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                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 21,
2001, is entered into between BIOPURE CORPORATION, a Delaware corporation (the
"Company"), and SOCIETE GENERALE, a bank organized under the laws of France (the
"Investor").

     WHEREAS, the Company and the Investor have entered into that certain Equity
Line Financing Agreement (the "Financing Agreement"), dated as of the date
hereof, pursuant to which the Company has agreed to issue and sell to the
Investor for an aggregate purchase price of up to $75,000,000 shares of Common
Stock, $0.01 par value per share (the "Common Stock"), from time to time as
provided in the Financing Agreement; and

     WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Financing Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Common Stock issued under the Financing Agreement;

     NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements contained herein and in
the Financing Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound hereby, the parties hereto agree as follows:

                             ARTICLE I DEFINITIONS

     SECTION 1.1  DEFINITIONS. Capitalized terms used herein and defined in the
Financing Agreement shall have the same respective meanings herein as are
ascribed to them therein. In addition, the following terms shall have the
meanings ascribed to them below:

     "Investor" shall mean the Investor referenced in the preamble, and, unless
the context otherwise requires, shall include any assignee or transferee of the
Investor who becomes bound by this Agreement in accordance with Section 4.5
hereof.

     "Registrable Securities" means all of the shares of Common Stock issued
under the Financing Agreement until, (i) a registration statement under the
Securities Act covering the offer and sale of such shares of Common Stock has
been declared effective by the Commission and such shares of Common Stock have
been disposed of pursuant to such effective registration statement, (ii) such
shares of Common Stock are sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) such shares of Common Stock have
been otherwise transferred and the Company has delivered a new certificate or
other evidence of ownership for such shares of Common Stock not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, which counsel shall be reasonably acceptable to the Investor, such
Shares of Common Stock may be sold without any time, volume or manner limitation
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.

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     "Registration Statement" means the registration statement filed by the
Company pursuant to Section 2.1(a) and any additional registration statement
filed by the Company pursuant to Section 2.1(b).

     "Underwriter" means a securities dealer that purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.

                         ARTICLE II REGISTRATION RIGHTS

     SECTION 2.1  REGISTRATION REQUIREMENTS. The Company shall use its
commercially reasonable efforts to effect the registration of the Registrable
Securities (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or facilitate the
sale or distribution of all the Registrable Securities in the manner (including
manner of sale) and in all states reasonably requested by the Investor. Such
commercially reasonable efforts by the Company shall include the following:

          (a) The Company will as expeditiously as possible, prepare and file
with the Commission a registration statement (the "Registration Statement") on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the Commission and, if not, on such other form promulgated by the
Commission for which the Company then qualifies and that counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method of
distribution of such Registrable Securities), and use its commercially
reasonable efforts to cause such filed Registration Statement to become
effective by the Effectiveness Deadline. The "Effectiveness Deadline" shall
mean, 180 days from the date of this Agreement. In the event the Registration
Statement shall not have been declared effective by the Commission by the
Effectiveness Deadline, the Investor shall have the right to terminate the
Financing Agreement. The Company will as expeditiously as possible prepare and
file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep the Registration Statement effective for a period of not less than: (i) in
the case of a non-underwritten offering of Registrable Securities, until there
shall no longer be any Registrable Securities or (ii) with respect to an
underwritten offering of Registrable Securities, until the completion of the
distribution of Registrable Securities covered by the Registration Statement
(but not before the expiration of the period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable), and the Company will
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the Investor as set forth
in the Registration Statement.

          (b) The number of Registrable Securities covered by the initial
Registration Statement shall equal 3,000,000 shares. To the extent the Company
files an additional registration statement to cover Registrable Securities in
excess of the number of Registrable Securities covered by the initial
Registration Statement, such additional registration statement

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shall, for purposes of the Agreement (other than with respect to the
Effectiveness Deadline), also be deemed to be the "Registration Statement."

          (c) The Company will, prior to filing the Registration Statement or
prospectus or any amendment or supplement thereto, furnish to the Investor, its
counsel, and each Underwriter, if any, of the Registrable Securities covered by
such Registration Statement copies of such Registration Statement and prospectus
or any amendment or supplement thereto as proposed to be filed, together with
exhibits thereto, which documents will be subject to review and approval by the
foregoing persons (such approval not to be unreasonably withheld or delayed),
and thereafter furnish to the Investor, its counsel and each Underwriter, if any
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents or
information as the Investor, its counsel or each Underwriter may reasonably
request in order to facilitate the disposition of the Registrable Securities.

          (d) The Company will use its commercially reasonable efforts to (i)
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Investor may
reasonably (in light of its intended plan of distribution) request and (ii) if
applicable, cause such Registrable Securities to be registered with or approved
by such other governmental agencies or authorities in the United States as may
be necessary by virtue of the business and operations of the Company and do any
and all other acts and things that may be reasonably necessary or advisable to
enable the Investor to consummate the disposition of the Registrable Securities;
provided that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for the fulfillment of its obligation under this paragraph (d), (B) subject
itself to taxation in any such jurisdiction or (C) consent or subject itself to
general service of process in any such jurisdiction.

          (e) The Company will promptly notify the Investor upon the occurrence
of any of the following events in respect of the Registration Statement or
related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that
(or the Company otherwise becomes aware of any statement included in the
Registration Statement, related prospectus or documents that is untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that), in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or

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omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (v) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate (in
which event the Company will promptly make available to the Investor any such
supplement or amendment to the Registration Statement and, as applicable, the
related prospectus).

          (f) The Company will enter into customary agreements (including, if
applicable, an underwriting agreement in customary form and that is reasonably
satisfactory to the Company) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the Registrable
Securities (the Investor may, at its option, require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of any applicable Underwriter also be made to and for the benefit of the
Investor).

          (g) The Company will make available to the Investor (and will deliver
to its counsel) and each Underwriter, if any, subject to restrictions imposed by
the United States federal government or any agency or instrumentality thereof,
copies of all correspondence between the Commission and the Company, its counsel
or auditors and will also make available, subject to restrictions imposed by the
United States federal government or any agency or instrumentality thereof, for
inspection by the Investor, its counsel, any Underwriter participating in any
disposition pursuant to a Registration Statement and any attorney, accountant or
other professional retained by the Investor or such Underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with the
Registration Statement. Records that the Company determines, in good faith, to
be confidential and that it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary in the reasonable opinion of the Inspectors to avoid or correct a
misstatement or omission in the Registration Statement or (ii) the disclosure or
release of such Records is required pursuant to a subpoena or other order from a
court of competent jurisdiction or governmental or administrative agency;
provided that prior to any disclosure or release pursuant to clause (ii), the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records; and, provided
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon written advice of counsel, are compelled to disclose such Records, the
Inspectors may disclose that portion of the Records that counsel has advised the
Inspectors that the Inspectors are compelled to disclose. The Company may
require, as a condition to the disclosure to any Inspector of any confidential
information, that such Inspector execute and deliver to the Company a written
agreement, in form and substance reasonably satisfactory to the Company,
pursuant to which such Inspector agrees to the confidential treatment of such
information as contemplated above. The Investor agrees that information obtained
by it as a result of such inspections (not including any information obtained
from a third party who is not prohibited from providing such information by a
contractual, legal

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or fiduciary obligation to the Company) shall be deemed confidential and shall
not be used by it as the basis for any market transactions in the securities of
the Company or its Affiliates unless and until such information is made
generally available to the public. The Investor further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.

          (h) In connection with an underwritten offering, the Company will
furnish to the Investor and to each Underwriter, if any, a signed counterpart,
addressed to the Investor and such Underwriter, of (1) such opinion or opinions
of counsel to the Company as may be required by an underwriting agreement in
customary form and (2) a comfort letter or comfort letters from the Company's
independent auditors in customary form and covering such matters of the type
customarily covered by comfort letters, as the Investor or the managing
Underwriter therefor reasonably requests pursuant to an underwriting agreement
in customary form. The Company also agrees to provide such comfort letters or
review letters from its independent auditors and such opinions of counsel to the
Company as are required by the Financing Agreement.

          (i) The Company will comply with all applicable rules and regulations
of the Commission, including, without limitation, compliance with applicable
reporting requirements under the Exchange Act, and will make available to its
security holders, as soon as reasonably practicable, an earning statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the Registration Statement, which earning statement shall
satisfy the provisions of Section 11(a) of the Securities Act.

          (j) The Company shall take all steps necessary to enable the Investor
to avail itself of the prospectus delivery mechanism set forth in Rule 153 (or
successor thereto) under the Securities Act, if available.

          (k) In connection with an underwritten offering, the Company will
cooperate, to the extent reasonably requested by the managing Underwriter for
the offering, in customary efforts to sell the securities under the offering,
including, without limitation, participating in "road shows" on a schedule as
shall be reasonably satisfactory to, and not unduly burdensome on, the Company;
provided that the Company shall not be obligated to participate in more than one
such offering in any twelve (12) -month period and any such participation by the
Company shall be at the expense of the managing Underwriter or the Investor
unless the Company shall also be offering securities in such underwritten
offering.

     The Company may require the Investor promptly to furnish in writing to the
Company such information regarding the intended methods of distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration, including, without limitation, all such information as may be
requested by the Commission or the NASD or any state securities commission or
similar authority. If the Investor fails to provide such information requested
in connection with such registration within ten (10) business days after
receiving such written request, then the Company may cease pursuit of such
registration in respect of the Investor's Registrable Securities until such
information is provided.

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     The Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 2.1(e) hereof, the
Investor will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement until the Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
2.1(e)(v) hereof, and, if so directed by the Company, the Investor will deliver
to the Company all copies, other than permanent file copies then in the
Investor's possession, of the most recent prospectus covering the Registrable
Securities at the time of receipt of such notice.

     SECTION 2.2  REGISTRATION EXPENSES. In connection with registration
hereunder, the Company shall pay the following registration expenses incurred in
connection therewith (the "Registration Expenses"): (i) all registration and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of a single firm of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with the listing or quotation of the Registrable Securities, (vi) fees and
disbursements of counsel for the Company and customary fees and expenses for
independent auditors retained by the Company (including the expenses of any (A)
opinion letters or costs associated with delivery by counsel to the Company of
an opinion letter or opinion letters or (B) comfort letters or review letters or
costs associated with the delivery by independent auditors of comfort letters or
review letters, in each case required by or contemplated by Section 2.1(h)
hereof), and (vii) the fees and expenses of any special experts retained by the
Company in connection with such registration. The Company shall have no
obligation to pay any underwriting fees, discounts or commissions, or any
transfer taxes attributable to the sale of Registrable Securities, or the cost
of any special audit required by the Investor or any underwriter, such costs to
be borne by the Investor.

                  ARTICLE III INDEMNIFICATION AND CONTRIBUTION

     SECTION 3.1  INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and each Person or entity, if
any, who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners,
Affiliates, officers, directors, employees and duly authorized agents of such
controlling Person or entity (collectively, the "Controlling Persons"), from and
against any loss, claim, damage, liability, reasonable attorneys' fees, costs or
expenses and costs and expenses of investigating and defending any such claim
(collectively, "Damages"), and any action in respect thereof to which the
Investor, its partners, Affiliates, officers, directors, employees and duly
authorized agents, and any such Controlling Person may become subject under the
Securities Act or otherwise, insofar as such Damages (or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
prospectus relating to the Registrable Securities or any preliminary prospectus,
or arise out of, or are based upon, any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of any prospectus or preliminary prospectus, in
light of the circumstances in which they were made) not misleading, except
insofar as the same are based upon information furnished in writing to the
Company by the Investor or an Underwriter expressly for use therein, and shall

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reimburse the Investor, its partners, Affiliates, officers, directors, employees
and duly authorized agents, and each such Controlling Person for any reasonable
legal and other expenses reasonably incurred by the Investor, its partners,
Affiliates, officers, directors, employees and duly authorized agents, or any
such Controlling Person in investigating or defending or preparing to defend
against any such Damages or proceedings as such expenses are incurred; provided,
however, that the Company shall not be liable to the Investor to the extent that
any such Damages arise out of or are based upon an untrue statement or omission
made in any preliminary prospectus if (i) the Investor failed to send or deliver
a copy of the final prospectus with or prior to the delivery of written
confirmation of the sale by the Investor to the Person asserting the claim from
which such Damages arise and (ii) the final prospectus would have corrected such
untrue statement or omission or alleged untrue statement or omission; provided
further, however, that the Company shall not be liable in any such case to the
extent that any such Damages arise out of or are based upon an untrue statement
or omission or alleged untrue statement or omission in any prospectus if (x)
such untrue statement or omission or alleged untrue statement or omission is
corrected in an amendment or supplement to such prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of such
prospectus as so amended or supplemented, the Investor thereafter fails to
deliver such prospectus as so amended or supplemented prior to or concurrently
with the sale of a Registrable Security to the Person asserting the claim from
which such Damages arise. The Company also agrees to indemnify any Underwriters
of the Registrable Securities, their officers and directors and each Person who
controls such Underwriters on customary terms.

     SECTION 3.2  INDEMNIFICATION BY THE INVESTOR. The Investor, agrees to
indemnify and hold harmless the Company, its partners, Affiliates, officers,
directors, employees and duly authorized agents and each Person or entity, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person, to the same extent as the foregoing indemnity from the Company to the
Investor, but only with reference to information related to the Investor or its
plan of distribution furnished in writing by the Investor or on the Investor's
behalf expressly for use in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its partners, Affiliates, officers, directors, employees
or duly authorized agents or any such controlling Person or its partners,
Affiliates, officers, directors, employees or duly authorized agents, in respect
of which indemnity may be sought against the Investor, the Investor shall have
the rights and duties given to the Company, and the Company or its partners,
Affiliates, officers, directors, employees or duly authorized agents, or such
controlling Person, or its partners, Affiliates, officers, directors, employees
or duly authorized agents, shall have the comparable rights and duties given to
the Investor by Section 4.1. The Investor also agrees to indemnify and hold
harmless any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters on customary terms with
reference to the same information as to which it agrees to indemnify the Company
referenced above. The Company shall be entitled to receive indemnities on
customary terms from Underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above, with respect to information so furnished in writing by
such persons specifically for inclusion in any prospectus or the Registration
Statement.

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     SECTION 3.3  CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by any person or entity in respect of which indemnity may be sought pursuant to
Section 3.1 or 3.2 (an "Indemnified Party") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the Person against whom such indemnity may be
sought (an "Indemnifying Party"), notify the Indemnifying Party in writing of
the claim or the commencement of such action; in the event an Indemnified Party
shall fail to give such notice as provided in this Section 3.3 and the
Indemnifying Party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1 or
3.2 shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, that the failure to
notify the Indemnifying Party shall not relieve it from any liability that it
may have to an Indemnified Party otherwise than under Section 4.1 or 4.2. If any
such claim or action shall be brought against an Indemnified Party, the
Indemnifying Party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified Indemnifying Party, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim or proceeding. Whether or not the defense of any claim or action
is assumed by an Indemnifying Party, such Indemnifying Party will not be subject
to any liability for any settlement made without its consent, which consent will
not be unreasonably withheld.

     SECTION 3.4  CONTRIBUTION. If the indemnification provided for in this
Article III is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages (i) as between the Company and the
Investor, on the one hand, and the Underwriters, on the other hand, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the

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Investor, on the one hand, and the Underwriters, on the other hand, from the
offering of the Registrable Securities, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company and the Investor,
on the one hand, and of the Underwriters, on the other hand, in connection with
the statements or omissions that resulted in such Damages, as well as any other
relevant equitable considerations, and (ii) as between the Company, on the one
hand, and the Investor, on the other hand, in such proportion as is appropriate
to reflect the relative fault of the Company and of the Investor in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Investor,
on the one hand, and the Underwriters, on the other hand, shall be deemed to be
in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and the Investor bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the prospectus. The relative fault of the Company and the
Investor, on the one hand, and of the Underwriters, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and the Investor
or by the Underwriters. The relative fault of the Company, on the one hand, and
of the Investor, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.

     The Company and the Investor agree that it would not be just and equitable
if contribution pursuant to this Section 3.4 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 3.4, the Investor shall in no event be required to contribute any amount
in excess of the amount paid by the Investor for the Registrable Securities
(less underwriting discounts and commissions payable in connection with an
underwritten offering). No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. In connection with an underwritten offering, in the event of
an inconsistency between the terms of this Article III and the terms of the
underwriting agreement entered into among the Company, the Investor and the
underwriter, the terms of such underwriting agreement shall control.

                            ARTICLE IV MISCELLANEOUS

     SECTION 4.1  TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate on such date as there shall be
no Registrable Securities; provided, however, that the provisions of Article IV
hereof shall survive any

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termination of this Agreement. The Company may terminate this Agreement prior to
the issuance of any Registrable Securities at such time as the Financing
Agreement is terminated.

     SECTION 4.2  RULE 144. The Company covenants that it will file all reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as registered holders of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable the Investor to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. If at any time the Company is
not required to file such reports, it will, upon the reasonable request of any
registered holder of Registrable Securities, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144, within
the limitations of the exemption provided thereby. Upon the request of the
Investor, the Company will deliver to the Investor a written statement as to
whether it has complied with such requirements.

     SECTION 4.3  RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. If, and to the
extent, reasonably requested by the managing Underwriter or Underwriters in the
case of an underwritten public offering, that includes Registrable Securities as
contemplated by Section 2.1, the Company shall use commercially reasonable
efforts to cause its Affiliates to agree not to effect any public sale or
distribution of any securities similar to those being registered in accordance
with Section 2.1 hereof, or any securities convertible into or exchangeable or
exercisable for such securities, during the thirty (30) days prior to, and
during the period beginning on the effective date of the Registration Statement
(except as part of the Registration Statement) until all of the Registrable
Securities offered thereunder have been sold pursuant to such underwritten
public offering, provided, however, that such period shall not exceed ninety
(90) days.

     SECTION 4.4  AMENDMENT AND MODIFICATION. Any provision of this Agreement
may be waived, provided that such waiver is set forth in a writing executed by
the party against whom the enforcement of such waiver is sought. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the Investor. No course of dealing between or among any
Persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Person under or by reason of this Agreement.

     SECTION 4.5  SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that the benefits and right contemplated hereunder to be provided to
any holder of Registrable Securities shall be limited to the registered holder
thereof. The Investor may assign its rights under this Agreement to any
subsequent holder of the Registrable Securities only with the consent of the
Company (which consent shall not be unreasonably withheld), provided that the
Company shall have the right to require any such subsequent holder of the
Registrable Securities to execute a counterpart of this Agreement as a condition
to such holder's claim to any rights hereunder. This Agreement,

                                       10

<PAGE>   11

together with the Financing Agreement, sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and thereof
and merges and supersedes all prior discussions, agreements and understandings
(written or oral) of any and every nature between them with respect to such
subject matter.

     SECTION 4.6  SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.

     SECTION 4.7  NOTICES. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or that are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice: (i) if to the Company, to: Biopure
Corporation, 11 Hurley Street, Cambridge, MA, Attention: Francis H. Murphy,
Facsimile No.: (617) 234-6507, with copies (which shall not constitute notice)
to: LeBoeuf, Lamb, Greene & MacRae, 125 West 55th Street, New York, NY 10019,
Attention: Joseph Ferraro, Facsimile No. (212) 424-8500; and (ii) if to the
Investor, Societe Generale c/o SG Cowen Securities Corporation, 1221 Avenue of
the Americas, New York, NY 10020, Attention: Guillaume Pollet, Facsimile No.:
(212) 278-5467, with copies (which shall not constitute notice) to: Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, NY 10022, Attention: J. Eric
Maki, Facsimile (212) 755-7306. Notice shall be deemed given on the date of
service or transmission if personally served or transmitted by telegram, telex
or facsimile before the close of business on such date and on the next business
day if not served or transmitted by the close of business on such date. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the next business day following delivery of
such notice by a reputable air courier service.

     SECTION 4.8  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

     SECTION 4.9  HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not constitute a part of this Agreement, nor shall
they affect their meaning, construction or effect.

     SECTION 4.10  COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original instrument, and all of which
together shall constitute one and the same instrument.

                                       11
<PAGE>   12

     SECTION 4.11  FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by the other party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.

                                       12

<PAGE>   13

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.

                                   BIOPURE CORPORATION

                                   By: /s/ Francis H. Murphy
                                      ----------------------------------
                                      Name:  Francis H. Murphy
                                      Title: CFO

                                   SOCIETE GENERALE

                                   By: /s/ Guillaume Pollet
                                      ----------------------------------
                                      Name:  Guillaume Pollet
                                      Title: Managing Director

                                       13<PAGE>   1

                                                                    EXHIBIT 10.1

                    EMPLOYMENT (CHANGE IN CONTROL) AGREEMENT

         AGREEMENT made effective as of this 11th day of January, 2001 by and
between WSI Industries, Inc., a Minnesota corporation with its principal offices
at Wayzata, Minnesota ("WSI") and Michael J. Pudil (the "Executive").

         WHEREAS, WSI considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of WSI and its shareholders; and

         WHEREAS, the Executive has made and is expected to make, due to
Executive's intimate knowledge of the business and affairs of WSI, its policies,
methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of WSI; and

         WHEREAS, WSI, as a publicly held corporation, recognizes that the
possibility of a Change in Control may exist and that such possibility and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of the Executive in the performance of the Executive's
duties to the detriment of WSI and its shareholders; and

         WHEREAS, Executive is willing to remain in the employ of WSI upon the
understanding that WSI will provide income security if the Executive's
employment is terminated under certain terms and conditions; and

         WHEREAS, it is in the best interests of WSI and its stockholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction and
to ensure the continued availability to WSI of the Executive in the event of a
Change in Control.

         THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:

         1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until January 11, 2003. After January 11, 2003,
this Agreement shall automatically renew for successive one-year periods unless
WSI notifies the Executive of termination of the Agreement at least sixty (60)
days prior to the end of the initial term or any renewal term. Notwithstanding
the preceding sentence, if a Change in Control occurs, this Agreement shall
continue in effect for a period of 24 months from the date of the occurrence of
a Change in Control.

         2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control, as set forth below.

                  (a) For purposes of this Agreement, a "Change in Control" of
         WSI shall be deemed to occur when and if any of the following occur:

                           (i) any "person" (as such term is used in Sections
                  13(d) and 14(d) of the Exchange Act) becomes a "beneficial
                  owner" (as defined in Rule 13d-3 under the Exchange Act),
                  directly or indirectly, of securities of WSI representing 50%
                  or more of the combined voting power of WSI's then outstanding
                  securities;

                           (ii) there ceases to be a majority of the Board of
                  Directors comprised of: (A) individuals who on the date hereof
                  constituted the Board of WSI, and (B) any new director (other
                  than a director whose initial assumption of office is in
                  connection with an actual or threatened contest, including but
                  not limited to a proxy or consent solicitation, relating to
                  the election of directors of WSI or a settlement of such
                  contest or consent solicitation) who subsequently was elected
                  or nominated for election by a majority of the directors who
                  held such office immediately prior to a Change in Control (the
                  individuals designated in (A) and (B) shall be referred to as
                  the "Incumbent Directors"); or

<PAGE>   2

                           (iii) WSI disposes of at least 75% of its assets,
                  other than to an entity owned 50% or greater by WSI or any of
                  its subsidiaries.

                  (b) A Change in Control which arises from a transaction or
         series of transactions which are not authorized, recommended or
         approved by formal action taken by a majority of the Incumbent
         Directors shall be referred to as an "Unapproved Change in Control." A
         Change in Control which has been authorized, recommended or approved by
         a majority of the Incumbent Directors shall be referred to as an
         "Approved Change in Control."

         3. Termination Following Change in Control. If a Change in Control
shall have occurred during the term of this Agreement and Executive's employment
is thereafter terminated, Executive shall be entitled to the benefits provided
in subsection 4(d) unless such termination is (A) because of Executive's Death
or Retirement, (B) by WSI for Cause or Disability, or (C) by Executive other
than for Good Reason.

                  (a) Disability; Retirement. If, as a result of incapacity due
         to physical or mental illness, the Executive shall have been absent
         from the full-time performance of Executive's duties with WSI for six
         consecutive months, and within 30 days after written Notice of
         Termination is given the Executive shall not have returned to the
         full-time performance of the Executive's duties, WSI may terminate
         Executive's employment for "Disability". Any question as to the
         existence of Executive's Disability upon which Executive and WSI cannot
         agree shall be determined by a qualified independent physician selected
         by Executive (or, if the Executive is unable to make such selection, it
         shall be made by any adult member of the Executive's immediate family),
         and approved by WSI. The determination of such physician made in
         writing to WSI and to Executive shall be final and conclusive for all
         purposes of this Agreement. Termination by Executive of Executive's
         employment based on "Retirement" shall mean retirement at or after the
         date the Executive has attained age 65.

                  (b) Cause. Termination by WSI of Executive's employment for
         "Cause" shall mean: (i) the willful and continued failure of Executive
         to perform his essential duties; (ii) the willful engaging by Executive
         in illegal conduct, or (iii) willful misconduct materially injurious to
         WSI, which, in the case of clause (i) and (iii), the Executive has not
         cured, in the sole opinion of the Board, determined in good faith,
         within 10 days of receipt of the Notice of Termination. An act of
         Executive shall not be deemed "willful" unless done or omitted to be
         done by Executive not in good faith and without reasonable belief that
         the act or omission was in WSI's best interests.

                  (c) Good Reason. Executive shall be entitled to terminate his
         employment for Good Reason. For purposes of this Agreement, "Good
         Reason" shall mean, without Executive's express written consent, any of
         the following:

                           (i) the assignment to Executive of any duties
                  inconsistent with Executive's status or position with WSI, or
                  a substantial reduction in the nature or status of Executive's
                  responsibilities from those in effect immediately prior to the
                  Change in Control;

                           (ii) a reduction by WSI in Executive's annual base
                  salary in effect immediately prior to a Change in Control;

                           (iii) the relocation of Executive's principal
                  executive offices to a location more than fifty miles from
                  Executive's principal office prior to the Change in Control,
                  except for required travel on WSI's business to an extent
                  substantially consistent with Executive's prior business
                  travel obligations;

                           (iv) the failure by WSI to continue to provide
                  Executive with benefits substantially similar to those enjoyed
                  by Executive under any of WSI's pension, life insurance,
                  medical, health

                                       2
<PAGE>   3

                  and accident, disability, deferred compensation, incentive
                  awards, incentive stock options, or savings plans in which
                  Executive was participating at the time of the Change in
                  Control, the taking of any action by WSI which would directly
                  or indirectly materially reduce any of such benefits or
                  deprive Executive of any material fringe benefit enjoyed at
                  the time of the Change in Control, or the failure by WSI to
                  provide Executive with the number of paid vacation days to
                  which Executive is entitled at the time of the Change in
                  Control, provided, however, that WSI may amend any such plan
                  or programs as long as such amendments do not reduce any
                  benefits to which Executive would be entitled upon
                  termination;

                           (v) the failure of WSI to obtain a satisfactory
                  agreement from any successor to assume and agree to perform
                  this Agreement, as contemplated in Section 7; or

                           (vi) any purported termination of Executive's
                  employment which is not made pursuant to a Notice of
                  Termination satisfying the requirements of subsection (e)
                  below; for purposes of this Agreement, no such purported
                  termination shall be effective.

                  (d) Voluntary Termination Deemed Good Reason. If an Unapproved
         Change in Control occurs, Executive may voluntarily terminate his
         employment for any reason during the period commencing on the 91st day
         following a Change in Control and ending on the 180th day following a
         Change in Control. Any such termination shall be deemed "Good Reason"
         for all purposes of this Agreement.

                  (e) Notice of Termination. Any purported termination of
         Executive's employment by WSI or by Executive shall be communicated by
         written Notice of Termination to the other party hereto in accordance
         with Section 8. For purposes of this Agreement, a "Notice of
         Termination" shall mean a notice which shall indicate the specific
         termination provision in this Agreement relied upon and shall set forth
         the facts and circumstances claimed to provide a basis for termination
         of Executive's employment.

                  (f) Date of Termination. For purposes of this Agreement, "Date
         of Termination" shall mean:

                           (i) if Executive's employment is terminated for
                  Disability, 30 days after Notice of Termination is given
                  (provided that the Executive shall not have returned to the
                  full-time performance of the Executive's duties during such 30
                  day period); and

                           (ii) if Executive's employment is terminated pursuant
                  to subsections (b), (c) or (d) above or for any other reason
                  (other than Disability), the date specified in the Notice of
                  Termination (which, in the case of a termination pursuant to
                  subsection (b) above shall not be less than 10 days, and in
                  the case of a termination pursuant to subsection (c) or (d)
                  above shall not be less than 10 nor more than 30 days,
                  respectively, from the date such Notice of Termination is
                  given).

                                       3

<PAGE>   4

                  (g) Dispute of Termination. If, within 10 days after any
         Notice of Termination is given, the party receiving such Notice of
         Termination notifies the other party in good faith that a dispute
         exists concerning the termination, the Date of Termination shall be the
         date on which the dispute is finally determined, either by mutual
         written agreement of the parties, or by a final judgement, order or
         decree of a court of competent jurisdiction in accordance with
         subsection 11(a) (which is not appealable or the time for appeal
         therefrom having expired and no appeal having been perfected);
         provided, that the date of Termination shall be extended by a notice of
         dispute only if such notice is given in good faith and the party giving
         such notice pursues the resolution of such dispute with reasonable
         diligence. Notwithstanding the pendency of any such dispute, WSI shall
         continue to pay Executive full compensation in effect when the notice
         giving rise to the dispute was given (including, but not limited to,
         base salary) and continue Executive as a participant in all
         compensation, benefit and insurance plans in which the Executive was
         participating when the notice giving rise to the dispute was given,
         until the dispute is finally resolved in accordance with this
         subsection. Amounts paid under this subsection are in addition to all
         other amounts due under this Agreement and shall not be offset against
         or reduce any other amounts under this Agreement.

         4. Compensation Upon Termination or During Disability. Following a
Change in Control of WSI, as defined in subsection 2(a), upon termination of
Executive's employment or during a period of Disability, Executive shall be
entitled to the following benefits:

                  (a) During any period that Executive fails to perform
         full-time duties with WSI as a result of a Disability, WSI shall pay
         Executive the base salary of the Executive at the rate in effect at the
         commencement of any such period, until such time as the Executive is
         determined to be eligible for long term disability benefits in
         accordance with WSI's insurance programs then in effect.

                  (b) If Executive's employment shall be terminated by WSI for
         Cause or by Executive other than for Good Reason or Retirement, WSI
         shall pay to Executive his full base salary through the Date of
         Termination at the rate in effect at the time Notice of Termination is
         given and WSI shall have no further obligation to Executive under this
         Agreement.

                  (c) If Executive's employment shall be terminated by WSI for
         Disability or by Executive for Retirement, or by reason of Death, WSI
         shall immediately commence payment to the Executive (or Executive's
         designated beneficiaries or estate, if no beneficiary is designated)
         any and all benefits to which the Executive is entitled under WSI's
         retirement and insurance programs then in effect.

                  (d) If Executive's employment by WSI shall be terminated (A)
         by WSI other than for Cause or Disability or (B) by Executive for Good
         Reason, then Executive shall be entitled to the benefits provided
         below:

                           (i) WSI shall pay Executive the Executive's full base
                  salary through the Date of Termination at the rate in effect
                  at the time the Notice of Termination is given;

                           (ii) In lieu of any further salary payments for
                  periods subsequent to the Date of Termination, WSI shall pay a
                  severance payment (the "Severance Payment") equal to the
                  amount described in (A) or (B) below, whichever is applicable:
                  (A) if an Unapproved Change in Control occurs, 2.99 times the
                  average of the annual Compensation (as defined below) paid to
                  Executive by WSI (or any corporation ("Affiliate") affiliated
                  with WSI within the meaning of Section 1504 of the Internal
                  Revenue Code of 1986, as amended (the "Code")) for the five
                  calendar years (or, if Executive has been employed by WSI for
                  less than five years, the number of complete calendar years of
                  employment or portions thereof calculated on an annualized
                  basis) (the "Base Period") preceding the earlier of the
                  calendar year in which a Change in Control of WSI occurred or
                  the calendar year of the Date of Termination; or (B) if an
                  Approved Change in Control occurs, 1.5 times the average of
                  the annual Compensation (as defined below) for the Base
                  Period. Such average (including the effect of bonuses paid in
                  the Base Period) shall be determined in accordance with the
                  temporary or final regulations promulgated under Section
                  280G(e) of the Code. For purposes of this Section 4,
                  "Compensation" payable to Executive by WSI (or an Affiliate)
                  shall mean every type and form of compensation includable in
                  Executive's gross income

                                       4
<PAGE>   5

                  for federal income tax purposes for each year, shall include
                  any voluntary salary deferral contributions to WSI's cash or
                  deferred arrangement under the WSI profit sharing plan (the
                  401(k) contributions) and the WSI cafeteria plan, but shall
                  exclude taxable compensation recognized as the result of the
                  exercise of stock options or sale of the stocks acquired or
                  any payments actually or constructively received with respect
                  to a plan of deferred compensation between WSI and Executive.
                  The Severance Payment shall be made within 60 days after the
                  Date of Termination, or such earlier date as any required
                  rescission period in respect of the release given by Executive
                  under Section 5 has expired.

                           (iii) For the period of (A) 18 months following the
                  Termination Date in the event of an Approved Change in Control
                  or (B) 36 months following the Termination Date in the event
                  of an Unapproved Change in Control, Executive shall be
                  entitled to continue participation in the life, disability,
                  accident and health insurance benefit plans of WSI
                  substantially similar to those which the Executive is
                  receiving or entitled to receive immediately prior to the
                  Notice of Termination. WSI and Executive shall share the cost
                  associated with such coverage as if Executive were still
                  actively employed by WSI. If Executive cannot be covered under
                  any of WSI's group plans or policies, WSI shall reimburse
                  Executive for his full cost of obtaining comparable
                  alternative group or individual coverage elsewhere, less any
                  contribution that Executive would have been required to make
                  under WSI's group plans or policies. Benefits otherwise
                  receivable by Executive pursuant to this paragraph (iii) shall
                  be reduced to the extent comparable benefits are actually
                  received by Executive during such period, and any such
                  benefits actually received by Executive shall be reported to
                  WSI.

                           (iv) Notwithstanding the foregoing, the Severance
                  Payment shall be reduced to that maximum amount permitted such
                  that no portion of the Severance Payment, together with any
                  other payment or the value of any benefit received or to be
                  received by Executive (whether payable pursuant to the terms
                  of this Agreement, any other plan, agreement or arrangement
                  with WSI or an Affiliate) that is contingent upon a change in
                  control of WSI as that term is defined in Section 280G of the
                  Code would constitute a "parachute payment" within the meaning
                  of Section 280G(b)(2) of the Code or would be nondeductible
                  solely by reason of the application of such Section 280G. In
                  determining the amount of the Severance Payment, in full or as
                  partially reduced as the case may be, payable pursuant to this
                  Section 4(d), the opinion of tax counsel selected by WSI and
                  acceptable to Executive with respect to all issues arising in
                  connection with the application of Section 280G of the Code to
                  such payments and benefits shall be final and binding on the
                  parties. The Executive may elect to have the benefit
                  continuation under Section 4(d)(iii) reduced or eliminated
                  prior to any reduction of the Severance Payment.

                           (v) If it is established pursuant to a final
                  determination of a court or an Internal Revenue Service
                  proceeding that, notwithstanding the good faith of Executive
                  and WSI in applying the terms of this Subsection 4(d), any
                  portion of the Severance Payment constitutes a "parachute
                  payments" and would result in part or all of such Severance
                  Payment being nondeductible by WSI or its Affiliates by reason
                  of Section 280G of the Code, then Executive shall repay to WSI
                  upon demand an amount equal to the sum of: (1) that portion of
                  the Severance Payment in excess of the maximum amount that
                  could have been paid to or for the Executive's benefit without
                  any portion constituting a "parachute payment" and being
                  nondeductible by reason of section 280G of the Code; and (2)
                  interest on the amount set forth in clause (1) of this
                  sentence at the applicable Federal rate (as defined in section
                  1274(d) of the Code) from the date of Executive's receipt of
                  such excess until the date of such payment.

                           (vi) The Severance Payment shall be in lieu of and
                  offset the amount of any payment or other benefits to which
                  the Executive may be entitled to in connection with the
                  termination of employment pursuant to the provisions of WSI's
                  Severance Pay Plan, as amended from time to time, or any
                  successor to such policy.

                                       5
<PAGE>   6

                  (e) Executive shall not be required to mitigate the amount of
         any payment provided for in this Section 4 by seeking other employment
         or otherwise, nor shall the amount of any payment or benefit provided
         for in this Section 4 be reduced by any compensation earned by
         Executive as the result of employment by another employer or by
         retirement benefits after the Date of Termination, or otherwise except
         as specifically provided in this Section 4.

                  (f) In addition to all other amounts payable to Executive
         under this Section 4, Executive shall be entitled to receive all
         benefits payable to the Executive under the WSI, Inc. Employee Savings
         Plan and any other plan or agreement relating to retirement benefits or
         otherwise generally applicable to executive employees.

         5. General Release. Executive agrees that the amounts payable to
Executive under Section 4 shall be contingent upon the execution by Executive of
a release agreement with WSI, which release agreement shall include language
releasing and holding WSI and its affiliates, officers, directors, shareholders,
employees, agents and insurers harmless from any and all claims, comply with all
applicable laws and contain other provisions standard in such agreements.

         6. Funding of Payments. In order to assure the performance by WSI or
its successor of its obligations under this Agreement, WSI shall, no later than
immediately prior to the closing of the transaction that constitutes an
Unapproved Change in Control, deposit in a so-called "rabbi trust" or similar
escrow arrangement an amount equal to the maximum payment that will be due the
Executive under the terms hereof. Under a written trust instrument, the Trustee
shall be instructed to pay to the Executive (or the Executive's legal
representative, as the case may be) the amount to which the Executive shall be
entitled under the terms hereof, and the balance, if any, of the trust not so
paid or reserved for payment shall be repaid to WSI. If and to the extent there
are not amounts in trust sufficient to pay Executive under this Agreement, WSI
shall remain liable for any and all payments due to Executive. In accordance
with the terms of such trust, at all times during the term of this Agreement
Executive shall have no rights, other than as an unsecured general creditor of
WSI, to any amounts held in trust and all trust assets shall be general assets
of WSI and subject to the claims of creditors of WSI. With respect to an
Approved Change in Control, WSI's obligations in this Section 6 shall not be
mandatory but rather shall be permissive.

         7. Successors; Binding Agreement.

                  (a) WSI will require any successor (whether direct or
         indirect, by purchase, merger, consolidation or otherwise) to all or
         substantially all of the business and/or assets of WSI to expressly
         assume and agree to perform this Agreement in the same manner and to
         the same extent that WSI would be required to perform it if no such
         succession had taken place. Failure of WSI to obtain such assumption
         and agreement prior to the effectiveness of any such succession shall
         be a breach of this Agreement and shall entitle Executive to
         compensation from WSI in the same amount and on the same terms as he
         would be entitled hereunder if he terminated his employment for Good
         Reason following a Change in Control, except that for purposes of
         implementing the foregoing, the date on which any such succession
         becomes effective shall be deemed the Date of Termination.

                  (b) This Agreement shall inure to the benefit of and be
         enforceable by Executive's personal or legal representatives,
         successors, heirs, and designated beneficiaries. If executive should
         die while any amount would still be payable to Executive hereunder if
         the Executive had continued to live, all such amounts, unless otherwise
         provided herein, shall be paid in accordance with the terms of this
         Agreement to the Executive's designated beneficiaries, or, if there is
         no such designated beneficiary, to the Executive's estate.

         8. Notice. For the purpose 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 or certified mail, return receipt requested, postage pre-paid,
addressed to the last known residence

                                       6
<PAGE>   7

address of the Executive or in the case of WSI, to its principal office to the
attention of each of the then directors of WSI with a copy to its Secretary, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.

         9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party thereto at
anytime of any breach by the other party to this Agreement of, 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 or at any prior or similar 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 are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota.

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

         11. Arbitration and Award of Attorneys' Fees.

                  (a) Any dispute arising between the parties relating to this
         Agreement shall be resolved by binding arbitration held in the City of
         Minneapolis pursuant to the Rules of the American Arbitration
         Association, except as hereinafter expressly modified. If the disputing
         and responding parties are unable to agree upon a resolution within
         forty-five business days after the responding party's receipt of
         written notice from the disputing party setting forth the nature of the
         dispute, within the following ten business days the disputing and
         responding parties shall select a mutually acceptable single arbitrator
         to resolve the dispute or, if the parties fail or are unable to do so,
         each shall within the following ten business days select a single
         arbitrator, and the two so selected shall select a third arbitrator
         within the following ten business days. Such single arbitrator or, as
         the case may be, panel of three arbitrators acting by majority
         decision, shall resolve the dispute within sixty days after the date
         such arbitrator, or the last of them so selected, is selected, or as
         soon thereafter as practicable. If either party refuses or fails to
         select an arbitrator within the time therefor, the other party may do
         so on such refusing or failing party's behalf. The arbitrators shall
         have no power to award any punitive or exemplary damages but may
         construe or interpret but shall not ignore or vary the terms of this
         Agreement and shall be bound by controlling law. The parties
         acknowledge the Executive's failure to comply with any confidentiality,
         non-solicit, and non-compete provisions of any agreement to which the
         Executive is bound will cause immediate and irreparable injury to WSI
         and that therefore the arbitrators, or a court of competent
         jurisdiction if an arbitration panel cannot be immediately convened,
         will be empowered to provide injunctive relief, including temporary or
         preliminary relief, to restrain any such failure to comply. The
         arbitration award or other resolution may be entered as a judgment at
         the request of the prevailing party by any court of competent
         jurisdiction in Minnesota or elsewhere.

                  (b) In the event WSI fails to pay Executive any amounts owing
         to Executive under this Agreement or to provide Executive any benefits
         to which Executive is ultimately determined, by settlement, mediation,
         arbitration, or by any court or other decision making body with
         jurisdiction, to be entitled to under this Agreement, WSI shall pay the
         legal expenses (including reasonable attorneys' fees, court costs and
         other out-of-pocket expenses), incurred by Executive to enforce his
         rights under this Agreement and collect or obtain such amounts or
         benefits.

         12. Confidential Information. Executive will not while this Agreement
is in effect or after its expiration or termination, use, other than in
connection with Executive's employment with WSI, or disclose any confidential
information to any person not employed by WSI or not authorized by WSI to
receive such information without the prior written consent of WSI. Executive
will use reasonable and prudent care to safeguard, protect and prevent the
unauthorized disclosure of confidential information. The obligations contained
in this Section 12 will survive for as long as WSI in its sole judgment
considers the information to be confidential information.

                                       7
<PAGE>   8

         13.      Disclosure and Assignment.

                  (a) Disclosure. Executive will disclose promptly in writing to
         WSI all inventions, improvements, discoveries and writings and other
         works of authorship ("works") which are conceived, made, discovered or
         written jointly or singly on WSI time or on Executive's time, providing
         the invention, improvement, discovery, writing or other work is capable
         of being used by WSI in the normal course of business, and all such
         inventions, improvements, discoveries, writings and works are hereby
         assigned to, and belong solely and exclusively to WSI.

                  (b) Assignment. Executive will sign and execute all
         instruments of assignment and other papers to evidence vestiture of the
         entire right, title, and interest in such inventions, improvements,
         discoveries, writings, or works in WSI, and will do all acts and sign
         all papers that WSI may reasonably request, relating to applications
         for patents, to patents, to copyrights, and to the enforcement and
         protection thereof. If such acts are requested and performed when
         Executive is not a WSI employee, WSI will pay a fee, determined by WSI,
         covering authorized time and expenses of Executive but no others.

                  (c) Limitations. Notwithstanding anything in this Section 13
         to the contrary, Executive is hereby given NOTICE that the assignment
         and statement of WSI ownership does not apply to any INVENTION for
         which no equipment, supplies, facility or trade secret information of
         WSI was used and which was developed entirely on Executive's own time,
         and (1) which does not relate (i) directly to the business of WSI or
         (ii) to WSI's actual or demonstrably anticipated research or
         development, or (2) which does not result from any work performed by
         Executive for WSI.

                  (d) Survival of Obligations.

                           (i) The obligations of this Section 13 survive the
                  expiration or termination of this Agreement.

                           (ii) This Agreement, or any termination hereof, has
                  no effect on any other Employee Agreement previously executed
                  by Executive which remains in full force and effect. To the
                  extent there are any conflicts between this Agreement and such
                  other Agreement, this Agreement prevails.

                           (iii) Upon termination of employment, Executive will
                  not take or retain, and will return to WSI all WSI property of
                  any nature or kind.

         14. Prior Agreement. This Agreement supersedes and replaces in its
entirety all prior agreements related to a change in control of WSI, including
any prior Employment (Change in Control) Agreement between WSI and Executive
dated October 18, 1995. This Agreement contains the entire understanding of the
parties, except for the Employment Agreement dated October 22, 1993, as amended
January 9, 1997 (collectively, the "Employment Agreement") which shall remain in
effect according to its terms. All references in the Employment Agreement to the
Change in Control Agreement dated October 18, 1995 shall mean and refer to this
Agreement. In the event of a conflict with the terms of the Employment
Agreement, this Agreement shall control. There shall be no duplication of
benefits on Executive's behalf in this Agreement and the Employment Agreement in
the event of the termination of Executive's employment following a Change in
Control.

                                       WSI INDUSTRIES, INC.

                                       By
                                         ---------------------------------------
                                         Paul D. Sheely, Vice President/CFO

                                       EXECUTIVE
                                                --------------------------------
                                                Michael J. Pudil

                                       8

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