Exhibit 10.2

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (“Amended Employment Agreement”)
is effective as of July 1, 2014 (the “Effective Date”), by and among Electromed,
Inc., a Minnesota corporation (the “Corporation”), and Jeremy Brock
(“Employee”).

 

RECITALS

 

WHEREAS, the Corporation and the Employee previously entered into an Employment
Agreement, dated as of October 18, 2011 (the “Original Agreement”); and

 

WHEREAS, the Corporation modified, amended and restated the Original Agreement
on November 15, 2012 (the “Amendment”); and

 

WHEREAS, the Corporation and Employee desire to modify and amend and restate the
Employment Agreement on the terms and conditions set forth in this Amended and
Restated Employment Agreement (the “Amended Employment Agreement”); and

 

WHEREAS, Corporation wishes to continue to employ Employee to the position of
Chief Financial Officer and Employee wishes to continue his employment pursuant
to the terms and conditions set forth in this Amended Employment Agreement.

 

WHEREAS, the Corporation and Employee desire to enter into this Amended
Employment Agreement, and it is the intention of the Corporation and Employee
that this Amended Employment Agreement entirely supersedes any prior agreements
with respect hereto.

 

AGREEMENT

 

In consideration of the above recitals and the mutual promises set forth in this
Amended Employment Agreement, the parties agree as follows:

 

1.                   Nature and Capacity of Employment.  Effective as of the
Effective Date, the Corporation hereby agrees to continue to employ the Employee
as its Chief Financial Officer, subject to the direction of the Board of
Directors of the Corporation and pursuant to the terms and conditions set forth
in this Amended Employment Agreement. The Employee hereby agrees to continue
acting in that capacity under the terms and conditions set forth in this Amended
Employment Agreement. The Employee agrees to perform or be available to perform
the functions of this position, pursuant to the terms of this Amended Employment
Agreement.

 

 

 

2.                   Term of Employment.  The term of the Employee’s employment
hereunder shall commence on the Effective Date of this Amended Employment
Agreement and shall continue thereafter for a period of two years, or through
June 30, 2016 (the “Two Year Term”), unless terminated earlier in accordance
with Paragraph 4 of this Amended Employment Agreement.  The term of this Amended
Employment Agreement and the Employee’s employment hereunder shall automatically
renew for successive one year periods beyond the expiration of the Two Year Term
(the “Renewal Term”), unless at least ninety (90) days prior to the expiration
of the Two Year Term or any Renewal Term either party hereto gives written
notice to the other party that it does not intend to renew this Amended
Employment Agreement for the coming year. During the Two Year Term or any
Renewal Term, this Amended Employment Agreement may be terminated pursuant to
the terms of Paragraph 4 of this Amended Employment Agreement.

 

3.                   Compensation and Benefits.

 

3.1.          Base Salary.  As of the Effective Date, the Corporation agrees to
pay the Employee an annualized base salary of $155,000 (the “Base Salary”),
which amount shall be earned by the Employee on a pro rata basis as the Employee
performs services and which shall be paid according to the Corporation’s normal
payroll practices. Employee shall be eligible for a raise of the Base Salary
payable under this Paragraph 3.1 and such raise shall be negotiated in good
faith by the Chief Executive Officer, acting in collaboration with the
Corporation’s Compensation Committee, and the Employee. Such raise shall not be
less than .0333 of the then current Base Salary upon completion of one year’s
service and shall be subject to approval by the Corporation’s Board of Directors
following review of Corporation’s progress toward meeting performance goals. The
Board of Directors acting reasonably shall also have the right to annually
review and determine the amount of Base Salary payable pursuant to this
Paragraph 3.1.

 

3.2          Non-Equity Incentive Compensation.  For the fiscal years ending
June 30, 2015 and June 30, 2016, Employee shall receive a bonus in the maximum
aggregate amount of 30% of the base salary set forth in Paragraph 3.1 only if he
achieves the goals and milestones set forth in the CFO Bonus Plan implemented
for the applicable fiscal year, as such goals have been determined by, and as
achievement against such goals will be evaluated by, the Personnel and
Compensation Committee of the Board of Directors. Future Non-Equity Incentive
Compensation will be determined by the Personnel and Compensation Committee or
the Board of Directors in their discretion. If a bonus is earned in accordance
with this Paragraph 3.2, it will be paid to Employee by the Corporation
regardless of whether he is employed by the Corporation on the date payable.

 

3.3          Non-Qualified Stock Option.  On the later of the Effective Date or
the date on which this Agreement is executed by the Corporation, or if such date
is not a business day on which stocks listed on the NYSE MKT national exchange
are trading, the first such business day following the Effective Date, Employee
shall be granted a non-qualified stock option to purchase 30,000 shares of the
Corporation’s common stock pursuant to the Corporation’s 2012 Stock Incentive
Plan. The option shall have an exercise price equal to the fair market value of
the Corporation’s common stock on the date of the grant, shall have a 10-year
term, and shall vest as to 10,000 shares on the last day of each of the
Corporation’s fiscal years ending June 30, 2015, 2016 and 2017. The remaining
terms of the option will be governed by the 2012 Stock Incentive Plan and the
non-qualified stock option agreement to be executed by the Corporation and the
Employee on or about the date of grant. Should there be a Change of Control, as
defined in Paragraph 4.3 of this Amended Employment Agreement, the options will
fully vest upon the Change of Control.

 

2

 

3.4.          Employee Benefits.  During the Employee’s employment with the
Corporation, the Employee shall be entitled to participate in the retirement
plans, health plans, and all other employee benefits made available by the
Corporation, and as they may be changed from time to time. The Employee
acknowledges and agrees that he will be subject to all eligibility requirements
and all other provisions of these benefits plans, and that the Corporation is
under no obligation to the Employee to establish and maintain any employee
benefit plan in which the Employee may participate. The terms and provisions of
any employee benefit plan of the Corporation are matters within the exclusive
province of the Corporation’s Board of Directors, subject to applicable law.

 

3.5.          Paid Time Off.  The Corporation agrees that the Employee shall be
entitled to Paid Time Off (“PTO”) of up to twenty (20) days per calendar year,
prorated for any partial calendar year of employment, without reduction of the
minimum annual base salary payable to the Employee pursuant to Paragraph 3.1 of
this Amended Employment Agreement. PTO which is unused at the end of any
calendar year will carry over to the next calendar year, subject to the
Corporation’s limitations on carry-over and accrual maximums. At the end of
Employee’s employment for any reason, the Corporation will pay Employee for his
ending balance of unused PTO.

 

3.6.          Other Benefits:  During the Two Year Term or Renewal Term, the
Corporation shall directly pay the cost of a cell phone or wireless handheld
device for the Employee’s use. Additionally, during the Two Year Term or any
Renewal Term, the Corporation shall provide an automobile allowance of $400 per
month. The Corporation shall also provide a corporate credit card for approved
business expenses and shall otherwise reimburse the Employee for, or pay
directly, all reasonable business expenses incurred by the Employee in the
performance of his duties under this Amended Employment Agreement, provided that
the Employee incurs and accounts for such expenses in accordance with all
Corporation policies and directives in effect from time to time.

 

4.                   Termination of Employment Prior to the End of the Two Year
Term or Renewal Term.  The Employee’s employment may be terminated prior to the
expiration of the Two Year Term or a Renewal Term as follows:

 

4.1.          For Cause Termination, Without Severance.  Notwithstanding
anything contained herein to the contrary, the Corporation may discharge the
Employee for Cause and terminate this Amended Employment Agreement immediately
upon written notice to the Employee. For the purposes of this Amended Employment
Agreement, “Cause” shall mean the occurrence of any of the following:

 

(i)          Employee’s material failure to perform his job duties competently
as reasonably determined by the Corporation’s Board of Directors; or

 

(ii)          gross misconduct by the Employee which the Corporation’s Board of
Directors determines is (or will be if continued) demonstrably and materially
damaging to the Corporation; or

 

3

 

(iii)          fraud, misappropriation, or embezzlement by the Employee; or

 

(iv)          conviction of a felony crime or a crime of moral turpitude; or

 

(v)           conduct in the course of employment that the Corporation’s Board
of Directors determines is unethical; or

 

(vii)          the material breach of this Amended Employment Agreement by the
Employee.

 

With respect to Sections 4.1 (i) and (v), the Corporation shall first provide
Employee with written notice and an opportunity to cure such breach, if curable,
in the reasonable discretion of the Corporation’s Board of Directors, and
identify with specificity the action needed to cure within 30 days of Employee’s
receipt of written notice from the Corporation. If the Corporation terminates
the Employee’s employment for Cause pursuant to this Paragraph 4.1, the Employee
shall not be entitled to severance pay.

 

4.2.          Without Cause, With Severance.  The Corporation may terminate the
Employee’s employment immediately at any time and for any reason without Cause
upon providing notice to the Employee. However, in such event, provided that the
Employee meets all of the conditions set forth in this paragraph for receiving
severance pay, the Corporation shall pay the Employee severance pay in the
amount of one year’s base salary at his then current base salary (the “Severance
Amount”) payable in a lump sum within sixty (60) days after termination,
together with any earned but unpaid non-equity incentive compensation. The
Employee shall only be entitled to receive the Severance Amount described herein
if the Employee (a) complies with his separate Non-Competition,
Non-Solicitation, and Confidentiality Agreement with an effective date of
October 18, 2011 and (b) before the 60th day after his termination, signs, does
not rescind and complies with a Confidential Separation Agreement at the time of
termination in a form prepared by the Corporation that includes in part: (i)
agreement to a general release of any and all legal claims; (ii) return of all
of the Corporation’s property in the Employee’s possession; and (iii) agreement
not to disparage the Corporation and its representatives. Such release shall not
release or waive Employee’s rights to indemnification or advancement of expenses
from the Corporation in accordance with and subject to the Corporation’s
Articles of Incorporation, Bylaws, and Section 302A.521 of the Minnesota
Business Corporations Act.

 

4.3.          Resignation By the Employee for Good Reason, With Severance.  The
Employee may resign the Employee’s position at any time for Good Reason and
receive the Severance Amount described above. “Good Reason” shall mean the
occurrence of any of the following:

 

(i)          a material diminution in the Employee’s responsibilities, authority
or duties; or

 

4

 

(ii)          a material diminution in the Employee's salary, other than
pursuant to a reduction in the salary for all executive employees of the
Corporation and its affiliates, applied on a pro rata basis to all salaried
executives including Employee;

 

(iii)          the material breach of this Amended Employment Agreement by the
Corporation.

 

Notwithstanding the foregoing, none of the forgoing events shall be considered
“Good Reason” if it occurs in connection with Employee’s death or disability,
provided that the Corporation has made diligent efforts to reasonably
accommodate Employee’s condition.

 

Before “Good Reason” has been deemed to have occurred, Employee must give the
Corporation written notice detailing why Employee believes a Good Reason event
has occurred and such notice must be provided to the Board of the Corporation
within 90 calendar days after Employee’s actual knowledge of the initial
occurrence of such alleged Good Reason event Employee’s Board shall then have 30
calendar days after its receipt of written notice to cure the condition cited in
the written notice, and if so cured, “Good Reason” will be deemed not to have
occurred with respect to the condition in question. If such condition is not so
cured, “Good Reason” will be deemed to have occurred with respect to the
condition in question, and Employee must terminate employment within 30 calendar
days following such 30 calendar day Board cure period. (For these purposes a
notice shall be sufficient if it is transmitted by facsimile or email on to the
Board and if it provides a general indication of the nature of the acts,
omissions, breach or breaches.)

 

In the event the Board cannot cure the “Good Reason” as set forth above, and
provided that the Employee meets all of the conditions set forth in this
paragraph for receiving severance pay, the Corporation shall pay the Employee
severance pay in the amount of one year’s base salary at his then current base
salary (the “Severance Amount”) payable in a lump sum on the 60th day after
termination, together with any earned but unpaid non-equity incentive
compensation. The Employee shall only be entitled to receive the Severance
Amount described herein if the Employee (a) complies with his separate
Non-Competition, Non-Solicitation, and Confidentiality Agreement dated October
18, 2011 and (b) before the 60th day after his termination, signs, does not
rescind, and complies with a Confidential Separation Agreement at the time of
termination in a form prepared by the Corporation that includes in part: (i)
agreement to a general release of any and all legal claims; (ii) return of all
of the Corporation’s property in the Employee’s possession; and (iii) agreement
not to disparage the Corporation and its representatives. Such release shall not
release or waive Employee’s rights to indemnification or advancement of expenses
from the Corporation in accordance with and subject to the Corporation’s
Articles of Incorporation and Section 302A.521 of the Minnesota Business
Corporations Act.

 

5

 

4.4.          Resignation by the Employee Due to Change of Control, With
Severance.  For purposes of this Amended Employment Agreement, “Change of
Control” means:

 

(i)           A “change in ownership,” as described in Section 1.409A-3(i)(5)(v)
of the Treasury Regulations.

 

(ii)          A “change in effective control,” as described in Section
1.409A-3(i)(5)(vi) of the Treasury Regulations.

 

(iii)         A “change in ownership of a substantial portion of the assets,” as
described in Section 1.409A-3(i)(5)(vii) of the Treasury Regulations.

 

Employee shall have the right to terminate the Employee’s employment for any
reason within six (6) months following a Change of Control in the Corporation
upon providing thirty (30) days advance written notice to the Corporation. The
Corporation may then elect either (a) to have the Employee continue performing
work for the Corporation throughout the 30 day notice period; or (b) to accept
the Employee’s resignation effective immediately.

 

In the event of the Employee’s termination of employment with the Corporation
following a Change of Control under this Paragraph 4.4, provided that the
Employee meets all of the conditions set forth in this paragraph for receiving
severance pay, the Corporation shall pay the Employee the Severance Amount
outlined in Paragraph 4.2 above in a lump sum within sixty (60) days after
termination. In addition, the Employee shall only be entitled to receive the
Severance Amount described herein if the Employee (a) complies with his separate
Non-Competition, Non-Solicitation, and Confidentiality Agreement with an
effective date of October 18, 2011 and (b) before the 60th day after his
termination, signs, does not rescind, and complies with a Confidential
Separation Agreement at the time of termination in a form prepared by the
Corporation that includes in part: (i) agreement to a general release of any and
all legal claims; (ii) return of all of the Corporation’s property in the
Employee’s possession; and (iii) agreement not to disparage the Corporation and
its representatives. Such release shall not release or waive Employee’s rights
to indemnification or advancement of expenses from the Corporation in accordance
with and subject to the Corporation’s Articles of Incorporation and Section
302A.521 of the Minnesota Business Corporations Act.

 

4.5.          Other Resignation by the Employee, Without Severance.  The
Employee may resign the Employee’s position upon providing sixty (60) days
advance, written notice to the Corporation. The Corporation may then elect
either (a) to have the Employee continue performing work for the Corporation
throughout the 60 day notice period; or (b) to accept the Employee’s resignation
effective immediately. In the event of the Employee’s termination of employment
with the Corporation under this Paragraph 4.4, the Employee shall not be paid
any severance pay, but Employee shall be entitled to any earned but unpaid
non-equity incentive compensation.

 

6

 

4.6.          Because of Death, Disability or Incapacity of the Employee,
Without Severance.  In the event of the Employee’s death, this Amended
Employment Agreement shall terminate immediately. If the Employee is unable to
perform the Employee’s essential job functions, with or without reasonable
accommodation, for more than ninety (90) days, or such longer period as required
by law, in any consecutive twelve (12) month period by reason of physical or
mental disability or incapacity, the Corporation may terminate the Employee’s
employment upon thirty (30) days advance written notice to the Employee. This
Paragraph does not relieve the Corporation of any duty to reasonably accommodate
a qualifying disability under the Americans with Disabilities Act, the Minnesota
Human Rights Act, any legal duty under the Family Medical Leave Act, or any of
its other duties pursuant to applicable law. If the Employee’s employment is
terminated pursuant to this Paragraph, the Employee shall not be entitled to
severance pay, but Employee shall be entitled to any earned but unpaid
non-equity incentive compensation.

 

4.7          Non-Renewal By Either Party Upon Expiration of the Two Year Term or
Renewal Term.  For the avoidance of doubt, the parties agree that either party
may elect, with or without cause, not to renew this Amended Employment Agreement
at the end of the then-current Term and that Employee shall not be entitled to
severance pay in the event of non-renewal by either party.

 

4.8          Section 409A and Taxes Generally.  The Corporation shall be
entitled to withhold on and report the making of such payments as may be
required by law as determined in the reasonable discretion of the Corporation.
Notwithstanding anything in this Amended Employment Agreement to the contrary,
if at the time of Employee’s termination of employment (which shall have the
same meaning as “separation from service” as defined in Section 409A of the
Internal Revenue Code of 1986, as amended, and the regulations, notices and
other guidance of general applicability issued thereunder (“Section 409A”)), the
Corporation determines that Employee is a “specified employee” within the
meaning of Section 409A, then, to the extent any payment or benefit that
Employee becomes entitled to under this Amended Employment Agreement on account
of Employee’s separation from service would be considered deferred compensation
subject to Section 409A, such payment shall not be payable and such benefit
shall not be provided until the date that is the earlier of (a) six months and
one day after Employee’s separation from service, and (b) Employee’s death. The
parties intend that this Amended Employment Agreement will be administered in
accordance with Section 409A and, to the extent that any provision of this
Amended Employment Agreement is ambiguous as to its compliance with Section
409A, the provision shall be read in such a manner so that all payments
hereunder comply with, or are exempt from, Section 409A. The parties agree that
this Amended Employment Agreement may be amended, as may be necessary to fully
comply with, or to be exempt from, Section 409A and all related rules and
regulations in order to preserve the payments and benefits provided hereunder
without additional cost to either party.

 

5.                   Miscellaneous.

 

5.1.          Integration.  This Amended Employment Agreement embodies the
entire agreement and understanding among the parties relative to subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter, including but not limited to any earlier employment agreements
of or offer letters to the Employee. Notwithstanding the foregoing, this Amended
Employment Agreement does not replace or otherwise impact the enforceability of
the separate Non-Competition, Non-Solicitation, and Confidentiality Agreement
with an effective date of October 18, 2011.

 

7

 

5.2.          Applicable Law.  This Amended Employment Agreement and the rights
of the parties shall be governed by and construed and enforced in accordance
with the laws of the state of Minnesota.

 

5.3.          Payments.  All amounts paid under this Amended Employment
Agreement shall be subject to normal withholdings or such other treatment as
required by law.

 

5.4          Employee’s Representations.  The Employee represents that he is not
subject to any agreement or obligation that would prevent or limit him from
entering into this Amended Employment Agreement or that would be breached upon
performance of his duties under this Amended Employment Agreement, including but
not limited to any duties owed to any former employers not to compete. If the
Employee possesses any information that he knows or should know is considered by
any third party, such as a former employer of the Employee’s, to be
confidential, trade secret, or otherwise proprietary, the Employee shall not
disclose such information to the Corporation or use such information to benefit
the Corporation in any way.

 

5.5.          Counterparts.  This Amended Employment Agreement may be executed
in several counterparts and as so executed shall constitute one agreement
binding on the parties hereto.

 

5.6.          Binding Effect.  Except as herein or otherwise provided to the
contrary, this Amended Employment Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors, assigns and personal
representatives without any requirement of the consent of the Employee for
assignment of its rights or obligations hereunder.

 

5.7.          Modification.  This Amended Employment Agreement shall not be
modified or amended except by a written instrument signed by the parties.

 

5.8.          Severability.  The invalidity or partial invalidity of any portion
of this Amended Employment Agreement shall not invalidate the remainder thereof,
and said remainder shall remain in fully force and effect.

 

5.9.          Opportunity to Obtain Advice of Counsel.  The Employee
acknowledges that the Employee has been advised by the Corporation to obtain
legal advice prior to executing this Amended Employment Agreement, and that the
Employee had sufficient opportunity to do so prior to signing this Amended
Employment Agreement.

 

8

 

5.10          Indemnification.  As to acts or omissions of Employee which are
within the scope of Employee’s authority as an officer, director, or employee of
the Corporation and/or any affiliate of the Corporation, the Corporation will
indemnify Employee in accordance with and subject to the limitations contained
in its Articles of Incorporation, Bylaws and Section 302A.521 of the Minnesota
Business Corporations Act. If Employee is made or threatened to be made a party
to any threatened, pending, or completed civil, criminal, administrative,
arbitration, or investigative proceeding, including a proceeding by or in the
right of the corporation, Employee is entitled, upon written request to the
Corporation, to payment or reimbursement by the Corporation of reasonable
expenses, including attorneys' fees and disbursements, incurred by Employee in
advance of the final disposition of the proceeding, (a) upon receipt by the
Corporation of a written affirmation by Employee of a good faith belief that the
criteria for indemnification set forth in Section 302A.521, subdivision 2 of the
Minnesota Business Corporations Act have been satisfied and a written
undertaking by Employee to repay all amounts so paid or reimbursed by the
Corporation, if it is ultimately determined that the criteria for
indemnification have not been satisfied, and (b) after a determination that the
facts then known to those making the determination would not preclude
indemnification under the Corporation’s Articles of Incorporation and Bylaws and
Section 302A.521 of the Minnesota Business Corporations Act, including but not
limited to whether the alleged misconduct by Employee that is the subject of the
proceeding is within the course and scope of Employee’s employment.

 

5.11          D&O Insurance.  The Corporation shall maintain an insurance policy
or policies providing directors' and officers' liability insurance,
comprehensive general liability insurance, and errors and omissions insurance,
and the Employee shall be covered by such policy or policies, in accordance with
its or their terms, to the maximum extent of the coverage available for any
officer of the Corporation.

 

5.12.          280G Limitations.  In the event that the severance and other
benefits provided for in this Amended Employment Agreement or otherwise payable
to Employee (a) constitute “parachute payments” within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended, (the “Code”) and (b)
would be subject to the excise tax imposed by Code Section 4999, then such
benefits shall be either be: (i) delivered in full, or (ii) delivered as to such
lesser extent which would result in no portion of such severance benefits being
subject to excise tax under Code Section 4999, whichever of the foregoing
amounts, taking into account the applicable federal, state and local income and
employment taxes and the excise tax imposed by Code Section 4999, results in the
receipt by Employee, on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be subject to
excise tax under Code Section 4999.

 

9

 

Any determination required under this Section 5.12 will be made in writing by an
accounting firm selected by the Corporation or such other person or entity to
which the parties mutually agree (the “Accountants”), whose determination will
be conclusive and binding upon Employee and the Company for all purposes. For
purposes of making the calculations required by this Section 5.12, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Code Sections 280G and 4999. The Corporation and
the Employee shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section. The Corporation shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by this
Section 5.12. Any reduction in payments and/or benefits required by this Section
5.12 shall occur in the following order: (A) cash payments shall be reduced
first and in reverse chronological order such that the cash payment owed on the
latest date following the occurrence of the event triggering such excise tax
will be the first cash payment to be reduced; (B) accelerated vesting of stock
awards, if any, shall be cancelled/reduced next and in the reverse order of the
date of grant for such stock awards (i.e., the vesting of the most recently
granted stock awards will be reduced first), with full-value awards reversed
before any stock option or stock appreciation rights are reduced; and (C)
deferred compensation amounts subject to Section 409A shall be reduced last.

 

*****remainder of page intentionally left blank—signature page to follow*****

 

 

 

 

 

 

 

10

 

THIS AMENDED EMPLOYMENT AGREEMENT was voluntarily and knowingly executed by the
parties effective as of the date and year first set forth above.

 

  ELECTROMED, INC.     Date:  July 10, 2014 /s/ Kathleen Skarvan   By:  
Kathleen Skarvan   Its: Chief Executive Officer               EMPLOYEE:      
Date:  July 10, 2014 /s/ Jeremy Brock   Jeremy Brock

 

 

 

 

 

 

 

 

 

 

11