Exhibit 10.5

 

RETENTION AGREEMENT

 

AGREEMENT, made and entered into as of February 15, 2005, by and between
REGENERATION TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and
JOSEPH CONDON (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 certain incentive opportunities and
severance protection to the Executive in the event the strategic review process
leads to a sale of the Company (a “Transaction”—which is defined in numbered
paragraph 7(c) below)).

 

NOW THEREFORE, the parties agree as follows:

 

1. Transaction Incentive Opportunity. Executive will be entitled to receive a
retention bonus of $83,200 if a Transaction occurs before December 31, 2005, and
(a) Executive’s employment with the Company (or its successor) continues until
the date that is six months following the date on which the Transaction is
consummated (the “Closing Date”), or (b) Executive’s employment is terminated
before that date by the Company (or its successor) without “Cause” (as defined
below) or by reason of the Executive’s death. The retention bonus (if any)
payable under this Agreement will be payable in the form of a single sum cash
payment immediately following the end of such six-month retention period or, if
applicable, upon the earlier death or termination of Executive’s employment,
subject to applicable withholding.

 

2. Severance Protection. If a Transaction occurs before December 31, 2005, and
if, before the second anniversary of 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 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 one times Executive’s annual salary
plus 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 one year 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). The Executive’s right to
receive severance payments and benefits under this numbered paragraph 2 shall
not affect the Executive’s right to receive a retention bonus under numbered
paragraph 1, and vice versa.

 

3. 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)

 

 

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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 3.

 

4. Golden Parachute Tax Limitation. If Executive is entitled to receive payments
and benefits under this Agreement and if, when combined with payments and
benefits Executive is entitled to receive under any other plan, program or
arrangement, Executive would be subject to excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”) or the Company would be
denied a deduction under Section 280G of the Code, then the amounts otherwise
payable to Executive under this Agreement will be reduced by the minimum amount
necessary to ensure that Executive will not be subject to such excise tax and
Company will not be denied any such deduction.

 

5. Effect of Other Agreements. If any termination or severance payments or
benefits are made or provided to Executive by the Company or any or its
affiliates pursuant to a written employment or other agreement with the Company
or Affiliate, such payments and benefits shall reduce the amount of the
comparable payments and benefits payable hereunder if and to the extent
necessary to avoid duplication of payments or benefits.

 

6. 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 2 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).

 

7. 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.

 

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(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.

 

8. 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.

 

(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.

 

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

 

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(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/ BRIAN K. HUTCHISON

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Name:   Brian K. Hutchison Title:   Chief Executive Officer    

/s/ JOSEPH CONDON

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    Executive

 

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