a self-insured retention against product liabilityclaims with insurance coverage over and above the retention. There are various other claims, lawsuits, disputes with third parties, investigations and pendingactions involving various allegations against the Company. Product liability claims are routinely reviewed by the Company’s insurance carrier and managementroutinely reviews all claims for purposes of establishing ultimate loss estimates. In addition, management must determine the estimated liability for claimsincurred, but not reported. Such estimates and any subsequent changes in estimates may result in adjustments to the Company’s operating results in the future.

Stock-Based Compensation Expense – On June 1, 2006 the Company adopted revised SFAS 123(R), Share-Based Payment, which requires all share-basedpayments to be recognized in our financial statements based on their respective grant date fair values. Under this standard, the fair value of each employee stockoption is estimated on the date of grant using an option-pricing model that meets certain requirements. The Company currently uses the Black-Scholesoption-pricing model to estimate the fair value of our share-based payments. The determination of the fair value of share-based payment awards utilizing theBlack-Scholes model is affected by Biomet’s stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate andexpected dividends. The Company estimates the expected volatility based on historical volatility of the Company’s common stock. The expected life of the stockoptions is based on historical and other data including life of the option and vesting period. The risk-free interest rate assumption is the implied yield currentlyavailable on zero-coupon U.S. Government issues with a remaining term equal to the expected life of the options. The dividend yield assumption is based on thehistorical dividend yield of the Company’s Common Shares. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequentperiods if actual forfeitures differ from those estimates. The Company uses an annual forfeiture rate of approximately 18% as of May 31, 2007, which representsthe portion that the Company expects will be forfeited each year over the vesting period. The Company will evaluate the assumptions used to value stock-basedawards periodically and adjust the forfeiture rate if necessary. If factors change and the Company employs different assumptions, stock-based compensationexpense may differ significantly from what the Company have recorded in the past. Had the Company adopted SFAS 123(R) in prior periods, the magnitude ofthe impact of that standard on the Company’s results of operations would have approximated the pro forma number impact of SFAS 123(R), Share-BasedPayment, described in Note I of our Notes to Consolidated Financial Statements under stock-based compensation.

Recent Accounting Pronouncements – Information about recent accounting pronouncements and their effect on the Company can be found in Note B of theNotes to Consolidated Financial Statements.

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Table of ContentsQuarterly Results

(in thousands, except earnings per share)

1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year2007 Net sales $ 508,161 $ 520,330 $ 529,530 $ 549,407 $ 2,107,428Gross profit 369,458 369,057 365,771 360,872 1,465,158Net income 104,380 104,767 85,255 41,490 335,892Earnings per share:

Basic .43 .43 .35 .17 1.37Diluted .43 .43 .35 .17 1.37

2006 Net sales $ 484,903 $ 494,690 $ 506,254 $ 539,892 $ 2,025,739Gross profit 350,322 354,965 363,096 375,249 1,443,633Net income 99,685 100,476 105,380 100,367 405,908Earnings per share:

Basic .40 .41 .42 .41 1.64Diluted .40 .40 .42 .41 1.63

2005 Net sales $ 438,160 $ 456,674 $ 482,023 $ 503,093 $ 1,879,950Gross profit 312,002 325,371 343,816 365,406 1,346,595Net income 59,019 89,789 95,710 104,855 349,373Earnings per share:

Basic .23 .36 .37 .42 1.38Diluted .23 .35 .37 .42 1.37

• Per share data may not cross-foot due to the share repurchase program affecting the weighted share calculation differently by quarter compared tothe full fiscal year.

• Net income for the fourth quarter of fiscal 2007 was adversely impacted by pre-tax charges of $29.9 million related to the renewal andre-negotiation of distribution agreements with existing distributors; $46.3 million related to inventory write-downs and accounts receivable reservesrelated to its BTBS operations; $8.2 million in expenses related to the Merger Agreement, and retirement/employment costs associated with changesin executive management; and $2 million in legal and accounting fees related to the previously announced stock option investigation.

• Net income for the third quarter of fiscal year 2007 was adversely impacted by pre-tax charges of $11 million related to inventory

write-downs related to its BTBS Operations; $15.7 million in additional legal and distribution expenses; and $6.2 million in expensesrelated to the Merger Agreement.

• Net income for the fourth quarter of fiscal 2006 was adversely impacted by pre-tax charges of $9 million in connection with the separation packagepayable to former President and CEO Dane A. Miller, Ph.D.; $5.4 million for expenses related to the Company’s review and reorganization of itsEBI operations; $4.8 million related to the discontinuation of the Acumen Surgical Navigation product line and the Company’s investment inZ-KAT, Inc.; and $2.6 million for a cross-licensing and settlement agreement between Biomet Biologics, Inc. and Cytomedix, Inc.

• Net income for the first quarter of fiscal 2005 was adversely impacted by a $26 million charge as a result of in-process research and development inconnection with the Interpore acquisition.

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Table of ContentsItem 7A. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, operations of the Company are exposed to fluctuations in interest rates and foreign currencies. These fluctuations can vary thecost of financing, investment yields and operations of the Company.

In connection with the Interpore acquisition, the Company entered into a 36-month revolving credit facility in the amount of $200 million. The outstanding creditline was paid off in February 2007 and the credit facility subsequently expired. The Company also maintains unsecured lines of credit in countries in which it hassignificant intercompany transactions in an effort to minimize currency rate risks. At May 31, 2007 and 2006, the Company had lines of credit of EUR100 million ($136 million) and EUR 100 million ($126 million), respectively, in Europe and YEN 6.0 billion ($50.2 million) and YEN 4.5 billion ($39.5million), respectively, in Japan. Outstanding borrowings under all lines of credit bear interest at a variable rate of the lender’s interbank rate plus an applicablemargin and, accordingly, changes in interest rates would impact the Company’s cost of financing.

The Company does not have any investments that would be classified as trading securities under generally accepted accounting principles. The Company’snon-trading investments, excluding cash and cash equivalents, consist of debt securities, equity securities and mortgage-backed securities. The debt securitiesinclude municipal bonds, with fixed rates, and preferred stocks, which pay quarterly fixed rate dividends. These financial instruments are subject to market risk inthat changes in interest rates would impact the market value of such investments. The Company generally does not utilize derivatives to hedge against increasesin interest rates which decrease market values, except for one of its investment managers who utilizes U.S. Treasury bond futures options (“futures options”) as aprotection against the impact of increases in interest rates on the fair value of preferred stocks managed by that investment manager. The Company marks anyoutstanding futures options to market and market value changes are recognized in current earnings. The futures options generally have terms ranging from 90 to180 days. Net realized gains (losses) on sales of futures options aggregated ($75,000) and ($136,000) for the years ended May 31, 2007 and 2006, respectively,and unrealized gains (losses) on outstanding futures options at May 31, 2007 and 2006, aggregated $28,000 and ($19,000), respectively.

Based on the Company’s overall interest rate exposure at May 31, 2007, including variable rate debt and fixed rate preferred stocks, a hypothetical 10 percentchange in interest rates applied to the fair value of the financial instruments as of May 31, 2007, would not have a material impact on earnings, cash flows or fairvalues of interest rate risk sensitive instruments over a one-year period.

The Company’s foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S. dollar against the European currencies. TheCompany faces transactional currency exposures that arise when its foreign subsidiaries (or the Company itself) enter into transactions, generally on anintercompany basis, denominated in currencies other than their local currency. The Company also faces currency exposure that arises from translating the resultsof its global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. The Company has not used financial derivativesto hedge against fluctuations in currency exchange rates. Based on the Company’s overall exposure for foreign currency at May 31, 2007, a hypothetical 10percent change in foreign currency rates would not have a material impact on the Company’s balance sheet, net sales, net income or cash flows over a one-yearperiod.

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Table of ContentsItem 8. Financial Statements and Supplementary Data.

Biomet, Inc. and Subsidiaries Index to consolidated Financial Statements and Schedule.

1. Financial Statements:

Management’s Report on Internal Control over Financial Reporting 39

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting 40

Report of Independent Registered Public Accounting Firm 41

Consolidated Balance Sheets as of May 31, 2007 and 2006 42

Consolidated Statements of Income for the years ended May 31, 2007, 2006 and 2005 43

Consolidated Statements of Shareholders’ Equity for the years ended May 31, 2007, 2006 and 2005 44

Consolidated Statements of Cash Flows for the years ended May 31, 2007, 2006 and 2005 45

Notes to Consolidated Financial Statements 46

2. Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts for the years ended May 31, 2007, 2006 and 2005 66

Schedules other than that listed above are omitted because they are not applicable or the required information is shown in the financial statements or notesthereto.

Management’s Report on Internal Control over Financial Reporting.

The management of Biomet, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (including itsconsolidated subsidiaries) and all related information appearing in the Company’s annual report on Form 10-K. The Company’s internal control over financialreporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of theeffectiveness of its internal control over financial reporting as of May 31, 2007. The framework on which such evaluation was based is contained in the reportentitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO” Report).Based on that evaluation and the criteria set forth in the COSO Report, management concluded that its internal control over financial reporting was effective as ofMay 31, 2007.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of May 31, 2007 has been audited by Ernst & YoungLLP, an independent registered public accounting firm, as stated in their report, which appears on page 40.

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Table of ContentsReport of Independent Registered Public Accounting Firm On Internal Control over Financial Reporting.

To the Board of Directors and Shareholders of Biomet, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Biomet, Inc.maintained effective internal control over financial reporting as of May 31, 2007, based on criteria established in Internal Control - Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Biomet, Inc.’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is toexpress an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on ouraudit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluatingthe design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believethat our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

In our opinion, management’s assessment that Biomet, Inc. maintained effective internal control over financial reporting as of May 31, 2007, is fairly stated, inall material respects, based on the COSO criteria. Also, in our opinion, Biomet, Inc. maintained, in all material respects, effective internal control over financialreporting as of May 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets ofBiomet, Inc. as of May 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years inthe period ended May 31, 2007 and our report dated July 25, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Fort Wayne, IndianaJuly 25, 2007

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Table of ContentsReport of Independent Registered Public Accounting Firm.

To the Board of Directors and Shareholders of Biomet, Inc.:

We have audited the accompanying consolidated balance sheets of Biomet, Inc. and subsidiaries as of May 31, 2007 and 2006, and the related consolidatedstatements of income, shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2007. Our audits also included the financialstatement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan 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 andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Biomet, Inc. andsubsidiaries at May 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 31,2007 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relationto the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Notes I and H, respectively, to the consolidated financial statements, the Company adopted Statement of Financial Accounting StandardsNo. 123(R), “Share-Based Payments, ” and No. 158, “Employers’ Accounting for Defined Benefit Pension and Postretirement Plans, ” an amendment of FASBStatements No. 87, 88, 106, and 132(R), in 2007.

We have also audited in accordance with standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Biomet Inc.’sinternal control over financial reporting as of May 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report dated July 25, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


41


Table of ContentsBiomet, Inc. & Subsidiaries Consolidated Balance Sheets.

At May 31,(in thousands, except par value)

2007 2006Assets Current assets:

Cash and cash equivalents $ 228,681 $ 160,963Investments 2,157 6,380Accounts and notes receivable, less allowance for doubtful receivables

(2007 – $84,112 and 2006 – $69,134) 498,738 507,883Inventories 540,428 534,515Refundable income taxes — 16,880Deferred income taxes 136,777 75,190Prepaid expenses and other 45,007 32,342

Total current assets 1,451,788 1,334,153

Property, plant and equipment: Land and improvements 28,211 24,944Buildings and improvements 170,214 154,101Machinery and equipment 583,457 476,387

781,882 655,432Less, Accumulated depreciation 354,486 297,800

Property, plant and equipment, net 427,396 357,632

Investments 42,989 58,128Goodwill 448,427 441,397Other intangible assets 74,569 79,498Other assets 12,692 11,839

Total assets $ 2,457,861 $ 2,282,647

Liabilities & Shareholders’ Equity Current liabilities:

Short-term borrowings $ 81,824 $ 276,561Accounts payable 68,709 62,276Accrued wages and commissions 80,335 84,665Accrued income taxes 11,611 — Other accrued expenses 103,333 94,085

Total current liabilities 345,812 517,587Deferred income taxes 21,242 26,991Employee related obligations 41,583 17,875

Total liabilities 408,637 562,453

Commitments and contingencies (Note M) Shareholders’ equity:

Preferred shares, $100 par value: Authorized 5 shares; none issued — — Common shares, without par value: Authorized 500,000 shares; issued and outstanding 2007 –245,667 shares and 2006 –

244,976 shares 229,610 206,633Additional paid-in capital 138,933 116,528Retained earnings 1,634,707 1,379,303Accumulated other comprehensive income 45,974 17,730

Total shareholders’ equity 2,049,224 1,720,194

Total liabilities and shareholders’ equity $ 2,457,861 $ 2,282,647

The accompanying notes are a part of the consolidated financial statements.

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Table of ContentsBiomet, Inc. & Subsidiaries Consolidated Statements of Income.

For the years ended May 31,(in thousands, except per share amounts)

2007 2006 2005 Net sales $ 2,107,428 $ 2,025,739 $ 1,879,950 Cost of sales 642,270 582,106 533,355

Gross profit 1,465,158 1,443,633 1,346,595 Selling, general and administrative expenses 881,140 750,259 696,302 Research and development expense 94,416 84,988 80,213 In-process research and development — — 26,020

Operating income 489,602 608,386 544,060 Other income, net 21,310 14,274 11,566 Interest expense (9,340) (11,665) (9,157)

Income before income taxes 501,572 610,995 546,469 Provision for income taxes 165,680 205,087 197,096

Net income $ 335,892 $ 405,908 $ 349,373

Earnings per share: Basic $ 1.37 $ 1.64 $ 1.38 Diluted 1.37 1.63 1.37

Shares used in the computation of earnings per share: Basic 245,217 247,576 252,387 Diluted 245,217 248,430 254,148


43


Table of ContentsBiomet, Inc. & Subsidiaries Consolidated Statements of Shareholders’ Equity.

(in thousands, except per share amounts)

Common Shares Additional

Paid-InCapital

RetainedEarnings

AccumulatedOther

ComprehensiveIncome (Loss)

Total

Shareholders’Equity

Number Amount

Balance at June 1, 2004 254,262 $ 167,301 $ 101,317 $ 1,181,168 $ 1,883 $ 1,451,669

Net income — — — 349,373 — 349,373 Change in unrealized holding value on investments, net

of $76 tax effect — — — — 142 142 Reclassification adjustment for losses included in net

income, net of $76 tax effect — — — — 141 141 Currency translation adjustments — — — — 21,085 21,085

Comprehensive income — — — — — 370,741

Exercise of stock options 1,360 24,640 — — — 24,640 Compensation expense — — 2,741 — — 2,741 Tax benefit from exercise of stock options — — 7,730 — — 7,730 Purchase of shares (5,743) (3,779) (1,362) (234,522) — (239,663)Cash dividends ($.20 per common share) — — — (50,872) — (50,872)Other — — 1,858 — — 1,858

Balance at May 31, 2005 249,879 188,162 112,284 1,245,147 23,251 1,568,844


of $591 tax effect — — — — 1,098 1,098 Reclassification adjustment for losses included in net

income, net of $366 tax effect — — — — (678) (678)Currency translation adjustments — — — — (5,941) (5,941)


Exercise of stock options 1,083 23,002 — — — 23,002 Compensation expense — — 1,985 — — 1,985 Tax benefit from exercise of stock options — — 2,240 — — 2,240 Purchase of shares (5,986) (4,531) (1,620) (209,279) — (215,430)Cash dividends ($.25 per common share) — — — (62,473) — (62,473)Other — — 1,639 — — 1,639

Balance at May 31, 2006 244,976 206,633 116,528 1,379,303 17,730 1,720,194


of $790 tax effect — — — — 1,467 1,467 Reclassification adjustment for losses included in net

income, net of $11 tax effect — — — — (22) (22)Currency translation adjustments — — — — 43,399 43,399


Employee defined benefit plan, net of $6,261 tax effect — — — — (16,600) (16,600)Exercise of stock options 901 23,154 — — — 23,154 Compensation expense — — 17,701 — — 17,701 Excess tax benefit from exercise of stock options — — 3,200 — — 3,200 Purchase of shares (210) (177) (58) (7,033) — (7,268)Cash dividends ($.30 per common share) — — — (73,455) — (73,455)Other — — 1,562 — — 1,562

Balance at May 31, 2007 245,667 $ 229,610 $ 138,933 $ 1,634,707 $ 45,974 $ 2,049,224


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Table of ContentsBiomet, Inc. & Subsidiaries Consolidated Statements of Cash Flows.

For the years ended May 31,(in thousands)

2007 2006 2005 Cash flows from (used in) operating activities:

Net income $ 335,892 $ 405,908 $ 349,373 Adjustments to reconcile net income to net cash from operating activities:

Depreciation 88,210 71,976 61,781 Amortization 8,795 10,201 7,821 Write-off of in-process research and development — — 26,020 Share-based expense 17,701 1,985 2,741 Other (2,395) 1,130 (19)Deferred income taxes (61,813) (4,356) 3,847 Tax benefit from exercise of stock options — 2,240 7,730 Excess tax benefit from exercise of stock options (3,200) — — Changes in current assets and liabilities, excluding effects of acquisitions and dispositions:

Accounts and notes receivable 21,999 (31,284) 16,265 Inventories 7,917 (69,728) (42,188)Accounts payable 2,825 4,030 (5,927)Other 23,822 21,368 (16,524)

Net cash from operating activities 439,753 413,470 410,920

Cash flows from (used in) investing activities: Proceeds from sales and maturities of investments 76,387 77,400 62,344 Purchases of investments (52,400) (68,621) (57,890)Capital expenditures (142,611) (108,912) (97,372)Acquisitions, net of cash acquired — — (266,229)Other (6,437) 1,068 (1,535)

Net cash used in investing activities (125,061) (99,065) (360,682)

Cash flows from (used in) financing activities: Increase (decrease) in short-term borrowings (196,871) (2,693) 167,624 Issuance of shares 23,154 23,002 24,640 Cash dividends (73,455) (62,473) (50,871)Purchase of common shares (7,268) (215,430) (239,663)Excess tax benefit from exercise of stock options 3,200 — —

Net cash used in financing activities (251,240) (257,594) (98,270)

Effect of exchange rate changes on cash 4,266 (554) (6,505)

Increase (decrease) in cash and cash equivalents 67,718 56,257 (54,537)Cash and cash equivalents, beginning of year 160,963 104,706 159,243

Cash and cash equivalents, end of year $ 228,681 $ 160,963 $ 104,706

Supplemental disclosures of cash flow information: Cash paid during the year for:

Interest $ 9,411 $ 11,342 $ 8,666 Income taxes 188,763 216,431 196,295


45


Table of ContentsBiomet, Inc. & Subsidiaries Notes To Consolidated Financial Statements.

Note A: Nature of Operations.

Biomet, Inc. and its subsidiaries design, manufacture and market products used primarily by musculoskeletal medical specialists in both surgical and nonsurgicaltherapy, including reconstructive products, fixation devices, spinal products and other products. Headquartered in Warsaw, Indiana, the Company and itssubsidiaries currently distribute products in more than 100 countries. The Company operates in one business segment, but has three reportable geographicsegments.

Note B: Accounting Policies.

The following is a summary of the accounting policies adopted by Biomet, Inc. that have a significant effect on the consolidated financial statements.

Basis of Presentation – The consolidated financial statements include the accounts of Biomet, Inc. and its subsidiaries (individually and collectively, “Biomet” orthe “Company”). All foreign subsidiaries are consolidated on the basis of an April 30 fiscal year. All significant intercompany accounts and transactions areeliminated. Investments in affiliates in which the Company does not have the ability to significantly influence the operations are accounted for on the costmethod, the carrying amount of which approximates market. Investments in affiliates in which the Company does have the ability to significantly influence theoperations, but does not control, are accounted for using the equity method.

Use of Estimates – The consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles and, accordingly, includeamounts that are based on management’s best estimates and judgments.

Translation of Foreign Currency – Assets and liabilities of foreign subsidiaries are translated at rates of exchange in effect at the close of their fiscal year.Revenues and expenses are translated at the weighted average exchange rates during the year. Translation gains and losses are accumulated within othercomprehensive income (loss) as a separate component of shareholders’ equity. Foreign currency transaction gains and losses resulting from product transferbetween subsidiaries is recorded in cost of goods sold. Other foreign currency exchange gains and losses, which are not material, are included in other income,net.

Cash and Cash Equivalents – The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Investments – Highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents. Certificates of deposit withmaturities greater than three months and less than one year are classified as short-term investments. Certificates of deposit with maturities greater than one yearare classified as long-term investments. The Company accounts for its investments in debt and equity securities under Statement of Financial AccountingStandards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which requires certain securities to be categorized as eithertrading, available-for-sale or held-to-maturity. Available-for-sale securities are carried at fair value with unrealized gains and losses recorded within othercomprehensive income (loss) as a separate component of shareholders’ equity. Held-to-maturity securities are carried at amortized cost. The Company has notrading securities. The cost of investment securities sold is determined by the specific identification method. Dividend and interest income are accrued as earned.The Company reviews its investments quarterly for declines in market value that are other than temporary. Investments that have declined in market value thatare determined to be other than temporary, are charged to other income by writing that investment down to market value.

Concentrations of Credit Risk and Allowance for Doubtful Receivables – The Company provides credit, in the normal course of business, to hospitals, privateand governmental institutions and healthcare agencies, insurance providers and physicians. The Company maintains an allowance for doubtful receivables andcharges actual losses to the allowance when incurred. The Company invests the majority of its excess cash in certificates of deposit with financial institutions,money market securities, municipal, corporate and mortgage-backed securities and common stocks. The Company does not believe it is exposed to anysignificant credit risk on its cash and cash equivalents or investments.

Inventories – Inventories are stated at the lower of cost or market, with cost determined under the first-in, first-out method.

Property, Plant and Equipment – Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed by the straight-linemethod over the estimated useful lives of 5 to 30 years for buildings and improvements and 3 to 10 years for machinery and equipment. Gains or losses on thedisposition of property, plant and equipment are included in income. Maintenance and repairs are expensed as incurred. In accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews property, plant and equipment for impairment whenever events orchanges in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated futurecash flows relating to the asset are less than its carrying amount, with the amount of the loss equal to the excess of carrying cost of the asset over fair value.

Goodwill – The Company accounts for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142, among other things,requires that goodwill not be amortized but should be tested for impairment at least annually. In addition, the Company reviews goodwill for possible impairmentby comparing the fair value of each reporting unit to its carrying amount annually. Based on the Company’s reviews, no impairment charges have been recorded.

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Table of ContentsBiomet, Inc. & Subsidiaries Notes To Consolidated Financial Statements (continued)

Note B: Accounting Policies, Continued.

Other Intangible Assets – Intangible assets consist primarily of developed technology and patents, trademarks and trade names, customer relationships andcovenants not to compete and are carried at cost less accumulated amortization. Intangible assets with an indefinite life, including certain trademarks and tradenames, are not amortized. The useful life of indefinite life intangible assets is assessed annually to determine whether events and circumstances continue tosupport an indefinite life. Amortization of intangibles with a finite life is computed based on the straight-line method over periods ranging from 3 to 15 years. Inaddition, the Company reviews other intangible assets (indefinite life) for possible impairment annually or whenever events or circumstances indicate that thecarrying amount may not be recoverable.

Income Taxes – Deferred income taxes are determined using the liability method. No provision has been made for U.S. and state income taxes or foreignwithholding taxes on the undistributed earnings (approximately $362 million at May 31, 2007) of foreign subsidiaries because it is expected that such earningswill be reinvested overseas indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. incometaxes (subject to an adjustment for foreign tax credits), state income taxes and withholding taxes payable to the various foreign countries. Determination of theamount of any unrecognized deferred income tax liability on these undistributed earnings is not practical.

Fair Value of Financial Instruments – The carrying amounts of cash and cash equivalents, receivables, short-term borrowings, accounts payable and accruals thatmeet the definition of a financial instrument approximate fair value. The fair value of investments is disclosed in Note D.

Revenue Recognition – For the majority of the Company’s products in a country where the Company has a direct distribution operation, revenue is recognizedupon notification to the Company that the product has been implanted in or applied to the patient. For other products or services, and in countries where theCompany does not have a direct distribution operation, the Company recognizes revenue when title passes to the customer and there are no remaining obligationsthat will affect the customer’s final acceptance of the sale. For its insurance billings in the United States, the Company records anticipated price adjustments,which can occur subsequent to invoicing, based on estimates derived from past experience, as a reduction of net sales in the same period that revenue isrecognized. The Company also records estimated sales returns and other adjustments as a reduction of net sales in the same period that revenue is recognized.Shipping and handling fees billed to customers are recorded as revenue, while related costs are included in cost of goods sold.

Comprehensive Income – Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles areincluded in comprehensive income but are excluded from net income as these amounts are recorded directly as an adjustment to shareholders’ equity. TheCompany’s other comprehensive income is comprised of unrealized gains (losses) on available-for-sale securities, net of tax, foreign currency translationadjustments, and unrecognized actuarial loss.

The components of accumulated other comprehensive income (loss) at May 31, 2007 and 2006 are as follows: (in thousands)

2007 2006 Net unrealized holding loss on investments, net of tax $ (604) $ (2,049)Cumulative translation adjustment 63,178 19,779 Unrecognized actuarial loss (16,600) —

$ 45,974 $ 17,730

Stock-Based Compensation Expense – Effective June 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment,” (“SFAS 123(R)”) using themodified prospective method. SFAS 123(R) requires all shared-based payments to employees, including stock options, to be expensed based on their fair valueover the required award service period. The Company uses the straight line method to recognize compensation expense related to share-based payments. In theprior year, the Company followed Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock option awards toemployees and recorded share-based compensation expense for awards that were issued at strike prices less than fair value at date of grant. Under the modifiedprospective method, the provisions of SFAS 123(R) apply to all share-based compensation awards granted or modified on or after the Company’s date ofadoption of SFAS 123(R), June 1, 2006. Prior period results are not restated under the modified prospective method. For shared-based compensation awardsgranted prior to the date of adoption, the unrecognized expense related to the unvested portion at the date of adoption will be recognized in net income under thegrant date fair value provisions under SFAS 123. The Company uses the Black-Scholes option-pricing model to determine the fair value of its employee stockoptions.

47



Note B: Accounting Policies, Concluded.

New Accounting Pronouncements

The Company implemented SFAS 151, “Inventory Costs,” an amendment of ARB No. 43 in the fiscal first quarter of 2007. The adoption of this statement didnot have a material effect on the Company’s financial statements.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of FASB Statement No. 109, “Accounting for IncomeTaxes,” This statement creates a single model to address uncertainty in tax positions which utilizes a two-step approach for evaluating such tax positions.Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained uponexamination. Measurement (step two) is only addressed if step one has been satisfied. In addition, expanded disclosures are required. FIN 48 is effective June 1,2007 and the Company will adopt it accordingly. The Company is currently evaluating the impact of adopting FIN 48. At this time, the Company does not expectthe adoption of FIN 48 to have a material impact on its financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” This statement defines fair value,establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Thestatement is effective in the fiscal first quarter of 2008. The Company believes that the adoption of SFAS No. 157 will not have a material effect on its financialstatements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employer’s Accounting for Defined Pension and OtherPostretirement Plans” – an amendment of FASB Statements No. 87, 88, 106 and 132(R). This statement requires the recognition of the funded status of a benefitplan in the statement of financial position. It also requires the recognition as a component of other comprehensive income (OCI), net of tax, of the gains or lossesand prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to statements 87 or 106.The statement also has new provisions regarding the measurement date as well as certain disclosure requirements. The statement was effective during the currentfiscal year and the Company adopted the statement as of May 31, 2007. See Note H for more information regarding Biomet’s adoption of SFAS No. 158.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, which expresses the Staff’s views regarding the process of quantifying financialstatement misstatements. The bulletin was effective at fiscal year end 2007. The implementation of this bulletin had no impact on the Company’s results ofoperations, cash flows or financial position.

48



Note C: Business Combinations.

On June 18, 2004, the Company acquired Interpore International Inc. (“Interpore”) for $266 million in cash. Based in Irvine, California, Interpore is focused onproviding innovative products for spinal surgery. The primary reason for making the Interpore acquisition was to broaden the product portfolio the Companyoffers in the spinal market. Interpore’s three major product groups include spinal implants, orthobiologic products and minimally-invasive surgery products usedby orthopedic surgeons and neurosurgeons in a wide range of applications. The purchase price of this acquisition exceeded the fair value of identifiable tangibleand intangible assets. This reflects the strategic compatibility of the products and technologies of Interpore and EBI, which is expected to provide increasedearnings power and an improved platform from which the combined entity can actively pursue growth opportunities in these product categories, bothdomestically and internationally. The Company accounted for this acquisition under the purchase method of accounting pursuant to SFAS No. 141, “BusinessCombinations.” Accordingly, Interpore’s results of operations have been included in the Company’s consolidated statements of income since the closing date,and its respective assets and liabilities were recorded at their estimated fair values in the Company’s consolidated balance sheets as of the closing date, with theexcess purchase price being allocated to goodwill. Interpore’s net sales in 2003 were approximately $67.5 million.

The following table summarizes the assets acquired and liabilities assumed in the acquisition:(in thousands)

As of

June 18, 2004Current assets $ 40,100Property, plant and equipment 9,307Intangible assets not subject to amortization:

Trademarks and trade names 1,260Intangible assets subject to amortization:

Developed technology 16,180License agreements 3,450Trademarks and tradenames 2,270Customer relationships 11,440

In-process research and development 26,020Deferred taxes 15,945Other assets 82Goodwill 169,596

Total assets acquired $ 295,650

Deferred taxes 14,512Other 14,909

Total liabilities assumed 29,421

Net assets acquired $ 266,229

The $26,020,000 assigned to in-process research and development was written off as of the acquisition date. With respect to the valuation of the Interporein-process research and development expense, there were four projects valued. Net cash flows were forecasted to commence between 2005 and 2006, discountrates of 20% to 30% were used, and assumed additional research and development expenditures prior to the date of initial product introduction totaledapproximately $2 million and approximately $1 million in 2005 and 2006, respectively. The major project, a total lumbar disc replacement, represented$18 million of the valuation. The total estimated additional expenditures have not changed to date, but the time table for getting the total lumbar disc replacementto market has been extended to 2012 or 2013 due to regulatory requirements. The weighted average amortization period for amortizable intangibles is 8 years. Noamount of goodwill is expected to be deductible for tax purposes.

49



Note C: Business Combinations, Concluded.

The Company completed its purchase price allocation for Interpore in accordance with U.S. generally accepted accounting principles. The process includedinterviews with management, review of the economics and competitive environment in which the companies operate and examination of assets, includinghistorical performance and future prospects. The purchase price allocation was based on information then available to the Company, and expectations andassumptions deemed reasonable to the Company’s management. No assurances can be given, however, that the underlying assumptions used to estimate expectedtechnology based product revenues, development costs or profitability, or the events associated with such technology, will occur as projected.

Other Acquisitions – During the current year, the Company acquired the remaining 49% equity interest in its China manufacturing operations. Prior to thisacquistion, the Company owned 51% and included its operating results in its financial statements. The Company recognized $1.9 million in goodwill. Duringfiscal 2006, the Company completed several acquisitions of foreign distributors and/or businesses. The acquisitions were accounted for using the purchasemethod of accounting with the operating results of the acquired businesses included in the Company’s consolidated financial statements from the date ofacquisition. Goodwill recognized in connection with these acquisitions aggregated $6.4 million.

Pro forma financial information reflecting all acquisitions accounted for as purchases has not been presented as it is not materially different from the Company’shistorical results.

50



Note D: Investments.

At May 31, 2007, the Company’s investment securities were classified as follows:(in thousands)

AmortizedCost

Unrealized FairValue Gains Losses

Available-for-sale: Debt securities $ 4,813 $ — $ (404) $ 4,409Equity securities 9,370 928 (96) 10,202Mortgage-backed securities 28,871 — (1,358) 27,513

Total available-for-sale 43,054 928 (1,858) 42,124

Held-to-maturity: Debt securities 2,969 — (54) 2,915Mortgage-backed obligations 53 — — 53

Total held-to-maturity 3,022 — (54) 2,968

Total $ 46,076 $ 928 $ (1,912) $ 45,092

At May 31,2006, the Company’s investment securities were classified as follows:(in thousands)

AmortizedCost

Unrealized FairValue Gains Losses

Available-for-sale: Debt securities $ 8,534 $ — $ (551) $ 7,983Equity securities 19,307 618 (541) 19,384Mortgage-backed securities 36,285 — (2,679) 33,606

Total available-for-sale 64,126 618 (3,771) 60,973

Held-to-maturity: Debt securities 2,961 — (66) 2,895Mortgage-backed obligations 74 — — 74

Total held-to-maturity 3,035 — (66) 2,969

Certificates of deposit 500 — — 500

Total $ 67,661 $ 618 $ (3,837) $ 64,442

Proceeds from sales of available-for-sale securities were $71,916,000, $71,118,000 and $58,050,000 for the years ended May 31, 2007, 2006 and 2005,respectively. There were no sales of held-to-maturity securities for the years ended May 31, 2007, 2006 and 2005. The cost of marketable securities sold isdetermined by the specific identification method. For the year ended May 31, 2007, gross realized gains and (losses) on sales of available-for-sale securities were$2,937,000 and $(542,000), respectively. For the year ended May 31, 2006, gross realized gains and (losses) on sales of available-for-sale securities were$2,380,000 and $(2,107,000), respectively. For the year ended May 31, 2005, gross realized gains and (losses) on sales of available-for-sale securities were$918,000 and $(899,000), respectively. The Company’s investment securities at May 31, 2007 include $2,157,000 of debt securities, maturing within one year,and $5,221,000 of debt securities and $27,566,000 of mortgage-backed securities all maturing past one year.

Investment income (included in other income, net) consists of the following:(in thousands)

2007 2006 2005Interest income $ 8,104 $ 6,851 $ 4,191Dividend income 1,602 1,905 1,890Net realized gains 9,097 5,617 1,785

Total $ 18,803 $ 14,373 $ 7,866

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Note E: Inventories.

Inventories at May 31, 2007 and 2006 consist of the following:(in thousands)

2007 2006Raw materials $ 77,695 $ 71,126Work-in-progress 70,469 48,416Finished goods 214,758 225,997Consigned distributor 177,506 188,976

Total $ 540,428 $ 534,515

Reserves for excess and slow-moving inventory at May 31, 2007 and 2006 were $153,352,000 and $99,427,000, respectively.

Note F: Goodwill and Other Intangible Assets.

The following table summarizes the changes in the carrying amount of goodwill for the year ended May 31, 2007:(in thousands)

UnitedStates Europe

Rest ofWorld Total

Balance at May 31, 2005 $ 245,999 $ 185,021 $ 4,601 $ 435,621 Goodwill acquired — 6,409 — 6,409 Currency translation — (752) 119 (633)

Balance at May 31, 2006 245,999 190,678 4,720 441,397

Goodwill acquired — 1,900 — 1,900 Currency translation — 4,930 200 5,130

Balance at May 31, 2007 $ 245,999 $ 197,508 $ 4,920 448,427

The components of identifiable intangible assets are as follows as of May 31:(in thousands)

2007 2006

Gross Carrying

Amount AccumulatedAmortization

Gross CarryingAmount

AccumulatedAmortization

Intangible assets subject to amortization: Developed technology and patents $ 53,743 $ 19,232 $ 50,658 $ 15,102Trademarks and trade names 3,599 1,077 3,599 765Customer relationships 16,511 8,288 16,734 5,858Covenants not to compete 3,974 2,447 3,974 1,639Other 923 637 923 526

78,750 31,681 75,888 23,890

Intangible assets not subject to amortization: Trademarks and trade names 27,500 — 27,500 —

Total identifiable intangible assets $ 106,250 $ 31,681 $ 103,388 $ 23,890

Total amortization expense for finite-lived intangible assets was $8,795,000, $10,201,000 and $7,821,000 in 2007, 2006 and 2005, respectively, and wasrecorded as part of selling, general and administrative expense. The weighted average amortization lives for the covenants not to compete, developed technologyand patents, trademarks and trade names, and customer relationships are 5 years, 10 years, 10 years and 15 years, respectively. The weighted averageamortization life of these intangible assets on a combined basis is 9 years. Estimated annual amortization expense for the years ended May 31, 2008 through 2011is $8.0 million.

52



Note G: Debt.

At May 31, 2007 and 2006, short-term borrowings consist of the following:(in thousands)

2007 2006Bank line of credit $ — $ 180,000Bank line of credit - Biomet Europe 31,610 57,037Bank line of credit - Biomet Japan 50,214 39,524

Total $ 81,824 $ 276,561

In connection with the Interpore acquisition, the Company entered into a 36-month revolving credit facility in the amount of $200 million due in June 2007. Theoutstanding credit line was paid off in February 2007 and the credit facility subsequently expired. Biomet Europe has a EUR 100 million ($136 million atMay 31, 2007) unsecured line of credit with a major European bank. This line of credit is used to finance its operations and interest on outstanding borrowings ispayable monthly at the lender’s interbank rate plus 0.6% (effective rate of 4.41% and 3.1% at May 31, 2007 and 2006, respectively). Biomet Japan has a YEN6.0 billion ($50.2 million at May 31, 2007) unsecured line of credit with major Japanese banks. This line of credit is used to finance its operations and interest onoutstanding borrowings is payable monthly at the lender’s interbank rate plus 0.6% (effective rate of 1.18% and 1.03% at May 31, 2007 and 2006, respectively).

Note H: Team Member Benefit Plans.

The Company has an Employee Stock Bonus Plan for eligible Team Members of the Company and certain subsidiaries. The Company has historicallycontributed up to 3% of an eligible Team Member’s compensation. The amounts expensed under this plan for the years ended May 31, 2007, 2006 and 2005were $5,842,000, $6,603,000 and $5,849,000, respectively. The Company makes cash contributions to the plan and issues no Common Shares in connection withthe plan. On March 31, 2007, the Company merged this plan into the existing 401(k) plan. This did not affect the funding of this plan during the current fiscalyear.

The Company also has a defined contribution profit sharing plan which covers substantially all of the Team Members within the continental U.S. and allowsparticipants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. The Company currently matches up to 75% ofthe Team Member’s contribution up to a maximum of 5% of the Team Member’s compensation. The amounts expensed under this profit sharing plan for theyears ended May 31, 2007, 2006 and 2005 were $4,903,000, $6,319,000 and $5,472,000, respectively.

The Company sponsors various retirement and pension plans, including defined benefit plans for some of its foreign operations. Many foreign employees arecovered by government sponsored programs for which the direct cost to the Company is not significant. Retirement plan benefits are primarily based onemployee’s compensation during the last several years before retirement and the number of years of service. Some foreign subsidiaries have plans under whichfunds are deposited with trustees, annuities are purchased under group contracts or reserves are provided. The Company uses the date of its consolidated financialstatements (April 30, 2007 and 2006 for its foreign subsidiaries) as the measurement date.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and OtherPostretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132R, which requires an employer to fully recognize the over-funded orunder-funded status of its pension and other postretirement benefit plans as an asset or liability in its financial statements. In addition, the Company is required torecognize as a component of other comprehensive income (loss) the actuarial gains or losses and the prior service costs and credits that arise during the periodbut are not immediately recognized as components of net periodic benefit costs. The company adopted SFAS No. 158 effective May 31, 2007. The incrementaleffect of applying SFAS No. 158 is a $16.6 million reduction in shareholder’s equity, net of deferred taxes.

Net periodic benefit costs for the Company’s defined benefit plans for 2007, 2006 and 2005 include the following components:

2007 2006 2005 Net periodic benefit costs: Service costs $ 5,110 $ 3,760 $ 3,342 Interest costs 5,280 4,291 3,375 Expected return on plan assets (4,518) (3,319) (2,881)Recognized actuarial losses 1,305 1,408 653

Net periodic benefit costs $ 7,177 $ 6,140 $ 4,489

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Note H: Team Member Benefit Plans, Continued.

The following table sets forth information related to the benefit obligation and the fair value of plan assets at year-end 2007 and 2006 for the Company’s definedbenefit retirement plans. The Company maintains no postretirement plans.

2007 2006 Change in Benefit Obligation Projected benefit obligation - beginning of year $ 98,916 $ 84,594

Service costs 5,110 3,760 Interest costs 5,280 4,291 Plan participant contribution 2,295 2,096 Actuarial (gains)/losses (2,966) 7,960 Benefits paid from plan (2,587) (1,939)Effect of exchange rates 9,677 (1,846)

Projected benefit obligation - end of year $ 115,725 98,916

Change in Plan Assets Plan assets at fair value - beginning of year $ 59,956 $ 44,727

Actual return on plan assets 2,444 11,376 Company contribution 5,936 4,601 Plan participant contribution 2,295 2,096 Benefits paid from plan (2,587) (1,939)Effect of exchange rates 6,098 (905)

Plan assets at fair value - end of year $ 74,142 $ 59,956

Funded status at end of year $ 41,583 $ 38,960 Unrecognized actuarial losses — (21,085)

Total recognized in the consolidated balance sheet $ 41,583 $ 17,875

Amounts Recognized in the Company’s Balance Sheet consist of the following:

Prior toAdopting

SFAS158

Effect ofAdoptingSFAS 158

As Reportedat May 31,

2007 Deferred income tax liability ($2,130) ($6,261) ($8,391) Employee related obligations 18,722 22,861 41,583 Other comprehensive income (loss) — (16,600) (16,600)

2008Amounts expected to be recognized in Net Periodic Cost in the coming year for

the Company’s defined benefit retirement plans Amortization of net actuarial losses $ 1,126

The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for theyear listed and also the net periodic benefit cost for the following year.

2007 2006 2005 Discount rate 5.30% 5.03% 5.29%Expected long-term rate of return on plan assets 6.72% 7.17% 7.49%Rate increase in compensation levels 3.30% 3.13% 2.97%

54



Note H: Team Member Benefit Plans, Concluded.

The projected future benefit payments from the Company’s defined benefit retirement plans are $2,164,000 - 2008, $2,252,000 - 2009, $2,339,000 - 2010,$2,431,000 - 2011, $2,503,000 - 2012, and $13,825,000 - 2013-2017. The Company expects to pay $6,889,000 into the plans during fiscal year 2008. In certaincountries, the funding of pension plans is not a common practice. Consequently, the Company has several pension plans which are not funded.

The Company’s retirement plan asset allocation at April 30, 2007 was 41% to equity securities, 41% to debt securities, 8% to real estate, and 10% to other. TheCompany’s retirement plan asset allocation at April 30, 2006 was 73% to equity securities, 9% to debt securities, 1% to real estate, and 17% to other.

Strategic asset allocations are determined by country, based on the nature of the liabilities and considering demographic composition of the plan participants(average age, years of service and active versus retiree status). The Company’s plans are considered non-mature plans and the long-term strategic assetallocations are consistent with these types of plans. Emphasis is placed on diversifying on a broad basis combined with currency matching the fixed incomeassets.

55



Note I: Stock Option Plans.

The Company adopted SFAS No. 123(R), on June 1, 2006 using the modified prospective method. SFAS 123(R) requires all share-based payments to employees,including stock options, to be expensed based on their fair value over the required award service period. The Company uses the straight line method to recognizecompensation expense related to share-based payments. In the prior year, the Company followed Accounting Principles Board No. 25, “Accounting for StockIssued to Employees,” in accounting for its stock option awards to employees, which required recording share-based compensation expense for awards that wereissued at strike prices less than fair value at date of grant. For the Company’s non-employee distributors, share-based expense is recorded in accordance withEmerging Issues Task Force No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquistion, or in Conjunction withSelling, Goods or Services.”

Under the modified prospective method, the provisions of SFAS 123(R) apply to all share-based compensation awards granted or modified on or after theCompany’s date of adoption of SFAS 123(R), June 1, 2006. Prior period results are not restated under the modified prospective method. For share-basedcompensation awards granted prior to the date of adoption, the unrecognized expense related to the unvested portion at the date of adoption will be recognized innet income under the grant date fair value provisions under SFAS 123(R). The Company uses the Black-Scholes option-pricing model to determine the fair valueof its employee stock options. Total compensation expense recognized for the year ended May 31, 2007 was $17,701,000 offset by $3,926,000 of tax benefit,which is $0.06 per share. The amount of pre-tax compensation cost related to nonvested stock options not yet recognized was $99.8 million at May 31, 2007,which is expected to be amortized through 2015.

If compensation expense for the Company’s employee stock options had been determined based on the fair value method of accounting in fiscal years 2006 and2005, pro forma net income and earnings per share would have been as follows:

2006 2005 Net income as reported (in thousands) $ 405,908 $ 349,373 Total share-based compensation expense included in the determination of net income

(in thousands) 2,166 2,690 Deduct: Total share-based compensation expense determined under fair value based method for all awards net of

related tax effects (in thousands) (11,590) (11,159)

Pro forma net income (in thousands) $ 396,484 $ 340,904

Earnings per share: Basic, as reported $ 1.64 $ 1.38 Basic, pro forma 1.60 1.35

Diluted, as reported 1.63 1.37 Diluted, pro forma 1.60 1.35

Prior to adopting SFAS 123(R), Biomet classified all tax benefits of deductions resulting from the exercise of stock options as operating cash flows. SFAS123(R) requires the cash flows resulting from excess tax benefits (i.e., tax deductions realized for stock options exercised in excess of the tax benefit recognizedon the related share-based payment expense) to be classified as financing cash flows.

The Company has various stock option plans: the 1992 Employee and Non-Employee Director Stock Option Plan; the 1992 Distributor Stock Option Plan, theBiomet, Inc. 1998 Qualified and Non-Qualified Stock Option Plan and the Biomet, Inc. 2006 Equity Incentive Plan. At May 31, 2007, the only plans with sharesavailable for grant are the Biomet, Inc. 1998 Qualified and Non-Qualified Stock Option Plan and the Biomet, Inc. 2006 Equity Incentive Plan.

Under the stock option plans, options may be granted to key employees, non-employee directors and distributors, at the discretion of the Compensation and StockOption Committee, and generally become exercisable in annual or biannual increments beginning one or two years after the date of grant in the case of employeeoptions and in annual increments beginning at the date of grant for distributor options. In the case of options granted to an employee of the Company who is a10% or more shareholder, the option price is an amount per share not less than 110% of the fair market value per share on the date of granting the option, asdetermined by the Compensation and Stock Option Committee. No options have been granted to employees who are 10% or more shareholders. The term of eachoption granted expires within the period prescribed by the Compensation and Stock Option Committee, but shall not be more than five years from the date theoption is granted if the optionee is a 10% or more shareholder, and not more than ten years for all other optionees. All rights under the options automaticallyterminate upon the optionee’s separation from service with the Company, unless such separation results from retirement, disability or death. For the years endedMay 31, 2007, 2006 and 2005, the amount of compensation expense applicable to options granted to distributors was not material to the consolidated financialstatements.

56



Note I: Stock Option Plans, Continued.

The following table summarizes stock option activity:

Number of

Shares

WeightedAverageExercise

PriceOutstanding, May 31, 2004 7,357,369 $ 25.89

Granted 2,407,505 42.44Exercised (1,326,339) 19.21Terminated (374,700) 24.99

Outstanding, May 31, 2005 8,063,835 31.86Granted 2,878,601 35.01Exercised (1,172,179) 22.76Terminated (607,301) 34.59

Outstanding, May 31, 2006 9,162,956 33.84Granted 2,832,903 33.49Exercised (917,737) 26.13Terminated (1,448,227) 34.75

Outstanding, May 31, 2007 9,629,895 $ 34.34

The following table summarizes information about outstanding stock options as of May 31, 2007, that are vested and those that are expected to vest, and that arecurrently exercisable:

OutstandingStock Options

Already Vested andExpected to Vest

Optionsthat are

ExercisableNumber of outstanding options 7,950,000 1,811,324Weighted average remaining contractual life 7.2 years 1 yearWeighted average exercise price per share $ 34.34 $ 34.02Intrinsic value $ 73,776,000 $ 17,389,000

Options outstanding at May 31, 2007, are exercisable at prices ranging from $11.57 to $48.27 and have a weighted average remaining contractual life of 7.2years. At May 31, 2007 there were 3,234,286 shares available for future option grants. The following table summarizes information about stock optionsoutstanding at May 31, 2007.

Range ofExercise Price

NumberOutstanding atMay 31, 2007

OutstandingWeightedAverage

RemainingContractual Life

WeightedAverageExercise

Price

NumberExercisable atMay 31, 2007

WeightedAverage

Exercise Price$11.57-20.00 18,346 1.0 year $ 16.43 13,564 $ 16.3020.01-30.00 1,702,006 4.5 years 26.05 610,763 25.6230.01-40.00 6,209,455 8.1 years 34.30 669,854 35.1840.01-48.27 1,700,088 6.6 years 42.97 517,143 42.89

9,629,895 1,811,324

The Company uses the Black-Scholes option-pricing model to determine the fair value of options. For stock options granted during the year ended May 31, 2007,expected volatility was derived based on historical volatility of the Company’s Common Shares. The expected term of the stock option was derived fromhistorical employee exercise behavior. The risk-free interest rate is determined using the implied yield currently available for zero-coupon U.S. Governmentissues with a remaining term equal to the expected life of the options. A dividend yield is derived based on the historical dividend yield of the Company’sCommon Shares.

57



Note I: Stock Option Plans, Concluded.

At May 31, 2006 and 2005, there were exercisable options outstanding to purchase 1,573,371 and 1,540,773 shares, respectively, at weighted average exerciseprices of $30.05 and $23.20, respectively. The weighted average fair value of options granted during the fiscal years ended May 31, 2007, 2006, and 2005 was$11.37, $12.57, and $11.87, per option respectively, determined using the following assumptions: (1) expected life of option of 5.41, 5.27 and 5.22 years;(2) dividend yield of 0.90%, 0.72% and 0.43%; (3) expected volatility of 32%, 32% and 33%; and (4) risk-free interest rate of 4.56%, 5.21% and 3.90%respectively. The total intrinsic value of options exercised during the years ended May 31, 2007, 2006 and 2005 were $11.1 million, $16.3 million and $32.2million, respectively.

Year Ended May 31, 2007 2006 2005

Numberof Shares

Weighted AveragePrice Per Share

Numberof Shares


Numberof Shares


Options granted with an exercise price equal tofair value at date of grant 2,799,903 $ 33.49 1,100,845 $ 36.46 637,955 $ 40.31

Options granted with an exercise price greaterthan fair value at date of grant — — 292,200 $ 34.85 582,275 $ 43.49

Options granted with an exercise price less thanfair value at date of grant 33,000 $ 34.44 1,485,556 $ 34.02 1,187,275 $ 42.66

Note J: Shareholders’ Equity & Earnings Per Share.

Shares used in computation of diluted earnings per share reflect the dilutive effect of stock options.

In December 1999, the Board of Directors of the Company adopted a new Shareholder Rights Plan (the “Plan”) to replace a 1989 rights plan that expired onDecember 2, 1999. On December 17, 2006, and immediately prior to the Company’s entry into the Merger Agreement with the Sponsor Group, the Company’sBoard of Directors terminated the Plan and redeemed all rights issued and outstanding under the Plan. As provided in the Plan, the rights terminated onDecember 17, 2006, and, thereafter, holders of the rights were entitled only to receive a redemption payment of $0.0001 per right (the “Redemption Payment”).The Redemption Payment was paid by the Company to rights holders of record on December 28, 2006 in accordance with the terms of the Plan on January 3,2007.

58



Note K: Income Taxes.

The components of income before income taxes are as follows:(in thousands)

2007 2006 2005United States operations $ 405,191 $ 531,317 $ 488,346Foreign operations 96,381 79,678 58,123

Total $ 501,572 $ 610,995 $ 546,469

The provision for income taxes is summarized as follows:(in thousands)

2007 2006 2005 Current:

Federal $ 189,129 $ 170,623 $ 160,386 State, including Puerto Rico 13,880 19,012 19,927 Foreign 24,484 19,808 12,936

227,493 209,443 193,249 Deferred (61,813) (4,356) 3,847

Total $ 165,680 $ 205,087 $ 197,096

Effective tax rate 33.0% 33.6% 36.1%

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate follows:

2007 2006 2005 U.S. statutory income tax rate 35.0% 35.0% 35.0%Add (deduct):

State taxes, less effect of federal reduction 1.1 1.7 2.0 Foreign income taxes at rates different from the U.S. statutory rate (1.4) (.9) (1.3)Tax benefit relating to operations in Puerto Rico (1.1) (.6) (.2)Tax credits (.3) (.3) (.4)Tax benefit relating to U.S. export sales (1.1) (1.2) (.6)In-process research and development — — 1.7 Other .8 (.1) (.1)

Effective tax rate 33.0% 33.6% 36.1%

The components of the net deferred tax asset and liability at May 31, 2007 and 2006 are as follows:(in thousands)

2007 2006 Current deferred tax asset:

Accounts and notes receivable $ 72,534 $ 19,541 Inventories 37,356 43,480 Accrued expenses 26,887 12,169

Current deferred tax asset $ 136,777 $ 75,190

Long-term deferred tax asset (liability): Depreciation $ (13,453) $ (11,296)Financial accounting basis of net assets of acquired companies different than tax basis (11,208) (12,100)Other 3,419 (3,595)

Long-term deferred tax liability $ (21,242) $ (26,991)

59



Note L: Segment Data.

The Company operates in one business segment, musculoskeletal products, which includes the designing, manufacturing and marketing of reconstructiveproducts, fixation devices, spinal products and other products. Other products consist primarily of softgoods and bracing products, arthroscopy products, generalinstruments and operating room supplies. The Company manages its business segment primarily on a geographic basis. These geographic markets are comprisedof the United States, Europe and the Rest of World. Major markets included in the Rest of World geographic market are Australia, Japan and Canada. TheCompany evaluates performance of each geographic segment based on net sales growth exclusive of foreign currency impact and operating income exclusive ofacquisition expenses and inventory step-up and in-process research and development write-offs. Identifiable assets are those assets used exclusively in theoperations of each geographic segment. Revenues attributable to each geographic segment are based on the location of the customer.

Net sales growth by geographic segment and product category are as follows:(in thousands)

2007 2006

Sales GrowthAs Reported FX Impact

Sales Growthin Local

Currencies Sales GrowthAs Reported FX Impact

Sales Growthin Local

Currencies Net sales to customers:

United States (1)% — % (1)% 7% — % 7%Europe 14 (6) 8 7 4 11 Rest of World 14 (1) 13 17 (1) 16 Total 4% (2)% 2% 8% 1% 9%

Product category sales growth: Reconstructive products 9% (2)% 7% 10% 1% 11%Fixation devices (11) (1) (12) 2 0 2 Spinal products (7) (1) (8) 4 0 4 Other products — % (1)% (1)% 5% 1% 6%

60



Note L: Segment Data, Concluded.

Net sales of musculoskeletal products by product category and reportable geographic segment results are as follows:(in thousands)

2007 2006 2005 Reconstructive products $ 1,503,874 $ 1,379,420 $ 1,254,234 Fixation devices 224,694 251,360 246,730 Spinal products 205,862 221,964 214,039 Other products 172,998 172,995 164,947

$ 2,107,428 $ 2,025,739 $ 1,879,950

Net sales to customers: United States $ 1,306,475 $ 1,325,113 $ 1,238,727 Europe 595,899 520,660 487,991 Rest of World 205,054 179,966 153,232

$ 2,107,428 $ 2,025,739 $ 1,879,950

Operating income: United States $ 383,565 $ 519,953 $ 505,799 Europe 97,192 77,666 75,769 Rest of World 8,845 10,767 12,762 Current period impact of inventory step-up — — (24,250)Write-off of in-process research and development — — (26,020)

$ 489,602 $ 608,386 $ 544,060

Long-lived assets: United States $ 526,391 $ 488,097 $ 475,087 Europe 390,983 364,110 353,979 Rest of World 41,295 32,879 23,732

$ 958,669 $ 885,086 $ 852,798

Capital expenditures: United States $ 75,730 $ 48,175 $ 50,930 Europe 51,941 47,023 38,008 Rest of World 14,940 13,714 8,434

$ 142,611 $ 108,912 $ 97,372

Depreciation and amortization: United States $ 44,317 $ 39,275 $ 29,273 Europe 45,017 37,477 34,695 Rest of World 7,671 5,425 5,634

$ 97,005 $ 82,177 $ 69,602

61



Note M: Commitments & Contingencies.

Medical Insurance Plan – The Company maintains a self-insurance program for covered medical expenses for all Team Members within the continental U.S. TheCompany is liable for claims up to $200,000 per insured annually, as well as an additional annual aggregate of $60,000. Self-insurance costs are accrued basedupon the aggregate of the liability for reported claims and a management-determined estimated liability for claims incurred but not reported.

Liability Insurance – Since 1989, the Company has self-insured against product liability risks, with excess coverage on a claims-made basis from variousinsurance carriers in excess of the self-insured amounts and subject to certain policy limits. Self-insurance costs are accrued based on reserves set in consultationwith the insurance carrier for reported claims and a management-determined estimated liability for claims incurred but not reported. Based on historicalexperience, management does not anticipate that incurred but unreported claims would have a material impact on the Company’s consolidated financial position.

U.S. Department of Justice Investigations.


The U.S. Attorney’s Office and the Company have recently begun discussions regarding a potential resolution of this matter. The results of any resolution remainuncertain at this time, but could, among other things, require monetary payments, cause the Company to significantly change some of its existing businesspractices, and include the potential for additional governmental oversight. Although the Company has cooperated and intends to continue to cooperate fully withthe Department of Justice inquiry, discussions are still in preliminary stages with respect to the terms of any proposed resolution and there can be no assurancethat the Company will enter into a consensual resolution of this matter with the U.S. Attorney’s Office. Given the preliminary nature of these discussions, theCompany does not believe that a range of loss is estimable; therefore, the Company has not accrued for any losses with regard to this inquiry.

In June 2006, the Company received a federal grand jury subpoena issued at the request of the U.S. Department of Justice, Antitrust Division, requestingdocuments from January 2001 through June 2006 regarding possible violations of federal criminal law, including possible violations of the antitrust laws, relatingto the manufacture and sale of orthopedic implant devices, or the subpoena. The Company is aware of similar subpoenas directed to other companies in theorthopedic industry. The Company has cooperated and intends to continue to fully cooperate with the Department of Justice investigation. The result of thisinvestigation may not be known for several years. However, the scope of the subpoena has currently been narrowed to a specific geographic region and specificproduct lines. It is the Company’s belief that the other orthopedic companies that received similar subpoenas have received similar guidance. It is the Company’sbelief that the investigation was prompted by an unsolicited e-mail sent by a representative of one of the Company’s competitors that proposed a common pricingstrategy in connection with a particular hospital. This e-mail was received by an independent sales representative of an independent distributor for BiometOrthopedics, but it was never transmitted to the Company. Neither the Company, the Company’s independent distributor, nor the Company’s independent salesrepresentative took any action in response to the e-mail, and the Company believes that no anticompetitive activity took place as a result of it. The Companyrequires compliance by the Company’s employees and the Company’s independent distributors with the Company’s Code of Business Conduct and Ethics andwith applicable antitrust laws. The information provided herein is limited to the information available to the Company at the present time and the Companycannot offer any assurances as to the scope and final outcome of this investigation. On an issue related to the subpoena the Company has received two complaintsin class action lawsuits alleging violations of the Sherman Antitrust Act. In addition, the Company is aware of other complaints that have been filed, but notserved on the Company. The complaints also named various other companies in the orthopedic industry as defendants. We intend to vigorously defend thismatter and believe that the Company has meritorious defenses to the claims being asserted.

In May 2007, the Company received a subpoena from the U.S. Department of Justice through the U.S. Attorney for the Southern District of West Virginiarequesting documents generally relating to a certain number of products manufactured, marketed and sold by the Company’s subsidiary EBI, L.P. for the timeperiod from January 1999 through the present. In June 2007, the Company received a second administrative subpoena from the U.S. Attorney for the SouthernDistrict of West Virginia requesting documents relating to a specific physician’s assistant. The Company intends to fully cooperate with the request of theDepartment of Justice. Further, the Company can make no assurances as to the time or resources that will be needed to devote to this inquiry or its final outcome.

Litigation Relating to Past Stock Option Practices.

On September 21, 2006, two shareholder-derivative complaints were filed against certain of the Company’s current and former officers and directors inKosciusko Superior Court I in Kosciusko Country, in the State of Indiana. The complaints, captioned Long v. Hann, et al., and Thorson v. Hann, et al., allegedviolations of state law relating to the issuance of certain stock option awards by the Company dating back to 1996. Both complaints sought unspecified moneydamages as well as other equitable and injunctive relief. These two cases were consolidated under the caption In re Biomet, Inc. Derivative Litigation, and onJanuary 19, 2007, plaintiffs filed an amended complaint that made additional allegations based on the Company’s December 18, 2006 disclosures related to stockoption awards, including allegations that the defendants sought to sell the company in order to escape liability for their conduct, and that they did so at a devaluedprice, thus further breaching their fiduciary duties to shareholders. On February 16, 2007, defendants filed a motion to dismiss plaintiffs’ amended complaint,which is currently pending with the court.

62



Note M: Commitments & Contingencies, Continued.

On December 11, 2006, a third shareholder-derivative complaint captioned International Brotherhood of Electrical Workers Local 98 Pension Fund v. Hann, etal., No. 06 CV 14312, was filed in federal court in the Southern District of New York. The IBEW case makes allegations and claims similar to those made in theIndiana litigation, in addition to purporting to state three derivative claims for violations of the federal securities laws. On February 15, 2007, defendants filed amotion to dismiss the plaintiff’s complaint. On April 11, 2007, plaintiffs filed a motion for partial summary judgment claiming that the disclosures in theCompany’s April 2, 2007 Form 8-K filing and press release regarding the Company’s historical stock options granting practices constitute admissions sufficientto establish defendants’ liability on certain of plaintiffs’ claims. Both motions are currently pending with the court.

Pursuant to Indiana law and provisions of the Company’s article of incorporation, the Company is advancing reasonable expenses, including attorneys’ fees,incurred by the Company’s current and former directors and officers in defending these lawsuits.

On May 25, 2007, the Board received and discussed an updated report from its Special Committee, which concluded that pursuing these threeshareholder-derivative complaints was not in the Company’s best interests. Under Indiana law, the Special Committee’s determination may be binding on thepending shareholder-derivative claims and result in the dismissal of these complaints.

Litigation Relating to the Merger.

On December 20, 2006, a purported class-action lawsuit captioned Long, et al. v. Hann, et al., was filed in Indiana State court in the County of Kosciusko. Thelawsuit names as defendants each member of the Company’s Board of Directors at the time, Dane Miller, Ph.D., and Blackstone Capital Partners V L.P., KKR2006 Fund L.P., Goldman Sachs Investments Ltd., and TPG Partners V, L.P. The complaint alleges, among other things, that the defendants breached, or aidedand abetted the breach of, fiduciary duties owed to the Company’s shareholders by the Company’s directors in connection with the Company’s entry into theMerger Agreement. Among the purported fiduciary breaches alleged in the complaint is that the Company’s director defendants “knew that the only way theycould escape liability for their stock option granting improprieties would be to sell the Company, thus eliminating their liability.” The complaint seeks, amongother relief, class certification of the lawsuit, a declaration that the Merger Agreement was entered into in breach of the fiduciary duties of the defendants, aninjunction preventing the defendants from proceeding with the Merger unless and until the defendants implement procedures to obtain the highest possible saleprice, an order directing the defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of the Company’s shareholders untilthe process for a sale of Biomet is completed and the highest price is obtained, an order directing the defendants to exercise their fiduciary duty to disclose allmaterial information in their possession concerning the Merger prior to the shareholder vote, including the Company’s fiscal 2007 second quarter financialresults, imposition of a constructive trust upon any benefits improperly received by the defendants, an award of attorneys’ fees and expenses, and such otherrelief as the court might find just and proper. On March 29 and 30, 2007, the defendants filed motions to dismiss the plaintiffs’ complaint, and these motions arecurrently pending before the court.

On January 2, 2007, a purported class action lawsuit captioned Gervasio v. Biomet, Inc., et al., was filed in the Supreme Court for the State of New York, NewYork County. A virtually identical action was filed on January 9, 2007, captioned Corry v. Biomet, Inc., etal., in the same court. Both of these lawsuits named asdefendants Biomet, each member of its Board of Directors at the time, Dane Miller, Ph.D., The Blackstone Group L.P., Kohlberg Kravis Roberts & Co.,Goldman Sachs Capital Partners, and Texas Pacific Group. The lawsuits made essentially the same claims and sought the same relief as in the Long actiondescribed above. On January 29, 2007, defendants filed a joint motion to dismiss Gervasio. On February 14, 2007, the plaintiff in Corry voluntarily discontinuedhis lawsuit and informed defendants that he intended to intervene in Gervasio. On March 26, 2007, the court granted defendants’ motion to dismiss Gervasio. OnMay 31, 2007, the Company entered into a memorandum of understanding regarding the settlement of these purported class action lawsuits relating to theMerger.

Pursuant to Indiana law and provisions of the Company’s articles of incorporation, the Company is advancing reasonable expenses, including attorneys’ fees,incurred by the Company’s current and former directors and officers in defending these lawsuits, with the exception of Dane Miller, Ph.D., whose status as adefendant does not arise from his status as a former director or officer.

On May 31, 2007, the Company entered into a memorandum of understanding regarding the settlement of class action lawsuits that were filed on behalf of theCompany’s shareholders following the announcement of the proposed Merger. Each of Biomet and the other defendants denies all of the allegations in theselawsuits, including any allegation that its current disclosures with regard to the pending Merger are false, misleading or incomplete in any way. Nevertheless,without admitting any liability or wrongdoing, the Company and other defendants in these cases have agreed in principle to settle them in order to avoid thepotential cost and distraction of continued litigation and to eliminate any risk of any delay to the closing of the Merger posed by these lawsuits. Such settlementis subject to execution and delivery of definitive documentation, the closing of the Merger and court approval. If the settlement becomes effective, the lawsuitswill be dismissed with prejudice.

Pursuant to the terms of the settlement, the Company has agreed to make available meaningful additional information, including financial information, to itsshareholders. Such additional information is contained in the Company’s Current Report on Form 8-K filed on May 31, 2007. In addition, the Sponsor Group hasagreed to cause the Company (or the Company’s successors) to pay the legal fees and expenses of plaintiffs’ counsel, in an amount of $600,000 in the aggregate,subject to the approval by the court and the closing of the Merger. This payment will not affect the amount of consideration to be paid in the Merger. The detailsof the settlement will be set forth in a notice to be sent to the Company’s shareholders prior to a hearing before the court to consider the settlement. Thesettlement will not affect the consideration to be paid in the Merger to the Company’s shareholders in connection with the proposed Merger.

Additional lawsuits pertaining to the Merger could be filed in the future.

63



Note M: Commitments & Contingencies, Concluded.

Nasdaq Delisting Proceedings.

The Company’s common shares are currently traded on the NASDAQ Global Select Market under the symbol “BMET.” On January 9, 2007, the Company fileda Form 12b-25 with the SEC stating that it did not anticipate filing its quarterly report on Form 10-Q for the second quarter of fiscal year 2007 on or before thefifth calendar day following the prescribed due date. On January 11, 2007, the Company received a Staff Determination letter from The Nasdaq Stock Marketindicating that the Company is not in compliance with the filing requirements for continued listing under Marketplace Rule 4310(c)(14). The letter was issued inaccordance with NASDAQ procedures due to the Company’s inability to file its quarterly report on Form 10-Q for the second quarter of fiscal year 2007 by theprescribed due date.

A hearing was held on March 1, 2007, at which the Company requested an exception within which to regain compliance with the NASDAQ’s filingrequirements. On April 11, 2007, a NASDAQ Listing Qualifications Panel (the “Panel”) granted the Company’s request for an exception and continued listingon the NASDAQ Global Select Market, notwithstanding the Company’s inability to timely file its quarterly report on Form 10-Q for the second quarter of fiscal2007. On May 22, 2007, the Company requested an extension of the May 29, 2007 deadline until June 12, 2007.

On April 12, 2007, the Company announced that it received an additional notice of non-compliance from The Nasdaq Stock Market, pursuant to MarketplaceRule 4310(c)(14), due to the previously announced delay in filing its quarterly report on Form 10-Q for the third quarter of fiscal 2007. In the notice, theCompany was invited to make an additional submission to the Panel addressing its plans for making the third quarter filing. On April 19,2007, the Companyrequested an exception until June 12, 2007 to file its quarterly report on Form 10-Q for the third quarter of fiscal 2007.

On May 29, 2007, the Panel made a determination with respect to the Company’s April 19, 2007 and May 22, 2007 requests. In its May 29, 2007 determination,the Panel granted the Company’s request to extend the time to file the Company’s reports on Form 10-Q for the second and third quarters of fiscal 2007, and tocomplete all required restatements, on or before July 11, 2007. The Panel added that notwithstanding this extension it expects the Company to comply with theterms of the exception by the June 12, 2007 date referenced in the Company’s April 19, 2007 and May 22, 2007 requests. On June 7, 2007, the Companyreceived a letter from the Panel stating that Biomet has evidenced compliance with the Panel’s prior decisions and all applicable Nasdaq Marketplace Rules, andthat the Panel has determined to continue the listing of Biomets’ common shares on the NASDAQ Global Select Market.

Other Litigation.

In February 2006, SDGI Holdings, Inc. and Medtronic Sofamor Danek, Inc. (collectively referred to herein as “Medtronic”) brought an action against EBI andBiomet alleging infringement of seven patents. Specifically, Medtronic alleges that the patents are infringed by certain components of the Company’s Vuelock ®

Anterior Cervical Plate System, as well as instruments and surgical implantation methods associated with the Company’s Array ® Spinal System. Medtronic’scomplaint did not seek a specific amount of damages, but does seek to enjoin the Company from manufacturing, selling and/or distributing the allegedlyinfringing products. The Company has filed a counterclaim seeking a finding of noninfringement of the patents at issue and a finding that certain of the patentsare invalid and unenforceable. The litigation is in the early stages of discovery. The Company is vigorously defending this matter and intends to continue to doso.

The Company and its subsidiary, Biomet Orthopedics, Inc., recently initiated legal proceedings against Zimmer US, Inc. (“Zimmer”), certain former Biometdistributors, and David Montgomery, a former employee of the Company who currently works for Zimmer. The thirteen count lawsuit filed in Marion County,Indiana alleges, among other things, that Zimmer and Mr. Montgomery attempted to create an unfair market advantage by engaging in a campaign tomisappropriate Biomet confidential information, to interfere with Biomet’s contractual relations with distributors and to attempt to buy the assets of most ofBiomet’s distributors (including the Company’s surgical instruments) throughout the United States. Further, the lawsuit alleges that the limited number ofdistributors who accepted Zimmer’s offer are in violation of their contractual obligations to the Company. Although nearly all of the Company’s distributorsrejected Zimmer’s offers and have remained with the Company, and although no amount of money damages can completely compensate the Company for thelosses it has sustained as a result of defendants’ conduct, the Company is nonetheless seeking to recover compensatory damages that are attributable to financialand other resources spent on signing new agreements with its sales force. To the extent the Company sustained damages as a result of its former distributorsagreeing to purportedly sell their assets to Zimmer, the Company is seeking to recover lost profits and other damages as well. In addition, the Company isseeking to recover punitive damages from the defendants.

In a related matter, the Company brought suit against a former distributor for Biomet Orthopedics who, in violation of his contractual and other obligations to theCompany under agreements stretching back to 1994, sold the assets of his distributorship to Zimmer in an apparent effort to avoid his contractual obligations tothe Company. The complaint, now pending in federal district court in Indiana, asserts five causes of action that include breach of contract, unjust enrichment, andstatutory wrongs. Among other things, the complaint seeks injunctive relief and compensatory and punitive damages. On July 16, 2007 a temporary restrainingorder was entered against the former Biomet distributor. Prior to the filing of the suit described above, that former Biomet distributor sued one of his formeremployees, who decided to continue to represent Biomet products in the future as he has for nearly ten years. The suit brought against this employee by theformer Biomet distributor who sold his assets to Zimmer claims, among other things, that the former employee is violating his non-competition agreement withthe former Biomet distributor by continuing to sell the same Biomet products he sold while employed by the former Biomet distributor. The suit also seeks,among other forms of relief, an injunction and compensatory and punitive damages.

There are various other claims, lawsuits, disputes with third parties, investigations and pending actions involving various allegations against the Companyincident to the operation of its business, principally product liability and intellectual property cases. Each of these matters is subject to various uncertainties, andit is possible that some of these matters may be resolved unfavorably to the Company. The Company accrues for losses that are deemed to be probable andsubject to reasonable estimate. Based on the advice of counsel to the Company in these matters, management believes that the ultimate outcome of these mattersand any liabilities in excess of amounts provided will not have a material adverse impact on the Company’s consolidated financial statements taken as a whole.

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Table of ContentsBiomet, Inc. & Subsidiaries Notes To Consolidated Financial Statements (concluded)

Note N: Subsequent Events.

On December 18, 2006, Biomet entered into an Agreement and Plan of Merger with LVB Acquisition, LLC, a Delaware limited liability company (“LVB”), andLVB Acquisition Merger Sub, Inc., an Indiana corporation and a wholly-owned subsidiary of LVB (“Purchaser”), which agreement was amended and restatedas of June 7, 2007 (as may be amended and restated, supplemented or otherwise modified from time to time, the “Merger Agreement”), pursuant to which, aftercompletion of the Offer (as defined below) and the satisfaction or waiver of certain conditions, Purchaser will be merged with and into Biomet, with Biometcontinuing as the surviving corporation (the “Merger”). LVB is controlled by a consortium of private equity funds: Blackstone Capital Partners V L.P., GoldmanSachs Investments Ltd., KKR 2006 Fund L.P. and Texas Pacific Group (each a “Sponsor” and collectively, the “Sponsor Group”).

Pursuant to the Merger Agreement, on June 13, 2007, Purchaser commenced a cash tender offer, or the Offer, to purchase all of Biomet’s outstanding commonshares, without par value (the “Common Shares” or the “Shares”), at a price of $46.00 per Share (the “Offer Price”), without interest and less any requiredwithholding taxes. The Offer was made pursuant to Purchaser’s offer to purchase dated June 13, 2007 and the related letter of transmittal, each of which was filedwith the SEC on June 13, 2007. The Offer expired at 12:00 midnight, New York City time, on July 11, 2007, with approximately 82.41% of the outstandingShares having been tendered to Purchaser. On July 17, 2007, Purchaser completed its purchase of the tendered Shares.

In connection with the closing of the Offer, all outstanding options, each an Option, to purchase Shares under Biomet’s stock plans, vested or unvested, werecancelled and each Option holder was paid an amount in cash equal to the excess, if any, of the Offer Price over the applicable option exercise price for eachShare subject to an Option, less any required withholding taxes.

In connection with the Offer, Purchaser entered into a credit agreement dated as of July 11, 2007 for a $6,165 million senior secured term loan facility, or theTender Facility, maturing on June 6, 2008, and pursuant to which it borrowed approximately $4,181 million to finance a portion of the Offer and pay related feesand expenses. Biomet expects to refinance all amounts borrowed under the Tender Facility concurrently with the closing of its new senior secured creditfacilities. Additional financing for the Offer was provided in the form of indirect equity contributions from the Sponsor Group, who collectively causedapproximately $5,197 million to be contributed as equity to LVB Acquisition Holding, LLC, or Holding, concurrently with the funding of the Tender Facility.Holding, which owned 100% of the outstanding equity interests in LVB at the time of the Offer, contributed such funds to LVB, which in turn contributed suchfunds to Purchaser.

As a result of Purchaser having acquired approximately 82.41% of the outstanding Shares pursuant to the Offer, Biomet will call a special meeting ofshareholders to vote upon the Merger, at which meeting Biomet expects that LVB and Purchaser will vote all of their Shares to approve the Merger. At theeffective time of the Merger, or the Effective Time, each Share, other than the Shares owned by LVB or Purchaser immediately prior to the Effective Time, willbe cancelled automatically and will cease to exist and will be converted into the right to receive the Offer Price, without interest and less any requiredwithholding taxes. Additional funds necessary to complete the Merger are expected to be funded using equity contributions by certain of Biomet’s directors andequity contribution or rollover of existing equity interests by certain of Biomet’s executive officers and members of Biomet’s senior management (the“Management Participants”), an offering of high-yield debt securities, initial borrowings under Biomet’s new senior secured credit facilities, its cash on handand, if necessary, additional equity contributions by the Sponsor Group.

Pursuant to the Merger Agreement, LVB obtained pro rata representation on and control of the Board of Directors.

The closing of the Merger is subject to various conditions as described in the Merger Agreement, including to customary conditions such as the absence of anygovernmental orders preventing the Merger or any other transaction contemplated by the Merger Agreement, Biomet’s provision to LVB of certain financialinformation and certificates described in the Merger Agreement, and the receipt of certain regulatory approvals. Biomet has agreed with LVB and Purchaser toeach use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicablelaw to consummate the Merger, including with respect to obtaining the necessary consents, approvals and authorizations from governmental authorities.

Completion of the transactions contemplated by the Merger Agreement is subject to various regulatory approvals or consents, including those required by (1) theHart-Scott-Rodino Antitrust Improvement Act of 1976, or the HSR Act, and (2) the antitrust laws of the European Union. On February 15, 2007, the parties weregranted early termination of the waiting period under the HSR Act for the Merger Agreement and related transactions. No approval of the antitrust authorities inthe European Union is required in connection with the Merger, and none of the parties is aware of any other required approvals. The Company has been informedby the Sponsor Group that, in accordance with the provisions of the Merger Agreement, the Sponsor Group currently expects to complete the Merger no earlierthan September 2007, subject to the satisfaction of the conditions contained therein.

65


Table of ContentsBiomet, Inc. and Subsidiaries Schedule II — Valuation and Qualifying Accounts

for the years ended May 31, 2007, 2006 and 2005(in thousands)

Col. A Col.B Col.C Col.D Col.E Additions

Description

Balance atbeginning of

period

(1)Charged tocosts andexpenses

(2)Charged to

otheraccounts -describe

Deductionsdescribe

Balanceat end ofperiod

Allowance fordoubtful receivables:

For the year endedMay 31, 2007

$ 69,134 $ 65,057

$

$

45

646

(B)

(C) $ 50,770(A) $ 84,112

For the year endedMay 31, 2006 $ 59,513 $ 21,725 $ (351)(C) $ 11,753(A) $ 69,134

For the year endedMay 31, 2005

$ 43,384 $ 29,116

$

288

1,005

(B)

(C) $ 14,280(A) $ 59,513

Excess and obsoleteinventory reserves:

For the year endedMay 31, 2007 $ 99,427 $ 67,348 $ 4,581(C) $ 18,004(D) $ 153,352

For the year endedMay 31, 2006 $ 93,046 $ 29,577 $ (1,290)(C) $ 21,906(D) $ 99,427

For the year endedMay 31, 2005 $ 81,655 $ 34,792 $ 2,984(C) $ 26,385(D) $ 93,046

Notes:

(A) Uncollectible accounts written off

(B) Collection of previously written off accounts

(C) Effect of foreign currency translation

(D) Inventory written off

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Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Company maintains disclosure controls and procedures (as defined in Rule 13a- 15(e) of theSecurities Exchange Act of 1934, as amended (the “Act”)) that are designed to provide reasonable assurance that information required to be disclosed by theCompany, including the Company’s consolidated entities, in the reports that the Company files or submits under the Act, is recorded, processed, summarized andreported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, includingthe President and Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”), as appropriate, toallow timely decisions regarding required disclosure. Prior to the filing of this report, the Company completed an evaluation under the supervision and with theparticipation of senior management, including the Company’s Principal Executive Officer and its Principal Financial Officer, of the effectiveness of the designand operation of the Company’s disclosure controls and procedures as of May 31, 2007. Based on this evaluation, Biomet’s Principal Executive Officer and itsPrincipal Financial Officer concluded that Biomet’s disclosure controls and procedures were effective at the reasonable assurance level as of May 31, 2007.

(b) Management’s Report on Internal Control over Financial Reporting. As described in more detail in Part II, Item 9A “Controls and Procedures” of theCompany’s amended annual report on Form 10-K/A filed with the SEC on May 29, 2007 (the “Form 10-K/A”), as of May 31, 2006 the Company did not havean effective control designed and in place over the establishment of the appropriate grant date or the measurement date for determining share-based expense.These deficiencies resulted in the misstatement of the Company’s share-based expense, payroll and other employee taxes, additional paid-in capital accounts,related income tax accounts, retained earnings, related financial disclosures and other accounts and resulted in the restatements discussed in the Form 10-K/A. Asa result of these deficiencies, the Company’s current management concluded that the Company had a material weakness as of May 31, 2006 and, therefore, theCompany’s internal control over financial reporting was not effective as of such date.

Throughout fiscal 2007, the Company implemented the following improvements or changes to its internal control over financial reporting to effectivelyremediate the material weakness described above:

• the Company is not currently granting any stock option awards, and has not granted any stock option awards since December 2006;

• on February 26, 2007, the Company announced the appointment of Jeffrey R. Binder as President and Chief Executive Officer and a member of theCompany’s Board of Directors;

• on March 30, 2007, Gregory D. Hartman retired as Senior Vice President—Finance, Chief Financial Officer and Treasurer, and Daniel P. Hannretired as Executive Vice President of Administration and a Director of the Company;

• on March 30, 2007, the Company announced the appointment of J. Pat Richardson as Vice President - Finance and Interim Chief Financial Officer

and Treasurer, and on May 14, 2007 the Company announced the appointment of Daniel P. Florin as Senior Vice President and Chief FinancialOfficer to become effective June 5, 2007;

• the Company appointed Bradley J. Tandy as Senior Vice President, General Counsel and Secretary;

• the Company’s current Chief Executive Officer and Interim Chief Financial Officer have met with the key personnel throughout the Company whohave significant roles in the establishment and maintenance of internal control over financial reporting and disclosure controls and procedures toemphasize the Company’s commitment to enhancing the Company’s internal control over financial reporting and disclosure controls andprocedures;

• the Company’s current Chief Executive Officer, current senior management and the Board of Directors are committed to setting the proper tone

regarding internal control over financial reporting and achieving transparency through effective corporate governance, a strong control environment,business standards reflected in Biomet’s Code of Business Conduct and Ethics, and financial reporting and disclosure completeness and integrity;

• the Company’s Human Resources, Legal and Finance departments either have or will, prior to the Company’s resumption of the issuance of stockoption awards, be provided additional training and education designed to ensure that relevant individuals involved in the administration of stockoption grants understand the terms of the Company’s equity-based award plans and the relevant accounting guidance for stock options and othershare-based payments; and

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• the Company’s Human Resources, Legal and Finance departments will develop, prior to the Company’s resumption of the issuance of stock option

awards, formal, documented stock option grant procedures and practices to ensure systematic approval and execution of stock option grants and theproper recording of such grants in the Company’s stock administration records and financial statements.

With the implementation of the above measures and other events occurring throughout fiscal 2007, the Company has improved its internal control over financialreporting and reduced to a remote likelihood the possibility of a material misstatement that would not be prevented or detected related to the material weaknessdescribed above. The Company has, therefore, concluded that the above referenced material weakness in internal control over financial reporting has beenremediated as of May 31, 2007.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted pursuant thereto, the Company included a report ofmanagement’s assessment of the effectiveness of its internal control over financial reporting as of May 31, 2007 as part of this report. The Company’sindependent registered public accounting firm also attested to, and reported on, management’s assessment of the effectiveness of internal control over financialreporting as of May 31, 2007. Management’s report and the independent registered public accounting firm’s attestation report are included on pages 40 and 41,respectively, of this report and are incorporated herein by reference.

(c) Changes in Internal Control. Except as Set forth in part (b) of this Item 9A, Controls and Procedures, during the fourth quarter of fiscal year 2007, there wereno changes in Biomet’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Biomet’s internalcontrol over financial reporting.

Item 9B. Other Information

There was no information to be disclosed in a Current Report on Form 8-K during the fourth quarter of fiscal year 2007 that was not previously reported.

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Item 10. Directors and Executive Officers of the Registrant.

DIRECTORS OF BIOMET

The following information sets forth, with respect to each individual, the name, age as of July 17, 2007, business address and current principal occupation oremployment, and business experience for the past five years of Biomet’s Board.

Jeffrey R. Binder, age 44 Director since 2007Mr. Binder was appointed the President and Chief Executive Officer effective February 26, 2007. Prior thereto, he served as Senior Vice President of DiagnosticOperations of Abbott Laboratories from January 2006 to February 2007. He previously served as President of Abbott Spine from June 2003 to January 2006, andPresident and Chief Executive Officer of Spinal Concepts from 2000 until June 2003. The business address of Mr. Binder is 56 East Bell Drive, Warsaw, Indiana46582.

Chinh E. Chu, age 40 Director since 2007Mr. Chu is a Senior Managing Director of The Blackstone Group, which he joined in 1990. Mr. Chu serves on the board of directors of Celanese AG, FinancialGuaranty Insurance Company, HealthMarkets, Inc., Nalco Holding Company, Nycomed Holdings and SunGard Data Systems Inc. The business address ofMr. Chu is 345 Park Avenue, New York, New York 10154.

Jonathan J. Coslet, age 42 Director since 2007Mr. Coslet has been a Partner of TPG Capital, L.P. since 1993 and is currently a Senior Partner. Mr. Coslet serves on the board of directors of IASIS HealthcareCorp., The Neiman Marcus Group, Inc., J. Crew Group, Inc. and Quintiles Transnational Corp. The business address of Mr. Coslett is 345 California Street, SanFrancisco, California 94101.

Michael Dal Bello, age 36 Director since 2007Mr. Dal Bello has been a Principal in the Private Equity Group of The Blackstone Group since December 2005 and from 2002 until December 2005, he was anAssociate in this group. Mr. Dal Bello serves on the board of directors of Catalent Pharma Solutions, Inc., Montecito Broadcast Group, LLC, Global TowerPartners, Sithe Global Power, LLC, Team Finance LLC and Vanguard Health Systems, Inc. The business address of Mr. Dal Bello is 345 Park Avenue, NewYork, New York 10154.

Sean Fernandes, age 33 Director since 2007Mr. Fernandes joined Goldman, Sachs & Co. in the Financial Institution Group, as an Associate in 2000 and he became a Vice President in 2003. He joined thePrincipal Investment Area in 2007. Mr. Fernandes serves on the board of directors of Signature Hospital LLC. The business address of Mr. Fernandes is 85Broad Street, New York, New York 10004.

C. Scott Harrison, M.D., age 70 Director since 1994Dr. Harrison is the founder, President and Chief Executive Officer of CURE International (non-profit organization). The business address of Dr. Harrison is P.O.Box 2323, Harrisburg, Pennsylvania 17105-2323.

Adrian Jones, age 43 Director since 2007Mr. Jones has been a Managing Director of Goldman, Sachs & Co. since 2002. Mr. Jones serves on the board of directors of Burger King Holdings, Inc.,Education Management Corporation, HealthMarkets, Inc. and Signature Hospital LLC. The business address of Mr. Jones is 85 Broad Street, New York, NewYork 10004.

Michael Michelson, age 56 Director since 2007Mr. Michelson has been a member of the limited liability company that serves as the general partner of Kohlberg Kravis Roberts & Co., L.P. since 1996 andprior thereto, he was a general partner of Kohlberg Kravis Roberts & Co, L.P. Mr. Michelson also serves on the board of directors of Accellent Inc., JazzPharmaceuticals, Inc. and HCA Inc. The business address of Mr. Michelson is 2800 Sand Hill Road, Menlo Park, California 94025.

Dane A. Miller, Ph.D., age 61 Director since 2007Dr. Miller is one of the four founders of Biomet and, from 1977 until 2006, he served as President, Chief Executive Officer and a Director of Biomet. Dr. Millerserves on the board of directors of 1st Source Corporation, ForeTravel, Inc., the Indiana Economic Development Corporation, the University of Chicago HealthSystems and the World Craniofacial Foundation. The business address of Dr. Miller is 700 Park Avenue, Suite G, Winona Lake, IN 46590.

Kenneth V. Miller, age 59 Director since 1979Mr. Miller is a self-employed attorney, venture capitalist and a principal in Havirco (private investment management firm). Mr. Miller is a director and a memberof the Compensation Committee of the Board of Directors of TEAM Industries, Inc. (manufacturer of expanded polystyrene products). Mr. Miller is also amember of the Board of Trustees of Western Michigan University, as well as the Chair of the Advisory Board of Haworth College of Business at WesternMichigan University. In addition, Mr. Miller serves as a director of various charitable and civic organizations. The business address of Mr. Miller is 3505Greenleaf Boulevard, Kalamazoo, Michigan 49008.


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John Saer, age 50 Director since 2007Mr. Saer has been an executive of the limited liability company that serves as the general partner of Kohlberg Kravis Roberts & Co., L.P. since 2001. Mr. Saeralso serves on the board of directors of KSL Holdings Corporation. The business address of Mr. Saer is 9 West 57th Street, New York, New York 10019.

Todd Sisitsky, age 35 Director since 2007Mr. Sisitsky has been a Partner of TPG Capital, L.P. since 2007. From 2003 until 2007, he was an Investor at TPG Capital, L.P. From 2001 until 2003, he was anInvestor/Associate at Forstmann Little & Co. Mr. Sisitsky serves on the board of directors of IASIS Healthcare Corp., Fenwal, Inc., and Surgical Care Affiliates,LLC. The business address of Mr. Sisitsky is 345 California Street, San Francisco, California 94101.

L. Gene Tanner, age 74 Director since 1985Mr. Tanner is Vice Chairman of the Board of NatCity Investments, Inc. (investment banking firm) and a director of the Indiana Chamber of Commerce. Inaddition, Mr. Tanner serves as a director of various charitable organizations. The business address of Mr. Tanner is 101 W. Washington Street, Indianapolis,Indiana 46255.

Each of Messrs. Chu, Coslet, Dal Bello, Fernandes, Jones, Michelson, Saer and Sisitsky is a partner, member or employee of an entity affiliated with one of theinvestment funds that indirectly own all of the equity interests in LVB Acquisition, Inc. (“LVB”) and generally is entitled to be indemnified by such entity for hisservice on Biomet’s Board pursuant to such entities’ governing documents or other arrangements, in each case in accordance with such entities’ policies.

None of the directors (other than Mr. Binder) currently holds any position with Biomet. Except as described below, none of the directors (other than Mr. Binder)or any of his or her affiliates (1) has a familial relationship with any directors or executive officers of Biomet or (2) has been involved in any transactions withBiomet or any of its directors, officers or affiliates which are required to be disclosed pursuant to the rules and regulations of the SEC, except as may bedisclosed herein.

Dr. Miller entered into a Separation, Release and Consultancy Agreement with Biomet on May 8, 2006. Pursuant to the terms of the agreement, Dr. Millerreceived or will receive $4,000,000 on October 1, 2006, $500,000 on November 30, 2006 and $500,000 on the last day of each quarter thereafter through the firstquarter of fiscal year 2010 as compensation for his consulting services. The agreement contains certain restrictive covenants prohibiting Dr. Miller fromcompeting with Biomet and soliciting employees of Biomet during the term of the agreement.

There have been no material changes to the procedures by which shareholders may recommend nominees to Biomet’s Board since August 15, 2006, the date ofBiomet’s Definitive Proxy Statement on Schedule 14A in connection with the 2006 Annual Meeting of Shareholders.

EXECUTIVE OFFICERS OF BIOMET

Information regarding Biomet’s executive officers is included in Part I, Item I of this Annual Report on Form 10-K under the caption “Executive Officers of theRegistrant.”

Audit Committee

The Board has a standing Audit Committee comprised of C. Scott Harrison, M.D., Kenneth V. Miller (Chair) and L.Gene Tanner. Furthermore, the Board hasdetermined that the the Audit Committee consists only of directors who, in the judgment of the Board, are independent within the meaning of The Nasdaq StockMarket listing standards. The Audit Committee and the Board have determined that each of the members of the Audit Committee qualifies as an “auditcommittee financial expert” within the meaning of the rules and regulations of the SEC. The Audit Committee operates pursuant to its charter adopted July 19,2006, a copy of which is available in the Corporate Governance section of Biomet’s website at www.biomet.com.

Code of Business Conduct and Ethics

Biomet has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all of its employees, officers, and directors, including itsChief Executive Officer, Chief Financial Officer and Controller, as well as certain other personnel associated with Biomet. All Biomet team members, includingthe aforementioned individuals and the Board, are required to comply with the Code of Conduct. The Code of Conduct is based on five broad corporate valuesthat shape Biomet’s business practices: (a) Legal/Compliance Obligations, (b) Integrity, (c) Respect for People, (d) Dedication to Quality and (e) Stewardship.The Code of Conduct also includes a procedure for reporting any potential violations of the Code of Conduct and a process for investigating and resolving anypotential violations. A copy of the Code of Conduct is available on Biomet’s website at www.biomet.com or a copy may also be requested free of charge bycontacting Biomet’s Investor Relations Department at Biomet, Inc., P.O. Box 587, Warsaw, Indiana 46581-0587 or at (574) 372-1514.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires Biomet’s directors, executive officers and persons who own more than 10 percent of a registered class of Biomet’sequity securities to file with the 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 bythem.

During the fiscal year ended May 31, 2007, to Biomet’s knowledge, based solely on the review of the copies of such reports furnished to Biomet and writtenrepresentations that no other reports were required, all Section 16(a) filing requirements applicable to its officers, directors and greater-than-ten percent beneficialowners were complied with on a timely basis, except that a Form 4 for each of Messrs. Allen, Haller, Kolter, Schiess, Sasso and Tandy and Ms. Whaley was filedlate on April 10, 2007 to report the exercise of stock options by each of these individuals. The exercise of stock options for each individual occurred on April 5,2007.

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Item 11. Executive Compensation.

Compensation Discussion and Analysis

This section includes information regarding, among other things, the overall objectives of Biomet’s compensation program and each element of compensationthat Biomet provides. The goal of this section is to provide a summary of Biomet’s executive compensation practices and the decisions that Biomet made duringthe 2007 fiscal year concerning the compensation package payable to its executive officers, including the seven executives in the Summary Compensation Table.Each of the seven executives listed in the Summary Compensation Table is referred to herein as a “named executive officer” or “NEO.” This “CompensationDiscussion and Analysis” should be read in conjunction with the detailed tables and narrative descriptions under “Executive Compensation Tables” below.

Compensation and Stock Option Committee and Compensation Methodology

During the 2007 fiscal year, the Compensation and Stock Option Committee of the Board was responsible for administering the compensation and benefitprograms for Biomet’s team members, including the executive officers. Historically, the Compensation and Stock Option Committee annually reviewed andevaluated cash compensation and stock option award recommendations along with the rationale for such recommendations, as well as summary informationregarding the aggregate compensation, provided to Biomet’s executive officers. The Compensation and Stock Option Committee examined theserecommendations in relation to Biomet’s overall objectives and makes compensation recommendations to the Board for final approval. The Compensation andStock Option Committee also historically sent to the Board for approval its recommendations on compensation for the Chairman of the Board and the Presidentand Chief Executive Officer, who do not participate in the decisions of the Board as to their compensation packages. Neither the Chairman of the Board nor thePresident and Chief Executive Officer was a member of the Compensation and Stock Option Committee during the 2007 fiscal year. On July 12, 2007, inaccordance with the provisions of the Merger Agreement, each of Messrs. Jerry L. Ferguson, M. Ray Harroff, Thomas F. Kearns, Jr., Jerry L. Miller, Charles E.Niemier and Niles L. Noblitt and Mses. Sandra A. Lamb and Marilyn Tucker Quayle (collectively, the “Resigning Directors”) submitted a resignation from theBoard and from any committees of the Board (including the Compensation and Stock Option Committee) on which such individuals were a member. Suchresignations were effective July 17, 2007. Also effective on July 17, 2007, and in accordance with the provisions of the Merger Agreement, Messrs. Chinh E.Chu, Jonathan J. Coslet, Michael Dal Bello, Sean Fernandes, Adrian Jones, Michael Michelson, Dane A. Miller, Ph.D., John Saer and Todd Sisitsky(collectively, “LVB’s Designees”) were appointed to the Board to replace the Resigning Directors. None of LVB’s Designees has entered into any employmentagreement or arrangement with Biomet.

Traditionally, Biomet has not hired a compensation consultant to review its compensation practices. In connection with change in control agreements entered intobetween Biomet and certain members of its senior management team, Biomet engaged The Kinsley Group, an independent compensation consultant, primarily toprovide guidance to the Board on the terms of the agreements and relevant practices of the marketplace. The Kinsley Group also provided an evaluation ofBiomet’s compensation practices with respect to the compensation paid to certain members of Biomet’s senior management team and members of the Board.More recently, Biomet has engaged The Kinsley Group to provide a more comprehensive evaluation of Biomet’s compensation practices and to offer additionalresearch capabilities and expertise in designing and operating executive compensation programs. This review is ongoing and has not yet been completed.

Prior to the engagement of The Kinsley Group, the compensation of Biomet’s executives was determined by the Compensation and Stock Option Committeeafter consideration of an informal peer group consisting of some of Biomet’s competitors through publicly available filings, such as proxy statements filed withthe SEC. However, the Compensation and Stock Option Committee did not engage in formal benchmarking during this informal review or in makingcompensation decisions. Among the companies that Biomet used for its informal peer group analysis are:

Stryker Corporation Zimmer Holdings, Inc. Smith & Nephew plcReAble Therapeutics, Inc. Orthofix International N.V. Wright Medical Group, Inc.Exactech, Inc.

Biomet’s executive compensation practices are also affected by the highly competitive nature of the orthopedics industry and the location of Biomet’s executiveoffices in Warsaw, Indiana. The fact that a number of the leading orthopedic manufacturers in the world have significant operations in and around Warsaw,Indiana, means that there are continuing opportunities for experienced orthopedic executives who reside in this area. On the other hand, the fact that Warsaw,Indiana, is a small town in a predominantly rural area can present challenges to attracting executive talent from other industries and parts of the country.

Executive Compensation Philosophy and Objectives

Biomet’s current executive compensation policies and practices reflect the compensation philosophies of Biomet’s founders. Biomet’s executive compensationpractices and policies are designed to help achieve the superior performance of Biomet’s executive officers and management team by accomplishing thefollowing goals:

• Attracting, retaining and rewarding highly-qualified and productive persons;

• Relating compensation to both company and individual performance;

• Establishing compensation levels that are internally equitable and externally competitive; and

• Encouraging an ownership interest and instilling a sense of pride in Biomet, consistent with the interests of Biomet’s shareholders.

Biomet’s compensation methodology is based on the belief that all team members play a critical role in Biomet’s success and, therefore, all team members areeligible to participate in Biomet’s cash and equity compensation plans. Biomet’s compensation methodology is based upon one of its founding philosophies: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 ofteam members, management and shareholders.

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Table of ContentsBased on these objectives, the compensation package of Biomet’s executive officers is intended to meet each of the following three criteria: (1) marketcompetitive - competitive levels with companies of similar size and performance to Biomet, such as the companies discussed above as its informal peer group;(2) performance-based—“at risk” pay that is based on both short- and long-term goals; and (3) shareholder aligned - incentives that are structured to createalignment between the shareholders and executives with respect to short- and long-term objectives.

The Elements of Biomet’s Compensation Program

As a result of Biomet’s compensation philosophies and objectives, the compensation package of Biomet’s executive officers consists of five primary elements:(1) base salary; (2) discretionary annual cash bonuses; (3) stock options; (4) participation in employee benefit plans; and (5) deferred compensation elections.

Base Salary. Consistent with the Compensation and Stock Option Committee’s consideration of Biomet’s informal peer group, Biomet’s practice is to providebase salaries at rates that it believes to be comparable with positions of executives in the orthopedics industry of similar responsibility to Biomet executives andother companies of similar size to Biomet. The Compensation and Stock Option Committee has historically made a recommendation to the Board concerning theappropriate base salary for each executive officer based on Biomet’s performance, the executive officer’s performance, Biomet’s future objectives and challengesand the current competitive environment. Historically the Board has set the base salary for each executive officer at the beginning of each calendar year, afterreceiving a recommendation from the Compensation and Stock Option Committee. In connection with the ongoing comprehensive evaluation of Biomet’scompensation practices by The Kinsley Group, Biomet may redesign certain aspects of its compensation program, which may affect future base salarydeterminations, depending on the results of this evaluation. Presently, Biomet considers its base salaries to be in line with its compensation objectives.

Discretionary Annual Cash Bonuses. Biomet provides the opportunity for all Biomet team members, including members of its senior management team, to earndiscretionary annual cash bonuses. These awards are intended to compensate Biomet team members for contributing to Biomet’s achievement of its financial andoperational goals and, in certain cases, for achieving individual annual performance objectives. Except as described below, the full amount of the potentialdiscretionary annual cash bonus for Biomet’s senior management team, including its NEOs, has historically been determined at the discretion of theCompensation and Stock Option Committee, after considering the recommendation of the President and Chief Executive Officer (other than for himself), andapproved by the Board after the conclusion of each fiscal year. In exercising its discretion, the Compensation and Stock Option Committee primarily hashistorically taken into account the growth in revenues and earnings and market share penetration of the operations for which each executive is responsible orplays a significant role, as well as the goals, objectives, responsibilities and length of service of each executive.

The annual cash bonuses payable to Biomet’s NEOs for the 2007 fiscal year are as follows:

• pursuant to the terms of the employment agreement between Biomet and Mr. Binder dated February 26, 2007, and the terms of the offer letterprovided to Mr. Richardson by Biomet dated March 26, 2007, Messrs. Binder and Richardson will receive bonuses of $162,500 and $24,722, whichrepresent Messrs. Binder’s and Richardson’s target discretionary annual cash bonuses for the 2007 fiscal year, respectively, pro-rated based on theirrespective lengths of service during the 2007 fiscal year;

• pursuant to the separation and retirement agreement dated May 31, 2007 between Biomet and Mr. England, Mr. England will receive either 100% ofhis target bonus if the transactions contemplated by the Merger Agreement are consummated or, if the Merger Agreement is terminated or thetransactions contemplated by the Merger Agreement are not consummated within six months of the effective date of Mr. England’s separation fromBiomet, Mr. England will receive an annual cash bonus payment equal to 94% of his target bonus;

• pursuant to his separation and retirement agreement dated June 6, 2007, Mr. Niemier will receive 100% of his target bonus;

• pursuant to the retirement and consulting agreement dated March 30, 2007 between Biomet and Mr. Hann, subject to certain conditions Biometagreed to pay Mr. Hann $133,333 in full discharge of Mr. Hann’s annual cash bonus for Biomet’s 2007 fiscal year (prior to his retirement onMarch 30, 2007, Mr. Hann had also received, and was permitted to retain, $200,000, which represents 50% of his target annual cash bonus for the2007 fiscal year, which was paid out in December 2006);

• pursuant to the retirement and consulting agreement dated March 30, 2007 between Biomet and Mr. Hartman, Mr. Hartman agreed to forfeit theremaining unpaid portion of his annual cash bonus for Biomet’s 2007 fiscal year (prior to his retirement on March 30, 2007, Mr. Hartman had alsoreceived, and was permitted to retain, $156,000, which represents 50% of his target annual cash bonus for the 2007 fiscal year, which was paid outin December 2006); and

• upon the Compensation and Stock Option Committee’s recommendation, the Board approved an annual cash bonus payment to Mr. van Broeck

equal to 97.5% of his target bonus, which was generally a higher percentage than other executive officers due to Biomet’s European operationsexceeding Biomet’s other significant business units in terms of sales and earnings.

Stock Options. Stock options have always been an element of Biomet’s long-term incentives program. The primary purpose of stock options is to provideexecutive officers and other team members with a personal and financial interest in Biomet’s success through Common Share ownership, thereby aligning theinterests of executive officers and other team members with those of Biomet’s shareholders. Biomet’s broad-based stock option program was intended to furtherBiomet’s goal of motivating outstanding long-term contributions by team members within all levels of Biomet. Biomet’s compensation methodology is basedupon the belief that stock options help to create an entrepreneurial environment within Biomet and instill the spirit of a small company. Additionally, Biomet’scompensation methodology is based upon the belief that stock options provide broad incentives for the day-to-day achievements of all team members in order tosustain and enhance Biomet’s long-term performance.

Stock option awards are based on an individual’s level of responsibility, contribution, length of service and total number of Common Shares owned in relation toother executive officers. All team members are eligible to receive stock options, including all hourly team members of

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Under the stock option plans, options may also be granted to key employees, non-employee directors and distributors, at the discretion of the Compensation andStock Option Committee, and generally become exercisable in annual or biannual increments beginning one or two years after the date of grant in the case ofemployee options and in annual increments beginning at the date of grant for distributor options. The term of each option granted expires within the periodprescribed by the Compensation and Stock Option Committee, but shall not be more than five years from the date the option is granted if the optionee is a 10% ormore shareholder, and not more than ten years for all other optionees. All rights under the options automatically terminate upon the optionee’s separation fromservice with Biomet, unless such separation results from retirement, disability or death.

During the 2005 and 2006 fiscal years, Biomet also granted conditional performance stock option awards, which conditioned the number of Common Sharesearned by the award recipient on Biomet’s shareholder return over a three-year period against Biomet’s informal peer group discussed above. Based on Biomet’sperformance over this three-year period, the recipient could earn between zero Common Shares and 150% of the target number of Common Shares provided forin the conditional performance grant. At the completion of the three-year performance period, the earned option remains exercisable for two years before theoption expires. During the 2007 fiscal year, Biomet did not grant any conditional performance option awards.

As of May 31, 2007, Biomet had two stock option plans with Common Shares available for grant: the Biomet, Inc. 1998 Qualified and Non-Qualified StockOption Plan (the “1998 Plan”) and the Biomet, Inc. 2006 Equity Incentive Plan (the “2006 Plan”). However, in connection with certain limitations placed onBiomet under the Merger Agreement, Biomet is not currently granting stock option awards. Since the terms of the original Merger Agreement provided, and theterms of the Merger Agreement provide, that all unexercised options are cashed out if the transactions contemplated thereby are completed, grants of stockoptions would offer no retentive value to members of senior management. Moreover, upon the closing of the Offer, all outstanding options (each an Option) topurchase Shares under Biomet’s stock plans, vested or unvested, were cancelled and each Option holder was paid an amount in cash equal to the excess, if any,of the Offer Price over the applicable option exercise price for each Share subject to an Option, less any required withholding taxes. For further details regardingthe treatment of stock options in connection with the Offer, refer to the Offer to Purchase, “The Offer—Section 11. Purpose of the Offer and Plans for Biomet;Merger Agreement.” Biomet did not grant stock options to recently hired members of its senior management team, including Messrs. Binder and Richardson, as aresult of the limitations under the original Merger Agreement in effect at the time Biomet hired Messrs. Binder and Richardson. Biomet has agreed, however, tomake certain equity awards to Messrs. Binder and Richardson in the event that the Merger Agreement is terminated. For a description of these agreements, referto “—Employment Agreements and Potential Post-Termination Payments—Employment Agreement with Jeffrey R. Binder” and “— Employment Agreementsand Potential Post-Termination Payments—Offer Letter to J. Pat Richardson” below.

If the transaction contemplated by the Merger Agreement is not consummated, Biomet’s Human Resources, Legal and Finance departments will, prior toBiomet’s resumption of the issuance of stock option awards, be provided additional training and education designed to ensure that relevant individuals involvedin the administration of stock option awards understand the terms of Biomet’s equity-based award plans and the relevant accounting guidance for stock optionsand other share-based payments. In addition, such departments will develop, prior to Biomet’s resumption of the issuance of stock option awards, formal,documented stock option granting procedures and practices to ensure systematic approval and execution of stock option awards and the proper recording of suchgrants in Biomet’s stock administration records and financial statements.

Perquisites. Biomet believes that it has taken a reasonable approach to perquisites relative to other companies in its industry, such as the companies discussedabove as its informal peer group. Biomet’s CEO and other NEOs are generally permitted, when practical, to use company aircraft for business and personal travelfor security reasons. On a case by case basis, Biomet may reimburse executives for social club dues or offer to provide a travel allowance in connection withBiomet-related travel or relocation assistance to certain members of its senior management team who relocate their principal residence at Biomet’s request. Forexample, Biomet may, at times, provide reimbursement of moving expenses, offer protection against a loss on the sale of the executive’s home or provide tax“gross ups” for certain capital gains recognized by executives on the sale of the executive’s home. Typically, however, Biomet does not provide tax “gross ups”on perquisites.

Health and Welfare Benefits. The NEOs receive similar benefits to those provided to all other salaried U.S. employees, such as medical, dental, vision, lifeinsurance and disability coverage.

Post-Termination Compensation and Management Continuity Agreements. As described in further detail below, during the 2007 fiscal year, the NEOs wereprovided arrangements which specified payments in the event the executive’s employment is terminated. The type and amount of payments vary by executivelevel and the nature of the termination. These severance benefits, which are competitive with the companies discussed above as Biomet’s informal peer groupand general industry practices, are payable if and only if the executive’s employment terminates as specified in the applicable plan document or employmentagreement. For more information, refer to “—Employment Agreements and Potential Post-Termination Payments.”

Historically, Biomet did not offer management continuity agreements to members of senior management. During the 2007 fiscal year, however, Biomet engagedThe Kinsley Group to assist with the preparation of and execution of change in control agreements with members of Biomet’s senior management team. Theseagreements were intended to provide for continuity of management in the context of a prospective change in control of Biomet. These agreements were necessaryto reinforce and encourage the continued attention and dedication of members of Biomet’s senior management to their assigned duties without distraction in theface of potentially disturbing circumstances arising from the possibility of a change in control. For certain NEOs, namely Messrs. Hartman, Hann, England andNiemier, original change in control

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Table of Contentsagreements executed with Biomet on September 20, 2006 were subsequently superceded or modified in connection with their retirement. For further informationon the terms of the change in control agreements, refer to “—Employment Agreements and Potential Post-Termination Payments—Change in ControlAgreements” below.

Retirement Plans. Biomet does not sponsor or maintain any pension plans applicable to its U.S.-based NEOs, however, Biomet has defined benefit retirementplans for certain of its foreign subsidiaries, discussed herein as its “foreign pension plans,” which cover certain of its overseas employees. One of these foreignpension plans is applicable to Mr. van Broeck and sponsored by Biomet Europe B.V. (“Biomet Europe”). Biomet Europe provides all employees, whethersalaried or hourly, with the opportunity to build up benefits under pension plans as part of Biomet Europe’s standard conditions for working in the Netherlands inorder to provide a level of retirement benefits competitive with European market conditions. The benefits under this foreign pension plan are generally based onyears of service and a calculation of the employee’s weighted average final base salary. Detailed explanations of these terms and calculations can be found in thenarrative discussion accompanying the Pension Benefits Table. The investment objective is to enable a fixed, guaranteed payout to the employee at the time ofthe employee’s retirement, except, in the case of Mr. van Broeck, for a moderate profit-sharing provision, which may affect him by providing an additionalbenefit based on the collective return of the plan assets. The assets covered by the pension plan are managed by independent investment professionals, however,due to the guaranteed payout, policy holders are relatively unaffected by poor performance and affected only by positive investment returns under theprofit-sharing provision. The net assets of these foreign pension plans did not include any of Biomet’s Common Shares as of April 30, 2007 (the samemeasurement dates used for the 2007 fiscal year with respect to Biomet’s foreign subsidiaries). For information about Mr. van Broeck’s pension benefits, refer tothe Pension Benefits Table in “—Executive Compensation Tables—Retirement And Non-Qualified Defined Contribution And Deferred CompensationPlans—Pension Plans” below.

Biomet’s executive officers are eligible to participate in Biomet’s 401(k) Plan. All team members residing in the United States who are at least 18 years of ageand complete at least 90 days of continuous service or work at least 1,000 hours per year are also eligible to participate in the 401(k) plan. Each year Biomet, inits 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 incash or in Common Shares. All contributions to the 401(k) Plan are allocated to accounts maintained on behalf of each participating team member and, to theextent vested, are available for distribution to the team member or beneficiary upon retirement, death, disability or termination of service. Historically, the 401(k)Plan has purchased Common Shares with Biomet’s matching contribution.

Executive officers have also historically participated in Biomet’s Employee Stock Bonus Plan (the “ESBP”), which was merged into and with Biomet’s 401(k)Plan during the 2007 fiscal year. Under the ESBP, Biomet could make contributions to the ESBP in the form of Common Shares or cash in such amounts, if any,as it determined in its sole discretion, and participating team members could make voluntary contributions to the ESBP in amounts up to 10% of their annualcompensation. Historically, Biomet had made contributions to the ESBP equal to 3% of each team member’s annual base salary, up to the maximum amountpermitted by applicable Internal Revenue Service regulations. The funds accumulated under the ESBP were invested by the trustee primarily in Biomet CommonShares.

In addition, Biomet maintains The Biomet, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), a non-qualified deferred compensation plan,which is available for Biomet’s senior management and members of the Board. The Deferred Compensation Plan allows eligible participants to defer pre-taxcompensation to reduce current tax liability and assist those team members in their planning for retirement and other long-term savings goals in a tax-effectivemanner. Biomet does not make any contributions to the Deferred Compensation Plan. Under the Deferred Compensation Plan, eligible participants may defer upto 100% of their base salary and cash bonus payments, as well as Board fees for non-employee directors, as applicable. Scheduled distributions from the DeferredCompensation Plan are available, and penalty-free, but treated as ordinary income subject to federal and state income taxation at the time of distribution. Exceptin circumstances of hardship, unscheduled withdrawals are not permitted. Amounts contributed to the Deferred Compensation Plan are at the participant’selection and “deemed investments,” which means that the participants have no ownership interest in the investment alternative selected. The participants’deferrals and gains are reflected on Biomet’s financial statements and are unsecured general assets of Biomet. The Deferred Compensation Plan is an unfunded“future promise to pay” on behalf of Biomet. Neither Biomet nor the Deferred Compensation Plan record-keeper provides any guarantee of investment return.Biomet does not pay above-market interest rates on deferred amounts of compensation. For more information, refer to “—Executive CompensationTables—Retirement and Non-Qualified Defined Contribution and Deferred Compensation Plans—Non-Qualified Defined Compensation” below.

Role of Management in Compensation Decisions. The Compensation and Stock Option Committee has historically annually reviewed and evaluatedrecommendations made by the Chairman of the Board and the President and Chief Executive Officer for the executive officers (other than for themselves) alongwith the rationale for such recommendations and the summary information regarding aggregate compensation provided to Biomet’s executive officers. TheCompensation and Stock Option Committee has historically examined these recommendations in relation to Biomet’s overall objectives and makes compensationrecommendations to the Board for final approval. The Compensation and Stock Option Committee also has historically delivered to the Board for approval itsrecommendations on compensation for the Chairman of the Board and the President and Chief Executive Officer, who do not participate in the decisions of theBoard as to their compensation packages. Neither the Chairman of the Board nor the President and Chief Executive Officer was a member of the Compensationand Stock Option Committee during the 2007 fiscal year.

Common Share Ownership Guidelines. In past years, Biomet has not adopted guidelines with respect to its senior management team’s ownership of CommonShares. More recently, the Board has considered adopting such a policy for members of senior management, however, these discussions were discontinued uponexecution of the original Merger Agreement.

Policy with Respect to Deductibility of Compensation Over $1 Million. Section 162(m) of the Internal Revenue Code of 1986 generally limits to $1 million thetax deductibility of annual compensation paid to certain executives named in the Summary Compensation Table. However,

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Table of Contentsperformance-based compensation can be excluded from this limit if it meets certain requirements. The Compensation and Stock Option Committee’s policy is toconsider the impact of Section 162(m) in establishing compensation for Biomet’s senior executives. However, it retains the discretion to establish compensation,even if such compensation is not deductible under Section 162(m), if, in the Compensation and Stock Option Committee’s judgment, such compensation is in thebest interest of Biomet and is reasonably expected to increase shareholder value.

Accounting for Stock-Based Compensation. Biomet adopted SFAS 123(R), “Share-Based Payment,” on June 1, 2006 using the modified prospective method.SFAS 123(R) requires all share-based payments to employees, including stock options, to be expensed based on their fair value over the required award serviceperiod. Biomet uses the straight line method to recognize compensation expense related to share-based payments. In the prior year, Biomet was governed byAccounting Principles Board No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock option awards to employees.

Under the modified prospective method, the provisions of SFAS 123(R) apply to all share-based compensation awards granted or modified on or after Biomet’sdate of adoption of SFAS 123(R), June 1, 2006. For share-based compensation awards granted prior to the date of adoption, the unrecognized expense related tothe unvested portion of such awards at the date of adoption will be recognized in net income under the grant date fair value provisions under SFAS 123(R). TheCompensation and Stock Option Committee reviews and considers the accounting impact of Biomet’s equity awards in recommending the size and terms of suchawards.

For a detailed discussion of stock option awards and their material terms, refer to “—The Elements of Biomet’s Compensation Program—Stock Options” aboveand “—Executive Compensation Tables—Grant of Plan-Based Awards Table” below. For further information about the assumptions Biomet uses in recognizingcompensation expense, refer to footnote (2) to the Summary Compensation Table in “Executive Compensation Tables” later in this section.

Changes in Senior Management During the 2007 Fiscal Year

During the 2007 fiscal year, there were several changes in Biomet’s executive management team. Among other changes, the following events occurred:

• on February 26, 2007, Mr. Binder was appointed President and Chief Executive Officer;

• on March 30, 2007, Mr. Hann retired as Executive Vice President of Administration -prior to his appointment as Executive Vice President of

Administration on February 26, 2007, Mr. Hann had served as Interim President and Chief Executive Officer from March 27, 2006 throughFebruary 26, 2007;

• on March 30, 2007, Mr. Hartman retired as Senior Vice President – Finance, Chief Financial Officer and Treasurer;

• on April 11, 2007, Mr. Richardson was appointed Vice President – Finance and Interim Chief Financial Officer and Treasurer; and

• on May 31, 2007, Mr. England retired as Chief Operating Officer – Domestic Operations.

In addition, on June 5, 2007, Mr. Daniel P. Florin was appointed Senior Vice President and Chief Financial Officer. Mr. Florin did not hold this position as ofMay 31, 2007, the last day of the 2007 fiscal year, and as a result is not considered an NEO under SEC rules for the 2007 fiscal year.

Also, as of May 31, 2007, Mr. Niemier served as Senior Vice President, Biomet, Inc. and Senior Vice President, Biomet International and Corporate Relations.However, on June 6, 2007, Mr. Niemier retired from these positions effective June 18, 2007.

Executive Compensation Tables

Summary Compensation Table

The following narrative, tables and footnotes describe the “total compensation” earned during Biomet’s 2007 fiscal year by Biomet’s NEOs. The totalcompensation presented below does not reflect the actual compensation received by Biomet’s NEOs or the target compensation of Biomet’s NEOs during its2007 fiscal year. The actual value realized by Biomet’s NEOs during its 2007 fiscal year from long-term incentives (options) is presented in the Option Exercisesand Stock Vested Table below.

The individual components of the total compensation calculation reflected in the Summary Compensation Table are broken out below:

Salary. Base salary earned during Biomet’s 2007 fiscal year. Refer to “Compensation Discussion and Analysis—The Elements of Biomet’s CompensationProgram—Base Salary” above for further information concerning this element of Biomet’s compensation program. The terms of their respective employmentagreements govern the base salaries for Messrs. Binder and Richardson.

Bonus. Biomet’s NEOs earned annual incentive bonuses for its 2007 fiscal year. Refer to “Compensation Discussion and Analysis—The Elements of Biomet’sCompensation Program—Discretionary Annual Cash Bonuses” above for further information concerning this element of Biomet’s compensation program.

Stock Awards. The only equity-based compensation that Biomet provided to its NEOs for its 2007 fiscal year was in the form of stock option awards. Forinformation about stock options granted to Biomet’s NEOs, see “Option Awards” immediately below.

Option Awards. The awards disclosed under the heading “Option Awards” consist of grants of stock options awarded under the 1998 Plan. For furtherinformation about Biomet’s stock option programs, refer to “Compensation Discussion and Analysis—The Elements of Biomet’s CompensationProgram—Stock Options” above. In addition, details about option awards made during Biomet’s 2007 fiscal year are included in the Grant of Plan-BasedAwards Table below. The dollar amounts for the awards in the Summary Compensation Table below represent the compensation expense recognized duringBiomet’s 2007 fiscal year under SFAS 123(R) for each NEO. The recognized compensation

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Table of Contentsexpense of the option awards for financial reporting purposes will likely vary from the actual amount ultimately realized by the NEO based on a number offactors. The factors include Biomet’s actual operating performance, Common Share price fluctuations, differences from the valuation assumptions used and thetiming of exercise or applicable vesting.

Non-Equity Incentive Plan Compensation. For the 2007 fiscal year, Biomet did not have any non-equity incentive compensation plans applicable to its NEOs.

Change in Pension Value. Biomet does not sponsor or maintain any pension plans applicable to its U.S.-based NEOs. For Mr. van Broeck, represents theaggregate change in the actuarial present value of the accumulated benefit under his pension plan sponsored by Biomet Europe from April 30,2006 toApril 30,2007 (the same measurement dates used for financial statement reporting purposes with respect to Biomet’s audited financial statements for the 2006and 2007 fiscal years with respect to Biomet’s foreign subsidiaries). For information on Mr. van Broeck’s retirement benefits and certain material features of thepension plan in which he participates, refer to “–Compensation Discussion and Analysis–The Elements of Biomet’s Compensation Program—Retirement Plans”above and “Retirement And Non-Qualified Defined Contribution And Deferred Compensation Plans—Pension Plans” below.

Of Biomet’s NEOs, only Messrs. Hann and England participate in the Deferred Compensation Plan, however, Biomet does not pay above market or preferentialearnings on non-qualified deferred compensation. For information on the Deferred Compensation Plan, refer to “—Compensation Discussion andAnalysis—Retirement Plans.”

All Other Compensation. The amounts included under the All Other Compensation heading represent the sum of: (1) certain perquisites and other personalbenefits; (2) Biomet-paid contributions to retirement plans; (3) Biomet-paid insurance premiums; (4) certain tax reimbursements made by Biomet; and (5) certainother amounts more fully described in footnote (3) to the Summary Compensation Table.

Name andPrincipal Position(1) Year Salary ($) Bonus ($)

OptionAwards (2)

($)

StockAwards

($)

Non-EquityIncentive

PlanCompen-sation ($)

Change inPension

Value andNon-

QualifiedDeferredCompen-

sationEarnings ($)

All OtherCompen-

sation (3) ($) Total($)Jeffrey R. Binder

President and Chief Executive Officer 2007

150,050

162,500

—

—

—

—

71,858

348,408

Daniel P. HannFormer Executive Vice President ofAdministration and Former Interim Presidentand Chief Executive Officer

2007

481,401

333,333

432,519

—

—

—

88,351

1,335,604

J. Pat RichardsonCorporate Vice President-Finance andTreasurer and Former Interim Chief FinancialOfficer

2007

25,834

24,722

—

—

—

—

3,788

54,344

Gregory D. HartmanFormer Senior Vice President-Finance, ChiefFinancial Officer and Treasurer

2007

303,692

156,000

135,535

—

—

—

105,896

701,123

Garry L. EnglandFormer Chief Operating Officer-DomesticOperations

2007

361,173

349,000(4)

205,911

—

—

—

1,521,274

2,437,358

Charles E. NiemierFormer Senior Vice President and FormerSenior Vice President, Biomet Internationaland Corporate Relations

2007

397,583

400,000(4)

160,367

—

—

—

28,442

986,392

Roger van BroeckVice President and President, Biomet Europe

2007

386,741(5)

284,235

119,486

—

—

77,073(5)

68,311

899,846

(1) For further information on the principal positions of Biomet’s NEOs, refer to “—Compensation Discussion and Analysis—Changes in Senior ManagementDuring the 2007 Fiscal Year.”

(2) For each NEO listed in the Summary Compensation Table above, the value reflects the compensation expense recognized by Biomet during the 2007 fiscalyear under SFAS 123(R). The amounts for Messrs. Hann and England reflect the acceleration of unvested stock option awards in connection with theirretirement. For information on the full grant-date fair value of awards granted solely during the 2007 fiscal year, refer the Grant of Plan-Based AwardsTable below and to footnote (1) of the Grant of Plan-Based Awards Table.

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Biomet uses the Black-Scholes option-pricing model to determine the fair value of options to calculate compensation expense. For information about theassumptions used in determining the compensation expense recognized by Biomet during the 2007 fiscal year, refer to Notes B and I to the ConsolidatedFinancial Statements included in this Annual Report on the Form 10-K. For further information about Biomet’s use and adoption of SFAS 123(R), refer to“—Compensation Discussion and Analysis—The Elements of Biomet’s Compensation Program—Accounting for Stock-Based Compensation” above.

(3) The table below presents an itemized account of “All Other Compensation” provided during Biomet’s 2007 fiscal year. Consistent with Biomet’s emphasison performance-based pay, perquisites and other compensation are limited in scope and primarily comprised of retirement benefit contributions andaccruals. For each NEO listed below, the sum of each of the columns reflects the total value included under the All Other Compensation heading in thetable above.

LifeInsurance

Premiums ($) Physical

Exams ($) Retirement PlanContributions ($)

MedicalFlex ($)

SocialClub

Dues ($) Travel

Allowance ($)

PersonalUse of

CompanyAircraft

($)(a) Other ($)

Amountsin

Connectionwith

Retirement($)(b)

Jeffrey R. Binder — — — 146 — — 63,600(c) 8,112(d) — Daniel P. Hann 60 585 14,850 1,100 4,920 7,200 — — 84,363J. Pat Richardson — — — 104 — — — 3,684(e) — Gregory D. Hartman 60 — 14,850 1,350 5,000 — — — 59,636Garry L. England 60 2,318 14,850 1,500 5,844 — 4,500 — 1,492,202Charles E. Niemier 60 2,062 14,850 1,550 4,920 5,000 — — — Roger van Broeck — — 38,811 — — 24,621 (f) — 4,879(g) —

(a) Biomet’s incremental cost for personal use of Biomet aircraft is calculated by multiplying the aircraft’s hourly variable operating cost by a trip’s flighttime, which includes any flight time of an empty return flight. Variable operating costs are based on industry standard rates of Biomet’s variable operatingcosts, including fuel and oil costs, maintenance and repairs, landing/ramp fees and other miscellaneous variable costs. On certain occasions, a spouse orother family member may accompany one of Biomet’s NEOs on a flight. No additional operating cost is incurred in such situations under the foregoingmethodology. Biomet does not pay its NEOs any amounts in connection with taxes on income imputed to them for personal use of Biomet’s aircraft.

(b) For Messrs. Hann and Hartman, the amounts under the Amounts in Connection with Retirement heading includes monthly consulting fees ($41,666 and$29,166, respectively) and monthly health insurance premiums under COBRA ($652 each) that Messrs. Hann and Hartman received for the months ofApril and May 2007 pursuant to retirement and consulting agreements between Biomet and Messrs. Hann and Hartman, respectively, dated March 30,2007. For Mr. England, the amount reflects benefits that Biomet has accrued in respect of his retirement, assuming the transactions contemplated by theMerger Agreement are consummated and such benefits are not forfeited. These benefits consisting of two times base salary and two times target annualcash bonus, each for the 2008 fiscal year and each of $360,000 plus other certain benefits, pursuant to the separation and retirement agreement betweenBiomet and Mr. England dated May 31, 2007. In the case of Messrs. Hann and England, however, these amounts do not include the SFAS 123(R)compensation expense for stock option awards accelerated under the retirement and consulting agreement between Biomet and Mr. Hann dated March 30,2007 or the separation and retirement agreement between Biomet and Mr. England dated May 31, 2007, respectively. These amounts are not included inthis column or under the All Other Compensation heading to the Summary Compensation Table above because the amounts are already reflected in theamounts representing the SFAS 123(R) compensation expense for stock option awards under the Option Awards heading. Similarly, in the case of Messrs.Hann, Hartman and England, these amounts do not include the annual discretionary cash bonuses paid to these individuals because the amounts are alreadyreflected in the amounts representing bonus payments under the Bonus heading to the Summary Compensation Table above. For further informationconcerning these agreements, refer to“—Employment Agreements and Potential Post-Termination Payments—Consulting Arrangements with Gregory D.Hartman and Daniel P. Hann” and “—Employment Agreements and Potential Post-Termination Payments-Retirements of Garry L. England and Charles E. Niemier” below.

(c) Pursuant to the employment agreement between Biomet and Mr. Binder, dated February 26, 2007, Biomet agreed to arrange, at its expense, for Mr. Binderto fly once per week to and from Mr. Binder’s Texas home and Biomet’s headquarters or such other location reasonably specified by Biomet during theterm of the employment agreement. Biomet will not provide Mr. Binder with a “gross up” for taxes incurred in connection with these benefits. If, however,Mr. Binder uses a commercial flight and the income imputed in connection with the commercial flight is greater than the amount that would have beenimputed to Mr. Binder if he had used a Biomet-aircraft, Biomet will provide to Mr. Binder “gross up” for taxes incurred on the incremental incomeassociated with the commercial flight. Biomet’s incremental costs associated with extending these benefits to Mr. Binder are capped at $500,000 in anytwelve-month period. For the purposes of applying this limitation, Biomet’s incremental cost for commercial flights shall be the cost of Mr. Binder’stickets and for flights on Biomet-operated aircraft shall be the incremental per-hour cost associated with Mr. Binder’s flights and other incremental costsrelated to such flights, such as landing fees, transportation and housing costs of aircrew and other similar costs. The amount that appears under thePersonal Use of Company Aircraft heading reflects the amount of this rolling twelve-month allowance that Mr. Binder has used.

(d) Represents the cost to Biomet of providing temporary housing to Mr. Binder in Warsaw, Indiana. In addition, pursuant to the employment agreementbetween Biomet) and Mr. Binder dated February 26, 2007, Biomet agreed to purchase Mr. Binder’s prior residence in Illinois at its appraised value, to bedetermined by an independent appraiser, up to $2,199,000. Furthermore, Biomet agreed to reimburse Mr. Binder for certain capital gains taxes, if any,incurred as a result of the sale of Mr. Binder’s prior residence. As a result of the independent appraisal, Biomet purchased Mr. Binder’s prior residence forsignificantly less than the maximum amount and Mr. Binder has not recognized any gain on the sale of his prior residence. The amount paid by Biomet toMr. Binder is not reflected in the amount shown in the table above for Mr. Binder under the All Other Compensation heading. In addition, because Mr.Binder recognized a loss on the sale of his house, Biomet has not paid any “gross up” amounts to Mr. Binder in connection with the sale of his house.Also, pursuant to the employment agreement between Biomet and Mr. Binder dated February 26, 2007, Biomet agreed to reimburse Mr. Binder up to$1,320,000 if Mr. Binder is required to pay his former employer in connection with the termination of his previous employment. As of May 31, 2007,Biomet had not paid any amounts under this provision of the employment agreement, however, it is expected that Biomet may make payments to Mr.Binder’s prior employer under this provision during the 2008 fiscal year.


(e) Represents the cost to Biomet of providing temporary housing to Mr. Richardson in Warsaw, Indiana.

(f) Represents the cost to Biomet of providing a car to Mr. van Broeck.

(g) Represents the Biomet-paid portion of Mr. van Broeck’s government mandated health and wellness expense.

In addition to the foregoing compensation, NEOs also participated in health and welfare benefit programs, including vacation and medical, dental, prescriptiondrug and disability coverage. These programs are generally available and comparable to those programs provided to all U.S. salaried employees.

(4) For Messrs. England and Niemier, represents an annual cash bonus for the 2007 fiscal year equal to 100% of their target bonus for the 2007 fiscal yearpursuant to the terms of the change in control agreements between Biomet and Messrs. England and Niemier, respectively. The amount is contingent uponthe consummation of the transactions contemplated by the Merger Agreement. If the Merger Agreement is terminated or the transactions contemplated bythe Merger Agreement are not consummated within six months of the effective date of each executive’s separation from Biomet, the annual cash bonuspayable to Messrs England and Niemier for the 2007 fiscal year will be reduced from 100% of their target annual bonus for the 2007 fiscal year to 94% ofbase salary, which represents a reduction of $20,940 and $24.000, respectively.

(5) For the purposes of the Summary Compensation Table above, to calculate Mr. van Broeck’s annual base salary and change in pension value in U.S.dollars, Biomet used, a currency conversion rate of 1 Euro to $1.3447, which represents the currency exchange rate from Euros to U.S. dollars on June 1,2007 as published in The Wall Street Journal.

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Table of ContentsGrant of Plan-Based Awards Table

During 2007, Biomet granted stock options to its NEOs under the 1998 Plan. Information with respect to each of these awards on a grant-by-grant basis is setforth in the table below. Fair market value under the 1998 Plan is defined as the closing price of the Common Shares as reported by The Nasdaq Stock Market orby any national securities exchange on which Common Shares may be traded. For additional discussion of Biomet’s stock option plans and certain material termsof Biomet’s stock option awards, refer to “Compensation Discussion and Analysis—The Elements of Biomet’s Compensation Program—Stock Options.”

All stock option awards to Biomet’s NEOs during the 2007 fiscal year were made such that the exercise price of the awards is equal to the closing price ofBiomet’s Common Shares on the date of grant.

Name Grant Date

All Other Option Awards:Number of Securities

Underlying Options (#)

Exercise of BasePrice of OptionAwards ($/Sh)

Grant-Date Fair Valueof Stock and Option

Awards(1) ($)Jeffrey R. Binder(2)

— — — — Daniel P. Hann — — — — J. Pat Richardson(3)

— — — — Gregory D. Hartman(4)

October 9, 2006 25,000 33.19 288,250Garry L. England(5)

October 9,

2006 25,000 33.19 288,250Charles E. Niemier(5)

October 9,

2006 50,000 33.19 576,500Roger van Broeck

October 9,

2006 25,000 33.19 288,250

(1) For each NEO listed in the Grant of Plan-Based Awards Table above, the value reflects the full grant-date fair value calculated under SFAS 123(R) solelyfor awards granted during the 2007 fiscal year. The fair value of the stock option awards for financial reporting purposes likely will vary from the actualamount ultimately realized by the NEO based on a number of factors. These factors include Biomet’s actual operating performance, Common Share pricefluctuations, differences from the valuation assumptions used and the timing of exercise or applicable vesting.

(2) Pursuant to an employment agreement dated February 26, 2007 between Biomet and Mr. Binder, if the Merger Agreement is terminated, Mr. Binder willbe granted an equity award after such termination and annually thereafter (if still employed) commencing after May 31, 2008. For further informationabout this equity award and Mr. Binder’s employment agreement, refer to “—Employment Agreements and Potential Post-TerminationPayments—Employment Agreement with Jeffrey R. Binder” below. If the transaction contemplated by the Merger Agreement is consummated,Mr. Binder will not receive this benefit; although it is expected that Mr. Binder will receive an equity award following the consummation of the transactioncontemplated by the Merger Agreement (although such award is still subject to negotiation and discussion).

(3) In the event that the Merger Agreement is terminated, Mr. Richardson will be entitled to equity awards that are commensurate with his position withBiomet. For further information about this equity award and the offer letter provided to Mr. Richardson, refer to “—Employment Agreements andPotential Post-Termination Payments—Offer Letter to J. Pat Richardson” below. If the transaction contemplated by the Merger Agreement isconsummated, Mr. Richardson will be granted an equity interest in Biomet or one of its affiliates pursuant to an equity incentive plan (although such awardis still subject to negotiation and discussion). Mr. Richardson’s equity interest in the new Biomet entity will be commensurate with his position withBiomet.

(4) For further information on stock options granted to Mr. Hartman during Biomet’s 2007 fiscal year, see footnote (7) to the Outstanding Equity Awards atFiscal Year-End table immediately below.

(5) For further information on stock options granted to Messrs. England and Niemier during Biomet’s 2007 fiscal year, see footnote (10) to the OutstandingEquity Awards at Fiscal Year-End table immediately below.

Outstanding Equity Awards at Fiscal Year-End Table

Biomet has awarded stock options to members of its senior management and other Biomet team members throughout Biomet. The terms of these awardstypically provide for vesting over a defined period of time. Awards listed in the table below, other than the conditional performance stock option awards,generally have an eight-part vesting schedule in which the first of the eight installments vests on the one-year anniversary of the grant date. Each subsequentone-eighth installment thereafter vests on the anniversary of the grant date for the next seven years. For information on the vesting schedule of the unvestedportions of outstanding equity awards listed below, refer to footnote (2) to the table below. Each installment, however, has a two year lifespan with respect toexercise and therefore each installment will expire if not exercised two years from the date that the particular installment vests.

For further information on Biomet’s stock option awards and their material terms, refer to “—Compensation Discussion and Analysis—The Elements ofBiomet’s Compensation Program—Stock Options.” For information about stock option awards granted solely during the 2007 fiscal year, refer to “—Grant ofPlan-Based Awards Table.”

In addition, during Biomet’s 2005 and 2006 fiscal years, the Compensation and Stock Option Committee granted conditional performance stock options tocertain of Biomet’s executive officers, with the exception of the Chairman of the Board who has never received stock option awards. The actual number ofCommon Shares available for exercise by each executive officer with respect to these conditional performance stock option awards will be determined by acalculation based on the performance of Biomet’s Common Shares in comparison to the performance of its informal peer group over a three-year time period. Asa result, the actual number of Common Shares granted may vary from zero Common Shares to 150% of the number of target Common Shares stated in theconditional performance stock option award. Biomet did not grant any conditional performance stock option awards during the 2007 fiscal year. In addition, ofBiomet’s NEOs, only Messrs. England, Niemier and van Broeck had outstanding conditional performance stock option awards as of May 31, 2007. For theamounts of these conditional performance stock option awards that remain outstanding, refer to Equity Incentive Plan Awards: Number of Securities UnderlyingUnexercised Unearned Options heading in the table below. For a detailed discussion of these conditional performance stock option awards and their materialterms, refer to “Compensation Discussion and Analysis—The Elements of Biomet’s Compensation Program—Stock Options.”


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Table of ContentsThe following table shows the equity awards granted to Biomet’s NEOs, which are comprised of a mix of the conditional performance stock option awards andthe time-based vesting stock option awards (vested and unvested), that were outstanding as of the end of Biomet’s 2007 fiscal year. In connection with theclosing of the Offer, all outstanding options, each an Option, to purchase Shares under Biomet’s stock plans, vested or unvested, were cancelled and each Optionholder was paid an amount in cash equal to the excess, if any, of the Offer Price over the applicable option exercise price for each Share subject to an Option, lessany required withholding taxes.

OPTION AWARDS

Name

Number ofSecurities Underlying

Unexercised Options (#)Exercisable(1)

Number ofSecurities Underlying

Unexercised Options (#)Unexercisable(2)

Equity Incentive Plan Awards:Number of Securities

Underlying UnexercisedUnearned Options (#)(3)

Option ExercisePrice ($)(4)

Option ExpirationDate(5)

Jeffrey R. Binder(6) — — — — —

Daniel P. Hann (7) 4,000 — — 24.0000 7/17/2007 1,875 — — 20.8333 1/16/2009 3,750 — — 29.0933 7/05/2008 2,500 — — 28.8800 7/09/2008 3,750 — — 43.7100 6/28/2008 25,000 — — 34.3200 3/23/2009 — — 75,000(8) 34.3200 — — — 2,500(8) 41.6000 1/02/2010 — — 3,750(8) 34.5800 6/28/2010

J. Pat Richardson(9) — — — — —

Gregory D. Hartman(7) 4,000 — — 24.0000 7/17/2007 1,875 — — 20.8333 1/16/2009 3,750 — — 29.0933 7/05/2008 2,500 — — 28.8800 7/09/2008 3,750 — — 43.7100 6/28/2008

Garry L. England(10) 4,000 — — 24.0000 7/17/2007 1,875 1,875(a) — 20.8333 1/16/2011 3,750 11,250(b) — 29.0933 7/05/2011 2,500 6,250(c) — 28.8800 7/09/2013 3,750 11,250(d) — 43.7100 6/28/2014 1,875 13,125(e) — 36.8800 1/01/2016 — 25,000(f) — 33.1900 10/8/2016 — — 18,000(11) 41.6000 1/02/2010 — — 53,000(11) 34.5800 6/28/2010

Charles E. Niemier(10) 4,000 — — 24.0000 7/17/2007 1,875 1,875(a) — 20.8333 1/16/2011 3,750 11,250(b) — 29.0933 7/05/2011 2,500 6,250(c) — 28.8800 7/09/20113 3,750 11,250(d) — 43.7100 6/29/2014 — 50,000(f) — 33.1900 10/8/2016 — — 12,000(12) 41.6000 1/02/2010 — — 32,000(12) 34.5800 6/28/2010

Roger van Broeck 938 1,875(a) — 20.8333 1/16/2011 — 11,250(b) — 29.0933 7/06/2011 — 6,250(c) — 28.8800 7/09/2013 3,750 11,250(d) — 43.7100 6/28/2014 — 25,000(f) — 33.1900 10/8/2016 — — 9,000(13) 41.6000 1/02/2010 — — 21,000(13) 34.5800 6/28/2010

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Table of Contents

(1) On an award-by-award basis, the number of Common Shares underlying unexercised options that are exercisable and that are not reported in Column3—”Number of Securities Underlying Unexercised Unearned Options.”

(2) On an award-by-award basis, the number of Common Shares underlying unexercised options that are unexercisable and that are not reported inColumn 3—“Number of Securities Underlying Unexercised Unearned Options.” In connection with the transactions contemplated by the MergerAgreement, all of these outstanding unvested equity awards will be accelerated and cashed out. The vesting schedules of the outstanding unvestedequity awards are listed below:

(a) Represents the outstanding unvested portion of the original option granted on January 17, 2001. The remaining unvested portion of the original awardvests in increments of 938 Common Shares and 937 Common Shares on January 17, 2008 and January 17, 2009, respectively.

(b) Represents the outstanding unvested portion of the original option granted on July 6, 2001. The remaining unvested 3/4 of the original award vests in 1/ 4increments annually with the next segment vesting on July 6, 2007.

(c) Represents the outstanding unvested portion of the original option granted on July 10, 2003. The remaining unvested 5/8 of the original award vests in 1/8increments annually with the next segment vesting on July 10, 2007.

(d) Represents the outstanding unvested portion of the original option granted on June 29, 2004. The remaining unvested 6/8 of the original award vests in 1/8increments annually with the next segment vesting on June 29, 2007.

(e) Represents the outstanding unvested portion of the original option granted on January 2, 2006. The remaining unvested 7/8 of the original award vests in1/8 increments annually with the next segment vesting on January 2, 2008.

(f) Represents the outstanding unvested portion of the original option granted on October 9, 2006. The original award is unvested in full and vests in 1/8increments annually beginning on October 9, 2007.

(3) On an award-by-award basis, the total number of Common Shares underlying unexercised options awarded under any equity incentive plan thathave not been earned.

(4) The exercise price for each option, as it was recorded in the stock option award at the time of grant, is reported in Columns 1 and 2—”Number ofSecurities Underlying Unexercised Options” and Column 3—”Number of Securities Underlying Unexercised Unearned Options.”

(5) Represents the final expiration date for each option award reported in Columns 1 and 2—”Number of Securities Underlying Unexercised Options” andColumn 3—”Number of Securities Underlying Unexercised Unearned Options.” However, the option awards reported in Columns 1 and 2 generally vestin equal installments over an eight year period. Once vested, each vested option must be exercised within two years. For information on the vestingschedule of unvested portions of outstanding option awards, see sub-footnotes (a)-(f) of footnote (2) above.

(6) For further information on equity awards that may be awarded to Mr. Binder pursuant to his employment agreement, refer to footnote (2) to the Grant ofPlan-Based Awards Table above and “—Employment Agreements and Potential Post-Termination Payments—Employment Agreement with Jeffrey R.Binder” below.

(7) Pursuant to the terms of severance and consulting agreements dated March 30, 2007 between Biomet and Messrs. Hartman and Hann, respectively,Messrs. Hann and Hartman have agreed that, with respect to misdated or mispriced stock option awards granted to Messrs. Hartman or Hann which havevested but not yet been exercised, the exercise price of such unexercised stock option awards will be increased to the fair market value of Biomet’sCommon Shares on the measurement date applicable to such award. Furthermore, Messrs. Hartman and Hann have agreed that, with respect to misdated ormispriced stock option awards which had previously been exercised, Messrs. Hartman and Hann would at a future date remit to Biomet an amount equal tothe excess, if any, of the fair market value of Biomet’s Common Shares on the measurement date for such award over the exercise price of such award.Lastly, except for the option to purchase 75, 000 Common Shares granted to Mr. Hann in March 2006 (of the unvested option to purchase 175, 000Common Shares awarded to Mr. Hann in March 2006) which immediately vested in connection with Mr. Hann’s severance and consulting agreement,Messrs. Hartman and Hann have each agreed to immediately terminate and forfeit any unvested stock option awards and that no options would beaccelerated as a result of their retirement. As a result, on March 30, 2007, Messrs. Hann and Hartman agreed to immediately terminate and forfeit unvestedoptions to purchase approximately 164, 000 and 89, 000 Common Shares respectively, awards which otherwise would have been reflected in the tableabove.

(8) The option to purchase 75, 000 Common Shares has vested and is discussed further in footnote (7) immediately above; however, pursuant to the consultingand retirement agreement between Biomet and Mr. Hann dated March 30, 2007, the proceeds from this option will be held by Biomet and will bedistributable to Mr. Hann upon completion of the consulting arrangement provided that Biomet has not otherwise terminated the consulting arrangement.As a result, this option award appears in Column 3. For information on the retirement and consulting agreement, refer to “—Employment Agreements andPotential Post-Termination Payments—Consulting Arrangements with Gregory D. Hartman and Daniel P. Hann” below.

(9) For further information on equity awards that may be awarded to Mr. Richardson pursuant to his offer letter, refer to footnote (3) to the Grant ofPlan-Based Awards Table above and “—Employment Agreements and “—Employment Agreements and Potential Post-Termination Payments—OfferLetter to J. Pat Richardson.”


(10) Pursuant to the terms of the separation and retirement agreements between Biomet and Messrs. England and Niemier dated May 31, 2007 and June 6,2007, respectively, Messrs. England and Niemier have agreed that, with respect to misdated or mispriced stock option awards granted to them, which havevested, but not yet been exercised, the exercise price of such unexercised stock option awards will be increased to the fair market value of Biomet’sCommon Shares on the measurement date applicable to such award. Furthermore, Messrs. England and Niemier have agreed that, with respect to misdatedor mispriced stock option awards which had previously been exercised, Messrs. England and Niemier would, at a future date, remit to Biomet an amountequal to the excess, if any, of the fair market value of Biomet’s Common Shares on the measurement date for such award over the exercise price of suchaward. Messrs. England and Niemier will also receive accelerated vesting of certain previously unvested equity awards and all vested, unexercised equityawards will be exercisable in accordance with the terms of each award until the earliest of (1) the award’s expiration date, (2) the fifth anniversary of theseparation date or (3) the date that the award is cashed out in a change in control event.

(11) Represents conditional performance stock option awards that were granted to Mr. England during the 2005 and 2006 fiscal years. As of May 31, 2007,these awards remained unearned and unexercisable. However, pursuant to the terms of the separation and retirement agreement between Biomet andMr. England dated May 31, 2007, these conditional performance stock option awards have accelerated and, therefore, these conditional performance stockoption awards are currently exercisable. The acceleration of these conditional performance stock option awards resulted in Mr. England earning the targetamount specified in the conditional performance stock option awards.

(12) Represents conditional performance stock option awards that were granted to Mr. Niemier during the 2005 and 2006 fiscal years. As of May 31, 2007,these awards remained unearned and unexercisable. However, pursuant to the terms of the separation and retirement agreement between Biomet andMr. Niemier dated June 6, 2007, these conditional performance stock option awards have accelerated and, therefore, these conditional performance stockoption awards are currently exercisable. The acceleration of these conditional performance stock option awards resulted in Mr. Niemier earning the targetamount specified in the conditional performance stock option awards.

(13) Represents conditional performance stock option awards that were granted to Mr. van Broeck during the 2005 and 2006 fiscal years. As of May 31, 2007,these awards remained unearned and unexercisable. The amount shown in the table assumes that Mr. van Broeck earns the target amount specified in theconditional performance stock option awards.

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Table of ContentsOption Exercises and Stock Vested Table

The following table shows the equity awards that were exercised by Biomet’s NEOs during the 2007 fiscal year.

Option Awards

Name Number of Shares

Acquired on Exercise (#) Value Realized onExercise ($) (1)(2)

Jeffrey R. Binder — — Daniel P. Hann

January 12, 2007 938 19,573J. Pat Richardson — — Gregory D. Hartman

June 28, 2006June 28, 2006January 12, 2007

1,2504,500

938

3,27591,62519,573

Garry L. EnglandJanuary 12, 2007 938 19,573

Charles E. NiemierJuly 7, 2006September 26, 2006January 12, 2007

1,2504,500

938

3,17597,02519,573

Roger van BroeckAugust 31, 2006August 31, 2006August 31, 2006August 31, 2006

937579

1,2503,750

11,1282,2184,788

13,563

(1) Value realized is calculated on the basis of the difference between the exercise price and the closing price of Biomet’s Common Shares as reported on theNASDAQ Global Select Market on the date of exercise, multiplied by the number of Common Shares underlying the options exercised. This value isirrespective of whether the NEO sold the Common Shares upon exercise or continued to hold the Common Shares.

(2) The value realized upon the exercise of stock option awards for Messrs. Hann, Hartman, England and Niemier may not represent the actual benefit theseindividuals ultimately receive from the option awards as a result of agreements between Biomet and these individuals. Pursuant to these agreements,Messrs. Hann, Hartman, England and Niemier agreed to remit to Biomet, an amount equal to the excess, if any, of the fair market value of Biomet’sCommon Shares on the measurement date for such award over the exercise price of such award with respect to misdated or mispriced stock option awardswhich had previously been exercised. For further information about the agreements between Biomet and Messrs. Hann, Hartman, England and Niemier,refer to footnotes (7) and (10) to the Outstanding Equity Awards at Fiscal Year-End Table above and “—Employment Agreements and PotentialPost-Termination Payments” below.

Retirement And Non-Qualified Defined Contribution And Deferred Compensation Plans

Pension Plans

Biomet does not sponsor or maintain any pension plans applicable to its U.S.-based NEOs. Of Biomet’s NEOs, only Mr. van Broeck, who is based in theNetherlands, is a participant in a foreign pension plan sponsored by Biomet Europe. Biomet Europe provides all employees based in Europe, whether salaried orhourly, with the opportunity to build up benefits under pension plans as part of Biomet Europe’s standard conditions for working in the Netherlands in order toprovide a level of retirement benefits competitive with European market conditions. Biomet Europe provides employees with pension benefits beginning after thecompletion of twelve consecutive months of employment with Biomet Europe. Once this minimum condition is met, however, the employee is credited withaccrued time of service for the first twelve months of employment.

Under the foreign pension plan applicable to Mr. van Broeck, the basic contribution is a fixed premium to which he contributes 7% of his annual base salary andBiomet Europe contributes the remainder. Bonus is not included for the purposes of pension calculations or contributions. Certain employees are affected by amaximum pensionable salary condition, which imposes a cap on the amount of salary used for calculations that affect certain amounts, such as premiums andbenefits. The benefits provided under this foreign pension plan are based on the following formula:

“years of service” x 1.75% x “final salary”

Under this foreign pension plan, “years of service” is calculated on a monthly basis from the date corresponding to the date that the employee first signed acontract with the plan provider providing the underlying coverage, which is meant to correspond to the first day of the employee’s employment at BiometEurope. The maximum number of years of credited service is 40 years. Biomet Europe does not allow additional years of service credits to be granted toemployees under this plan. For the purpose of the benefits formula, the calculation presumes the employee accrues 40 years of credited service and then the valueis adjusted downward, if necessary.

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Table of ContentsIn addition, under this foreign pension plan, “final salary” is calculated as the average of the employee’s base salary over the last five calendar years subject tothe maximum pensionable salary of 175,000 Euros.

Benefits under the plan are provided to the employee in a lump sum following retirement, unless the employee elects to purchase an annuity, which in operationprovides a monthly retirement allowance. The benefits are payable only at normal retirement age and the plan contains no provisions allowing early retirementthat would not result in a reduction in benefits. Normal retirement age under the plan is age 65.

The benefits provided by this foreign pension plan provide a guaranteed payout, which is intended to be based on the targeted annual payout of an annuitypurchased at the time of retirement. Mr. van Broeck joined this plan in 1998, which provides for him to receive a guaranteed payout in the amount of 609,094Euros on September 1, 2013.

Pension Benefits Table

The following table describes the estimated actuarial present value of accrued pension benefits through the end of Biomet’s 2007 fiscal year for each of the NEOslisted in the table. The calculation of actuarial present value is generally consistent with the methodology and assumptions outlined in Biomet’s audited financialstatements, except that the calculation does not assume an average salary increase of 3.0%, a discount rate of 4.9% or an inflation rate of 2% because Mr. vanBroeck’s salary is frozen for the purposes of the pension plan and because the payout amount is guaranteed. In addition, the calculation presumes an implied rateof return on the plan assets during the 2007 fiscal year of 4.0%. The expected rate of return on the plan assets is 4.9%, as assumed in conjunction with thepreparation of Biomet’s audited financial statements. The actuarial present value of benefits is calculated in accordance with the following assumptions:(1) assumed retirement age: 65; (2) no pre-retirement decrements; and (3) assumed form of payment: lump sum. The actuarial increase during Biomet’s 2007fiscal year of the projected retirement benefits can be found in the Summary Compensation Table under the “Change in Pension Value and Non-QualifiedDeferred Compensation Earnings” heading (for Mr. van Broeck, the amount reported under that heading represents actuarial increases in Mr. van Broeck’s plan).

Name Plan Name Number of Years of

Credited Service (#)(2)

Present Value ofAccumulatedBenefit ($)(3)

Payment DuringLast Fiscal Year ($)(4)

Jeffrey R. Binder — — — — Daniel P. Hann — — — — J. Pat Richardson — — — — Gregory D. Hartman — — — — Garry L. England — — — — Charles E. Niemier — — — — Roger van Broeck Biomet Europe Pension Plan* 9 504,329 38,811

* The English translation of the plan’s proper name, Biomet Europe Pensioenplan

(1) Mr. van Broeck participates in the Biomet Europe Pension Plan, which is sponsored by Biomet Europe.

(2) Mr. van Broeck’s nine years of accrued service under the Biomet Europe Pension Plan, started in 1998 with BioMer C. V., which was a joint venturebetween Biomet, Inc. and Merck KGaA, and then later with Biomet Europe, the successor company to BioMer C.V. Prior to 1998, Mr. van Broeck waswith Biomet in different positions in different countries for which he did not carry over any build up of pension benefits to his current pension plan.

(3) For Mr. van Broeck, represents the actuarial present value of the accumulated benefit under the Biomet Europe Pensioenplan, which was computed as ofApril 30, 2007, which is the same pension plan measurement date used for financial statement reporting purposes with respect to Biomet’s auditedfinancial statements for the fiscal year ended May 31, 2007. For the purposes of the Pension Benefits Table above, to calculate the actuarial present valueof Mr. van Broeck’s accumulated benefit in U.S. dollars, Biomet used a currency conversion rate of 1 Euro to $1.3447, which represents the currencyexchange rate from Euros to U.S. dollars on June 1, 2007 as published in The Wall Street Journal.

(4) For Mr. van Broeck, represents the annual premium contributed to the Biomet Europe Pension Plan after Mr. van Broeck’s contribution of 7% of hisannual base salary.

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Table of ContentsNon-Qualified Deferred Compensation

The Deferred Compensation Plan is a non-qualified deferred compensation plan, which is available for members of Biomet’s senior management and membersof the Board. The Plan allows eligible participants to defer pre-tax compensation to reduce current tax liability and assist those team members in their plan forretirement and other long-term savings goals in a tax-effective manner. Under the Plan, eligible participants may defer up to 100% of their base salary and bonuspayments, as well as Board fees for non-employee Directors, as applicable. Biomet does not make any contributions to the Plan. For further information on theDeferred Compensation Plan, refer to “—Compensation Discussion and Analysis—The Elements of Biomet’s Compensation Program—Retirement Plans.”

During the 2007 fiscal year, only Messrs. Hann and England participated in the Deferred Compensation Plan. Biomet does not pay above-market or preferentialearnings on non-qualified deferred compensation.

Name

ExecutiveContributions in

Last FY ($)(1)

RegistrantContributions in

Last FY ($)(2) Aggregate Earnings

in Last FY ($)(3)

AggregateWithdrawals/

Distributions ($) Aggregate Balance

at Last FY ($)(4)

Jeffrey R. Binder — — — — — Daniel P. Hann 116,052 — 36,926 — 289,303J. Pat Richardson — — — — — Gregory D. Hartman — — — — — Garry L. England 81,175 — 52,072 — 344,646Charles E. Niemier — — — — — Roger van Broeck _ _ _ _ _

(1) The amounts shown in this column are reported in amounts included in the Summary Compensation Table under the Base Salary heading.

(2) Biomet does not make any contributions to the Deferred Compensation Plan.

(3) The amounts shown in this column are not reported in the Summary Compensation Table because Biomet does not pay above-market or preferentialearnings on deferred compensation.

(4) The amounts shown in this column primarily represent amounts consisting of: (a) contributions by Messrs. Hann and England from prior fiscal years ofeach’s own compensation and (b) any at-market and non-preferential earnings on the accumulated balance.

Employment Agreements and Potential Post-Termination Payments

Biomet historically did not provide NEOs with employment agreements, with the exception of unique circumstances or if such agreements were customary inforeign countries. Of the current NEOs, Biomet has an employment agreement with Mr. Binder and has provided an offer letter to Mr. Richardson. In addition,Biomet has entered into Retirement and Consulting Agreements with Messrs. Hartman and Hann and Separation and Retirement Agreements with Messrs.Niemier and England.

Furthermore, on September 20, 2006, Biomet entered into change in control agreements with certain of its then current executive officers. With respect to certainof Biomet’s NEOs, namely Messrs. Hann, Hartman, England and Niemier, these change in control agreements were subsequently superceded or modifiedrespectively in connection with such NEO’s retirement, as described in more detail below. In addition, in connection with the employment agreement betweenBiomet and Mr. Binder and the offer letter provided to Mr. Richardson, Biomet subsequently entered into change in control agreements with Messrs. Binder andRichardson.

In addition, on September 21, 2006, Biomet adopted the Biomet, Inc. Executive Severance Pay Plan, which provides each participating Biomet executive withseverance benefits in the event of certain terminations of the executive’s employment. The following narrative describes the terms of these various agreementsand the Severance Plan.

Employment Agreement with Jeffrey R. Binder

On February 26, 2007, Biomet entered into an employment agreement with Mr. Binder to become President and Chief Executive Officer of Biomet. Pursuant tothe terms of the agreement between Biomet and Mr. Binder, the agreement has an initial three-year term that provides for automatic twelve-month extensions,beginning on January 1, 2010, unless either Biomet or Mr. Binder gives prior notice of termination. Mr. Binder will receive a base salary at a rate no less than$650,000 per year, which shall be adjusted at the discretion of Biomet. Mr. Binder will also have the opportunity to earn an annual cash bonus in an amount noless than 100% of his base salary for on-target performance with the possibility of exceeding 100% for high achievement.

If Mr. Binder is required to pay his former employer in connection with the termination of his employment, Biomet will reimburse him for the amount of suchpayment up to $1,320,000 (the “Make Whole Bonus”). Mr. Binder is required to pay such amount to Biomet if, prior to February 26, 2009, Mr. Binder terminateshis employment other than for “good reason”, which generally includes any demotion, assignment of duties inconsistent with his position or a reduction in basesalary or Biomet terminates his employment for “cause”, which generally includes failure to substantially perform his duties, conviction of a crime involvingdishonesty or unappealable regulatory sanction related to his employment, material violation of a material written Biomet policy, material breach of theemployment agreement, failure to cooperate with reasonable Biomet or governmental investigation or inquiries or willfully acting to injure Biomet. For furtherinformation, please refer to Mr. Binder’s agreement, previously filed with the SEC. This repayment obligation lapses with respect to 25% of the Make WholeBonus for each six month period of

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Table of Contentsemployment after the date of the agreement. In addition, pursuant to the employment agreement between Biomet and Mr. Binder, in connection with therelocation arrangement provided for in the employment agreement, Biomet agreed to purchase Mr. Binder’s prior residence in Illinois at its then prevailing value,to be determined by an appraiser mutually agreeable to both parties, up to $2,199,000. Furthermore, Biomet agreed to reimburse Mr. Binder for certain capitalgains taxes, if any, incurred as a result of the sale of Mr. Binder’s prior residence. As a result of the independent appraisal, Biomet purchased Mr. Binder’s priorresidence for less than the maximum amount and Mr. Binder has not recognized any gain on the sale of his prior residence.

As a result of Mr. Binder’s spending weekends at his home in Austin, Texas, Biomet has agreed to arrange at its expense for Mr. Binder to fly (using commercialand corporate aircraft) once per week to and from his Texas home and Biomet’s headquarters. Biomet will not “gross up” Mr. Binder for taxes incurred inconnection with this benefit and Biomet’s incremental costs associated with extending this benefit. However, if Mr. Binder uses a commercial flight and theincome imputed in connection with the flights is greater than the amount imputed if Mr. Binder had used a Biomet aircraft, Biomet will provide a “gross up” toMr. Binder for taxes on the incremental income associated with the commercial flight. Biomet’s incremental costs associated with extending these benefits forMr. Binder are capped at $500,000 in any twelve-month period.

If the Merger Agreement is terminated, Mr. Binder will be granted an equity award after such termination and annually thereafter (if still employed) commencingafter May 31, 2008, each with a nominal value of no less than $3,500,000 on the date of each grant. Each award would vest in five equal installments on the firstfive anniversaries of the grant date. Biomet’s Compensation and Stock Option Committee will have the discretion as to the form of this benefit, expected to be50% in stock options and 50% in restricted stock or restricted stock units. Biomet’s Compensation and Stock Option Committee will also have the discretion togrant up to four-sevenths of each annual equity award in the form of restricted stock or restricted stock units the vesting of which will be contingent on theachievement of performance goals mutually agreed upon by the Compensation and Stock Option Committee and Mr. Binder. If the transaction contemplated bythe Merger Agreement is consummated, Mr. Binder will not receive this benefit; although it is expected that Mr. Binder will receive an equity award followingthe consummation of the transaction contemplated by the Merger Agreement (although such award is still subject to negotiation and discussion).

The agreement provides that Mr. Binder could be entitled to certain severance benefits following termination of employment. If he is terminated by Biomet forany reason other than for cause or disability, or if Mr. Binder terminates his employment for good reason, he would be entitled to the following:

• An amount equal to (a) 1.5 times his base salary in effect at the date of termination (the “Base Component”), plus (b) 1.5 times the average of (x) theannual incentive bonus earned by Mr. Binder for the prior year and (y) the annual incentive bonus Mr. Binder would have received for the currentyear if his employment had not been terminated, based on Biomet’s performance to the date of termination extrapolated through the end of thecurrent year (the “Bonus Component”, and together with the “Base Component”, the “Severance Benefit”). The total amount of the SeveranceBenefit will be paid in equal, ratable installments in accordance with Biomet’s regular payroll policies over the course of the 18 month non-competeperiod provided for in the agreement. If Mr. Binder becomes employed by another employer during that period, the Bonus Component will ceaseand the Severance Benefit will be limited to the Base Component;

• If Mr. Binder is eligible for and elects continuation coverage pursuant to COBRA, Biomet will pay the premiums for such coverage (or reimburse

Mr. Binder for such premiums) during the 18 month period during which, under the employment agreement, Mr. Binder agrees not to engage incertain activities in competition with Biomet;

• Continued payment of Mr. Binder’s company-provided car allowance, if any, for a period of 12 months from the termination date;

• All outstanding options granted to Mr. Binder by Biomet (including the annual equity awards described above) on any Common Shares, that wouldhave vested in the ordinary course within 12 months after the termination date if his employment had not been terminated will become immediatelyvested and exercisable (to the extent not yet vested and exercisable) as of the termination date and all vested options shall remain exercisable untilthe earlier of (x) the expiration of their original term or (y) 18 months from the date of termination. As of June 1, 2007 Mr. Binder had nooutstanding options. To the extent not otherwise provided under the written agreement, if any, evidencing the grant of any restricted CommonShares to Mr. Binder, all such outstanding Common Shares that have been granted to Mr. Binder subject to restrictions that would have lapsed in theordinary course within 12 months after the termination date if his employment had not been terminated will vest automatically upon the terminationdate, and Mr. Binder will become the owner of such Common Shares free and clear of all such restrictions. As of June 1, 2007 Mr. Binder had norestricted Common Shares. Biomet shall pay Mr. Binder an additional $1,000,000 in a cash lump sum if, and only if, a termination described aboveoccurs prior to grant by Biomet to Mr. Binder of his first annual equity award and prior to the consummation of the transaction contemplated by theMerger Agreement. Such payment, if any, shall be made upon the termination of Mr. Binder’s employment.

Mr. Binder will not be eligible to receive the above severance benefits at a time he would also be entitled to benefits under the change in control agreementdescribed below if his employment were terminated by Biomet without “cause” or by Mr. Binder for “good reason” (each as defined in the change in controlagreement, described below). To receive the severance benefits provided under the agreement, Mr. Binder must sign a general release of claims. The agreementcontains customary confidentiality, non-competition and non-solicitation provisions. Mr. Binder’s non-competition period is for 18 months after his termination.

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Table of ContentsIf Mr. Binder is terminated due to Mr. Binder’s death or disability, Mr. Binder is entitled to receive the following:

• His base salary in effect through date of termination;

• A pro-rated portion (based on the percentage of Biomet’s fiscal year preceding the date of termination) of the average of (x) the annual incentivebonus earned by Mr. Binder for the prior year and (y) the annual incentive bonus Mr. Binder would have received in the current year if hisemployment had not been terminated, based on the Company’s performance to the date of termination extrapolated through the end of the currentyear; and

• Biomet shall pay to Mr. Binder, or his estate, as applicable, as they come due, any “Accrued Benefits” (as defined in the agreement).

If Mr. Binder is terminated with “cause” or without “good reason” (each as defined in the agreement) Biomet will pay Mr. Binder the base salary in effectthrough the termination date and any “Accrued Benefits” (as defined in the agreement) when due.

Offer Letter to J. Pat Richardson

On March 30, 2007, Biomet announced the appointment of J. Pat Richardson as Corporate Vice President–Finance and Interim Chief Financial Officer andTreasurer effective April 11, 2007. Pursuant to an offer of employment between Biomet and Mr. Richardson, Mr. Richardson receives, among other benefits, abase salary of $250,000 per year, an opportunity to earn an annual bonus of 60% of base salary for on-target performance, a car allowance, and other customarybenefits. In addition, subject to compliance with applicable state and federal securities laws, and subject to closing of the Merger Agreement, Mr. Richardson willbe granted an equity interest in Biomet or one of its affiliates pursuant to an equity incentive plan commensurate with his position at Biomet (although suchaward is still subject to negotiation and discussion). In the event that the Merger Agreement is terminated, Mr. Richardson will be entitled to equity awardsissued by the Compensation and Stock Option Committee that are commensurate with his position at Biomet. The option will be subject to the terms andconditions applicable to options granted under the 2006 Plan, as described in the 2006 Plan and the applicable stock option award. The exercise price perCommon Share will be equal to the fair market value per Common Share on the date the option is granted. Further, if Mr. Richardson is terminated for anyreason within the first three years of employment, he is required to repay Biomet his relocation costs. This repayment obligation lapses with respect to 33% ofthis relocation cost for each year of employment after the date of the agreement.

Change-in-Control Agreements

On September 20,2006, Biomet entered into change in control agreements with its then current executive officers, including Messrs. England, Hann, Hartman,Niemier and van Broeck. The agreements were intended to provide for continuity of management in the context of a prospective change in control of Biomet,which is generally defined as a change in the majority of the Board, not including any new Board member approved by the majority of the Board, any personbecoming the beneficial owner of 20% or more of the outstanding shares of Biomet, any reorganization, merger, sale of all or substantially all of Biomet’s assetsor similar corporate transaction or approval by the shareholders of a complete liquidation of Biomet. For additional information, see the change in controlagreements previously filed with the SEC. Upon a change in control, including as may occur in connection with the transactions contemplated by the MergerAgreement, the agreements remain in effect for a period of at least 24 months beyond the month of such change in control. Each agreement provides that duringthe 24-month period following a change in control, Biomet agrees to continue to employ the executive and the executive agrees to remain in the employ ofBiomet. In connection with the retirement of Messrs. Hann and Hartman on March 30, 2007, Messrs. Hann and Hartman entered into severance and consultingagreements with Biomet which supercede the earlier September 20, 2006 change in control agreements. For further information, refer to “—ConsultingArrangements with Gregory D. Hartman and Daniel P. Hann” below. In connection with the separation and retirement agreements of Messrs. Niemier andEngland dated June 6, 2007 and May 31, 2007, respectively, their respective change in control agreements were modified. For further information, refer to“—Retirement of Garry L. England and Charles E. Niemier” below.

In connection with the execution of the employment agreement with Mr. Binder and Mr. Richardson’s offer letter, Biomet entered into change in controlagreements with Messrs. Binder and Richardson. The agreements are intended to provide for continuity of management of Biomet in the event of a change incontrol other than the proposed Merger Agreement and related transactions with LVB and Purchaser, which are exempted from the agreements. The terms of theagreements are substantially the same as the terms of the agreements entered into on September 20, 2006, which are described above except that the change incontrol agreements with Messrs. Binder and Richardson automatically terminate and are cancelled immediately prior to the closing of the transactionscontemplated by the Merger Agreement.

Under the change in control agreements, if, following a change in control, certain executives die or are terminated by Biomet for any reason other than for“cause”, which is generally defined as willful failure to substantially perform the executive’s duties, willfully engaging in conduct injurious to Biomet orconviction of a felony, or disability, or by the executives for “good reason”, generally defined as any demotion, assignment of duties inconsistent with their title,relocation, any failure to pay or provide benefits to the executive (for more information, please see the agreements on file with the SEC) the executives would beentitled to: (1) a lump sum severance payment equal to two times (or, in the case of Mr. Binder, three times and Mr. Richardson, one times) the sum of theexecutive’s annual base salary, target bonus (or, in certain circumstances, the executive’s annual bonus earned during a specified time period), annual Biometcontributions to all qualified retirement plans on behalf of the executive and the executive’s total annual car allowance; (2) the executive would receive a payoutof his unpaid annual base salary, the higher of the executive’s target bonus for the fiscal year in which termination occurs or the actual bonus paid to theexecutive for the fiscal year preceding termination and other accrued compensation and benefits through the end of the fiscal year containing the terminationdate; (3) Biomet would pay the executive a lump sum cash stipend equal to 24 times (or, in the case of Mr. Richardson, 18 times) the monthly premium thencharged for family coverage under Biomet’s medical and dental plans and (4) the executive would receive life insurance and long-term disability benefits, or thecash equivalent if not available, substantially similar to those that the executive is receiving immediately prior to the notice of termination for a 24-month period(or, in the case of Mr. Richardson, a 12-month period) after the date of termination. Further, all outstanding stock options granted to the executive would becomeimmediately vested and exercisable and all restrictions on restricted stock

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Table of Contentsawards would lapse, unless otherwise provided for under the option award. The change in control agreements also provide for the reimbursement ofoutplacement services for a period of 12 months after termination occurs, but not in excess of $25,000.

In the event an “anticipatory termination” (as defined in the agreements) occurs, the executive would receive the sale benefits as they would in a terminationwithout “cause” (as defined in the agreements) and all options or other stock awards terminated as a result of their anticipatory termination that were forfeited orwould have vested had the termination originally been deemed a termination without cause shall be reinstated or the executive will be paid the fair value of suchawards in cash. The executive is also entitled to receive $25,000 in liquidated damages.

In the event that any payments made to the executives in connection with a change in control and termination of employment would be subject to excise taxesunder the Internal Revenue Code, Biomet will “gross up” the executive’s compensation to offset certain of such excise taxes.

Severance benefits, other than the life insurance and long-term disability benefits, are generally not subject to mitigation or reduction. To receive the severancebenefits provided under the agreements, the executive must sign a general release of claims. In connection with the execution of the agreements, each executiveexecuted a customary confidentiality, non-competition and non-solicitation agreement with Biomet.

Severance Pay Plan

On September 21, 2006, Biomet adopted the Biomet, Inc. Executive Severance Pay Plan for the executives party to the change in control agreements describedabove. The Severance Plan provides each participating Biomet executive with severance benefits in the event of a termination of the executive’s employmentunrelated to the executive’s (1) performance of his employment duties or (2) commission of an act or acts outside of the scope of his employment duties thatwould constitute the basis of a termination for cause under his agreement.

Severance benefits under the Severance Plan generally consist of the following: (1) payment of a pro-rata target bonus (based on the elapsed portion of the yearof termination) in a lump sum; (2) continued payment of base salary for 52 weeks plus one week per full year of service at Biomet, up to a maximum of 78 weeksfollowing the termination date; (3) immediate vesting of all of the executive’s outstanding equity awards (stock options and restricted stock); (4) at Biomet’sexpense, continuation of coverage under Biomet health insurance plans pursuant to COBRA for a period not to exceed eighteen months from the terminationdate; and (5) continuation of any Biomet-provided car allowance for a period of twelve months from the termination date.

As a condition to receiving severance benefits under the Severance Plan, the executive must execute a waiver and release of claims in favor of Biomet and enterinto to a customary confidentiality, non-competition and non-solicitation agreement with Biomet. Severance benefits under the Severance Plan are generallyintended to be the sole source of severance benefits payable upon a termination of the executive’s employment and are generally not subject to mitigation orreduction. Biomet may amend or terminate the Severance Plan at any time. In the event the executive is entitled to benefits under the change in control agreementas a result of a termination of employment, such executive is not entitled to receive benefits under the Severance Plan.

Management Arrangements

LVB has informed Biomet that it currently intends to retain members of Biomet’s management team following the Offer and Merger. LVB has also informedBiomet that it may offer current and former members of management the opportunity to convert all or a portion of their current equity interests in Biomet into, orotherwise invest on terms that are no more favorable than the other investors in, equity in LVB (and/or a subsidiary thereof). Further, LVB has informed Biometthat it intends to establish equity-based incentive compensation plans for management of the surviving corporation, a portion of which is likely to be allocated toBiomet’s executive officers. The size of such equity-based incentive compensation plans has not yet been determined and no awards have yet been made orpromised to Biomet’s current executive officers. It is anticipated that equity awards granted under these incentive compensation plans would generally vest overa number of years of continued employment and would entitle management to share in the future appreciation of the surviving corporation.

Although certain members of Biomet’s current management team may enter into new arrangements with LVB or its affiliates regarding employment (andseverance arrangements) with, and the right to purchase or participate in the equity of, LVB (and/or a subsidiary thereof), there can be no assurance that anyparties will reach an agreement. These matters are subject to negotiation and discussion and no terms or conditions have been finalized. Any new arrangementsare currently expected to be entered into at or prior to the completion of the Merger and would not become effective until the time the Merger is completed.

Although no arrangement has been made as of the date of this Annual Report on Form 10-K, LVB has informed Biomet that it expects to offer Mr. Binder,Biomet’s President and Chief Executive Officer, the opportunity to serve on the boards of directors of LVB and the surviving corporation following the purchaseof Common Shares in the Offer, which boards of directors are expected to include at least eleven other members prior to completion of the Merger.

Although LVB has not indicated whether it plans to terminate any of Biomet’s executive officers, the following table shows the amount of potential cash payable(both accrued obligations and severance) to Biomet’s executive officers as of June 1, 2007, pursuant to the change in control agreements, based on an assumedtermination date of June 1, 2007. The table also shows the cost to Biomet of continuing coverage and other benefits under Biomet’s group health, dental,disability and life insurance plans and the estimated tax “gross up” payments to each such officer. Although the calculations are intended to provide reasonableestimates of the potential benefits, they are based on numerous assumptions and do not represent the actual amount an executive would receive if an eligibletermination event were to occur.

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Table of ContentsPotential Payments Upon Certain Terminations

This table shows the potential compensation that Biomet would have to pay to certain named executive officers upon a termination following a terminationwithout “cause” or with “good reason” (as defined in the applicable agreements) related or unrelated to a change in control, death or disability related orunrelated to a change in control, an “anticipatory termination” (as defined in the applicable agreements) in connection with a change in control or terminationwith “cause” or without “good reason” (as defined in the applicable agreements). The table excludes certain amounts payable pursuant to plans that are availablegenerally to all salaried employees. In the event of the death or disability of one of the NEOs listed in the following table, the deceased or disabled NEO, or hisdesignated beneficiaries, would receive a payment pursuant to the terms of Biomet-funded life or disability plans, respectively. The amounts shown assume thattermination of employment was effective June 1, 2007. The amounts shown are only estimates of the amounts that would be payable to the executives upontermination of employment and do not reflect tax positions Biomet may take or the accounting treatment of such payments. Actual amounts to be paid can onlybe determined at the time of separation. Although the calculations are intended to provide reasonable estimates of the potential benefits, they are based onnumerous assumptions and do not represent the actual amount an executive would receive if an eligible termination event were to occur.

Termination in Connection with a Change in

Control(1) Termination in Absence of a Change in Control

Name of ExecutiveOfflcer(2)(3)

Terminationwithout

Cause orwith Good

Reason AnticipatoryTermination Disability Death(7)

Terminationwithout

Cause orwith Good

Reason

Terminationwith Causeor without

GoodReason Disability Death

Jeffrey R. Binder Estimated Value of

AccruedObligations $ 5,437,800(4) $ 5,462,800(5) $ 1,327,425(6) $ 5,412,800(4) $ 2,125,075(8) $ 164,281(9) $ 165,394(10) $ 165,394(10)

Estimated Value ofOptions &AwardsPayments 1,000,000(11) — — 1,000,000(11) 1,000,000(11) — — —

Estimated Value ofBeneflts(12) 16,202 16,202 632,418 16,202 12,013 — 623,201 —

Total 6,454,002 5,479,002 1,950,843 6,429,002 3,137,088 164,281 788,595 165,394

J. Pat Richardson Estimated Value of

AccruedObligations 941,445(4) 966,445(5) 483,070(6) 916,445(4) 310,853(13) 35,567(9) 310,853(13) 310,853(13)

Estimated Value ofOptions &AwardsPayments — — — — — — — —

Estimated Value ofBeneflts(12) 16,202 16,202 602,491 16,202 11,736 — 614,010 11,736

Total 957,647 982,647 1,085,561 932,647 322,589 35,567 924,863 322,589

Roger van Broeck(15) Estimated Value of

AccruedObligations 2,387,544(4) 2,412,554(5) 953,008(6) 2,362,554(4) 892,476(13) 249,295(9) 892,476(13) 892,476(13)

Estimated Value ofOptions &AwardsPayments 814,326(14) 814,326(14) — 814,326(14) 814,326(14) — 814,326(14) 814,326(14)

Estimated Value ofBeneflts(12) 9,757 9,757 742,421 9,757 7,318 — 744,860 7,318

Total 3,211,637 3,236,367 1,695,429 3,186,637 1,714,120 249,295 $ 2,451,662 $ 1,714,120

(1) In connection with the execution of the employment agreement with Mr. Binder and Mr. Richardson’s offer letter, Biomet entered into change in controlagreements with Messrs. Binder and Richardson, however the proposed Merger Agreement and related transactions with LVB and Purchaser are exemptedfrom the agreements.

(2) In connection with the retirement of Messrs. Hann and Hartman on March 30, 2007, Biomet entered into severance and consulting agreements with them.These severance and consulting agreements supersede the earlier change in control agreements between Biomet and Messrs. Hann and Hartman datedSeptember 20, 2006. For more information concerning these arrangements, refer to “—Consulting Arrangements with Gregory D. Hartman and Daniel P.Hann” immediately below.

(3) On May 31, 2007 and June 6, 2007, respectively, Biomet entered into separation and retirement agreements with Messrs. England and Niemier. Theseseparation and retirement agreements modify the earlier change in control agreements between Biomet and Messrs. England and Niemier datedSeptember 20, 2006. For further information concerning the terms of the separation and retirement agreements between Biomet and Messrs. England andNiemier, refer to “—Retirements of Garry L. England and Charles E. Niemier” below.

(4) Represents the sum of: (a) the executive’s annual base salary and car allowance from the date of termination occurred, (b) the higher of the executive’starget bonus for the fiscal year in which termination occurs or the actual bonus paid to the executive for the fiscal year preceding termination, (c) theamount the executive would have received during the fiscal year in additional employer contributions to Biomet tax-qualified plans (d) any unpaid accruedvacation or other accrued compensation (e) the total car allowance to the executive for the calendar year immediately preceding the year the change incontrol occurred and (f) amounts payable for nonqualified deferred compensation plan plus the amount equal to the product of one (for Mr. Richardson),two (for Mr. van Broeck) or three (for Mr. Binder) times (a) the executive’s annual base salary and car allowance from the date of termination through theend of Biomet’s fiscal year in which such termination occurred, (b) the highest of the executive’s target bonus for the fiscal year in which terminationoccurs or the highest actual bonus paid to the executive for the fiscal year (for Mr. Richardson), two years (for Mr. van Broeck) or three years (forMr. Binder) preceding termination, minus any amounts paid pursuant to any other contractual arrangement with the executive or plan providing coverageto the executive as a result of the termination (c) total contributions (other than salary reduction contributions) made by Biomet on behalf of the executive


for the calendar year immediately preceding the year in which the change in control occurs and (d) the total car allowance to the executive for the calendaryear immediately preceding the year the change in control occurred paid as a lump sum. It also includes the maximum $25,000 payable by Biomet foroutsourcing services to the executive and, for Mr. van Broeck only, the amount of payments to the pension plan in which Mr. van Broeck participates byBiomet.

(5) Represents the same payments as are due as described in footnote 4 of this table, with the addition of a $25,000 liquidated damages payment.

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(6) Represnt the sum of: (a) the executive’s annual base salary and car allowance from the date of termination through the end of Biomet’s fiscal year in whichsuch termination occurred, (b) the higher of the executive’s target bonus for the fiscal year in which termination occurs or the actual bonus paid to theexecutive for the fiscal year preceding termination, (c) the amount the executive would have received during the fiscal year in additional employercontributions to Biomet tax-qualified plans (d) any unpaid accrued vacation or other accrued compensation and (e) the total car allowance to the executivethrough the end of the calendar year in which the change of control occurred paid in a lump sum. For Mr. van Broeck only, this amount also includes theamount of payments to the pension plan in which Mr. van Broeck participates. For a further description of this plan see “Executive Compensation -Compensation Discussion and Analysis” above.

(7) If the executive’s death occurs before a “change in control” (as defined in the agreements) occurs, then there are no payments under the change in controlagreements. If the executive’s death occurs after the “change in control” (as defined in the Agreements) occurs and within the term of the change in controlagreements the executive receives what they would if they were terminated without cause.

(8) Represents 1.5 times Mr. Binder’s base salary plus 1.5 times the average of the previous year’s bonus and the what current year’s bonus would be based onBiomet’s current performance extrapolated through the end of the fiscal year paid in accordance with Biomet’s regular payroll policies over the course of18 months, as well as twelve months of Mr. Binder’s applicable car allowance.

(9) Represents base salary through the termination date and any unpaid accrued benefits, if applicable.

(10) Represents payments under Mr. Binder’s employment agreement including unpaid base salary through the termination date and a pro-rated portion of theaverage of the previous year’s bonus and what the current year’s bonus would be based on Biomet’s current performance extrapolated through the end ofthe fiscal year and any accrued benefits owed to the executive.

(11) Represents the lump sum payment due Mr. Binder under the terms of his change of control agreement or employment agreement, as applicable.

(12) Represents the cost to Biomet of continuing coverage and other benefits under Biomet’s group health, dental, disability and life insurance plans, andcertain other benefits to each such officer under the terms of the applicable agreements or plans. Such coverage is under the same terms as available to allBiomet salaried employees. The disability amounts include the present value of the benefits payments the executives would receive after their disabilityunder the disability plan discounted at 10%.

(13) Represents the payments under the Severance Plan for Messrs. Richardson and van Broeck, assuming the “eligible employee” criteria is met, for salarycontinuation for a number of weeks equal to 52 plus one week per year of service, up to a maximum of 78 weeks and applicable car allowance for oneyear, all paid out over the applicable periods in accordance with Biomet’s standard payroll practices; as well as a pro-rated portion of the executive’s targetbonus for the year in which the termination occurred.

(14) Represents the intrinsic value under SFAS 123(R) of unexercised stock option awards as of June 1, 2007 (including unvested options).

(15) For the purposes of the table above, to calculate Mr. van Broeck’s amounts Biomet used a currency conversion rate of 1 Euro to $1.3447, which representsthe currency exchange rate from Euros to U.S. dollars on June 1,2007 as published in The Wall Street Journal.

Consulting Arrangements with Gregory D. Hartman and Daniel P. Hann

On March 30, 2007, Gregory D. Hartman retired as Senior Vice President—Finance, Chief Financial Officer and Treasurer, and Daniel P. Hann retired asExecutive Vice President of Administration and as a Biomet director. In order to ensure a smooth transition of business operations and financial matters, Messrs.Hartman and Hann agreed to serve as consultants to Biomet pursuant to severance and consulting agreements. These agreements discharged any other severanceobligations that Biomet may have had with respect to Messrs. Hartman and Hann, including pursuant to their change of control agreements with Biomet datedSeptember 20,2006. Pursuant to Mr. Hartman’s agreement, Mr. Hartman will be eligible to receive $29,166 per month during a six month consulting term. Inaddition, Mr. Hartman will be eligible to receive $325,000 upon completion of the six month consulting term if the transactions contemplated by the MergerAgreement have been consummated at a price not less than $44.00 per Common Share and the consulting arrangement has not otherwise been terminated.Mr. Hartman will also be reimbursed for insurance premiums he incurs as a result of his election to continue his health insurance coverage under COBRA at acost to Biomet of $3,912. Biomet may terminate the consulting arrangement without any further payments or obligations to Mr. Hartman if the transactionscontemplated by the Merger Agreement have been terminated or are consummated at a price less than the price currently set forth in the proposed MergerAgreement as a result of Biomet’s review of historical stock option granting practice; or if Biomet determines that Mr. Hartman has not adequately performed hisconsulting duties under the contract or has failed to cooperate with the SEC in connection with Biomet’s review of historical stock option granting practices.Mr. Hartman agreed to customary claims releases, waivers, confidentiality and non-compete terms.

Pursuant to Mr. Hann’s agreement, Mr. Hann will be eligible to receive $41,666 per month during a twelve-month consulting term. In addition, Mr. Hann isentitled to receive $133,333 in respect of his bonus for Biomet’s 2007 fiscal year and will be eligible to receive $400,000 upon completion of the twelve-monthconsulting term if the consulting arrangement has not otherwise been terminated. Mr. Hann will also be reimbursed for insurance premiums he incurs as a resultof his election to continue his health insurance coverage under COBRA, at a cost to Biomet of $7,824. Furthermore, 75,000 options granted to Mr. Hann inMarch 2006 (of the 175,000 unvested options awarded to Mr. Hann in March 2006) were immediately vested in connection with Mr. Hann’s retirement andconsulting agreement, the intrinsic value of which, as of June 1, 2007, equaled $720,750. Biomet refers to these accelerated options as the “CEO Options.” TheCEO Options, or the proceeds therefrom, will be held by Biomet and will be distributable to Mr. Hann upon completion of the consulting arrangement providedthat Biomet has not otherwise terminated the consulting arrangement. Biomet may terminate the consulting arrangement without any further payments orobligations to Mr. Hann, other than the non-competition payments described below, if the proposed Merger Agreement has been terminated or is consummated ata price less than $44.00 per Common Share as a result of Biomet’s review of historical stock option granting practices; or if Biomet determines that Mr. Hann hasnot adequately performed his consulting duties under the contract or has failed to cooperate with the SEC in connection with Biomet’s review of historical stockoption granting practices.


Lastly, Mr. Hann has agreed not to compete with Biomet during the period beginning on the effective date of his agreement and extending for a period of sixmonths following the expiration or termination of his consulting arrangement. In exchange, Biomet has agreed to make a $50,000 per month payment toMr. Hann during the six month non-competition period. Mr. Hann also agreed to customary claims releases, waivers, and confidentiality terms.

Retirements of Garry L. England and Charles E. Niemier

Garry L. England retired as Chief Operating Officer—Domestic Operations, effective May 31, 2007. Charles E. Niemier retired as Senior Vice President,Biomet, Inc. and Senior Vice President, Biomet International and Corporate Relations effective June 18, 2007. Mr. Niemier has remained with Biomet as a Classin member of the Board.

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Table of ContentsPursuant to the terms of the separation and retirement agreements between Biomet and Messrs. England and Niemier, both Messrs. England and Niemier beganreceiving payments and benefits under the Severance Plan as of their respective separation dates. Each of Messrs. England and Niemier will receive 100% oftheir annual bonus for the fiscal year ended May 31, 2007, totaling $349,000 and $400,000, respectively, if the transactions contemplated by the MergerAgreement are consummated. If the Merger Agreement is terminated or the transactions contemplated by the Merger Agreement are not consummated within sixmonths of the date of separation of Mr. England the annual bonus payable will be reduced from 100% to 94% of base salary, totaling $328,060 and Mr. Niemierwill receive 100% of his annual bonus. In lieu of his car allowance, Mr. Niemier received full ownership of the car he used under his car allowance, at anapproximate value of $12,000. Mr. England will receive his car allowance for 12 months, costing Biomet approximately $12,575. Messrs. England and Niemierare also entitled to receive 78 weeks of salary continuation at their base salaries as of termination, totaling $549,000 and $630,000, respectively. Messrs. Englandand Niemier are entitled to payment of their health and insurance premiums for 72 weeks, at a cost to Biomet of $15,436 for each. Biomet also agreed toaccelerate the vesting of certain unvested options held by Messrs. England and Niemier and that such options would be exercisable until the earlier of theirapplicable expiration date or five years from the date of separation, the intrinsic value of which, as of June 1, 2007, was approximately $1,435,611 and$1,392,191, respectively. Mr. England is also entitled to reimbursement of his annual country club dues for 2007 and 2008, not to exceed $5,000 per year.Mr. Niemier is entitled to retain the computer, mobile phone and mobile phone number provided to him by Biomet, valued at approximately $1,700, however allongoing costs of their operation are to be borne by Mr. Niemier. In the event a change of control does not occur within six months of Mr. Niemier’s date ofseparation, Mr. Niemier shall receive two times his base salary plus the higher of his target bonus or the highest annual incentive bonus earned by Mr. Niemierduring the last two complete fiscal years immediately preceding Mr. Niemier’s separation date (annualized in the event Mr. Niemier was not employed byBiomet for the whole of any such fiscal year) plus total contributions (other than salary reductions contributions) made by Biomet to all qualified retirement planson behalf of Mr. Niemier in the previous calendar year and the total car allowance for the previous year minus the amounts already paid under the Severance Planfor salary continuation and car allowance the cost of which would be approximately $1,472,042 to Biomet. Pursuant to the terms of these separation andretirement agreements, Messrs. England and Niemier have agreed to customary claims releases, waivers, confidentiality and non-compete terms.

If an applicable change in control event occurs, such as the completion of the transactions contemplated by the Merger Agreement, within six months of the dateof Mr. Niemier’s and Mr. England’s respective separation and retirement agreements (or in the case of Mr. Niemier only, upon the expiration of the six-monthperiod following his separation date if a change in control event does not occur during this period), Messrs. England and Niemier will no longer receive thepayments and benefits under the Severance Plan, but will receive certain payments and benefits under the change in control agreements with Biomet datedSeptember 20, 2006. Notwithstanding the express terms of the change in control agreements, both Messrs. England and Niemier have agreed to (1) forego anypayments or benefits provided in the change of control agreements equal to the compensation continued through the end of the year in which the executive isterminated, the vesting of outstanding options and restricted stock, reimbursement for outplacement costs, and the $25,000 in liquidated damages for an“anticipatory termination” (as defined in the agreement), of the change in control agreements and (2) reduce the payment of two times (a) the executive’s annualbase salary and car allowance from the date of termination through the end of Biomet’s fiscal year in which such termination occurred, (b) the highest of theexecutive’s target bonus for the fiscal year in which termination occurs or the highest actual bonus paid to the executive for the two years preceding termination,minus any amounts paid pursuant to any other contractual arrangement with the executive or plan providing coverage to the executive as a result of thetermination (c) total contributions (other than salary reduction contributions) made by Biomet on behalf of the executive for the calendar year immediatelypreceding the year in which the change in control occurs and (d) the total car allowance to the executive for the calendar year immediately preceding the year thechange in control occurred paid as a lump sum. Messrs. England and Niemier would also be entitled to a lump sum cash stipend equal to 24 times the monthlypremium then charged for family coverage under Biomet’s medical and dental plans and the executive would receive life insurance and long-term disabilitybenefits, or the cash equivalent if not available, substantially similar to those that the executive is receiving immediately prior to the notice of termination for a24-month period after the date of termination. The approximate total value of these payments for Messrs. England and Mr. Niemier are $1,456,202 and$1,696,202, respectively, which will be reduced by the amounts previously paid to Messrs. England and Niemier under the Severance Plan.

Non-Employee Director Compensation and Benefits

Biomet’s compensation package for non-employee directors is generally comprised of cash (annual retainers and committee meeting fees) and stock optionawards. The annual pay package is designed to attract and retain highly-qualified, independent professionals to represent Biomet’s shareholders and reflectBiomet’s position in the industry. Biomet’s compensation package is also designed to create alignment between its directors and its shareholders through the useof equity-based awards. Actual annual pay varies among directors based on Board committee memberships, committee chair responsibilities and meetingsattended. In past years, Biomet has not adopted guidelines with respect to non-employee director ownership of Common Shares. More recently, the Board hasconsidered adopting such a policy, however, these discussions were discontinued upon execution of the original Merger Agreement.

Historically, at the beginning of each calendar year, each Biomet non-employee director has received a vested option to purchase 2,000 of Biomet’s CommonShares each year during his or her service on the Board in accordance with the terms of the 1998 Plan. At the 2006 Annual Meeting, Biomet’s shareholdersapproved the Biomet, Inc. 2006 Equity Incentive Plan, which provided non-employee directors with an additional option grant to purchase 3,000 CommonShares every year. In connection with the transactions contemplated by the original Merger Agreement and other compelling reasons, each director consented toforego and forever waive the annual grant of option awards for the 2007 fiscal year under both plans.

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Table of ContentsCompensation for non-employee directors during the 2007 fiscal year consisted of the following:

Type of Compensation Amount ($)Annual retainer for non-employee directors for Board membership (1) 45,000Annual retainer for non-employee director serving as Chairman of the Board (2) 125,000Annual retainer for non-employee director serving as Lead Director (3) 30,000Annual retainer for non-employee director serving as Chair of the Audit Committee 20,000Annual retainer for non-employee director serving as Chair of the Compensation and Stock Option Committee or Nominating and Corporate

Governance Committee 5,000Annual retainer for non-employee directors serving on the Executive Committee, Audit Committee (non-Chair) 10,000Quarterly fee for non-employee directors serving on a special committee of the Board 5,000Meeting fee for attendance by non-employee directors and non-employee members of committees (except meetings of the Compensation and Stock Option and Nominating and Corporate Governance Committees held in conjunction with a

meeting of the Board, for which no meeting fee is paid) 1,800Meeting fee for telephonic participation by non-employee directors and non-employee members of committees 1,200Meeting fee for committee meeting held in conjunction with Board meeting 0

(1) In past years, a minimum of 50% of the Board retainer fee received in Common Shares was held in trust by Biomet until such director’s retirement fromthe Board. Biomet non-employee directors could then take, at each director’s election, between 50% and 100% of the annual retainer fee in the form ofBiomet Common Shares in lieu of cash. During the 2007 fiscal year, however, in connection with the original Merger Agreement and pursuant to Boardaction authorized on December 15,2006, the Board agreed to receive their entire annual retainer fee in cash rather than as Biomet Common Shares.

(2) The Chairman of the Board will receive this fee and meeting fees, but will not receive any additional committee fees.

(3) The Lead Director will receive this fee, in addition to other committee and meeting fees, as appropriate.

Compensation Granted in Connection with Biomet’s Strategic Alternatives

In addition, on December 15, 2006, Biomet’s Board also authorized the one-time payment of $5,000 to each of Dr. Harrison, Thomas F. Kearns, Jr., and SandraA. Lamb in recognition of the services they provided in connection with the Board’s preliminary review of strategic alternatives for Biomet prior to the formationof the Strategic Alternatives Committee.

Business Expenses

The directors are reimbursed for their business expenses related to their attendance at Biomet meetings, including room, meals and transportation to and fromBoard and committee meetings. On rare occasions, a director’s spouse may accompany a director when traveling on Biomet business. At times, a director maytravel to and from Biomet meetings on Biomet’s corporate aircraft. Directors are also eligible to be reimbursed for attendance at qualified director educationprograms.

Director and Officer Liability Insurance and Travel Accident Insurance

Director and officer liability insurance individually insures Biomet’s directors and officers against certain losses that they are legally required to bear as a resultof their actions while performing duties on Biomet’s behalf. Biomet’s D&O insurance policy does not break out the premium for directors versus officers and,therefore, a dollar amount cannot be assigned to the coverage provided for individual directors.

Biomet also maintains an Aviation Insurance Policy that provides benefits to each director in the event of death or disability (permanent and total) during travelon Biomet’s corporate aircraft. This policy also covers employees and others while traveling on Biomet’s corporate aircraft and, therefore, a dollar amountcannot be assigned to the coverage provided for individual directors.

Non-Employee Directors’ Compensation Table

The following table shows information regarding the compensation of Biomet’s non-employee directors for the 2007 fiscal year. Mr. Binder is not included in thetable below because, as President and Chief Executive Officer, disclosure in respect of his compensation is presented in the Summary Compensation Table.Mr. Niemier is not included in the table below because, during the 2007 fiscal year, he was Chief Operating Officer-Domestic Operations and, as a result,disclosure in respect of his compensation is also presented in the Summary Compensation Table.

Also, in response to the Special Litigation Committee’s preliminary report, all current members of the Board agreed that, with respect to misdated or mispricedstock option awards to the current directors on or after January 1,1996 which had not yet been exercised, the exercise price of such unexercised stock optionawards would be increased to the fair market value of Biomet’s Common Shares on the measurement date applicable to such award. In addition, the currentmembers of the Board agreed that, with respect to misdated or mispriced stock option awards to the current directors on or after January 1,1996 which hadpreviously been exercised, such directors would at a future date remit to Biomet an amount equal to the excess, if any, of the fair market value of Biomet’sCommon Shares on the measurement date for such award over the exercise price of such award. Biomet and the Special Litigation Committee are continuing toconsider various matters, including other potential remedial measures.

Furthermore, as employee directors, Messrs. Binder and Niemier did not receive compensation in their capacity as directors. However, in connection with theseparation and retirement agreement between Biomet and Mr. Niemier, dated June 6,2007, Mr. Niemier retired from active service as an employee of Biomet,effective June 18,2007, and has remained a member of the Board. As of the effective date his retirement, therefore, Mr. Niemier became a non-employeedirector.

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Name

Fees Earnedor Paid inCash ($)(1)

StockAwards

($)(2)

OptionAwards

$(3)

Non-EquityIncentive PlanCompensation

($)(4)

Change inPension Value

and NonqualifiedDeferred

CompensationEarnings ($)(5)

All OtherCompensation

($)(6) Total

($)Jerry L. Ferguson 126,000 — — — — 18,500 144,500C. Scott Harrison, M.D. 136,400 — 5,340 — — — 141,740M. Ray Harroff 63,000 — 5,340 — — — 68,340Thomas F. Kearns, Jr. 77,000 — 5,340 — — — 82,340Sandra A. Lamb 103,600 — 5,340 — — — 108,940Dane Miller, Ph.D. — — — — — — — Jerry L. Miller 111,600 — 5,340 — — — 116,940Kenneth V. Miller 147,800 — 5,340 — — — 153,140Niles L. Noblitt 162,800 — — — — — 162,800Marilyn Tucker Quayle 105,000 — 5,340 — — — 110,340L. Gene Tanner 91,000 — 5,340 — — — 96,340

(1) The aggregate dollar amount of all fees earned or paid in cash for services as a director, including annual Board and committee chair retainer fees, andcommittee meeting fees, in each case including amounts deferred pursuant to director elections.

(2) In connection with the original Merger Agreement, during the 2007 fiscal year, Biomet’s Board agreed to receive its annual retainer fees in cash ratherthan in Biomet Common Shares.

(3) For each director listed in the Non-Employee Directors’ Compensation Table above, the value reflects the compensation expense recognized by Biometduring the 2007 fiscal year under SFAS 123(R). For information concerning the assumptions used in determining the compensation expense recognized byBiomet during the 2007 fiscal year, refer to Notes B and I to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Duringthe 2007 fiscal year, Biomet’s non-employee directors agreed to waive their annual grants of option awards. As of June 1, 2007, except Messrs. Fergusonand Noblitt, each of Biomet’s non-employee directors held options to purchase 4,000 Biomet Common Shares, all of which were vested. As of June 1,2007, Messrs. Ferguson and Noblitt held no outstanding options to purchase Biomet Common Shares.

(4) Biomet does not have a non-equity incentive plan for non-employee directors.

(5) Biomet does not have a pension plan for non-employee directors and does not pay above market or preferential rate on non-qualified deferredcompensations for non-employee directors.

(6) For Mr. Ferguson, represents $ 13,500 in personal use of Biomet aircraft and $5,000 in travel allowance. For information on how Biomet calculates itsincremental cost of personal use of Biomet aircraft, refer to footnote (3)(a) to the Summary Compensation Table above.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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 andoutstanding Biomet Common Shares as of July 17, 2007.

Name and Address of Beneficial Owner Amount and Nature

of Beneficial Ownership Percentof Class

LVB Acquisition, LLC and related entitiesc/o Corporation Trust Center1209 Orange StreetWilmington, Delaware 19801

208,324,7251

84.74%

(1) This figure represents the Common Shares beneficially owned by LVB, including 202,601,130 Common Shares acquired by LVB Acquisition MergerSub, Inc. pursuant to the tender offer and 5,723,595 Common Shares owned by Dr. and Mrs. Miller, who, pursuant to a voting agreement, have agreedwith LVB to vote all Common Shares beneficially owned by them in favor of the Merger.

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Table of ContentsThe following table sets forth the beneficial ownership of Biomet Common Shares as of July 17, 2007, by each of Biomet’s current directors, each namedexecutive officer for fiscal 2007 and by all directors and executive officers currently employed by Biomet as a group (as well as Mr. Hann).

Name of Beneficial Owner

Numberof Shares

BeneficiallyOwned (1)

Biomet’sEmployee StockBonus Plan (2)

Biomet 401(k)Savings and

Retirement Plan (3)

OptionShares

ExercisableWithin

60 Days (4)

Total Numberof Shares

BeneficiallyOwned

Percentof Class

Jeffrey R. Binder 0 0 0 0 0 0 Garry L. England 0 0 0 0 0 0 Daniel P. Hann (3) 74,406 0 15,032 0 89,438 * C. Scott Harrison, M.D. 1,284 0 0 0 1,284 * Kenneth V. Miller 1,282 0 0 0 1,282 * Charles E. Niemier 1,250 0 65,396 0 66,646 * L. Gene Tanner 2,558 0 0 0 2,558 * J. Pat Richardson 0 0 0 0 0 0 Gregory D. Hartman 160,478 0 34,694 0 195,172 * Roger van Broeck 65,432 0 1,731 0 67,078 * Chinh E. Chu(4) 0 0 0 0 0 0 Jonathan J. Coslet (4) 0 0 0 0 0 0 Michael Dal Bello (4) 0 0 0 0 0 0 Sean Fernandes (4) 0 0 0 0 0 0 Adrian Jones (4) 0 0 0 0 0 0 Michael Michelson (4) 0 0 0 0 0 0 Dane A. Miller, Ph.D. (5) 5,723,595 0 0 0 5,723,595 2.3%John Saer (4) 0 0 0 0 0 0 Todd Sisitsky (4) 0 0 0 0 0 0 Other Executive Officers (10 persons) 247,654 0 137,272 0 384,926 * All Directors and Executive Officers as a Group

(29 persons, including the foregoing) 6,284,279 0 256,335 0 6,540,614 2.7%

* Represents less than 1.0% of Biomet’s issued and outstanding Common Shares.

(1) Other than as noted below, each director and executive officer has sole or shared voting power and investment power with respect to the Common Shareslisted next to his or her name:

• Mr. Gregory D. Hartman—17,117 Common Shares in an individual indirect trust in the name of his spouse over which he has no voting orinvestment power and disclaims any beneficial ownership thereof; 57,486 Common Shares held by his spouses as to which Mr. Hartman has novoting or investment power and disclaims beneficial ownership and 2,800 Common Shares held in the name of his children over which he has novoting or investment power and disclaims any beneficial ownership thereof.

• Other Executive Officers—8,958 Common Shares held by the children of four of these executive officers, as to which the executive

officers have no voting or investment power and disclaim beneficial ownership; and 14,607 Common Shares held by the spouses of oneof these executive officers, as to which the executive officers have no voting or investment power and disclaim beneficial ownership.

(2) Biomet’s executive officers may elect to participate in Biomet’s Profit Sharing Plan and Trust qualified under Section 401(k) of the Internal RevenueCode. The officers have no voting power for the Common Shares held in their accounts in the 401(k) plan. They have sole investment power with respectto any shares purchased through their personal contributions to their accounts in the 401(k) plan. They have no investment power with respect to theCommon Shares contributed by Biomet to their accounts in the 401(k) plan.

(3) On March 30,2007, Mr. Hann retired as Executive Vice President of Administration and a Biomet director. He is reflected in the table above as he met thecriteria to be a named executive officer, under SEC regulations, for the 2007 fiscal year.

(4) Each of Messrs. Chu, Coslet, Dal Bello, Fernandes, Jones, Michelson, Saer and Sisitsky was designated to serve on Biomet’s Board by LVB, which is thebeneficial owner of 208,324,725 Common Shares.

(5) Dr. Miller was designated to serve on Biomet’s Board by LVB, which is the beneficial owner of 208,324,725 Common Shares, including 5,723,595Common Shares owned by Dr. Miller and his wife. Dr. Miller and his wife, Mary Louise Miller are subject to a voting agreement with LVB and agreedthat during the time that the voting agreement is in effect, at any meeting of Biomet’s shareholders, however called, and at every adjournment orpostponement thereof, with respect to outstanding Biomet Common Shares owned beneficially or of record by Dr. and Mrs. Miller, Dr. and Mrs. Miller(individually and jointly) will: (a) appear at such meeting or otherwise cause their Common Shares to be counted as present thereat for purposes ofestablishing a quorum; (b) vote or cause to be voted their Common Shares in favor of the Merger and the approval and adoption by Biomet’s shareholdersof the “plan of merger” contained in the Merger Agreement, and any action required in furtherance thereof; and (c) vote or cause to be voted, or executeconsents in respect of, their

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Common Shares against any proposal, action or transaction involving Biomet or any of its shareholders that could reasonably be expected to prevent ormaterially impede or delay the consummation of the transactions contemplated by the Merger Agreement. The voting agreement will terminateimmediately upon the earliest of: (a) the effective time of the Merger; (b) the termination of the Merger Agreement; and (c) the mutual agreement of theparties to terminate the voting agreement. According to the voting agreement, as of the date of the voting agreement, Dr. and Mrs. Miller owned,individually or collectively and in the aggregate, 5,723,595 Common Shares, representing approximately 2.3% of the total number of outstandingCommon Shares as of July 17, 2007. Any Common Shares acquired by Dr. and/or Mrs. Miller after the date of the voting agreement and prior to thetermination voting agreement will also be subject to the voting agreement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information regarding the securities to be issued and the securities remaining available for issuance under Biomet’s stock-basedincentive plans as of July 17, 2007 (in thousands, except exercise price per Common Share):

Number of Securities toBe Issued upon Exerciseof Outstanding Options,

Warrants and Rights

Weighted-AverageExercise Price of

Outstanding Options,Warrants and Rights

Number of SecuritiesRemaining Available forFuture Issuance Under

Equity Compensation Plans(excluding securities

reflected in first column)Equity compensation plans approved by security holders 9,629,895 $ 34.34 13,234,286Equity compensation plans not approved by security holders — — —

Total 9,629,895 $ 34.34 13,234,286

Further information about Biomet’s stock-based incentive plans can be found in Note 1 to the financial statements contained in Item 8 of this report. Biomet doesnot have any plans not approved by its shareholders.

If the Merger Agreement is terminated, Mr. Binder will be granted an equity award after such termination and annually thereafter (if still employed) commencingafter May 31, 2008, each with a nominal value of no less than $3,500,000 on the date of each grant. Each award would vest in five equal installments on the firstfive anniversaries of the grant date. Biomet’s Compensation and Stock Option Committee will have the discretion as to the form of this benefit, expected to be50% in stock options and 50% in restricted stock or restricted stock units, which are not included in the table above. For more information please see “Item 11.Executive Compensation - Employment Agreements and Potential Post-Termination Payments - Employment Agreement with Jeffrey R. Binder.”

Item 13. Certain Relationships and Related Transactions.

Related Party Transactions

The Board has not adopted a written policy relating to the review and approval of transactions with related persons that are required to be disclosed by SECregulations (“related person transactions”). However, it is Biomet’s practice for the Audit Committee to review and approve all such transactions to confirm thatthe terms of these transactions are no less favorable to Biomet than would have been available in the absence of the relationship with the related person. A“related person” is defined under the applicable SEC regulation and includes Biomet’s directors, executive officers, and 5% or more beneficial owners ofBiomet’s Common Shares. At times, it may be advisable to initiate a transaction before the Audit Committee has evaluated it, or a transaction may begin beforediscovery of a related person’s participation. In such instances, management consults with the Chairman of the Audit Committee to determine the appropriatecourse of action. The Audit Committee periodically reports on its activities to the Board.

During Biomet’s 2007 fiscal year, there were no related person transactions.

Director Independence

As of July 17, 2007, 12 of Biomet’s 13 directors were non-employee directors. As of July 17, 2007, the Board has determined that 3 of its 12 non-employeedirectors (C. Scott Harrison, M.D., Kenneth V. Miller and L. Gene Tanner) satisfy the independence standards set forth in The Nasdaq Stock Market listingstandards. The remaining directors (other than Dr. Miller and Mr. Binder) may also satisfy the independence standards (other than with respect to membership onthe Audit Committee), however, the Board has not made such a determination as of the date of this Annual Report on Form 10-K.

As a result of LVB controlling more than 50% of Biomet’s voting power, Biomet qualifies as a “controlled company” as defined in Rule 4350(c)(5) of theNasdaq Marketplace Rules. Therefore, Biomet is exempt from the requirements of Rule 4350(c) of the Nasdaq Marketplace Rules with respect to its Board beingcomprised of a majority of “independent directors” as defined by the Nasdaq Marketplace Rules and the related rules covering the independence of directorsserving on the Compensation Committee and the Nominating and Corporate Governance Committee of the Board. The controlled company exemption does notmodify the independence requirements for the Audit Committee. Of the 13 directors currently serving on the Board, the Board has determined that 3 directorsmeet the independence standards for Audit Committee members.

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Item 14. Principal Accounting Fees and Services.

Fees for professional services provided by Biomet’s independent accountants in each of the last two fiscal years, in each of the following categories are:

2007 2006Audit Fees $ 3,022,716 $ 1,915,213Audit-Related Fees 99,160 49,538Tax Fees 5,168 13,347All Other Fees 0 0

$ 3,127,044 $ 1,978,098

Fees for audit services include fees associated with the annual audit of consolidated financial statements (including Sarbanes-Oxley 404 attestation in 2007 and2006), the reviews of Biomet’s quarterly reports on Form 10-Q, audit-related accounting consultations, audit-related acquisition accounting and statutory auditsrequired internationally. Audit-related fees principally included due diligence in connection with acquisitions, assistance with implementation of various rulesand standards and benefit plan audits. Tax fees included tax compliance, tax advice and tax planning. Pursuant to the Audit and Non-Audit ServicesPre-Approval Policy, the Audit Committee, or the Chair of the Audit Committee, is responsible for approving in advance all audit and permitted non-auditservices to be performed for Biomet by its independent accountants. Prior to the engagement of the independent accountants for the next year’s audit,management, with the participation of the independent accountants, submits to the Audit Committee for approval an aggregate request for services expected to berendered during that year for various categories of services. In the event that additional services are required from the independent accountants, the AuditCommittee has delegated authority to approve or deny such requests to the Chair of the Audit Committee.

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Table of ContentsPART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following financial statements and financial statement schedule are included in Item 8 herein.

(1) Financial Statements:

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of May 31, 2007 and 2006

Consolidated Statements of Income for the years ended May 31, 2007, 2006 and 2005

Consolidated Statements of Shareholders’ Equity for the years ended May 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended May 31, 2007, 2006 and 2005

Notes to Consolidated Financial Statements

(2) Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts

(3) Exhibits:

Refer to the Index to Exhibits immediately following the signature page of this report, which is incorporated herein by reference.

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Table of ContentsSIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized on July 27, 2007.

BIOMET, INC.

By: /s/ JEFFREY R. BINDER Jeffrey R. Binder President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and inthe capacities indicated on July 27, 2007.

By: /s/ CHINH E. CHU Chinh E. Chu, Director

By: /s/ JONATHAN J. COSLET Jonathan J. Coslet, Director

By: /s/ MICHAEL DAL BELLO Michael Dal Bello, Director

By: /s/ JEFFREY R. BINDER

Jeffrey R. Binder, President and Chief Executive Officerand Director

(Principal Executive Officer)

By: /s/ C. SCOTT HARRISON, M.D. C. Scott Harrison, M.D., Lead Director

By: /s/ SEAN FERNANDES Sean Fernandes, Director

By: /s/ ADRIAN JONES Adrian Jones, Director

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By: /s/ MICHAEL MICHELSON Michael Michelson, Director

By: /s/ DANE A. MILLER Dane A. Miller, Director

By: /s/ KENNETH V. MILLER Kenneth V. Miller, Director

By: /s/ JOHN SAER John Saer, Director

By: /s/ TODD SISITSKY Todd Sisitsky, Director

By: /s/ L. GENE TANNER L. Gene Tanner, Director

By: /s/ DANIEL P. FLORIN

Daniel P. Florin, Senior Vice President - Finance (PrincipalFinancial Officer)

By: /s/ JAMES W. HALLER

James W. Haller, Controller(Principal Accounting Officer)

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Table of ContentsINDEX TO EXHIBITS

Exhibit Number Assignedin Regulation S-K, Item 601

Title of Exhibits

(2)

2.1

Agreement and Plan of Merger, dated as of December 18, 2006, among Biomet, Inc., LVB Acquisition, LLC and LVB Acquisition Merger Sub,Inc. (Incorporated by reference to Exhibit 2.1 to Biomet, Inc. Form 8-K Current Report dated December 18, 2006, File No. 0-12515) asamended and restated as of June 7, 2007 (Incorporated by reference to Exhibit 2.1 to Biomet, Inc. Form 8-K Current Report dated June 7, 2007,File No. 0-12515).

(3)

3.1

Amended Articles of Incorporation filed July 23, 1982 (Incorporated by reference to Exhibit 3(a) to Biomet, Inc. Form S-18 RegistrationStatement, 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. Form10-K Report for year ended May 31, 1983, File No. 0-12515).

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 year ended May 31,1987, File No. 0-12515).

3.4

Articles of Amendment to the Amended Articles of Incorporation filed September 18, 1989 (Incorporated by reference to Exhibit 3.4 to Biomet,Inc. Form 10-K Report for year ended May 31, 1990, File No. 0-12515).

3.5

Amended and Restated Bylaws as Amended December 13, 1997 (Incorporated by reference to Exhibit 3.6 to Biomet, Inc. Form 10-K Report foryear ended May 31, 1998, File No. 0-12515).

3.6

Articles of Amendment to Amended Articles of Incorporation filed January 18, 2007 (Incorporated by reference to Exhibit 3.1 to Biomet, Inc.Form 8-K Current Report dated January 19,2007, File No. 0-12515).

3.7 Amended and Restated Bylaws as Amended June 6, 2007.*

(4)

4.1

Specimen certificate for Common Shares (Incorporated by reference to Exhibit 4.1 to Biomet, Inc. Form 10-K Report for year ended May 31,1985, File No. 0-12515).

(9)

9.1

Voting Agreement, dated June 6, 2007, among LVB Acquisition Acquisition, LLC and Dane A. Miller, Ph.D. and Mary Louise Miller(Incorporated by reference to Exhibit (d)(1)(J) of the Schedule TO filed by LVB Acquisition Merger Sub, Inc. and LVB Acquisition LLC withthe SEC on June 13, 2007).

(10)

10.1

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 year ended May 31, 1993, File No. 0-12515).

10.2

Form of Stock Option Agreement under the Employee and Non-Employee Stock Option Plan dated September 18, 1992 (Incorporated byreference to Exhibit 4.03 to Biomet, Inc. Form S-8 Registration Statement, File No. 33-65700).

10.3 401(k) Savings and Retirement Plan amended as of April 1, 2007.*

10.4

Biomet, Inc. 1998 Qualified and Non-Qualified Stock Option Plan adopted August 3, 1998 (Incorporated by reference to Exhibit 10.6 toBiomet, Inc. Form 10-K Report for year ended May 31,1998, File No. 0-12515).

10.5

Joint Venture Agreement between Biomet, Inc. and Merck KGaA dated as of November 24, 1997 (Incorporated by reference to Exhibit 2.01 toBiomet, Inc. Form 8-K Current Report dated February 17, 1998, File No. 0-12515).

10.6

Purchase and Substitution Agreement dated March 19,2004 by and among Merck KGaA, Biomet, Inc., BioHoldings UK Ltd. and BiometEurope Ltd. (Incorporated by reference to Exhibit 10.1 to Biomet, Inc. Form 8-K current Report dated March 19, 2004, File No. 0-12515).

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10.7

Agreement and Plan of Merger dated March 7, 2004 among Biomet, Inc., Laker Acquisition Corp. I and Interpore International, Inc.(Incorporated by reference to Exhibit 1 to Biomet, Inc. Form SC 13D General Statement of Acquisition of Beneficial Ownership datedMarch 17, 2004, File No. 0-12515).

10.8

Separation and Release Agreement dated August 21, 2006 between Bart J. Doedens, M.D. and Biomet, Inc. (Incorporated by reference toExhibit 10.1 to Biomet, Inc. Form 8-K Current Report dated August 25, 2006, File No. 0-12515).

10.9

Severance and Change in Control Agreement dated as of September 20, 2006, by and among Biomet, Inc. and Daniel P. Hann (Incorporated byreference to Exhibit 10.1 to Biomet, Inc. Form 8-K Current Report dated September 20, 2006, File No. 0-12515).

10.10

Change in Control Agreement dated as of September 20, 2006, by and among Biomet, Inc. and Garry L. England (Incorporated by reference toExhibit 10.2 to Biomet, Inc. Form 8-K Current Report dated September 20, 2006, File No. 0-12515).

10.11

Change in Control Agreement dated as of September 20, 2006, by and among Biomet, Inc. and Charles E. Niemier (Incorporated by referenceto Exhibit 10.3 to Biomet, Inc. Form 8-K Current Report dated September 20, 2006, File No. 0-12515).

10.12

Executive Severance Pay Plan dated as of September 22, 2006 (Incorporated by reference to Exhibit 10.4 to Biomet, Inc. Form 8-K CurrentReport dated September 20, 2006, File No. 0-12515).

10.13

Employment Agreement dated as of February 26, 2007, by and among Biomet, Inc. and Jeffrey R. Binder (Incorporated by reference to Exhibit10.1 to Biomet, Inc. Form 8-K Current Report dated February 27, 2007, File No. 0-12515).

10.14

Change in Control Agreement dated as of February 26, 2007, by and among Biomet, Inc. and Jeffrey R. Binder (Incorporated by reference toExhibit 10.2 to Biomet, Inc. Form 8-K Current Report dated February 27, 2007, File No. 0-12515).

10.15

Offer Letter dated as of March 26, 2007, by and among Biomet, Inc. and J. Pat Richardson (Incorporated by reference to Exhibit 10.1 toBiomet, Inc. Form 8-K Current Report dated March 30, 2007, File No. 0-12515).

10.16

Change in Control Agreement dated as of March 29, 2007, by and among Biomet, Inc. and J. Pat Richardson (Incorporated by reference toExhibit 10.2 to Biomet, Inc. Form 8-K Current Report dated March 30, 2007, File No. 0-12515).

10.17

Retirement and Consulting Agreement dated as of March 30, 2007, by and among Biomet, Inc. and Gregory D.Hartman (Incorporated byreference to Exhibit 10.1 to Biomet, Inc. Form 8-K Current Report dated April 23, 2007, File No. 0-12515).

10.18

Retirement and Consulting Agreement dated as of March 30, 2007, by and among Biomet, Inc. and Daniel P. Hann (Incorporated by referenceto Exhibit 10.2 to Biomet, Inc. Form 8-K Current Report dated April 23, 2007, File No. 0-12515).

10.19

Letter Dated April 25, 2006 to Bart J. Doedens, M.D. describing compensation and relocation benefits (Incorporated by reference to Exhibit10.19 of Biomet, Inc. Form 10-K Report for year ended May 31, 2006, File No. 0-12515).

10.20

Offer Letter dated as of May 10, 2007, by and among Biomet, Inc. and Daniel P. Florin (Incorporated by reference to Exhibit 10.1 to Biomet,Inc. Form 8-K Current Report dated May 16, 2007, File No. 0-12515).

10.21

Change in Control Agreement dated as of May 14, 2007, by and among Biomet, Inc. and Daniel P. Florin (Incorporated by reference to Exhibit10.2 to Biomet, Inc. Form 8-K Current Report dated May 16, 2007, File No. 0-12515).

10.22

Separation and Retirement Agreement dated as of May 31, 2007 between Garry L. England and Biomet, Inc. (Incorporated by reference toExhibit 10.1 to Biomet, Inc. Form 8-K Current Report dated June 6, 2007, File No. 0-12515).

10.23 Change in Control Agreement, dated as of September 20, 2006, between Gregory D. Hartman and Biomet, Inc.*

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10.24

Limited Guarantee, dated June 7, 2007, by TPG Partners V L.P. (incorporated by reference to Exhibit (d) (1)(F) of the Schedule TO filed byLVB Acquisition Merger Sub, Inc. and LVB Acquisition LLC with the SEC on June 13, 2007).

10.25

Limited Guarantee, dated June 7, 2007, by KKR 2006 Fund L.P. (incorporated by reference to Exhibit (d) (1)(G) of the Schedule TO filed byLVB Acquisition Merger Sub, Inc. and LVB Acquisition LLC with the SEC on June 13,2007).

10.26

Limited Guarantee, dated June 7, 2007, by GS Capital Partners VI Parallel, L.P., GS Capital Partners VI GmbH & Co. KG, GS CapitalPartners VI Fund, L.P. and GS Capital Partners Offshore Fund, L.P. (incorporated by reference to Exhibit (d)(1)(G) ofthe Schedule TO filedby LVB Acquisition Merger Sub, Inc. and LVB Acquisition LLC with the SEC on June 13,2007).

10.27

Limited Guarantee, dated June 7, 2007, by Blackstone Capital Partners V L.P. (incorporated by reference to Exhibit (d)(1)(H) ofthe ScheduleTO filed by LVB Acquisition Merger Sub, Inc. and LVB Acquisition LLC with the SEC on June 13, 2007).

10.28

Biomet 2006 Equity Incentive Plan adopted July 19, 2006 (incorporated by reference to Biomet, Inc. Schedule 14A Definitive ProxyStatement dated August 15, 2006).

10.29

Separation, Release and Consultancy Agreement with Dane A. Miller, Ph.D. (incorporated by reference to Exhibit 10.1 to Biomet, Inc. Form8-K Current Report dated May 10,2006, File No. 0-12515).

(11) No exhibit.

(12) No exhibit.

(13) No exhibit.

(14) No exhibit.

(16) No exhibit.

(18) No exhibit.

(21) 21.1 Subsidiaries of the Registrant.*

(22) No exhibit.

(23) 23.1 Consent of Independent Registered Public Accounting Firm.*

(24) No exhibit.

(31) 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

(32) 32.1 Written Statement of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

* Filed herewith

** Furnished herewith

100


Exhibit 3.7

AMENDED AND RESTATED

BYLAWS

OF

BIOMET, INC.

(As Amended June 6, 2007)

ARTICLE I

Records Pertaining to Share Ownership

Section 1. Recognition of Shareholders. Biomet, Inc. (the “Corporation”) is entitled to recognize a person registered on its books as the owner of shares ofthe Corporation as having the exclusive right to receive dividends and to vote those shares, notwithstanding any other person’s equitable or other claim to, orinterest in, those shares.

Section 2. Transfer of Shares. Shares are transferable only on the books of the Corporation subject to any transfer restrictions imposed by the Articles ofIncorporation, these Bylaws, or an agreement among shareholders and the Corporation. Shares may be so transferred upon presentation of the certificaterepresenting the shares, endorsed by the appropriate person or persons, and accompanied by (a) reasonable assurance that those endorsements are genuine andeffective, and (b) a request to register the

1


transfer. Transfers of shares are otherwise subject to the provisions of the Indiana Business Corporation Law (the “Act”) and Article 8 of the Indiana UniformCommercial Code.

Section 3. Certificates. Each shareholder is entitled to a certificate signed (manually or in facsimile) by the President and Chief Executive Officer or a VicePresident and the Secretary or an Assistant Secretary, setting forth (a) the name of the Corporation and that it was organized under Indiana law, (b) the name ofthe person to whom issued, and (c) the number and class of shares represented. The Board of Directors shall prescribe the form of the certificate.

Section 4. Lost or Destroyed Certificates. A new certificate may be issued to replace a lost of destroyed certificate. Unless waived by the Board ofDirectors, the shareholder in whose name the certificate was issued shall make an affidavit or affirmation of the fact that his certificate is lost or destroyed, shalladvertise the loss or destruction in such manner as the Board of Directors may require, and shall give the Corporation a bond of indemnity in the amount andform which the Board of Directors may prescribe.

2


ARTICLE II

Meetings of the Shareholders

Section 1. Annual Meeting. Annual meetings of the shareholders shall be held on the first Friday in September of each year, or on such other date as maybe designated by the Board of Directors.

Section 2. Special Meetings. Special meetings of the shareholders may be called by the President and Chief Executive Officer or by the Board of Directors.Special meetings of the shareholders shall be called upon delivery to the Secretary of the Corporation of one or more written demands for a special meeting of theshareholders describing the purposes of that meeting and signed and dated by the holders of at least 90% of all the votes entitled to be cast on any issue proposedto be considered at that meeting.

Section 3. Notice of Meetings. The Corporation shall deliver or mail written notice stating the date, time and place of any shareholders’ meeting and, in thecase of a special shareholders’ meeting or when otherwise required by law, a description of the purposes for which the meeting is called, to each shareholder ofrecord entitled to vote at the meeting, at such address as appears in the records of the Corporation and at least 10, but no more than 60, days before the date of themeeting.

3


Section 4. Waiver of Notice. A shareholder may waive notice of any meeting, before or after the date and time of the meeting as stated in the notice, bydelivering a signed waiver to the Corporation for inclusion in the minutes. A shareholder’s attendance at any meeting, in person or by proxy (a) waives objectionto lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting businessat the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purposes described in the meeting notice,unless the shareholder objects to considering the matter when it is presented.

Section 5. Record Date. The Board of Directors may fix a record date, which may be a future date, for the purpose of determining the shareholders entitledto notice of a shareholders’ meeting, to demand a special meeting, to vote, or to take any other action. A record date may not exceed 70 days before the meetingor action requiring a determination of shareholders. If the Board of Directors does not fix a record date, the record date shall be the 10th day prior to the date ofthe meeting or other action.

Section 6. Voting by Proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder pursuant to a written appointment formexecuted by the shareholder or the shareholder’s duly authorized attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or

4


other officer or agent of the Corporation authorized to tabulate votes. The general proxy of a fiduciary is given the same effect as the general proxy of any othershareholder. A proxy appointment is valid for 11 months unless otherwise expressly stated in the appointment form.

Section 7. Voting Lists. After a record date for a shareholders’ meeting has been fixed, the Secretary shall prepare an alphabetical list of all shareholdersentitled to notice of the meeting showing the address and number of shares held by each shareholder. The list shall be kept on file at the principal office of theCorporation or at a place identified in the meeting notice in the city where the meeting will be held. The list shall be available for inspection and copying by anyshareholder entitled to vote at the meeting, or by the shareholder’s agent or attorney authorized in writing, at any time during regular business hours, beginning 5business days before the date of the meeting through the meeting. The list shall also be made available to any shareholder, or to the shareholder’s agent orattorney authorized in writing, at the meeting and any adjournment thereof. Failure to prepare or make available a voting list with respect to any shareholder’smeeting shall not affect the validity of any action taken at such meeting.

Section 8. Quorum; Approval. At any meeting of shareholders, a majority of the votes entitled to be cast on a matter at the meeting constitutes a quorum. Ifa quorum is present when a vote is taken, action on a matter is

5


approved if the votes cast in favor of the action exceed the votes cast in opposition to the action, unless a greater number is required by law, the Articles ofIncorporation or these Bylaws.

Section 9. Action by Consent. Any action required or permitted to be taken at a shareholders’ meeting may be taken without a meeting if the action istaken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed byall the shareholders entitled to vote on the action, and delivered to the Corporation for inclusion in the minutes. If not otherwise determined pursuant to Section 5of this Article II, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent to suchaction.

Section 10. Presence. Any or all shareholders may participate in any annual or special shareholders’ meeting by, or through the use of, any means ofcommunication by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder so participating is deemed to bepresent in person at the meeting.

6


ARTICLE III

Board of Directors

Section 1. Powers and Duties. All corporate powers are exercised by or under the authority of, and the business and affairs of the Corporation are managedunder the direction of, the Board of Directors, unless otherwise provided in the Articles of Incorporation.

Section 2. Number and Terms of Office; Qualifications. The Board of Directors shall have not less than 10 nor more than 14 persons, as may from time totime be determined by resolution adopted by the Board of Directors. The Board of Directors shall be divided into three classes, as nearly equal in numbers aspossible. Directors shall be elected to all classes at the annual meeting of the shareholders of the Corporation to be held in 1989. One class of directors so electedshall hold office until the annual meeting of the shareholders to be held in 1990, another class so elected shall hold office until the annual meeting of theshareholders to be held in 1991, and another class so elected shall hold office until the annual meeting of the shareholders to be held in 1992, and in each case thedirectors shall hold office until their successors are duly elected and qualified or until death, resignation, or removal in accordance with the Articles ofIncorporation or these Bylaws. Directors elected at each annual (or special in lieu of the annual) meeting after 1989 shall serve for a term of three years and untiltheir successors are elected and qualified or until death, resignation, or removal in accordance with the Articles of Incorporation or these Bylaws. A person neednot be a shareholder or an Indiana resident to qualify to be a director.

7


Section 3. Removal. Any director may be removed with or without cause by action of the holders of at least 75% of all the votes entitled to be cast thereonat any meeting the notice of which states that one of the purposes of the meeting is removal of the director.

Section 4. Vacancies. If a vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of directors, the Boardof Directors may fill the vacancy. If the directors remaining in office constitute fewer than a quorum of the Board, the directors remaining in office may fill thevacancy by the affirmative vote of a majority of those directors. Any director elected to fill a vacancy holds office until the next annual meeting of theshareholders and until a successor is elected and qualified.

Section 5. Annual Meetings. Unless otherwise agreed by the Board of Directors, the annual meeting of the Board of Directors shall be held immediatelyfollowing the annual meeting of the shareholders, at the place where the meeting of shareholders was held, for the purpose of electing officers and consideringany other business which may be brought before the meeting. Notice is not necessary for any annual meeting.

Section 6. Regular and Special Meetings. Regular meetings of the Board of Directors may be held pursuant to a resolution of the Board of Directors

8


establishing a method for determining the date, time and place of those meetings. Notice is not necessary for any regular meeting. Special meetings of the Boardof Directors may be held upon the call of the President and Chief Executive Officer or Secretary or of any 2 directors and upon 24 hours’ written or oral noticespecifying the date, time and place of the meeting. The notice need not describe the purpose of the special meeting. Notice of a special meeting may be waived inwriting before or after the time of the meeting. The waiver must be signed by the director entitled to the notice and filed with the minutes of the meeting.Attendance at or participation in a meeting waives any required notice of the meeting, unless at the beginning of the meeting (or promptly upon the director’sarrival) the director objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

Section 7. Quorum. A quorum for the transaction of business at any meeting of the Board of Directors consists of a majority of the number of directorsspecified in Section 2 of this Article III. If a quorum is present when a vote is taken, action on a matter is approved if the action receives the affirmative vote of amajority of the directors present.

Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if theaction is taken by all directors then in office. The action must be evidenced

9


by one or more written consents describing the action taken, signed by each director, and included in the minutes. Action of the Board of Directors taken byconsent is effective when the last director signs the consent, unless the consent specifies a prior or subsequent effective date.

Section 9. Committees. The Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Eachcommittee may have one or more members, who serve at the pleasure of the Board of Directors. The creation of a committee and appointment of members to itmust be approved by the greater of (i) a majority of all the directors in office when the action is taken, or (ii) the number of directors required under Section 7 ofthis Article III to take action. All rules applicable to action by the Board of Directors apply to committees and their members. The Board of Directors mayspecify the authority that a committee may exercise; however, a committee may not (a) authorize distributions, except a committee may authorize or approve areacquisition of shares if done according to a formula or method prescribed by the Board of Directors, (b) approve or propose to shareholders action that must beapproved by shareholders, (c) fill vacancies on the Board of Directors or on any of its committees, (d) amend the Articles of Incorporation, (e) adopt, amend orrepeal these Bylaws, (f) approve a plan of merger not requiring shareholder approval, or (g) authorize or approve the issuance or sale of a contract for the sale ofshares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except the Board of Directors may authorize acommittee to so act within limits prescribed by the Board of Directors.

10


Section 10. Presence. The Board of Directors may permit any or all directors to participate in any annual, regular, or special meeting by any means ofcommunication by which all directors participating may simultaneously hear each other during the meeting. A director so participating is deemed to be present inperson at the meeting.

Section 11. Compensation. Each director shall receive such compensation for service as a director as may be fixed by the Board of Directors.

Section 12. Nominations of Board Members. Only persons who are nominated in accordance with the procedures set forth in this Section 12 shall beeligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders byor at the direction of the Board of Directors or by any shareholder of the Corporation entitled to vote for the election of directors at the meeting who complieswith the notice procedures set forth in this Section 12. Such nominations, other than those made by or at the direction of the Board of Directors, shall be madepursuant to notice in writing to the Secretary of the Corporation, which notice shall be delivered to or mailed and received at the principal executive offices of theCorporation not less than 60 days nor more

11


than 90 days prior to the meeting; provided, however, that in the event that less than 70 days’ notice or prior public disclosure of the date of the meeting is givenor made to shareholders, any notice of nomination by the shareholder must be so received not later than the close of business on the 10th day following the dayon which such notice of the date of the meeting was mailed or such public disclosure was made.

A shareholder’s notice of nomination shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as adirector, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class andnumber of shares of the Corporation which are beneficially owned by such person, and (iv) any other information relating to such person that is required to bedisclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Actof 1934, as amended (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a directorif elected); and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such shareholder and (ii) theclass and number of shares of the Corporation which are beneficially owned by such shareholder. At the request of the Board of Directors any person nominatedby the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder’snotice of nomination which pertains to the nominee.

12


The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with theprocedures prescribed by these Bylaws, and if he would so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

ARTICLE IV

Officers

Section 1. Officers. The Corporation shall have a Chairman of the Board, a Vice Chairman of the Board, a President and Chief Executive Officer, one ormore Vice Presidents, a Secretary, a Treasurer, and such assistant officers as the Board of Directors or the President and Chief Executive Officer designates. Thesame individual may simultaneously hold more than one office.

Section 2. Terms of Office. Officers are elected at each annual meeting of the Board of Directors and serve for a term expiring at the following annualmeeting of the Board of Directors. An officer who has been removed pursuant to Section 4 of this Article IV ceases to serve as an officer immediately uponremoval; otherwise, an officer whose term has expired continues to serve until a successor is elected and qualified.

Section 3. Vacancies. If a vacancy occurs among the officers, the Board of Directors may fill the vacancy. Any officer elected to fill a vacancy holds officeuntil the next annual meeting of the Board of Directors and until a successor is elected and qualified.

13


Section 4. Removal. Any officer may be removed by the Board of Directors at any time with or without cause.

Section 5. Compensation. Each officer shall receive such compensation for service in office as may be fixed by the Board of Directors.

Section 6. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board shallhave general executive powers, and such other powers and duties as these Bylaws or the Board of Directors may from time to time prescribe.

Section 7. Vice Chairman of the Board. The Vice Chairman of the Board, if one is elected, shall have all the powers of, and perform all the dutiesincumbent upon, the Chairman of the Board during his absence or disability and shall have such other powers and duties as these Bylaws or the Board ofDirectors may from time to time prescribe.

Section 8. President and Chief Executive Officer. The President and Chief Executive Officer is the chief executive officer of the Corporation and isresponsible for managing and supervising the affairs and personnel of the

14


Corporation, subject to the general control of the Board of Directors. The President and Chief Executive Officer shall preside at all meetings of the shareholders.The President and Chief Executive Officer, or proxies appointed by the President and Chief Executive Officer, may vote shares of other corporations owned bythe Corporation. The President and Chief Executive Officer has authority to execute, with the Secretary, powers of attorney appointing other corporations,partnerships or individuals as the agents of the Corporation, subject to law, the Articles of Incorporation, and these Bylaws. The President and Chief ExecutiveOfficer has such other powers and duties as these Bylaws or the Board of Directors may from time to time prescribe.

Section 9. Vice Presidents. The Vice Presidents in the order designated by the Board of Directors shall have all the powers of, and perform all the dutiesincumbent upon, the President and Chief Executive Officer during his absence or disability and shall have such other powers and duties as these Bylaws or theBoard of Directors may from time to time prescribe.

Section 10. Secretary. The Secretary is responsible for (a) attending all meetings of the shareholders and the Board of Directors, (b) preparing true andcomplete minutes of the proceedings of all meetings of the shareholders, the Board of Directors, and all committees of the Board of Directors, (c) maintainingand safeguarding the books (except books of account) and records of the Corporation, and (d) authenticating the records of the Corporation. If required,

15


the Secretary attests the execution of deeds, leases, agreements, powers of attorney, certificates representing shares of the Corporation, and other officialdocuments by the Corporation. The Secretary serves all notices of the Corporation required by law, the Board of Directors, or these Bylaws. The Secretary hassuch other powers and duties as these Bylaws or the Board of Directors may from time to time prescribe.

Section 11. Treasurer. The Treasurer is responsible for (a) keeping correct and complete books of account which show accurately at all times the financialcondition of the Corporation, (b) safeguarding all funds, notes, securities, and other valuables which may from time to time come into the possession of theCorporation, and (c) depositing all funds of the Corporation with such depositories as the Board of Directors shall designate. The Treasurer shall furnish atmeetings of the Board of Directors, or when otherwise requested, a statement of the financial condition of the Corporation. The Treasurer has such other powersand duties as these Bylaws or the Board of Directors may from time to time prescribe.

Section 12. Assistant Officers. The Board of Directors or the President and Chief Executive Officer may from time to time designate and elect assistantofficers who shall have such powers and duties as the officers whom they are elected to assist specify and delegate to them, and such other powers and duties asthe Board of Directors or the President and Chief Executive Officer may from

16


time to time prescribe. An Assistant Secretary may, during the absence or disability of the Secretary, discharge all responsibilities imposed upon the Secretary ofthe Corporation, including, without limitation, attesting the execution of all documents by the Corporation.

17


ARTICLE V

Miscellaneous

Section 1. Records. The Corporation shall keep as permanent records minutes of all meetings of the shareholders, the Board of Directors, and allcommittees of the Board of Directors, and a record of all actions taken without a meeting by the shareholders, the Board of Directors and all committees of theBoard of Directors. The Corporation or its agent shall maintain a record of the shareholders in a form that permits preparation of a list of the names and addressesof all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each. The Corporation shall maintain its records inwritten form or in a form capable of conversion into written form within a reasonable time. The Corporation shall keep a copy of the following records at itsprincipal office: (a) the Articles of Incorporation then currently in effect, (b) the Bylaws then currently in effect, (c) all resolutions adopted by the Board ofDirectors with respect to one or more classes or series of shares and fixing their relative rights, preferences, and limitations, if shares issued pursuant to thoseresolutions are outstanding, (d) minutes of all shareholders’ meetings, and records of all actions taken by shareholders without a meeting, for the past three years,(e) all written communications to shareholders generally during the past three years, including annual financial statements furnished upon request of the

18


shareholders, (f) a list of the names and business addresses of the current directors and officers, and (g) the most recent annual report filed with the IndianaSecretary of State.

Section 2. Execution of Contracts and Other Documents. Unless otherwise authorized or directed by the Board of Directors, all written contracts and otherdocuments entered into by the Corporation shall be executed on behalf of the Corporation by the President and Chief Executive Officer or a Vice President, and,if required, attested by the Secretary or an Assistant Secretary.

Section 3. Accounting Year. The accounting year of the Corporation begins on June 1 of each year and ends on the May 31 immediately following.

Section 4. Corporate Seal. The Corporation has no seal.

Section 5. Chapter 42 Inapplicable. IC 23-1-42-1, et seq. (the “Control Share Acquisition” chapter of the Indiana Business Corporation Law) does notapply to the Corporation.

19


ARTICLE VI

Amendment

These Bylaws may be amended or repealed only by the Board of Directors. The affirmative vote of a majority of all the directors is necessary to amend orrepeal these Bylaws.

ARTICLE VII

Indemnification of Directors, Officers, and Employees

Section 1. General. The Corporation shall indemnify every person (and his heirs and legal representatives) who is or was a director, officer, or employee ofthe Corporation, or of any other corporation which he has served as such at the request of the Corporation and of which the Corporation directly or indirectly is orwas a shareholder or creditor, in accordance with the Articles of Incorporation.

Section 2. Advance of Expenses. The Corporation may advance expenses incurred with respect to any claim, action, suit, or other proceeding of thecharacter described in Section 1 of this Article VII prior to final disposition upon receiving an undertaking by or on behalf of the recipient to repay such amount,unless it is ultimately determined that the recipient is entitled to indemnification under this Article VII.

20


Section 3. Insurance. The Board of Directors may authorize procurement of insurance policies at the expense of the Corporation to insure any individualwho is or was an officer, director or employee of the Corporation against liability asserted against or incurred by the individual in that capacity or arising fromthe individual’s status as a director, officer, or employee, whether or not the Corporation would have power to indemnify the individual against the same liabilityunder Section 1 of this Article VII.

Section 4. Rights Not Exclusive. The rights of indemnification provided in this Article VII shall be in addition to any rights to which any person (or theheirs or legal representatives of such person) referred to in Section 1 of this Article may otherwise be entitled by contract or as a matter of law, and shall beavailable whether or not the claim asserted against such person is based on matters which antedate the adoption of this Article.

21


Exhibit 10.3

BIOMET 401(k) SAVINGS AND

RETIREMENT PLAN

Plan Number 002 Effective as of April 1, 2007

(except as otherwise herein provided)


TABLE OF CONTENTS

PageARTICLE I. RESTATEMENT OF PLAN 2

ARTICLE II. DEFINITIONS AND CONSTRUCTION 3

Section 2.01. Definitions 3Section 2.02. Construction and Governing Law 23

ARTICLE III. PARTICIPATION 25

Section 3.01. Participation 25Section 3.02. Cessation of Participation 27Section 3.03. Reemployment 27Section 3.04. Change in Employment Status 27Section 3.05. Transfer of Employment Between Employers 28Section 3.06. Completion of Forms by Participants and Beneficiaries 29

ARTICLE IV. CONTRIBUTIONS 29

Section 4.01. Contributions 29Section 4.02. Pre-Tax Contributions 30Section 4.03. Matching Contributions 32Section 4.04. Regular and Nonelective Contributions 33Section 4.05. Participant After-Tax Contributions 35Section 4.06. Payment, Deductibility, and Nature of Contributions and Dividends 35Section 4.07. Expenses of Plan 36Section 4.08. Recapture of Tax Credit 36Section 4.09. Rollover Contributions and Transfers to the Plan 37Section 4.10. Employer Contributions Under the Biomet, Inc. Flexible Benefits Plan 38

ARTICLE V. LIMITATIONS ON CONTRIBUTIONS AND OTHER ADDITIONS 39

Section 5.01. Applicability of Article 39Section 5.02. Definitions 39Section 5.03. Distribution of Excess Deferral Amount 44Section 5.04. Limitations on Contributions under Code Section 401(k) and the Distribution of Excess Contributions 45Section 5.05. Limitations on Contributions under Code Section 401(m) and the Distribution of Excess Aggregate Contributions 46Section 5.06. Stock Bonus Component Aggregation 48Section 5.07. Limitation under Code Section 415 48Section 5.08. Priority of Limitations 51

- i -


ARTICLE VI. ACCOUNTING 51

Section 6.01. Participant Accounts 51Section 6.02. Valuation 53Section 6.03. Value of Accounts of Participants 53Section 6.04. Allocation of Earnings to Non-Stock Subaccounts 54Section 6.05. Calculation on Basis of Employer Stock 54

ARTICLE VII. BENEFITS 55

Section 7.01. Retirement Benefits 55Section 7.02. Death Benefits 56Section 7.03. Beneficiaries 56Section 7.04. Termination Benefits 58Section 7.05. In-Service Withdrawals of Pre-Tax Contribution Account 59Section 7.06. In-Service Withdrawals of Rollover/Transfer Account 63Section 7.07. In-Service Withdrawals from Savings Account 64Section 7.08. In-Service Withdrawals Upon Attainment of Age 59 1/2 64Section 7.09. Charge or Discount 64Section 7.10. Persons Under Legal Disability 64Section 7.11. Payments at Direction of Administrator 65Section 7.12. Limitation on Distributions from Tax Credit Account 65Section 7.13. Special Rollover Distribution Rules 65Section 7.14. Requirements for Commencement and Distribution of Benefits 68

ARTICLE VIII. PLAN LOANS 70

Section 8.01. Plan Loans 70Section 8.02. Terms and Conditions 71Section 8.03. Loan Procedures 75

ARTICLE IX. BORROWING BY PLAN 75

Section 9.01. Borrowing by the Plan 75Section 9.02. Restrictions on Loans 79

ARTICLE X. VESTING 80

Section 10.01. Vesting Standards 80Section 10.02. Forfeitures 81Section 10.03. Reinstatement 81

ARTICLE XI. ADMINISTRATION OF THE PLAN 82

Section 11.01. Administrator 82Section 11.02. Claims Procedure 84Section 11.03. Employment of Consultants 85Section 11.04. Delegation by Administrator 85

- ii -


Section 11.05. Qualified Public Accountant 86Section 11.06. Fiduciary Liability 86Section 11.07. Fiduciary Insurance 86

ARTICLE XII. TRUST 87

Section 12.01. Trust Funds 87Section 12.02. Investments 88Section 12.03. Transfers Among Investment Funds 89Section 12.04. Investment of Stock Subaccounts 91Section 12.05. Investments 91Section 12.06. Acquisition and Disposition of Employer Stock 92Section 12.07. Voting of Stock 92Section 12.08. ERISA Section 404(c) 93

ARTICLE XIII. AMENDMENT OR TERMINATION OF PLAN 94

Section 13.01. Amendment or Termination 94Section 13.02. Amendment for Qualification of Plan 94Section 13.03. Restrictions on Amendments 95Section 13.04. Discontinuance or Suspension of Contributions 95Section 13.05. Allocation of Assets on Termination 95

ARTICLE XIV. ENTRY AND WITHDRAWAL OF EMPLOYERS 96

Section 14.01. Entry of Employers 96Section 14.02. Withdrawal from Plan 96

ARTICLE XV. TOP-HEAVY PROVISIONS 97

Section 15.01. Definitions 97Section 15.02. Top-Heavy Plan Provisions 100

ARTICLE XVI. NONALIENATION OF BENEFITS AND DOMESTIC RELATIONS ORDERS 102

Section 16.01. Nonalienation of Benefits 102Section 16.02. Procedures Regarding Domestic Relations Orders 103Section 16.03. Surviving Spouse 105

ARTICLE XVII. OPTIONS AND RESTRICTIONS ON EMPLOYER STOCK 105

Section 17.01. Participant Put Option 105Section 17.02. Restrictions on Transfer 106Section 17.03. Payment of Purchase Price 109Section 17.04. Nonterminable Protections and Rights 110Section 17.05. Restrictions on Loans 110

- iii -


ARTICLE XVIII. MISCELLANEOUS PROVISIONS RELATING TO EMPLOYER STOCK 110

Section 18.01. Stock Dividends and Rights 110Section 18.02. Endorsement of Stock Certificates 111Section 18.03. Securities Laws 111Section 18.04. Dividends on Company Stock 111

ARTICLE XIX. MISCELLANEOUS 112

Section 19.01. Non-Diversion 112Section 19.02. Military Service 113Section 19.03. Merger, Consolidation of Plans, or Transfer of Plan Assets 114Section 19.04. Allocation of Fiduciary Responsibilities 114Section 19.05. Limitation of Rights and Obligations 114Section 19.06. Notice 115Section 19.07. Right of Recovery 115Section 19.08. Legal Counsel 116Section 19.09. Evidence of Action 116Section 19.10. Audit 116Section 19.11. Bonding 116Section 19.12. Receipt and Release 116Section 19.13. Legal Actions 117Section 19.14. Reliance 117Section 19.15. Entire Plan 117Section 19.16. Counterparts 117

ARTICLE XX.

SPECIAL PROVISIONS RELATING TO AMOUNTS TRANSFERRED FROM THE INTERPORE INTERNATIONAL, INC.RETIREMENT SAVINGS PLAN 117

Section 20.01. General Provisions 117Section 20.02. Vesting 118Section 20.03. Distribution of Benefits 119Section 20.04. Transferred Participant Loans 119

- iv -


BIOMET401(k) SAVINGS AND RETIREMENT PLAN

This restated Plan is hereby executed on behalf of Biomet, Inc., an Indiana corporation, effective as specifically provided herein.

PRELIMINARY INFORMATION

Desiring to recognize and reward the contribution made to it by its employees, Biomet, Inc. established the Biomet, Inc. 401(k) Profit Sharing Planeffective as of June 1, 1985. The Biomet, Inc. 401(k) Profit Sharing Plan has been amended several times since that date, and amended and restated most recentlyeffective January 1, 2006. Effective December 31, 1994, the Kirschner Medical Corporation 401(k) Savings and Retirement Plan was merged with the Biomet,Inc. 401(k) Profit Sharing Plan. Effective January 1, 2006, the Interpore International, Inc. Retirement Savings Plan was merged into the Biomet, Inc. 401(k)Profit Sharing Plan. Now, effective April 1, 2007, the Biomet, Inc. Employee Stock Bonus Plan shall be merged into the Biomet, Inc. 401(k) Profit Sharing Planand the merged plan shall be restated and designated as the Biomet 401(k) Savings and Retirement Plan (“Plan”).

The Plan is an employee stock ownership plan, which is a stock bonus plan designed to satisfy the requirements of Code Sections 401(a) (including, butnot limited to Code Sections 401(a)(23)) and 4975(e)(7), as amended), and a profit sharing plan with a qualified cash or deferred arrangement within the meaningof Code Sections 401(a)(27) and 401(k), and the appropriate provisions of the Plan shall likewise be interpreted to accomplish this end. The Plan shall complywith the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.

The purpose of the Plan is to (i) provide retirement income to eligible employees of the Company and any adopting subsidiaries or affiliated employerswho become Participants in this


Plan and (ii) invest the stock bonus component of the Plan primarily in the stock of the Company thereby enabling Participants to obtain a proprietary interest inthe Company and encouraging such Participants to devote themselves to the development, growth, and prosperity of the Company and any adopting subsidiariesor affiliated employers.

The Company has entered into a Trust Agreement with the Trustee to hold the assets of the Plan.

ARTICLE I.

RESTATEMENT OF PLAN

The Biomet 401(k) Retirement and Savings Plan (“Plan”) is hereby amended and restated, effective as of April 1, 2007, except as otherwise specificallyprovided herein, to (i) incorporate all amendments to the Biomet, Inc. Employee Stock Bonus Plan since its prior restatement, including a good faith amendmentto comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) effective for Plan Years beginning on and after January 1, 2002,(ii) update the Plan to comply with regulatory guidance included in the 2006 Cumulative List under IRS Notice 2007-3, (iii) incorporate changes to comply withthe Pension Protection Act of 2006 with January 1, 2007 and January 1, 2008 effective dates, and (iv) make certain other changes determined by the Company tobe necessary or desirable. Except as otherwise specifically provided herein or as required by the Code or ERISA, the Plan as hereinafter set forth establishes therights and obligations with respect to individuals who are Employees on and after such dates, as applicable, and to transactions under the Plan on and after suchdates, as applicable. The rights and benefits, if any, of individuals who are not Employees on or after such dates, as applicable, shall be determined in accordancewith the terms and provisions of the Plan that were in effect on the date that their employment terminated. The

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adoption of this restatement of the Plan is conditioned on the receipt of a determination letter, in a form satisfactory to the Company, from the Internal RevenueService with respect to the Plan. Except to the extent specifically provided otherwise herein, all contributions to the Plan may be made without regard to profitsfor the taxable year; provided, however, the profit sharing component of the Plan shall qualify as a discretionary contribution profit sharing plan for purposes ofCode Sections 401(a), 402, 412, and 417.

ARTICLE II.

DEFINITIONS AND CONSTRUCTION

Section 2.01. Definitions. When the initial letter of a word or phrase is capitalized herein, the meaning of such word or phrase shall be as follows:

(a) “Account” means the following separate bookkeeping accounts maintained for each Participant, reflecting his accrued benefit in the Plan. With respectto each Account maintained for each Participant, separate subaccounts shall be maintained thereunder referred to as the “Stock Subaccount,” which shallconstitute the stock bonus plan component of the Plan, and the “Non-Stock Subaccount,” which shall constitute the profit sharing plan component of the Plan.The “Stock Subaccount” shall mean the Participant’s interest in the Trust Fund attributable to shares of Employer Stock (including any Leveraged Shares)acquired or held by the Trust and invested in Employer Stock and allocated to the Participant’s Account at any time on or after April 1, 2007, or pursuant to theParticipant’s election under Section 12.02, Section 12.03 or Section 12.04, plus any allocable earnings or losses attributable to Employer Stock. The “Non-StockSubaccount” shall mean the Participant’s interest in the Trust Fund attributable to assets other than Employer Stock acquired or held by the Trust on and afterApril 1, 2007, in assets other than Employer Stock pursuant to the Participant’s election under Sections 12.02, 12.03 and/or 12.04, plus any allocable earnings orlosses attributable to assets other than Employer Stock.

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(1) “Dividend Account” means the account maintained to reflect the cash dividends paid into the stock bonus component of the Plan, and used topurchase shares of Employer Stock to be allocated to a Participant, pursuant to the Participant’s election under Section 18.04.

(2) “Pre-Tax Contribution Account” means the account maintained to reflect the accrued benefit of the Participant attributable to his Pre-TaxContributions, including Catch-Up Contributions. This account shall also reflect the Participant’s “Employee Pre-Tax Account” balance (if any)transferred from the Kirschner Medical Corporation 401(k) Savings and Retirement Plan effective as of December 31, 1994.

(3) “Matching Account” means the account maintained to reflect the accrued benefit of the Participant attributable to his share of MatchingContributions

(4) “Nonelective Contribution Account” means the account maintained to reflect the accrued benefit of the Participant attributable to his share ofNonelective Contributions. This account shall also reflect the Participant’s “Discretionary Account” balance (if any) transferred from the KirschnerMedical Corporation 401(k) Savings and Retirement Plan effective as of December 31, 1994.

(5) “Regular Account” means the account maintained to reflect the accrued benefit of the Participant attributable to his share of RegularContributions. This account shall also reflect the Participant’s “Regular Account” balance (if any) transferred from the Biomet, Inc. Employee StockBonus Plan effective as of April 1, 2007.

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(6) “Rollover/Transfer Account” means the account maintained to reflect the accrued benefit of the Participant attributable to his RolloverContributions. This account shall also reflect the Employer Matching Account balance (if any) transferred from the Kirschner Medical Corporation 401(k)Savings and Retirement Plan effective as of December 31, 1994.

(7) “Savings Account” means the Participant’s Savings Account balance (if any) transferred from the Biomet, Inc. Employee Stock Bonus Plan,effective April 1, 2007, which reflects the accrued benefit of the Participant attributable to his after-tax contributions.

(8) “Tax Credit Account” means the Participant’s Tax Credit Account balance (if any) transferred from the Biomet, Inc. Employee Stock BonusPlan, effective April 1, 2007, which reflects any and all amounts transferred to the Biomet, Inc. Employee Stock Bonus Plan by an Employer in accordancewith Code Sections 41(c)(1)(B) or 48(n)(1) (as in effect prior to the enactment of the Tax Reform Act of 1984).

(b) “Acquisition Loan” means a loan to the Trust (or to the trust of the Biomet, Inc. Employee Stock Bonus Plan) that is either made or guaranteed by aParty in Interest and is used to finance the purchase of Employer Stock by the Trustee. If the context so requires, the term “Acquisition Loan” also refers to theagreement pursuant to which the Acquisition Loan is made.

(c) “Administrator” means the Benefits Committee, as defined in Section 11.01 of the Plan, which shall serve as the plan administrator under ERISA;provided, however, to the extent the Benefits Committee has delegated duties pursuant to Section 11.04, the term “Administrator” shall be deemed to include theperson to whom such duties have been delegated.

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(d) “Affiliated Employer” means an Employer and any corporation that is a member of a controlled group of corporations (as defined in CodeSection 414(b)) that includes an Employer; any trade or business (whether or not incorporated) that is under common control (as defined in Code Section 414(c))with an Employer; any organization (whether or not incorporated) that is a member of an affiliated service group (as defined in Code Section 414(m)) thatincludes an Employer; and any other entity required to be aggregated with an Employer pursuant to regulations under Code Section 414(o). For purposes of CodeSection 415, in applying Code Sections 414(b) and (c) to determine an Affiliated Employer the phrase “more than 50 percent” shall be substituted for the phrase“at least 80 percent” each place it appears in Code Section 1563(a)(1). An Affiliated Employer shall be included as such only for the period or periods duringwhich such employer is under common control, affiliated, or aggregated and only to the extent required by any applicable provision of the Code.

(e) “Allocation Date” means the last day of the fiscal year of the Company (May 31) and such other date or dates as the Administrator may designate.

(f) “Alternate Payee” means an alternate payee, as defined by Code Section 414(p)(8).

(g) “Applicable Form” means the appropriate form as designated and furnished by the Administrator to make an election or provide a notice required bythe Plan. To the extent permitted by the Code, or ERISA, and the regulations thereunder, the Administrator may prescribe an oral, electronic, or telephonic formin lieu of or in addition to a paper form.

(h) “Beneficiary” has the meaning set forth in Section 7.03.

(i) “Board of Directors” means the board of directors of the Company.

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(j) “Break in Service” means, with respect to an Employee, a Vesting Computation Period during which an Employee completes five hundred (500) orfewer Hours of Service. Solely for purposes of determining whether a Break in Service has occurred in the Vesting Computation Period after 1984 for eligibilityand vesting purposes, an Employee shall receive credit for each Hour of Service, not to exceed five hundred one (501), for each Hour of Service the Employeeotherwise normally would have been credited (or if such hours cannot be determined, eight (8) Hours of Service per normal work day of absence), if theEmployee is absent from work (i) by reason of the pregnancy of the Employee, (ii) by reason of the birth of a child of the Employee, (iii) by reason of theplacement of a child with the Employee in connection with the adoption of such child by such Employee, or (iv) for purposes of caring for such child for a periodbeginning immediately following such birth or placement. Such Hours of Service shall be credited (i) to the Vesting Computation Period in which the absencebegins if the crediting is necessary to prevent a Break in Service in that period, or (ii) in all other cases, to the following Vesting Computation Period. No suchHours of Service shall be credited unless the Employee furnishes to the Administrator such timely information as the Administrator may reasonably require toestablish (i) that the absence from work is for one of the reasons provided above, and (ii) the number of days for which there was such an absence. To the extentrequired by the FMLA and the regulations thereunder, an Employee shall not incur a Break in Service for eligibility and Vesting purposes on or after August 5,1993, on account of an absence from work that qualifies as a family or medical leave under the FMLA. To the extent required by the USERRA and theregulations thereunder, an Employee shall not incur a Break in Service for eligibility and Vesting purposes on or after December 12, 1994, on account of a periodof qualified military service under the USERRA and Code Section 414(u)(8)(A). Notwithstanding

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the preceding provisions, for purposes of determining whether a Break in Service has occurred for purposes determining an Employee’s eligibility and Vesting,an Employee who was a Participant in the Biomet, Inc. Profit Sharing 401(k) Plan shall incur a Break in Service during the period beginning June 1, 2005, andending December 31, 2006, if the Participant has five hundred (500) or fewer Hours of Service during (i) the twelve (12) month period beginning on June 1,2005, and ending on May 31, 2006, or (ii) the twelve (12) month period beginning on January 1, 2006, and ending on December 31, 2006; provided, however,the Employee shall incur at most only one (1) Break in Service during said period beginning June 1, 2005, and ending December 31, 2006. In addition, anEmployee who was a Participant in the Biomet, Inc. Employee Stock Bonus Plan shall incur a Break in Service during the period beginning June 1, 2006, andending December 31, 2007, if the Participant has five hundred (500) or fewer Hours of Service during (i) the twelve (12) month period beginning onJune 1, 2006, and ending on May 31, 2007 or (ii) the twelve (12) month period beginning on January 1, 2007, and ending on December 31, 2007, provided,however, the Employee shall incur at most only one (1) Break in Service during said period beginning June 1, 2006, and ending December 31, 2007.

(k) Catch-Up Contribution Limit” means, with respect to a Plan Year, the applicable dollar limit under Code Section 414(v).

(l) “Catch-Up Eligible Participant” means, with respect to a Plan Year, an Employee who is eligible to make Pre-Tax Contributions and who will reach age50 by the end of the Plan Year.

(m) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(n) “Company” means Biomet, Inc. or any successor thereto.

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(o) “Continuous Employment” means any period for which an Employee is paid, or entitled to payment, for duties performed for an Affiliated Employer,on consecutive days without interruption by any period of more than two consecutive business days during which the Employee performs no such duties,excluding any days that the Employee performs no such duties as a result of weekends, vacation, holiday, illness, incapacity (including disability), layoff, juryduty, military duty or other approved leave of absence.

(p) “Contributions” means the following types of contributions to the Plan:

(1) “Pre-Tax Contributions” means contributions made to the Plan by an Employer at the election of a Participant pursuant to Section 4.02 provided,however, to the extent provided in Subsection 4.02(b), Catch-Up Contributions shall not be treated as Pre-Tax Contributions.

(2) “Catch-Up Contribution” means a Pre-Tax Contribution made by a Catch-Up Eligible Participant, to the extent that such Contribution exceedsthe Pre-Tax Contribution Limit but does not exceed the Catch-Up Contribution Limit.

(3) “Matching Contributions” means contributions made to the Plan by an Employer for a Plan Year by reason of Pre-Tax Contributions of aParticipant pursuant to Section 4.03.

(4) “Nonelective Contributions” means contributions made to the Plan by an Employer for a Plan Year that are designated as NonelectiveContributions pursuant to Subsection 4.04(b).

(5) “Regular Contributions” means contributions made to the Plan by an Employer for a Plan Year that are designated as Regular Contributionspursuant to Subsection 4.04(a).

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(6) “Rollover Contribution” means, with respect to any Participant, a rollover contribution or transfer made by, or on behalf of, the Participantpursuant to Section 4.09.

(q) “Cost of Living Adjustment” means the cost of living adjustment prescribed by the Secretary of the Treasury under Code Section 415(d) for anyapplicable year.

(r) “Covered Participant” means, with respect to a Plan Year, a Participant who completed an Hour of Service as an Eligible Employee during the PlanYear and who remains employed as an Employee as of the applicable Allocation Date.

(s) “Disability” or “Disabled” means, with respect to a Participant, that he has a disability as determined for purposes of the Social Security Act thatqualifies the Participant for permanent disability insurance payments in accordance with such act. The Administrator may require subsequent proof of continuedDisability and a Participant shall not be considered to be Disabled until he has shown to the Administrator’s satisfaction that he is disabled within the meaning ofthis Subsection.

(t) “Disability Retirement Date” means the first day of the month (prior to the Participant’s Early Retirement Date or Normal Retirement Date) after whicha Participant Retires because of a Disability.

(u) “Early Retirement Date” means the first day of the month (prior to the Participant’s Normal Retirement Date) after which a Participant Retires from theemployment of an Employer after attaining age fifty-five (55) and completing six (6) Years of Service. Notwithstanding the foregoing, “Early Retirement Date”for a Participant who was an Eligible Employee and a participant in the Interpore International, Inc. Retirement Savings Plan on December 31, 2005, shall meanthe first day of the month (prior to the Participant’s Normal Retirement Date) after which such Participant Retires from the employment of an Employer afterattaining age fifty-five (55).

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(v) “Election Period” means the 5-Plan Year period beginning with the Plan Year after the Plan Year in which the Participant reaches age fifty-five(55) (or, if later, beginning with the Plan Year after the first Plan Year in which the individual first became a Participant).

(w) “Eligible Employee” means an Employee of an Employer who has met the participation requirements under Section 3.01; provided, however, the term“Eligible Employee” shall not include any of the following Employees: (i) “leased employees” (as defined in Subsection 2.01(x) below); (ii) seasonalEmployees, (iii) co-op Employees, and (iv) student interns.

(x) “Employee” means any common law employee employed by an Affiliated Employer, except (i) any individual designated in good faith by anEmployer as an independent contractor, regardless of whether such person is later determined by the Internal Revenue Service, a court of law, or any otheragency to be a common law employee for tax, workers compensation or other purposes, (ii) any individual who is a nonresident alien and who receives no earnedincome (within the meaning of Code Section 911(d)(2)) from an Employer that constitutes income from sources within the United States within the meaning ofCode Section 861(a)(3), and (iii) any person who is a member of a unit covered by collective bargaining agreement between his Employer and a collectivebargaining agent, provided that retirement benefits have been a subject of good faith bargaining, unless the collective bargaining agreement provides for coverageunder the Plan. Notwithstanding any other provision of the Plan, for purposes of satisfying the requirements of Code Section 414(n)(3), a leased employee shallbe treated as an Employee; provided, however, such leased employee shall not become a

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Participant unless he is an Employee without regard to this sentence and he satisfies the participation requirements of Article III. Effective for Plan Yearsbeginning on or after January 1, 1997, the term “leased employee” means any person (other than an individual employed by an Affiliated Employer) whopursuant to an agreement between the Affiliated Employer and any other person (“leasing organization”) has performed services for the Affiliated Employer (orfor the Affiliated Employer and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at leastone (1) year, and such services are performed under the primary direction or control of the Affiliated Employer. Contributions or benefits provided to a leasedemployee by the leasing organization that are attributable to services performed for the Affiliated Employer shall be treated as provided by the AffiliatedEmployer. A leased employee shall not be considered an Employee if (i) he is covered by a money purchase pension plan providing (1) a nonintegrated employercontribution rate of at least ten percent (10%) of compensation, as defined in Code Section 415(n)(5)(C)(iii), (2) immediate participation, and (3) full andimmediate vesting; and (ii) leased employees do not constitute more than twenty percent (20%) of the Affiliated Employers’ nonhighly compensated workforce,as defined in Code Section 414(n)(5)(C)(ii).

(y) “Employer” means, severally, the Company and any other Affiliated Employer or any part or division thereof authorized by the Administrator toparticipate in the Plan in a manner consistent with Article XIV with respect to its Employees. As of April 1, 2007, the following Affiliated Employers areconsidered Employers under the Plan: Biomet, Inc.; Arthrotek, Inc.; Biolectron, Inc.; Biomet Fair Lawn L.P.; Biomet Manufacturing Corp.; Biomet Orthopedics,Inc.; Biomet Orthopedics Puerto Rico, Inc.; EBI Holdings, Inc.; EBI Patient Care (effective March 1, 2006), Electro-Biology, Inc.; Florida Services Corporation(effective January 1, 2004);

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Implant Innovations, Inc.; Interpore Spine Ltd. (effective June 18, 2004); Interpore Cross International, Inc. (effective June 18, 2004); Interpore Orthopaedics,Inc. (effective June 18, 2004); and Walter Lorenz Surgical, Inc.

(z) “Employer Stock” means any common share of stock issued by an Employer that constitutes a Qualifying Employer Security.

(aa) “Employer Stock Collateral Account” means the Plan’s bookkeeping account under which Leveraged Shares purchased by the Plan are accountedbefore release to the Employer Stock Suspense Account. A separate Employer Stock Collateral Account shall be established with respect to each AcquisitionLoan.

(bb) “Employer Stock Suspense Account” means the Plan’s bookkeeping account to which (i) Leveraged Shares released from the Employer StockCollateral Account due to contributions under the stock bonus portion of the Plan are credited until allocated to the Stock Subaccounts of eligible Participants,(ii) Employer Stock acquired by the Plan pursuant to Subsection 9.01(b) is credited until allocated pursuant to Section 4.04, and (iii) forfeitures of any StockSubaccount are credited until reallocated to Participants or used to reduce Employer Contributions pursuant to Section 10.02.

(cc) “Entry Date” means the first day of the month immediately following the day the Eligible Employee meets the requirements of Section 3.01.

(dd) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

(ee) “FMLA” means the Family and Medical Leave Act of 1993, as amended from time to time.

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(ff) “Fund” means a separate investment fund that forms part of the Trust Fund established by the Trustee at the direction of the Administrator. EmployerStock is a separate Fund available under the Trust Fund.

(gg) “Highly Compensated Employee” means, effective for Plan Years beginning on or after June 1, 1997, an employee described in Code Section 414(q)and the regulations promulgated thereunder and, generally, includes highly compensated active employees and highly compensated former employees asdescribed below:

(1) Highly compensated active employees include any Employee who performs service for an Affiliated Employer during the Determination Yearand is in one or more of the following groups:

(A) Employees who were five percent (5%) owners of an Affiliated Employer at any time during the Determination Year or the Look-BackYear;

(B) Employees who (i) received compensation (as defined in Code Section 414(q)(4)) from an Affiliated Employer in excess of EightyThousand Dollars ($80,000) (as increased by the Cost of Living Adjustment) during the Look-Back Year, and (ii) were in the top twenty percent(20%) of Employees ranked according to the amount of compensation (as defined in Code Section 414(q)(4)) received from the AffiliatedEmployers during such Look-Back Year.

(2) Highly compensated former employees include former Employees who:

(A) Terminated Employment or Retired prior to the Determination Year;

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(B) performed no service for an Affiliated Employer during the Determination Year; and

(C) were highly compensated active employees, as described in Paragraph (1) above, during the year of Termination of Employment orRetirement or any Plan Year ending on or after the date the Employee attained age fifty-five (55).

(3) For purposes of the definition of Highly Compensated Employee, “Determination Year” means the Plan Year for which the determination ofhighly compensated employees is being made.

(4) For purposes of the definition of Highly Compensated Employee, “Look-Back Year” means the twelve (12) month period immediately precedingthe Determination Year.

(hh) “Hour of Service” means each hour for which an Employee is entitled to credit as follows:

(1) An Employee shall be credited with each hour for which he is paid, or entitled to payment, for the performance of duties for an AffiliatedEmployer. An Hour of Service described in this Paragraph shall be credited to an Employee for the Vesting Computation Period in which the duties areperformed.

(2) An Employee shall be credited with each hour for which he is paid, or entitled to payment, by an Affiliated Employer on account of a periodduring which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity(including disability), layoff, jury duty, military duty, or leave of absence; provided, however, that no Hours of Service

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shall be credited under this Paragraph for periods during which no duties are performed and for which the Employee is paid or entitled to payment, if suchpayment is made or due solely to reimburse an Employee for medical or medically related expenses or solely for the purpose of complying with applicableworkers’ compensation, unemployment compensation, or disability insurance laws. Not more than five hundred one (501) Hours of Service shall becredited to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not this period occurs in asingle Vesting Computation Period) unless the Hours of Service are credited pursuant to Paragraph (4). An Hour of Service credited to an Employeepursuant to this Paragraph shall be credited to the Vesting Computation Period or periods during which no duties are performed.

(3) An Employee shall be credited with each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by anAffiliated Employer. The same Hour of Service shall not be credited under Paragraph (1) or Paragraph (2), as the case may be, and under thisParagraph. An Hour of Service described in this Paragraph shall be credited to the Vesting Computation Period or periods to which the award or agreementfor back pay pertains, rather than to the Vesting Computation Period in which the award, agreement, or payment is made.

(4) “Hours of Service” shall be credited for military leave for training or service, or both, with the Uniformed Services of the United States to theextent required under USERRA.

(5) An Employee shall be credited with Hours of Service as required by 29 C.F.R. § 2530.200b-2 and such other regulations promulgated from timeto time by the United States Department of Labor under ERISA regarding the definition of hours of service.

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(6) For eligibility and Vesting purposes only, “Hours of Service” shall be credited for leave that qualifies as family or medical leave under theFMLA; provided, however, such Hours of Service shall be credited only to the extent required by the FMLA and the regulations thereunder.

(ii) “Investment Manager” means any person other than the Trustee, in its capacity as trustee, or the Administrator who:

(1) has the power to manage, acquire, or dispose of any assets of the Plan;

(2) is qualified to act as an investment manager under ERISA;

(3) has acknowledged in writing that it is a fiduciary with respect to the Plan;

(4) has been designated by the Administrator as investment manager for the Plan.

(jj) “Late Retirement Date” means the first day of the month subsequent to the Normal Retirement Date of the Participant after which the Participantactually Retires.

(kk) “Leveraged Shares” means shares of Employer Stock purchased with an Acquisition Loan.

(ll) “Non-Highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.

(mm) “Normal Retirement Date” means the first day of the month after which a Participant attains age sixty-five (65).

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(nn) “Participant” means an Eligible Employee or former Eligible Employee who is, or may become, eligible to receive a benefit of any type from the Planand who has commenced participation in the Plan.

(oo) “Party in Interest” means a (i) Participant who is an active Employee, or (ii) Participant or Beneficiary who is a “party in interest” as that term isdefined in Section 3(14) of ERISA.

(pp) “Plan” means, jointly and severally, as the context so requires, the stock bonus plan and the profit sharing and 401(k) plan created and embodiedherein, as amended from time to time, designated as the “Biomet 401(k) Retirement and Savings Plan.”

(qq) “Plan Compensation” means, for a Plan Year, the cash remuneration as defined under Code Section 3401(a) of a Participant received from hisEmployer in the Plan Year, but only for periods after the Participant commences participation in the Plan, that is reportable for federal income tax withholding atthe source purposes (which excludes, among other things, amounts related to the disqualifying disposition of a qualified stock option) but determined withoutregard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the servicesperformed. Notwithstanding anything contained in this Subsection to the contrary, Plan Compensation shall include elective amounts that are not includable ingross income pursuant to Code Sections 125, 132(f)(4), 401(k), 402(e)(3), 402(h) or 403(b). Notwithstanding anything contained herein, and to the extentrequired by Code Section 401(a)(17), the compensation of a Participant for any Plan Year taken into account under the Plan shall not exceed Two HundredThousand Dollars ($200,000) (as increased by Code Section 401(a)(17)(B) for the applicable Plan Year). If any Plan Year consists of less than twelve(12) months, the compensation limit under Code Section

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401(a)(17) shall be multiplied by a fraction, the numerator of which is the number of months in the short Plan Year and the denominator of which is twelve (12).For purposes of Regular Contributions to be made under Section 4.04, a Participant’s Plan Compensation shall be determined as set out in this Subsection,except that it shall be the Participant’s Plan Compensation during the Company’s 12-month fiscal year (June 1 through May 31) ending on the applicableAllocation Date rather than the Plan Year.

(rr) “Plan Year” means any twelve (12) month period beginning on January 1 and ending on the following December 31; provided, however:

(1) that the period beginning June 1, 2005, and ending December 31, 2005, shall be a short Plan Year with respect to the portion of the Plan that wasformerly known as the Biomet, Inc. 401(k) Profit Sharing Plan;

(2) that prior to June 1, 2005, “Plan Year” means, with respect to the portion of the Plan that was formerly known as the Biomet, Inc. 401(k) ProfitSharing Plan, any twelve (12) month period beginning on June 1 and ending on the following May 31;

(3) that the period beginning June 1, 2006, and ending March 31, 2007, shall be a short Plan Year with respect to the portion of the Plan that wasformerly known as the Biomet, Inc. Employee Stock Bonus Plan; and

(4) that prior to June 1, 2006, “Plan Year” means, with respect to the portion of the Plan formerly known as the Biomet, Inc. Employee Stock BonusPlan, any twelve (12) month period beginning on June 1 and ending on the following May 31.

(ss) “Qualified Domestic Relations Order” means a domestic relations order that is determined to be qualified within the meaning of CodeSection 414(p)(l).

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(tt) “Qualifying Employer Securities” means any security that is issued by the Company or an Affiliated Employer and that meets the requirements ofCode Section 409(l) and ERISA Section 407(d)(5).

(uu) “Retires” or “Retirement” means that a Participant Terminates Employment on his Normal, Early, Late, or Disability Retirement Date.

(vv) “Section” means, when not preceded by the word Code or ERISA, a section of this Plan.

(ww) “Spouse” means the person to whom the Participant is legally married, pursuant to the applicable law of the state of the Participant’s residence.

(xx) “Terminated Employment,” “Terminates Employment” or “Termination of Employment” means, with respect to an Employee, that the Employeeceases to be an Employee of all Affiliated Employers; provided, however, it shall not include: (i) temporary absence of such Employee due to vacation, sickness(not including Disability), or layoff; (ii) military leave for training or service, or both, with the Uniformed Services of the United States to the extent requiredunder USERRA and Code Section 414(u)(8)(A); (iii) a leave that qualifies as a family or medical leave under the FMLA; (iv) a leave of absence for any reasonapproved by an Affiliated Employer on a nondiscriminatory basis; or (v) a change in employment in which the Employee’s new employer assumes sponsorshipof the Plan or maintains the Plan or accepts a transfer of assets and liabilities (within the meaning of Code Section 414(l)) with respect to the Employee.

(yy) “Trust” means the trust or trusts established and maintained under the Plan and any Trust Agreement to hold the Trust Fund.

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(zz) “Trust Agreement” means the Trust Agreement for the Biomet 401(k) Savings and Retirement Plan, as amended from time to time.

(aaa) “Trust Fund” means the assets of the Plan held by the Trustee in various Funds, pursuant to the terms of the Plan and the Trust.

(bbb) “Trustee” means the trustee(s) of the Trust or any successor trustee or trustees designated and appointed under the Trust.

(ccc) “Uniformed Services of the United States” means the Armed Forces (as defined in USERRA), the Army National Guard and the Air National Guardwhen engaged in active duty for training, inactive duty training, or full-time National Guard duty, the commissioned corps of the Public Health Service, and anyother category of persons designated by the President in time of war or emergency.

(ddd) “USERRA” means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended from time to time.

(eee) “Valuation Date” means each day of the Plan Year or such other Valuation Dates as the Administrator or its designee may establish. In the case ofthe valuation of an asset or Account as of a Valuation Date, such valuation shall be determined as described in Article VI.

(fff) “Vested” or “Vesting” means, when used with respect to an Account of a Participant or his Beneficiary, a claim to that part of the Account that arisesfrom service of the Participant that is unconditional, is legally enforceable against the Plan, and is nonforfeitable. Notwithstanding the preceding sentence, anamendment to this Plan may reduce the Vested Accounts of a Participant if such amendment satisfies the requirements of ERISA and the Code.

(ggg) “Vesting Computation Period” means each Plan Year; provided, however, that (i) for any Employee who was a Participant in the Biomet, Inc. 401(k)Profit Sharing Plan and

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who completed an Hour of Service during the short Plan Year period beginning June 1, 2005, and ending December 31, 2005, the following overlapping VestingComputation Periods shall be established and such Participant shall be credited with a Year of Service in each such overlapping Vesting Computation Period inwhich he is credited with at least one thousand (1,000) Hours of Service: (A) June 1, 2005 to May 31, 2006, and (B) January 1, 2006 to December 31, 2006; and(ii) for any Employee who was a Participant in the Biomet, Inc. Employee Stock Bonus Plan and completed an Hour of Service during the short Plan Year periodbeginning June 1, 2006 and ending March 31, 2007, the following overlapping Vesting Computation Periods shall be established and such Participant shall becredited with a Year of Service in each such overlapping Vesting Computation Period in which he is credited with at least one thousand (1,000) Hours of Service:(A) June 1, 2006 to May 31, 2007, and (B) January 1, 2007 to December 31, 2007.

(hhh) “Years of Service” means, for an Employee, each Vesting Computation Period during which the Employee completes at least one thousand(1,000) Hours of Service; provided, however, the following Years of Service shall be excluded:

(1) In the case of an Employee who incurs a one (1) year Break in Service, Years of Service before such break will not be taken into account untilthe Employee has completed one (1) Year of Service after such Break in Service.

(2) Any Years of Service occurring prior to any period of consecutive one (1) year Breaks in Service shall not be taken into account if (i) the numberof consecutive one (1) year Breaks in Service within such period equals or exceeds the greater of five (5) or the aggregate number of Years of Service ofthe Employee prior to such period, and if (ii) the Employee had no Vested right to any portion of his Account balances derived

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from Employer contributions at the commencement of such Break in Service; provided, however, any Years of Service excluded pursuant to thisParagraph shall also be excluded from any subsequent determination of Years of Service.

Notwithstanding the preceding provisions, the Years of Service of any Employee shall include any Years of Service of such Employee while he was anEmployee of any Affiliated Employer. The Years of Service of any Employee shall also include: (i) any years of service such Employee was credited with underthe Kirschner Medical Corporation 401(k) Savings and Retirement Plan as of December 31, 1994, (ii) any years of service such Employee was credited withunder the Implant Innovations, Inc. Retirement 401(k) Plan as of December 15, 1999, (iii) any years of service such Employee was credited with under theBiolectron, Inc. 401(k) Plan as of September 24, 2000, and (iv) with respect to any Employee who was employed by Interpore Spine Ltd., Interpore CrossInternational, Inc., or Interpore Orthopaedics, Inc. as of June 18, 2004, and who was otherwise considered an Eligible Employee under the terms of the Plan, anyyears of service such Employee was credited with under the Interpore International, Inc. 401(k) Plan as of such date. Notwithstanding the preceding provisions,any Employee hired on October 25, 2004, who was an employee of Z-KAT, Inc. on October 24, 2004, shall be credited with his or her service while an employeeof Z-KAT, Inc. for purposes of determining such Employee’s Years of Service.

Section 2.02. Construction and Governing Law. The following rules of construction shall govern any interpretation of the Plan:

(a) This Plan shall be interpreted, enforced, and administered and the validity thereof determined in accordance with ERISA, the Code, and, when notinconsistent with ERISA or the Code, the internal laws of the State of Indiana, without regard to conflict of law principles.

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(b) Words used herein in the masculine gender shall be construed to include the feminine gender where appropriate and words used herein in the singularor plural shall be construed as being in the plural or singular where appropriate.

(c) In resolving any conflict between provisions of the Plan and in resolving any other uncertainty as to the meaning or intention of any provision of thePlan, the interpretation that (i) causes the Plan to constitute a qualified plan under the provisions of Code Section 401 and the Trust to be exempt from tax underCode Section 501, (ii) causes the contributions of any Employer to the Trust to be deductible by such Employer from net income for federal income tax purposes,(iii) causes the Plan to satisfy the requirements to be an employee stock ownership plan which is a stock bonus plan described in Code Sections 4975(e)(7) and401(a)(23), respectively, (iv) causes the Plan to constitute a profit sharing plan within the meaning of Code Section 401(a)(27), (v) causes the Plan to contain aqualified cash or deferred arrangement described in Code Section 401(k), and (vi) causes the Plan to comply with all applicable requirements of ERISA and theCode shall prevail over any different interpretation.

(d) The headings and subheadings in the Plan are inserted for convenience of reference only and are not to be considered in the construction of anyprovision of the Plan.

(e) If any provision of the Plan shall be held to violate ERISA or the Code or be illegal or invalid for any other reason, that provision shall be deemed to benull and void, but the invalidation of that provision shall not otherwise impair or affect the Plan.

(f) Reference to a provision of the Code or ERISA shall be deemed to include the successor of such provision, to the extent the context so permits.

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ARTICLE III.

PARTICIPATION

Section 3.01. Participation. Any individual who was a Participant in either the Biomet, Inc. 401(k) Profit Sharing Plan or the Biomet, Inc. Employee StockBonus Plan on the day immediately preceding April 1, 2007, shall continue to be a Participant on April 1, 2007, subject to the terms of the Plan.

(a) Any other Eligible Employee is eligible to become a Participant in the Plan if he has satisfied the following requirements:

(1) he (A) has completed ninety (90) days of Continuous Employment for an Employer and is scheduled to work at least one thousand (1,000) hoursper year, or (B) has completed one thousand (1,000) Hours of Service in any Plan Year or in any of the overlapping Vesting Computation Periods requiredby the changes in the Plan Year under Subsection 2.01(rr); and

(2) he has attained at least age eighteen (18).

(b) An Eligible Employee shall become a Participant on the next Entry Date after which he has satisfied the participation requirements of Subsection (a),provided that he is an Eligible Employee on that Entry Date. If an individual who has satisfied the eligibility requirements of Subsection (a) is not an EligibleEmployee on the applicable Entry Date, and the individual later completes an Hour of Service as an Eligible Employee, he shall become a Participant uponcompleting that Hour of Service, provided that he did not Terminate Employment and incur a Break in Service before completing that Hour of Service. If theEmployee did incur a Break in Service, he shall become a Participant as provided in Subsection (a), taking into account the Break in Service rules set out inSubsection 2.01(hhh).

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(c) Notwithstanding the preceding provisions, all service credited under the Biolectron, Inc. 401(k) Plan as of September 24, 2000, including any days ofcontinuous employment with Biolectron, Inc., shall be counted in determining an Employee’s eligibility to participate under the Plan. An Eligible Employee whowas an employee of Biolectron, Inc. on September 24, 2000, shall become a Participant on December 1, 2000, provided such Eligible Employee has satisfied theeligibility requirements of Subsection (a) as of December 1, 2000, pursuant to the terms of this Subsection (c). If such Eligible Employee has not satisfied theeligibility requirements of Subsection (a) as of December 1, 2000, after applying the provisions of this Subsection (c), such Eligible Employee shall become aParticipant on the next Entry Date after which he has satisfied the participation requirements of Subsection (a).

(d) Notwithstanding the preceding provisions, any Employee hired on October 25, 2004, who was an employee of Z-KAT, Inc. on October 24, 2004, shallbe credited with his or her service while an employee of Z-KAT, Inc. in determining such Employee’s eligibility to participate under the Plan. An EligibleEmployee, who was an employee of Z-KAT, Inc. on October 24, 2004, shall become a Participant on November 1, 2004, provided such Eligible Employee hassatisfied the eligibility requirements of Subsection (a) as of November 1, 2004, pursuant to the terms of this Subsection (d). If such Eligible Employee has notsatisfied the eligibility requirements of Subsection (a) as of November 1, 2004, after applying the provisions of this Subsection (d), such Eligible Employeeshall become a Participant on the next Entry Date after which he or she has satisfied the participation requirements of Subsection (a).

(e) Notwithstanding the preceding provisions, all service credited under the Interpore International, Inc. Retirement Savings Plan as of December 31, 2005,including any days of continuous employment with Interpore Orthopaedics, Inc., Interpore Spine Ltd., or Interpore

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Cross International, Inc., shall be counted in determining an Employee’s eligibility to participate under the Plan. An Eligible Employee who was an employee ofInterpore Orthopaedics, Inc., Interpore Spine Ltd., or Interpore Cross International, Inc., on June 17, 2004, shall become a Participant on June 18, 2004, providedsuch Eligible Employee has satisfied the eligibility requirements of Subsection (a) as of June 18, 2004, pursuant to the terms of this Subsection (e). If suchEligible Employee has not satisfied the eligibility requirements of Subsection (a) as of June 18, 2004, after applying the provisions of this Subsection (e), suchEligible Employee shall become a Participant on the next Entry Date after which he has satisfied the participation requirements of Subsection (a).

Section 3.02. Cessation of Participation. A Participant shall cease to be a Participant on the distribution or forfeiture of his Account.

Section 3.03. Reemployment.

(a) A former Participant shall become a Participant as of the date he again performs an Hour of Service as an Eligible Employee.

(b) A former Eligible Employee who had not satisfied the participation requirements under Subsection 3.01(a) at the time of his Termination ofEmployment shall become a Participant only in accordance with the requirements of Section 3.01.

Section 3.04. Change in Employment Status.

(a) A Participant whose employment status changes so that he no longer satisfies the definition of Eligible Employee, but who remains an Employee shallbecome a limited Participant hereunder as of the date of the change in employment status. Such limited Participant shall cease to make or share in Contributionsunder the Plan as of the date of such change in employment status. A limited Participant shall retain a right to be eligible for benefits under the

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Plan, but only to the extent of the balance of his Accounts, as of the date of his change in employment status adjusted to reflect adjustments under Article VI anddistributions or withdrawals under Article VII. If such limited Participant does not again become an Eligible Employee prior to Retirement or Termination ofEmployment, the Vested Accounts of the limited Participant, if any, shall be paid as provided in Article VII.

(b) A limited Participant who again has a change in employment status, and becomes an Eligible Employee, shall become a full Participant as of suchchange in employment status. Thereafter, such Participant shall be entitled to make and share in Contributions in accordance with the terms of the Plan as ineffect as of the date of subsequent change in employment status. In no event, however, shall such a Participant receive a greater benefit under the Plan than thebenefit that the Participant would have received had the Participant not had a change in employment status.

(c) An Employee of the Employer or an Affiliated Employer who first becomes an Eligible Employee due to a change in employment status shall becomea Participant as provided in Section 3.01.

Section 3.05. Transfer of Employment Between Employers.

(a) Subject to the provisions of Section 3.04, a Participant who is transferred from employment with an adopting Employer to employment with anotheradopting Employer shall continue to participate in accordance with the provisions of the Plan. Such a Participant’s prior election to make Pre-Tax Contributionsshall continue in effect until revoked or changed in accordance with the provisions of Section 4.02 and receive an allocation of Matching Contributions thereonin accordance with Section 4.03. Such a transferred Participant shall be entitled to receive an allocation of Employer Contributions under Section 4.04 (to theextent

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eligible thereunder) for the Plan Year in which such transfer of employment occurs, based on Plan Compensation attributable to the respective adoptingEmployers during such Plan Year, if he is employed by an adopting Employer on the applicable Allocation Date.

(b) A Participant who is transferred from employment with an adopting Employer to employment with an Affiliated Employer that is not an adoptingEmployer under the Plan shall not be permitted to make any additional Pre-Tax Contributions to the Plan subsequent to such date of transfer. Such a transferredParticipant shall be entitled to receive an allocation of Employer Contributions under Section 4.04 for the Plan Year in which such transfer of employmentoccurs, based upon Plan Compensation attributable to the adopting Employer during such Plan Year, if he otherwise satisfies the requirements to receive suchEmployer Contribution and is employed by an Affiliated Employer on the applicable Allocation Date.

Section 3.06. Completion of Forms by Participants and Beneficiaries. Each Participant and any Beneficiary eligible to receive, or claiming a right toreceive, any benefits under the Plan shall complete such Applicable Form and furnish such proofs and information as may be required at any time by the Trusteeor the Administrator.

ARTICLE IV.

CONTRIBUTIONS

Section 4.01. Contributions.

(a) Contributions shall be made to the Plan in accordance with this Article and subject to the limitations under Article V. Contributions made pursuant toSections 4.02 shall be made in cash. The contributions under Sections 4.03 and 4.04 may be made in cash or in the form of Qualifying Employer Securities, thevalue of which shall be determined pursuant to the Trust Agreement and Section 6.03. To the extent that any Contribution under Section 4.03 or

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4.04 is made in the form of Employer Stock, such Contribution shall be held in the Trust under the stock bonus component of the Plan and shall be allocated,pursuant to the provisions of Section 4.03 or 4.04, as applicable, to the Participants’ Stock Subaccounts, unless and until any such Participant directs theinvestment of such Contribution to one (1) or more of the other investment Funds available under the Plan pursuant to Section 12.02, at which time suchContribution shall become part of the non-stock bonus component of the Plan and shall be accounted for under such Participant’s Non-Stock Subaccounts.

(b) Notwithstanding anything in this Article IV to the contrary, Contributions under Section 4.04 shall be made in cash to the extent necessary to enablethe Trustee to pay any maturing obligations under any outstanding Acquisition Loan. To the extent that Contributions for a Plan Year are used to repay anAcquisition Loan, any Leveraged Shares released from the Employer Stock Collateral Account as a result of the Contributions under Section 4.04 for the PlanYear shall be credited to the Employer Stock Suspense Account until allocated as provided in Section 4.04.

Section 4.02. Pre-Tax Contributions.

(a) A Participant who is an Eligible Employee may elect to have Pre-Tax Contributions made on his behalf as provided in this Section. Such a Participantmay enter into a written salary deferral agreement with his Employer agreeing to have the Employer reduce his current cash compensation and contribute thereduction as Pre-Tax Contributions to the Plan of a specified percentage, equal to or greater than one percent (1%) of his Plan Compensation each pay period;provided, however, that Pre-Tax Contributions made on behalf of a Participant under the Plan (including Pre-Tax Contributions made pursuant to Section 4.10)for any calendar year shall not exceed (i) the dollar limitation contained in Code Section 402(g) in effect for such

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taxable year, and (ii) sixty (60%) percent of his Plan Compensation. A Participant’s Pre-Tax Contributions under this Section 4.02 shall include any EmployerContributions allocated to the Participant’s Pre-Tax Contribution Account. Pre-Tax Contributions shall reduce the cash compensation otherwise payable to suchParticipant and shall be paid in cash to the Trustee by the Employer on a basis consistent with its payroll practices within a reasonable period after being withheldfrom the cash compensation of a Participant, as required by ERISA.

(b) To the extent that the elected Pre-Tax Contributions of a Catch-Up Eligible Participant would exceed the applicable dollar limit under CodeSection 402(g), such Contributions shall be deemed to be Catch-Up Contributions to the extent that the Participant’s Catch-Up Contributions for the Plan Year donot exceed the applicable Catch-Up Contributions Limit. In addition, a Catch-Up Eligible Participant may enter into a separate salary reduction agreement withhis Employer pursuant to which his Employer shall reduce his cash compensation by an amount in excess of the applicable Pre-Tax Contribution Limit up to theCatch-Up Contribution Limit, and such reduction amount shall be contributed to the Plan as Catch-Up Contributions. Catch-Up Contributions made pursuant tothis Subsection for a Plan Year, together with amounts deemed as Catch-Up Contributions for such Plan Year, shall not exceed the Catch-Up Contributions Limitfor the Plan Year. Catch-Up Contributions shall not be treated as Pre-Tax Contributions for purposes of the Plan provisions implementing the requirements ofCode Sections 401(k)(3), 402(g), 410(b), 415, or 416.

(c) No Participant shall be permitted to have elective deferrals made under this Plan, or any other qualified plan maintained by the Employer during anytaxable year, in excess of the dollar limitation contained in Code Section 402(g) in effect for such taxable year, except to the extent permitted under Subsection(b) and Code Section 414(v), if applicable.

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(d) Participant elections to make Pre-Tax Contributions shall be made on the Applicable Form, which form may enable the Participant to exclude deferralelections from bonuses or other specified elements of Plan Compensation. A Participant may elect to make or change an election to make Pre-Tax Contributionsas of the first day of each month on the Applicable Form within such period before the effective date of the change as the Administrator may establish. AParticipant may suspend his Pre-Tax Contributions at any time on an Applicable Form filed with the Administrator within such period before the effective date ofthe suspension as the Administrator may establish.

(e) An election to make Pre-Tax Contributions shall not be valid with respect to any period during which the Participant is not an Eligible Employee. Noelection to make, change, or discontinue Pre-Tax Contributions shall be given retroactive effect.

(f) Pre-Tax Contributions made on behalf of a Participant for a Plan Year shall be allocated to the Pre-Tax Contributions Account of the Participanteffective as of the earlier of the date coincident with or immediately following the date on which they are contributed to the applicable Trust or the last day of thePlan Year.

(g) The Administrator may establish additional nondiscriminatory rules and procedures governing the manner and timing of elections by Employees tomake, change, or discontinue Pre-Tax Contributions, including, but not limited to, an additional limit on the Pre-Tax Contributions of Highly CompensatedEmployees.

Section 4.03. Matching Contributions.

(a) As of each payroll date during a Plan Year, Matching Contributions may be contributed on behalf of each Participant equal to a percentage of thePre-Tax Contributions the Participant has made during that payroll period under Section 4.02 as approved by the

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Administrator, plus an allocated percentage of the forfeitures from the previous Plan Year, if any. The Administrator may, for each Plan Year, determine thatportion or percentage, if any, of the Pre-Tax Contributions of Participants that each Employer shall contribute as Matching Contributions and any limitationsapplicable to those contributions. In so doing, the Administrator may limit the maximum Matching Contribution of each Participant to a percentage of his PlanCompensation or a stated dollar amount. Effective for Plan Years beginning on or after June 1, 2002, notwithstanding anything contained herein to the contraryand unless determined otherwise by the Administrator, each Employer shall contribute on behalf of each Participant a Matching Contribution equal toseventy-five percent (75%) of such Participant’s Pre-Tax Contributions that do not exceed five percent (5%) of such Participant’s Plan Compensation. EachEmployer shall contribute the established Matching Contribution for a Plan Year on behalf of each Participant.

(b) If a Participant is employed by more than one (1) Employer during a Plan Year, the portion of the total Matching Contribution of the Participant for thePlan Year that is paid by each Employer shall equal the percentage of the Pre-Tax Contributions of the Participant for the Plan Year paid by the Employer.Matching Contributions made on behalf of a Participant for a Plan Year shall be allocated to his Matching Account as of the date the Employer contributes theMatching Contribution to the Trust; provided, however, such Matching Contributions shall be allocated no later than the last day of the Plan Year during whichthe related Pre-Tax Contributions were made to the Plan.

Section 4.04. Regular and Nonelective Contributions.

(a) For each Plan Year, and subject to Subsection (c) below, the Administrator, in its sole discretion, shall determine and designate the amount of RegularContributions, if any, that

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an Employer shall contribute. Regular Contributions for a Plan Year shall be allocated among the Regular Accounts of Covered Participants as of the AllocationDate for the Plan Year in proportion to the relative Plan Compensation of the Covered Participants for the Company’s fiscal year ending on the Allocation Date.

(b) Except as otherwise provided in Subsection (c), the Administrator shall determine and designate the amount of Nonelective Contributions, if any, thatan Employer shall contribute for a Plan Year. Nonelective Contributions for a Plan Year shall be allocated among the Nonelective Contribution Accounts ofCovered Participants who are Non-Highly Compensated Employees as of the last day of the Plan Year in proportion to the relative Plan Compensation of theCovered Participants for the Plan Year.

(c) Notwithstanding the preceding provisions of Subsections (a) and (b), to the extent that an Acquisition Loan is outstanding during any Plan Year, theamount of Employer Contributions with respect to such Plan Year, plus any applicable dividends on unallocated shares, shall first be applied to pay any maturingobligations on such Acquisition Loan. Each Acquisition Loan shall provide for the release from encumbrance of Employer Stock used as collateral for theAcquisition Loan pursuant to this Subsection (c). For each Plan Year during which the Acquisition Loan is outstanding, the number of shares of Employer Stockreleased from the Employer Stock Collateral Account must equal the number of encumbered shares held immediately before release for the current Plan Yearmultiplied by a fraction, the numerator of which is equal to the amount of principal and interest paid for the Plan Year and the denominator of which is equal tothe sum of the numerator plus the principal and interest to be paid in future Plan Years without regard to possible extension or renewal periods. Amounts releasedfrom the Employer Stock Collateral Account for a Plan Year shall be credited to the Employer Stock

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Suspense Account as provided until allocated among the Stock Subaccounts of Covered Participants, as of the last day of such Plan Year, in proportion to therelative Compensation of such Covered Participants for the Plan Year. Such number of shares of Employer Stock shall be identified as part of the RegularAccounts of such Participant. The shares of Employer Stock allocated under this Section shall be credited to the Trust Fund at the fair market value of suchshares as of the applicable allocation date, as determined in accordance with Section 12.04.

(d) If a Covered Participant is employed by more than one (1) Employer during a Plan Year, the portion of the Nonelective Contributions and RegularContributions of such Covered Participant for the Plan Year that is paid by each Employer shall equal the percentage of the Plan Compensation of the CoveredParticipant for the Plan Year paid by that Employer.

(e) For any Participant who is on a leave of absence pursuant to the FMLA, allocations under this Section shall be made to the Participant’s Account(s) asthough the Participant was currently at work on the applicable allocation date(s); provided, however that, for any Participant who does not return to workimmediately following a leave of absence taken pursuant to the FMLA, said Participant shall forfeit any and all allocations made to the Participant’s Account(s)during the Participant’s FMLA leave of absence.

Section 4.05. Participant After-Tax Contributions. Effective March 16, 2007, Participant after-tax contributions shall no longer be permitted to be madeunder the Plan.

Section 4.06. Payment, Deductibility, and Nature of Contributions and Dividends.

(a) The Employer Contributions under Sections 4.03 and 4.04 shall be made as of the last day of the Plan Year, or such earlier allocation date asdetermined by the Employer; and shall actually be paid within such time period as permitted by law.

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(b) If an Employer is unable to make any Contribution provided under Sections 4.03 or 4.04, any other Employer may make such Contributions on behalfof such Employer, as determined in the sole discretion of the Administrator; provided, however, the total Contributions of an Employer for any Plan Year underSections 4.03 and 4.04, including any dividends, shall not exceed the amount allowable as a deduction from the income of the Employer for purposes of incometax liability under the Code, and any such Contributions are conditioned on such deductibility.

(c) Dividends paid on Employer Stock held under the stock bonus plan component of the Plan, and as provided in Section 18.04, shall be deductible to thefull extent provided under Code Section 404(k).

Section 4.07. Expenses of Plan. All reasonable expenses of administering the Plan shall be paid by the Trustee and shall be charged against and paid fromthe Trust Fund, unless an Employer pays such expenses.

Section 4.08. Recapture of Tax Credit.

(a) Any and all amounts transferred to the Plan by an Employer because of the requirements of Code Sections 41(c)(1)(B) or 48(n)(1) (as in effect prior tothe enactment of the Tax Reform Act of 1984) shall remain in the Plan to be allocated to the Tax Credit Accounts of the Participants (and if previously allocatedto the Tax Credit Accounts of the Participants shall remain so allocated), even though part or all of the Employee plan credit (as in effect prior to the enactmentof the Tax Reform Act of 1984) or the federal tax credit allowed under Code Section 41 with respect to such amounts is recaptured or redetermined.

(b) Notwithstanding Subsection (a) above, contributions by the Employer are conditioned on the determination by the Secretary of Treasury, or hisdelegate, that the Plan

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meets the requirements of Code Section 409 and any such contribution shall be returned to the Employer within one (1) year after the date on which theSecretary, or his delegate, issues a notice to the Company that the Plan does not satisfy the requirements of Code Section 409; provided an application for suchdetermination was filed with the Secretary or his delegate not later than ninety (90) days after the date on which an Employee plan credit is claimed under theCode by an Employer.

Section 4.09. Rollover Contributions and Transfers to the Plan.

(a) At any time during a Plan Year, an Eligible Employee may contribute to the Plan in cash, and the Plan shall accept, Direct Rollovers (as defined inSection 7.13) of distributions from the following types of plans: (i) a qualified plan described in Code Section 401(a) or 403(a), excluding after-tax employeecontributions; (ii) an annuity contract described in Code Section 403(b), excluding after-tax employee contributions; and (iii) an eligible plan under CodeSection 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The Planshall accept a contribution from an Eligible Employee of an Eligible Rollover Distribution (as defined in Section 7.13) (excluding after-tax employeecontributions) from (i) a qualified plan described in Code Section 401(a) or 403(a), (ii) an annuity contract described in Code Section 403(b), and (iii) an eligibleplan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of astate. The Plan shall accept a rollover contribution from an Eligible Employee (excluding after-tax employee contributions) of the portion of a distribution froman individual retirement account or annuity described in Code Section 408(a) or 408(b) that is eligible to be rolled over and would otherwise be includible ingross income. Before a Rollover Contribution is made, the Eligible Employee shall designate the

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Fund or Funds in which he wishes his Rollover Contribution to be invested. A Rollover Contribution shall be allocated to the Rollover/Transfer Account of theEligible Employee as of the date of the contribution.

(b) A direct transfer to the Trustee of this Plan from the trustee of another plan that is qualified under Code Section 401(a) shall be made in connectionwith the merger of such other plan into this Plan or the transfer under Code Section 414(l) of the accrued benefit of any Participant who was a participant undersuch other plan. Any such direct transfer must be made directly by the trustee or other funding agent of the other plan rather than by the Participant. In no eventmay any direct transfer be made to this Plan which is attributable to deductible voluntary contributions within the meaning of Code Section 72(o)(5).

(c) A direct transfer may be made in cash or property; provided, however, that the Trustee shall have the right to reject a direct transfer if the assets are in aform inconsistent with the investment philosophy of the Trustee. Alternatively, the Trustee shall have the authority to convert noncash transferred assets to cash,securities or other investments. Any expenses incurred in converting such assets shall be paid from the assets received in the direct transfer.

(d) Unless the Eligible Employee elects otherwise on the Applicable Form, the direct transfer shall be invested in the investment Fund or Funds in whichthe Accounts to which the direct transfer is recorded pursuant to this Subsection 4.09(d). Separate accounting may be maintained with respect to any amountstransferred to this Plan pursuant to this Section 4.09.

Section 4.10. Employer Contributions Under the Biomet, Inc. Flexible Benefits Plan. Employer contributions as provided for under the Biomet, Inc.Flexible Benefits Plan, a benefit program under the Biomet, Inc. Employee Benefit Plan (“Flexible Benefits Plan”) may be allocated to the Participant’s Pre-TaxContribution Account as Pre-Tax Contributions to the extent so elected by the Participant under the Flexible Benefits Plan, in accordance with the terms andconditions of the Plan and the Flexible Benefits Plan.

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ARTICLE V.

LIMITATIONS ON CONTRIBUTIONS AND OTHER ADDITIONS

Section 5.01. Applicability of Article. Notwithstanding any other provision of the Plan to the contrary, Contributions to the Plan and additions to Accountsof Participants shall be limited as provided in Code Sections 401(k), 401(m) and 415, as provided in this Article.

Section 5.02. Definitions. As used in this Article, the following terms, when capitalized, shall have the following meanings, unless otherwise expresslyprovided:

(a) “Allocable Income” means the sum of the allocable gain or loss for the year or partial year, as the case may be, determined in accordance with CodeSection 401(k), 401(m), or 402(g), and the regulations promulgated thereunder. For Plan Years beginning before December 31, 2007, Allocable Income shallinclude gains or losses for the period from the end of the year to the date of the distribution or correction, but only to the extent that the excess amounts are orwill be credited with gains or losses for the period.

(b) “Average Contribution Percentage” means the average (expressed as a percentage to the nearest one-hundredth of one percent) of the ContributionPercentages of the Eligible Participants in a group.

(c) “Average Deferral Percentage” means the average (expressed as a percentage to the nearest one-hundredth of one percent) of the Deferral Percentagesof the Eligible Participants in a group.

(d) “Compensation” means, for purposes of Code Sections 401(k) and 401(m), compensation as defined in Code Section 414(s) which, in general, definescompensation as

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having the meaning given such term by Subsection 5.06(d); provided, however, to the extent permitted by the Code, Compensation for any period during whichan individual is not a Participant may be disregarded. For Plan Years beginning on or before December 31, 1997, the Company may elect to include electivedeferrals described in Code Section 414(s)(2) in Compensation. For Plan Years beginning after December 31, 1997, elective deferrals described in CodeSection 414(s)(2) shall be included in Compensation unless the Company elects to exclude such elective deferrals. In general, elective deferrals described inCode Section 414(s)(2) include any amount that is contributed by an Affiliated Employer pursuant to a salary reduction agreement and that is not includible inthe gross income of an Employee under Code Section 125, 132(f)(4), 402(e)(3), 402(h), 403(b) or 457.

(e) “Contribution Percentage” means the ratio (expressed as a percentage to the nearest one-hundredth of one percent) of the Matching Contributions(excluding Matching Contributions that are forfeited because the contribution to which they relate are Excess Deferral Amounts, Excess Contributions or ExcessAggregate Contributions) and after-tax contributions of an Eligible Participant for the Plan Year to the extent not used to satisfy one of the tests underSubsection 5.04(a), as applicable, to the Compensation of the Participant for the Plan Year. As may be necessary to satisfy one (1) of the tests underSubsection 5.05(a), and in the sole discretion of the Administrator, Elective Deferrals and Nonelective Contributions of a Participant that are not necessary tomeet one (1) of the tests under Subsection 5.04(a) for the Plan Year may be included in the determination of such Contribution Percentage for the Plan Year. TheContribution Percentage for Participants shall be determined in accordance with the following:

(1) The Contribution Percentage for any Highly Compensated Participant for the Plan Year who is eligible to make employee contributions, or toreceive matching

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contributions, qualified nonelective contributions, or Elective Deferrals allocated to his accounts under two (2) or more plans described in CodeSection 401(a) or arrangements described in Code Section 401(m), and that are maintained by an Affiliated Employer, shall be determined as if all suchcontributions and deferrals were made under this Plan, without regard to the plan years of the other plans or arrangements.

(2) In the event that the Plan satisfies the requirements of Code Section 410(b) only if aggregated with one (1) or more other plans, or if one (1) ormore other plans satisfy the requirements of Code Section 410(b) only if aggregated with the Plan, the Contribution Percentages of Eligible Participantsshall be determined as if all such plans were a single plan.

(f) “Current Plan Year” means the Plan Year for which tests given in Section 5.04 or 5.05 are being performed.

(g) “Deferral Percentage” means for an Eligible Participant the ratio (expressed as a percentage to the nearest one-hundredth of one percent) of the sum ofElective Deferrals (including Excess Deferral Amounts of Highly Compensated Participants) and Nonelective Contributions of the Participant for the Plan Yearto the Compensation of the Eligible Participant for the Plan Year. The Deferral Percentage for Participants shall be determined in accordance with the following:

(1) The Deferral Percentage for any Highly Compensated Participant for the Plan Year who is eligible to make Elective Deferrals, or to receivematching contributions or qualified nonelective contributions allocated to his accounts under two (2) or more plans described in Code Section 401(a) orarrangements described in Code Section 401(k), and that are maintained by an Affiliated Employer, shall be determined as if all such contributions anddeferrals were made under this Plan, without regard to the plan years of the other plans or arrangements.

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(2) In the event that the Plan satisfies the requirements of Code Section 410(b) only if aggregated with one (1) or more other plans, or if one (1) ormore other plans satisfy the requirements of Code Section 410(b) only if aggregated with the Plan, the Deferral Percentages of Eligible Participants shallbe determined as if all such plans were a single plan.

(h) “Elective Deferrals” means elective deferrals as defined by Code Section 402(g)(3), excluding, however, Catch-Up Contributions and any deferralsproperly distributed as excess annual additions under Section 5.06.

(i) “Eligible Participant” means for a Plan Year any Eligible Employee who is eligible, in accordance with Code Section 401(k), to make Pre-TaxContributions for the Plan Year.

(j) “Excess Aggregate Contributions” means the total amount of Matching Contributions and after-tax contributions with respect to Highly CompensatedParticipants for the Plan Year that, if reduced, would result in the Plan satisfying one (1) of the tests under Subsection 5.05(a). The Excess AggregateContributions are determined for the group of Highly Compensated Participants under a leveling method, starting with the Participant with the highestContribution Percentage. The first amount of excess attributable to that Participant is the amount of said Matching Contributions and after-tax contributions that,if reduced, would result in the Contribution Percentage of the Participant being equal to the greater of (i) the Contribution Percentage of the Participant with thenext highest Contribution Percentage, or (ii) the Contribution Percentage for the Participant that would result in the Plan satisfying one (1) of the

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tests under Subsection 5.05(a). If one (1) of the tests under Subsection 5.05(a) is not then satisfied, the same process is repeated with the Highly CompensatedParticipant with the next highest Contribution Percentage until one (1) of such tests is satisfied. The total amount of Excess Aggregate Contributions is equal tothe total of the reductions in Matching Contributions and after-tax contributions of all affected Participants after application of this Section.

(k) “Excess Contributions” means the total amount of Elective Deferrals with respect to Highly Compensated Participants for the Plan Year that, ifreduced, would result in the Plan satisfying one (1) of the tests under Subsection 5.04(a). Excess Contributions are determined for the group of Participants whoare Highly Compensated Participants under a leveling method, starting with the Participant with the highest Deferral Percentage. The first amount of excessattributable to that Participant is the amount of Elective Deferrals that, if reduced, would result in the Deferral Percentage of the Participant being equal to thegreater of (i) the Deferral Percentage of the Highly Compensated Participant with the next highest Deferral Percentage or (ii) the Deferral Percentage that wouldresult in the Plan satisfying one (1) of the tests under Subsection 5.04(a). If one (1) of the tests under Subsection 5.04(a) is not then satisfied, the same process isrepeated with the Highly Compensated Participant with the next highest Deferral Percentage until one (1) of such tests is satisfied. The total amount of ExcessContributions is equal to the total of such reductions in Elective Deferrals of all affected Participants after application of this Section.

(l) “Excess Deferral Amount” means the amount of Elective Deferrals for a calendar year that the Participant timely claims pursuant to the followingprocedure:

(1) A Participant may submit a claim on the Applicable Form to the Administrator not later than the March 1 following the close of the calendar yearfor which the claim for an Excess Deferral Amount is made, specifying the Excess Deferral Amount claimed by the Participant for the preceding calendaryear for the Plan.

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(2) Said claim shall be accompanied by the written statement of such Participant that if such amounts are not distributed, such claimed ExcessDeferral Amount, when added to amounts deferred under other plans or arrangements described in Code Sections 401(k), 403(b), or 408(k), exceeds thelimit imposed on the Participant by Code Section 402(g) (including, if applicable, the limitation on Catch-Up Contributions under Code Section 414(v))for the calendar year in which the deferral occurred.

(m) “Highly Compensated Participant” means any Participant who is a Highly Compensated Employee and who is an “eligible employee” within themeaning of Code Section 401(k) or 401(m), as the case may be.

(n) “Nonelective Contributions” means, for a Participant for a Plan Year, the amount of Nonelective Contributions designated under Subsection 4.04(b);provided, however, Matching Contributions may be treated as Nonelective Contributions to the extent used to satisfy one (1) of the tests underSubsection 5.04(a).

(o) “Non-Highly Compensated Participant” means any Participant who is not a Highly Compensated Participant and who is an “eligible employee” withinthe meaning of Code Section 401(k) or 401(m), as the case may be.

(p) “Prior Plan Year” means the Plan Year immediately preceding the Current Plan Year.

Section 5.03. Distribution of Excess Deferral Amount. Excess Deferral Amounts, adjusted for Allocable Income, may be distributed in the discretion of theAdministrator not later than each April 15 to the Participant who claims such Excess Deferral Amount for the preceding calendar year.

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Section 5.04. Limitations on Contributions under Code Section 401(k) and the Distribution of Excess Contributions.

(a) The Plan shall be administered to satisfy the test under either Paragraph (1) or Paragraph (2) below in each Plan Year:

(1) The Average Deferral Percentage for the group of Highly Compensated Participants for the Current Plan Year shall not exceed the AverageDeferral Percentage for the group of Non-Highly Compensated Participants for the Current Plan Year multiplied by one and twenty-five one-hundredths(1.25).

(2) The Average Deferral Percentage for the group of Highly Compensated Participants for the Current Plan Year shall not exceed the AverageDeferral Percentage for the group of Non-Highly Compensated Participants for the Current Plan Year multiplied by two (2.0), provided the AverageDeferral Percentage for the group of Highly Compensated Participants does not exceed the Average Deferral Percentage for the group of Non-HighlyCompensated Participants by more than two (2) percentage points.

(b) In the event there are Excess Contributions for a Plan Year, one (1) of the tests under Subsection (a) shall be met by distributing to each affectedParticipant the Excess Contributions allocable to such Participant pursuant to Subsection (c), adjusted for Allocable Income, on or before the last day of thefollowing Plan Year. Notwithstanding anything in the Plan to the contrary, no Matching Contributions shall be made with respect to any such ExcessContributions.

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(c) The Excess Contributions for a Plan Year shall be allocated among Highly Compensated Participants under a leveling method, starting with the HighlyCompensated Participant with the highest dollar amount of Elective Deferrals for the Plan Year. The first amount of excess allocated to that Participant is theamount of said Elective Deferrals that, if reduced, would result in the dollar amount of Elective Deferrals of the Participant being equal to the greater of (i) thedollar amount of Elective Deferrals of the Highly Compensated Participant with the next highest dollar amount of Elective Deferrals, or (ii) the dollar amount ofcontributions for the Participant that would result in the Plan satisfying one (1) of the tests under Subsection 5.04(a). If one (1) of the tests underSubsection 5.04(a) is not then satisfied, the same process is repeated with the Highly Compensated Participant with the next highest dollar amount of ElectiveDeferrals until one (1) of such tests is satisfied. The Excess Contributions, adjusted for Allocable Income, shall be distributed to the affected Participants no laterthan the last day of the succeeding Plan Year.

(d) The Administrator may adjust the Elective Deferral election of any Highly Compensated Participant to the extent it anticipates that such adjustment isnecessary to satisfy the test under Subsection 5.04(a).

Section 5.05. Limitations on Contributions under Code Section 401(m) and the Distribution of Excess Aggregate Contributions.

(a) The Plan shall be administered to satisfy the test under either Paragraph (1) or Paragraph (2) below in each Plan Year:

(1) The Average Contribution Percentage for the group of Highly Compensated Participants for the Current Plan Year shall not exceed the AverageContribution Percentage for the group of Non-Highly Compensated Participants for the Current Plan Year multiplied by one and twenty-fiveone-hundredths (1.25).

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(2) The Average Contribution Percentage for the group of Highly Compensated Participants for the Current Plan Year shall not exceed the AverageContribution Percentage for the group of Non-Highly Compensated Participants for the Current Plan Year multiplied by two (2.0), provided that theAverage Contribution Percentage for the group of Highly Compensated Participants does not exceed the Average Contribution Percentage for the group ofNon-Highly Compensated Participants by more than two (2) percentage points.

(b) In the event there are Excess Aggregate Contributions for a Plan Year, one of the tests under Subsection (a) shall be met by forfeiting, if forfeitable, ordistributing to each affected Participant, if not forfeitable, the Excess Aggregate Contributions, adjusted for Allocable Income, allocable to such Participant nolater than the last day of the succeeding Plan Year. The Excess Aggregate Contributions shall be allocated among Highly Compensated Participants under aleveling method, starting with the Highly Compensated Participant with the highest dollar amount of Matching Contributions and after-tax contributions for thePlan Year. The first amount of excess distributed to that Participant is the amount of said Matching Contributions and after-tax contributions that, if reduced,would result in the dollar amount of Matching Contributions and after-tax contributions of the Participant being equal to the greater of (i) the dollar amount ofMatching Contributions and after-tax contributions of the Highly Compensated Participant with the next highest dollar amount of Matching Contributions andafter-tax contributions, or (ii) the dollar amount of Matching Contributions and after-tax contributions for the Participant that would result in the Plan satisfyingone (1) of the tests under

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Subsection 5.05(a). If one (1) of the tests under Subsection 5.05(a) is not then satisfied, the same process is repeated with the Highly Compensated Participantwith the next highest dollar amount of Matching Contributions and after-tax contributions until one (1) of such tests is satisfied.

(c) The determination of the Excess Aggregate Contributions for the Plan Year shall be made after application of the provisions of Section 5.04 for thePlan Year. Forfeitures of Excess Aggregate Contributions shall be used to reduce future Employer Contributions under Section 4.03 or 4.04.

Section 5.06. Stock Bonus Component Aggregation. For purposes of satisfying the nondiscrimination requirements under Code Sections 401(k) and401(m) as provided in Sections 5.04 and 5.05, the stock bonus component of the Plan should be aggregated with the profit sharing plan component of the Plan.

Section 5.07. Limitation under Code Section 415. Notwithstanding any other provisions in the Plan to the contrary, the following limitations shall apply:

(a) Except to the extent permitted under Subsection 4.02(b) and Code Section 414(v), in no event shall the “annual addition,” as defined in Subsection (f),for a Participant for any Plan Year (which shall be the limitation year) exceed the lesser of:

(1) Forty Thousand Dollars ($40,000) (as increased by the Cost of Living Adjustment); or

(2) One hundred percent (100%) of the “compensation,” as defined in Subsection (d), that such Participant received from Affiliated Employersduring the Plan Year.

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The Compensation limit referred to in Paragraph (2) above shall not apply to any Contribution for medical benefits after separation from service (within themeaning of Code Section 401(h) or Code Section 419A(f)(2) that is otherwise treated as an annual addition). Notwithstanding the foregoing, if any Plan Yearconsists of less than twelve (12) months, the annual dollar limit referred to in Paragraph (l) shall be multiplied by a fraction, the numerator of which is thenumber of months in the short Plan Year and the denominator of which is twelve (12).

(b) The Plan shall be administered so as to comply with the limitations of Code Section 415. Notwithstanding anything in Article IV, the Contributions onbehalf of any Participant shall be reduced to the extent necessary to comply such limitations.

(c) For purposes of this Section and subject to Code Section 415(h), all defined contribution plans of an Affiliated Employer are to be treated as a singledefined contribution plan, and all Affiliated Employers shall be considered as a single employer.

(d) For purposes of this Section, ‘compensation’ means compensation as defined in Code Section 415(c)(3). In general, Code Section 415(c)(3) definescompensation as all of a Participant’s wages as defined in Code Section 3401(a) for the purposes of income tax withholding at the source but determined withoutregard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as theexception for agricultural labor in Code Section 3401(a)(2)); provided, however, compensation shall also include the amount of any elective deferrals, as definedin Code Section 402(g)(3), and any amount contributed or deferred by the employer at election of the Employee and that is not includable in the gross income ofthe Employee by reason of Code Section 125, 132(f)(4) or 457.

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(e) If the annual addition for a Participant under the Plan, determined without regard to the limitation of Subsection (a), would have been greater than theannual addition for such Participant as limited by Subsection (a), then the excess, if due to a reasonable error in estimating compensation or such othercircumstances as found by the Secretary of the Treasury to justify application of this Subsection, shall be reduced, to the extent necessary to satisfy suchlimitation by reallocating to the other Participants any Employer Contributions of such Participant for the Plan Year without any allocation of income or lossthereto in proportion to the relative Plan Compensation of the Participants for the Plan Year. Provided, however, if such reallocations would result in the annualadditions for all eligible Participants exceeding the limitations of Subsection (a), the excess shall be held unallocated in a suspense account and used to reduceEmployer Contributions in subsequent Plan Years.

(f) For purposes of this Section, “annual addition” means the annual addition as defined in Code Section 415(c) and as modified in Code Sections 415(l)(1)and 419(A)(2). In general, Code Section 415(c) defines the annual addition as the sum of the following amounts credited to a Participant’s accounts for thelimitation year under this Plan and any other plan maintained by an Affiliated Employer:

(1) employer contributions;

(2) employee contributions; and

(3) forfeitures.

Amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code Section 415(1)(2), that is part of a pension or annuity planmaintained by an Affiliated Employer are treated as annual additions to a defined contribution plan. Excess Aggregate Contributions and Excess Contributionsshall be treated as annual additions under the Plan even if distributed.

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Rollover Contributions are not included in annual additions. Also, amounts derived from contributions paid or accrued after December 31, 1984, in taxable yearsending after such date, that are attributable to post-retirement medical benefits, allocated to the separate account of a key employee, as defined in CodeSection 419A(d)(3), under a welfare benefit fund, as defined in Code Section 419(e), maintained by an Affiliated Employer are treated as annual additions to adefined contribution plan.

For purposes of this Section, any Leveraged Shares of Employer Stock released from the Employer Stock Suspense Account and allocated to aParticipant’s Stock Subaccounts for a Plan Year shall be accounted for at the lower of (i) the fair market value of the shares as of the allocation date, or (ii) theamount of the Employer Contributions made to the Plan which resulted in the release of those shares from the Employer Stock Suspense Account for the PlanYear.

Section 5.08. Priority of Limitations. The provisions of Sections 5.03, 5.04, 5.05, and 5.07 shall be applied in the following order: (i) Section 5.03;(ii) Section 5.04; (iii) Section 5.05; and (iv) Section 5.07.

ARTICLE VI.

ACCOUNTING

Section 6.01. Participant Accounts.

(a) The Administrator shall establish and maintain adequate records to reflect the Accounts of each Participant and Beneficiary. Credits and charges shallbe made to such Accounts pursuant to the Plan to reflect contributions, distributions, and withdrawals and to reflect gains or losses. Each Participant shall have aseparate Pre-Tax Contribution Account, Matching Account, Nonelective Contribution Account, Regular Account, Rollover/Transfer Account, Savings Accountand Tax Credit Account, with a Stock Subaccount and Non-Stock

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Subaccount maintained under each such Account. The Administrator shall maintain a record of the Employer Stock and the value of all other assets attributableto each Account. The maintenance of individual accounts is for accounting purposes only, and a segregation of Plan assets to each Account shall not be required,except as otherwise provided in the Plan.

(b) Each Participant’s Stock Subaccount shall be credited with shares of Employer Stock (including fractional shares), as provided in the Plan, whether(i) contributed to the Trust, (ii) acquired and paid for by the Trust, including Leveraged Shares released from the Employer Stock Suspense Account, or(iii) invested, at the Participant’s direction, in Employer Stock at any time on or after June 1, 2001. Each Participant’s Stock Subaccount shall be charged orreduced with respect to all or any portion of such Stock Subaccount that is transferred, at the Participant’s direction, to the Participant’s Non-Stock Subaccount.The Administrator shall maintain records of the cost basis (which, at the Administrator’s sole discretion, may be based on average cost) of Employer Stockallocated to a Participant’s Stock Subaccount.

(c) Each Participant’s Non-Stock Subaccount shall be credited with his allocable share, as provided in the Plan, of (i) Contributions that are not in the formof Employer Stock, and (ii) investments, at the Participant’s direction or pursuant to the default investment established by the Administrator, at all times on andafter June 1, 2001, in assets other than Employer Stock, and shall be adjusted for any net income or loss of the Trust not attributable to Employer Stock, asprovided in Section 6.04. Each Participant’s Non-Stock Subaccount shall be charged or reduced for (i) the Participant’s share of any cash payment by the Trusteefor the acquisition of Employer Stock, (ii) the payment of any principal or interest due under any Acquisition Loan, or (iii) the transfer of all or any portion ofsuch Non-Stock Subaccount, at the Participant’s direction, to the Participant’s Stock Subaccount.

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Section 6.02. Valuation. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund, each separate Fund and each shareof Employer Stock that it holds in accordance with the Trust Agreement and Section 6.03. Based on the valuation of the Trustee, the Administrator, or itsdesignee, shall determine the value of the Accounts of each Participant and the number of shares of Employer Stock, if any, credited to that Account.

Section 6.03. Value of Accounts of Participants.

(a) The value of an Account as of any Valuation Date shall be determined in accordance with ERISA Sections 408(e) and 3(18) and regulationsthereunder. The value of the Account shall be determined as of the close of business on such Valuation Date, or if the NASDAQ or any national securitiesexchange on which the Fund or Employer Stock is trading, is not open on such date (or, in the case of Employer Stock, the Employer Stock is not traded on suchdate), as of the close of business on the first day prior to such Valuation Date that the NASDAQ or national securities exchange is open (or that Employer Stockis traded), increased by the amount of any Contributions allocated to the Account after the prior Valuation Date and reduced by the amount of any payments orwithdrawals made from the Account after the prior Valuation Date.

(b) The value of Employer Stock shall be the closing price of the Employer Stock as reported on NASDAQ or any national securities exchange on whichthe Employer Stock is trading; provided, however, that if the Employer Stock is traded on NASDAQ and if the closing price is greater than the bid price or lessthan the asked price, then the value of Employer Stock shall be determined by taking the average of the most recent bid and asked prices quoted by personsindependent of the Employer or any Party in Interest, as reported on NASDAQ. Determination of the value of Employer Stock with respect to transactionsbetween the Plan and a Party of Interest shall be made as of the date of the transaction.

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Section 6.04. Allocation of Earnings to Non-Stock Subaccounts. Subject to the loan provisions under Article VIII, earnings on the Non-StockSubaccounts of each Participant shall be allocated as follows:

(a) If a Fund separately accounts for the portion of each Participant’s share of the Fund earnings, the earnings of the Fund, whether positive or negative,shall be allocated among the Non-Stock Subaccounts invested in that Fund pursuant to the rules of the Fund.

(b) If a Fund does not separately account for the portion of each Participant’s Fund earnings, the earnings of the Fund, whether positive or negative, shallbe allocated among all Non-Stock Subaccounts in proportion to the relative value of those Non-Stock Subaccounts invested in the Fund during the periodfollowing the preceding Valuation Date, which relative value shall be determined under a reasonable procedure established by the Administrator and consistentlyapplied. Accounts terminated since the preceding Valuation Date shall be disregarded for purposes of this Subsection.

(c) The earnings of a Fund shall be determined pursuant to the rules of that Fund.

Section 6.05. Calculation on Basis of Employer Stock. For purposes of determining the net unrealized appreciation on any Employer Stock distributed tothe Participant, the cost or other basis of such Employer Stock shall be the cost or other basis to the Trust Fund of each such share of Employer Stock.

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ARTICLE VII.

BENEFITS

Section 7.01. Retirement Benefits.

(a) When a Participant Retires he is entitled to begin distribution of his Accounts. Such Accounts shall be paid, as elected by the Participant on theApplicable Form, either (i) in a lump sum payment, or (ii) in monthly, quarterly, semiannual, or annual installments over a period of years not to exceed the lifeexpectancy of the Participant, increased or decreased for any gain or loss as allocated to the Accounts under the Plan during the installment period. If any portionof the Vested Accounts of the Participant consists of Employer Stock, the Participant may elect that all or any part of such portion of his Vested Accounts bedistributed in whole shares of such Employer Stock and the remainder thereof in cash. In the event a Participant makes no election, his Accounts shall be paid ina lump sum cash payment.

(b) Actual payment of such benefits shall begin within ninety (90) days after the later of the Participant’s Normal Retirement Date or the date he actuallyRetires; provided, however, a Participant who Retires before his Normal Retirement Date may elect an earlier distribution on an Applicable Form. After aParticipant informs the Administrator of his wish to receive an early distribution, the Administrator shall provide the Participant with a written notice of (i) hisright to defer receipt of the distribution, and (ii) his right to a period of at least 30 days after receiving the notice to decide whether to elect an early distribution.After receiving the Administrator’s written notice, the Participant may elect an early distribution date that is not more than 180 days after the date of the noticeand, except as provided in the following sentence, is at least 30 days after the notice. The Participant may waive the 30-day notice requirement described in thepreceding sentence, but not the 180-day requirement. The Participant’s election must be made on the Applicable Form.

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(c) Notwithstanding the foregoing and effective with respect to a distribution made on or after March 28, 2005, if the value of the Accounts of aParticipant, excluding his Rollover/Transfer Account, at the time of distribution does not exceed One Thousand Dollars ($1,000), his Accounts shall be paid tohim in a lump sum payment within ninety (90) days after the Participant Retires.

(d) Distributions shall be based on the value of the Accounts as of the Valuation Date coincident with or immediately preceding the distribution date.

Section 7.02. Death Benefits.

(a) If a Participant dies after distribution of his Accounts has begun under the Plan, any remaining installments shall be paid as they become due unless hisBeneficiary elects a lump sum cash payment of such remaining installments on an Applicable Form.

(b) If a Participant dies prior to distribution of his Accounts, his Accounts, if any, shall be paid to the primary or contingent Beneficiary of the Participantunder Section 7.03 in a lump sum cash payment, or, at the Beneficiary’s election and only to the extent of the value of the Participant’s Stock Subaccounts at thetime of distribution, in the form of Employer Stock. Payment of such benefit shall be made as soon as administratively feasible following the date of death.

Section 7.03. Beneficiaries.

(a) If a Participant is married, his primary Beneficiary shall be his Spouse, unless he elects a different primary Beneficiary under Subsection (b).

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(b) Each Participant may designate on an Applicable Form filed with the Administrator one (1) or more primary and contingent Beneficiaries to receiveany death benefits payable under this Plan upon his death. Each such designation may be revoked, amended, or changed by the Participant by notice in writing tothe Administrator. To be effective, a Beneficiary designation must be received by the Administrator during the Participant’s life. The designation of a Beneficiaryother than the Spouse of such Participant shall not be effective unless:

(1) the consent of the Spouse of the Participant (i) is obtained on the Applicable Form, (ii) acknowledges the effect of the election, (iii) applies onlyto a specific Beneficiary designation that may not be changed without spousal consent (or the consent of the Spouse expressly permits future elections bythe Participant without any requirement of further consent by the Spouse), and (iv) is witnessed by a notary public; or

(2) the Participant establishes to the satisfaction of the Administrator, in its sole discretion, that the consent under Paragraph (1) cannot be obtainedbecause (i) the Participant has no Spouse, (ii) the Spouse of the Participant cannot be located, or (iii) of such other circumstances as the Secretary of theTreasury by regulation may prescribe.

Any consent by a Spouse of a Participant, or establishment that consent of such Spouse cannot be obtained, shall be effective only with respect to such Spouse.

(c) In the absence of a designation by the Participant or if all designated Beneficiaries predecease the Participant, the benefits, if any, shall be paid to thesurviving Spouse of the Participant, if living at the time of the death of the Participant, or if no such Spouse is then living, then to the descendants of theParticipant, per stirpes, who are living at the time of the death of the Participant, or if there are no such descendants then living, then to the estate of theParticipant.

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Section 7.04. Termination Benefits.

(a) If a Participant Terminates Employment prior to his Retirement for any reason other than death, such Participant is entitled to receive his VestedAccounts, if any, as provided in this Section. If any portion of the Vested Accounts of the Participant consists of Employer Stock, the Participant may elect thatall or any part of such portion of his Vested Accounts be distributed in whole shares of such Employer Stock and the remainder thereof in cash.

(b) The Vested portion of the Accounts of a Participant under Subsection (a), based on the value of his Accounts as of the Valuation Date coincident withor immediately preceding the distribution, shall be paid in a lump sum within ninety (90) days after the Participant Terminates Employment, if, effective withrespect to a distribution made on or after March 28, 2005, the Vested portion of the Accounts of the Participant, excluding his Rollover/Transfer Account, doesnot exceed One Thousand Dollars ($1,000) at the time of the distribution.

(c) If the Vested portion of the Accounts of the Participant, excluding his Rollover/Transfer Account, exceeds One Thousand Dollars ($1,000) at the timeof any distribution on or after March 28, 2005, the Vested portion of the Accounts of a Participant under Subsection (a) shall be paid in a lump sum withinninety (90) days after the Participant Terminates Employment and elects such a distribution if the Participant consents on the Applicable Form to suchdistribution.

(d) In the event that the Vested Accounts of a Participant equal or exceed the cash surrender value of any insurance contracts held in the Participant’sname, the Trustee, when so directed by the Administrator and agreed to by the Participant, shall assign, transfer, and give

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over to such Participant all contracts on his life in such form or with such endorsements, so that the settlement options are consistent with the provisions ofSection 7.01. In the event that the Vested Accounts do not at least equal the cash surrender value of the contracts, if any, held in the Participant’s name, theParticipant may pay over to the Trustee the sum needed to make the distribution equal to the value of the contracts being assigned or transferred, or the Trustee,pursuant to the election of the Participant, may borrow the cash surrender value of the contracts from the insurer and then assign the contracts to the Participant.

(e) If the Vested portion of the Accounts of a Participant under Subsection (a) are not paid pursuant to Subsections 7.04(b), (c), or (d), such VestedAccounts shall be paid pursuant to the provisions of Section 7.01 commencing as of the date which would have been the Normal Retirement Date of theParticipant had he not Terminated Employment.

(f) If a Participant who has Terminated Employment with a Vested Account dies before he begins receiving benefits hereunder, the Vested Accountspayable under Subsection (a) shall be paid in accordance with Section 7.02.

(g) Distributions payable as of any date shall be made on or as soon as administratively feasible after that date.

Section 7.05. In-Service Withdrawals of Pre-Tax Contribution Account.

(a) In addition to the withdrawal provisions in Section 7.08, a Participant who has not Terminated Employment may request on the Applicable Form, forreason of financial hardship as defined under regulations of the Internal Revenue Service, to withdraw in cash as of any Valuation Date all or part of his Pre-TaxContribution Account, excluding any earnings of the Trust Fund allocated to such Pre-Tax Contribution Account after December 31, 1988. Only one (1) suchrequest may be made each calendar quarter. Such a request must be on the

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Applicable Form. Such hardship withdrawals may include all or any portion of the Stock Subaccount under the Participant’s Pre-Tax Contribution Account,which shall be deemed to be an election that any such Employer Stock be liquidated prior to distribution of the requested hardship withdrawal. The request willbe approved only if it satisfies all the requirements of this Section.

(b) A withdrawal for reason of financial hardship must be on account of:

(1) expenses incurred for medical care as described in Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% ofadjusted gross income) for the Participant, his Spouse, or any dependent of the Participant as defined in Code Section 152 or expenses necessary for suchpersons to obtain such medical care;

(2) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant;

(3) payment of tuition, room and board expenses, and related educational fees for up to the next twelve (12) months of post-secondary education,including expenses for the then current semester or quarter, for the Participant, his Spouse, children, or any dependents of the Participant as defined inCode Section 152, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B);

(4) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the principal residence of theParticipant; or

(5) with respect to Plan Years beginning on or after January 1, 2007, payments for funeral or burial expenses for the Participant’s deceased parent,Spouse, child or dependent (as defined in Code Section 152, without regard to Code Section 152(d)(1)(B);

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(6) with respect to Plan Years beginning on or after January 1, 2007, expenses to repair damage to the Participant’s principal residence that wouldqualify for a casualty loss deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); or

(7) such other financial circumstances as declared by the Commissioner of Internal Revenue to constitute immediate and heavy financial need underCode Section 401(k) or the regulations thereunder.

(c) Any withdrawal under this Section for reason of financial hardship must satisfy all of the following requirements:

(1) The distribution may not be in excess of the amount of the immediate and heavy financial need of the Participant. The amount of the immediateand heavy financial need may include any amounts necessary to pay any federal, state, or local taxes or penalties reasonably anticipated to result from thedistribution.

(2) The Participant must have obtained all distributions, other than hardship distributions, all dividends and all nontaxable loans currently availableunder all plans maintained by an Affiliated Employer; provided, however, the Participant shall not be required to obtain any such distribution or loan if theeffect of such distribution or loan would be to increase the amount of the immediate and heavy financial need of the Participant.

(3) The Pre-Tax Contributions of the Participant under the Plan and any elective contributions or employee contributions of the Participant underany other plan maintained by an Affiliated Employer, except for employee contributions under a health or welfare benefit plan, including one that is part ofa cafeteria plan under Code Section 125, shall be suspended for six (6) months after receipt of any withdrawal.

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(d) The request by a Participant for a withdrawal shall specify the reason of the financial hardship, specify the amount the Participant wishes to withdrawto meet the need caused by the financial hardship, and state the need cannot be met:

(1) through reimbursement or compensation by insurance or otherwise;

(2) by reasonable liquidation of the assets of the Participant, to the extent such liquidation would not itself cause an immediate and heavy financialneed;

(3) by cessation of Pre-Tax Contributions under the Plan; or

(4) by other currently available distributions (including distributions of dividends under Code Section 404(k)) and nontaxable (at the time of theloan) loans from plans maintained by the Employers or by any other employer, or by borrowing from commercial sources on reasonable commercialterms.

The Administrator shall determine whether financial hardship exists, and its determination shall be final and conclusive. Denial of a withdrawal requestshall be made in accordance with the claims procedure of the Plan. In making this determination, the Administrator may rely on the representation by theParticipant that the need cannot be met by any of the aforementioned resources or from any other resources that are reasonably available to the Participant. Forpurposes of this Section, the resources of the Participant include those assets of the Spouse of the Participant and the minor children of the Participant that arereasonably available to the Participant. The determination of whether resources are reasonably available to the Participant is to be made on the basis of allrelevant facts and circumstances. If the Administrator requires further information in order to determine whether financial hardship exists, it may request thisinformation.

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(e) The Administrator shall apply uniform and nondiscriminatory standards in administering the provisions of this Section. The withdrawals shall be paidto the Participant as soon as practicable after approval by the Administrator of the Participant’s written request for a hardship withdrawal.

(f) No amount that is held as security for an outstanding Plan loan pursuant to Subsection 8.02(e) shall be eligible for a hardship withdrawal pursuant tothis Section 7.05.

(g) Notwithstanding the foregoing provisions of this Section 7.05, as permitted by Code Section 401(k)(2)(B)(i) with regard to distributions made afterSeptember 11, 2001, any “qualified reservist” may request a distribution from his Pre-Tax Contribution Account at any time during a period of active duty andshall not be subject to the ten percent (10%) early withdrawal penalty tax under Code Section 72(t). For purposes of this Subsection (g), a “qualified reservist” isan individual who is a reservist or national guardsman who was ordered or called to active duty after September 11, 2001 and before December 31, 2007 for aperiod in excess of one hundred seventy-nine (179) days or for an indefinite period. A qualified reservist who takes a distribution from his Pre-Tax ContributionAccount under this Subsection (g) may repay such distribution to an individual retirement account (i) at any time during the two (2) year period after the end ofactive duty, or (ii) by August 17, 2008, if later.

Section 7.06. In-Service Withdrawals of Rollover/Transfer Account.

(a) A Participant who has not Terminated Employment may request on the Applicable Form, for reason of financial hardship as defined under regulationsof the Internal Revenue Service, to withdraw in cash all or part of his Rollover/Transfer Account. Such a

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withdrawal may not occur more than twice each Plan Year and is subject to approval of the Administrator. The request will be approved only if it satisfies all therequirements of this Section and Subsections 7.05(b), (c), (d), and (e).

(b) Any withdrawal under this Section for reason of financial hardship must not be in excess of the amount of the immediate and heavy financial need forthe Participant.

(c) A Participant may, at his election, also withdraw any amount necessary to cover withholding for federal income tax purposes.

Section 7.07. In-Service Withdrawals from Savings Account. A Participant may request a withdrawal of all or part of the balance in his Savings Account.Any such withdrawal request shall be made on an Applicable Form and be filed with the Trustee and the Administrator. The amount requested shall bedistributed to the Participant within ninety (90) days following the date of the request.

Section 7.08. In-Service Withdrawals Upon Attainment of Age 59 1/2. A Participant who has attained age fifty-nine and one-half (59-1/2) and who has notTerminated Employment may request (once in any Plan Year) on the Applicable Form to withdraw all or any portion of his Vested Accounts. Such request mustbe on an Applicable Form and be filed with the Administrator at least two (2) weeks before the date the Participant wishes to receive the withdrawal.

Section 7.09. Charge or Discount. If any charge or discount is incurred by the Trustee as an incident to the payment of any benefits hereunder, such chargeor discount shall be charged against the benefits of the Participant or Beneficiary to which the same relates.

Section 7.10. Persons Under Legal Disability. If any benefit is payable to a minor or other person who is incapacitated, under a legal disability, or othersimilar situation as defined by

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state law, of which the Administrator has been informed in writing, the Administrator may direct that such payments be made to the legal guardian of suchperson or to such other person or organization as a court of competent jurisdiction may direct in full satisfaction of any payment due under the Plan.

Section 7.11. Payments at Direction of Administrator. Any benefit payable under the Plan shall be paid by the Trustee only at the direction of theAdministrator.

Section 7.12. Limitation on Distributions from Tax Credit Account. Notwithstanding any other provision in this Article, no Employer Stock allocated tothe Tax Credit Account of a Participant may be distributed from that Account’s Stock Subaccount prior to the end of the eighty-fourth (84th) month beginningafter the month in which the Employer Stock is allocated to such Participant’s Tax Credit Account; provided, however, such Employer Stock may be distributedprior to the end of the preceding eighty-four (84) month period in the case of the Participant’s death, Disability, or Termination of Employment.

Section 7.13. Special Rollover Distribution Rules. Notwithstanding any other provision of the Plan to the contrary that would otherwise limit aDistributee’s election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of anEligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

(a) Definitions.

(1) An “Eligible Rollover Distribution” is any distribution of all or any portion of the balance to the credit of the Distributee, except that an EligibleRollover Distribution does not include: (i) any distribution that is (A) one of a series of substantially equal periodic payments (not less frequently thanannually) made for the life

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(or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or(B) for a specified period of ten (10) years or more; (ii) any distribution to the extent such distribution is required under Code Section 401(a)(9); (iii) anyfinancial hardship distribution described in Code Section 401(k) and the regulations thereunder; (iv) the portion of any distribution that is not includable ingross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities) or (v) any distribution to aParticipant of dividends declared on Employer Stock pursuant to Section 18.04. A portion of the distribution shall not fail to be an Eligible RolloverDistribution merely because the portion consists of employee after-tax contributions that are not includable in gross income. However, such after-taxportion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or in a direct trustee-to-trusteerollover to a qualified trust described in Code Section 401(a) or 403(a) that is part of a defined contribution or defined benefit plan, or to an annuitycontract, described in Code Section 403(b), and such trust or annuity contract separately accounts for amounts so transferred, including separatelyaccounting for the portion of such distribution that is includable in gross income and the portion of the distribution that is not so includable. EffectiveJanuary 1, 2008, an Eligible Rollover Distribution shall also mean a qualified rollover contribution to a Roth IRA within the meaning of CodeSection 408A.

(2) An “Eligible Retirement Plan” is (i) an individual retirement account described in Code Section 408(a), (ii) an individual retirement annuitydescribed in Code Section 408(b), (iii) an annuity plan described in Code Section 403(a), or (iv) a qualified

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plan described in Code Section 401(a), that accepts the Distributee’s Eligible Rollover Distribution. “Eligible Retirement Plan” also means an annuitycontract described in Code Section 403(b) or an eligible plan under Code Section 457(b) maintained by a state, political subdivision of a state, or anyagency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan fromthis Plan. Effective January 1, 2008, an Eligible Retirement Plan shall also mean a Roth IRA described in Code Section 408A.

(3) A “Distributee” includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving Spouse and theEmployee’s or former Employee’s Spouse or former Spouse who is the Alternate Payee under a Qualified Domestic Relations Order, are Distributees withregard to the interest of the Spouse or former Spouse. Effective January 1, 2007, a designated Beneficiary (as defined in Code Section 401(a)(9)(E) of theEmployee who is not a surviving Spouse is a Distributee with regard to the interest of the designated Beneficiary.

(4) A “Direct Rollover” is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

(b) If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence less than thirty (30) days after thenotice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that:

(1) the Plan Administrator clearly informs the Participant that he has a right to a period of at least thirty (30) days after receiving the notice toconsider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and

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(2) the Participant, after receiving the notice, affirmatively elects a distribution.

Section 7.14. Requirements for Commencement and Distribution of Benefits. Notwithstanding any provision of the Plan to the contrary, any distributionunder the Plan shall be made in accordance with Code Section 401(a)(9) and the regulations promulgated thereunder, including the incidental death benefit rulesunder Code Section 401(a)(9)(G), and shall comply with the following rules:

(a) To the extent required by Code Section 401(a)(9) and the regulations promulgated thereunder, payment of the Accounts of a Participant shall begin notlater than the “required beginning date.” For purposes of this Section, “required beginning date” means April 1 of the calendar year following the later of: (i) thecalendar year in which the Participant reaches age seventy and one-half (70-1/2), or (ii) the calendar year in which the Participant Retires; provided, however, fora Participant who is a five percent (5%) owner, as defined in Code Section 416, “required beginning date” means April 1 of the calendar year following thecalendar year in which the Participant reaches age seventy and one-half (70-1/2), regardless of whether he has Retired. A Participant who (i) has not TerminatedEmployment, (ii) attained age seventy and one-half (70-1/2) prior to January 1, 1997, and (iii) began receiving distributions from the Plan pursuant to therequirements of Code Section 401(a)(9) as in effect on December 31, 1996, may elect to discontinue such distributions at any time by filing the Applicable Formwith the Plan Administrator.

(b) If the Participant dies before distributions have begun, the entire interest, if any, of a Participant under the Plan shall be distributed by December 31 ofthe calendar year containing the fifth (5th) anniversary of the Participant’s death, unless the Participant or Beneficiary elects otherwise pursuant to Subsection(c).

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(c) Notwithstanding the provisions of Subsection (b), effective for distributions commencing on or after January 1, 2004, Participants or Beneficiariesmay elect on an individual basis whether (i) the Participant’s entire interest in the Plan shall be distributed to the designated Beneficiary by December 31 of thecalendar year containing the fifth (5th) anniversary of the Participant’s death, or (ii) the distribution of benefits shall begin (A) in the case of a non-spouseBeneficiary or if the surviving Spouse is not the sole Beneficiary, no later than the December 31 of the calendar year following the calendar year in which theParticipant died, or (B) in the case of a surviving Spouse, no later than December 31 of the calendar year in which the Participant would have attained ageseventy and one-half (70 1/2). The election must be made no later than the earlier of the date on which distribution would be required to begin under (i) or (ii) ofthis Subsection. If neither the Participant nor Beneficiary makes an election under this Subsection, distributions shall be made in accordance with Subsection (b).If the surviving Spouse is the designated Beneficiary and the surviving Spouse dies before the distribution of benefits begins, this Subsection shall be applied asif the surviving Spouse were the Participant.

(d) Unless a Participant elects otherwise, the payment of his benefits under the Plan must begin not later than the sixtieth (60th) day after the end of thePlan Year in which occurs the latest of (i) the Participant’s sixty-fifth (65th) birthday, (ii) the tenth (10th) anniversary of the Plan Year in which the Participantbegan participation in the Plan, or (iii) the Participant’s Termination of Employment.

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ARTICLE VIII.

PLAN LOANS

Section 8.01. Plan Loans.

(a) Any Party in Interest may apply on the Applicable Form to the Administrator for a loan from the Plan pursuant to this Article and such otherprocedures as may be established by the Administrator. Loans will be available to all such Parties in Interest on a uniform and nondiscriminatory basis. Loansshall not be made available to Highly Compensated Employees, officers, or shareholders in an amount greater than the amount made available to other Parties inInterest, as determined in accordance with ERISA and the Code. Such loans may not include any portion of the Participant’s Stock Subaccounts, but shall only beavailable from the Participant’s Non-Stock Subaccounts.

(b) The amount of such loan, when added to the outstanding balance of all other loans from the Plan, shall not exceed the lesser of:

(1) Fifty Thousand Dollars ($50,000), reduced by the excess, if any, of the highest outstanding balance of loans from the Plan during the one (1) yearperiod ending on the date on which the loan is made, over the outstanding balance of loans from the Plan on the date on which such loan is made; or

(2) One-half (1/2) of the Vested Accounts of the Participant under the Plan.

For purposes of the above limitations, all loans from all plans of the Affiliated Employers shall be aggregated.

Notwithstanding the foregoing, the minimum amount of a loan shall be One Thousand Dollars ($1,000) and the maximum amount of a loan shall notexceed the value of the Participant’s Non-Stock Subaccounts on the date the loan is made.

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Section 8.02. Terms and Conditions. The loan program described in this Article shall be administered by the Administrator. All loans under Section 8.01shall comply with the following terms and conditions and the terms and conditions of any applicable loan procedures:

(a) All loans shall be subject to the approval of the Administrator.

(b) A Party in Interest may apply for a loan by completing the Applicable Forms; provided, however a Party in Interest may only request one (1) loan ineach twelve (12) month period. Notwithstanding the preceding provisions, the Administrator may, on a nondiscriminatory basis, permit more than one (1) loanduring a twelve (12) month period or permit refinancing of a loan if such loan would otherwise prevent the Party in Interest from receiving a hardshipdistribution during such period.

(c) The Party in Interest receiving the loan shall make the required repayments in accordance with the loan agreement.

(d) Rates of interest shall be determined by the Administrator in accordance with ERISA.

(e) Each loan shall be adequately secured. The Plan shall have a security interest in the Accounts of the Party in Interest; provided however, such securityinterest of the Plan shall not exceed fifty percent (50%) of the value of such Accounts at the inception of the loan, or from time to time thereafter, whichever isgreater.

(f) Each loan shall be amortized on a substantially level basis over a period not to exceed five (5) years (ten (10) years in the event the loan is for thepurchase or construction of the Party in Interest’s principal residence) with payments not less frequently than quarterly. The term of the loan shall not extendbeyond the earliest of (i) in the case of a distribution that begins after the date of the loan, the date such distribution of the Accounts under Article VII begins;

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provided, however, a withdrawal for reason of financial hardship pursuant to Section 7.05 shall not be taken into account under this Subsection unless theamount withdrawn from the Accounts of the Party in Interest affects the security of the loan, (ii) the date of distribution or separation of the Accounts pursuant toa Qualified Domestic Relations Order of any portion of the Accounts if the amount distributed or separated from the Accounts of the Party in Interest pursuant tosuch offer affects the security of the loan, or (iii) the date of a default on the loan.

(g) Notwithstanding Subsection (f), loan repayments may be suspended for a period, not longer than one (1) year, that the Party in Interest is on anEmployer-approved leave of absence, whether without pay from an Affiliated Employer or at a rate of pay (after income and employment tax withholding) that isless than the amount of the loan repayments required under the term of the loan; provided, however, the loan must be repaid in full not later than five (5) years(ten (10) years in the event the loan is for purchase or construction of the Party in Interest’s principal residence) after the date of the loan. Loan repayments dueafter the leave ends (or if earlier, after the first year of the leave) shall be reamortized on a substantially level basis with payments not less frequently thanquarterly.

(h) Notwithstanding Subsection (f) and Subsection (g), if a Party in Interest Terminates Employment or takes a leave of absence from an AffiliatedEmployer because of a period of service in the Uniformed Services of the United States and does not receive a distribution of his Vested Accounts, the Plan shallsuspend loan payments as permitted under Code Section 414(u)(4) and USERRA. If a Party in Interest has an outstanding loan(s) during a period of service in theUniformed Services of the United States, (i) loan payments shall be suspended during such period, (ii) interest shall accrue on the loan during such period at arate equal to the lesser of six percent (6%) as provided under the Servicemembers Civil Relief Act of

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2003 or the rate of interest determined at the inception of the loan pursuant to Subsection (d), (iii) the time for repayment of such loan(s) shall be extended for aperiod of time equal to the period of service in the Uniformed Services of the United States, and if the original term of the loan was less than the maximum termpermitted under Subsection (f), the time for repayment may be extended for a period of time equal to the maximum term permitted under Subsection (f) plus theperiod of Uniformed Services of the United States, (iv) loan payments shall resume upon the completion of such period of Uniformed Services of the UnitedStates, and (v) the frequency and amount of the periodic installments following the period of Uniformed Services of the United States shall not be less than thefrequency and amount of the periodic installments required under the terms of the original loan.

(i) A default on the loan shall occur thirty (30) days after the occurrence of either of the following conditions: (i) the Party in Interest fails to make apayment, or (ii) the Administrator in good faith deems the Plan insecure with respect to the repayment of the loan and notifies the Party in Interest of this deemedinsecurity. Except as provided below, notwithstanding the foregoing sentence, the Administrator may allow the Party in Interest to cure the defaulted loan, inwhich case the Party in Interest may pay the amount due plus accrued interest not later than the last day of the calendar quarter following the calendar quarter inwhich the Party in Interest failed to make the payment.

(j) Notwithstanding the preceding Subsection, any Party in Interest who has Retired or Terminated Employment or any Beneficiary of a deceased Party inInterest must pay off the outstanding balance on any outstanding loan, determined at the time of such Retirement, Termination of Employment, or Party inInterest’s death, as applicable, within ninety (90) days of the Retirement, Termination of Employment or death, or the loan shall be deemed to be a distribution tothe Party in Interest or his Beneficiary.

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(k) If the Party in Interest (or Beneficiary of a deceased Party in Interest) is in default, the Dividend Account, the Rollover/Transfer Account, the SavingsAccount, the Regular Account and the Matching Account of the Party in Interest may in the discretion of the Administrator be applied against the outstandingloan to the extent necessary to fully repay the same. In the event the loan remains outstanding after application of the Accounts in the preceding sentence, thePre-Tax Contribution Account and Nonelective Contribution Account of the Party in Interest may in the discretion of the Administrator be applied against theoutstanding loan provided that the Party in Interest (i) is age fifty-nine and one-half (59-1/2), (ii) is deceased, (iii) is Disabled, or (iv) has TerminatedEmployment. If a Party in Interest defaults on a loan and the loan is not repaid, such as by an offset of the Party in Interest’s Accounts, then (i) the loan shallremain outstanding, (ii) the amount available for any subsequent loan requested by the Party in Interest shall be reduced by the amount of the outstanding loan,and (iii) any subsequent loan shall be included in the Party in Interest’s taxable income for the year the subsequent loan is taken unless the Party in Interest agreesto repay the loan through payroll deductions under a legally enforceable arrangement or adequate security is given for the loan in addition to the Party inInterest’s Account balance.

(l) No distributions to a Party in Interest (or a Beneficiary of a deceased Party in Interest) shall be made prior to repayment of all outstanding loans, exceptas provided in Subsection (k). A default is a distributable event, to the extent permitted by the Code.

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(m) The Party in Interest (or a Beneficiary of a deceased Party in Interest) may repay at any time, in a form acceptable to the Administrator and withoutpenalty, the entire outstanding principal balance of the loan and accrued interest to date of repayment.

Section 8.03. Loan Procedures.

(a) The Administrator shall approve any loan application that satisfies the requirements set forth in this Article. Denial of a loan shall be made inaccordance with the claims procedure of the Plan.

(b) Any loan to a Party in Interest shall be considered to be a separate asset of the Trust Fund segregated for the benefit of such Party in Interest. Theinterest paid on the loan shall be credited to the Account or Accounts of the Party in Interest, and such portion of the Account or Accounts segregated shall notshare in the allocation of gains or losses, pursuant to Article VI. The principal and interest paid on the loan shall be credited to the Account or Accounts and suchFund or Funds as determined by the Administrator. The loan proceeds shall come from such Account or Accounts and from such Fund or Funds of the Party inInterest as determined by the Administrator.

(c) The Administrator may establish and charge a processing fee with respect to any loan.

ARTICLE IX.

BORROWING BY PLAN

Section 9.01. Borrowing by the Plan.

(a) (a) Subject to the requirements of this Article, the Trustee may enter into an Acquisition Loan to acquire Employer Stock on such terms and conditionsas the Trustee deems reasonable and appropriate.

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(b) If the Acquisition Loan under Subsection (a) above would be a prohibited transaction under Code Section 4975(c) except for the exemption underCode Section 4975(d)(3), such Acquisition Loan may only be entered into if it is primarily for the benefit of the Participants and their Beneficiaries and theTrustee has determined that the following conditions are satisfied:

(1) At the time the Acquisition Loan is made, the interest rate for the Acquisition Loan and the price of the Employer Stock to be acquired with theAcquisition Loan proceeds are not such that the Plan assets shall be drained off. In determining if this condition is satisfied, the Trustee shall make itsdetermination based on the projected net effect of the Acquisition Loan on the Plan for the duration of the loan.

(2) At the time the Acquisition Loan is made the terms of the Acquisition Loan are at least as favorable to the Plan as the terms of a comparable loanresulting from arm’s length negotiations between independent parties.

(3) The interest rate of the Acquisition Loan shall not be in excess of a reasonable rate of interest, taking into account the amount and duration of theAcquisition Loan, the security and guarantee (if any) involved, and the interest rates prevailing on comparable loans.

(4) The Acquisition Loan shall be for a specific period and shall not be payable at the demand of any person except in the case of default.

(5) The proceeds of the Acquisition Loan shall be used within a reasonable time after their receipt by the Plan only for any or all of the followingpurposes:

(A) to acquire Employer Stock, provided such Employer Stock is a qualifying employer security within the meaning of Code Section 409(l),which is readily tradable on an established national securities market;

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(B) to repay such Acquisition Loan; or

(C) to repay a prior Acquisition Loan made pursuant to this Article.

(6) Except as otherwise required by applicable law, no Employer Stock acquired with the proceeds of such Acquisition Loan shall be subject to aput, call, or other option, or buy-sell or similar arrangement while held by and when distributed from the Plan, whether or not the Plan is then an employeestock ownership plan. All Leveraged Shares acquired by the Trust with the proceeds of an Acquisition Loan shall be credited to an Employer StockCollateral Account (whether or not used as collateral for the Acquisition Loan). Leveraged Shares shall be withdrawn from the Employer Stock CollateralAccount each Plan Year pursuant to the provisions of Subsection 4.04(c) and Paragraph (11) as though all securities in the Employer Stock CollateralAccount were encumbered.

(7) Such Acquisition Loan shall be without recourse against the Plan and the only assets of the Plan that shall be given as collateral on theAcquisition Loan are Leveraged Shares acquired with the proceeds of such Acquisition Loan or Employer Stock that was used as collateral on a priorAcquisition Loan pursuant to this Article that was repaid with the proceeds of the current Acquisition Loan.

(8) No person entitled to payment under the Acquisition Loan shall have any right to any assets of the Plan other than:

(A) collateral given for the Acquisition Loan;

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(B) Contributions (other than Contributions of Employer Stock) that are made under the Plan to meet its obligations under the AcquisitionLoan; and

(C) earnings attributable to such collateral and the investment of such Contributions.

(9) Payments of principal and interest on an Acquisition Loan shall be made by the Trustee (as directed by the Administrator) from (i) Contributionsby the Employer to the Trust and the earnings on those Contributions; (ii) dividends on the Employer Stock; (iii) Leveraged Shares held as collateral for anAcquisition Loan and earnings attributable to those Leveraged Shares; and (iv) the proceeds of a subsequent Acquisition Loan made to repay a priorAcquisition Loan. The payments made with respect to the Acquisition Loan by the Plan during a Plan Year shall not exceed an amount equal to the sum ofsuch Contributions by the Employers and earnings received during or prior to the Plan Year less such payments in prior years.

(10) Contributions that are made under the Plan to meet the obligations under the Acquisition Loan and earnings thereon shall be accounted forseparately on the books of account of the Plan until the Acquisition Loan is repaid.

(11) The Acquisition Loan shall provide for the release from encumbrance of Employer Stock used as collateral for the Acquisition Loan as follows:for each Plan Year during the duration of the Acquisition Loan, the number of shares of Employer Stock released must equal the number of encumberedshares of Employer Stock held immediately before the release for the current Plan Year multiplied by a fraction, the numerator of which is the amount ofprincipal and interest paid for the year and the denominator of which is the sum of the numerator plus the principal and interest to be

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paid for all future Plan Years. If the interest rate under the loan is variable, the interest to be paid in future years must be computed using the interest rateapplicable as of the end of the Plan Year. Any Employer Stock released from such encumbrance, shall be allocated to the Accounts of Participantspursuant to Section 4.04.

(12) In the event of default under the Acquisition Loan, the value of Plan assets transferred in satisfaction of the Acquisition Loan shall not exceedthe amount of default. Further, if the lender is a disqualified person under Code Section 4975 or a Party in Interest, the Acquisition Loan shall provide for atransfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Acquisition Loan.

(c) Any Employer Stock acquired with the proceeds of an Acquisition Loan subject to this Article shall not be part of the Trust Fund nor allocated to theAccounts of Participants until released from encumbrance under Paragraph (b)(11) above and allocated to the Regular Accounts of Participants underSection 4.04 and credited to the Trust Fund. Such Employer Stock shall nevertheless be held in trust as a part of the assets of the Plan.

Section 9.02. Restrictions on Loans.

(a) Employer Stock allocated to a Tax Credit Account shall not be used as collateral for, or to satisfy, an Acquisition Loan made to the Plan.

(b) Notwithstanding anything in the Plan or any other agreement to which the Plan may be bound, the Trustee, on behalf of the Plan, may not enter into anAcquisition Loan made by a Party in Interest or disqualified person or an Acquisition Loan that is guaranteed by a Party in Interest or disqualified person, unlessall the terms, conditions, and requirements of any regulations or rulings of the United States Department of Labor or the Internal Revenue Service have beensatisfied or for which provision has otherwise been made.

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ARTICLE X.

VESTING

Section 10.01. Vesting Standards.

(a) A Participant shall be 100% Vested in his Pre-Tax Contribution Account, Nonelective Contribution Account, Savings Account, Tax Credit Accountand Rollover/Transfer Account at all times.

(b) A Participant shall be Vested in his Matching Account and Regular Account on and after the earlier of his attaining age sixty-five (65), his DisabilityRetirement Date, Early Retirement Date, or his date of death.

(c) A Participant shall be Vested in his Matching Account and Regular Account in the following percentages as of the completion of the following Yearsof Service:

Number ofYears of Service

VestedPercentage

Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100%

(d) A Plan amendment changing any Vesting schedule under the Plan shall not affect the Vested portion of a Participant’s Accounts (determined as of theday immediately preceding the later of the day such amendment is adopted, or the day such amendment becomes effective). Each Participant having not fewerthan three (3) Years of Service shall be permitted to elect on an Applicable Form, within a reasonable period after the adoption of such amendment, to have

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his Vested Accounts computed under the Plan without regard to such amendment. The reasonable period shall end no earlier than the latest of the following dates(i) the date that is sixty (60) days after the day the amendment is adopted, (ii) the date that is sixty (60) days after the day the amendment becomes effective, or(iii) the date that is sixty (60) days after the day the Participant is issued written notice of the amendment by the Employer or Administrator.

Section 10.02. Forfeitures.

(a) Except as otherwise provided in Subsection (b), the non-Vested Accounts of a Participant shall be forfeited at the time he incurs five (5) consecutiveBreaks in Service with any such forfeiture coming first from the Non-Stock Subaccounts of such Participant.

(b) Upon distribution of the entire Vested Accounts of a Participant before the end of the second Plan Year following the Plan Year in which theParticipant Terminates Employment, his non-Vested Accounts shall be forfeited. If at the time a Participant Terminates Employment, his Accounts are entirelynon-Vested, he shall be deemed to have received a distribution of his Vested Accounts upon Termination of Employment, and his non-Vested Accounts shall beforfeited.

(c) Such forfeited amounts shall be held in a “Forfeited Suspense Account”. Forfeitures attributable to Matching Contributions, Regular Contributions andNonelective Contributions shall be used to reduce Employer contributions under Section 4.03, Subsection 4.04(a) or Subsection 4.04(b), respectively, in thediscretion of the Employer, as of the earliest possible Allocation Date.

Section 10.03. Reinstatement. If a former Participant whose non-Vested Accounts are forfeited pursuant to Section 10.02 is reemployed by the Employer,the forfeited amounts shall be restored; provided, however, if the Participant received a distribution described in the first

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sentence of Subsection 10.02(b), he must repay to the Trust the full amount distributed to him before the earlier of five (5) years from his date of reemploymentor the date on which he incurs five (5) consecutive Breaks in Service after the date of the distribution before such restoration occurs. Such restoration shall bemade from the “Forfeited Suspense Account” under Section 10.02 or from additional Employer payments. This additional contribution shall not constitute anannual addition under Code Section 415. The restored amount will become Vested in accordance with Section 10.01 provided the reemployed Participantcontinues in the employ of an Affiliated Employer until such date.

ARTICLE XI.

ADMINISTRATION OF THE PLAN

Section 11.01. Administrator.

(a) The Plan shall be administered by a Benefits Committee of at least three (3) persons appointed by the President of the Company and serving at thepleasure of the President of the Company. The Benefits Committee shall act by a majority of its membership. The action of the majority may be expressed by avote at a meeting, or in writing without a meeting. The Benefits Committee shall be the Administrator of the Plan within the meaning of ERISA. Each member ofthe Benefits Committee shall hold office until removed by the President of the Company, which removal may be without cause and without advance notice. TheAdministrator shall have the authority to control and manage the operation and administration of the Plan and shall be the named fiduciary of the Plan. TheAdministrator is authorized to accept service of legal process.

(b) The Administrator shall have such power and authority (including discretion with respect to the exercise of that power and authority) as may benecessary, advisable, desirable, or convenient to enable the Administrator to carry out its duties under the Plan. By way of illustration and not limitation, theAdministrator is empowered and authorized:

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(1) to make rules and regulations in respect of the Plan not inconsistent with the Plan, the Code, or ERISA and to amend or rescind such rules andregulations;

(2) to determine, consistently therewith, all questions of law or fact that may arise as to the eligibility, benefits, status, and rights of any personclaiming benefits or rights under the Plan, including without limitation, Participants, former Participants, surviving Spouses of Participants, Beneficiaries,Employees and former Employees;

(3) to direct the Trustee to make payments from the Trust Fund to Participants, their Beneficiaries, and other persons as the Administrator maydetermine, and

(4) subject to and consistent with the Code and ERISA, to construe and interpret the Plan and to correct any defects, supply any omissions, orreconcile any inconsistencies in the Plan.

Benefits under this Plan shall be paid only if the Administrator, in its sole discretion, decides the applicant for the benefits is entitled to the benefits.

(c) Any action by the Administrator, which is not found to be an abuse of discretion, shall be final, conclusive, and binding on all individuals affectedthereby. The Administrator may take any such action in such manner and to such extent as the Administrator in its sole discretion may deem expedient and theAdministrator shall be the sole and final judge of such expediency.

(d) The Administrator shall not take any action with respect to any of the benefits provided hereunder or act otherwise in pursuance of the powersconferred herein upon the

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Administrator that would be discriminatory in favor of Participants who are Highly Compensated Employees or that would result (i) in benefiting one(1) Participant or group of Participants at the expense of another, (ii) in discrimination as between Participants similarly situated, or (iii) in the application ofdifferent rules to a substantially similar set of facts.

Section 11.02. Claims Procedure. Any person who believes that he is entitled to any benefits under the Plan shall present such claim in writing to theAdministrator. The Administrator shall, within sixty (60) days after receipt of the claim, provide adequate notice in writing to any claimant as to its decision onany such claim, unless special circumstances require an extension of time to process the claim. Written notice of any extension shall be furnished to the claimantprior to the termination of the initial sixty (60) day period specifying the circumstances requiring an extension and when a final decision will be reached, whichshall be no later than one hundred twenty (120) days after the claim was filed.

(a) If a claim is denied, in whole or in part, the Administrator’s notice shall set forth (i) the specific reasons for such denial; (ii) specific reference to anypertinent provisions of the Plan on which denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect theclaim and an explanation of why such material or information is necessary; and (iv) an explanation of the review procedure for the Plan. Such notice shall bewritten in a manner calculated to be understood by the Participant.

(b) Within sixty (60) days after receipt by the claimant of notification of denial, the claimant shall have the right to present a written appeal to theAdministrator. If such appeal is not filed within said sixty (60) day period, the decision of the Administrator shall be final and binding. The Administrator shallact as a fiduciary in making a full and fair review of such denial. The claimant or his duly authorized representative may review any Plan documents that arepertinent to the claim and may submit issues and comments to the Administrator in writing.

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(c) A decision by the Administrator shall be made promptly, and in any event not later than sixty (60) days after its receipt of the appeal; provided,however, if the Administrator decides that special circumstances require an extension of time to process any appeal, such as a hearing at which the claimant orhis duly authorized representative may be present is necessary and such a hearing is held, such decision shall be rendered as soon as possible, but not later thanone hundred twenty (120) days after its receipt of the appeal. If the period for reviewing the appeal is extended because of the failure to submit informationneeded to decide the claim, the sixty (60) day extension period within which the Administrator must make a determination shall be put on hold until the date ofwhich the claimant responds to the request for additional information.

(d) Any such decision of the Administrator shall be in writing and provide adequate notice to the claimant setting forth the specific reasons for any denial,and shall be written in a manner calculated to be understood by a Participant. Any such decision by the Administrator shall be final. All claims procedures shallbe governed by the regulations promulgated by the Secretary of Labor.

Section 11.03. Employment of Consultants. The Administrator or a fiduciary named by the Administrator may employ one (1) or more persons to renderadvice with regard to their respective responsibilities under the Plan.

Section 11.04. Delegation by Administrator. The Administrator may from time to time delegate to an individual, committee, or organization certain of itsfiduciary responsibilities under the Plan. Any such individual, committee, or organization shall remain a fiduciary until

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such delegation is revoked by the Administrator, which revocation may be without cause and without advance notice. To the extent permitted under ERISA, suchindividual, committee, or organization shall have such power and authority with respect to such delegated fiduciary responsibilities as the Administrator hasunder the Plan. The Administrator shall not be liable for any act or omission of such fiduciary in carrying out such responsibility, except as may be otherwiseprovided in ERISA.

Section 11.05. Qualified Public Accountant. If required under ERISA, the Administrator shall engage on behalf of all Participants an independent qualifiedpublic accountant who is qualified to act as such under ERISA and who shall conduct such an examination of any financial statements of the Plan, and of otherbooks and records of the Plan, as the qualified public accountant may deem necessary to enable him to form an opinion as to whether the financial statements andschedules required to be included in the annual report of the Plan under ERISA are presented fairly in conformity with generally accepted accounting principlesapplied on a basis consistent with that of the preceding Plan Year and who shall perform such other services for the Plan as the Administrator may require.

Section 11.06. Fiduciary Liability. If the Employer, Administrator, Trustee, or any other fiduciary with respect to the Plan acts in accordance with thefiduciary duties of ERISA in (i) relying on a consent or revocation made pursuant to Article VII, or (ii) making a determination under Section 16.02, theconsent, revocation or determination shall be treated as valid for purposes of discharging the Plan from liability to the extent of payments made pursuant to suchacts.

Section 11.07. Fiduciary Insurance. The Plan may purchase fiduciary liability insurance for any of its fiduciaries, or for itself, to cover liability or lossesoccurring by reason of the act or omission of a fiduciary, provided that such insurance permits recourse by the insurer against the fiduciary in the case of a breachof a fiduciary obligation under ERISA by such fiduciary.

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ARTICLE XII.

TRUST

Section 12.01. Trust Funds.

(a) All Contributions under the Plan shall be transferred to the Trust directed by the Administrator to be held, managed, invested, and distributed as part ofthe appropriate Fund by the Trustee in accordance with the provisions of the Plan and the Trust Agreement. All Trust assets invested in Employer Stock shall betransferred to, and accounted for, solely under the Stock Subaccounts of the Participants, shall constitute the primary assets of the stock bonus plan portion of thePlan, and shall become subject to the requirements of Code Sections 4975(e)(7), 409(e), 409(h), and 409(o), as provided in this restatement of the Plan. All Trustassets not invested in Employer Stock, shall be retained in, and accounted for, solely under the profit sharing plan portion of the Plan. Except as provided in thepreceding sentences, the Trustee shall be accountable only for funds actually received by the Trustee, and the Trustee shall have no right or duty (i) to inquireinto the amount of Contributions or distributions made by the Company, (ii) to inquire into the methods used in determining the amount of Contributions ordistributions, or (iii) to pursue and collect such amounts. All benefits under the Plan shall be distributed solely from the Trust Fund, and the Employer shall haveno liability therefore other than the obligation to make Contributions as provided in the Plan.

(b) The Administrator may designate investment funds for the Non-Stock Subaccounts designed with such investment guidelines as the Administrator mayspecify (“Fund”), and may add additional Funds or eliminate Funds in its sole discretion. Any such

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Funds may invest through the medium of any common, collective, or commingled fund maintained by the Trustee that is invested principally in property of thekind specified for such Fund, and may be in individual assets not part of the Fund. The Administrator or its designee shall establish investment guidelines orpolicies applicable to each such Fund. A portion of each Fund may be maintained in cash or cash equivalents. Income or losses from investments in each Fundshall be credited or debited to the same Fund.

(c) In the event the Administrator allows Participants to individually direct specific investments under the Plan, a separate directed investment fund shallbe established for each Participant who has directed an investment pursuant to Subsection 12.02(b). Transfers between the Trust Funds and the directedinvestment fund of the Participant shall be charged and credited as the case may be to the appropriate Account. The directed investment fund shall not share inTrust Fund earnings, but it shall be charged or credited as appropriate with the net earnings, gains, losses, and expenses as well as any appreciation ordepreciation in market value during each Plan Year attributable to such account.

Section 12.02. Investments.

(a) Except as otherwise provided herein, Participants shall be permitted to direct the Trustee as to the investment of all or a portion of their Accounts.Investment directions of Participants shall be subject to the procedures established and applied in a nondiscriminatory manner, under which Participants shalldirect the applicable Trustee on the Applicable Form to invest their Accounts in specific Funds.

(b) As of June 1, 2001, the Administrator permitted Participants in the Biomet, Inc. 401(k) Profit Sharing Plan to direct the investment of all or a portion oftheir Pre-Tax Contribution Accounts, Nonelective Contribution Accounts and Rollover/Transfer Accounts. As

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of January 1, 2007, the Administrator permitted Participants in the Biomet, Inc. 401(k) Profit Sharing Plan who have completed three (3) or more Years ofService to direct the investment of all or a portion of their Matching Accounts. As of April 1, 2007, the Administrator permits Participants who have completedthree (3) or more Years of Service to direct the investment of all or a portion of their Regular Accounts, Savings Accounts and Tax Credit Accounts. Participantsshall be permitted to direct the Trustee to invest their Accounts in specific assets including Employer Stock or Employer real property that constitutes aQualifying Employer Security, and other investments authorized by the Administrator, including self-directed brokerage accounts. Effective April 1, 2007, if aParticipant directs the investment of all or any portion of his Non-Stock Subaccounts into Employer Stock, such directed amount shall be transferred to his StockSubaccounts and shall become subject to the terms of Section 12.04.

(c) The Administrator may appoint one or more Investment Managers to direct the investment and reinvestment of all or a portion of the Trust Funds heldin a Fund.

(d) Any loan to a Participant or Beneficiary shall be considered to be a separate asset of the Trust Fund segregated for the benefit of such Participant. Theinterest and principal paid on the loan shall be credited to the Account or Accounts of such Participant and such Fund or Funds from which the loan proceedscame.

Section 12.03. Transfers Among Investment Funds. (a) Effective as of the Valuation Date following any request of a Participant, (i) Participant Pre-TaxContribution Accounts, Non-Elective Contribution Accounts, and Rollover Transfer Accounts, (ii) amounts credited to the Matching Accounts of Participantswho have completed three Years of Service with respect to Plan Years beginning on or after January 1, 2007, and (iii) amounts credited to the Regular Accounts,Savings Accounts and Tax Credit Accounts of Participants who have completed three

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Years of Service on or after April 1, 2007, may be transferred among designated investment Funds, including Employer Stock, as directed by the Participant. TheAdministrator shall transfer such Funds as directed as soon as administratively feasible.

(b) Elections with respect to investments in Employer Stock by Participants who are members of the Board of Directors of the Company or who areofficers of the Company within the meaning of Securities and Exchange Commission Rule 16a-1(f), will be given effect only if one of the following conditions ismet:

(1) if the election is made in connection with the death, Disability, Retirement or Termination of Employment of the Participant; or

(2) the election is required to be made available to the Participant pursuant to the Code; or

(3) if the election involves a transfer of existing Non-Stock Subaccount balances into Stock Subaccounts, it is not made within six (6) monthsfollowing the most recent election, with respect to any employee benefit plan of the Company, that effected a transaction that was a disposition ofEmployer Stock; or, if the election involves a transfer of Stock Subaccounts into Non-Stock Subaccounts, it is not made within six (6) months followingthe most recent election, with respect to any employee benefit plan of the Company, that effected a transaction that was an acquisition of Employer Stock;or

(4) if the election results in the investment of future contributions (e.g., new money) into Employer Stock; or

(5) the election is determined by the Trustee, based upon the advice of counsel to the Company, to be otherwise exempt from Section 16(b) of theExchange Act of 1934.

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Section 12.04. Investment of Stock Subaccounts.

(a) The Stock Subaccounts of Participants shall be invested primarily in Employer Stock, and any amounts transferred from a Participant’s Non-StockSubaccount to his Stock Subaccount shall be so invested; provided, however, a Participant may direct that all or any portion of his Stock Subaccounts be investedin or transferred to one (1) or more of the Funds in accordance with Section 12.02 or Section 12.03. Notwithstanding the foregoing, any portion of aParticipant’s Account balance that is invested in Employer Stock shall be subject to the provisions of this Plan that apply to Stock Subaccounts, including theprovisions of Subsections (b) and (c) below.

(b) Within ninety (90) days after the last day of each Plan Year during the Election Period of the Participant, the Participant shall be permitted to direct thePlan as to the investment of at least twenty-five percent (25%) of the value of his Stock Subaccounts in one (1) or more of the Funds; provided, however, aParticipant may direct the Plan as to the investment of at least fifty percent (50%) of the value of his Stock Subaccounts starting with the last Plan Year in theElection Period of the Participant.

(c) A Participant’s direction under Subsection (a) shall specify which, if any, of the investment Funds offered by the Plan, in accordance with CodeSection 401(a)(28)(B)(ii)(II) and the regulations thereunder, that the Participant selects. Such direction shall be provided to the Administrator in writing on theApplicable Form and the Plan shall then invest the portion of the Account of the Participant covered by the election in accordance with such direction no laterthan ninety (90) days after the election is made.

Section 12.05. Investments. Notwithstanding anything in the Plan to the contrary, the Stock Subaccounts which constitute the stock bonus component ofthe Plan shall be invested

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primarily in Employer Stock, and as otherwise provided in the Trust Agreement. Therefore, there shall be no limitation on the percentage of the assets of the Planin the Stock Subaccounts that are invested in Employer Stock. The Plan assets in the Non-Stock Subaccounts may also be invested in appropriate investmentsother than Employer Stock, including cash or readily liquidated investments, in anticipation of the acquisition of Employer Stock, and as otherwise set forth inthe Trust Agreement.

Section 12.06. Acquisition and Disposition of Employer Stock. Subject to the following provisions, the Trustee, in its sole discretion, may purchaseEmployer Stock from, or sell Employer Stock to, any person.

(a) The purchase price paid by the Trust for Employer Stock shall not exceed fair market value (as determined pursuant to Subsection 6.03(b)), and thesale price received by the Trust for Employer Stock shall not be less than fair market value (as determined pursuant to Subsection 6.03(b)).

(b) Except as provided in Article IX, any Employer Stock acquired by the Plan shall be held in the Employer Stock Suspense Account, until allocatedpursuant to Section 4.04.

(c) No commission shall be charged to the Plan with respect to a transaction between the Trust and an Interested Party or any other transaction to whichERISA Section 406 or 407 applies.

Section 12.07. Voting of Stock. Except as specifically provided in Subsection (a), the Trustee shall have all voting rights appurtenant to the EmployerStock held in the Trust, and shall vote the shares as determined in the sole discretion of the Trustee.

(a) Each Participant shall have the right to direct the Trustee as to the manner in which the voting rights of Employer Stock (including fractional shares)allocated to the

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Participant’s Stock Subaccounts are to be voted. Each Participant shall be entitled to one (1) vote for each share of Employer Stock allocated to his StockSubaccounts and a fractional vote based upon any fractional shares allocated to such Stock Subaccounts.

(b) The Trustee shall vote the combined shares and fractional shares of Employer Stock that are allocated to Participants’ Stock Subaccounts, inaccordance with the direction of such Participants (the “Directed Shares”). If any Participant fails to direct the Trustee as to the manner in which to vote hisallocated Employer Stock, the Trustee shall vote the shares or fractional shares of such Participant’s allocated Employer Stock in the same proportion as theDirected Shares. With respect to any shares of Employer Stock that are held in the Employer Stock Suspense Account or the Employer Stock Collateral Accountunder the Plan, the Trustee shall vote such shares in the same proportion as the Directed Shares.

(c) The Company shall furnish the Trustee and all Participants entitled to direct voting of any Employer Stock with notices and information statementswhen voting rights are to be exercised. The time and manner for furnishing such Participants with a notice or information statement must comply with thecorporate law of the State of Indiana and the Articles of Incorporation and By-laws of the Company. The content of the information statements must be the samefor Participants as for other security holders. The Company’s management may solicit and exercise the voting rights of Participants under any proxy provisionapplicable to all security holders of the Company.

(d) The Beneficiaries of deceased Participants shall have the same voting rights as Participants.

Section 12.08. ERISA Section 404(c). The Plan is intended to comply with ERISA Section 404(c), and such compliance shall limit the liability of Planfiduciaries with regard to

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Participant-directed investments. In accordance with the provisions of ERISA Section 404(c), each Participant shall have the right to direct the investment of hisAccounts in one (1) or more Funds in accordance with this Article, the Trust Agreement, and any rules promulgated and adopted by the Plan Administrator.

ARTICLE XIII.

AMENDMENT OR TERMINATION OF PLAN

Section 13.01. Amendment or Termination. The Administrator shall have the right, in its sole and final discretion, to amend or terminate this Plan at anytime and to any extent that it may deem advisable; provided, however, that no amendment shall retroactively increase the duties or responsibilities of the Trusteewithout its written consent. A certified copy of the resolution of the Administrator taking such action shall be delivered to the Trustee, and the Plan shall beamended or terminated in the manner and effective as of the date set forth in such resolution, and the Employers, Employees, Participants, Beneficiaries, Trustee,Administrator, and all other persons having any interest under this Plan shall be bound thereby. Provided, however, that no such Administrator action shalloperate to recapture for an Employer any contributions or payments previously made to the Plan, nor to adversely affect any benefits otherwise payable toParticipants and their Beneficiaries, except to the extent permitted by ERISA and the Code.

Section 13.02. Amendment for Qualification of Plan. It is the intent of the Company that the Plan shall be and remain qualified for tax purposes under theCode. The Administrator shall timely submit the Plan for approval under the Code and all expenses incident thereto shall be borne by the Company. TheAdministrator may make any modifications, alterations, or amendments to the Plan necessary to obtain and retain approval of the Secretary of the Treasury

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or his delegate as may be necessary to establish and maintain the status of the Plan as qualified and the deductibility for income tax purposes of Employercontributions thereto under the provisions of the Code or other federal legislation, as now in effect or hereafter enacted, and the regulations issued thereunder.Any modification, alteration, or amendment of the Plan, made in accordance with this Section, may be made retroactively, if necessary or appropriate. A certifiedcopy of the resolution of the Administrator making such amendment shall be delivered to the Trustee, and the Plan shall be amended in the manner and effectiveas of the date set forth in such resolution, and the Employers, Employees, Participants, Beneficiaries, Trustee, Administrator, and all others having any interestunder the Plan shall be bound thereby.

Section 13.03. Restrictions on Amendments. Any amendment may be made to the Plan that is not contrary to ERISA or the Code. No amendment may bemade to the Plan that violates Code Section 411(d)(6).

Section 13.04. Discontinuance or Suspension of Contributions. An Employer may discontinue completely or suspend temporarily for a definite orindefinite period its contributions under the Plan, or terminate its participation in the Plan, at any time without any liability whatsoever, as contributions by theEmployers are completely voluntary and the Employers are under no contractual obligation to continue contributions. Temporary suspension of contributions byan Employer shall not result in any Accounts becoming Vested.

Section 13.05. Allocation of Assets on Termination. In the case of the complete or partial termination of the Plan, as to one (1) or more Employers,including a termination arising from the complete discontinuance of contributions, the Accounts of each affected Participant shall become irrevocably Vested. Onsuch complete or partial termination, the affected portion of the Trust Funds shall be liquidated pursuant to the direction of the Administrator. The Plan

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shall remain in full effect with respect to each Employer, and Participants who are Employees of such Employer, that does not terminate its participation in thePlan on behalf of its Employees; provided, however, that the termination of participation by less than all of the Employers shall not affect the Plan as it applies toParticipants who are not, at the time of termination, Employees of a terminating Employer.

ARTICLE XIV.

ENTRY AND WITHDRAWAL OF EMPLOYERS

Section 14.01. Entry of Employers. Any organization classified by the Administrator as an Employer may become a party to the Plan as of the first day ofany Plan Year, or such other date specified by the Administrator, by delivering to the Administrator an appropriate resolution by the board of directors or othergoverning body of such organization. With the consent of the Administrator, such organization shall become an Employer hereunder, as of the specified date, andshall be subject to the terms and provisions of the Plan as then in effect and thereafter amended, including such credit for Years of Service as established by theAdministrator.

Section 14.02. Withdrawal from Plan. Any Employer may withdraw from the Plan under the following conditions:

(a) Any Employer hereunder which elects to withdraw from the Plan shall deliver to the Administrator a resolution of its board of directors or othergoverning body authorizing its withdrawal as an Employer hereunder. Notice of withdrawal must be submitted to the Administrator at least thirty (30) days priorto the date withdrawal is to be effective, unless such requirement is waived by the Administrator.

(b) If the withdrawal of an Employer is a part of the complete termination and dissolution of the business of said Employer or the discontinuance of thePlan without

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termination of its business and without the immediate establishment of a new qualified plan under the Code, the provisions of Article XIII hereof shall apply tothe withdrawal of such Employer as if the withdrawal were a part of the complete termination of this Plan, but without affecting the participation of otherEmployers hereunder.

(c) If the withdrawal of any Employer hereunder is the result of the establishment of a new and different retirement plan for its employees that willimmediately upon withdrawal of said Employer from the Plan cover employees of such Employer who are Participants under the Plan, upon receiving evidenceof the terms of such new plan, the Trustee shall establish the interest of said Employer in the value of the Trust Fund, as approved by the Administrator, and, afterreduction for charges and expenses incurred to process withdrawal of the Employer, shall transfer such amount from the Trust Fund to the trustee or trustees ofsuch new Plan. Provided, however, the Administrator in its sole discretion, shall have the right to require the Trustee to transfer the withdrawal value of saidEmployer to the trustee or trustees of the new plan in the form of installments, in cash or in cash and securities over a period of time not to exceed one (1) yearfollowing the effective date of the withdrawal of said Employer. The application of the interest of the withdrawing Employer in the Trust Fund pursuant to theterms of this Article shall constitute a complete discharge of the Trustee, Administrator, Board of Directors, and any other Employers without any responsibilityon their part to see to the application or disposition thereof.

ARTICLE XV.

TOP-HEAVY PROVISIONS

Section 15.01. Definitions. For purposes of this Article, the following definitions shall apply:

(a) “Aggregation Group” means each qualified plan of the Employers (including any terminated plan if it was maintained at any time during the last one(1) year period ending on the Determination Date) in which at least one (1) Key Employee participates in the Plan Year containing the Determination Date or anyof the four (4) preceding Plan Years and each other qualified plan of the Employers that, during such period, enables any plan in which a Key Employeeparticipates to meet the requirements of Code Sections 401(a)(4) or 410. “Aggregation Group” also includes each other qualified plan of the Employersdesignated by the Employers as part of such group, if such group, taking into account such plan, would continue to meet the requirements of Code Sections401(a)(4) and 410.

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(b) “Compensation” means compensation within the meaning of Code Section 414(q)(4) which, in general, has the same meaning given such term bySubsection 5.06(d)

(c) “Determination Date” means, for any Plan Year, the last day of the preceding Plan Year.

(d) “Key Employee” means any Employee or former Employee, and the Beneficiaries of such Employee, who at any time during the Plan Year thatincludes the Determination Date was:

(1) an officer of an Employer having annual Compensation greater than One Hundred Thirty Thousand Dollars ($130,000) (as adjusted under CodeSection 416(i)(l));

(2) a five percent (5%) owner of an Employer; or

(3) a one percent (1%) owner of an Employer with annual Compensation of more than One Hundred Fifty Thousand Dollars ($150,000).

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The status of an Employee as a Key Employee shall be determined with reference to the Plan Year containing the Determination Date, and shall be determined inaccordance with Code Section 416(i)(1) and the regulations thereunder.

(e) “Non-Key Employee” means any Employee or former employee, and the Beneficiaries of such Employee, who is not a Key Employee.

(f) “Top-Heavy Plan” means, for any Plan Year, the Plan if the “top-heavy ratio” for the Aggregation Group as of the Determination Date exceeds sixtypercent (60%). The top-heavy ratio is a fraction, the numerator of which is the present value of the cumulative accrued benefits as of the Top-Heavy AllocationDate under the defined benefit plans for all Key Employees plus the sum of account balances as of the Determination Date under the defined contribution plansfor all Key Employees, and the denominator of which is the present value of the cumulative accrued benefits as of the Top-Heavy Allocation Date under thedefined benefit plans plus the sum of account balances as of the Determination Date under the defined contribution plans for all Participants, including KeyEmployees, former Participants, and the Beneficiaries of such Participants. Provided, however, in the calculation of the top-heavy ratio (i) if any Participant hasnot performed any services for an Employer at any time during the one (1) year period ending on the Determination Date, the cumulative accrued benefit and thevalue of the accounts of such Participant shall not be taken into account; (ii) the value of account balances and cumulative accrued benefits of a Participant whois a Non-Key Employee but who was a Key Employee in a prior year shall be disregarded; (iii) the value of account balances and cumulative accrued benefits forthe Aggregation Group shall be calculated with reference to the Determination Date of each plan that falls within the same calendar year; (iv) the extent to whichdistributions, rollovers, and transfers are taken into account will be made in accordance with

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Code Section 416 and the regulations thereunder; and (v) the present value of the cumulative accrued benefits and account balances of a Participant shall beincreased by the aggregate distributions made with respect to such Participant during the one (1) year period ending on the Determination Date (five (5) yearperiod ending on the Determination Date in the case of a distribution for a reason other than separation from service, death or disability), including suchdistributions from terminated plans that, if not terminated, would be required to be included in the Aggregation Group. The accrued benefit of a Participant otherthan a Key Employee shall be determined under: (i) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained bythe Employers, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule ofCode Section 411(b)(1)(C).

(g) “Top-Heavy Allocation Date” means, for any Plan Year, the date of the most recent valuation immediately preceding or coincident with theDetermination Date for the Plan Year.

(h) “Top-Heavy Year” means any Plan Year in which the Plan is a Top-Heavy Plan.

Section 15.02. Top-Heavy Plan Provisions. If the Plan is a Top-Heavy Plan in any one (1) or more Plan Years, and notwithstanding Article V, in eachTop-Heavy Year the following provisions shall apply:

(a) The minimum allocation to the Accounts for each Participant who is a Non-Key Employee and who is an Employee on the last day of the Plan Yearshall equal a percentage of the Participant’s Compensation for the Top-Heavy Year equal to the lesser of (i) three percent (3%) or (ii) the percentage ofCompensation for the Top-Heavy Year allocated to the Accounts of the Key Employee with the highest percentage allocation for the Top-Heavy Year; provided,

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however, the minimum allocation may not be less than three percent (3%) if the Plan is required to be included in an Aggregation Group and the Plan enables adefined benefit plan required to be included in such group to meet the requirements of Code Section 401(a)(4) or 410. The minimum allocation to the Accountsof a Non-Key Employee shall include all amounts allocated to the Accounts of such Employee for the Top-Heavy Year pursuant to Article IV; provided,however, that Catch-Up Contributions shall not be counted for this purpose. The preceding sentence shall apply with respect to Matching Contributions under thePlan or, if the Plan provides that the minimum allocation requirement shall be met in another plan, such other plan. Employer Matching Contributions that areused to satisfy the minimum allocation requirements shall be treated as Matching Contributions for purposes of the Average Contribution Percentage test underSection 5.05 and other requirements of Code Section 401(m). In determining the highest percentage allocation for any Key Employee for the Top-Heavy Year,all amounts allocated to the Accounts of the Key Employee for the Top-Heavy Year pursuant to Article IV are taken into account. Those Non-Key Employeeswho are Participants in the Plan and have not Terminated Employment by the end of the Plan Year shall receive the minimum allocation regardless of whetherthe Non-Key Employee has completed fewer than one thousand (1,000) Hours of Service during the Plan Year, and regardless of the level of Compensation ofthe Non-Key Employee.

(b) Notwithstanding Subsection (a), if an Employer maintains another Top-Heavy Plan that is a defined contribution plan, and the other plan satisfiesSubsection (a) with respect to a Participant who is a Non-Key Employee in both plans, then Subsection (a) shall not apply to this Plan with respect to suchParticipant.

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(c) Notwithstanding Subsection (a), if an Employer maintains another Top-Heavy Plan that is a defined benefit plan, then either (i) this other plan mustsatisfy the defined benefit minimum provisions of Code Section 416(c)(1) with respect to a Participant who is a Non-Key Employee in both plans, or (ii) thisPlan must provide a minimum allocation for such Participant (determined under the rules of Subsection (a)) equal to five percent (5%) of the Participant’sCompensation for the Top-Heavy Year.

ARTICLE XVI.

NONALIENATION OF BENEFITS AND DOMESTIC RELATIONS ORDERS

Section 16.01. Nonalienation of Benefits.

(a) Except as provided in Subsection (b), no benefit under the Plan, prior to actual receipt thereof by a Participant or a Beneficiary, shall be subject to anydebt, liability, contract, engagement, or tort of any Participant or his Beneficiary, nor subject to anticipation, sale, assignment, transfer, encumbrance, pledge,charge, attachment, garnishment, execution, alienation, or other voluntary or involuntary alienation or other legal or equitable process, nor transferable byoperation of law.

(b) The benefits of a Participant shall be paid (i) to an Alternate Payee pursuant to the applicable requirements of any Qualified Domestic Relations Orderunder Code Sections 401(a)(13) and 414(p), and (ii) pursuant to any settlement or judgment to which Code Section 401(a)(13)(C) applies.

(c) Notwithstanding any other provision of the Plan, any benefit payable to a Participant or a Beneficiary of a Participant shall be reduced by any benefitpaid or payable pursuant to a Qualified Domestic Relations Order from the benefits of the Participant under the Plan. The Administrator, in its sole discretion,may direct the Trustee to separately account for any benefit payable pursuant to Subsection (b).

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(d) Notwithstanding any other provision of the Plan, the Plan may make a distribution to an Alternate Payee pursuant to a Qualified Domestic RelationsOrder prior to the date the Participant attains his earliest retirement age, as defined in Code Section 414(p)(4)(B), if the order specifically provides for suchdistribution.

Section 16.02. Procedures Regarding Domestic Relations Orders.

(a) If the Plan receives any order that may be a Qualified Domestic Relations Order, the Administrator shall:

(1) promptly notify the Participant and any prospective Alternate Payee of (i) the receipt of such order, and (ii) the procedures under the Plan fordetermining whether such order is a Qualified Domestic Relations Order; and

(2) within a reasonable period after receipt of such order, and in accordance with regulations that the Secretary of Labor may prescribe, determinewhether such order is a Qualified Domestic Relations Order and notify the Participant and each Alternate Payee of such decision.

(b) The Administrator shall establish reasonable procedures to determine whether an order is a Qualified Domestic Relations Order and to administer thedistribution of benefits with respect to such orders. The procedures shall (i) be in writing, (ii) provide prompt notice of such procedures to each person specifiedin the order as entitled to the payment of benefits, at the address specified in the order, and (iii) permit an Alternate Payee to designate a representative for receiptof copies of notices that are sent to Alternate Payees with respect to a Qualified Domestic Relations Order.

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(c) During any period of time in which the issue of whether an order is a Qualified Domestic Relations Order is being determined by the Administrator, acourt of competent jurisdiction, or otherwise, the Administrator shall provide the Trustee with written direction to separately account under the Trust for theamounts, if any, that would be payable to an Alternate Payee during such period if such order is determined to be a Qualified Domestic Relations Order. If withinthe eighteen (18) month period beginning on the date on which the first payment would be required to be made under the order, the order, or modificationthereof, is determined to be a Qualified Domestic Relations Order, the Administrator shall pay such separately accounted amounts, plus any interest thereon, tothe Alternate Payee or Payees entitled thereto. If within the eighteen (18) month period the order is determined to not be a Qualified Domestic Relations Order,or if such issue has not been resolved, the Administrator shall direct the Trustee to pay such separately accounted amounts, plus any interest thereon, to theParticipant or Beneficiary entitled to such amounts as if there had been no order. Any determination that an order is a Qualified Domestic Relations Order afterthe close of the eighteen (18) month period shall have prospective application only. Notwithstanding the preceding provisions, and in accordance with suchregulations as the Secretary of the Treasury may prescribe, the Administrator, in its sole discretion, may delay payment of any amounts payable under the Plan toa Participant (i) to the end of said eighteen (18) month period, if an order is found to be defective within said eighteen (18) month period and the Administratorhas notice that the parties with respect to the order are attempting to rectify any defects in the order, or (ii) for a reasonable period of time, if the Administratorreceives notice that an order that may be a Qualified Domestic Relations Order is being sought with respect to the Participant; provided, however, for thesepurposes, a court stay to the Administrator during the time an appeal is pending is notice that the parties with respect to

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an order are attempting to cure any defects in an order, and the Administrator shall honor a restraining order prohibiting the disposition of any amounts withrespect to a Participant pending resolution of a dispute with respect to an order that may be a Qualified Domestic Relations Order.

(d) The Administrator may establish and charge a processing fee with respect to any Qualified Domestic Relations Order.

Section 16.03. Surviving Spouse. To the extent so provided in any Qualified Domestic Relations Order, the former Spouse of a Participant shall be treatedas the surviving Spouse of the Participant under the Plan for purposes of Code Sections 401(a)(11) and 417 and the Spouse of the Participant shall not be treatedas a Spouse of the Participant for such purposes.

ARTICLE XVII.

OPTIONS AND RESTRICTIONS ON EMPLOYER STOCK

Section 17.01. Participant Put Option.

(a) If the Employer Stock is not readily tradable on an established market, within the meaning of Code Section 409(h)(1), the provisions of this Sectionshall apply. A Participant or a Beneficiary shall have the right to require the Company to purchase any Employer Stock distributed to the Participant or theBeneficiary under the Plan (“put option”). The put option shall be exercisable during a fifteen (15) month period that shall begin on the date the Employer Stockis distributed to the Participant or Beneficiary by the Plan. If not exercised during such period, the put option shall lapse. For purposes of this Section, aParticipant or a Beneficiary includes donees of such Participant or Beneficiary and a person (including an estate or its distributee) to whom the security passes byreason of the death of such Participant or Beneficiary.

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(b) The put option is exercised by the holder notifying the Administrator and the Trustee in writing that the put option is being exercised. The purchaseprice at which the put option is exercisable is the fair market value of the Employer Stock as determined under Section 6.03. If the holder of the put optionnotifies the Administrator in writing that he desires to exercise such put option, the Plan may elect to exercise the rights of the Administrator at the time the putoption is exercised.

(c) At the election of the Administrator (or the Plan, if applicable) payment of the purchase price to the holder of the put option may be made in a lumpsum, or if otherwise permitted by ERISA, in deferred installments. Any installment payments shall provide for a reasonable rate of interest, and as security forsuch installment payments, the holder of the put option shall be given a promissory note that provides that it shall become due and payable in full if the purchaserdefaults in the payment of such installment payments. The installment payments shall begin within thirty (30) days after the date the put option is exercised andmust be substantially equal. The cumulative payments at any time shall be no less than the aggregate of reasonable periodic payments as of such time. Generally,the payment period for such installments may not end more than five (5) years after the date the put option is exercised; provided, however, if otherwisereasonable, such period may be extended to a date no later than the earlier of ten (10) years from the date the put option is exercised or the date the proceeds ofthe exempt loan used by the Plan to acquire the Employer Stock subject to the put option is entirely repaid.

Section 17.02. Restrictions on Transfer.

(a) In the event the Employer Stock is not readily tradable on an established market at the time an option may be exercised, the Trustee shall have anoption, and if the Trustee fails to

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exercise such option in whole or in part, each Employer shall have an option to purchase, as provided in Section 17.03, any or all shares of Employer Stockpreviously distributed pursuant to Article VI in the event of a “transfer” of any of such shares. The term “transfer” as used herein shall mean and include anysale, assignment, conveyance, gift, bequest, intestate transfer, pledge, foreclosure of a pledge or other encumbrance, levy or other transfer pursuant to a judicialorder or legal process, voluntary or involuntary bankruptcy of a shareholder holding such shares, or the appointment of a receiver with respect to the property ofsuch shareholder or any other disposition of any kind or character.

(b) Prior to any voluntary “transfer” or proposed “transfer” or immediately following any involuntary “transfer,” as set forth in Subsection (a) above, theholder of Employer Stock, or any holder of an interest therein, that is the subject of such transfer, shall give notice to the Trustee, the Administrator, and theSecretary of the Company of the transfer or proposed transfer, setting forth all of the terms and conditions of any such transfer or proposed transfer including:

(1) the identification of each transferee or proposed transferee of the Employer Stock;

(2) the number of shares and certificate numbers of Employer Stock that are subject to the transfer or proposed transfer, or owned by a deceasedParticipant or Beneficiary, as the case may be;

(3) the authority, conditions, and circumstances under which the transferee or proposed transferee obtained or shall obtain any interest in suchEmployer Stock;

(4) the proposed purchase price, if any, offered by a buyer making a good faith offer to purchase the Employer Stock; and

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(5) all other terms of the transfer or proposed transfer.

(c) The options of the Trustee and the Employers under Subsection (a) above shall arise on the earlier of:

(1) the receipt by the Trustee, the Administrator, and the Secretary of the Company of the notice required under Subsection (b) above; or

(2) the tender of any certificate representing such Employer Stock to the Employer for transfer on the records of the Company.

The Trustee, or if the Trustee fails to exercise its option in whole, each Employer, may exercise its option by giving notice to the holder of such shares ofits intention to exercise the option within fourteen (14) days after the date the option arises.

(d) On and after the date of any involuntary transfer of Employer Stock, or the transfer of any such stock in violation of this Section, and until the earlier of(i) the transfer of such shares to the Trustee or an Employer pursuant to the exercise of any option hereunder, or (ii) the lapse of the period for the exercise of anysuch options with respect to such shares under Subsection (c) above, such shares shall not be voted and any vote of such shares shall be void ab initio, and alldistributions with respect to such shares shall be held by the Company or any other person receiving such distribution in trust, to be paid to the transferee of suchshares upon the exercise or nonexercise of the options with respect to such shares.

(e) In the event neither the Trustee nor the Employers exercises the option to purchase Employer Stock, provided in Subsection (a) above, and such sharesare not otherwise subject to any restriction on transfer, the holder of such shares shall have a right to sell, encumber, transfer or otherwise dispose of such shareson the terms of the transfer set forth in the written notice to the Trustee, the Administrator, and the Secretary of the Company, provided any

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such voluntary transfer is effected within fourteen (14) days after the expiration of the fourteen (14) day option period under Subsection (c) above. If the transferis not effected within such period, the options under Subsection (a) above shall reapply. If neither the Trustee nor the Employer exercises the option to purchaseEmployer Stock in the event of an involuntary transfer, the Secretary shall effect the transfer of such shares on its records. In the event of the disposition of theEmployer Stock, the transferee of such shares shall take and hold such shares subject to the options provided in this Section.

Section 17.03. Payment of Purchase Price.

(a) The purchase price of the Employer Stock subject to an option under Subsection 17.02(a), and the terms of such purchase, shall be at the fair marketvalue of such stock as provided under Section 11.03 and upon the terms under Subsection (b) below, or if greater, the proposed purchase price and upon suchother terms as set forth in the notice required under Subsection 17.02(b).

(b) Purchases by the Trustee or an Employer pursuant to Subsection (a) above may be paid: (i) in a lump sum, (ii) in quarterly installments over a periodnot to exceed ten (10) years, with interest at six percent (6%), compounded annually, or (iii) in accordance with any payment terms set forth in the written noticereferred to in Subsection 17.02(b), at the election of the Trustee or an Employer. Such payment or payments of the purchase price shall be made or commencedas soon as practicable after the date the Trustee or an Employer becomes obligated to purchase the stock. Within thirty (30) days of the date on which the Trusteeor an Employer exercises the option, the holder of such shares shall deliver to the Trustee or an Employer the share certificates, duly endorsed or accompanied byall documents necessary to effect a transfer, and accompanied by the payment of any transfer taxes due, and the Trustee or an Employer shall

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pay the shareholder in a lump sum or shall execute a promissory note to the shareholder in the amount of the unpaid price. The purchase price, or any partthereof, may be prepaid at any time without penalty.

Section 17.04. Nonterminable Protections and Rights. The protections and rights provided to Participants under Section 17.01 concerning put options arenonterminable and the Plan shall not be amended to effect a termination of such protections and rights so long as such termination is prohibited by regulations orrulings of the United States Department of Labor or the Internal Revenue Service.

Section 17.05. Restrictions on Loans. Notwithstanding anything in the Plan or any other agreement to which the Plan may be bound, the Trustee, on behalfof the Plan, may not enter into a loan made by a Party in Interest or disqualified person or a loan that is guaranteed by a Party in Interest or disqualified person,unless all the terms, conditions, and requirements of any regulations or rulings of the United States Department of Labor or the Internal Revenue Service havebeen satisfied or for which provision has otherwise been made.

ARTICLE XVIII.

MISCELLANEOUS PROVISIONS RELATING TOEMPLOYER STOCK

Section 18.01. Stock Dividends and Rights. The Trustee shall allocate any Employer Stock received as a stock dividend, or stock split, or as the result of areorganization in the same manner as the Employer Stock to which it is attributable. The Trustee, as directed by the Administrator, shall exercise rights, warrants,or options issued on Employer Stock held in the Plan, to the extent cash is then available. Any such rights, warrants, or options that cannot be exercised due tolack of cash then available shall be sold by the Trustee and the proceeds treated as a cash dividend received on Employer Stock.

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Section 18.02. Endorsement of Stock Certificates. Certificates for Employer Stock registered in the name of the Trustee and certificates for EmployerStock distributed to a Participant or Beneficiary shall have endorsed thereon (if required) an appropriate legend setting forth the restrictions and limitations on thetransfer, hypothecation, or sale thereof under the Plan.

Section 18.03. Securities Laws. All transactions provided for herein including but not limited to the issuance of any instrument evidencing a beneficialinterest in the Plan and the acquisition of Employer Stock by the Plan, distribution thereof as a benefit, and repurchase or sale thereof by the Plan, are subject toand conditioned upon compliance with any applicable provisions of federal and state securities laws or regulations and with the rules of any stock exchange onwhich Employer Stock may be listed; and any such transaction also shall be conditioned upon such clearance or approval thereof by such other regulatory bodiesas the Administrator may deem advisable.

Section 18.04. Dividends on Company Stock.

(a) Stock dividends paid during a Plan Year on Employer Stock allocated to Participant Stock Subaccounts shall be allocated to such Stock Subaccounts asof the date of payment. Cash dividends on Employer Stock allocated to Participant Stock Subaccounts shall be used as provided in this Subsection. Cashdividends paid on Employer Stock allocated to a Participant’s Stock Subaccount, pursuant to the Participant’s election, shall be either:

(1) paid into the stock bonus plan component of the Plan, and used to purchase shares of Employer Stock to be allocated to the Participant’sDividend Account; or

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(2) distributed to the Participant, either directly by the Company to the Participant (or, if the Participant is deceased, his Beneficiary), or if paid tothe Trustee, by the Trustee to the Participant (or, if a Participant is deceased, his Beneficiary) as soon as administratively feasible after payment to theTrustee but in no case later than ninety (90) days after the end of the Plan Year in which the dividends are paid.

The Participant’s election under this Subsection shall be irrevocable as of the date the cash dividend is paid or such earlier date as designated by theAdministrator or its designee; provided however, that a Participant may change his election with regard to any future cash dividend at least annually. If aParticipant does not make an election under this Subsection, the Participant shall be deemed to have elected that such cash dividend shall be paid into the stockbonus plan component of the Plan and used to purchase additional shares of Employer Stock pursuant to Paragraph (1). All cash dividends paid on CompanyStock and allocated to Participants’ Dividend Accounts under this Subsection shall be immediately one hundred percent (100%) Vested.

(b) If an Acquisition Loan is outstanding, cash dividends on unallocated shares of Employer Stock purchased with the proceeds of the Acquisition Loanshall be used to meet the obligations of such Acquisition Loan through which the purchase of the shares was financed.

ARTICLE XIX.

MISCELLANEOUS

Section 19.01. Non-Diversion. The assets of the Plan shall never inure to the benefit of an Employer and shall be held for the exclusive purposes ofproviding benefits to Participants in the Plan and their Beneficiaries and defraying reasonable expenses of administering the Plan, except as follows:

(a) If a contribution is made by an Employer under a mistake of fact, such contribution shall be returned to the Employer, upon demand, within one(1) year after the payment of the contribution and shall be reduced for any loss incurred but unadjusted for any gains earned during the time the mistakencontribution was part of the Trust.

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(b) Contributions by an Employer are conditioned on the deductibility of the contribution under the Code. To the extent the deduction is disallowed, suchcontributions to the extent disallowed shall be returned to the Employer, upon demand, within one (1) year after the disallowance of such deduction. Any amountnot returned to the Employer shall be deductible in subsequent taxable periods as provided in the Code.

Section 19.02. Military Service.

Notwithstanding any other provision in the Plan to the contrary, any Participant who is entitled to the rights, protections, and privileges afforded byUSERRA and is reemployed with an Affiliated Employer as provided in USERRA, shall, to the extent required by USERRA, (i) receive credit for the periodserved in the military for purposes of Vesting and benefit accrual under the terms of the Plan, (ii) be entitled to receive any Employer Contributions theParticipant failed to receive as a result of his or her military service as required by USERRA, and (iii) be entitled to make-up any contributions the Participantmissed as a result of his or her military service, to the extent required by USERRA and permitted under the Code. However, any make-up Contributions shall notexceed the amount the Participant would have been permitted to contribute to the Plan had the Participant remained continuously employed by the Employerthroughout the period of his or her military service. Any make-up Contributions to the Plan described in this Section shall be made during the period beginningwith the date of reemployment and ending on the date that occurs on the earlier of (i) three (3) times the period of the Participant’s military service, or (ii) five(5) years.

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Section 19.03. Merger, Consolidation of Plans, or Transfer of Plan Assets. In the case of any merger or consolidation with, or transfer of assets orliabilities to, any other plan, each Participant in the Plan shall be entitled to a benefit (as if the Plan had been terminated) immediately after the merger,consolidation, or transfer that is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, ortransfer (as if the Plan had been terminated). The Plan shall comply with the requirements of Code Sections 401(a)(11)(A) and 417, and the regulations issuedthereunder, with respect to a Participant’s benefits, if for that Participant, the Plan is a direct or indirect transferee of benefits held on or after January 1, 1985, bya defined benefit plan or a defined contribution plan subject to those laws. If the Plan provides for a separate accounting with respect to any such transferredbenefits, the Plan may apply these requirements only to the separate account attributable to the transferred benefits.

Section 19.04. Allocation of Fiduciary Responsibilities. To the extent permitted under ERISA, each fiduciary under the Plan shall be responsible only forthe specific duties assigned under the Plan and shall not be directly or indirectly responsible for the duties assigned to another fiduciary. Any person or a group ofpersons may serve in more than one (1) fiduciary capacity with respect to the Plan.

Section 19.05. Limitation of Rights and Obligations. Neither the establishment nor maintenance of the Plan nor any amendment thereof, nor any act oromission under the Plan or resulting from the operation of the Plan shall be construed:

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(a) as conferring upon any Participant, Beneficiary, or any other person a right or claim against the Trust, the Company, the Employer, the Administrator,or the Trustee, except to the extent that such right or claim shall be specifically expressed and provided in the Plan or provided under ERISA;

(b) as creating any responsibility or liability of the Employer for the validity or effect of the Plan;

(c) as a contract or agreement between the Employer and any Participant or other person;

(d) as being consideration for, or an inducement or condition of, employment of any Participant or other person, or as affecting or restricting in any manneror to any extent whatsoever the rights or obligations of the Employer or any Participant or other person to continue or terminate the employment relationship atany time; or

(e) as giving any Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge anyParticipant or other person at any time.

Section 19.06. Notice. Any notice given under this Plan shall be sufficient if given to the Administrator, when addressed to its office, or if given to aParticipant, when addressed to the Participant at his or her address as it appears in the records of the Administrator.

Section 19.07. Right of Recovery. If the Company and/or the Trustee makes any payment that according to the terms of the Plan and the benefits providedhereunder should not have been made, the Company and/or the Trustee may recover that incorrect payment, whether or not it was made due to the error of theCompany and/or the Trustee, from the person to whom it was made, or from any other appropriate party. If any such incorrect payment is made directly to aParticipant, the Company and/or the Trustee may deduct it when making future payments directly to that Participant.

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Section 19.08. Legal Counsel. The Administrator and/or its designee, and the Trustee may from time to time consult with counsel, who may be counsel forthe Company, and shall be fully protected in acting upon the advice of such counsel.

Section 19.09. Evidence of Action. Any action by any Employer pursuant to any of the provisions of this Plan shall be evidenced by resolution of itsgoverning body, and the Administrator shall be fully protected in acting in accordance with such resolution so certified to it. All orders, requests and instructionsto the Administrator by an Employer or by any duly authorized representative, shall be in writing and the Administrator shall act and shall be fully protected inacting in accordance with such orders, requests and instructions.

Section 19.10. Audit. If an audit of the Plan and Trust is required under ERISA for any Plan Year, the Administrator shall engage an independent qualifiedpublic accountant. Such audit shall be conducted in accordance with the requirements of ERISA Section 103.

Section 19.11. Bonding. Each fiduciary of the Plan, unless exempted under ERISA, shall be bonded to the extent required by ERISA. The expense of suchbond shall be paid from the assets of the Plan unless paid by the Employer.

Section 19.12. Receipt and Release. Any payments to any Participant or Beneficiary shall, to the extent thereof, be in full satisfaction of the claim of suchParticipant or Beneficiary being paid thereby and the Trustee or Administrator may condition payment thereof on the delivery by the Participant or Beneficiary ofthe duly executed receipt and release in such form as may be determined by the Trustee or Administrator.

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Section 19.13. Legal Actions. If the Administrator is made a party to any legal action regarding the Trust or the Plan, except for a breach of fiduciaryresponsibility of such person or persons, any and all costs and expenses, including reasonable attorneys’ fees, incurred by the Administrator in connection withsuch proceeding shall be paid from the assets of the Plan unless paid by the Company.

Section 19.14. Reliance. The Administrator shall not incur any liability in acting upon any notice, request, signed letter, telegram, or other paper ordocument believed by the Administrator to be genuine or to be executed or sent by an authorized person.

Section 19.15. Entire Plan. The Plan document and the documents incorporated by reference herein shall constitute the only legally governing documentsfor the Plan. All statements made by the Company, Employer, Administrator, or Trustee shall be deemed representations and not warranties. No such statementsshall void or reduce coverage under the Plan or be used in defense to a claim unless in writing signed by the Administrator.

Section 19.16. Counterparts. The Plan may be executed in any number of counterparts, each of which shall be deemed to be an original. All thecounterparts shall constitute but one (1) and the same instrument and shall be sufficiently evidenced by any one (1) counterpart.

ARTICLE XX.

SPECIAL PROVISIONS RELATING TOAMOUNTS TRANSFERRED FROM THE

INTERPORE INTERNATIONAL, INC. RETIREMENT SAVINGS PLAN

Section 20.01. General Provisions. Notwithstanding any provision contained herein to the contrary, any amounts held under the Plan which weretransferred from the Interpore International, Inc. Retirement Savings Plan on behalf of Participants who were transferred from the Interpore International, Inc.Retirement Savings Plan to the Plan as a result of a merger of the

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Plans on or about January 1, 2006 (hereinafter “Interpore Transferred Employees”), shall be administered to preserve any protected benefits, rights and featuresassociated with such amounts consistent with the provisions of Code Sections 401(a)(12) and 414(l).

Section 20.02. Vesting.

(a) Notwithstanding any provision contained herein to the contrary, any amounts held under the Plan which are transferred from the InterporeInternational, Inc. Retirement Savings Plan on behalf of Interpore Transferred Employees shall be Vested consistent with the provisions of CodeSection 411(a)(10) and as provided in Section 10.01.

(b) Accordingly, any Interpore Transferred Employee shall be Vested in his or her Account balance under the Plan, attributable to both (i) the amountstransferred to the Plan from the Interpore International, Inc. Retirement Savings Plan, and (ii) the amounts accrued under the Plan on and after the date suchInterpore Transferred Employee became a Participant in the Plan, in the following percentages based on the years of vesting service completed by the InterporeTransferred Employee as of January 1, 2006, as determined under the elapsed time method set forth in the Interpore International, Inc. Retirement Savings Plan:

Years ofVesting Service

VestedPercentage

Less than 1 0%1 33%2 67%

3 or more 100%

(c) Notwithstanding the foregoing, any Interpore Transferred Employee who has not completed at least three (3) years of Vesting Service under theInterpore International, Inc. Retirement Savings Plan as of January 1, 2006, shall continue to be Vested at the percentage determined January 1, 2006 until theInterpore Transferred Employee has completed five (5)

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Years of Service under the Plan. Upon completion of five (5) Years of Service, any Interpore Transferred Employee subject to this Subsection (c) shall becomesubject to the vesting schedule under Subsection 10.01(c), and such Interpore Transferred Employee’s Vested percentage attributable to both (i) the amountstransferred to the Plan from the Interpore International, Inc. Retirement Savings Plan, and (ii) the amounts accrued under the Plan on and after the date suchInterpore Transferred Employee became a Participant in the Plan shall be subject to the vesting schedule set forth under Subsection 10.01(c) of the Plan.

Section 20.03. Distribution of Benefits. The benefits payable under Article VII of the Plan on behalf of Interpore Transferred Employees shall becomprised of the Vested account balance of such Interpore Transferred Employees attributable to both the amounts transferred to the Plan from the InterporeInternational, Inc. Retirement Savings Plan and the amounts accrued under the Plan on and after the date such Interpore Transferred Employee became aParticipant in the Plan. Consistent with the provisions of Treasury Regulation Section 1.411(d)-4 (Q&A-2(e)), effective with respect to distributions to InterporeTransferred Employees that first commence on and after the effective date of this Article XX, the benefits payable under Article VII of the Plan on behalf ofInterpore Transferred Employees shall be payable at the time and in the forms of distribution permitted under Article VII of the Plan, and all optional forms ofbenefit previously available under the Interpore International, Inc. Retirement Savings Plan but not available under Article VII of the Plan, including but notlimited to annuities, shall cease to be available under the Plan.

Section 20.04. Transferred Participant Loans. With regard to any participant loans outstanding and attributable to amounts transferred to this Plan onbehalf of a Interpore Transferred Employee pursuant to the provisions of this Article, such loans shall continue to be

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administered pursuant to the requirements of Code Section 72(p) and the provisions of Article VIII, to the extent not inconsistent herewith. Provided, however,that the availability of new loans after the date such Interpore Transferred Employee became a Participant in this Plan shall be governed exclusively byArticle VIII of this Plan.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

SIGNATURE PAGE FOLLOWS.]

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On behalf of the Benefits Committee this restatement of the Plan is executed this day of , 2007.

BENEFITS COMMITTEE

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AMENDMENT NUMBER ONETO THE

BIOMET 401(k) SAVINGS AND RETIREMENT PLAN

THIS AMENDMENT NUMBER ONE is hereby executed on behalf of Biomet, Inc. (“Company”).

The Biomet 401(k) Savings and Retirement Plan (f/k/a the Biomet, Inc. 401(k) Profit Sharing Plan) (“Plan”) was originally established effective June 1,1985, was most recently merged with the Biomet, Inc. Employee Stock Bonus Plan and amended, restated and renamed effective as of April 1, 2007. TheAdministrator, having reserved the right to amend the Plan pursuant to Section 13.01 of the Plan, now desires to amend the Plan to clarify certain plan provisionsfollowing the merger with the Stock Bonus Plan.

THEREFORE, the Plan is hereby amended, effective April 1, 2007, as follows:

1. The following sentence shall be added to the end of Subsection 2.01(hhh) of the Plan, regarding the computation of years of service, to be and read asfollows:

“Notwithstanding the preceding provisions, for purposes of determining whether a Participant has three (3) or more Years of Service determined underCode Section 401(a)(35) and the participant-directed investment provisions of Sections 12.02 and 12.03, a Year of Service shall be credited to theParticipant as of the first day of the month (or such other date designated by the Administrator) following the date on which such Participant firstcompletes one thousand (1,000) Hours of Service during any Vesting Computation Period.”

2. Paragraph 3.01(a)(1) of the Plan, regarding participation, shall be amended to be and read as follows:

“(1) he (A) has completed three (3) full consecutive months of continuous, active employment (i.e., he must be actively employed with the Employeron each day of the three full consecutive months) with the Employer for an Employer and is scheduled to work at least one thousand (1,000) hours peryear, or (B) has completed one thousand (1,000) Hours of Service in any Plan Year or in

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any of the overlapping Vesting Computation Periods required by the changes in the Plan Year under Subsection 2.01(rr); and”

3. Subsection 8.02(b) of the Plan, regarding plan loans, shall be amended to be and read as follows:

“(b) A Party in Interest may apply for a loan by completing the Applicable Forms; provided, however a Party in Interest may only request one(1) loan in each twelve (12) month period. Notwithstanding the preceding provisions, the Administrator may, on a nondiscriminatory basis, permitmore than one (1) loan during a twelve (12) month period if such loan would otherwise prevent the Party in Interest from receiving a hardshipdistribution during such period.”

4. A new Section 12.08 of the Plan, regarding tender offers, shall be added to the Plan with the remaining sections to be re-numberedaccordingly, to be and read as follows:

“Section 12.08. Tender Offers.

(a) If any person, either alone or in conjunction with others, makes a tender offer, or exchange offer, or otherwise offers to purchase or solicits anoffer to sell to such person 1% or more of the outstanding shares of Employer Stock (referred to hereinafter collectively as a “Tender Offer”), thefollowing shall apply:

(1) Each Participant (or Beneficiary in the event a Participant is deceased) may direct the Trustee to sell, offer to sell, exchange or otherwisedispose of the Employer Stock allocated to such Participant’s Account (or Beneficiary’s Account in the event a Participant is deceased) inaccordance with the provisions, conditions and terms of the Tender Offer and the provisions of this Section. Such directions shall be in the form andshall be filed in the manner and at such time as the Trustee or the Administrator may prescribe.

(2) The Trustee shall sell, offer to sell, exchange or otherwise dispose of the Employer Stock allocated to the Participant’s Accounts (orBeneficiary’s Account in the event a Participant is deceased) in accordance with the direction of such Participant (or Beneficiary in the event aParticipant is deceased) (the “Directed Shares”). The proceeds of a disposition directed by a Participant (or Beneficiary) from his Account shall beallocated to such Participant’s (or Beneficiary’s) Account and be invested as described in Subsection (b) below.

(3) If any Participant (or Beneficiary) fails to validly direct the Trustee to sell, offer to sell, exchange or otherwise dispose of the Employer

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Stock allocated to his Account, he shall be deemed to have directed the Trustee that such shares remain invested in Employer Stock subject to allprovisions of the Plan.

(4) In the case of shares of Stock that are held unallocated in the Employer Stock Suspense Account, the Trustee shall tender, sell, offer to sell,exchange or otherwise dispose such of shares in the same proportion in which Participant’s tendered the Directed Shares in relation to all shares ofEmployer Stock held under the Plan. The proceeds of a disposition of Stock in the Employer Stock Suspense Account shall be held by the Trusteesubject to the provisions of the Trust Agreement, the Plan and any applicable loan agreement.

(b) Except as otherwise determined by the Administrator, the proceeds of a disposition of Employer Stock in a Participant’s (or Beneficiary’s)Account pursuant to this Section 12.08 shall be reinvested in the Fund or Funds elected by the Participant (or Beneficiary) for the investment of futurecontributions to the Plan (excluding Employer Stock) in effect as of the date on which such proceeds are received by the Trust, or, if no such investmentelection is in effect as of the date on which such proceeds are received by the Trust, in the default investment alternative designated by the Administrator.”

5. In all other respects the Plan shall be and remain unchanged.

This Amendment Number One is executed this day of , 2007.

BENEFITS COMMITTEE

Bradley J. Tandy

Darlene Whaley

Daniel P. Florin


Exihibit 10.23

CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, dated as of September 20, 2006, is made by and between Biomet, Inc., an Indiana corporation (the “Company”), and Gregory D.Hartman (the “Executive”).

Recitals

A. The Company considers it essential to the best interests of its shareholders to foster the continuous employment of certain key management personnel,including the Executive who is currently serving as Senior Vice President, Finance, Chief Financial Officer and Treasurer, Biomet, Inc.

B. The Board recognizes that, as is the case with many publicly-held corporations, the possibility of a Change in Control exists and that such a possibility,and the uncertainty and questions that it may raise among management, may result in the departure or distraction of certain key management personnel to thedetriment of the Company and its shareholders.

C. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of theCompany’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from,among other things, the possibility of a Change in Control.

D. The parties intend that no amount or benefit will be payable under this Agreement unless both of the following events occur: (i) a Change in Controloccurs; and (ii) the Executive’s employment with the Company is terminated as provided in this Agreement.

AGREEMENT

In consideration of the premises and the mutual covenants and agreements set forth below, the Company and the Executive agree as follows:

ARTICLE ITerm of Agreement

Section 1.01 Term. The “Term” of this Agreement is the period commencing on the date hereof and ending on the second anniversary of the date hereof;provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annualanniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Term shall be automatically extended so as toterminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Board shall give notice to the Executive that the Term not beso extended. Notwithstanding any notice to the Executive that the Term shall not be extended, if a Change in Control occurs prior to the expiration of the Term,then the Term shall be automatically extended so as to expire two years from the date of such Change in Control.

Section 1.02 Post-Change in Control Employment Period. Subject to the terms and conditions of this Agreement, the Company hereby agrees to continuethe Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company for the period commencing on the first date on which aChange in Control occurs during the Term and ending on the second anniversary of such date (the “Post-CIC Employment Period”).

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ARTICLE IITermination of Employment

Section 2.01 Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Term. If the Companydetermines in good faith that the Disability (pursuant to the definition of Disability set forth below) of the Executive has occurred during the Term, it may give tothe Executive written notice in accordance with Article VII of this Agreement of its intention to terminate the Executive’s employment. In such event, theExecutive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability EffectiveDate”), provided that, within the thirty days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. Forpurposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180consecutive business days as a result of incapacity due to mental or physical illness, which is determined to be a disability pursuant to the Company’s thenexisting long term disability plan or, in the absence of such a plan, a disability determined to be total and permanent by a physician selected by the Company andacceptable to the Executive or the Executive’s legal representative.

Section 2.02 Cause. The Company may terminate the Executive’s employment during the Term for Cause.

Section 2.03 Good Reason. The Executive’s employment may be terminated by the Executive for Post-CIC Good Reason.

Section 2.04 Notice of Termination. Any termination by the Company for Cause, or by the Executive for Post-CIC Good Reason, shall be communicatedby Notice of Termination to the other party hereto given in accordance with Article VII of this Agreement. For purposes of this Agreement, a “Notice ofTermination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth inreasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and(iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Executive orthe Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Post-CIC Good Reason or Cause shall notwaive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact orcircumstance in enforcing the Executive’s or the Company’s rights hereunder.

Section 2.05 Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by theExecutive for Post-CIC Good Reason, the date of receipt of the Notice of Termination or any later date up to six months thereafter specified therein, as the casemay be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on whichthe Company notifies the Executive of such termination or any later date specified therein within 30 days of such notice and (iii) if the Executive’s employmentis terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case maybe.

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ARTICLE IIIObligations of the Company Upon Termination

Section 3.01 Post-CIC Good Reason; Other Than for Cause or Disability. If, during the Post-CIC Employment Period, the Executive shall terminateemployment for Post-CIC Good Reason or the Company shall terminate the Executive’s employment other than for Cause or Disability (entitling the Executiveto benefits under the Company’s long-term disability plan, after any applicable waiting period):

(a) The Company shall pay to the Executive in a lump sum in cash on the tenth (10) Business Day following the Date of Termination the aggregateof the following amounts:

(i) the sum of (1) the Executive’s Annual Base Salary (which for this purpose shall include any allowance for perquisites that is paid directlyto the Executive) through the end of the fiscal year containing the Date of Termination; (2) an amount equal to (x) the higher of the target bonus amount or thebonus actually paid to the Executive under the Company’s incentive bonus plan (or any comparable successor plan(s)) for the fiscal year of the Company prior tothe Date of Termination (or the first date on which a Change in Control occurs, if such date is earlier) or (y) the target bonus amount payable to the Executiveunder such plan(s) for the fiscal year of the Company which contains the Date of Termination, whichever of (x) or (y) is higher (the “Target Bonus”); (3) the totalcontributions (other than salary reduction contributions) made by the Company to all qualified retirement plans on behalf of the Executive through the end of thefiscal year containing the Date of Termination; (4) the total car allowance contributions made by the Company to the Executive through the end of the fiscal yearcontaining the Date of Termination; and (5) any accrued vacation or other pay not theretofore paid (the sum of the amounts described in clauses (1), (2), (3),(4) and (5) are herein referred to as the “Accrued Obligations”); and,

(ii) the amount equal to the product of (1) two and (2) the sum of (w) the Executive’s Annual Base Salary (which for this purpose shallinclude any allowance for perquisites that is paid directly to the Executive) and (x) the higher of (aa) the Target Bonus and (bb) the highest annual incentivebonus earned by Executive during the last two (2) completed fiscal years of the Company immediately preceding Executive’s Date of Termination (annualized inthe event Executive was not employed by the Company for the whole of any such fiscal year), with the product of (1) and (2) reduced by the amounts paid, ifany, to the Executive pursuant to any other contractual arrangement with the Executive or plan providing coverage to the Executive as a result of suchtermination; (y) the total contributions (other than salary reduction contributions) made by the Company to all qualified retirement plans on behalf of theExecutive for the calendar year immediately preceding the calendar year in which the Change in Control occurs; and (z) the total car allowance contributionsmade by the Company to the Executive for the calendar year immediately preceding the calendar year in which the Change in Control occurs.

(b) The Company shall provide the following benefit payments to the Executive:

(i) For a 24-month period after the Date of Termination, the Company will arrange to provide the Executive with life insurance benefits andlong-term disability benefits substantially similar to those that the Executive was receiving from the Company immediately prior to the Date of Termination (orthe first date on which a Change in Control occurs, if such date is earlier). Life insurance benefits and long-term disability benefits otherwise receivable by theExecutive pursuant to the preceding sentence will be reduced to the

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extent comparable benefits are actually received by or made available to the Executive by any source other than the Company without greater cost to him than asprovided by the Company during the 24-month period following the Executive’s termination of employment (and the Executive will report to the Company anysuch benefits actually received by or made available to the Executive). If, as of the Date of Termination, the Company reasonably determines that the continuedlife insurance coverage and/or long-term disability coverage required by this Section 3.01(b) is not available from the Company’s group insurance carrier, cannotbe procured from another carrier, and cannot be provided on a self-insured basis without adverse tax consequences to the Executive or his death beneficiary, then,in lieu of continued life insurance coverage and/or long-term disability coverage, the Company will pay the Executive a lump sum payment, in cash, equal to 24times the full monthly premium payable to the Company’s group insurance carrier for comparable coverage for an executive employee under the Company’sgroup life insurance plan or long-term disability plan then in effect.

(ii) The Company will offer the Executive and any eligible family members the opportunity to elect to continue medical and dental coveragepursuant to the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). The Executivewill be responsible for paying the required monthly premium for that coverage, but the Company will pay the Executive a lump sum cash stipend equal to 24times the monthly premium then charged to qualified beneficiaries for full family COBRA continuation coverage under the Company’s medical and dental plans,which the Executive may choose to use for the payment of COBRA premiums. The Company will pay the stipend to the Executive whether or not the Executiveor anyone in his family elects COBRA continuation coverage, whether or not the Executive continues COBRA coverage for a full 24 months, and whether or notthe Executive receives health coverage from another employer while the Executive is receiving COBRA continuation coverage.

(c) All outstanding Options will become immediately vested and exercisable (to the extent not yet vested and exercisable as of the Date ofTermination) and shall remain exercisable until the earlier of (i) the expiration of the option term or (ii) five (5) years after the Date of Termination. To the extentnot otherwise provided under the written agreement, if any, evidencing the grant of any restricted Shares to the Executive, all outstanding Shares that have beengranted to the Executive subject to restrictions that, as of the Date of Termination, have not yet lapsed will lapse automatically upon the Date of Termination, andthe Executive will own those Shares free and clear of all such restrictions.

(d) For 12 months following the Date of Termination the Company shall, at its sole expense, reimburse the Executive for the cost (but not in excessof $25,000 in the aggregate), as incurred, for outplacement services the scope and provider of which shall be selected by the Executive in Executive’s solediscretion.

(e) To the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required tobe paid or provided or which Executive is eligible to receive under any plan, program, policy, practice, contract or agreement of the Company (such otheramounts and benefits shall be hereinafter referred to as the “Other Benefits”).

Section 3.02 Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Term and prior to a Change in Control, thisAgreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement. Anything in this Agreement to the contrarynotwithstanding, if the Executive’s death occurs after a Change In Control, then this Section 3.02 shall not apply and the Executive’s estate and/or beneficiariesshall be entitled to the benefits of Section 3.01.

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Section 3.03 Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Term, this Agreement shallterminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.Accrued Obligations shall be paid to the Executive in a lump sum in cash on the twentieth (20th) Business Day following the Date of Termination. The term“Other Benefits” as utilized in this Section 3.03 shall include, without limitation, and the Executive shall be entitled after the Disability Effective Date to receive,disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executivesand/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peerexecutives and their families at any time during the 120-day period immediately preceding the Date of Termination (or the date on which a Change in Controloccurs, if such date is earlier) or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect toother peer executives of the Company and their families.

Section 3.04 Termination in Anticipation of a Change in Control.

(a) An “Anticipatory Termination” occurs if either

(i) (1) the Company terminates the Executive’s employment other than for Cause or Disability prior to the date on which a Change inControl occurs, (2) it is reasonably demonstrated by the Executive that such termination of employment (x) was at the request or instruction of a third party whohad taken steps reasonably calculated to effect a Change in Control or (y) otherwise arose within six months of, and was in connection with or in anticipation of,a Change in Control, and (3) a Change in Control occurs, or

(ii) (1) during the Term, an event occurs that would have constituted Post-CIC Good Reason if the date on which a Change in Controloccurs was deemed to be the date immediately prior to the date of such event and the Executive terminated his employment subsequent to such event, (2) theExecutive can reasonably demonstrate that such Post-CIC Good Reason event (x) was at the request or instruction of a third party who had taken steps reasonablycalculated to effect a Change in Control or (y) otherwise arose within six months of, and was in connection with or in anticipation of, a Change in Control, and(3) a Change in Control occurs.

(iii) For purposes of clauses (i)(1)(y) and (ii)(1)(y) of this Section 3.04(a), it shall be presumed that such event was in connection with or inanticipation of a Change in Control unless the Company establishes otherwise by clear and convincing evidence.

(b) If the Executive has reason to believe that an Anticipatory Termination may have occurred, he shall provide a notice setting forth such belief inaccordance with Article VII of this Agreement within 120 days after a Change in Control has occurred. Upon an Anticipatory Termination, the Executive shall beentitled to (A) the payments specified in Sections 3.01(a),(d) and (e) (to the extent not previously paid), (B) the benefits specified in Section 3.01(b) (to the extentnot previously provided) (or the after-tax equivalent thereof to the extent that such benefits have not been or are not provided in kind), (C) to the extent that theExecutive has outstanding any unexercised stock options and other stock-based awards, the provisions of Section 3.01(c) shall apply to them, (D) in respect ofany stock options or other stock based awards that were forfeited by the Executive as a result of his termination of

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employment but would have vested had Section 3.01(c) applied, such awards shall be reinstated (or if not reinstated, the Executive shall be paid in cash the fairvalue of such award), and (E) liquidated damages of $25,000 for penalties associated with the Anticipatory Termination. For the purposes of this Section 3.04(b),the Executive’s Date of Termination shall be deemed to be his last date of employment by the Company.

Section 3.05 Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan,program, policy or practice provided by the Company and for which the Executive may qualify, nor, subject to Section 8.02, shall anything herein limit orotherwise affect such rights as the Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which theExecutive is otherwise entitled to receive under any plan, policy, practice, or program of or any contract or agreement with the Company at or subsequent to theDate of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by thisAgreement.

Section 3.06 Certain Additional Payments by the Company.

(a) Anything in this Agreement or in any other agreement between the Company and the Executive or in any stock option or other benefit plan to thecontrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefitof the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard toany additional payments required under this Section 3.06) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interestor penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinaftercollectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount suchthat after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any incometaxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of theGross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) All determinations required to be made under this Section 3.06, including whether and when a Gross-Up Payment is required and the amount ofsuch Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Accounting Firm, which shall provide detailedsupporting calculations both to the Company and the Executive within fifteen business days of the receipt of notice from the Executive that there has been aPayment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the Company or theindividual, entity or group effecting the Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinationsrequired hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall beborne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 3.06, shall be paid by the Company to the Executive in thecalendar year that includes the date on which the Payment was made; provided, however, that if a payment is made after December 1 of any calendar year, thenthe Gross-Up Payment, as determined pursuant to this Section 3.06, shall be paid by the Company to the Executive in the immediately succeeding calendar year.In either case, the Gross-Up Payment shall be made on the later of the fifth day following the Accounting Firm’s determination and the first day of the applicablecalendar year. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.

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Section 3.07 Tax Matters. Notwithstanding anything contained in this Agreement (or any other agreement between Executive and the Company or any ofits subsidiaries) to the contrary, the Company and its subsidiaries shall be entitled to deduct and withhold any amounts required by the Code or under any state orlocal law relating to compensation from any payment amounts distributable or due to Executive from the Company or any of its subsidiaries, including fromExecutive’s wages, compensation, or benefits, as may be required by the Code or under any state or local law relating to compensation. The Company and theExecutive agree to use commercially reasonable efforts to ensure that this Agreement complies with Section 409A of the Code such that Executive is not subjectto any additional taxes, interest or penalties under such provisions. In furtherance thereof, if payment or provision of any amount or benefit hereunder at the timespecified in this Agreement would subject such amount or benefit to any additional tax under Section 409A of the Code, the payment or provision of suchamount or benefit shall be postponed to the earliest commencement date on which the payment or the provision of such amount or benefit could be made withoutincurring such additional tax (including paying any severance that is delayed in a lump sum upon the earliest possible payment date which is consistent withSection 409A of the Code). Without limiting the generality of the immediately preceding sentence, if payment or provision of any amount or benefit hereunder atthe time specified in this Agreement would fail to comply with the provisions of Section 409A of the Code because the Executive is treated as a “specified”employee (within the meaning of Section 409A(a)(2)(B)(i) of the Code), then such amount or benefit shall not be paid or provided at the time otherwise specifiedin this Agreement, but instead shall be paid or provided on the date that is six months after the date of separation from service (or, if earlier, the date of death ofthe Executive). In addition, to the extent that any regulations or guidance issued under Code §409A (after application of the previous provision of this paragraph)would result in Executive being subject to the payment of interest or any additional tax under Code §409A, the Company and the Executive agree, to the extentreasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Code §409A, which amendment shallhave the minimum economic effect necessary on Executive and be reasonably determined in good faith by the Company and the Executive.

ARTICLE IVNo Mitigation

The Company agrees that, if the Executive’s employment by the Company is terminated during the term of this Agreement, the Executive is not requiredto seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Article III. Further, the amountof any payment or benefit provided for in Article III (other than Section 3.01(b)(i)) will not be reduced by any compensation earned by the Executive as the resultof employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

ARTICLE VThe Executive’s Covenants

Section 5.01 Noncompetition Agreement. In consideration for this Agreement, the Executive will execute, concurrent with the execution of thisAgreement, a noncompetition agreement in the form attached to this Agreement as Exhibit A. In the event of termination of this Agreement as provided inSection 1.01, the noncompetition Agreement shall survive termination.

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Section 5.02 Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all material proprietaryinformation, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by theExecutive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other thanby acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company,the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge anysuch information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of thisSection 5.02 constitute a basis for denying, deferring or withholding any amounts or benefits payable to the Executive under this Agreement.

Section 5.03 General Release. The Executive agrees that, notwithstanding any other provision of this Agreement, the Executive will not be eligible for anypayments under Section 3.01 unless the Executive timely signs, and does not timely revoke, a General Release in substantially the form attached to thisAgreement as Exhibit B.

ARTICLE VISuccessors; Binding Agreement

Section 6.01 Obligation of Successors. In addition to any obligations imposed by law upon any successor to the Company, the Company will require anysuccessor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company toexpressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if nosuccession had occurred. Failure of the Company to obtain such an assumption and agreement prior to the effectiveness of any such succession will be a breachof this Agreement.

Section 6.02 Enforcement Rights of Others. This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legalrepresentatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount is still payable to theExecutive under this Agreement, (other than amounts that, by their terms, terminate upon the Executive’s death), then, unless otherwise provided in thisAgreement, all such amounts will be paid in accordance with the terms of this Agreement to the executors, personal representatives, or administrators of theExecutive’s estate.

ARTICLE VIINotices

For the purpose of this Agreement, notices and all other communications provided for in the Agreement will be in writing and will be deemed to have beenduly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forthbelow, or to such other address as either party may furnish to the other in writing in accordance with this Article VIII, except that notice of change of address willbe effective only upon actual receipt:

To the Company: To the Executive:Biomet, Inc.56 E. Bell DriveP. O. Box 587Warsaw, Indiana 46581-0587

Gregory D. Hartman59625 County Road 13Elkart, Indiana 46517

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ARTICLE VIIIMiscellaneous; At-Will

Section 8.01 Miscellaneous. No provision of this Agreement may be modified, waived, or discharged unless the waiver, modification, or discharge isagreed to in writing and signed by the Executive and an officer of the Company specifically designated by the Board. No waiver by either party at any time ofany breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party will be deemed a waiver ofsimilar or dissimilar provisions or conditions at the same or at any other time. Neither party has made any agreements or representations, oral or otherwise,express or implied, with respect to the subject matter of this Agreement that are not expressly set forth in this Agreement. The validity, interpretation,construction, and performance of this Agreement will be governed by the laws of the State of Indiana. All references to sections of the Exchange Act or the Codewill be deemed also to refer to any successor provisions to those sections. Any payments provided for under this Agreement will be paid net of any applicablewithholding required under federal, state, or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and theExecutive under Articles III, IV, and VI will survive the expiration of this Agreement, if applicable.

Section 8.02 At-Will. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement betweenthe Executive and the Company, the employment of the Executive by the Company is “at will,” and the Executive’s employment may be terminated by either theExecutive or the Company at any time.

ARTICLE IXValidity

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement,which will remain in full force and effect.

ARTICLE XCounterparts

This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one andthe same instrument.

ARTICLE XISettlement of Disputes; Arbitration

All claims by the Executive for benefits under this Agreement must be in writing and will be directed to and determined by the Board. Any denial by theBoard of a claim for benefits under this Agreement will be delivered to the Executive in writing and will set forth the specific reasons for the denial and thespecific provisions of this Agreement relied upon. The Board will afford a reasonable opportunity to the Executive for a review of the decision denying a claimand will further allow the Executive to appeal to the Board a decision of the Board within 60 days after notification by the Board that the Executive’s claim hasbeen denied. Any further dispute or controversy arising under or in connection with this Agreement will be settled exclusively by arbitration in Warsaw, Indianain accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having

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jurisdiction. Each party will bear its own expenses in the arbitration for attorneys’ fees, for its witnesses, and for other expenses of presenting its case. Otherarbitration costs, including arbitrators’ fees, administrative fees, and fees for records or transcripts, will be borne equally by the parties. Notwithstanding anythingin this Article to the contrary, if the Executive prevails with respect to any dispute submitted to arbitration under this Article, the Company will reimburse or payall reasonable legal fees and expenses that the Executive incurred in connection with that dispute as required by Section 3.08.

ARTICLE XIIDefinitions

For purposes of this Agreement, the following terms will have the meanings indicated below:

“401(k) Plan” means the Biomet, Inc. Profit Sharing Plan and Trust qualified under section 401(k) of the Code and any comparable successor plan(s).

“Accounting Firm” means such nationally recognized certified public accounting firm as may be designated by the Executive.

“Accrued Obligations” shall have the meaning described in Section 3.01(a)(i).

“Annual Base Salary” means the Executive’s annual base salary as in effect immediately prior to the date of the Change in Control.

“Anticipatory Termination” shall have the meaning described in Section 3.04.

“Beneficial Owner” has the meaning stated in Rule 13d-3 under the Exchange Act.

“Board” means the Board of Directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are infact closed in, the State of Indiana.

“Cause” for termination by the Company of the Executive’s employment, after any Change in Control, means (1) the willful and continued failure by theExecutive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due tophysical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Post-CIC Good Reason or Pre-CIC GoodReason or by the Executive pursuant to Sections 3.01 and 3.02) for a period of at least 30 consecutive days after a written demand for substantial performance isdelivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantiallyperformed the Executive’s duties; (2) the Executive willfully engages in conduct that is demonstrably and materially injurious to the Company or its subsidiaries,monetarily or otherwise; or (3) the Executive is convicted of, or has entered a plea of no contest to, a felony. For purposes of clauses (1) and (2) of this definition,no act, or failure to act, on the Executive’s part will be deemed “willful” unless it is done, or omitted to be done, by the Executive not in good faith and withoutreasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company.

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“Change in Control” will be deemed to have occurred if any of the following events occur:

(a) Individuals who, as of September 20, 2006, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majorityof such Board, provided that any person becoming a director after September 20, 2006 and whose election or nomination for election was approved by a vote ofat least a majority of the Incumbent Directors then on the Board shall be deemed an Incumbent Director; provided, however, that no individual initially elected ornominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“ElectionContest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including byreason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

(b) Any Person is or becomes a Beneficial Owner directly or indirectly, of either (A) 20% or more of the then-outstanding Company Shares or(B) securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for theelection of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (b), the following acquisitions shall notconstitute a Change in Control: (i) an acquisition directly from the Company, (ii) an acquisition by the Company or a subsidiary of the Company, or (iii) anacquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company; or

(c) The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving theCompany or a subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition ofassets or stock of another corporation (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all ofthe individuals and entities who were the beneficial owners, respectively, of the outstanding Company Shares and outstanding Company Voting Securitiesimmediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstandingshares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the casemay be, of the corporation resulting from such Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of suchtransaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “SurvivingCorporation”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstandingCompany Shares and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (i) the Company or any subsidiary of theCompany, (ii) the Surviving Corporation or its ultimate parent corporation, or (iii) any employee benefit plan or related trust sponsored or maintained by any ofthe foregoing) is the beneficial owner, directly or indirectly, of 20% or more of the total common stock or 20% or more of the total voting power of theoutstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of theSurviving Corporation were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization,Sale or Acquisition; or

(d) Approval by the shareowners of the Company of a complete liquidation or dissolution of the Company.

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“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and interpretative rules and regulations.

“Company” means Biomet, Inc., an Indiana corporation, and any successor to its business and/or assets that assumes and agrees to perform this Agreementby operation of law, or otherwise (except in determining whether or not any Change in Control of the Company has occurred in connection with the succession).

“Company Shares” means shares of common stock of the Company or any equity securities into which those shares have been converted.

“Date of Termination” shall have the meaning described in Section 2.05.

“Disability” shall have the meaning described in Section 2.01.

“Disability Effective Date” shall have the meaning described in Section 2.01.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and interpretive rules and regulations.

“Excise Tax” shall have the meaning described in Section 3.05(a).

“Executive” “ shall have the meaning described in the first paragraph of this Agreement.

“Gross-Up Payment” shall have the meaning described in Section 3.06(a).

“Notice of Termination” shall have the meaning described in Section 2.04.

“Options” means options for Shares granted to the Executive under the Stock Option Plan.

“Other Benefits” shall have the meaning described in Section 3.01 (e) or 3.03, as determined by the nature of the termination of the Agreement, asdescribed in each of those sections.

“Payment” shall have the meaning described in Section 3.06(a).

“Person” has the meaning stated in section 3(a)(9) of the Exchange Act, as modified and used in sections 13(d) and 14(d) of the Exchange Act; however, aPerson will not include (1) the Company or any of its subsidiaries, (2) a trustee or other fiduciary holding securities under an employee benefit plan of theCompany or any of its subsidiaries, (3) an underwriter temporarily holding securities pursuant to an offering of those securities, or (4) a corporation owned,directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

“Post-CIC Employment Period” shall have the meaning assigned in Section 1.02.

“Post-CIC Good Reason” for termination by the Executive of the Executive’s employment means the death of the Executive during the Post-CICEmployment Period or the

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occurrence (without the Executive’s express written consent) of any one of the following acts by the Company, or failures by the Company to act, in each caseduring the Post-CIC Employment Period, unless, in the case of any act or failure to act described in paragraph (i), (iv), (v), (vi), or (viii) below, the act or failureto act is corrected prior to the Date of Termination specified in the Executive’s Notice of Termination:

(i) The assignment to the Executive of any duties inconsistent with the Executive’s status as an executive officer of the Company or asubstantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to a Change in Control;

(ii) A reduction by the Company in the Executive’s annual base salary and/or Target Bonus as in effect on the date of this Agreement or asthe same may be increased from time to time;

(iii) The Company’s requiring the Executive to be based more than 50 miles from the Company’s offices at which the Executive is basedprior to a Change in Control (except for required travel on the Company’s business to an extent substantially consistent with the Executive’s business travelobligations immediately prior to the Change in Control), or, in the event the Executive consents to any such relocation of his offices, the Company’s failure toprovide the Executive with all of the benefits of the Company’s historical practices with respect to relocation of executive employees as in operation immediatelyprior to the Change in Control;

(iv) The Company’s failure, without the Executive’s consent, to pay to the Executive any portion of the Executive’s current compensation(which means, for purposes of this paragraph (4), the Executive’s annual base salary as in effect on the date of this Agreement, or as it may be increased fromtime to time, and any installment of the annual target bonus earned by the Executive) or to pay to the Executive any portion of an installment of deferredcompensation under any deferred compensation program of the Company, within seven days of the date the compensation is due;

(v) The Company’s failure to continue in effect any compensation plan in which the Executive participates immediately prior to a Change inControl, which plan is material to the Executive’s total compensation, including, but not limited to, the Stock Option Plan or any substitute plans adopted prior tothe Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to that plan, or theCompany’s failure to continue the Executive’s participation in such a plan (or in a substitute or alternative plan) on a basis not materially less favorable, both interms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, as existed at the time of the Change inControl;

(vi) The Company’s failure to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive underany of the Company’s retirement plans (including, without limitation, the Company’s 401(k) Plan, the Biomet, Inc. Employee Stock Bonus Plan, and such otherlife insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control); the taking of anyaction by the Company that would directly or indirectly materially reduce any of those benefits or deprive the Executive of any material fringe benefit enjoyed bythe Executive at the time of a Change in Control; or the Company’s failure to provide the Executive with the number of paid vacation days to which theExecutive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of theChange in Control;

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(vii) Any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying therequirements of Section 4.01; for purposes of this Agreement, no such purported termination will be effective; or

(viii) any failure by the Company to comply with and satisfy Section 6.01 of this Agreement.

The Executive’s right to terminate the Executive’s employment for Post-CIC Good Reason will not be affected by the Executive’s incapacity due tophysical or mental illness. The Executive’s continued employment will not constitute consent to, or a waiver of rights with respect to, any act or failure to act thatconstitutes Post-CIC Good Reason. Notwithstanding the foregoing, the occurrence of an event that would otherwise constitute Post-CIC Good Reason will ceaseto be an event constituting Post-CIC Good Reason if the Executive does not timely provide a Notice of Termination to the Company within 120 days of the dateon which the Executive first becomes aware (or reasonably should have become aware) of the occurrence of that event.

“Renewal Date” shall have the meaning described in Section 1.01.

“Shares” means shares of the common stock of the Company.

“Stock Option Plan” means the 1998 Biomet, Inc. Qualified and Non-Qualified Stock Option Plan and any other equity compensation plan of theCompany approved by the Board and adopted by the shareholders of the Company.

“Target Bonus” shall have the meaning described in Section 3.01(a)(i).

“Term” shall have the meaning described in Section 1.01.

* * *

EXECUTIVE BIOMET, INC.

/s/Gregory D. Hartman By: Gregory D. Hartman Name:

Its:

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EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

(as the date of filing)

Biomet, Inc. (the Registrant; Indiana corporation)

Domestic subsidiaries:American OsteoMedix Corp. (California corporation)Biolectron, Inc. (Delaware corporation)Biomet 3i, Inc. (Florida corporation)Biomet Biologics, Inc. (Indiana corporation)Biomet Europe Ltd. (Delaware corporation)Biomet Fair Lawn, L.P. (Indiana limited partnership)Biomet Holdings Ltd. (Delaware corporation)Biomet International Ltd. (Delaware corporation)Biomet Investment Corp. (Delaware corporation)Biomet Leasing, Inc. (Indiana corporation)Biomet Manufacturing Corp. (Indiana corporation)Biomet Microfixation, Inc. (Florida corporation)Biomet Orthopedics, Inc. (Indiana corporation)Biomet Sports Medicine, Inc. (Indiana corporation)Biomet Travel, Inc. (Indiana corporation)Blue Moon Diagnostics, Inc. (Indiana corporation)Cross Medical Products, Inc. (Delaware corporation)EBI, L.P. (Indiana limited partnership)EBI Holdings, Inc. (Delaware corporation)EBI Medical Systems, Inc. (Delaware corporation)EBI Patient Care, Inc. (Puerto Rican corporation)Electro-Biology, Inc. (Delaware corporation)Implant Innovations Holding Corporation (Indiana corporation)Interpore Cross International, Inc. (California corporation)Interpore Orthopaedics Inc. (Delaware corporation)Interpore Spine Ltd. (Delaware corporation)Kirschner Medical Corporation (Delaware corporation)Meridew Medical, Inc. (Indiana corporation)Poly-Medics, Inc. (Indiana corporation)Thoramet, Inc. (Indiana corporation)Vascu-Med, Inc. (Indiana corporation)

Foreign subsidiaries:Arthrovision Sport GmbH (German corporation)Biomet 3i Australia Pty. Ltd. (Australian corporation)Biomet 3i France (French corporation)Biomet 3i Netherlands B.V. (Dutch corporation)Biomet 3i Switzerland GmbH (Swiss corporation)Biomet 3i U.K., Ltd. (U.K. corporation)Biomet C Z S.r.o. (Czech corporation)Biomet Acquisitions Limited (U.K. corporation)Biomet Argentina S.A. (Argentine corporation)Biomet Australia Pty. Ltd. (Australian corporation)Biomet Austria GmbH (Austrian corporation)Biomet Belgium BVBA (Belgian corporation)Biomet Bridgend B.V. (Dutch corporation)Biomet Canada, Inc. (Canadian corporation)Biomet Cementing Technologies AB (Swedish corporation)Biomet Chile, S.A. de C.V. (Chilean corporation)Biomet Danmark ApS (Danish corporation)Biomet Deutschland GmbH (German corporation)


Biomet Europe B.V. (Dutch corporation)Biomet Europe Spine B.V. (Dutch corporation)Biomet European Distribution Center B.V. (Dutch corporation)Biomet Finland Oy (Finnish corporation)Biomet France S.á r.l. (French corporation)Biomet Hellas Commercial and Industrial Company of Medical

and Pharmaceutical Products S.A. (Greek corporation)Biomet Holdings B.V. (Dutch corporation)Biomet Insurance Ltd. (Bermuda Captive insurance company)Biomet Italia s.r.l. (Italian company)Biomet Japan, Inc. (Japanese corporation)Biomet Korea Co. Ltd. (Korean corporation)Biomet Luxembourg S.á r.l. (Luxembourg company)Biomet Magyarorszag Kft. (a/k/a Biomet Hungary Kft.) (Hungarian company)Biomet Manufacturing Polska Sp. z o.o. (Polish Corporation)Biomet Medikal Ürünler Dađưtưm Pazarlama

Ưthalat Ưhracat ve Dưs Ticaret?Ltd. Sti (Turkish company)Biomet Norge A.S. (Norwegian corporation)Biomet Onroerend Goed BV (Dutch corporation)Biomet Polska Sp. z o.o. (Polish corporation)Biomet Portugal, Unipessoal Lda. (Portuguese corporation)Biomet Mexico S.A. de C.V. (Mexican corporation)Biomet Orthopaedic Ltd. (New Zealand corporation)Biomet Orthopaedics Switzerland GmbH (Swiss corporation)Biomet Orthopedics Puerto Rico, Inc. (Puerto Rican corporation)Biomet Spain Orthopaedics S.L. (Spanish corporation)Biomet Swindon B.V. (Dutch corporation)Biomet Taiwan Ltd. (Taiwan corporation)Biomet UK Ltd. (U.K. corporation)Biomet UK Real Estate Holdings B.V. (Dutch corporation)EBI Medical Systems Ltd. (U.K. corporation)Implant Innovations Benelux Holding N.V. (Belgium complany)Implant Innovations Belgium N.V. (Belgium company)Implant Innovations do Brasil Ltda. (Brazilian corporation)Implant Innovations Canada, Inc. (Canadian corporation)Implant Innovations Deutschland, GmbH (German corporation)Implant Innovations Iberica, SL (Spanish corporation)Implant Innovations de Mexico S.A. de C.V. (Mexican corporation)Implant Innovations Nordic AB (Swedish corporation)Implant Innovations Portugal Lda. (Portugese corporation)Ortopédica Biomet Costa Rica S.A. (Costa Rican corporation)Ortra Holdings, S.A. (Swiss corporation)Rewi Holding BV (Dutch corporation)Scandimed Holding AB (Swedish corporation)Zhejiang Biomet Medical Products Co., Ltd. (Chinese corporation)

Each subsidiary is wholly-owned by its immediate parent, except for the following: Biomet Chile, S.A. de C.V. of which Biomet International Ltd. owns 71% ofthe outstanding shares.


EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements of Biomet, Inc. on Forms S-8 (File Nos. 333-118326, 333-118323,333-118264, 333-65139, 333-00331, 33-75618, 33-65700, 33-50268, 33-37561, 33-26826 and 33-7361), on Form S-4 (File No. 333-88905) and on Forms S-3(File Nos. 33-50420, 33-27008 and 333-94959) and in the related prospectus, of our reports dated July 25, 2007, with respect to the consolidated financialstatements and schedule of Biomet, Inc., Biomet, Inc., management’s assessment of the effectiveness of internal control over financial reporting, and theeffectiveness of internal control over financial reporting of Biomet, Inc. included in this Form 10-K for the year ended May 31, 2007.



EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey R. Binder, certify that:

1. I have reviewed this annual report on Form 10-K of Biomet, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure

that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,

to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal

quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.

July 30, 2007

/S/ JEFFREY R. BINDER

Jeffrey R. BinderPresident and Chief Executive Officer


EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel P. Florin, certify that:

1. I have reviewed this annual report on Form 10-K of Biomet, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure

that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,

to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal

quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.

July 30, 2007

/S/ DANIEL P. FLORIN

Daniel P. FlorinSenior Vice President and Chief Financial Officer


EXHIBIT 32.1

SECTION 1350 CERTIFICATIONS OF CHIEF EXECUTIVE OFFICERAND CHIEF FINANCIAL OFFICER

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Biomet, Inc. (the “Company”), each hereby certifies pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge on the date hereof:

(a) The Annual Report on Form 10-K of the Company for the Fiscal Year Ended May 31, 2007 filed on the date hereof with the Securities and ExchangeCommission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

July 30, 2007

/S/ JEFFREY R. BINDER

Jeffrey R. Binder President and Chief Executive Officer

July 30, 2007

/S/ DANIEL P. FLORIN

Daniel P. Florin Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be deemed to beconsidered filed as part of the Form 10-K.

_____________________________________

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