Document:

Exhibit 10.1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and
entered into as of January 31,
2007 (the “Effective Date”) by and between IsoTis, Inc. (the “Company” or “IsoTis”)
and _______________________ (“Employee”).

     WHEREAS, the Employee has been employed by the Company and its affiliates since                         ;

     WHEREAS, the Company and Employee (the “Parties”) wish to set forth in writing the
terms on which Employee will be employed by the Company as of the Effective Date;

     THEREFORE, the Parties agree as follows:

	1.	 	EMPLOYMENT

     The Company
hereby employs Employee and Employee hereby accepts employment as the Company’s
                        
reporting directly to                         ,
beginning on the Effective Date upon the terms and conditions set forth below.

	2.	 	TERM

     2.1 Term. The term of this Agreement shall commence on the Effective Date and shall
continue on the terms and conditions set forth below until Employee’s employment is terminated as
provided in Section 5 (the “Term”).

	3.	 	COMPENSATION

     3.1 Base Compensation. Employee shall be paid a salary at the annual rate of
$                        (the “Base Compensation”). The Base Compensation shall be reviewed at least
annually, and may be increased, but not decreased. In the event that the Base Compensation is
increased, the new salary shall be the Base Compensation for purposes of this Agreement thereafter.

     3.2 Bonus Compensation. The Compensation Committee of the Board of Directors of the
Company (the “Compensation Committee”), or its designee, shall review Employee’s
performance on an annual basis and, after due consideration of any recommendation by the
Compensation Committee, the Board of Directors shall cause the Company to award Employee a cash
bonus (a) for 2007, subject to the terms and conditions of the Company’s bonus program, in an
amount up to                          (          %) of the Base Compensation paid to Employee in 2007, based upon
Employee’s achieving objectives as set forth in the bonus program in effect at such time to time,
and (b) for 2008 and subsequent years, in accordance with the terms and based upon the objects set
forth in the bonus program for such year. The bonus shall be paid in no event later than March 15
of the year following the year for which the bonus is awarded.

 

 

     3.3 Benefits. Employee shall be entitled to participate in all pension, 401(k) and
other employee plans and benefits, including without limitation, medical, dental, vision, life
insurance and long term disability plans, in accordance with the terms of such plans or policies as
they may be in effect from time to time.

     3.4 Automobile Allowance. The Company shall provide Employee with an automobile
allowance of five hundred ($500) dollars per month during the term of Employee’s employment
hereunder, in lieu of reimbursement for automobile expenses actually incurred.

     3.5 Method of Payment. The monetary compensation payable and any benefits due to
Employee hereunder may be paid or provided in whole or in part when due, from time to time, by the
Company and/or its respective parents, subsidiaries and affiliates, but shall at all times remain
the responsibility of the Company.

	4.	 	POSITION AND DUTIES

     
4.1 Position or Duties. Employee shall hold the position of
                        
of the Company and shall have such duties consistent with this Agreement as
assigned to him from time to time by
                        .
 Employee will do and
perform all services, acts or things necessary or advisable to manage and conduct
                        
 functions of the Company. Unless the Parties otherwise agree in writing, prior to Employee’s
termination in accordance with this Agreement, Employee will perform the services he is required to
perform in accordance with the terms of this Agreement, reporting directly to the
                        .

     4.2 Devotion of Time and Effort. Employee shall use Employee’s good faith best
efforts and judgment in performing Employee’s duties as required hereunder and to act in the best
interests of the Company. Employee shall devote all of Employee’s business time, attention and
energies to the business of the Company.

     4.3 Other Activities. Employee may engage in other activities for Employee’s own
account while employed hereunder, including without limitation, charitable, community and other
business activities, provided that in the judgment of the Board of Directors of the Company (the
“Board”) such other activities do not materially interfere with the performance of
Employee’s duties hereunder, and do not violate Sections 6 and 7. With regard to any other
businesses or activities, Employee shall notify the Board of all such activities and shall not
begin such activities until Employee receives written approval from the Board, which shall not be
unreasonably withheld, conditioned or delayed. This restriction shall not apply to Employee’s
passive investment in less than one (1) percent of the publicly traded securities of a publicly
traded entity.

     4.4 Paid Time Off. Employee shall be entitled to twenty (20) days of paid time off
(“PTO”) annually during the term, and otherwise subject to the Company’s policies
concerning accrual, use and scheduling of paid time off, as such policies may be in effect from
time to time.

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     4.5 Business Expenses. Employee shall be entitled to reimbursement of reasonable
business expenses in accordance with Company policies, as they may be in effect from time to time.

	5.	 	TERMINATION

     5.1 Due to Death. Employee’s employment shall terminate as of the date of Employee’s
death.

     5.2 Due to Disability. The Company may terminate Employee’s employment due to
Employee’s Disability, upon written notice to Employee. For purposes of this Agreement, the term
“Disability” shall mean a physical or mental incapacity as a result of which Employee
becomes unable to continue to perform the essential functions of the job with or without
accommodation hereunder for six consecutive calendar months or for shorter periods aggregating 125
business days in any 12 month period, or, if this provision is inconsistent with any applicable
law, to the extent not prohibited by law.

     5.3 By the Company Without “Cause”. The Company may terminate Employee’s employment
without “Cause” as defined in Section 5.5 below, at any time upon not less than 30 and not more
than 45 days written notice to Employee.

     5.4 By Employee Without “Good Reason”. Employee may terminate Employee’s employment
hereunder without Good Reason, as defined in Section 5.6 below, at any time upon not less than 30
and not more than 45 days written notice (the “Notice Period”) to the Company. During the
Notice Period, Employee shall continue to perform Employee’s duties hereunder and shall not accept
any other employment.

     5.5 By The Company For Cause. The Company may terminate Employee’s employment for
Cause at any time, upon written notice to Employee. For purposes of this Agreement,
“Cause” shall mean:

          (a) Employee’s conviction of or plea of nolo contender to a felony or any crime involving
moral turpitude;

          (b) Employee’s commission of any act of theft, embezzlement or misappropriation against the
Company;

          (c) Employee’s failure to substantially perform Employee’s duties hereunder (other than such
failure resulting from Employee’s incapacity due to physical or mental illness), which failure is
not remedied within thirty (30) days after written demand for substantial performance is delivered
by the Company which specifically identifies the manner in which the Company believes that Employee
has not substantially performed Employee’s duties; or

          (d) Employee’s material breach of his obligations under this Agreement, which breach is not
remedied within thirty (30) days after written notice is delivered by the Company which
specifically identifies the breach that the Company believes has occurred.

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     5.6 By Employee For Good Reason. Employee may terminate Employee’s employment for
Good Reason upon not less than 30 nor more than 45 days prior written notice to the Company. For
purposes of this Agreement, “Good Reason” shall mean:

          (a) the Company’s material breach of the salary and benefit obligations hereunder, and either
such breach or action is incurable or irreversible, or, if curable or reversible, has not been
cured or reversed within fifteen (15) days following receipt of written notice by Employee to the
Company of such breach by the Company; or

          (b) any of the following actions without Employee’s prior written consent:

     (i) a material reduction in the authority of Employee;

     (ii) an adverse change in Employee’s title;

     (iii) Employee’s primary reporting relationship being changed such that Employee no
longer reports to the Board of the Company; or

     (iv) a relocation of Employee’s primary office to a location more than 80 miles from
Irvine, California.

Employee shall be deemed to have waived Employee’s right to terminate for “good reason” with
respect to a breach or action described in Section 5.6(b) if Employee does not notify the Company
in writing of such breach or action within fifteen (15) days of his actual knowledge of such breach
or action.

     The fact that the Company becomes a subsidiary of another entity, or that the Company’s status
changes from publicly-traded to privately-held, shall not, by itself, constitute Good Reason.

     5.7 Severance Payment.

          (a) No Severance Upon Termination Pursuant to Sections 5.1, 5.4 or 5.5.

     In the event Employee’s employment terminates pursuant to Sections 5.1 (Death), 5.4 (By
Employee Without Good Reason), or 5.5 (By the Company For Cause), Employee (or Employee’s estate,
as applicable) shall have the right to receive Employee’s compensation as otherwise provided under
this Agreement through the Date of Termination. Employee (or Employee’s estate, as applicable)
shall have no further right to receive compensation, benefits or other consideration from the
Company, and Employee (or Employee’s estate, as applicable) shall not be entitled to any severance
payments or benefits, except as required by applicable law.

     The “Date of Termination” shall be: in the case of termination under Section 5.1, the
date of employee’s death, or in the case of termination under Sections 5.2 through 5.6, the date
specified in the notice required by Sections 5.2 through 5.6, respectively.

          (b)
Severance Upon Termination Pursuant to Sections 5.2, 5.3 or 5.6

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     In the event that Employee’s employment is terminated pursuant to Sections 5.2 (Due to
Disability), 5.3 (By the Company Without Cause), or 5.6 (By Employee For Good Reason), Employee
shall (unless Employee is incapable due to physical or mental illness) continue to render services
to the Company pursuant to this Agreement until the Date of Termination and shall continue to
receive compensation, as provided in this Agreement, through the Date of Termination. Thereafter,
Employee shall be entitled to the payments and benefits as set forth in subsections (i) through
(iii) below provided that a general release of claims in the form acceptable to the Company (the
“Release”) has been signed, delivered to the Company by Employee and becomes irrevocable, and
Employee is not in material breach of any of the provisions of this Agreement that survive
termination of this Agreement.

     (i) Severance Payment. On the thirtieth day following Employee’s separation from
service with the Company and/or its Affiliates within the meaning of Section
409A(a)(2)(A)(i) of the Internal Revenue Code and the regulations thereunder (the
“Separation from Service”), the Company shall pay Employee, as a single cash severance
payment, the sum of (i)       times Employee’s highest monthly Base Compensation paid hereunder
plus (ii)      times the Average Annual Bonus, subject to the limitations set forth in
Schedule A (collectively, the “Severance Amount”).

     Notwithstanding Schedule A, in the event the Company terminates Employee’s employment
Without Cause pursuant to Section 5.3 or Employee terminates employment for Good Reason
following a Change in Control pursuant to Section 5.6, Employee shall be eligible for 100%
of the Severance Amount.

     The “Average Annual Bonus” shall mean: the average of the annual merit bonuses
paid to the Employee during the twenty-four month period immediately preceding the
Employee’s termination of employment; provided, however, that if Employee has not been
employed through the date of an award of any annual merit bonus, the target bonus for the
bonus year in which the termination occurs shall be used as the average annual bonus, or if
Employee has been eligible to participate in only one bonus period during the twenty-four
month period immediately preceding the Employee’s Date of Termination, period, the bonus
awarded for that bonus period shall be used as the average annual bonus.

     (ii) Vesting of Equity Awards. Unvested options or restricted stock of the Company
held by the Employee shall immediately vest in accordance with Schedule A
(“Vesting”).

     Notwithstanding Schedule A, in the event of a Change in Control as defined in Section
5.8, 100% of the unvested options or restricted stock of the Company then held by the
Employee shall vest.

     The options and restricted stock grants that vest as set forth above shall be
immediately exercisable and will continue to be exercisable for three months after the Date
of Termination subject to the maximum term of the option, after which time they will
terminate. If less than one hundred (100) percent of the options and/or restricted stock
will vest, the earlier granted options and/or restricted stock shall vest.

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     In the event that Employee does not timely sign and deliver to the Company the Release,
or Employee revokes the Release, on the thirtieth (30th) day following the Date
of Termination: (1) all unexercised options vested pursuant to this Section 5.7(b) shall be
cancelled; (2) with respect to any options exercised, Employee shall pay to the Company an
amount equal to the difference between the exercise price and the closing price of such
shares on the date of exercise multiplied by the number of shares subject to the options
exercised; and (3) with respect to any restricted shares, Employee shall pay to the Company
an amount equal to the closing price of such shares on the Date of Termination multiplied by
the number of restricted shares vested pursuant to this Section 5.7(b).

     (iii) Benefits. On the thirtieth day following Employee’s Separation from Service, the
Company shall pay Employee, as a single cash severance payment, an amount equal to 18 times
the portion of the monthly COBRA premium in effect as of the Date of Termination equal to
the difference between such monthly COBRA premium and Employee’s monthly contribution
towards health care benefits immediately prior to the Date of Termination (the
“Severance Benefits”).

The timing of the payments required by subsections (i) and (iii) may be delayed in accordance with
Subject to Section 5.10(b).

          5.8 Change in Control.

          For purposes of Section 5.7(b) of this Agreement, a “Change in Control” shall mean the
occurrence of any of the following events:

               (a) the individuals constituting the Board as of the Effective Date (the “Incumbent
Board”) cease for any reason to constitute at least two-thirds (2/3rds) of the Board; provided,
however, that if the election, or nomination for election by the Company’s stockholders, of any new
director was approved by a vote of at least two-thirds (2/3rds) of the Incumbent Board, such new
director shall be considered a member of the Incumbent Board; or

               (b) an acquisition of any voting securities of the Company (the “Voting Securities”)
by any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the
Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such
person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act)
(“Beneficial Ownership”) of thirty five (35) percent or more of the combined voting power
of the Company’s then outstanding Voting Securities; or

               (c) approval by the stockholders of the Company of:

     (i) a merger, consolidation, share exchange or reorganization involving the Company,
unless

     (A) the stockholders of the Company, immediately before such merger,
consolidation, share exchange or reorganization, own, directly or indirectly
immediately following such merger, consolidation, share exchange or

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reorganization, at least sixty-five (65) percent of the combined voting power of
the outstanding voting securities of the corporation that is the successor in
such merger, consolidation, share exchange or reorganization (the “Surviving
Company”) in substantially the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation, share exchange or
reorganization; provided, however, that a merger, consolidation, share exchange or
reorganization of the Company shall not constitute a Change in Control if such
merger, consolidation, share exchange or reorganization of the Company is approved
by the Board and is recommended by the Employee to the Board for its approval; and

     (B) the individuals who were members of the Incumbent Board immediately prior
to the execution of the agreement providing for such merger, consolidation, share
exchange or reorganization constitute at least two-thirds (2/3rds) of the members of
the board of directors of the Surviving Company; or

     (ii) a complete liquidation or dissolution of the Company; or

     (iii) an agreement for the sale or other disposition of all or substantially all of the
assets of the Company.

	5.9	 	Excise Tax Gross Up.

     If any payment or benefit received or to be received by Employee in connection with any change
in control of the Company or termination of Employee’s employment other than by the Company for
Cause or by Employee for Good Reason (whether payable pursuant to the terms of this Agreement, a
stock option plan or any other plan or arrangement with the Company) (the “Total Payments”) will be
subject to the excise tax imposed by Section 4999 of the Code, as amended, the Company will pay to
the Employee, within thirty days of any payments giving rise to excise tax, an additional amount
(the “gross-up payment”) equal to the excise tax on the Total Payments. For purposes of
determining whether any of the Total Payments would not be deductible by the Company and would be
subject to the excise tax, and the amount of such excise tax, (1) Total Payments will be treated as
“parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all parachute
payments in excess of the base amount within the meaning of Section 280G(b)(3) will be treated as
subject to the excise tax unless, in the opinion of tax counsel selected by the Company’s
independent auditors prior to the change in control and acceptable to the Employee, such Total
Payments (in whole or in part) are not parachute payments, or such parachute payments in excess of
the base amount (in whole or in part) are otherwise not subject to the excise tax, and (2) the
value of any non-cash benefits or any deferred payment will be determined by the Company’s
independent auditors in accordance with Sections 280G(d)(3) and (4) of the Code. If the excise tax
is subsequently determined to be less than the amount originally taken into account hereunder, the
Employee will repay to the Company, when such reduction in excise tax is finally determined, the
portion of the gross-up payment attributable to such reduction. If the excise tax is determined to
exceed the amount originally taken into account hereunder (including by reason of any payment, the
existence or amount of which cannot be determined at the time of the gross-up payment), the Company
will

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make an additional gross-up payment in respect of such excess (plus any interest payable with
respect to such excess) when such excess if finally determined.

     5.10 Compliance With Internal Revenue Code Section 409A.

          (a) Short-Term Deferral Exemption. This Agreement is not intended to provide for any
deferral of compensation subject to Code Section 409A and, accordingly, the benefits provided
pursuant to this Agreement are intended to be paid not later than the later of: (i) the
15th day of the third month following Employee’s first taxable year in which such
benefit is no longer subject to a substantial risk of forfeiture, and (ii) the 15th day
of the third month following first taxable year of the Company in which such benefit is no longer
subject to a substantial risk of forfeiture, as determined in accordance with Code Section 409A and
any Treasury Regulations and other guidance issued thereunder. The date determined under this
subsection is referred to as the “Short-Term Deferral Date.”

          (b) Compliance with Code Section 409A. Notwithstanding anything to the contrary
herein, in the event that any benefits provided pursuant to this Agreement is not actually or
constructively received by the Employee on or before the Short-Term Deferral Date or is not
otherwise exempt from or complaint with Code Section 409A, to the extent such benefit constitutes a
deferral of compensation subject to Code Section 409A, then: (i) subject to clause (ii), such
benefit shall be paid upon Employee’s “Separation from Service,” and (ii) if Employee is a
“specified employee,” as defined in Code Section 409A(a)(2)(B)(i), with respect to the
Company and its affiliates, such benefit shall be paid upon the date which is six months after
the date of Employee’s “Separation from Service” (or, if earlier, the date of Employee’s death).
In the event that any benefit provided for in this agreement is subject to this subsection, such
benefit shall be paid on the 60th day following the payment date determined under this
subsection, and shall be made subject to the requirements of Section 5.7.

	6.	 	CONFIDENTIALITY

     During the Term, Employee will have access to and become acquainted with various information
relating to the Company’s business operations, including customer (meaning a broker or borrower)
lists, customer files, marketing data, business plans, strategies, employee lists, contracts,
financial records and accounts, projections and budgets, and similar information. Employee agrees
that to the extent such information is not generally known to or available to the public and/or the
industry, and gives the Company an advantage over competitors who do not know of or use such
information, such information and documents constitute “Confidential Information” of the
Company. Employee further agrees that any documents relating to the business of the Company,
whether they are prepared by Employee or come into Employee’s possession in any other way, are
owned by the Company, shall remain the exclusive property of the Company, and must be returned to
the Company upon termination of employment. Employee shall not use any Confidential Information of
the Company, directly or indirectly, for Employee’s own benefit, or the benefit of any person or
entity other than the Company, nor shall Employee disclose Confidential Information to any person
or entity other than the Company and its employees, either during the Term or at any time
thereafter, except as may be appropriate for Employee to perform his duties as an employee, officer
and/or director, directly or indirectly, of the Company. In the event Employee violates this
provision during any period in which he is

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receiving severance under Section 5.7 of this Agreement,
in addition to any other remedies the Company may have, the Company may terminate the Severance
Payments, Vesting and Severance Benefits under Section 5.7.

	7.	 	NON-SOLICITATION/NON-COMPETITION

     7.1 Non-Solicitation. For a period of one year following the date Employee’s
employment hereunder is terminated, Employee shall not solicit or induce any of the Company’s
employees, agents or independent contractors to end their relationship with the Company, or
recruit, solicit or otherwise induce any such person to perform services for Employee, or any other
person, firm or company. The restrictions set forth in this Section 7 shall not apply if
Employee’s employment is terminated pursuant to Section 5.3 or 5.6.

     7.2 Non-Competition. Employee acknowledges that IsoTis does business throughout the
world. During the Term, and, if Employee is receiving severance under Section 5.7 of this
Agreement, for the one-year period after the Term, Employee shall not, directly or indirectly,
serve as an employee, consultant, officer, director, lender, investor, shareholder, partner,
manager or member of any person or entity, or own or act as a sole proprietor of a business that
engages in the production of demineralized bone matrix products or similar business, or other
businesses that the Company enters into while Employee is employed by Isotis, during that period in
any County of the State of California or any of the States of the United States of America, other
than the Company or its affiliates, or as approved in advance in writing by the
Board. In the event Employee violates this provision during any period in which he is
receiving severance under Section 5.7 of this Agreement, in addition to any other remedies the
Company may have, the Company may terminate unpaid Severance Payments and/or Severance Benefits
under Section 5.7 and may cancel any options or restricted stock vested under Section 5.7.
Employee acknowledges that these restrictions shall not prevent or unduly restrict Employee from
practicing his profession, or cause him economic hardship.

	8.	 	ARBITRATION AGREEMENT

     8.1 Claims Subject to Arbitration. Any controversy, dispute or claim between Employee
and the Company, or its parents, subsidiaries, affiliates and any of their officers, directors,
agents or other employees, shall be resolved by binding arbitration, at the request of either
party.

     The arbitrability of any controversy, dispute or claim under this policy shall be determined
by application of the substantive provisions of the Federal Arbitration Act (9 U.S.C. sections 1
and 2) and by application of the procedural provisions of the California Arbitration Act, except as
provided herein. Arbitration shall be the exclusive method for resolving any dispute and all
remedies available from a court of competent jurisdiction shall be available; provided, however,
that either party may request provisional relief from a court of competent jurisdiction, as
provided in California Code of Civil Procedure Section 1281.8, if such relief is not available in a
timely fashion through arbitration.

     The claims which are to be arbitrated include, but are not limited to any Claim arising out of
or relating to this Agreement or the employment relationship between Employee and the

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Company, claims for wages and other compensation, claims for breach of contract (express or implied), claims
for violation of public policy, wrongful termination, tort claims, claims for unlawful
discrimination and/or harassment (including, but not limited to, race, religious creed, color,
national origin, ancestry, physical disability, mental disability, gender identity or expression,
medical condition, marital status, age, pregnancy, sex or sexual orientation) to the extent allowed
by law, and claims for violation of any federal, state, or other government law, statute,
regulation, or ordinance, except for claims for workers’ compensation and unemployment insurance
benefits. This Agreement shall not be interpreted to provide for arbitration of any dispute that
does not constitute a claim recognized under applicable law.

     8.2 Selection of Arbitrator. The Employee and the Company will select a single
neutral arbitrator by mutual agreement. If the Employee and the Company are unable to agree on a
neutral arbitrator within thirty (30) days of a demand for arbitration, either party may elect to
obtain a list of arbitrators from the Judicial Arbitration and Mediation Service (“JAMS”)
or the American Arbitration Association (“AAA”), and the arbitrator shall be selected by
alternate striking of names from the list until a single arbitrator remains. The party initiating
the arbitration shall be the first to strike a name.

     8.3 Demand for Arbitration. The demand for arbitration must be in writing and must be
made by the aggrieved party within the statute of limitations period provided under applicable
State and/or Federal law for the particular claim(s). Failure to make a written demand within the
applicable statutory period constitutes a waiver of the right to assert that claim in any forum.

     8.4 Location of Arbitration. Arbitration proceedings will be held in Orange County,
California.

     8.5 Choice of Law. The arbitrator shall apply applicable State and/or Federal
substantive law to determine issues of liability and damages regarding all claims to be arbitrated,
and shall apply the California Evidence Code to the proceeding.

     8.6 Discovery. The parties shall be entitled to conduct reasonable discovery and the
arbitrator shall have the authority to determine what constitutes reasonable discovery. The
arbitrator shall hear motions for summary judgment/adjudication as provided in the California Code
of Civil Procedure.

     8.7 Written Opinion and Award. Within thirty days following the hearing and the
submission of the matter to the arbitrator, the arbitrator shall issue a written opinion and award
which shall be signed and dated. The arbitrator’s award shall decide all issues submitted by the
parties, and the arbitrator may not decide any issue not submitted. The opinion and award shall
include factual findings and the reasons upon which the decision is based. The arbitrator shall be
permitted to award only those remedies in law or equity which are requested by the parties and
allowed by law.

     8.8 Costs of Arbitration. The cost of the arbitrator and other incidental costs of
arbitration that would not be incurred in a court proceeding shall be borne by the Company. The
parties shall each bear their own costs and attorneys’ fees in any arbitration proceeding,
provided, however, that the arbitrator shall have the authority to require either party to pay the

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costs and attorneys’ fees of the other party to the extent permitted under applicable federal or
state law, as a part of any remedy that may be ordered.

     8.9 Waiver of Right to Jury. Both the Company and Employee understands that by using
arbitration to resolve disputes they are giving up any right that they may have to a judge or jury
trial with regard to all issues concerning employment or otherwise covered by this Section 8.

	9.	 	GENERAL PROVISIONS

     9.1 Assignment; Binding Effect. Neither the Company nor Employee may assign, delegate
or otherwise transfer this Agreement or any of their respective rights or obligations hereunder
without the prior written consent of the other party. Any attempted prohibited assignment or
delegation shall be void. This Agreement shall be binding upon and inure to the benefit of any
permitted successors or assigns of the parties and the heirs, executors, administrators and/or
personal representatives of Employee.

     9.2 Notices. All notices, requests, demands and other communications that are
required or may be given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method with electronic confirmation of receipt; the day after it
is sent, if sent for next-day delivery to a domestic address by recognized overnight delivery
service (e.g., FedEx); and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:

	 	 	 
	If to the Company:
	 	IsoTis, Inc.

	 	 	2 Goodyear

	 	 	Irvine, CA 92618

	 	 	Attention: Chairman of the Board

	 	 	Facsimile: (949) 595-8717

	 
	 	 

	If to Employee:	 	 

	 	 	c/o IsoTis, Inc.

	 	 	2 Goodyear

	 	 	Irvine, CA 92618

	 	 	Facsimile: (949) 595-8717

     Any party may change its address for the purpose of this
Section 9.2 by giving the other
party written notice of its new address in the manner set forth above.

     9.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements
with respect to the subject matter hereof, including, without limitation, the employment agreement
between Employee and IsoTis S.A., which was assigned to the Company; provided, however, that this
Agreement shall supplement, not supersede, any prior agreements to the extent such agreements
concern Confidential Information, Trade Secrets or other intellectual property of the Company, and
any conflicts or inconsistencies between such

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agreements concerning Confidential Information, Trade
Secrets or other intellectual property of the Company shall be resolved so that the provision
providing greater rights to the Company shall prevail.

     9.4 Amendments; Waivers. This Agreement may be amended or modified, and any of the
terms and covenants may be waived, only by a written instrument executed by the parties hereto, or,
in the case of a waiver, by the party waiving compliance. Any waiver by any party in any one or
more instances of any term or covenant contained in this Agreement shall neither be deemed to be
nor construed as a further or continuing waiver of any such term or covenant of this Agreement.

     9.5 Provisions Severable. In case any one or more provisions of this Agreement shall
be invalid, illegal or unenforceable, in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not, in any way, be affected or impaired thereby.
If any provision hereof is determined by any court of competent jurisdiction to be invalid or
unenforceable by reason of such provision extending the covenants and agreements contained herein
for too great a period of time or over too great a geographical area, or being too extensive in any
other respect, such provision shall be interpreted to extend only over the maximum period of time
and geographical area, and to the maximum extent in all other respects, as to which it is valid and
enforceable, all as determined by such court in such action.

     9.6 Attorney’s Fees. If any legal action, arbitration or other proceeding, is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach or default in
connection with any of the provisions of this Agreement, each of the
parties hereto shall be responsible for payment of their own attorneys’ fees and other costs incurred by them in that
action or proceeding, without regard to whomever is the prevailing party in such action or
proceeding with respect to such claims, except as otherwise provided in Section 8.

     9.7 Governing Law. This Agreement shall be construed, performed and enforced in
accordance with, and governed by the laws of the State of California without giving effect to the
principles of conflict of laws thereof.

     9.8 Non-Disparagement. During Employee’s employment and thereafter for a period of one
year, Employee agrees to represent the Company in a positive light and not to disparage or in any
other way communicate to any person or entity any negative information or opinion concerning the
Company, its parents, subsidiaries and affiliates, or any of their partners, members, shareholders,
officers, directors, employees or agents, or any of them. This provision shall not prohibit
Employee from making any statements or taking any actions required by law, or reporting any actions
or inactions Employee believes to be unlawful. This provision shall not be interpreted to require
or encourage Employee to make any misrepresentations.

     9.9 Return of Property. Upon termination of Employee’s employment, Employee shall
return to the Company any and all company property, materials, or equipment in Employee’s
possession, including, without limitation, Company property described in Section 6.

     9.10 Cooperation. During Employee’s employment with the Company and thereafter for a
period of one year, Employee agrees, at Company’s sole expense, to cooperate with

12

 

Employer and Employer’s agents, accountants and attorneys concerning any matter with which Employee was involved
during Employee’s employment. Such cooperation shall include, but not be limited to, providing
information to, meeting with and reviewing documents provided by Employer and Employer’s agents,
accountants and attorneys during normal business hours or other mutually agreeable hours upon
reasonable notice and to make himself/herself available for depositions and hearings, if necessary
and upon reasonable notice. If Employee’s cooperation is required after the termination of
Employee’s employment, the Company shall reimburse Employee for any out of pocket expenses incurred
in and any wages lost by Employee for time spent performing Employee’s obligations hereunder.

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

     9.12 Headings. The headings contained in this Agreement are provided solely for the
Parties’ convenience and shall not be deemed to alter the meaning of the text of the Agreement.

     9.13 Survival. Sections 6 through 9 shall survive the termination of this Agreement.

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

THE COMPANY:

IsoTis Inc,

a Delaware corporation

	 	 	 
	 

	 	 
	By:

	 	Date
	Its: 
	 	 
	 
	 	 
	EMPLOYEE:
	 	 
	 
	 	 
	 

	 	 
	

	 	Date

13

 

Schedule A

	 	 	 	 	 
	 	 	Percentage of	 
	 	 	Severance Amount,	 
	 	 	Unvested Options or	 
	 	 	Restricted Stock	 
	 	 	Vesting for which	 
	 	 	Employee is	 
	Date of Termination	 	Eligible	 
	Less than 90 days of Continuous Service 1
	 	 	0	%
	At least 90 days, but less than 1 year, of Continuous
Service
	 	 	20	%
	At least 1 year, but less than 2 years, of Continuous
Service
	 	 	30	%
	At least 2 years, but less than 3 years, of Continuous
Service
	 	 	50	%
	At least 3 years, but less than 4 years, of Continuous
Service
	 	 	70	%
	At least 4 years, but less than 5 years, of Continuous
Service
	 	 	90	%
	5 or more years of Continuous Service
	 	 	100	%

 

			
	1	 	The Employee’s Continuous Service
shall be measured from the date on which Employee became employed by IsoTis, Inc., its
predecessors or affiliates, including, without limitation, IsoTis S.A., through
the Date of Termination, if there has been no break in active service other
than an approved vacation, sick, family, medical, disability or pregnancy
leave. Where there has been any other break in active service, periods of
employment prior to the break in service shall not be counted towards the
period of Continuous Service.

14

 

Schedule to Exhibit 10.1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Employed	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	with the	 	 	 	 	 	 	 	 	 	 
	Named	 	 	 	Company and	 	Initial	 	Duties	 	Maximum	 	 	 	 
	Executive	 	Principal	 	its Affiliates	 	Base	 	Assigned	 	Bonus for	 	 	 	Severance
	Officer	 	Position	 	Since	 	Salary ($)	 	by/Reporting to	 	2007	 	Additional Benefits	 	Payment
	Pieter Wolters

	 	President & Chief

Executive Officer
	 	1997 and served as
President and CEO
since July 1, 2002
	 	$	330,000	 	 	The Board of
Directors of the
Company
	 	 	50	%(1)	 	The Company shall
continue to pay for
certain
continuations and
additions to the
custom pension and
disability policies
for 2007
	 	24 times his
highest monthly
base, plus 1.0
times his average
annual bonus
	Robert J. Morocco

	 	Senior

Vice-President

Chief Financial

Officer
	 	January 27, 2005
	 	$	212,000	 	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	18 times his
highest monthly
base salary plus
0.75 times his
average annual
bonus
	Alan Donze

	 	Senior Vice
President of Sales
	 	February 21, 2006
	 	$	200,000	 	 	The President and
CEO
	 	$150,000(2)
	 	N/A
	 	18 times his
highest monthly
base salary plus
0.75 times his
average annual
bonus(3)
	John F. Kay(4)

	 	Chief Scientific

Officer
	 	October 1, 2003
	 	$	240,000	(5)	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	12 times his
highest monthly
base salary plus
0.5 times his
average annual
bonus
	Kathryn 

Liljestrand(4)

	 	Vice President of
Marketing
	 	August 1, 2005
	 	$	182,875	 	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	12 times her
highest monthly
base salary plus
0.5 times her
average annual
bonus
	Karon Morell(4)

	 	Vice President of
Regulatory Affairs
and Quality
Assurance
	 	May 8, 2006
	 	$	175,000	 	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	12 times her
highest monthly
base salary plus
0.5 times he
average annual
bonus
	Jim Poser(6)

	 	Senior Vice
President of
Research and
Development
	 	July 15, 2006
	 	$	240,000	 	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	18 times his
highest monthly
base salary plus
0.75 times his
average annual
bonus
	Gene Reu

	 	Senior Vice
President of
Operations
	 	August 23, 2006
	 	$	230,000	 	 	The President and
CEO
	 	 	30	%(1)	 	N/A
	 	18 times his
highest monthly
base salary plus
0.75 times his
average annual
bonus

	(1)	 	The bonus amount is calculated as a percent of the employee’s base salary and ranges from a
minimum of 0% up to the above-stated maximum.
	 
	(2)	 	For 2007, $120,000 of Mr. Donze’s bonus is determined by objectives set forth in accordance
with our bonus program while the remaining $30,000 is determined in the sole discretion of the President
and Chief Executive Officer.
	 
	 
	(3)	 	If Mr. Donze’s employment is terminated on or before February 21, 2008 (except for cause),
the severance amount shall be $120,000, subject to limitations set forth in schedule A of the
form of employment agreement.
	 
	(4)	 	The employment agreements with Dr. Kay, Ms. Liljestrand and Ms. Morell do not include Section
5.9 of the Form of Employment Agreement.
	 
	(5)	 	Dr. Kay’s base salary will increase to $250,000 beginning April 1, 2007.
	 
	(6)	 	Dr. Poser’s has the following exclusion to the non-compete provision in Section 7.2 of the
Form of Employment Agreement: “Notwithstanding the foregoing, Employee may engage in the
development of products to 1) control renal stone formation through physiological modulation
of electrolytes, and 2) treat herniated spinal discs through the use of medical devices or
agents that exert their influence through physical-chemical means. This work will be
performed in collaboration with Professor Paul Brown (Penn StateUniversity) and Articular
Engineering LLC.”exv10w14

 

Exhibit 10.14

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

     THIS AGREEMENT, made and entered into as of the ___th day of ___, 2007, by and between
Pentair, Inc., a Minnesota corporation (hereinafter referred to as the “Company”), and ___
(hereinafter referred to as the “Executive”).

W I T N E S S E T H

     WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company
(hereinafter referred to collectively as the “Employer”) in a key executive capacity and the
Executive’s services are valuable to the conduct of the business of the Company;

     WHEREAS, the Company desires to continue to attract and retain dedicated and skilled
management employees in a period of industry consolidation, consistent with achieving the best
possible value for its shareholders in any change in control of the Company;

     WHEREAS, the Company recognizes that circumstances may arise in which a change in control of
the Company occurs, through acquisition or otherwise, thereby causing a potential conflict of
interest between the Company’s needs for the Executive to remain focused on the Company’s business
and for the necessary continuity in management prior to and following a change in control, and the
Executive’s reasonable personal concerns regarding future employment with the Employer and economic
protection in the event of loss of employment as a consequence of a change in control;

     WHEREAS, the Company and the Executive are desirous that any proposal for a change in control
or acquisition of the Company will be considered by the Executive objectively and with reference
only to the best interests of the Company and its shareholders;

     WHEREAS, the Executive will be in a better position to consider the Company’s best interests
if the Executive is afforded reasonable economic security, as provided in this Agreement, against
altered conditions of employment which could result from any such change in control or acquisition;

     WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company
and has acquired certain confidential information and data with respect to the Company; and

     WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the
benefit of the Executive’s services and to protect its confidential information and goodwill.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually covenant and agree as follows:

	 	1.	 	Definitions.
	 
	 	(a)	 	Accrued Benefits. The Executive’s “Accrued Benefits” shall include the following
amounts, payable as described herein: (i) all base salary for the time period ending with the
Termination Date; (ii) reimbursement for any and all monies advanced in connection with
the 

 

 

	 	 	 	Executive’s employment for reasonable and necessary expenses incurred by the Executive on
behalf of the Employer for the time period ending with the Termination Date; (iii) any and all
other cash earned through the Termination Date and deferred at the election of the Executive or
pursuant to any deferred compensation plan then in effect; (iv) notwithstanding any provision of
any bonus or incentive compensation plan applicable to the Executive, a lump sum amount, in cash,
equal to the sum of (A) any bonus or incentive compensation that has been allocated or awarded to
the Executive for a fiscal year or other measuring period under the plan that ends prior to the
Termination Date but has not yet been paid (pursuant to Section 5(f) or otherwise) and (B)
a pro rata portion to the Termination Date of the aggregate value of all contingent bonus or
incentive compensation awards to the Executive for all uncompleted periods under the plan
calculated as to each such award as if the Goals with respect to such bonus or incentive
compensation award had been attained reduced by any amounts paid to the Executive pursuant to
Section(b)(iii) and Section 3(b)(iv) under the plan for the fiscal year in which
the Termination Date occurs; and (v) all other payments and benefits to which the Executive (or in
the event of the Executive’s death, the Executive’s surviving spouse or other beneficiary) may be
entitled on the Termination Date as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, excluding severance payments under any Employer severance policy, practice or
agreement in effect on the Termination Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Company’s prevailing practice with respect to clauses (i) and
(ii) or, with respect to clauses (iii), (iv) and (v), pursuant to
the terms of the benefit plan or practice establishing such benefits.
	 
	 	(b)	 	Act. The term “Act” means the Securities Exchange Act of 1934, as amended.
	 
	 	(c)	 	Affiliate and Associate. The terms “Affiliate” and “Associate” shall have the
respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under
the Act.
	 
	 	(d)	 	Annual Cash Compensation. The term “Annual Cash Compensation” shall mean the sum
of (i) the Executive’s Annual Base Salary (determined as of the time of the Change in Control of
the Company or, if higher, immediately prior to the date the Notice of Termination is given) plus
(ii) an amount equal to the greater of the Executive’s annual incentive target bonus for the fiscal
year in which the Termination Date occurs or the annual incentive bonus the Executive received for
the fiscal year prior to the Change in Control of the Company (the aggregate amount set forth in
clause (i) and clause (ii) shall hereafter be referred to as the “Annual Cash
Compensation”),
	 
	 	(e)	 	Beneficial Owner. A Person shall be deemed to be the “Beneficial Owner” of any
securities:

	 	(i)	 	which such Person or any of such Person’s Affiliates or Associates has the
right to acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or upon
the exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to
the 

 

 

	 	 	 	terms of the Company’s Rights Agreement, dated as of December 10, 2004, between
the Company and Wells Fargo Bank, N.A., as amended from time to time (or any
successor to such Rights Agreement), at any time before the issuance of such
securities;
	 
	 	(ii)	 	which such Person or any of such Person’s Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has “beneficial
ownership” of (as determined pursuant to Rule l3d-3 of the General Rules and
Regulations under the Act), including pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security under this clause (ii) as a
result of an agreement, arrangement or understanding to vote such security if the
agreement, arrangement or understanding: (A) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable rules and regulations under
the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any
comparable or successor report); or
	 
	 	(iii)	 	which are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person’s Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in clause (ii)
above) or disposing of any voting securities of the Company.

	 	(f)	 	Cause. “Cause” for termination by the Employer of the Executive’s employment in
connection with a Change in Control of the Company shall be limited to (i) the engaging by the
Executive in intentional conduct that the Company establishes, by clear and convincing evidence,
has caused demonstrable and serious financial injury to the Employer, as evidenced by a
determination in a binding and final judgment, order or decree of a court or administrative agency
of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an
action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii)
conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion of all rights of appeal); or (iii) continuing
willful and unreasonable refusal by the Executive to perform the Executive’s duties or
responsibilities (unless significantly changed without the Executive’s consent).
	 
	 	(g)	 	Change in Control of the Company. A “Change in Control of the Company” shall be
deemed to have occurred if an event set forth in any one of the following paragraphs shall have
occurred:

	 	(i)	 	any Person (other than (A) the Company or any of its subsidiaries, (B) a
trustee or other fiduciary holding securities under any employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock in the Company (“Excluded Persons”)) is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any

 

 

	 	 	 	securities acquired directly from the Company or its Affiliates after February 12,
2007, pursuant to express authorization by the Board that refers to this exception)
representing 30% or more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company’s then outstanding voting
securities; or
	 
	 	(ii)	 	the following individuals cease for any reason to constitute a majority of
the number of directors of the Company then serving: (A) individuals who, on
February 12, 2007 constituted the Board and (B) any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Act) whose appointment or election by the Board
or nomination for election by the Company’s shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors on February 12, 2007, or whose appointment, election or nomination for
election was previously so approved (collectively the “Continuing Directors”);
provided, however, that individuals who are appointed to the Board pursuant to or in
accordance with the terms of an agreement relating to a merger, consolidation, or
share exchange involving the Company (or any direct or indirect subsidiary of the
Company) shall not be Continuing Directors for purposes of this Agreement until
after such individuals are first nominated for election by a vote of at least
two-thirds (2/3) of the then Continuing Directors and are thereafter elected as
directors by the shareholders of the Company at a meeting of shareholders held
following consummation of such merger, consolidation, or share exchange; and,
provided further, that in the event the failure of any such persons appointed to the
Board to be Continuing Directors results in a Change in Control of the Company, the
subsequent qualification of such persons as Continuing Directors shall not alter the
fact that a Change in Control of the Company occurred; or
	 
	 	(iii)	 	the consummation of a merger, consolidation or share exchange of the
Company with any other corporation or the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange of the Company
(or any direct or indirect subsidiary of the Company), in each case, which requires
approval of the shareholders of the Company, other than (A) a merger, consolidation
or share exchange which would result in the voting securities of the Company
outstanding immediately prior to such merger, consolidation or share exchange
continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at least 50% of the
combined voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger,
consolidation or share exchange, or (B) a merger, consolidation or share exchange
effected to implement a recapitalization of the Company (or similar transaction) in
which no Person (other than an Excluded Person) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly from
the Company or its Affiliates after February 12, 2007, pursuant to express
authorization by the Board that refers to this exception) representing 30% or
more of 

 

 

	 	 	 	either the then outstanding shares of common stock of the Company or the
combined voting power of the Company’s then outstanding voting securities; or
	 
	 	(iv)	 	the consummation of a plan of complete liquidation or dissolution of the
Company or a sale or disposition by the Company of all or substantially all of the
Company’s assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), in each case, which requires approval of the
shareholders of the Company, other than a sale or disposition by the Company of all
or substantially all of the Company’s assets to an entity at least 75% of the
combined voting power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of the Company immediately
prior to such sale.

Notwithstanding the foregoing, no “Change in Control of the Company” shall be deemed to have
occurred if there is consummated any transaction or series of integrated transactions immediately
following which the record holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to own, directly or indirectly, in the same
proportions as their ownership in the Company, an entity that owns all or substantially all of the
assets or voting securities of the Company immediately following such transaction or series of
transactions.

	 	(h)	 	Code. The term “Code” means the Internal Revenue Code of 1986, including any
amendments thereto or successor tax codes thereof.
	 
	 	(i)	 	Covered Termination. Subject to Section 2(b), the term “Covered
Termination” means any termination of the Executive’s employment during the Employment Period where
the Termination Date or the date Notice of Termination is delivered is any date prior to the end of
the Employment Period.
	 
	 	(j)	 	Employment Period. Subject to Section 2(b), the term “Employment Period”
means a period commencing on the date of a Change in Control of the Company, and ending at 11:59
p.m. Central Time on the earlier of the second anniversary of such date or the Executive’s Normal
Retirement Date.
	 
	 	(k)	 	Good Reason. The Executive shall have “Good Reason” for termination of employment
in connection with a Change in Control of the Company in the event of:

	 	(i)	 	any breach of this Agreement by the Employer, including specifically any
breach by the Employer of the agreements contained in Section 3, Section
4, Section 5, or Section 6, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith that the Employer
remedies promptly after receipt of notice thereof given by the Executive;
	 
	 	(ii)	 	any reduction in the Executive’s base salary, percentage of base salary
available as incentive compensation or bonus opportunity or benefits, in each case
relative to those most favorable to the Executive in effect at any time during the
180-day period prior to the Change in Control of the Company or, to the extent more favorable to the Executive, those in effect at any time during the
Employment Period;

 

 

	 	(iii)	 	the removal of the Executive from, or any failure to reelect or reappoint
the Executive to, any of the positions held with the Employer on the date of the
Change in Control of the Company or any other positions with the Employer to which
the Executive shall thereafter be elected, appointed or assigned, except in the
event that such removal or failure to reelect or reappoint relates to the
termination by the Employer of the Executive’s employment for Cause or by reason of
disability pursuant to Section 12;
	 
	 	(iv)	 	a good faith determination by the Executive that there has been a material
adverse change, without the Executive’s written consent, in the Executive’s working
conditions or status with the Employer relative to the most favorable working
conditions or status in effect during the 180-day period prior to the Change in
Control of the Company, or, to the extent more favorable to the Executive, those in
effect at any time during the Employment Period, including but not limited to (A) a
significant change in the nature or scope of the Executive’s authority, powers,
functions, duties or responsibilities, or (B) a significant reduction in the level
of support services, staff, secretarial and other assistance, office space and
accoutrements, but in each case excluding for this purpose an isolated,
insubstantial and inadvertent event not occurring in bad faith that the Employer
remedies within ten (10) days after receipt of notice thereof given by the
Executive;
	 
	 	(v)	 	the relocation of the Executive’s principal place of employment to a
location more than 50 miles from the Executive’s principal place of employment on
the date 180 days prior to the Change in Control of the Company;
	 
	 	(vi)	 	the Employer requires the Executive to travel on Employer business 20% in
excess of the average number of days per month the Executive was required to travel
during the 180-day period prior to the Change in Control of the Company;
	 
	 	(vii)	 	failure by the Company to obtain the Agreement referred to in Section
17(a) as provided therein.

	 	(l)	 	Normal Retirement Date. The term “Normal Retirement Date” means “Normal
Retirement Date” as defined in the primary qualified defined benefit pension plan applicable to the
Executive, or any successor plan, as in effect on the date of the Change in Control of the Company.
	 
	 	(m)	 	Person. The term “Person” shall mean any individual, firm, partnership,
corporation or other entity, including any successor (by merger or otherwise) of such entity, or a
group of any of the foregoing acting in concert.
	 
	 	(n)	 	Termination Date. Except as otherwise provided in Section 2(b),
Section 10(b), and Section 17(a), the term “Termination Date” means (i) if the
Executive’s employment is terminated by the Executive’s death, the date of death; (ii) if the
Executive’s employment is terminated by reason of voluntary early retirement, as agreed in writing by the Employer and
the Executive, the date of such early retirement which is set forth in such written agreement;
(iii) if the Executive’s employment is terminated for purposes of this Agreement by reason of
disability pursuant to Section 12, the earlier of thirty days after the Notice of
Termination is given or one day 

 

 

	 	 	 	prior to the end of the Employment Period; (iv) if the Executive’s
employment is terminated by the Executive voluntarily (other than for Good Reason), the date the
Notice of Termination is given; and (v) if the Executive’s employment is terminated by the Employer
(other than by reason of disability pursuant to Section 12) or by the Executive for Good
Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the
end of the Employment Period. Notwithstanding the foregoing,

	 	 	 	(A)	If termination is for Cause pursuant to Section 1(f)(iii) and if
the Executive has cured the conduct constituting such Cause as described by the
Employer in its Notice of Termination within such thirty-day or shorter period, then
the Executive’s employment hereunder shall continue as if the Employer had not
delivered its Notice of Termination.
	 
	 	 	 	(B)	If the Executive shall in good faith give a Notice of Termination for Good
Reason and the Employer notifies the Executive that a dispute exists concerning the
termination within the fifteen-day period following receipt thereof, then the
Executive may elect to continue his or her employment during such dispute and the
Termination Date shall be determined under this paragraph. If the Executive so
elects and it is thereafter determined that Good Reason did exist, the Termination
Date shall be the earliest of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 22, (2) the date of the Executive’s death or (3) one
day prior to the end of the Employment Period. If the Executive so elects and it is
thereafter determined that Good Reason did not exist, then the employment of the
Executive hereunder shall continue after such determination as if the Executive had
not delivered the Notice of Termination asserting Good Reason and there shall be no
Termination Date arising out of such Notice. In either case, this Agreement
continues, until the Termination Date, if any, as if the Executive had not delivered
the Notice of Termination except that, if it is finally determined that Good Reason
did exist, the Executive shall in no case be denied the benefits described in
Section 9 (including a Termination Payment) based on events occurring after
the Executive delivered his Notice of Termination.
	 
	 	 	 	(C)	Except as provided in Section 1(n)(B), if the party receiving the
Notice of Termination notifies the other party that a dispute exists concerning the
termination within the appropriate period following receipt thereof and it is
finally determined that the reason asserted in such Notice of Termination did not
exist, then (1) if such Notice was delivered by the Executive, the Executive will be
deemed to have voluntarily terminated his employment and the Termination Date shall
be the earlier of the date fifteen days after the Notice of Termination is given or
one day prior to the end of the Employment Period and (2) if delivered by the
Company, the Company will be deemed to have terminated the Executive other than by
reason of death, disability or Cause.

	 	2.	 	Termination or Cancellation Prior to Change in Control.
	 
	 	(a)	 	Subject to Section 2(b), the Employer and the Executive shall each retain the
right to terminate the employment of the Executive at any time prior to a Change in Control of the

 

 

	 	 	 	Company. Subject to Section 2(b), in the event that prior to a Change in Control of the
Company (i) the Executive’s employment is terminated or (ii) as determined in writing by the
Compensation Committee of the Board of Directors of the Company in its sole discretion, the
Executive’s authority, powers, functions, duties, responsibilities or pay grade are materially
reduced, this Agreement shall be terminated and cancelled and of no further force and effect, and
any and all rights and obligations of the parties hereunder shall cease.
	 
	 	(b)	 	Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the
Company occurs and if the Executive’s employment with the Employer is terminated (other than a
termination due to the Executive’s death or as a result of the Executive’s disability) during the
period of 180 days prior to the date on which the Change in Control of the Company occurs, and if
it is reasonably demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a Change in Control of
the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of
the Company, then for all purposes of this Agreement such termination of employment shall be deemed
a “Covered Termination,” “Notice of Termination” shall be deemed to have been given, and the
“Employment Period” shall be deemed to have begun on the date of such termination which shall be
deemed to be the “Termination Date” and the date of the Change of Control of the Company for
purposes of this Agreement. Anything in this Agreement to the contrary notwithstanding, if a
Change in Control of the Company occurs and if the Executive’s authority, powers, functions,
duties, responsibilities or pay grade were reduced pursuant to Section 2(a)(ii) during the period
of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is
reasonably demonstrated by the Executive that such reduction in authority, powers, functions,
duties, responsibilities or pay grade (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in
connection with or in anticipation of a Change in Control of the Company, then the termination and
cancellation of this Agreement pursuant to Section 2(a) shall be deemed null and void, this
Agreement shall be deemed to remain in full force and effect with any and all rights and
obligations of the parties hereunder continuing and such reduction in authority, powers, functions,
duties, responsibilities or pay grade shall be considered “Good Reason” for the Executive to
terminate employment in connection with a Change in Control of the Company.
	 
	 	3.	 	Employment Period; Vesting and Payment of Certain Benefits.
	 
	 	(a)	 	If a Change in Control of the Company occurs when the Executive is employed by the
Employer, the Employer will continue thereafter to employ the Executive during the Employment
Period, and the Executive will remain in the employ of the Employer in accordance with and subject
to the terms and provisions of this Agreement. Any termination of the Executive’s employment
during the Employment Period, whether by the Company or the Employer, shall be deemed a termination
by the Company for purposes of this Agreement.
	 
	 	(b)	 	If a Change in Control of the Company occurs when the Executive is employed by the
Employer, (i) the Company shall cause all restrictions on restricted stock awards made to the
Executive prior to the Change in Control of the Company to lapse such that the Executive is fully and immediately vested in the Executive’s restricted stock upon such a
Change in Control of the Company; (ii) the Company shall cause all stock options granted to the
Executive prior to the Change in Control of the Company pursuant to the Company’s stock option
plan(s) to be fully and immediately vested upon such a Change in Control of the Company; (iii) the
Company 

 

 

	 	 	 	shall cause all incentive compensation units and performance awards granted to the
Executive pursuant to any long-term incentive plan maintained by the Company to be paid to the
Executive within ten (10) business days after the Change in Control of the Company (A) at one-third
(1/3) of target, if the award cycle has been in effect less than twelve (12) months, (B) at two
thirds (2/3) of the then current value pursuant to such plan, if the award cycle has been in effect
twelve (12) or more months but less than twenty-four (24) months, and (C) at the then current value
pursuant to such plan, if the award cycle has been in effect twenty-four (24) or more months, in
each case as if all performance or incentive requirements and periods had been satisfied; and (iv)
the Company shall pay to the Executive within ten (10) business days after the Change in Control of
the Company an amount equal to the Executive’s annual incentive target bonus for the fiscal year in
which the Change in Control of the Company occurs.
	 
	 	4.	 	Duties. During the Employment Period, the Executive shall, in the same capacities
and positions held by the Executive at the time of the Change in Control of the Company or in such
other capacities and positions as may be agreed to by the Employer and the Executive in writing,
devote the Executive’s best efforts and all of the Executive’s business time, attention and skill
to the business and affairs of the Employer, as such business and affairs now exist and as they may
hereafter be conducted.
	 
	 	5.	 	Compensation. During the Employment Period, the Executive shall be compensated as
follows:
	 
	 	(a)	 	The Executive shall receive, at reasonable intervals (but not less often than monthly) and
in accordance with such standard policies as may be in effect immediately prior to the Change in
Control of the Company, an annual base salary in cash equivalent of not less than twelve times the
Executive’s highest monthly base salary for the twelve-month period immediately preceding the month
in which the Change in Control of the Company occurs or, if higher, annual base salary at the rate
in effect immediately prior to the Change in Control of the Company (which base salary shall,
unless otherwise agreed in writing by the Executive, include the current receipt by the Executive
of any amounts which, prior to the Change in Control of the Company, the Executive had elected to
defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise),
subject to adjustment as hereinafter provided in Section 6 (such salary amount as adjusted
upward from time to time is hereafter referred to as the “Annual Base Salary”).
	 
	 	(b)	 	The Executive shall receive fringe benefits at least equal in value to the highest value
of such benefits provided for the Executive at any time during the 180-day period immediately prior
to the Change in Control of the Company or, if more favorable to the Executive, those provided
generally at any time during the Employment Period to any executives of the Employer of comparable
status and position to the Executive; and shall be reimbursed, at such intervals and in accordance
with such standard policies that are most favorable to the Executive that were in effect at any
time during the 180-day period immediately prior to the Change in Control of the Company, for any
and all monies advanced in connection with the Executive’s employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Employer, including travel expenses.
	 
	 	(c)	 	The Executive and/or the Executive’s family, as the case may be, shall be included, to the
extent eligible thereunder (which eligibility shall not be conditioned on the Executive’s salary
grade or on any other requirement which excludes persons of comparable status to 

 

 

	 	 	 	the Executive unless such exclusion was in effect for such plan or an equivalent plan at any time during the
180-day period immediately prior to the Change in Control of the Company), in any and all plans
providing benefits for the Employer’s salaried employees in general, including but not limited to
group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans;
provided, that, (i) in no event shall the aggregate level of benefits under such plans in which the
Executive is included be less than the aggregate level of benefits under plans of the Employer of
the type referred to in this Section 5(c) in which the Executive was participating at any
time during the 180-day period immediately prior to the Change in Control of the Company and (ii)
in no event shall the aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(c) provided at any time
after the Change in Control of the Company to any executive of the Employer of comparable status
and position to the Executive.
	 
	 	(d)	 	The Executive shall annually be entitled to not less than the amount of paid vacation and
not fewer than the highest number of paid holidays to which the Executive was entitled annually at
any time during the 180-day period immediately prior to the Change in Control of the Company or
such greater amount of paid vacation and number of paid holidays as may be made available annually
to other executives of the Employer of comparable status and position to the Executive at any time
during the Employment Period.
	 
	 	(e)	 	The Executive shall be included in all plans providing additional benefits to executives
of the Employer of comparable status and position to the Executive, including but not limited to
deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock
appreciation, stock bonus and similar or comparable plans; provided, that, (i) in no event shall
the aggregate level of benefits under such plans be less than the highest aggregate level of
benefits under plans of the Employer of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period immediately prior to the
Change in Control of the Company; (ii) in no event shall the aggregate level of benefits under such
plans be less than the aggregate levels of benefits under plans of the type referred to in this
Section 5(e) provided at any time after the Change in Control of the Company to any
executive of the Employer comparable in status and position to the Executive; and (iii) the
Employer’s obligation to include the Executive in bonus or incentive compensation plans shall be
determined by Section 5(f).
	 
	 	(f)	 	To assure that the Executive will have an opportunity to earn incentive compensation after
a Change in Control of the Company, the Executive shall be included in a bonus plan of the Employer
which shall satisfy the standards described below (such plan, the “Bonus Plan”). Bonuses under the
Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably
related to the business of the Employer as the Employer shall establish (the “Goals”), all of which
Goals shall be attainable, prior to the end of the Employment Period, with approximately the same
degree of probability as the most attainable goals under the Employer’s bonus plan or plans as in
effect at any time during the 180-day period immediately prior to the Change in Control of the
Company (whether one or more, the “Company Bonus Plan”) and in view of the Employer’s existing and
projected financial and business circumstances applicable at the time. The amount of the bonus
(the “Bonus Amount”) that the Executive is eligible to earn under the Bonus Plan shall be no less
than 200% of the Executive’s target award provided in such Company Bonus Plan (such bonus amount
herein referred to as the “Targeted Bonus”), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan
shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably
related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be

 

 

	 	 	 	affected by any circumstance occurring subsequent to the end of the Employment Period, including
termination of the Executive’s employment.
	 
	 	6.	 	Annual Compensation Adjustments. During the Employment Period, the Board of
Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least
annually, the contributions of the Executive to the Company, and in accordance with the Company’s
practice prior to the Change in Control of the Company, due consideration shall be given to the
upward adjustment of the Executive’s Annual Base Salary, at least annually, (a) commensurate with
increases generally given to other executives of the Company of comparable status and position to
the Executive, and (b) as the scope of the Company’s operations or the Executive’s duties expand.
	 
	 	7.	 	Termination For Cause or Without Good Reason. If there is a Covered Termination
for Cause or due to the Executive’s voluntarily terminating his or her employment other than for
Good Reason (any such terminations to be subject to the procedures set forth in Section
13), then the Executive shall be entitled to receive only Accrued Benefits.
	 
	 	8.	 	Termination Giving Rise to a Termination Payment. If there is a Covered
Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death,
(ii) disability pursuant to Section 12, or (iii) Cause (any such terminations to be subject
to the procedures set forth in Section 13), then the Executive shall be entitled to
receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary
for periods following the Termination Date, as liquidated damages and additional severance pay and
in consideration of the covenant of the Executive set forth in Section 14(a), the
Termination Payment pursuant to Section 9(a).
	 
	 	9.	 	Payments Upon Termination.
	 
	 	(a)	 	Termination Payment. The “Termination Payment” shall be an amount equal to the
Annual Cash Compensation times two and one-half (2 1/2 ). The Termination Payment shall be paid to
the Executive in cash equivalent ten (10) business days after the Termination Date. Such lump sum
payment shall not be reduced by any present value or similar factor, and the Executive shall not be
required to mitigate the amount of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other
employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by
the Executive of the Termination Payment shall constitute the Executive’s release of any rights of
the Executive to, any other cash severance payments under any Company severance policy, practice or
agreement.
	 
	 	(b)	 	Certain Additional Payments by the Company.

	 	(i)	 	Notwithstanding any other provision of this Agreement, if any portion of
the Termination Payment or any other payment under this Agreement, or under any
other agreement with or plan of the Employer (in the aggregate, “Total Payments”),
would constitute an “excess parachute payment” as defined in Section 280G of the
Code (or any successor provision), then the Company shall pay the Executive an additional amount (the “Gross-Up Payment”) such that the net
amount retained by the Executive after deduction of any excise tax imposed under
Section 4999 of the Code (or any successor provision) and any interest charges or
penalties in respect of the imposition of such excise tax (collectively, the “Excise
Tax”) (but not 

 

 

	 	 	 	any federal, state or local income tax, or employment tax) on the
Total Payments, and any federal, state and local income tax, employment tax, and
excise tax upon the payment provided for by this Section 9(b)(i), shall be
equal to the Total Payments. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax and employment
taxes at the highest marginal rate of federal income and employment taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive’s domicile for income tax purposes on the date the Gross-Up Payment is
made, net of the maximum reduction in federal income taxes that may be obtained from
the deduction of such state and local taxes. Notwithstanding the foregoing, if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but that
the Total Payments would not be subject to the Excise Tax if the Total Payments were
reduced by an amount that is less than 10% of the Total Payments that would be
treated as “parachute payments” under Section 280G of the Code (or any successor
provision), then the amounts payable to the Executive under this Agreement shall be
reduced (but not below zero) to the maximum amount that could be paid to the
Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no
Gross-Up Payment shall be made to the Executive. For purposes of reducing the Total
Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no
other Total Payments) shall be reduced. If the reduction of the amounts payable
hereunder would not result in a reduction of the Total Payments to the Safe Harbor
Cap, no amounts payable under this Agreement shall be reduced pursuant to this
provision.
	 
	 	(ii)	 	For purposes of this Agreement, the terms “excess parachute payment” and
“parachute payments” shall have the meanings assigned to them in Section 280G of the
Code (or any successor provision) and such “parachute payments” shall be valued as
provided therein. Present value for purposes of this Agreement shall be calculated
in accordance with Section 1274(b)(2) of the Code (or any successor provision).
Promptly following a Covered Termination or notice by the Company to the Executive
of its belief that there is a payment or benefit due the Executive which will result
in an “excess parachute payment” as defined in Section 280G of the Code (or any
successor provision), the Executive and the Company, at the Company’s expense, shall
obtain the opinion (which need not be unqualified) of nationally recognized tax
counsel (“National Tax Counsel”) selected by the Company’s independent auditors and
reasonably acceptable to the Executive (which may be regular outside counsel to the
Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments, (C) the amount and present value of any
excess parachute payments, and (D) the amount of any Gross-Up Payment or the
reduction of any Total Payments to the Safe Harbor Cap, as the case may be. As used
in this Agreement, the term “Base Period Income” means an amount equal to the
Executive’s “annualized includable compensation for the base period” as defined in Section 280G(d)(1) of the Code.
For purposes of such opinion, the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Company’s independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the Code (or any
successor provisions), which determination shall be evidenced in a certificate of
such auditors 

 

 

	 	 	 	addressed to the Company and the Executive. The opinion of National
Tax Counsel shall be addressed to the Company and the Executive and shall be binding
upon the Company and the Executive. If such National Tax Counsel so requests in
connection with the opinion required by this Section 9(b), the Executive and
the Company shall obtain, at the Company’s expense, and the National Tax Counsel may
rely on, the advice of a firm of recognized executive compensation consultants as to
the reasonableness of any item of compensation to be received by the Executive
solely with respect to its status under Section 280G of the Code and the regulations
thereunder. Within five (5) days after the National Tax Counsel’s opinion is
received by the Company and the Executive, the Company shall pay (or cause to be
paid) or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement.
	 
	 	(iii)	 	In the event that upon any audit by the Internal Revenue Service, or by a
state or local taxing authority, of the Total Payments or Gross-Up Payment, a change
is finally determined to be required in the amount of taxes paid by the Executive,
appropriate adjustments shall be made under this Agreement such that the net amount
which is payable to the Executive after taking into account the provisions of
Section 4999 of the Code (or any successor provision) shall reflect the intent of
the parties as expressed in this Section 9, in the manner determined by the
National Tax Counsel.
	 
	 	(iv)	 	The Company agrees to bear all costs associated with, and to indemnify and
hold harmless, the National Tax Counsel of and from any and all claims, damages, and
expenses resulting from or relating to its determinations pursuant to this
Section 9(b), except for claims, damages or expenses resulting from the
gross negligence or willful misconduct of such firm.

	 	(b)	 	Additional Benefits. If there is a Covered Termination and the Executive is
entitled to Accrued Benefits and the Termination Payment, then the Company shall provide to the
Executive the following additional benefits:

	 	(i)	 	The Executive shall receive, at the expense of the Company, outplacement
services, on an individualized basis at a level of service commensurate with the
Executive’s status with the Company immediately prior to the date of the Change in
Control of the Company (or, if higher, immediately prior to the termination of the
Executive’s employment), provided by a nationally recognized executive placement
firm selected by the Company; provided that the cost to the Company of such services
shall not exceed 10% of the Executive’s Annual Base Salary.
	 
	 	(ii)	 	Until the earlier of the end of the Employment Period or such time as the
Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits,
the Executive shall continue to be covered, at the expense of the Company, by the
same or equivalent life insurance, hospitalization, medical and dental coverage as
was required hereunder with respect to the Executive immediately prior to the date
the Notice of Termination is given.

 

 

	 	(iii)	 	The Company shall bear up to $15,000 in the aggregate of fees and
expenses of consultants and/or legal or accounting advisors engaged by the Executive
to advise the Executive as to matters relating to the computation of benefits due
and payable under this Section 9.
	 
	 	(iv)	 	The Company shall cause the Executive to be fully and immediately vested
in his accrued benefit under the Pentair, Inc. 1999 Supplemental Executive
Retirement Plan (“SERP”) and the Pentair, Inc. Restoration Plan (“Restoration Plan”)
or any successor plans thereto (the “Plans”) (to the extent the Executive
participates in the Plans) and in any defined contribution retirement plan of the
Employer. The amount of Plan benefits shall be determined as if the Executive had
completed additional years of Benefit Service (as such term is defined in the Plans)
equal to the lesser of (A) three years or (B) the greater of (x) seven minus the
years of Benefit Service credited to such Executive under the Plans, determined
without regard to the terms of this Agreement, as of the end of the calendar year
which includes the date of the Change in Control of the Company, or (y) zero. In
addition, if the Executive is described in Appendix A to the SERP, the additional
benefit therein provided for the Executive shall be fully vested and the amount of
such additional benefit shall be no less than if the Executive had continued in
qualified employment through the end of the calendar year in which he would attain
age sixty-two. In addition, the Executive’s accrued benefit under the Restoration
Plan shall be appropriately increased by the value of the Executive’s accrued
benefit, if any, under the Company’s tax-qualified defined benefit plan which is
forfeited due to the Executive’s failure to become fully vested thereunder.

	 	10.	 	Death.
	 
	 	(a)	 	Except as provided in Section 10(b), in the event of a Covered Termination due to
the Executive’s death, the Executive’s estate, heirs and beneficiaries shall receive all the
Executive’s Accrued Benefits through the Termination Date.
	 
	 	(b)	 	In the event the Executive dies after a Notice of Termination is given (i) by the Company
or (ii) by the Executive for Good Reason, the Executive’s estate, heirs and beneficiaries shall be
entitled to the benefits described in Section 10(a) and, subject to the provisions of this
Agreement, to such Termination Payment as the Executive would have been entitled to had the
Executive lived. For purposes of this Section 10(b), the Termination Date shall be the
earlier of thirty days following the giving of the Notice of Termination, subject to extension
pursuant to Section 1(n), or one day prior to the end of the Employment Period.
	 
	 	11.	 	Retirement. If, during the Employment Period, the Executive and the Employer
shall execute an agreement providing for the early retirement of the Executive from the Employer,
or the Executive shall otherwise give notice that he is voluntarily choosing to retire early
from the Employer, the Executive shall receive Accrued Benefits through the Termination Date;
provided, that if the Executive’s employment is terminated by the Executive for Good Reason or by
the Company other than by reason of death, disability or Cause and the Executive also, in
connection with such termination, elects voluntary early retirement, the Executive shall also be
entitled to receive a Termination Payment pursuant to Section 8.

 

 

	 	12.	 	Termination for Disability. If, during the Employment Period, as a result of the
Executive’s disability due to physical or mental illness or injury (regardless of whether such
illness or injury is job-related), the Executive shall have been absent from the Executive’s duties
hereunder on a full-time basis for a period of six consecutive months and, within thirty days after
the Company notifies the Executive in writing that it intends to terminate the Executive’s
employment (which notice shall not constitute the Notice of Termination contemplated below), the
Executive shall not have returned to the performance of the Executive’s duties hereunder on a
full-time basis, the Company may terminate the Executive’s employment for purposes of this
Agreement pursuant to a Notice of Termination given in accordance with Section 13. If the
Executive’s employment is terminated on account of the Executive’s disability in accordance with
this Section, the Executive shall receive Accrued Benefits through the Termination Date and shall
remain eligible for all benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
	 
	 	13.	 	Termination Notice and Procedure. Any Covered Termination by the Company or the
Executive (other than a termination of the Executive’s employment that is a Covered Termination by
virtue of Section 2(b)) shall be communicated by a written notice of termination (“Notice
of Termination”) to the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following procedures and those
set forth in Section 23:
	 
	 	(a)	 	If such termination is for disability, Cause or Good Reason, the Notice of Termination
shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such
termination.
	 
	 	(b)	 	Any Notice of Termination by the Company shall have been approved, prior to the giving
thereof to the Executive, by a resolution duly adopted by a majority of the directors of the
Company (or any successor corporation) then in office.
	 
	 	(c)	 	If the Notice is given by the Executive for Good Reason, the Executive may cease
performing his duties hereunder on or after the date fifteen days after the delivery of Notice of
Termination and shall in any event cease employment on the Termination Date. If the Notice is
given by the Company, then the Executive may cease performing his duties hereunder on the date of
receipt of the Notice of Termination, subject to the Executive’s rights hereunder.
	 
	 	(d)	 	The Executive shall have thirty days, or such longer period as the Company may determine
to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for
termination of the Executive’s employment for Cause under this Agreement pursuant to Section
1(f)(iii).
	 
	 	(e)	 	The recipient of any Notice of Termination shall personally deliver or mail in accordance
with Section 23 written notice of any dispute relating to such Notice of Termination to
the party giving such Notice within fifteen days after receipt thereof; provided, however,
that if the Executive’s conduct or act alleged to provide grounds for termination by the Company
for Cause is curable, then such period shall be thirty days. After the expiration of such period,
the contents of the Notice of Termination shall become final and not subject to dispute.

 

 

	 	14.	 	Further Obligations of the Executive.
	 
	 	(a)	 	Competition. The Executive agrees that, in the event of any Covered Termination
where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive
shall not, for a period expiring one year after the Termination Date, without the prior written
approval of the Company’s Board of Directors, (i) solicit for employment an employee of the Company
or its subsidiaries or (ii) participate in the management of, be employed by or own any business
enterprise at a location within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise’s revenues from any competitive activities
amount to 10% or more of such enterprise’s net revenues and sales for its most recently completed
fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the
Executive from owning stock or other securities of a competitor amounting to less than five percent
of the outstanding capital stock of such competitor.
	 
	 	(b)	 	Confidentiality. During and following the Executive’s employment by the Company,
the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or
make lists of any confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of Directors of the Company
or required by any court or administrative agency, other than to an employee of the Company or a
person to whom disclosure is reasonably necessary or appropriate in connection with the performance
by the Executive of duties as an executive of the Company. Confidential information shall not
include any information known generally to the public or any information of a type not otherwise
considered confidential by persons engaged in the same business or a business similar to that of
the Company. All records, files, documents and materials, or copies thereof, relating to the
business of the Company which the Executive shall prepare, or use, or come into contact with, shall
be and remain the sole property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
	 
	 	15.	 	Expenses and Interest. If, after a Change in Control of the Company, (a) a
dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or
(b) any legal or arbitration proceeding shall be brought to enforce or interpret any provision
contained herein or to recover damages for breach hereof, in either case so long as the Executive
is not acting in bad faith, then the Company shall reimburse the Executive for any reasonable
attorneys’ fees and necessary costs and disbursements incurred as a result of the dispute, legal or
arbitration proceeding (“Expenses”), and prejudgment interest on any money judgment or arbitration
award obtained by the Executive calculated at the rate of interest announced by U.S. Bank National
Association, Minneapolis, Minnesota, from time to time at its prime or base lending rate from the
date that payments to him or her should have been made under this Agreement. Within ten days after
the Executive’s written request therefor, the Company shall pay to the Executive, or such other
person or entity as the Executive may designate in writing to the Company, the Executive’s
reasonable Expenses in advance of the final disposition or conclusion of any such dispute, legal or
arbitration proceeding.
	 
	 	16.	 	Payment Obligations Absolute. The Company’s obligation during and after the
Employment Period to pay the Executive the amounts and to make the benefit and other arrangements
provided herein shall be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section 15, all 

 

 

	 	 	 	amounts payable by the Company hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Company shall be final, and the Company will not seek to recover all
or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any
reason whatsoever.
	 
	 	17.	 	Successors.
	 
	 	(a)	 	If the Company sells, assigns or transfers all or substantially all of its business and
assets to any Person or if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a “Sale of Business”),
then the Company shall assign all of its right, title and interest in this Agreement as of the date
of such event to such Person, and the Company shall cause such Person, by written agreement in form
and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform
from and after the date of such assignment all of the terms, conditions and provisions imposed by
this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the
effective date of such Sale of Business shall be a breach of this Agreement constituting “Good
Reason” hereunder, except that for purposes of implementing the foregoing the date upon which such
Sale of Business becomes effective shall be deemed the Termination Date. In case of such
assignment by the Company and of assumption and agreement by such Person, as used in this
Agreement, “Company” shall thereafter mean such Person which executes and delivers the agreement
provided for in this Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of,
and be enforceable by, such Person. The Executive shall, in his or her discretion, be entitled to
proceed against any or all of such Persons, any Person which theretofore was such a successor to
the Company and the Company (as so defined) in any action to enforce any rights of the Executive
hereunder. Except as provided in this Section 17(a), this Agreement shall not be
assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
	 
	 	(b)	 	This Agreement and all rights of the Executive shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators, heirs
and beneficiaries. All amounts payable to the Executive under Sections 3, 7, 8, 9, 10, 11, 12
and 15 if the Executive had lived shall be paid, in the event of the Executive’s death, to the
Executive’s estate, heirs and representatives; provided, however, that the foregoing shall not be
construed to modify any terms of any benefit plan of the Employer, as such terms are in effect on
the date of the Change in Control of the Company, that expressly govern benefits under such plan in
the event of the Executive’s death.
	 
	 	18.	 	Severability. The provisions of this Agreement shall be regarded as divisible,
and if any of said provisions or any part hereof are declared invalid or unenforceable by a court
of competent jurisdiction, the validity and enforceability of the remainder of such provisions or
parts hereof and the applicability thereof shall not be affected thereby.
	 
	 	19.	 	Contents of Agreement; Waiver of Rights; Amendment. This Agreement sets forth the
entire understanding between the parties hereto with respect to the subject matter hereof and shall
supersede in all respects, and the Executive hereby waives all rights under, any prior or other
agreement or understanding between the parties with respect to such subject matter, including, but
not limited to the Management Assurance Agreement between the Company and the Executive. This 

 

 

	 	 	 	Agreement may not be amended or modified at any time except by written instrument executed by the
Company and the Executive.
	 
	 	20.	 	Withholding. The Company shall be entitled to withhold from amounts to be paid to
the Executive hereunder any federal, state or local withholding or other taxes or charges which it
is from time to time required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Company shall be entitled to rely on an
opinion of the National Tax Counsel if any question as to the amount or requirement of any such
withholding shall arise.
	 
	 	21.	 	Certain Rules of Construction. No party shall be considered as being responsible
for the drafting of this Agreement for the purpose of applying any rule construing ambiguities
against the drafter or otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an agreement in writing
shall be deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
	 
	 	22.	 	Governing Law; Resolution of Disputes. This Agreement and the rights and
obligations hereunder shall be governed by and construed in accordance with the laws of the State
of Minnesota. Any dispute arising out of this Agreement shall, at the Executive’s election, be
determined by arbitration under the rules of the American Arbitration Association then in effect
(in which case both parties shall be bound by the arbitration award) or by litigation. Whether the
dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation
shall be Minneapolis, Minnesota or, at the Executive’s election, if the Executive is not then
residing or working in the Minneapolis, Minnesota metropolitan area, in the judicial district
encompassing the city in which the Executive resides; provided, that, if the Executive is not then
residing in the United States, the election of the Executive with respect to such venue shall be
either Minneapolis, Minnesota or in the judicial district encompassing that city in the United
States among the thirty cities having the largest population (as determined by the most recent
United States Census data available at the Termination Date) which is closest to the Executive’s
residence. The parties consent to personal jurisdiction in each trial court in the selected venue
having subject matter jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for the giving of
notices.
	 
	 	23.	 	Notice. Notices given pursuant to this Agreement shall be in writing and, except
as otherwise provided by Section 13(d), shall be deemed given when actually received by the
Executive or actually received by the Company’s Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Pentair,
Inc., Attention: Secretary (or President, if the Executive is then Secretary), 5500 Wayzata Blvd.,
Suite 800, Golden Valley, Minnesota 55416, or if to the Executive, at the address set forth below
the Executive’s signature to this Agreement, or to such other address as the party to be notified
shall have theretofore given to the other party in writing.
	 
	 	24.	 	No Waiver. No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be performed by the other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time
or any prior or subsequent time.

 

 

	 	25.	 	Headings. The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.

 

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.

	 	 	 	 	 	 
	 	PENTAIR, INC.

 	 	 
	 	By: 	 	 	 
	 	 	Its:	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	Attest: 	 	 	 
	 	 	Its:	 	 
	 	 	 	 
	 

	 	 	 	 	 	 
	 	EXECUTIVE:
 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	Address:

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