EXHIBIT 10.1
SEPARATION AGREEMENT AND GENERAL
RELEASE
1.
PARTIES. This Separation Agreement and
General Release (“Agreement and Release”), dated
this 1st day of August, 2008, is by and between
PacificHealth Laboratories, Inc. (“PacificHealth”), a
Delaware corporation which has its principal offices situated at
100 Matawan Road, Suite 420, Matawan, New Jersey 07747 and Dr.
Robert Portman (“Portman”), a citizen of the State of
New Jersey, residing at 247 Kemp Avenue, in the Borough of Fair
Haven, New Jersey.
2.
RECITALS.
WHEREAS,
PacificHealth offered Portman employment pursuant to
an Employment Agreement dated January 1, 2007 (the
“Employment Agreement”), a copy of which is attached
hereto as Exhibit A ;
WHEREAS,
among the terms set forth in the Employment Agreement are
provisions concerning compensation upon termination and
non-competition;
WHEREAS, by
executing the Employment Agreement, Portman acknowledged his
acceptance of, and agreement to, the terms set forth in the
Employment Agreement;
WHEREAS,
Portman commenced employment with PacificHealth upon its inception
in April 1995 and currently serves as PacificHealth’s Chief
Executive Officer, Chief Scientific Officer, and Chairman of the
Board of Directors;
WHEREAS,
Portman and PacificHealth have mutually decided that because of a
contemplated change in duties, Portman’s employment service
as Chief Executive Officer and Chief Scientific Officer would be
terminated, and Portman would continue on the Board of Directors as
a non-executive Chairman of the Board of Directors;
WHEREAS,
PacificHealth and Portman agree that an orderly transition is in
the best interest of PacificHealth and its stockholders;
WHEREAS, it
is the intention of PacificHealth and Portman that the provisions
of this Agreement and Release will clarify the terms of the
Employment Agreement as to the termination of Portman’s
employment with PacificHealth and his obligations to PacificHealth
during the one year following the date of his termination of
employment from PacificHealth.
NOW
THEREFORE, PacificHealth and Portman, intending to be legally
bound, and in consideration of the mutual promises set forth
herein, agree as follows:
3.
TERMS OF AGREEMENT AND RELEASE.
3.1
TERMINATION OF EMPLOYMENT . PacificHealth and
Portman agree that Portman’s employment with PacificHealth,
including without limitation his role as Chief Executive Officer
and Chief Scientific Officer, will terminate, effective August 1,
2008 (hereinafter “Termination
Date”). Immediately upon termination, Portman will
retain his position as the non-executive Chairman of the Board of
Directors. Portman hereby acknowledges and agrees that
his responsibilities as non-executive Chairman of the Board of
Directors shall be limited to presiding as Chairman at meetings of
the Board of Directors of PacificHealth and that the President and
Chief Executive Officer of PacificHealth shall report to the full
Board of Directors. During his term as a director,
Portman will receive the compensation awarded to other
non-employee directors of PacificHealth for periods after the
Termination Date. For avoidance of doubt, it is agreed
that Portman shall receive two thirds of the compensation which
other directors receive for the quarter ending September 30,
2008.
3.2
COMPENSATION . In consideration for
Portman’s agreements set forth in this Agreement and Release,
in particular the non-compete restrictions set forth in Section 3.4
hereof, PacificHealth agrees to pay Portman during the Restricted
Period (as defined in Section 3.4) for the non-compete
restrictions, $295,000 for a period of one year following the
Termination Date (the “Non-Compete
Payment”). The Non-Compete Payment will be paid in
12 equal monthly payments of $24,583.33 to Signal Nutrition, LLC,
Portman’s limite liability company, payable on the
first business day of each month, with the
first payment upon execution of this Agreement, and reported on
Form 1099 as payment to an independent contractor. The
Non-Compete Payment shall be in lieu of any payments owed by
PacificHealth to Portman pursuant to the terms of the Employment
Agreement, including without limitation, the payments set forth in
Sections 3 and 5 of the Employment Agreement.
3.3
STOCK OPTIONS . As further consideration for Portman’s
execution of this Agreement and as set forth in his Employment
Agreement all Options issued to Portman (a list of which is
attached hereto as EXHIBIT B ) shall vest on the Termination
Date. The Company agrees that notwithstanding the
provisions of paragraph 3c(iv) of Portman’s Employment
Agreement, to the extent not previously exercised, the Options
shall terminate upon the earlier of (A) their normal expiration in
accordance with their terms or (B) six (6) months following the
termination of Portman’s service on the Board of
Directors.
3.4
OTHER BENEFITS . As further consideration for
Portman’s agreements set forth in this Agreement and Release,
and provided that Employee properly and timely elects to continue
medical and/or dental coverage under PacificHealth’s plans in
accordance with the continuation requirements of COBRA,
PacificHealth shall pay for the cost of the premium for such
coverage beginning on the last day of employment and continuing
until the earlier of either (1) July 31, 2009 or (2) the date on
which Portman is eligible to receive medical benefits from another
employer. If PacificHealth or Portman is able to arrange
for the COBRA invoices to be sent to PacificHealth, PacificHealth
shall pay such amounts directly. Otherwise,
PacificHealth shall pay such amounts directly, provided Portman
forwards invoices to the Company, or shall reimburse Portman
provided he provides evidence of payment. Except as set
forth in Section 3.2 and 3.3 hereof, Portman shall not be entitled
to receive any other payment or benefit from PacificHealth,
including without limitation, any reimbursement for expenses
associated with any Company-owned or leased automobile for his use
and any other expenses and other benefits set forth in Section 4 of
the Employment Agreement.
3.5
RESTRICTED ACTIVITIES .
(a)
Based
on Section 5b of the Employment Agreement, and by recounting the
language therein, and for the consideration referenced herein, for
a period of one year following the Termination Date (the
"Restricted Period”), Portman shall not become employed by,
become an officer, director, partner, member, manager or agent of,
serve as an advisor or consultant to, or become an investor in, any
business engaged in the manufacture or sale of sports nutrition or
diet/weight loss products, or any other products which the Company
(as defined in the Employment Agreement) was manufacturing or
selling at the effective date of his termination that contribute
greater than 5% of the business’ total revenues, or had
planned in writing to manufacture or sell, prior to the date of
termination (all of the foregoing collectively referred to as the
“Restricted Activities”); provided that (i) the Company
pays to Portman the payments required by Section 3.2 of this
Agreement. Any failure by the Company to make the
payments required hereunder as and when due, or to honor and timely
perform its other monetary obligations to Portman under this
Agreement, which continue for a period of ten calendar days
following notice from Portman to the Company, will constitute a
breach of this Agreement and Portman shall not be deemed to violate
the restrictions contained in this paragraph
thereafter. In the event of a breach of this Section
3.5(a) by Portman, if such breach is not cured within ten calendar
days after notice by PacificHealth to Portman, PacificHealth may,
in addition to all other remedies at law or in equity, cease
payment of the compensation provided for in Section 3.2 hereof as
well as any other monetary benefit provided by this
Agreement. Moreover, in the event of a breach of this
Agreement, Portman may seek all legal and equitable
remedies available to him.. During the Restricted
Period, and prior to commencing service with a business
organization that engages in a Restricted Activity as well as
activities which are not Restricted Activities, Portman may seek
approval from the Company by providing the Company with
the name and address of such organization, his prospective title
and a description of his prospective duties and responsibilities,
and a certification to the Company that he will not engage in, or
render advice with respect to, any Restricted Activity and that
Portman will inform his superiors in the new organization of his
obligations under this Agreement and any confidentiality or similar
agreement between Company and Portman, and the Board of Directors
of the Company does not determine, in its good faith discretion,
that Portman’s duties and responsibilities with the new
organization are Restricted Activities.
(b) Nothing
in subparagraph (a) above or elsewhere in this Agreement shall
prohibit Portman from acquiring a passive equity stake representing
less then five (5%) of any class of an issuer’s outstanding
securities.
