EXHIBIT 10.1

September 1st, 2006

Maureen Lamb

Dear Maureen:

We are pleased to offer you a position with Kyphon Inc. (“Kyphon” or the
“Company”) as VP and Chief Financial Officer, commencing September 15th, 2006,
reporting to Rich Mott. This employment offer is contingent upon the
satisfactory completion of your background check. Your compensation package will
include the following:

 

•   Annual salary of $280,000, which will be paid semi-monthly in accordance
with the Company’s normal payroll procedures.

 

•   A one-time gross hire-on bonus of $25,000 paid in the first payroll check.
If you were to leave Kyphon voluntarily prior to your one-year anniversary, you
will need to reimburse Kyphon the full amount.

 

•   You will also be eligible to participate in our Key Contributor Incentive
Plan (KCIP). This plan pays bonuses to participating employees based on
achievement of defined Company and individual performance objectives, and is
paid out annually. The current KCIP target bonus for your position is
30%. Actual annual pay-outs can be more or less than the target based on actual
Company and individual results. The initial payment is pro-rated to your hire
date.

 

•   In addition, you will be participating in our Variable Incentive Plan (VIP)
bonus program. This bonus is based on the Company’s achievement of defined
performance objectives, and is paid out quarterly. The current VIP target bonus
is 5% of base salary. Actual quarterly pay-outs can be more or less than the
target based on actual Company results. The initial payment is pro-rated to your
hire date.

 

•   Subject to the approval of the Company’s Board of Directors or designated
delegate, you will be granted a nonqualified stock option to purchase 100,000
shares of Company common stock under the Company’s 2002 Stock Plan (the
“Option”) at an exercise price equal to the price of Kyphon stock at the market
close on the grant date. The grant date will be your date of hire, or the date
on which the Board of Directors or designated delegate approves the grant,
whichever is later. Twenty-five percent of the shares subject to the Option will
vest one year after your employment start date, and one forty-eighth of the
shares will vest on the monthly anniversary of your employment start date each
month thereafter, provided that vesting is contingent on your continued
employment through each applicable vesting date. In all other respects, the
Option shall be subject to the terms, definitions and provisions of the
Company’s 2002 Stock Plan and Stock Option Agreement by and between you and the
Company.

 

•   You will be eligible for Kyphon’s health & welfare benefits effective your
employment start date. These include:

 

  •   401(k) Plan: You may contribute 1 - 100% of your pay each pay period (up
to the annual IRS maximum). Kyphon will match 50% of the first 5% of your
compensation contributed to the 401(k) plan each pay period. In addition, Kyphon
will true-up the matching contribution at year end to ensure all active
employees receive a match of at least 50% of their first $4,000 contributed.

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  •   Employee Stock Purchase Plan (ESPP): The ESPP gives you the opportunity to
purchase Company stock at a discount of 15% through payroll deductions.
Enrollment dates are February 1 or August 1. Once enrolled, you may contribute 1
- 15% of your pay each pay period to the ESPP.

 

  •   Paid Time-Off (PTO): You will accrue 17 days of PTO your first year and
your accrual rate will increase by one additional day of PTO on each Kyphon
employment anniversary date (up to a maximum annual accrual rate of 22
days/year). PTO provides paid leave for vacations, illness, injury or personal
time.

 

  •   Employee Education Assistance Program: You are eligible for tuition
reimbursement for eligible courses up to 100% of the total reimbursable expenses
up to an annual calendar maximum of $5,250. Employees working greater than or
equal to 30 hours per week are eligible for this program.

 

  •   Dependent Education Assistance Program: Depending on your length of
service, Kyphon may reimburse eligible dependent college and/or university
expenses up to $7,500 per calendar year per qualifying dependent. The
reimbursement level is based on your length of service with Kyphon. Employees
working greater than or equal to 30 hours per week with at least one year of
service with Kyphon are eligible for this program.

 

  •   Please refer to the Employee Handbook and various plan policies and forms
for detailed information on all these benefits. To the extent there is any
discrepancy between the terms of those policies/plans and this agreement, the
policies/plans will control.

Your benefits new hire orientation will be at 2:00 PM on the Monday of your
start date in the Elizabeth Blackwell conference room. In this orientation you
will learn about our complete benefit offerings. If your start date is not on a
Monday, your new hire orientation will occur the Monday following your start
date at the above time and location.

You should be aware that your employment with the Company is for no specified
period and constitutes at will employment. As a result, you are free to resign
at any time, for any reason or for no reason. Similarly, the Company is free to
conclude its employment relationship with you at any time, with or without
cause.

For purposes of federal immigration law, you will be required to provide to the
Company documentary evidence of your identity and eligibility for employment in
the United States. Such documentation must be provided to us within three
(3) business days of your date of hire, or our employment relationship with you
may be terminated.

Prior to the start of your employment, you will be required to sign the
Company’s standard Employee Proprietary Information Agreement, a copy of which
is enclosed. If you accept this offer, please return to me a signed copy of that
agreement. In addition, you agree to abide by the Company’s strict policy that
prohibits any employee from using or bringing with him or her from any employer
other than the Company any confidential information, trade secrets or
proprietary materials or processes of such other employer.

In order to protect the Company’s valuable proprietary information, you agree
that during your employment and for a period of one year following the
termination of your employment with the Company for any reason, you will not, as
a compensated or uncompensated officer, director, consultant, advisor, partner,
joint venturer, investor, independent contractor, employee or otherwise, provide
any labor, services, advice or assistance concerning methods or devices for
treating vertebral compression fractures to any of the following entities, which
are some, but not all,

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of the Company’s direct competitors: Medtronic Sofamor Danek, Disc-O-Tech,
Biomet, Synthes Spine, Spineology, SpineWave, A-Spine, and Stryker Spine. You
acknowledge and agree that the restrictions contained in the preceding sentence
are reasonable and necessary, as there is a significant risk that your provision
of labor, services, advice or assistance to any of those competitors could
result in the inevitable disclosure of the Company’s proprietary
information. You further acknowledge and agree that the restrictions contained
in this paragraph will not preclude you from engaging in any trade, business or
profession that you are qualified to engage in.

In the event of any dispute or claim arising out of or relating to your
employment relationship with the Company, the termination of that relationship,
or this agreement (including, but not limited to any claims of wrongful
termination, breach of contract, fraud, infliction of emotional distress, or
age, sex, race, national origin, disability, religious or other discrimination,
harassment or retaliation), you and the Company agree that all such disputes or
claims shall be resolved exclusively by means of a court trial conducted by the
Santa Clara County (California) Superior Court or the federal district court for
the Northern District of California, and you and the Company agree that such
courts will have personal and subject matter jurisdiction over all such disputes
or claims. You and the Company hereby irrevocably waive any and all rights to
have such disputes or claims tried by a jury. You and the Company further agree
that if, and only if, this jury waiver shall, for any reason, be held to be
invalid or unenforceable, then any dispute or claim between us will be
exclusively resolved by binding arbitration conducted by the American
Arbitration Association in Santa Clara County, California.

If any provision of this agreement is deemed invalid or unenforceable, that
provision will be modified to the extent necessary to make it valid and
enforceable, and the validity and enforceability of the remaining provisions of
this agreement shall not be affected in any way.

To indicate your acceptance of the Company’s offer, please sign and date this
letter in the space provided below and return it to me by September 5th, 2006. A
duplicate original is enclosed for your records. This agreement, along with any
other agreements described above, set forth the terms of your employment with
the Company and supersede any prior representations or agreements, whether
written or oral. This letter may not be modified or amended except by a written
agreement, signed by an authorized representative of the Company and by you.

 

  We look forward to working with you at Kyphon!   Sincerely,   KYPHON INC.  

/s/ Steve Hams

  Steve Hams   Vice President of Human Resources

I agree to and accept employment with Kyphon Inc. on the terms and conditions
set forth in this agreement.

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/s/ Maureen Lamb

  

9/6/06

Name    Date

 

Enclosures:      Duplicate Original Letter     
Proprietary Information Agreement in Duplicate