Ex-CEO’s filing hits NanoMech on terminology

It claims that motion to ax separation deal is improper

The former CEO of bankrupt NanoMech has filed a limited objection to the company’s motion to reject its separation deal with him, saying the wording of a proposed order attached is improper, according to a filing Wednesday.

In the court documents, attorneys representing former chief executive Jim Phillips found fault with the wording in the proposed order attached to the motion allowing NanoMech to reject the separation agreement “to the extent not already terminated.”

Phillips contends there is no basis to suggest the agreement is terminated and that it was NanoMech who has breached the deal. Phillips also argued the rejection of the contract does not terminate it or rescind rights granted under it, adding that he wishes to reserve his rights under the separation deal, including all his claims because of NanoMech’s breach of the contract.

Earlier this month, NanoMech asked a judge to allow it to reject its separation deal with Phillips. NanoMech called the agreement burdensome, adding that the company determined the deal is of no value. NanoMech argues bankruptcy law allows a debtor to reject executory contracts or leases.

In the Wednesday filing, Phillips said NanoMech breached the separation deal by not paying the full amounts agreed upon for monthly payments, by failing to pay for his health and life insurance, and by falsely accusing him of wrongdoing in his role as NanoMech’s CEO.

Phillips retired weeks before NanoMech filed for Chapter 11 bankruptcy protection in April in U.S. Bankruptcy Court for the District of Delaware.

NanoMech said in earlier court filings that its investigations show Phillips spent more than $750,000 in company funds on personal expenses and also awarded himself a compensation package the company could ill afford.

Phillips contends that NanoMech’s allegations are gross mischaracterizations of the truth or outright fabrications.

In the court documents, NanoMech said Phillips’ separation deal includes a $400,000 severance payment, $452,000 in accrued unpaid salary, and a payment of $155,283. The deal called for an initial payment of $500,000 with the remainder to be paid in monthly installments over 24 months, beginning in mid-March.

In late July, a judge approved the sale of NanoMech’s assets free of liens and other legal encumbrances to P&S Holdings for $8 million. P&S is a subsidiary of Houston-based Vinmar International Ltd., a global marketing, distribution and projectdevelopment company serving the petrochemical industry.