Exhibit 10.4
CONFIDENTIAL SEPARATION AGREEMENT AND
RELEASE
THIS
AGREEMENT is made and entered into between Lawrence W. Gadbaw
(hereinafter, “Gadbaw”) and BIODRAIN MEDICAL, INC.,
(hereinafter, “the Company”).
WHEREAS,
Gadbaw was employed by the Company and resigned that employment
August 13, 2008; and
WHEREAS,
Gadbaw and the Company previously entered into an Employment
Agreement in conjunction with execution of the Nondisclosure and
Noncompete Agreement dated October 18, 2006 and attached hereto as
Exhibit A and Exhibit B; and
WHEREAS,
Gadbaw is currently the Chairman of the Board of Directors for the
Company; and
WHEREAS,
the parties agree it is in their best interests to sever the
employment relationship; and
WHEREAS,
the parties acknowledge no stock option plan yet exists, but hope
to create one; and
WHEREAS,
the purpose of this Agreement is to set forth the terms and
conditions under which Gadbaw and the Company will sever their
employment relationship;
NOW,
THEREFORE, in consideration of the recitals stated above and the
mutual agreements, covenants, and provisions contained, in this
Agreement, the parties agree as follows:
1.
Termination . Gadbaw and the Company agree that the
effective date of Gadbaw’s termination is August 13, 2008
(the “Termination Date”). Gadbaw shall be paid his
regular salary and benefits through the Termination
Date.
2.
Payments . As consideration for the terms contained in this
Agreement, including Gadbaw’s release of any and all claims,
his agreement to maintain the confidentiality of this Agreement,
and his promise to abide by the restrictive covenants set forth in
his Nondisclosure and Noncompete Agreement, the Company shall pay
to Gadbaw the following:
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a.
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Gadbaw’s regular salary
from the Termination Date through the end of August
2008.
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b.
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The amount of Forty-Six Thousand
Dollars ($46,000), less applicable withholdings for taxes and any
other benefits typically deducted from Gadbaw’s salary (the
“Accrued Salary Payment”). The Accrued Salary Payment
shall be payable in equal monthly installments of Two Thousand
Dollars ($2,000) (the “Monthly Payments”). The Monthly
Payments shall commence only upon expiration of the rescission
period described in Section 8 without the occurrence of any
rescission and shall be paid, concurrently with, the
Company’s payroll cycle until, such time as the Accrued
Salary Payment is paid in full (the “Payment Term). If the
Company is able to raise Three Million Dollars ($3,000,000)
in
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additional funds delivered to the
Company before the expiration of the Payment Term, the remaining
unpaid balance of the Accrued Salary Payment shall be paid in full
by the Company to Gadbaw within 30 days after the Investment is
reached and the Company has received the funds, and the Company
shall have no further obligation to make Monthly Payments.
Severance payment is the balance of monthly pay from 8/14/08 to
8/31/08 in the amount of $5,843.83, for a period of 18
days.
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c.
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If the Company receives the funds
from the Investment, Gadbaw will be eligible for an additional
bonus in the amount of Twenty-Five Thousand Dollars ($25,000), less
applicable tax withholdings, to be paid within 30 days after the
Company receives the funds from the Investment. The Company has no
obligation to pay the $25,000 if the Company does not receive the
funds from the Investment.
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d.
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Gadbaw shall have no right to any
compensation, benefits, salary or bonus beyond that referenced in
the preceding subparagraphs of this Section 2 on account of his
employment or termination of employment with the Company. These
sums will only be paid, however, provided the rescission period
referred to in Section 8 has expired without rescission of this
Agreement by Gadbaw.
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e.
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The Company’s obligation
for payment of the above-referenced amounts shall cease in the
event that Gadbaw i) fails to sign the release in the form attached
hereto as Exhibit B (“Release”), ii) rescinds the
Release, or iii) breaches any portion of this Agreement. If Gadbaw
fails to sign the Release under this Agreement or if Gadbaw
breaches any portion of this Agreement, he will be obligated to
repay to the Company all payments made to him under the terms of
this Agreement.
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f.
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The Company will pay Gadbaw and
Gadbaw will accept from the Company, in full and final settlement,
the above-referenced consideration.
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Gadbaw
agrees that he is solely responsible for any and all liability
created under the federal and state tax laws and agrees to
indemnify the Company and hold it harmless for all such liability
or obligations, if any Further, the Company makes no warranty
concerning the treatment of any sums paid hereunder under said laws
and Gadbaw has not relied upon any such warranty.
Gadbaw
understands that no additional money is to be paid or other
consideration given to him on account of his employment or
termination of employment with the Company other than the
consideration referenced in this Agreement.
3.
Continued Non-Employment Relationship . Gadbaw will continue
his relationship with the Company after the Termination Date as a
non-employee Chairman of the Board of Directors, subject to the
same rights and limitations as other members of the Board of
Directors. During such time as Gadbaw serves as the Chairman of the
Board of Directors, the Company
2.
shall pay Gadbaw at the rate of
Twenty-Four Thousand Dollars ($24,000) per year, to be paid to
Gadbaw in equal monthly payments concurrently with the
Company’s payroll cycle.
4.
Stock Options . Subject to Gadbaw’s execution of stock
option and shareholder agreements acceptable to the Company, the
Company shall grant Gadbaw stock options for One Hundred Sixty
Thousand (160.000) shares of common stock in the Company. The
exercise price will be the fair market value of the Company at the
time of grant as determined by the Board of Directors.
Additionally, on each September 1 during such time as Gadbaw serves
as Chairman of the Board of Directors, the Company shall grant to
Gadbaw additional stock options for 30,000 shares of common stock,
commencing on September 1 of the year following the year of
Gadbaw’s termination of employment, the exercise price to be
determined in the same manner.
If,
at the time of each grant, the Company has adopted a stock option
plan (an “Option Plan”), such options may, but need
not, be granted pursuant to and subject to such plan. Such
options:
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a.
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Shall be non-qualified options to
purchase common stock;
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b.
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Shall have a term of three years
from the date of grant subject to termination 90 days after
death;
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c.
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Shall vest at grant;
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d.
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Shall, have no registration
rights;
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e.
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Shall be non-transferrable except
upon death;
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f.
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May, but need not, provide for
cashless exercise (either by surrender of shares or of
options);
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g.
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Shall be subject to adjustment,
for stock splits, stock dividends, reverse splits and similar
events;
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h.
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Shall terminate immediately if
Gadbaw i) fails to sign the Release, ii) rescinds the Release, or
iii) breaches any portion of this Agreement;
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i.
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Shall not be represented by a
certificate or agreement other than this Agreement unless granted
pursuant to an option plan;
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j.
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Shall allow exercise only if, at
exercise, Gadbaw has paid to the Company (in addition to the
exercise price), any tax withholdings required to be
made;
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k.
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Shall be subject to Gadbaw, at
exercise, making customa
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