
Electromed (NSDQ:ELMD) said it settled legal beefs with its co-founder and former CEO, Robert Hansen, and ex-marketing director Eileen Manning over the composition of the medical device company’s board.
Electromed sued Manning and Hansen in December 2012, alleging that Manning broke proxy solicitation rules when she sought to have hand-picked candidates elected to Electromed’s board. The company alleged that Hansen broke a separation agreement "in connection with his actions relating to Ms. Manning’s proposal," according to a regulatory filing.
Both Manning and Hansen filed counter-claims, with Manning asserting that Electromed violated her shareholder’s rights "by failing to count and certify the results of the election" and Hansen alleging that the New Prague, Minn.-based company violated his separation deal "in connection with his actions relating to Ms. Manning’s proposal," according to the filing.
The settlements involve a final separation payment to Hansen of $150,000 in exchange for "an extended standstill agreement preventing him from taking certain actions relating to the control of the company for a period of 3 years from Sept. 6, 2013, restrictions on his ability to vote his shares of Electromed for 18 months from Sept. 6, 2013, and certain other agreements," Electromed said in the filing.
The settlement with Manning requires her to dismiss her lawsuit with prejudice, "refrain from taking certain actions relating to the control of the company for a period of 3 years from Sept. 23, 2013, and to withdraw her nomination of 2 individuals for election to the company’s board of directors, in addition to certain other agreements," according to the filing.
In an August 2012 letter to Electromed chairman Stephen Craney, Manning wrote that her "experiences with the members of the new management team and their performance over the most recently completed fiscal year [2013] lead me to conclude that the company is being taken in a direction that as a shareholder I cannot support."
"From my observations, the company is not currently being managed in a manner which is consistent with the energy, risk tolerance, and leadership qualities associated with a successful publicly held medical device company. As a result, the confidence and morale needed to drive sales growth so essential in the valuation of a public company are rapidly degrading," she wrote. "I realize that the past fiscal year has presented a number of important challenges in personnel composition and investment allocation. Important personnel changes have occurred in a number of key positions. My conclusion is that the company and its shareholders are being disadvantaged. In such a situation, an appropriate recommendation begins with changes in the membership of the board of directors."
Hansen stepped down after 20 years at the helm in May 2012 to pursue another technology-based company which he also founded, saying he was "confident that my successor, the management team, staff, and emerging technologies will serve the company’s patients and shareholders well." That sentiment evidently changed by the end of last year, when he supported Manning’s bid for changing the board’s composition.
Then-COO James Cassidy was named interim CEO following Hansen’s retirement. Electromed put Kathleen Skarvan into the corner office in December 2012.