Exhibit 10.1

 

SEVERANCE AGREEMENT AND GENERAL RELEASE

 

October 22, 2004

 

Paul A. Looney

9 Pheasant Lane

Lexington, MA 02421

 

Dear Paul:

 

In connection with the termination of your employment with Biosphere Medical,
Inc. (the “Company”) pursuant to Section 4.4 of your March 25, 2004 Employment
Agreement (the “Employment Agreement”) on November 2, 2004, you are eligible to
receive the severance benefits described in the “Description of Severance
Benefits” attached to this letter as Attachment A if you sign and return this
letter agreement to Lisa McGrath on or after November 2, 2004 but no later than
November 5, 2004. By signing and returning this letter, you will be entering
into a binding agreement with the Company and will be agreeing to the terms and
conditions set forth in the numbered paragraphs below, including the release of
claims set forth in paragraph 3. Therefore, you are advised to consult with your
attorney before signing this letter and you may take up to twenty-one (21) days
to do so. If you sign this letter, you may change your mind and revoke your
agreement during the seven (7) day period after you have signed it. If you do
not so revoke, this letter will become a binding agreement between you and the
Company upon the expiration of the seven (7) day revocation period.

 

If you choose not to sign and return this letter agreement by November 2, 2004
but no later than November 5, 2004, you shall not receive any severance benefits
from the Company. You will, however, receive payment on your termination for any
unused vacation time accrued through the termination date. Also, regardless of
signing this letter, you may elect to continue receiving group medical insurance
pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq. All premium costs
shall be paid by you on a monthly basis for as long as, and to the extent that,
you remain eligible for COBRA continuation. You should consult the COBRA
materials to be provided by the Company for details regarding these benefits.
All other benefits, including life insurance and long term disability, will
cease upon your Termination Date. Further, pursuant to the terms of the stock
option reward(s) made to you under the Company’s 1997 Stock Option Incentive
Plan, as amended, you will have up three (3) years after the Termination Date to
exercise any vested stock rights you may have (as provided for by the plan). All
unvested stock rights will be cancelled on the Termination Date.

 

If, after reviewing this letter agreement with your attorney, you find the terms
and conditions are satisfactory to you, you should sign and return this letter
to Lisa McGrath on or after November 2, 2004 but no later than November 5, 2004.

 

The following numbered paragraphs set forth the terms and conditions which will
apply if you timely sign and return this letter agreement and do not revoke it
within the seven (7) day period:

 

1. Termination Date - Your effective date of termination from the Company is
November 2, 2004 (the “Termination Date”), and you agree to waive the sixty (60)
day notice provision set forth in the Employment Agreement in exchange for
payment of an additional two (2) months of severance pay as described in
Attachment A hereto.

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2. Board Service - The termination of your employment with the Company shall not
affect your service as Chairman of the Company’s Board of Directors (the
“Board”). You will continue to serve as Chairman of the Board until the
Company’s 2005 Annual Meeting, provided, that you agree to resign from your
position as Chairman and a member of the Board upon request of a majority of the
members of the Board.

 

3. Description of Severance Benefits - The severance benefits paid to you if you
timely sign and return this letter are described in the “Description of
Severance Benefits” attached as Attachment A (the “severance benefits”).

 

4. Release - In consideration of the payment of the severance benefits, which
you acknowledge you would not otherwise be entitled to receive, you hereby
fully, forever, irrevocably and unconditionally release, remise and discharge
the Company, its officers, directors, stockholders, corporate affiliates,
subsidiaries, parent companies, agents and employees (each in their individual
and corporate capacities) (hereinafter, the “Released Parties”) from any and all
claims, charges, complaints, demands, actions, causes of action, suits, rights,
debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys’ fees and costs), of every kind
and nature which you ever had or now have against the Released Parties arising
out of your employment with and/or separation from the Company, including, but
not limited to, all employment discrimination claims under Title VII of the
Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., the Age Discrimination in
Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of
1990, 42 U.S.C., §12101 et seq., the Family and Medical Leave Act, 29 U.S.C. §
2601 et seq., and the Worker Adjustment and Retraining Notification Act
(“WARN”), 29 U.S.C. § 2101 et seq., all as amended; all claims arising out of
the Fair Credit Reporting Act, 15 U.S.C. §1681 et seq., the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., the
Massachusetts Fair Employment Practices Act., M.G.L. c.151B, §1 et seq., the
Massachusetts Civil Rights Act, M.G.L. c.12 §§11H and 11I, the Massachusetts
Equal Rights Act, M.G.L. c.93, §102 and M.G.L. c.214, §1C, the Massachusetts
Labor and Industries Act, M.G.L. c.149, §1 et seq., the Massachusetts Privacy
Act, M.G.L. c. 214, §1B, and the Massachusetts Maternity Leave Act, M.G.L. c.
149, §105(d), all as amended; all common law claims including, but not limited
to, actions in tort, defamation and breach of contract (including any and all
claims pursuant to the Employment Agreement or the Executive Retention Agreement
between you and the Company dated March 25, 2004); all claims to any non-vested
ownership interest in the Company, contractual or otherwise, including but not
limited to claims to stock or stock options; and any claim or damage arising out
of your employment with or separation from the Company (including a claim for
retaliation) under any common law theory or any federal, state or local statute
or ordinance not expressly referenced above; provided, however, that nothing in
this Agreement prevents you from filing, cooperating with, or participating in
any proceeding before the EEOC or a state Fair Employment Practices Agency
(except that you acknowledge that you may not be able to recover any monetary
benefits in connection with any such claim, charge or proceeding).

 

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5. Non-Disclosure and Non-Competition and Non-Solicitation - You acknowledge and
reaffirm your obligation to keep confidential all non-public information
concerning the Company which you acquired during the course of your employment
with the Company, as stated more fully in Section 7 of the Employment Agreement,
which remains in full force and effect. You further acknowledge and reaffirm
your obligations with respect to non-competition and non-solicitation as stated
more fully in Section 6 of the Employment Agreement which likewise remain in
full force and effect.

 

6. Return of Company Property - You confirm that you have returned to the
Company all keys, files, records (and copies thereof), equipment (including, but
not limited to, computer hardware, software and printers, wireless handheld
devices, cellular phones, pagers, etc.), Company identification, Company
vehicles and any other Company-owned property in your possession or control and
have left intact all electronic Company documents, including but not limited to
those which you developed or help develop during your employment. You further
confirm that you have cancelled all accounts for your benefit, if any, in the
Company’s name, including but not limited to, credit cards, telephone charge
cards, cellular phone and/or pager accounts and computer accounts.

 

7. Business Expenses and Compensation - You acknowledge that you have been
reimbursed by the Company for all relocation costs and business expenses
incurred in conjunction with the performance of your employment and that no
other reimbursements are owed to you. You further acknowledge that you have
received payment in full for all services rendered in conjunction with your
employment by the Company and that no other compensation is owed to you.

 

8. Non-Disparagement - You understand and agree that as a condition for payment
to you of the consideration herein described, you shall not make any false,
disparaging or derogatory statements to any media outlet, industry group,
financial institution or current or former employee, consultant, client or
customer of the Company regarding the Company or any of its directors, officers,
employees, agents or representatives or about the Company’s business affairs and
financial condition.

 

9. Amendment - This letter agreement shall be binding upon the parties and may
not be modified in any manner, except by an instrument in writing of concurrent
or subsequent date signed by duly authorized representatives of the parties
hereto. This letter agreement is binding upon and shall inure to the benefit of
the parties and their respective agents, assigns, heirs, executors, successors
and administrators.

 

10. Waiver of Rights - No delay or omission by the Company in exercising any
right under this letter agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.

 

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11. Validity - Should any provision of this letter agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms or provisions shall not be affected
thereby and said illegal or invalid part, term or provision shall be deemed not
to be a part of this letter agreement.

 

12. Confidentiality - You understand and agree that as a condition for payment
to you of the severance benefits herein described, the terms and contents of
this letter agreement, and the contents of the negotiations and discussions
resulting in this letter agreement, shall be maintained as confidential by you
and your agents and representatives and shall not be disclosed except to the
extent required by federal or state law or as otherwise agreed to in writing by
the Company.

 

13. Acknowledgments - You acknowledge that you have been given at least
twenty-one (21) days to consider this letter agreement, including Attachment A,
and that the Company advised you to consult with an attorney of your own
choosing prior to signing this letter agreement. You understand that you may
revoke this letter agreement for a period of seven (7) days after you sign this
letter agreement, and the letter agreement shall not be effective or enforceable
until the expiration of this seven (7) day revocation period. You understand and
agree that by entering into this letter agreement you are waiving any and all
rights or claims you might have under The Age Discrimination in Employment Act,
as amended by The Older Workers Benefit Protection Act, and that you have
received consideration beyond that to which you were previously entitled.

 

14. Voluntary Assent - You affirm that no other promises or agreements of any
kind have been made to or with you by any person or entity whatsoever to cause
you to sign this letter agreement, and that you fully understand the meaning and
intent of this letter agreement. You state and represent that you have had an
opportunity to fully discuss and review the terms of this letter agreement with
an attorney. You further state and represent that you have carefully read this
letter agreement, including Attachment A, understand the contents herein, freely
and voluntarily assent to all of the terms and conditions hereof, and sign your
name of your own free act.

 

15. Applicable Law - This letter agreement shall be interpreted and construed by
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions. You hereby irrevocably submit to and acknowledge and recognize
the jurisdiction of the courts of the Commonwealth of Massachusetts, or if
appropriate, a federal court located in Massachusetts (which courts, for
purposes of this letter agreement, are the only courts of competent
jurisdiction), over any suit, action or other proceeding arising out of, under
or in connection with this letter agreement or the subject matter hereof.

 

16. Entire Agreement - This letter agreement, including Attachment A, contains
and constitutes the entire understanding and agreement between the parties
hereto with respect to your severance benefits and the settlement of claims
against the Company and cancels all previous oral and written negotiations,
agreements, commitments, writings in connection therewith. Nothing in this
paragraph, however, shall modify, cancel or supersede your obligations set forth
in paragraph 5 herein.

 

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If you have any questions about the matters covered in this letter, please call
your Human Resources department.

 

Very truly yours, By:  

/s/ John H. MacKinnon

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Name:   John H. MacKinnon Title:   Chairman, Compensation Committee

 

I hereby agree to the terms and conditions set forth above and in the attached
Description of Severance Benefits. I have been given at least twenty-one (21)
days to consider this agreement and I have chosen to execute this on the date
below. I intend that this letter agreement become a binding agreement between me
and the Company if I do not revoke my acceptance in seven (7) days.

 

/s/ Paul A. Looney

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      Date 11/2/04

Employee Name: Paul A. Looney

           

 

To be returned Lisa McGrath on or after November 2, 2004 but no later than
November 5, 2004.

 

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ATTACHMENT A

 

DESCRIPTION OF SEVERANCE BENEFITS

 

Severance Compensation. The Company will provide you with a total of fourteen
(14) months of severance pay, payable as follows:

 

Salary Continuation. The Company will provide you with salary continuation, with
an initial payment on November 11, 2004 of $4,100.18, and thereafter,
continuation of your current bi-weekly salary of $12,300.58, less all applicable
state and federal taxes, during the period between the Termination Date and
December 31, 2004 (the “Salary Continuation Period”).

 

Severance Pay. Following the termination of the Salary Continuation Period, on
January 1, 2005, the Company will pay you Three Hundred Nineteen Thousand Eight
Hundred and Fifteen Dollars and Eight Cents ($319,815.08), less all applicable
state and federal taxes, as well as withholdings for your portion of medical and
dental coverage continuation premiums described below (the “Severance Pay”).
This Severance Pay will be paid in one lump-sum in accordance with the Company’s
normal payroll procedures, but in no event earlier than the eighth (8th) day
after execution of this letter agreement.

 

Payment of the above-described severance compensation represents payment of two
(2) months of your annual salary in exchange for your waiver of the 60-day
notice period under Section 4.4 of the Employment Agreement, as well as twelve
(12) months of your annual salary pursuant to Section 5.1(b) of the Employment
Agreement. Please note that because no bonus was paid to you for FY 2003, no
bonus payment is due pursuant to the Employment Agreement.

 

Benefits Continuation. Effective as of the Termination Date, you shall be
considered to have elected to continue receiving group medical and dental
insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq. For a
period of twelve (12) months from the Termination Date (the “Benefits
Continuation Period”), the Company shall continue to pay the share of the
premium for such coverage that is paid by the Company for active and
similarly-situated employees who receive the same type of coverage. The
remaining balance of the premium costs during the Benefits Continuation Period
shall be deducted from the Severance Pay, and all premium costs after the
Severance Pay Period shall be paid by you on a monthly basis for as long as, and
to the extent that, you remain eligible for COBRA continuation. You should
consult the COBRA materials to be provided by the Company for details regarding
these benefits.

 

Life Insurance Coverage Reimbursement. The Company also will provide you with a
lump sum payment of $900 (representing the sum of the Company’s cost of
providing you with group life insurance coverage for twelve (12) months from the
Termination Date, and in lieu of the provision of such coverage by the Company).
This payment will less applicable state and federal taxes, and will be made in
accordance with the Company’s normal payroll procedures, but in no event earlier
than the eighth (8th) day after execution of this letter agreement.

 

401K Payment. The Company also will provide you with a lump sum payment of
$1,500 (representing the maximum Company 401K match available had you remained
an employee of

 

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the Company during the twelve (12) month period following the Termination Date).
This payment will less applicable state and federal taxes, and will be made in
accordance with the Company’s normal payroll procedures, but in no event earlier
than the eighth (8th) day after execution of this letter agreement.

 

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