Document:

exv10w2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made and entered as of December 12, 2006 (the
“Commencement Date”), between Enpath Medical, Inc., a Minnesota corporation (the “Company”), and
John C. Hertig (“Executive”), a resident of Minnesota.

RECITALS

     WHEREAS, the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the Company and its
shareholders; and

     WHEREAS, due to the Executive’s experience and knowledge, the Executive has made and is
expected to continue to make a significant contribution to the profitability, growth and financial
strength of the Company; and

     WHEREAS, the Executive is willing to continue employment with the Company upon the
understanding that the Company will provide income security if the Executive’s employment is
terminated under certain terms and conditions;

     WHEREAS, it is in the best interests of the Company, as a publicly held corporation, and its
shareholders to reinforce and encourage the Executive’s continued attention and dedication to the
assigned duties without distraction and to ensure the Executive’s continued availability to the
Company in the event of a change in control;

AGREEMENT

     NOW, THEREFORE, in consideration of the Executive’s employment with the Company and the
foregoing premises, the mutual covenants set forth below, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the
Executive agree as follows:

ARTICLE 1: EMPLOYMENT, TERM AND DUTIES

     1.1 Employment. The Company hereby continues to employ the Executive as President and Chief
Executive Officer and the Executive accepts this continued employment and agrees to perform
services for the Company, for the period and upon the other terms and conditions set forth in this
Agreement

     1.2 Term. This Agreement will be effective from and after the date hereof and will
continue in effect through December 31, 2008, and will automatically be extended for successive
one-year periods thereafter unless either the Company or the Executive provides written notice to
the other party no later than the September 30 prior to the expiration of the Agreement of the
intent not to extend. If, however, a Change in Control has occurred during the original or any
extended term of this Agreement, this Agreement will continue in effect for a period of the later
of:

 

 

	 	(a)	 	12 months from the date of the occurrence of a Change in
Control;
	 
	 	(b)	 	if an event triggering the Company’s severance payment
obligations to the Executive under Section 3.2.4 has occurred, until the
benefits payable to the Executive hereunder have been paid in full; or
	 
	 	(c)	 	the date the Executive enters into a new employment agreement
with the Company or its successor. This Agreement neither imposes nor confers
any further rights or obligations on the Company or the Executive on the day
after the end of the term of this Agreement. Expiration of the term of this
Agreement of itself and without subsequent action by the Company or the
Executive will not end the employment relationship between the Company and the
Executive.

     1.3 Position and Duties. The Executive agrees to serve the Company and to perform the
duties of this position and such other duties not inconsistent with this position as the Board will
assign to the Executive from time to time. During the Term, the Executive agrees to serve Company
faithfully and to the best of the Executive’s ability and to devote the Executive’s full business
time, attention and efforts to the business and affairs of Company. Executive will perform all of
the Executive’s responsibilities in compliance with all applicable laws and with all of the
applicable policies generally in effect for employees of the Company, including without limitation,
the Company’s Code of Conduct and related policies, as the same may be amended from time to time.

ARTICLE 2: COMPENSATION, BENEFITS AND EXPENSES

     2.1 Base Salary. As the initial base compensation for all services the Executive
renders under this Agreement, the Executive will receive an annualized base salary (“Annual Base
Salary”) of $250,000. The Annual Base Salary will be paid in accordance with the Company’s normal
payroll procedures and policies, as these procedures and policies may be modified from time to
time. The Annual Base Salary will be reviewed and increased in the sole discretion of the Company
according to a schedule and in a manner consistent with the Company’s practices for salary
adjustment, which practices may be revised from time to time.

     2.2 Incentive Compensation. The Executive will be eligible to participate in any
incentive compensation plans established by the Company to the extent the Company in its sole
discretion may determine from time to time. The Company does not guarantee the adoption or
continuance of any particular incentive plan during the Term, and nothing in this Agreement is
intended to, or will in any way restrict the right of the Company, to amend, modify or terminate
any of its incentive plans during the Term.

     2.3 Benefit Plans. During the Term, the Executive will be entitled to paid time off
consistent with the Company’s policies and to participate in the employee benefits offered
generally by the Company to its salaried employees, to the extent that the Executive’s position,
tenure, salary, health, and other qualifications make the Executive eligible to participate. The
Executive’s participation in these benefits will be subject to the terms of the applicable plans,
as the same may be amended from time to time. The Company does not guarantee the adoption or

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continuance of any particular employee benefit or benefit plan during the Term, and subject to
the rights of the Executive in accordance with Section 3.2.4, nothing in this Agreement is intended
to, or will in any way restrict the right of the Company, to amend, modify or terminate any of its
benefits or benefit plans during the Term.

     2.4 Expenses. During the Term, the Executive will be entitled to reimbursement for
all reasonable business expenses the Executive incurs in carrying out the duties under this
Agreement in accordance with the policies and practices of the Company for submission of expense
reports, receipts, or similar documentation of these expenses as in effect from time to time by the
Company.

     2.5 Executive Perquisites. The Executive will be eligible to receive any perquisites
that the Company may from time to time deem are appropriate and administratively feasible to
provide to its senior executives generally or to the Executive, specifically.

ARTICLE 3: TERMINATION OF EMPLOYMENT

     3.1 Termination. The Executive’s employment under this Agreement may be terminated
during the Term as described in this Article 3.

          3.1.1 Death or Disability. The Executive’s employment will terminate automatically
upon the Executive’s death. The Executive’s employment will terminate due to the Executive’s
Disability (as defined in Appendix A) immediately after 30 days’ written notice to the Executive if
the Executive has not returned to the full-time performance of the Executive’s duties during this
period.

          3.1.2  Termination by Company Prior to a Change in Control. Prior to a “Change in
Control” (as defined in Appendix A), the Company may terminate this Agreement and the Executive’s
employment hereunder at any time and for any reason after providing written notice to the
Executive. If, however, the Company terminates the Executive’s employment prior to a Change in
Control for any reason other than “Cause” (as defined in Appendix A), the Company must pay the
Executive in accordance with Section 3.2.2.

          3.1.3 Resignation by the Executive. The Executive may, whether prior to or after a
Change in Control, resign employment with the Company effective upon 30 days’ advance written
notice to the Chairman of the Board of the Directors of the Company. In that event, the Chairman
may terminate the Executive’s employment effective immediately upon delivery of written notice to
the Executive, at any time during the 30-day notice period, and the Company will continue to pay
the Executive’s Base Salary and the Company’s portion of the Executive’s health insurance premiums
for the duration of the 30-day notice period. Thereafter, except as provided in Section 3.2.4, the
Company will pay the Executive in accordance with Section 3.2.3.

          3.1.4 Termination by the Company other than for Cause or Resignation by the Executive for
Good Reason After a Change in Control. If a Change in Control occurs and during the 12-month
period following a Change in Control, the Company terminates the Executive’s employment for any
reason other than Cause, or the Executive resigns employment for “Good Reason” (as defined in
Appendix A), then the terms of Section 3.2.4 will apply. The

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Executive will have Good Reason to terminate employment if: (a) within 45 days following the
Executive’s actual knowledge of the event which the Executive determines constitutes Good Reason,
the Executive notifies the Company in writing that the Executive has determined a Good Reason
exists and specifies the event creating Good Reason, and (b) following receipt of the notice, the
Company fails to remedy the event within 45 days. If either condition is not met, the Executive
will not have a Good Reason to terminate employment.

     3.2 Compensation Following Termination Prior to the End of the Term. In the event
that the Executive’s employment is terminated prior to the end of the Term, the Executive will be
entitled only to the following compensation and benefits upon such termination, if the Executive is
in compliance with the covenants contained in the Confidentiality, Noncompetition and Inventions
Agreement (Technical and Executive Employees) described in Article 4.

          3.2.1 Termination by Reason of the Executive’s Death or Disability. If Executive’s
employment is terminated prior to the expiration of the Term by reason of the Executive’s death or
Disability as provided in Section 3.1.1, the Company will pay to the Executive, the Executive’s
spouse or estate, as the case may be, any amounts due to the Executive for Base Salary through the
date of employment termination, together with any other unpaid and pro rata amounts to which the
Executive is entitled as of the date of termination pursuant to Article 2, including, without
limitation, accrued paid time off in accordance with Company policy and amounts that the Executive
is entitled to under any benefit plan of the Company in accordance with the terms of such plan.
The Executive will have no rights to any unvested benefits or any other compensation or payments
coming due after the date of the Executive’s employment termination.

          3.2.2 Termination by the Company other than for Cause Prior to a Change in Control.
If the Executive’s employment is terminated other than for Cause as provided in Section 3.1.2, and
provided the Executive has executed a written release of any and all claims arising out of
Executive’s employment in form acceptable to the Company and the rescission period specified
therein has expired, the Company will pay to the Executive:

	 	(a)	 	any Annual Base Salary earned but not paid through the date of
the Executive’s employment termination and payment of any accrued but unpaid
time off in accordance with Company policy; and
	 
	 	(b)	 	if the Executive’s termination of employment occurs after June
30 of any year, the annual incentive bonus for that fiscal year at target
performance (or if the target goals have not been set at the time of
Executive’s employment termination, then the target goals in effect for the
prior fiscal year), waiving any other condition precedent, such as continued
employment, multiplied by a fraction, the numerator of which is the number of
days worked by the Executive in the bonus period prior to the termination of
employment, and the denominator of which is the number of days in the bonus
period, less any amount of any such incentive bonus that has been paid. The
pro-rated incentive bonus will be paid only if senior management of the Company
are paid a bonus based on achievement of goals at or above target for the year
in which the

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	 	 	 	termination occurs, and will be paid to the Executive at the same time and
manner as the bonus is paid to other senior management of the Company; and
	 
	 	(c)	 	continuation of Executive’s Base Salary in accordance with the
Company’s regular payroll policies for a period of 26 weeks from the date of
Executive’s employment termination or until the end of the Term of this
Agreement, whichever occurs first; and
	 
	 	(d)	 	the amount of any other benefits to which the Executive is
legally entitled as of such date under the terms and conditions of any benefit
plans of the Company in which the Executive is participating as of such date.

Except as provided in (a) through (d) above, the Company will have no further obligations under
this Agreement.

     3.2.3 Termination by the Executive. If the Executive’s employment is terminated as
provided in Section 3.1.3, the Company will pay to the Executive (a) any Annual Base Salary earned
but not paid through the date of the Executive’s employment termination, plus (b) the amount of any
other benefits to which the Executive is legally entitled as of such date under the terms and
conditions of any benefit plans of the Company in which the Executive is participating as of such
date. Thereafter, the Company will have no further obligations under this Agreement

     3.2.4 Termination by the Company other than for Cause or Resignation by the Executive for
Good Reason After a Change in Control. In the event the Executive’s employment is terminated
by the Company without Cause or by the Executive for Good Reason as provided in Section 3.1.4, and
provided in either case that the Executive has executed a written release of any and all claims
arising during the Executive’s employment in form acceptable to the Company and the rescission
period specified therein has expired, the Company will pay or provide the following amounts or
benefits to the Executive:

	 	(a)	 	any accrued but unpaid Annual Base Salary and any other form or
type of compensation, benefit or perquisite that is vested or accrued at the
date of termination of the Executive’s employment with the Company for services
rendered to such date, and payment for any accrued paid time off in accordance
with the Company’s policies; and
	 
	 	(b)	 	the annual incentive bonus for that fiscal year at target
performance (or if the target goals have not been set at the time of
Executive’s employment termination, then the target goals in effect for the
prior fiscal year), waiving any other condition precedent, such as continued
employment, multiplied by a fraction, the numerator of which is the number of
days worked by the Executive in the bonus period prior to the termination of
employment, and the denominator of which is the number of days in the bonus
period, less any amount of any such incentive bonus that has been paid. The
pro-rated incentive bonus will only be payable and paid,

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	 	 	 	however, only if senior management of the Company are paid a bonus based on
achievement of goals at or above target for the year in which the
termination occurs, and will be paid to the Executive at the same time and
manner the bonus is paid to other senior management of the Company; and
	 
	 	(c)	 	a severance payment equal to the Executive’s Annual Base Salary
in effect as of the date of termination (without regard to any reduction that
is in breach of this Agreement), to be paid in cash in a single sum within 30
days of the date of the Executive’s termination of employment; and
	 
	 	(d)	 	the amount of any other benefits to which the Executive is
legally entitled as of such date under the terms and conditions of any benefit
plans of the Company in which the Executive is participating as of the date of
termination (without regard to any reduction in such benefit that is in breach
of this Agreement).

Except as provided in (a) through (d) above, the Company will have no further obligations under
this Agreement.

          3.2.5 Dispute of Termination. If, following a Change in Control, within 10 days after
any notice of termination by the Executive for Good Reason or by the Company for Cause, the party
receiving the notice notifies the other party that a dispute exists concerning the termination, the
effective date of the termination will be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or the time for appeal has expired and no
appeal having been perfected). A notice of dispute will extend the date of termination only if the
notice is given in good faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any dispute, the Company will continue
to pay the Executive full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and continue the Executive as a participant in
all compensation, benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, to the extent permissible under the terms of the
applicable group plans and state and federal law, until the dispute is finally resolved in
accordance with this subparagraph. Amounts paid under this Section 3.2.5 are in addition to any
amounts otherwise due under this Agreement, but in no event must the Company pay more than 25% of
the severance payment set forth in Section 3.2.4(c) pursuant to this Section 3.2.5.

          3.2.6 Payments Subject to Code 409A. Notwithstanding anything herein to the contrary,
if the Executive is designated as a “specified employee” as defined in Code §409A and Regulations
applicable thereto at the time any payment is due, any payments that would constitute “deferred
compensation” under Code §409A will be paid on the 181st day following the Executive’s separation
from service (as defined in Code §409A), and any such delay in payment will accrue interest at the
applicable federal short term rate as determined under Code § 1274 in effect on the date payment
was otherwise due.

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     3.3 No Other Benefits. If the Executive receives the payments and benefits described
in this Article 3, the Executive will not be eligible to receive from the Company or any Affiliate
any other severance payments provided by the Company under any plan or policy or arrangement to
which the Executive is otherwise eligible. Nothing in this Agreement will extend the continuation
period of any benefit beyond the maximum period otherwise required by law and regulation.

ARTICLE 4: CONFIDENTIALITY, NONCOMPETITION AND INVENTIONS

As a condition to and in consideration of the benefits to be provided by the Company to the
Executive pursuant to the terms of this Agreement, the Executive agrees to execute and to be bound
by the provisions of the Confidentiality, Noncompetition and Inventions Agreement (Technical and
Executive Employees) attached hereto as Exhibit A. Notwithstanding any termination of the
Executive’s employment with the Company, the Executive, will remain bound by the provisions of this
Agreement that specifically relate to periods, activities or obligations upon or subsequent to the
termination of the Executive’s employment, including, but not limited to, the covenants contained
in Exhibit A, which are hereby incorporated into this Agreement as though fully set forth herein.

ARTICLE 5: DISPUTE RESOLUTION PROCESS

     5.1 Dispute Defined. The Company and the Executive desire to establish a reasonable
and confidential means of resolving any dispute, question or interpretation arising out of or
relating to: (a) this Agreement or the alleged breach or threatened breach of it, (b) the making of
this Agreement, including claims of fraud in the inducement, or (c) the Executive’s employment by
the Company pursuant to this Agreement, including claims of wrongful termination or discrimination
(each dispute to be referred to herein as a “Dispute”).

     5.2 Procedure. In furtherance of the parties’ mutual desire, the Company and the
Executive agree that if either party believes a Dispute exists, that party will provide the other
with written notice of the claimed Dispute. If the parties are unable to mutually resolve a
Dispute within 30 days of the first written notice, the Dispute will be resolved exclusively by
final and binding arbitration held in accordance with the provisions of this Agreement and the
American Arbitration Association (“AAA”) National Rules for the Resolution of Employment Disputes
then in effect, unless those rules are inconsistent with the provisions of this Agreement. In
connection with the arbitration:

	 	(a)	 	any such arbitration will be conducted: (i) by a neutral
arbitrator appointed by mutual agreement of the parties; or (ii) failing such
agreement, by a neutral arbitrator appointed in accordance with said AAA rules;
	 
	 	(b)	 	the Company will pay the fees and expenses of the arbitrator;
	 
	 	(c)	 	the parties will be permitted reasonable discovery in
accordance with the provisions of the Minnesota Rules of Civil Procedure,
including the production of relevant documents by the other party, the exchange
of witness lists, and a limited number of depositions, including depositions of
any expert who will testify at the arbitration;

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	 	(d)	 	the summary judgment procedure applicable under Rule 56 of the
Minnesota Rules of Civil Procedure will be available and apply to any
arbitration conducted pursuant to this Agreement;
	 
	 	(e)	 	the arbitrator’s award will include findings of fact and
conclusions of law showing the legal and factual bases for the arbitrator’s
decision;
	 
	 	(f)	 	the arbitrator will have the authority to award to the
prevailing party any remedy or relief that a United States District Court or
court of the State of Minnesota could order or grant if the dispute had first
been brought in that judicial forum, including costs (other than the
arbitrator’s fees and expenses) and, in case of bad faith, attorneys’ fees;
	 
	 	(g)	 	the arbitrator’s award may be entered by any court of competent
jurisdiction; and
	 
	 	(h)	 	unless otherwise agreed by the parties, the place of any
arbitration proceeding will be Minneapolis, Minnesota.

     5.3 Confidentiality of Dispute Resolution. Except as the parties agree in writing,
upon court order, or as required by law, neither the Company nor the Executive will disclose to any
third party, except for its counsel, retained experts and other persons directly serving counsel or
retained experts, any fact or information in any way pertaining to the process of resolving a
Dispute under this Article 5, or to the fact of or any term that is part of a resolution or
settlement of any Dispute. This prohibition on disclosure specifically includes, without
limitation, any disclosure of an oral statement or of a written document made or provided by either
the Executive or the Company, or by any of the Company’s or the Executive’s representatives,
counsel or retained experts, or other persons directly serving any representatives, counsel or
retained experts.

     5.4 Right to Injunctive Relief. The Executive acknowledges and agrees that the
services to be rendered by the Executive hereunder are of a special, unique and extraordinary
character, that it would be difficult to replace these services and that any violation of the
Executive’s obligations under the Confidentiality, Noncompetition and Inventions Agreement
(Technical and Executive Employees) would be highly injurious to the Company any Company Affiliate
and that it would be extremely difficult to compensate the Company for any Company Affiliate fully
for damages for any such violation. Accordingly, notwithstanding the terms of this Article 5, the
Company or any Company Affiliate, as the case may be, will be entitled to seek temporary and
permanent injunctive relief from a court of law, in the event of violation by the Executive of any
of the obligations under any provision of the Confidentiality, Noncompetition and Inventions
Agreement (Technical and Executive Employees) as set forth in Exhibit A. This provision with
respect to injunctive relief will not, however, diminish the right of the Company or any Company
Affiliate to claim and recover damages, or to seek and obtain any other relief available to it
pursuant to the provisions of this Article 5.

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ARTICLE 6: ASSIGNMENT; SUCCESSORS.

     6.1 Assignment. This Agreement is personal to the Executive and, without the prior
written consent of the Company, is not assignable by the Executive. This Agreement will inure to
the benefit of and be enforceable by the Executive’s heirs, executors and administrators.

     6.2 Successors. This Agreement will inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company may not assign this Agreement, however, except
in connection with the sale or disposition of all or substantially all of the assets of the Company
in a transaction described in Appendix A, or by law as a result of a merger or consolidation.

ARTICLE 7: MISCELLANEOUS PROVISIONS

     7.1 Notices. All notices and other communications under this Agreement will be in
writing and will be given by hand delivery to the other party, by registered or certified mail,
return receipt requested, postage prepaid, or by facsimile with printed confirmation, addressed to
the Executive at the last know mailing address on file with the Company and to the Company as
follows:

Enpath Medical, Inc.

Attention: Chairman of the Board

2300 Berkshire Lane

Minneapolis, MN 55441

With a copy to:

Thomas G. Lovett, IV

Lindquist & Vennum, PLLP

4200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

or to such other address as either party furnishes to the other in writing in accordance with this
paragraph. Notices and communications will be effective when actually received by the addressee or
3 days after the initiation of delivery.

     Any party may change the address for the purpose of this Section by giving the other written
notice of the new address in the manner set forth above.

     7.2 Enforceability. To the extent any provision of this Agreement is determined to be
invalid or unenforceable in any jurisdiction, that provision will be deemed deleted from this
Agreement as to such jurisdiction only, and the validity and enforceability of the remainder of
that provision and of this Agreement will be unaffected. In furtherance of and not in limitation
of the foregoing, the Executive expressly agrees that should the duration of, geographical extent
of, or business activities covered by, any provision of this Agreement be in excess of that which
is valid or enforceable under applicable law in a given jurisdiction, then such provision, as to

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such jurisdiction only, will be construed to cover only that duration, extent or activities
that may validly or enforceability be covered.

     7.3 Taxes. Notwithstanding any other provision of this Agreement, the Company will
withhold from any amount payable under this Agreement all federal, state, local and foreign taxes
that are required under any and all applicable laws or regulations, or that are consistent with the
Company’s prevailing practice.

     7.4 Governing Law, Construction, and Severability. The laws of the State of Minnesota
govern the validity, interpretation, performance and enforcement of this Agreement. In the event
any provision of this Agreement is held to be illegal or invalid for any reason, said illegality or
invalidity will not in any way affect the legality or validity of any other provision of this
Agreement. It is the intention of the parties hereto that the Company be given the broadest
possible protection respecting its confidential information and trade secrets and respecting
competition by the Executive following the Executive’s separation from the Company.

     7.5 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 will be litigated only in the State of Minnesota, Hennepin County District Court,
or the United States District Court for the District of Minnesota. The Executive waives any right
the Executive may have to transfer or change the venue of any litigation brought against the
Executive by the Company.

     7.6 Entire Agreement; Amendment. This Agreement is the final, complete and exclusive
agreement of the parties with respect to the subject matter hereof and supersedes all prior
discussions between the Company and the Executive regarding the subject matter hereof. Except as
provided in the next sentence, no modification of, or amendment to, this Agreement, nor any waiver
of either party’s rights under this Agreement, will be effective unless in writing and signed by
both parties. Notwithstanding the foregoing: (a) any subsequent change or changes in the
Executive’s duties, obligations, salary or compensation as a result of the exercise of discretion
in accordance with the provisions of this Agreement will not affect the validity or scope of this
Agreement; and (b) the Company will have the right, without the consent of the Executive, to amend
any provision of this Agreement as it may determine to avoid the imposition of any excise tax under
Code §409A, preserving, to the greatest extent possible, the economic benefit provided by this
Agreement to the Executive.

     7.7 Counterparts. This Agreement may be simultaneously executed in any number of
counterparts, and such counterparts executed and delivered, each as an original, will constitute
but one and the same instrument.

     7.8 Captions and Headings. The captions and paragraph headings used in this Agreement
are for convenience of reference only, and will not affect the construction or interpretation of
this Agreement or any of the provisions hereof.

     7.9 Survivability. The provisions of this Agreement that by their terms call for
performance subsequent to termination of the Executive’s employment under this Agreement, or of
this Agreement, will so survive such termination.

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     7.10 Waiver. No waiver by the Company of any breach or violation of this Agreement
will be a waiver of any preceding or succeeding breach or violation. No waiver by the Company of
any right under this Agreement will be construed as a waiver of any other right hereunder. The
Company will not be required to give notice to enforce strict adherence to any of the terms or
conditions of this Agreement.

     7.11 Advice of Counsel. The Executive acknowledges that the Executive has been
provided the opportunity to seek, and has obtained, the advice of counsel in connection with the
negotiation and execution of this Agreement.

     7.12 No Strict Construction. Each of the Executive and the Company acknowledge and
agree that the language used in this Agreement and the other agreements referred to herein is, and
will be deemed to be, the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against either party hereto.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

Dated this 26 day of March, 2007

Executive

/s/ John C. Hertig

John C. Hertig

Enpath Medical, Inc.

	 	 	 	 	 	 	 
	By	 	/s/ James D. Hartman	 	 
	 	 	 	 	 
	 

	 	Its
	 	Board Chairman	 	 
	 

	 	 	 	 	 	 

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APPENDIX A

For purposes of this Agreement, the following definitions will apply:

Change in Control. Change in Control means:

	 	(a)	 	any “person” as such term is used in Section 13(d) and 4(d) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”), together with all Affiliates and
Associates (as defined below) (collectively, the “Acquiring Person”) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities representing 50% or more of the combined voting power of the
Company’s then outstanding securities, but will not include

	 	i.	 	the Company,
	 
	 	ii.	 	any subsidiary of the Company,
	 
	 	iii.	 	or any employee benefit plan of the Company or of
any subsidiary of the Company or any entity holding shares of common
stock of the Company organized, appointed or established for, or pursuant
to the terms of, any such employee benefit plan;

	 	(b)	 	during any period of two consecutive years (not including any period ending
prior to the Commencement Date of this Agreement), the Continuing Directors (as defined
below) cease to constitute a majority of the Company’s Board of Directors;
	 
	 	(c)	 	consummation of a merger or consolidation of the Company with any other entity,
other than:

	 	i.	 	a merger or consolidation that:

(A) results in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the merged or
consolidated entity) 50% or more of the combined voting power of the
voting securities of the resulting entity outstanding immediately after
such merger or consolidation, and

(B) at least a majority of the members of the board of directors of the
resulting entity were Continuing Directors at the time of the action of
the Board of Directors of the Company approving the merger or
consolidation; or

	 	ii.	 	a merger or consolidation effected to implement a
recapitalization of the Company or similar transaction in which no
Acquiring Person is or becomes the “beneficial owner,” directly or
indirectly of more than 50%

 

 

	 	of the combined voting power of the Company’s then outstanding securities;
or

	 	(d)	 	consummation of the sale or disposition by the Company of all or substantially
all of its assets. “The sale or disposition by the Company of all or substantially all
of its assets” means a sale or other disposition transaction or series of related
transactions involving assets of the Company or of any Company Affiliate (including the
stock of any direct or indirect subsidiary of the Company) in which the value of the
assets or stock being sold or otherwise disposed of (as measured by the purchase price
being paid therefor or by such other method as the Board of Directors of the Company
determines is appropriate in a case where there is no readily ascertainable purchase
price) constitutes more than 50% of the fair market value of the Company. For purposes
of the preceding sentence, the “fair market value of the Company” will be the aggregate
market value of the Company’s outstanding common stock (on a fully diluted basis) plus
the aggregate market value of the Company’s other outstanding equity securities plus
the total of all debt outstanding. The aggregate market value of the Company’s common
stock will be determined by multiplying the number of shares of the Company’s common
stock (on a fully diluted basis) outstanding on the date of the execution and delivery
of a definitive agreement (“Transaction Date”) with respect to the sale or disposition
by the Company of all or substantially all of the Company’s assets by the average
closing price for the Company’s common stock for the ten trading days immediately
preceding the Transaction Date. The aggregate market value of any other equity
securities of the Company will be determined in a manner similar to that prescribed in
the immediately preceding sentence for determining the aggregate market value of the
Company’s common stock or by such other method as the Board of Directors of the Company
determines is appropriate; or
	 
	 	(e)	 	approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

Continuing Director. “Continuing Director” means any person who is a member of the
Company’s Board, who is not an Acquiring Person or an Affiliate or Associate (as defined below) of
an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or
Associate, and who:

	 	(a)	 	was a member of the Board on the Commencement Date of this Agreement, or
	 
	 	(b)	 	subsequently becomes a member of the Board, if such person’s initial nomination
for election or initial election to the Board is recommended or approved by at least
two thirds of the Continuing Directors.

Affiliate. “Affiliate” and “Associate” has the respective meanings ascribed to such terms
in Rule 12b-2 promulgated under the Exchange Act.

Cause. For purposes of this Agreement, “Cause” means:

 

 

	 	(a)	 	the willful and continued failure by the Executive (other than any such failure
resulting from (i) the Executive’s incapacity due to physical or mental illness, (ii)
any such actual or anticipated failure after the issuance of a Notice of Termination by
the Executive for Good Reason or (iii) the Company’s active or passive obstruction of
the performance of the Executive’s duties and responsibilities) to perform
substantially the duties and responsibilities of the Executive’s position with the
Company after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the duties or
responsibilities;
	 
	 	(b)	 	the conviction of the Executive by a court of competent jurisdiction for felony
criminal conduct that, in the good faith opinion of the Company, would impair the
Executive’s ability to perform his or her duties or impair the business reputation of
the Company; or
	 
	 	(c)	 	the willful engaging by the Executive in fraud or dishonesty that is
demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the Executive’s part will be deemed “willful” unless committed, or
omitted by the Executive in bad faith and without reasonable belief that the Executive’s act or
failure to act was in the best interest of the Company and the Executive will have either failed to
correct, or failed to take all reasonable steps to correct, such act or failure to act within 60
days from the Executive’s receipt of written notice from the Company demanding that the Executive
take such action.

Good Reason. Good Reason will exist in the event that the Company, without the Executive’s
written consent:

	 	(a)	 	institutes a material adverse change in the Executive’s title or in the duties
assigned to the Executive (except for any diminution that occurs solely as a result of
the fact that the Company ceases to be a public company);
	 
	 	(b)	 	requires the Executive to relocate the Executive’s principal residence to a
location outside of a reasonable commuting distance from the Twin Cities metropolitan
area;
	 
	 	(c)	 	reduces the Executive’s Annual Base Salary below the amount in effect
immediately prior to the Change in Control;
	 
	 	(d)	 	materially reduces the aggregate monetary value of the Executive’s
participation in, or payment or benefit under all incentive plans (other than equity
plans), benefit plans, arrangements and perquisites, from the aggregate monetary value
of those plans, arrangements or perquisites that were in effect immediately prior to
the Change in Control;
	 
	 	(e)	 	substantially fails to comply with the provisions of Article 2 hereof;
provided, however, that an unintentional failure to comply or a failure to comply that
results

 

 

	 	 	 	from administrative oversight will not give rise to Good Reason, if such failure is
promptly corrected; or
	 
	 	(f)	 	the failure of the Company to obtain the assumption of this Agreement by the
acquirer of substantially all the assets of the Company in a transaction that
constitutes a Change in Control.

Disability. Disability means any medically determinable physical or mental impairment of
the Executive that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months that either:

	 	(a)	 	renders the Executive unable to engage in any substantial gainful activity; or
	 
	 	(b)	 	results in the Executive receiving income replacement benefits for a period of
not less than 3 months under an accident and health plan covering employees of the
Company.

 

 

Exhibit A

CONFIDENTIALITY, NONCOMPETITION

AND INVENTIONS AGREEMENT

(Technical and Executive Employees)

     This is an Agreement between Enpath Medical, Inc., which is referred to as “you” or “your,”
and the employee whose signature appears below, who is referred to as “I,” “me” or “my.”

     I understand that I am being employed in a position of trust and confidence and that I will
generate, have access to, and become familiar with confidential information. I also understand
that you have expended significant time and money on the development of customer good will and a
sound business reputation. As part of my duties, I will develop and maintain close working
relationships with your clients.

     I understand that my unauthorized use or disclosure of your confidential information, or my
violation of my obligation not to compete with you, would seriously harm your business and cause
monetary loss that would be difficult, if not impossible, to measure

     I was advised of and understand the terms of this agreement before agreeing to work for you.

Agreement To Maintain Confidential Information

     1. “Confidential information” means any information not generally known in your profession by
third parties, including your competitors or the general public. It includes (but is not limited
to) your methods, procedures, trade secrets, client lists, marketing plans and techniques, new
products and new product development, strategic plans, business plans, budgets, product prices,
sales volume, information about clients and potential clients (including identities of the clients
and the clients’ contact person(s), the clients’ buying history and tendencies and other details
about your relationship with them), drawings, specifications, reports and information about your
compensation and finances. I will treat information that is not expressly identified as
“confidential” as confidential unless, under the circumstances, I know or have reason to know that
you do not intend to keep that type of information confidential.

     2. Except to the extent required during the course of my employment for you, I will not,
during or after the term of my employment, disclose your confidential information to any other
person or entity, or use your confidential information for my own benefit or for the benefit of
another, unless you expressly direct me to do so.

Return of Property

     3. If either you or I terminate my employment, I will deliver to you immediately all records,
documents or information I generated or received in connection with my employment with you,
including but not limited to: all originals and all copies of any records, documents or information
(whether in paper, computer or other form) including drawings, specifications, reports, client
lists, financial information, or any confidential information as described above I

 

 

will at the same time also deliver to you all other property I received in connection with my
employment with you, including but not limited to, computer equipment, computer hard drives or
diskettes, telephone equipment, and facsimile machines.

Noncompetition Agreement

     4. During my employment with you, I will devote my full time and energy to furthering your
business and I will not become affiliated in any capacity with any individual or entities who are
competing or planning to compete with you at that time.

     5. For a period of 12 months after the termination of my employment (whether voluntary or
involuntary), I will not directly or indirectly solicit, offer to provide, or provide any services
on behalf of or to any entity with whom you compete, except with your written consent.

     6. I will not, during the term of my employment or for a period of one year following the
termination of my employment, directly or indirectly solicit any of your employees or independent
contractors for the purpose of hiring them to work for me or another person, entity or employer, or
for the purpose of inducing them to leave their employment with you, without your written consent.

Inventions

     7. During my employment with you, I will promptly disclose to you in writing any ideas,
inventions or discoveries (collectively known as “inventions”) related to your business, I agree
that these inventions belong to you, and agree to assign or offer to assign to you all rights,
title and interest in such inventions, and will cooperate in your efforts to protect your rights to
them I understand that this agreement does not apply to any invention for which none of your
equipment, supplies, facility or trade secret information was used and which was developed entirely
on my own time, and (1) which does not relate (a) directly to your business, or (b) to your actual
or demonstrably anticipated research or development, or (2) which does not result from any work
that I performed for you.

Remedies

     8. If I violate this Agreement, you may seek injunctive relief and/or any other remedy allowed
by law and collect from me reasonable attorneys’ fees and costs incurred in bringing any action
against me or otherwise enforcing the terms of this Agreement. I also agree that I will repay all
profits, compensation, commissions or other benefits which I have realized as a result of my
violation, and that I will permit an individual of your choosing to conduct an audit for that
purpose.

     9. Your action in not enforcing a breach of any part of this Agreement or similar agreement
signed by another employee shall not prevent you from enforcing the Agreement as to any other
breach of this Agreement that you discover. If a court rules that any part of this Agreement is
not enforceable, that part may be modified by the court to make it enforceable to the maximum
extent permitted by law or it may be severed and the other parts of the Agreement shall remain
enforceable.

 

 

     10. This Agreement incorporates our entire understanding about confidentiality, return of
property, and my obligations not to compete. It is not intended to alter the at-will nature of our
employment relationship. This Agreement may not be canceled or modified except by another written
agreement signed by me and by your authorized officer, except that this Agreement may be assigned
by you. This Agreement shall be interpreted according to the laws of the State of Minnesota,
without reference to principles of conflict of laws. Any actions to interpret or enforce this
Agreement shall be filed in the state or federal courts of Minnesota. I consent to jurisdiction in
such courts.

	 	 	 
	EMPLOYEE:

	 	Enpath Medical, Inc.
	 
	 	 
	John C. Hertig

	 	/s/ James D. Hartman
	 

	 	 
	Print Name

	 	By
	 
	 	 
	/s/ John C. Hertig

	 	Board Chairman
	 

	 	 
	Signature

	 	Its
	 
	 	 
	March 26, 2007

	 	March 26, 2007
	 

	 	 
	Date

	 	Dateexv10w3

 

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made and entered as of December 12, 2006 (the
“Commencement Date”), between Enpath Medical, Inc., a Minnesota corporation (the “Company”), and
Scott P. Youngstrom (“Executive”), a resident of Minnesota.

RECITALS

     WHEREAS, the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the Company and its
shareholders; and

     WHEREAS, due to the Executive’s experience and knowledge, the Executive has made and is
expected to continue to make a significant contribution to the profitability, growth and financial
strength of the Company; and

     WHEREAS, the Executive is willing to continue employment with the Company upon the
understanding that the Company will provide income security if the Executive’s employment is
terminated under certain terms and conditions;

     WHEREAS, it is in the best interests of the Company, as a publicly held corporation, and its
shareholders to reinforce and encourage the Executive’s continued attention and dedication to the
assigned duties without distraction and to ensure the Executive’s continued availability to the
Company in the event of a change in control;

AGREEMENT

     NOW, THEREFORE, in consideration of the Executive’s employment with the Company and the
foregoing premises, the mutual covenants set forth below, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the
Executive agree as follows:

ARTICLE 1: EMPLOYMENT, TERM AND DUTIES

     1.1 Employment. The Company hereby continues to employ the Executive as
Vice-President of Finance and Chief Financial Officer and the Executive accepts this continued
employment and agrees to perform services for the Company, for the period and upon the other terms
and conditions set forth in this Agreement

     1.2 Term. This Agreement will be effective from and after the date hereof and will,
unless terminated early as provided herein, continue in effect through December 31, 2008, and will
automatically be extended for successive one-year periods thereafter unless either the Company or
the Executive provides written notice to the other party no later than the September 30 prior to
the expiration of the Agreement of the intent not to extend. If, however, a Change in Control has
occurred during the original or any extended term of this Agreement, this Agreement will continue
in effect for a period of the later of:

 

 

	 	(a)	 	12 months from the date of the occurrence of a Change in
Control;
	 
	 	(b)	 	if an event triggering the Company’s severance payment
obligations to the Executive under Section 3.2.4 has occurred, until the
benefits payable to the Executive hereunder have been paid in full; or
	 
	 	(c)	 	the date the Executive enters into a new employment agreement
with the Company or its successor. This Agreement neither imposes nor confers
any further rights or obligations on the Company or the Executive on the day
after the end of the term of this Agreement. Expiration of the term of this
Agreement of itself and without subsequent action by the Company or the
Executive will not end the employment relationship between the Company and the
Executive.

     1.3 Position and Duties. The Executive agrees to serve the Company and to perform the
duties of this position and such other duties not inconsistent with this position as the Chief
Executive Officer of the Company will assign to the Executive from time to time. During the Term,
the Executive agrees to serve Company faithfully and to the best of the Executive’s ability and to
devote the Executive’s full business time, attention and efforts to the business and affairs of
Company. Executive will perform all of the Executive’s responsibilities in compliance with all
applicable laws and with all of the applicable policies generally in effect for employees of the
Company, including without limitation, the Company’s Code of Conduct and related policies, as the
same may be amended from time to time.

ARTICLE 2: COMPENSATION, BENEFITS AND EXPENSES

     2.1 Base Salary. As the initial base compensation for all services the Executive
renders under this Agreement, the Executive will receive an annualized base salary (“Annual Base
Salary”) of $175,000. The Annual Base Salary will be paid in accordance with the Company’s normal
payroll procedures and policies, as these procedures and policies may be modified from time to
time. The Annual Base Salary will be reviewed and increased in the sole discretion of the Company
according to a schedule and in a manner consistent with the Company’s practices for salary
adjustment, which practices may be revised from time to time.

     2.2 Incentive Compensation. The Executive will be eligible to participate in any
incentive compensation plans established by the Company to the extent the Company in its sole
discretion may determine from time to time. The Company does not guarantee the adoption or
continuance of any particular incentive plan during the Term, and nothing in this Agreement is
intended to, or will in any way restrict the right of the Company, to amend, modify or terminate
any of its incentive plans during the Term.

     2.3 Benefit Plans. During the Term, the Executive will be entitled to paid time off
consistent with the Company’s policies and to participate in the employee benefits offered
generally by the Company to its salaried employees, to the extent that the Executive’s position,
tenure, salary, health, and other qualifications make the Executive eligible to participate. The
Executive’s participation in these benefits will be subject to the terms of the applicable plans,
as the same may be amended from time to time. The Company does not guarantee the adoption or

2

 

continuance of any particular employee benefit or benefit plan during the Term, and subject to
the rights of the Executive in accordance with Section 3.2.4, nothing in this Agreement is intended
to, or will in any way restrict the right of the Company, to amend, modify or terminate any of its
benefits or benefit plans during the Term.

     2.4 Expenses. During the Term, the Executive will be entitled to reimbursement for
all reasonable business expenses the Executive incurs in carrying out the duties under this
Agreement in accordance with the policies and practices of the Company for submission of expense
reports, receipts, or similar documentation of these expenses as in effect from time to time by the
Company.

ARTICLE 3: TERMINATION OF EMPLOYMENT

          3.1 Termination. The Executive’s employment under this Agreement may be terminated
during the Term as described in this Article 3.

          3.1.1 Death or Disability. The Executive’s employment will terminate automatically
upon the Executive’s death. The Executive’s employment will terminate due to the Executive’s
Disability (as defined in Appendix A) immediately after 30 days’ written notice to the Executive if
the Executive has not returned to the full-time performance of the Executive’s duties during this
period.

          3.1.2 Termination by Company Prior to a Change in Control. Prior to a “Change in
Control” (as defined in Appendix A), the Company may terminate this Agreement and the Executive’s
employment hereunder at any time and for any reason after providing written notice to the
Executive. If, however, the Company terminates the Executive’s employment prior to a Change in
Control for any reason other than “Cause” (as defined in Appendix A), the Company must pay the
Executive in accordance with Section 3.2.2.

          3.1.3 Resignation by the Executive. The Executive may, whether prior to or after a
Change in Control, resign employment with the Company effective upon 30 days’ advance written
notice to the Chief Executive Officer of the Company. In that event, the Chief Executive Officer
may terminate the Executive’s employment effective immediately upon delivery of written notice to
the Executive, at any time during the 30-day notice period, and the Company will continue to pay
the Executive’s Base Salary and the Company’s portion of the Executive’s health insurance premiums
for the duration of the 30-day notice period. Thereafter, except as provided in Section 3.2.4, the
Company will pay the Executive in accordance with Section 3.2.3.

          3.1.4 Termination by the Company other than for Cause or Resignation by the Executive for
Good Reason After a Change in Control. If a Change in Control occurs and during the 12-month
period following a Change in Control, the Company terminates the Executive’s employment for any
reason other than Cause, or the Executive resigns employment for “Good Reason” (as defined in
Appendix A), then the terms of Section 3.2.4 will apply. The Executive will have Good Reason to
terminate employment if: (a) within 45 days following the Executive’s actual knowledge of the event
which the Executive determines constitutes Good Reason, the Executive notifies the Company in
writing that the Executive has determined a Good

3

 

Reason exists and specifies the event creating Good Reason, and (b) following receipt of the
notice, the Company fails to remedy the event within 45 days. If either condition is not met, the
Executive will not have a Good Reason to terminate employment.

     3.2 Compensation Following Termination Prior to the End of the Term. In the event
that the Executive’s employment is terminated prior to the end of the Term, the Executive will be
entitled only to the following compensation and benefits upon termination, and only if the
Executive is in compliance with the covenants contained in the Confidentiality, Noncompetition and
Inventions Agreement (Technical and Executive Employees) described in Article 4. No rights to
other compensation or benefits will accrue to Executive.

          3.2.1 Termination by Reason of the Executive’s Death or Disability. If Executive’s
employment is terminated prior to the expiration of the Term by reason of the Executive’s death or
Disability as provided in Section 3.1.1, the Company will pay to the Executive, the Executive’s
spouse or estate, as the case may be, any amounts due to the Executive for Base Salary through the
date of employment termination, together with any other unpaid and pro rata amounts to which the
Executive is entitled as of the date of termination pursuant to Article 2, including, without
limitation, accrued paid time off in accordance with Company policy and amounts that the Executive
is entitled to under any benefit plan of the Company in accordance with the terms of the plan. The
Executive will have no rights to any unvested benefits or any other compensation or payments coming
due after the date of the Executive’s employment termination.

          3.2.2 Termination by the Company other than for Cause Prior to a Change in Control.
If the Executive’s employment is terminated other than for Cause as provided in Section 3.1.2, and
provided the Executive has executed a written release of any and all claims arising out of
Executive’s employment in form acceptable to the Company and the rescission period specified
therein has expired, the Company will pay to the Executive:

	 	(a)	 	any Annual Base Salary earned but not paid through the date of
the Executive’s employment termination and payment of any accrued but unpaid
time off in accordance with Company’s policy; and
	 
	 	(b)	 	continuation of Executive’s Base Salary in accordance with the
Company’s regular payroll policies for a period equal to the greater of (i) 17
weeks or (ii) two weeks severance for each completed whole year of employment
from the Executive’s date of hire through the date of the Executive’s
termination, and
	 
	 	(c)	 	the amount of any other benefits to which the Executive is
legally entitled as of such date under the terms and conditions of any benefit
plans of the Company in which the Executive is participating as of such date.

Except as provided in (a) through (c) above, the Company will have no further obligations under
this Agreement.

          3.2.3 Termination by the Executive. If the Executive’s employment is terminated as
provided in Section 3.1.3, the Company will pay to the Executive (a) any Annual

4

 

Base Salary earned but not paid through the date of the Executive’s employment termination,
plus (b) the amount of any other benefits to which the Executive is legally entitled as of such
date under the terms and conditions of any benefit plans of the Company in which the Executive is
participating as of such date. Thereafter, the Company will have no further obligations under this
Agreement

          3.2.4 Termination by the Company other than for Cause or Resignation by the Executive for
Good Reason After a Change in Control. In the event the Executive’s employment is terminated
by the Company without Cause or by the Executive for Good Reason as provided in Section 3.1.4, and
provided in either case that the Executive has executed a written release of any and all claims
arising during the Executive’s employment in form acceptable to the Company and the rescission
period specified therein has expired, the Company will pay or provide the following amounts or
benefits to the Executive:

	 	(a)	 	any accrued but unpaid Annual Base Salary and any other form or
type of compensation, benefit or perquisite that is vested or accrued at the
date of termination of the Executive’s employment with the Company for services
rendered to such date, and payment for any accrued paid time off in accordance
with Company policy; and
	 
	 	(b)	 	the annual incentive bonus for that fiscal year at target
performance (or if the target goals have not been set at the time of
Executive’s employment termination, then the target goals in effect for the
prior fiscal year), waiving any other condition precedent, such as continued
employment, multiplied by a fraction, the numerator of which is the number of
days worked by the Executive in the bonus period prior to the termination of
employment, and the denominator of which is the number of days in the bonus
period, less any amount of any such incentive bonus that has been paid. The
pro-rated incentive bonus will be payable and paid, however, only if senior
management of the Company are paid a bonus based on achievement of goals at or
above target for the year in which the termination occurs, and will be paid to
the Executive at the same time and manner as the bonus is paid to other senior
management of the Company; and
	 
	 	(c)	 	a severance payment equal to 26 weeks, based upon the weekly
equivalent of the Executive’s Annual Base Salary in effect on the date of
termination (without regard to any reduction that is in breach of this
Agreement), to be paid in cash in a single sum within 30 days of the date of
the Executive’s termination of employment; and
	 
	 	(d)	 	the amount of any other benefits to which the Executive is
legally entitled as of such date under the terms and conditions of any benefit
plans of the Company in which the Executive is participating as of the date of
termination (without regard to any reduction in such benefit that is in breach
of this Agreement).

5

 

Except as provided in (a) through (d) above, the Company will have no further obligations under
this Agreement.

          3.2.5 Dispute of Termination. If, following a Change in Control, within 10 days after
any notice of termination by the Executive for Good Reason or by the Company for Cause, the party
receiving the notice notifies the other party that a dispute exists concerning the termination, the
effective date of the termination will be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or the time for appeal has expired and no
appeal having been perfected). A notice of dispute will extend the date of termination only if the
notice is given in good faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any dispute, the Company will continue
to pay the Executive full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and continue the Executive as a participant in
all compensation, benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, to the extent permissible under the terms of the
applicable group plans and state and federal law, until the dispute is finally resolved in
accordance with this subparagraph. Amounts paid under this Section 3.2.5 are in addition to any
amounts otherwise due under this Agreement, but in no event must the Company pay more than 25% of
the severance payment set forth in Section 3.2.4(c) pursuant to this Section 3.2.5.

          3.2.6 Payments Subject to Code 409A. Notwithstanding anything herein to the contrary,
if the Executive is designated as a “specified employee” as defined in Code §409A and Regulations
applicable thereto at the time any payment is due, any payments that would constitute “deferred
compensation” under Code §409A will be paid on the 181st day following the Executive’s separation
from service (as defined in Code §409A), and any delay in payment will accrue interest at the
applicable federal short term rate as determined under Code § 1274 in effect on the date payment
was otherwise due.

     3.3 No Other Benefits. If the Executive receives the payments and benefits described
in this Article 3, the Executive will not be eligible to receive from the Company or any Affiliate
any other severance payments provided by the Company under any plan or policy or arrangement to
which the Executive is otherwise eligible. Nothing in this Agreement will extend the continuation
period of any benefit beyond the maximum period otherwise required by law and regulation.

ARTICLE 4: CONFIDENTIALITY, NONCOMPETITION AND INVENTIONS

As a condition to and in consideration of the benefits to be provided by the Company to the
Executive pursuant to the terms of this Agreement, the Executive agrees to execute and be bound by
the provisions of the Confidentiality, Noncompetition and Inventions Agreement (Technical and
Executive Employees) attached hereto as Exhibit A. Notwithstanding any termination of the
Executive’s employment with the Company, the Executive, will remain bound by the provisions of this
Agreement that specifically relate to periods, activities or obligations upon or subsequent to the
termination of the Executive’s employment, including, but not limited to, the covenants

6

 

contained in Exhibit A, which are hereby incorporated into this Agreement as though fully set forth
herein.

ARTICLE 5: DISPUTE RESOLUTION PROCESS

     5.1 Dispute Defined. The Company and the Executive desire to establish a reasonable
and confidential means of resolving any dispute, question or interpretation arising out of or
relating to: (a) this Agreement or the alleged breach or threatened breach of it, (b) the making of
this Agreement, including claims of fraud in the inducement, or (c) the Executive’s employment by
the Company pursuant to this Agreement, including claims of wrongful termination or discrimination
(each dispute to be referred to herein as a “Dispute”).

     5.2 Procedure. In furtherance of the parties’ mutual desire, the Company and the
Executive agree that if either party believes a Dispute exists, that party will provide the other
with written notice of the claimed Dispute. If the parties are unable to mutually resolve a
Dispute within 30 days of the first written notice, the Dispute will be resolved exclusively by
final and binding arbitration held in accordance with the provisions of this Agreement and the
American Arbitration Association (“AAA”) National Rules for the Resolution of Employment Disputes
then in effect, unless those rules are inconsistent with the provisions of this Agreement. In
connection with the arbitration:

	 	(a)	 	any such arbitration will be conducted: (i) by a neutral
arbitrator appointed by mutual agreement of the parties; or (ii) failing such
agreement, by a neutral arbitrator appointed in accordance with said AAA rules;
	 
	 	(b)	 	the Company will pay the fees and expenses of the arbitrator;
	 
	 	(c)	 	the parties will be permitted reasonable discovery in
accordance with the provisions of the Minnesota Rules of Civil Procedure,
including the production of relevant documents by the other party, the exchange
of witness lists, and a limited number of depositions, including depositions of
any expert who will testify at the arbitration;
	 
	 	(d)	 	the summary judgment procedure applicable under Rule 56 of the
Minnesota Rules of Civil Procedure will be available and apply to any
arbitration conducted pursuant to this Agreement;
	 
	 	(e)	 	the arbitrator’s award will include findings of fact and
conclusions of law showing the legal and factual bases for the arbitrator’s
decision;
	 
	 	(f)	 	the arbitrator will have the authority to award to the
prevailing party any remedy or relief that a United States District Court or
court of the State of Minnesota could order or grant if the dispute had first
been brought in that judicial forum, including costs (other than the
arbitrator’s fees and expenses) and, in case of bad faith, attorneys’ fees;
	 
	 	(g)	 	the arbitrator’s award may be entered by any court of competent
jurisdiction; and

7

 

	 	(h)	 	unless otherwise agreed by the parties, the place of any
arbitration proceeding will be Minneapolis, Minnesota.

     5.3 Confidentiality of Dispute Resolution. Except as the parties agree in writing,
upon court order, or as required by law, neither the Company nor the Executive will disclose to any
third party, except for their counsel, retained experts and other persons directly serving counsel
or retained experts, any fact or information in any way pertaining to the process of resolving a
Dispute under this Article 5, or to the fact of or any term that is part of a resolution or
settlement of any Dispute. This prohibition on disclosure specifically includes, without
limitation, any disclosure of an oral statement or of a written document made or provided by either
the Executive or the Company, or by any of the Company’s or the Executive’s representatives,
counsel or retained experts, or other persons directly serving any representatives, counsel or
retained experts.

     5.4 Right to Injunctive Relief. The Executive acknowledges and agrees that the
services to be rendered by the Executive hereunder are of a special, unique and extraordinary
character, that it would be difficult to replace these services and that any violation of the
Executive’s obligations under the Confidentiality, Noncompetition and Inventions Agreement
(Technical and Executive Employees) would be highly injurious to the Company and to any Company
Affiliate and that it would be extremely difficult to compensate the Company or any Company
Affiliate fully for damages for any such violation. Accordingly, notwithstanding the terms of this
Article 5, the Company or any Company Affiliate, as the case may be, will be entitled to seek
temporary and permanent injunctive relief from a court of law, in the event of violation by the
Executive of any of the obligations under any provision of the Confidentiality, Noncompetition and
Inventions Agreement (Technical and Executive Employees) as set forth in Exhibit A. This provision
with respect to injunctive relief will not, however, diminish the right of the Company or any
Company Affiliate to claim and recover damages, or to seek and obtain any other relief available to
it pursuant to the provisions of this Article 5.

ARTICLE 6: ASSIGNMENT; SUCCESSORS.

     6.1 Assignment. This Agreement is personal to the Executive and, without the prior
written consent of the Company, is not assignable by the Executive. This Agreement will inure to
the benefit of and be enforceable by the Executive’s heirs, executors and administrators.

     6.2 Successors. This Agreement will inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company may not assign this Agreement, however, except
in connection with the sale or disposition of all or substantially all of the assets of the Company
in a transaction described in Appendix A, or by law as a result of a merger or consolidation.

ARTICLE 7: MISCELLANEOUS PROVISIONS

     7.1 Notices. All notices and other communications under this Agreement will be in
writing and will be given by hand delivery to the other party, by registered or certified mail,
return receipt requested, postage prepaid, or by facsimile with printed confirmation, addressed to

8

 

the Executive at the last know mailing address on file with the Company and to the Company as
follows:

Enpath Medical, Inc.

2300 Berkshire Lane

Minneapolis, Mn 55441

Attention: Chief Executive Officer

With a copy to:

Thomas G. Lovett, IV

Lindquist & Vennum, PLLP

4200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

or to such other address as either party furnishes to the other in writing in accordance with this
paragraph. Notices and communications will be effective when actually received by the addressee or
3 days after the initiation of delivery.

     Any party may change the address for the purpose of this Section by giving the other written
notice of the new address in the manner set forth above.

     7.2 Enforceability. To the extent any provision of this Agreement is determined to be
invalid or unenforceable in any jurisdiction, that provision will be deemed deleted from this
Agreement as to such jurisdiction only, and the validity and enforceability of the remainder of
that provision and of this Agreement will be unaffected. In furtherance of and not in limitation
of the foregoing, the Executive expressly agrees that should the duration of, geographical extent
of, or business activities covered by, any provision of this Agreement be in excess of that which
is valid or enforceable under applicable law in a given jurisdiction, then such provision, as to
such jurisdiction only, will be construed to cover only that duration, extent or activities that
may validly or enforceability be covered.

     7.3 Taxes. Notwithstanding any other provision of this Agreement, the Company will
withhold from any amount payable under this Agreement all federal, state, local and foreign taxes
that are required under any and all applicable laws or regulations, or that are consistent with the
Company’s prevailing practice.

     7.4 Governing Law, Construction, and Severability. The laws of the State of Minnesota
govern the validity, interpretation, performance and enforcement of this Agreement. In the event
any provision of this Agreement is held to be illegal or invalid for any reason, said illegality or
invalidity will not in any way affect the legality or validity of any other provision of this
Agreement. It is the intention of the parties hereto that the Company be given the broadest
possible protection respecting its confidential information and trade secrets and respecting
competition by the Executive following the Executive’s separation from the Company.

     7.5 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

9

 

provision hereof will be litigated only in the State of Minnesota, Hennepin County District
Court, or the United States District Court for the District of Minnesota. The Executive waives any
right the Executive may have to transfer or change the venue of any litigation brought against the
Executive by the Company.

     7.6 Entire Agreement; Amendment. This Agreement is the final, complete and exclusive
agreement of the parties with respect to the subject matter hereof and supersedes all prior
discussions between the Company and the Executive regarding the subject matter hereof. Except as
provided in the next sentence, no modification of, or amendment to, this Agreement, nor any waiver
of either party’s rights under this Agreement, will be effective unless in writing and signed by
both parties. Notwithstanding the foregoing: (a) any subsequent change or changes in the
Executive’s duties, obligations, salary or compensation as a result of the exercise of discretion
in accordance with the provisions of this Agreement will not affect the validity or scope of this
Agreement; and (b) the Company will have the right, without the consent of the Executive, to amend
any provision of this Agreement as it may determine to avoid the imposition of any excise tax under
Code §409A, preserving, to the greatest extent possible, the economic benefit provided by this
Agreement to the Executive.

     7.7 Counterparts. This Agreement may be simultaneously executed in any number of
counterparts, and such counterparts executed and delivered, each as an original, will constitute
but one and the same instrument.

     7.8 Captions and Headings. The captions and paragraph headings used in this Agreement
are for convenience of reference only, and will not affect the construction or interpretation of
this Agreement or any of the provisions hereof.

     7.9 Survivability. The provisions of this Agreement that by their terms call for
performance subsequent to termination of the Executive’s employment under this Agreement, or of
this Agreement, will so survive such termination.

     7.10 Waiver. No waiver by the Company of any breach or violation of this Agreement
will be a waiver of any preceding or succeeding breach or violation. No waiver by the Company of
any right under this Agreement will be construed as a waiver of any other right hereunder. The
Company will not be required to give notice to enforce strict adherence to any of the terms or
conditions of this Agreement.

     7.11 Advice of Counsel. The Executive acknowledges that the Executive has been
provided the opportunity to seek, and has obtained, the advice of counsel in connection with the
negotiation and execution of this Agreement.

     7.12 No Strict Construction. Each of the Executive and the Company acknowledge and
agree that the language used in this Agreement and the other agreements referred to herein is, and
will be deemed to be, the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against either party hereto.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

10

 

Dated this 27 day of February, 2007

/s/ Scott P. Youngstrom

     Executive

Enpath Medical, Inc.

	 	 	 	 	 	 	 
	By	 	/s/ John C. Hertig	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its
	 	CEO
 

	 	 

11

 

APPENDIX A

For purposes of this Agreement, the following definitions will apply:

Change in Control. Change in Control means:

	 	(a)	 	any “person” as such term is used in Section 13(d) and 4(d) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”), together with all Affiliates and
Associates (as defined below) (collectively, the “Acquiring Person”) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities representing 50% or more of the combined voting power of the
Company’s then outstanding securities, but will not include

               i. the Company,

               ii. any subsidiary of the Company or

               iii. any employee benefit plan of the Company or of any subsidiary of the Company or
any entity holding shares of common stock of the Company organized, appointed or established
for, or pursuant to the terms of, any such plan;

	 	(b)	 	during any period of two consecutive years (not including any period ending
prior to the Commencement Date of this Agreement), the Continuing Directors (as defined
below) cease to constitute a majority of the Company’s Board of Directors;
	 
	 	(c)	 	consummation of a merger or consolidation of the Company with any other entity,
other than:

               i. a merger or consolidation that:

	 	A)	 	results in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
merged or consolidated entity) 50% or more of the combined voting power
of the voting securities of the resulting entity outstanding immediately
after such merger or consolidation, and
	 
	 	B)	 	at least a majority of the members of the board of
directors of the resulting entity were Continuing Directors at the time
of the action of the Board of Directors of the Company approving the
merger or consolidation; or
	 
	 	ii.	 	a merger or consolidation effected to implement a
recapitalization of the Company or similar transaction in which no
Acquiring Person is or becomes the “beneficial owner,” directly or
indirectly of more than 50%

 

 

	 	 	 	of the combined voting power of the Company’s then outstanding securities;
or

	 	(d)	 	consummation of the sale or disposition by the Company of all or substantially
all of its assets. “The sale or disposition by the Company of all or substantially all
of its assets” means a sale or other disposition transaction or series of related
transactions involving assets of the Company or of any Company Affiliate (including the
stock of any direct or indirect subsidiary of the Company) in which the value of the
assets or stock being sold or otherwise disposed of (as measured by the purchase price
being paid therefor or by such other method as the Board of Directors of the Company
determines is appropriate in a case where there is no readily ascertainable purchase
price) constitutes more than 50% of the fair market value of the Company. For purposes
of the preceding sentence, the “fair market value of the Company” will be the aggregate
market value of the Company’s outstanding common stock (on a fully diluted basis) plus
the aggregate market value of the Company’s other outstanding equity securities plus
the total of all debt outstanding. The aggregate market value of the Company’s common
stock will be determined by multiplying the number of shares of the Company’s common
stock (on a fully diluted basis) outstanding on the date of the execution and delivery
of a definitive agreement (“Transaction Date”) with respect to the sale or disposition
by the Company of all or substantially all of the Company’s assets by the average
closing price for the Company’s common stock for the ten trading days immediately
preceding the Transaction Date. The aggregate market value of any other equity
securities of the Company will be determined in a manner similar to that prescribed in
the immediately preceding sentence for determining the aggregate market value of the
Company’s common stock or by such other method as the Board of Directors of the Company
determines is appropriate; or
	 
	 	(e)	 	approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

Continuing Director. “Continuing Director” means any person who is a member of the
Company’s Board, who is not an Acquiring Person or an Affiliate or Associate (as defined below) of
an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or
Associate, and who:

	 	(a)	 	was a member of the Board on the Commencement Date of this Agreement, or
	 
	 	(b)	 	subsequently becomes a member of the Board, if such person’s initial nomination
for election or initial election to the Board is recommended or approved by at least
two thirds of the Continuing Directors.

Affiliate. “Affiliate” and “Associate” has the respective meanings ascribed to such terms
in Rule 12b-2 promulgated under the Exchange Act.

Cause. For purposes of this Agreement, “Cause” means:

 

 

	 	(a)	 	the willful and continued failure by the Executive (other than any such failure
resulting from: (i) the Executive’s incapacity due to physical or mental illness, (ii)
any such actual or anticipated failure after the issuance of a Notice of Termination by
the Executive for Good Reason or (iii) the Company’s active or passive obstruction of
the performance of the Executive’s duties and responsibilities) to perform
substantially the duties and responsibilities of the Executive’s position with the
Company after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the duties or
responsibilities;
	 
	 	(b)	 	the conviction of the Executive by a court of competent jurisdiction for felony
criminal conduct which, in the good faith opinion of the Company, would impair the
Executive’s ability to perform his or her duties or impair the business reputation of
the Company; or
	 
	 	(c)	 	the willful engaging by the Executive in fraud or dishonesty that is
demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the Executive’s part will be deemed “willful” unless committed, or
omitted by the Executive in bad faith and without reasonable belief that the Executive’s act or
failure to act was in the best interest of the Company and the Executive will have either failed to
correct, or failed to take all reasonable steps to correct, such act or failure to act within sixty
(60) days from the Executive’s receipt of written notice from the Company demanding that the
Executive take such action.

Good Reason. Good Reason will exist in the event that the Company, without the Executive’s
written consent:

	 	(a)	 	institutes a material adverse change in the Executive’s title or in the duties
assigned to the Executive (except for any diminution that occurs solely as a result of
the fact that the Company ceases to be a public company);
	 
	 	(b)	 	requires the Executive to relocate the Executive’s principal residence to a
location outside of a reasonable commuting distance from the Twin Cities metropolitan
area;
	 
	 	(c)	 	reduces the Executive’s Annual Base Salary below the amount in effect
immediately prior to the Change in Control;
	 
	 	(d)	 	materially reduces the aggregate monetary value of the Executive’s
participation in, or payment or benefit under all incentive plans (other than equity
plans), benefit plans, arrangements and perquisites, from the aggregate monetary value
of those plans, arrangements or perquisites that were in effect immediately prior to
the Change in Control;
	 
	 	(e)	 	substantially fails to comply with the provisions of Article 2 hereof;
provided, however, that an unintentional failure to comply or a failure to comply that
results

 

 

	 	 	 	from administrative oversight will not give rise to Good Reason, if such failure is
promptly corrected; or
	 
	 	(f)	 	the failure of the Company to obtain the assumption of this Agreement by the
acquirer of substantially all the assets of the Company in a transaction that
constitutes a Change in Control.

Disability. Disability means any medically determinable physical or mental impairment of
the Executive that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months that either: (a) renders the Executive unable to engage in any
substantial gainful activity; or (b) results in the Executive receiving income replacement benefits
for a period of not less than 3 months under an accident and health plan covering employees of the
Company.

 

 

Exhibit A

CONFIDENTIALITY, NONCOMPETITION

AND INVENTIONS AGREEMENT

(Technical and Executive Employees)

     This is an Agreement between Enpath Medical, Inc., which is referred to as “you” or “your,”
and the employee whose signature appears below, who is referred to as “I,” “me” or “my.”

     I understand that I am being employed in a position of trust and confidence and that I will
generate, have access to, and become familiar with confidential information. I also understand
that you have expended significant time and money on the development of customer good will and a
sound business reputation. As part of my duties, I will develop and maintain close working
relationships with your clients.

     I understand that my unauthorized use or disclosure of your confidential information, or my
violation of my obligation not to compete with you, would seriously harm your business and cause
monetary loss that would be difficult, if not impossible, to measure

     I was advised of and understand the terms of this agreement before agreeing to work for you.

Agreement To Maintain Confidential Information

     1. “Confidential information” means any information not generally known in your profession by
third parties, including your competitors or the general public. It includes (but is not limited
to) your methods, procedures, trade secrets, client lists, marketing plans and techniques, new
products and new product development, strategic plans, business plans, budgets, product prices,
sales volume, information about clients and potential clients (including identities of the clients
and the clients’ contact person(s), the clients’ buying history and tendencies and other details
about your relationship with them), drawings, specifications, reports and information about your
compensation and finances. I will treat information that is not expressly identified as
“confidential” as confidential unless, under the circumstances, I know or have reason to know that
you do not intend to keep that type of information confidential.

     2. Except to the extent required during the course of my employment for you, I will not,
during or after the term of my employment, disclose your confidential information to any other
person or entity, or use your confidential information for my own benefit or for the benefit of
another, unless you expressly direct me to do so.

Return of Property

     3. If either you or I terminate my employment, I will deliver to you immediately all records,
documents or information I generated or received in connection with my employment with you,
including but not limited to: all originals and all copies of any records, documents or information
(whether in paper, computer or other form) including drawings, specifications, reports, client
lists, financial information, or any confidential information as described above I

 

 

will at the same time also deliver to you all other property I received in connection with my
employment with you, including but not limited to, computer equipment, computer hard drives or
diskettes, telephone equipment, and facsimile machines.

Noncompetition Agreement

     4. During my employment with you, I will devote my full time and energy to furthering your
business and I will not become affiliated in any capacity with any individual or entities who are
competing or planning to compete with you at that time.

     5. For a period of 12 months after the termination of my employment (whether voluntary or
involuntary), I will not directly or indirectly solicit, offer to provide, or provide any services
on behalf of or to any entity with whom you compete, except with your written consent.

     6. I will not, during the term of my employment or for a period of one year following the
termination of my employment, directly or indirectly solicit any of your employees or independent
contractors for the purpose of hiring them to work for me or another person, entity or employer, or
for the purpose of inducing them to leave their employment with you, without your written consent.

Inventions

     7. During my employment with you, I will promptly disclose to you in writing any ideas,
inventions or discoveries (collectively known as “inventions”) related to your business, I agree
that these inventions belong to you, and agree to assign or offer to assign to you all rights,
title and interest in such inventions, and will cooperate in your efforts to protect your rights to
them I understand that this agreement does not apply to any invention for which none of your
equipment, supplies, facility or trade secret information was used and which was developed entirely
on my own time, and (1) which does not relate (a) directly to your business, or (b) to your actual
or demonstrably anticipated research or development, or (2) which does not result from any work
that I performed for you.

Remedies

     8. If I violate this Agreement, you may seek injunctive relief and/or any other remedy allowed
by law and collect from me reasonable attorneys’ fees and costs incurred in bringing any action
against me or otherwise enforcing the terms of this Agreement. I also agree that I will repay all
profits, compensation, commissions or other benefits which I have realized as a result of my
violation, and that I will permit an individual of your choosing to conduct an audit for that
purpose.

     9. Your action in not enforcing a breach of any part of this Agreement or similar agreement
signed by another employee shall not prevent you from enforcing the Agreement as to any other
breach of this Agreement that you discover. If a court rules that any part of this Agreement is
not enforceable, that part may be modified by the court to make it enforceable to the maximum
extent permitted by law or it may be severed and the other parts of the Agreement shall remain
enforceable.

 

 

     10. This Agreement incorporates our entire understanding about confidentiality, return of
property, and my obligations not to compete. It is not intended to alter the at-will nature of our
employment relationship. This Agreement may not be canceled or modified except by another written
agreement signed by me and by your authorized officer, except that this Agreement may be assigned
by you. This Agreement shall be interpreted according to the laws of the State of Minnesota,
without reference to principles of conflict of laws. Any actions to interpret or enforce this
Agreement shall be filed in the state or federal courts of Minnesota. I consent to jurisdiction in
such courts.

	 	 	 
	EMPLOYEE:

	 	Enpath Medical, Inc.
	 
	 	 
	Scott P. Youngstrom

	 	/s/ John C. Hertig
	 

	 	 
	Print Name

	 	By
	 
	 	 
	/s/ Scott P. Youngstrom

	 	CEO
	 

	 	 
	Signature

	 	Its
	 
	 	 
	February 27, 2007

	 	February 27, 2007
	 

	 	 
	Date

	 	Date

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