Document:

EXHIBIT 10.7

	
  
IsoTis
  	
  
IsoTis OrthoBiologics, Inc.
  
	
  
     OrthoBiologicsTM
  	
  
 
  	
  
2 Goodyear
  
	
   
 	
  
 
  	
  
Irvine, CA 92618
  
	
  
 
  	
  
 
  	
  
USA
  
	
  
 
  	
  
Tel
  	
  
(949) 595.8710
  
	
  
 
  	
  
Fax
  	
  
(949) 595.8711
  
	
  
 
  	
  
www
  	
  
isotis.com
  

February 27, 2004

William Franklin
 100 Strawthorne Court
 Apex, North Carolina  27502

Dear Bill:

We are pleased to offer you a position with IsoTis OrthoBiologics, Inc., based in Irvine, California.

Your title will be Vice President of Manufacturing reporting to the US Division President.  Your employment will begin on April 1, 2004.

As you know, this organization brings a variety of opportunities and challenges that are expected to pay off significantly for everyone with a positive, entrepreneurial attitude who achieves outstanding results.  Out future success depends on the achievement of outstanding individual, division, and corporate results and we feel your contribution will be mutually rewarding.

COMPENSATION

IsoTis offers a three part compensation plan which consists of salary, annual bonus, and stock options.  The following is your plan:

	
  
1.
  	
  
Compensation Level #1:
  	
  
$165,000 Annual Base Salary
  
	
  
 
  	
  
 
  	
  
 
  
	
  2.
  	
  
Compensation Level #2:
  	
  
Bonus for 2004 will be calculated on a 20% scale   based on Corporate, Division and Individual results achieved.  Bonus for 2005 will be calculated on a 20%   scale for Q1 2005 and a 25% scale for Q2, Q3, & Q4 2005.  For 2005 and moving forward, employee will   be eligible for 25% annual Bonus based on Corporate, Division and Individual   results achieved.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
3.
  	
  
Compensation Level #3:
  	
  
25,000 stock options granted on July 1, 2004 (pending   final approval from the Board of Directors).  Strike price for all options will be set   as the 5 days average Closing price of the Company’s stock on the SWX stock   exchange preceding the date of acceptance of this offer.  All options granted will vest over 4 years   and will be subject to the terms and conditions of the Company’s Stock Option   Plan, to be provided under separate cover.
  

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In consideration of your acceptance of this offer, IsoTis will accommodate your relocation to Southern California.  The following considerations will be granted:

	
  1.
  	
  
Relocation Allowance::
  	
  
Employee will be eligible for a relocation allowance   in the amount of $15,000. This allowance will be made in two payments; the   first $7,500 will be paid on or before April 16, 2004, provide employee   is working full-time from the Irvine facility. The remaining $7,500 will be   paid within 30 days of the employee’s relocation to California.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
2.
  	
  
Household Goods:
  	
  
Company to fully fund the relocation of personal   household belongings and automobiles; to include but not limited to packing,   transportation and delivery of such belongings to Southern California.   Details for the physical relocation will be executed by the employee; i.e.   professional movers may be engaged or personal move of belongings via a   rental truck is acceptable. Approval for moving expenditures will be   submitted to Human Resources in advance.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
3.
  	
  
Misc. Relocation Cost:
  	
  
The Company will pay reasonable airfare for spouse   to visit California for the purpose of finding a residence. Details to be   coordinated through Human Resources.
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
In the event the employee elects to self move   vehicle(s) or personal belongings for the purpose of conserving costs, the   Company will reimburse employee and/or spouse for reasonable misc. expenses   associated with the respective cross country relocation to California, to   include but not limited to lodging, meals and gas, provided employee supplies   supporting receipts. Such receipts will be submitted to Human Resources for   processing.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
4.
  	
  
Closing Costs:
  	
  
Company to pay a $47,000 Bonus for the purpose of   aiding in the closing costs associated with selling and purchasing of   residences. Payment of the $47,000 will be made in two payments; first   payment of $23,500 will be made within 30 days of acceptance of this offer   and the remaining $23,500 win be made 30 days after relocation to California.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
5.
  	
  
Tax Adjustment:
  	
  
Company to pay a one time bonus in the amount of   $20,000. Payment of the tax adjustment bonus will be paid as mutually agreed   upon by the parties.
  

In addition, IsoTis shall grant you 160 hours of Paid Time Off. You will accrue future PTO in alignment with the company’s Paid Time Off policy for team members that have completed three

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 years of service with the organization. Secondly, IsoTis will waive the customary 90 day waiting period associated with your company paid medical and dental insurance. As such, the effective date of your benefits will be April 1, 2004.

IsoTis OrthoBiologics, Inc. is an at-will employer, and cannot guarantee employment for any specific duration.  You are free to quit, and IsoTis is entitled to terminate your employment at any time, with or without cause.  This provision can only be changed or revoked in a formal written contract signed by the Director of Operations, and cannot be changed by any express or implied agreement based on statements or action by any employee or supervisor.

You will be required to provide proof of your identity and authorization to work in the United States as required by federal immigration laws.

You will be required to sign a Confidentiality Agreement, as well as the necessary tax and benefit enrolment forms.

As I have discussed with all Team Members, IsoTis policy is that it expects Team Members, both during their employment with IsoTis as well as thereafter, to maintain the confidentiality of IsoTis proprietary information.  Similarly, and for the same reasons, IsoTis expects Team Members to not disclose the proprietary information of their former employers.

This letter sets forth the entire agreement between you and IsoTis.  Once signed by you, it will become a legally binding contract, and will supersede all prior discussions, promises, and negotiations.

Bill, we appreciate the opportunity to have people like you as part of our Team and we look forward to an outstanding future of mutual growth and success.

To confirm that you agree to the terms stated in this letter, please sign and date the enclosed copy of this letter and return it to me no later than March 3rd, 2004.  I welcome you to IsoTis, and I wish you success in your employment.

Sincerely,

	
  
/s/ KERRI LUCHS
  	
  
 
  
	
  

  	
  
 
  
	
  
Kerri Luchs
  	
  
 
  
	
  
Director of Operations
  	
  
 
  

 

I agree to the terms stated in this letter.

	
  
/s/ WILLIAM FRANKLIN
  	
  
 
  	
  
3/1/2004
  
	
  

  	
  
 
  	
  

  
	
  William Franklin
  	
   
  	
  DateEXHIBIT 10.8

IsoTis

Letter Agreement

	
  
 
  	
  
Dr. James Trotman
  
	
  
 
  	
  
161 C Street # 132
  
	
  
 
  	
  
Blaine, Washington    98230
  
	
  
 
  	
  
USA
  

January 15, 2004

Dear Dr. Trotman,

This Agreement confirms certain terms and conditions agreed to between you and IsoTis SA (“IsoTis”) effective October 27, 2003.

You hereby agree to terminate and waive all claims under your employment agreement dated January 1, 2003 with GenSci OrthoBiologics Inc., GenSci Regeneration Sciences Inc. and GenSci OCF, Inc. (“Employment Agreement”).  In consideration thereof, IsoTis shall pay you the sum of USD $180,000.

With respect to your relocation, IsoTis will pay you USD $1,900 per month until June 2004.

IsoTis also agrees to continue providing you with the life insurance, health insurance and disability benefits received under the same terms and conditions which were in place as of October 27, 2003, with a maximum expense to IsoTis of USD $20,000 per annum.  In the event such benefits can not be provided to you by IsoTis for any reason and this Agreement has not terminated or expired, then IsoTis shall pay you up to USD $20,000 annually until the termination or expiration of this Agreement.

With respect to your 672,000 options to acquire shares of unrestricted common stock of GenSci Regeneration Sciences Inc. at an exercise price of CDN $0.40 per share (the “Existing Options”), you will be granted options under a new stock option plan similar to the IsoTis Stock Option Plan dated November 27, 2002 and at least equivalent in material respects to IsoTis’ existing stock option plan (the “New Stock Option Plan”).  The number of replacement options to which you shall be entitled shall be 328,474, each with an exercise price of CHF1.00 (the “New Options”).  All of the New Options shall vest as of November 27, 2003.  The New Options may be exercised at any time during the six (6) years immediately following vesting and shall expire if they are not exercised by you within the six (6) year period immediately following vesting as provided in the New Stock Option Plan.

 

IsoTis SA
 18-20 Avenue de Sévelin
 1004 Lausanne
 Switzerland
 Tel+41 21 620 6000

970617.1

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With respect to your Reward for Tenure IsoTis shall contribute the sum equal to USD $385,000 to the Bioresearch Foundation or its assignee on or before December 31, 2003.  IsoTis further agrees that on or before December 31, 2003, IsoTis shall assign for the benefit of the Bioresearch Foundation or its assignee the cash surrender value of the two (2) life insurance policies written by Prudential Life and insuring Employee’s life (policy numbers 77748479 and 77748454), which IsoTis may be entitled to, however, it is understood that IsoTis shall not make any cash contributions or other payments toward such life insurance policies.

If the above terms are acceptable, please sign and date the duplicate copies of this letter in the spaces provided below and return one fully executed copy to IsoTis. 

Very truly yours,

	
  
ISOTIS SA
  	
  
 
  
	
  
 
  	
  
 
  
	
  
/s/ JACQUES ESSINGER
  	
  
 
  
	
  

  	
  
 
  
	
  
Jacques Essinger, CEO
  	
  
 
  
	
  
 
  	
  
 
  
	
  
 
  	
  
 
  
	
  
AGREED TO AND ACCEPTED
  	
  
 
  
	
   
  	
   
  
	
  /s/ Dr. JAMES TROTMAN
  	
   
  
	
  

  	
   
  
	
   
  	
   
  
	
  Date:    January 23, 2004

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