Exhibit 10.1
SEVERANCE AND 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 Daniel P.
Hann (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 interim President and Chief Executive
Officer.
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 the detriment of
the Company and its shareholders.
C.
In addition, the Board recognizes that the service of the Executive
as President and Chief Executive Officer on an interim basis raises
questions of uncertainty that may result in the distraction of the
Executive to the detriment of the Company and its
shareholders.
D.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company’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.
E.
The parties intend that no amount or benefit will be payable under
this Agreement unless (1) the Executive terminates his employment
for Pre-CIC Good Reason or (2) both of the following events
occur: (i) a Change in Control occurs; 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 I
Term 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 annual anniversary thereof shall be hereinafter referred
to as the “ Renewal Date ”), unless previously
terminated, the Term shall be automatically extended so as to
terminate 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 be so 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 continue the 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 a Change in
Control occurs during the Term and ending on the second anniversary
of such date (the “ Post-CIC Employment Period
”).
ARTICLE II
Termination 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 Company determines 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
to the Executive written notice in accordance with Article VII of
this Agreement of its intention to terminate the Executive’s
employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the “ Disability
Effective Date ”), provided that, within the thirty days
after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties. For purposes
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 180 consecutive 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 then
existing 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 and acceptable 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 Pre-CIC Good
Reason or Post-CIC Good Reason.
Section
2.04 Notice of Termination . Any termination by
the Company for Cause, or by the Executive for Pre-CIC Good Reason
or Post-CIC Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Article VII of this Agreement. For purposes of this Agreement, a
“ Notice of Termination ” means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable 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 or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Pre-CIC Good Reason
or Post-CIC Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance 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 the
Executive for Pre-CIC Good Reason or 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 case may 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 which the 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 employment is
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 may be.
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ARTICLE III
Obligations 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 terminate employment for Post-CIC Good Reason or
the Company shall terminate the Executive’s employment other
than for Cause or Disability (entitling him to 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
aggregate of 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 directly to 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 the bonus 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 to the 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 Executive under 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 total contributions (other
than salary reduction contributions) made by the Company to all
qualified retirement plans on behalf of the Executive through the
end of the fiscal 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 year containing 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) three and (2) the sum of (w)
the Executive’s Annual Base Salary (which for this purpose
shall include 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 incentive bonus earned by Executive during
the last three (3) completed fiscal years of the Company
immediately preceding Executive’s Date of Termination
(annualized in the 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, if any, to the Executive pursuant
to any other contractual arrangement with the Executive or plan
providing coverage to the Executive as a result of such
termination; (y) the total contributions (other than salary
reduction contributions) made by the Company to all qualified
retirement plans on behalf of the Executive for the calendar year
immediately preceding the calendar year in which the Change in
Control occurs; and (z) the total car allowance contributions made
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 and
long-term disability benefits substantially similar to those that
the Executive was receiving from the Company immediately prior to
the Date of Termination (or the 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 the
Executive pursuant to the preceding sentence will be reduced to the
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 as provided by the Company during
the 24-month period following the Executive’s termination of
employment (and the Executive will report to the Company any such
benefits actually received by or
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made available to
the Executive). If, as of the Date of Termination, the Company
reasonably determines that the continued life 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, cannot be 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 24 times the full monthly premium payable to the
Company’s group insurance carrier for comparable coverage for
an executive employee under the Company’s group 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
coverage pursuant to the continuation coverage requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“ COBRA ”). The Executive will 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 24
times 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 Executive or
anyone in his family elects COBRA continuation coverage, whether or
not the Executive continues COBRA coverage for a full 24 months,
and whether or not the 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 of Termination) 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 extent not otherwise provided
under the written agreement, if any, evidencing the grant of any
restricted Shares to the Executive, all outstanding Shares that
have been granted 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, and the 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 excess of $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 sole
discretion.
(e)
To the extent not theretofore paid or provided, the Company shall
timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to
receive under any plan, program, policy, practice, contract or
agreement of the Company (such other amounts and benefits shall be
hereinafter referred to as the “ Other Benefits
”).
Section
3.02
Severance Payment to the Executive in the event of Termination
by the Company prior to a Change in Control or for Termination by
the Executive for Pre-CIC Good Reason. If, at any time
during the Term the Company appoints a President and CEO other than
the Executive, and (i) the Company terminates the Executive’s
employment other than for Cause, Death or Disability or (ii) the
Executive elects to terminate employment for Pre-CIC Good Reason,
the Executive shall be entitled to the following on the tenth (10)
Business Day following (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 extent not 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 the Executive has outstanding any unexercised stock
options and other stock-based awards, the provisions of Section
3.01(c) shall apply to them, and (D) in respect of any stock
options or other stock based awards that were forfeited by the
Executive as a result of
4
his termination
of 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 fair value of such
award.
Section
3.03
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, this Agreement shall terminate without further
obligations to the Executive’s legal representatives under
this Agreement. Anything in this Agreement to the contrary
notwithstanding, if the Executive’s death occurs after a
Change in Control, then this Section 3.03 shall not apply and the
Executive’s estate and/or beneficiaries shall be entitled to
the benefits of Section 3.01.
Section
3.04
Disability . If the Executive’s employment is
terminated by reason of the Executive’s Disability during the
Term, this Agreement shall terminate 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 3.04 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 executives and/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 peer executives 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 Control occurs, 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 to other peer executives of the Company and
their families.
Section
3.05
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 in
Control 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 who had 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 Control
occurs 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) the Executive 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 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.
(iii)
For purposes of clauses (i)(1)(y) and (ii)(1)(y) of this Section
3.05(a), it shall be presumed that such event was in connection
with or in anticipation 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 in accordance with Article VII of this Agreement
within 120 days after a Change in Control has occurred. Upon an
Anticipatory Termination, the Executive shall be entitled to (A)
the payments specified in Sections 3.01(a),(d) and (e) (to the
extent
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not previously
paid), (B) the benefits specified in Section 3.01(b) (to the extent
not 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 the Executive 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
of any stock options or other stock based awards that were
forfeited by the Executive as a result of his termination of
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 fair value of such award), and (E)
liquidated damages of $25,000 for penalties associated with the
Anticipatory Termination. For the purposes of this Section 3.05(b),
the Executive’s Date of Termination shall be deemed to be his
last date of employment by the Company.
Section
3.06
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 or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Comp
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