Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 2 of 13 PageID #:365 SETTLEMENT AGREEMENT AND RELEASE This Settlement Agreement and Release ("Agreement"), effective as of the last date set forth below the signature of any party hereto ("Effective Date"), is entered into by and between the following "Settling Parties": (a) Evolutions Enterprises, LLC, an Delaware limited liability company (on behalf of itself and derivatively on behalf of Medical Safety Solutions, Inc.) ("Evolutions"), Andrew LaPointe Steven Roppolo, David Atkinson and Ralph Scumaci (collectively, the "Plaintiffs"), on behalf of themselves and on behalf of all persons who own MSS Class A and Class B preferred shares as of the Effective Date, and who continue to hold their shares as of the date of the final settlement approval hearing ("Current MSS Shareholders"), and (b) Kenneth A. Jackson, William Schureck, Marco S. Burnette, Richard VanHorn, Albert S. Miller, and Medical Safety Solutions, Inc., a Nevada corporation (on behalf of itself and as nominal defendant with respect to Plaintiffs' derivative claims in the Lawsuit (as defined below)) ("MSS") (collectively, the "Defendants"). WHEREAS, the Plaintiffs and the Defendants are parties to a lawsuit captioned Evolutions Enterprises, LLC eta!' v. Jackson et a!., Case No. 12-CV-9365, pending in the United States District Court for the Northern District of Illinois, Eastern Division (the "Lawsuit"); WHEREAS, MSS has licensed to a third-party licensee ("Third-Party Licensee") and the Third-Party Licensee has licensed certain intellectual property in the possession of MSS, including without limitation, all rights, title and interest in and to the Sharps Terminator ("Third-Party License") and will make efforts to market and sell that product; and WHEREAS, the Settling Parties desire to settle their respective claims and avoid further litigation and legal proceedings that might arise as a result of such claims, acknowledging that settlement is in the best interests of the Plaintiffs, Defendants and the Current MSS Shareholders. NOW, THEREFORE, in consideration of the premises, and the mutual covenants and obligations set forth below, the receipt, adequacy and sufficiency of which as consideration for this Agreement are hereby acknowledged, the Settling Parties agree as follows: 1. Payment to Shareholders. (a) As full and final settlement of the Lawsuit and any and all claims between the Settling Parties, MSS shall direct the Third-Party Licensee (and the appropriate Defendants shall cause such direction to be made) to pay $17,559,480 of the royalties payable to MSS into an escrow account established by the parties to this Agreement (the "Escrow") as is necessary to pay each owner of record of MSS Class A Preferred Shares the amount of$1.00 per share and each owner of record ofmss Class B Preferred shares the amount of $10.00 per share (the "Payment"). It is understood and agreed that the royalties will not be paid by the Third-Party Licensee in one lump sum, but rather will be paid to MSS and into the
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 3 of 13 PageID #:366 Escrow over time as follows: (1) Fifty percent of all royalties due and payable to MSS; and (2) Fifty percent of all royalties due and payable into the Escrow until such time as $17,559,480 has been paid into the Escrow. Thereafter, subject to subparagraph 1 (b), all royalties shall be paid directly to MSS. (b) Payments to shareholders from the funds paid into the Escrow by the Third-Party Licensee shall be administered by a party mutually agreed upon by the Plaintiffs and Defendants (the "Administrator"). The Plaintiffs and Defendants shall use their best efforts to appoint an Administrator when the royalties paid into the Escrow equal $100,000. In addition to the royalties that will be paid into the Escrow pursuant to subparagraph l(a), MSS shall direct the Third-Party Licensee to pay into the Escrow royalties necessary to account for any fees and expenses incurred by the Administrator. (c) The Defendants represent and warrant that MSS currently possesses records sufficient to ascertain the amount due to each shareholder entitled to any portion of the Payment described in subparagraph 1 (a). The Defendants shall provide a full and complete list of each such shareholder to counsel for the Plaintiffs so that counsel for the Plaintiffs can send the required notice of this settlement to each such shareholder. (d) It is understood that neither Third-Party Licensee nor Defendants have made any representations to anyone as to the size of any or all royalty payments over time or that there will ever be any royalty payments. Indeed, unless and until royalty payments are made by the Third Party Licensee, Plaintiffs and the shareholders will not receive any payments. (e) Once the initial $100,000 has been paid into the Escrow as described in subparagraph 1 (b), and at any time thereafter when the Escrow reaches a balance of at least $50,000, the Administrator shall disburse such royalties received from Third Party Licensee in accordance with the following formula: i. Class A Preferred Shareholders shall receive 50% of all royalties received into the Escrow, except for any fees and expenses incurred by the Administrator, ("Receipts") with each shareholder receiving a pro-rata share of each payment based on the number of Class A Preferred shares each shareholder owns; and ii. Class B Preferred Shareholders shall receive 50% of all Receipts, except for any fees and expenses incurred by the Administrator, as the funds are received into the Escrow, as a class with each shareholder receiving a pro-rata share of each payment based on his/her individual stock purchase amount in dollars divided by the total amount of capital contribution made by all Class B Preferred Shareholders. (f) If one class of shareholders described in Paragraph l(e) receives full recovery of its payment, then that class of shareholders will be deemed to have achieved full recovery and the Defendants' obligations under this Agreement to such class will end. At such point, one hundred per cent of all remaining royalties received into the Escrow shall be paid by the Administrator to the remaining class of Preferred Shareholders. 2
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 4 of 13 PageID #:367 (g) When the Administrator has made total Payments of $17,559,480 to the shareholders as described in subparagraphs l(a) and 1 (e), and when the amounts due to the Administrator pursuant to subparagraph l(b) have been paid into the Escrow, MSS's obligations under this Agreement shall automatically terminate. (h) In the event that (1) royalties are paid into the Escrow but such royalties are not in an amount sufficient to trigger a payment of such royalties to the shareholders by the Administrator or otherwise and (2) no royalties have been paid into the Escrow for a period of 365 days, then any balance in the Escrow shall be paid to the shareholders (by the Administrator, if one has been appointed, or by the agreement of the parties who have authority to control the Escrow) in accordance with the provisions of this Paragraph 1 that would otherwise apply if royalties in an amount sufficient to trigger a payment of such royalties to the shareholders had been reached in the Escrow. (i) The Administrator shall make all payments to shareholders by check and such payment is deemed to be made pursuant to the terms of this Agreement, the Addendum to Articles of Incorporation of MSS, Article 8, Division A(i), Express Terms of the Class A Preferred Shares Section 1 and the prospectus for Class B Preferred Shares. 2. Amounts Claimed Due to the Parties. The Settling Parties agree that all amounts claimed to be owed by Evolutions to MSS and all amounts claimed to be owed by MSS to Evolutions offset each other, cancel each other, result in no outstanding balance owed to or by either Evolution or MSS to each other, and further result in and require no monetary payment to be made by any Party to the Lawsuit to any other Party in such Lawsuit, provided, however, that (i) any Party who is also a shareholder shall be entitled to their proportionate share of the Payment described in Paragraph 1 pursuant to her, his, or its status as a MSS shareholder (ii) at time of Agreement the $15,000 Scumaci and the $65,000 Evolutions loan repayment obligations owed to Schur Partnership will be transferred to and assumed by MSS and said loan obligations will be paid to Schur Partnership by MSS after this Agreement is fulfilled as described in paragraph l(a) through (g), (iii) Evolutions and LaPointe shall transfer all common shares (320,000) to MSS simultaneously to the certificates being issued to Evolutions described in Section 3 herein below, and (iv) the trademark(s) Evolutions obtained in Europe shall be transferred to MSS within sixty (60) days of the signing of this Agreement. 3. Stock Certificate. On or before the Effective Date, MSS shall issue a stock certificate to Evolutions for the remaining 97,450 MSS Class A Preferred Shares that Evolutions owns. The Effective Date shall be the record date for the purposes of this Agreement, including paragraph 1 hereof. For purposes of clarity, and notwithstanding anything in this Agreement to the contrary, Evolutions shall be deemed to be the owner of record of 97,450 MSS Class A Preferred Shares for the purposes of this Agreement, including for the purposes of Paragraph 1 (a) above. 4. Mutual Releases / Bar Order. Except with respect to the Settling Parties' obligations under this Agreement, and except as provided below, the Plaintiffs, on their own behalf, on behalf of all Current MSS Shareholders, and on behalf of Plaintiffs,' and Current MSS Shareholders' heirs, administrators, successors, assigns, wholly-owned subsidiaries, affiliated 3
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 5 of 13 PageID #:368 companies, entities and franchisees; each of their respective current and/or former owners, principals, partners, officers, directors, managers, employees, agents, attorneys, insurers, successors, predecessors, assigns and representatives, in consideration of the benefits to be obtained both by them and all Current MSS Shareholders as set forth in Paragraph 1, the releases set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, fully and finally release, forever discharge, and covenant not to sue the Defendants, on each of their own behalf, on behalf of Current MSS Shareholders, and on behalf of each of Plaintiffs' and Current MSS Shareholders' heirs, administrators, successors, assigns, wholly-owned subsidiaries, affiliated companies, entities and franchisees, each of their respective current and/or former owners, principals, partners, officers, directors, managers, employees, agents, attorneys, insurers, successors, predecessors, assigns and representatives, for and from all past and present claims that the Plaintiffs and/or Current MSS Shareholders now have, may have, or may hereafter have or claim to have against the Defendants, whether based in tort or contract, at law or in equity, direct or indirect, known or unknown, suspected or unsuspected, contingent or non-contingent, arising out of or relating to the subject matter of the claims, defenses and/or allegations asserted or threatened to be asserted or pursued in the Lawsuit or any other claims related thereto. Plaintiffs and Current MSS Shareholders are permanently barred, enjoined, and restrained from commencing, prosecuting, or asserting any such claim against Defendants. It is the intent of the Settling Parties for this Agreement to give the broadest release and discharge possible under the law with respect to the Plaintiffs' claims against the Defendants. The Settling Parties acknowledge, and Current MSS Shareholders shall be deemed to have acknowledged by operation of the Court's order approving this Agreement, that the foregoing release was separately bargained for and a key element of the settlement. The Plaintiffs agree that should any of them pursue litigation against any other Parties involved in the Lawsuit, they will reduce any judgment obtained against such parties by the amount necessary under applicable law to preclude claims for contribution or indemnity (other than as based on any written indemnity) from being asserted against the Defendants by those other parties. This release is binding upon and for the benefit of the Settling Parties and their respective designees, wholly-owned subsidiaries, successors, predecessors and affiliated entities, and each of their respective current and/or former partners, principals, employees, agents, servants, directors, officers, counsel and insurers. The Plaintiffs, on their own behalf and on behalf of Current MSS Shareholders, expressly waive any and all provisions, rights and benefits conferred by any law of the United States or of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to 1542 of the California Civil Code, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH HIS DEBTOR. Likewise, except with respect to the Settling Parties' obligations under this Agreement, and except as provided below, the Defendants, in consideration of the Payment set forth in 4
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 6 of 13 PageID #:369 Paragraph 1, the releases set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, fully and finally release, forever discharge, and covenant not to sue the Plaintiffs on their own behalf and on behalf of their heirs, administrators, successors, assigns, wholly-owned subsidiaries, affiliated companies, entities and franchisees, their current and/or former owners, principals, partners, officers, directors, managers, employees, agents, attorneys, insurers, successors, predecessors, assigns and representatives, for and from all past and present claims that the Defendants now have, may have, or may hereafter have or claim to have against the Plaintiffs, whether based in tort or contract, at law or in equity, direct or indirect, known or unknown, arising out of or relating to the subject matter of the claims, defenses and/or allegations asserted or threatened to be asserted or pursued in the Lawsuit or any other claims related thereto. It is the intent of the Settling Parties for this Agreement to give the broadest release and discharge possible under the law with respect to the Lawsuit and such claims. This release is binding upon and for the benefit of each of the Settling Parties and their respective designees, wholly-owned subsidiaries, successors, predecessors and affiliated entities, and each of their respective current and/or former partners, principals, employees, agents, servants, directors, officers, counsel and insurers. The Defendants expressly waive any and all provisions, rights and benefits conferred by any law of the United States or of any state or territory -of the United States, or principle of common law, which is similar, comparable or equivalent to 1542 of the California Civil Code, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH HIS DEBTOR. 5. Non-Admission. The settlement of the Lawsuit and any and all claims between the Settling Parties is voluntary and does not constitute an admission of fraud, negligence, breach of contract or any other basis for liability by any of the Parties, or an admission of the existence of any facts upon which liability could be based. 6. Non-Disparagement. The Settling Parties shall not make any statements, written or verbal, or cause or encourage others to make any statements, written or verbal, that defame, disparage or in any way criticize any other Settling Party's personal or business reputation, practices, conduct, employees, managers, members, officers and/or directors. This prohibition extends to statements, written or verbal, made to anyone, including, but not limited to, customers, potential customers, competitors, strategic partners, vendors, employees (past and present), investors, potential investors, the news media and industry analysts. The Settling Parties hereby acknowledge that this non-disparagement provision is a material term of this Agreement; that any violation of this provision would cause irreparable harm; that an individual Party who violates this paragraph by defaming, disparaging, or otherwise criticizing another Party shall alone be in material breach of this Agreement; but that every other individual Party who does not violate this paragraph shall not be in material breach of the Agreement and this provision and the Agreement shall remain enforceable by them. Notwithstanding the foregoing, nothing in this paragraph shall limit any Settling Party from making competitive comparisons of 5
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 7 of 13 PageID #:370 their products or services for the purposes of competing with any other Settling Party in good faith. 7. Authority. The Settling Parties hereto hereby each represent and warrant to the other that each (a) is the sole owner of any claims released by this Agreement, (b) has not filed, assigned, transferred, or purported to or agreed to assign or transfer any claim released by this Agreement to any person or entity, and (c) has full authority to enter into this Agreement. Each Settling Party shall indemnify and hold harmless each of the other Settling Parties for any breach of the representations and warranties made by it in this paragraph. 8. Court Approval of Settlement and Dismissal of Lawsuit. Pursuant to Federal Rule of Civil Procedure 23.1 (c), any agreement to voluntarily dismiss or settle a derivative action such as this Lawsuit must be approved by the Court and notice of any such proposed settlement or voluntary dismissal must be provided to MSS's shareholders in the manner that the Court orders. Upon the fulfillment of any obligations imposed by the Court pursuant to Rule 23.1 to the satisfaction of the Court, the Plaintiffs will cause to be filed with the Court a stipulation of dismissal of the Lawsuit with prejudice. 9. Confidentiality. Except as may be"necessary pursuant to Rule 23.1 of the Federal Rules of Civil Procedure and the Court's order(s) with respect to that Rule, and except as may be necessary to enforce any rights, duties or obligations hereunder, the terms and conditions of this Agreement shall be treated as confidential by the Settling Parties, and no Settling Party shall disclose (other than with the prior written consent of the Settling Parties) the contents of this Agreement, as well as any settlement negotiations, documentation and/or information sufficient to show the Settling Parties' actual or asserted costs, expenses or damages in connection herewith to anyone other than: (i) the Settling Parties hereto; including their employees, managers, members, officers and/or directors with a business need to know; and (ii) the Settling Parties' respective legal, financial and/or tax advisors to the extent necessary (hereinafter "Permitted Disclosure"). In the event of a Permitted Disclosure, the disclosing Settling Party will inform the person( s) or entity(ies) to whom such information is disclosed of this confidentiality requirement and the Settling Parties' obligations hereunder. In addition, nothing in this Agreement shall preclude any Settling Party from disclosing such information: (a) in response to a subpoena, document request, interrogatory, deposition, trial questioning, or other discovery request or testimony; (b) in response to a formal request or demand from a governmental or regulatory agency; (c) as necessary to enforce the terms of this Agreement; (d) as required to establish a judgment reduction or settlement credit under applicable law; or (e) as otherwise required by law (such as in connection with federal or state income tax return filings). Each Settling Party shall respond to oral or written inquiries regarding the Lawsuit by stating words to the effect that "the lawsuit has been resolved between the parties." An individual Party who violates this paragraph shall alone be in breach of this Agreement, but every other individual Party who does not violate this paragraph shall not have their rights and obligations under this Agreement affected. 6
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 8 of 13 PageID #:371 10. Notice. The Settling Parties agree to provide each other with written notice within seven (7) days (or if served within less than seven days of any deadline to respond, immediately) of any subpoena, summons, motion, order, or other request or directive that may call for documents relating to and/or testimony about the terms or conditions of this Agreement so that the other Settling Parties may seek appropriate protection. Written notice of the foregoing, and any other notice provided relating to this Agreement, shall be sent by facsimile and overnight delivery as follows: To Plaintiffs: Evolutions Enterprises, LLC Attn: Andrew Lapointe 1781 Edmonds Ave. New Lenox, IL 60451 Copies to: Michael P. Tomlinson 8501 W. Higgins Road, Suite 420 Chicago, IL 60631 To Defendants: Medical Safety Solutions Attn: William Schureck 87 Sawyer Parkway Mansfield, OH 44903 Copies to: Vincent W. Rakestraw 4930 Reed Road, Suite 200 Columbus, OH 43220 Blake T. Hannafan Hannafan & Hannafan, Ltd. One East Wacker Dr. Suite 2800 Chicago, IL 60601 11. Entire Consideration. The Parties agree that the Payment made pursuant to Paragraph 1 will settle the Lawsuit and the any and all the claims between the Parties. Each Party shall bear its own costs, expenses, and attorneys' fees in connection with the Lawsuit, the claims released herein and this Agreement. 12. Entire Agreement. The Agreement constitutes the entire agreement between the Parties relating to the settlement of the Lawsuit and any and all claims between the Parties. Any 7
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 9 of 13 PageID #:372 representations, promises or statements not set forth in the Agreement are of no force and effect and have not been relied upon. 13. Amendments. This Agreement may be amended only by a written instrument signed by each Party or an officer or other authorized representative (as the case may be) of each Party hereto or a successor to each Party hereto. 14. Other Documents. The Parties agree to execute any further agreements or other documents that may be necessary to carry out the tenns of this Agreement. 15. Severability. The invalidity of any tenn or provision herein, or any part hereof, shall not render the balance of the Agreement invalid. Any tenn or provision, or part thereof, which is detennined to be invalid, shall be severed from the Agreement and the remainder of the Agreement shall continue in full force and effect. If any provision of this Agreement is so broad as to be unenforceable, that provision shall be interpreted to be only so broad as is enforceable. 16. Counterparts. This Agreement may be executed in any number of counterparts, and by facsimile or PDF, each of which shall be deemed an original, and which, when taken together, shall constitute one and the same Agreement, notwithstanding that all Parties may not have executed the same counterpart, and each Party may execute a separate signature page, which may be apprehended to fonn one or more duplicate originals of this Agreement. 17. Choice of Law. The Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to or application of conflict of law rules or principles. The Parties hereby agree to waive their respective right to a jury trial of any claim or cause of action based upon or arising out of this Agreement. 18. KNOWING AND VOLUNTARY. EACH PARTY SIGNING THIS AGREEMENT VERIFIES THAT HE OR IT HAS READ AND UNDERSTANDS THE PROVISIONS OF THIS AGREEMENT AND THE RELEASES EXECUTED PURSUANT TO THIS AGREEMENT, THAT HE OR IT KNOWINGLY AND VOLUNTARILY ENTERS INTO THIS AGREEMENT AND THE RELEASES EXECUTED PURSUANT TO THIS AGREEMENT WITH THE ADVICE OF COUNSEL, AND THAT HE OR IT HAS NOT BEEN COERCED OR THREATENED INTO SIGNING THIS AGREEMENT OR THE RELEASES EXECUTED PURSUANT TO THIS AGREEMENT AND IS NOT RELYING UPON ANY STATEMENTS, REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, NOT EXPRESSLY SET FORTH HEREIN. EACH PARTY EXPRESSLY STATES, REPRESENTS AND RECOGNIZES THAT HE OR IT DOES NOT HAVE ANY DUTY TO SPEAK OR DISCLOSE ANY FACT, STATE OF EVENTS, ACTION, INACTION, OCCURRENCE, NON-OCCURRENCE, ADMISSION, OR OMISSION, AND EACH PARTY EXPRESSLY REPRESENTS THAT THAT PARTY HAS HAD A FAIR, REASONABLE AND UNHINDERED OPPORTUNITY TO INVESTIGATE AND INSPECT ANY AND ALL RELEV ANT DOCUMENTS, PROPERTY AND OTHER THINGS, WHETHER THEY ARE OR WERE EVER IN THE POSSESSION, CONTROL OR CUSTODY OF ANY PARTY OR ANY THIRD PERSONS OR ENTITIES, AND INVESTIGATE, INSPECT AND INTERVIEW ANY PERSONS NECESSARY DURING AND BEFORE THE COURSE OF EXECUTING THIS AGREEMENT. 8
Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 10 of 13 PageID #:373
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Case: 1:12-cv-09365 Document #: 29-1 Filed: 07/30/13 Page 13 of 13 PageID #:376 RALPH SCUMACI RICIL'\RD V.. 4.NBOIlN Date: A.LB.ERT S. MILLER ; 20 11