SEVERANCE AGREEMENT AND GENERAL RELEASE
This Severance Agreement and General Release ("AGREEMENT") is entered
into as of September 1, 2003, by and between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("EMPLOYEE") and
PrimeSource Healthcare, Inc., a Massachusetts corporation (the "COMPANY")
(collectively, the "PARTIES").
WHEREAS, Employee's employment as President and Chief Executive Officer
of the Company ceased on September 1, 2003;
WHEREAS, the Company and Employee are parties to the Employment
Agreement effective as of the date of the Initial Closing, as defined in the
Purchase Agreement dated August 6, 2002, under which Employee was employed by
the Company (the "EMPLOYMENT AGREEMENT");
WHEREAS, the Parties mutually agree to the termination of Employee's
employment with the Company and all affiliates of the Company;
WHEREAS, the Parties have agreed on severance benefits to Employee that
differ from those in the Employment Agreement and are setting forth the agreed
severance benefits in this Agreement;
WHEREAS, Employee recognizes that the Company's obligation to provide
severance benefits to him under this Agreement is conditioned upon his release
of claims, as set forth in Section 3 below he may have against the Company
arising out of or relating to his employment with, and cessation of employment
with, the Company; and
WHEREAS, the Parties also wish to resolve their employer-employee
relationship and thus hereby engage in releases of claims against one another as
specified herein.
NOW THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are expressly acknowledged, the Parties agree as follows:
1. RESIGNATION AND CESSATION OF EMPLOYEE'S EMPLOYMENT. Employee hereby
resigns, and confirms his resignation, as President, Chief Executive Officer and
director of the Company and as an employee and director of all affiliates of the
Company, effective as of September 1, 2003, and the Parties hereby acknowledge
and agree that Employee's employment with the Company ceased on September 1,
2003 (the "SEPARATION DATE"). The Parties expressly waive the notice period
requirements contained in Sections 5(b) and 5(d) of the Employment Agreement.
2. SEVERANCE BENEFITS.
a. After the Employee provides the Company with an executed copy of
this Agreement, and within seven (7) days following the Effective Date, as
defined in Section 3(d) below, the Company shall pay and provide Employee the
severance payment or payments and other post-employment benefits, subject to
applicable payroll and withholding taxes, described below in this Section 2(a)
(the "SEVERANCE BENEFITS") in consideration of Employee's release of claims, as
set forth in Section 3 below, and his other covenants and agreements contained
herein. Employee shall not be required to seek other employment or otherwise
mitigate his damages, and the Severance Benefits shall not be reduced by any
other Employee earnings.
i. The Company shall make severance payments to Employee, equal
to $20,833.33 monthly, for the six (6) consecutive months from and
after the Separation Date (the "SEVERANCE PERIOD"). These severance
payments will be payable in semi-monthly installments in equal amounts
(as nearly as possible) during the Severance Period on each of the
Company's standard payroll dates.
ii. The Company shall also make severance payments to Employee,
equal to $50,000, in two installments of $25,000 on September 5, 2003,
and $25,000 on or promptly (within five (5) business days) after the
last day of the Severance Period.
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iii. During the Severance Period, Employee and his dependents
shall be entitled to continued coverage under the Company's standard
insurance plans, policies, or programs, providing health, dental,
vision, accidental death and dismemberment, long-term disability, and
life insurance coverage (collectively, the "Benefit Plans") under terms
as if Employee remained an employee of the Company; provided, however,
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that the Company shall be responsible for the premium costs of the
Benefit Plans during the Severance Period. Following the Severance
Period, Employee shall be entitled to continued coverage under the
Company's group health plans, as required by Section 4980B of the
Internal Revenue Code of 1986, as amended, at Employee's expense.
iv. The Company shall pay Employee, promptly after its receipt of
the documentation or other evidence (if any) necessary under the
Company's standard reimbursement policies, all amounts to which
Employee is entitled as reimbursement of expenses through the
Separation Date under the Company's reimbursement policies as in effect
on the date the expenses were incurred. In addition, the Company shall
reimburse Employee for reasonable out-of-pocket expenses, consistent
with the Company's expense reimbursement policies, that are incurred in
connection with his activities undertaken pursuant to Section 4 below.
v. With respect to acts or omissions of Employee while he was a
director and officer of the Company, Employee will continue to be
entitled to (A) the right to indemnification and advancement of
expenses, to the fullest extent provided by the Company's bylaws or
otherwise, from the Company, unless prohibited by applicable law, and
(B) coverage under the Company's directors' and officers' liability
insurance policies maintained by or on behalf of Company's directors
and officers. For the absence of doubt, Employee shall be entitled to
the benefits described in this Section 2(a)(v) with respect to any
liability incurred by Employee in connection with current litigation
whereby plaintiffs have named Employee, Employee's wife, the Company
and various others as defendants.
b. The Company shall pay Employee, no later than the next regular
payday after the Separation Date, any accrued but unpaid salary and any accrued
but unused vacation through the Separation Date.
c. Notwithstanding anything in the Employment Agreement or the
applicable stock option plan or agreement to the contrary, Employee and the
Company agree that Employee's option to purchase 1,300,000 shares of Common
Stock of the Company, granted on or about August 6, 2003, Employee's option to
purchase 1,950,000 shares of Common Stock of the Company, granted on August 6,
2002, and Employee's option to purchase 7,500 shares of Series G Convertible
Redeemable Preferred Stock, granted on August 6, 2002, each are fully vested and
exercisable at any time prior to the earlier of (i) the date that is one (1)
year following the registration of the applicable option's underlying shares
under the Securities Act of 1933, as amended, on Form S-8 or otherwise or (ii)
March 1, 2009. Upon expiration of the applicable exercise period, the applicable
option shall terminate. Except as provided in this paragraph, this Agreement
shall not alter the terms of any stock options granted to Employee by the
Company.
d. Except for the Severance Benefits and such other amounts (if any)
to which Employee is entitled under the terms of the Employment Agreement as
compensation or benefits for his services through the Separation Date or as
otherwise provided for in this Agreement, Employee shall not be entitled to
receive any other compensation of any sort, including, without limitation,
salary, vacation, sick pay, bonuses, short-term or long-term disability
benefits, or health care continuation coverage (except as provided under
applicable State or federal law), from the Company, its affiliates, or their
respective partners, principals, officers, directors, shareholders, managers,
employees, agents, representatives, or insurance companies, or their respective
predecessors, successors or assigns at any time (although Employee shall be
entitled to the benefits of any agreement with or plan of the Company or any of
its affiliates that, by its terms, continues to afford him rights after the
Separation Date, including, without limitation, stock option agreements and
plans of the Company).
3. GENERAL AND SPECIAL RELEASE.
a. Employee's Release of Claims. In consideration of the Severance
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Benefits and the Company's release of all claims against Employee Release
Parties (defined in Section 3(b)) and its other obligations hereunder, except as
otherwise provided herein, Employee hereby forever releases and discharges the
Company, its parent and subsidiary corporations, their respective affiliates,
and their respective past and present officers, directors, shareholders,
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partners, members, managers, agents and employees, and each of their respective
successors and assigns (collectively, "COMPANY RELEASED PARTIES"), from any and
all claims, charges, complaints, liens, demands, causes of action, obligations,
damages and liabilities, known or unknown, suspected or unsuspected, that
Employee had, now has, or may hereafter claim to have against the Company
Released Parties, arising out of or relating in any way to Employee's hiring by,
employment with, or separation from the Company or otherwise relating to any of
Company Released Parties up to and including the date Employee signs this
Agreement. Except to the extent that such waiver is precluded by law, Employee
further promises and agrees that he will not file, initiate, or cause to be
filed or initiated, any claim, charge, suit, complaint, grievance, action, or
cause of action based upon, arising out of, or relating to any claim, demand, or
cause of action released herein, nor shall he participate, assist or cooperate
in any claim, charge, suit, grievance, complaint, action or proceeding regarding
any of Company Released Parties, whether before a court or administrative agency
or otherwise, unless required to do so by law.
b. Company's Release of Claims. In consideration of Employee's
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release of all claims against Company Released Parties and his other obligations
herein, except as otherwise provided herein, the Company hereby forever releases
and discharges Employee and his heirs, executors and administrators ("Employee
Released Parties") from any and all claims, charges, complaints, liens, demands,
causes of action, obligations, damages and liabilities, known or unknown,
suspected or unsuspected, that the Company had, now has, or may hereafter claim
to have against Employee Released Parties, arising out of or relating in any way
to Employee's hiring by, employment with, or separation from the Company or
otherwise relating to Executive up to and including the date Employee signs this
Agreement. Except to the extent that such waiver is precluded by law, the
Company further promises and agrees that it will not file, initiate, or cause to
be filed or initiated, any claim, charge, suit, complaint, grievance, action, or
cause of action based upon, arising out of, or relating to any claim, demand, or
cause of action released herein, nor shall it participate, assist or cooperate
in any claim, charge, suit, grievance, complaint, action or proceeding regarding
any of Employee Released Parties, whether before a court or administrative
agency or otherwise, unless required to do so by law. The Company does not
release any claims, charges, complaints, liens, demands, causes of action,
obligations, damages or liabilities arising prior to Employee's employment with
the Company and during the period in which Employee acted as a consultant to the
Company.
c. The releases set forth in Sections 3(a) and 3(b) above
specifically extend to, without limitation, claims or causes of action for
wrongful termination, impairment of ability to compete in the open labor market,
breach of an express or implied contract, breach of the covenant of good faith
and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, discrimination,
harassment, disability, loss of future earnings, and claims under any state
constitution, the United States Constitution, and applicable state and federal
fair employment laws, applicable state and federal equal employment opportunity
laws, and applicable state and federal labor statutes and regulations, including
but not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act,
the National Labor Relations Act, the Labor-Management Relations Act, the Worker
Retraining and Notification Act of 1988, the Americans With Disabilities Act of
1990, the Rehabilitation Act of 1973, the Employee Retirement Income Security
Act of 1974, and the Age Discrimination in Employment Act of 1967, all as
amended from time to time, and all other laws, statutes or regulations.
d. Employee's Release of Unknown Claims. Employee acknowledges and
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agrees that, as a condition of this Agreement, Employee expressly waives all
rights and claims against Company Released Parties that he knows about or
suspects as well as those he may not know about or suspect, including those
afforded by applicable law, up to and including the date he signs this
Agreement. For the purpose of implementing a full and complete release and
discharge of Company Released Parties, as expressed in Section 3(a), above,
Employee expressly acknowledges that the release above in this Agreement is
intended to include and does include in its effect, without limitation, all
claims which he does not know or suspect to exist in his favor against Company
Released Parties, and that this Agreement expressly contemplates the
extinguishments of all such claims, including, but not limited to, any and all
claims under any applicable federal, state or local law.
e. Company's Release of Unknown Claims. The Company acknowledges and
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agrees that, as a condition of this Agreement, the Company expressly waives all
rights and claims against Employee Released Parties that it knows about or
suspects as well as those it may not know about or suspect, including those
afforded by applicable law, up to and including the date Employee signs this
Agreement. For the purpose of implementing a full and complete release and
discharge of Employee Released Parties, as expressed in Section 3(b), above, the
Company expressly acknowledges that the release above in this Agreement is
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intended to include and does include in its effect, without limitation, all
claims which it does not know or suspect to exist in its favor against Employee
Released Parties, and that this Agreement expressly contemplates the
extinguishments of all such claims, including, but not limited to, any and all
claims under any applicable federal, state or local law.
f. Notwithstanding any other provision of this Agreement, the
releases in Sections 3(a) and 3(b) specifically do not extend to any obligation
of the Company or any of its affiliates under this Agreement or any other
agreement with or plan of the Company or any of its affiliates that, by its
terms, continues to afford Employee rights or benefits after the Separation Date
(including, without limitation, the provisions of stock option agreements and
plans of the Company in which Employee is entitled to participate following the
Separation Date).
g. Review and Revocation Period. Employee acknowledges that the
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Company has advised Employee that pursuant to the Age Discrimination in
Employment Act of 1967, as amended, he may consult with an attorney of
Employee's choosing prior to signing this Agreement and that Employee has
twenty-one (21) days during which to consider the provisions of this Agreement,
although Employee may sign and return it sooner. If Employee executes and
returns this Agreement prior to the expiration of such twenty-one (21) day
period, Employee acknowledges that he has had sufficient time to consider the
terms of this Agreement with counsel and that he expressly, voluntarily and
knowingly waives the remainder of such twenty-one (21) day period. Employee
further acknowledges that Employee has been advised by the Company that Employee
has the right to revoke this Agreement for a period of seven (7) days after
signing it and that this Agreement shall not become effective or enforceable
until such seven (7)-day revocation period has expired (the "EFFECTIVE DATE").
Employee acknowledges and agrees that if Employee wishes to revoke this
Agreement, Employee must do so in writing, and that such revocation must be
signed by Employee and received by ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer, no
later than 5:00 p.m., Arizona time, on the seventh (7th) day after Employee has
signed this Agreement. Employee acknowledges and agrees that, in the event that
Employee revokes this Agreement, Employee shall have no right to receive any
benefits hereunder, including the Severance Benefits, except as required by law.
4. COOPERATION FOLLOWING THE SEPARATION DATE. During the Severance Period,
Employee agrees to cooperate with the Company's reasonable requests for
consultation and minor services. Following the Severance Period, Employee shall
not be obligated to provide such services, but the Parties may agree to any
consulting arrangement, for fee otherwise. From time-to-time, Employee shall
provide reasonable assistance and cooperation to the Company and its affiliates
in activities related to the prosecution or defense of any pending or future
lawsuits, arbitrations, regulatory inquiries or other legal proceedings or
claims involving the Company or its affiliates (excluding any proceeding
involving any alleged breach of this Agreement), and within reason, make himself
available to Company representatives, including legal counsel, upon reasonable
notice and without the need for issuance of any subpoena or similar process to
testify in any such proceeding.
5. NO DISPARAGEMENTS. Employee agrees not to make any oral or written,
public or private statements that are disparaging of the Company or any of
Company Released Parties, except that Employee may respond accurately and fully
to any questions, inquiries, or requests for information when required by legal
process, to the extent so required. The Company agrees not to make any oral or
written, public or private statements that are disparaging of the Employee,
except that the Company may respond accurately and fully to any questions,
inquiries, or requests for information when required by legal process, to the
extent so required.
6. RESTRICTIVE COVENANT. During the Severance Period, Employee agrees not
to, at any time, directly or indirectly, whether or not for compensation, engage
in, or have any interest in, any person, firm, corporation or business (whether
as an employee, security holder, proprietor, officer, director, agent, trustee,
consultant, partner, creditor or otherwise), which sells or markets specialty
surgical and critical care products manufactured by third parties, or
manufactures surgical illumination systems or ancillary products (the
"BUSINESS") in any state in the United States or in any other jurisdiction
outside the United States in which the Company or any of its subsidiaries or
affiliates conducted the Business; provided, however, that during the Severance
Period, Employee may own shares of companies whose securities are publicly
traded, so long as the securities so owned do not constitute more than five (5%)
percent of the outstanding securities of such company (unless such company is
the Company, in which case no limit shall apply). In the event that Employee
undertakes any such activities without written permission from the Company, the
Company's obligation to pay Employee the Severance Benefits shall cease.
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7. NON-ADMISSION OF LIABILITY. Nothing in this Agreement shall be
construed as an admission of liability by the Parties; rather, Employee and the
Company Released Parties are resolving any and all disputes arising from
Employee's employment with the Company, cessation of that employment, and all
other relationships between Employee and the Released Parties, as to each of
which each of Company Released Parties and Employee denies any liability.
8. BINDING EFFECT. This Agreement shall be binding upon the Parties and
their respective heirs, administrators, representatives, executors, successors
and assigns, and shall inure to the benefit of the Parties and their respective
heirs, administrators, representatives, executors, successors and assigns.
9. SEVERABILITY. While the provisions contained in this Agreement are
considered by the Parties to be reasonable in all circumstances, it is
recognized that provisions of the nature in question may fail for technical
reasons and, accordingly, it is hereby agreed and declared that if any one or
more of such provisions shall, either by itself or themselves or taken with
others, be adjudged to be invalid as exceeding what is reasonable in all
circumstances for the protection of the interests of the Company, but would be
valid if any particular restrictions or provisions were deleted or restricted or
limited in a particular manner, then the said provisions shall apply with any
such deletions, restrictions, limitations, reductions, curtailments, or
modifications as may be necessary to make them valid and effective.
10. ENTIRE AGREEMENT/MODIFICATION. This Agreement, along with the
provisions of the Employment Agreement that survive the cessation of Employee's
employment thereunder and the other documents expressly referred to in this
Agreement that continue in effect after the Separation Date, constitute the
entire understanding between the Parties and may not be modified without the
express written consent of the Parties. In addition, this Agreement, with the
other documents referred to in the preceding sentence, supersedes all other
prior written and/or oral and all contemporaneous oral agreements regarding the
subject matter hereof. The Parties agree that (i) the provisions contained in
Section 6(a) of the Employment Agreement are not superceded by this Agreement,
(ii) the provisions contained in Section 6(b) of the Employment Agreement are
superceded by this Agreement, and (iii) the provisions contained in Section 6(e)
of the Employment Agreement are not superceded by this Agreement, except that
such provisions shall only be effective during the Severance Period, and shall
lapse thereafter.
11. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced pursuant to the laws of the State of Arizona applicable to contracts
made and entirely to be performed therein, except to the extent otherwise set
forth in Section 12, below.
12. BINDING ARBITRATION OF DISPUTES. Except as is necessary to specifically
enforce, or enjoin the breach of, this Agreement (to the extent such remedies
are otherwise available), the Parties agree that any disputes that may arise in
connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to Employee's employment with the
Company, the cessation of that employment or any other dispute by and between
the Parties, including any and all claims Employee or the Company may later
attempt to assert against any of Company Released Parties or Employee Released
Parties, respectively, as defined in Section 3, above, shall be submitted to
binding arbitration in Tucson, Arizona pursuant to the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association. This
arbitration provision shall be governed by and construed and enforced pursuant
to the Federal Arbitration Act. The Parties agree that each shall bear his or
its own attorneys' fees and costs in connection with any such arbitration,
though the arbitrator or arbitration panel may (as part of the arbitration award
or determination) otherwise allocate such attorneys' fees and costs. Should
either Party pursue any other legal or administrative action with respect to any
matter included within this binding arbitration provision, the responding Party
shall be entitled to recover its costs, expenses and attorneys' fees incurred as
a result of such action.
13. PAYMENT OF EXPENSES. The Company shall pay the reasonable legal fees
and expenses of Employee in negotiating, preparing, and executing this
Agreement, not to exceed $2,500. Otherwise, each Party shall be responsible for
his or its own expenses incurred in connection with performing his or its
obligations under or referred to in this Agreement, with the exception of
reasonable expenses incurred by Employee in providing assistance to or
cooperating with the Company in activities related to any legal proceedings or
claims involving the Company or its affiliates pursuant to Section 2(a)(v),
which shall be reimbursed by the Company.
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14. VOLUNTARY AGREEMENT/NO INDUCEMENTS. BY SIGNING THIS AGREEMENT, EMPLOYEE
ACKNOWLEDGES AND AGREES THAT EMPLOYEE HAS READ THIS AGREEMENT AND HAS HAD
SUFFICIENT OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF EMPLOYEE'S CHOOSING
PRIOR TO SIGNING IT, AND EMPLOYEE DOES NOT RELY, AND HAS NOT RELIED, ON ANY
FACT, REPRESENTATION, STATEMENT OR ASSUMPTION OTHER THAN AS SPECIFICALLY SET
FORTH OR REFERRED TO IN THIS AGREEMENT. EMPLOYEE FURTHER ACKNOWLEDGES AND AGREES
THAT EMPLOYEE UNDERSTANDS EACH OF THE TERMS OF THIS AGREEMENT AND EMPLOYEE IS
ENTERING INTO THIS AGREEMENT FREELY, VOLUNTARILY, AND WITHOUT COERCION.
Employee: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Dated this 5 day of September, 2003
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PRIMESOURCE HEALTHCARE, a Massachusetts corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Its: Chief Financial Officer
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Dated this 5 day of September, 2003
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