Exhibit 10.3
SEVERANCE AGREEMENT
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THIS SEVERANCE AGREEMENT (the "Agreement") is entered into by and
between HEALTH AND NUTRITION SYSTEMS INTERNATIONAL, INC., a Florida Company
("HNS", or the "COMPANY") and XXXXXX XXXXXXXXX, an individual ("Xxxxxxxxx").
PREAMBLE
WHEREAS, Xxxxxxxxx has served as an executive officer for HNS; and
WHEREAS, Xxxxxxxxx and HNS desire that Xxxxxxxxx cease serving as an
executive officer of HNS; and
WHEREAS, HNS and Xxxxxxxxx agree to the following terms relating to
Xxxxxxxxx' cessation of service as an officer of HNS;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten and No/100 ($10.00)
Dollars and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, HNS and Xxxxxxxxx (collectively hereinafter
referred to as the "Parties"), intending to be legally bound, hereby agree as
follows:
WITNESSETH:
ARTICLE ONE
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TERM
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1.1 This Agreement shall be for a term of one (1) year, commencing on
January 1, 2002 (the "Term").
ARTICLE TWO
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DEFINITION
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2.1 As used herein, "Change of Control" means: (a) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 28%
(twenty-eight) or more of the then outstanding shares of common stock
of the Company; or (b) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; or (c) approval by the
shareholders of the Company of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding common stock immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 75% of, respectively, the then outstanding shares
of common stock of the Company resulting from such reorganization,
merger or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation of the outstanding common stock; or (d) approval by the
shareholders of the Company of (i) a complete liquidation or
dissolution of the Company or (ii) the sale or other disposition of all
or substantially all of the assets of the Company, other than to a
Company, with respect to which following such sale or other
disposition, more than 75% of, respectively, the then outstanding
shares of common stock of such Company is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
outstanding common stock immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the outstanding
common stock.
ARTICLE THREE
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SEVERANCE
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3.1 Xxxxxxxxx shall be entitled to the following payments from HNS: Thirty
One Thousand, Two Hundred and Fifty Dollars ($31,250.00), to be paid in
twenty-six (26) equal payments of One Thousand, Two Hundred and One
Dollars and 93/100 ($1,201.93) paid every two (2) weeks. The parties
acknowledge that these amounts have been reduced by $18,750 pursuant to
a settlement agreement among HNS, Xxxxxxxxx, Xxxxxx Xxxxxxxxx and
certain other parties to the litigation.
3.2 During the Term, Xxxxxxxxx shall be entitled to health insurance which
is in effect as of the date hereof, and if the Company is unable to
keep such health insurance in effect, Xxxxxxxxx shall be entitled to
insurance similar to the insurance in effect as of the date hereof, for
himself and his immediate family. During the Term, HNS agrees to give
Xxxxxxxxx thirty (30) days' written notice in the event that HNS'
director and officers insurance is terminated or modified.
3.3 The parties hereto acknowledge and agree that Xxxxxxxxx is owed back
salary and bonus for fiscal year ended 2001 aggregating $23,443 and in
respect thereof (a) the Company shall pay to Xxxxxxxxx $3,443 in cash
within 30 days of the date hereof; and (b) the Company shall issue to
Xxxxxxxxx a number of shares of Company Common Stock (restricted under
Rule 144) determined by dividing $20,000 by the "Market Value" of such
shares. For purposes of this Section 3.3, "Market Value" shall mean the
average of the bid and asked prices for the Common Stock over the 20
trading days immediately preceding the date hereof.
ARTICLE FOUR
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PERSONAL GUARANTY OF COMPANY DEBT
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4.1 The parties acknowledge that Xxxxxxxxx has signed a personal guaranty,
or other instrument, which personally obligates him for Company debt or
obligations as follows:
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(i) a personal guaranty on a lease with Credential Leasing;
(ii) a personal guaranty on a software and hardware lease with Avanta;
(iii) a personal guaranty on a Pitney Xxxxx lease;
(iv) the Validity Indemnification dated September 6, 2001 with Alliance
Financial Capital, Inc. in connection with the Factoring Agreement of
even date therewith (the "Validity Indemnification"); and
(v) a personal guaranty on the SunTrust Loan to HNS with a current
principal balance of $24,000 and the pledge of Xxxxxxxxx'x personal
Certificate of Deposit in the amount of $25,000 (the "SunTrust Loan").
Collectively, the obligations listed in subsections (i) through (v) are
hereinafter referred to as the "Guaranteed Obligations."
4.2 HNS agrees that on the earlier to occur of (i) a Change in Control, or
(ii) December 31, 2002, HNS shall within thirty (30) days thereafter,
provide substitute collateral for the Guaranteed Obligations to the
extent necessary to fully and completely release Xxxxxxxxx from any and
all personal liability on the Guaranteed Obligations. In the event that
HNS is unable to provide substitute collateral within such thirty day
period, HNS shall, within xxxxxx (30) days thereafter, repay the
Guaranteed Obligations in full. Notwithstanding anything to the
contrary contained herein, HNS (i) shall repay in full the outstanding
principal and accrued but unpaid interest on the SunTrust Loan no later
than the earlier to occur of (i) July 1, 2002 and (ii) a Change of
Control; (ii) shall not borrow additional funds or increase the
principal amount outstanding under the SunTrust Loan as of the date
hereof without the prior written consent of Xxxxxxxxx; and (iii) shall
cause Xxxxxxxxx to be released from the Validity Indemnification no
later than sixty (60) days after the date hereof. Xxxxxxxxx agrees that
he will (i) not take any action which will compromise or call into
question the Guaranteed Obligations before a Change of Control or
December 31, 2002, whichever occurs first, and (ii) cooperate and do
all things necessary to avoid acceleration of, or an event of default
under, the SunTrust Loan before July 1, 2002.
ARTICLE FIVE
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MISCELLANEOUS
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5.1 Notices. All notices, demands or other communications hereunder shall
be in writing, and unless otherwise provided, shall be deemed to have
been duly given on the first business day after mailing by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
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TO HNS: HEALTH AND NUTRITION SYSTEMS INTERNATIONAL, INC.
0000 Xxxxxxxxxx Xxxx, Xxxx. 0
Xxxx Xxxx Xxxxx, XX 00000
WITH A COPY TO: XXXXXXXXX XXXXXXX P.A.
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000X
Xxxx Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
TO XXXXXXXXX: XXXXXX XXXXXXXXX
WITH A COPY TO: Xxxx X. Xxxxx, Esq.
The International Building
0000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000,
or to such other person as either Party shall designate to the other
for such purposes in the manner here-in-above set forth.
5.2 Amendment. No modification, waiver, amendment, discharge or change of
this Agreement shall be valid unless the same is in writing and signed
by the Party against which the enforcement of said modification,
waiver, amendment, discharge or change is sought.
5.3 Merger. This instrument contains all of the understandings and
agreements of the Parties with respect to the subject matter discussed
herein. All prior agreements whether written or oral are merged herein
and shall be of no force or effect.
5.4 Survival. The several representations, warranties, and covenants of the
Parties contained herein shall survive the execution hereof and shall
be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
5.5 Severability. If any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining
portions of such provision or portion of such provisions of this
Agreement or the application of such provision or portion of such
provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or
unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue. This Agreement shall be construed in
accordance with the laws of the State of Florida and any proceeding
arising between the Parties in any matter pertaining or related to this
Agreement shall, to the extent permitted by law, be held in Palm Beach
County, Florida.
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5.7 Litigation. In any action between the Parties to enforce any of the
terms of this Agreement or any matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
5.8 The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns,
personal representative, estate, heirs and legatees.
5.9 Captions. The captions in this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the
scope of this Agreement or the intent of any provisions hereof.
5.10 Further Assurances. The parties hereby agree to do, execute,
acknowledge and deliver or cause to be done, executed or acknowledged
or delivered and to perform all such acts and deliver all such deeds,
assignments, transfers, conveyances, powers of attorney, assurances,
stock certificates and other documents, as may, from time to time, be
required herein to effect the intent and purposes of this Agreement.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts. All executed counterparts shall constitute one Agreement
notwithstanding that all signatories are not signatories to the
original or the same counterpart.
IN WITNESS THEREOF, the Parties have executed this Agreement, effective
as of the 1st day of January 2002.
Signed, Sealed & Delivered
In Our Presence HEALTH AND NUTRITION SYSTEMS, INC.
/s/ Xxxxxx X. Xxxxx By: /s/Xxxxxxxxxxx Xxxx
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Signature
Xxxxxx X. Xxxxx Attest: Xxxx Xxxxx
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Print Name
(CORPORATE SEAL)
By: /s/Xxxxxx Xxxxxxxxx
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XXXXXX XXXXXXXXX
