Document:

Exhibit
10.3

 

Director Compensation Policy

 

                Each
director who is not an employee is eligible to receive compensation from us for
his or her services as a member of our board or any of its standing committees.
Each such non-employee director will be entitled to receive an annual retainer
of 10,000 shares of our common stock per year of service plus an additional
amount of common stock up to 10,000 shares based on active board participation.Exhibit
10.4

 

EMPLOYMENT AGREEMENT

 

                This
EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of the 15 day of May, 2004,
(the “Effective Date”) by and between Osiris Therapeutics, Inc., a Delaware
corporation (the “Company”), and Charles Randal Mills (the “Executive”).

 

WHEREAS, the Company desires to employ the
Executive, and the Executive desires to be employed by the Company, on the
terms and conditions set forth herein from
and after July 5, 2004; and

 

WHEREAS, the board of directors of the Company (the “Board”)
has approved and authorized the entry into
this Agreement with the Executive.

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the parties hereto agree as follows:

 

1.         Employment
Agreement. On the terms and conditions set forth in this Agreement, the
Company agrees to employ the Executive and the Executive agrees to be employed
by the Company for the Employment Period set forth in Section 2 hereof and in
the position and with the duties set forth in Section 3 hereof.

 

2.         Term. The
initial term of employment under this Agreement shall be for a three-year
period commencing on the date hereof (the “Initial Term”). The term of
employment shall be automatically renewed for an additional consecutive
12-month period (the “Extended Term”) as of the third and every subsequent
anniversary of the date hereof, unless and until either party provides written
notice to the other party in accordance with Section 11 hereof not less than 90
days before such anniversary date that such party is terminating the term of
employment under this Agreement, which termination shall be effective as of the
end of such Initial Term or Extended Term, as the case may be, or until such
term of employment is otherwise terminated as hereinafter set forth. Such
Initial Term and all such Extended Terms are collectively referred to herein as
the “Employment Period.” The parties’ obligations under Sections 6, 8, 9, and
10 hereof shall survive the expiration or termination
of the Employment Period.

 

 

 

3.         Position and Duties.
The Executive shall initially serve as President, Chief Executive Officer, and
Board Member subject to shareholder election during the Employment Period. As
such, the Executive shall render executive policy and other management services
to the Company of the type customarily performed by persons serving in a
similar officer capacity and shall perform the other duties and objectives as
the Board may determine from time to time. The Executive shall report to the Board.  Objectives of the Executive may be amended by
the Board from time to time.  The
Executive shall devote the Executive’s best efforts and working time to the performance
of the Executive’s duties and the advancement of the business and affairs of the Company. 
The Executive is permitted to perform advisory work, provided such work
does not materially detract from the performance of the Executive’s duties to
the Company and does not compete with the Business of the Company.  Such advisory work is subject to Board
approval from case to case.

 

4.         Compensation.

 

(a) Base
Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary (the “Base Salary”), which
initially shall be at the rate of USD 300,000 per year. The Base Salary shall
be reviewed no less frequently than annually and may be increased at the
discretion of the Board. When the Executive’s Base Salary is increased, the increased amount shall be the Base
Salary for the next 12-month period. Except as otherwise agreed in
writing by the Executive, the Base Salary shall not be reduced from the amount
previously in effect during the Employment
Period. The Base Salary shall be payable semimonthly or in such other
installments as shall be consistent with the Company’s payroll procedures.

 

(b) Bonus. At the discretion of the Board, the
Executive may be eligible to earn a bonus in the amount of USD of up to 75,000
for the year 2004, which payments shall be based on mutually agreed performance
targets.  The Executive may further be
eligible to a bonus in the amount of USD 100,000 for the year 2005, which
payments shall be based and dependent on mutually agreed performance targets.

 

(c) Benefits. During the
Employment Period, the Executive will be entitled to such other benefits
approved by the Board and made available to employees generally. Nothing
contained in this Agreement shall prevent the Company from changing insurance
carriers or from effecting modifications in insurance coverage or other
employee benefits that impact Executive.

 

 

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(d) Vacation:
Holidays. The Executive shall be entitled to all public
holidays observed by the Company and per Company policy as determined by the
Board and twenty vacation days in accordance with the applicable vacation
policies for senior executives of the Company, which shall be taken at a
reasonable time or times so as not to negatively impact the operations of the
Company. A maximum of 10 unused vacation
days may be carried over for twelve months after the year in which they accrue.

 

(e) Withholding Taxes and
Other Deductions. 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.

 

(f)
Equity. Upon the effective date of the Agreement, the Executive shall be
granted 600,000 options to purchase Company common stock at USD .10 per share, as
determined in the sole discretion of the Board. 
The options shall vest ratably, one-fourth on each anniversary of the effective
date for four consecutive years until fully vested.  The Executive shall further be granted 400,000
options to purchase Companies common stock at USD .10, after 1 year employment
with the Company.  These shares shall be
granted upon meeting certain milestones set in mutual agreement by the Company
and the Executive.  These shares shall
vest ratably, one-fourth on each anniversary of the grant date for four
consecutive years until fully vested. 
Upon mutual agreement of the Board and the Executive, stock grants or
similar instruments may be substituted in place of stock options.  In any event, all unvested shares will vest
immediately upon a “Change of Control”, of the Company as defined below.

 

(g) Relocation.  The Company will reimburse or advance all
reasonable and necessary costs and expenses associated with the relocation of
Executive and his family from Florida to the Baltimore, Maryland area to
include: incurred closing costs, real estate commissions, and packaging,
moving, and temporary storage services. 
Such reimbursements will take into account the tax consequences of any non-deductible
monies, such that all reimbursements or items of imputed income will also
include monies sufficient to cover the state and federal tax liabilities
associated with such payments (i.e., these payments will be “grossed-up”), and
such reimbursements shall be made within thirty (30) days of the presentment of
invoices for same or advanced where appropriate, not more than 75,000.

 

During the transition
period of Executive’s move from Florida to Maryland, the Company shall also
provide, for a period of up to six (6) months the following temporary housing
and travel reimbursements and advances: (i) temporary executive housing in the
Baltimore area; (ii) round-trip airfare for either Executive or Executive’s
wife, between Gainesville and 

 

 

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Baltimore, on weekends during the period.

 

5.         Expenses.  The
Executive’s expenses incurred in the performance of his duties hereunder,
including the costs of travel, and similar business expenses incurred shall be
reimbursed by the Company promptly in accordance with Company expense policies
upon periodic presentation by the Executive of an itemized account of such
expenses, with appropriate documentation, which shall be reviewed by the audit
committee from time to time at its discretion.

 

6.                        Confidentiality: Work Product.

 

(a) Information.  The Executive acknowledges that the information,
observations and data obtained by the Executive concerning the business and
affairs of the Company and its Subsidiaries during the course of the Executive’s
performance of services for, or employment with, any of the foregoing Persons
(whether or not compensated for such services) are the property of the Company and its Subsidiaries, including information
concerning acquisition opportunities in or reasonably related to the
business or industry of the Company or its
Subsidiaries of which the Executive becomes aware during such period.
Therefore, the Executive agrees that he will not at any time (whether during or
after the Employment Period) disclose to any unauthorized person or, directly
or indirectly, use for the Executive’s own account or the account of any other
Person, any of such information, observations or data without the Board’s
consent, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a direct
or indirect result of the Executive’s acts or omissions to act or the acts or
omissions to act of other senior or junior management employees of the Company
and its Subsidiaries. The Executive agrees to deliver to the Company at the termination of the Executive’s
employment, or at any other time the Company may request in writing
(whether during or after the Employment Period), all memoranda, notes, plans,
records, reports and other documents, regardless of the format or media (and
copies thereof), relating to the business of
the Company and its Subsidiaries and their predecessors (including, without limitation,
all acquisition prospects, lists, customer and contact information) which the Executive may then possess or have under
the Executive’s control.

 

(b)
Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements,
developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not patentable)
that relate to the actual or anticipated business, research and

 

 

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development or existing or
future products or services of the Company or its Subsidiaries that are
conceived, developed, made or reduced to practice by the Executive while
employed by the Company or any of its predecessors (“Work Product”) belong to the Company and the Executive
hereby assigns, and agrees to assign,
all of the above to the Company. Any copyrightable work prepared in whole or in part by the Executive in the course of
the Executive’s work for any of the
foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company shall own all rights
therein. To the extent that any such copyrightable work is not a “work made for
hire,” the Executive hereby assigns and agrees to assign to the Company
all right, title and interest, including without
limitation, copyright in and to such copyrightable work. The Executive shall promptly disclose such Work Product and
copyrightable work to the Board and perform all actions reasonably
requested by the Board (whether during or after
the Employment Period) to establish and confirm the Company’s ownership (including,
without limitation, assignments, consents, powers of attorney and other instruments).

 

7.                        Termination of Employment.

                                                                         

(a) Permitted Terminations.
The Executive’s employment hereunder may be
terminated during the Employment Period without any breach of this Agreement only under the following circumstances:

 

(i)      Death. The Executive’s employment
hereunder shall terminate upon the executive’s death;

 

(ii)                    By the Company.   The Company may terminate the Executive’s employment:

 

(A)      If the Executive shall have
been unable to perform all of the Executive’s
duties hereunder by reason of illness, physical or mental disability or
other similar incapacity, which inability
shall continue for three or more consecutive months or four or more non-consecutive months; or

 

(B)            for
the failure of Executive to satisfactorily perform the duties and the tasks of
the office held by the Executive as reasonably determined by the Board, and
such failure is not cured within 30 days after the Executive receives specific
written notice thereof from the Board; or

 

(C) for Cause; or

 

(iii)             By the Executive.  
The Executive may terminate 

 

 

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employment for Good Reason.

 

                                (b)
Termination. Any termination of the Executive’s employment by the
Company or the Executive (other than because of the Executive’s death) shall be
communicated by written Notice of Termination to the other party hereto in accordance
with Section 11 hereof. Termination of the Executive’s employment shall
take effect on the Date of Termination.

 

                8.             Compensation Upon Termination.

 

                                (a)
Death. If the Executive’s employment is terminated during the Employment
Period as a result of the Executive’s death, the Company shall pay to the
Executive’s estate, or as may be directed by the legal representatives of such
estate, the Executive’s Base Salary prorated through the Date of Termination
and all other accrued and unpaid amounts, if any, to which the Executive is
entitled as of the Date of Termination, and the Company shall have no further
obligations to the Executive under this Agreement.

 

                                (b)
Disability. If the Company terminates the Executive’s employment during
the Employment Period because of the Executive’s disability pursuant to
Section 7(a)(ii)(A) hereof, the Company shall pay to the Executive, the
Executive’s Base Salary prorated through the Date of Termination and all other
accrued and unpaid amounts, if any, to which the Executive is entitled as of
the Date of Termination, and the Company shall have no further obligations to
the Executive under this Agreement; provided, that payments so made to
the Executive during any period that the Executive is unable to perform all of the
Executive’s duties hereunder by reason of illness, physical or mental illness
or other similar incapacity shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment under
disability benefit plans of the Company and which amounts were not previously
applied to reduce any such payment.

 

                                (c)
By the Company with Cause or by the Executive without Good Reason. If
the Company terminates the Executive’s employment during the Employment Period
for Cause pursuant to Section 7(a)(ii)(C) hereof or if the Executive
voluntarily terminates the Executive’s employment during the Employment Period
other than for Good Reason, the Company shall pay the Executive the Executive’s
Base Salary prorated through the Date of Termination and all other accrued and
unpaid amounts, if any, to which Executive is entitled as of the Date of
Termination, and the Company shall have no further obligations to the Executive
under this Agreement.

 

                                (d)
By the Company due to Lack of Performance. If the Company terminates the
Executive’s employment during the Employment Period due to Lack of Performance
pursuant to Section 7(a)(ii)(B) hereof, the Company 

 

 

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shall pay the Executive in a lump sum (A) the Executive’s Base
Salary prorated through the Date of Termination and all other accrued and
unpaid amounts, if any, to which the Executive is entitled as of the Date of
Termination, and (B) an aggregate amount equal to one half of the
Executive’s annual Base Salary, payable in a lump sum within 30 days from the
Date of Termination, plus all medical, life, and disability benefits, if any,
Executive had been receiving immediately preceding the termination for the
six-month period following the Date of Termination (the “Severance Period”),
provided such medical, life, and disability benefits shall be subject to the
mitigation obligations in Section 8(e) below (the “Severance Payments”),
and the Company shall have no further obligations to the Executive under this
Agreement.

 

                                (e)
By the Company without Cause or by the Executive for Good Reason. If the
Company terminates the Executive’s employment during the Employment Period
other than for Cause, Lack of Performance, disability or death pursuant to
Section 7(a)(i) or (ii) hereof, or the Executive terminates his employment
during the Employment Period for Good Reason pursuant to Section 7(a)(iii)
hereof, the Company shall pay the Executive in a lump sum (A) the
Executive’s Base Salary prorated through the Date of Termination and all other accrued
and unpaid amounts, if any, to which the Executive is entitled as of the Date
of Termination, and (B) an aggregate amount equal to one full year of the
Executive’s Base Salary, payable in a lump sum within 30 days from the Date of
Termination, plus all medical, life, and disability benefits, if any, Executive
had been receiving immediately preceding the termination for the twelve-month
period following the Date of Termination (the “Severance Period”), provided
such medical, life, and disability benefits shall be subject to the mitigation
obligations in Section 8(e) below (the “Severance Payments”), and the
Company shall have no further obligations to the Executive under this
Agreement.

 

                                (f)
Mitigation. The Company’s obligation to continue to provide the
Executive with medical, life, and disability benefits pursuant to
Section 8(d) and (f) above shall cease if the Executive becomes eligible
to participate in benefits similar to those provided under this Agreement as a
result of the Executive’s subsequent employment, whether as part of an
organization or as an independent consultant, during the period that the
Executive is entitled to receive such benefits.

 

                                (g)
Release. The Executive agrees that, except for such other payments and
benefits to which the Executive may be entitled as expressly provided by the
terms of this Agreement or any applicable employee benefit plan, the Severance
Payments set forth above shall be in lieu of all other claims that the
Executive may make by reason of termination of his employment or any such 

 

 

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breach of this Agreement and that, as a condition to receiving the
Severance Payments, the Executive will execute a release of claims in a form
reasonably satisfactory to the Company.

 

                                (h)
Effect on other Benefits. Except as specifically provided in this
Agreement, no compensation or other benefits are guaranteed beyond the Date of
Termination or termination of this Agreement.

 

                9.             Noncompetition and
Nonsolicitation.

 

                                (a) Noncompetition. The
Executive acknowledges that in the course of his employment with the Company
and its Subsidiaries, he has and will continue to become familiar with the
trade secrets of, and other confidential information concerning, the Company
and its Subsidiaries, that the Executive’s services will be of special, unique
and extraordinary value to the Company and its Subsidiaries and that the
Company’s ability to accomplish its purposes and to successfully pursue its
business plan and compete in the marketplace depend 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,
during the Employment Period and any Severance Period, although in no event
less than two years from the Date of Termination, so long as Severance Payments
are made or have been made in accordance with this Agreement (the “Noncompete
Period”), he shall not 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 or its Subsidiaries in any country
where the Company or its Subsidiaries conducts business, or plans to conduct
business, provided such plans have been communicated to Executive. For purposes
of this Section 11, the “Business” shall mean all commercial or
therapeutic use that involves mesenchymal stem cells (MCSs) or cells
substantially similar to mesnchymal 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 Osiris to which the Executive has confidential knowledge. (to
cover hiring, business partnerships, vendor relationships, etc.). Executive
acknowledges that this covenant has a unique, very substantial and immeasurable
value to Company, that Executive has sufficient assets and skills to provide a
livelihood for himself while such covenant remains in force.

 

                                (b) Nonsolicitation. During
the Employment Period and for two (2) years following the Date of
Termination, the Executive shall not directly or indirectly through another
entity (i) induce or attempt to induce any employee 

 

 

8

 

of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
willfully interfere with the relationship between the Company or any Subsidiary
and any employee thereof or (ii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company or any Subsidiary
to cease doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee
or business relation and the Company or any Subsidiary.

 

                                (c) Revision of Restrictions.
If, at the time of enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances then existing,
the parties hereto agree that the maximum duration, scope or geographical area
reasonable under such circumstances shall be substituted for the stated period,
scope or area and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum duration, scope and area permitted by
law.

 

                10.           Enforcement.
The Executive acknowledges that the restrictions imposed on him by
Section 6(a), 6(b) and 9 are reasonable and necessary, in view of the
nature of the Company’s business, the nature of the services to be provided by
the Executive and the Executive’s access to confidential information of the
Company, to protect the legitimate interests of the Company and that any breach
or threatened breach of any provision thereof will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy
therefor. Therefore, in the event a breach or threatened breach by the
Executive of any provision of Section 6(a), 6(b) or 9, the Company shall
be entitled to obtain from any court of competent jurisdiction, in addition to
any and all other rights and remedies existing in its favor, an order of
specific performance and/or preliminary or permanent injunctive relief in order
to enforce, or prevent any violations of, such provision (without posting a
bond or other security).

 

                11.           Notices.
All notices, demands, requests or other communications required or permitted to
be given or made hereunder shall be in writing and shall be delivered,
telecopied or mailed by first class registered or certified mail, postage
prepaid, addressed as follows:

 

                                (a)           If
to the Company:

 

                                                Osiris Therapeutics,
Inc.
                                                2001
Aliceanna St.
                                                Baltimore,
MD 21231
                                                ATTN:
CFO
                                                Fax:
410-563-0794

 

 

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                                (b)           If
to the Executive:

 

                                                Charles Randal Mills
                                                13140
Southwest 2nd Place
                                                Newberry,
Florida 32669

 

or to such other address as may be designated by either party in a
notice to the other. Each notice, demand, request or other communication that
shall be given or made in the manner described above shall be deemed
sufficiently given or made for all purposes three days after it is deposited in
the U.S. mail, postage prepaid, or at such time as it is delivered to the
addressee (with the return receipt, the delivery receipt, the answer back or
the affidavit of messenger being deemed conclusive evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.

 

                12.           Severability. The invalidity
or unenforceabilility of any one or more provisions of this Agreement shall not
affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect.

 

                13.           Survival. It is the express
intention and agreement of the parties hereto that the provisions of
Sections 6, 8, 9, and 10 hereof shall survive the termination of
employment of the Executive. In addition, all obligations of the Company to
make payments hereunder shall survive any termination of this Agreement on the
terms and conditions set forth herein.

 

                14.           Assignment. The rights and
obligations of the parties to this Agreement shall not be assignable or
delegable, except that (i) in the event of the Executive’s death, the
personal representative or legatees or distributees of the Executive’s estate,
as the case may be, shall have the right to receive any amount owing and unpaid
to the Executive hereunder and (ii) the rights and obligations of the
Company hereunder shall be assignable and delegable in connection with any
subsequent merger, consolidation, sale or other transfer of all or
substantially all of the assets of the Company or similar reorganization of a
successor corporation.

 

                15.           Binding Effect. Subject to any
provisions hereof restricting assignment, this Agreement shall be binding upon
the parties hereto and shall inure to the benefit of the parties and their
respective heirs, devisees, executors, administrators, legal representatives,
successors and assigns.

 

                16.           Amendment: Waiver. This
Agreement shall not be amended, altered or modified except by an instrument in
writing duly executed by the parties hereto. Neither the waiver by either of
the parties hereto of a breach of or a default under any of the provisions of
this Agreement, nor the failure of

 

 

10

 

either of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall thereafter be construed as a waiver of any subsequent breach or default
of a similar nature, or as a waiver of any such provisions, rights or
privileges hereunder.

 

                17.           Headings. Section and
subsection headings contained in this Agreement are inserted for convenience of
reference only, shall not be deemed to be a part of this Agreement for any
purpose, and shall not in any way define or affect the meaning, construction or
scope of any of the provisions hereof.

 

                18.           Governing Law. This Agreement,
the rights and obligations of the parties hereto, and any claims or disputes
relating thereto, shall be governed by and construed in accordance with the
laws of the State of Delaware (but not including the choice of law rules
thereof), and the parties irrevocably consent to the personal jurisdiction of
the state and federal courts in Delaware.

 

                19.           Entire Agreement; Agreement
Replaced. This Agreement constitutes the entire agreement between the
parties respecting the employment of Executive, there being no representations,
warranties or commitments except as set forth herein.

 

                20.           Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be an original
and all of which shall be deemed to constitute one and the same instrument.

 

                21.           Attorney’s Fees. In the case
of a formal dispute hereunder brought in any forum of competent jurisdiction,
the prevailing party shall be entitled to recover from the non-prevailing
party, all reasonable legal fees, and expense and costs incurred in connection
with such dispute, including any appeal therefrom.

 

                22.           Furtherance of Agreement.
Executive agrees to execute any documents or take any other actions reasonably
necessary or otherwise requested by Company to effectuate the intent of all
provisions under this Agreement.

 

                23. Confidentiality.
Both parties agree to keep confidential the existence of this agreement until
the separation of the Executive from his current place of employment (RTI) has
been made public by RTI, but not later than June 15, 2004 unless agreed to by
the Executive and the Company.

 

                24.           Definitions.

 

                                “Agreement”
means this Employment Agreement.

 

 

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                                Base
Salary” is defined in Section 4(a) above.

 

                                “Beneficial
Owner” means a beneficial owner within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended.

 

                                “Board”
means the board of directors of the Company.

 

                                “Business”
is defined in Section 9 above.

 

                                “Cause”
means (i) the commission of a felony or a crime involving moral turpitude or
the commission of any other act or omission involving dishonesty or fraud with
respect to the Company or any of its Subsidiaries or any of their customers or
suppliers, (ii) conduct tending to bring the Company or any of its Subsidiaries
into substantial public disgrace or dispute, (iii) gross negligence or willful
misconduct with respect to the Company or any of its Subsidiaries or (iv) any
breach of a material Section of this Agreement.

 

                                “Change
of Control” means if Friedli Corporate Finance and its affiliates controls
less than 33% of the Company or public offering.

 

                                “Code”
means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

 

                                “Company”
means Osiris Therapeutics, Inc., its subsidiaries, affiliates, and its
successors and assigns.

 

                                “Date
of Termination” means (i) if the Executive’s employment is terminated by
the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s
employment is terminated because of the Executive’s disability pursuant to
Section 7(a)(ii)(A) hereof, the effective date of Notice of Termination; (iii)
if the Executive’s employment is terminated by the Company for Lack of
Performance pursuant to Section 7(a)(ii)(B), or for Cause pursuant to Section
7(a)(ii)(C) hereof or by the Executive for Good Reason pursuant to Section
7(a)(iii) hereof, the date specified in the Notice of Termination; or (iv) if
the Executive’s employment is terminated during the Employment Period other
than pursuant to Section 7(a), the date on which Notice of Termination is
given.

 

                                “Effective
Date” means May 15, 2004.

 

                                “Employment
Period” is defined in Section 2 above.

 

                                “Executive”
means Charles Randal Mills.

 

 

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                                “Extended
Term” is defined in Section 2 above.

 

                                “Good
Reason” means (i) the Company’s failure to perform or observe any of the
material terms or provisions of this Agreement, and the continued failure of
the Company to cure such default within 30 days after written demand for
performance has been given to the Company by the Executive, which demand shall
describe specifically the nature of such alleged failure to perform or observe
such material terms or provisions; (ii) a material reduction in the scope of
the Executive’s responsibilities and duties; or (iii) in the absence of a
written agreement between Company and Executive, a material reduction in
Executive’s base pay or incentive compensation.

 

                                “Initial
Acquirer” means any individual, or entity organized under the laws of any
jurisdiction for the purpose of investing in securities of entities engaged in
the Business.

 

                                “Initial
Term” is defined in Section 2 above.

 

                                “Lack
of Performance” means the failure of Executive to satisfactorily perform
the duties and the tasks of the office held by the Executive as reasonably
determined by the Board, and such failure is not cured within 30 days after the
Executive receives specific written notice thereof from the Board.

 

                                “Noncompete
Period” is defined in Section 9(a) above.

 

                                “Notice
of Termination” is defined in Section 7(b) above.

 

                                “Person”
means an individual, a partnership, a limited liability company, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

 

                                “Severance
Payments” is defined in Section 8(d), (e) above.

 

                                “Severance
Period” is defined in Section 8(d), (e) above.

 

                                “Subsidiary”
means any corporation of which the Company owns securities having a majority of
the ordinary voting power in electing the board of directors directly or
through one or more subsidiaries.

 

                                “Work
Product” is defined in Section 6(b) above.

 

 

13

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the
day and year first hereinabove written.

 

	
  Osiris Therapeutics, Inc.

  
	
   

  
	
   

  
	
  By: /s/ Peter Friedli

  
	
  Name: Peter Friedli

  
	
  Title:

  
	
   

  
	
  Date:  May 15, 2004

  
	
   

  
	
   

  
	
  The Executive:

  
	
   

  
	
  /s/ Charles Randal Mills

  
	
  Charles Randal Mills

  
	
   

  
	
  Date:  May 15, 2004

  
	
  __________________________

  

 

 

14

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