SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is made this
10th day of February, 2012 ("Effective Date"), by and among Xxxxxx Xxxxxxxxx,
MGS Grand Sport, Inc., a California Corporation, Xxxxxxxxx Design & Associates
("Xxxxxxxxx Parties") and Xxxxxx International Holdings, Inc., Modena Sports
Design, LLC; Harbor Guard Boats, Inc., Xxxxxxx Xxx Xxxxxx, and Xxxxxx Xxxxxx
("Xxxxxx Parties").
WHEREAS, on Xxxxx 00, 0000, Xxxxxx Xxxxxxxxx and MGS Grand Sport, Inc.
filed a First Amended Complaint for Breach of Contract, Money Lent, Account
Stated, Accounting, Declaratory Relief, Fraud and Deceit, Breach of Fiduciary
Duty, Conversion, and Involuntary Dissolution against Xxxxxx International
Holdings, Inc., Modena Sports Design, LLC; Harbor Guard Boats, Inc., Xxxxxxx Xxx
Xxxxxx, and Xxxxxx Xxxxxx, in the Superior Court of the State of California for
the Country of Orange, Case No. 00-0000-00000000
("Xxxxxxxxx Complaint");
WHEREAS, Xxxxxx International Holdings, Inc., Modena Sports Design,
LLC; Harbor Guard Boats, Inc., Xxxxxxx Xxx Xxxxxx, and Xxxxxx Xxxxxx filed an
Answer and filed a Counterclaim to the Xxxxxxxxx Complaint ("Xxxxxx Parties
Answer and Counterclaim") on March 29, 2011 for Breach of Contract, Breach of
the Implied Covenant of Good Faith and Fair Dealing, Fraud and Deceit, Negligent
Misrepresentation, and Breach of Fiduciary Duty, adding Xxxxxxxxx Design &
Associates as an additional Cross-Defendant;
WHEREAS, without admitting any liability the Xxxxxxxxx Parties and
Xxxxxx Parties (also referred to herein collectively as the "Parties") desire to
resolve these disputes on amicable terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and terms set
forth herein, and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the Parties agree as follows:
LICENSE
1. The Xxxxxxxxx Parties grant to Harbor Guard Boats, Inc. ("HGB") a
non-exclusive worldwide license ("License") to make, have made, develop, sell,
promote, distribute and market commercial and governmental boats utilizing U.S.
Patent Nos. 6,620,003, 6,343,964, and 7,004,101 ("Licensed Patents"). HGB shall
have the right to sublicense the Licensed Patents to all current and future
subsidiaries and affiliates, including Xxxxxx International Holdings, Inc.
("MIHI"). The License shall commence upon the Effective Date and expire on the
5th year anniversary of the Effective Date ("License Period"). Any extensions,
modifications, or amendments to the License must be in writing and signed by
both the Xxxxxxxxx Parties and HGB.
2. The Xxxxxxxxx Parties provide the License AS IS, without warranties of any
nature whatsoever, including, but not limited to, no express or implied
warranties as to the validity or enforceability of the Licensed Patents, no
express or implied warranties as to the merchantability of the Licensed Patents,
and no express or implied warranties as to the fitness for purpose of the
Licensed Patents. However, Xxxxxx Xxxxxxxxx agrees to use his best efforts,
short of taking formal legal action, to stop unlicensed third parties from
infringing the Licensed Patents.
3. In the event of the filing of a voluntary or involuntary bankruptcy petition
by HGB and MIHI during the License Period, the License to use the Licensed
Patents shall automatically terminate without further legal action, except that
the License shall remain in effect for any boat in the process of manufacture as
of the date of the bankruptcy petition.
ROYALTY
4. During the License Period, HGB and MIHI agree to pay the Xxxxxxxxx Parties
$1,500 per boat per each commercial and/or governmental boat produced and sold
by HGB, MIHI, or any current or future sublicensed subsidiary or affiliate of
HGB and MIHI ("Royalty"), whether or not such boats use the Licensed Patents. No
Royalty shall be paid for a boat produced from designs acquired from third
parties that require royalty payments to said third parties, except that, in the
event any such boat uses the Licensed Patents in any fashion whatsoever in its
production, then the Royalty shall be paid for each such boat. $750 of each
Royalty due shall be payable within thirty (30) days of receiving the customer
deposit, and the remaining $750 of each Royalty due shall be payable within
thirty (30) days of final payment by the customer. In the event a Royalty
payment is not made within the thirty (30) days as required herein, there shall
be a grace period of ten (10) days following written demand for such payment,
and if such payment is not then made within the grace period, the failure to
make such payment shall constitute a default in the terms of this Agreement (an
"Xxxxxx Parties Event of Default").
5. During the License Period, HGB, MIHI, or any current or future sublicensed
subsidiary or affiliate of HGB and MIHI, will provide invoices, including VIN
numbers, to the Xxxxxxxxx Parties for all applicable boat sales. Such invoices
shall be provided within thirty (30) days of issuance of the invoice to a
customer. HGB and MIHI agree that any sublicense agreement shall include this
requirement. In the event an invoice is not provided within the thirty (30) days
as required herein, there shall be a grace period of ten (10) days following
written demand to do so, and if such invoice is not then provided within the
grace period, the failure to provide such invoice shall constitute a default in
the terms of this Agreement (a "Xxxxxx Parties Event of Default").
MOLDS
6. The Xxxxxx Parties shall retain and own any and all molds provided by the
Xxxxxxxxx Parties to make 24', 26' and 28' Fire Rescue Boats ("Xxxxxxxxx
Molds"). The Xxxxxxxxx Parties, at their own cost, shall have the option for a
period of ninety (90) days from the Effective Date, to take possession of any
other molds originally provided by the Xxxxxxxxx Parties to HGB. After the
ninety (90) day period, all molds still in HGB's possession ("Remaining Molds")
shall become the exclusive property of HGB. HGB shall own the Remaining Molds
free from any ownership claims from the Xxxxxxxxx Parties or any third parties,
and shall have the exclusive right to modify, transfer, or dispose of the
Remaining Molds as they see fit. The Xxxxxx Parties accept the Purchased Molds
and, if applicable, the Remaining Molds AS IS, without warranties of any nature
whatsoever, including, but not limited to, no express or implied warranties as
to the merchantability of the Purchased Molds and Remaining Molds, and no
express or implied warranties as to the fitness for purpose of the Purchased
Molds and Remaining Molds.
REMAINING INVENTORY
7. The Xxxxxx Parties shall retain all inventory, tools, machinery, parts,
drawings, manuals, and all other material acquired from the Xxxxxxxxx Parties
during the course of the business relationship free from any claim of ownership
from the Xxxxxxxxx Parties or any third parties.
BOAT REPAIRS
8. For boats sold by the Xxxxxxxxx Parties prior to June 18, 2008, that are in
need of repairs/or modifications, HGB shall be responsible for the costs of such
warranty work up to an amount that is fifteen percent (15%) of the purchase
price of the boat being repaired or modified. The Xxxxxxxxx Parties will be
responsible for any costs of such warranty work in excess of fifteen percent
(15%) of the purchase price of the boat. The Parties agree that the warranty for
boats sold by the Xxxxxxxxx Parties prior to June 18, 2008, is a ten (10) year
limited warranty, a true and correct copy of which is attached hereto as Exhibit
A. The Parties agree that the Xxxxxxxxx Parties will not be responsible for any
costs for work not covered by the limited warranty.
TRADEMARKS
9. The Harbor Guard Boats trademark shall remain the exclusive property of HGB.
However, if, during the License Period, HGB or MIHI files a voluntary or
involuntary bankruptcy petition and the Contingency Payment specified in
paragraph 10, and the Credit Line Payment specified in paragraph 13, have not
been paid in full prior to said petition, the Harbor Guard Boats trademark shall
be transferred to the Xxxxxxxxx Parties without further legal action.
CONTINGENCY PAYMENT AND CREDIT LINE PAYMENT
10. Starting on January 1, 0000, XXX and MIHI shall pay the Xxxxxxxxx Parties up
to $250,000 ("Contingency Payment"). Payments paid toward the Contingency
Payment shall be paid based on the collective sales of every 24', 26' and 28'
boat manufactured per calendar year by HGB and MIHI from Xxxxxxxxx molds or any
current or future sublicensed subsidiary or affiliate of HGB and MIHI (together
the "Selling Entities"). If the Selling Entities sell four (4) or fewer boats in
a calendar year, then HGB and MIHI shall not pay the Xxxxxxxxx Parties any sum
toward the Contingency Payment for that calendar year. If the Selling Entities
sell five (5) or more boats in a calendar year, then HGB and MIHI shall make
payments toward the Contingency Payment upon the sale of the fifth boat and each
boat thereafter per the following schedule of payments for each boat sold:
Boat #: Payment:
------------------------------
5 $10,000
6 $20,000
7 $10,000
8 $13,000
9 $14,500
10 $15,000
11 $17,500
12 $20,000
-------
$120,000
11. The maximum amount of payments toward the Contingency Payment for any
calendar year is $120,000. Payments toward the Contingency Payment shall be due
and payable within forty-five (45) days of the end of each quarter, i.e., on May
15, August 15, November 15, February 15, or, in the event that date falls on a
weekend or a holiday, the next business day. The maximum total amount of
Contingency Payments under this Agreement is $250,000 and will be accounted as a
contingent liability and shown in the Balance Sheet as a foot note.
12. In the event any payment is not made on the date as required herein, there
shall be a grace period of ten (10) days thereafter for such payment, and if
such payment is not then made within the grace period, the failure to make such
payment shall constitute a default in the terms of this Agreement (a "Xxxxxx
Parties Event of Default").
13. Starting on January 1, 0000, XXX and MIHI shall pay off, based on the
payment plan specified herein, the CITI Card Credit Line, of which Xxxxxxxxx is
a signatory, up to the total amount of $94,932 ("Credit Line Payment"). Payments
shall be made directly to CITI and paid based on the collective sales of every
24', 26' and 28' boat manufactured per calendar year by any of the Selling
Entities from Xxxxxxxxx molds. If the Selling Entities sell four (4) or fewer
boats in a calendar year, the Selling Entities shall not pay any sum toward the
Credit Line Payment, except that HGB and MIHI shall make all monthly payments
due CITI. If the Selling Entities sell 5 or more boats per calendar year, the
Selling Entities shall make payments toward the Credit Line Payment upon the
sale of the fifth boat and each boat thereafter per the following schedule of
payments for each boat sold:
Boat #: Payment:
-----------------------------
5 $3,257
6 $6,743
7 $28,257
8 $30,500
9 $25,243
10 $932
----
$94,932
14. All payments toward the Credit Line Payment shall be due and payable within
forty-five (45) days of the end of each quarter, i.e., on May 15, August 15,
November 15, February 15, or, in the event that date falls on a weekend or a
holiday, the next business day. In the event any payment is not made on the date
as required herein, there shall be a grace period of ten (10) days following
written demand for such payment, and if such payment is not then made within the
grace period, the failure to make such payment shall constitute a default in the
terms of this Agreement (a "Xxxxxx Parties Event of Default").
15. The Selling Entities agree to refrain from further borrowing against the
CITI Credit Card Line, and agree that the current obligation on the credit line
is $94,932. The Selling Entities agree to remove Xxxxxx Xxxxxxxxx as a guarantor
on the credit line within thirty (30) days of paying the final payment of the
outstanding $94,932. If the Selling Entities do not remove Xxxxxx Xxxxxxxxx as a
guarantor as required herein, Xxxxxx Xxxxxxxxx shall be entitled to specific
performance, including injunctive relief. The failure to remove Xxxxxx Xxxxxxxxx
as a guarantor as required herein, or the failure to refrain from borrowing
against the CITI Credit Card Line, shall, after a grace period of ten (10) days
to do so following written notice of such failure, constitute a default in the
terms of this Agreement (a "Xxxxxx Parties Event of Default"). Until such time
as the Contingent Payment and Credit Line Payment are paid in full, the Selling
Entities will provide invoices, including VIN numbers, to the Xxxxxxxxx Parties
for all applicable boat sales. Such invoices shall be provided within thirty
(30) days of issuance of the invoice to a customer. HGB and MIHI agree that any
sublicense agreement shall include this requirement. In the event an invoice is
not provided within the thirty (30) days as required herein, there shall be a
grace period of ten (10) days thereafter to do so, and if such invoice is not
then provided within the grace period, the failure to provide such invoice shall
constitute a default in the terms of this Agreement (a "Xxxxxx Parties Event of
Default").
STOCK TRANSFER
16. The Parties agree that the Xxxxxxxxx Parties hold in excess of 11,000,000
shares of MIHI stock as of the Effective Date (the "Xxxxxxxxx Shares"). When the
Contingency Payments from the Selling Entities to the Xxxxxxxxx Parties total
$250,000, and when the Credit Line Payment has been paid in full, the Xxxxxxxxx
Parties shall, within ninety (90) days of receiving the last payment and/or
notice of final payment to CITI, whichever is later, transfer 5,500,000 shares
of the Xxxxxxxxx Shares to MIHI (the "Reserved Shares"). The Xxxxxxxxx Parties
shall be liable for any and all taxes, costs, and fees they incur upon transfer
of the Reserved Shares. The Xxxxxxxxx Parties shall retain the balance of shares
of Xxxxxxxxx Shares. MIHI will not be responsible for future share dilutions in
the event money has to be raised or for any other reasons. If the Xxxxxxxxx
Parties do not transfer the Reserved Shares in accordance with the provisions of
this paragraph, said failure shall constitute a default in the terms of this
Agreement (a "Xxxxxxxxx Parties Event of Default") and MIHI shall be entitled to
specific performance, including injunctive relief. 17. Other than for the
Reserved Shares, MIHI agrees as of the Effective Date to take all necessary
actions to remove the restrictions on the sale of Xxxxxxxxx Shares upon the
written request of Xxxxxx Xxxxxxxxx, or his heirs and assigns, including all
actions necessary for registration of the shares for sale under Rule 144 or
other applicable statutes. Upon the occurrence of a Xxxxxx Parties Event of
Default as defined in this Agreement, MIHI agrees to take all necessary actions
to remove the restrictions on the sale of the Reserved Shares upon the written
request of Xxxxxx Xxxxxxxxx, his heirs or assigns, including all actions
necessary for registration of the shares for sale under Rule 144 or other
applicable statutes. If MIHI does not take the necessary actions in accordance
with the provisions of this paragraph with ninety (90) days of the date of such
written request, said failure to act shall constitute a default in the terms of
this Agreement (a "Xxxxxx Parties Event of Default"), and the Xxxxxxxxx Parties
shall be entitled to specific performance, including injunctive relief.
STIPULATED JUDGMENT
18. At the time of execution of this Agreement, HGB and MIHI shall execute a
Stipulation for Judgment in the form attached hereto as Exhibit B. The original
of the Stipulation for Judgment shall be held by Xxxxx X. Xxxxxxx, Esq., and
shall not be filed or recorded except as provided in the Stipulation for
Judgment.
19. Should a Xxxxxx Parties Event of Default occur as that term is defined in
this Agreement, the Xxxxxxxxx Parties may, after notice as provided in the
Stipulation for Judgment, enter Judgment in the form attached to the Stipulation
for Judgment as Attachment A, for the Xxxxxxxxx Parties and against HGB and
MIHI, joint and severally, in the amount provided by the Stipulation for
Judgment.
20. At the time of execution of this Agreement, the Xxxxxxxxx Parties
shall execute a Stipulation for Judgment in the form attached hereto as Exhibit
C. The original of the Stipulation for Judgment shall be held by Wang, Hartmann,
Xxxxx & Xxxxxx, PC, and shall not be filed or recorded except as provided in the
Stipulation for Judgment.
21. Should a Xxxxxxxxx Parties Event of Default occur as that term is defined in
this Agreement, the Xxxxxx Parties may, after notice as provided in the
Stipulation for Judgment, enter Judgment in the form attached to the Stipulation
for Judgment as Attachment 1, for the Xxxxxx Parties against the Xxxxxxxxx
Parties, joint and severally, in the form provided by the Stipulation for
Judgment.
TERMINATION OF LICENSE
22. If for any reason, HGB discontinues the manufacture of commercial or
governmental boats, and the Licensed Patents have not been sublicensed to a
subsidiary or affiliate of HGB that is then engaged in the manufacture of such
boats, then the Xxxxxxxxx Parties may, upon sixty (60) days' written notice,
choose to terminate the License.
MISCELLANEOUS
23. Within five (5) days of the signing of this Agreement, the Parties shall
file requests for dismissal with prejudice of all claims in the respective First
Amended Complaint and Counterclaim, dismissing all outstanding claims in the
litigation.
24. Except for the agreements between the Parties expressly made
herein, each of the Parties for itself and its successors, assigns, affiliates,
agents, predecessors, subsidiaries, shareholders, officers, directors,
employees, insurers and other agents, hereby releases and forever discharges the
other Parties and their respective successors, assigns, affiliates, agents,
predecessors, subsidiaries, shareholders, officers, directors, employees,
insurers and other agents, from any and all manner of actions, causes of action,
debts, dues, claims, suits, contracts, accounts, judgments, obligations, damages
and liabilities, both at law and in equity, known and unknown, accrued or
unaccrued, that any Party ever had or now has against the other with respect to
the claims alleged in the Xxxxxxxxx Complaint and Xxxxxx Answer and Counterclaim
and with respect to the Licensed Patents.
25. The Parties acknowledge that they understand and waive and relinquish all
rights and benefits they may have under Section 1542 of the Civil Code of the
State of California, which states:
A GENERAL RELEASE DOES NOT EXTEND TO THE CLAIMS THE CREDITOR DOES NOT
KNOW OF OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING A RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
26. The Parties acknowledge that they may hereafter discover facts different
from or in addition to those that they now know or believe to be true with
respect to the subject matter of this Agreement and agree that the foregoing
releases shall be and remain effective in all respects notwithstanding such
different or additional facts or the discovery thereof.
27. No breach of any provision hereof can be waived unless in writing. The
waiver of any breach of any provision hereof shall not be deemed to be a
continuing waiver of that provision or waiver of any other breach of any
provision hereof unless the continuing waiver is stated in writing.
28. This Agreement constitutes the entire Agreement between the Parties in
regards to, and supersedes, all prior agreements between the Parties including,
but not limited to, the License Agreement, dated June 18, 2008; the Mold
Purchase Agreement, dated June 18, 2008; the Employment Agreement, dated July 1,
2008; and the Fixed Asset Purchase Agreement, dated June 18, 2008. The Parties
agree the aforementioned superseded agreements are hereby cancelled and all
rights and claims contained therein are released by this Agreement.
29. This Agreement may not be modified, altered or changed in any manner
whatsoever, and no agreements or undertakings varying or extending the
settlement herein shall be binding, except by a written instrument duly executed
by authorized representatives of each of the Parties.
30. This Agreement represents the compromise of disputed claims, and the
foregoing releases are given and accepted by the Parties in settlement in good
faith of such disputed claims solely for the purpose of avoiding further
litigation. Each of the Parties hereby expressly denies all liability for the
claims alleged in the litigation referred to herein, and nothing contained
herein is to be construed to state or imply, and does in no sense constitute, an
admission of any kind of any guilt or liability by any of the Parties.
31. This Agreement is deemed to have been drafted collectively by the Parties
hereto. Any uncertainty or ambiguity shall not be construed for or against any
Party based on attribution of drafting to said Party.
32. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provisions were
omitted.
33. This Agreement shall be construed under the substantive laws of the State of
California without giving effect to its conflicts of law principles. In the
event that it becomes necessary for any Party hereto to enforce the terms of
this Agreement, then the prevailing Party in such litigation shall be entitled
to be paid by the losing Party its reasonable attorneys' fees and other costs
associated with such litigation, including the costs of enforcing a final
judgment.
34. This Agreement may be executed in counterparts, including facsimile
counterparts, with the same effect as if all Parties have signed the same
document, and each such executed counterpart shall be deemed to be an original
instrument. All executed counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and made effective as of the date first above written.
Dated: Xxxxxx Xxxxxxxxx
------------------
Dated:
MGS Grand Sport, Inc.
By: Xxxxxx Xxxxxxxxx
Title:
Dated:
MGS Grand Sport, Inc.
------------------------
By: Xxxxxx Xxxxxxxxx
Title:
Dated: Xxxxxxxxx Design & Associates
----------------------
By: Xxxxxx Xxxxxxxxx
Title:
Dated: Xxxxxx International Holdings, Inc.
-----------------------------------
By:
Title:
Dated: Modena Sports Design, LLC
-----------------------------
By:
Title:
Dated: Harbor Guard Boats, Inc.
------------------------
By:
Title:
Dated: Xxxxxxx Xxx Xxxxxx
-----------------------------
Dated: Xxxxxx Xxxxxx
-----------------------------
