Document:

Exhibit 10.1

 

TORNIER, INC.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into effective as of July 18,
2006, between Tornier, Inc., a Delaware corporation (the “Company”),
and Douglas W. Kohrs (the “Executive”).

 

R E C I T A L S:

 

WHEREAS, the Company
recognizes that the future growth, profitability and success of the Company’s
business will be substantially and materially enhanced by the employment of the
Executive by the Company; and

 

WHEREAS, the Company desires
to employ the Executive and the Executive has indicated his willingness to
provide his services to the Company, on the terms and conditions set forth
herein;

 

NOW, THEREFORE, on the basis
of the foregoing premises and in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:

 

Section 1.  Employment.  The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth.  The Executive shall serve as the President
and Chief Executive Officer of the Company, and in such capacity, shall report
directly to the Board of Directors of the Company (the “Board of Directors”)
and shall have such duties as are typically performed by the President of a
corporation, together with such additional duties, commensurate with the
Executive’s position as the Chief Executive Officer of the Company, as may be
assigned to the Executive from time to time by the Board of Directors. The
Executive shall take the office of President and CEO effective July 18,
2006. The principal location of the Executive’s employment shall be at the
Company’s principal executive office located in Minnesota, although the
Executive understands and agrees that she may be required to travel from time
to time for Company business reasons.

 

Section 2.  Term. 
Unless terminated pursuant to Section 6 hereof, the Executive’s
employment hereunder shall commence on the date hereof and shall continue
during the period ending on the third anniversary of the date hereof (the “Initial
Term”).  Thereafter, the Executive’s
employment term shall extend automatically for consecutive periods of one year
unless either party shall provide notice of termination not less than sixty
(60) days prior to an anniversary date of this Agreement.  The Initial Term, together with any extension
pursuant to this Section 2, is referred to herein as the “Employment
Term.”  The Employment Term shall
terminate upon any termination of the Executive’s employment pursuant to Section 6.

 

 

Section 3.  Compensation.  During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:

 

(a) 
Salary.  As compensation for the
performance of the Executive’s services hereunder, the Company shall pay to the
Executive a base salary (the “Salary”) of $425,000 per year with
increases, if any, as may be approved by the Board of Directors or the
Compensation Committee of the Board.  The
Salary shall be payable in accordance with the customary payroll practices of
the Company as the same shall exist from time to time.  In no event shall the Salary be decreased
during the Employment Term.

 

(b) 
Bonus.  During the Employment
Term, in addition to Salary, the Executive shall be eligible to participate in
such bonus plans as may be adopted from time to time by the Board of Directors
for other officers of the Company (the “Bonus”) for each such calendar
year ending during the Employment Period; provided that, unless the Board of
Directors or the Compensation Committee of the Board determines otherwise, the
Executive must be employed on the last day of such calendar year in order to
receive the Bonus attributable thereto.  The
bonus of the President and CEO shall be initially targeted at 60% of his base
salary.  The Executive’s entitlement to
the Bonus for any particular calendar year shall be based on the attainment of
performance objectives established by the Board of Directors or the
Compensation Committee of the Board in any such bonus plan.

 

(c) 
Benefits.  Except as otherwise
provided in this Agreement, in addition to the Salary and Bonus, if any, the
Executive shall be entitled during the Employment Term to participate in
health, insurance, retirement, disability, and other benefit programs provided
to other officers of the Company on terms no less favorable than those
available to the other officers of the Company. 
The Executive shall also be entitled to the same number of vacation days,
holidays, sick days and other benefits as are generally allowed to other senior
executives of the Company in accordance with the Company’s policies in effect
from time to time.  The president and CEO
shall be initially entitled to 5 weeks of vacation under this Agreement.

 

(d)  Stock Options.  The Executive shall be granted stock options
(the “Option”) to acquire 3.5% of the shares of Common Stock of TMG
B.V., a company organized under the laws of the Netherlands (the “Parent
Corporation”) at a price equal to Fair Market Value in effect on the Price
Date.  All of the terms and conditions
relating to the Option, including the vesting and expiration dates, are set
forth in the Stock Option Agreements executed by the Parent Corporation and the
Executive (the “Stock Option Agreements”).

 

(e)  Stock Purchase. 
During the employment term, in addition to Salary, Bonus, and the
Options, the executive is granted the rights to purchase up to 1.5% of the
outstanding shares of the Parent Corporation upon initial financing of the
Parent Corporation, as well as to keep purchasing additional shares of the
Parent Corporation to maintain this 1.5% pro-rata amount.

 

(f)  Services.  For
the avoidance of doubt, none of the compensation or benefits received by the
Executive pursuant to this Agreement (including, without limitation, the 

 

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Salary,
the Bonus or the Option) are related to the services rendered by the Executive
in his capacity as a member of the Board of Directors of the Parent
Corporation.

 

Section 4.
 Exclusivity.  During the Employment Term, the Executive
shall devote his full time to the business of the Company and its subsidiaries,
shall faithfully serve the Company and its subsidiaries, shall in all respects
conform to and comply with the lawful and reasonable directions and
instructions given to him by the Board of Directors in accordance with the
terms of this Agreement, shall use his best efforts to promote and serve the
interests of the Company and its subsidiaries and shall not engage in any other
business activity, whether or not such activity shall be engaged in for
pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and its subsidiaries, (iii) participate in the activities on non
profit organizations (iii) engage in personal investing activities and (iv) serve on the board of directors of
not more than four (4) other companies whose businesses are not in
competition with the business interests of the Company or any of its
subsidiaries or affiliates, provided that the activities set forth in
these clauses (i), (ii), (iii) and (iv), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.

 

Section 5.  Reimbursement for Expenses.  During the Employment Term, the Executive is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items in accordance with the Company’s expense reimbursement policy, as
the same may be modified by the Company from time to time.  The Company shall reimburse the Executive for
all such proper expenses upon presentation by the Executive of itemized
accounts of such expenditures in accordance with the financial policy of the
Company, as in effect from time to time.

 

Section 6. 
Termination and Default.

 

(a) 
Death.  The Executive’s employment
shall automatically terminate upon his death and upon such event, the Executive’s
estate shall be entitled to receive the amounts specified in Section 6(e) below.

 

(b) 
Disability.  If the Executive is
unable to perform the duties required of him under this Agreement because of
illness, incapacity, or physical or mental disability, the Employment Term
shall continue and the Company shall pay all compensation required to be paid
to the Executive hereunder, unless the Executive is disabled such that the
Executive would be entitled to receive disability benefits under the Company’s
long-term disability plan, or if no such plan exists, the Executive is unable
to perform the duties required of him under this Agreement for an aggregate of
180 days (whether or not consecutive) during any 12-month period during the
term of this Agreement, in which event the Executive’s employment shall
terminate.

 

(c) 
Cause.  The Company may terminate
the Executive’s employment at any time, with or without Cause.  In the event of termination pursuant to this Section 6(c) for
Cause (as defined below), the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the 

 

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reason for such
termination.  Termination of the
Executive’s employment hereunder shall be effective upon delivery of such
notice of termination.  For purposes of
this Agreement, “Cause” shall mean: 
(i) the Executive’s failure (except where due to a disability
contemplated by subsection (b) hereof), neglect or refusal to perform his
duties hereunder which failure, neglect or refusal shall not have been
corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any continued or repeated absence from the
Company, unless such absence is (A) approved or excused by the Board of
Directors or (B) is the result of the Executive’s illness, disability or
incapacity (in which event the provisions of Section 6(b) hereof
shall control); (iv) use of illegal drugs by the Executive or repeated
drunkenness; (v) conviction of the Executive for the commission of a
felony; or (vi) the commission by the Executive of an act of fraud or
embezzlement against the Company.

 

(d) 
Resignation.  The Executive shall
have the right to terminate his employment at any time by giving notice of his
resignation.

 

(e) 
Payments.  In the event that the
Executive’s employment terminates for any reason, the Company shall pay to the
Executive all amounts and benefits accrued but unpaid hereunder through the
date of termination in respect of Salary or unreimbursed expenses, including
accrued and unused vacation.  In
addition, in the event the Executive’s employment is terminated by the Company
without Cause, whether during or upon expiration of the then current term of
this Agreement, in addition to the amounts specified in the foregoing sentence,
(i) the Executive shall continue to receive the Salary (less any
applicable withholding or similar taxes) at the rate in effect hereunder on the
date of such termination periodically, in accordance with the Company’s
prevailing payroll practices, for a period of twelve (12) months following the
date of such termination (the “Severance Term”) and (ii) to the
extent permissible under the Company’s health and welfare plans, the Executive
shall continue to receive any health and welfare benefits provided to him as of
the date of such termination in accordance with Section 3(c) hereof
during the Severance Term, on the same basis and at the same cost as during the
Employment Term.  Further, in the event
the Executive’s employment is terminated without Cause by reason of the Company
having notified the Executive that this Agreement will not be extended pursuant
to Section 2, the Executive shall be entitled to receive a pro-rated
amount of the Bonus in a lump sum based on the Executive’s period of employment
during the calendar year in which such termination occurs (less any applicable
withholding or similar taxes).  Following
the end of the Severance Term, the Executive shall be entitled to elect health
care continuation coverage permitted under Section 601 through 608 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
as if his employment had then terminated. 
In the event the Executive accepts other full time employment or engages
in his own business prior to the last date of the Severance Term, the Executive
shall forthwith notify the Company and the Company shall be entitled to set off
from amounts and benefits due the Executive under this Section 6(e) (other
than in respect of the Bonus) the amounts paid to and benefits received by the
Executive in respect of such other employment or business activity.  Amounts owed by the Company in respect of the
Salary, Bonus or reimbursement for expenses under the provisions of Section 5
hereof shall, except as otherwise set forth in this Section 6(e), be paid
promptly upon any 

 

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termination.  The payments and benefits to be provided to
the Executive as set forth in this Section 6(e) in the event the
Executive’s employment is terminated by the Company without Cause:  (i)  shall be lieu of any and all
benefits otherwise provided under any severance pay policy, plan or program
maintained from time to time by the Company for its employees, and (ii) 
shall not be paid to the extent that Executive’s employment is terminated
following a Change in Control under circumstances entitling the Executive to
the benefits described in Section 6(f).

 

(f) 
Change in Control Benefit. In the event that the Executive’s employment
is terminated by the Company without Cause or by the Executive for Good Reason,
as defined below, during the 12-month period immediately following a Change in
Control, as defined below, whether during or upon expiration of the then
current term of this Agreement:  (i) the
Company shall pay to the Executive all amounts and benefits accrued but unpaid
hereunder through the date of termination in respect of Salary or unreimbursed
expenses, including accrued and unused vacation (less any applicable
withholding or similar taxes), (ii) all unvested shares that are subject
to the Options shall become immediately vested and exercisable as set forth in
the Stock Option Agreements, (iii) the Company shall pay to Executive a
lump sum payment equal to 12 months of his Salary at the rate in effect
hereunder on the date of such termination, plus his full target Bonus for the
year in which the Change in Control occurs (less any applicable withholding or
similar taxes), and (iv) to the extent permissible under the Company’s
health and welfare plans, the Executive shall continue to receive, at the
Company’s cost, any health and welfare benefits provided to him as of the date
of such termination for the 12-month period following his termination of
employment.  Following the end of the
12-month period described in clause (iv) of the preceding sentence, the
Executive shall be entitled to elect health care continuation coverage
permitted under Sections 601 through 608 of ERISA as if his employment with the
Company then terminated.

 

(g)  Gross-Up Payment. 
If the Executive becomes entitled to payments and benefits following a
Change in Control under Section 6(f) or the vesting of the Options
accelerate following a Change in Control as provided in the Stock Option
Agreements, the Company will cause its independent auditors promptly to review,
at the Company’s sole expense, the applicability of Code Section 4999 to
any payment or distribution of any type by the Company to or for the Executive’s
benefit, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement, the Stock Option Agreements or otherwise (the “Total
Payments”). If the auditor determines that the Total Payments result in an
excise tax imposed by Code Section 4999 or any comparable state or local
law, or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred
to as the “Excise Tax”), the Company will make an additional cash
payment (a “Gross-Up Payment”) to the Executive within 10 days
after such determination equal to an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Executive would retain an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Total Payments. 
For purposes of the foregoing determination, the Executive’s tax rate
will be deemed to be the highest statutory marginal state and federal tax rate
(on a combined basis) then in effect. If no determination by the Company’s
auditors is made prior to the time the Executive is required to file a tax
return reflecting the Total Payments, the Executive will be entitled to receive
from the Company a Gross-Up Payment calculated on the basis of the Excise Tax
the 

 

5

 

Executive reported in such tax return, within 10 days after the later
of the date on which the Executive files such tax return or the date on which
the Executive provides a copy thereof to the Company. In all events, if any tax
authority determines that a greater Excise Tax should be imposed upon the Total
Payments than is determined by the Company’s independent auditors or reflected
in the Executive’s tax return pursuant to this Section 6(g), the Executive
will be entitled to receive from the Company the full Gross-Up Payment
calculated on the basis of the amount of Excise Tax determined to be payable by
such tax authority within 10 days after the Executive notifies the Company of
such determination.

 

For purposes of this Agreement, “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”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more (on a fully diluted basis)
of either (A) the then outstanding shares of common stock of the Parent
Corporation, taking into account as outstanding for this purpose such common
stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire
such common stock (the “Outstanding Parent Corporation Common Stock”) or
(B) the combined voting power of the then outstanding voting securities of
the Parent Corporation entitled to vote generally in the election of directors
(the “Outstanding Parent Corporation Voting Securities”); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change in Control: (x) any acquisition by the
Parent Corporation or any “affiliate” of the Parent Corporation, within the
meaning of 17 C.F.R. § 230.405 (an “Affiliate”), (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Parent Corporation or any Affiliate of the Parent
Corporation, (z) any acquisition by any corporation or business entity
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (ii) of this Section 6(f) (persons and entities
described in clauses (x), (y) and (z) being referred to herein as “Permitted
Holders”); or

 

(ii)  The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Parent Corporation (a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Parent Corporation Common Stock and
Outstanding Parent Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
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 corporation
resulting from such Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Parent Corporation or all or
substantially all of the Parent Corporation’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Parent Corporation Common Stock and Outstanding Parent Corporation Voting
Securities, as the case may be, and (B) no Person (excluding any Permitted
Holder) beneficially owns, directly or indirectly, 50% or more (on a fully
diluted basis) of, respectively, the then outstanding shares of 

 

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common
stock of the corporation resulting from such Business Combination, taking into
account as outstanding for this purpose such common stock issuable upon the
exercise of options or warrants, the conversion of convertible stock or debt,
and the exercise of any similar right to acquire such common stock, or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the incumbent Board of Directors of the Parent Corporation at
the time of the execution of the initial agreement providing for such Business
Combination; or

 

(iii)  Approval by the shareholders of the Parent Corporation of a
complete liquidation or dissolution of the Parent Corporation; or

 

(iv)  The sale of at least 80% of the assets of the Parent
Corporation to an unrelated party, or completion of a transaction having a
similar effect; or

 

(v)  The individuals
who on the date of this Agreement constitute the Board of Directors of the
Parent Corporation thereafter cease to constitute at least a majority thereof;
provided that any person becoming a member of the Board of Directors of the
Parent Corporation subsequent to the date of this Agreement and whose election
or nomination was approved by either (A) a vote of at least two-thirds of
the directors who then comprised the Board of Directors of the Parent
Corporation immediately prior to such vote or (B) the Nominating Committee
of the Board of Directors of the Parent Corporation shall be considered a
member of the Board of Directors of the Parent Corporation on the date of this
Agreement.

 

For purposes of this Agreement, “Good Reason” shall mean,
without the Executive’s prior written consent, (i) a substantial
diminution in the Executive’s authority, duties or responsibilities as in
effect prior to the Change in Control, (ii) a reduction by the Company in
the Executive’s base Salary or Bonus as in effect immediately prior to the
Change in Control or as thereafter increased, (iii) the failure by the
Company to cover the Executive under employee benefit plans that, in the
aggregate, provide substantially similar benefits to the Executive and/or his
family and dependents at a substantially similar total cost to the Executive
(e.g., premiums, deductibles, co-pays, out of pocket maximums, required
contributions, taxes and the like) relative to the benefits and total costs
under such benefit plans in which the Executive (and/or his family or
dependents) was participating at any time during the 90-day period immediately
preceding the Change in Control, or (iv) the Company’s requiring the
Executive to be based at any office or location that is more than fifty (50)
miles further from the office or location thereof immediately preceding a
Change in Control; provided, however, Good Reason shall not
include any of the circumstances or events described herein unless the
Executive has first provided written notice of such circumstance or event and
the Company has not corrected such circumstance or event within thirty (30)
days of receipt by the Company of such written notice from the Executive.

 

(h) 
Survival of Operative Sections. 
Upon any termination of the Executive’s employment, the provisions of
Sections 6(e), 6(f), 6(g) and 7 through 18 of this Agreement shall survive
to the extent necessary to give effect to the provisions thereof.

 

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Section 7.  Secrecy and Non-Competition.

 

(a) 
No Competing Employment.  The
Executive acknowledges that the agreements and covenants contained in this Section 7
are essential to protect the value of the Company’s, or any of its subsidiaries’ or affiliates’, business and assets and
by his current employment with the Company and its subsidiaries, the Executive
has obtained and will obtain such knowledge, contacts, know-how, training and
experience and there is a substantial probability that such knowledge,
know-how, contacts, training and experience could be used to the substantial
advantage of a competitor of the Company or any of its subsidiaries or affiliates and to the Company’s, or any of its subsidiaries’ or affiliates’,
substantial detriment.  Therefore, the
Executive agrees that for the period commencing on the date of this Agreement and
ending on the first anniversary of the termination of the Executive’s
employment hereunder (such period is hereinafter referred to as the “Restricted
Period”) with respect to any State in which the Company is engaged in
business during the Employment Term, the Executive shall not participate or
engage, directly or indirectly, for himself or on behalf of or in conjunction
with any person, partnership, corporation or other entity, whether as an
employee, agent, officer, director, partner or joint venturer, in any business
activities if such activity consists of any activity undertaken or expressly
contemplated to be undertaken by the Company or any of its subsidiaries or by
the Executive at any time during the last three (3) years of the
Employment Term.  The foregoing
restrictions contained in this Section 7(a) shall not prevent the
Executive from accepting employment with a large diversified organization with
separate and distinct divisions that do not compete, directly or indirectly,
with the Company or any of its
subsidiaries or affiliates, so long as prior to accepting such
employment the Company receives separate written assurances from the
prospective employer and from the Executive, satisfactory to the Company, to
the effect that the Executive will not render any services, directly or
indirectly, to any division or business unit that competes, directly or
indirectly, with the Company or any of
its subsidiaries or affiliates. 
During the Restricted Period, the Executive will inform any new
employer, prior to accepting employment, of the existence of this Agreement and
provide such employer with a copy of this Agreement.

 

(b) 
Nondisclosure of Confidential Information.  The Executive, except in connection with her
employment hereunder, shall not disclose to any person or entity or use, either
during the Employment Term or at any time thereafter, any information not in
the public domain or generally known in the industry that the Company any of its subsidiaries or affiliates
treats as confidential or proprietary, in any form, acquired by the Executive
while employed by the Company or any predecessor to the Company’s business or,
if acquired following the Employment Term, such information which, to the
Executive’s knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company or any of its
subsidiaries or affiliates, relating to the Company, its subsidiaries or
affiliates, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company’s, or any of its subsidiaries’ or affiliates’,
products or services), business plans, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and
printouts, plans (business, technical or otherwise), customer and industry
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the 

 

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Company or any subsidiaries
or affiliates thereof.  The Executive
agrees and acknowledges that all of such information, in any form, and copies
and extracts thereof, are and shall remain the sole and exclusive property of
the Company any of its subsidiaries or
affiliates, and upon termination of his employment with the Company, the
Executive shall return to the Company any
of its subsidiaries or affiliates the originals and all copies of any
such information provided to or acquired by the Executive in connection with
the performance of his duties for the Company, and shall return to the Company any of its subsidiaries or affiliates
all files, correspondence and/or other communications received, maintained
and/or originated by the Executive during the course of his employment.

 

(c) 
No Interference.  During the
Restricted Period, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), directly or indirectly solicit,
endeavor to entice away from the Company or any of its subsidiaries or affiliates, or otherwise directly
interfere with the relationship of the Company or any of its subsidiaries or affiliates with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or any of its
subsidiaries or affiliates (including, but not limited to, any independent
sales representatives or organizations) or who is, or was within the then most
recent twelve-month period, a customer or client of the Company, its
predecessors or any of its subsidiaries
or affiliates.  The placement of
any general classified or “help wanted” advertisements and/or general
solicitations to the public at large shall not constitute a violation of this Section 7(c) unless
the Executive’s name is contained in such advertisements or solicitations.

 

(d) 
Inventions, etc.  The Executive
hereby sells, transfers and assigns to the Company or any of its subsidiaries or affiliates or to any person or entity
designated by the Company all of the entire right, title and interest of the
Executive in and to all inventions, ideas, disclosures and improvements,
whether patented or unpatented, and copyrightable material, made or conceived
by the Executive, solely or jointly, during his employment by the Company which
relate to methods, apparatus, designs, products, processes or devices, sold,
leased, used or under consideration or development by the Company or any of its subsidiaries or affiliates,
or which otherwise relate to or pertain to the business, functions or
operations of the Company or any of its
subsidiaries or affiliates or which arise from the efforts of the
Executive during the course of his employment for the Company.  The Executive shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information,
details and data pertaining to the aforementioned inventions, ideas,
disclosures and improvements; and the Executive shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Executive to permit the
Company or any of its subsidiaries or
affiliates or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereof.  Any invention
relating to the business of the Company or any of its subsidiaries or affiliates and disclosed by the
Executive within one year following the termination of his employment with the
Company shall be deemed to fall within the provisions of this paragraph unless
proved to have been first conceived and made following such termination.  The foregoing requirements of this Section 7(d) shall
not apply to any invention for which no equipment, supplies, facility or trade
secret information of the Company was used and 

 

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which was developed entirely
on the Executive’s own time, and (i) which does not relate directly to the
Company’s, or any of its subsidiaries’
or affiliates’, business or to the Company’s, or any of its subsidiaries’ or affiliates’, actual or demonstrably
anticipated research or development, or (ii) which does not result from
any work the Executive performed for the Company or any of its subsidiaries or affiliates.

 

Section 8.  Injunctive Relief.  Without intending to limit the remedies
available to the Company or any of its
subsidiaries or affiliates, the Executive acknowledges that in the event
of a breach of any of the covenants contained in Section 7 hereof may
result in material irreparable injury to the Company or its subsidiaries or
affiliates for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction,
without the necessity of proving irreparable harm or injury as a result of such
breach or threatened breach of Section 7 hereof, restraining the Executive
from engaging in activities prohibited by Section 7 hereof or such other
relief as may be required specifically to enforce any of the covenants in Section 7
hereof.

 

Section 9.  Representations and Warranties of the
Executive.  The Executive represents
and warrants to the Company as follows:

 

(a) 
This Agreement, upon execution and delivery by the Executive, will be duly
executed and delivered by the Executive and (assuming due execution and
delivery hereof by the Company) will be the valid and binding obligation of the
Executive enforceable against the Executive in accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Executive (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental
regulation applicable to the Executive. 
Without limiting the generality of the foregoing, the Executive is not a
party to any non-competition, non-solicitation, no hire or similar agreement
that restricts in any way the Executive’s ability to engage in any business or
to solicit or hire the employees of any person.

 

The representations and
warranties of the Executive contained in this Section 9 shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 10.  Representations and Warranties of the
Company.  The Company represents and
warrants to the Executive as follows:

 

(a) 
This Agreement, upon execution and delivery by the Company, will be duly
executed and delivered by the Company and (assuming due execution and delivery
hereof by the 

 

10

 

Executive) will be the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Company (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental
regulation applicable to the Company.

 

The representations and
warranties of the Company contained in this Section 10 shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 11.  Successors and Assigns; No Third-Party
Beneficiaries.  This Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of
each of the parties, including, but not limited to, the Executive’s heirs and
the personal representatives of the Executive’s estate; provided, however,
that neither party shall assign or delegate any of the obligations created
under this Agreement without the prior written consent of the other party.  Notwithstanding the foregoing, the Company
shall have the unrestricted right to assign this Agreement and to delegate all
or any part of its obligations hereunder to any of its subsidiaries or affiliates,
but in such event such assignee shall expressly assume all obligations of the
Company hereunder and the Company shall remain fully liable for the performance
of all of such obligations in the manner prescribed in this Agreement.  Nothing in this Agreement shall confer upon
any person or entity not a party to this Agreement, or the legal
representatives of such person or entity, any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement.

 

Section 12.  Waiver and Amendments.  Any waiver, alteration, amendment or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however,
that any such waiver, alteration, amendment or modification is consented to on
the Company’s behalf by the Board of Directors. 
No waiver by either of the parties hereto of their rights hereunder
shall be deemed to constitute a waiver with respect to any subsequent
occurrences or transactions hereunder unless such waiver specifically states
that it is to be construed as a continuing waiver.

 

Section 13.  Severability and Governing Law.  The Executive acknowledges and agrees that
the covenants set forth in Section 7 hereof are reasonable and valid in
geographical and temporal scope and in all other respects.  If any of such covenants or such other
provisions of this Agreement are found to be invalid or unenforceable by a
final determination of a court of competent jurisdiction (a) the remaining
terms and provisions hereof shall be unimpaired and (b) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA 

 

11

 

APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED, HOWEVER, THE
PROVISIONS OF THIS AGREEMENT RELATING TO THE OPTION UNDER SECTION 3(d) HEREOF
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

 

Section 14. 
Notices.

 

(a)  All communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by overnight courier or by registered or certified mail, postage
prepaid:

 

(i)  If to the Executive,
at 7444 Shannon Drive, Edina, MN 55439 or at such other address as the
Executive may have furnished the Company in writing, and

 

(ii)  If to the
Company, at Minnesota Headquarters, marked for the attention of the Chief
Executive Officer, or at such other address as it may have furnished in writing
to the Executive.

 

(b)  Any notice so
addressed shall be deemed to be given: 
if delivered by hand, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the
date of such mailing.

 

Section 15.  Section Headings.  The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof, affect the meaning or interpretation of this
Agreement or of any term or provision hereof.

 

Section 16.  Entire Agreement.  This Agreement, including the Exhibits
hereto, constitutes the entire understanding and agreement of the parties
hereto regarding the employment of the Executive.  This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter of this
Agreement.

 

Section 17.  Severability.  In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.

 

Section 18.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

 

[Remainder of Page Intentionally Left Blank]

 

12

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.

 

 

	
   

  	
   

  	
  TORNIER, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sean Carney

  
	
   

  	
   

  	
   

  	
  Name: Sean Carney

  
	
   

  	
   

  	
   

  	
  Title: Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DOUGLAS W. KOHRS

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Douglas W.
  KohrsExhibit 10.2

 

TORNIER, INC.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into effective as of February 5,
2007, between Tornier, Inc., a Delaware corporation (the “Company”),
and Mike Doty (the “CFO; Chief Financial Officer”).

 

R E C I T A L S:

 

WHEREAS, the Company
recognizes that the future growth, profitability and success of the Company’s
business will be substantially and materially enhanced by the employment of the
Executive by the Company; and

 

WHEREAS, the Company desires
to employ the Executive and the Executive has indicated his willingness to
provide his services to the Company, on the terms and conditions set forth
herein;

 

NOW, THEREFORE, on the basis
of the foregoing premises and in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:

 

Section 1.  Employment.  The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth.  The Executive shall serve as the Chief
Financial Officer, and in such capacity, shall report directly to the President
and Chief Executive Officer and shall have such duties as are typically
performed by the Chief Financial Officer of a corporation. The Executive shall
take the office of Chief Financial Officer effective February 5, 2007. The
principal location of the Executive’s employment shall be at the Company’s
principal executive office located in Minnesota, although the Executive
understands and agrees that he may be required to travel from time to time for
Company business reasons.

 

Section 2.  Term. 
Unless terminated pursuant to Section 6 hereof, the Executive’s
employment hereunder shall commence on the date hereof and shall continue
during the period ending on the third anniversary of the date hereof (the “Initial
Term”).  Thereafter, the Executive’s
employment term shall extend automatically for consecutive periods of one year
unless either party shall provide notice of termination not less than sixty
(60) days prior to an anniversary date of this Agreement.  The Initial Term, together with any extension
pursuant to this Section 2, is referred to herein as the “Employment
Term.”  The Employment Term shall
terminate upon any termination of the Executive’s employment pursuant to Section 6.

 

Section 3.  Compensation.  During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:

 

 

(a) 
Salary.  As compensation for the
performance of the Executive’s services hereunder, the Company shall pay to the
Executive a base salary (the “Salary”) of $290,000 per year (which is
not subject to a cap or a maximum) with increases, if any, as may be approved
by the Board of Directors or the Compensation Committee of the Board.  The Salary shall be payable in accordance
with the customary payroll practices of the Company as the same shall exist
from time to time.  In no event shall the
Salary be decreased during the Employment Term.

 

(b) 
Bonus.  During the Employment
Term, in addition to Salary, the Executive shall be eligible to participate in
such bonus plans as may be adopted from time to time by the Board of Directors
for other officers of the Company (the “Bonus”) for each such calendar
year ending during the Employment Period; provided that, unless the Board of
Directors or the Compensation Committee of the Board determines otherwise, the
Executive must be employed on the last day of such calendar year in order to
receive the Bonus attributable thereto.  The
bonus of the Chief Financial Officer shall be initially targeted at 40% of his
base salary at 100% achievement.  The
Executive’s entitlement to the Bonus for any particular calendar year shall be
based on the attainment of performance objectives established by the President
and CEO or the Compensation Committee of the Board in any such bonus plan.  In no event shall the bonus target be
decreased during the employment term.

 

(c) 
Benefits.  Except as otherwise
provided in this Agreement, in addition to the Salary and Bonus, if any, the
Executive shall be entitled during the Employment Term to participate in
health, insurance, retirement, disability, and other benefit programs provided
to other officers of the Company on terms no less favorable than those
available to the other officers of the Company. 
The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of the Company in accordance with the Company’s policies in
effect from time to time.  The Chief
Financial Officer shall be initially entitled to 4 weeks of accrued vacation
for immediate use under this Agreement.

 

(d)  Stock Options.  The Executive shall be granted stock options
(the “Option”) to acquire 350,000 of the shares of Common Stock of TMG
B.V., a company organized under the laws of the Netherlands (the “Parent
Corporation”) at a price equal to Fair Market Value in effect on the Price
Date.  All of the terms and conditions
relating to the Option, including the vesting and expiration dates, are set
forth in the Stock Option Agreements executed by the Parent Corporation and the
Executive (the “Stock Option Agreements”).

 

Section 4.  Exclusivity.  During the Employment Term, the Executive
shall devote his full time to the business of the Company and its subsidiaries,
shall faithfully serve the Company and its subsidiaries, shall in all respects
conform to and comply with the lawful and reasonable directions and
instructions given to him by the President and CEO in accordance with the terms
of this Agreement, shall use his best efforts to promote and serve the
interests of the Company and its subsidiaries and shall not engage in any other
business activity, whether or not such activity shall be engaged in for
pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and its subsidiaries, (iii) participate in the activities on non profit
organizations (iii) 

 

2

 

engage in personal investing
activities and (iv) serve on the
board of directors of not more than one (1) other companies whose
businesses are not in competition with the business interests of the Company or
any of its subsidiaries or affiliates, provided that the activities set
forth in these clauses (i), (ii), (iii) and (iv), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.

 

Section 5.  Reimbursement for Expenses.  During the Employment Term, the Executive is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items in accordance with the Company’s expense reimbursement policy, as
the same may be modified by the Company from time to time.  The Company shall reimburse the Executive for
all such proper expenses upon presentation by the Executive of itemized
accounts of such expenditures in accordance with the financial policy of the
Company, as in effect from time to time.

 

Section 6. 
Termination and Default.

 

(a) 
Death.  The Executive’s employment
shall automatically terminate upon his death and upon such event, the Executive’s
estate shall be entitled to receive the amounts specified in Section 6(e) below.

 

(b) 
Disability.  If the Executive is
unable to perform the duties required of him under this Agreement because of
illness, incapacity, or physical or mental disability, the Employment Term
shall continue and the Company shall pay all compensation required to be paid
to the Executive hereunder, unless the Executive is disabled such that the
Executive would be entitled to receive disability benefits under the Company’s
long-term disability plan, or if no such plan exists, the Executive is unable
to perform the duties required of him under this Agreement for an aggregate of
180 days (whether or not consecutive) during any 12-month period during the
term of this Agreement, in which event the Executive’s employment shall
terminate.

 

(c) 
Cause.  The Company may terminate
the Executive’s employment at any time, with or without Cause.  In the event of termination pursuant to this Section 6(c) for
Cause (as defined below), the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the reason for such
termination.  Termination of the
Executive’s employment hereunder shall be effective upon delivery of such
notice of termination.  For purposes of
this Agreement, “Cause” shall mean: 
(i) the Executive’s failure (except where due to a disability
contemplated by subsection (b) hereof), neglect or refusal to perform his
duties hereunder which failure, neglect or refusal shall not have been
corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any continued or repeated absence from the
Company, unless such absence is (A) approved or excused by the Board of
Directors or (B) is the result of the Executive’s illness, disability or
incapacity (in which event the provisions of Section 6(b) hereof
shall control); (iv) use of illegal drugs by the Executive or repeated
drunkenness; (v) 

 

3

 

conviction of the Executive
for the commission of a felony; or (vi) the commission by the Executive of
an act of fraud or embezzlement against the Company.

 

(d) 
Resignation.  The Executive shall
have the right to terminate his employment at any time by giving notice of his
resignation.

 

(e) 
Payments.  In the event that the
Executive’s employment terminates for any reason, the Company shall pay to the
Executive all amounts and benefits accrued but unpaid hereunder through the
date of termination in respect of Salary or unreimbursed expenses, including
accrued and unused vacation.  In
addition, in the event the Executive’s employment is terminated by the Company
without Cause, whether during or upon expiration of the then current term of
this Agreement, in addition to the amounts specified in the foregoing sentence,
(i) the Executive shall continue to receive the Salary (less any
applicable withholding or similar taxes) at the rate in effect hereunder on the
date of such termination periodically, in accordance with the Company’s
prevailing payroll practices, for a period of twelve (12) months following the
date of such termination (the “Severance Term”) and (ii) to the
extent permissible under the Company’s health and welfare plans, the Executive
shall continue to receive any health and welfare benefits provided to him as of
the date of such termination in accordance with Section 3(c) hereof
during the Severance Term, on the same basis and at the same cost as during the
Employment Term.  Further, in the event
the Executive’s employment is terminated without Cause by reason of the Company
having notified the Executive that this Agreement will not be extended pursuant
to Section 2, the Executive shall be entitled to receive a pro-rated
amount of the Bonus in a lump sum based on the Executive’s period of employment
during the calendar year in which such termination occurs (less any applicable
withholding or similar taxes).  Following
the end of the Severance Term, the Executive shall be entitled to elect health
care continuation coverage permitted under Section 601 through 608 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
as if his employment had then terminated. 
In the event the Executive accepts other full time employment or engages
in his own business prior to the last date of the Severance Term, the Executive
shall forthwith notify the Company and the Company shall be entitled to set off
from amounts and benefits due the Executive under this Section 6(e) (other
than in respect of the Bonus) the amounts paid to and benefits received by the
Executive in respect of such other employment or business activity.  Amounts owed by the Company in respect of the
Salary, Bonus or reimbursement for expenses under the provisions of Section 5
hereof shall, except as otherwise set forth in this Section 6(e), be paid
promptly upon any termination.  The
payments and benefits to be provided to the Executive as set forth in this Section 6(e) in
the event the Executive’s employment is terminated by the Company without
Cause:  (i)  shall be lieu of any
and all benefits otherwise provided under any severance pay policy, plan or
program maintained from time to time by the Company for its employees, and (ii) 
shall not be paid to the extent that Executive’s employment is terminated
following a Change in Control under circumstances entitling the Executive to
the benefits described in Section 6(f).

 

(f) 
Change in Control Benefit. In the event that the Executive’s employment
is terminated by the Company without Cause or by the Executive for Good Reason,
as defined below, during the 12-month period immediately following a Change in
Control, as defined below, whether during or upon expiration of the then
current term of this Agreement:  (i) the
Company shall pay to the Executive all amounts and benefits accrued but unpaid
hereunder 

 

4

 

through the date of
termination in respect of Salary or unreimbursed expenses, including accrued
and unused vacation (less any applicable withholding or similar taxes), (ii) all
unvested shares that are subject to the Options shall become immediately vested
and exercisable as set forth in the Stock Option Agreements, (iii) the
Company shall pay to Executive a lump sum payment equal to 12 months of his
Salary at the rate in effect hereunder on the date of such termination, plus
his full target Bonus for the year in which the Change in Control occurs (less
any applicable withholding or similar taxes), and (iv) to the extent
permissible under the Company’s health and welfare plans, the Executive shall
continue to receive, at the Company’s cost, any health and welfare benefits
provided to him as of the date of such termination for the 12-month period
following his termination of employment. 
Following the end of the 12-month period described in clause (iv) of
the preceding sentence, the Executive shall be entitled to elect health care
continuation coverage permitted under Sections 601 through 608 of ERISA as if his
employment with the Company then terminated.

 

For purposes of this Agreement, “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”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more (on a fully diluted basis)
of either (A) the then outstanding shares of common stock of the Parent
Corporation, taking into account as outstanding for this purpose such common
stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire
such common stock (the “Outstanding Parent Corporation Common Stock”) or
(B) the combined voting power of the then outstanding voting securities of
the Parent Corporation entitled to vote generally in the election of directors
(the “Outstanding Parent Corporation Voting Securities”); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change in Control: (x) any acquisition by the
Parent Corporation or any “affiliate” of the Parent Corporation, within the
meaning of 17 C.F.R. § 230.405 (an “Affiliate”), (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Parent Corporation or any Affiliate of the Parent
Corporation, (z) any acquisition by any corporation or business entity
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (ii) of this Section 6(f) (persons and entities
described in clauses (x), (y) and (z) being referred to herein as “Permitted
Holders”); or

 

(ii)  The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Parent Corporation (a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Parent Corporation Common Stock and
Outstanding Parent Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
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 corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Parent Corporation
or all or substantially all of the Parent Corporation’s assets either 

 

5

 

directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Parent Corporation Common Stock and Outstanding Parent Corporation
Voting Securities, as the case may be, and (B) no Person (excluding any
Permitted Holder) beneficially owns, directly or indirectly, 50% or more (on a
fully diluted basis) of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination, taking into
account as outstanding for this purpose such common stock issuable upon the
exercise of options or warrants, the conversion of convertible stock or debt,
and the exercise of any similar right to acquire such common stock, or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the incumbent Board of Directors of the Parent Corporation at the
time of the execution of the initial agreement providing for such Business
Combination; or

 

(iii)  Approval by the shareholders of the Parent Corporation of a
complete liquidation or dissolution of the Parent Corporation; or

 

(iv)  The sale of at least 80% of the assets of the Parent
Corporation to an unrelated party, or completion of a transaction having a
similar effect; or

 

(v)  The individuals
who on the date of this Agreement constitute the Board of Directors of the
Parent Corporation thereafter cease to constitute at least a majority thereof;
provided that any person becoming a member of the Board of Directors of the
Parent Corporation subsequent to the date of this Agreement and whose election
or nomination was approved by either (A) a vote of at least two-thirds of
the directors who then comprised the Board of Directors of the Parent
Corporation immediately prior to such vote or (B) the Nominating Committee
of the Board of Directors of the Parent Corporation shall be considered a
member of the Board of Directors of the Parent Corporation on the date of this
Agreement.

 

For purposes of this Agreement, “Good Reason” shall mean,
without the Executive’s prior written consent, (i) a substantial
diminution in the Executive’s authority, duties or responsibilities as in
effect prior to the Change in Control, (ii) a reduction by the Company in
the Executive’s base Salary or Bonus as in effect immediately prior to the
Change in Control or as thereafter increased, (iii) the failure by the
Company to cover the Executive under employee benefit plans that, in the
aggregate, provide substantially similar benefits to the Executive and/or his
family and dependents at a substantially similar total cost to the Executive
(e.g., premiums, deductibles, co-pays, out of pocket maximums, required
contributions, taxes and the like) relative to the benefits and total costs
under such benefit plans in which the Executive (and/or his family or
dependents) was participating at any time during the 90-day period immediately
preceding the Change in Control, or (iv) the Company’s requiring the
Executive to be based at any office or location that is more than fifty (50)
miles further from the office or location thereof immediately preceding a
Change in Control; provided, however, Good Reason shall not
include any of the circumstances or events described herein unless the
Executive has first provided written notice of such circumstance or event and
the Company has not corrected such circumstance or event within thirty (30)
days of receipt by the Company of such written notice from the Executive.

 

6

 

(g) 
Survival of Operative Sections. 
Upon any termination of the Executive’s employment, the provisions of
Sections 6(e), 6(f), and 7 through 18 of this Agreement shall survive to the
extent necessary to give effect to the provisions thereof.

 

Section 7.  Secrecy and Non-Competition.

 

(a) 
No Competing Employment.  The
Executive acknowledges that the agreements and covenants contained in this Section 7
are essential to protect the value of the Company’s, or any of its subsidiaries’ or affiliates’, business and assets and
by his current employment with the Company and its subsidiaries, the Executive
has obtained and will obtain such knowledge, contacts, know-how, training and
experience and there is a substantial probability that such knowledge,
know-how, contacts, training and experience could be used to the substantial
advantage of a competitor of the Company or any of its subsidiaries or affiliates and to the Company’s, or any of its subsidiaries’ or affiliates’,
substantial detriment.  Therefore, the
Executive agrees that for the period commencing on the date of this Agreement
and ending on the first anniversary of the termination of the Executive’s
employment hereunder (such period is hereinafter referred to as the “Restricted
Period”) with respect to any State in which the Company is engaged in
business during the Employment Term, the Executive shall not participate or
engage, directly or indirectly, for himself or on behalf of or in conjunction
with any person, partnership, corporation or other entity, whether as an
employee, agent, officer, director, partner or joint venturer, in any business
activities if such activity consists of any activity undertaken or expressly
contemplated to be undertaken by the Company or any of its subsidiaries or by
the Executive at any time during the last three (3) years of the
Employment Term.  The foregoing
restrictions contained in this Section 7(a) shall not prevent the
Executive from accepting employment with a large diversified organization with
separate and distinct divisions that do not compete, directly or indirectly,
with the Company or any of its
subsidiaries or affiliates, so long as prior to accepting such
employment the Company receives separate written assurances from the
prospective employer and from the Executive, satisfactory to the Company, to
the effect that the Executive will not render any services, directly or
indirectly, to any division or business unit that competes, directly or
indirectly, with the Company or any of
its subsidiaries or affiliates. 
During the Restricted Period, the Executive will inform any new
employer, prior to accepting employment, of the existence of this Agreement and
provide such employer with a copy of this Agreement.

 

(b) 
Nondisclosure of Confidential Information.  The Executive, except in connection with his employment
hereunder, shall not disclose to any person or entity or use, either during the
Employment Term or at any time thereafter, any information not in the public
domain or generally known in the industry that the Company any of its subsidiaries or affiliates
treats as confidential or proprietary, in any form, acquired by the Executive
while employed by the Company or any predecessor to the Company’s business or,
if acquired following the Employment Term, such information which, to the
Executive’s knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company or any of its
subsidiaries or affiliates, relating to the Company, its subsidiaries or
affiliates, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data 

 

7

 

(including the revenues,
costs or profits associated with any of the Company’s, or any of its subsidiaries’ or affiliates’,
products or services), business plans, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and
printouts, plans (business, technical or otherwise), customer and industry
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any subsidiaries or affiliates thereof.  The Executive agrees and acknowledges that
all of such information, in any form, and copies and extracts thereof, are and
shall remain the sole and exclusive property of the Company any of its subsidiaries or affiliates,
and upon termination of his employment with the Company, the Executive shall
return to the Company any of its
subsidiaries or affiliates the originals and all copies of any such
information provided to or acquired by the Executive in connection with the
performance of his duties for the Company, and shall return to the Company any of its subsidiaries or affiliates
all files, correspondence and/or other communications received, maintained
and/or originated by the Executive during the course of his employment.

 

(c) 
No Interference.  During the
Restricted Period, the Executive shall not, whether for his own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), directly or indirectly solicit,
endeavor to entice away from the Company or any of its subsidiaries or affiliates, or otherwise directly
interfere with the relationship of the Company or any of its subsidiaries or affiliates with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or any of its
subsidiaries or affiliates (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client of the Company, its
predecessors or any of its subsidiaries
or affiliates.  The placement of
any general classified or “help wanted” advertisements and/or general
solicitations to the public at large shall not constitute a violation of this Section 7(c) unless
the Executive’s name is contained in such advertisements or solicitations.

 

(d) 
Inventions, etc.  The Executive
hereby sells, transfers and assigns to the Company or any of its subsidiaries or affiliates or to any person or entity
designated by the Company all of the entire right, title and interest of the
Executive in and to all inventions, ideas, disclosures and improvements,
whether patented or unpatented, and copyrightable material, made or conceived
by the Executive, solely or jointly, during his employment by the Company which
relate to methods, apparatus, designs, products, processes or devices, sold,
leased, used or under consideration or development by the Company or any of its subsidiaries or affiliates,
or which otherwise relate to or pertain to the business, functions or
operations of the Company or any of its
subsidiaries or affiliates or which arise from the efforts of the
Executive during the course of his employment for the Company.  The Executive shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information,
details and data pertaining to the aforementioned inventions, ideas,
disclosures and improvements; and the Executive shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Executive to permit the
Company or any of its subsidiaries or
affiliates or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain 

 

8

 

copyright thereof.  Any invention relating to the business of the
Company or any of its subsidiaries or
affiliates and disclosed by the Executive within one year following the
termination of his employment with the Company shall be deemed to fall within
the provisions of this paragraph unless proved to have been first conceived and
made following such termination.  The
foregoing requirements of this Section 7(d) shall not apply to any
invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on the
Executive’s own time, and (i) which does not relate directly to the
Company’s, or any of its subsidiaries’
or affiliates’, business or to the Company’s, or any of its subsidiaries’ or affiliates’, actual or demonstrably
anticipated research or development, or (ii) which does not result from
any work the Executive performed for the Company or any of its subsidiaries or affiliates.

 

Section 8.  Injunctive Relief.  Without intending to limit the remedies
available to the Company or any of its
subsidiaries or affiliates, the Executive acknowledges that in the event
of a breach of any of the covenants contained in Section 7 hereof may
result in material irreparable injury to the Company or its subsidiaries or
affiliates for which there is no adequate remedy at law, that it will not be possible
to measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction, without the
necessity of proving irreparable harm or injury as a result of such breach or
threatened breach of Section 7 hereof, restraining the Executive from
engaging in activities prohibited by Section 7 hereof or such other relief
as may be required specifically to enforce any of the covenants in Section 7
hereof.

 

Section 9.  Representations and Warranties of the
Executive.  The Executive represents
and warrants to the Company as follows:

 

(a) 
This Agreement, upon execution and delivery by the Executive, will be duly
executed and delivered by the Executive and (assuming due execution and
delivery hereof by the Company) will be the valid and binding obligation of the
Executive enforceable against the Executive in accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Executive (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental regulation
applicable to the Executive.  Without
limiting the generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no hire or similar agreement that restricts
in any way the Executive’s ability to engage in any business or to solicit or
hire the employees of any person.

 

The representations and
warranties of the Executive contained in this Section 9 shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

9

 

Section 10.  Representations and Warranties of the
Company.  The Company represents and
warrants to the Executive as follows:

 

(a) 
This Agreement, upon execution and delivery by the Company, will be duly
executed and delivered by the Company and (assuming due execution and delivery
hereof by the Executive) will be the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Company (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental
regulation applicable to the Company.

 

The representations and
warranties of the Company contained in this Section 10 shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 11.
 Successors and Assigns; No
Third-Party Beneficiaries.  This
Agreement shall inure to the benefit of, and be binding upon, the successors
and assigns of each of the parties, including, but not limited to, the
Executive’s heirs and the personal representatives of the Executive’s estate; provided,
however, that neither party shall assign or delegate any of the
obligations created under this Agreement without the prior written consent of
the other party.  Notwithstanding the
foregoing, the Company shall have the unrestricted right to assign this
Agreement and to delegate all or any part of its obligations hereunder to any
of its subsidiaries or affiliates, but in such event such assignee shall
expressly assume all obligations of the Company hereunder and the Company shall
remain fully liable for the performance of all of such obligations in the
manner prescribed in this Agreement. 
Nothing in this Agreement shall confer upon any person or entity not a
party to this Agreement, or the legal representatives of such person or entity,
any rights or remedies of any nature or kind whatsoever under or by reason of
this Agreement.

 

Section 12.  Waiver and Amendments.  Any waiver, alteration, amendment or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however,
that any such waiver, alteration, amendment or modification is consented to on
the Company’s behalf by the Board of Directors. 
No waiver by either of the parties hereto of their rights hereunder
shall be deemed to constitute a waiver with respect to any subsequent
occurrences or transactions hereunder unless such waiver specifically states
that it is to be construed as a continuing waiver.

 

Section 13.  Severability and Governing Law.  The Executive acknowledges and agrees that
the covenants set forth in Section 7 hereof are reasonable and valid in
geographical and temporal scope and in all other respects.  If any of such covenants or such other
provisions of this Agreement are found to be invalid or unenforceable by a
final determination of a court of 

 

10

 

competent jurisdiction (a) the
remaining terms and provisions hereof shall be unimpaired and (b) the
invalid or unenforceable term or provision shall be deemed replaced by a term
or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED,
HOWEVER, THE PROVISIONS OF THIS AGREEMENT RELATING TO THE OPTION UNDER SECTION 3(d) HEREOF
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

 

Section 14. 
Notices.

 

(a)  All communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by overnight courier or by registered or certified mail, postage
prepaid:

 

(i)  If to the Executive,
at such other address as the Executive may have furnished the Company in
writing, and

 

(ii)  If to the
Company, at Minnesota Headquarters, marked for the attention of the Chief
Executive Officer, or at such other address as it may have furnished in writing
to the Executive.

 

(b)  Any notice so
addressed shall be deemed to be given: 
if delivered by hand, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the
date of such mailing.

 

Section 15.  Section Headings.  The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof, affect the meaning or interpretation of this
Agreement or of any term or provision hereof.

 

Section 16.  Entire Agreement.  This Agreement, including the Exhibits
hereto, constitutes the entire understanding and agreement of the parties
hereto regarding the employment of the Executive.  This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter of this
Agreement.

 

Section 17.  Severability.  In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.

 

11

 

Section 18.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

 

[Remainder of Page Intentionally Left Blank]

 

12

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.

 

 

	
   

  	
   

  	
  TORNIER, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Doug Kohrs

  
	
   

  	
   

  	
   

  	
  Name: Doug Kohrs

  
	
   

  	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MIKE DOTY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mike Doty

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