| Item
5.02 |
Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On
May 5, 2023, Nephros, Inc. (the “Company”) entered into an employment agreement with Robert Banks (the “Employment
Agreement”) pursuant to which the Company appointed Mr. Banks as its President and Chief Executive Officer, which appointment will
become effective the business day immediately following the date on which the Company files with the Securities and Exchange Commission
its Quarterly Report on Form 10-Q for the period ended March 31, 2023 (the “Effective Date”). Mr. Banks was also appointed
to the Company’s Board of Directors as a Class III director as of the Effective Date.
Prior
to joining the Company, Mr. Banks, 48, most recently served as Vice President Global OEM & Strategic Accounts at Danfoss Power Solutions,
a position he held from November 2021 to May 2023. Prior to that, he was Executive Director of Product Management at ITT Goulds Pumps
from October 2018 to November 2021. Previously, Mr. Banks was employed for 19 years at General Electric, holding various positions of
increasing responsibility, including more than 16 years with GE Water & Process Technologies. Mr. Banks received his Bachelor of
Arts in Mechanical Engineering from the University of Delaware and his M.B.A. from the University of Maryland University College.
Mr.
Banks was not appointed pursuant to any arrangement or understanding with any person, and Mr. Banks does not have any family relationships
with any directors or executive officers of the Company. Mr. Banks has not had a direct or indirect material interest in any transaction
with the Company since January 1, 2021, nor is any such transaction currently proposed, that would be reportable under Item 404(a) of
Regulation S-K.
In
accordance with the terms of the Employment Agreement, Mr. Banks will receive an initial base salary of $350,000. The base salary will
automatically increase to $400,000 per year at such time as the Company has achieved annual net revenue of at least $15 million in any
fiscal year, and further increase to $450,000 per year at such time as the Company has achieved annual net revenue of at least $20 million
in any fiscal year. Mr. Banks will also be eligible for an annual performance bonus targeted at 50% of his annualized base salary, based
primarily on Company performance and other performance objectives established by the Board of Directors. In addition, pursuant to the
Employment Agreement, on May 5, 2023, Mr. Banks received a 10-year stock option to purchase an aggregate of 357,165 shares of the Company’s
common stock pursuant to the Company’s 2015 Equity Incentive Plan, which option is exercisable at a price per share equal to $1.44,
the closing price of the Company’s common stock on the grant date. Mr. Banks’s right to purchase the shares will vest and
become exercisable, subject to his continued employment, as to 25% of the shares on the first anniversary of the grant date, and the
remaining 75% of the shares subject to the option will thereafter vest and become exercisable in twelve approximately equal quarterly
installments. The Employment Agreement also provides that if the Company terminates Mr. Banks without “cause” or Mr. Banks
resigns for “good reason,” then he will be entitled to up to twelve months of continued base salary and health benefits.
The
foregoing summary of the Employment Agreement is qualified in its entirety by reference to the complete agreement, a copy of which will
be filed with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023.
On
May 5, 2023, Andrew Astor resigned as the Company’s President and Chief Executive Officer and from the Company’s
Board of Directors, effective as of the Effective Date. Mr. Astor’s decision to resign was not a result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Astor will remain as the Company’s
Chief Financial Officer.
A
copy of the press release announcing these executive changes is attached hereto as Exhibit 99.1 and is incorporated herein by reference.