EXHIBIT 10.4
EMPLOYMENT AGREEMENT
     THIS AGREEMENT effective the 27th day of September, 2004 (the “Effective
Date”) between OSTEOTECH, INC., a Delaware corporation (the “Corporation”) and
Robert Honneffer (the “Employee”).
WITNESSETH:
     WHEREAS, the Corporation desires to retain the Employee as Vice President
Supply Chain & Distribution; and
     WHEREAS, the Employee desires to maintain such employment upon the terms
and conditions set forth herein.
     NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto agree as follows:
     1. Term. Unless sooner terminated in accordance with this Agreement, the
term of this Agreement and the term of employment of the Employee shall be for
two (2) years commencing on the Effective Date hereof and shall be automatically
renewable for successive additional two (2) year terms unless at least three
(3) months prior to the initial two-year period or any subsequent two-year term
the Corporation terminates this Agreement by written notice to the Employee,
whereupon this Agreement shall be terminated at the end of the applicable
two-year period (with such initial two year term and any two year renewal
thereof, unless sooner terminated in accordance with this Agreement being the
“Term of Employment”).
     2. Duties. The Employee shall be employed in an executive capacity as the
Vice President Supply Chain & Distribution of the Corporation. The Employee
shall perform such

 

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duties and services, consistent with his positions, as may be assigned to him
from time to time by the President & Chief Operating Officer of the Corporation,
In furtherance of the foregoing, the Employee hereby agrees to perform well and
faithfully the aforesaid duties and responsibilities and the other reasonable
senior executive duties and responsibilities assigned to him from time to time
by the Board of Directors of the Corporation or its designee. During the Term of
the Employment, the Corporation shall provide the Employee with an office,
secretarial and other support services at its headquarters as may be required
for the Employee to perform the duties assigned to him hereunder.
     3. Time to be Devoted to Employment.
     (a) Except for reasonable vacations (to consist of at least 4 weeks per
year) and absences due to temporary illness, during the Term of Employment, the
Employee shall devote substantially his full time and energy to the business of
the Corporation.
     (b) During the Term of Employment, the Employee shall not be engaged in any
other business activity which, in the reasonable judgment of the Corporation,
conflicts with the duties of the Employee hereunder, whether or not such
activity is pursued for gain, profit or other pecuniary advantage.
     4. Compensation; Reimbursement.
     (a) During the Term of Employment, the Corporation (or at the Corporation’s
option, any subsidiary or affiliate thereof) shall pay to the Employee an annual
base salary (“Base Salary”) of $150,000, payable in installments as is the
policy of the Corporation with respect to employees of the Corporation at
substantially the same employment level as the Employee, but in no event less
frequently than once per month. Thereafter, the Base Salary shall be subject to
increase at the option and in the sole discretion of the Board of Directors of
the Corporation.

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     (b) Employee shall be eligible for an annual bonus as determined by the
Board of Directors of the Corporation based on Employee’s performance. The bonus
payment to Employee for a calendar year is contingent upon the Employee being
retained as an employee of the Corporation at the time such payments are made.
     (c) Effective in 2005, the Employee shall be eligible for an annual stock
option grant consistent with the Corporation’s Stock Option Plan with said grant
being determined by the Board of Directors of the Corporation based on the
Corporation’s performance. Upon employment, the Employee will receive a stock
option grant in the amount of 25,000 shares.
     (d) During the Term of Employment, the Employee shall be entitled to such
fringe benefits as are made available from time to time to the employees of the
Corporation at substantially the same employment level as the Employee,
including, without limitation, 4 weeks of paid vacation time.
     (e) The Corporation shall reimburse Employee, in accordance with the
practice from time to time for other officers of the Corporation, for all
reasonable and necessary traveling expenses, disbursements and other reasonable
and necessary incidental expenses incurred by him for or on behalf of the
Corporation in the performance of his duties hereunder upon presentation by the
Employee to the Corporation of appropriate vouchers, receipts and reports.
     5. Disability or Death.
     (a) If the Employee is incapacitated or disabled by accident, sickness or
otherwise so as to render him mentally or physically incapable of performing the
services required to be performed by him under this Agreement for a period of 90
consecutive days or longer, (such condition being herein referred to as
“Disability”), the Employee will be eligible to receive benefits under the
Corporation’s Long Term Disability Benefits Plan pursuant to the terms and
conditions of such

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plan. Until the Employee becomes eligible for benefits under the Corporation’s
Long Term Disability Benefits Plan and so long as the Corporation shall not have
otherwise terminated the Employee’s employment hereunder in accordance with this
Agreement, the Employee shall be entitled to receive his compensation,
notwithstanding any such Disability.
     (b) If the Employee dies during the Term of Employment, his employment
hereunder shall be deemed to cease as of the date of his death.
     6. Termination For Cause. The Corporation may, with the approval of a
majority of the Board of Directors of the Corporation, terminate the employment
of the Employee hereunder at any time during the Term of Employment for “cause”
(such termination being hereinafter called a “Termination For Cause”) by giving
the Employee notice of such termination, and upon the giving of such notice
termination shall take effect immediately. For the purposes of this Section 6,
“cause” shall mean (i) the Employee’s actions on behalf of the Corporation or
any subsidiary or affiliate thereof, without the authorization of the Board of
Directors, Chief Executive Officer, or President & Chief Operating Officer of
the Corporation, which actions are knowingly for the pecuniary benefit of the
Employee or members of his family and which actions materially and adversely
effect the business or affairs of the Corporation or any subsidiary’ or
affiliate thereof, or (ii) the Employee fails in any material respect to observe
and perform his obligations hereunder or under the Employee Confidential
Information, Invention and Non-Competition Agreement by and between Employee and
Corporation which failure is not cured within twenty (20) days after written
notice thereof is given to the Employee by the Corporation, or, (iii) the
commission by the Employee of an act involving embezzlement or fraud against the
Corporation (other than non-material expense account issues) or commission or
conviction of a felony or (iv) the repeated use by the Employee of alcohol in a
manner which impairs his duties or the use of any controlled substance other
than under

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a physicians prescription.
     7. Termination Without Cause. The Corporation may, with the approval of a
majority of the Board of Directors of the Corporation, terminate the employment
of the Employee hereunder at any time during the Term of Employment without
“cause” (such termination being hereinafter called a “Termination Without
Cause”) by giving the Employee notice of such termination, upon the giving of
such notice, termination shall take effect immediately.
     8. Voluntary Termination. Any termination of the employment of the Employee
hereunder otherwise then as a result of an Involuntary Termination, a
Termination For Cause or a Termination Without Cause shall be deemed to be a
“Voluntary Termination”. A Voluntary Termination shall be deemed to be effective
immediately upon receipt of notice to the Corporation of such termination.
     9. Effect of Termination of Employment.
     (a) Upon the termination of the Employee’s employment hereunder pursuant to
a Voluntary Termination or a Termination For Cause, neither the Employee nor his
beneficiary or estate shall have any further rights or claims against the
Corporation under this Agreement except to receive:

  (i)   the unpaid portion of the Base Salary provided for in Section 4(a),
computed on a pro-rata basis to the date of termination; and     (ii)  
reimbursement for any expenses for which the Employee shall not have theretofore
been reimbursed as provided in Section 5(e).     (iii)   any amounts due and
owing to the Employee by the Corporation under any benefit plan.

     (b) Upon the termination of the Employee’s employment hereunder pursuant to

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Disability or death neither the Employee nor his beneficiary or estate shall
have any further rights or claims against the Corporation under this Agreement
except to receive payments equal to that provided for in Section 5(a), if
applicable, and Section 9(a) hereof and any other benefits available under the
Corporation’s Benefits Plans.
     (c) Upon the termination of the Employee’s employment hereunder pursuant to
a Termination Without Cause, neither the Employee nor his beneficiary or estate
shall have any further rights or claims against the Corporation under this
Agreement except to receive a termination payment equal to that provided for in
Section 9(a) hereof, plus an aggregate amount equal to twelve (12) months Base
Salary, payable in equal monthly installments and the continuation of medical
and dental benefits and life insurance for the same twelve (12) month period to
the extent such benefits were being provided to Employee at the time of
termination.
     10. General Provisions
     (a) This Agreement and any or all terms hereof may not be changed, waived,
discharged, or terminated orally, but only by way of an instrument in writing
signed by the parties.
     (b) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey, without reference to the conflicts of laws
of the State of New Jersey or any other jurisdiction.
     (c) If any portion of this Agreement shall be found to be invalid or
contrary to public policy, the same may be modified or stricken by a Court of
competent jurisdiction, to the extent necessary to allow the Court to enforce
such provision in a manner which is as consistent with the original intent of
the provision as possible. The striking or modification by the Court of any
provision shall not have the effect of invalidating the Agreement as a whole.
     (d) Employee acknowledges that he has signed the Corporation’s Confidential

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Information, Invention and Non-Competition Agreements and said agreements are
made a part hereof.
     (e) This Agreement, together with the Corporation’s Confidential
Information, Invention and Non-Competition Agreements, constitutes the entire
and exclusive agreement between Employee and Corporation pertaining to the
subject matter thereof, and supersedes and replaces any and all earlier
agreements.
     11. Notices. Notices and other communications hereunder shall be in writing
and shall be delivered personally or sent by air courier or first class
certified or registered mail, return receipt requested and postage prepaid,
addressed as follows:
If to the Employee:
Robert Honneffer
P.O.Box 163188
Fort Worth, Texas 76161
If to the Corporation:
Osteotech, Inc.
51 James Way
Eatontown, New Jersey 07724
Attn: President & Chief Operating Officer
Copy to:
Dorsey & Whitney LLP
250 Park Avenue
New York, NY 10177
Attn: Kevin T. Collins, Esq
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of delivery if personally delivered; on the business day after the date
when sent if sent by air courier; and on the third business day after the date
when sent if sent by mail, in each case addressed to such party as

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provided in this Section or in accordance with the latest unrevoked direction
from such party.
     12. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
     13. Assignment. This Agreement is personal in its nature and the parties
hereto shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
provisions hereof shall inure to the benefit of, and be binding upon (i) each
successor of the Corporation, whether by merger, consolidation, transfer of all
or substantially all assets, or otherwise and (ii) the heirs and legal
representatives of the Employee.
     IN WITNESS WHEREOF, the parties have duly executed this Agreement effective
as of the date first above written.

                  OSTEOTECH INC.:
 
           
 
  By:   /s/ Sam-Owusu-Akyaw    
 
           
 
  Name:   Sam-Owusu-Akyaw    
 
  Title:   President & Chief Operating Officer    
 
                EXECUTIVE:
 
           
 
  By:   /s/ Robert Honneffer    
 
           
 
  Name:   Robert Honneffer    
 
  Title:   Vice President Supply Chain & Distribution    

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