Exhibit 10.12 to Electromed, Inc. Form S1



Exhibit 10.12


NEW EMPLOYMENT AGREEMENT


          This New
Employment Agreement (“Agreement”) is effective as of January 1, 2010 (the
“Effective Date”), by and among Electromed, Inc., a Minnesota corporation (the
“Corporation”), and Robert D. Hansen (“Employee”). 


RECITALS


	
  

 	
  

 
	
 A.

 	
 Employee is the co-founder of the Corporation and has been employed
 since the Corporation’s inception in 1992. 

 
	
  

 	
  

 
	
 B.

 	
 Employee is currently employed by the Corporation in the capacity of
 Chairman and Chief Executive Officer. 

 
	
  

 	
  

 
	
 C.

 	
 The Corporation highly values the efforts, abilities, and
 accomplishments of the Employee on behalf of the Corporation and recognizes
 that his future services are vital to the Corporation’s continued growth and
 profits and that the loss of his services would be a substantial loss for the
 Corporation and, as such, the Corporation wishes to provide incentives for
 the Employee to continue to remain with the Corporation.

 
	
  

 	
  

 
	
 D.

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

 


AGREEMENT


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


          1.          Nature
and Capacity of Employment. The Corporation hereby agrees to employ the
Employee as its Chief Executive Officer, subject to the direction of the Board
of Directors of the Corporation and pursuant to the terms and conditions set
forth in this Agreement. The Employee hereby accepts employment under the terms
and conditions set forth in this Agreement. The Employee agrees to perform or
be available to perform the functions of this position, pursuant to the terms
of this Agreement. 


          2.          Term
of Employment. The term of the Employee’s employment hereunder shall commence on the Effective
Date of this Agreement and shall continue thereafter through the last day of
Calendar Year 2013 (“Initial Expiration Date”), unless terminated
earlier in accordance with Paragraph 4 of this Agreement. The term of this
Agreement and the Employee’s employment hereunder shall automatically renew for
successive one year periods beyond the Initial Expiration Date, unless at least
ninety (90) days prior to the
anniversary date of this Agreement either party hereto gives written notice to
the other party that it does not intend to renew this Agreement for the coming
Calendar Year. During any Renewal Term, this Agreement may be terminated
pursuant to the terms of Paragraph 4 of this Agreement. 


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Exhibit 10.12 


	
  

 	
  

 
	
  

 	
 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 $209,000.00, 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. For the Calendar Year ending in December 31, 2011 and thereafter
 during the term of this Agreement or any Renewal Term, the Board of Directors
 acting reasonably shall determine the amount of Base Salary payable pursuant
 to this Paragraph 3.1. 

 
	
  

 	
  

 
	
  

 	
           3.2.     Annual
 Bonus. For the Calendar Year ending December 31, 2010, provided that the
 gross sales revenue of the Corporation reaches at least $10,000,000, the
 Employee shall receive an Annual Bonus as follows: For every $250,000 above
 $10,000,000 of gross sales revenue reached by the Corporation for the Calendar
 Year ending December 31, 2010, the Employee shall receive an additional
 amount of $2,500. Notwithstanding anything to the contrary set forth herein,
 the Employee shall not be entitled to any Annual Bonus if the gross sales
 revenue for the Calendar Year ending December 31, 2010, is less than
 $10,000,000. Unless an exception is approved by the Board of Directors, the
 Employee’s Annual Bonus, if any, will be paid to the Employee in equal
 bi-monthly installments throughout the first ten months of the subsequent
 Calendar Year according to the Corporation’s normal payroll practices. For
 the Calendar Year ending December 31, 2011 and thereafter during the term of
 this Agreement or any Renewal Term, the Board of Directors acting reasonably
 shall determine the amount of, and related gross sales revenue levels for,
 the Annual Bonus payable pursuant to this Paragraph 3.2. 

 
	
  

 	
  

 
	
  

 	
           3.3.     Deferred
 Compensation. Employee shall not be entitled to deferred compensation and
 by signing this Agreement, Employee knowingly waives and forfeits any
 existing rights to deferred compensation under the Corporation’s Deferred
 Compensation Plan effective January 1, 2010. 

 
	
  

 	
  

 
	
  

 	
           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, 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 six (6) weeks per year without reduction of the
 minimum annual base salary payable to the Employee pursuant to Paragraph 3.1
 of this Agreement. PTO which is unused at the end of any Calendar year will carry over to the next Calendar
 year. 

 
	
  

 	
  

 
	
  

 	
           3.6.     Life
 Insurance: The Corporation shall maintain a term life insurance policy on the Employee’s life in a
 principal amount equal to at least $1,000,000.00. The Corporation 

 


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Exhibit 10.12 


	
  

 	
  

 	
  

 
	
  

 	
 shall pay all annual premiums on the policy during the Term or any
 Renewal Term and the Employee will have the right to designate and change
 beneficiaries in his discretion. 

 
	
  

 	
  

 	
  

 
	
  

 	
           3.7.     Other
 Benefits: During the Term or Renewal Term, the Corporation shall directly
 provide an automobile and a cell phone or wireless handheld device for the
 Employee’s use. 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 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 Term or Renewal Term. The
 Employee’s employment may be terminated prior to the expiration of the 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 Agreement immediately upon written notice to the Employee.
 For the purposes of this Agreement, “Cause” shall mean the occurrence of any
 of the following: 

 
	
  

 	
  

 
	
  

 	
  

 	
 (i)      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 

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (v)     the material breach of this
 Agreement by the Employee. 

 
	
  

 	
  

 	
  

 
	
  

 	
           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 under Paragraph
 4.2 or to any bonus or incentive compensation of any kind. 

 
	
  

 	
  

 	
  

 
	
  

 	
           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 the Corporation
 shall pay the Employee any earned and unpaid bonus, if any, on a pro rata
 basis for the period through the Employee’s termination date. The amount of
 such bonus, if any, shall be calculated based on the Corporation’s annualized
 gross sales revenue as of the last day of Employee’s employment and shall be
 paid in a lump sum approximately sixty (60) days after termination. In
 addition, 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 a lump sum equal to one year’s base salary within
 sixty (60) days after termination. The Employee shall only be entitled to
 receive the severance pay described herein if the Employee signs and does not
 rescind a Confidential Separation Agreement at the time of termination in a
 form prepared by 

 


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Exhibit 10.12 


	
  

 	
  

 	
  

 
	
  

 	
 the Corporation that includes: (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. 

 
	
  

 	
  

 
	
  

 	
 4.3.     Resignation by The Employee Due
 to Change of Control, With Severance.
For purposes of this 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. 

 
	
  

 	
  

 	
  

 
	
  

 	
           The
 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 4.3, the Corporation shall
 pay the Employee any earned and unpaid bonus or incentive compensation, if
 any, on a pro rata basis for the period through the Employee’s termination
 date. The amount of such bonus, if any, shall be calculated based on the
 Corporation’s annualized gross sales revenue as of the last day of Employee’s
 employment and shall be paid in a lump sum approximately sixty (60) days
 after termination. In addition, 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 a lump sum equal to two
 year’s base salary within sixty (60) days after termination. The Employee
 shall only be entitled to receive the severance pay described herein if the
 Employee signs and does not rescind a Confidential Separation Agreement at
 the time of termination in a form prepared by the Corporation that includes:
 (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. 

 
	
  

 	
  

 
	
  

 	
           4.4. Other
 Resignation by Employee, Without Severance. The Employee may resign the
 Employee’s position upon providing ninety (90) 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 90 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 as provided in Paragraph 4.2, but shall be paid any earned and
 unpaid bonus, if any, on a pro rata basis for the period through the
 Employee’s termination date. The amount of such bonus, if any, shall be
 calculated based on the Corporation’s annualized gross sales 

 


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Exhibit 10.12 


	
  

 	
  

 
	
  

 	
 revenue as of the last day of Employee’s employment and shall be paid
 in a lump sum approximately sixty (60) days after termination. 

 
	
  

 	
  

 
	
  

 	
           4.5.          Because
 of Death, Disability or Incapacity of The Employee, Without Severance. In
 the event of the Employee’s death, this Agreement shall terminate
 immediately. If the Employee is unable to perform the Employee’s duties and
 responsibilities for more than ninety (90) days 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, 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 under Paragraph 4.2, but shall
 be paid any earned and unpaid bonus, if any, on a pro rata basis for the
 period through the Employee’s termination date. The amount of such bonus, if
 any, shall be calculated based on the Corporation’s annualized gross sales
 revenue as of the last day of Employee’s employment and shall be paid in a
 lump sum approximately sixty (60) days after termination. 

 
	
  

 	
  

 
	
  

 	
 5.      Miscellaneous. 

 
	
  

 	
  

 
	
  

 	
           5.1.     Integration.
 This 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. 

 
	
  

 	
  

 
	
  

 	
           5.2.     Applicable
 Law. This 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 Agreement shall be subject to normal withholdings
 or such other treatment as required by law. 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           5.5.     Binding
 Effect. Except as herein or otherwise provided to the contrary, this
 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. 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           5.8.     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 

 


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Exhibit 10.12 


	
  

 	
  

 
	
  

 	
 Agreement, and that the Employee had sufficient opportunity to do so
 prior to signing this Agreement. 

 
	
  

 	
  

 
	
  

 	
           5.9     Public
 Company Savings Clause. Notwithstanding anything in this Agreement to the
 contrary, if any of the payments described in this Agreement are subject to
 the requirements of Code Section 409A and the Corporation determines that
 Employee is a “specified employee” as defined in Code Section 409A as of the
 date of Employee’s termination of employment, such payments shall not be paid
 or commence earlier than the first day of the seventh month following the
 date of Employee’s termination of employment. In addition, notwithstanding
 anything in this Agreement to the contrary, the Corporation expressly
 reserves the right to amend this Agreement to the extent necessary to comply
 with Code Section 409A, as it may be amended from time to time, and the
 regulations, notices and other guidance of general applicability issued
 thereunder. 

 


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


	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ELECTROMED, INC.

 	
  

 	
 EMPLOYEE:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	

/s/ Terry Belford


 	
  

 	

 /s/ Robert D.
 Hansen


 	
  

 
	
  

 	
  

 	
  

 	
   Robert D.
 Hansen

 	
  

 



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