SEPARATION, RELEASE AND CONSULTING AGREEMENT
SEPARATION, RELEASE AND
CONSULTING AGREEMENT
This SEPARATION, RELEASE AND CONSULTING
AGREEMENT (the “Agreement”) is made and entered into this 30th day of
March 2010 by and between Xxxxxx X. Xxxxx III (hereinafter “Executive”) and
Nephros, Inc., a Delaware corporation (the “Company”).
WHEREAS,
Executive has been employed by the Company as its President and Chief Executive
Officer and has served as a member of the Company’s Board of Directors (the
“Board”); and
WHEREAS,
in connection with his employment with the Company, Executive executed an
Employment Agreement dated September 15, 2008 (the “Employment Agreement”);
and
WHEREAS,
in connection with his employment, pursuant to the Nephros, Inc. 2004 Stock
Incentive Plan and certain Incentive Stock Option Agreements dated September 15,
2008, January 6, 2009 and December 31, 2009, the Company granted Executive
options to purchase a total of 825,000 shares of common stock of the Company
(the “Incentive Option Shares”), 206,250 of which shares have vested as of the
Termination Date (as defined below); and
WHEREAS,
Executive wishes to voluntarily resign from his employment and relinquish his
Board seat, and the Company wishes to accept such resignation and Board seat;
and
WHEREAS,
notwithstanding Executive’s resignation, Company and Executive have agreed that
Executive will have the benefit of a temporary consulting arrangement with the
Company; and
WHEREAS,
the parties intend that this Agreement will set out the terms of Executive’s
separation from his employment, the general release of the Company by Executive
and the terms of Executive’s consulting arrangement with the
Company;
NOW, THEREFORE, in consideration of the
promises and the mutual covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Termination of Employment;
Board Resignation. Executive hereby resigns from his regular
full time employment with the Company, effective March 30, 2010 (the
“Termination Date”), and the Company hereby accepts such
resignation. In addition, Executive hereby resigns as a director of
the Company, effective as of the Termination Date. Executive will
receive his regular salary (minus applicable federal, state and local payroll
taxes, and other withholdings required by law or properly requested by
Executive) for his work through the Termination Date on the Company’s next
regular payday following the Termination Date. Except as expressly
provided herein or required by applicable law, after the Termination Date,
Executive will be entitled to no further employee benefits from the
Company. In addition, upon receipt of his final paycheck from the
Company, Executive acknowledges and agrees that he will have been paid all
compensation for labor or services rendered by him for the Company or on the
Company’s behalf through the Termination Date. Executive hereby
agrees not to seek reemployment by the Company.
2. Severance
Benefits. In consideration of Executive’s execution of this
Agreement and of the general release contained herein, the Company will pay to
Executive his regular base salary (minus applicable federal, state and local
payroll taxes, and other withholdings required by law or properly requested by
Executive) for a period of three (3) weeks (the “Severance
Payment”). The Severance Payment shall be paid to Executive in
accordance with the Company’s regular payroll practices and procedures beginning
on the Company’s first regular payday following the expiration of the
“Revocation Period” as defined in Section 14 below. In addition,
conditioned upon Executive’s proper and timely election to continue his health
insurance benefits under COBRA after the Termination Date, the Company will pay
Executive’s applicable COBRA premiums for the period ending April 30, 2010 (the
“COBRA Payment”). Thereafter, Executive will have the right to
continue his health insurance coverage under COBRA at his own expense. Each
party agrees it is the Company’s normal practice to reimburse employees for the
first $5,000 of out-of-pocket expenditures made to satisfy the deductible under
the Company’s insurance plan, and the Company agrees to extend this
reimbursement practice to Executive for calendar year 2010 so long as the COBRA
coverage continues. Further, the Company agrees to continue Executive's current
Company-provided vision and dental insurance through April 30, 2010. Executive
hereby acknowledges that, but for his execution of this Agreement and the
release contained herein, he would not be entitled to receive the Severance
Payment, COBRA Payment, dental and vision benefits or deductible
reimbursement as provided for herein.
If
Executive does not sign this Agreement and return it to the Company within
twenty-one (21) days, or if Executive revokes it pursuant to Section 14 below,
Executive will not be entitled to receive the separation benefits described
herein.
3. Incentive Option
Shares. All unvested Incentive Option Shares are forfeited as
of the Termination Date. Executive will have up to ninety (90) days
after the Termination Date to exercise his unexercised vested Incentive Option
Shares; thereafter, any unexercised Incentive Option Shares will be
cancelled. Executive covenants and agrees that he will not sell any
Incentive Option Shares he acquires for a period of thirty (30) days from the
date hereof. Executive will remain subject to and personally
responsible for his own actions under xxxxxxx xxxxxxx rules and all other
applicable securities laws.
4. Consulting
Arrangement. As further consideration for Executive’s
execution of this Agreement and of the general release contained herein, during
the period beginning from and after the Termination Date through May 31, 2010
(the “Initial Consulting Period”), Executive agrees to make himself available to
render, and to render at the request of the Board, the Acting Chief Executive
Officer or the Chief Executive Officer, services as are deemed necessary by the
Company (the “Consulting Services”). During the Initial Consulting
Period, Executive will be expected to devote up to fifteen (15) hours per week
providing the Consulting Services. Beginning April 16th and
ending on May 31st, the
Company will pay Executive for his services at the rate of fifty percent (50%)
of his regular base salary in effect prior to the Termination
Date. In addition, in the discretion of the Company, the Company may
elect to extend the consulting arrangement for a period of up to four (4)
additional months (the “Extended Consulting Period”). During the
Extended Consulting Period, Executive will be expected to devote up to seven and
one half (7½) hours per week providing the Consulting Services, and the Company
will pay Executive at the rate of twenty-five percent (25%) of his regular base
salary in effect prior to the Termination Date. (Fees paid to
Executive during the Initial and Extended Consulting Periods are hereinafter
referred to as the “Consulting Fees”). If the Company elects to
extend the consulting arrangement after the Initial Consulting Period, the
Company may terminate the consulting arrangement at any time, in its discretion,
upon thirty (30) days written notice to Executive. Upon termination
of the consulting arrangement, Executive will receive only the Consulting Fees
earned through the date of such termination. Executive hereby
acknowledges and agrees that, during the Initial and the Extended Consulting
Periods, Executive will be an independent contractor and not an employee of the
Company, and therefore will not be entitled to any benefits or rights provided
by the Company to employees (whether by agreement or by operation or law),
including but not limited to group insurance, liability insurance, disability
insurance, paid vacations, sick leave, retirement plans, health plans, premium
overtime pay, and the like. In addition, the Company will not provide
workers’ compensation coverage for Executive. Because Executive will
be an independent contractor, the Company will have no obligations to pay
Executive overtime compensation under the Fair Labor Standards Act, or to make
any payments other than what is agreed to by the parties in this
Agreement. Executive hereby agrees to indemnify, defend and hold
harmless the Company, its officers, directors, employees, agents and
shareholders, from and against any and all claims, actions, proceedings,
liabilities or losses including, without limitation, reasonable attorneys’ fees,
arising from or based on the Fair Labor Standards Act, workers’ compensation
laws, the Internal Revenue Code or any other federal, state or local law in
connection with Executive’s providing the Consulting Services to the Company
pursuant to this Agreement.
5. Release of
Claims. In exchange for the Company’s providing Executive with
the separation benefits described herein, by signing this Agreement, Executive
releases and forever discharges the Company, as well as its parent companies,
affiliates, subsidiaries, divisions, officers, directors, stockholders,
employees, agents, representatives, attorneys, lessors, lessees, licensors and
licensees, and their respective successors, assigns, heirs, executors and
administrators (collectively, the “Company Parties”), from any and all claims,
demands, and causes of action of every kind and nature, whether known or
unknown, direct or indirect, accrued, contingent or potential, which Executive
ever had or now has, including but not limited to any claims arising out of or
related to his employment with the Company and the termination thereof (except
where and to the extent that such a release is expressly prohibited or made void
by law). The release includes, without limitation, Executive’s
release of the Company and the Company Parties from any claims for lost wages or
benefits, stock options, restricted stock, compensatory damages, punitive
damages, attorneys’ fees and costs, equitable relief or any other form of
damages or relief. In addition, this release is meant to release the
Company and the Company Parties from all common law claims, including claims in
contract or tort, including, without limitation, claims for breach of contract,
wrongful or constructive discharge, intentional or negligent infliction of
emotional distress, misrepresentation, tortious interference with contract or
prospective economic advantage, invasion of privacy, defamation, negligence or
breach of any covenant of good faith and fair dealing. Executive also
specifically and forever releases the Company and the Company Parties (except
where and to the extent that such a release is expressly prohibited or made void
by law) from any claims based on unlawful employment discrimination or
harassment, including the New
Jersey Conscientious Employee Protection Act, N.J. Stat. Xxx. § 34:19-1,
the New York Human Rights Act, the New York City Administrative Code and the
Federal Age Discrimination In Employment Act (29 U.S.C. § 621
et. seq.).
Executive hereby acknowledges that this
release applies both to known and unknown claims that may exist between
Executive and the Company and the Company Parties. Executive
expressly waives and relinquishes all rights and benefits which he may have
under any state or federal statute or common law principle that would otherwise
limit the effect of this Agreement to claims known or suspected prior to the
date he executes this Agreement, and does so understanding and acknowledging the
significance and consequences of such specific waiver. Provided,
however, that nothing in this Agreement extinguishes any claims Executive may
have against the Company for breach of this Agreement.
6. No Admissions.
Executive understands, acknowledges and agrees that the release set out above in
Section 5 is a final compromise of any potential claims by Executive against the
Company and/or the Company Parties in connection with his employment by the
Company, and is not an admission by the Company or the Company Parties that any
such claims exist or that the Company or any of the Company Parties are liable
for any such claims. Unless prohibited by applicable law or
regulation, Executive further agrees not to hereafter, directly or indirectly,
xxx, assist in or be a voluntary party to any litigation against Company or any
one or more of the Company Parties for any claims relating to events occurring
prior to or simultaneously with the execution of this Agreement, including but
not limited to the termination of Executive’s employment with the
Company.
Notwithstanding the foregoing, nothing
in this Agreement prohibits Executive from filing a charge with, or
participating in any investigation or proceeding conducted by, the U.S. Equal
Employment Opportunity Commission or a comparable state or federal fair
employment practices agency; provided, however, that this Agreement fully and
finally resolves all monetary matters between Executive and the Company and the
Company Parties, and by signing this Agreement, Executive acknowledges that he
is waiving any right to monetary damages, attorneys’ fees and/or costs related
to or arising from any such charge, complaint or lawsuit filed by
Executive or on Executive’s behalf, individually or collectively.
7. Cooperation. By
signing this Agreement, Executive promises and agrees, at all times after the
Termination Date, to cooperate fully with the Company and its officers,
directors, employees, agents and legal counsel in connection with any claim,
complaint, charge, suit or action previously or hereafter asserted or filed by
the Company or against the Company or any of the Company Parties which relates
to, arises out of or is connected directly or indirectly with (i) Executive’s
employment with the Company, (ii) any other relationship or dealings between
Executive and the Company or any of the Company Parties, or (iii) any other
matter relating to the Company or any of the Company
Parties. Executive’s cooperation with the Company shall continue
throughout the pendency of any such claim, complaint, charge, suit or
action. Further, Executive promises and agrees that, in the event he
is subject to a valid and enforceable subpoena or court order which compels his
testimony at a trial, hearing or deposition concerning his relationship with the
Company or any other matter relating to the Company or any of the Company
Parties, he will provide reasonable and prompt notice to the Company of this
fact and cooperate fully with the Company prior to and during his testimony, to
the maximum extent possible, consistent with his obligation to provide truthful
testimony. Executive further agrees that, in the event he is named as
a defendant in a legal proceeding resulting from, arising out of, or connected
directly or indirectly with Executive’s employment with the Company, or any act,
omission or conduct occurring during Executive’s employment with the Company, he
will provide reasonable and prompt notice of this fact to the
Company. The Company agrees to reimburse Executive for reasonable
out-of-pocket expenses resulting from such cooperation and
consultation. If counsel is required in connection with any such
matter, Company may, at its option, provide Executive with representation by
Company counsel or reimburse separate counsel, acceptable to the Company,
retained to represent Executive.
8. Return of
Property. Following the Consulting Period, or earlier as
deemed by the Company, Executive shall return all property of the Company in his
possession, including, without limitation, any Company credit cards,
Company-owned equipment, and all originals and any copies of all disks, tapes,
files, correspondence, data, notes and other documents pertaining to the
Company’s proprietary products, customers and business and Confidential
Information as defined in the Employment Agreement. Such property
shall be in the same condition as when provided to Executive, reasonable wear
and tear excepted.
9. Confidentiality and
Restrictive Covenants. Executive hereby acknowledges and
agrees that his post-employment duties and obligations under the Employment
Agreement will remain in full force and effect in accordance with their terms,
and that a breach of the Employment Agreement will also constitute a breach of
this present Agreement.
10. No
Disparagement. Executive agrees that he will not denigrate,
defame, disparage or cast aspersions upon the Company, the Company Parties,
their products, services, business and manner of doing business, and that he
will use his reasonable best efforts to prevent any member of his immediate
family from engaging in any such activity.
11. Relief and
Enforcement. Executive understands and agrees that, in
addition to any other remedies that the Company (or the Company Parties) has at
law or in equity, any breach of this Agreement by Executive will relieve the
Company of its obligation to provide any unpaid Severance Payment as set out in
Section 2, above, and Executive agrees that he will repay to the Company any and
all Consulting Fees that have been paid to him pursuant to Section 4,
above. Executive also understands and agrees that if he violates the
terms of Sections 7, 8, 9 and 10 of this Agreement, Executive will cause injury
to the Company and/or one or more of the Company Parties) that will be difficult
to quantify or repair, so that the Company (and/or the Company Parties) will
have no adequate remedy at law. Accordingly, Executive agree that if
he violates Sections 7, 8, 9, and 10 of this Agreement, the Company (or the
Company Parties) will be entitled as a matter of right to obtain an injunction
from a court of law, restraining Executive from any further violation of this
Agreement. The right to an injunction is in addition to any other
remedies that the Company (or the Company Parties) has at law or in
equity.
12. Assignment. This
Agreement may not be assigned by Executive without the prior written consent of
the Company. The Company shall have the right to assign this
Agreement to its successors and assigns, and all covenants and agreements
hereunder shall inure to the benefit of and be enforceable by said successors or
assigns. The term “Company” shall include any of the Company’s subsidiaries,
subdivisions or affiliates.
13. No Modifications; Governing
Law; Entire Agreement. This Agreement cannot be amended,
modified or terminated orally, and no modification or waiver of any of the
provisions of this Agreement is effective unless in writing and signed by all of
the parties hereto and expressly states that it is intended to amend, modify or
terminate this Agreement or waive a provision hereof. The parties
agree that this Agreement is to be governed by and construed in accordance with
the laws of the State of Delaware. This Agreement and the Employment
Agreement set forth the entire and fully integrated understanding between the
parties, and there are no representations, warranties, covenants or
understandings, oral or otherwise, that are not expressly set out
therein.
14. Right to
Revoke. ONCE SIGNED BY EXECUTIVE, THIS AGREEMENT IS REVOCABLE
IN WRITING FOR A PERIOD OF SEVEN (7) DAYS (THE “REVOCATION
PERIOD”). IN ORDER TO REVOKE HIS ACCEPTANCE OF THIS AGREEMENT,
EXECUTIVE MUST DELIVER WRITTEN NOTICE TO XXXXXX XXXXXXXXX, AND SUCH WRITTEN
NOTICE MUST ACTUALLY BE RECEIVED WITH THE SEVEN (7) DAY REVOCATION
PERIOD.
15. Voluntary
Execution. By signing below, Executive acknowledges that he
has read this Agreement, that he understands its contents and that he has relied
upon or had the opportunity to seek the legal advice of his attorney, who is the
attorney of his own choosing.
EXECUTIVE HEREBY
ACKNOWLEDGES THAT HE HAS BEEN GIVEN A PERIOD OF AT LEAST TWENTY-ONE (21) DAYS TO
CONSIDER WHETHER TO EXECUTE THIS AGREEMENT. EXECUTIVE ALSO
ACKNOWLEDGES THAT HE IS HEREBY ADVISED BY THE COMPANY IN WRITING TO CONSULT WITH
AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.
IN
WITNESS WHEREOF, each of the parties hereto acknowledges having read and
understood the contents and effect of this Agreement and has executed this
Agreement freely and with full authority duly given, all as of the date first
above written.
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THE
COMPANY:
NEPHROS,
INC.
By:
______________________(SEAL)
Name:
Title:
EXECUTIVE:
_________________________(SEAL)
Xxxxxx
X. Xxxxx III
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