the 10q...last one
2. RECENT DEVELOPMENTS
On May 28, 2010, the Company and Ventures entered into an agreement with George Foreman (“Foreman”) and GFPI, which restructured the contractual rights and obligations of the parties. In addition, Foreman and GFPI exchanged all of their membership interests in Ventures for the Company’s common stock under the Investor Rights Agreement entered into as of August 15, 2005. The parties agreed to terminate the Services and Assignment Agreements and all of the rights and obligations of the parties thereunder. Ventures agreed to sell, grant, assign and otherwise set over to Foreman and GFPI, solely and exclusively and forever, irrevocably and unconditionally, all of their right, title and interest, of every nature and description, whether or not such rights are now known, recognize or contemplated, including the right to enforce the same for all past, present and future infringements, in and to: the Foreman Indicia and the Indicia Rights, marks any and all registrations of, and applications to register, the Marks filed in the United States Patent and Trademark Office, in any states within the United States and anywhere else in the world; and all materials created or produced using the Marks, the Foreman Indicia and/or Indicia Rights including, without limitation, all copyrights therein.
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The Company, Ventures, and each of the respective Affiliates agreed to cease and desist from any and all uses of, and shall not use, the Foreman Indicia, the Indicia Rights and/or the Marks, subject only to the licenses previously provided to Ventures for the use of the Foreman Indicia, the Indicia Rights, the Materials and/or the Marks solely in connection with and for the purpose of complying with and/or exercising its contractual rights, representations, commitments and obligations under the Ventures’ License Agreements.
Foreman and GFPI Parties agreed to waive any right to receive shares of preferred stock pursuant to the Registration Rights Agreement (see Note 12 below) and any amounts due to them. Foreman and George Foreman Jr. resigned from the Company’s board of directors immediately upon the execution of this agreement. George Foreman Jr. and George Foreman III, former employees of the Company, agreed to waive any right to receive any amounts due to them under their employment contracts. As a result of this waiver by George Foreman Jr. and George Foreman III, George Foreman Management Inc. recognized forgiveness of indebtedness of $68,621. When these rights were waived, the Company reclassified the elimination of the $68,621 payroll accrual to additional paid-in capital.
Ventures entered into another Agreement with Foreman and United States Pharmaceutical Group, LLC (d/b/a NationsHealth) (“NationsHealth”) on May 28, 2010 pursuant to which Foreman was appointed as NationsHealth’s exclusive spokesman for core diabetic supplies and Foreman granted NationsHealth, through the Agreement with Ventures, an exclusive worldwide license to use the Foreman name, likeness, image and signature in connection with advertising to promote the core diabetic supplies. As part of the Agreement, both Ventures and Foreman will share qualified lead income received from NationsHealth in addition to 10% of the net profits derived from the value of diabetic supplies. Ventures has received $50,000 of revenue to-date from NationsHealth.
On December 13, 2010, Ventures received a demand letter from the minority members of InStride Ventures claiming that Ventures breached its fiduciary duty to InStride Ventures by entering into this Agreement with NationsHealth on May 28, 2010. InStride Ventures had previously entered into a product distribution agreement with NationsHealth on September 4, 2008 and the minority members contend that the May 28, 2010 agreement bypassed the rights of InStride Ventures LLC. No further action has been taken by the minority members of InStride Ventures. The Company believes that the claims set forth in the demand letter are without merit and will vigorously defend these claims.
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