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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
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On
February 13, 2017 (the “Effective Date”), Nephros, Inc. (the “Company”) appointed Andrew Astor as its
Chief Financial Officer, effective immediately. Mr. Astor, age 60, is a technology and business executive with 30 years of financial
and operating experience. Mr. Astor was most recently President and Chief Financial Officer at Open Source Consulting Group, a
growth stage services firm. Previously, he was a Managing Director at Synechron, a global consulting organization, from 2013 to
2015. From 2009 to 2013, he served as Vice President at Asurion, a large, privately-held insurance company. Mr. Astor was co-founder
of the software company EnterpriseDB, and served as its CEO from 2004 to 2008. Mr. Astor was Vice President, Strategic Solutions
at webMethods, a software firm, from 2002 to 2004 and Vice President of Transactional Products at Dun & Bradstreet from 1998
to 2001. Prior to 1998, Mr. Astor held various roles at American Management Systems, SHL/MCI Systemhouse, and Ernst & Young.
Mr. Astor received his Bachelor of Arts in Mathematics from Clark University, and his MBA from The Wharton School at the University
of Pennsylvania.
The
terms of Mr. Astor’s employment with the Company are set forth in letter agreement dated as of February 10, 2017 (the “Agreement”).
The Agreement provides that Mr. Astor’s employment will be at-will and will initially be at 50% time, but after approximately
six to nine months, the Company expects to consider increasing the position to full time. Pursuant to the Agreement, Mr. Astor
will initial receive a salary of $10,000 per month, which the Company would expect to increase to an annualized base salary of
$250,000 if the position transitions to full-time. Mr. Astor is also eligible for up to a 25% annual bonus, based primarily on
Company performance.
In
addition, Mr. Astor was granted a 10-year stock option to purchase an aggregate of 579,571 shares of the Company’s common
stock pursuant to the Company’s 2015 Equity Incentive Plan. The option is exercisable at a price of $0.4599 per share,
which represents the closing sale price of the Company’s common stock on the Effective Date. Mr. Astor’s right to
purchase the shares vests, subject to his continued employment, as follows:
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12.5%
of the shares subject to the option vest on the first anniversary of the Effective Date;
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37.5%
of the shares subject to the option vest in twelve equal quarterly installments, with the first installment vesting three
months following the first anniversary of the Effective Date;
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20%
of the shares subject to the option will vest, if ever, upon approval of listing of the Company’s common stock on the
NASDAQ Stock Market, New York Stock Exchange or such other national securities exchange approved by the Board;
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10%
of the shares subject to the option will vest, if ever, on the February 1
st
following the Company’s first
completed fiscal year in which annual revenue exceeds $6,000,000; and
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20%
of the shares subject to the option will vest, if ever, on the February 1
st
following the Company’s first
completed fiscal year in which annual revenue exceeds $10,000,000.
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The
Agreement provides that if the Company terminates Mr. Astor without “cause” (as defined in the Agreement), then, if
such termination occurs prior to the second anniversary of the Effective Date, he shall be entitled to continuation of his base
salary and health benefits for a period of three months, or, if such termination occurs following the second anniversary of the
Effective Date, continuation of his base salary and health benefits for a period of six months.
Effective
upon Mr. Astor’s appointment as Chief Financial Officer, Daron Evans no longer serves as Acting Chief Financial Officer.
The
foregoing descriptions of the material terms of the Agreement are qualified in their entirety by reference to the full text of
the Agreement, a copy of which is attached as Exhibit 10.1 to this report and incorporated herein by reference. A copy of the
Company’s press release issued February 14, 2016, announcing Mr. Astor’s appointment is attached hereto and incorporated
by reference herein as Exhibit 99.1