EXHIBIT 10.27
RELEASE AND SETTLEMENT AGREEMENT
This Agreement made this 13th day of January, 1999, effective as of
the day of December, 1998, by and between XXXXX X. XXXXX, both individually and
as President of D.V. BACK PRODUCTS, INC. General Partner of BACKSTROKE, LTD. an
Ohio Limited Partnership, of 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000,
hereinafter collectively referred to as 'BACK PRODUCTS" or "Back Products" and
THG CONSTRUCTION MANAGEMENT, INC., FLEX MARKETING, INC., XXXXXX XXXXXXX, and
XXXXX XXXXX; all of whom have various addresses within the State of Ohio, but
who for purposes of this Agreement shall collectively be hereinafter referred to
as 'FLEX MARKETING" or "FMI", witnesseth:
Whereas, Back Products has commenced a law suit naming FMI as
Defendant(s), being known as Case Xx. 00 XX 000, Xxxxx xx Xxxxxx Xxxxx,
Xxxxxxxxxx Xxxxxx, Xxxx, hereinafter the "Suit". The claims raised in the suit
include Count One for Fraudulent Inducement, Count Two for Anticipatory Breach
of Contract, Count Three for Breach of Contract, and Count Four for Injunctive
Relief; and
Whereas, all of such claims derive from a certain contractual
agreement previously entered into between all of the parties, with such Contract
being dated March 10, 1997. The subject matter of such contract involved certain
patent ownership, licensing, trade xxxx, manufacturing, and marketing and
distribution rights concerning a certain home health care/fitness devise which
may be more specifically referred to as a "back massager" and known as "The
Backstroke" or "Backstroke"; and
Whereas, following the filing of the suit by Back Products, hearing
was scheduled on Back Product's Motion for Injunctive Relief, with an agreement
being reached at the scheduled hearing which resulted in the filing of an Agreed
Judgment Entry as to certain matters raised in the request for injunctive
relief; and
Whereas, these parties desire to settle the suit and buy their peace
in a manner which would not constitute an admission of liability, culpability or
responsibility on the part of either Back Products or FMI; and
Whereas, these parties agree and understand that any and all actions
undertaken by these parties are in full settlement and in satisfaction of any
and all claims which have been raised in the Complaint of Back Products as set
forth in the suit, as well as those which could be raised by FMI in any Counter
Claim filed in the suit or which could possibly be raised in the future, in
connection with or arising from or out of the licensing contract, including, but
not limited to, all discussions concerning the a licensing contract, whether
such discussions occurred prior to or subsequent to the execution of the
licensing contract, and also including the relationship between these parties
which arose following the execution of the licensing contract.
NOW THEREFORE, in consideration of the mutual promises and
obligations agreed to be undertaken and as are contained herein it is hereby
agreed by these parties as follows:
1. SALE AND TRANSFER OF PATENT RIGHTS.
1.1 Sale and Transfer of the Patent. Xxxxx X. XXXXX and Back Products
shall transfer and convey all of their right title and interest in and to Patent
No. 5,352,188 to FMI, subject to the royalty rights of Xxxxx X. Xxxxx and Back
Products to receive the Royalties as set forth in Paragraph 3, hereof, all as
their interests may appear. FMI shall be the exclusive owner of the Patent No.
5,352,188 and possess all rights commonly associated with such status, with
regard to Patent No.
5,352,188, subject only to the royalty rights of Back Products, as hereinafter
set forth.
1.2 Enforcement of Rights on Infringement by Third Parties. Should
BACK PRODUCTS discover that FMI's right under the Patent is being, or has been,
infringed upon, he or it shall communicate the details to FMI, and FMI shall
thereupon have the right, but not the obligation, to take whatever action it
deems necessary, including the filing of lawsuits, to protect the rights of the
parties to the Agreement and to terminate such infringement. BACK PRODUCTS shall
cooperate with FMI if FMI takes any such action, but all expenses of FMI shall
be borne by FMI, if FMI recovers any damages or compensation for any action it
takes hereunder, FMI shall retain 100% of such damages. If FMI does not wish to
take any action hereunder, BACK PRODUCTS shall also have the right, but not the
obligation, to take any such action, in which case FMI shall cooperate with BACK
PRODUCTS, but all of BACK PRODUCTS' expenses shall be borne by BACK PRODUCTS.
BACK PRODUCTS shall receive 75% of any damages or compensation it recovers for
any such infringement and shall pay 25% of such damages or compensation to FMI,
after deducting its costs, including attorney fees.
1.3 Assignment by FMI. The rights of FMI under this Agreement shall
be freely assignable or otherwise transferrable, in whole or in part, by FMI,
and shall vest FMI'S assigns or transferees with the same rights and obligations
as were held by FMI; provided, however, that any assignee of the Patent shall be
bound by the terms of this Agreement.
2. CONSIDERATION FOR TRANSFER OF THE BACKSTROKE
2.1 National City Bank Debt. As consideration for its purchase of the
Patent, FMI agrees to pay in full the debt owed by Back Products to National
City Bank, up to an including the current balance owed, not to exceed the amount
of $265,754.00 (the "NCB Note"). If in the event FMI fails to make full payment
on the NCB Note on or before January 31, 1999, then FMI shall make all monthly
payments of principal and interest on the NCB Note which shall hereafter become
due and owing on such debt. Said promise to pay the NCB Note shall be secured by
a mechanism acceptable to NCB, but limited in value to $265,754.00.
2.2 Cash Payments. In addition to the foregoing, FMI shall pay
directly to Xxxxx X. Xxxxx calendar year 1998 payment on the NCB Note, not to
exceed the total sum of Twelve Thousand Five Hundred Ninety-One and 15/100
Dollars ($12,591.15) ("cash payment").
3. ROYALTIES.
3.1 Primary Royalty. Back Products shall receive a royalty of 3%
based upon the "net factory sales price" of the Backstroke Back Massager payable
for the life of the product, defined as the time period during which sales of
the Backstroke Back Massager are taking place, in any location and upon any
terms. The term "not factory sales price" shall be defined as the gross selling
price of the Backstroke Back Massager, or the U.S. Importer's gross selling
price, if this product is being manufactured abroad, less usual trade discounts
actually allowed, but not including advertising allowances or fees or
commissions paid to employees or agents of FMI. The net factory sales price
shall not include 1) packaging costs, 2) import and export taxes, excise and
other sales taxes, and customs duties, and 3) costs of insurance and
transportation, is separately billed from the place of manufacture if in the
U.S., or from the place of importation if manufactured abroad, to customer's
premises or next point of distribution or sale. Bona Fide returns may, of
course, be deducted from the units shipped in computing the royalty payable
after such returns are made. This right to royalties granted to Back Products
shall be binding upon any and all successors in interest to or assigns of FMI;
and shall follow the patent, (follow the ownership of or licensing rights with
regard to the patent), such patent bearing Patent No. 5,352,188.
3.2 Up-Sell Rights. Back Products shall receive a royalty of 2% based
upon the sale of all "up-sell" and "back-end" items ("item") marketed by FMI,
unless otherwise agreed to by the parties in a writing executed in a manner
consistent with paragraph 5.5 hereof, based upon the "net factory sales price"
of the item. The term "net factory sales price" shall be defined as the gross
selling price of the item, or the U.S. Importer's gross selling price, if the
item is being manufactured abroad, less usual trade discounts actually allowed,
but not including advertising allowances or fees or commissions paid to
employees or agents of FMI. The net factory sales price shall not include 1)
packaging costs, 2) import and export taxes, excise and other sales taxes, and
customs duties, and 3) costs of insurance and transportation, if separately
billed from the place of manufacture if in the U.S., or from the place of
importation if manufactured abroad, to customer's premises or next point of
distribution or sale.
3.3 Payment Dates. All royalty payments to be made by FMI or its
successors or assigns, shall be paid quarterly, with the actual payments being
due and payable on fifteenth day of the second month of the next succeeding
quarter immediately following the end of the preceding quarter.
3.4 Late Payments. Any payments due from FMI, which is not timely
paid (as set forth in sub-paragraph 3.3 hereof), shall bear interest at an
annual percentage rate of 7%, compounded monthly, until such payment has been
made in full.
4. FMI's Right of First Refusal to Related Products. In the event that Xxxxx X.
Xxxxx, the developer of the Backstroke, shall, in the future, introduce any new
products for which a new or additional patent has been obtained, or for which an
application for a new or additional patent is to be filed and which new or
additional patent is or will be owned by Xxxxx X. Xxxxx and which patent or
patent application shall be directly or indirectly related to the Backstroke,
then FMI shall be afforded the first right of refusal with regard to such patent
or patent application, as follows:
4.1 Procedure for Notice and Exercise of FMI's Right of First
Refusal. Back Product's grant of right of first refusal to FMI shall provide
that FMI shall possess a period of sixty (60) days, commencing upon its actual
receipt of a written notification from Xxxxx X. Xxxxx with regard to the new
patent, or application therefor, to complete any marketing survey or due
diligence study of FMI's choosing (the "due diligence period"). In the event
that on or before the sixtieth (60th) day of such due diligence period, FMI
shall notify Xxxxx X. Xxxxx, in writing, of its decision to purchase or license
certain rights involving such patent, which may include licensing and/or
ownership, upon terms mutually agreeable to FMI and Back Products then Back
Products shall, upon payment of the sums then agreed upon by FMI, immediately
transfer such rights, as have been agreed upon, to FMI through an appropriate
Agreement to be prepared, at the sole expense of FMI.
If, at any time, on or before the 60th day of the due diligence
period provided for herein, Back Products shall receive any bonafide offer from
an third party unrelated to Back Products for the purchase or license of any new
patented product (the "competing offer"), then Back products shall, within 72
hours, provide FMI with a copy of said competing offer, for its review and
consideration, and the presentment of any such competing offer shall, upon
receipt of same by FMI, afford FMI to declare and begin a new due diligence
period, as defined above. Upon the completion of its due diligence, FMI shall
then be afforded the opportunity to match the terms of the competing offer. If
in the event, however, that FMI shall not match such competing offer or elect
not to make any offer to purchase such patent rights as are being offered; then
upon the expiration of the 60th day of the due diligence period, Back products
shall be free to sell such patent rights to offering party at the price which
was presented to FMI by that third party.
4.2 Cooperation with FMI. Xxxxx X. XXXXX shall make himself available
to FMI, its successors and/or assigns, upon reasonable notice, for purposes of
providing FMI with information concerning communication which may have occurred
with other persons who are not a party to the suit.
In addition, if subpoenaed, Xxxxx X. XXXXX agrees to appear for purposes of
providing testimony, either by way of deposition or otherwise, in any legal
proceedings which may hereafter be filed; all in connection with or arising from
claims relating to the Backstroke Back Massager.
4.3 Indemnification of Xxxxx X. Xxxxx. FMI shall represent, defend
and indemnify Back Products in the event that any law suit shall be filed
against any of them in connection with or arising out of this agreement to
cooperate with FMI, as set forth in the preceding paragraph. To the extent
feasible, FMI shall name Xxxxx X. Xxxxx as an additional insured on FMI's
product liability policy.
4.4 Back Products Covenant Not to Compete.
4.4.1 Representations and Warranties. Xxxxx X. Xxxxx,for himself and
for D.V. Back Products, Ltd., represents and warrants that no assignment,
license or other transfer or conveyance of any property rights to the Backstroke
Back Massager, or rights to use or sell the Backstroke Back Massager, have been
granted or issued to any third parties, except that certain transfer and
conveyance to FMI, and/or its shareholders as set forth in that certain document
executed by Back Products and FMI and/or its shareholders, dated March 10, 1997,
a copy of which is attached hereto as Exhibit "B".
Xxxxx X. Xxxxx, for himself and for D.V. Back Products, Ltd. further
represents and warrants that it has not licensed the Backstroke Back Massager to
any third party, the right to market the Backstroke Back Massager in any country
outside the territorial limits of the United States of America.
FMI represents and warrants that, to the best of their knowledge,
Exhibit A, attached hereto, is intended to and believes that it will be an
exhibit to the agreement between FMI and the ISSUER as identified therein.
4.4.2 Non-Competition. Notwithstanding any provision of this Agreement
to the contrary, Back Products represents and warrants that it, or they, as the
case may be, shall not and will not compete, directly or indirectly, with FMI in
the marketing of the Backstroke, or any other such device which provides for
back massage, for a period of seven (7) years anywhere in the world. It is
further agreed by Back Products that the duration of time and the geographical
limits of this covenant are necessary and reasonable to effect the intent of the
parties to this Agreement. To that end, Back Products expressly waives any and
all claims and challenges, which they may now have or in the future possess, of
or to the reasonableness of this covenant not to compete.
5. RELEASE
5.1 Release by the Parties. In consideration of the foregoing
payments which have been agree to be made and the additional consideration
agreed to in this Agreement; both Back Products and FMI will forever release and
discharge the other, their successors, legal representatives, and assigns from
all debts, demands, actions, causes of action, charges, complaints, judgments,
suits, contracts, and obligations existing at the time of this agreement, or
arising hereafter, in connection with the Backstroke Back Massager and the
Contract dated March 10, 1997, but reserving any and all right to enforce the
provisions of this Agreement, including the right to seek and obtain injunctive
and other equitable relief, notwithstanding, and in addition to, any claim for
damages arising out of a parties breach of this Agreement, or any
misrepresentations or breach of any warranties set forth in this Agreement.
5.2 Representation and Assignment of Claims. In making and executing
this Agreement, each of the parties hereto represents and warrants as follows:
1. Back Products has received independent legal advise from its
legal counsel, Xxxx X. Xxxxxx, concerning its respective rights
and concerning the advisability of executing this Agreement.
2. FMI has received independent legal advice from its legal counsel,
Xxxxx X. Xxxxxx, concerning its respective rights and concerning
the advisability of executing this Agreement.
3. Neither party hereto has assigned, transferred or attempted to
assign or transfer any claim release herein.
5.3 Non-Disclosure. Except as may be required by law, neither Back
Products nor FMI nor their respective counsel shall disclose to any other person
any facts or information relating in any manner to the Suit or the existence of
and/or terms of this Agreement except that this matter has been settled.
5.4 Rectification. In case of any mistake in this Agreement,
including any error, ambiguity, illegality, contradiction or omission, this
Agreement shall be interpreted as if such mistake were rectified in a manner
which implements the intent of the parties as nearly as possible as effects
substantial fairness, considering all pertinent circumstances.
5.5 Entire Agreement. This Agreement constitutes the entire agreement
between these parties, and supersedes all prior written and oral agreements
between any of the parties hereto. There are no other agreements, whether
written or oral, expressed or implied between the parties except as have been
set forth herein. Any modification of this Agreement shall be void unless said
modification is evidenced in a writing signed by all of the parties hereto.
5.6 Construction. This Agreement shall be construed according to
the laws of the State of Ohio.
The undersigned have read the foregoing Release and Settlement
Agreement and fully understand it.
Signed, sealed and delivered this 12th day of January, 1999 by such
persons who are the duly authorized representatives of the parties to the Suit
and who by their signatures intend to bind all of the parties to the Suit.
WITNESSES: D.V. BACK PRODUCTS
/s/ Xxxx X. Xxxxxxxxx By: /s/ Xxxxx X. Xxxxx
---------------------- -------------------------
/s/Xxxxxxx X. Xxxxx XXXXX X. XXXXX, President
----------------------
XXXXX X. XXXXX
/s/ Xxxx X. Xxxxxxxxx By: /s/ Xxxxx X. Xxxxx
----------------------- -------------------------
/s/Xxxxxxx X. Xxxxx XXXXX X. XXXXX, Individually
----------------------
FLEX MARKETING, INC.
/s/Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx Xxxxxxx
---------------------- -----------------------------
XXXXXX XXXXXXX, President
XXXXX X. XXXXX
/s/ Delua X. Xxxxxx By /s/Xxxxx X. Xxxxx
--------------------- -----------------------------
/s/ Xxxx X. Xxxxx XXXXX X. XXXXX, individually
--------------------
XXXXXX XXXXXXX
/s/Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx Xxxxxxx
---------------------- -----------------------------
XXXXXX XXXXXXX, Individually
THG CONSTRUCTION MANAGEMENT, INC.
//s/ Delua X. Xxxxxx By /s/Xxxxx X. Xxxxx
----------------------- ------------------------------
/s/ Xxxx X. Xxxxx XXXXX X. XXXXX, President
---------------------
STATE OF OHIO )
)SS.
COUNTY OF COLUMBIANA)
BE IT REMEMBERED, That on the 12th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Xxxxx X.
XXXXX, President of D.V. Back Products, Inc., who executed the foregoing
instrument and acknowledged the signing thereof to be his voluntary act, for the
uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 12th day of January, 1999.
/s/ Xxxxxx X. Xxxxxxxx
------------------------
NOTARY PUBLIC
BE IT REMEMBERED, That on the 12th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Xxxxx X.
XXXXX, individually, who executed the foregoing instrument and acknowledged the
signing thereof to be his voluntary act, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 12th day of January, 1999.
/s/ Xxxxxx X. Xxxxxxxx
------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 19th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Flex
Marketing, Inc., by and through its President, Xxxxxx Xxxxxxx, who executed the
foregoing instrument and acknowledged the signing thereof to be his voluntary
act, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 19th day of January, 1999.
/s/Xxxxxx X. Xxxxxxxx
-------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 13th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Xxxxx X.
Xxxxx, who executed the foregoing instrument and acknowledged the signing
thereof to be his voluntary act, for the uses and purposes therein mentioned.
/s/ Xxxxxx Xxxxxxx
----------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 14th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came Xxxxxx
Xxxxxxx, who executed the foregoing instrument and acknowledged the signing
thereof to be his voluntary act, for the uses and purposes therein mentioned.
/s/Xxxxxx X. Xxxxxxxx
-------------------------
NOTARY PUBLIC
STATE OF OHIO )
)ss.
COUNTY OF MAHONING )
BE IT REMEMBERED, That on the 13th day of January, 1999, and fore me,
the subscriber, a Notary Public in and for said county, personally came THG
Construction Management, Inc., by and through its president, Xxxxx X. Xxxxx, who
executed the foregoing instrument and acknowledged the signing thereof to be his
voluntary act, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto affixed by official signature
and affixed my Notary Seal, on the 19th day of January, 1999.
/s/ Xxxxxx Xxxxxxx
----------------------
NOTARY PUBLIC
ADDITIONAL OBLIGATIONS TO XXXXX - EXHIBIT "E"
1. Xxxxx X. Xxxxx agrees to settle and dismiss that certain lawsuit filed by
Xxxxx and other against FLEX and other (Case No. 98-CV-349, in the Court of
Common Pleas for the County of Columbia, Ohio) for a total settlement amount of
$275,000.00 plus interest thereon at the rate of Percent ( %) per annum; such
sum shall be payable by FLEX in equal monthly installments in the amount of $
. foregoing consideration, Xxxxx X. Xxxxx agrees to transfer, sell
and assign to FLEX ISSUER, or their designees, all right, title and interest in
and to Patent No. 5,352,188 (the "Patent") along with the first option to
purchase or license any and all patents of Xxxxx X. Xxxxx relating to the
Backstroke, whether said products or patents are now in existence or are
developed in the future by Xxxxx X. Xxxxx, subject to certain specified royalty
payments otherwise required herein.
2. Xxxxx agrees to transfer, sell and assign to FLEX, ISSUER, or its designee,
all the right, title and interest in and to the Patent, and further agrees to
execute any and all documents requested by FLEX or ISSUER to secure any and all
claims to ownership of the Patent at any time in the future FLEX or ISSUER may
so request.
3. FLEX shall pay royalties on the Patent in the total amount of two percent
(3%) to Xxxxx (the "Royalty"). If after 30 days of receipt of written
notification of failure to pay the Royalty, FLEX fails to pay the Royalty, all
right, title and interest in and to the Patent shall revert back to Xxxxx, Hayek
and Xxxxxxx, as their interests may then be.
XXXXX FLEX
/s/ Xxxxx X. Xxxxx /s/ Xxxxxx Xxxxxxx
-------------------- ----------------------
Xxxxx X. Xxxxx Flex Marketing, inc.
By: Xxxxxx Xxxxxxx
Its President
D.V. BACK PRODUCTS, INC.
/s/ Xxxxx X. Xxxxx
-------------------
By: Xxxxx X. Xxxxx
ITS: President
EXHIBIT A
