Exhibit 10.1


 


EMPLOYMENT
AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (“Agreement”) is made effective  July 16, 2008 by and between ProUroCare
Inc., a Minnesota corporation with its principal place of business in Golden
Valley, Minnesota (the “Company”), and Richard C. Carlson (“Employee”).


 


WHEREAS, the Company is in the business of developing and
marketing products to treat prostate conditions;


 


WHEREAS, the Company desires to employ the Employee as its
Chief Executive Officer, in accordance with the following terms, conditions and
provisions; and,


 


WHEREAS, the Employee desires to perform such services for
the Company, all in accordance with the following terms, conditions and
provisions;


 


NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:


 


1.                                      EMPLOYMENT AND DUTIES.


 


The Company hereby continues the Employee’s
employment, and the Employee hereby accepts and agrees to serve the Company as
the Company’s Chief Executive Officer. 
The Employee’s duties shall be to direct the Company’s strategic
initiatives, oversee its operations, manage the Company’s relationships with
the investment community, participate in recruiting senior management, and
other reasonable duties subject to review and modification from time to time at
the direction of the Company’s Board of Directors. The Employee shall apply his
best efforts, and devote his full time and attention to the Company’s affairs.


 


2.                                      TERM.


 


Subject to Paragraph 5, the term of this Agreement and
the Employee’s employment under this Agreement shall commence on July 16,
2008, and shall continue thereafter until December 31, 2009. Upon the
expiration of the original term; this Agreement may be renewed by mutual
agreement.


 


3.                                      COMPENSATION.


 


The Company shall compensate the Employee for his
services at the following salary, bonus and benefits:


 


3.1          Base Salary.


 


The Employee shall be paid a
minimum annualized base salary of $150,000 per year, payable on the Company’s
normal payroll cycle, less all required and authorized withholdings and taxes,
through December 31, 2009. This base salary is the minimum salary during
the respective time period of the term of this Agreement, and may be 


 

















 


increased
from time to time at the discretion of the Board of Directors. The Employee
shall be considered an exempt employee under federal and state law.


 


3.2          Bonus.


 


The Employee is eligible to
earn a bonus of up to 40% of his annual base salary, less all required and
authorized withholdings and taxes. The annual bonus criteria will be set by the
Compensation Committee of the Board of Directors.


 


3.3          Stock Options.


 


The Employee shall be
eligible to participate in the annual grant of Company stock options,
consistent with the terms and conditions of the 2002 and 2004 Stock Option
Plans, and with amounts of options, including exercise price and vesting
provisions, determined by the Compensation Committee of the Board of Directors
from time to time. The stock options are also subject to Sections 5 and 6 of
this Agreement.


 


3.4          Employee Benefits Plans.


 


Employee shall be eligible
for fringe benefits offered to other executive-level employees of the Company,
subject to the Company’s policies and the terms, restrictions, limitations and
requirements of any summary plan description and/or plan documents. Nothing
herein shall alter, modify or change any such policy, summary plan description
or plan document.


 


3.5          Life Insurance.


 


During the term of this
Agreement, the Company shall secure and pay the premium for a term life
insurance policy assignable to the Employee in the amount of two times the
Employee’s annual base salary or, at the Employee’s written request, the
Company shall reimburse the Employee for comparable premiums on an existing
policy for the same rating.


 


4.                                      EXPENSES.


 


The Company will reimburse the Employee for reasonable
expenses incurred by the Employee in connection with the business of the
Company upon presentation by the Employee of appropriate substantiation for
such expenses.


 


5.                                      TERMINATION.


 


This Agreement shall terminate upon the occurrence of
any of the following:


 


5.1.         Termination or Decision
Not to Renew this Agreement by the Company for Reasons Other than Cause.


 


The Company may terminate
this Agreement or not renew this Agreement prior to any renewal date for
reasons other than Cause, upon 30 days’ notice by the Company.  If 


 


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the
Company so terminates or fails to renew the Agreement, the Employee shall be
entitled to severance payments and benefits described in Section 6.


 


5.2.         Termination by Employee.


 


Employee may terminate this
Agreement at any time, upon 30 days’ notice to the Company.  In the event Employee terminates this
Agreement for other than Good Reason or Change in Control as set forth in
Sections 5.3 and 5.7 below, the Company shall pay Employee all salary, bonuses,
and other benefits earned and accrued up to the date of termination.


 


5.3.         Termination by the Employee for Good
Reason.


 


In the event Employee
Terminates this Agreement for Good Reason, Employee shall be entitled to
severance payments and benefits provided for in Section 6.  The Employee must provide notice of the
existence of the Good Reason condition within a period not to exceed 90 days of
its initial existence.  Upon receiving
such notice, the Company shall have 30 days to remedy the Good Reason
condition.


 


For purpose of this
Agreement, “Good Reason” shall be defined as the occurrence of any of the
following events without the express written consent of Employee:


 


(a)   a
material reduction in Employee’s base salary during the initial term of this
Agreement;


 


(b)   a
change in Employee’s title or position or a material diminution in Employee’s
duties or the assignment of duties on a regular basis which are not customarily
associated with or consistent with the title of Chief Executive Officer; or


 


(c)   a
breach by the Company of any of its material payment obligations to Employee
under this Agreement or any Exhibits to this Agreement.


 


5.4.         Termination upon Employee’s Death.


 


Under circumstances of the
Employee’s death, the Company agrees to make any earned, but unpaid, salary and
bonus payments to the Employee’s designated beneficiaries. Additionally, any
unexercised, vested stock options which were available to the Employee
immediately prior to date of death shall be exercisable by beneficiaries in
accordance with the Company’s stock option plan.


 


5.5.         Termination in the Event of Disability.


 


The Company may terminate
this Agreement, upon 30 days’ notice, if the Employee is not able to perform
the essential functions of Employee’s position(s), with reasonable
accommodation, for a continuous period in excess of ninety (90) days.


 


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5.6.         Termination by the Company for Cause.


 


For purposes of this
Agreement, “Cause” shall be defined as:


 


(a)   Failure
of the Employee to substantially perform any duties reasonably required by the
Company that are consistent with the Employee’s position and failure to cure
the breach within ten (10) days of written notice of the breach by the
Company;


 


(c)   The
commission by the Employee of any criminal act, or act of fraud or dishonesty
by the Employee as determined solely by the Company to be related to or in
connection with his employment by the Company; or,


 


(c)   If the
Employee materially breaches the Employee’s other covenants contained in this
Agreement and fails to cure the breach within ten (10) days of written
notice of the breach by the Company.


 


5.7.                            Termination
Due to Change in Control.


 


(a)   If, during a one (1) year period subsequent to a “Change in
Control” as defined below, the Employee separates from employment with the then
controlling company for one of the following reasons, the then controlling
company agrees to continue Employee’s then current salary for six (6) months
and one (1) additional month for each full year of service with the
Company, with a maximum accumulated severance of twelve (12) months, and
immediately vest all unvested stock options held by Employee:


 


(i)            termination without “cause”;


 


(ii)           unacceptable demotion;


 


(iii)          Employee is asked to assume duties or responsibilities
which are substantially lower in status and unacceptable to the Employee; or


 


(iv)          the Employee is asked to relocate geographically to a
location more than 100 miles away from Employee’s work location prior to the
change of control and is unacceptable to Employee.


 


(b)   For purposes of this Agreement, a “Change in
Control” will be defined as follows:


 


(i)            When any “person” as defined in Section 3(a)(9) of
the Securities Exchange Act as used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) of the Securities
Exchange Act, but excluding the Company or any subsidiary or parent or any
employee benefit plan sponsored or maintained by the Company or any subsidiary
or parent (including any trustee of such plan acting as trustee), directly or
indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Securities Exchange Act, as amend time to time) of securities of the
Company 


 


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representing
greater than fifty (50) percent of the combined voting power of the Company’s
then outstanding securities; or,


 


(ii)           When, subsequent to the effective
date of this Agreement, the individuals who, at the beginning of such period,
constitute the Board of Directors (“Incumbent Directors”) cease for any reason
other than death to constitute at least a majority thereof, provided, however,
that a Director who was not a Director at the beginning of this period will be
deemed to have satisfied the definition of “Incumbent Director” if such
Director was elected by, or with the approval of at least sixty (60) percent of
the Directors who then qualified as Incumbent Directors; or,


 


(iii)          The approval by the shareholders of
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company,
the adoption of any plan or proposal for the liquidation or dissolution of the
Company, or, any consolidation or merger involving the Company whereby the
Company is not the continuing or surviving entity or the Company’s shares are
converted into cash, securities or other property, provided, however, this
provision shall not apply if the shareholders of the Company have the same
proportionate share of the surviving entity after the transaction.


 


6.                                      SEVERANCE
PAYMENTS


 


6.1          Severance Pay


 


In
the event that the Company terminates or decides not to renew this Agreement
without Cause pursuant to Section 5.1 or that Employee terminates this
Agreement with Good Reason pursuant to Section 5.3, Employee shall be
entitled to severance payments and benefits as follows:


 


(a)   If
terminated or not renewed during any term of this Agreement, the Company shall
continue to pay to Employee the equivalent of Employee’s then current salary
for a continuation period of six (6) months plus one (1) month per
year of service up to a maximum of twelve (12) months, such continuation period
to include the 30 day notice provision in Section 5.1.


 


(b)   All
stock options granted but still subject to vesting at the time of termination
shall be immediately vested and shall be exercisable according to the terms of
the Stock Option Agreement.


 


(c)   The
Company shall pay to Employee all bonuses or other benefits earned and accrued
up to the date of termination or expiration upon nonrenewal.


 


(d)   The
Company shall continue to pay its portion of any contribution to Employee’s
health and life insurance premiums for six (6) months (including the 30
day notice provision in Section 5.1).


 


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6.2          Employee Service Date


 


For
purposes of computing years of service pursuant to Section 5.7(a) and
6.1(a), the Employee’s date of hire shall be January 1, 2005.


 


7.                                      RESTRICTIVE
COVENANTS, TRADE SECRETS AND PROPRIETARY RIGHTS.


 


7.1          Definitions.


 


The following phrases, when
used in this Agreement, will have the meanings set forth below:


 


(a)   “Confidential
Information” means materials, records, data and other information that is not
generally known about or that is personal, sensitive or proprietary to the
Company, its shareholders, the Company’s clients, prospective clients and their
dependents, and information that the Company is obligated to treat as
proprietary or confidential. This information includes, without limitation:


 


(i)            trade secret information about the Company and its
products, planned and/or future products;


 


(ii)           “Inventions,” as defined in Section 7.1(b) below;


 


(iii)          information concerning the Company’s business, as the
Company has conducted it, or as it may conduct it in the future;


 


(iv)          information concerning any of the Company’s past, current,
planned or future products, services, costs, prices and other financial
information, including (without limitation) information about the Company’s
research, development, engineering, purchasing, servicing, finances, marketing
or selling;


 


(v)           the identity of the Company’s clients, prospective clients
and their dependents, and their pricing, buying history, tendency, and their
health information;


 


(vi)          information that the Company’s clients, prospective clients
and their dependents consider confidential, whether notified by the client,
prospective client or dependent or not, so long that a prudent person would
consider the information confidential;


 


(vii)         information regarding any patents developed, owned or used
by or licensed to the Company; and,


 


(viii)        the Company’s procedures, manuals,
financial, cost and sales data, business opportunities for new or developing
business, reports, . customer lists and contracts.


 


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(b)   “Inventions”
means any discoveries, modifications, designs, methods, know-how, systems or
improvements (whether or not they are in writing or reduced to practice) or
works of authorship (whether or not they can be patented or copyrighted) that
the Employee makes, authors, or conceives (either alone or with others) and
that:


 


(i)            concern the Company’s current, planned and/or future
products, research, testing or development;


 


(ii)           result from any work the Employee performs for the
Company; and/or


 


(iii)          in which the Company’s equipment, facilities, or trade
secret information were used.


 


“Inventions” does not
include discoveries, modifications, designs or improvements developed: (1) entirely
on the Employee’s own time which do not relate to any of the Company’s
products, including those in development stages, or services that the Company
provides to its clients; (2) in which the Company’s equipment, facilities,
supplies or trade secret information were not used in any way, and; (3) do
not directly relate to the Company’s business or the Company’s actual or
demonstrably anticipated research or development, or does not result from any
work the Employee performed under this Agreement.


 


(c)   “Comparable
Technology” means


 


(i)            any
pressure sensing technology or system that is used to measure the elasticity of
soft tissue in the prostate or related urologic organs (i.e., kidney, ureters
or bladder);


 


(ii)           any
pressure sensing technology or system that is used to create two or three
dimensional images for the purpose of identifying abnormal lesions and for
guiding biopsy in prostate or related urologic organs; and/or


 


(iii)          any
EIT (electrical impedance tomography) technology or system that is used for the
purpose of measuring heat propagation and/or electrical conductivity in the
prostate or related urologic organs.


 


(iv)          any
other applications for which the Company (1) has made a direct investment;
(2) has obtained licensing rights to acquire such technology; and (3) is
actively engaged in research and development (or has been so engaged during the
past twelve (12) months).


 


7.2          Return of Confidential Information.


 


The Employee will not,
during or after the Employee’s relationship with the Company, use any
Confidential Information (except as required by the Employee’s duties 


 


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with
the Company), or communicate, divulge or disclose any Confidential Information
to any person or organization, except as authorized in writing by the Board of
Directors of the Company. Upon termination of the Employee’s relationship with
the Company, Employee agrees to return and/or leave with the Company all
material concerning any Confidential Information in the Employee’s possession
or control, including, but not limited to, any records, manuals, books,
documents, letters, reports, data, and client lists, whether prepared by the
Employee or others, whether originals or copies, whether in -hard copy or
stored on a diskette or hard drive or otherwise, including drawings, blueprints
and other reproductions.


 


7.3          Property Rights.


 


With the exception of work,
tests, research, materials, processes or systems conducted, developed or used by
the Employee that do not directly or indirectly relate to the Company’s
business or the Company’s actual or demonstrably anticipated research and/or
development, the Company will own and have all right and title in all
Inventions, Confidential Information, work, tests, research, materials,
processes or systems conducted, developed or used by the Employee under this
Agreement or during the course of the performance of the Employee’s duties with
the Company prior to the date of this Agreement (collectively, the “Company
Works”).  To the extent that the Employee
retains any rights, title and/or interest, including, without limitation, all
ownership rights, copyright rights, trademark rights, patentable invention
rights, and trade secret rights in any Company Works (collectively, the “IP
Rights”), or acquires any such IP Rights, the Employee hereby forever assigns,
transfers and conveys to the Company all current and future ownership interest
and all current and future rights in, to and arising out of the such IP Rights
and grants to the Company an irrevocable, nonexclusive, worldwide, royalty-free
license to use, execute and copy any Company Works. The assignment, transfer,
grant, conveyance and setting over to the Company as made in the preceding
sentence shall include the assignment of all rights to recover all damages,
attorneys’ fees, and lost profits associated with the loss or infringement of
any of the IP Rights, as well as the right to seek injunctive relief (both
preliminary and permanent) with respect to the foregoing and the right to
receive any and all other remedies available at law or in equity. Employee
agrees not to disclose, use, market or sell, either directly or indirectly, any
Company Works to any person or entity. The Employee shall take reasonable
precautions and measures to protect the Confidential Information, Company Works
and IP Rights related thereto. The rights and obligations under this Section 7.3
are perpetual in nature.


 


7.4          Inventions.


 


(a)   The
Employee agrees that all Inventions that the Employee: (1) makes, develops
or collaborates on during the term of this Agreement; or, (2) made,
developed or collaborated on during the course of his work with the Company
starting in January 2005, before the term of this Agreement, are the sole
and exclusive property of the Company. Upon executing this Agreement, the
Employee. will, with respect to any such Invention:


 


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(i)            provide the Company with current, accurate, and complete
records of any and all Invention(s) which records will belong to the
Company and be kept and stored on the Company’s premises by the Company;


 


(ii)           promptly and fully disclose the existence and describe the
nature of any Invention(s) to the Company in writing (and without
request);


 


(iii),         assign, and the Employee does hereby
assign, to the Company any and all of the Employee’s rights to the
Invention(s), and applications the Employee makes for patents or copyrights in
any country, and any patents or copyrights granted to the Employee in any
country.


 


(iv)          acknowledge and deliver promptly to the Company any written
instruments, and perform any other reasonable acts necessary in the Company’s
opinion and at its expense to preserve property rights in the Invention(s) against
forfeiture, abandonment, or loss and to obtain and maintain letters patent
and/or copyrights on the Invention(s) and to vest the entire right and
title to the Invention(s) in the Company, provided that the Employee makes
no warranty or representation to the Company as to rights against third parties
hereunder.


 


(b)   The
Employee hereby represents and agrees that at the time of entering this
Agreement there are no Inventions which relate to the business of the Company
or to the Company’s research or development that the Employee has an obligation
to assign to anyone except the Company.


 


(c)   The
Employee hereby represents and agrees that at the time of entering this
Agreement there are no Inventions which relate to the business of the Company
or to the Company’s research or development that the Employee made or conceived
prior to the Employee’s employment by the Company,.


 


7.5          Covenants Against Competition and
Solicitation.


 


In view of the unique value
to the Company of the services to be performed by the Employee, in
consideration of the Confidential Information to be obtained by or disclosed to
the Employee, and as a material inducement to the Company to enter into this
Agreement and to pay and provide the Employee the compensation and benefits
provided for herein, the Employee covenants and agrees that, from and after the
date hereof and until one (1) year after the Employee’s employment with
the Company terminates for whatever reason, the Employee will not; directly or
indirectly, anywhere in the world in which the Company is conducting business
during the term of Employee’s employment:


 


(a)   own,
manage, operate or control, prepare or plan to own, manage, operate or control,
or participate in the ownership, management, operation or control of any
business engaged in the research, development, production or marketing of any
Comparable Technology;


 


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(b)   conduct
or assist any person or entity to conduct any business engaged in the research,
development, production or marketing of any Comparable Technology;


 


(c)   seek,
accept or act, either as an employee, shareholder, partner, member, joint
venturer, agent or other equity holder of or consultant or advisor, to business
engaged in the research, development, production or marketing of any Comparable
Technology;


 


(d)   solicit
or divert, attempt to solicit or divert, or otherwise interfere in any fashion
with, any former or existing customer, client, account, partner or other
business source, or business prospect for the purpose of selling to such person
any product or service of any Comparable Technology; or,


 


(e)   induce,
influence, solicit, hire, or engage or attempt to induce, influence, solicit,
hire or engage any employee of, or consultant to, the Company to do any of the
foregoing or to discontinue such person’s association with the Company or
obtain such person as an employee, consultant or in a similar capacity for any
other business.


 


Employee acknowledges that
the covenants in this Section 7.5 are fair, necessary, and
reasonable, in both scope and duration, for the consideration provided for in
this Agreement.


 


7.6          Blue Pencil Doctrine.


 


If the duration or geographical extent of, or business activities
covered by Section 7.5 are in excess of what is valid and enforceable
under applicable law, then such provision shall be construed to cover only that
duration, geographical extent or activities that are valid and enforceable.
Employee acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.


 


7.7          Breach.


 


The Employee acknowledges
that any breach, violation or evasion by the Employee of the terms of Section 7
may result in an immediate and irreparable injury and harm to the Company, and
will cause the Company to suffer damages in amounts difficult to ascertain.
Accordingly, the Company shall be entitled to the remedies of injunction and
specific performance, or either of such remedies, as well as other legal or
equitable remedies and damages to which the Company may be entitled. The
Company shall also be entitled to its costs and attorneys’ fees for any breach
of Section 7 by the Employee.


 


8.                                      OTHER BUSINESS ACTIVITIES.


 


The Employee may not serve as an officer or director
of any other organization without express prior written approval by the Company’s
Board of Directors.


 


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9.                                      AGREEMENT AND ACKNOWLEDGEMENT.


 


The Employee represents that the Employee is free to
enter into this Agreement and the acceptance of the relationship with the
Company does not violate any agreement between the Employee and any third
party.


 


10.                               COOPERATION IN CLAIMS.


 


Both during Employee’s employment and thereafter, the
Employee agrees that in the event of a legal action against the Company, or
legal action initiated by the Company against another party, in which the
Employee is deemed by the Company to be a material witness or affiant, the
Employee agrees to make reasonable and best efforts to cooperate with the
Company in such matters. If the Employee is no longer employed, Company will
reimburse the Employee for time and expenses incurred as a result of
cooperation for this purpose.


 


11.                               INDEMNIFICATION.


 


The Company agrees to make its best efforts to
indemnify and hold harmless the Employee from liability incurred as a result of
performance of duties as an officer and member of the Board of Directors. This
includes but is not limited to applicable statute, as well as efforts to secure
coverage under pertinent insurance policies.


 


12.                               NOTICES.


 


All notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed to have been given when mailed at any general or branch United States
Post Office enclosed in a certified postpaid envelope, return receipt
requested, and addressed to the address of the respective.


 


If to the Employee:


 


Richard C. Carlson

810 Lake Susan Hills Drive

Chanhassen, MN 55317


 


If to the Company:


 


Chairman of the Compensation Committee

ProUroCare Medical Inc.

5500 Wayzata Blvd., Suite 310


Golden Valley, MN 55416


 


Any notices of change of address shall only be
effective, however, when received.


 


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13.                               SUCCESSORS AND ASSIGNS.


 


This Agreement
shall inure to the benefit of, and be binding upon, the Company, its successors
and assigns, including, without limitation, any corporation which may acquire
all or substantially all of the Company’s assets and business or into which the
Company may be consolidated or merged, and the Employee, his heirs, executors,
administrators and legal representatives. The Employee may assign his right to payment,
and his obligations, under this Agreement.


 


14.                               APPLICABLE LAW.


 


This Agreement shall be governed by the laws of the
State of Minnesota without regard to any conflict of law analysis. The Parties
agree that any dispute arising out or related to this Agreement shall be venued
in the State of Minnesota and the Parties consent to the exclusive jurisdiction
of the Minnesota state or federal courts for such disputes.


 


15.                               OTHER AGREEMENTS.


 


This Agreement supersedes all prior understandings and
agreements between the parties. It may be amended only by a writing signed by
the parties hereto.


 


16.                               NON-WAIVER.


 


No delay or failure by either party in exercising any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right.


 


17.                               HEADINGS.


 


Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provision.


 


18.                               COUNTERPARTS.


 


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


 


19.                               SURVIVORSHIP.


 


The Parties’ obligations and rights set forth in
Sections 7, 10, 11 12, 13, 14, 15, and 16 shall survive the termination of this
Agreement.


 


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  PROUROCARE INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/David F. Koenig

  
	
   

  	
   

  	
   David F. Koenig

  
	
   

  	
   

  	
   Its:  Chairman,
  Compensation Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Richard C. Carlson

  
	
   

  	
  Richard C. Carlson

  



 


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