An investigation into stock-option backdating at Biomet Inc. resulted in two executives retiring March 30.
The executives are Gregory D. Hartman, senior vice president of finance and chief financial officer and treasurer, and Daniel P. Hann, executive vice president of administration and a director.
In an investigation delving into the options granted between 1996 and 2006, a committee appointed by the board in December found that the company disregarded terms of its option plans and that most of the options issued during the period were not priced at fair market value on the date of their respective grants, Biomet disclosed late last week.
Moreover, opportunistic misdating and mispricing of options took place to take
advantage of lower exercise prices.
Hartman and Hann were, or should have been, aware of the accounting and legal ramifications of the misdated and mispriced options, Biomet said.
The committee analyzed 17,000 grants to buy about 17 million Biomet shares in the 11 years. The grants were spread over 500 dates.
As a result of the probe, Biomet will restate financial results for 2006. The restatement will include a $50-million noncash compensation charge related to stock-option transactions over the 11 years. The revision could include a cut in earnings.
Both executives will remain as consultants and be paid severance.
Hartman will receive nearly $175,000 for consulting for six months and another $325,000 after the period has ended, assuming Biomet’s acquisition by a private equity firm closes.
Hann will be paid nearly $500,000 for 12 months of consulting and another $533,333 at the end. He will receive an additional $300,000 during a six-month non-compete period that begins when his consulting work ends.
Hartman, Hann and board members have agreed to reimburse the company for any amounts in excess of the fair market value of company shares.
Biomet is being acquired for $10.9 billion by a group including Blackstone Group LP, Goldman Sachs Capital Partners, Texas Pacific Group and Kohlberg Kravis Roberts.