**Exhibit 10.1**

 

SUMMARY OF

RETENTION AND INCENTIVE PLAN

 

On September 24, 2002, theBoard of Directors of Restoragen, Inc. approved a Retention and Incentive Planfor the Company’s four senior managers (the “Plan”).  Following is a summary of the material terms of the Plan.

 

SeniorManagers

 

David Hathaway

AshleighPalmer

RobertaSchneider

David Walker

 

Retention Plan:

 

•                                          Forthe period beginning August 1, 2002 through January 31, 2003, the base salaryof each of the Senior Managers will be increased by 50%.  Each Senior Manager’s increase will applyonly to those pay periods during which the Senior Manager remains employed bythe Company.  Beginning February 1,2003, the base salary will revert back to the base salary prior to adoption ofthis Plan, unless the Board of Directors determines otherwise.

 

•                                          TheCompany will pre-pay 100% of the Senior Manager’s health insurance and dentalinsurance premiums for the period from October 1, 2002 to September 30,2003.  This coverage will continue forthis period regardless of whether a Senior Manager resigns or is terminated bythe Company during this period.

 

•                                          Paymentsmade for increased salary and insurance will reduce any obligations by theCompany under the Senior Manager’s employment contracts.  The employment contracts are not beingterminated at this point in time.

 

Incentive Plan– This Incentive Plan is intended to define the milestones for incentivecompensation described in the employment agreements with each SeniorManager.  Rather than basing theobjectives on a calendar year (as contemplated by the employment agreements),the following incentive payments will be made if the objectives areaccomplished during the 12-month period beginning on the date of adoption ofthis Plan by the Board of Directors. Each Senior Manager will be entitled to the following incentive paymentsif the Senior Manager is employed by the Company on the date the Company signsa definitive agreement for the transaction and the transaction closes as setforth in the definitive agreement:

 

•                                          0.5month’s salary upon receipt of the first $500,000 milestone payment under thenon-strategic license agreement under negotiation.

 

•                                          0.5month’s salary upon receipt of payment of the second $500,000 payment under thenon-strategic license agreement under negotiation.

 

 

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•                                          1.0month’s salary upon the successful closing of at least $1.5 million in aprivate placement of debt.

 

•                                          3.0months salary upon completion of a Board-approved partnership arrangement witha viable development partner.

 

Payment of the incentiveamounts will be made as follows:

 

•                                          50%on the closing of the transaction (receipt of funds) described in objective

 

•                                          50%within 30 days of closing

 

If a Senior Manager isterminated by the Company without cause after signing of the definitiveagreement but prior to closing, the Senior Manager will be entitled to paymentof the full amount for that objective. If a Senior Manager resigns at any time or is terminated for any otherreason, the Senior Manager forfeits any unpaid amounts under this IncentivePlan.

 

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