Exhibit 10.1

 

SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

 

This General Release and Settlement Agreement (“Agreement”), is made this 8th
day of August 2014 (the “Effective Date”), by and among Roy Radakovich, as
representative on behalf of the former shareholders of Pump Engineering, LLC
(hereinafter referred to as “Plaintiff”) and Energy Recovery, Inc., a Delaware
Corporation (hereinafter referred to as “ERI”). Each of Plaintiff and ERI are
sometimes referred to herein as a “Party;” and Plaintiff and ERI together are
sometimes referred to collectively herein as the “Parties.”

 

RECITALS

 

WHEREAS, on or about August 8, 2011, Plaintiff filed a Complaint against ERI in
the United States District Court for the Eastern District of Michigan, Southern
Division, captioned Roy Radakovich v. Energy Recovery, Inc., Case No.
2:11-cv-13443-DPH-MAR (the “Action”); and

 

WHEREAS, Plaintiff and ERI, without admitting any liability, have agreed to
settle, compromise, resolve and discontinue the Action and any and all other
claims, counterclaims, and/or causes of action between them, whether pleaded or
unpleaded in the Action or related in any way to the Action;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
recited herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Plaintiff and ERI jointly and
severally agree as follows:

 

AGREEMENT TERMS

 

1.

Certain Definitions.

 

 

(a)

“Pump Engineering, LLC” means and includes all predecessors, successors,
subsidiaries, divisions, parents and/or affiliates thereof, past or present, and
all past or present officers, directors, affiliates, agents, employees,
attorneys, consultants, representatives, and any other person acting or
purporting to act on behalf of Pump Engineering, LLC.

 

 

(b)

“Plaintiff” means the Former Pump Engineering Shareholders, with Roy Radakovich
acting as their Shareholder Representative.

 

 

(c)

“Former Pump Engineering Shareholders” means and includes Plaintiff and all
other former Pump Engineering, LLC shareholders prior to the closing of the
Agreement and Plan of Merger and as referred to in said agreement and any and
all of their spouses, domestic partners, children (natural or adopted),
siblings, heirs, successors in interest or any other direct lineal antecedents
or descendants of such named individuals.

 

 

(d)

“ERI” means Energy Recovery, Inc., and all predecessors, successors,
subsidiaries, divisions, parents and/or affiliates thereof, past or present,
including without limitation CFE Acquisition Corporation, and all past or
present officers, directors, affiliates, agents, employees, attorneys,
consultants, representatives, and any other person acting or purporting to act
on behalf of Energy Recovery, Inc.

  

 
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(e)

“Agreement and Plan of Merger” means the Agreement and Plan of Merger entered
into between ERI and Pump Engineering, LLC on or about December 2, 2009 that is
related to the Contingent Payment Escrow Agreement entered into between ERI and
Pump Engineering, LLC on or about December 21, 2009.

 

 

(f)

“Contingent Payment Escrow Agreement” means the Contingent Payment Escrow
Agreement entered into between ERI and Pump Engineering, LLC on or about
December 21, 2009 that is related to the Agreement and Plan of Merger entered
into between ERI and Pump Engineering, LLC on or about December 2, 2009.

 

 

(g)

“Milestone 1” means the milestone payment of $1,300,000 defined in Exhibit B of
the Contingent Payment Escrow Agreement.

 

 

(h)

“Milestone 2” means the milestone payment of $1,200,000 defined in Exhibit B of
the Contingent Payment Escrow Agreement.

 

 

(i)

“Milestone 3” means the milestone payment of $1,000,000 defined in Exhibit B of
the Contingent Payment Escrow Agreement.

 

 

2.

Settlement Payment Obligation. In consideration of the releases, covenants,
agreements and obligations set forth herein, the Parties agree as follows:

 

 

2.1

No later than August 8, 2014, ERI and Plaintiff shall direct the Escrow Agent to
remit to ERI Milestone 1 funds in the amount of $1,300,000 held in escrow
pursuant to the Contingent Payment Escrow Agreement, increased by the amount of
accrued interest, gain, or other income on such portion less 40% of such accrued
income amount for years prior to 2014 for the Tax Obligation as defined in
Paragraphs 2 and 3(c) of the Contingent Payment Escrow Agreement (which 40%
amount was previously paid to ERI for taxes payable on such income).

 

 

2.2

No later than August 8, 2014, ERI and Plaintiff shall direct the Escrow Agent to
disburse to Plaintiff Milestone 2 funds in the amount of $1,200,000 held in
escrow pursuant to the Contingent Payment Escrow Agreement, increased by the
amount of accrued interest, gain, or other income on such portion less 40% of
such accrued income amount for years prior to 2014 for the Tax Obligation as
defined in Paragraphs 2 and 3(c) of the Contingent Payment Escrow Agreement
(which 40% amount was previously paid to ERI for taxes payable on such income).

 

 

2.3

No later than August 8, 2014, ERI and Plaintiff shall direct the Escrow Agent to
disburse to Plaintiff a portion of Milestone 3 funds in the amount of $175,000
held in escrow pursuant to the Contingent Payment Escrow Agreement, increased by
the amount of accrued interest, gain, or other income on such portion less 40%
of such accrued income amount for years prior to 2014 for the Tax Obligation as
defined in Paragraphs 2 and 3(c) of the Contingent Payment Escrow Agreement
(which 40% amount was previously paid to ERI for taxes payable on such income).

  

 
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2.4

No later than August 8, 2014, ERI and Plaintiff shall direct the Escrow Agent to
disburse to ERI the remaining $825,000 of Milestone 3 funds held in escrow
pursuant to the Contingent Payment Escrow Agreement, increased by the amount of
accrued interest, gain, or other income on such portion less 40% of such accrued
income amount for years prior to 2014 for the Tax Obligation as defined in
Paragraphs 2 and 3(c) of the Contingent Payment Escrow Agreement (which 40%
amount was previously paid to ERI for taxes payable on such income).

         

For any interest, gain, or other income accruing after January 1, 2014, no taxes
will be withheld and the Escrow Agent will report the 2014 taxable income to the
IRS and the Parties commensurate with the amounts of such income actually
distributed to each of the Parties per the above sections.

  

3.

Plaintiff’s Release of ERI. Effective upon receipt by Plaintiff of the payments
in Paragraphs 2.2 and 2.3 above, Plaintiff, and its representatives, attorneys,
consultants, spouses, domestic partners, children (natural or adopted),
siblings, heirs, successor in interest or any other direct lineal antecedent or
descendant of such named individuals, hereby release and forever discharge ERI
from any and all claims, liens, demands, causes of action, obligations, damages
and liabilities, known or unknown, that Plaintiff had in the past, or now has,
or may have in the future against ERI that were asserted, or could have been
asserted, in the Action, or that arise out of or relate to the Contingent
Payment Escrow Agreement and/or Milestone 1, Milestone 2 and/or Milestone 3, or
that arise out of or relate to the Agreement and Plan of Merger. Plaintiff
expressly understands and acknowledges that it is possible that unknown losses
or claims exist or that present losses or claims have been underestimated in
amount or severity, and Plaintiff represents that it explicitly took that into
account in determining the amount of consideration to be paid for the giving of
the release, and a portion of said consideration and the mutual covenants
contained herein, having been bargained for between the Parties with the
knowledge of the possibility of such unknown claims, were given in exchange for
a full accord, satisfaction and discharge of all such claims.

 

4.

ERI’s Release of Plaintiff. Effective upon receipt by ERI of the payments in
Paragraphs 2.1 and 2.4 above, ERI, and its predecessors, successors,
subsidiaries, divisions, parents and/or affiliates thereof, past or present, and
all past or present officers, directors, affiliates, agents, employees,
attorneys, consultants and representatives, hereby release and forever discharge
Plaintiff (including the Former Pump Engineering Shareholders) and Pump
Engineering LLC from any and all claims, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, that ERI had in the
past, or now has, or may have in the future against Plaintiff (including the
Former Pump Engineering Shareholders) and Pump Engineering, LLC that were
asserted, or could have been asserted, in the Action, or that arise out of or
relate to the Contingent Payment Escrow Agreement and/or Milestone 1, Milestone
2 and/or Milestone 3, or that arise out of or relate to the Agreement and Plan
of Merger. ERI expressly understands and acknowledges that it is possible that
unknown losses or claims exist or that present losses or claims have been
underestimated in amount or severity (including any warranty claims that may be
asserted), and ERI represents that it explicitly took that into account in
determining the amount of consideration to be paid for the giving of the
release, and a portion of said consideration and the mutual covenants contained
herein, having been bargained for between the Parties with the knowledge of the
possibility of such unknown claims, were given in exchange for a full accord,
satisfaction and discharge of all such claims.

  

 
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5.

No Liability. This Agreement is the result of a compromise among the Parties
hereto and shall never at any time or for any purpose be considered as an
admission of liability and/or responsibility on the part of any Party herein
released, nor shall the payment of any sum of money in consideration for the
execution of this Agreement constitute or be construed as an admission of any
liability whatsoever by any Party herein released, each of which continues to
deny such liability and disclaim such responsibility.

 

6.

Dismissal. Plaintiff shall submit to the Court a Stipulated Order of Dismissal
with Prejudice of the Action and of all claims and counterclaims asserted by the
Parties in the Action within three (3) business days of the Parties providing
direction to the Escrow Agent as to the disbursement of the Escrow Funds as set
forth in paragraph 2 of this Agreement. The Stipulated Order of Dismissal will
also indicate that the Action is being dismissed without costs and without
attorney fees to either party.

 

7.

Confidentiality.  Roy Radakovich, Robert Oklejas, ERI, and their counsel, agree
to keep the terms of this Agreement confidential, except that disclosure may be
made by Roy Radakovich, Robert Oklejas or ERI to the following persons or under
the following circumstances:  (a) the directors, officers, and managers of ERI
that need to know the settlement terms for the purpose of performing their
duties to ERI; (b) the Former Pump Engineering Shareholders; (c) Roy Radakovich,
Robert Oklejas or ERI’s attorneys, accountants, and others who need to know and
disclose such information in order to implement this Agreement or to perform
professional services (e.g., accounting, tax, legal) for Roy Radakovich, Robert
Oklejas or ERI, but only to the extent necessary for such purposes; (d) as
required by a court of competent jurisdiction during the course of litigation or
other legal proceeding; (e) for the purposes of disclosure in connection with
the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, or any other filings, reports or disclosures that may be required under
applicable laws or regulations; (f) in response to a valid subpoena or as
otherwise may be required by law.  No press release or other public announcement
concerning the terms of this Agreement may be made by Roy Radakovich, Robert
Oklejas, ERI, or any other person acting at their direction or encouragement. 
However, Roy Radakovich, Robert Oklejas and ERI may disclose that the dispute at
issue in the Action has been settled on a mutually satisfactory basis, on
confidential terms.  If ERI discloses the amounts of any of the escrow payments
set forth in Paragraph 2 of this Agreement to the SEC or in any other public
filing under subparagraph (e) above, then Roy Radakovich and Robert Oklejas may
also disclose the existence of same escrow payments, but that is all that they
may disclose other than that the Action has been settled on a mutually
satisfactory basis on confidential terms. Roy Radakovich, Robert Oklejas, ERI,
and their counsel, acknowledge and agree that in the event of a breach under
this Paragraph 7, only the disclosing party is liable.

  

 
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8.

Authority. Each Party to this Agreement represents and warrants that the person
executing this Agreement on its behalf has full authority to bind the Parties to
this Agreement and is legally competent to do so. Each Party further represents
and warrants to the other Parties hereto that it has not made any assignments or
transfers of any claims or rights relating to the subject matter of this
Agreement or any pending proceedings described herein or related thereto. Each
Party also represents that it has not made and will not make any assignments or
transfers for the purpose of avoiding any of the obligations contained in this
Agreement, has not formed and will not form any new entities or associations for
the purpose of avoiding any of the obligations contained in this Agreement, and
has not and will not take any action to circumvent or otherwise avoid any of the
terms or obligations of this Agreement. This section shall not obligate the
Former Pump Engineering Shareholders to maintain any holding companies through
which they previously held interests.

 

9.

Consultation with Counsel. The Parties hereby affirm and acknowledge that (i)
they have read this Agreement and have discussed it with their counsel, (ii)
they fully understand and appreciate the meaning of its terms, and (iii) it is a
voluntary, full and final settlement, compromise, and release to the fullest
extent permitted by law. Without limiting the generality of the foregoing, the
Parties acknowledge that the terms of the settlement have been entered into
freely and are reasonable and appropriate.

 

10.

Joint Participation and Preparation of Agreement. The Parties hereto
participated jointly in the preparation of this Agreement, and each has had the
opportunity to review, comment upon and re-draft this Agreement. Accordingly, it
is agreed that this Agreement shall be construed as if the Parties jointly
prepared this Agreement and any uncertainty or ambiguity shall not be
interpreted against any one Party and in favor of any other.

 

11.

No Inducement. The Parties each represent that by entering into the Agreement,
that they rely on no promise, inducement, or other agreement not expressly
contained in the Agreement; that they have read the Agreement and have been
encouraged and given the opportunity to discuss it thoroughly with their
respective legal counsel; that they understand all of the provisions of the
Agreement and intend to be bound by them; and that they enter into the Agreement
voluntarily.

 

12.

Sole Agreement. This Agreement constitutes a full and complete integration of
the entire understanding and agreement of the Parties with respect to the
matters referred to herein. Any representation, promise or condition, whether
written or oral, between the Parties with respect to the matters referred to in
this Agreement, which is not specifically incorporated in this Agreement shall
not be binding upon any of the Parties and the Parties acknowledge that they
have not relied, in entering into this Agreement, upon any representations,
promises or conditions not specifically set forth in this Agreement. No prior
oral or written understanding, covenant or agreement between the Parties, with
respect to the matters referred to in this Agreement, shall survive the
execution of this Agreement.

  

 
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13.

Execution in Counterparts/Electronic or Facsimile Signatures. This Agreement may
be executed in counterparts and when each Party has signed and delivered one
such counterpart, each counterpart shall be deemed an original and all
counterparts taken together shall constitute one and the same agreement which
shall be binding and effective as to all Parties. Electronic and facsimile
signatures shall be treated the same as original signatures.

 

14.

Absence of Waiver. The failure of any party to enforce at any time any provision
of this Agreement shall in no way be construed as a waiver of such provision,
nor in any way to affect the validity of this Agreement or any part thereof, or
the right of any party to later enforce each and every such provision. No waiver
of any breach of this Agreement shall be held to be a waiver of any other or
subsequent breach.

 

15.

Severability. If any provision or provisions of this Agreement shall be held to
be invalid, illegal, unenforceable, or in conflict with the law of any
jurisdiction, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

16.

Modifications. No modification of any of the terms of the Agreement will be
valid unless in writing and signed by both parties.

 

17.

Binding Effect. All the terms of this Agreement are contractual including those
terms contained in the “Recitals” section of this Agreement.

 

18.

Survival. This Agreement shall survive the release of any claims.

 

19.

Attorneys’ Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys’ fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.

 

20.

Governing Law/Venue. This Agreement shall be interpreted, construed and
enforced, and disputes relating to its validity shall be resolved, in accordance
with the laws of the State of Delaware, excluding Delaware’s conflict of laws
principles. The Parties further agree to the exclusive jurisdiction and venue
for any dispute arising under, out of or relating to this Agreement, and/or
disputes related to the enforcement and/or interpretation of the Agreement, in
the United States District Court in and for the Eastern District of Michigan.

  

 
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IN WITNESS HEREOF and intending to be legally bound hereby, the Parties have
executed this Agreement effective as of the Effective Date.

 

 

 

ROY RADAKOVICH, an individual, and as representative of the former shareholders
of Pump Engineering, LLC

          Dated: August 5, 2014 By: /s/Roy Radakovich       Company
Representative                     ENERGY RECOVERY, INC.               Dated:
August 8, 2014 By: /s/ Thomas S. Rooney, Jr.     Name: Thomas S. Rooney, Jr.    
Title: Chief Executive Officer  

 

 

 

 

 

 

 

 

 

 

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