THIS RESTATED
EMPLOYMENT AGREEMENT (the “ Agreement
”) is made and entered into by and between Frank Menzler
(“ Executive ”) and HepaLife Technologies, Inc.
(the “ Company ”), effective as of September 30,
2009 (the “ Effective Date ”).
WHEREAS
, the Company and
Executive entered into an employment agreement dated August 1, 2006
(the “ Prior Employment Agreement ”);
and
WHEREAS
, the Company and
Executive wish to restate the terms of Executive’s employment
and replace in its entirety the Prior Employment Agreement in order
to provide for the Executive’s continued employment by the
Company and in order to come into compliance with Section 409A of
the Internal Revenue Code of 1986, as amended (the “
Code ”), and any final regulations and official
guidance promulgated thereunder (“ Section 409A
”), as set forth below.
NOW
THEREFORE ,
in consideration of the foregoing and of the respective covenants
and agreements set forth herein, the Company and Executive agree
that the Prior Employment Agreement is restated and replaced in its
entirety as follows:
1. Term,
Duties and Scope of Employment.
(a)
Term; At-Will Employment. The initial term of
this Agreement shall commence on the Effective Date and shall
terminate, subject to earlier termination as provided herein, on
March 31, 2010 (the “ Initial Term ”).
Following the Initial Term, each of the Company and Executive
further acknowledge that Executive’s employment to the extent
continued after the Initial Term is and will continue to be
at-will, and anything herein to the contrary notwithstanding, may
be terminated by the Company or the Executive with or without cause
The period of Executive’s employment under this Agreement is
referred to herein as the “ Employment Term
.”
(b) Position and
Duties.
(i) Executive will
continue to serve as the Company’s Chief Executive Officer
and President. Executive will continue to render such
business and professional services in the performance of
Executive’s duties, consistent with Executive’s
position within the Company, as will reasonably be assigned by the
Company’s Board of Directors (the “ Board
”) and to the extent consistent with Executive’s
fiduciary duties. Executive shall be available to travel as the needs of the
business require. Executive agrees to exclusively devote hisr full
business time, energy and skill to the duties assigned to him by
the Board.
(ii) Anything herein to
the contrary notwithstanding, Executive and Company agrees and
acknowledges that the Board or the
Executive, at any time during the Employment Term, may modify
Executive’s job title, duties and responsibilities, including
but not limited to the appointment of the Executive to an
executive position with any of the Company’s subsidiaries or
to a non-executive position with the Company, as the Board
deems necessary and appropriate in light of the Company’s
needs and interests from time to time (collectively, a
“Reassignment of Responsibilities”). The Board shall
provide Executive with three (3) days prior notice of any such
Reassignment of Responsibilities, which notice shall provide a
general description of the Executives new duties and
responsibilities
hereunder.
(iii) A Reassignment of
Responsibilities shall not result in a reduction or diminution of
the Executive’s Salary (as defined below) or other Benefits
(as defined below).
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(iv) subject to
termination by the Executive this Agreement, and the parties
obligations hereunder, will remain in full force and effect,
regardless of a Reassignment of Responsibilities to a position with
a subsidiary of the Company;
(v) the new position must be one that utilizes Executive’s
skills and experience;
(vi) Executive shall have the option to perform the reassigned
position from Executive’s home;
(vii) In the event of a
Reassignment of Responsibilities the Executive shall be deemed to
have resigned as the Company’s Chief Executive Officer and
President and, if requested will promptly provided a letter of
resignation to the Board confirming the same.
(c) Obligations
. Executive will
continue to perform Executive’s duties faithfully and to the
best of Executive’s ability and will continue to devote
Executive’s full business efforts, energy and skills to the
duties assigned to him by the Board. For the duration of
the Employment Term, Executive agrees not to actively engage in any
other employment, occupation or consulting activity for any direct
or indirect remuneration without the prior approval of the
Board.
2.
Compensation.
(a)
Salary . As of the Effective
Date, the Company will pay Executive a monthly salary of $18,750.00 payable in two
installments of $9,375 each on the 15 th and last day of
each calendar month during the Employment Term in full compensation
of Executive’s services hereunder (the “ Salary ”).
The Salary will be paid in accordance
with the Company’s normal payroll practices and be subject to
the usual, required withholdings.
(b) Signing
Bonus. As a
further inducement to Executive to enter into this Agreement, the
Company will pay Executive a one-time payment of thirty-five
thousand ($35,000) dollars on October 15, 2009 (the “Signing
Bonus”).
(c) Equity.
During the Initial Term,
Executive will not be eligible to receive awards of stock options,
restricted stock, restricted stock units, stock appreciation
rights, performance units and performance shares or other equity
awards pursuant to any plans or arrangements the Company may have
in effect from time to time (collectively, “ Awards
”).
3. Employee
Benefits.
(a)
General.
Executive will continue to be entitled to participate in the
employee benefit plans currently and hereafter maintained by the
Company of general applicability to other senior executives of the
Company.
(b)
Medical Expense/Life Insurance: During the Initial Term the Company agrees to
continue to reimburse Executive for his monthly private health
insurance (as currently in effect) premium of $1,687.61, his
monthly private dental insurance (as currently in effect) premium
of $136.00 and his monthly private life insurance (as currently in
effect) premium of currently $75.00, all of such amounts subject to
increase from time to time upon notice to Executive by the
applicable insurance carrier (the “Benefit
Payments”). Company agrees to reimburse Executive for
any such increases up to a maximum of twenty (20%) percent of the
current premiums.
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(c)
US VISA/Work
Authorization: During the
Employment Term, the Company will assist Executive in obtaining the
necessary Visa/Work Authorization for Executive and his family,
followed immediately by an application for a US Green Card, on the
assumption, and agreement by Executive, that Executive meets all
necessary criteria for obtaining a Green Card. Any legal cost
associated with obtaining a Green Card will be paid by the
Company.
(d)
Expenses: The Company will reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in
the furtherance of or in connection with the performance of
Executive’s duties hereunder, in accordance with the
Company’s expense reimbursement policy as in effect from time
to time , upon submission and approval of written statements
and bills in accordance with the then regular procedures of the
Company.
(e) Director
and Officer Insurance. During the Employment Term Company shall
maintain (i) Directors and Officers Insurance (the
“D&O Insurance”) with an insurance company with an
A.M. Best rating and coverage as in place as of the Effective Date
and Executive shall be included as an “officer” of
Company under such policy, and (ii) reasonable and customary
indemnification provisions in its By-laws and Certificate of
Incorporation that are at least as protective of Executive as the
laws of the state in which Company is then incorporated. The
Company will use commercially reasonable efforts to
maintain the D&O Insurance in effect for a period of six
years following the termination of this Agreement. .
4.
Waiver of Rights and Benefits Under the Prior Employment
Agreement.
As a further inducement
to the Company to enter into this Agreement, Executive hereby
waives any and all rights, benefits, payments, stock options and
Awards to which Executive may have been entitled to under the terms
of the Prior Employment Agreement, including without
limitation:
(a)
Any and all Options (as defined in the Prior Employment Agreement)
permitting the Executive to acquire up to an aggregate of 2,000,000
shares of the Company’s common stock whether vested or
unvested pursuant to the Stock Option Agreement (as defined in the
Prior Employment Agreement) as the same may have been from time to
time amended are hereby terminated as of the Effective Date and are
of no further force and effect; Executive has simultaneously with
his execution and delivery of this Agreement delivered the Stock
Option Agreement to the Company for cancellation;
(b)
Any and all Options permitting the
Executive to acquire up to an aggregate of 500,000 shares of the
Company’s common stock whether vested or unvested pursuant to
the Stock Option Agreement dated June 11, 2008 as the same may have
been from time to time amended (the “June 2008 Stock Option
Agreement”) are hereby terminated as of the Effective Date
and are of no further force and effect; Executive has
simultaneously with his execution and delivery of this Agreement
delivered the June, 2008 Stock Option Agreement to the Company for
cancellation;
(c)
Anything in Section 4(a) of the Prior Employment Agreement to the
contrary notwithstanding, the relocation expense reimbursement in
the amount of $35,000 referred to in Section 4(a) of the Prior
Employment Agreement is hereby waived by Executive; and
(d)
The discretionary annual bonus fund in the aggregate principal
amount of $50,000.
5.
Resignations. Executive as of the Effective Date
hereby resigns as a director of the Company and from any office
other than that of the Chief Executive Officer and President of the
Company. Upon termination of Executive’s employment
hereunder, Executive shall be deemed to have
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resigned as an officer and director
of Company, its subsidiaries and affiliates, if then so acting, as
of the date of such termination.
6. Earlier
Termintion.
(a) By Executive.
The Executive may terminate this Agreement by five (5)
day prior written notice to the Company:
(i) at any time for
any or no reason
(ii) at any time on or
after March 31, 2010 , for any or no reason, with or without Cause,
upon written notice to Executive.
(b) By the
Company. The Company may terminate this Agreement at any
time:
(i) during the
Initial Term immediately upon written notice to Executive,
for Cause; and
(ii) on or after March
31, 2010 , for any or no reason, with or
without Cause, upon written notice to Executive.
7.
Severance Benefits.
(a) Termination By the
Executive During the Initial Term. If during the
Initial Term, Executive terminates his employment (or requires or
consents to the Company’s termination of his employment) for
any or no reason, then, subject to Section 6(d) below,
Executive will receive the following severance from the Company or,
if a Change of Control has been consummated, the Company’s
successor in a Change of Control:
(i) Severance
Payment. Executive will receive a
lump sum in the amount equal to the pro-rata portion of
Executive’s Salary (less applicable withholding taxes) for a
period from the date of such termination through March 31, 2010
plus the Signing Bonus to the extent not previously paid (the
“ Salary Severance Payment ”).
(iii) Continued
Employee Benefits . Executive will receive
a lump sum in the amount equal to the pro-rata portion of the
Benefit Payments for a period from the date of such termination
through March 31, 2010 (the “ Benefit Severance
Payment ”). The Salary Severance Payment and the Benefits
Severance Payment are collectively, herein referred to as the
“ Severance Payments.”
(b) Termination
by the Company for Cause. The Company may terminate this
Agreement for Cause at any time during the Employment Term.
If Executive’s employment with the Company terminates
for Cause by the Company (or any parent or subsidiary of the
Company), then (i) all payments of compensation by the Company to
Executive hereunder will terminate immediately (except as to
amounts already earned as of the date Executive receives written
notification of Executive’s termination for Cause), and (ii)
Executive will not be entitled to receive the Severance Payment or
other benefits, including, the Signing Bonus, to the extent not
already paid.
(c) Termination
After the Expiration of the Initial Term. Termination of the this Agreement
and the Executive’s employment, by either the Company or the
Executive for any reason whatsoever after the Initial Term shall
not result in any obligation to make any Severance Payment or
any
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other payment of any kind to
Executive.
(d) Separation
and Release of Claims Agreement. The receipt of any
Severance Payments or benefits pursuant to this Agreement is
subject to the Executive signing and not revoking a separation and
release of claims agreement in substantially the form of Exhibit
A hereto (the “ Release ”), which must
become effective no later than the 60th day following the
Executive’s termination of employment (the “ Release
Deadline ”), and if not, the Executive will forfeit
any right to Severance Payments or benefits under this
Agreement. To become effective, the Release must be
executed by the Executive and any revocation periods (as required
by statute, regulation, or otherwise) must have expired without the
Executive having revoked the Release. In addition, no
Severance Payments or benefits will be paid or provided until the
Release actually becomes effective. The Company shall
deliver to Executive a release in the form of Exhibit B
hereto.
(e) Timing
of Severance Payments. The Company will pay the
Severance Payments to which Executive is entitled in one lump sum
within five (5) business days of the date of termination of this
Agreement.
(f) Unemployment.
Upon termination of
Executive’s employment with the Company for any reason other
than Cause or because of a Reassignment of Responsibilities, the
Company shall not contest any filing made by Executive for
unemployment compensation and shall promptly respond to
requests for information made by the applicable state unemployment
office.
(g) Exclusive
Remedy. In the event of a
termination of Executive’s employment with the Company (or
any parent or subsidiary of the Company), the provisions of this
Section 6 are intended to be and are exclusive and in lieu of any
other rights or remedies to which Executive or the Company may
otherwise be entitled, whether at law, tort or contract, in equity,
or under this Agreement. Executive will be entitled to
no severance or other benefits upon termination of employment with
respect to acceleration of Award vesting or severance pay other
than those benefits expressly set forth in this Section
7.
8. Definition
of Terms. The following terms
referred to in this Agreement will have the following
meanings:
(a) Cause. “
Cause ” is defined as a determination by the Company
of any of the following: (i) Executive’s conviction of, or
plea of guilty or nolo contendere to, a felony
; (ii) a willful act by Executive which constitutes gross
misconduct and which is injurious to the Company; (iii)
continued violations by Executive of Executive’s obligations
as an employee of the Company which are demonstrably willful and
deliberate on Executive’s part after there has been delivered
to Executive a written demand for performance from the Company
which describes the basis for the Company's belief that Executive
has not substantially performed Executive’s duties (unless
such violation by its nature cannot be cured, in which case notice
and an opportunity to cure shall not be required); or (iv)
Executive’s conviction for or a plea bargain as to any crime
involving fraud, embezzlement or any other act of moral
turpitude.
(b) Change
of Control. “ Change of Control ”
means the occurrence of any of the following events:
(i)
