EMPLOYMENT AGREEMENT
This
EMPLOYMENT
AGREEMENT (this
“Agreement”), made in New York, New York as of the 15th day of September 2008
(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 III
(“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 Effective Date
and
ending on September 14, 2011 (the “Expiration Date,” and collectively, the
“Term”).
2. Employment.
2.1 Employment
by the Company; Duties.
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 and Chief Executive Officer (“CEO”), 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
presidents and chief executive officer’s of similar sized companies conducting
similar business, such as, but not limited to, corporate planning and oversight
of the financial, marketing, research and other 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 and will not engage in any other employment, occupation or
consulting for any direct or indirect remuneration, nor engage in any other
activities that conflict with his obligations to the Company without the prior
written approval of the Board.
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 3.6 below), travel to domestic and international locations.
2.4 At-Will
Employment.
The
parties agree that Executive’s employment shall be on an “at-will” basis,
subject to the terms of this Agreement, and may be terminated at any time,
with
or without good cause or for any or no cause, at the option of either the
Company or Executive with or without notice. Executive understands and agrees
that neither his job performance nor promotions, commendations, bonuses or
the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of his
employment with the Company.
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 $240,000, payable in equal installments consistent with the Company's
payroll practices.
3.2 Performance
Bonus.
The
Company shall establish for Executive a target
discretionary bonus of 30%
of
annual base salary. The bonus amount, if any, will be determined by the
Compensation Committee of the Board (or the independent members of the Board,
if
there is no Compensation Committee) (the “Compensation Committee”) in its sole
discretion, based in part on attainment of personal objectives as determined
by
Executive and Compensation Committee, and based in part on the Company achieving
overall corporate targets. The Company will provide a guaranteed bonus of
$35,000 for the period beginning on Executive’s start date and ending on
December 31, 2008.
3.3 Grant
of Options and Terms Thereof.
Upon
execution of this Agreement, the Company shall grant to Executive options to
purchase 750,000 shares of the Company's common stock ("Options") pursuant
to
the Company’s 2004 Stock Incentive Plan or successor plans, if applicable,
subject to exercise price, vesting and forfeiture as described in the
Schedule
A.
3.4 Change
of Control.
In
the
event of a Change of Control (as defined below), all unvested Options shall
vest
and become exercisable immediately and, unless all such options are cashed-out
in the Change of Control transaction, shall remain exercisable for a period
of
not less than 360 days, regardless of whether Executive’s employment is
terminated.
| (i) |
For
purposes of this Agreement, a “Change of Control” shall mean (A) the
acquisition, directly or indirectly, following the date hereof by
any
person (as such term is defined in Section 13(d) and 14(d)(2) of
the
Securities Exchange Act of 1934, as amended), in one transaction
or a
series of related transactions, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company’s
then outstanding securities if such person or his or its affiliate(s)
do
not own in excess of 50% of such voting power on the date of this
Agreement, or (B) 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 transaction or series of related
transactions (other than a merger effected exclusively for the purpose
of
changing the domicile of the
Company).
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| (ii) | Notwithstanding Section 3.4(i) above, no transaction shall be considered a Change of Control under this Agreement, and no Options shall vest, pursuant to this Section 3.4: |
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a.
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if
the Company’s 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;
or
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b.
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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
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c.
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for
any transaction ascribing a valuation to the Company of less than
Seventy
Five Million Dollars ($75,000,000); 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
3.4.
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3.5 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 the Company’s
eligible employees. Executive shall be entitled to receive four weeks of annual
paid vacation in accordance with the Company’s vacation policy, with the timing
and duration of specific vacations mutually and reasonably agreed to by the
parties hereto. The Company reserves the right to cancel or change the benefit
plans and programs it offers to its employees at any time.
3.6 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.
3.7 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.
3.8 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.
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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 earned but unpaid Base Salary for services rendered through the date
of
termination, and any and all unvested Options shall automatically be cancelled
and forfeited by Executive as of the date of termination. Executive 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
Executive 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) an indictment, conviction, or plea of
nolo
contendere
to, any
felony or a misdemeanor involving fraud or dishonesty (whether or not involving
the Company); (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
earned but unpaid Base Salary for services rendered through the date of
termination. Any and all unvested Options shall automatically be cancelled
and
forfeited by Executive as of the date of Executive's death or Executive's
voluntary resignation or retirement, except upon exercise of Executive’s Change
of Control Termination Option (as defined in Section 4.6). Executive or
Executive’s estate shall have the right to exercise any and all vested Options
within the Options Exercise Period. Any Options not exercised by Executive
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, the
Company determines that Executive has failed to perform Executive's duties
hereunder on a full time basis for either (i) ninety (90) days within any three
hundred sixty-five (365) day period, or (ii) sixty (60) consecutive days, the
Company may terminate Executive's employment hereunder for "Disability". In
that
event, the Company shall pay to Executive only the earned 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 Executive’s Options shall be tolled during
the Disability Period and in the event of a termination of this Agreement as
a
result of Executive’s Disability, any and all unvested Options shall
automatically be cancelled and forfeited by Executive as of the date of such
termination. Executive (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 Executive 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.
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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 Executive as of the date of such
termination and the Company shall pay to Executive:
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(i)
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any
earned but unpaid Base Salary for services rendered through such
date of
termination; and
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(ii)
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continuing
payments of severance pay (less applicable withholding taxes) at
a rate
equal to his Base Salary rate, as then in effect, for a period equal
to
the lesser of (i) Maximum Severance Period (as defined below), and
(ii)
the remaining Term from the date of such termination (herein after
the
“Severance
Term”),
to be paid periodically in accordance with the Company's normal payroll
policies); provided
that if Executive continues to be employed in any capacity by a successor
entity following a Change of Control, the severance pay that would
otherwise be payable under this Section 4.5 shall be reduced by the
amount
of base compensation and guaranteed bonus (if any) Executive receives
in
such capacity during or attributable to the Severance Term.
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As
used
herein, the “Maximum Severance Period” shall mean three months, until Executive
has been employed hereunder for at least one year, and, thereafter, shall mean
six months.
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) and (ii) of this Section
4.5 shall cease and Executive's rights thereto shall terminate and shall be
forfeited.
5
4.6 Change
of Control Termination.
As soon
as reasonable prior any event constituting a Change of Control, but no later
than thirty one (31) days prior thereto, the Company shall advise Executive
of
this pending occurrence (the “Change of Control Notice”). Executive shall then
have thirty one (31) days from the date of the Change of Control Notice to
discuss, negotiate and confer with any successor entity regarding the terms
and
conditions of Executive's continued employment with the successor Company
following a Change of Control. If Executive, acting reasonably, is unable to
reach an agreement through good faith negotiations with any successor to the
Company during such 31 day period, then Executive may elect (the “Change of
Control Termination Option”) to terminate his employment with the Company and
receive the payments outlined in Section 4.5 hereof.
4.7 Release.
Except
for any accrued obligations, the severance payments described in Section 4.5
will be provided to Executive only if the following conditions are satisfied:
(i) Executive 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) Executive 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 Executive 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 Executive’s employment or
termination of employment with the Company.
4.8 Section
409A.
Notwithstanding the due date of any post-employment payments, if at the time
of
the termination of employment Executive is a “specified employee” (as defined in
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”))
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 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; 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.
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5.2 No
Competition.
(a) 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(ii) (the “Post-Employment Period”),
Executive shall not, directly or indirectly, for himself or any third party,
engage without the prior consent of the Company as owner, investor, financier,
partner, stockholder, employer, employee, consultant, advisor, director, officer
or otherwise in any firm, partnership, corporation, entity, or business that
engages or participates in a business that offers any product or service that
competes in any material respect with a product or service (i) provided by
the
Company to customers or (ii) that the Company is developing, during the period
of Executive’s employment with the Company (a “Competing Business”) anywhere in
the world where the Company conducts its business, 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.
(b) The
provisions of Section 5.2(a) will not be deemed breached merely because
Executive owns less than 1% of the outstanding common stock of a publicly-traded
company.
(c) 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
and any such extension shall extend the Post-Employment Period.
(d) The
covenants contained in Section 5.2(a) shall be construed as a series of separate
covenants, one for each county, city, state, or any similar subdivision in
any
geographic area. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 5.2(a).
If, in any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such
part)
shall be eliminated from this Agreement to the extent permitted by law and
necessary to permit the remaining separate covenants (or portions thereof)
to be
enforced. In the event that the provisions of this section are deemed to
exceed the time, geographic or scope limitations permitted by applicable law,
then such provisions shall be, to the extent permitted by law, reformed to
the
maximum time, geographic or scope limitations, as the case may be, permitted
by
applicable laws.
(e) Executive
acknowledges that the limitations of time, geography and scope of activity
agreed to in this no competition provision are reasonable because, among other
things, (i) the Company is engaged in a highly competitive industry, (ii)
he will have access to trade secrets and know-how of the Company, (iii) he
will
be able to obtain suitable and satisfactory employment without violation of
this
agreement, and (iv) these limitations are necessary to protect the trade
secrets, confidential information and goodwill of the Company.
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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 Post-Employment Period, 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 Notifications.
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 Sufficient
Consideration.
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.
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6. Inventions
and Proprietary Property.
6.1 Definition
of Proprietary Property.
For
purposes of this Agreement, "Proprietary Property" shall mean non-public
information that relates to the actual or anticipated business or research
and
development of the Company, 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 and customers (including, but not limited to, customers of the
Company on whom Executive called or with whom Executive became acquainted during
the term of his employment), 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.
(a) 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
or designee 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, whether or not patentable or
registrable under copyright or similar laws, which Executive may solely or
jointly conceive or develop or reduce to practice, or cause to be conceived
or
developed or reduced to practice, during the period of time Executive is in
the
employ of the Company (collectively referred to as “Inventions”).
(b) 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.
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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.
(a) 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.
(b) 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.
10
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 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.
11
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).
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.
12
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 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 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.
9.5 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.
9.6 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.
9.7 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.
13
9.8 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.
9.9 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.
9.10 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.
9.11 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 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.
14
9.12 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: Xxxxx X. Xxxxxxxx, Esq., Xxxxxx and Xxxxx, LLP, 000 Xxxx 00x Xxxxxx,
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
9.13 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.
9.14 Survival.
Cessation or termination of Executive's employment with the Company shall not
result in termination of this Agreement. To the extent that any of the
obligations of this Agreement constitute continuing obligations, they shall
survive any termination or expiration of this Agreement or of Executive’s
employment hereunder.
[Signature
page follows]
15
IN
WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
as
of September 15, 2008, to be deemed effective as of the date first written
above.
| EMPLOYER | ||
| NEPHROS, INC. | ||
| |
|
|
| By: /s/ Xxxxxx X. Xxxxxxxxx | ||
|
Name: Xxxxxx X. Xxxxxxxxx |
||
| Title: V.P. & CFO | ||
| EXECUTIVE | ||
|
/s/ Xxxxxx X. Xxxxx III
|
||
16
SCHEDULE
A
Options
|
Options:
|
Options
to purchase 750,000 shares of Common Stock. The Options shall vest
in four
equal installments on each of September 15, 2009, September 15, 2010,
September 15, 2011 and September 15, 2012; provided that Executive
remains
employed by the Company at such time. The Options 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.
|
17
