EXHIBIT 10.3
SETTLEMENT AGREEMENT
AND GENERAL RELEASE
This SETTLEMENT
AGREEMENT AND GENERAL RELEASE (the “Settlement
Agreement”) is entered into as of October 9, 2009, by and
between Baywood International, Inc., a Nevada corporation (the
“Baywood”), Nutritional Specialties, Inc., a Nevada
corporation (“NSI”) (collectively, Baywood and NSI
being referred to as the “Company”), and Thomas
Pinkowski, an individual residing at 3703 Calle Fino Clarete San
Clemente, California 92673 ("Employee").
WHEREAS, on March 30,
2007, Baywood Acquisition, Inc., a Nevada corporation and
wholly-owned subsidiary of the Company entered into an Asset
Purchase Agreement pursuant to which it purchased substantially all
of the assets and assumed certain liabilities of Nutritional
Specialties, Inc. d/b/a LifeTime ® or LifeTime Vitamins®, a
California corporation (“LifeTime”) and subsequently
changed its name from Baywood Acquisition, Inc. to Nutritional
Specialties, Inc. (referred to herein as
“NSI”);
WHEREAS, as part of the
purchase price of the assets of LifeTime, the Company and NSI
issued to Employee, at the direction of LifeTime, an 8%
subordinated promissory note with a face value of $350,000 (the
“Note”) and an 8% convertible subordinated promissory
note with a face value of $100,000 (the “Convertible
Note,” and together with the Note, the “Notes”),
each of which were subordinated to the Company’s senior
secured indebtedness to Vineyard Bank, N.A.;
WHEREAS, as of October
9, 2009, an aggregate of $121,729.31 comprised of $94,678.35
outstanding on the Note, including accrued and unpaid interest, and
$27,050.96 outstanding on the Convertible Note, including accrued
and unpaid interest, remain outstanding on the Notes (in the
aggregate, referred to as the “Outstanding
Indebtedness”);
WHEREAS, Employee
entered into an employment agreement dated March 30, 2007 (the
“Employment Agreement”) pursuant to which Employee was
employed by the Company as its Vice President and as President of
NSI;
WHEREAS, the Company
owes Employee 60,000 restricted shares of its common stock (the
“Shares”), that represent the remaining unvested
balance of common stock that was issued as additional consideration
to Employee under the Employment Agreement;
WHEREAS, Employee owes
$80,000 under an unsecured promissory note, dated December 10,
2004, payable to LifeTime with an original principal amount of
$100,000 (the “LifeTime Note”);
WHEREAS, Section 3(b) of
the Employment Agreement requires Employee to promptly pay the
Company the remaining balance on the LifeTime Note in the event the
Employment Agreement is terminated for any reason prior to the end
of its term;
WHEREAS, the Company has
determined that it would be in its best interest to sell
substantially all of the assets of its nutraceutical business and
desires to terminate its employment arrangement with Employee and
Employee wishes to tender his resignation as an Officer and
Employee of the Company;
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WHEREAS, given the
Company’s sale of assets and the Employee’s
resignation; the Company desires to pay to Employee the Outstanding
Indebtedness, issue the Shares and forgive the outstanding balance
on the LifeTime Note;
WHEREAS, all references
to shares of the Company’s common stock give effect to a 1
for 20 reverse stock split, effective December 18, 2007 (the
“Reverse Split”); and
WHEREAS, each party
desires to provide the other party with a release of any and all
claims, if any, against the other, subject to the terms and
conditions hereof.
NOW THEREFORE, in
consideration of the premises and the undertakings set forth
herein, and intending to be fully bound hereby, the parties
agree:
Effective as of the date
hereof, any and all agreements of whatever kind between the Company
and Employee, including but not limited to the Employment
Agreement, the Notes and the LifeTime Note, are hereby cancelled
and terminated and shall have no further force or effect.
Neither the Company nor Employee shall have any further
rights or obligations under any such agreements, under federal or
state law, with respect to payment or other obligations, except to
the extent set forth in this Settlement Agreement.
Employment Agreement.
With respect to the Employment Agreement, the Company and
Employee agree as of the date hereof as follows:
Employee agrees,
concurrent with this Settlement Agreement, to tender his
resignation and terminate the Employment Agreement pursuant to
Section 5(f) of the Employment Agreement (such date, the
“Termination Date”). The Company waives any
notice required by Section 5(f) of the Employment Agreement.
As of the Termination Date, Employee will no longer serve as
Vice President of the Company or as President of NSI and Employee
will no longer be considered an Employee, Officer or Consultant of
the Company in any capacity.
As a result of Employee
terminating the Employment Agreement, the terms of the Employment
Agreement shall govern the relationship between the parties except
to the extent this Settlement Agreement states otherwise. As
set forth in the Employment Agreement, the Company shall pay the
following amounts to Employee pursuant to Section 6(c) of the
Employment Agreement: (i) any accrued but unpaid Base Salary (as
determined pursu
