Document:

exv10w14

 

EXHIBIT 10.14

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (this “Agreement”) dated as of December 2, 2002,
between Rehabilicare Inc. (the “Company”), a Minnesota corporation, and Scott
Youngstrom (the “Employee”), a resident of Minnesota.

     WHEREAS, the Company wishes to employ the Employee to render services for
the Company on the terms and conditions set forth in this Agreement, and the
Employee wishes to be retained and employed by the Company on such terms and
conditions.

     NOW, THEREFORE, in consideration of the premises, the mutual agreements
set forth below and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

     1.     Employment. The Company hereby employs the Employee, and the Employee
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.

     2.     Term. Unless terminated at an earlier date in accordance with Section
9 of this Agreement, the term of the Employee’s employment hereunder shall be
for a period of one year, commencing on December 16, 2002. Thereafter, the
term of this Agreement shall be automatically extended for successive one-year
periods unless either party objects to such extension by written notice to the
other party at least 60 days prior to the expiration of the initial term or any
extension term.

     3.     Position and Duties.

     (a)  Service with Company. During the term of the Employee’s employment,
the Employee agrees to perform such reasonable employment duties as the Chief
Executive Officer of the Company shall assign to him from time to time. The
Employee’s title shall be “Chief Financial Officer (CFO).”

     (b)  Performance of Duties. The Employee agrees to serve the Company
faithfully and to the best of his ability and to devote his full time,
attention and efforts to the business and affairs of the Company during his
employment by the Company. The Employee hereby confirms that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement and that during the term of this Agreement, he will not render or
perform services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement. While he remains employed
by the Company, the Employee may participate in reasonable charitable
activities and personal investment activities so long as such activities do not
interfere with the performance of his obligations under this Agreement.

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     4.     Compensation.

     (a)  Base Salary. As compensation in full for all services to be rendered
by the Employee under this Agreement, the Company shall pay to the Employee a
base salary of $190,000, less deductions and withholdings, which salary shall
be paid on a monthly basis in arrears in accordance with the Company’s normal
payroll procedures and policies. The compensation payable to the Employee
during each year after the first year of the Employee’s employment shall be
established by the Company’s Board of Directors following an annual performance
review, but in no event shall the salary for any subsequent year be less than
the salary in effect for the prior year.

     (b)  Incentive Compensation. In addition to the base salary, the Employee
shall be eligible to participate in any bonus or incentive compensation plans
that may be established by the Board of Directors of the Company from time to
time applicable to the Employee. For the first twelve months of Employee’s
employment, the Company will establish a bonus program for the fiscal year
ending June 30, 2003, that will provide the Employee the opportunity to achieve
an annual bonus of up to 30% of his annual base salary (subject to satisfaction
of performance measures to be established by the Company’s Chief Executive
Officer, in his absolute discretion), such bonus to be pro rated for the actual
number of months served.

     (c)  Participation in Benefit Plans. While he is employed by the Company,
the Employee shall also be eligible to participate in all employee benefit
plans or programs (including vacation time) of the Company to the extent that
the Employee meets the requirements for each individual plan. The Company
provides no assurance as to the adoption or continuance of any particular
employee benefit plan or program, and the Employee’s participation in any such
plan or program shall be subject to the provisions, rules and regulations
applicable thereto.

     (d)  Expenses. The Company will pay or reimburse the Employee for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company’s normal
policies for expense verification.

     (e)  Issuance of Stock Option. Subject to approval of the board of
directors of the Company (in its discretion) and as of such date of their
approval, the Company will grant to the Employee an option to purchase up to
200,000 shares of the Company’s common stock pursuant to the Company’s 1998
Stock Incentive Plan. Such option will be subject to the vesting schedule and
terms and conditions set forth in the form of stock option agreement attached
as Exhibit A hereto.

     5.     Confidential Information. Except as permitted or directed by the Company’s Chief Executive
Officer, during the term of his employment or at any time thereafter, the
Employee shall not divulge, furnish or make accessible to anyone or use in any
way (other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that the
Employee has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of the period of his employment by the
Company (including employment by the Company or any affiliated companies prior
to the date of this Agreement), whether developed by himself or by others,
concerning any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company,

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any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. The Employee
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial
investment of time and expense by the Company, and that any disclosure or other
use of such knowledge or information other than for the sole benefit of the
Company would be wrongful and would cause irreparable harm to the Company.
Both during and after the term of his employment, the Employee will refrain
from any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality shall
not apply to any knowledge or information that is now published or which
subsequently becomes generally publicly known in the form in which it was
obtained from the Company, other than as a direct or indirect result of the
breach of this Agreement by the Employee.

     6.     Ventures. If, during the term of his employment the Employee is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company. Except
as approved by the Company’s Chief Executive Officer, the Employee shall not be
entitled to any interest in such project, program or venture or to any
commission, finder’s fee or other compensation in connection therewith other
than the compensation to be paid to the Employee as provided in this Agreement.
The Employee shall have no interest, direct or indirect, in any vendor or
customer of the Company.

     7.     Noncompetition Covenant.

     (a)  Agreement Not to Compete. During the term of his employment with the
Company and for a period of one year after the termination of such employment
(whether such termination is with or without cause, or whether such termination
is occasioned by the Employee or the Company), he shall not, directly or
indirectly, engage in competition with the Company in any manner or capacity
(e.g., as an advisor, principal, agent, partner, officer, director,
stockholder, employee, member of any association or otherwise) in any phase of
the business which the Company is conducting during the term of this Agreement,
including the design, development, manufacture, distribution, marketing,
leasing or selling of accessories, devices or systems related to the products
or services being sold by the Company or hire any current or former employee of
the Company.

     (b)  Geographic Extent of Covenant. The obligations of the Employee under
Section 7(a) shall apply to any geographic area in which the Company (i) has
engaged in business during the term of this Agreement through production,
promotional, sales or marketing activity, or otherwise, or (ii) has otherwise
established its goodwill, business reputation or any customer or supplier
relations.

     (c)  Limitation of Covenant. Ownership by the Employee, as a passive
investment, of less than two percent of the outstanding shares of capital stock
of any corporation listed on a national securities exchange or publicly traded
on Nasdaq shall not constitute a breach of this Section 7.

     (d)  Indirect Competition. The Employee will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this Section 7
if such activity were carried out by the

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Employee, either directly or
indirectly. In particular the Employee agrees that he will not, directly or
indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.

     (e)  Acknowledgment. The Employee agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to protect
the legitimate interests of the Company and that any violation of this Section
7 will cause substantial and irreparable harm to the Company that would not be
quantifiable and for which no adequate remedy would exist at law and
accordingly injunctive relief shall be available for any violation of this
Section 7.

     (d)  Blue Pencil Doctrine. If the duration or geographical extent of, or
business activities covered by, this Section 7 are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Employee acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.

     8.     Patent and Related Matters.

     (a)  Disclosure and Assignment. The Employee will promptly disclose in
writing to the Company complete information concerning each and every
invention, discovery, improvement, device, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by the Employee,
either solely or in collaboration with others, during the term of this
Agreement, or within six months thereafter, whether or not during regular
working hours, relating either directly or indirectly to the business,
products, practices or techniques of the Company (“Developments”).

     The Employee, to the extent that he has the legal right to do so, hereby
acknowledges that any and all of the Developments are the property of the
Company and hereby assigns and agrees to assign to the Company any and all of
the Employee’s right, title and interest in and to any and all of the
Developments. At the request of the Company, the Employee will confer with the
Company and its representatives for the purpose of disclosing all Developments
to the Company as the Company shall reasonably request during the period ending
one year after termination of the Employee’s employment with the Company.

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     (b)  Future Developments. As to any future Developments made by the
Employee that relate to the business, products or practices of the Company and
that are first conceived or reduced to practice during the term of this
Agreement, or within six months thereafter, but which are claimed for any
reason to belong to an entity or person other than the Company, the Employee
will promptly disclose the same in writing to the Company and shall not
disclose the same to others if the Company, within 20 days thereafter, shall
claim ownership of such Developments under the terms of this Agreement. If the
Company makes no such claim, the Employee hereby acknowledges that the Company
has made no promise to receive and hold in confidence any such information
disclosed by the Employee.

     (c)  Limitation on Sections 8(a) and 8(b). The provisions of Section 8(a)
and 8(b) shall not apply to any Development meeting the following conditions:

	 	(i)	 	such Development was developed entirely on the Employee’s own time;
	 
	 	(ii)	 	such Development was made without the use of any Company
equipment, supplies, facility or trade secret information;
	 
	 	(iii)	 	such Development does not relate (A) directly to the
business of the Company or (B) to the Company’s actual or
demonstrably anticipated research or development; and
	 
	 	(iv)	 	such Development does not result from any work performed
by the Employee for the Company.

     (d)  Assistance of the Employee. Upon request and without further
compensation therefore, but at no expense to the Employee, the Employee will do
all lawful acts, including but not limited to, the execution of papers and
lawful oaths and the giving of testimony, that in the opinion of the Company,
may be necessary or desirable in obtaining, sustaining, reissuing, extending
and enforcing United States and foreign copyrights and Letters Patent,
including but not limited to, design patents, on the Developments, and for
perfecting, affirming and recording the Company’s complete ownership and title
thereto, and to cooperate otherwise in all proceedings and matters relating
thereto.

     (e)  Records. The Employee will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts,
notes, data and records shall be the property of the Company, and, upon
its request, the Employee will promptly surrender same to it or, if not
previously surrendered upon its request or otherwise, the Employee will
surrender the same, and all copies thereof, to the Company upon the conclusion
of his employment.

     (f)  Obligations, Restrictions and Limitations. The Employee understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. The Employee shall be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by him while he is employed

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 by the Company and shall take any and all
further action which may be required to discharge such obligations and to
comply with such restrictions and limitations.

     (g)  Copyrightable Material. All right, title and interest in all
copyrightable material that the Employee shall conceive or originate, either
individually or jointly with others, and which arise out of the performance of
this Agreement, will be the property of the Company and are by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation
therefore, but at no expense to the Employee, the Employee shall execute all
papers and perform all other acts necessary to assist the Company to obtain and
register copyrights on such materials in any and all countries. Where
applicable, works of authorship created by the Employee for the Company in
performing his responsibilities under this Agreement shall be considered “works
made for hire,” as defined in the U.S. Copyright Act.

     (h)  Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by the Employee that arises out of the performance of
his obligations or responsibilities under this Agreement or any related
material or information shall be the property of the Company, and all rights
therein are by this Agreement assigned to the Company.

     9.     Termination of Employment.

     (a)  Grounds for Termination. The Employee’s employment shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that at any time:

	 	(i)	 	The Employee dies,
	 
	 	(ii)	 	The Employee becomes “disabled,” so that he
cannot perform the essential functions of his position with or
without reasonable accommodation,
	 
	 	(iii)	 	The Board of Directors of the Company elects to
terminate this Agreement for “cause” and notifies the Employee
in writing of such election,
	 
	 	(iv)	 	The Board of Directors of the Company elects to
terminate this Agreement without “cause” and notifies the
Employee in writing of such election, or
	 
	 	(iv)	 	The Employee elects to terminate this Agreement
and notifies the Company in writing of such election.

     If this Agreement is terminated pursuant to clause (i), (ii) or (iii) of
this Section 9(a), such termination shall be effective immediately. If this
Agreement is terminated pursuant to clause (iv) or (v) of this Section 9(a),
such termination shall be effective 30 days after delivery of the notice of
termination.

     (b)  “Cause” Defined. “Cause” means:

	 	(i)	 	The Employee has breached the provisions of
Section 5, 7 or 8 of this Agreement in any material respect,

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	 	(ii)	 	The Employee has engaged in willful and material
misconduct, including willful and material failure to perform
the Employee’s duties as an officer or employee of the Company
and has failed to cure such default within 30 days after
receipt of written notice of default from the Company,
	 
	 	(iii)	 	The Employee has committed fraud,
misappropriation or embezzlement in connection with the
Company’s business, or
	 
	 	(iv)	 	The Employee has been convicted or has pleaded
nolo contendere to criminal misconduct (except for parking
violations and occasional minor traffic violations).

In the event that the Company terminates the Employee’s employment for “cause”
pursuant to clause (ii) of this Section 9(b) and the Employee objects in
writing to the Board’s determination that there was proper “cause” for such
termination within 20 days after the Employee is notified of such termination,
the matter shall be resolved by arbitration in accordance with the provisions
of Section 10(a). If the Employee fails to object to any such determination of
“cause” in writing within such 20-day period, he shall be deemed to have waived
his right to object to that determination. If such arbitration determines that
there was not proper “cause” for termination, such termination shall be deemed
to be a termination pursuant to clause (iv) of Section 9(a) and the Employee’s
sole remedy shall be to receive the wage continuation benefits contemplated by
Section 9(f).

     (c)  Effect of Termination. Notwithstanding any termination of this
Agreement, the Employee, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this
Agreement which specifically relate to periods, activities or obligations upon
or subsequent to the termination of the Employee’s employment.

     (d)  “Disabled” Defined.“Disabled” means any mental or physical condition
that renders the Employee unable to perform the essential functions of his
position, with or without reasonable accommodation, for a period in excess of
three months.

     (e)  Surrender of Records and Property. Upon termination of his employment
with the Company, the Employee shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.

     (f)  Salary Continuation. If the Employee’s employment by the Company is
terminated by the Company pursuant to clause (ii) or (iv) of Section 9(a), the
Company shall continue to pay to the Employee his base salary (less any
payments received by the Employee from any disability income insurance policy
provided to him by the Company) through the earlier of (a) the date that

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the
Employee has obtained other full-time employment, or (b) six months from the
date of termination of employment. If this Agreement is terminated pursuant to
clauses (i), (iii) or (v) of Section 9(a), the Employee’s right to base salary
and benefits shall immediately terminate, except as may otherwise be required
by applicable law.

     10.     Settlement of Disputes.

     (a)  Arbitration. Except as provided in Section 10(b), any claims or
disputes of any nature between the Company and the Employee arising from or
related to the performance, breach, termination, expiration, application or
meaning of this Agreement or any matter relating to the Employee’s employment
and the termination of that employment by the Company shall be resolved
exclusively by arbitration in Hennepin County, Minnesota, in accordance with
the applicable rules of the American Arbitration Association. In the event of
submission of any dispute to arbitration, each party shall, not later than 30
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at
the hearing and a list of all persons each party intends to call at the
hearing. The fees of the arbitrator(s) and other costs incurred by the
Employee and the Company in connection with such arbitration shall be paid by
the party that is unsuccessful in such arbitration.

     The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment of the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.

     (b)  Resolution of Certain Claims—Injunctive Relief. Section 10(a) shall
have no application to claims by the Company asserting a violation of Section
5, 7, 8 or 9(e) or seeking to enforce, by injunction or otherwise, the terms of
Section 5, 7, 8 or 9(e). Such claims may be maintained by the Company in a
lawsuit subject to the terms of Section 10(c). The Employee acknowledges that
it would be difficult to fully compensate the Company for damages resulting
from any breach by him of the provisions of this Agreement.

Accordingly, the Employee agrees that, in addition to, but not to the exclusion
of any other available remedy, the Company shall have the right to enforce the
provisions of Sections 5, 7, 8 and 9(e) by applying for and obtaining temporary
and permanent restraining orders or injunctions from a court of competent
jurisdiction without the necessity of filing a bond therefore, and without the
necessity of proving actual damages, and the Company shall be entitled to
recover from the Employee its reasonable attorneys’ fees and costs in enforcing
the provisions of Sections 5, 7, 8 and 9(e).

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     (c)  Venue. Any action at law, suit in equity or judicial proceeding
arising directly, indirectly, or otherwise in connection with, out of, related
to or from this Agreement, or any provision hereof, shall be litigated only in
the courts of the State of Minnesota, County of Hennepin. The Employee and the
Company consent to the jurisdiction of such courts over the subject matter set
forth in Section 10(b). The Employee waives any right the Employee may have to
transfer or change the venue of any litigation brought against the Employee by
the Company.

     11.     Miscellaneous.

     (a)  Entire Agreement. This Agreement (including the exhibits, schedules
and other documents referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations, written or
oral, relating to the subject matter hereof.

     (b)  Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may execute
this Agreement by signing any such counterpart.

     (c)  Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable under any applicable law or rule, the validity,
legality and enforceability of the other provision of this Agreement will not
be affected or impaired thereby. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business
activities covered by, any provision of this Agreement be in
excess of that which is valid and enforceable under applicable law, then
such provision shall be construed to cover only that duration, extent or
activities which may validly and enforceably be covered. The Employee
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provision valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.

     (d)  Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives and, to the extent permitted by subsection (e), successors and
assigns.

     (e)  Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable (including by operation of law) by either party without the prior
written consent of the other party to this Agreement, except that the Company
may, without the consent of the Employee, assign its rights and obligations
under this Agreement to any corporation, firm or other business entity with or
into which the Company may merge or consolidate, or to which the Company may
sell or transfer all or substantially all of its assets, or of which 50% or
more of the equity investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, the Company provided such
assignee corporation firm or business expressly assumes all of the obligations
of the Company under this Agreement. After any such assignment by the Company,
the Company shall be

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 discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement including this Section 11.

     (f)  Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No course of
dealing between the parties will modify, amend, waive or terminate any
provision of this Agreement or any rights or obligations of any party under or
by reason of this Agreement. No delay on the part of the Company in exercising
any right hereunder shall operate as a waiver of such right. No waiver,
express or implied, by the Company of any right or any breach by the Employee
shall constitute a waiver of any other right or breach by the Employee.

     (g)  Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and delivered by
personal delivery, overnight courier, mail, electronic facsimile or e-mail
addressed to the receiving party at the address set forth herein. All such
communications shall be effective when received.

     Scott Youngstrom

     4230 Mount Curve

     Deephaven, MN 55391

     Rehabilicare Inc.

     1811 Old Highway 8

     New Brighton, MN 55112

     Attn. Chief Executive Officer

Any party may change the address set forth above by notice to each other party
given as provided herein.

     (h)  Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

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     (i)  Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW PROVISIONS THEREOF.

     (j)  Third-Party Benefit. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies, obligations
or liabilities of any nature whatsoever.

     (k)  Withholding Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.

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          IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.

	 	 	 	 
	 	Rehabilicare Inc.
	 	 	 	 
	 	By:	 	/s/ Dan W. Gladney
	 	 	

	 	Name:	 	Dan W. Gladney
	 	 	

	 	Title:	 	Chief Executive Officer
	 	 	

	 	/s/ Scott P. Youngstrom
	 	

	 	Scott P. Youngstrom

12exv10w15

 

EXHIBIT 10.15

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (this “Agreement”) dated as of November 25, 2002,
between Rehabilicare Inc. (the “Company”), a Minnesota corporation, and
Marshall T. Masko (the “Employee”), a resident of Minnesota.

     WHEREAS, the Company wishes to employ the Employee to render services for
the Company on the terms and conditions set forth in this Agreement, and the
Employee wishes to be retained and employed by the Company on such terms and
conditions.

     NOW, THEREFORE, in consideration of the premises, the mutual agreements
set forth below and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

     1.     Employment. The Company hereby employs the Employee, and the Employee
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.

     2.     Term. Unless terminated at an earlier date in accordance with Section
9 of this Agreement, the term of the Employee’s employment hereunder shall be
for a period of one year years, commencing on November 25, 2002.

     3.     Position and Duties.

     (a)  Service with Company. During the term of the Employee’s employment,
the Employee agrees to perform such reasonable employment duties as the Chief
Executive Officer of the Company shall assign to him from time to time. The
Employee’s title shall be “Vice President of Marketing.”

     (b)  Performance of Duties. The Employee agrees to serve the Company
faithfully and to the best of his ability and to devote his full time,
attention and efforts to the business and affairs of the Company during his
employment by the Company. The Employee hereby confirms that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement and that during the term of this Agreement, he will not render or
perform services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement. While he remains employed
by the Company, the Employee may participate in reasonable charitable
activities and personal investment activities so long as such activities do not
interfere with the performance of his obligations under this Agreement.

     4.     Compensation.

     (a)  Base Salary. As compensation in full for all services to be rendered
by the Employee under this Agreement, the Company shall pay to the Employee a
base salary of $155,000, less deductions and withholdings, which salary shall
be paid on a monthly basis in arrears in accordance with the Company’s normal
payroll procedures and policies. The compensation

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payable to the Employee
during each year after the first year of the Employee’s employment shall be
established by the Company’s Board of Directors following an annual performance
review, but in no event shall the salary for any subsequent year be less than
the salary in effect for the prior year.

     (b)  Incentive Compensation. In addition to the base salary, the Employee
shall be eligible to participate in any bonus or incentive compensation plans
that may be established by the Board of Directors of the Company from time to
time applicable to the Employee. For the first twelve months of Employee’s
employment, the Company will establish a bonus program for the fiscal year
ending June 30, 2003, that will provide the Employee the opportunity to achieve
an annual bonus of up to 25% of his annual base salary (subject to satisfaction
of performance measures to be established by the Company’s Chief Executive
Officer, in his absolute discretion), such bonus to be pro rated for the actual
number of months served.

     (c)  Participation in Benefit Plans. While he is employed by the Company,
the Employee shall also be eligible to participate in all employee benefit
plans or programs (including vacation time) of the Company to the extent that
the Employee meets the requirements for each individual plan. The Company
provides no assurance as to the adoption or continuance of any particular
employee benefit plan or program, and the Employee’s participation in any such
plan or program shall be subject to the provisions, rules and regulations
applicable thereto.

     (d)  Expenses. The Company will pay or reimburse the Employee for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company’s normal
policies for expense verification.

     (e)  Issuance of Stock Option. Concurrently with the execution of this
Agreement, the Company is granting to the Employee an option to purchase up to
150,000 shares of the Company’s common stock pursuant to the Company’s 1998
Stock Incentive Plan. Such option shall be subject to the vesting schedule and
terms and conditions set forth in the form of stock option agreement attached
as Exhibit A hereto.

     5.     Confidential Information. Except as permitted or directed by the
Company’s Chief Executive Officer, during the term of his employment or at any
time thereafter, the Employee shall not divulge, furnish or make accessible to
anyone or use in any way (other than in the ordinary course of the business of
the Company) any confidential or secret knowledge or information of the Company
that the Employee has acquired or become acquainted with or will acquire or
become acquainted with
prior to the termination of the period of his employment by the Company
(including employment by the Company or any affiliated companies prior to the
date of this Agreement), whether developed by himself or by others, concerning
any trade secrets, confidential or secret designs, processes, formulae, plans,
devices or material (whether or not patented or patentable) directly or
indirectly useful in any aspect of the business of the Company, any customer or
supplier lists of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. The Employee acknowledges that the
above-described knowledge or information constitutes a unique and valuable
asset of the Company and represents a substantial investment of time and
expense by the Company, and that any disclosure or other use of such knowledge
or information other than for the sole benefit of the Company would be wrongful
and would cause irreparable harm to the Company. Both during and for a period
of two years after

2

 

the term of his employment, the Employee will refrain from
any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality shall
not apply to any knowledge or information that is now published or which
subsequently becomes generally publicly known in the form in which it was
obtained from the Company, other than as a direct or indirect result of the
breach of this Agreement by the Employee.

     6.     Ventures. If, during the term of his employment the Employee is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company. Except
as approved by the Company’s Chief Executive Officer, the Employee shall not be
entitled to any interest in such project, program or venture or to any
commission, finder’s fee or other compensation in connection therewith other
than the compensation to be paid to the Employee as provided in this Agreement.
The Employee shall have no interest, direct or indirect, in any vendor or
customer of the Company.

     7.     Noncompetition Covenant.

     (a)  Agreement Not to Compete. During the term of his employment with the
Company and for a period of one year after the termination of such employment
(whether such termination is with or without cause, or whether such termination
is occasioned by the Employee or the Company), he shall not, directly or
indirectly, engage in competition with the Company in any manner or capacity
(e.g., as an advisor, principal, agent, partner, officer, director,
stockholder, employee, member of any association or otherwise) in any phase of
the business which the Company is conducting during the term of this Agreement,
including the design, development, manufacture, distribution, marketing,
leasing or selling of accessories, devices or systems related to the products
or services being sold by the Company or hire any current or former employee of
the Company.

     (b)  Geographic Extent of Covenant. The obligations of the Employee under
Section 7(a) shall apply to any geographic area in which the Company (i) has
engaged in business during the term of this Agreement through
production, promotional, sales or marketing activity, or otherwise, or
(ii) has otherwise established its goodwill, business reputation or any
customer or supplier relations.

     (c)  Limitation of Covenant. Ownership by the Employee, as a passive
investment, of less than two percent of the outstanding shares of capital stock
of any corporation listed on a national securities exchange or publicly traded
on Nasdaq shall not constitute a breach of this Section 7.

     (d)  Indirect Competition. The Employee will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this Section 7
if such activity were carried out by the Employee, either directly or
indirectly. In particular the Employee agrees that he will not, directly or
indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.

     (e)  Acknowledgment. The Employee agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to protect
the legitimate interests of the

3

 

Company and that any violation of this Section
7 will cause substantial and irreparable harm to the Company that would not be
quantifiable and for which no adequate remedy would exist at law and
accordingly injunctive relief shall be available for any violation of this
Section 7.

     (f)  Blue Pencil Doctrine. If the duration or geographical extent of, or
business activities covered by, this Section 7 are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Employee acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.

     8.     Patent and Related Matters.

     (a)  Disclosure and Assignment. The Employee will promptly disclose in
writing to the Company complete information concerning each and every
invention, discovery, improvement, device, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by the Employee,
either solely or in collaboration with others, during the term of this
Agreement, or within six months thereafter, whether or not during regular
working hours, relating either directly or indirectly to the business,
products, practices or techniques of the Company (“Developments”). The
Employee, to the extent that he has the legal right to do so, hereby
acknowledges that any and all of the Developments are the property of the
Company and hereby assigns and agrees to assign to the Company any and all of
the Employee’s right, title and interest in and to any and all of the
Developments. At the request of the Company, the Employee will confer with the
Company and its representatives for the
purpose of disclosing all Developments to the Company as the Company shall
reasonably request during the period ending one year after termination of the
Employee’s employment with the Company.

     (b)  Future Developments. As to any future Developments made by the
Employee that relate to the business, products or practices of the Company and
that are first conceived or reduced to practice during the term of this
Agreement, or within six months thereafter, but which are claimed for any
reason to belong to an entity or person other than the Company, the Employee
will promptly disclose the same in writing to the Company and shall not
disclose the same to others if the Company, within 20 days thereafter, shall
claim ownership of such Developments under the terms of this Agreement. If the
Company makes no such claim, the Employee hereby acknowledges that the Company
has made no promise to receive and hold in confidence any such information
disclosed by the Employee.

     (c)  Limitation on Sections 8(a) and 8(b). The provisions of Section 8(a)
and 8(b) shall not apply to any Development meeting the following conditions:

	 	(i)	 	such Development was developed entirely on the Employee’s own time;
	 
	 	(ii)	 	such Development was made without the use of any
Company equipment, supplies, facility or trade secret
information;
(iii) such Development does not relate (A) directly to
the business of the Company or (B) to the Company’s actual or
demonstrably anticipated research or development; and

4

 

	 	(iv)	 	such Development does not result from any work
performed by the Employee for the Company.

     (d)  Assistance of the Employee. Upon request and without further
compensation therefore, but at no expense to the Employee, the Employee will do
all lawful acts, including but not limited to, the execution of papers and
lawful oaths and the giving of testimony, that in the opinion of the Company,
may be necessary or desirable in obtaining, sustaining, reissuing, extending
and enforcing United States and foreign copyrights and Letters Patent,
including but not limited to, design patents, on the Developments, and for
perfecting, affirming and recording the Company’s complete ownership and title
thereto, and to cooperate otherwise in all proceedings and matters relating
thereto.

     (e)  Records. The Employee will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, the Employee will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, the Employee will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.

     (f)  Obligations, Restrictions and Limitations. The Employee understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. The Employee shall be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by him while he is employed by the Company and shall take any and all
further action which may be required to discharge such obligations and to
comply with such restrictions and limitations.

     (g)  Copyrightable Material. All right, title and interest in all
copyrightable material that the Employee shall conceive or originate, either
individually or jointly with others, and which arise out of the performance of
this Agreement, will be the property of the Company and are by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation
therefor, but at no expense to the Employee, the Employee shall execute all
papers and perform all other acts necessary to assist the Company to obtain and
register copyrights on such materials in any and all countries. Where
applicable, works of authorship created by the Employee for the Company in
performing his responsibilities under this Agreement shall be considered “works
made for hire,” as defined in the U.S. Copyright Act.

     (h)  Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by the Employee that arises out of the performance of
his obligations or responsibilities under this Agreement or any related
material or information shall be the property of the Company, and all rights
therein are by this Agreement assigned to the Company.

     9.     Termination of Employment.

5

 

     (a)  Grounds for Termination. The Employee’s employment shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that at any time:

	 	(i)	 	The Employee dies,
	 
	 	(ii)	 	The Employee becomes “disabled,” so that he
cannot perform the essential functions of his position with or
without reasonable accommodation,
	 
	 	(iii)	 	The Board of Directors of the Company elects to
terminate this Agreement for “cause” and notifies the Employee
in writing of such election,
	 
	 	(iv)	 	The Board of Directors of the Company elects to
terminate this Agreement without “cause” and notifies the
Employee in writing of such election, or
	 
	 	(v)	 	The Employee elects to terminate this Agreement
and notifies the Company in writing of such election.

     If this Agreement is terminated pursuant to clause (i), (ii) or (iii) of
this Section 9(a), such termination shall be effective immediately. If this
Agreement is terminated pursuant to clause (iv) or (v) of this Section 9(a),
such termination shall be effective 30 days after delivery of the notice of
termination.

     (b)  “Cause” Defined. “Cause” means:

	 	(i)	 	The Employee has breached the provisions of
Section 5, 7 or 8 of this Agreement in any material respect,
	 
	 	(ii)	 	The Employee has engaged in willful and material
misconduct, including willful and material failure to perform
the Employee’s duties as an officer or employee of the Company
and has failed to cure such default within 30 days after
receipt of written notice of default from the Company,
	 
	 	(iii)	 	The Employee has committed fraud,
misappropriation or embezzlement in connection with the
Company’s business, or
	 
	 	(iv)	 	The Employee has been convicted or has pleaded
nolo contendere to criminal misconduct (except for parking
violations and occasional minor traffic violations).

     In the event that the Company terminates the Employee’s employment for “cause”
pursuant to clause (ii) of this Section 9(b) and the Employee objects in
writing to the Board’s determination that there was proper “cause” for such
termination within 20 days after the Employee is notified of such termination,
the matter shall be resolved by arbitration in accordance with the provisions
of Section 10(a). If the Employee fails to object to any such determination of
“cause” in writing within such 20-day period, he shall be deemed to have waived
his right to object to that determination. If such arbitration determines that
there was not proper “cause” for termination,

6

 

such termination shall be deemed
to be a termination pursuant to clause (iv) of Section 9(a) and the Employee’s
sole remedy shall be to receive the wage continuation benefits contemplated by
Section 9(f).

     (c)  Effect of Termination. Notwithstanding any termination of this
Agreement, the Employee, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this
Agreement which specifically relate to periods, activities or obligations upon
or subsequent to the termination of the Employee’s employment.

     (d)  “Disabled” Defined. “Disabled” means any mental or physical condition
that renders the Employee unable to perform the essential functions of his
position, with or without reasonable accommodation, for a period in excess of
three months.

     (e)  Surrender of Records and Property. Upon termination of his employment
with the Company, the Employee shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.

     (f)  Salary Continuation. If the Employee’s employment by the Company is
terminated by the Company pursuant to clause (ii) or (iv) of Section 9(a), the
Company shall continue to pay to the Employee his base salary (less any
payments received by the Employee from any disability income insurance policy
provided to him by the Company) through the earlier of (a) the date that the
Employee has obtained other full-time employment, or (b) six months from the
date of termination of employment; If this Agreement is terminated pursuant to
clauses (i), (iii) or (v) of Section 9(a), the Employee’s right to base salary
and benefits shall immediately terminate, except as may otherwise be required
by applicable law.

     10.     Settlement of Disputes.

     (a)  Arbitration. Except as provided in Section 10(b), any claims or
disputes of any nature between the Company and the Employee arising from or
related to the performance, breach, termination, expiration, application or
meaning of this Agreement or any matter relating to the Employee’s employment
and the termination of that employment by the Company shall be resolved
exclusively by arbitration in Hennepin County, Minnesota, in accordance with
the applicable rules of the American Arbitration Association. In the event of
submission of any dispute to arbitration, each party shall, not later than 30
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at
the hearing and a list of all persons each party intends to call at the
hearing. The fees of the arbitrator(s) and other costs incurred by the
Employee and the Company in connection with such arbitration shall be paid by
the party that is unsuccessful in such arbitration.

     The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment of the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.

7

 

     (b)  Resolution of Certain Claims—Injunctive Relief. Section 10(a) shall
have no application to claims by the Company asserting a violation of Section
5, 7, 8 or 9(e) or seeking to enforce, by injunction or otherwise, the terms of
Section 5,
7, 8 or 9(e). Such claims may be maintained by the Company in a lawsuit
subject to the terms of Section 10(c). The Employee acknowledges that it would
be difficult to fully compensate the Company for damages resulting from any
breach by him of the provisions of this Agreement. Accordingly, the Employee
agrees that, in addition to, but not to the exclusion of any other available
remedy, the Company shall have the right to enforce the provisions of Sections
5, 7, 8 and 9(e) by applying for and obtaining temporary and permanent
restraining orders or injunctions from a court of competent jurisdiction
without the necessity of filing a bond therefor, and without the necessity of
proving actual damages, and the Company shall be entitled to recover from the
Employee its reasonable attorneys’ fees and costs in enforcing the provisions
of Sections 5, 7, 8 and 9(e).

     (c)  Venue. Any action at law, suit in equity or judicial proceeding
arising directly, indirectly, or otherwise in connection with, out of, related
to or from this Agreement, or any provision hereof, shall be litigated only in
the courts of the State of Minnesota, County of Hennepin. The Employee and the
Company consent to the jurisdiction of such courts over the subject matter set
forth in Section 10(b). The Employee waives any right the Employee may have to
transfer or change the venue of any litigation brought against the Employee by
the Company.

     11.     Miscellaneous.

     (a)  Entire Agreement. This Agreement (including the exhibits, schedules
and other documents referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations, written or
oral, relating to the subject matter hereof.

     (b)  Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may execute
this Agreement by signing any such counterpart.

     (c)  Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable under any applicable law or rule, the validity,
legality and enforceability of the other provision of this Agreement will not
be affected or impaired thereby. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business
activities covered by, any provision of this Agreement be in excess of that
which is valid and enforceable under applicable law, then such provision shall
be construed to cover only that duration, extent or activities which may
validly and enforceably be covered. The Employee acknowledges the uncertainty
of the law in this respect and expressly stipulates that this Agreement be
given the construction which renders its provision valid and enforceable to the
maximum extent (not exceeding its express terms) possible under applicable law.

8

 

     (d)  Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives and, to the extent permitted by subsection (e), successors and
assigns.

     (e)  Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable (including by operation of law) by either party without the prior
written consent of the other party to this Agreement, except that the Company
may, without the consent of the Employee, assign its rights and obligations
under this Agreement to any corporation, firm or other business entity with or
into which the Company may merge or consolidate, or to which the Company may
sell or transfer all or substantially all of its assets, or of which 50% or
more of the equity investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, the Company. After any such
assignment by the Company, the Company shall be discharged from all further
liability hereunder and such assignee shall thereafter be deemed to be the
Company for the purposes of all provisions of this Agreement including this
Section 11.

     (f)  Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No course of
dealing between the parties will modify, amend, waive or terminate any
provision of this Agreement or any rights or obligations of any party under or
by reason of this Agreement. No delay on the part of the Company in exercising
any right hereunder shall operate as a waiver of such right. No waiver,
express or implied, by the Company of any right or any breach by the Employee
shall constitute a waiver of any other right or breach by the Employee.

     (g)  Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and delivered by
personal delivery, overnight courier, mail, electronic facsimile or e-mail
addressed to the receiving party at the address set forth herein. All such
communications shall be effective when received.

     Marshall T. Masko

     4683 Chantrey Place

     Minnetonka, MN

     55345

Any party may change the address set forth above by notice to each other party
given as provided herein.

9

 

     (h)  Headings. The headings and any table of contents contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

     (i)  Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS
THEREOF.

     (j)  Third-Party Benefit. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies, obligations
or liabilities of any nature whatsoever.

     (k)  Withholding Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.

	 	 	 	 	 
	 	 	Rehabilicare Inc.
	 	 	 	 	 
	 	 	
By:	 	/s/ Dan W. Gladney
	 	 	 	 	

	 	 	Name: Dan W. Gladney
	 	 	Title: President and CEO
	 	 	 
	 	 	/s/ Marshall T. Masko
	 	 	

Marshall T. Masko

10

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