SEPARATION AGREEMENT
Exhibit 10.3
This Separation Agreement (“Agreement”) is made and entered into as of November 4, 2009 by and
between M. E. Xxxx Xxxxxxxxx, an individual (“Durschlag”), and HealthSport, Inc., a Delaware
corporation (“HealthSport”), with respect to the following facts:
X. Xxxxxxxxx has served as the chief executive officer of HealthSport since December 11, 2007
and as a director of HealthSport.
X. Xxxxxxxxx now desires to resign from all of his positions with HealthSport.
X. Xxxxxxxxx and HealthSport now desire to release one another from certain claims that they
may have against one another arising out of Durschlag’s employment with HealthSport, director
position with HealthSport and otherwise prior to the date of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and
intending to be legally bound, HealthSport and Durschlag agree as follows:
Section 1. Resignation. Durschlag hereby resigns as an officer, employee and director
of HealthSport effective as of the date of this Agreement. Durschlag will return to HealthSport
all property owned by HealthSport, including all originals and copies of the following, whether in
Durschlag’s possession or previously removed by Durschlag from HealthSport’s premises and still
existing, and whether recorded on paper, computer disk, other computer readable-form, or any other
medium: all computers, office equipment, company assets, lists, correspondence, books, letters,
records, financial data, product information, formulas, sales information and other materials and
writing owned by HealthSport or used by it in connection with the conduct of its business.
Section 2. Separation Payment. As separation compensation, HealthSport shall, subject
to Durschlag’s satisfaction of any withholding or other taxes that may be due:
(i) Pay to Durschlag the sum of $67,750 which shall be paid on or before December 1, 2009 and
$7,000 on the first day of each of the next ten (10) months beginning January 1, 2010 for an
aggregate payment of $137,750;
(ii) Pay the monthly cost of Durschlag’s current health insurance coverage through December
31, 2009;
(iii) Pay to Durschlag the reasonable cost of any expenses incurred by Durschlag during the
thirty (30) days after the execution of this Agreement, provided that (i) such expenses are related
to his previous duties as Chief Executive Officer or to his work in aiding the Company during the
transition to a new Chief Executive Officer, (ii) such expenses are less than $1,500, and (iii)
Durschlag provides the Company with accurate receipts for all such expenses;
(iv) Issue 300,000 unregistered shares of common stock of HealthSport to Durschlag on or
before December 1, 2009;
(v) Issue 50,000 unregistered shares of common stock of HealthSport to Durschlag, up to a
maximum of 500,000 shares in the aggregate (the “Incentive Shares”), for each $1,000,000 in Net
Sales Revenues (as defined below) received by HealthSport on the sale of any and all dietary
supplement/nutritional supplement edible film strip products; and
(vi) Pay to Durschlag a commission of 0.5% of the Net Sales Revenues (as defined below)
received by HealthSport on the sale or license of any and all dietary supplement/nutritional
supplement edible film strip products for a period of seven (7) years from the date of this
Agreement.
(vii) “Net Sales Revenues” shall mean the gross sales revenues and license fee revenues
actually received by HealthSport minus all discounts, credits, withholdings, returns, allowances,
deductions, freight costs, taxes and custom duties. Payment of the commission and issuance of the
Incentive Shares will be made within fifteen (15) days following the filing of HealthSport’s annual
or quarterly report for all Net Sales Revenues generated in the prior quarter but in no event later
than December 31st of the scheduled year of payment.
Durschlag shall be solely responsible for payment of any and all applicable taxes associated with
this Agreement.
Section 3. Audit Rights. The Company shall keep, or cause to be kept, accurate books,
records and data in sufficient detail to verify the calculation of commissions under Section 2
herein and shall retain such books, records and data at its principal place of business for at
least two (2) years after the end of the fiscal year to which they pertain. Durschlag shall have
the right, at his expense and not more frequently than once per fiscal year, to have its
accountants and/or auditors examine, during normal business hours, all books, records and data of
the Company relating to the calculation of such commissions for any period during which the Company
is required to keep the books, records and data. If such examination discovers an error in excess
of ten percent (10%) for the period under review, the Company shall reimburse Durschlag for its
reasonable costs of audit and examination.
Section 4. Section 409A Compliance. This Agreement is intended to comply with the
requirements of section 409A of the Internal Revenue Code (“409A”). In the event this Agreement or
any benefit paid to Durschlag hereunder is deemed to be subject to 000X, Xxxxxxxxx hereby consents
to the Company adopting such conforming amendments as the Company deems necessary, in its
reasonable discretion, to comply with 409A. If upon Durschlag’s “separation from service” within
the meaning of 409A, he is then a “specified employee” (as defined in 409A), then solely to the
extent necessary to comply with 409A and avoid the imposition of taxes under 409A, the Company
shall defer payment of “nonqualified deferred compensation” subject to 409A payable as a result of
and within six (6) months following such separation from service until the earlier of (i) the first
business day of the seventh month following Durschlag’s separation from service, or (ii) ten (10)
days after the Company receives written notification of Durschlag’s death. Any such delayed
payments shall be made without interest. In addition, to the extent required by 409A, any expense
reimbursement payments to Durschlag must be made by no later than the end of Durschlag’s taxable
year following the taxable year in which the expense is incurred. Such reimbursement or in-kind
benefit rights may not be subject to liquidation or exchange for another benefit. The Company (nor
any of its directors, employees or agents) shall not be liable to Durschlag or other persons as
to any unexpected or adverse tax consequence realized by Durschlag or other person as a result
of this Agreement or any payment or benefit provided under this Agreement.
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Section 5. Ongoing Obligations. In addition to Durschlag’s ongoing obligations as a
director of HealthSport, Durschlag agrees to remain reasonably available to HealthSport and its
senior executives via telephone for a period of thirty (30) days from the date of this Agreement to
respond to questions and assist with issues related to the transition of Durschlag’s
responsibilities with HealthSport.
Section 6. Indemnification Claims Not Released. Durschlag retains, and does not
release in this Agreement, any rights to indemnification in accordance with the terms of
HealthSport’s articles of incorporation or bylaws.
Section 7. General Release. Except for the claims set forth in Section 6 above,
Durschlag for himself, his heirs, executors, administrators, assigns and successors, fully and
forever releases and discharges HealthSport and its current, former and future parents,
subsidiaries, affiliates, related entities, employee benefit plans and their fiduciaries,
predecessors, successors, officers, directors, shareholders, agents, employees and assigns
(collectively, “Releases”), with respect to any and all claims, liabilities and causes of action,
of every nature, kind and description, in law, equity or otherwise, which have arisen, occurred or
existed at any time prior to the signing of this Agreement, including, without limitation, any and
all claims, liabilities and causes of action arising out of or relating to Durschlag’s employment
relationship and director relationship with HealthSport prior to the date of this Agreement.
Section 8. Knowing Waiver of Employment-Related Claims. Durschlag understands and
agrees that, with the exception of potential employment-related claims identified below, he is
waiving any and all rights he may have had, now has, or in the future may have, to pursue against
any of the Releases any and all remedies available to him under any employment-related causes of
action, including without limitation, claims of wrongful discharge, breach of contract, breach of
the covenant of good faith and fair dealing, fraud, violation of public policy, defamation,
discrimination, personal injury, physical injury, emotional distress, claims under Title VII of the
Civil Rights Act of 1964, as amended, the Americans With Disabilities Act, the Federal
Rehabilitation Act, the California Fair Employment and Housing Act, the California Family Rights
Act, the Equal Pay Act of 1963, the provisions of the California Labor Code and any other federal,
state or local laws and regulations relating to employment, conditions of employment (including
wage and hour laws), perquisites of employment (including but not limited to claims relating to
stock and/or stock options) and/or employment discrimination. Claims not covered by the release
provisions of this Agreement are (i) claims for unemployment insurance benefits, (ii) claims under
the California Workers’ Compensation Act, and (iii) claims for indemnity under the California Labor
Code, (iv) claims arising from HealthSport’s nonperformance under this Agreement and (v) any
challenge to the validity of Durschlag’s release of claims under the Age Discrimination in
Employment Act of 1967, as amended, (“ADEA”) as set forth in Section 7 below. Durschlag expressly
waives any right to recovery of any type, including damages and reinstatement, in any
administrative or court action, whether state or federal, and whether brought by him or on his
behalf, related in any way to the matters released herein.
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Section 9. Knowing Waiver of ADEA Claims. Durschlag acknowledges that he is knowingly
and voluntarily waiving and releasing any rights he may have under the federal Age Discrimination
in Employment Act of 1967, as amended. He also acknowledges that the consideration given for this
waiver and release is in addition to anything of value to which he was already was entitled.
Durschlag further acknowledges that he has been advised by this writing, as required by law, that:
(i) his waiver and release specified in this paragraph do not apply to any rights or claims that
may arise after the date he signs this Agreement or to any challenge to the validity of this waiver
of ADEA claims; (ii) he has been advised hereby that he has the right to consult with an attorney
prior to executing this Agreement; (iii) he has twenty one (21) days to consider this Agreement
(although he may choose to voluntarily execute this Agreement earlier); (iv) he has seven (7) days
following his execution of this Agreement to revoke the Agreement (in writing); and (v) this
Agreement will not be effective until the date upon which the revocation period has expired, which
will be the eighth (8th) day after this Agreement is executed by Durschlag.
Section 10. Waiver of Civil Code § 1542. Durschlag expressly waives any and all
rights and benefits conferred upon him by Section 1542 of the Civil Code of the State of
California, which states as follows:
“A general release does not extend to claims which the creditor
does not know or suspect to exist in his or her favor at the
time of executing the release, which if known by him or her
must have materially affected his or her settlement with the
debtor.”
Durschlag expressly agrees and understands that the release given by him pursuant to this Agreement
applies to all unknown, unsuspected and unanticipated claims, liabilities and causes of action
which he may have against any of the other Releases.
Section 11. Severability of Release Provisions. Durschlag agrees that if any
provision of the release given by him under this Agreement is found to be unenforceable, it will
not affect the enforceability of the remaining provisions and the courts may enforce all remaining
provisions to the extent permitted by law.
Section 12. Representation Regarding Legal Actions. Durschlag represents that, as of
the date of this Agreement, he has not filed any lawsuits, charges, complaints, petitions, claims
or other accusatory pleadings against the Releases in any court or any with any governmental
agency. Except for claims preserved by law or expressly by this Agreement, Durschlag promises
never to xxx any of the Releases, or otherwise institute or participate in any legal or
administrative proceedings against any of the Releases, with respect to any claim covered by the
release provisions of this Agreement, unless he is compelled by legal process to do so. Durschlag
promises and agrees that he shall not advocate or incite the institution of, or assist or
participate in, any suit, complaint, charge or administrative proceeding by any other person
against any of the Releasees, unless compelled by legal process to do so.
Section 13. Promise to Maintain Confidentiality of HealthSport’s Confidential
Information. Durschlag acknowledges that due to the position he has occupied and the
responsibilities he has had at HealthSport, he has received confidential information concerning
HealthSport’s products, procedures, customers, sales, prices, contracts, and the like. Durschlag
hereby promises and agrees that, unless compelled by legal process, he will not disclose to
others and will keep confidential all information he has received while employed by HealthSport
concerning HealthSport’s products and procedures, the confidential purchasing information relating
to HealthSport’s customers, HealthSport’s sales, HealthSport’s prices, the terms of any of
HealthSport’s contracts with third parties, and the like. Durschlag agrees that a violation by him
of the foregoing obligation to maintain the confidentiality of HealthSport’s confidential
information will constitute a material breach of this Agreement.
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Section 14. Entire Agreement. This Agreement constitutes the sole agreement between
the parties with respect to its subject matter and supersedes all prior discussions, arrangements
or agreements, whether written or oral, with respect to its subject matter.
Section 15. Waiver, Amendment and Modification of Agreement. The parties agree that
no waiver, amendment or modification of any of the terms of this Agreement shall be effective
unless in writing and signed by all parties affected by the waiver, amendment or modification. No
waiver of any term, condition or default of any term of this Agreement shall be construed as a
waiver of any other term, condition or default.
Section 16. Representation by Counsel. The parties acknowledge that they have had the
opportunity to be represented in negotiations for the preparation of this Agreement by counsel of
their own choosing, and that they have entered into this Agreement voluntarily, without coercion.
This Agreement shall be construed in accordance with its plain meaning and not strictly for or
against either party.
Section 17. California Law. The parties agree that this Agreement and its terms shall
be construed under California law, without regard to any choice of law provisions.
Section 18. Counterparts. This Agreement may be signed in multiple counterparts and
my be delivered by facsimile or electronic mail in portable document format or other means intended
to preserve the original graphical content of a signature. Each such counterparts shall be an
original and all of which, taken together, shall constitute one and the same instrument.
Section 19. Period to Consider Terms of Agreement. Durschlag acknowledges that this
Agreement was presented to him on November 4, 2009 and that he is entitled to have up to
twenty-one (21) days’ time in which to consider the terms of this Agreement. Durschlag
acknowledges that he has obtained the advice and counsel from the legal representative of his
choice and executes this Agreement having had sufficient time within which to consider its terms.
Durschlag represents that if he executes this Agreement before 21 days have elapsed, he does so
voluntarily, upon the advice and with the approval of his legal counsel, and that he voluntarily
waives any remaining consideration period.
Section 20. Revocation of Agreement. Durschlag understands that after executing this
Agreement, he has the right to revoke it within seven (7) days after his execution of it.
Durschlag understands that this Agreement will not become effective and enforceable unless the
seven-day revocation period passes and Durschlag does not revoke the Agreement in writing.
Durschlag understands that this Agreement may not be revoked after the seven-day revocation period
has passed. Durschlag understands that any revocation of this Agreement must be made in writing
and delivered to HealthSport’s General Counsel within the seven-day period.
Section 21. Effective Date. This Agreement shall become effective and binding upon
the parties eight (8) days after Durschlag’s execution thereof, so long as Durschlag has not
revoked this Agreement within the time period and in the manner specified in Section 20, above.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
| /s/ M.E. Xxxx Xxxxxxxxx | ||||
| M.E. Xxxx Xxxxxxxxx | ||||
| HEALTHSPORT, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Xxxxxx X. Xxxxxxxx | ||||
| Chairman of the Board | ||||
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