Patent Settlement Agreement With Precise

PATENT SETTLEMENT AGREEMENT


This Patent Settlement Agreement (the "Settlement Agreement") is entered into by and between Precise (as defined below) and Bollinger (as defined below), and is effective as of the Effective Date (as defined below).


WHEREAS, Precise owns the Patents (as defined below) and the Patents are valid and enforceable;


WHEREAS, Bollinger uses, offers to sell, sells, and distributes the Products (as defined below) and the Patents read on the Products;


WHEREAS, the parties to this Settlement Agreement desire to avoid the substantial expense which would be incurred in litigating any patent infringement claims;


NOW THEREFORE, for good and valuable consideration, the adequacy of which is hereby acknowledged, Precise and Bollinger do hereby represent, warrant, covenant and agree as follows:


I. DEFINITIONS


1. "ACCUSED UNITS OF PRODUCT" shall mean the 400,000 units of Products
(defined below) that Bollinger represents and warrants it has,
marketed, sold, offered to sell or distributed from September 1, 1999
through the Effective Date, excluding the Current Inventory (defined
below).


2. "BOLLINGER ACTION" shall mean Bollinger Industries, L.P., v. Precise
Exercise Equipment, Inc., et al., Case No. 400-CV-0135-A in the United
States District Court for the Northern District of Texas (the "Texas
Court").


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3. "BOLLINGER" shall mean Bollinger Industries, Inc., a Delaware
corporation, Bollinger Industries, L.P., a Texas limited partnership,
and each of their respective directors, officers, stockholders, agents,
employees, affiliates, subsidiaries, successors and assigns.


4. "CURRENT INVENTORY" shall mean the units of Products for which
Bollinger has a non-cancelable purchase commitment or that are in the
possession or control of Bollinger as of the Effective Date which
Bollinger represents and warrants do not exceed Two Hundred Thousand
(200,000) units. Bollinger shall have the right to market the Current
Inventory only in accordance with the Limited Sell-off Right (as
defined below).


5. "EFFECTIVE DATE" shall mean the date that this Settlement Agreement is
fully executed by the parties.


6. "KMART ACTION" shall mean Precise Exercise Equipment, Inc., et al. v.
KMart Corporation, et al., Case No. ED CV 00-312 RT (RCx) in the United
States District Court for the Central District of California, Eastern
Division (the "Court").


7. "LIMITED SELL-OFF RIGHT" shall mean the limited right set forth in
paragraph II.3 below whereby Precise grants Bollinger the limited right
to market and sell-off its Current Inventory.


8. "PATENTS" shall mean U.S. Patent Nos. 5,492,520 and 5,577,987, any
corresponding foreign patents and patent applications (a list of which
is attached hereto as EXHIBIT A), and any patents which issue on any
continuation, continuation-in-part, divisional or reissue applications
thereof.


9. "PRECISE" shall mean Precise Exercise Equipment, Inc., a New Jersey
corporation, and Fitness Innovations and Technologies (F.I.T.), Inc., a
Delaware corporation, and each of their respective directors, officers,
stockholders, agents, employees, affiliates, subsidiaries, successors
and assigns.


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10. "PRODUCTS" shall mean any and all abdominal exercise devices on which
one or more of the Patents read and which have been manufactured, used,
marketed, sold or distributed by Bollinger since September 1, 1999,
including, but not limited to, the devices referred to as the
"AbRock'It", the "AbRock'It Plus", and the "EZ Abs".


11. "STEP PRODUCT" shall mean all products covered by the Sublicense
Agreement attached as Exhibit B.


12. "TERRA STAR" shall mean Terra Star, Inc., a Utah corporation.


13. "WALMART ACTION" shall mean Precise Exercise Equipment, Inc., et al.
vs. Walmart Stores Incorporated, Case No. ED CV 00-881 RT (RCx) in the
United States District Court for the Central District of California,
Eastern Division.


II. SETTLEMENT TERMS


1. WARRANTY REGARDING UNITS OF PRODUCT. Bollinger warrants it has not
sold, manufactured, caused the manufacture of or distributed more than
the 600,000 units of Products since September 1, 1999. Bollinger also
warrants that this number of units of Product includes the Current
Inventory, which consists of 200,000 units of Products.


a. AUDIT. On the Effective Date and for 90 days thereafter,
Bollinger shall provide Precise with the opportunity to
inspect and audit the applicable records of Bollinger relating
to the units of Product made, used, sold or distributed by
Bollinger since September 1, 1999.


b. SALES IN EXCESS OF ACCUSED UNITS OF PRODUCT AND THE CURRENT
INVENTORY. Unless otherwise provided herein, Bollinger shall
pay Precise a reasonable royalty rate of $4.50 per unit for
each and every additional unit of Product manufactured, sold
or


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distributed by Bollinger after September 1, 1999 in excess of
the Accused Units of Product and the Current Inventory.


2. SETTLEMENT AMOUNT. In exchange for Precise settling and dismissing the
Action on the terms stated in this Settlement Agreement, Bollinger has
agreed to deliver consideration to Precise that the parties have valued
at Four Dollars ($4.00) per Accused Product Unit. This consideration
will be paid or delivered by Bollinger as follows: (1) on the Effective
Date, Bollinger shall pay Precise by wire transfer or by certified
check One Hundred Three Thousand Dollars ($103,000.00); (2) Bollinger
shall, as expeditiously as possible, obtain any necessary authorization
and approval and execute and deliver the Sublicense Agreement to
Precise; (3) within nine (9) days after the Effective Date, Bollinger
shall execute and deliver the Assignment Agreement to Precise; and (4)
Bollinger shall perform its obligations under paragraph II.4 below. The
payment and delivery of consideration by Bollinger to Precise under
this Settlement Agreement are attributable to, among other things, the
past manufacture, use, sale and distribution of the Product by
Bollinger and compensation for the diminution in value to the business
reputation, goodwill and customer relations of Precise.


3. LIMITED SELL-OFF RIGHT RE: CURRENT INVENTORY. After the Effective Date,
Bollinger shall be entitled to market, sell and distribute its Current
Inventory only on the following terms:


a. LIMITED TO CURRENT INVENTORY. The Limited Sell-Off Right shall
apply only to the marketing and sale of the Current Inventory
for the purpose of fulfilling existing commitments from
current Bollinger customers. The Current Inventory shall not
exceed Two Hundred Thousand (200,000) units of Product. This
Limited Sell-Off Right does not grant Bollinger any other
right to manufacture, market, sell or distribute any other
Products upon which one or more of the Patents read, nor does
it permit Bollinger to market or sell any Products in excess
of the Two Hundred Thousand (200,000) units of Product of the
Current Inventory.


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b. ROYALTY AND TERMINATION DATE. Bollinger shall pay Precise a
royalty equal to Two Dollars and Fifty Cents ($2.50) per unit
of Current Inventory [Product] sold or distributed pursuant to
the Limited Sell-Off Right (the "Sell-Off Royalty"). Bollinger
shall pay Precise all such royalty payments on a monthly basis
by wire transfer or by cashier's check for all units of
Product which Bollinger has shipped to any customer in the
immediately preceding month. Sell-Off Royalties shall be paid
within ten (10) days following the end of the month for which
they are due. The Sell-Off Royalty shall be paid on all
Products shipped from November 1, 2000 through the termination
of the Limited Sell-Off Right. The Limited Sell-Off Right
shall terminate on March 1, 2001.


c. REPORTING REQUIREMENT. Bollinger shall supply Precise on a
monthly basis with a written accounting of all units of
Product sold from the Current Inventory by customer account.
This accounting shall be supplied with the Sell-Off Royalty
payment for the relevant month. At Precise's request,
Bollinger shall supply Precise with copies of such documents
that permit Precise to verify the number of units of Product
sold by Bollinger, including all purchase orders, bills of
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