Separation Agreement and General Release - Medix Resources Inc. and John Prufeta
CONFIDENTIAL
December 20, 2002
John Prufeta
Re: Separation Agreement and General Release
Dear John:
This letter proposes the following Separation Agreement and General Release
("Agreement") between you and Medix Resources, Inc., (the "Company") regarding
the terms of your release and separation from Medix.
I. Background
A. You were employed by the Company as Chief Executive Officer.
B. Your employment has been terminated.
II. Terms of Agreement
To effect the termination of your employment and to provide you with certain
benefits that you would not otherwise be entitled to, you and the Company agree
as follows:
1. On September 24, 2002 your services with the Company officially
terminated.
2. You shall resign your position on the Medix Board of directors
effective upon signing this Agreement.
3. Your termination from the Company will be categorized as
termination-without-cause, the Employment Agreement dated February 1,
2002 is all aspects null and void. This Agreement supersedes any and
all other agreements between you and Medix with the exception of the
OPTION PLAN.
4. This Agreement shall not be in any way construed as an admission by
either party that it has acted wrongfully with respect to the other or
any other person or entity, or that either party has any rights
whatsoever against the other.
5. Even if you do not sign this Agreement, you will be offered benefits
to which you are entitled under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), and you retain all benefits
under the Company's 401(k) Plan if you are a participant.
6. In the event you do not sign this Agreement or revoke your signature
after signing, the Company will not convert your ISO options to NQO's
and you will have 30 days from your revocation date to exercise those
options and the requisite provisions of your employment agreement are
in effect including non-competition, confidentiality and non
solicitation.
Notwithstanding the additional 30 days within which your options ISO
options may be exercised, you acknowledge that you shall not be
permitted to exercise your unexercised options pursuant to the Option
Plan until the expiration of the revocation period described in
Paragraph 15 below. In the event you revoke this Agreement, the
Company reserves all rights to consider your termination as either a
resignation or a termination for cause under either the Option Plan or
your Employment Agreement and reserves all of it's rights with respect
to your NQO and ISO options, including considering your termination as
for cause.
7. In exchange for the promises contained in this Agreement and release
of claims as set forth below, and provided that you sign this
Agreement and return it to me by December 22, 2002, and do not revoke
this Agreement as set forth in Paragraph 15(d):
a. The Company will commencing with the next payroll period, pay you
twelve months of continued salary in the amount of your current
base monthly salary beginning to be paid on a bi-weekly basis and
in accordance with the Company's normal payroll process.
b. The Company shall at its option pay you for your unused vacation
of 19 days either at the next payroll period or ratably during
the twelve-month salary continuation.
c. The Company will within 5 days of the expiration of the
revocation period herein, reimburse your expenses, in an amount
not to exceed $7,150.00, during the week of January 1, 2003.
d. Upon the expiration of the revocation period provided you have
not revoked the Agreement, the Company will take steps to convert
your ISO stock options to NQO's.
e. The Company will within 5 days of the expiration of the
revocation period herein pay you $3,900 for reimbursement of
furniture expenses.
f. The Company will within 30 days of the expiration of the
revocation period herein pay you $4,500 as an incentive to
execute this Agreement.
g. The Company will beginning on January 1, 2003 commence to pay you
$5,000 per month towards the principal on your two loans to the
Company in the amounts of $65,000 each, made separately on May
2002 and August 2002. The loan shall be due in full on May 1,
2003. Each payment hereunder shall have a 15-day grace period.
Interest shall accrue at the rate of 5% from the respective dates
the books and records of the Company reflect receipt of the
funds. In the event of a default under the terms of the loan
provision herein, the loan shall accelerate and interest shall be
computed at the rate of 15%.
h. In recognition of your willingness to lend the Company money at a
time when the prospect of repayment was dim, as well as you
deferral of salary continuation from September until the next pay
period the Company shall accelerate the vesting of 250,000
options at $.50, such vesting to occur as of the date this
Agreement becomes effective.
i. The Company will indemnify you and hold you harmless to the
fullest extent permitted by law and the by-laws of the
corporation provided same does not conflict with the Company's
Directors and Officers insurance policy.
j. (i) The Company, it's officers and Directors (the "Company
Releasors") hereby release you from any and all claims,
liabilities, promises, actions, damages and the like, known or
unknown, which they ever had against you arising out of or
relating to your employment with the Company and/or the
termination of your employment with the Company. This release is
intended to be comprehensive, except that it shall not apply to
any fraudulent actions or failures to act, any willful misconduct
or willful failure to act, for which you would not be entitled to
indemnification as provided in Paragraph 7(i), above (the
"Excepted Claims").
(ii) The Company Releasors shall not bring any legal action
against you for any claim waived and released under this
Agreement. The Company Releasors represent and warrant that
no such claim has been filed to date. The Company Releasors
further agree that should they bring any type of proceeding
of any kind, administrative or legal action arising out of
claims waived under this Agreement, or out of any claims or
facts arising during the course of your employment they will
bear all legal fees and costs, including those you incur.
The Company Releasors further covenant not to bring any
claim or testify against you absent legal process.
(iii)Provided that you are not in material breach of this
Agreement, the Company Releasors agree that they will not
file or commence any complaint, charge, or action against
you alleging wrongdoing pertaining to your employment with
the Company or the termination thereof, other than with
respect to any Excepted Claims. The Company Releasors agree
that if any governmental agency or any court or arbitrator
hereafter assumes jurisdiction of any complaint, charge, or
action against you, that they will not participate in such
proceeding or action, as a witness or otherwise, unless
compelled by subpoena or court order to do so and only after
giving you immediate advance written notice of such subpoena
or order and all cooperation reasonably required by you, at
your expense (unless covered by the indemnification
provisions of this Agreement), to challenge or limit the
same. (iv) If in the course of any litigation, the release
and waiver contained in this Agreement is deemed to be valid
by a court of competent jurisdiction and is thereby a bar to
a claim by the Company Releasors, then the Company Releasors
shall pay your reasonable costs and attorney's fees
pertaining to the investigation and defense of such action
or proceeding.
(v) Nothing contained herein shall be deemed to release or
discharge any claim based upon a breach of this Agreement
8. In consideration of the promises contained in this Agreement, you
agree:
a. On behalf of yourself, individually in your capacity as a
shareholder or option holder and anyone claiming through you or
who's rights emanated from you, irrevocably and unconditionally
to release, acquit and forever discharge the Company and/or its
parent corporation, subsidiaries, divisions, predecessors,
successors and assigns, as well as each of their respective past
and present officers, directors, employees, shareholders,
trustees, joint venturers, partners, and anyone claiming through
them (hereinafter "Releasees" collectively), in each of their
individual and/or corporate capacities, from any and all claims,
liabilities, promises, actions, damages and the like, known or
unknown, which you ever had against any of the Releasees arising
out of or relating to your employment with the Company and/or the
termination of your employment with the Company. Said claims
include, but are not limited to: (1) employment discrimination
(including claims of sex discrimination and/or sexual harassment)
and retaliation under Title VII (42 U.S.C.A. 2000e etc.) and
under 42 U.S.C.A. section 1981 and section 1983, age
discrimination under the Age Discrimination in Employment Act (29
U.S.C.A. sections 621-634) and/or any other relevant federal,
state statutes or municipal ordinances; (2) any and all claims
under the Americans with Disabilities Act (3) disputed wages; (4)
wrongful discharge and/or breach of any alleged employment
contract; and (5) claims based on any tort, such as invasion of
privacy, defamation, fraud and infliction of emotional distress
or any other theory or concept or cause of action in law or
equity.
b. That you shall not bring any legal action against any of the
Releasees for any claim waived and released under this Agreement
and that you represent and warrant that no such claim has been
filed to date. You further agree that should you bring any type
of proceeding of any kind, administrative or legal action arising
out of claims waived under this Agreement, or out of any claims
or facts arising during the course of your employment you will
bear all legal fees and costs, including those of the Releases.
In the event you initiate a proceeding contemplated to be waived
and released herein you agree that as a condition precedent to
same you shall return to Medix the full amount of any salary
continuation payments and surrender any unexercised converted
ISO's In the event you have exercised the converted ISO's you
shall transfer to Medix the exercised stock or the fair market
value in cash or Medix stock as of the day you exercised the
options. You further covenant not to bring any claim or testify
against the company absent legal process.
c. You agree that if any governmental agency or any court or
arbitrator hereafter assumes jurisdiction of any complaint,
charge, or action against the Company you will not participate in
such proceeding or action, as a witness or otherwise, unless
compelled by subpoena or court order to do so and only after
giving the Company immediate advance written notice of such
subpoena or order and all cooperation reasonably required by the
Company, at its expense, to challenge or limit the same. The
Company will provide you with defense with respect to prior
conduct of your as a company employee, but no defense will be
provided respecting conduct involving your individual, ultra
vires the Company conduct or conduct otherwise prohibited herein.
d. Provided the company is not in material breach of this Agreement,
you agree that you will not file or commence any complaint,
charge, or action against the Company alleging wrongdoing
pertaining to your employment with the Company or the termination
thereof, except that, in the event the only <U>such</U> breach at issue
is a default under Paragraph 7(g), your remedy shall be an action
to collect the amount due thereunder in the event of default.
e. Notwithstanding the execution of this Agreement, should you
commence any action or proceeding against the Company pertaining
to the subject matter of the release or any waiver contained in
this Agreement, you shall as a condition precedent to the
prosecution of such action cause to be returned to the Company
the full amount of any profits realized by you in the course of
exercising any ISO's that were converted to NQO's and all
remaining unexercised options shall immediately expire.
f. If in the course of any litigation, the release and waiver
contained in this Agreement is deemed to be valid by a court of
competent jurisdiction and is thereby a bar to your claim, then
you shall pay the Company's reasonable costs and attorney's fees
pertaining to the investigation and defense of such action or
proceeding.
g. Nothing contained herein shall be deemed to release or discharge
any claim based upon a breach of this Agreement.
9. This Agreement shall be binding on the parties and upon their heirs,
administrators, representatives, executors, successors and assigns and
shall inure to their benefit and to that of their heirs,
administrators, representatives, executors, successors and assigns.
10. On or before December 22, 2002 you will return all of the Company's
property in your possession including, but not limited to, things such
as financial documents, business models, contracts, customer lists,
mailing lists, account information, price lists and pricing
information and all of the tangible and intangible property belonging
to the Company and relating to your employment with the Company. You
further represent and warrant that you have not retained any copies,
electronic or otherwise, of such property.
11. You will cooperate fully, at reasonable times and places, with the
Company in its defense of or other participation in any
administrative, judicial or other proceeding arising from any charge,
complaint or other action that has been or may be filed. Out-of-pocket
expenses you may incur in connection with the foregoing shall be
reimbursed by the Company. In addition, should efforts on your part in
connection with this paragraph exceed a total of one (1) business day,
then your services thereafter shall be compensated at a reasonable per
diem rate.
12. You warrant and represent that you have not filed any complaint,
action or any other matter nor initiated any proceeding with any
administrative or regulatory body on either a municipal, state or
federal level.
13. You and the Company agree that neither will make any comments relating
to the other or, in your case, the Company's employees or directors
which are critical, derogatory to the other or which may tend to
injure the business of the other, to anyone outside of the senior
management and directors of the Company, unless required by law or in
connection with any action or proceeding to enforce this Agreement.
14. In the event either party materially breaches any of his or its
obligations under this Agreement (subject to Paragraph 8(d)),
including specifically Paragraph 13 above, any outstanding obligations
of the non-breaching party hereunder shall immediately terminate and,
in your case any payments previously made to you pursuant to Paragraph
3 shall be returned to the Company (other than loan repayment).
15. You also acknowledge that you have been informed pursuant to the
federal Older Workers Benefit Protection Act of 1990 that:
a. You have the right to consult with an attorney before signing
this Agreement. You have been represented by Ira Sessler, Esq,
and Maury Josephson, Esq. and you are satisfied with the advice
and counsel they have provided you;
b. You do not waive rights or claims under the federal Age
Discrimination in Employment Act that may arise after the date
this waiver is executed;
c. You have had twenty-one (21) days to consider this Agreement; and
d. You have seven (7) days after signing this Agreement to revoke
the Agreement, and the Agreement will not be effective until that
revocation period has expired.
16. The provisions of this Agreement are severable. If any provision is
held to be invalid or unenforceable, it shall not affect the validity
or enforceability of any other provision.
17. This Agreement sets forth the entire agreement between you and the
Company and supersedes any and all prior oral or written agreements or
understandings between you and the Company concerning the subject
matter of this Agreement. This Agreement may not be altered, amended
or modified, except by a further written document signed by you and
the Company.
18. Each party agrees that at any time, and from time to time, before and
after the consummation of the transactions contemplated by this
Agreement, it will do all such things and execute and deliver all such
other agreements, instruments and other documents and other
assurances, as the other party or its counsel reasonably deems
necessary or desirable in order to carry out the terms and conditions
of this Agreement and the transactions contemplated hereby or to
facilitate the enjoyment of any of the rights created hereby or to be
created hereunder.
19. The validity, interpretation, construction and performance of this
Agreement shall be governed by, and construed in accordance with, the
applicable laws of the United States of America and the laws of the
State of New York applicable to contracts made and performed in such
State and, in any event, without giving effect to any choice or
conflict of laws provision or rule that would cause the application of
domestic substantive laws of any other jurisdiction.
20. You represent that you fully understand your right to review all
aspects of this Agreement with an attorney of your choice, that you
have had the opportunity to consult with an attorney of your choice,
that you have carefully read and fully understand all the provisions
of this Agreement and that you are freely, knowingly and voluntarily
entering into this Separation Agreement and General Release.
If you are willing to enter into this Agreement, please signify your
acceptance in the space indicated below, and return to me. As I noted
earlier, this Agreement will not become effective until seven (7) days
after the date you sign this Agreement.
PLEASE READ CAREFULLY. YOU ARE GIVING UP ANY LEGAL CLAIMS THAT YOU HAVE AGAINST
THE COMPANY BY SIGNING THIS AGREEMENT. Very truly yours,
----------------
Patrick W. Jeffries
Chairman of the Board
Accepted and agreed to on this ____ day of ____________, 2002
-------------------
John Prufeta