Document:

exv10w4

 

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is entered into this 23rd
day of March 2004, by and between Brion D. Umidi (the “Executive”) and ReGen
Biologics, Inc (the “Company”), acting on behalf of itself and its wholly owned
subsidiary, Rbio, Inc. (“ReGen”).

     WHEREAS, the Company and ReGen wish to retain the services of Executive,
and

     WHEREAS, the Executive desires to be employed by the Company and ReGen,

     NOW, THEREFORE, in consideration of the promises and mutual agreements
made herein, and intending to be legally bound hereby, the Company and
Executive agree as follows:

     1. Employment Term. The Company, on behalf of itself and
ReGen, shall employ the Executive for consecutive one-year terms
beginning on January 1 of each calendar year, with the provisions of
this Agreement deemed to have been in effect as of July 15, 2002.

     2. Employment Duties. Executive will serve in a full-time
capacity as Senior Vice President and Chief Financial Officer of both
the Company and ReGen. Executive shall be responsible for the following
activities of the Company and ReGen: accounting and reporting
activities, contract management and legal coordination, Board of
Director meeting preparation and support, shareholder relations, support
of capital financing activities and related matters, and other related
duties as assigned by the Chairman and Chief Executive Officer.
Executive shall report directly to the Chairman and Chief Executive
Officer.

     3. Compensation. Executive’s base salary is $175,000 per
annum, to be paid in equal bi-weekly installments, which amount shall be
increased to $180,250 effective January 1, 2004. The Compensation
Committee of the Board of Directors shall review Executive’s base salary
at the beginning of each calendar year during its annual compensation
review. Such compensation may be adjusted by the Company by mutual
agreement with Executive at such annual reviews.

     4. Benefits.

          (a) Executive will be entitled during the term of this Agreement to
such paid vacation, paid holidays, and sick leave benefits as are
provided by the Company’s and ReGen’s standard policies. Additionally,
Executive shall be entitled during the term of this Agreement to (i) the
Company’s or ReGen’s standard health and disability benefits, (ii)
participation in the Company’s or ReGen’s 401(k) program, and (iii) any
other benefits that may be customarily provided from time to time by the
Company or ReGen to its employees.

 

 

          (b) The Company shall reimburse Executive for all reasonable
expenses incurred in connection with the performance of his duties under
the Agreement pursuant to the Company’s and ReGen’s standard business
expense reimbursement policies.

          (c) The Company shall provide Executive during the term of this
Agreement the same level of coverage of directors and officers liability
insurance that the Company extends to its other officers and directors.
In addition, Company shall indemnify and hold Executive harmless from
any and all claims, demands, judgments, damages and attorneys’ fees
resulting from his actions in the performance of his duties under this
Agreement on behalf of the Company, to the extent provided in the
“Indemnification Agreement” attached hereto as Exhibit A, which shall be
executed by the Company and Executive simultaneously with the execution
of this Agreement.

     5. Termination.

          (a) For Cause. Notwithstanding any other provision of this
Agreement, the Company may terminate Executive’s employment for cause at
any time without notice. For purposes of this Agreement, “cause” shall
mean the Executive’s (i) commission of an action having a material
adverse effect on the Company or ReGen which constitutes an act of
fraud, dishonesty, or moral turpitude, or which, if proven in a court of
law, would constitute a violation of a criminal code or other law; (ii)
divulging the Company’s or ReGen’s Confidential Information (as defined
in Section 8) in a manner that has a material adverse effect on the
Company; or (iii) material breach of any material duty or obligation
imposed upon the Executive by the Company or ReGen. Should the Company
reasonably determine that such “cause” exists, it shall inform Executive
of such “cause” and afford him thirty (30) days following his receipt of
written notice of the Company’s “cause” finding and the facts underlying
it, to cure the “cause.” Executive’s cure of such “cause” shall not be
unreasonably rejected by the Company. Should Executive fail to cure the
“cause,” and the Company terminate him pursuant to this Section 5(a),
the Company’s obligations under this Agreement shall cease, and except
as required by applicable law, Executive shall forfeit all rights to
receive any other compensation or benefits under this Agreement, except
that he shall be entitled to his base salary for services rendered
through the effective date of termination.

          (b) Without Cause. Notwithstanding any other provision of
this Agreement, the Company may terminate Executive’s employment and
this Agreement without cause by providing Executive ninety (90) days
advance written notice, provided that in the event of such termination,
Executive shall be entitled to exercise vested stock options in
accordance with their terms (but with an extension of 12 months of the
period within which such options must be exercised), and continuation of
his salary and Company-paid health and other welfare benefits for six
(6) months. Solely for purposes of determining the vested percentage of
the Executive Grants at the time of such termination, Executive shall be
deemed to have continued employment with the Company for six (6) months
beyond the termination date.

          (c) Material Change in Responsibilities. Notwithstanding
any other provision of this Agreement, should the Company materially
change Executive’s

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responsibilities, Executive may provide the Company thirty (30)
days written notice of his objection to such change. The Company shall
be afforded thirty (30) days from receipt of such notice to respond to
and cure Executive’s objection(s). Should the Company fail to restore
Executive’s responsibilities in full during this thirty (30) day period,
Executive shall be entitled to resign; and such resignation for purposes
of salary and benefit continuation, and vesting, shall be treated as a
termination without cause as defined in Section 5(b). For purposes of
this Section, a “material change in responsibility” shall mean a
material change in Executive’s duties or authority.

          (d) Termination Due to Departure of Current Chairman and CEO. In
the event Gary Bisbee is no longer Chairman and CEO of the Company (or is no
longer in an equivalent position), Executive shall be entitled to resign; and
such resignation for purposes of salary and benefit continuation, and vesting,
shall be treated as a termination without cause as defined in Section 5(b).

     6. Termination Due to Change in Control.

          (a) Defined. For purposes of this Agreement, a “change in
control” is: (1) the purchase or other acquisition by any person,
entity or syndicate group of persons and/or entities within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended, or any comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under such Act) of forty
percent (40%) or more of either the outstanding shares of common stock
or the combined voting power of the Company’s then outstanding voting
securities entitled to vote generally; (2) the approval by the
stockholders of the Company of a reorganization, merger or
consolidation, in each case, with respect to which persons who were
stockholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than
fifty percent (50%) of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Company’s then outstanding securities; (3) a liquidation or
dissolution of the Company; or (4) the sale of all or substantially all
of the Company’s assets.

          (b) In the event that a change in control results in an involuntary
termination of Executive through elimination of his position, Executive
shall be entitled to exercise his stock options in accordance with their
terms, and continuation of his salary and Company-provided health and
other welfare benefits for six (6) months as provided in Section 5(b).

          (c) In the event of Executive’s termination pursuant to Section
6(b), Executive may, at his sole option, elect to receive payment of his
four (4) months salary in the form of a lump sum distribution, less
applicable withholdings, which shall be payable within twenty (20) days
of the effective date of his termination.

     7. Disability. The Company may terminate the Executive in
the event that he becomes disabled during the term of this Agreement.
Executive shall be considered “disabled” within the meaning of this
Section if he is unable because of accident or

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illness (physical or mental) to perform the material duties of his
position for a period of six (6) consecutive months. Executive’s
termination pursuant to this Section shall be treated as a termination
without cause as defined in Section 5(b).

     8. Confidentiality. In the course of performing his duties
under this Agreement, Executive will have access to “Confidential
Information.” Executive agrees and acknowledges that this Confidential
Information constitutes a valuable and unique asset of the Company and
ReGen, and that its protection is of critical importance to the Company
and ReGen. To ensure that such Confidential Information is not
disclosed or divulged to third persons, Executive agrees:

          (a) that Confidential Information is owned by the Company or ReGen,
and is to be held by Executive in trust and solely for the benefit of
the such entity;

          (b) that he shall not in any way utilize such Confidential
Information for the gain or advantage of Executive or others to the
detriment of either entity; and

          (c) that upon termination of this Agreement, he shall promptly
return any and all such Confidential Information to the Company or
ReGen, as the case may be, and shall continue to abide by the
confidentiality provisions of this Section.

     For purposes of this Agreement, “Confidential Information” shall include,
but not be limited to, information that has been created, discovered, developed
or otherwise become known to the Company or ReGen and/or in which property
rights have been assigned or otherwise conveyed to the Company or ReGen, which
information has commercial value in the business in which the Company or ReGen
is at the time engaged or in which it has an identified plan to be engaged. By
way of illustration, but not limitation, Confidential Information includes
trade secrets, processes, structures, formulas, data and know-how,
improvements, inventions, product concepts, techniques, marketing plans,
strategies, forecasts, customer lists and information about the Company’s or
ReGen’s employees, and/or consultants.

     Executive further agrees that he will execute a mutually agreeable
proprietary information and invention agreement as a condition of his
employment.

     9. Non-Solicitation.

          (a) Executive agrees that during the term of this Agreement and for
a six (6) month period following his receipt of notice of his
termination under this Agreement, he will not, directly or indirectly,
without the prior written consent of the Company, solicit or attempt to
solicit business from any individual or entity that was a customer of
the Company or ReGen at any time during the six (6) month period
immediately prior to Executive’s termination of employment with the
Company or ReGen.

          (b) Executive agrees that during the term of this Agreement and for
a twelve (12) month period following his receipt of notice of
termination under this Agreement (hereinafter referred to as the
“Employee Solicitation Period”), he will not, directly or indirectly,
without the prior written consent of the Company, solicit or induce any
employee, contractor or consultant of the Company or ReGen to leave
their employ,

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or hire for any purpose any employee, contractor or consultant of
the Company. With respect to part-time employees (that is, employees
regularly working less than thirty five (35) hours per week), the
Employee Solicitation Period shall be six (6) months.

     10. Notices. Any notice or communication under this
Agreement will be in writing and sent by registered or certified mail
addressed to the respective parties as follows:

    	 	 	 	 
	 	If to
            the Company: 
	 	Chairman and Chief Executive Officer
	 	 
	 	ReGen Biologics, Inc.
	 	 
	 	509 Commerce Street, East Wing
	 	 
	 	Franklin Lakes, N.J. 07417
	 	 
	 	 
	 	If to
            the Executive: 
	 	Brion D. Umidi
	 	
	 	989 Bayberry Drive
	 	
	 	Arnold, MD 21012

     Executive shall notify the Company by certified mail of any change in his
address, and thereafter, the Company shall forward any notices under this
Agreement to Executive at such new address.

     11. Entire Agreement. This Agreement embodies the entire
agreement of the Parties relating to Executive’s employment and
supersedes all prior agreements, oral or written. No amendment or
modification of this Agreement shall be valid or enforceable unless made
in writing and signed by the Parties.

     12. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the state of Delaware.

     13. Severability. Should one or more of the provisions of
this Agreement be held invalid or unenforceable by a court of competent
jurisdiction, such provisions or portions thereof shall be ineffective
only to the extent of such invalidity or unenforceability, and the
remaining provisions of this Agreement or portions thereof shall
nevertheless be valid, enforceable and remain in full force and effect.

    	 	 	 
	 	 	 ReGen Biologics, Inc.
	 	 	 
	/s/ Brion
            D. Umidi                
          
	 	 /s/ Gerald E. Bisbee, Jr., Ph.D.
        
	BRION D. UMIDI
	 	By: Gerald E. Bisbee, Jr., Ph.D..
	 	 	Its: Chairman and Chief Executive Officer
	 	 	 
	March 25,
            2004                     
            
	 	 March 25, 2004                                 
	Date
	 	 Date

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Exhibit A

Indemnification Agreement

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EXHIBIT 10.5

[Company Logo]

January 18, 2002

Richard Fritschi

President EU/Asia/Latin America

Sulzer Orthopedics AG

Grabenstrasse 25

CH-6341 Baar

	 	 	 	Re: Changes to Distributorship Agreement

Dear Richard:

This is to confirm the agreements we have arrived at for amending the
distributorship arrangements between ReGen Biologics, Inc. (“ReGen”) and Sulzer
Orthopedics AG (“Sulzer”).

Specifically, we have agreed to amend the original distributorship agreement
dated February 16, 1996 (the “Agreement”) between ReGen and Sulzer (as
successor in interest to Allo Pro AG). By virtue of this letter, the Agreement
shall be amended as follows:

	1.	 	The following language shall be added at the end of Section 6.1.1,
regarding “Marketing Efforts”:

	 	 	“As a part of these efforts, Sulzer and ReGen shall meet on a quarterly
basis in order to discuss and evaluate Sulzer’s marketing efforts against
five specific objectives (as defined below) that the parties have agreed
are to be completed by Sulzer by December 31, 2002. The objectives (the
“Objectives”) are:

	 	(a)	 	Establish seven (7) full time positions for sports
medicine and CMI Product dedicated product and sales
specialists throughout the organization of Sulzer and its
authorized sub-distributors or other resellers;
	 
	 	(b)	 	Develop a reimbursement plan for Germany and Switzerland
by February 28, 2002, which will include Sulzer’s intended
specific actions to address the different local reimbursement
issues, respective allocation of resources, and planned
timelines;
	 
	 	(c)	 	Perform surgical training for the CMI Product
implantation procedure for at least sixty (60) surgeons;
	 
	 	(d)	 	Perform at least 200 follow-up sales calls to surgeons;
and

 

 

	 	(f)	 	Establish a dedicated CMI Product distribution system in
Germany, Spain and Italy (i.e. establish an appropriate channel of
sports medicine and CMI Product dedicated product and sales
specialists, establish well defined reporting structures and clear
responsibilities, outline priorities to include reimbursement
strategies and training programs, and set forth marketing and sales
objectives) and perform a market surveillance study in Switzerland.

	 	 	In the event that Sulzer fails to meet at least four (4) of the five (5)
Objectives by December 31, 2002, ReGen may, at its option, either: (i)
convert Sulzer’s exclusive right to distribute the CMI Product to a
non-exclusive right upon written notice to Sulzer, or (ii) terminate the
Agreement, which termination shall include ReGen paying Sulzer a
termination fee equal to fifty percent (50%) of the “net sales costs”
incurred by Sulzer during the period commencing January 1, 2002 through
and including the effective date of termination (the “Termination Fee”).
For the purposes of calculating the Termination Fee, “net sales costs”
shall be the documented direct costs and an allocation of fixed costs
directly associated with the sales and marketing of the CMI Product that
are incurred by Sulzer during such period (not to include corporate or
other overhead allocations unrelated to sales or marketing of the CMI
Product), less all revenue from the sales of CMI Product received by
Sulzer during such period adjusted to exclude any portion of such revenues
payable to ReGen under this Agreement.

	2.	 	The following language shall be added after the first sentence of Section
6.2.3, regarding “Marketing Plans and Research”:
	 
	 	 	“By February 28, 2002 Sulzer will develop, complete and deliver to ReGen a
detailed marketing, sales and distribution plan (the “Plan”) for CMI
Product sales in Germany, Switzerland, Italy and Spain. At a minimum, the
Plan shall include descriptions of: (i) Sulzer’s proposed strategy and
tactics, (ii) Sulzer’s plan for obtaining reimbursement in such countries,
and (iii) how Sulzer plans to achieve the Objectives. For a period of 20
days after receipt of the Plan, ReGen will have the opportunity to submit
its comments in regard to the Plan and Sulzer will further revise the Plan
at its sole discretion. Thereafter the Plan shall be updated by Sulzer
not less than quarterly, with subsequent opportunity for ReGen to provide
comments. The parties’ shall meet quarterly to discuss marketing efforts
and updates to the Plan.
	 
	 	 	By February 28, 2002, ReGen will develop a plan to address issues that are
key to effectively support sales of CMI Product in Europe. These issues
shall include the shelf life extension of the CMI Product, individual
packaging of the Sharpshooter handle, the submission for publication of
the 5-year follow up results from the Phase II study, and the development
of a lateral CMI Product.”
	 
	3.	 	The following new language regarding “Distribution” shall be added to the
Agreement as Section 6.2.4:
	 
	 	 	“6.2.4 Distribution. By June 30, 2002 Sulzer shall complete a
comprehensive

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	 	 	marketing, sales and distribution plan (the “Comprehensive Plan”)
addressing all of the countries on Schedule II, all of the countries in
South America, and Mexico. The Comprehensive Plan shall be updated by
Sulzer on a quarterly basis during the term of the Agreement. Sulzer may
engage one or more sub-distributors to assist with the distribution of the
CMI Product in the Sulzer Territory, provided, however, that Sulzer shall
provide written notice to ReGen of the intended engagement together with a
summary of its key terms not less than thirty (30) days in advance of the
finalization of such engagement. Notwithstanding any other term of this
Agreement, Sulzer shall have the right to select and appoint
sub-distributors in the Sulzer Territory without the approval of ReGen.”
	 
	4.	 	The following new Section 6.4 shall be added at the end of Article 6,
regarding “Minimum Sales Requirements”:
	 
	 	 	“6.4 Minimum Sales Requirements. Notwithstanding any other provisions of
the Agreement, Sulzer and its sub-distributors [see comment under 6.2.4]
shall sell, at a minimum, the following number of CMI Products (the
“Minimum Requirements”) during the time periods specified. For purposes
of determining whether Sulzer has satisfied the Minimum Requirements,
sales made by Sulzer to sub-distributors or other resellers shall not be
included. Further, all sales included in the Minimum Requirements must be
final sales, net of returns and allowances.

	 	(a)	 	During the calendar year 2002, Sulzer shall sell at least
350 CMI Products in the Sulzer Territory. In the event that
Sulzer fails to sell at least 350 CMI Products in calendar year
2002, ReGen shall have the option to require Sulzer to
purchase, at the average price actually received by ReGen for
calendar year 2002, the number of additional CMI Products
required to satisfy the Minimum Requirement for calendar year
2002. Sulzer shall provide ReGen with quarterly sales reports
as provided in Section 5.7 and a final sales report within
sixty (60) days following the end of the calendar year. Such
sales reports shall detail the sales activity as specified in
Section 5.7 and shall include the sales returns and allowances
for such period. In the event that ReGen believes that Sulzer
failed to meet the Minimum Requirement for calendar year 2002,
ReGen shall elect the option, if at all, and give written
notice thereof to Sulzer, no later than forty-five (45) days
following the receipt of Sulzer’s final sales report. ReGen’s
election, if exercised, shall become effective as of the
thirtieth (30th) day following the date Sulzer receives ReGen’s
written notice of election unless Sulzer shall have commenced
an arbitration proceeding in accordance with Section 14.14 of
this Agreement, in which event the parties shall continue to
perform according to the terms of the Agreement until the
dispute is resolved by binding arbitration.
	 
	 	(b)	 	During the calendar year 2003, Sulzer shall sell at least
800 CMI Products in the Sulzer Territory. In the event that
Sulzer fails to sell at least 800 CMI Products in calendar year
2003, ReGen may, at its option, (i) require Sulzer to purchase,
at the average price actually received by ReGen for calendar
year 2003, the number of additional CMI Products required to
satisfy the Minimum Requirement for

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	 	 	 	calendar year 2003, or (ii) convert Sulzer’s exclusive right to
distribute the CMI Product to a non-exclusive right, or (iii)
terminate the Agreement by paying Sulzer the Termination Fee.
Sulzer shall provide ReGen with quarterly sales reports as provided
in Section 5.7 and a final sales report within sixty (60) days
following the end of the calendar year. Such sales reports shall
detail the sales activity as specified in Section 5.7 and shall
include the sales returns and allowances for such period. In the
event that ReGen believes that Sulzer failed to meet the Minimum
Requirement for calendar year 2003, ReGen shall elect one of the
foregoing options, if any, and give written notice thereof to
Sulzer, no later than forty-five (45) days following the receipt of
Sulzer’s final sales report. ReGen’s election, if any, shall become
effective as of the thirtieth (30th) day following the date Sulzer
receives ReGen’s written notice of election unless Sulzer shall have
commenced an arbitration proceeding in accordance with Section 14.14
of this Agreement, in which event the parties shall continue to
perform according to the terms of the Agreement until the dispute is
resolved by binding arbitration.
	 
	 	(c)	 	In subsequent calendar years, Sulzer and ReGen shall in
good faith agree upon reasonable Minimum Requirements at least
ninety (90) days in advance of the commencement of each year.
The parties agree that the Minimum Requirement for CMI Product
sales in calendar year 2004 and subsequent calendar years is
intended to define a level of sales below which Sulzer’s
performance in distribution of the CMI Product is clearly not
diligent. In determining the Minimum Requirement, the parties
shall take into consideration, among other factors (i) the
sales of CMI Products in the Sulzer Territory in preceding
years, (ii) the factors that influence sales of the CMI Product
in the Sulzer Territory, including, but not limited to,
reimbursement, the market’s perception of the product
performance, publication of supporting clinical data, and the
parties’ expectations as to the impact of these factors on
future sales, (iii) the existence of competitive products and
the extent of Sulzer’s share of market in the Sulzer Territory,
and (iv) any other matter that may affect future sales of the
CMI Product. If the parties are not able to agree upon
reasonable Minimum Requirements, such determination may be
submitted to binding arbitration pursuant to Section 14.14. In
the event that Sulzer fails to sell the Minimum Requirement of
CMI Products in any subsequent calendar year, ReGen may, at its
option (i) require Sulzer to purchase, at the average price
actually received by ReGen for the year in question, the number
of additional CMI Products required to satisfy the Minimum
Requirement for such calendar year, or (ii) convert Sulzer’s
exclusive right to distribute the CMI Product to a
non-exclusive right upon written notice to Sulzer, or (iii)
terminate the Agreement by paying Sulzer the Termination Fee.
Sulzer shall provide ReGen with quarterly sales reports as
provided in Section 5.7 and a final sales report within sixty
(60) days following the end of the calendar year. Such sales
reports shall detail the sales activity as provided in Section
5.7 and shall include the sales returns and allowances for such
period. In the event that ReGen believes that Sulzer failed to
meet the Minimum Requirement for the preceding calendar year,
ReGen shall elect one of the

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	 	 	 	foregoing options, if any, and give written notice thereof to
Sulzer, no later than forty-five (45) days following the receipt of
Sulzer’s final sales report. ReGen’s election, if any, shall become
effective as of the thirtieth (30th) day following the date Sulzer
receives ReGen’s written notice of election unless Sulzer shall have
commenced an arbitration proceeding in accordance with Section 14.14
of this Agreement, in which event the parties shall continue to
perform according to the terms of the Agreement until the dispute is
resolved by binding arbitration.”

	5.	 	The last sentence of Section 14.8, regarding litigation in the Courts of
New York, shall be deleted and a new Section 14.14, regarding
“Arbitration” shall be added to the Agreement:
	 
	 	 	“14.14 Arbitration. Any dispute or controversy arising under or in
connection with the Agreement shall be settled exclusively by arbitration
conducted before a single arbitrator in accordance with the rules of the
American Arbitration Association then in effect. The arbitrator shall not
have the authority to add to, detract from, or modify any provision hereof
except that the arbitrator shall have the ability to award special,
incidental or consequential damages if so requested by either party. A
decision by the arbitrator shall be final and binding. Judgment may be
entered on the arbitrator’s award in any New York court having
jurisdiction. Each party shall bear its own counsel fees. The expenses
of the arbitration shall be paid by the non-prevailing party. The
arbitration proceeding shall be held in the New York metropolitan area.”

In addition to these amendments to the Agreement, the parties have also agreed
as follows:

	A.	 	Subject to applicable notice, consent and participation rights of ReGen’s
shareholders, Sulzer may purchase additional equity in ReGen to maintain
or increase its ownership up to a level not to exceed 19.9% of the
outstanding shares of ReGen. Sulzer and ReGen agree to execute such other
agreements and make such amendments to the Shareholders’ Agreement and/or
ReGen’s Articles of Incorporation as may be necessary to carry out the
intent and purpose of this provision that Sulzer’s right to participate in
additional equity offerings of ReGen shall not exceed 19.9% of the
outstanding shares of ReGen. However, nothing shall prohibit Sulzer from
making an offer to obtain all or substantially all of the assets of ReGen
directly to the Board of Directors of ReGen at any time.

	 	 	This provision shall remain in effect only until such time as ReGen offers
it shares to the public, or a “change of control” of ReGen occurs. For
the purposes of this paragraph, a “change of control” means possession,
directly or indirectly, of more than 50% in voting power of the equity
securities of ReGen. This provision shall not prevent Sulzer from
participating in the subscription for a public offering.

	B.	 	All debt owed by ReGen to Sulzer and its affiliates as of the date
hereof, with the exception of the debt owed pursuant to that certain
Convertible Subordinated Promissory Note dated April 13, 2001 given by
ReGen in favor of Sulzer Medica USA Holding Company (the “Debt”), will be
restructured to provide for repayment of all principal and

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	 	 	interest within the earlier of (i) thirty-six (36) months of FDA approval
of the CMI Product for sale in the U.S. or (ii) December 31, 2009 (the
“Due Date”). On the Due Date, ReGen may, at its option, require Sulzer to
convert any unpaid Debt to equity in ReGen provided that (a) ReGen’s shares are publicly traded, (b) there is reasonable liquidity in the
trading of ReGen’s shares, and (c) the Debt is converted into registered shares. In such case, the conversion price shall be seventy five percent
(75%) of the fair market value per share of ReGen at the time of
conversion.

	C.	 	Finally, the following changes shall be made for purposes of legal
consistency and clarification:

	 	i.	 	Wherever the term “Allo Pro AG” appears in
the Agreement it shall be deemed to read “Sulzer
Orthopedics AG,” and wherever the term “Allo Pro” appears
in the Agreement it shall be deemed to read “Sulzer.”
	 
	 	ii.	 	All of the agreements and amendments in this
letter shall be effective as of January 18, 2002. All of
the terms, conditions and provisions of the Agreement
that are not expressly amended in this letter shall
remain in full force and effect.

Please confirm your agreement to the foregoing terms and conditions by
executing this letter in the space indicated below and returning and executed
copy to me via facsimile at 203-972-3585 with a copy to Brion Umidi at
410-923-6107.

	 	 	 	 	 
	 	Very truly yours,

ReGen Biologics

 	 
	 	By:  	/s/ Gerald E. Bisbee, Jr., Ph.D.
 	 
	 	 	Name:  	Gerald E. Bisbee, Jr., Ph.D. 	 
	 	 	Title:  	Chairman and CEO 	 
	 

Agreed to and accepted:

Sulzer Orthopedics AG

	 	 	 
	 	 
	 	By:  	/s/ Richard Fritschi
 
	 	Name:  	Richard Fritschi 
	 	Title:  	President 

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