Document:

depetraemploymentagreement.htm

    

    EXHIBIT
10.1

     

    EMPLOYMENT
AGREEMENT

     

    This is
an Employment Agreement (“Agreement”) between Winland Electronics, Inc., a
Minnesota corporation (the “Corporation”), and Thomas J. de Petra
(“Employee”).

    

    Recitals

     

    WHEREAS,
Employee has been acting as the Corporation’s Interim Chief Executive Officer
and President; and

     

    WHEREAS,
On April 23, 2008, the Corporation’s Board of Directors appointed Employee the
Corporation’s Chief Executive Officer and President and eliminated the Interim
nature of the relationship; and

     

    WHEREAS,
Employee and the Corporation desire to state in writing the terms and conditions
of Employee’s employment by the Corporation; and

     

    WHEREAS,
Employee and the Corporation agree to the terms and conditions of Employee’s
employment by the Corporation hereinafter set forth in this
Agreement;

     

    NOW,
THEREFORE, in consideration of the
mutual covenants and undertakings set forth below, the parties agree as
follows:

    

     

    ARTICLE
1

    EMPLOYMENT;
TERM OF EMPLOYMENT

    

    1.1)           Employment.  The
Corporation hereby agrees to continue to employ Employee and Employee hereby
agrees to continue employment with the Corporation in the position of Chief
Executive Officer and President upon the terms and conditions hereinafter set
forth in this Agreement effective as of the date on which Employee executes this
Agreement.

    

    1.2)           Term.  Employee’s
employment with the Corporation shall continue until terminated by Employee or
the Corporation in accordance with Articles 4 or 6.

    

     

    ARTICLE
2

    DUTIES;
EXTENT OF SERVICES

    

    2.1)           Duties.  During
Employee’s employment with the Corporation, Employee shall serve the Corporation
faithfully and to the best of his ability.  Except as approved in
writing by the Board of Directors or its designees, which approval shall not be
unreasonably withheld, Employee shall devote his full business and professional
time, energy, and diligence to the performance of the duties of such
office.  Employee shall perform such duties for the Corporation (a) as
are customarily incident to his office and (b) as may be assigned or delegated
to him from time to time by the Board of Directors.  During employment
with the Corporation, Employee shall not engage in any other business activity
that would conflict or interfere with his ability to perform his duties under
this Agreement.  Employee shall use his best efforts to promote the
interests of the Corporation.

    
 

    2.2)           Compliance with Rules;
Authority.  Employee agrees to be subject to the Corporation’s
control, rules, regulations, policies and programs.  Employee further
agrees that he shall carry on all correspondence, publicity and advertising in
the Corporation’s name and he shall not enter into any contract on behalf of the
Corporation except as expressly authorized by the Corporation.

    

    ARTICLE
3

    COMPENSATION

    

    3.1)           Compensation for
Services.  As compensation for his services to the Corporation,
the Corporation will pay Employee as set forth in the attached Exhibit A, which
shall be reviewed by the Board of Directors and/or its designee from time to
time but no less than annually.  All compensation paid to Employee
shall be inclusive of all applicable income, social security, and other taxes
and charges that are required by law to be withheld by the Corporation or that
are requested to be withheld by Employee.  All regular compensation
shall be payable in accordance with the Corporation’s usual payroll
schedule.

    

    3.2)           Benefits.  Employee
shall be eligible to participate in or receive benefits under the Corporation’s
paid time off (PTO) policy, employee benefit plans, health plans, or
arrangements, if any, made available from time to time by the Corporation to its
employees as set forth in an employee manual or otherwise including, but not
limited to, medical, dental, and long-term disability coverage, to the extent
that Employee’s age, tenure, and title make him eligible to receive those
benefits.  Nothing in this Agreement is intended to or shall in any
way restrict the Corporation’s right to amend, modify or terminate any of its
benefits or benefit plans during the term of Employee’s employment.

    

    3.3)           Business
Expenses.  During Employee’s employment, the Corporation shall
reimburse Employee for all ordinary and necessary business expenses incurred by
Employee in connection with the business of the Corporation and its subsidiaries
and consistent with the Corporation’s policies in effect from time to time with
respect to travel, entertainment and other business expenses.  Payment
or reimbursement to Employee will be made upon submission by Employee of
vouchers, receipts or other evidence and documentation of such expense in a form
reasonably satisfactory to the Corporation and in compliance with applicable
requirements of taxing authorities.

    

    ARTICLE
4

    TERMINATION

    

    4.1)           Termination.  Either
Employee or the Corporation may terminate the employment relationship at any
time, for any or no reason, upon ninety (90) days’ written notice to the other
party.  The Corporation shall have the right, in its sole discretion,
to provide Employee ninety (90) days’ pay and benefits in lieu of written
notice.  Notwithstanding the foregoing, the Corporation shall have the
right to terminate Employee’s employment immediately for “Cause” as defined in
Section 4.4 below.

    

    4.2)           Return of
Property.  Immediately upon termination (or at such earlier
time as requested by the Corporation’s Board of Directors or its designees),
Employee shall deliver to the Corporation all of its property, including but not
limited to all work in progress, research data, equipment, originals and copies
of documents and software, customer information and lists, financial
information, and all other material in Employee’s possession or control that
belongs to the Corporation or its customers or contains Confidential Information
(as defined in Section 5.1(E) below).

    

    4.3)           Payment Upon
Termination.  Except as provided in Section 4.4 or Article 6,
after the effective date of termination, Employee shall not be entitled to any
compensation, benefits, or payments whatsoever except for compensation earned
through Employee’s last day of employment and any accrued benefits.

    

    4.4)           Severance.  If
Employee satisfies the conditions set forth in Section 4.4(C) of this Agreement,
the Corporation will provide Employee the severance benefits described in this
Section 4.4.  Nothing in this provision is intended to limit the
Corporation’s right to provide Employee ninety (90) days’ pay and benefits in
lieu of written notice or Employee’s right to receive such pay and benefits, nor
shall such pay and benefits in any way limit the severance contemplated by
Section 4.4 of this Agreement.

    

    A.           Termination by Employer with
Cause.  For purposes of this Article 4, “Cause” shall be
defined to include, but not be limited to, the following:

    

    1.           Employee’s
neglect of any of his material duties or his failure to carry out reasonable
directives from the Board of Directors, or its designees, or failure to comply
with rules, regulations or policies of the Corporation or its Board of
Directors;

    

    2.           Any
willful or deliberate misconduct that is injurious to the Corporation, its
business reputation or its goodwill;

    

    3.           Dishonesty
in any dealings between Employee and the Corporation or between Employee and
vendors or customers of the Corporation;

    

    4.           Employee’s
commission of a felony, or other crime involving moral turpitude or immoral
conduct, whether or not against the Corporation and whether or not committed
during Employee’s employment;

    

    5.           Employee’s
acting in a manner adverse to the best interests of the Corporation including,
but not limited to, being under the influence of alcohol or illegal drugs while
on the job; or

    

    
      	
               
      

            	
              6.

            	
              Employee’s
      breach of any term of this
Agreement.

            

    

    

    B.           Termination by Employee for
Good Reason.  For purposes of this Article 4, “Good Reason”
shall be defined to include the following:

    

    1.           The
assignment to Employee, without Employee’s consent, of employment
responsibilities that are not of comparable responsibility and status to the
employment responsibilities described in this Agreement;

    

    2.           The
Corporation’s reduction of Employee’s base salary without Employee’s consent
except for any reduction implemented as part of a broad-based employee cost
reduction initiative; or

    

    3.           The
Corporation’s requiring Employee to be based anywhere other than within one
hundred (100) miles of the Corporation’s principal location at the time of
Employee’s execution of this Agreement.

    

    C.           Severance Benefits Upon
Termination by the Corporation Without Cause or Termination by Employee for Good
Reason.  If (1) Employee’s employment is terminated by the
Corporation without Cause in accordance with Section 4.1 or is terminated by
Employee for Good Reason in accordance with Section 4.4(B), and
(2) Employee executes and does not rescind a separation agreement supplied
by the Corporation, which will include, but not be limited to, a comprehensive
release of all legal claims, then the Corporation will (a) pay Employee in a
lump sum or at regular payroll intervals, at the Corporation’s option, an amount
equal to twelve (12) months of Employee’s then current base salary, subject to
required and authorized deductions and withholdings; and (b) continue to pay the
Corporation’s ordinary share of premiums for six (6) calendar months for
Employee’s COBRA continuation coverage in the Corporation’s group medical,
dental, and life insurance plans (as applicable), provided Employee elects such
continuation coverage and timely pays Employee’s share of such premiums, if
any.

    

    

    ARTICLE
5

    RESTRICTION
AGAINST COMPETITION; CONFIDENTIALITY

    

    5.1)           Restriction Against
Competition.  Employee acknowledges that he is employed in a
position of trust and confidence and has had and will continue to have access to
and become familiar with the unique methods, services and procedures used by the
Corporation and that, as part of Employee’s duties, he has developed and will
continue to develop and maintain close working relationships with vendors,
customers and employees of the Corporation and its
subsidiaries.  Employee further acknowledges that the Corporation and
its subsidiaries, over the years, through goodwill, advertising, honest business
methods and aggressive promotion, have built a lucrative business and obtained
loyal vendors and customers.  Employee further acknowledges that
disclosure or use of any of the Corporation’s Confidential Information relating
to the operation of the business of the Corporation or its subsidiaries (as
defined in Section 5.1(E) of this Agreement) could have a serious detrimental
effect upon the Corporation, the monetary loss from which would be difficult, if
not impossible, to measure.  In consequence of the foregoing, and in
consideration for the Corporation’s agreement to provide severance rights and
benefits to Employee as set forth in Article 4 of this Agreement and the Change
of Control rights and benefits to Employee as set forth in Article 6 of this
Agreement, which Employee acknowledges and agrees are rights and benefits to
which he is otherwise not entitled, Employee agrees as follows:

    

    A.           Noncompetition.  During
Employee’s employment and for a period of two (2) years after termination of
Employee’s employment, regardless of the reason for and timing of the
termination, Employee agrees as follows:

    

    
      	
               
      

            	
              1.

            	
              Not
      to directly or indirectly engage in, own, manage, operate, join, control,
      consult with, participate in the ownership, operation or control of, be
      employed by, perform services for, contract with or be connected with as a
      director, officer, principal, shareholder, member, agent, consultant,
      salesperson or otherwise, any person, corporation, partnership or other
      entity that produces or markets any product or service competitive with
      the Corporation’s environmental controls and sensors business, or conspire
      with others to do so;

            

    

    

    
      	
               
      

            	
              2.

            	
              Not
      to directly or indirectly engage in, own, manage, operate, join, control,
      consult with, participate in the ownership, operation or control of, be
      employed by, perform services for, contract with or be connected with as a
      director, officer, principal, shareholder, member, agent, consultant,
      salesperson or otherwise, any person, corporation, partnership or other
      entity that produces or markets any product or service competitive with
      the Corporation’s electronic manufacturing services (“EMS”) business, or
      conspire with others to do so, in any state where the Corporation markets
      its EMS business or, as of Employee’s termination date, has articulable
      plans to actively do so.

            

    

    

    
      	
              B.

            	
              Exceptions to
      Noncompetition.  The restrictions contained in Section
      5.1(A) will

            

    

    

    
      	
              1.

            	
              Not
      prevent Employee from the
following:

            

    

    

    
      	
               
      

            	
              a.

            	
              Owning
      up to three percent (3%) of a publicly held company that competes with the
      Corporation and/or its subsidiaries, so long as Employee does not
      otherwise violate the terms of this Article 5;
  or

            

    

    

    
      	
               
      

            	
              b.

            	
              Accepting
      employment with a large diversified organization with separate and
      distinct divisions that do not compete, directly or indirectly, with the
      Corporation on the following conditions: Prior to accepting such
      employment, Employee provides the Corporation written assurance that he
      will not provide any of the Corporation’s trade secrets or other
      Confidential Information to the new employer, will not render any
      services, directly or indirectly, to any division or business unit that
      competes, directly or indirectly, with the Corporation, and that he will
      not violate any of the terms of Article 5 of this Agreement;
      or

            

    

    

    
      	
               
      

            	
              2.

            	
              Have
      no force or effect if the circumstances of Employee’s termination of
      employment trigger the Corporation’s obligation to pay severance pursuant
      to Section 4.4 or Change of Control Termination amounts pursuant to
      Article 6 herein and the Corporation is unable to pay the amount due to
      Employee as a result of the Corporation’s liquidation or
      insolvency.

            

    

    

    C.           Nonsolicitation of
Customers.  Employee agrees he will not, during his employment
and for a two-year period immediately following termination of his employment
hereunder, regardless of the reason for and timing of the termination, attempt
to divert any business of the Corporation or its subsidiaries by soliciting,
contacting, or communicating with any customers of the Corporation or its
subsidiaries with whom Employee, or employees under his supervision, had
contacts during the year preceding termination of his employment or any persons
or entities who might reasonably be considered within the class of customers
actively solicited by the Corporation or its subsidiaries.

    

    D.           Nonsolicitation of Employees
and Contractors.  Employee agrees he will not, during his
employment and for a two-year period immediately following termination of his
employment, regardless of the reason for and timing of the termination, solicit
any then-current employee or contractor of the Corporation or its subsidiaries
for the purpose of hiring or attempting to hire such employee or contractor, nor
will Employee in any manner attempt to persuade or encourage any of the
then-current employees or contractors of the Corporation or its subsidiaries to
discontinue their employment or contractual engagement with the Corporation or
its subsidiaries.

    

    
      	
              E.

            	
              Confidential
      Information.  Employee will not, during or after the term
      of this Agreement, directly or indirectly, use or disclose any of the
      Corporation’s Confidential Information relating to the operation of the
      business of the Corporation or its subsidiaries to any person, firm,
      corporation, association, or other entity for any reason or purpose
      whatsoever except the furtherance of the interests of the Corporation or
      its subsidiaries.  For purposes of this Agreement, “Confidential
      Information” includes but is not limited to the
  following:

            

    

    

    Information
not generally known and which is proprietary to the Corporation including,
without limitation, use of or customization to computer application programs;
financial, management, or customer data that is provided, or to which access is
provided, in the course of employment by the Corporation; data or conclusions or
opinions formed by Employee in the course of employment; policies and
procedures; manuals; trade secrets; methods, procedures, or techniques
pertaining to the business of the Corporation or a customer of the Corporation;
specifications for products or services of the Corporation; systems; price
lists; marketing plans; sales or service analyses; financial information;
customer names or other information; vendor names or other information; employee
names or other information; research and development data; diagrams; drawings;
videotapes, audiotapes, or computerized media used as training regimens; notes,
memoranda, notebooks, and all other records or documents that are handled, seen,
or used by Employee in the course of employment; information not likely to be
available to the general public without the expenditure of time or expense; and
any other information designated as such by the Corporation in its sole
discretion as confidential.  “Confidential Information” does not
include (i) information which is in the public domain, (ii) information which,
through no fault of Employee, hereafter comes into the public domain, or (iii)
information disclosed to Employee by third parties who do not violate duties to
the Corporation in disclosing that information.

    

    5.2           Copyrights.

    

    
      	
              A.

            	
              Employee
      hereby acknowledges and agrees that, to the extent any work performed by
      Employee for the Corporation gives rise to the creation of any
      copyrightable material (“Work”), all such Work, including all text,
      software, source code, scripts, designs, diagrams, documentation,
      writings, visual works, or other materials shall be deemed to be a work
      made for hire for the Corporation.

            

    

     

    
      	
              B.

            	
              To
      the extent that title to any Work may not, by operation of law, vest in
      the Corporation or such Work may not be considered work made for hire for
      the Corporation, all rights, title and interest therein were assigned and
      are hereby irrevocably assigned to the Corporation, including but not
      limited to the right to sue for past, present, and future infringement of
      any Work.  All such Work shall belong exclusively to the
      Corporation, with the Corporation having the right to obtain and to hold
      in its own name, copyrights, registrations or such other protection as may
      be appropriate to the subject matter, and any extensions and renewals
      thereof.

            

    

     

    
      	
              C.

            	
              To
      the extent that title to any Work may not be assigned to the Corporation,
      Employee hereby grants the Corporation a worldwide, nonexclusive,
      perpetual, irrevocable, fully paid-up, royalty-free, unlimited,
      transferable, sublicensable license, without right of accounting, in such
      Work.

            

    

     

    
      	
              D.

            	
              Employee
      agrees to execute and deliver without further consideration such documents
      and to perform such other lawful acts as the Corporation, its successors
      and assigns may deem necessary to fully secure the Corporation’s rights,
      title or interest in all Works as set forth in this
    Agreement.

            

    

    

    5.3           Inventions.

     

    
      	
              A.

            	
              Employee
      agrees to communicate promptly and fully to the Corporation all
      inventions, discoveries, improvements or designs conceived or reduced to
      practice by Employee during the period of his employment with the
      Corporation (alone or jointly with others), and, except as provided in
      Section 5.3(C), Employee will and hereby does assign to the Corporation
      and/or its nominees all of his right, title and interest in such
      inventions, discoveries, improvements or designs and all of his right,
      title and interest in any patents, patent applications or copyrights based
      thereon without obligation on the part of the Corporation to pay any
      further compensation, royalty or payment to
  Employee.

            

    

    

    
      	
              B.

            	
              Employee
      further agrees to assist the Corporation and/or its nominee (without
      charge but at no expense to Employee) at any time and in every proper way
      to obtain and maintain for its and/or their own benefit, patents for all
      such inventions, discoveries and improvements and copyrights for all such
      designs.

            

    

    

    
      	
              C.

            	
              This
      Agreement does not obligate Employee to assign to the Corporation any
      invention, discovery, improvement or design for which no equipment,
      supplies, facility or trade secret information of the Corporation was used
      and which was developed entirely on Employee’s own time, and (i) which
      does not relate (A) directly to the business of the Corporation or (B) to
      the Corporation’s actual or demonstrably anticipated research or
      development, or (ii) which does not result from any work performed by
      Employee for the Corporation.

            

    

    

    
      	
              D.

            	
              Employee
      shall keep complete, accurate and authentic accounts, notes, data and
      records of all inventions, discoveries, improvements or designs in the
      manner and form requested by the Corporation.  Such accounts,
      notes, data and records shall be the property of the Corporation, and upon
      its request Employee shall promptly surrender the same to the
      Corporation.

            

    

    

    
      	
              E.

            	
              The
      obligations of this Section 5.3 shall continue beyond the termination of
      Employee’s employment with respect to any invention, discovery,
      improvement or design conceived or made by Employee during the period of
      Employee’s employment with the Corporation and shall be binding upon
      Employee’s assigns, executors, administrators, and other legal
      representatives.  In the event Employee is called upon to render
      assistance to the Corporation pursuant to Section 5.3(B) after termination
      of Employee’s employment with the Corporation, the Corporation shall pay
      Employee reasonable compensation for the assistance rendered and shall
      call upon Employee for assistance at such reasonable times so as not to
      interfere with Employee’s new employment or business.  For
      purposes of this Agreement, any invention, discovery, improvement or
      design relating to the business of the Corporation upon which Employee
      files a patent, trademark or copyright application within one (1) year
      after termination of Employee’s employment with the Corporation shall be
      presumed to have been made while Employee was employed by the Corporation,
      subject to proof to the contrary by good faith, written and duly
      corroborated records establishing that such invention, discovery,
      improvement or design was conceived and made by Employee following
      termination of employment and without violation of his continuing
      obligations under Section 5.1(E)
hereof.

            

    

    

    5.4           Specific Performance and
Injunctive Relief.  Employee acknowledges that the restrictions
and covenants contained in this Article 5 are reasonable and necessary to
protect the legitimate interests of the Corporation.  Employee
understands and agrees that the remedies at law for any violation of the
restrictions or covenants by this Article 5 may be inadequate, that such
violations may cause irreparable injury within a short period of time and that
the Corporation shall be entitled to preliminary injunctive relief and other
injunctive relief against such violation or threatened violation without the
necessity of proving actual damages.  Such injunctive relief shall be
in addition to and not in limitation of any and all other remedies the
Corporation shall have in law and at equity for the enforcement of such
restrictions and covenants.  Nothing herein provided shall be
construed as prohibiting the Corporation or Employee from pursuing any other
remedies available in the event of breach or threatened breach, including the
recovery of damages.  In the event of a violation of any of the
provisions of this Article 5, the successful party shall have the right to
collect a reasonable attorney’s fee for bringing such legal or equitable action
or otherwise enforcing the terms and conditions of this Article.

    

    5.5           Acknowledgement.  Employee
acknowledges that he has carefully considered the restrictions contained in this
Article 5 and determined that the restrictions in this Article 5 will not unduly
restrict him in securing other suitable employment in the event of the
termination of his employment with the Corporation.

    

    ARTICLE
6

    CHANGE
OF CONTROL

    

    6.1)           Change of Control Right and
Payment.  In consideration for Employee entering into the
noncompetition, nonsolicitation, confidentiality, and other obligations set
forth in Article 5, the following Change of Control rights and benefits will
apply during the term of Employee’s employment with Corporation:

    

    
      	
              A.

            	
              For
      a period of two (2) years following a Change of Control, as defined in
      Section 6.2., Employee shall have the right, within Employee’s sole
      discretion, to terminate employment with the Corporation for a “Change of
      Control Good Reason” as defined in Section 6.2.  Such
      termination shall be accomplished by Employee giving ninety (90) days’
      written notice to the Corporation of Employee’s decision to
      terminate.

            

    

    

    
      	
              B.

            	
              In
      the event of a Change of Control Termination, as defined in Section 6.2.,
      then, in lieu of any severance benefits payable under Section 4.4 and
      without further action by the Board of Directors, the Corporation shall
      pay to Employee an amount equal to Employee’s compensation (including any
      (a) base salary, and (b) annual bonuses, but excluding non-cash fringe
      benefits such as insurance and perquisites) for the two completed fiscal
      years preceding such termination, which amount shall be paid by the
      Corporation in 24 equal monthly installments beginning on the first day of
      the calendar month following the calendar month in which such Change of
      Control Termination occurs with the remaining payments made on the first
      day of each of the succeeding 23 months.  Notwithstanding the
      foregoing, in no event shall Employee receive any Change of Control
      Action, as defined below, which would constitute a “parachute payment” for
      purposes of Code Section 280G, or any successor provision, and the
      regulations thereunder.  In the event any Change of Control
      Actions would constitute a “parachute payment,” Employee shall have the
      right to designate those Change of Control Actions which would be reduced
      or eliminated so that Employee will not receive a “parachute
      payment.”  For purposes of this Section 6.1, a “Change of
      Control Action” shall mean any payment, benefit or transfer of property in
      the nature of compensation paid to or for the benefit of Employee under
      any arrangement which is considered contingent on a Change of Control for
      purposes of Code Section 280G, including, without limitation, any and all
      of the Corporation’s salary, bonus, incentive, restricted stock, stock
      option, compensation or benefit plans, programs or other arrangements, and
      shall include any benefits payable under this
  Agreement.

            

    

    

    
      	
              C.

            	
              Interest.  In
      the event the Corporation does not make timely payment of the Change of
      Control Termination amounts described in Section 6.1, Employee shall be
      entitled to receive interest on any unpaid amount at the prime rate of
      interest (or such comparable index as may be adopted) published from time
      to time by the Wall Street Journal.

            

    

    

    
      	
              D.

            	
              Attorneys’
      Fees.  In the event Employee prevails in an action
      against the Corporation to enforce or defend his rights under Article 6 of
      this Agreement, or to recover damages for breach thereof, Employee shall
      be entitled to recover from the Corporation any reasonable expenses for
      attorneys’ fees and disbursements
incurred.

            

    

    

    6.2)           Definitions.  For
purposes of this Article 6, the following definitions shall be
applied:

    

    A.           “Continuing
Directors” shall mean the directors of the Corporation as of the date of
Employee’s execution of this Agreement and any new director whose election to
the Board of Directors or nomination for election to the Board of Directors is
approved by a vote of at least two-thirds (2/3) of the directors as of the date
of Employee’s execution of this Agreement who are then still in
office.

    

    B.           “Change
of Control” shall mean any of the following events unless approved in advance by
a majority of the Continuing Directors:

    

    1.           The
acquisition of direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) in the aggregate of securities of the
Corporation representing twenty percent (20%) or more of the total combined
voting power of the Corporation’s then issued and outstanding securities by any
person or entity, or group of associated persons or entities acting in concert,
except for the officers and directors of the Corporation as of the date this
Agreement is executed; or

    

    2.           A
merger or consolidation to which the Corporation is a party if the individuals
and entities who were shareholders of the Corporation immediately prior to the
effective date of such merger or consolidation have beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than
fifty percent (50%) of the total combined voting power for election of directors
of the surviving corporation following the effective date of such merger or
consolidation; or

    

    3.           The
sale of the properties and assets of the Corporation, substantially as an
entirety, to any person or entity which is not a wholly-owned subsidiary of the
Corporation; or

    

    4.           A
change in the composition of the Corporation’s Board of Directors at any time
after Employee’s execution of this Agreement such that the Continuing Directors
cease for any reason to constitute at least a fifty-one percent (51%) majority
of the Board.

    

    C.           “Change
of Control Termination” shall mean with respect to Employee any of the following
events occurring within two (2) years after a Change of Control:

    

    1.           Termination
of Employee’s employment by the Corporation for any reason other than pursuant
to Section 4.4(A) (a “Cause” termination); or

    

    2.           Termination
of Employee’s employment by Employee pursuant to Section 6.1.  A
Change of Control Termination by Employee shall not include termination by
reason of death or disability.

    

    D.           “Change
of Control Good Reason” shall mean a good faith determination by Employee that
one or more of the following events has occurred, without Employee’s express
written consent, after a Change of Control:

    

    1.           A
change in Employee’s reporting responsibilities, titles or position as in effect
immediately prior to the Change of Control, or any removal of Employee from, or
any failure to re-elect Employee to, any of such positions, which has the effect
of materially diminishing Employee’s responsibility or authority;

    

    2.           A
material reduction by the Corporation in Employee’s total compensation as in
effect immediately prior to the Change of Control or as the same may be
increased from time to time;

     

    
      3.           The
Corporation requiring Employee to be based anywhere other than within one
hundred (100) miles of Employee’s job location at the time of the Change of
Control;

      
4.           Without
replacement by a plan, program, or arrangement providing benefits to Employee of
the Corporation and its subsidiaries equal to or greater than those discontinued
or adversely affected, the failure by the Corporation to continue in effect,
within its maximum stated term, any pension, bonus, incentive, stock ownership,
purchase, option, life insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or arrangement, in which Employee
is participating immediately prior to a Change of Control or the taking of any
action by the Corporation that would adversely affect Employee’s participation
or materially reduce Employee’s benefits under any of such plans, programs or
arrangements;

    

    

    5.           The
taking of any action by the Corporation that would materially and adversely
affect the workplace environment existing at the time of the Change of Control
in or under which Employee performs his employment duties; or

    

    6.           The
taking of any action by the Corporation that would materially change the
Corporation’s business strategies or practices existing at the time of the
Change of Control including, but not limited to, changes in the types and brands
of products offered, advertising and promotion programs, employment policies,
and the segment to which the Corporation markets its products.

    

     

    ARTICLE
7

    MISCELLANEOUS

    

    7.1)           Severability.  If
any term or provision of this Agreement shall be held to be invalid or
unenforceable for any reason, such term or provision shall be ineffective to the
extent of such invalidity or unenforceability without invalidating the remaining
terms or provisions of this Agreement.  Without in any way limiting
the generality of the foregoing, in the event that any provision of Article 5
hereof is held invalid or unenforceable by a court of competent jurisdiction,
the Corporation and Employee agree that that part should modified by the court
to make it enforceable to the maximum extent possible.  If the part
cannot be modified, then that part may be severed and the other parts of this
Agreement shall remain enforceable.

    

    7.2)           Section 409A
Requirements.  The Corporation and Employee recognize and agree
that revisions to the post-termination payments and benefits provisions
contemplated by Section 4.4 and Article 6 may be necessary and desirable to
comply with the requirements of Internal Revenue Code Section 409A, and the
regulations, notices and other guidance of general application issued thereunder
(hereinafter, “409A Requirements”), in a manner intended to prevent any adverse
tax consequences to Employee and the Corporation as a result of any failure to
so comply.  Any such revisions will be made only with the written
consent of both parties; and each of them agrees to cooperate in good faith to
make any such revisions in a manner that timely complies with the 409A
Requirements.

    

    7.3)           Notices.  Any
notice required or permitted to be given under this Agreement shall be
sufficient, if given in person or if in writing, sent by certified mail, return
receipt requested, to the last known residence address in the case of Employee
or to its principal office in the case of the Corporation.

    

    7.4)           Waiver of
Breach.  The failure of either party hereto to enforce its
rights under any provision of this Agreement shall not operate or be construed
as a waiver of such breach or of any subsequent breach by any
party.

    

    7.5)           Entire
Agreement.  This Agreement contains the entire agreement of the
parties concerning the employment of Employee by the Corporation and supersedes
and replaces any prior agreement or arrangement relative to Employee’s
employment by the Corporation, whether oral or written.  Except as
provided in Section 7.1 of this Agreement, no modification, supplement, or
amendment of any provision hereof shall be valid unless made in writing and
signed by the parties against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

    

    7.6)           Governing
Law.  This Agreement shall be construed and interpreted
according to the laws of the State of Minnesota.

    

    7.7)           Headings.  The
captions set forth in this Agreement are for convenience only and shall not be
considered a part of this Agreement or in any way limiting or amplifying the
terms or provisions hereof.

    

    7.8)           Obligations Which Survive
Termination.  The obligations and remedies of Sections 4.2,
4.3, 4.4, and Articles 5, 6 and 7 of this Agreement shall survive the
termination of this Agreement or any successor relationship and the termination
of Employee’s employment for any reason, except as expressly otherwise provided
for in this Agreement.

    

    7.9)           Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the Corporation and Employee and their respective successors,
assigns, heirs, executors, and administrators, except that the services to be
performed by Employee are personal and are not assignable.

    

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

    

    IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed and delivered as of the day and
year written below.

    

    

     

     

    
      
        	 	WINLAND ELECTRONICS,
      INC.	 
	 	 	 	 
	
                Date: 
      May 6, 2008

              	
                By:
      

              	/s/
      Thomas J. Goodmanson 	 
	 	 	Thomas
      J. Goodmanson	 
	 	 	Chairman	 
	 	 	 	 

      

    

    

    
      
        	 	 	 
	 	 	 	 
	
                Date: 
      May 6, 2008

              	
                By:
      

              	/s/ Thomas
      J. de Petra	 
	 	 	Thomas
      J. de Petra	 
	 	 	Employee	 
	 	 	 	 

      

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A

    

    In consideration of the mutual covenants
and undertakings set forth in the Employment Agreement between Winland
Electronics, Inc., a Minnesota corporation (the “Corporation”), and Thomas J. de
Petra (“Employee”), the parties
agree as follows:

    

    1.           Base
Salary.  For each fiscal year of the Corporation during
Employee’s employment, the Corporation shall pay Employee an annual base salary
(“Base Salary”) in the amount determined by the Compensation Committee of the
Corporation’s Board of Directors, provided that such amount shall not be less
than the Base Salary for the immediately preceding fiscal year without the
consent of Employee unless such reduction is implemented as part of a
broad-based employee cost reduction initiative.  For the fiscal year
from January 1, 2008 (effective April 24, 2008) through December 31, 2008,
Employee’s annual Base Salary shall be $202,000, payable in accordance with the
Corporation’s usual payroll schedule.

    

    2.           Bonus.  The
Corporation may, but is not obligated to, pay Employee an annual bonus (“Annual
Bonus”) consisting of stock options or a cash payment or both, the amounts of
which, if any, shall be determined by the Compensation Committee of the Board of
Directors.  If any Annual Bonus is earned by Employee, it shall be
paid within ninety (90) days after the end of the Corporation’s applicable
fiscal year.

    

    3.           Health Club
Membership.  The Corporation shall pay a monthly health club
membership for Employee.  Such payment will be for an amount not to
exceed $200 per month and shall be reimbursed to Employee, upon demand and proof
of payment received from Employee.

    

    4.           Stock Option
Grant.  The Corporation shall issue to Employee, a stock option
for the purchase of 50,000 shares of the Corporation’s common
stock.  Such stock option vests 20% annually starting on May 6, 2009
and expires on May 6, 2014.  The exercise price of the option shall be
$1.74 per share price, which reflects the closing price of the Corporation’s
common stock on the American Stock Exchange on May 6, 2008.

    

    5.           Paid Time
Off.  The Corporation shall give Employee paid time off of four
(4) weeks per year.  For 2008, such four (4) weeks shall be on an
annualized basis effective as of April 24, 2008.

    

    6.           Amendment.  The
Board of Directors and/or its designee reserves the right to modify, supplement
and/or amend the terms of this Exhibit A from time to time with written notice
to Employee.

    

     

     

     

     

    

    IN WITNESS WHEREOF, the parties hereto
have caused this Exhibit A to be duly executed and delivered as of the day and
year written below.

    

    
      	 	WINLAND ELECTRONICS,
      INC.	 
	 	 	 	 
	
              Date: 
      May 6, 2008

            	
              By:
      

            	/s/
      Thomas J. Goodmanson 	 
	 	 	Thomas
      J. Goodmanson	 
	 	 	Chairman	 
	 	 	 	 

    

     

     

    
      
        	 	 	 
	 	 	 	 
	
                Date: 
      May 6, 2008

              	
                By:
      

              	/s/ Thomas
      J. de Petra 	 
	 	 	Thomas
      J. de Petra	 
	 	 	Employeedepetraincentivestock.htm

    EXHIBIT
10.2

    

    INCENTIVE
STOCK OPTION AGREEMENT

    

    WINLAND
ELECTRONICS, INC.

    2008
EQUITY INCENTIVE PLAN

    

    

    THIS AGREEMENT, made effective as of
this 6th day of May, 2008, by and between Winland Electronics, Inc., a Minnesota
corporation (the “Company”), and Thomas J. de Petra
(“Participant”).

    

    

    W I T N E
S S E T H:

    

    WHEREAS, Participant on the date hereof
is a key employee or officer of the Company or one of its Subsidiaries;
and

    

    WHEREAS, the Company wishes to grant an
incentive stock option to Participant to purchase shares of the Company’s Common
Stock pursuant to the Company’s 2008 Equity Incentive Plan (the “Plan”);
and

    

    WHEREAS, the Administrator of the Plan
has authorized the grant of an incentive stock option to Participant and has
determined that, as of the effective date of this Agreement, the fair market
value of the Company’s Common Stock is $1.74 per share;

    

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

    

    1.           Grant of
Option.  The Company hereby grants to Participant on the date
set forth above (the “Date of Grant”) the right and option (the “Option”) to
purchase all or any portion of an aggregate of fifty thousand (50,000) shares of
Common Stock at a per share price of $1.74 on the terms and conditions set forth
herein and subject to adjustment pursuant to Section 15 of the
Plan.  This Option is intended to be an incentive stock option within
the meaning of Section 422, or any successor provision, of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder, to the
extent permitted under Code Section 422(d).

    

    2.           Duration
and Exercisability.

    

    a.           General.  The
term during which this Option may be exercised shall terminate on May 6,
2014, except as
otherwise provided in Paragraphs 2(b) through 2(d) below.  This Option
shall become exercisable according to the following schedule:

    

    
      	
              Vesting
      Date

            	 
      	
              Number of
      Shares

            
	 
      	 
      	 
      
	
              May
      6, 2009

            	 
      	
              10,000

            
	
              May
      6, 2010

            	 
      	
              10,000

            
	
              May
      6, 2011

            	 
      	
              10,000

            
	
              May
      6, 2012

            	 
      	
              10,000

            
	
              May
      6, 2013

            	 
      	
              10,000

            
	 
      	 
      	 
      

    

    Once the
Option becomes exercisable to the extent of one hundred percent (100%) of the
aggregate number of shares specified in Paragraph 1, Participant may continue to
exercise this Option under the terms and conditions of this Agreement until the
termination of the Option as provided herein.  If Participant does not
purchase upon an exercise of this Option the full number of shares which
Participant is then entitled to purchase, Participant may purchase upon any
subsequent exercise prior to this Option’s termination such previously
unpurchased shares in addition to those Participant is otherwise entitled to
purchase.

    

    b.           Termination
of Employment (other than Disability or Death).  If
Participant’s employment with the Company or any Subsidiary is terminated for
any reason other than disability or death, this Option shall completely
terminate on the earlier of (i) the close of business on the three-month
anniversary date of such termination of employment, and (ii) the expiration
date of this Option stated in Paragraph 2(a) above.  In such period
following the termination of Participant’s employment, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date
immediately preceding such termination of employment, but had not previously
been exercised.  To the extent this Option was not exercisable upon
such termination of employment, or if Participant does not exercise the Option
within the time specified in this Paragraph 2(b), all rights of Participant
under this Option shall be forfeited.

    

    c.           Disability.  If
Participant’s employment terminates because of disability (as defined in Code
Section 22(e), or any successor provision), this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date of
such termination of employment, and (ii) the expiration date of this Option
stated in Paragraph 2(a) above.  In such period following the
termination of Participant’s employment, this Option shall be exercisable only
to the extent the Option was exercisable on the vesting date immediately
preceding such termination of employment, but had not previously been
exercised.  To the extent this Option was not exercisable upon such
termination of employment, or if Participant does not exercise the Option within
the time specified in this Paragraph 2(c), all rights of Participant under this
Option shall be forfeited.

    

    d.           Death.  In
the event of Participant’s death, this Option shall terminate on the earlier of
(i) the close of business on the twelve-month anniversary date of the date of
Participant’s death, and (ii) the expiration date of this Option stated in
Paragraph 2(a) above.  In such period following Participant’s death,
this Option shall be exercisable by the person or persons to whom Participant’s
rights under this Option shall have passed by Participant’s will or by the laws
of descent and distribution only to the extent the Option was exercisable on the
vesting date immediately preceding the date of Participant’s death, but had not
previously been exercised.  To the extent this Option was not
exercisable upon the date of Participant’s death, or if such person or persons
do not exercise this Option within the time specified in this Paragraph 2(d),
all rights under this Option shall be forfeited.

    

    3.           Manner of
Exercise.

    

    a.           General.  The
Option may be exercised only by Participant (or other proper party in the event
of death or incapacity), subject to the conditions of the Plan and subject to
such other administrative rules as the Administrator may deem advisable, by
delivering within the Option Period written notice of exercise to the Company at
its principal office.  The notice shall state the number of shares as
to which the Option is being exercised and shall be accompanied by payment in
full of the Option price for all shares designated in the notice.  The
exercise of the Option shall be deemed effective upon receipt of such notice by
the Company and upon payment that complies with the terms of the Plan and this
Agreement.  The Option may be exercised with respect to any number or
all of the shares as to which it can then be exercised and, if partially
exercised, may be so exercised as to the unexercised shares any number of times
during the Option period as provided herein.

    

    b.           Form of
Payment.  Payment of the option price by Participant shall be
in the form of cash, personal check, certified check or, if not prohibited by
the Administrator, previously acquired shares of Common Stock of the Company, or
any combination thereof.  Any stock so tendered as part of such
payment shall be valued at its Fair Market Value as provided in the
Plan.  For purposes of this Agreement, “previously acquired shares of
Common Stock” shall include shares of Common Stock that are already owned by
Participant at the time of exercise.

    

    c.           Stock
Transfer Records.  As soon as practicable after the effective
exercise of all or any part of the Option, Participant shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased, and
the Company shall deliver to Participant one or more duly issued stock
certificates evidencing such ownership.  All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.

    

    4.           Miscellaneous.

    

    a.           Employment;
Rights as Shareholder.  This Agreement shall not confer on
Participant any right with respect to continuance of employment by the Company
or any of its Subsidiaries, nor will it interfere in any way with the right of
the Company to terminate such employment.  Participant shall have no
rights as a shareholder with respect to shares subject to this Option until such
shares have been issued to Participant upon exercise of this
Option.  No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such shares are
issued, except as provided in Section 15 of the Plan.

    

    b.           Securities
Law Compliance.  The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant to such
exercise will not violate any state or federal securities or other
laws.  Participant may be required by the Company, as a condition of
the effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is registered and freely tradable under applicable
state and federal securities laws, for Participant’s own account without a view
to any further distribution thereof, that the certificates for such shares shall
bear an appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state and
federal securities laws.

    

    c.           Mergers,
Recapitalizations, Stock Splits, Etc.  Pursuant and subject to
Section 15 of the Plan, certain changes in the number or character of the Common
Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Participant’s rights
with respect to any unexercised portion of the Option (i.e., Participant
shall have such “anti-dilution” rights under the Option with respect to such
events, but shall not have “preemptive” rights).

    

    d.           Shares
Reserved.  The Company shall at all times during the option
period reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.

    

    e.           Withholding
Taxes on Disqualifying Disposition.  In the event of a
disqualifying disposition of the shares acquired through the exercise of this
Option, Participant hereby agrees to inform the Company of such
disposition.  Upon notice of a disqualifying disposition, the Company
may take such action as it deems appropriate to insure that, if necessary to
comply with all applicable federal or state income tax laws or regulations, all
applicable federal and state payroll, income or other taxes are withheld from
any amounts payable by the Company to Participant.  If the Company is
unable to withhold such federal and state taxes, for whatever reason,
Participant hereby agrees to pay to the Company an amount equal to the amount
the Company would otherwise be required to withhold under federal or state
law.  Participant may, subject to the approval and discretion of the
Administrator or such administrative rules it may deem advisable, elect to have
all or a portion of such tax withholding obligations satisfied by delivering
shares of the Company’s Common Stock having a fair market value equal to such
obligations.  Such election shall be approved by the Administrator and
otherwise comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.

    

    f.           Nontransferability.  During
the lifetime of Participant, the accrued Option shall be exercisable only by
Participant or by the Participant’s guardian or other legal representative, and
shall not be assignable or transferable by Participant, in whole or in part,
other than by will or by the laws of descent and distribution.

    

    g.           2008
Equity Incentive Plan.  The Option evidenced by this Agreement
is granted pursuant to the Plan, a copy of which Plan has been made available to
Participant and is hereby incorporated into this Agreement.  This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan.  All defined terms of the Plan shall have the same
meaning when used in this Agreement.  The Plan governs this Option
and, in the event of any questions as to the construction of this Agreement or
in the event of a conflict between the Plan and this Agreement, the Plan shall
govern, except as the Plan otherwise provides.

    

    h.           Lockup
Period Limitation.  Participant agrees that in the event the
Company advises Participant that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seeks to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Participant hereby agrees that for a period not to exceed 180 days from the
prospectus, Participant will not sell or contract to sell or grant an option to
buy or otherwise dispose of this option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or its
representative(s).

    

    i.           Blue Sky
Limitation.  Notwithstanding anything in this Agreement to the
contrary, in the event the Company makes any public offering of its securities
and determines in its sole discretion that it is necessary to reduce the number
of issued but unexercised stock purchase rights so as to comply with any state
securities or Blue Sky law limitations with respect thereto, the Board of
Directors of the Company shall have the right (i) to accelerate the
exercisability of this Option and the date on which this Option must be
exercised, provided that the Company gives Participant 15 days’ prior written
notice of such acceleration, and (ii) to cancel any portion of this Option or
any other option granted to Participant pursuant to the Plan which is not
exercised prior to or contemporaneously with such public
offering.  Notice shall be deemed given when delivered personally or
when deposited in the United States mail, first class postage prepaid and
addressed to Participant at the address of Participant on file with the
Company.

    

    j.           Stock
Legend.  The Administrator may require that the certificates
for any shares of Common Stock purchased by Participant (or, in the case of
death, Participant’s successors) shall bear an appropriate legend to reflect the
restrictions of Paragraphs 4(b), 4(h) and 4(i) of this Agreement.

    

    
      k.           Scope of
Agreement.  This Agreement shall bind
and inure to the benefit of the Company and its successors and assigns and
Participant and any successor or successors of Participant permitted by
Paragraph 2 or Paragraph 4(f) above.

    

    

    l.           Arbitration.  Any
dispute arising out of or relating to this Agreement or the alleged breach of
it, or the making of this Agreement, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy.  If,
notwithstanding, such dispute cannot be resolved, such dispute shall be settled
by binding arbitration.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof.  The arbitrator shall be a retired state or federal judge or
an attorney who has practiced securities or business litigation for at least 10
years.  If the parties cannot agree on an arbitrator within 20 days,
any party may request that the chief judge of the District Court for Hennepin
County, Minnesota, select an arbitrator.  Arbitration will be
conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement.  Limited civil
discovery shall be permitted for the production of documents and taking of
depositions.  Unresolved discovery disputes may be brought to the
attention of the arbitrator who may dispose of such dispute.  The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded.  The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator’s fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable  attorneys’
fees.  Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

     

    

    
      	 	WINLAND ELECTRONICS,
      INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ Thomas
      J. Goodmanson	 
	 	 	Thomas
      J. Goodmanson, Chairman	 
	 	 	COMPANY	 
	 	 	 	 

    

     

     

    
      
        	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Thomas
      J. de Petra	 
	 	 	Thomas
      J. de Petra	 
	 	 	PARTICIPANT

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]