SETTLEMENT AGREEMENT AND
GENERAL RELEASE
This SETTLEMENT AGREEMENT AND GENERAL
RELEASE (the “AGREEMENT”) is made and entered into
this 16th day of April, 2009, by and between NATIONSHEALTH, INC.
(“NATIONSHEALTH”) and UNITED STATES PHARMACEUTICAL
GROUP, L.L.C. (“USPG”) (collectively referred to herein
as the “COMPANY”), on the one hand, and SUSAN HILL
(“MS. HILL”) and ROBERT HILL (“MR. HILL”)
(collectively referred to as “the HILLS”), on the other
hand (the HILLS and the COMPANY are collectively referred to herein
as the “PARTIES”), and is joined, solely as to Section
4(b) hereof, by CAPITALSOURCE FINANCE LLC in its capacity as Agent
for the Lenders under the Loan Agreement referred to below
(“Agent”).
WHEREAS , USPG and MS. HILL entered into a Stock
Purchase Agreement, dated September 4, 2007, that provides for
USPG to purchase one hundred percent (100%) of the stock of
Diabetes Care and Education, Inc. (“DCE”) (the
“Purchase Agreement”);
WHEREAS , in conjunction with the purchase of DCE,
NATIONSHEALTH and MS. HILL entered into an employment agreement
dated September 4, 2007 that provided for employment by MS.
HILL by NATIONSHEALTH (the “Employment
Agreement”);
WHEREAS , in conjunction with the purchase of DCE,
NATIONSHEALTH and MR. HILL entered into a non-competition agreement
dated September 4, 2007 that provided, among other things,
certain non-disclosure, non-competition and non-disparagement
provisions by MR. HILL and the NATIONSHEALTH (the
“Mr. Hill Non-Competition Agreement”);
WHEREAS , following the closing of the Purchase
Agreement, NATIONSHEALTH has employed MS. HILL and MR. HILL in
positions with responsibilities related to the ongoing management
of DCE;
WHEREAS , the PARTIES have had disputes regarding the
appropriate management of DCE and their respective obligations
under the Purchase Agreement and the Employment
Agreement;
WHEREAS , the PARTIES have reached an agreement to
compromise and settle all disputes between them;
WHEREAS , MS. HILL has agreed that any special
distribution payments as defined in Paragraph 4 of this
Agreement shall be subject to the Subordination Agreement dated
September 4, 2007 (the “Subordination Agreement”)
entered into between MS. HILL and CapitalSource Finance LLC
(together with its successors and assigns, “Lender” and
sometimes, individually or collectively with Agent,
“CSF”) pursuant to which MS. HILL subordinated the
Subordinated Debt (as defined in the Subordination Agreement) to
the Senior Debt (as defined in the Subordination
Agreement);
WHEREAS , Lender has designated Agent as its agent to
take certain actions under the Loan Agreement (as defined in the
Subordination Agreement) pursuant to Section 12.12. of the
Loan Agreement;
NOW, THEREFORE , for and in consideration of the mutual
promises herein contained, and for good and valuable consideration,
the receipt, sufficiency and adequacy of which are hereby
acknowledged, the PARTIES agree as follows:
1. The HILLS agree that they both will:
(a) resign from their positions with the COMPANY effective
October 2, 2008 (the “Separation Date”), such that
their last day on salary as active employees shall be
October 1, 2008 and their last day as participants in the
group medical plan as active employees shall be November 30,
2008; (b) refrain from applying for or otherwise seeking
employment with the COMPANY or any of its subsidiaries or
affiliates at any time in the future; (c) return all property of
the COMPANY, including, but not limited to, access keys or cards,
cell phones, laptop computers, printers, answering machines,
modems, manuals, calculators, handbooks, files, papers, memoranda,
letters, facsimiles, computer software and financial
data.
2. The COMPANY shall provide to MR. HILL:
(a) payment of severance at an annual rate of $100,000.00 for
a period of six (6) months (the “MR. HILL
Severance”), starting on October 2, 2008 and running
through and including April 2, 2009 (the “Severance
Period”); and (b) reimbursement of cost of the premiums
under COBRA, following submission of appropriate documentation, for
continued medical coverage (at the same level coverage in place on
October 1, 2008) for the months of December through
June 2009, provided that such payments shall cease at any such
earlier time should MR. HILL no longer be eligible for coverage
under COBRA (collectively, “MR. HILL’s Separation
Benefits”). The amount set forth in Paragraph 2(a), less
applicable taxes, withholdings, and authorized deductions, will be
paid to Employee in 12 equal installments with the COMPANY’s
regular, semi-monthly payroll. Each installment will be in the
gross amount of $4,166.67, less applicable taxes, withholdings, and
authorized deductions. In addition to the MR. HILL Severance, the
Company shall provide to MR. HILL equal installments of $4,166.77
with the COMPANY’s regular, semi-monthly payroll for the
period April 3, 2009 through and including the date of the
payment described below in Section 4(a)(i), which “MR.
HILL Additional Severance” shall be subject to applicable
taxes, withholdings and authorized deductions.
3. The COMPANY shall provide to MS. HILL:
(a) payment of severance at an annual rate of $180,000.00 for
a period of six (6) months (the “MS. HILL
Severance”), which shall be payable during the Severance
Period; and (b) reimbursement of cost of the premiums under
COBRA, following submission of appropriate documentation, for
continued medical coverage (at the same level coverage in place on
October 1, 2008) for the months of December 2008 through
June 2009, provided that such payments shall cease at any such
earlier time should MS. HILL no longer be eligible for coverage
under COBRA (collectively, “MS. HILL’s Separation
Benefits”). The amount set forth in Paragraph 3(a), less
applicable taxes, withholdings, and authorized deductions, will be
paid to Employee in 12 equal installments with the COMPANY’s
regular, semi-monthly payroll. In addition to the MS. HILL
Severance, the Company shall provide to MS. HILL equal installments
of $7,500.00 with the COMPANY’s regular, semi-monthly payroll
for the period April 3, 2009 through and including the date of
the payment described below in Section 4(a)(i) through and
including the date of the payment described below in
Section 4(a)(i), which “MS. HILL Additional
Severance” shall be subject to applicable taxes, withholdings
and authorized deductions. (The MS. HILL Additional Severance and
the MR. HILL Additional Severance shall collectively be known as
the “Additional Severance.”) Furthermore, the Company
shall pay to MS. HILL the amount of her attorneys’ fees
associated with the negotiation of this AGREEMENT, up to a ten
thousand dollar ($10,000) cap, upon submission to the Company of
documentation of such legal fees and costs.
4. (a) In addition to MS. HILL’s
Separation Benefits described above and in lieu of any
“Earn-Out Payments” as provided for under the Purchase
Agreement, the COMPANY and MS. HILL have agreed that the COMPANY
will provide her with a special distribution in the total amount of
one million seven hundred fifty thousand dollars ($1,750,000.00)
(the “Special Distribution Payments”), which shall be
paid in accordance with the following schedule: (i) a three
hundred thousand dollar ($300,000) payment to MS. HILL on or before
June 30, 2009; (ii) a three hundred thousand dollar
($300,000) payment to MS. HILL on or before December 31, 2009;
(iii) a three hundred thousand dollar ($300,000) payment to
MS. HILL on or before June 30, 2010; (iv) a four hundred
thousand dollar ($400,000) payment on or before December 31,
2010; and (v) a four hundred fifty thousand dollar ($450,000)
payment on or before June 30, 2011. Each Special Distribution
Payment shall be wire transferred by the COMPANY to the
HILL’s bank account listed on Schedule 1, or such other
account as the HILLS may designate in writing to USPG from time to
time. Notwithstanding the foregoing, the lump-sum payment to be
made under Section 4(a)(i) shall be reduced by the amount that
is equivalent to seventy-seven percent (77%) of the Additional
Severance paid to the HILLS under Paragraphs 2 and 3 of this
AGREEMENT.
(b) The PARTIES agree that the payment of
any Special Distribution Payment shall be subject to the provisions
of the Subordination Agreement. The PARTIES and Agent on behalf of
Lender agree that the Subordination Agreement shall be amended as
follows:
(i) The defined terms “Earn-Out
Obligation” and “Subordinated Debt” are amended
so that all references thereto in the Subordination Agreement
shall, as the context requires, mean and refer to the Special
Distribution Payments.
(ii) The defined term “SPA” is
amended so that all references thereto in the Subordination
Agreement shall, as the context requires, mean and refer to, and
include, this AGREEMENT.
(iii) The
second sentence of Section 2 of the Subordination Agreement is
amended as follows:
Borrower may request to make a regularly
scheduled payment of Subordinated Debt by delivering a written
notice to Senior Lender of its intent to make such a payment (a
“Payment Request”) at least six (6) weeks prior to
making such payment, which request shall contain (i) a
statement as to the amount of the Special Distribution Payment to
be paid and (ii) a certification from an authorized officer of
Borrower that there then exists no Default or Event of Default, and
no such Default or Event of Default would result by or from such
payment and that such payment will be made in compliance with the
provisions of the SPA as in effect as of the date hereof (except
for the date of such payment).
(iv) The
third sentence of Section 2 of the Subordination Agreement is
amended as follows:
Following Borrower’s delivery of a Payment
Request, Borrower may make such requested payment of the
Subordinated Debt upon its receipt of Senior Lender’s written
consent thereto (a “Senior Lender Consent”), which
Senior Lender Consent shall be delivered to Borrower within six
(6) weeks of Senior Lender’s receipt of the Payment
Request so long as no Default or Event of Default has occurred and
is continuing, and no such Default or Event of Default would result
by or from such payment.
The PARTIES and
CSF agree that, except as otherwise provided in this AGREEMENT, the
Subordination Agreement remains in full force and effect and has
not otherwise been amended or modified in any respect, it being the
intention of the PARTIES and CSF that this Section 4(b) and the
Subordination Agreement be read, construed and interpreted as one
and the same instrument. The PARTIES and CSF agree that, in the
event of any conflict or inconsistency between the provisions of
this AGREEMENT and the Subordination Agreement, the terms of the
Subordination Agreement shall govern with the Special Distribution
Payments being Subordinated Debt thereunder.
(c) The COMPANY shall deliver each Payment
Request to Senior Lender on or before six (6) weeks before
each Special Distribution Payment is due.
(d) The COMPANY shall provide the HILLS
with a copy of the Payment Request (contemporaneously with the
sending of the Payment Request, provided that inadvertent failure
to provide copy thereof to the HILLS shall not be a material breach
of this AGREEMENT) and the Senior Lender Consent (per the
Subordination Agreement) with respect to such Special Distribution
Payment on the date such payment is made. The HILLS acknowledge and
agree that the failure of the COMPANY to provide a copy of the
Payment Request or the Senior Lender Consent shall not affect any
of CSF’s rights under the Subordination Agreement or the
subordination of the Subordinated Debt.
5. MS. HILL owns 473,933 shares of
NATIONSHEALTH common stock which was issued in connection with the
Purchase Agreement. It is the intention of the signatories hereto
that all such stock (the “Shares”) shall be transferred
to the COMPANY. Specifically, simultaneous with the Effective Date
of this AGREEMENT (as defined in Paragraph 15), MS. HILL shall
deliver to counsel for the COMPANY all stock certificates
representing all of the Shares, duly-endorsed to transfer all such
Shares to the COMPANY, which delivery process shall include MS.
HILL executing the stock power documents appended at
Appendix A . Further, MS. HILL represents and warrants
that, as of the Effective Date of this AGREEMENT: (i) she owns
all rights, title and interest in and to the Shares, (ii) she
has not sold, transferred, assigned, pledged, hypothecated to any
third party or otherwise encumbered any interest in the Shares,
(iii) there is no litigation or governmental
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