EMPLOYMENT AGREEMENT
Exhibit 10.6
This EMPLOYMENT AGREEMENT (this “Agreement”), made in New York, New York as of the 1st day of
July 2007 (the “Effective Date”), between Nephros, Inc., a Delaware corporation having its
executive offices and principal place of business at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
“Company”), and Xxxxxx X. Xxxxx (“Executive”).
RECITALS
WHEREAS, the Company desires to employ Executive, and Executive desires to accept such
employment on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
the Company and Executive agree as follows:
1. Term. The term of this Agreement shall be the period commencing on the date first
written above, and ending on June 30, 2010 (the “Expiration Date,” and collectively, the “Term”).
Each period of July 1 through June 30 shall hereinafter be designated a “Term Year”.
2. Employment.
2.1 Employment by the Company. Executive agrees to be employed by the Company during the
Term upon the terms and subject to the conditions set forth in this Agreement. Executive shall
serve as President, Chief Executive Officer and Chairman of the Company, reporting to the Board of
Directors of the Company (the “Board”), and shall have such duties as may be prescribed by the
Board from time to time and which are commonly performed by CEO/Presidents/Chairmen of similar
sized companies conducting similar business, such as, but not limited to, corporate planning and
oversight of the financial, marketing, research and other vital functions of the organization.
2.2 Performance of Duties. Throughout the Term, Executive shall faithfully and diligently
perform Executive’s duties in conformity with the directions of the Board and serve the Company to
the best of Executive’s ability. Executive shall devote Executive’s entire working time to the
business and affairs of the Company, subject to vacations and sick leave in accordance with Company
policy and as otherwise permitted herein.
2.3 Place of Performance. During his employment with the Company, Executive will work at
the Company’s offices in New York, New York, as necessary or appropriate, or at such other location
in the greater New York City area as the Company may determine. Throughout the Term, Executive
agrees to maintain Executive’s personal residence within reasonable access to Executive’s place of
employment. Executive recognizes that his duties will require, from time to time and at the
Company’s expense (subject to Section 3.7 below), travel to domestic and international locations.
3. Compensation and Benefits.
3.1 Base Salary. The Company agrees to pay to Executive a base salary (“Base Salary”) at
the annual rate of $360,000 payable in equal installments consistent with the Company’s payroll
practices. Within 10 days after the date that this Agreement is fully executed, the Company shall
pay the Executive
a catch up payment reflecting the increase in Base Salary payable to the Executive from the
Effective Date through such date.
3.2 Performance Bonus. Within 10 days after the achievement of any of the milestones
described in this paragraph, the Company shall pay to Executive a cash bonus (“Milestone Bonus”)
equal to 10% of Executive’s Base Salary at the time the milestone is achieved. Executive shall be
entitled to a Milestone Bonus upon the achievement of any one or more of the following:
(i)
the successful completion of the clinical trial of the OLpūr H2H™
Hemodiafiltration Module and OLpūr MD 220 Hemodiafilter in the United States. If such
trial is not successfully completed prior to May 01, 2008, this bonus shall be 5% of
Executive’s Base Salary at the time the milestone is achieved.
(ii) the first regulatory approval of the device described in Section 3.2(i) above in
the United States. If such approval is not achieved within the calendar year 2008, this
bonus shall be 5% of Executive’s Base Salary at the time the milestone is achieved.
Upon the Executive’s belief that any milestone has been achieved, Executive will notify the
Chairman of the Compensation Committee to obtain the Chairman’s confirmation of such achievement
prior to the Company’s payment of any Milestone Bonus. The milestones described in this paragraph
may be amended by written agreement of the parties.
After November 2nd, 2008 (the “Anniversary Date”) and, if applicable, November
2nd of each Term year thereafter, at least two performance milestones shall be added by
the Compensation Committee of the Board, after consultation with Executive, each year and Executive
shall be paid for the achievement of each such performance milestone an amount to be determined by
the Compensation Committee of the Board, provided that the total potential payment for milestones
(if achieved) each year equals at least 20% of Executive’s Base Salary as of the date the
milestones are set by the Compensation Committee of the Board.
3.3 Financing Bonus. Within 10 days of signing this Agreement, the Company shall pay to
Executive a bonus of $100,000 in recognition of the successful completion of the Company’s 2007
Financing. Additionally, this bonus recognizes the efforts contributed to this transition period
and the additional responsibilities that will be associated with the duties as Chairman of Nephros’
Board of Directors.
3.4 Change of Control Bonus. The Company shall pay the Executive the applicable amount
set forth on Schedule A upon a Change of Control (as defined below) of the Company in which
the Company is ascribed a valuation equal to or above those amounts set forth on Schedule
A. In the event of a Change of Control, the applicable bonus shall be paid on the effective
date of such Change of Control and all unvested Employment Options shall vest and become
exercisable immediately and shall remain exercisable for a period of the lesser of (x) five (5)
years or (y) the remaining term of the Options, regardless of whether the Executive’s employment is
terminated following the closing of such Change of Control transaction.
(i) For purposes of this Agreement, a “Change of Control” shall mean:
| a. | A private transaction (or series of related private transactions) leading to a merger, acquisition, consolidation, or sale of all or substantially all of the assets of the Company. Such Change of Control shall be deemed to have occurred at the completion of such merger, acquisition, consolidation or sale of substantially all of the assets of the Company. |
| b. | Any transaction a result of which a single party (or group of affiliated parties) acquires or holds capital stock of the Corporation representing a majority of the Corporation’s outstanding voting power. Such Change of Control shall be deemed to have occurred at the completion of the transaction constituting such acquisition. | ||
| c. | The disposition by the Company (whether direct or indirect, by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets in one transactions or series of related transactions (other than a merger effected exclusively for the purposes of changing the domicile of the Company). Such Change of Control shall be deemed to have occurred at the completion of such disposition by the Company of all or substantially all of its business and/or assets. |
(ii) Notwithstanding Section 3.5(i)(a) and 3.5(i)(b) above, no transaction shall be
considered a Change of Control under this Agreement, and no bonus shall be paid or
options vest, pursuant to this Section 3.5:
| a. | if the stockholders existing prior to such transaction(s) hold in the aggregate more than fifty percent (50%) of the securities or assets of the surviving or resulting company; | ||
| b. | in connection with a private placement of equity securities of the Company in connection with a financing of the Company’s on-going operations; or | ||
| c. | for any transaction ascribing a valuation of less than One Hundred Twenty-Five Million Dollars ($125,000,000); provided, however, that such a transaction may be considered as part of a series of transactions that gives rise to a Change of Control pursuant to Section 3.5(i). |
3.5
Grant of Options and Terms Thereof. Upon execution of this Agreement, the Company
shall grant to Executive a one-time option (the “Option”), pursuant to the Nephros 2004 Stock
Incentive Plan or successor plans, if applicable, to purchase shares of the Company’s common stock
(the “Option Shares”), subject to vesting and forfeiture as set forth in the Stock Option Agreement
including any amendments, modifications and successors thereto, attached hereto as Schedule
B.
3.6
Benefits and Perquisites. Executive shall be entitled to participate in, to the
extent Executive is otherwise eligible under the terms thereof, the benefit plans and programs, and
receive the benefits and perquisites, generally provided to executives of the same level and
responsibility as Executive, including without limitation family medical insurance, life insurance
and disability insurance (subject to generally-applicable required employee contributions). The
Executive shall be entitled to receive four weeks of annual paid vacation.
3.7
Travel and Business Expenses. Upon submission of itemized expense statements in the
manner specified by the Company, Executive shall be entitled to reimbursement for reasonable travel
and other reasonable business expenses duly incurred by Executive in the performance of Executive’s
duties under this Agreement in accordance with the policies and procedures established by the
Company from time to time for executives of the same level and responsibility as Executive.
3.8
No Other Compensation or Benefits; Payment. The compensation and benefits specified
in this Section 3 and in Section 4 of this Agreement shall be in lieu of any and all other
compensation and
benefits. Payment of all compensation and benefits to Executive hereunder shall be made in
accordance with the relevant Company policies in effect from time to time to the extent the same
are consistently applied, including normal payroll practices, and shall be subject to all
applicable employment and withholding taxes and other withholdings.
3.9 Cessation of Employment. In the event Executive shall cease to be employed by the
Company for any reason, then Executive’s compensation and benefits shall cease on the date of such
event, except as otherwise provided herein or in any applicable employee benefit plan or program.
4. Termination of Employment.
4.1 Termination. The Company may terminate Executive’s employment for Cause (as defined
below), in which case the provisions of Section 4.2 of this Agreement shall apply. The Company may
also terminate Executive’s employment in the event of Executive’s Disability (as defined below), in
which case the provisions of Section 4.4 of this Agreement shall apply. The Company may also
terminate Executive’s employment for any other reason by written notice to Executive, in which case
the provisions of Section 4.5 of this Agreement shall apply. If Executive’s employment is
terminated by reason of Executive’s death, retirement or voluntary resignation, the provisions of
Section 4.3 of this Agreement shall apply.
4.2 Termination for Cause. In the event that Executive’s employment hereunder is
terminated during the Term by the Company for Cause (as defined below), then the Company shall pay
to Executive only the (i) accrued, but unpaid Base Salary for services rendered through the date of
termination, and (ii) any Milestone Bonuses due and payable under the terms of this Agreement
through such date of termination (collectively, the “Accrued Obligations”), which Milestone Bonuses
shall be paid at the same time as provided under Section 3.2 hereof and any and all unvested
Options shall automatically be cancelled and forfeited by the Executive as of the date of
termination. Employee shall have the right to exercise any and all vested Options within the
period commencing on the date of termination and ending ninety days after the date of such
termination (the “Options Exercise Period”). Any Options not exercised by Employee within the
Options Exercise Period shall be cancelled. In all other respects, all such Options shall be
governed by the plans, programs, agreements, and other documents pursuant to which such Options
were granted. For purposes of this Agreement, “Cause” shall mean (i) conviction of any crime
(whether or not involving the Company) constituting a felony in the jurisdiction involved; (ii)
engaging in any act which, in each case, subjects, or if generally known would subject, the Company
to public ridicule or embarrassment; (iii) gross neglect or misconduct in the performance of
Executive’s duties hereunder; or (iv) material breach of any provision of this Agreement by
Executive; provided, however, that with respect to clauses (iii) or (iv), Executive shall have
received written notice from the Company setting forth the alleged act or failure to act
constituting “Cause” hereunder, and Executive shall not have cured such act or refusal to act
within 10 business days of his actual receipt of notice.
4.3 Termination by Reason of Death or Retirement or Voluntary Resignation. In the event
that Executive’s employment hereunder is terminated during the Term (x) by reason of Executive’s
death, or (y) by reason of Executive’s voluntary resignation or retirement, then the Company shall
pay to Executive only the (i) accrued, but unpaid Base Salary for services rendered through the
date of termination, and (ii) any Milestone Bonuses due and payable under the terms of this
Agreement through such date of termination and those that become due and payable within 90 days of
such date of termination, which Milestone Bonuses shall be paid at the same time as provided under
Section 3.2 hereof. Any and all unvested Options shall automatically be cancelled and forfeited by
the Executive as of the date of Executive’s death or Executive’s voluntary resignation or
retirement. Employee shall have the right to exercise any and all vested Options within the
Options Exercise Period. Any Options not exercised by Employee within the Options Exercise Period
shall be cancelled. In all other respects, all such Options
shall be governed by the plans, programs, agreements, and other documents pursuant to which
such Options were granted.
4.4 Disability. If, as a result of Executive’s incapacity due to physical or mental
illness, Executive shall have failed to perform Executive’s duties hereunder on a full time basis
for either (i) one hundred twenty (120) days within any three hundred sixty-five (365) day period,
or (ii) ninety (90) consecutive days, the Company may terminate Executive’s employment hereunder
for “Disability”. In that event, the Company shall pay to Executive only the accrued, but unpaid,
Base Salary for services rendered through such date of termination. Any and all unvested Options
shall be cancelled as of the date of termination. During any period that Executive fails to
perform Executive’s duties hereunder as a result of incapacity due to physical or mental illness (a
“Disability Period”), Executive shall continue to receive the compensation and benefits provided by
Section 3 of this Agreement until Executive’s employment hereunder is terminated; provided,
however, that the amount of compensation and benefits received by Executive during the Disability
Period shall be reduced by the aggregate amounts, if any, payable to Executive under disability
benefit plans and programs of the Company or under the Social Security disability insurance
program. Additionally, the vesting of the Executive’s Options shall be tolled during the
Disability Period and in the event of a termination of this Agreement as a result of the
Executive’s Disability, any and all unvested Options shall automatically be cancelled and forfeited
by the Executive as of the date of such termination. Employee (or as applicable, his spouse or
estate) shall have the right to exercise any and all vested Options within the Options Exercise
Period. Any Options not exercised by Employee within the Options Exercise Period shall be
cancelled. In all other respects, all such Options shall be governed by the plans, programs,
agreements, and other documents pursuant to which such Options were granted.
4.5 Termination by Company for Any Other Reason. In the event that Executive’s employment
hereunder is terminated by the Company prior to the expiration of the Term for any reason other
than as provided in Sections 4.2, 4.3 or 4.4 of this Agreement, any and all unvested Options shall
automatically be cancelled and forfeited by the Executive as of the date of such termination and
the Company shall pay to Executive:
| (i) | any accrued, but unpaid Base Salary for services rendered through such date of termination; | ||
| (ii) | any unpaid Milestone Bonuses due, payable or which accrue on or prior to the date of termination or within 90 days thereafter, which Milestone Bonuses shall be paid at the same time as provided under Section 3.2 hereof; | ||
| (iii) | the continued payment of the Base Salary, in the amount as of the date of termination, for a period (the “Severance Term”) consisting of the lesser of (x) six months, or (y) the remaining term of the contract from the date of termination, such payments to be made at the times such Base Salary would have been paid had Executive’s employment not terminated. |
Notwithstanding anything to the contrary contained herein, in the event that Executive shall breach
Sections 5, 6 or 7 of this Agreement at any time, in addition to any other remedies the Company may
have in the event Executive breaches this Agreement, the Company’s obligation under clauses (i),
(ii) and (iii) of this Section 4.5 shall cease and Executive’s rights thereto shall terminate and
shall be forfeited.
4.6 Benefits Following Termination. The benefits to which Executive (or as applicable,
his spouse or estate) may be entitled pursuant to the plans and programs referred to in Section 3.6
hereof upon termination of Executive’s employment shall be determined and paid in accordance with
the terms of such
plans and programs, or as may be required by applicable law. In the event Executive is
terminated in accordance with Section 4.5, the Company shall, on behalf of the Executive, fund the
COBRA premiums or other premiums, as applicable, for the various benefits in which the Executive
had participated prior to the termination date, for the Severance Term as defined in Section
4.5(iii) above.
4.7 Release. Except for any Accrued Obligations, the severance payments described in
Section 4.5 will be provided to Employee only if the following conditions are satisfied: (i)
Employee agrees to continue to be bound by and complies with all surviving provisions of the
confidentiality and/or non-compete provisions of this Agreement; and (ii) Employee executes and
delivers to the Company, and does not revoke, a full general release, in a form acceptable to the
Company, releasing all claims, known or unknown, that Employee may have against the Company, and
any subsidiary or related entity, their officers, directors, employees and agents, arising out of
or any way related to Employee’s employment or termination of employment with the Company.
4.8 Notwithstanding the due date of any post-employment payments, if at the time of the
termination of employment the executive is a “specified employee” (as defined in Section 409Aof the
Internal Revenue Code of 1986, as amended) as determined by the Compensation Committee of the
Board, Executive will not be entitled to any payments upon termination of employment until the
earlier of (i) the date which is six (6) months after the termination of employment for any reason
other than death or (ii) the date of the Executive’s death. The provisions of this paragraph will
only apply if and to the extent required to avoid any “additional tax” under Section 409A.
5. Exclusive Employment; Noncompetition.
5.1 No Conflict; No Other Employment. During the period of Executive’s employment with
the Company, Executive shall not: (i) engage in any activity which conflicts or interferes with or
derogates from the performance of Executive’s duties hereunder nor shall Executive engage in any
other business activity, whether or not such business activity is pursued for gain or profit,
except as approved in advance in writing by the Board of Directors of the Company; provided,
however, that Executive shall be entitled to manage his personal investments and otherwise attend
to personal affairs, including charitable activities, in a manner that does not unreasonably
interfere with his responsibilities hereunder, or (ii) accept any other employment, whether as an
executive or consultant or in any other capacity, and whether or not compensated therefor, unless
Executive receives the prior written approval of the Board of Directors of the Company.
5.2 No Competition. Executive acknowledges and recognizes the highly competitive nature of
the Company’s business and that access to the Company’s confidential records and proprietary
information renders him special and unique within the Company’s industry. In consideration of the
payment by the Company to Executive of amounts that may hereafter be paid to Executive pursuant to
this Agreement (including, without limitation, pursuant to Sections 3 and 4 hereof) and other
obligations undertaken by the Company hereunder, Executive agrees that during (i) his employment
with the Company and (ii) the period beginning on the date of termination of employment for any
reason and ending on the last day of the Severance Term as defined in Section 4.5(iii), Executive
shall not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer,
employee, consultant, advisor, director or otherwise) in any Competing Business, provided that the
provisions of this Section 5.2 will not be deemed breached merely because Executive owns less than
1% of the outstanding common stock of a publicly-traded company. Additionally, the Company shall
have the option to extend the No Competition Period for an additional six months in return for a
six-month extension of the Severance Term. For purposes of this Agreement, “Competing Business”
shall mean (i) any business in which the Company is currently engaged anywhere in the world,
including but not limited to (A) the development of medical
equipment in the hemodiafiltration realm for use in ESRD chronic therapy, and (B) the
development of cold water or air purification systems.
5.3 Non-Solicitation. In further consideration of the payment by the Company to Executive
of amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without
limitation, pursuant to Sections 3 and 4 hereof) and other obligations undertaken by the Company
hereunder, Executive agrees that during his employment and the Severance Term, he shall not,
directly or indirectly, (i) solicit, encourage or attempt to solicit or encourage any of the
employees, agents, consultants or representatives of the Company or any of its affiliates to
terminate his, her, or its relationship with the Company or such affiliate; (ii) solicit, encourage
or attempt to solicit or encourage any of the employees of the Company or any of its affiliates to
become employees or consultants of any other person or entity; (iii) solicit, encourage or attempt
to solicit or encourage any of the consultants of the Company or any of its affiliates to become
employees or consultants of any other person or entity, provided that the restriction in this
clause (iii) shall not apply if (A) such solicitation, encouragement or attempt to solicit or
encourage is in connection with a business which is not a Competing
Business and (B) the consultant’s rendering of services for the other person or entity will not interfere
with the consultant’s rendering of services to the Company; (iv) solicit or attempt to solicit any
customer, vendor or distributor of the Company or any of its affiliates with respect to any product
or service being furnished, made, sold or leased by the Company or such affiliate, provided that
the restriction in this clause (iv) shall not apply if such solicitation or attempt to solicit is
(A) in connection with a business which is not a Competing Business and (B) does not interfere
with, or conflict with, the interests of the Company or any of its affiliates; or (v) persuade or
seek to persuade any customer of the Company or any affiliate to cease to do business or to reduce
the amount of business which any customer has customarily done or contemplates doing with the
Company or such affiliate, whether or not the relationship between the Company or its affiliate and
such customer was originally established in whole or in part through Executive’s efforts. For
purposes of this Section 5.3 only, the terms “customer,” “vendor” and “distributor” shall mean a
customer, vendor or distributor who has done business with the Company or any of its affiliates
within twelve months preceding the termination of Executive’s employment.
5.4 During Executive’s employment with the Company and during the Severance Term, Executive agrees
that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below)
concerning the possible employment of Executive by the Competitor, (ii) receiving an offer of
employment from a Competitor, or (iii) becoming employed by a Competitor, Executive will (A)
immediately provide written notice to the Company of such circumstances and (B) provide copies of
Section 5 of this Agreement to the Competitor. Executive further agrees that the Company may
provide notice to a Competitor of Executive’s obligations under this Agreement, including without
limitation Executive’s obligations pursuant to Section 5 hereof. For purposes of this Agreement,
“Competitor” shall mean any entity (other than the Company or any of its affiliates) that engages,
directly or indirectly, in any Competing Business.
5.5 Executive understands that the provisions of this Section 5 may limit his ability to earn a
livelihood in a business similar to the business of the Company or its affiliates but nevertheless
agrees and hereby acknowledges that the consideration provided under this Agreement, including any
amounts or benefits provided under Sections 3 and 4 hereof and other obligations undertaken by the
Company hereunder, is sufficient to justify the restrictions contained in such provisions. In
consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees
that he will not assert in any forum that such provisions prevent him from earning a living or
otherwise are void or unenforceable or should be held void or unenforceable.
6. Inventions and Proprietary Property.
6.1 Definition of Proprietary Property. For purposes of this Agreement, “Proprietary
Property” shall mean designs, specifications, ideas, formulas, discoveries, inventions,
improvements, innovations, concepts and other developments, trade secrets, techniques, methods,
know-how, technical and non-technical data, works of authorship, computer programs, computer
algorithms, computer architecture, mathematical models, drawings, trademarks, copyrights, customer
lists, marketing plans, and all other matters which are legally protectable or recognized as forms
of property, whether or not patentable or reduced to practice or to a writing.
6.2 Assignment of Proprietary Property to the Company or its Subsidiaries. Executive
hereby agrees to assign, transfer and set over, and Executive does hereby assign, transfer and set
over, to the Company (or, as applicable, a subsidiary of the Company), without further
compensation, all of Executive’s rights, title and interest in and to any and all Proprietary
Property which Executive, either solely or jointly with others, has conceived, made or suggested or
may hereafter conceive, make or suggest, in the course of Executive’s employment with the Company.
The assignment of Proprietary Property hereunder includes without limitation all rights of
paternity, integrity, disclosure and withdrawal and any other rights that may be known as or
referred to as moral rights (“Moral Rights”). To the extent that such Moral Rights cannot be
assigned under applicable law and to the extent the following is allowed by the laws in the various
countries where Moral Rights exist, Executive hereby waives such Moral Rights and consents to any
action of the Company or any subsidiary of the Company that would violate such Moral Rights in the
absence of such consent. Executive also will endeavor to facilitate such use of any such Moral
Rights as the Company, or, as applicable, a subsidiary of the Company, shall reasonably instruct,
including confirming any such waivers and consents from time to time as requested by the Company
(or, as applicable, a subsidiary of the Company).
6.3 Works for Hire. Executive acknowledges that all original works of authorship or other
creative works which are made by Executive (solely or jointly with others) within the scope of the
employment of Executive by the Company and which are protectable by copyright are “works made for
hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101). To the extent such
original work of authorship or other creative works are not works made for hire, Executive hereby
assigns to the Company (or, as directed by the Company, to a subsidiary of the Company) all of the
rights comprised in the copyright of such works.
6.4 Disclosure of Proprietary Property and Execution of Documents. Executive further
agrees to promptly disclose to the Company any and all Proprietary Property which Executive has
assigned, transferred and set over or will assign, transfer and set over as provided in Section 6.2
above, and Executive agrees to execute, acknowledge and deliver to the Company (or, as applicable,
to a subsidiary of the Company), without additional compensation and without expense to Executive,
any and all instruments reasonably requested, and to do any and all lawful acts which, in the
reasonable judgment of the Company or its attorneys (or, as applicable, a subsidiary of the Company
or its attorneys) may be required or desirable in order to vest in the Company or such subsidiary
all property rights with respect to such Proprietary Property.
6.5 Enforcement of Proprietary Rights. Executive will assist the Company (or, as
applicable, a subsidiary of the Company) in every proper way to obtain, assign to the Company (or,
as directed by the Company, to a subsidiary), confirm and from time to time enforce, United States
and foreign patent trade secret, trademark, copyright, mask work, and other intellectual property
rights relating to Proprietary Property in any and all countries. To that end Executive will
execute, verify and deliver such documents and perform such other acts (including appearances as a
witness) as the Company, or, as applicable, a subsidiary of the Company, may reasonably request for
use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such proprietary
rights and the assignment of such Proprietary
Property. In addition, Executive will execute, verify and deliver assignments of such
Proprietary Property and all rights therein to the Company, its subsidiary or its or their
designee. The obligation of Executive to assist the Company, or, as applicable, a subsidiary of the
Company, with respect to proprietary rights relating to such Proprietary Property in any and all
countries shall continue beyond the termination of employment, but the Company, or as applicable, a
subsidiary of the Company, shall compensate Executive at a mutually agreed upon fee, in addition to
any expenses, after such termination.
In the event the Company, or, as applicable, a subsidiary of the Company, is unable for any reason,
after reasonable effort, to secure the signature of Executive on any document needed in connection
with the actions specified in the preceding paragraph, Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as agent and attorney in fact,
which appointment is coupled with an interest, to act for and on behalf of Executive, to execute,
verify and file any such documents and to do all other lawfully permitted acts to further the
purposes of the preceding paragraph with the same legal force and effect as if executed by
Executive. Executive hereby waives and quitclaims to the Company or, as applicable, a subsidiary of
the Company, any and all claims, of any nature whatsoever, which Executive now or may hereafter
have for infringement of any proprietary rights assigned hereunder to the Company or such
subsidiary.
6.6 Third Party Information. To the extent Executive has or possesses any Confidential
Information (as hereinafter defined) belonging to Executive or to others, Executive shall not use
or disclose to the Company or its subsidiaries or induce the Company or its subsidiaries to use any
such Confidential Information unless the Company or its subsidiaries have a legal rights to use
such Confidential Information. Executive will promptly advise the Company in writing if any of
Executive’s involvement with the Company or any subsidiary of the Company might result in the
possible violation of Executive’s undertakings to others or the use of any Confidential Information
of Executive or of others.
7. Confidential Information.
7.1 Existence of Confidential Information. The Company owns and has developed and
compiled, and the Company and its subsidiaries will develop and compile, certain proprietary
techniques and confidential information, which have and will have great value to their businesses
(referred to in this Agreement, collectively, as “Confidential Information”). Confidential
Information includes not only information disclosed by the Company (or, as applicable, a subsidiary
of the Company) to Executive, but also information developed or learned by Executive during the
course or as a result of employment with the Company, which information shall be the property of
the Company or, as applicable, such subsidiary. Confidential Information includes all information
that has or could have commercial value or other utility in the business in which the Company or
any of its subsidiaries is engaged or contemplates engaging, and all information of which the
unauthorized disclosure could be detrimental to the interests of the Company or its subsidiary,
whether or not such information is specifically labeled as Confidential Information by the Company
or such subsidiary. By way of example and without limitation, Confidential Information includes any
and all information developed, obtained, licensed by or to or owned by the Company or any of its
subsidiaries concerning trade secrets, techniques, know-how (including designs, plans, procedures,
merchandising, marketing, distribution and warehousing know-how, processes, and research records),
software, computer programs and designs, development tools, all Proprietary Property, and any other
intellectual property created, used or sold (through a license or otherwise) by the Company or any
of its subsidiaries, electronic data information know-how and processes, innovations, discoveries,
improvements, research, development, test results, reports, specifications, data, formats,
marketing data and plans, business plans, strategies, forecasts, unpublished financial information,
orders, agreements and other forms of documents, price and cost information, merchandising
opportunities, expansion plans, budgets, projections, customer, supplier, licensee, licensor and
subcontractor identities, characteristics, agreements and operating procedures, and salary,
staffing and employment information.
7.2 Protection of Confidential Information. Executive acknowledges and agrees that in the
performance of Executive’s duties hereunder, the Company or a subsidiary of the Company may
disclose to and entrust Executive with Confidential Information which is the exclusive property of
the Company or such subsidiary and which Executive may possess or use only in the performance of
Executive’s duties to the Company. Executive also acknowledges that Executive is aware that the
unauthorized disclosure of Confidential Information, among other things, may be prejudicial to the
Company’s or its subsidiaries’ interests, an invasion of privacy and an improper disclosure of
trade secrets. Executive shall not, directly or indirectly, use, make available, sell, disclose or
otherwise communicate to any corporation, partnership or other entity, individual or other third
party, other than in the course of Executive’s assigned duties and for the benefit of the Company,
any Confidential Information, either during the Term or thereafter. In the event Executive desires
to publish the results of Executive’s work for or experiences with the Company or its subsidiaries
through literature, interviews or speeches, Executive will submit requests for such interviews or
such literature or speeches to the Board of Directors of the Company at least fourteen (14) days
before any anticipated dissemination of such information for a determination of whether such
disclosure is in the best interests of the Company and its subsidiaries, including whether such
disclosure may impair trade secret status or constitute an invasion of privacy. Executive agrees
not to publish, disclose or otherwise disseminate such information without the prior written
approval of the Board of Directors of the Company.
7.3 Delivery of Records. In the event Executive’s employment with the Company ceases for
any reason, Executive will not remove from the Company’s premises without its prior written consent
any records (written or electronic), files, drawings, documents, equipment, materials and writings
received from, created for or belonging to the Company or its subsidiaries, including those which
relate to or contain Confidential Information, or any copies thereof. Upon request or when
employment with the Company terminates, Executive will immediately deliver the same to the Company.
8. Assignment and Transfer.
8.1 Company. This Agreement shall inure to the benefit of and be enforceable by, and may
be assigned by the Company to, any purchaser of all or substantially all of the Company’s business
or assets, any successor to the Company or any assignee thereof (whether direct or indirect, by
purchase, merger, consolidation or otherwise). As soon as reasonable prior to such an event (but no
later than 31 days prior thereto), the Company shall advise Executive of this pending occurrence.
Executive shall then have 31 days to discuss, negotiate and confer with any successor entity the
terms and conditions of Executive’s continued employment with the successor Company. If Executive,
acting reasonably, is unable to reach an agreement, through good faith negotiations with any
successor to the Company, acting reasonably, Executive may terminate his employment with the
Company and receive the payments and bonuses outlined in Section 4.5 hereof (“Termination By
Company For Any Other Reason”).
8.2 Executive. Executive’s rights and obligations under this Agreement shall not be
transferable by Executive by assignment or otherwise, and any purported assignment, transfer or
delegation thereof shall be void; provided, however, that if Executive shall die, all amounts then
payable to Executive hereunder shall be paid in accordance with the terms of this Agreement to
Executive’s devisee, legatee or other designee or, if there be no such designee, to Executive’s
estate.
9. Miscellaneous.
9.1 Other Obligations. Executive represents and warrants that neither Executive’s
employment with the Company or Executive’s performance of Executive’s obligations hereunder will
conflict with or
violate or otherwise are inconsistent with any other obligations, legal or otherwise, which
Executive may have. Executive covenants that he shall perform his duties hereunder in a
professional manner and not in conflict or violation, or otherwise inconsistent with other
obligations legal or otherwise, which Executive may have.
9.2 Nondisclosure; Other Employers. Executive will not disclose to the Company or any of
its subsidiaries, or use, or induce the Company or any of its subsidiaries to use, any proprietary
information, trade secrets or confidential business information of others. Executive represents and
warrants that Executive does not possess any property, proprietary information, trade secrets and
confidential business information belonging to prior employers.
9.3 Cooperation. Following termination of employment with the Company for any reason,
Executive shall cooperate with the Company, as requested by the Company, to effect a transition of
Executive’s responsibilities and to ensure that the Company is aware of all matters being handled
by Executive.
9.4 No Duty to Mitigate. Executive shall be under no duty to mitigate any losses or
damage to the Company with respect to any amounts payable pursuant to Section 4 of this Agreement.
9.5 Protection of Reputation. During the Term and thereafter, Executive agrees that he
will take no action which is intended, or would reasonably be expected, to harm the Company or any
of its subsidiaries or its or their reputations or which would reasonably be expected to lead to
unwanted or unfavorable publicity to the Company or any of its subsidiaries, other than those
required in order to permit Executive to comply with applicable law or those made in connection
with legal or arbitral process. During the Term and thereafter, the Company agrees that it will
take no actions which are intended, or would reasonably be expected, to harm Executive or his
reputation or which would reasonably be expected to lead to unwanted or unfavorable publicity to
the executive, other than those required in order to permit the Company to comply with applicable
law or those made in connection with legal or arbitral process. Notwithstanding the foregoing, this
paragraph shall not prevent the Company or Executive from exercising any of their respective rights
under this Agreement.
9.6 Governing Law. This Agreement shall be governed by and construed (both as to validity
and performance) and enforced in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed wholly with such jurisdiction, without regard to
principles of the conflict of laws thereof or where the parties are located at the time a dispute
arises.
9.7 Consent to Jurisdiction, Waiver of Jury Trial. Each of the parties hereby irrevocably
and unconditionally consents to the exclusive jurisdiction of any federal or state court of New
York sitting in New York County and irrevocably agrees that all actions or proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby shall be litigated
exclusively in such Courts. Each of the parties agrees not to commence any legal proceeding
related hereto except in such Courts. Each of the parties irrevocably waives any objection which
it may now or hereafter have to the laying of the venue of any such proceeding in any such Court
and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any
such Court that any such action, suit or proceeding brought in any such court has been brought in
an inconvenient forum. Each of the parties irrevocably waives any right it may have to a trial by
jury in any such action, suit or proceeding. Each of the parties agrees that the prevailing party
in any action or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby shall be entitled to recover its reasonable fees and expenses in connection
therewith, including legal fees.
9.8 Entire Agreement. This Agreement (including all exhibits hereto) contains the entire
agreement and understanding between the parties hereto in respect of Executive’s employment and
supersedes, cancels and annuls any prior or contemporaneous written or oral agreements,
understandings, commitments and practices between them respecting Executive’s employment, including
all prior employment agreements, if any, between the Company and Executive, which agreement(s)
hereby are terminated and shall be of no further force or effect.
9.9 No Amendment/Waiver. This Agreement may not be amended or modified in any manner nor
may any of its provisions be waived except by written amendment executed by the parties. A waiver,
modification or amendment by a party shall only be effective if (a) it is in writing and signed by
the parties, (b) it specifically refers to this Agreement and (c) it specifically states that the
party, as the case may be, is waiving, modifying or amending its rights hereunder. Any such
amendment, modification or waiver shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.10 Severability. If any term, provision, covenant or condition of this Agreement or part
thereof, or the application thereof to any person, place or circumstance, shall be held to be
invalid, unenforceable or void by a court of competent jurisdiction, the remainder of this
Agreement and such term, provision, covenant or condition shall remain in full force and effect,
and any such invalid, unenforceable or void term, provision, covenant or condition shall be deemed,
without further action on the part of the parties hereto, modified, amended and limited, and the
court shall have the power to modify, to the extent necessary to render the same and the remainder
of this Agreement valid, enforceable and lawful. In this regard, Executive acknowledges that the
provisions of Sections 5, 6 and 7 of this Agreement are reasonable and necessary for the protection
of the Company.
9.11 Construction. The headings and captions of this Agreement are provided for convenience
only and are intended to have no effect in construing or interpreting this Agreement. The language
in all parts of this Agreement shall be in all cases construed according to its fair meaning and
not strictly for or against the Company or Executive. The use herein of the word “including,” when
following any general provision, sentence, clause, statement, term or matter, shall be deemed to
mean “including, without limitation.” As used herein, “Company” shall mean the Company and its
subsidiaries and any purchaser of, successor to or assignee (whether direct or indirect, by
purchase, merger, consolidation or otherwise) of all or substantially all of the Company’s business
or assets which is obligated to perform this Agreement by operation of law, agreement or otherwise.
As used herein, the words “day” or “days” shall mean a calendar day or days. As used herein,
“Compensation Committee” means the Compensation Committee of the Board or, if no such committee is
then serving, at least two members of the Board as selected by the Board.
9.12 Remedies for Breach. The parties hereto agree that Executive is obligated under this
Agreement to render personal services during the Term of a special, unique, unusual, extraordinary
and intellectual character, thereby giving this Agreement special value, and, in the event of a
breach or threatened breach of any covenant of Executive herein, the injury or imminent injury to
the value and the goodwill of the Company’s and its subsidiaries’ businesses could not be
reasonably or adequately compensated in damages in an action at law. Accordingly, Executive
acknowledges that the Company (and as applicable, one or more of its subsidiaries) shall be
entitled to seek injunctive relief or any other equitable remedy against Executive in the event of
a breach or threatened breach of Sections 5, 6 or 7 of this Agreement. The rights and remedies of
the Executive and Company are cumulative and shall not be exclusive, and Executive and Company
shall be entitled to pursue all legal and equitable rights and remedies and to secure performance
of the obligations and duties of the other under this Agreement, and the enforcement of one or more
of such rights and remedies by Executive or Company shall in no way
preclude Executive or Company from pursuing, at the same time or subsequently, any and all
other rights and remedies available to Executive or Company.
9.13 Notices. Any notice, request, consent or approval required or permitted to be given
under this Agreement or pursuant to law shall be sufficient if in writing, and if and when sent by
certified or registered mail, return receipt requested, with postage prepaid, or by overnight
courier, to Executive’s residence, as reflected in the Company’s records or as otherwise designated
by Executive, or to the Company’s principal executive office, attention: Chairman of the
Compensation Committee of the Board of Directors with a copy (which shall not constitute notice)
to: Xxxxxx X. Xxxxxxxx, Esq., Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, XX 00000, as the case may be. All such notices, requests, consents and approvals shall be
effective upon being deposited in the United States mail. However, the time period in which a
response thereto must be given shall commence to run from the date of receipt on the return receipt
of the notice, request, consent or approval by the addressee thereof. Rejection or other refusal to
accept, or the inability to deliver because of changed address of which no notice was given as
provided herein, shall be deemed to be receipt of the notice, request, consent or approval sent
9.14 Assistance in Proceedings, Etc. Executive shall, without additional compensation
during the Term and with complete reimbursement of expenses after the expiration of the Term, upon
reasonable notice, furnish such information and proper assistance to the Company as may reasonably
be required by the Company in connection with any legal or quasi-legal proceeding, including any
external or internal investigation, involving the Company or any of its subsidiaries or in which
any of them is, or may become, a party.
9.15 Survival. Cessation or termination of Executive’s employment with the Company shall
not result in termination of this Agreement. The respective obligations of Executive, and rights
and benefits afforded to the Company, as provided in this Agreement, including, without limitation,
Sections 5, 6, 7 and 9.13, shall survive cessation or termination of Executive’s employment
hereunder.
[Signature page follows]
IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on November 8,
2007, to be deemed effective as of the date first written above.
| EMPLOYER | ||||||
| NEPHROS, INC. |
||||||
| By: | /s/ Xxxx X. Xxxx, M.D.
|
|||||
| Name: | Xxxx X. Xxxx, M.D. | |||||
| Title: | Lead Director | |||||
| EXECUTIVE | ||||||
| XXXXXX X. XXXXX | ||||||
| /s/ Xxxxxx X. Xxxxx
|
||||||
SCHEDULE A
Change of Control Bonus
| Cash Bonus | Company Valuation | |||
| $ | 100,000 | Greater than $125,000,000 but Less than $175,000,000 |
||
| $ | 150,000 | Greater than $175,000,000 but Less than $225,000,000 |
||
| $ | 250,000 | Greater than $225,000,000 |
||
SCHEDULE B
Options
Employment Options:
|
Options to purchase 500,000 shares of Common Stock. The Employment Options shall vest in substantially equal monthly installments at the end of each calendar month during the period from the time of Execution of the Employment Agreement until June 30, 2010 and shall be exercisable at an exercise price equal to the Common Stock’s closing price on the American Stock Exchange on the date of grant. For purposes of this Agreement, November 30, 2007 shall be deemed the first completed month of vesting regardless of whether this Agreement is executed on the 1st day of November or a subsequent date in November, provided that this Agreement is executed within the month of November 2007. |
