Exhibit 10.1


EMPLOYMENT
SEPARATION AGREEMENT AND RELEASE


 


This Employment Separation
Agreement and Release (the “Agreement”) is made and entered into this 23rd day
of November, 2007 (the “Execution Date”), by and between Osiris Therapeutics,
Inc., a Delaware corporation (the “Company”), and Cary J. Claiborne (the “Executive”).  The Company and the Executive are sometimes
referred to as the “Parties” or individually as a “Party” to this Agreement.


RECITALS


The Executive has been
employed by the Company since December 2004. 
His positions with the Company as of November 23, 2007 (the “Separation
Date”) were Chief Financial Officer and Corporate Secretary.


The Executive has submitted
his resignation effective on the Separation Date and the Company has accepted that
resignation.  The Executive and the
Company now desire to confirm the resignation of Executive and set forth the
terms of severance and release.  .


NOW, THEREFORE, in
consideration of the foregoing, the promises and covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, the Parties agree
as follows:


1.             Incorporation of
Recitals.  The Recitals
set forth above are incorporated by reference as part of this Agreement.


2.             Separation of
Employment.  The Executive
hereby confirms that he previously resigned from employment, as well as from
all positions with the Company or any affiliated entity, including without
limitation his positions as Chief Financial Officer and Corporate Secretary, in
each case effective as of the Separation Date. 
The Executive’s termination from employment will be treated as a
voluntary termination under Section 8(e) of the Employment Agreement dated as
of December 3, 2004 (the “Employment Agreement”) between the Executive and the
Company.


3.             Severance Pay and
Benefits.  The Company
shall provide the following severance benefits and make the following payments
to the Executive (the “Separation Benefits”), in addition to the other benefits
generally available to Company employees on termination of employment, in
consideration for entering into this Agreement and providing the release set
forth in Section 5:


(a)  Severance pay in the total amount of
$158,333.30, representing ten (10) months of 
the Executive’s base salary in effect as of the Separation Date.  To the extent required by law, the Company
shall withhold from any payments due Executive under this Agreement any
applicable federal, state or local taxes and such other deductions as are
prescribed by law or Company policy;


 

















 


(b)  plus
all medical, life, and disability benefits, if any, Executive had been
receiving immediately preceding the Separation Date for the a period of one
year following the Separation Date; provided, however, that the Company’s
obligation to continue to provide the
Executive with medical, life, or disability benefits pursuant to this clause
(b) shall cease at such time as the Executive first becomes eligible to participate in generally similar benefit arrangements
as a result of the Executive’s subsequent employment, whether as part of
an organization or as an independent consultant.


 


4.             Impact on
Employment Agreement/ Stock Options and Other Rights.  Without the need for any further action on
the part of the Executive or the Company, effective on the Separation Date, the
Employment Agreement, dated December 3, 2004, between the Company and the
Executive shall terminate and be of no further force and effect.  In addition, the Executive agrees that all
rights of the Executive in and to any outstanding stock options, warrants,
restricted stock or other rights in and to equity or other securities of the
Company, whether or not exercisable (but excluding shares of Common Stock held
outright by the Executive free of restrictions other than securities law
restrictions) are terminated and the Executive waives any and all rights
thereunder or thereunto.


5.             General Release of Claims.


(a)           The Executive, for himself and his
heirs, executors, administrators and assigns, if any, and anyone purporting to
claim by or through the Executive, does hereby waive, release and forever
discharge the Company, its subsidiaries, predecessors, successors, assigns,
employee benefit plans and trusts, if any, and each of their past, present and
future managers, members, directors, officers, partners, agents, employees,
attorneys, representatives, fiduciaries, plan sponsors, administrators and
trustees, if any, (hereinafter collectively “the Company Released Parties”), of
and from any and all actions, causes of action, claims (including without
limitation, any claim for wrongful discharge or breach of contract and claims
under the federal, state or local employment discrimination law such as Title
VII of the Civil Rights Act, the Americans with Disabilities Act, the Age
Discrimination in Employment Act and other similar laws) suits, demands,
rights, damages, accounts, judgments, wages, commissions, executions, debts,
obligations, attorneys’ fees, costs and all other liabilities of any kind or
description whatsoever, either at law or in equity, whether known or unknown,
suspected or unsuspected and whether or not based on his employment or the
termination of his employment, that the Executive ever had, now has or may have
or claim to have in the future against any of the Company Released Parties for
or by reason of any cause, matter or event whatsoever, from the beginning of
time to the date of this Agreement.  The
Executive further agrees that he will not bring any law suit or arbitration
against any of the Company Released Parties for any claims hereby
released.  Notwithstanding anything to
the contrary set forth in this Section, this Release shall not apply to claims
relating to the validity or enforcement of this Agreement, claims for any accrued
benefit under the terms of any employee benefit plan within the meaning of the
Employee Retirement Income Security Act maintained by the Company (except that
it will apply to any severance benefits that otherwise might be payable outside
of this Agreement) or claims for indemnification or defense to which the
Executive is entitled under the Certificate of Incorporation, the Bylaws and/or
any insurance policy of the Company or its subsidiaries.


 


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(b)           Because the Executive is at least
forty (40) years of age, he has specific rights under the Older Workers Benefit
Protection Act (“OWBPA”), which prohibits discrimination on the basis of
age.  It is the Company’s desire and
intent to make certain the Executive fully understand the provisions and effect
of this Agreement.  To that end, the
Executive is encouraged, and has been given the opportunity, to consult with
legal counsel for the purpose of reviewing the terms of this Agreement.  As required by the OWBPA, the Company has
attached to this Agreement as Exhibit A
information regarding the job titles and ages of other employees in the
Executive’s job classification or organizational unit who are not eligible for
separation pay and benefits.  Also,
consistent with the provisions of the OWBPA, and as described in Section 14 of
this Agreement, the Company is providing the Executive with forty-five
(45) days in which to consider and accept the terms of this Agreement.


(c)           The Company does hereby waive,
release and forever discharge the Executive, his heirs, executors,
administrators and assigns, if any (the “Executive Released Parties”), of and
from any and all actions, causes of action, claims, suits, demands, rights,
damages, accounts, judgments, wages, commissions, executions, debts,
obligations, attorneys’ fees, costs and all other liabilities of any kind or
description whatsoever, either at law or in equity, whether known or unknown,
suspected or unsuspected, that the Company ever had, now has or may have or
claim to have in the future against any of the Executive Released Parties for
or by reason of any cause, matter or event whatsoever, from the beginning of
time to the date of this Agreement.  The
Company further agrees that it will not bring any law suit or arbitration
against any of the Executive Released Parties for any claims hereby
released.  Notwithstanding anything to
the contrary set forth in this Section, this Release shall not apply to claims
relating to the validity or enforcement of this Agreement, claims for
reimbursement of amounts paid in indemnification, if it is finally determined
by a court of competent jurisdiction that the Company’s indemnification of the
Executive was improper and for claims under Section 16 of the Securities
Exchange Act of 1934, as amended, or for claims under any insider trading law.


6.             Return of Company
Property.  All information
and documents relating to the Company shall be the exclusive property of the
Company and the Executive shall use his best efforts to prevent any publication
or disclosure thereof.  By the Execution
Date, the Executive shall have delivered to the Company all Company property of
any kind or character, which shall include, but not be limited to, all Company
identification and credit cards, any Company equipment, books, keys, journals,
records, publications, files, computers and computer disks, memoranda and
documents of any kind or description, or any other Company property that may be
in his possession, custody or control.


7.             Confidentiality.  Except
in the normal course of business in the performance of his duties, the
Executive shall not, directly or indirectly, disclose or permit to be known, to
any person, firm or corporation, any confidential information acquired by him
during the course of, or as an incident to, his employment by the Company or
his consulting services for the Company, relating to the Company, the directors
of the Company, or any client of the Company, including, but not limited to,
the business affairs of each of the foregoing. 
Such confidential information shall include, but shall not be limited
to, proprietary technology, trade secrets, patented processes, research and
development data, know-how, formulae, pricing policies, the substance of
agreements with customers and others, and arrangements, customer 


 


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lists and any other
documents embodying such confidential information; provided, however, that
confidential information shall not include any information that has become public
knowledge through no fault of the Executive. 
Executive also agrees not to disclose any confidential or proprietary
information that the Company obtains from a third party and which the Company
treats as confidential or proprietary or designates as confidential, whether or
not such information is owned or developed by the Company.  All Confidential Information, regardless of
form, is the exclusive property of the Company. 
Executive assigns to the Company any rights to the foregoing
Confidential Information and any other proprietary data, inventions or other
intellectual property used or developed during the term of this Agreement by
Executive in providing services to the Company. 
Executive understands and agrees that this obligation shall survive the
termination of this Agreement.


8.             Restrictive Covenants.


(a)Executive acknowledges that in the course of his
employment with the Company he has become familiar with the trade secrets of,
and other confidential information concerning, the Company, and that the
Company’s ability to accomplish its purposes and to successfully pursue its
business plan and compete in the marketplace depended substantially on the
skills and expertise of the Executive. Therefore, and in further consideration
of the compensation being paid to the Executive hereunder, the Executive agrees
that for no less than two (2) years from the Separation Date, so long as the
payments are made or have been made in accordance with this Agreement (the “Noncompete
Period”), he shall not (i)  directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in, any business competing with the Business of
the Company in any country where the Company conducts business, or plans to
conduct business, provided such plans have been communicated to Executive (a “Competing
Business”), where for  purposes of this
Section 8(a), the “Business” shall mean all commercial or therapeutic use that
involves mesenchymal stem cells (MSCs) or cells substantially similar to
mesenchymal stem cells, that is, a homogeneous population of cells that can
differentiate along more than one connective tissue lineage, regardless of the
source; all commercial efforts to deliver or improve the delivery of MSCs for
therapeutic purposes; all commercial efforts that would seek to enhance the
endogenous in vivo population of MSCs in the body by pharmaceutical or chemical
means; any other effort to commercially compete with the Company to which the
Executive has confidential knowledge. (to cover hiring, business partnerships,
vendor relationships, etc.) ]; (ii) 
assist others in engaging in any Competing Business in the manner
described in clause (i) above; or (iii) induce any employee of the Company or
any subsidiary thereof to terminate his or her employment with the Company or
any subsidiary thereof or engage in any Competing Business or in any way
willfully interfere with the relationship between the Company and any employee
thereof or (iv) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company to cease doing business with the
Company, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company.  .  The
ownership of not more than 5% of the stock of any entity having a class of
equity securities actively traded on a national securities exchange or on the
NASDAQ Stock Market or any minority interest in any private entity shall not be
deemed, in and of itself, to violate the prohibitions of this Section 9(a).


 


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(b)  For a period of five (5) years after the
Execution Date, the Executive shall not disparage, deprecate, or make any
comments or take any other actions, directly or indirectly, that will reflect
adversely on the Company or its officers, directors, employees or agents or
adversely affect their business reputation or goodwill.


(c)           For a period of five (5) years after the Execution Date,
the Company shall not disparage, deprecate or make any comments or take any
other actions, directly or indirectly, that will reflect adversely on the
Executive or adversely affect his business reputation


(d)  If any portion of the restrictions set forth
in this Section 8 should, for any reason whatsoever, be declared invalid
by a court of competent jurisdiction, the validity or enforceability of the
remainder of such restrictions shall not thereby be adversely affected.  The Executive declares that the territorial,
time limitations and scope of activities restricted as set forth in this
Section 8 are reasonable and properly required for the adequate protection
of the business of the Company.  In the
event that any such territorial, time limitation and scope of activities
restricted is deemed to be unreasonable by a court of competent jurisdiction,
the Company and the Executive agree to the reduction of the territorial, time
limitation or scope to the area or period which such court shall have deemed
reasonable.  Executive acknowledges that the
covenant included in Section 8(a) above has unique, very substantial and
immeasurable value to Company, and that Executive has sufficient assets and
skills to provide a livelihood for himself while such covenant remains in
force.


The existence of any claim
or cause of action by the Executive against the Company shall not constitute a
defense to the enforcement by the Company of the foregoing restrictive
covenants, but such claim or cause of action shall be litigated separately.


9.             Enforcement.  It is
the desire and intent of the parties hereto that the provisions of this
Agreement be enforceable to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, to the extent that a restriction
contained in this Agreement is more restrictive than permitted by the laws of
any jurisdiction where this Agreement may be subject to review and
interpretation, the terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be the maximum
restriction allowed by the laws of such jurisdiction and such restriction will
be deemed to have been revised accordingly herein.


 


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10.          Remedies; Survival.  The Parties each acknowledge and understand
that the covenants contained in Sections 7 and 8 hereof, the violation of which
cannot be accurately compensated for in damages by an action at law, are of
crucial importance to the benefited Party, and that the breach or threatened
breach of any of such provisions by the other Party would cause the benefited
Party irreparable harm.  In the event of
a breach or threatened breach by the other Party of any of the provisions of
Sections 7 or 8 hereof, the benefited Party will be entitled to seek an
injunction restraining the other Party from such breach.  Nothing herein contained will be construed as
prohibiting the benefited Party from pursuing any other remedies available in
law or in equity for any breach or threatened breach of this Agreement,
including without limitation, damages and an equitable accounting of all
earnings, profits and other benefits arising from such breach.


11.          Cooperation.  The Executive will cooperate with any
reasonable request of the Company for assistance from the Executive in respect
of the transition of the Executive’s previous responsibilities with the Company
to his successor, through March 31, 2008. 
Such assistance will be provided with no additional compensation to
Executive from the Company and the Executive agrees to abide by all typical
policies of the Company in respect of confidentiality, non disclosure and the
like in the providing by Executive of such assistance.  The Company will, however, reimburse the
Executive for all reasonable out-of-pocket expenses he incurs as a result of
such assistance with prior approval of the Company.


12.          Governing Law.  This Agreement shall be deemed to be made in,
and in all respects to be interpreted, construed and governed by and in
accordance with the laws of the State of Maryland, without giving effect to the
principles of conflicts of law under Maryland law.  The Parties shall submit to the jurisdiction
and venue of the state and federal courts located in Maryland in the event that
there is any claim of breach of this Agreement.


13.          Voluntary Execution by
Executive.  The Executive
(a) has carefully read and understands the provisions of this Agreement; (b)
has been given the opportunity to examine this Agreement for a period of 45
calendar days; and (c) is advised by the Company that he should consult with
his personal attorney before deciding whether to accept this Agreement.  The Executive’s signature to this Agreement
signifies that this Section 13 has been complied with, and that if this Agreement
is signed by the Executive before the expiration of the 45-day consideration
period, the Executive is voluntarily waiving his right to consider the
Agreement for the entire 45-day period. 
The Parties recognize that the Executive shall have seven days after the
Executive returns a signed copy of this Agreement to revoke the Agreement by
submitting a signed revocation notice to the Company.  Upon the expiration of that seven day period;
provided the Executive has not revoked this Agreement, this Agreement shall
become effective (the “Effective Date”).


14.          Construction.  Captions are inserted herein for convenience,
do not constitute a part of this Agreement and shall not be admissible for the
purposes of proving the intent of the Parties. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original.


 


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15.          Severability.  Should any provision of this Agreement be
declared and/or determined by any court to be illegal or invalid, the validity
of the remaining parts, terms or provisions shall not be affected.


16.          Notice.  All notices contemplated by this Agreement
shall be sent to each of the parties as follows:


To:                             Cary J. Claiborne


                                                3056 Seneca Chief Trail


                                                Ellicott City, Maryland 
21042


 


To:                             Osiris Therapeutics, Inc.


                                                7015 Albert Einstein Drive


                                                Columbia, Maryland 
21046


                                                Attention: President


 


Unless otherwise specified herein, any Notice
shall be deemed received (i) on the date delivered, if by hand; or
(ii) one business day after deposit with FedEx or other overnight
courier.  A party may, by Notice given as
aforesaid, change the person or persons and/or address or addresses for its
Notices; provided, however, that a Notice of a change of addressee or address
shall only be effective upon receipt.


17.          Public Disclosure.  The Company and the Executive shall provide
each other with a reasonable opportunity to review and provide comments to any
press release or other public disclosure made by the Company or by the Executive
or a future employer of the Executive related to this Agreement or to the
employment relationship between the Company and the Executive.  This Section 18 shall survive any expiration
or termination of this Agreement.


18.          Binding Effect.  This Agreement shall inure to the benefit of
and be binding upon the Parties and their respective executors, administrators,
personal representatives, heirs, predecessors, successors, assigns, directors,
agents, employees, trustees and affiliates forever.


19.          Entire Agreement.  This Agreement, along with its Exhibits and
the other documents referred to in this Agreement, constitutes the entire
Agreement between the Parties with respect to the termination of Executive’s
employment and his severance pay and benefits and supersedes any prior or
contemporaneous written or oral agreements between the Parties with respect
thereto, including the Employment Agreement. 
Each of the Parties agrees and acknowledges that in deciding to enter into
this Agreement he or it is not relying on any statements, representations, or
promises other than those contained herein. 
This Agreement may not be modified except by a writing, which has been
signed by each of the Parties.


20.          Facsimile Signature.  Any signature to this Agreement may be delivered
by facsimile to the other party to this Agreement, and such facsimile signature
shall be valid execution of this Agreement and be binding on both parties.


 


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IN WITNESS WHEREOF, and with the intention of being legally bound
hereby, the Parties have executed this Agreement as of the dates set forth
below.


	
   

  	
   

  	
  Osiris
  Therapeutics, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  C. RANDAL MILLS

  	
   

  
	
  Name:

  	
  C.
  Randal Mills, Ph.D.

  
	
  Title:

  	
  President
  & Chief Executive Officer

  
	
  Date
  Executed:        November 23, 2007

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Executive

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  CARY J. CLAIBORNE

  	
   

  
	
  Name:

  	
  Cary
  J. Claiborne

  
	
  Date
  Executed:        November 23, 2007

  



 


 


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EXHIBIT A


 


Disclosure
Chart


 


Unit/Group Covered:  Vice Presidents & Executive Officers


Eligible for Severance and
Benefits:


	
  Job Title

  	
   

  	
  Age

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Chief Operating Officer

  	
   

  	
  56

  	
   

  
	
  Vice President and General Manager for Orthopedics

  	
   

  	
  59

  	
   

  
	
  Vice President and General Manager for Inflammatory Diseases

  	
   

  	
  42

  	
   

  



 


Not Eligible for Severance and
Benefits:


	
  Job Title

  	
   

  	
  Age

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Vice President of Development

  	
   

  	
  33