Document:

exv10w1

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is made and entered into effective
as of February 28, 2011 (the “Effective Date”), by and between Ardea Biosciences, Inc.
(the “Company”) and David T. Hagerty, MD (the “Executive”). The Company and the Executive
are hereinafter collectively referred to as the “Parties”, and individually referred to as a
“Party”.

Recitals

A. The Company desires assurance of the association and services of the Executive in order to
retain the Executive’s experience, skills, abilities, background and knowledge, and is willing to
engage the Executive’s services on the terms and conditions set forth in this Agreement.

B. The Executive desires to be in the employ of the Company, and is willing to accept such
employment on the terms and conditions set forth in this Agreement.

Agreement

     In consideration of the foregoing Recitals and the mutual promises and covenants herein
contained, and for other good and valuable consideration, the Parties, intending to be legally
bound, agree as follows:

	 	1.	 	Employment.

          1.1 Title. The Executive shall initially have the title of Senior Vice President, Chief
Medical Officer of the Company and shall serve in such other capacity or capacities as the Company
may from time to time prescribe. The Executive shall initially report to the Company’s Chief
Executive Officer (“CEO”).

          1.2 Duties. The Executive shall do and perform all services, acts or things necessary or
advisable to manage and conduct the business of the Company, which are normally associated with the
position of Chief Medical Officer, consistent with the bylaws of the Company and as required by the
CEO.

          1.3 Policies and Practices. The employment relationship between the Parties shall be governed
by the policies and practices established by the Company and/or the Company’s Board of Directors
(the “Board”). The Executive acknowledges that he has read the Company’s Employee Handbook and
other governing policies, which will govern the terms and conditions of his employment with the
Company, along with this Agreement. In the event that the terms of this Agreement differ from or
are in conflict with the Company’s policies or practices or the Company’s Employee Handbook, this
Agreement shall control.

          1.4 Location. Unless the Parties otherwise agree in writing, during the term of this
Agreement, the Executive shall perform the services the Executive is required to perform pursuant
to this Agreement at the Company’s offices, located in San Diego, California; provided,

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however, that the Company may from time to time reasonably require the Executive to travel
temporarily to other locations in connection with the Company’s business.

	 	2.	 	Loyal and Conscientious Performance; Noncompetition.

          2.1 Loyalty. During the Executive’s employment by the Company, the Executive shall devote the
Executive’s full business energies, interest, abilities and productive time to the proper and
efficient performance of the Executive’s duties under this Agreement.

          2.2 Covenant not to Compete. Except with the prior written consent of the Board or the CEO,
which shall not be unreasonably withheld, the Executive will not, during the Executive’s employment
by the Company, engage in competition with the Company and/or any of its Affiliates, either
directly or indirectly, in any manner or capacity, as adviser, principal, agent, affiliate,
promoter, partner, officer, director, employee, stockholder, owner, co-owner, consultant, or member
of any association or otherwise, in any phase of the business of developing, manufacturing and
marketing of products or services which are in the same field of use or which otherwise compete
with the products or services or proposed products or services of the Company and/or any of its
Affiliates. For purposes of this Agreement, “Affiliate” means, with respect to any specific
entity, any other entity that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified entity.

          2.3 Agreement not to Participate in Company’s Competitors. During any period during which the
Executive is receiving any compensation or consideration from the Company, the Executive agrees not
to acquire, assume or participate in, directly or indirectly, any position, investment or interest
known by the Executive to be adverse or antagonistic to the Company, its business or prospects,
financial or otherwise or in any company, person or entity that is, directly or indirectly, in
competition with the business of the Company or any of its Affiliates. Notwithstanding the
foregoing, ownership by the Executive, as a passive investment, of less than two percent (2%) of
the outstanding shares of capital stock of any corporation with one or more classes of its capital
stock listed on a national securities exchange or publicly traded on the Nasdaq Stock Market or in
the over-the-counter market shall not constitute a breach of Section 2.2 or this Section 2.3.

	 	3.	 	Compensation of the Executive.

          3.1 Base Salary. The Company shall pay the Executive a base salary of Three Hundred Twenty
Thousand Dollars ($320,000) per year, less payroll deductions and all required withholdings payable
in regular periodic payments in accordance with Company policy. Such base salary shall be prorated
for any partial year of employment on the basis of a 365-day fiscal year.

          3.2 Annual Performance Bonus. In addition to the Executive’s base salary, the Executive shall
be eligible for an annual performance bonus based upon the Executive’s and the Company’s
achievement of specified objectives established by the CEO and/or the Board during the first
quarter of each year, as evaluated by the CEO and/or Board in the exercise of good faith reasonable
judgment. The target bonus for achievement of all objectives shall be

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thirty-five percent (35%) of the Executive’s then-current base salary. Bonuses awards will be
pro-rated based upon the number of months employed during the calendar year.

          3.3 Stock Option. Upon the commencement of the Executive’s employment and subject to approval
of the Board and the terms of the Company’s 2004 Stock Equity Incentive Plan, (the “Plan”), the
Executive will be granted a stock option under the Plan to purchase one hundred fifty thousand
(150,000) shares of the Company’s Common Stock (the “Option”). To the maximum extent possible, the
Option shall be an Incentive Stock Option as such term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended. The Option will be governed by and granted pursuant to a
separate Stock Option Agreement and the Plan. The exercise price per share of the Option will be
equal to the fair market value of the Common Stock established on the date of grant, subject to
approval by the Board. The Option will vest over four (4) years for so long as the Executive
continues to be employed by the Company, as follows: twenty-five percent (25%) of the shares
subject to the Option shall vest on the first anniversary of the Executive’s first day of
employment with the Company, and 1/48th of the shares subject to the Option shall vest
on the same calendar day of each month thereafter.

          3.4 Changes to Compensation. The Executive’s compensation will be reviewed on a regular basis
by the Company and may be increased from time to time as deemed appropriate.

          3.5 Employment Taxes. All of the Executive’s compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be collected or
withheld by the Company.

          3.6 Other Benefits. The Executive shall also be eligible to receive all other benefits
normally offered to full-time regular executive level employees, including, without limitation,
medical insurance, dental insurance, life insurance, 401(k) plan and fifteen (15) working days paid
time off per year accruing on a bi-weekly basis, as outlined in the Company’s Employee Handbook.

	 	4.	 	Termination.

          4.1 Termination by the Company. The Executive’s employment by the Company shall be at will.
The Executive’s employment with the Company may be terminated by the Company at any time and for
any reason or no reason. Subject to the terms of the Company’s Senior Executive Severance Benefit
Plan, which is hereby incorporated into this Agreement, as it may be amended from time to time
(provided that any amendment shall not result in a reduction of benefits as set forth in such plan
as of the date hereof), in the event the Company terminates the Executive’s employment, the Company
shall have no further obligation to the Executive, except for payment of earned wages and accrued
and unused paid time off earned through the date of termination, at the rate in effect at the time
of termination, subject to standard deductions and withholdings, and such other benefits as
required in such event by applicable law.

          4.2 Termination by Mutual Agreement of the Parties. The Executive’s employment pursuant to
this Agreement may be terminated at any time upon mutual agreement

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in writing of the Parties. Any such termination of employment shall have the consequences
specified in such agreement.

          4.3 Termination by the Executive. The Executive’s employment by the Company shall be at will.
The Executive shall have the right to resign or terminate the Executive’s employment at any time
and for any reason or no reason. Subject to the terms of the Company’s Senior Executive Severance
Benefit Plan, as it may be amended from time to time (provided that any amendment shall not result
in a reduction of benefits as set forth in such plan as of the date hereof), in the event the
Executive resigns or terminates his employment, the Company shall have no further obligation to the
Executive, except for payment of earned wages and accrued and unused paid time off earned through
the date of resignation or termination, at the rate in effect at the time of resignation or
termination, subject to standard deductions and withholdings, and such other benefits as required
in such event by applicable law.

          4.4 Change in Control. The provisions of Article Two, Section IVB(i) and (ii) of the Plan
providing for acceleration of vesting of outstanding stock options in the event of a “Change in
Control” (as defined in the Appendix, Section C, of the Plan) and an “Involuntary Termination”
thereafter (as defined in the Plan) are hereby incorporated into this Agreement and shall apply in
full.

	 	5.	 	Confidential and Proprietary Information; Nonsolicitation.

          As a condition of employment, the Executive agrees to execute and abide by the Proprietary
Information and Inventions Agreement attached hereto as Exhibit A.

	 	6.	 	Assignment and Binding Effect.

          This Agreement shall be binding upon and inure to the benefit of the Executive and the
Executive’s heirs, executors, personal representatives, assigns, administrators and legal
representatives. Because of the unique and personal nature of the Executive’s duties under this
Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be
assignable by the Executive. This Agreement shall be binding upon and insure to the benefit of the
Company and its successors, assigns and legal representatives.

	 	7.	 	Choice of Law.

          This Agreement is made in California. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California.

	 	8.	 	Integration.

          This Agreement, the Company’s Proprietary Information and Inventions Agreement attached as
Exhibit A hereto, the Company’s Senior Executive Severance Benefit Plan and the Plan contain the
complete, final and exclusive agreement of the Parties relating to the terms and conditions of the
Executive’s employment and the termination of Executive’s employment, and supersedes all prior and
contemporaneous oral and written employment agreements or arrangements between the Parties. To the
extent this Agreement conflicts with the Proprietary Information and Inventions Agreement attached
as Exhibit A hereto, the Proprietary

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Information and Inventions Agreement shall control. To the extent this Agreement conflicts
with the terms of the Employee Handbook, the Company’s Senior Executive Severance Benefit Plan or
the Plan, this Agreement shall control.

	 	9.	 	Amendment.

          This Agreement cannot be amended or modified, except by a written agreement signed by the
Executive and the Company.

	 	10.	 	Waiver.

          No term, covenant or condition of this Agreement or any breach thereof shall be deemed waived,
except with the written consent of the Party against whom the waiver is claimed, and any waiver of
any such term, covenant, condition or breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant, condition or breach.

	 	11.	 	Severability.

          The finding by a court of competent jurisdiction of the unenforceability, invalidity or
illegality of any provision of this Agreement shall not render any other provision of this
Agreement unenforceable, invalid or illegal. Such court shall have the authority to modify or
replace the invalid or unenforceable term or provision with a valid and enforceable term or
provision which most accurately represents the Parties’ intention with respect to the invalid or
unenforceable term or provision.

	 	12.	 	Interpretation; Construction.

          The headings set forth in this Agreement are for convenience of reference only and shall not
be used in interpreting this Agreement. This Agreement has been drafted by legal counsel
representing the Company, but the Executive has been encouraged to consult with the Executive’s own
independent counsel and tax advisors with respect to the terms of this Agreement. The Parties
acknowledge that each Party has reviewed and revised, or had an opportunity to review and revise,
this Agreement, and the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of this Agreement.

	 	13.	 	Representations and Warranties.

          The Executive represents and warrants that the Executive is not restricted or prohibited,
contractually or otherwise, from entering into and performing each of the terms and covenants
contained in this Agreement, and that the Executive’s execution and performance of this Agreement
will not violate or breach any other agreements between the Executive and any other person or
entity.

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	 	14.	 	Counterparts.

          This Agreement may be executed in two counterparts, each of which shall be deemed an original,
all of which together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile or by email of a scanned copy will
be effective as delivery of an original executed counterpart of this Agreement.

	 	15.	 	Arbitration.

          To ensure the rapid and economical resolution of disputes that may arise in connection with
the Executive’s employment with the Company, the Executive and the Company agree that any and all
disputes, claims or causes of action, in law or equity, arising from or relating to the Executive’s
employment, or the termination of that employment, will be resolved pursuant to the Federal
Arbitration Act and to the fullest extent permitted by law, by final, binding and confidential
arbitration in San Diego, California conducted by the Judicial Arbitration and Mediation Services
(“JAMS”), or its successors, under the then current rules of JAMS for employment disputes;
provided, however, that the arbitrator shall: (a) have the authority to compel adequate discovery
for the resolution of the dispute and to award such relief as would otherwise be permitted by law;
and (b) issue a written arbitration decision, including the arbitrator’s essential findings and
conclusions and a statement of the award. Both the Executive and the Company shall be entitled to
all rights and remedies that either the Executive or the Company would be entitled to pursue in a
court of law. The Company shall pay all fees, including the arbitrator’s fee. Nothing in this
Agreement is intended to prevent either the Executive or the Company from obtaining injunctive
relief in court to prevent irreparable harm pending the conclusion of any such arbitration.

	 	16.	 	Trade Secrets Of Others.

          It is the understanding of both the Company and the Executive that the Executive shall not
divulge to the Company and/or its Affiliates any confidential information or trade secrets
belonging to others, including the Executive’s former employers, nor shall the Company and/or its
Affiliates seek to elicit from the Executive any such information. Consistent with the foregoing,
the Executive shall not provide to the Company and/or its Affiliates, and the Company and/or its
Affiliates shall not request, any documents or copies of documents containing such information.

	 	17.	 	Advertising Waiver.

          The Executive agrees to permit the Company and/or its Affiliates, and persons or other
organizations authorized by the Company and/or its Affiliates, to use, publish and distribute
advertising or sales promotional literature concerning the products and/or services of the Company
and/or its Affiliates, or the machinery and equipment used in the provision thereof, in which the
Executive’s name and/or pictures of the Executive taken in the course of the Executive’s provision
of services to the Company and/or its Affiliates, appear. The Executive hereby waives and releases
any claim or right the Executive may otherwise have arising out of such use, publication or
distribution.

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	 	18.	 	Indemnification.

          The Executive shall have no liability to the Company for any loss suffered by the Company that
arises out of any action or inaction of the Executive if the Executive in good faith determined
that such course of conduct was in the best interest of the Company, and such course of conduct did
not constitute gross negligence or willful misconduct of the Executive. The Executive shall be
indemnified by the Company against losses, judgments, liabilities, expenses and amounts paid in
settlement of any claims sustained by him in connection with the Company, provided that the same
were not the result of gross negligence or willful misconduct on the part of the Executive.

     In Witness Whereof, the Parties have executed this Agreement as of the Effective
Date.

Ardea Biosciences, Inc.

	 	 	 	 	 
	/s/ Barry D. Quart
 	 	 
	Barry D. Quart 	 	 
	Chief Executive Officer 	 	 

Executive

	 	 	 	 	 
	/s/ David T. Hagerty
 	 	 
	David T. Hagerty, MD 	 	 
	 	 	 

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EXHIBIT A

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

     In consideration of my employment or continued employment by Ardea Biosciences,
Inc. (“Company”), and the compensation paid to me now and during my employment with the
Company, I agree to the terms of this Agreement as follows:

1. Confidential Information Protections.

     1.1 Nondisclosure; Recognition of Company’s Rights. At all times during and after my
employment, I will hold in confidence and will not disclose, use, lecture upon or publish any of
Company’s Confidential Information (defined below), except as may be required in connection with my
work for Company, or as expressly authorized by the Chief Executive Officer (the “CEO”) of Company.
I will obtain the CEO’s written approval before publishing or submitting for publication any
material (written, oral or otherwise) that relates to my work at Company and/or incorporates any
Confidential Information. I hereby assign to Company any rights I may have or acquire in any and
all Confidential Information and recognize that all Confidential Information shall be the sole and
exclusive property of Company and its assigns.

     1.2 Confidential Information. The term “Confidential Information” shall mean any and all
confidential knowledge, data or information related to Company’s business or its actual or
demonstrably anticipated research or development activities, including, without limitation, (a)
trade secrets, inventions, ideas, processes, computer source and object code, data, formulae,
programs, other works of authorship, know-how, improvements, discoveries, developments, designs,
and techniques; (b) information regarding products, services, plans for research and development,
marketing and business plans, budgets, financial statements, contracts, prices, suppliers and
customers; (c) information regarding the skills and compensation of Company’s employees,
contractors, and any other service providers of Company; and (d) the existence of any business
discussions, negotiations or agreements between Company and any third party.

     1.3 Third Party Information. I understand that Company has received and in the future will
receive from third parties confidential or proprietary information (“Third Party Information”)
subject to a duty on Company’s part to maintain the confidentiality of such information and to use
it only for certain limited purposes. During and after the term of my employment, I will hold
Third Party Information in strict confidence and will not disclose to anyone (other than Company
personnel who need to know such information in connection with their work for Company) or use Third
Party Information, except in connection with my work for Company or unless expressly authorized by
an officer of Company in writing.

     1.4 No Improper Use of Information of Prior Employers and Others. I represent that my
employment by Company does not and will not breach any agreement with any former employer,
including any non-compete agreement or any agreement to keep in confidence or refrain from using
information acquired by me prior to my employment by Company. I further represent that I have not
entered into, and will not enter into, any agreement, either written or oral, in conflict with my
obligations under this Agreement. During my employment by Company, I will not improperly make use
of or disclose any information or trade secrets of any former employer or other third party, nor
will I bring onto the premises of Company or use any unpublished documents or any property
belonging to any former employer or other third party, in violation of any lawful agreements with
that former employer or third party. I will use in the performance of my duties only information
that is generally known and used by persons with training and experience comparable to my own, is
common knowledge in the industry or otherwise legally in the public domain, or is otherwise
provided or developed by Company.

2. Inventions.

     2.1 Inventions and Intellectual Property Rights. As used in this Agreement, the term
“Invention” means any ideas, concepts, information, materials, processes, data, programs, know-how,
improvements, discoveries, developments, designs, artwork, formulae, other copyrightable works, and
techniques and all Intellectual Property Rights in any of the items listed above. The term
“Intellectual Property Rights” means all trade secrets, copyrights, trademarks, mask work rights,
patents and other intellectual property rights recognized by the laws of any jurisdiction or
country.

     2.2 Prior Inventions. I have disclosed on Exhibit A a complete list of all Inventions that
(a) I have, or I have caused to be, alone or jointly with others, conceived, developed or reduced
to practice prior to the commencement of my employment by Company; (b) in which I have an ownership
interest or which I have a license to use; (c) and that I wish to have excluded from the scope of
this Agreement (collectively referred to as “Prior Inventions”). If no Prior Inventions are listed
in Exhibit A, I warrant that there are no Prior Inventions. I agree that I will not incorporate,
or permit to be incorporated, Prior Inventions in any Company Inventions (defined below) without
Company’s prior written consent. If, in the course of my employment with Company, I incorporate a
Prior Invention into a Company process, machine or other work, I hereby grant Company a
non-exclusive, perpetual,

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fully-paid and royalty-free, irrevocable and worldwide license, with rights to sublicense
through multiple levels of sublicensees, to reproduce, make derivative works of, distribute,
publicly perform and publicly display in any form or medium, whether now known or later developed,
make, have made, use, sell, import, offer for sale, and exercise any and all present or future
rights in, such Prior Invention.

     2.3 Assignment of Company Inventions. Inventions assigned to the Company or to a third party
as directed by the Company pursuant to the section titled “Government or Third Party” are referred
to in this Agreement as “Company Inventions.” Subject to the section titled “Government or Third
Party” and except for Inventions that I can prove qualify fully under the provisions of California
Labor Code section 2870 and I have set forth in Exhibit A, I hereby assign and agree to assign in
the future (when any such Inventions or Intellectual Property Rights are first reduced to practice
or first fixed in a tangible medium, as applicable) to Company all my right, title, and interest in
and to any and all Inventions (and all Intellectual Property Rights with respect thereto) made,
conceived, reduced to practice or learned by me, either alone or with others, during the period of
my employment by Company.

     2.4 Obligation to Keep Company Informed. During the period of my employment and for one (1)
year after my employment ends, I will promptly and fully disclose to Company in writing (a) all
Inventions authored, conceived or reduced to practice by me, either alone or with others, including
any that might be covered under California Labor Code section 2870, and (b) all patent applications
filed by me or in which I am named as an inventor or co-inventor.

     2.5 Government or Third Party. I agree that, as directed by the Company, I will assign to a
third party, including, without limitation, the United States, all my right, title and interest in
and to any particular Company Invention.

     2.6 Enforcement of Intellectual Property Rights and Assistance. During and after the period
of my employment, I will assist Company in every proper way to obtain and enforce United States and
foreign Intellectual Property Rights relating to Company Inventions in all countries. If the
Company is unable to secure my signature on any document needed in connection with such purposes, I
hereby irrevocably designate and appoint Company and its duly authorized officers and agents as my
agent and attorney in fact, which appointment is coupled with an interest, to act on my behalf to
execute and file any such documents and to do all other lawfully permitted acts to further such
purposes with the same legal force and effect as if executed by me.

     2.7 Incorporation of Software Code. I agree that I will not incorporate into any Company
software or otherwise deliver to Company any software code licensed under the GNU General Public
License or Lesser General Public License or any other license that, by its terms, requires or
conditions the use or distribution of such code on the disclosure, licensing or distribution of any
source code owned or licensed by Company.

3. Records. I agree to keep and maintain adequate and current records (in the form of
notes, sketches, drawings and in any other form that is required by the Company) of all Inventions
made by me during the period of my employment by the Company, which records shall be available to,
and remain the sole property of, the Company at all times.

4. Additional Activities. I agree that (a) during the term of my employment by Company, I
will not, without Company’s express written consent, engage in any employment or business activity
that is competitive with, or would otherwise conflict with my employment by, Company, and (b) for
the period of my employment by Company and for one (l) year thereafter, I will not, either directly
or indirectly, solicit or attempt to solicit any employee, independent contractor or consultant of
Company to terminate his, her or its relationship with Company in order to become an employee,
consultant or independent contractor to or for any other person or entity.

5. Return of Company Property.  Upon termination of my employment or upon Company’s
request at any other time, I will deliver to Company all of Company’s property, equipment and
documents, together with all copies thereof, and any other material containing or disclosing any
Inventions, Third Party Information or Confidential Information and certify in writing that I have
fully complied with the foregoing obligation. I agree that I will not copy, delete or alter any
information contained upon my Company computer or Company equipment before I return it to Company.
In addition, if I have used any personal computer, server or e-mail system to receive, store,
review, prepare or transmit any Company information, including, but not limited to, Confidential
Information, I agree to provide the Company with a computer-useable copy of all such Confidential
Information and then permanently delete and expunge such Confidential Information from those
systems. I agree to provide the Company access to my system as reasonably requested to verify that
the necessary copying and/or deletion is completed. I further agree that any property situated on
Company’s premises and owned by Company is subject to inspection by Company’s personnel at any time
with or without notice. Prior to the termination of my employment or promptly after termination of
my employment, I will cooperate with Company in attending an exit interview and certify in writing
that I have complied with the requirements of this section.

6. Notification Of New Employer. If I leave the employ of Company, I consent to the
notification of my new employer of my rights and obligations under this Agreement, by Company
providing a copy of this Agreement or otherwise.

7. General Provisions.

     7.1 Governing Law and Venue. This Agreement and any action related thereto will be governed
and interpreted by and under the laws of the State of California,

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without giving effect to any conflicts of laws principles that require the application of the
law of a different state. I expressly consent to personal jurisdiction and venue in the state and
federal courts for the county in which Company’s principal place of business is located for any
lawsuit filed there against me by Company arising from or related to this Agreement.

     7.2 Severability. If any provision of this Agreement is, for any reason, held to be invalid
or unenforceable, the other provisions of this Agreement will remain enforceable and the invalid or
unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum
extent permitted by law.

     7.3 Survival. This Agreement shall survive the termination of my employment and the
assignment of this Agreement by Company to any successor or other assignee and be binding upon my
heirs and legal representatives.

     7.4 Employment. I agree and understand that nothing in this Agreement shall give me any right
to continued employment by Company, and it will not interfere in any way with my right or Company’s
right to terminate my employment at any time, with or without cause and with or without advance
notice.

     7.5 Notices. Each party must deliver all notices or other communications required or
permitted under this Agreement in writing to the other party at the address listed on the signature
page, by courier, by certified or registered mail (postage prepaid and return receipt requested),
or by a nationally-recognized express mail service. Notice will be effective upon receipt or
refusal of delivery. If delivered by certified or registered mail, notice will be considered to
have been given five (5) business days after it was mailed, as evidenced by the postmark. If
delivered by courier or express mail service, notice will be considered to have been given on the
delivery date reflected by the courier or express mail service receipt. Each party may change its
address for receipt of notice by giving notice of the change to the other party.

     7.6 Injunctive Relief. I acknowledge that, because my services are personal and unique and
because I will have access to the Confidential Information of Company, any breach of this Agreement
by me may cause irreparable injury to Company for which monetary damages would not be an adequate
remedy and, therefore, will entitle Company to seek injunctive relief (including specific
performance). The rights and remedies provided to each party in this Agreement are cumulative and
in addition to any other rights and remedies available to such party at law or in equity.

     7.7 Waiver. Any waiver or failure to enforce any provision of this Agreement on one occasion
will not be deemed a waiver of that provision or any other provision on any other occasion.

     7.8 Export. I agree not to export, directly or indirectly, any U.S. technical data acquired
from Company or any products utilizing such data, to countries outside the United States, because
such export could be in violation of the United States export laws or regulations.

     7.9 Entire Agreement. If no other agreement governs nondisclosure and assignment of
inventions during any period in which I was previously employed or am in the future employed by
Company as an independent contractor, the obligations pursuant to sections of this Agreement titled
“Confidential Information Protections” and “Inventions” shall apply. This Agreement is the final,
complete and exclusive agreement of the parties with respect to the subject matter hereof and
supersedes and merges all prior communications between us with respect to such matters. No
modification of or amendment to this Agreement, or any waiver of any rights under this Agreement,
will be effective unless in writing and signed by me and the CEO of Company. Any subsequent change
or changes in my duties, salary or compensation will not affect the validity or scope of this
Agreement.

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     This Agreement shall be effective as of the first day of my employment with Company.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

	David T. Hagerty, MD	 	Ardea Biosciences, Inc.  
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	I have read, understand,
and accept this Agreement and
have been given the
opportunity to review it with
independent legal
counsel:	 	Accepted and agreed:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By: 
	/s/ David T. Hagerty	 	By:	 	/s/ Barry D. Quart	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Barry D. Quart	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Chief Executive Officer	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Address:
	 	 	Address: 4939 Directors Place	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	        San Diego, CA  92121	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT A

INVENTIONS

1. Prior Inventions Disclosure. The following is a complete list of all Prior Inventions (as
provided in Section 2.2 of the attached Employee Confidential Information and Inventions Assignment
Agreement, defined herein as the “Agreement”):

	 	o	 	None
	 
	 	o	 	See immediately below:
	 
	 	 

	 
	 	 

2. Limited Exclusion Notification.

     This is to notify you in accordance with Section 2872 of the California Labor Code
that the foregoing Agreement between you and Company does not require you to assign or offer to
assign to Company any Invention that you develop entirely on your own time without using Company’s
equipment, supplies, facilities or trade secret information, except for those Inventions that
either:

     a. Relate at the time of conception or reduction to practice to Company’s business, or actual
or demonstrably anticipated research or development; or

     b. Result from any work performed by you for Company.

     To the extent a provision in the foregoing Agreement purports to require you to assign an
Invention otherwise excluded from the preceding paragraph, the provision is against the public
policy of this state and is unenforceable.

     This limited exclusion does not apply to any patent or Invention covered by a contract between
Company and the United States or any of its agencies requiring full title to such patent or
Invention to be in the United States.exv10w2

Exhibit 10.2

MANAGEMENT CONTINUITY AGREEMENT

     THIS AGREEMENT dated as of this 28th day of February 2011 between Alexander W.
Pease (the “Executive”) and EnPro Industries, Inc., a North Carolina corporation (the “Company”).

     WHEREAS, the Company considers it essential to the best interests of its shareholders to
foster the continuous employment of key management personnel in the event there is, or is
threatened, a change in control of the Company; and

     WHEREAS, the Company recognizes that the uncertainty and questions which may arise among key
management in connection with the possibility of a change in control may result in the departure or
distraction of key management personnel to the detriment of the Company and its shareholders; and

     WHEREAS, the Company desires to provide certain protection to Executive in the event of a
change in control of the Company as set forth in this Agreement in order to induce Executive to
remain in the employ of the Company notwithstanding any risks and uncertainties created by the
possibility of a change in control of the Company;

WITNESSETH:

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein contained,
the parties agree as follows:

     1. Term. The “Term” of this Agreement shall mean the period commencing on the date
hereof and ending twenty-four (24) months after such date; provided, however, that commencing on
the date one year after the date hereof, and on each annual anniversary of such date (such date and
each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), the Term
shall be automatically extended so as to terminate twenty-four (24) months from such Renewal Date,
unless at least sixty (60) days prior to the Renewal Date the Company shall give notice to the
Executive that the Term shall not be so extended.

     2. Period of Employment. Executive’s “Period of Employment” shall commence on the
date on which a Change in Control occurs during the Term and shall end on the date that is
twenty-four (24) months after the date on which such Change in Control occurs (subject to the
provisions of Section 20 below pursuant to which the Period of Employment may be deemed to have
commenced prior to the date of a Change in Control in certain circumstances).

     3. Certain Definitions. For purposes of this Agreement:

     “Board” shall mean the Board of Directors of the Company.

     “Cause” shall mean Executive’s termination of employment with the Company due to (A)
the willful and continued failure by Executive to substantially perform Executive’s duties
with the Company, which failure causes material and demonstrable injury to the Company
(other than any such failure resulting from Executive’s incapacity due to physical or mental
illness), after a demand for substantial performance is delivered

 

 

to Executive by the Board which specifically identifies the manner in which the Board
believes that Executive has not substantially performed Executive’s duties, and after
Executive has been given a period (hereinafter known as the “Cure Period”) of at least
thirty (30) days to correct Executive’s performance, or (B) the willful engaging by
Executive in other gross misconduct materially and demonstrably injurious to the Company.
For purposes hereof, no act, or failure to act, on Executive’s part shall be considered
“willful” unless conclusively demonstrated to have been done, or omitted to be done, by
Executive not in good faith and without reasonable belief that Executive’s action or
omission was in the best interests of the Company. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and until there shall have been
delivered to Executive a Notice of Termination which shall include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to Executive and an opportunity for Executive, together with Executive’s
counsel, to be heard before the Board), finding that in the good faith opinion of the Board
Executive was guilty of conduct set forth above in clause (A) (including the expiration of
the Cure Period without the correction of Executive’s performance) or clause (B) above and
specifying the particulars thereof in detail.

     “Change in Control” shall mean:

     (i) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of
the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in the election
of directors (the “Outstanding Company Voting Securities”); provided, however, that the
following acquisitions shall not constitute a Change in Control: (A) any acquisition
directly from the Company (other than by exercise of a conversion privilege), (B) any
acquisition by the Company or any of its subsidiaries, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of its
subsidiaries or (D) any acquisition by any company with respect to which, following such
acquisition, more than 70% of, respectively, the then outstanding shares of common stock of
such company and the combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially the same
proportions as their ownership, solely in their capacity as shareholders of the Company,
immediately prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or (ii) individuals who, as of
the Distribution Date (as such term is defined in the Distribution Agreement among Goodrich
Corporation, EnPro Industries, Inc. and Coltec Industries Inc.), constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the Distribution
Date whose election, or nomination for election by the Company’s shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such

2

 

individual were a member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest; or (iii) consummation of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, solely in their capacity as
shareholders of the Company, more than 70% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the company
resulting from such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger or
consolidation of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or (iv) consummation of (A) a complete liquidation or
dissolution of the Company or (B) a sale or other disposition of all or substantially all of
the assets of the Company, other than to a company, with respect to which following such
sale or other disposition, more than 70% of, respectively, the then outstanding shares of
common stock of such company and the combined voting power of the then outstanding voting
securities of such company entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the individuals
and entities, solely in their capacity as shareholders of the Company, who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such sale or
other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be.

     “Date of Termination” is as defined in Section 8 below.

     “Good Reason” shall mean:

     (i) without Executive’s express written consent, (A) the assignment to Executive of any
new duties or responsibilities substantially inconsistent in character with Executive’s
duties and responsibilities within the Company immediately prior to a Change in Control, (B)
any substantial adverse change in Executive’s duties and responsibilities as in effect
immediately prior to a Change in Control, including, but not limited to, a reduction in
duties or responsibilities which occurs because the Company is no longer an independent
publicly-held entity, (C) any removal of Executive from or any failure to re-elect Executive
to any director position of the Company, (D) a change in the annual or long term incentive
plan in which Executive currently participates such that Executive’s opportunity to earn
incentive compensation is impaired, (E) a material reduction in the aggregate value of
Company perquisites made available to Executive, (F) an elimination or material impairment
of Executive’s ability to participate in retirement plans comparable to those in which
Executive currently participates, (G) any substantial increase in Executive’s obligation to
travel on the Company’s business over Executive’s present business travel obligations, or
(H) an elimination or material impairment of Executive’s ability to receive stock options
with values comparable to those Executive was granted within the one year period preceding
the commencement of the Period of Employment; (ii) the failure of the Company to comply
with any other of its obligations

3

 

under Section 4 herein; (iii) the relocation of the offices of the Company at which
Executive was employed immediately prior to the Change in Control to a location which is
more than fifty (50) miles from such prior location, or the failure of the Company to (A)
pay or reimburse Executive, in accordance with the Company’s relocation policy for its
employees in existence immediately prior to a Change in Control, for all reasonable costs
and expenses; plus “gross ups” referred to in such policy incurred by Executive relating to
a change of Executive’s principal residence in connection with any relocation of the
Company’s offices to which Executive consents, and (B) indemnify Executive against any loss
(defined as the difference between the actual sale price of such residence and the higher of
(1) Executive’s aggregate investment in such residence or (2) the fair market value of such
residence as determined by the relocation management organization used by the Company
immediately prior to the Change in Control (or other real estate appraiser designated by
Executive and reasonably satisfactory to the Company)) realized in the sale of Executive’s
principal residence in connection with any such change of residence; (iv) the failure of
the Company to obtain the assumption of and the agreement to perform this Agreement by any
successor as contemplated in Section 11 hereof; or (v) any purported termination of
Executive’s employment during the Period of Employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section 7 hereof.

     “Incapacity Discharge” means Executive’s termination of employment with the Company if,
as a result of Executive’s incapacity due to physical or mental illness, Executive shall
have been absent from Executive’s duties with the Company on a full-time basis for
one-hundred twenty (120) consecutive business days, and within thirty (30) days after a
written Notice of Termination is given, Executive shall not have returned to the full-time
performance of Executive’s duties.

     “Mandatory Retirement Date” shall mean the compulsory retirement date, if any,
established by the Company for those executives of the Company who, by reason of their
positions and the size of their nonforfeitable annual retirement benefits under the
Company’s pension, profit-sharing, and deferred compensation plans, are exempt from, the
provisions of the Age Discrimination in Employment Act, 29 U.S.C. Sections 621, et seq.,
which date shall not in any event be earlier for any executive than the last day of the
month in which such Executive reaches age 65.

     “Notice of Termination” is as defined in Section 7 below.

     “Payment Period” shall mean twenty-four (24) months, provided that the Payment Period
shall not exceed the number of whole calendar months between the Executive’s Date of
Termination and Mandatory Retirement Date (if applicable).

     4. Compensation During Period of Employment. For so long during Executive’s Period of
Employment as Executive is an employee of the Company, the Company shall be obligated to compensate
Executive as follows:

     (a) Executive shall continue to receive Executive’s full base salary at the rate in
effect immediately prior to the Change in Control. Executive’s base salary shall be
increased annually, with each such increase due on the anniversary date of Executive’s most
recent previous increase. Each such increase shall be no less than an amount which

4

 

at least equals on a percentage basis the mean of the annualized percentage increases
in base salary for all elected officers of the Company during the two full calendar years
immediately preceding the Change in Control.

     (b) Executive shall continue to participate in all benefit and compensation plans
(including but not limited to the Equity Compensation Plan, Long-Term Incentive Program,
Performance Share Deferred Compensation Plan, Annual Performance Plan, Executive Life
Insurance Program, Deferred Compensation Plan, 401(K) plan, savings plan, flexible benefits
plan, life insurance plan, health and accident plan or disability plan) in which Executive
was participating immediately prior to the Change in Control, or in plans providing
substantially similar benefits, in either case upon terms and conditions and at levels at
least as favorable as those provided to Executive under the plans in which Executive was
participating immediately prior to the Change in Control;

     (c) Executive shall continue to receive all fringe benefits, perquisites, and similar
arrangements which Executive was entitled to receive immediately prior to the Change in
Control; and

     (d) Executive shall continue to receive annually the number of paid vacation days and
holidays Executive was entitled to receive immediately prior to the Change in Control.

     5. Compensation Upon Termination of Employment. The following provisions set forth
the benefits that may become payable to Executive upon termination of employment with the Company
during the Period of Employment in accordance with, and subject to, the provisions of Section 6
below:

     (a) By not later than the fifth business day following the Date of Termination, the
Company shall pay Executive in a lump sum an amount equal to the sum of the following:

     (i) any base salary that is earned but unpaid as of the Date of Termination;

     (ii) a pro rata portion of the “target incentive amount” under the Annual
Performance Plan for the calendar year in which the Date of Termination occurs
(based on the number of calendar days in such calendar year completed through the
Date of Termination); and

     (iii) a pro rata portion of the “calculated market value” of the phantom
Performance Shares, if any, awarded to Executive under the Company’s Long-Term
Incentive Program (the “LTIP”) for each Plan Cycle under the LTIP that has not been
completed as of the Date of Termination, determined as follows:

     (A) The performance for each such Plan Cycle under the applicable LTIP
award agreement shall be determined based on (x) for any completed calendar
year of the Plan Cycle as of the Date of Termination, actual performance for
the calendar year, (y) for the calendar year in which the Date of
Termination occurs if at least one calendar quarter has been completed
during such calendar year, the greater of target

5

 

performance for the calendar year or actual performance for the
completed calendar quarter(s) for the calendar year annualized for the year,
and (z) for any other calendar years of the Plan Cycle, target performance
for the calendar year.

     (B) The number of phantom Performance Shares for each such Plan Cycle
shall be adjusted in accordance with the formula set forth in the applicable
LTIP award agreement based on the performance for the Plan Cycle determined
under paragraph (A) above.

     (C) The pro rata portion of the “calculated market value” of the
number of phantom Performance Shares adjusted in accordance with paragraph
(B) above shall be based on the number of calendar days in the Plan Cycle
completed through the Date of Termination.

	 	 	Section 5(c) below sets for the method for determining the “target incentive amount” under
the Annual Performance Plan and the “calculated market value” of phantom Performance Shares
under the LTIP. Any amounts payable under Sections 5(a)(ii) or (iii) above shall be offset
dollar-for-dollar by any pro rata payments otherwise provided for under the Annual
Performance Plan or the LTIP.

     (b) In lieu of any salary payments that Executive would have received if he had
continued in the employment of the Company during the Payment Period, the Company shall pay
to Executive in a lump sum, by not later than the fifth business day following the Date of
Termination, an amount equal to one-twelfth of Executive’s annualized base salary in effect
immediately prior to the Date of Termination, multiplied by the number of months in the
Payment Period.

     (c) By not later than the fifth day following the Date of Termination, the Company
shall pay Executive in a lump sum an amount equal to the sum of:

     (i) under the Annual Performance Plan (and in lieu of any further awards under
the Annual Performance Plan that Executive would have received if he had continued
in the employment of the Company during the Payment Period), the number of months in
the Payment Period multiplied by the greatest of one-twelfth of: (A) the amount most
recently paid to Executive for a full calendar year; (B) Executive’s “target
incentive amount” for the calendar year in which his Date of Termination occurs; or
(C) Executive’s “target incentive amount” in effect prior to the Change in Control
for the calendar year in which the Change in Control occurs; plus, if applicable,

     (ii) under the LTIP (and in lieu of any further grants under the LTIP that
Executive would have received if he had continued in the employment of the Company
during the Payment Period), sixteen (16) multiplied by the greatest of: (A) with
respect to the most recently completed Plan Cycle as of the Date of Termination,
one-twelfth of the “calculated market value” of the Performance Shares actually
awarded Executive (including the value of any Performance Shares Executive may have
elected to defer under the Performance Share Deferred Compensation Program); (B)
with respect to the most recently

6

 

commenced Plan Cycle under the LTIP (if Executive is a participant in such Plan
Cycle) prior to Executive’s Date of Termination, one-twelfth of the “calculated
market value” of the phantom Performance Shares, if any, awarded to Executive; or
(C) with respect to the most recently commenced Plan Cycle prior to the date of the
occurrence of the Change in Control, one-twelfth of the “calculated market value” of
the phantom Performance Shares, if any, awarded to Executive.

     For purposes of this Section 5, Executive’s “target incentive amount” under the
Annual Performance Plan for a given calendar year (i.e., the calendar year in which
the Date of Termination occurs or the Change in Control occurs, as applicable) is
determined by multiplying (i) Executive’s annualized total gross base salary for the
calendar year by (ii) the incentive target percentage which is applicable to
Executive’s incentive category under the Annual Performance Plan for the calendar
year. For purposes of this Section 5, the “calculated market value” of each
Performance Share actually awarded upon completion of a Plan Cycle, Performance
Share deferred under the Performance Share Deferred Compensation Program or phantom
Performance Share granted under the LTIP shall be the mean of the high and low
prices of the Company’s common stock on the relevant date as reported on the New
York Stock Exchange Composite Transactions listing (or similar report), or, if no
sale was made on such date, then on the next preceding day on which a sale was made
multiplied by the number of shares involved in the calculation. The relevant date
for Section 5(a)(iii) and clauses 5(c)(ii)(B) and 5(c)(ii)(C) is the date upon which
the Compensation Committee (“Committee”) of the Board of Directors awarded the
phantom Performance Shares in question; for clause 5(c)(ii)(A) the relevant date is
the date on which the Committee made a determination of attainment of financial
objectives and awarded Performance Shares (including any Performance Shares
Executive may have elected to defer under the Performance Share Deferred
Compensation Program).

     Any payments received pursuant to Sections 5(c)(i) or (ii) above shall be in
addition to, and not in lieu of, any payments required to be made to Executive as
the result of the happening of an event that would constitute a change in control
pursuant to the provisions of the Annual Performance Plan or LTIP, as applicable.

     (d) By not later than the fifth day following the Date of Termination, the Company
shall pay Executive in a lump sum an amount equal to the sum of:

     (i) If Executive is under age 55, or over the age of 55 but not eligible to
retire, at the Date of Termination the present value of all health and welfare
benefits the Executive would have been entitled to had the Executive continued as an
employee of the Company during the Payment Period and been entitled to or
participated in the same health and welfare benefits during the Payment Period as
immediately prior to the Date of Termination plus an amount in cash equal to the
amount necessary to cause the amount of the aggregate after-tax lump sum payment the
Executive receives pursuant to this provision to be equal to the aggregate after-tax
value of the benefits which Executive would have received if Executive continued to
receive such benefits as an employee; or

7

 

     (ii) If Executive is age 55 or over and eligible to retire on the Date of
Termination, the present value of the health and welfare benefits to which Executive
would have been entitled under the Company’s general retirement policies if
Executive retired on the Date of Termination with the Company paying that percentage
of the premium cost of the plans which it would have paid under the terms of the
plans in effect immediately prior to the Change of Control with respect to
individuals who retire at age 65, regardless of Executive’s actual age on the
Termination Date, provided such lump sum value would be at least equal to the lump
sum value of the benefits which would have been payable if Executive had been
eligible to retire and had retired immediately prior to the Change in Control.

     (e) By not later than the fifth day following the Date of Termination, the Company
shall pay Executive in a lump sum an amount equal to the sum of the present value of the
fringe benefit programs, perquisites (if any), and similar arrangements the Executive would
have been entitled to receive had the Executive continued in employment with the Company for
the Payment Period and been entitled to or participated in the same such benefits during the
Payment Period as immediately prior to the Date of Termination. In addition and
notwithstanding any provision of the Company’s 2002 Equity Compensation Plan (or any
comparable equity award plan of the Company) or any applicable award agreement thereunder to
the contrary, Executive may exercise any of Executive’s stock options that are vested as of
Executive’s Date of Termination at any time during the Payment Period (but not exceeding the
original expiration date of the options).

     (f) The Company shall, in addition to the benefits to which Executive is entitled under
the retirement plans or programs sponsored by the Company or its affiliates in which
Executive participates (including without limitation any Supplemental Executive Retirement
Plan in which Executive participates, if applicable), pay Executive in a lump sum in cash by
no later than the fifth day following the Date of Termination an amount equal to the
actuarial equivalent of the retirement pension to which Executive would have been entitled
under the terms of such retirement plans or programs had Executive accumulated additional
years of continuous service under such plans equal in length to Executive’s Payment Period.
The length of the Payment Period will be added to total years of continuous service for
determining vesting, the amount of benefit accrual, to the age which Executive will be
considered to be for the purposes of determining eligibility for normal or early retirement
calculations and the age used for determining the amount of any actuarial reduction. For the
purposes of calculating the additional benefit accrual under this paragraph, the amount of
compensation Executive will be deemed to have received during each month of Executive’s
Payment Period shall be equal to the sum of Executive’s annual base salary prorated on a
monthly basis as provided for under Section 4(a) immediately prior to the Date of
Termination (including salary increases), plus under the Company’s Annual Performance Plan
the greatest of one-twelfth of:

     (i) the amount most recently paid to Executive for a full calendar year,

     (ii) Executive’s “target incentive amount” for the calendar year in which
Executive’s Date of Termination occurs, or

8

 

     (iii) Executive’s “target incentive amount” in effect prior to the Change in
Control for the calendar year in which the Change in Control occurs. Attached as
Exhibit 1 is an illustration, not intending to be exhaustive, of examples of how
inclusion of the Payment Period may affect the calculation of Executive’s retirement
benefit.

     (g) In no event shall any amount payable to Executive described in this Section 5 be
considered compensation or earnings under any pension, savings or other retirement plan of
the Company.

     6. Termination.

     (a) Termination Without Compensation. If Executive’s employment is terminated for any
of the following reasons, Executive shall not be entitled by virtue of this Agreement to any
of the benefits provided in the foregoing Section 5:

     (i) If, prior to the commencement of the Period of Employment, Executive’s
employment with the Company is terminated at any time for any reason, including
without limitation due to (A) Executive’s death, (B) an Incapacity Discharge, (C) a
termination initiated by the Company with or without Cause or (D) resignation,
retirement or other termination initiated by Executive with or without Good Reason,
subject, however, to the provisions of Section 20 below.

     (ii) If Executive’s employment with the Company is terminated during the
Period of Employment with Cause.

     (iii) If Executive resigns, retires or otherwise voluntarily terminates
employment with the Company during the Period of Employment without Good Reason.

     (b) Termination with Compensation. If Executive’s employment is terminated for any of
the following reasons, Executive shall be entitled by virtue of this Agreement to the
benefits provided in the foregoing Section 5 as follows:

     (i) If, during the Period of Employment, the Company discharges Executive
other than for Cause, Executive shall receive all of the benefits and payments
provided in Section 5.

     (ii) Executive may terminate his employment with the Company at any time
during the Period of Employment for Good Reason (“Good Reason Termination”) and
shall receive all of the benefits and payments provided in Section 5.

     (iii) If, during the Period of Employment, Executive either (A) retires from
employment with the Company or (B) if the Company discharges Executive due to an
Incapacity Discharge, in either case while Executive has cause to terminate his
employment as a Good Reason Termination (whether or not Executive has provided
Notice of Termination to the Company pursuant to

9

 

Section 7), Executive shall receive all of the benefits and payments provided
in Section 5.

     (iv) If Executive dies while employed by the Company during the Period of
Employment while having cause to terminate his employment as a Good Reason
Termination (whether or not Executive has provided Notice of Termination to the
Company pursuant to Section 7), Executive’s beneficiary or beneficiaries named on
Exhibit 2 to this Agreement (or Executive’s estate if he has not named a
beneficiary) shall be entitled to receive those payments provided under Sections
5(a), 5(b) and 5(c) of this Agreement in addition to any benefits that such
beneficiaries would be entitled under any other plan, program or policy of the
Company as a result of Executive’s employment with the Company.

     (v) Executive may become eligible for the benefits and payments under Section
5 for termination of employment prior to a Change in Control in accordance with, and
subject to, the provisions of Section 20 below.

     7. Notice of Termination. Any termination of Executive’s employment by the Company or
any termination by Executive as a Good Reason Termination shall be communicated by written notice
to the other party hereto. For purposes of this Agreement, such notice shall be referred to as a
“Notice of Termination.” Such notice shall, to the extent applicable, set forth the specific reason
for termination, and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive’s employment under the provision so indicated.

     8. Date of Termination. “Date of Termination” shall mean:

     (a) If Executive terminates Executive’s employment as a Good Reason Termination, the
date specified in the Notice of Termination, but in no event more than sixty (60) days after
Notice of Termination is given.

     (b) If Executive’s employment is terminated with Cause, the date on which a Notice of
Termination is given, except that the Date of Termination shall not be any date prior to the
date on which the Cure Period expires without the correction of Executive’s performance (if
applicable).

     (c) If Executive’s employment pursuant to this Agreement is terminated following
absence due to physical incapacity as an Incapacity Discharge, then the Date of Termination
shall be thirty (30) days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of Executive’s duties on a full-time basis during
such thirty (30) day period).

     (d) A termination of employment by either the Company or by Executive shall not affect
any rights Executive or Executive’s surviving spouse or beneficiaries may have pursuant to
any other agreement or plan of the Company providing benefits to Executive, except as
provided in such agreement or plan.

10

 

     9. Adjustments to Payments.

     (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall
be determined that any payment or distribution by the Company to Executive or for
Executive’s benefit (whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (the “Payments”) would be subject to the excise
tax imposed by Section 4999 (or any successor provisions) of the Internal Revenue Code of
1986, as amended (the “Code”), or any interest or penalty is incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest and penalties,
is hereinafter collectively referred to as the “Excise Tax”), then the Payments shall be
reduced (but not below zero) if and to the extent that such reduction would result in
Executive retaining a larger amount, on an after-tax basis (taking into account federal,
state and local income taxes and the imposition of the Excise Tax), than if Executive
received all of the Payments. The Company shall reduce or eliminate the Payments, by first
reducing or eliminating the portion of the Payments which are not payable in cash and then
by reducing or eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the determination.

     (b) All determinations required to be made under this Section 9, including whether and
when an adjustment to any Payments is required and, if applicable, which Payments are to
be so adjusted, shall be made by PricewaterhouseCoopers LLC (or their successors) (the
“Accounting Firm”) which shall provide detailed supporting calculations both to the Company
and to Executive within fifteen (15) business days of the receipt of notice from Executive
that there has been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines
that no Excise Tax is payable by Executive, it shall furnish Executive with a written
opinion that failure to report the Excise Tax on Executive’s applicable federal income tax
return would not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and Executive.

     10. No Obligation to Mitigate Damages, No Effect on Other Contractual Rights.
Executive shall not be required to refund the amount of any payment or employee benefit provided
for or otherwise mitigate damages under this Agreement by seeking or accepting other employment or
otherwise, nor shall the amount of any payment required to be made under this Agreement be reduced
by any compensation earned by Executive as the result of any employment by another employer after
the date of termination of Executive’s employment with the Company, or otherwise. Upon receipt of
written notice from Executive that Executive has been reemployed by another company or entity on a
full-time basis, benefits, fringe benefits and perquisites otherwise receivable by Executive
pursuant to Sections 5(d) or 5(e) related to life, health, disability and accident insurance plans
and programs and other similar benefits, company cars, financial planning, country club
memberships, and the like (but not incentive compensation, LTIP, pension plans or other similar
plans and programs) shall be reduced to the extent

11

 

comparable benefits are made available to Executive at his new employment and any such
benefits actually received by Executive shall be reported to the Company by Executive.

     The provisions of the Agreement, and any payment or benefit provided for hereunder shall not
reduce any amount otherwise payable, or in any way diminish Executive’s existing rights, or rights
which would occur solely as a result of the passage of time, under any other agreement, contract,
plan or arrangement with the Company.

     11. Successors and Binding Agreement.

     (a) The Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business or assets of
the Company, by agreement in form and substance satisfactory to Executive, to assume and
agree to perform this Agreement.

     (b) This Agreement shall be binding upon the Company and any successor of or to the
Company, including, without limitation, any person acquiring directly or indirectly all or
substantially all of the assets of the Company whether by merger, consolidation, sale or
otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of
this Agreement), but shall not otherwise be assignable by the Company.

     (c) This Agreement shall inure to the benefit of and be enforceable by Executive and
Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amounts would still
be payable to Executive pursuant to Sections 5 and 6 hereunder if Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there
be no such designee, to Executive’s estate.

     12. Notices. For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this Agreement, provided that
all notices to the Company shall be directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such other address as either party may
have furnished to the other in writing, except that notices of change of address shall be effective
only upon receipt.

     13. Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of North Carolina, without giving effect to
the principles of conflict of laws of such State.

     14. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged, and this Agreement may not be terminated before the end of the Term, unless such
waiver, modification, discharge or termination is agreed to in a writing signed by Executive and
the Company. No waiver by either party hereto at any time of any breach by the other party hereto
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same

12

 

or at any prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof, have been made by either party which
is not set forth expressly in this Agreement.

     15. Validity. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     16. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
agreement.

     17. Withholding of Taxes. The Company may withhold from any amounts payable under
this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.

     18. Nonassignability. This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 11 above. Without limiting the foregoing,
Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than by a transfer by Executive’s will
or by the laws of descent and distribution and in the event of any attempted assignment or transfer
contrary to this Section 18 the Company shall have no liability to pay any amounts so attempted to
be assigned or transferred.

     19. Legal Fees and Expenses. If a Change in Control shall have occurred, thereafter
the Company shall pay and be solely responsible for any and all attorneys’ and related fees and
expenses incurred by Executive to successfully (in whole or in part and whether by modification of
the Company’s position, agreement, compromise, settlement, or administrative or judicial
determination) enforce this Agreement or any provision hereof or as a result of the Company or any
Shareholder of the Company contesting the validity or enforceability of this Agreement or any
provision hereof. To secure the foregoing obligation, the Company shall, within 90 days after being
requested by Executive to do so, enter into a contract with an insurance company, open a letter of
credit or establish an escrow in a form satisfactory to Executive. Notwithstanding the provisions
of this Section 19 to the contrary, in no event shall any payments made to Executive under this
Section 19 be made for expenses incurred by Executive following the end of the second calendar year
following the calendar year in which Executive’s Date of Termination occurs, provided that the
period during which reimbursement for such expenses may be made may extend to the end of the third
calendar year in which Executive’s Date of Termination occurs.

     20. Employment Rights. Nothing expressed or implied in this Agreement shall create
any right or duty on Executive’s part or on the part of the Company to have Executive remain in the
employment of the Company prior to the commencement of the Period of Employment; provided, however,
that any termination or purported termination of Executive’s employment by the Company without
Cause, or termination of Executive’s employment by Executive under circumstances that would
constitute Good Reason had a Change in Control occurred, in either case following the commencement
of any discussion with a third party, or the announcement by a third party of the commencement of,
or the intention to commence a tender

13

 

offer, or other intention to acquire all or a portion of the equity securities of the Company
that ultimately results in a Change in Control shall be deemed to be a termination of Executive’s
employment after a Change in Control for purposes of (i) this Agreement and both the Period of
Employment and the Payment Period shall be deemed to have begun on the day prior to such
termination and (ii) the Company’s Equity Compensation Plan as if the Change in Control had
occurred on the day prior to such termination (resulting in the full vesting and extended
exercisability of the Executive’s outstanding stock options under, and in accordance with, the
provisions of the Equity Compensation Plan).

     21. Right of Setoff. There shall be no right of setoff or counterclaim against, or
delay in, any payment by the Company to Executive or Executive’s designated beneficiary or
beneficiaries provided for in this Agreement in respect of any claim against Executive or any debt
or obligation owed by Executive, whether arising hereunder or otherwise.

     22. Rights to Other Benefits. The existence of the Agreement and Executive’s rights
hereunder shall be in addition to, and not in lieu of, Executive’s rights under any other of the
Company’s compensation and benefit plans and programs, and under any other contract or agreement
between Executive and the Company.

     23. Prior Agreements. This Agreement supersedes and replaces any and all prior
agreements and understandings between the Company and the Executive with respect to the subject
matter hereof. Any such prior agreements and understandings are no longer in force or effect.

     24. Compliance with Section 409A of the Internal Revenue Code. Any payments under
this Agreement that are deemed to be deferred compensation subject to the requirements of Section
409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended, are intended to comply with
the requirements of Section 409A. To this end and notwithstanding any other provision of this
Agreement to the contrary, if at the time of Executive’s termination of employment with the
Company, (i) the Company’s securities are publicly traded on an established securities market; (ii)
Executive is a “specified employee” (as defined in Section 409A); and (iii) the deferral of the
commencement of any payments or benefits otherwise payable pursuant to this Agreement as a result
of such termination of employment is necessary in order to prevent any accelerated or additional
tax under Section 409A, then the Company will defer the commencement of such payments (without any
reduction in amount ultimately paid or provided to Executive) that are not paid within the
short-term deferral rule under Section 409A (and any regulations thereunder) or within the
“involuntary separation” exemption of Treasury Regulation § 1.409A-1(b)(9)(iii). Such deferral
shall last until the date that is six (6) months following Executive’s termination of employment
with the Company (or the earliest date as is permitted under Section 409A). Any amounts the
payment of which are so deferred shall be paid in a lump sum payment within ten (10) days after the
end of such deferral period. If Executive dies during the deferral period prior to the payment of
any deferred amount, then the unpaid deferred amount shall be paid to the personal representative
of Executive’s estate within sixty (60) days after the date of Executive’s death. For purposes of
Section 409A, the right to a series of installment payments under this Agreement shall be treated
as a right to a series of separate payments.

14

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

	 	 	 	 	 
	 	ENPRO INDUSTRIES, INC.

 	 
	 	By:  	/s/ Stephen E. Macadam
 	 
	 	 	Name:  	Stephen E. Macadam 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 	 	 
	 	
/s/ Alexander W. Pease
 	 
	 	Alexander W. Pease 	 
	 	 	 
	 

15

 

EXHIBIT 1

     A. If as of Executive’s Date of Termination Executive’s years of continuous service under the
applicable retirement plans for purposes of determining eligibility for normal or early retirement
plus the length of Executive’s Payment Period is at least 5, then

     1. If as of Executive’s Date of Termination Executive’s age plus the length of
Executive’s Payment Period is at least 65, Executive’s retirement benefit under Section 5(f)
will be calculated as a “normal retirement” benefit to which Executive would have been
entitled under the terms of the retirement plan in which Executive participates had
Executive accumulated benefit service under the retirement plan that included the Payment
Period; and

     2. If as of Executive’s Date of Termination Executive’s age plus the length of
Executive’s Payment Period is at least 55 but less than 65, Executive’s retirement benefit
under Section 5(f) will be calculated as an “early retirement” benefit to which Executive
would have been entitled under the terms of the retirement plan in which Executive
participates had Executive accumulated benefit service under the retirement plan that
included the Payment Period. The actuarial reduction used shall be the actuarial reduction
factor for early retirement, calculated to Executive’s actual age plus the length of
Executive’s Payment Period, at Executive’s Date of Termination.

     B. If as of Executive’s Date of Termination the sum of Executive’s years of continuous service
under the applicable retirement plans for purposes of determining eligibility for normal or early
retirement plus the length of Executive’s Payment Period is less than 5, or Executive’s age plus
the length of Executive’s Payment Period is less than 55, Executive’s retirement benefit under
Section 5(f) will be calculated as a “deferred vested pension” to which Executive would have been
entitled under the terms of the retirement plans in which Executive participates had Executive
accumulated benefit service under the retirement plan that included the Payment Period. The
actuarial reduction used shall be the actuarial reduction factor for a deferred vested pension,
calculated to Executive’s actual age at Executive’s Date of Termination plus the length of
Executive’s Payment Period.

     C. For purposes of Section 5(f), “actuarial equivalent” shall be determined using the same
methods and assumptions as those utilized under the Company’s retirement plans and programs
immediately prior to the Change in Control.

 

EXHIBIT 2

BENEFICIARY DESIGNATION

     I hereby designate the following person(s) as a beneficiary for the purposes of Section
6(b)(iv) to the extent of the percentage interest listed next to their name:

	 	 	 	 	 
	NAME 	 	PERCENTAGE INTEREST	 
	 
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 
	TOTAL (CANNOT EXCEED 100%)

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