Exhibit 10.1

 

SEVERANCE AGREEMENT

 

AGREEMENT, made and entered into as of February 15, 2005, by and between
REGENERATION TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and
BRIAN HUTCHISON (the “Executive”).

 

WHEREAS, the Company has previously announced it is exploring a range of
strategic alternatives to enhance stockholder value; and

 

WHEREAS, the Company desires to provide the Executive with certain payments,
benefits and additional severance protection in the event the strategic review
process leads to a sale of the Company (a “Transaction”—which is defined in
numbered paragraph 6(c) below).

 

NOW THEREFORE, the parties agree as follows:

 

1. Severance Protection. If a Transaction occurs before December 31, 2005, and
if, before the second anniversary of the the date on which the Transaction is
consummated (the “Closing Date”), the Company or any successor entity (the
“Employer”) terminates Executive’s employment without “Cause” or such employment
is terminated by the Executive following the Closing Date for “Good Reason” (as
both such terms are defined below), then, within ten days following such
termination of employment, the Executive will be entitled to receive from the
Employer (a) a single sum cash payment equal to the sum of (1) Executive’s
annual incentive target for the year in which such termination occurs (or, if
higher, for the year in which the Transaction occurs), pro-rated to reflect the
portion of the year that has elapsed as of the date of Executive’s termination
of employment, and (2) an amount equal to two times Executive’s annual salary
plus two times Executive’s annual incentive target (based on the higher of
Executive’s present or then current annual incentive target and salary), and (b)
continuing participation in the Employer’s group health plan on the same basis
as active employees for a period of at least two years following the termination
of Executive’s employment or, if earlier, until the Executive becomes eligible
for comparable coverage under another employer’s plan (or an additional cash
payment equal to the Employer’s cost of such continuing coverage if such
continuing coverage is not permitted under the provisions of the applicable
plan).

 

2. Effect of Transaction on Stock Options. All outstanding Company stock options
held by Executive shall become fully vested immediately before the occurrence of
the Transaction if (a) Executive is then still employed by Company or an
Affiliate; or (b) Executive’s employment with the Company terminated before the
Closing Date for any reason other than voluntarily by the Executive or by the
Company for Cause. If Executive becomes vested in a stock option award pursuant
to part (b) of the preceding sentence, then, immediately before the Transaction,
the Company will make a cash payment to Executive equal to the number of shares
covered by the option multiplied by the excess of the Transaction purchase price
per share over the per share option exercise price. The vesting and other terms
and conditions of Executive’s stock options and other equity-based awards will
continue to govern except as otherwise specifically provided by this numbered
paragraph 2.

 

3. Excise Tax Gross-up Payment. If Executive is entitled to receive payments and
benefits under this Agreement and if, when combined with payments and benefits
Executive is

 

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entitled to receive under any other plan, program or arrangement, Executive
would be subject to excise tax under Section 4999 of the Code, then Company
shall make additional payments to Executive so that, on an after-tax basis,
Executive is placed in the same economic position in which he would have been if
no excise tax were payable by him and no payments were required to be made to
him under this numbered paragraph 3.

 

4. Effect of Other Agreements. If the Executive becomes entitled to receive
severance payments and benefits under this Agreement, such payments and benefits
will be in lieu of and not in addition to the severance payments and benefits to
which Executive may otherwise have been entitled under Section 5 of the
Employment Agreement between the Company and Executive dated November 30, 2001
and said Employment Agreement is hereby amended to that limited extent.

 

5. Release of Claims. Notwithstanding anything to the contrary contained herein,
the the Company (or its successor) may condition Executive’s right to receive
severance payments and benefits under numbered paragraph 1 of this Agreement
upon the execution and delivery by the Executive (or Executive’s beneficiary) of
a general release in favor of Company and its successors and affiliates, and
their officers, directors and employees, in such form as the Company may
specify. Any payment or benefit that is so conditioned may be deferred until the
expiration of the seven day revocation period prescribed by the Age
Discrimination in Employment Act of 1967, as amended (or any similar revocation
period then in effect).

 

6. Definitions. For purpose of this Agreement, the following terms shall have
the meanings set forth below:

 

(a) “Cause” means Executive’s (i) commission of a felony, (ii) commission of an
act of fraud upon the Employer, or (iii) willful failure to perform Executive’s
employment duties in all material respects which failure (other than by reason
of death or disability) continues uncorrected for ten days after Executive’s
receipt of written notice from the Employer stating with specificity the nature
of such failure.

 

(b) “Good Reason” means (a) a material diminution by the Employer of the
Executive’s duties, position, responsibilities or working conditions, or (b)
relocation by more than 50 miles of the Executive’s principal place of
employment.

 

(c) “Transaction” means (1) the completion of the sale or other disposition of
all or substantially all of the assets of the Company to a party unaffiliated
with the Company, or (2) the completion of a merger or other transaction
relating to the Company if neither the Company nor its stockholders immediately
prior to such merger or other transaction hold, directly or indirectly, more
than 50% of the voting power of the surviving corporation or other entity
resulting from such merger or other transaction.

 

7. General Provisions.

 

(a) Nothing in this Agreement is intended to create a contract of employment
between Executive and the Company or any of its subsidiaries, or to interfere in
any way with the right of the Company or any of its subsidiaries to terminate
Executive’s employment at any time.

 

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(b) All payments made pursuant to this Agreement will be subject to applicable
withholding requirements.

 

(c) No payments made pursuant to this Agreement will be treated as compensation
for purposes of calculating Executive’s benefits, if any, under any
retirement/pension plan maintained by the Company and/or any of its subsidiaries
or any of its or their successors.

 

(d) This Agreement will be governed by and construed in accordance with the laws
of the State of Delaware without regard to its conflict of laws provisions.

 

(e) No amendment or modification of this Agreement may be made except by a
written instrument signed by the Company and Executive.

 

(f) All disputes arising under or related to this Agreement will be resolved by
arbitration. Such arbitration will be conducted by an arbitrator mutually
selected by the Company (or the Employer if the Company is not a party to the
dispute) and Executive (or, if the Company and Executive are unable to agree
upon an arbitrator within ten days, then the Company and Executive will each
select an arbitrator, and the arbitrators so selected will mutually select a
third arbitrator, who will resolve such dispute). Such arbitration will be
conducted in accordance with the applicable rules of the American Arbitration
Association. Any decision rendered by an arbitrator pursuant hereto may be
enforced by a court of competent jurisdiction without review of such decision by
such court. All attorneys’ fees and costs of the arbitration will in the first
instance be borne by the respective party incurring such costs and fees, but the
arbitrator will award costs and attorneys’ fees to the prevailing party.

 

(g) This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, but all of which taken together will constitute one
and the same agreement.

 

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(h) This Agreement will terminate and be of no force or effect if a Transaction
does not occur by December 31, 2005.

 

(i) This Agreement constitutes the entire agreement between the parties hereto
relating to the matters encompassed hereby and supersedes any prior oral or
written agreements relating thereto.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

REGENERATION TECHNOLOGIES, INC. By:  

/s/ THOMAS F. ROSE

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Name:   Thomas F. Rose Title:   Vice President, Chief Financial     Officer and
Secretary    

/s/ BRIAN K. HUTCHISON

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    Brian K. Hutchison

 

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