EX-10.14 Employment Agreement - Scott Youngstrom

EXHIBIT 10.14

EMPLOYMENT AGREEMENT

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

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

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

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

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

     3.     Position and Duties.

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

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

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     4.     Compensation.

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

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

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

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

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

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

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

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

     7.     Noncompetition Covenant.

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

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

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

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

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

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

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

     8.     Patent and Related Matters.

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

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

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

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

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

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

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

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

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

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

     9.     Termination of Employment.

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

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

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

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

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

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

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

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

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

     10.     Settlement of Disputes.

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

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

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

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

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

     11.     Miscellaneous.

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

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

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

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

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

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

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

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

     Scott Youngstrom
     4230 Mount Curve
     Deephaven, MN 55391

     Rehabilicare Inc.
     1811 Old Highway 8
     New Brighton, MN 55112
     Attn. Chief Executive Officer

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

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

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

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

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

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

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