EXHIBIT 10.26
RELEASE AND SETTLEMENT AGREEMENT
THIS AGREEMENT dated this 19th day of January, 2001 by and between
SAVAGE ARMS, INC. (hereinafter referred to as "Savage") and INTELECT
COMMUNICATIONS, INC. (hereinafter referred to as "Intelect").
WHEREAS, Savage is a wholly owned subsidiary of Savage Sports
Corporation, a corporation organized and existing under the laws of the state of
Delaware with its principal place of business in Westfield, Hampden County,
Massachusetts; and
WHEREAS, Intelect is a corporation organized and existing under the
laws of the state of Delaware, with its principal place of business in
Richardson, Texas; and
WHEREAS, on or about June 21, 2000, Savage commenced an action against
Intelect in the Superior Court Department of the Trial Court in Hampden County,
Massachusetts, in which it seeks, inter alia, a declaration that Intelect is
obligated to indemnify Savage for Savage's costs, expenses and liabilities
incurred in connection with certain litigation commonly known and referred to by
Savage and Intelect as "the Emhart Litigation, the Xxxxxx Litigation and the
Xxxxx Litigation", as well as all future product liability claims (the
"Action"); and
WHEREAS, Intelect has at all times and in all pleadings filed in the
Action denied liability to Savage; and
WHEREAS, the parties desire to avoid further controversy and to resolve
amicably the Action without further litigation.
1
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Savage and Intelect agree as follows:
1. Intelect and its affiliates shall defend Savage and indemnify and
hold harmless Savage and its affiliates, directors, officers, agents,
employees, stockholders, heirs, executors, administrators, legal
representatives, predecessors, successors and assigns from all demands,
claims, suits, actions, judgments, requests for relief, or proceedings
related to or arising out of the Xxxxxx Litigation, and in connection
with the Xxxxx Litigation, for up to twenty-five percent (25%) of the
attorneys' fees, related costs and final judgment obligations, if any,
ultimately attributable to Savage, to the extent such fees, costs
and/or liability awards in such litigation matters are not covered or
extinguished by available insurance coverage. The obligation to defend
shall include, without limitation, legal fees, litigation expenses and
costs, investigative expenses and costs, appeal costs (including bonds)
incurred to the date of this Agreement and which may be incurred in the
future. Intelect shall also reimburse Xxxxxx Xxxxxx for the reasonable
time he dedicates in responding to those liability claims asserted
against Intelect and/or Savage involving any Savage firearm that was
manufactured during the time that Intelect or its predecessors owned
the operations of Savage Arms. Intelect shall reimburse Xx. Xxxxxx at
the rate he has historically charged for such services or an amount
that is reasonably related thereto.
2
2. Intelect shall pay to Savage the sum of One Million One Hundred
Fifty-two Thousand Two Hundred Thirty-two and 11/100 Dollars
($1,125,396.04) as follows:
a. Upon Execution of this Agreement - $568,896.04
b. Future Payments:
April 1, 2001 - 79,500.00
July 1,2001 - 79,500.00
September 1, 2001 - 79,500.00
January 1,2002 - 79,500.00
April 1,2002 - 79,500.00
July 1,2002 - 79,500.00
September 1, 2002 - 79,500.00
All payments made by Intelect pursuant to this paragraph shall
be credited against the judgment as defined in paragraph 5 of this
Agreement.
3. Savage will have Intelect listed as a named insured on three
insurance policies purchased in connection with the Emhart Litigation:
a primary liability policy with One Million Dollars ($1,000,000.00)
coverage for an initial term of five (5) years, an umbrella policy in
the amount of Five Million Dollars ($5,000,000.00) and a fully paid up
tail policy in the amount of Five Million Dollars ($5,000,000.00),
retroactive to the commencement of such policies. Intelect shall
further pay to Savage its proportionate share of the renewal premium
for the primary liability policy as set forth above, upon presentation
of a statement by Savage, but in no event later than thirty (30) days
prior to the due
3
date for such insurance premiums. It is understood that the primary
liability policy, under the requirements of the settlement by Savage of
the Emhart Litigation, must be maintained by continuous payment of
premiums five years in advance. Savage and Intelect hereby agree that
the deductible for the liability policy may be increased to Five
Hundred Thousand Dollars ($500,000.00), to reduce premium costs. It is
also agreed that, based on such deductible, the current premium due for
the fifth year of the policy is anticipated to be approximately Three
Hundred Thousand Dollars ($300,000.00), of which Intelect will be
responsible for One Hundred Eighty Thousand Dollars ($180,000.00) and
Savage responsible for One Hundred Twenty Thousand Dollars
($120,000.00). If the premium for the fifth year of the policy is less
than $300,000.00, Savage and Intelect's shares of the premium shall be
the same percentage as they would have been if the premium had been
$300,000.00. In the event that the premium for the fifth year of the
policy is in excess of $300,000.00, Savage shall pay $120,000.00 and
Intelect shall pay the balance of the premium. Intelect agrees that it
shall be responsible for payment of any deductible up to Five Hundred
Thousand Dollars ($500,000.00), in the event of any claim requiring
payment of part or all of such deductible and involving any Savage
firearm that was manufactured during the time that Intelect or its
predecessors owned the operations of Savage Arms.
4. Intelect will be involved and consulted in the process of selecting
liability insurance on an annual basis. It is further agreed that for
all subsequent years, the premium cost for the primary liability policy
will be allocated between Savage
4
and Intelect, based on an actuarial determination reasonably made by
Savage's insurance brokers. Savage agrees to make reasonable efforts to
obtain primary liability coverage for future years as required under
the Emhart Settlement Agreement at the then-lowest cost available in
the insurance market. Savage will use its best efforts to convince
Black & Xxxxxx in the future to forego the strict insurance
requirements of five years advance coverage as required under the
Emhart settlement agreement.
5. Intelect shall enter into an agreement for judgment in the present
action between the parties pending in the Hampden County,
Massachusetts, Superior Court, in the form attached hereto as Exhibit
"A". So long as there is not an Event of Default as defined in
paragraph 6 hereof, Savage shall forebear from taking any action to
record, enforce, or otherwise execute upon the judgment.
6. The occurrence of any one or more of the following events shall
constitute an "Event of Default":
a. Intelect fails to pay when due any amount due under
this Agreement and such failure to pay is not cured
within fifteen (15) days of Intelect receiving
written notice from Savage of an overdue payment;
b. The filing by Intelect or any successor entity of any
voluntary petition seeking liquidation,
reorganization, arrangement, readjustment of debts or
for any other relief under the Bankruptcy Code or
under any other act or law pertaining to insolvency
or debtor relief, whether state, federal or foreign,
now or hereafter existing;
5
c. The filing against Intelect or any successor entity
of any involuntary petition seeking liquidation,
reorganization, arrangement, readjustment of debts or
for any other relief under the Bankruptcy Code or
under any other act or law pertaining to insolvency
or debtor relief, whether state, federal or foreign,
now or hereafter existing, which petition is not
dismissed within sixty (60) days of the date of
filing;
d. A custodian, trustee, receiver or assignee for the
benefit of creditors is appointed or takes possession
of all or any material portion of the assets of
Intelect or any of its Affiliates and such
appointment is not set aside within sixty (60) days
of the date of its issuance.
7. Upon and at any time after the occurrence and during the
continuance of any Event of Default, Savage may take any or
all of the following actions:
a. Declare all or any part of the amounts due under this
Agreement to be immediately due and payable whereupon
such outstanding amounts shall become immediately due
and payable without further demand or other notice of
any kind;
b. Take any and all actions available to it to enforce
the Judgment.
8. This Agreement constitutes the entire understanding between
Savage and Intelect with respect to the Action and any
promises, representations or warranties not herein contained
shall have no force and effect.
9. This Agreement may be amended, modified, supplemented or
changed in whole or in part only by an agreement in writing
and executed by each of
6
the parties hereto. Any of the terms and conditions of this
Agreement may be waived in whole or in part, but only by an
agreement in writing and executed by the party that is
entitled to the benefit thereof.
10. Intelect and Savage acknowledge and agree that the October
3,1995 Stock Purchase Agreement and the January 3,1997
Commitment Agreement remain fully enforceable according to
their terms and the terms of this Agreement are intended to
supplement and amend such Agreements. The terms of this
Agreement shall not cause a novation nor shall it extinguish,
terminate or impair the respective rights and obligations of
Intelect and Savage under the 1995 Stock Purchase Agreement
and 1997 Commitment Agreement. Except to the extent
inconsistent with the terms of this Agreement, all other
provisions of the 1995 Stock Purchase Agreement and the 1997
Commitment Agreement shall remain unchanged and in full force
and effect.
11. RELEASES
Except as to any claims and obligations arising out of the
October 3,1995 Stock Purchase Agreement, the January 3,1997 Commitment
Agreement and this Release and Settlement Agreement, Savage hereby
releases and discharges Intelect and its affiliates, predecessors,
successors, assigns, officers, directors, employees, agents and
attorneys from all actions, causes of actions suits, debts, dues, sums
of money, accounts, reckonings, covenants, contracts, controversies,
agreements, promises, damages, judgments, executions, claims and
demands whatsoever, in law or equity, known or unknown, foreseen or
7
unforeseen, which Savage and any of its assigns, affiliates,
predecessors, successors, directors, shareholders, employees, agents,
representatives, attorneys and insurers ever had, now have, or
hereafter can, shall, or may have from, upon, or by reason of any
matter, cause or thing whatsoever at any point in time up to and
including the date of the Release and Settlement Agreement.
Except as to any claims and obligations arising out of the
October 3,1995 Stock Purchase Agreement, the January 3,1997 Commitment
Agreement and this Release and Settlement Agreement, Intelect hereby
releases and discharges Savage and its affiliates, predecessors,
assigns, officers, directors, employees, agents and attorneys from all
actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, damages, judgments, executions, claims and
demands whatsoever, in law or equity, known or unknown, foreseen or
unforeseen, which Intelect and any of its assigns, affiliates,
predecessors, successors, directors, shareholders, employees, agents,
representatives, attorneys and insurers ever had, now have, or
hereafter can, shall, or may have from, upon, or by reason of any
matter, cause or thing whatsoever at any point in time up to and
including the date of this Release and Settlement Agreement.
12. The terms of this Agreement and the discussions leading up to it
concerning it shall be kept strictly confidential, should not be
disclosed to any person other than the parties' business and legal
advisors, or government agencies on an as-needed basis, for any reason,
except on written consent of all
8
parties or pursuant to a lawful court order as to which all parties to
this Agreement have had prior notice and opportunity to be heard.
13. This Agreement represents settlement of a disputed claim, and by
entering into the Agreement, Intelect is not admitting to any liability
or fault.
14. This Agreement is binding upon and inures to the benefit of the
parties hereto and their respective affiliates, directors, officers,
agents, employees, stockholders, heirs, executors, administrators,
legal representatives, predecessors, successors and assigns.
15. This Agreement may be assigned by Savage to any of its Affiliates.
16. The parties hereto represent that they have authority to enter into
this Agreement, and acknowledge and agree that no other promises,
covenants or agreements have been made by or on behalf of any of them
in order to induce the execution of this Agreement.
17. This Agreement shall be delivered in the Commonwealth of
Massachusetts and shall be governed, construed and interpreted in all
respects in accordance with the law of the Commonwealth of
Massachusetts without regard to the conflict of laws and principles
thereof.
18. Any notice, request, instruction or other document or communication
required or permitted to be given under this Agreement shall be in
writing to the following addresses:
Intelect Communications, Inc.
Attn: Xxxxxx X. Xxxxx
0000 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
9
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Savage Arms, Inc.
Attn: Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
NOW THEREFORE, the parties hereto set their hands and seals.
SAVAGE ARMS, INC.
By
--------------------------------------
Xxxxxx Xxxxxx, Its President
INTELECT COMMUNICATIONS, INC.
By /s/ XXXXXX X. XXXXX
--------------------------------------
Xxxxxx X. Xxxxx, Its Executive
Vice President
10
