Exhibit 10.3
SEPARATION AGREEMENT
This Separation Agreement (“Agreement”) is made and entered into as of
November 4, 2009 by and between M. E. Hank Durschlag, an individual
(“Durschlag”), and HealthSport, Inc., a Delaware corporation (“HealthSport”),
with respect to the following facts:
A. Durschlag has served as the chief executive officer of HealthSport since
December 11, 2007 and as a director of HealthSport.
B. Durschlag now desires to resign from all of his positions with HealthSport.
C. Durschlag 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;

 

 

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(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 409A, Durschlag 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 sue 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. Hank Durschlag       M.E. Hank Durschlag           
HEALTHSPORT, INC.
      By:   /s/ Robert S. Davidson         Robert S. Davidson        Chairman of
the Board   

 

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