Exhibit 10.1 to Biodrain Medical, Inc. Form S-1



Exhibit 10.1 


EMPLOYMENT AGREEMENT


This
Agreement, made and entered into effective the 4th day of October,
2006, by and between Kevin R. Davidson,
an individual residing at 16771 Ironwood Circle, Lakeville, MN 55044,
(“Employee”), and BioDrain Medical
Incorporated, 699 Minnetonka Highlands Lane, Orono, MN 55356-9728, a Minnesota corporation
(“Company”).


          WITNESSETH:


          WHEREAS, the Company desires to
employ the Employee to
render services for the Company as its
President & Chief Executive Officer (CEO) on the terms and conditions
hereinafter set forth, and the Employee desires to be employed by the
Company on such terms and conditions;


          NOW,
THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereby agree as follows:


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
1. 

	
Employment. The Company agrees to employ the Employee for a period of four (4)
 years from the date of this
 Agreement unless Employee violates the terms set forth in Paragraph 7: Termination
 for Cause or the Employee voluntarily resigns. The term is automatically
 renewable annually except by action of the Board of Directors.


	
 

	
 

	
 

	
 


	
 

	
2. 

	
Duties.
 The Employee will hold the title of President and CEO and shall report to the
 Board of Directors of the Company.
 The general scope of the Employee’s duties shall include:


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
a. 

	
Exhibit
 A.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
The
 Employee’s duties may be modified from time to time by mutual agreement
 between the Employee and the Board
 of Directors as they deem to be in the best interest of the Company, provided that the Employee’s duties shall be
 commensurate with those of a senior executive of the Company.


	
 

	
 

	
 

	
 

	
 


	
 

	
3. 

	
 

	
Extent of Services. The Employee shall devote his full attention,
 energy and skills to the business
 of the Company and use his best efforts to fully and competently perform the duties of his office; with the exception of the
 time period from the date of this Agreement to December 31, 2006, during which time the Employee has prior
 part-time engagement responsibilities.
 The Employee has assured the Company that such prior responsibilities will not interfere with performance of his
 obligations to the Company.


	
 

	
 

	
 

	
 

	
 


	
 

	
4.

	
Compensation.


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
a.

	
Base Salary. $150,000 per year. Initial payment will be monthly and will be
 according to the Company’s salary
 schedule, which will begin as funds become available, but not later than
 when cumulative new funding has reached a minimum of $250,000. With the exceptions noted below, annual reviews will
 determine future salary and bonus amounts, as a part of Company compensation
 procedures. The following exceptions are


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
•

	
Upon reaching total new
 funding of $1,000,000, annual salary shall increase to $170,000 beginning
 with the next full month.





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•

	
Upon
 reaching a cumulative total of $5,000,000 in net sales, annual salary shall increase to $200,000 per year beginning with the
 next full month.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
b.

	
Bonus.
 The Employee will be eligible for participation in the Company’s bonus plan
 when completed and approved by the
 Board of Directors and the Compensation Committee. The following bonus
 schedule is in force:


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Initial
 grant of 50,000 shares of BioDrain common stock upon signing the Agreement. Such stock will include an
 anti-dilution protection amounting to 3.81% (percent) of the Company’s
 outstanding fully diluted common stock up to the completion of the
 first $1,000,000 in new funding raised. This would mean that, at $1.00 per share for 1,000,000 new shares of
 common stock, an additional 45,536 shares of common stock would be
 issued to Employee.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
•

	
Additional 50,000
 shares of BioDrain common stock upon reaching the first $200,000 of new
 funding. (170,000 New)


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
•

	
Additional
 50,000 shares of BioDrain common stock upon reaching an additional $500,000 of new funding, or a total of $700,000
 of new funding.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
•

	
$25,000
 in cash or BioDrain common stock having an equal market value upon reaching an additional $300,000 in new funding,
 or a total of $1,000,000 of new funding.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
•

	
Total
 potential shares as a result of these milestones would equal 220,536 shares, assuming
 the final milestone was taken in shares, not cash.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
c.

	
Executive
 Compensation. The Employee will be eligible for executive
 compensation such as stock, stock
 options, deferred compensation, life insurance, etc., as approved by the Board of Directors and the Compensation
 Committee when such executive compensation plan is completed.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
5.

	
Additional Benefits.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
a.

	
Automobile. The Company shall reimburse the Employee for deductible automobile mileage or auto
allowance according to its
 Expense Reporting Procedures.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
b.

	
Business
 Expense. The Company will reimburse the Employee for all
 reasonable, deductible and substantiated
 business expenses per its Expense Reporting Procedures. This includes, but is not limited to such expenses as
 telephone, cell phone, home office, business meetings, etc.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
c.

	
Benefits. The Employee will be eligible for the Company’s benefits package and
 executive benefits listed in Paragraph 4.c. which will be implemented as
 funds become available and upon development and approval by the
 Compensation Committee.


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
d.

	
Vacation. The Employee will receive a minimum of three weeks’ vacation per
 year or as per the executive vacation plan when written, whichever is
 greater.





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e.

	
Education. The Company will support the Employee in his pursuit of continuing
 education provided sufficient cash
 flows support tuition reimbursement and he meets the conditions and terms of the tuition reimbursement
 guidelines as outlined in the Employee Manual when written.


	
 

	
 

	
 

	
 


	
 

	
6.

	
Board
 of Directors Membership. The Employee, as of the date of
 the Agreement, will become a member of the
 Board of Directors of the Company and will have the option to submit for
 Board approval one additional Board member.


	
 

	
 

	
 

	
 


	
 

	
7.

	
Termination
 for Cause; Voluntary Resignation. The Company may terminate
 this Agreement for “cause” as defined
 hereinafter at any time during the term of the Employee’s employment,
 and the Employee may voluntarily resign from his employment with the Company at any time. For this purpose, the term
 “cause” shall mean any of the following:


	
 

	
 

	
 

	
 


	
 

	
 

	
a.

	
the
 continued noncompliance by the Employee with the Company’s directors’ written
 instructions, directives or regulations, after fifteen (15) days’ written
 notice of such noncompliance from
 the Company; a breach by the Employee of any material term of this Agreement,
 which breach is not cured within seven (7) days of written notice thereof
 from the Company; unsatisfactory
 performance of employment duties, obligations and work and production standards that is not corrected
 within thirty (30) days after written notice of such unsatisfactory
 performance from the Company, or such longer period as specified in such notice;


	
 

	
 

	
 

	
 


	
 

	
 

	
b.

	
malfeasance,
 misfeasance, or nonfeasance by the Employee in the course of his employment;


	
 

	
 

	
 

	
 


	
 

	
 

	
c.

	
fraud
 or a criminal act committed by the Employee, provided such criminal act
 adversely affects the business of the Company;


	
 

	
 

	
 

	
 


	
 

	
 

	
d.

	
any
 breach of the Employee of his fiduciary obligations to the Company or any act
 or omission of the Employee constituting a breach of his obligations
 contained in the Confidentiality
 and Non-Competition Agreement attached hereto as Exhibit B and incorporated
 herein as reference; and;


	
 

	
 

	
 

	
 


	
 

	
 

	
e.

	
the
 Employee’s voluntary resignation at any time.


	
 

	
 

	
 

	
 


	
 

	
 

	
In
 the event of a termination for cause, as defined herein, the Employee shall
 only be entitled to receive payment
 of base salary, adjusted pro-rata to the date of such termination, subject to
 offset, and to the extent permitted, for any amounts then owed to the
 Company by the Employee. The Employee
 shall have absolutely no right to receive or retain any other payment or
 compensation whatsoever under this Agreement, regardless of the term of the
 employment then elapsed. The Employee’s rights and obligations regarding
 stock options and shares of the Company’s
 common stock owned by the Employee shall be determined in accordance with and
 be governed by the Shareholder
 Agreement and the Company’s Stock Option Plan.


	
 

	
 

	
 

	
 


	
 

	
8.

	
Termination
 without Cause. In the event that the Employee’s employment
 is terminated by the Company without cause, as cause defined in Section 7
 hereof, the Employee shall be entitled to receive from the Company an amount
 equal to twelve (12) months of the Employee’s annual base salary for the year
 of termination, payable in equal installments divided among the Company’s standard payroll periods over six (6)
 months following that in which termination occurs. The consideration provided
 in this Section is conditioned upon the





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Employee’s return to
 the Company in good condition any and all property owned by or belonging to the Company and the Employee’s
 disclosure to the Company of any passwords or procedures necessary for
 the Company’s access to any computer software or computer programs. This consideration provided in this
 Section is further conditioned on the Employee’s continued complete adherence to the terms of
 the Employee’s Confidentiality and Non-competition Agreement for two
 years from the date of termination. All payments made hereunder will be subject to all required withholding and reporting.
 The Employee’s rights and obligations
 regarding any shares of the Company’s common stock owned by the Employee shall be determined in accordance with and be
 governed by the Shareholder Agreement.


	
 

	
 

	
 

	
 


	
 

	
9.

	
Termination for Good Reason. Employee may terminate this Agreement for Good
 Reason. The Employee may also
 terminate the Agreement hereunder without Good Reason by giving a Notice of
 Termination during the year immediately following a Change in Control of more
 than 40% of the Company’s outstanding stock (a “Special Termination”), with
 the exception of stock issued by
 the Company, provided that, with the exception of dilution‚ Employee is
 adversely affected by such Change in Control. Upon a Good Reason
 termination or a Special Termination, the
 Executive shall become entitled to the payments and benefits provided in Paragraph
 8 hereof in accordance with the terms of such Paragraph.


	
 

	
 

	
 

	
 


	
 

	
10.

	
Death. Upon
 the death or disability of the Employee, bonus and other related benefits
 will be paid pro-rata for the current year.


	
 

	
 

	
 

	
 


	
 

	
11.

	
Sale,
 Reorganization or Transfer of Ownership. In the event the
 Company is sold, or if majority ownership
 of the Company should pass from the existing majority shareholders, the terms of this Agreement shall remain in force.
 Terms of all executive employment agreements will identify the specifics for sale, reorganization or transfer of
 ownership, to be approved by the Compensation Committee.


	
 

	
 

	
 

	
 


	
 

	
12.

	
Insolvency or Cessation of Business. In the event the Company becomes insolvent or
 ceases business due to lack of
 funds, this Agreement is immediately null and void and the terms and conditions are rendered non-enforceable,
 specifically those clauses associated with non-disclosure and
 non-competition.


	
 

	
 

	
 

	
 


	
 

	
13.

	
Governing Law. This agreement will be governed by and construed in accordance with
 the laws of the State of Minnesota.


	
 

	
 

	
 

	
 


	
 

	
14.

	
Notices.
 Any notice or other communication required or permitted hereunder shall be in
 writing and shall be deemed to have been
 given, when received, if delivered by hand or by telegram, or three
 (3) working days after deposited, if placed in the mails for delivery by certified mail, return receipt requested,
 postage prepaid and addressed to the appropriate party at the
 following address:








	
 

	
 

	
 


	
 

	
Company:

	
BioDrain Medical Inc.


	
 

	
 

	
Attention: Lawrence W. Gadbaw,
 Chairman


	
 

	
 

	
699 Minnetonka Highlands Lane


	
 

	
 

	
Orono, MN 55356-9728


	
 

	
 

	
 


	
 

	
Employee:

	
Kevin R. Davidson


	
 

	
 

	
16771 Ironwood Circle


	
 

	
 

	
Lakeville, MN 55044





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Addresses
 may be changed by written notice given pursuant to this Section; however any
 such notice shall not be effective,
 if mailed, until three (3) working days after depositing in the mails or
 when actually received, whichever occurs first.


	
 

	
 

	
 


	
 

	
15.

	
Other Agreements. This Agreement contains the entire agreement between the parties concerning
 terms of employment and supersedes at the effective date hereof any other
 agreement, written or oral.


	
 

	
 

	
 


	
 

	
16.

	
Modification and Waiver. A waiver by either party of a breach of any
 provision of this Agreement shall
 not operate as or be construed as a waiver of any subsequent breach thereof.


	
 

	
 

	
 


	
 

	
17.

	
Binding Effect, Assigns, Successors, Etc. This Agreement shall be binding upon the
 parties hereto and their respective
 heirs, representatives, successors and assigns, and shall continue in full force unless and until terminated by the
 mutual agreement of all parties hereto.


	
 

	
 

	
 


	
 

	
18.

	
Savings Clause. If any provision, portion or aspect of this Agreement is determined
 to be void, or voidable by any
 legislative, judicial or administrative action as properly applied to this Agreement, then this Agreement shall be
 construed to so limit such provision, portion or aspect thereof to render same enforceable to the
 greatest extent permitted by or in the relevant jurisdiction.


	
 

	
 

	
 


	
 

	
19.

	
Headings. The headings of this Agreement are intended solely for convenience
 and reference, and shall give no
 effect in the construction or interpretation of this Agreement.


	
 

	
 

	
 


	
 

	
20.

	
Survival. Employee understands and agrees that portions of the provisions of
 this Agreement extend beyond
 termination of the Employee’s employment and shall continue in full force and
 effect after such termination of
 employment or termination of this Agreement.


	
 

	
 

	
 


	
 

	
21.

	
Execution. This Agreement may be executed in two (2) or more counterparts, and
 each such counterpart deemed an original. Original signatures on copies of
 the Agreement transmitted by facsimile will be deemed originals for
 all purposes hereunder.





IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective
as of the day and year first written above.


	
 

	
 

	
 


	
 

	
BioDrain Medical Incorporated


	
 

	
 

	
 


	
 

	
By: 

	



	
 

	
 

	 


	
 

	
 

	
Lawrence W. Gadbaw, Chairman


	
 

	
 

	
 


	
 

	
By: 

	



	
 

	
 

	 


	
 

	
 

	
Kevin R. Davidson, Employee





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