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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of October 24,
1995, is by and among SELFIX, INC., a Delaware corporation ("Selfix"); MERICON
CORPORATION, a Michigan corporation ("MERICON"), CLAW, L.L.C., a Delaware
limited liability company ("Claw"), and XXXXXX XXXXXXXX ("XXXXXXXX") (Mericon,
Claw and Buckshaw are collectively referred to as the "SELLERS").
WHEREAS, Mericon, located at 00000 Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx (the
"FACILITY"), is engaged in the business of developing, manufacturing and
distributing child safety and protection products (the "MERICON BUSINESS").
WHEREAS, Mericon wishes to merge into Selfix and Selfix wishes to have
Mericon merge and form a Mericon Division (the "MERICON DIVISION") following
the "Closing" (as defined herein);
WHEREAS, Buckshaw and/or Claw currently own the exclusive title to and
currently posses patents or applications for patents which are pending with the
United States Patent and Trademark Office for various items related to the
Mericon Business (the "PATENTS") these Patents are listed on attached and
incorporated Schedule A;
WHEREAS, Claw and Buckshaw wish to grant and Selfix wishes to obtain an
exclusive license to use the Patents owned by Claw and Buckshaw related to the
Mericon Business ("EXISTING LICENSE PRODUCTS") and the right of first refusal
for all future products, ideas, and patents created by Claw and/or Buckshaw
which relate to child safety products, including but not limited to those in
process and completed products, ideas and patents ("NEW LICENSE PRODUCTS")
(collectively, the Existing License Products and the New License Products are
referred to as the "EXCLUSIVE LICENSE PRODUCTS"); and
WHEREAS, following the Closing, Buckshaw is willing to provide consulting
services to Selfix, on an as needed basis, pursuant to the terms of a
Consulting Agreement to be entered into on the date of Closing.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth in this
Merger Agreement, the parties hereto, agree as follows:
ARTICLE I
THE PLAN OF MERGER
1.1 THE MERGER. SURVIVING CORPORATION. Upon the performance of all
covenants and obligations of the parties contained herein and upon the
fulfillment of all conditions to the obligations of the parties contained
herein (other than such covenants, obligations and conditions as shall have
been waived in accordance with the terms hereof), and in accordance with the
Delaware Business Corporation Law ("DBCL"), on the Closing Date, Mericon shall
be merged with and into Selfix or a wholly owned corporate subsidiary of Selfix
designated by Selfix and Selfix or the corporate subsidiary designated by it
shall be the surviving corporation and shall continue its corporate
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existence under the laws of the State of Delaware ("MERGER"). At the Closing of
the Merger, the separate existence of Mericon shall cease and all previously
issued shares of Mericon stock shall be cancelled. In the event that Selfix
designates a wholly owned corporate subsidiary to be merged with Mericon,
Selfix shall remain fully liable for all the liabilities and obligations as
provided in this Agreement.
ARTICLE II
ADDITIONAL TRANSACTIONS
2.1 THE TRANSACTION. At the Closing, Selfix shall sell, transfer, assign
and deliver to the Mericon shareholders, and the Mericon shareholders shall
accept, assume and receive from Selfix, all rights, title and interest in and
to the "MERGER SHARES," as defined herein ("TRANSFER"), in the amounts and to
the specific persons and/or entities as set forth on Schedule 2.1.
2.2 CONSULTING AGREEMENT. On the date of Closing, Buckshaw shall enter
into a Consulting Agreement with Selfix in the form as attached hereto as
Exhibit 2.2 ("CONSULTING AGREEMENT") which consulting Agreement shall be
supported by separate consideration.
2.3 COVENANT NOT TO COMPETE. On the date of Closing, Mericon shall cause
Claw and Xxxxx Xxxxx ("XXXXX") to enter into a Covenant Not To Compete with
Selfix in the Mericon Business in North America for a period of five (5) years
following the date of Closing, in the form as attached hereto as Exhibit 2.3
("COVENANT NOT TO COMPETE").
2.4 AFFIRMATION TO EXISTING LICENSE PRODUCTS. On the date of Closing, Claw
and Buckshaw shall grant Selfix an affirmation of Mericon's transferable rights
to the Existing License Products as set forth in Exhibit 2.4 ("AFFIRMATION").
2.5 LICENSE AGREEMENT. On the date of Closing, Claw and Buckshaw shall
enter into a License Agreement with Selfix for the Existing License Products,
in the form attached hereto as Exhibit 2.5.
2.6 RESEARCH & DEVELOPMENT AGREEMENT. On the Closing date, Buckshaw and
Selfix shall enter into a Research & Development Agreement in the form attached
hereto as Exhibit 2.6.
ARTICLE III
CONSIDERATION
3.1 CONSIDERATION. In consideration for entering into the Merger,
executing the Covenant Not to Compete and granting the Affirmation, Selfix
shall make distributions as follows:
(a) Selfix shall issue two hundred fifty thousand (250,000) shares
of Selfix stock (the "MERGER SHARES") duly issued and authorized,
fully paid and non-
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assessable with other rights to be defined herein, to the Mericon Shareholders
as set forth on attached and incorporated Schedule 2.1 and as follows:
(i) A certificate or certificates representing the
number of whole Merger Shares into which
Mericon Stock has been converted, shall be issued
by Selfix.
(ii) The existence of dissenting shareholders
shall not terminate or postpone the Merger. Mericon
shall diligently pursue such negotiations and
Selfix shall be solely responsible for any payment
required in connection therewith the amount of
which shall be deducted from the amount due to
Sellers.
(iii) On the Effective Date, all shares of
Mericon stock shall be cancelled.
(b) Upon Closing Selfix shall pay Buckshaw a fee for the exclusive
rights to the New License Products in the amount of One Hundred Ninety-Five
Thousand Dollars ($195,000.00). Thereafter, royalty payments shall accrue and
be payable quarterly by Selfix to Claw ("ROYALTY") as set forth in the License
Agreement.
(c) Upon Closing, Selfix shall pay each of Buckshaw and Xxxxx for the
Covenant Not To Compete Twenty-Eight Thousand Dollars ($28,000.00) and Two
Thousand Dollars ($2,000.00) respectively; and
(d) So long as Sellers are not in material breach of this Agreement,
Selfix shall extend Claw a line of credit prior to April 10, 1996 in the amount
of Seventy Thousand Dollars ($70,000.00) with interest accruing quarterly at
the rate of eight percent (8%) per annum. Such line of credit if used by Claw
shall be prepayable by the deduction of twenty percent (20%) of each quarterly
Royalties payment from Selfix to Claw, which amount shall be applied first to
interest and then to principal. Claw shall pay Selfix all accrued and unpaid
interest and principal which shall be payable in full five (5) years from the
date of granting the line of credit. Claw may borrow funds against such line of
credit by delivering written notice ("Notice") to Selfix. Upon receipt of
Notice from Claw (provided Sellers are not in material breach of this
Agreement) and execution by Claw of an unsecured promissory note evidencing the
amount borrowed and other related documents which are necessary to establish
that the loan is a bona fide obligation of Claw, Selfix shall deliver the funds
requested, up to Seventy Thousand Dollars ($70,000.00), by wire transfer to an
account designated by Claw, within five (5) days from the date that Selfix
receives the Notice ("DUE DATE"). In the event that Selfix does not deliver the
funds requested by the Due Date, Selfix shall be obligated to pay Claw Five
Hundred Dollars ($500.00) for each day past the Due Date until the funds are
delivered. In the event that the funds are not delivered by the Due Date, Claw
shall be entitled to immediate injunctive relief to compel Selfix to deliver
the requested funds as set forth in the Notice. For purposes of this paragraph,
Selfix irrevocably agrees and consents that any action to enforce the terms of
this paragraph may be brought in any state or Federal court that has competent
jurisdiction and is located in or whose district includes, Xxxxx County,
Michigan and that any such court shall have personal jurisdiction over Selfix
for purposes of this action.
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ARTICLE IV
CLOSING
4.1 EFFECTIVE DATE. The Merger shall be effected by: (i) Board of
Director resolutions authorizing the plan of merger; (ii) Shareholder approval
of the plan of merger if required by law; and (iii) filing of articles of
merger and certificate of merger as applicable, to which this Agreement shall
be annexed, with both the Secretary of State of Delaware in accordance with the
provisions of the DBCL and the Michigan Department of Commerce in accordance
with the provisions of the Michigan Business Corporation Act ("ARTICLES OF
MERGER"). The Merger shall be deemed effective at the time of filing of the
Articles of Merger by the Secretary of State of Delaware and the Certificate of
Merger with the Michigan Department of Commerce, which Articles and Certificate
of Merger shall be so filed contemporaneously on or about the Closing date,
which date shall be on or about October 24, 1995 (the "CLOSING"). The date and
time when the Merger shall be deemed effective is herein referred to as the
"EFFECTIVE DATE."
4.2 COOPERATION; CONSENTS. Each of the parties hereto will use its
best efforts to obtain all consents, authorizations, orders and
approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation by it of the transactions contemplated on
its part hereby and will cooperate fully with the other party in assisting it
to obtain such consents, authorizations, orders and approvals and to make such
filings and registrations. No party hereto will take or omit to take any action
for the purpose of delaying, impairing or impeding the receipt of any required
consent, authorization, order or approval or the making of any required filing
or registration.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby make the following representations and warranties to
Selfix, each of which they warrant to be true and correct on the date hereof
and, except as affected by the transactions expressly contemplated by this
Agreement, on the date of Closing.
5.1 AUTHORITY. Sellers have full legal right, power and authority,
without the consent of any other party, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby. All corporate and other
actions required to be taken by Sellers to complete performance of this
Agreement and all transactions contemplated hereby have or will be duly and
properly taken prior to the date of Closing.
5.2 VALIDITY. This Agreement has been, and the documents to be
delivered at the Closing will be, duly executed and delivered and are, or at
the Closing will be, the lawful, valid and legally binding obligations of
Sellers, enforceable in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, rearrangement,
reorganization or similar debtor relief legislation affecting the rights of
creditors generally and subject to the application of general principles of
equity. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby are not or will not:
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(a) be prohibited by, do not violate or conflict with
any provision of, and do not result in a default under or a
breach of (i) Mericon's Articles of Incorporation or by-laws,
(ii) any contract, agreement or other instrument to which any
of the Sellers are a party or by which any of the Sellers or
Mericon may be bound, (iii) any regulation, order, writ,
decree or judgment of any court or governmental agency, or
(iv) any law applicable to any of the Sellers; or
(b) accelerate or modify, terminate or give any party the
right to accelerate, terminate, modify, abandon or refuse
to perform any contract, agreement or other instrument with
respect to which Mericon or the Mericon Business is a party.
5.3 DUE ORGANIZATION. Mericon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan, and is
in good standing as a foreign corporation under the laws of any other state in
which failure to so qualify would have a material adverse affect on Mericon and
with full power and authority to own or lease its properties and to carry on
the Mericon Business as heretofore conducted.
5.4 TITLE TO ASSETS. Mericon is the sole and exclusive legal and
equitable owner of all right, title and interest in and has good, marketable
and indefeasible title to all of the assets of Mericon (including, but not
limited to), as set forth in the Financial Statements as described in Section
5.13 below, subject to such purchases, sales and retirements as occur in the
ordinary course of business ("MERICON ASSETS"). The Mericon Assets are free and
clear of all liens, claims, securities interests, pleadings, encumbrances of
any kind except those of First of America Bank and Xxxxxx as listed in Schedule
5.4. Prior to the date of Closing, Mericon shall have the right (subject to the
conditions set forth in Section 5.13) to transfer all or any portion of its
office equipment and furniture to an entity of its choice for nominal
consideration.
5.5 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of Mericon consists only of fifty thousand (50,000) shares of One
($1.00) Dollar par value common stock and twenty thousand (20,000) shares of
preferred, Ten Dollars ($10.00) par value stock. As of the date of this
Agreement, fifty thousand (50,000) shares of common stock and ten thousand
(10,000) shares of preferred stock were issued and outstanding to the persons
and/or entities and in the amounts as set forth in Schedule 5.5, and there are
no other shares of capital stock issued and outstanding. All issued and
outstanding shares of Mericon Stock are validly issued, fully paid and
nonassessable. There are not, and at the Effective Date there will not be, any
outstanding options, warrants, convertible debentures, calls, subscriptions or
rights to purchase or acquire any capital stock of Mericon, and there are not,
and at the Closing there will not be, except as set forth above, any contracts,
commitments, understandings, arrangements or restrictions by which Mericon is
bound to issue any additional shares of its capital stock.
5.6 CONTRACTS. Attached and incorporated Schedule 5.6 lists all
material contracts, leases, agreements, plans and arrangements, whether written
or oral, express or implied, or having any other legally binding basis to which
Mericon is a party or by which Mericon or any of its properties are bound and
which require the payment of more than Ten Thousand Dollars ($10,000.00)
(collectively the "MERICON AGREEMENTS"),
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including but not limited to those which involve the following: (i) capital
expenditures; (ii) financing, loan and other agreements which involve borrowed
funds or the extension of credit; (iii) security agreements; (iv) guaranties;
(v) equipment leases; (vi) chattel or real property mortgages; (vii) real
property leases; (viii) confidentiality agreements; (ix) union or collective
bargaining agreements; (x) employment, consulting or other agreements involving
personnel or services which are not terminable at will; (xi) employee benefit,
stock option and pension plans; (xii) licenses (where Mericon is licensee or
licensor; and (xiii) sales representative and/or independent contractor
agreements. Schedule 5.6 also identifies the following information concerning
each of the Mericon Agreements: the parties to such contracts; the date of
their execution and termination; whether or not such contracts are terminable on
thirty (30) days notice; whether there is any dispute concerning such
contracts; the substantive area of each such contract; and the amounts
involved. Schedule 5.6(i) identifies all Mericon Agreements that require the
consents of third parties, which consents the Sellers shall obtain on or prior
to the Closing. Except as set forth on Schedule 5.6(i), the Agreements will not
require the consent, approval or act of or the filing of notice with any other
party in order for them to be effective with respect to Selfix.
5.7 INTANGIBLE PROPERTY. In the conduct of the Mericon Business,
Mericon has not infringed upon or otherwise acted adversely to the rights of
any person under or with respect of any patent, copyright, trademark or trade
name or other proprietary or intellectual property rights of any other person
or received any notice of claim of such infringement or act which pertains to
the Mericon Business. Except as set forth on Schedule 5.7 and the Claw License
Agreement, Mericon is not obligated or under any liability whatsoever to make
any royalty or other payments to any owner or licensee of or other claimant to
any patent, copyright, trademark, trade name or other proprietary or
intellectual property right with respect to the use thereof or in connection
with the conduct of the Mericon Business.
5.8 LITIGATION. Sellers are not, with respect to the Mericon Business,
engaged in or a party to or, to Sellers' knowledge, threatened with any suit,
claim, action or proceeding relating to the Mericon Business before or by any
federal, state, municipal or other governmental court, department, commission,
board, agency or instrumentality, domestic or foreign, and no notice has been
received by Sellers and to Sellers' knowledge no other circumstances exist to
provide any basis for any such action against Sellers with respect to the
Mericon Business. Sellers are not, with respect to the Mericon Business,
subject to any order, writ, injunction or decree, related to or affecting the
Mericon Business, of any court, domestic or foreign, or any federal agency or
instrumentality.
5.9 TAXES. Mericon has filed on a timely basis all federal, state,
county and local income, excise, withholding, property, sales, use, franchise
or other tax returns, declarations or reports which any state, local, municipal
or federal authority ("GOVERNMENTAL AUTHORITY") required Mericon to file on or
before the Closing Date. All such tax returns, declarations and reports which
Mericon filed were true and correct, and accurately reflected all taxable
income and tax liabilities of Mericon for the periods such reports covered.
Mericon has paid all taxes, interest and penalties (if any), which became due
pursuant to such returns or pursuant to any assessment which has become
payable. If reasonably necessary to Selfix, Mericon shall provide Selfix with
copies of all income and other tax returns they filed for the previous five (5)
tax years, with any Governmental Authority. Mericon has filed or will file on a
timely basis all required
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federal, state, county and local income, excise, withholding, social security
and other payroll, property, sales, use, franchise and other tax returns which
any Governmental Authority required them to file on or before the date of
Closing. The Sellers will cause all such returns, declarations and reports
concerning taxes which they file to be, to the best of their knowledge, true
and correct and to reflect accurately all taxable income and all tax
liabilities of Mericon for the period such reports cover. The Sellers have not
received notice that an examination of or proceeding concerning any tax return
or report of Mericon is currently in progress or threatened of any kind.
Mericon does not have any outstanding agreements or waivers extending the
statutory period of limitations established by any Governmental Authority that
are applicable to any of their tax returns.
5.10 BROKERS. Sellers have not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders' fees with respect to this Agreement or the transactions contemplated
hereby.
5.11 LEGAL COMPLIANCE.
(a) Mericon has, in all material respects, complied with all
laws, statutes, ordinances, rules, regulations and orders of all governmental
entities applicable to the Mericon Business. Any immaterial violations in the
aggregate would not adversely affect Mericon.
(b) No notice has been issued which has not been cured and no
investigation, litigation, administrative proceeding, judgment, order or review
is pending or, to the best knowledge of the Sellers, is threatened by any
governmental entity with respect to: (i) any alleged violation by Mericon of
any law, ordinance, rule, regulation, order, policy or guideline of any
governmental entity, or (ii) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the Mericon Business.
5.12 REAFFIRMATION. All of Sellers' representations, warranties and
information contained in this Agreement and in the documents furnished to
Selfix by Sellers pursuant to this Agreement are, and shall be at the date of
Closing, true, correct and complete. Mericon represents and warrants that since
May 26, 1995, there have been no material adverse changes in the business which
would affect the representations and warranties provided herein. Selfix
acknowledges that since May 26, 1995, it has discussed and is familiar with the
operations of Mericon's business with Sellers and that it has been apprised of
certain transactions entered into by Mericon.
5.13 FINANCIAL STATEMENTS. Mericon has heretofore delivered to Selfix:
(i) balance sheet of Mericon as at December 31, 1994 as reviewed by Xxxxxxx,
Rudzewicz & Co., P.C. ("BALANCE SHEET"), and (ii) statements of income,
shareholders' equity and cash flow for the partial year ended August 31, 1995,
as prepared by Mericon management (the Balance Sheet statement of cash flow and
statement of income are hereby collectively called the "FINANCIAL STATEMENTS").
The Financial Statements fairly and accurately present the financial position
of Mericon as of the respective dates thereof and fairly and accurately present
the results of operations and cash flow of Mericon for the period then ended,
subject to normal year-end audit adjustments. As of August 31, 1995, the net
worth of Mericon (as disclosed on a Balance Sheet compiled by Xxxxxxx,
Rudzewicz & Co., P.C.) will not be less than a negative Eighty Thousand Dollars
($80,000.00). If the August 31, 1995 Balance Sheet shows a net worth better
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than negative Eighty Thousand Dollars ($80,000.00), such difference shall
increase the amount of Sellers' basket for representations and warranties
described in Paragraph 11.6; if such net worth amount is worse than negative
Eighty Thousand Dollars ($80,000.00), such difference shall decrease the amount
of Mericon's basket for representations and warranties described in Paragraph
11.6
5.14 LABOR RELATIONS. Mericon is not a party to or bound by any oral or
written employee collective bargaining or other union agreement, employment
agreement which is not terminable at will, employee leasing agreements,
consultant, advisory or service agreements, deferred compensation agreements,
confidentiality agreements or covenants not to compete, except as set forth in
Exhibit 5.14(a). Schedule 5.14(b) identifies all employee pension, profit
sharing, cash or deferred benefit, stock option, bonus, incentive, stock
purchase, welfare, life insurance, hospital or medical benefit plans, severance
pay, vacation or holiday pay policies and any other employee benefit agreements
or plans of Mericon. Sellers shall indemnify and hold Selfix harmless from all
claims, obligations, and liability with respect to Mericon's: (i) employee
pension, profit sharing, cash or deferred benefit, stock option, bonus,
incentive, stock purchase, welfare, life insurance, disability insurance,
hospital or medical benefit plans, severance pay, vacation or holiday pay
policies and any other employee benefit agreements or plans of Mericon; and
(ii) all fringe benefits which Mericon provides to all classes of their
employees, independent contractors or directors.
5.15 COBRA. Mericon has or will provide each of Mericon's present and
former employees with the right to continue his or her respective insurance
program with Mericon, in compliance with and if required by all relevant
provisions of the Internal Revenue Code, as modified by the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and Title I of ERISA,
including all amendments to COBRA as contained in the Tax Reform Act of 1986,
or any subsequent legislation.
5.16 CONDITION OF EQUIPMENT. All of the equipment, molds, and fixed
assets of Mericon are in good operating condition (ordinary wear and tear
excepted).
5.17 UNDISCLOSED LIABILITIES. Mericon has no debts or liabilities of
any nature or type, whether accrued, absolute or contingent, determined or
undetermined, whether due or to become due (including, without limitation,
unassorted claims whether known or unknown, liabilities for taxes of any type,
penalties, fees or interests) other than-those reflected in the August 31, 1995
Balance Sheet described in Section 5.13 herein, those liabilities otherwise
disclosed in this Agreement, and those liabilities incurred in the ordinary
course of business since the date of the August 31, 1995 Balance Sheet
("ORDINARY COURSE LIABILITIES"); the net change of the ordinary course
liabilities is not material and adverse to the financial condition of Mericon
or the Mericon Business since the date of the August 31, 1995 Balance Sheet.
5.18 BUSINESS RELATIONS. The Sellers have and will in the future take
all actions to maintain good relations with Mericon's employees,
representatives, suppliers, agents and customers. Sellers have not taken and
will not in the future commit any actions which were or are calculated to
dissuade or had or will have the effect of dissuading any present employees,
representatives, suppliers, agents or customers of Mericon who are or were
associated with the Mericon Business, from becoming associated with Selfix. To
the best knowledge of the Sellers, no supplier, customer or agent of Mericon
currently contemplates discontinuing or recently has discontinued its
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business relationship with Mericon. Selfix acknowledges that it is aware of
Mericon's participation in the "MADE IN AMERICA PROGRAM" of Walmart Corporation
and the "MINORITY SUPPLIER" program at K-Mart Corporation. Furthermore, Selfix
acknowledges Mericon's concern that participation in these programs might
affect the business relationships with the regular channel of buyers for these
customers. Mericon asserts that as of the Effective Date it has no knowledge
that participation in these programs has affected the business relationship
between it and Walmart or K-Mart.
5.19 ABSENCE OF CERTAIN CHANGES. Since May 26, 1995 Mericon has not
experienced any material adverse change in the Mericon Business, operations,
assets, liabilities, profits, prospects or other conditions (whether financial
or otherwise). No fact or condition exists, is contemplated or is threatened
which might reasonably be expected to cause such a change in the future.
Mericon has not experienced any theft, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking adversely
affecting in any material respect prospects for the Mericon Business.
5.20 PERMITS. Mericon owns, holds or possesses all governmental
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations (collectively the "PERMITS") which are necessary to entitle
Mericon to own, lease, operate and use its assets and to conduct the Mericon
Business as currently conducted, a list of the Permits is disclosed on attached
and incorporated Schedule 5.20. The Sellers have delivered true, complete and
correct copies of all the Permits to Selfix. Mericon has fulfilled and
performed all its obligations under each Permit. Mericon has not received
notice of cancellation, of default or of any material dispute concerning any
Permits. Each Permit is valid, subsisting and in full force and effect and will
continue in full force and effect after the Closing.
5.21 PERSONAL PROPERTY. To the Sellers' best knowledge, Mericon uses
all of the Mericon Assets in conformity with all applicable laws, regulations,
rules, ordinances, codes, licenses, franchises and permits (including without
limitation electrical, building, environmental and occupational safety and
health requirements). Mericon has not received notice of any violation of any
of such matters relating to its assets or their use.
5.22 ACCOUNTS RECEIVABLE. All Mericon's accounts receivable have
arisen from bona fide transactions in the ordinary course of Mericon's
business. The accounts receivable, net of allowances for doubtful accounts, as
shown on the closing balance sheet dated October 24, 1995 or such other date
as the closing shall occur (as compiled by Xxxxxxx, Rudzewicz & Co., P.C.) will
be good and collectible not later than one hundred twenty (120) days from the
date of Closing. Attached and incorporated Schedule 5.22 contains a true and
materially correct list of accounts receivable as of the Closing.
5.23 EMPLOYEE RELATIONS. Mericon is in compliance with all laws, rules
and regulations concerning prices, wages, hours, discrimination in employment,
collective bargaining and the general operation of the Mericon Business.
Mericon is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the aforesaid laws. The Sellers believe that
Mericon has satisfactory relations with its employees. Mericon is not a party
to, affected by or to the Seller's best knowledge threatened with any dispute
or controversy with a union or with respect to unionization or collective
bargaining which involves either Mericon's employees, or any supplier or
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customer of Mericon. There has not been within the past twelve (12) months any
strike, slowdown, work stoppage or labor dispute concerning Mericon, whether or
not such dispute affects unionized employees of Mericon.
5.24 LEASES. Attached and incorporated Schedule 5.24 sets forth a list
and description of each lease or similar agreement (showing the annual rental,
expiration date, renewal and purchase options if any, improvements located on
the leased premises, uses made of the leased premises and location of the real
property subject to such lease) under which Mericon is lessor or lessee or
holds or operates any real property owned by any third party, the Seller or any
affiliate of the Seller. Mericon has not violated any terms or conditions under
any such lease, and all the covenants which any other party must perform under
any such lease have been fully performed. All the property which Mericon leases
is in a state of good maintenance and repair and is adequate and suitable for
the purposes for which it is presently being used.
5.25 INSURANCE. Attached and incorporated Schedule 5.25 contains a
list and a brief description of all property, casualty and general liability
insurance policies which Mericon owns, maintains or holds as of the date of
this Agreement. To the Sellers' best knowledge, Mericon has procured and
continues to maintain in full force and effect all insurance coverage which any
law, order or agreement requires Mericon to maintain, and to the Sellers' best
knowledge, Mericon has complied materially with all such insurance
requirements. The Sellers shall cause Mericon to keep such insurance or
comparable insurance in full force and effect through the Closing. Mericon has
complied with all material requisites of each of its insurance policies, and
has not failed to give any notice or present any claim under such policies in a
due and timely fashion, where failure to do so would have a material, adverse
effect on Mericon or the Mericon Business.
5.26 ENVIRONMENTAL. To the actual knowledge of Sellers: (i) with
respect to any contaminant, there are not material actions, proceedings, or
investigations pending or threatened before any federal or state environmental
regulatory body, or before any federal or state court, alleging non-compliance
with or liability in connection with, or by Mericon, CERCLA or any other
Environmental Laws; (ii) there is no reasonable basis for the institution of
any material action, proceeding or investigation against Mericon under any
Environmental Law; (iii) Mericon is not responsible in any material respect
under any Environmental Law for any release; (iv) Mericon is not responsible
for any material costs of any response action required by virtue of any release
of any contaminant into the environment including, without limitation, costs
arising from investigation, removal or remediation of contaminants, security
fencing, alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body or any
other person; (v) Mericon is, in all material respects, in compliance with all
applicable Environmental Law; and (vi) no real property owned or used by
Mericon contains any contaminant including, without limitation, any asbestos,
PCBs or petroleum products or byproducts in any form, the presence, location or
condition of which (a) could require remediation or other corrective action
pursuant to any Environmental Law in any material respect, or (b) otherwise
would pose any significant health or safety risk unless remedial measures were
taken.
5.27 DISCLOSURES. None of the representations or warranties which the
Sellers make either in this Agreement, the exhibits, the schedules or in
connection therewith contain or will contain any untrue statement of fact, or
omit or will omit to state a fact
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necessary to make the statements contained in such representations or
warranties not misleading. The foregoing includes any and all statements which
the Sellers or Mericon have provided to Selfix in any schedule, financial
statement, exhibit, list or document associated with this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELFIX
6.1 GENERAL. To induce the Sellers to cause the Merger, Selfix
covenants that the warranties and representations set forth in this Article 6
are true and correct and will be true and correct as of the Closing.
6.2 AUTHORIZATION OF AGREEMENT. Selfix has the full power and
authority to enter into this Agreement, to consummate the Agreement and to
comply with the material terms, conditions and provisions of this Agreement and
the related agreements. This Agreement and related agreements constitute the
valid and binding obligation of Selfix, enforceable against Selfix in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general.
6.3 CORPORATE ORGANIZATION. Selfix (and, if applicable, any wholly
owned corporate subsidiary into which Mericon is merged) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
6.4 NO BREACH. Selfix's execution, delivery and performance under this
Agreement will not conflict with, nor result in the breach or termination of,
nor constitute a default under any lease, agreement, contract, commitment or
other instrument or any order, judgment or decree to which Selfix is party or
by which Selfix is bound.
6.5 LITIGATION OF AGREEMENT. There are no judicial or administrative
actions, proceedings or investigations pending or to Selfix's best knowledge
threatened that question the validity of this Agreement or any action which
Selfix has taken in connection with this Agreement.
6.6 FINANCING. Selfix has all funds necessary to pay the Purchase
Price and has the financial capacity to perform all its obligations under this
Agreement.
6.7 DISCLOSURES. None of the representations or warranties of Selfix
made either in this Agreement, the exhibits, the schedules or in connection
therewith contain or will contain any untrue statement of fact, or omit or will
omit to state a fact necessary to make the statements contained in such
representations or warranties not misleading. The foregoing includes any and
all statements which Selfix has provided to the Sellers in any schedule,
financial statement, exhibit, list or document associated with this Agreement.
6.8 FINANCIAL STATEMENTS. Selfix has delivered to Mericon: (i) balance
sheet of Selfix as of December 31, 1994 ("SELFIX BALANCE SHEET"), and (ii)
statements of income, shareholders' equity and cash flow for the year ended
December 31, 1994, audited by Xxxxx Xxxxxxx, LLP, Certified Public Accountants,
whose reports thereon are included therewith; Selfix has also delivered its
interim financial statements for the
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quarters ended March 31, 1995 and June 30, 1995 (all of such statements being
referred to as the "SELFIX FINANCIAL STATEMENTS"). The Selfix Financial
Statements fairly and accurately present the results of operations, cash flow
and the financial position of Selfix for the period then ended, subject to
normal year-end audit adjustments.
6.9 MERGER SHARES. The Merger Shares will be validly issued,
non-assessable and freely transferable as of the Closing Date, subject to all
applicable securities laws and regulations.
ARTICLE VII
COVENANTS OF SELLERS
Sellers hereby agree to keep, perform and duly discharge the following
covenants and agreements:
7.1 INTERIM CONDUCT OF MERICON BUSINESS. From the date hereof to the
date of the Closing, Mericon shall preserve, protect and maintain the Mericon
Business and protect, repair, maintain and keep in good operating condition
Mericon Assets and leased property. Mericon shall operate the Mericon Business
as a for profit going concern consistent with prior practice and in the
ordinary course that Mericon has previously operated the Mericon Business.
7.2 CONFIDENTIAL INFORMATION. Sellers, its officers, directors, and
affiliates shall not communicate, divulge, or use for the benefit of any
person, firm, partnership or corporation any of the trade secrets, business
methods, business records and files, customer lists, supplier lists, product
specifications, drawings and prototypes, price lists, instruction manuals,
reports, or any other confidential or proprietary information of any type or
description being acquired by Selfix pursuant to this Agreement, provided that
Sellers may disclose such information to the extent necessary to comply with
any reporting requirement or any audit or investigation by its lenders, any
federal, state or local authorities or under court order or subpoena. This
Section shall not apply to any information which is generally available to the
public (other than by reason of any disclosure by Sellers). In the event this
transaction is not consummated for any reason, each party shall forthwith
deliver to the other (without retaining copies thereof) any and all documents or
other written information obtained from the other party.
7.3 NO THIRD PARTY NEGOTIATIONS. Prior to the date of Closing,
Sellers, and their respective affiliates, shareholders, directors, officers and
employees shall not enter into or engage in any negotiations or discussions
with other parties relating to the potential acquisition of Mericon (other than
product sales within the ordinary course of business), nor disclose the
existence or substance of this Agreement, except to persons within Mericon's or
Sellers' organization who must be so informed or to Sellers' professional
advisors.
7.4 CUMULATIVE SALES. Sellers warrant to Selfix that in the five (5)
years following the Closing, the cumulative sales by the Mericon division of
Selfix of products primarily derived from the Exclusive Licensed Products and
improvements thereto and all other presently existing Mericon products which
are not included in such term shall exceed Five Million Dollars ($5,000,000.00)
("CUMULATIVE SALES"). In the event the Cumulative Sales are less than Five
Million Dollars ($5,000,000.00), Sellers shall pay
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to Selfix twenty percent (20%) of the difference between the Cumulative Sales
and Five Million Dollars ($5,000,000.00), plus interest from Closing on such
amount at the prime rate from time to time (the "SALES SHORTFALL AMOUNT").
Notwithstanding anything to the contrary contained herein, the Sales Shortfall
Amount due and owing Selfix shall not exceed Three Hundred Twelve Thousand
Dollars ($312,000.00) plus interest from Closing at the prime rate from time to
time. Payment of the Sales Shortfall Amount to Selfix shall be secured by the
Exclusive License Products and the Royalty.
7.5 INVESTMENT INTENT. Sellers acknowledge that they know that Selfix
has not registered the Merger Shares pursuant to the Securities Act of 1933 (as
amended), and as a result the Mericon shareholders of record as of the Closing
Date (collectively "MERICON SHAREHOLDERS") may be required to hold the Shares
pursuant to the Securities Act of 1933. Sellers warrant that the Mericon
Shareholders are acquiring the Shares solely for investment purposes and not
with the intention to resell or otherwise redistribute the Shares.
7.6 LIMITATION OF WARRANTIES AND REPRESENTATIONS. Sellers make no
warranties or representations, whether express or implied, with respect to any
matter which relates to the transaction contemplated by this Agreement other
than those expressly set forth in the Agreement.
ARTICLE VIII
COVENANTS OF SELFIX AND SELLERS
Selfix and Sellers hereby agree to keep, perform and duly discharge the
following covenants and agreements:
8.1 EMPLOYMENT OF EMPLOYEES. Sellers and Selfix agree that Selfix
shall not be obligated in any way to offer employment to any employee
or independent contractor of Mericon and that Selfix will not be responsible or
liable in connection with any employment arrangements (whether written or oral)
made by Sellers or Mericon with employees or independent contractors of
Mericon, or for any salaries, severance pay, vacation accruals other than all
accrued salary or hourly wage liabilities for current services in connection
with employment and independent contractors as reflected in the Closing Balance
Sheet or other benefits owed or payable by Sellers to any employees or
independent contractors of Mericon. However, if Selfix shall employ any of
Mericon's employees or independent contractors, Selfix agrees to be liable for
all salaries and other benefits to such persons after the date of Closing.
Selfix may approach any Mericon employees regarding their employment by Selfix
following the date of Closing. Mericon will terminate all employees at closing.
8.2 TRANSFER OF MERICON BUSINESS ASSETS. All Mericon Assets shall be
removed, at Selfix's expense, from the premises of Mericon. Selfix shall
reimburse Denshaw for any and all reasonable employee or independent contractor
costs for work performed for Selfix by such employees or independent
contractors during the transition and transfer of the Mericon Business from
Detroit, Michigan to Chicago, Illinois.
8.3 POST CLOSING ACCESS. For a period of five (5) years following the
Closing, Selfix shall provide reasonable access to the Sellers, upon reasonable
prior written notice, to inspect and photocopy during normal business hours, at
Sellers' expense, such
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business records pertaining to the Mericon Business,in written, magnetic or
electronic form, as are reasonably necessary for the Sellers to prosecute,
defend, answer or respond to, state, local or federal governmental proceedings
of any type, or litigation or manifest threats thereof and shall maintain such
business records for not less than six (6) years.
8.4 REGISTRATION RIGHTS. If Selfix proposes to file a registration
statement under the Securities Act of 1933, as amended on a form on which any
common shares of Selfix can be registered in any transaction in which Selfix is
registering securities ("PROPOSED OFFERED SECURITIES"), then Selfix shall give
written notice of such proposed filing to the holders of the Merger Shares at
least thirty (30) days before the anticipated filing date, and such notice
shall offer such holders the opportunity to elect within ten (10) days of
receipt thereof to register such amount of Selfix Shares as each holder may
request. Selfix shall use its best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering ("OFFERING") to permit holders
of the Merger Shares to be included in any demand registration or any Piggyback
registration of Selfix on the same terms and conditions as are offered to the
other security holders involved in the Offering. If any Proposed Offered
Securities are to be sold in one or more underwritten offerings, and the
managing underwriters deliver a written opinion to Selfix and such holders of
the Merger Shares that the total amount and/or class of Selfix Capital Shares
and Proposed Offered Securities to be included in such offering is such as to
materially and adversely affect the success of such offering, then the amount
of securities to be offered for the account of the holders of the Merger Shares
shall be reduced pro rata with all other persons or entities seeking to
register other Proposed Offered Securities to the extent necessary to reduce
the total amount of securities to be included in such offering to the amount
recommended by such managing underwriter.
Selfix shall be obligated to afford the holders of the Merger Shares the
aforesaid opportunity in each and every such registration taking place until
the earlier of: (a) the time all Merger Shares have been included in a
registration statement; (b) the time at which legal counsel for Selfix
determines that the Merger Shares can be sold free of registration under the
Securities Act of 1933, as amended; or (c) the Merger Shares otherwise become
free of such restrictions.
The inclusion of the Merger Shares in any such registration or
underwritten offering shall be upon the condition that the holders thereof have
their registered Merger Shares sold through the underwriters on the same terms
and conditions as are applicable to Selfix or, if there be any such other
selling holders, to such other selling holders of proposed offered securities.
8.5 CONFIDENTIAL INFORMATION. In the event this transaction is not
consummated for any reason, Selfix, its officers, directors, and affiliates
shall not communicate, divulge, or use for the benefit of any person, firm,
partnership or corporation any of the trade secrets, business methods, business
records and files, customer lists, supplier lists, product specifications,
drawings and prototypes, price lists, instruction manuals, reports, or any
other confidential or proprietary information of any type or description which
was to be acquired by Selfix pursuant to the Agreement, provided that Selfix may
disclose such information to the extent necessary to comply with any reporting
requirement or any audit or investigation by its lenders, any federal, state or
local authorities or under court order or subpoena. This Section shall not
apply to any information which is generally available to the public (other than
by reason of any
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disclosure by Sellers). In the event this transaction is not consummated for
any reason, each party shall forthwith deliver to the other (without retaining
copies thereof) any and all documents or other written information obtained
from the other party.
8.6 ASSUMPTION OF LIABILITIES. Except as otherwise provided in this
Agreement, Selfix shall succeed to and assume all liabilities of Mericon,
without setoff, as disclosed on the August 31, 1995 balance sheet, including
the ordinary course liabilities referenced in Paragraph 5.17, and other
liabilities assumed by Selfix as set forth in this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELFIX
Each and all of the obligations of Selfix to consummate the
transactions contemplated by this Agreement are subject to fulfillment, prior
to or as of the date of Closing, of the following conditions precedent (any of
which may be waived in writing by Selfix):
9.1 ACCURACY OF WARRANTIES, PERFORMANCE OF COVENANTS. The
representations and warranties of Sellers and Mericon contained herein shall be
accurate in all material respects as if made on and as of the date of Closing.
Sellers and Mericon shall have performed each and all of the obligations and
complied with each and all of the covenants, agreements and conditions
specified herein to be performed or complied with on or prior to the date of
Closing.
9.2 NO PENDING ACTION. No action or proceeding (nor investigation
preliminary thereto) shall be instituted at any time prior to or as of the date
of Closing before any court or other governmental body or by any person or
public authority seeking to restrain or prohibit, or seeking damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
9.3 DELIVERIES BY SELLERS. At the Closing, Sellers shall deliver to
Selfix the following:
(a) Assignments. Written instruments or stock powers,
assigning all of the beneficial interest in and to the Shares
from the Sellers, which assignments or stock powers shall be
executed in blank by the Sellers.
(b) Certificates. The certificates representing all of the Shares;
(c) Certificate of Good Standing. A Mericon Certificate of Good
Standing issued by the Michigan Department of Commerce no more
than two (2) weeks prior to the Closing;
(d) Corporate Records. The current Articles of Incorporation, as
amended or restated (certified by the Michigan Department of
Commerce within two (2) weeks prior to the Closing and by the
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Secretary of Mericon as of the Closing), original minute book
seals, stock transfer books and all other books and records of
Mericon which the Mericon Secretary has certified as the
complete true and accurate records of Mericon (the Sellers may
deliver certain of Mericon's books and records to Selfix at
Mericon's place of business);
(e) UCC Searches. Satisfactory UCC searches, lien, tax and
judgment searches in accordance with this Agreement;,
(f) Consents. All original executed consents and estoppel
certificates in accordance with this Agreement;
(g) Closing Certificates of Accuracy. A certificate of the
President of Mericon and Sellers certifying as to the continued
accuracy of the representations and warranties, the performance
and observance of the covenants and the compliance with the
conditions precedent contained in Articles V, VII, VIII, and IX,
respectively, of this Agreement;
(h) Corporate Documents. Corporate documents including: (i)
resolutions of the Board of Directors and the Shareholders of
Mericon authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
which have been adopted and a certificate of Mericon's Secretary
or Assistant Secretary certifying that such resolutions have not
been amended or rescinded and remain in full force and effect as
of the date of Closing, and (ii) a Certificate of Incumbency of
officers who will be executing the Closing documents;
(i) Consulting Agreement. The Consulting Agreement in the form
attached hereto as Exhibit 2.2;
(j) Covenant Not to Compete. The Covenant Not to Compete in the
form attached hereto as Exhibit 2.3;
(k) Other Documents. All other documents either necessary or
appropriate to consummate the transactions set forth in this
Agreement.
(l) License Agreement. The License Agreement attached hereto as
Exhibit 2.5.
9.4 REGULATORY CONSENTS, AUTHORIZATION, ETC. All consents,
authorizations, orders and approvals of any governmental commission, board or
other regulatory body or lender (including all Uniform Commercial Code
termination statements) which are required in connection with the execution and
delivery of this Agreement and the consummation by each party hereto of the
transactions contemplated on its part hereby, shall have been obtained or made,
other than consents, authorization, orders, or approvals, as to which the
failure to obtain or make will not, after the date of Closing, (a) materially
and adversely affect the Mericon Business, or (b) subject Selfix, any of its
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subsidiaries or affiliates or any of its or their respective directors or
officers to liability on the grounds that it or they have breached any law or
regulation or have otherwise acted improperly in relation to the transactions
contemplated by this Agreement.
9.5 CONDITION OF MERICON BUSINESS AND ASSETS. There shall have been no
material adverse changes from the date of this Agreement in the condition of
the assets of Mericon or the condition of, or prospects for, the operation and
business of the Mericon Business.
9.6 OPINION LETTER OF SELLERS' COUNSEL. Sellers shall deliver to
Selfix an opinion letter from legal counsel for the Sellers, with respect to
Sections 5.1, 5.2, 5.3 (except the opinion with respect to 5.3 shall be made to
the best of its actual knowledge for matters concerning any state other than
Michigan), and to the best of its actual knowledge 5.8 in form acceptable to
Selfix's counsel.
9.7 EXECUTION OF AGREEMENTS. Buckshaw and Xxxxx shall have executed
and delivered to Selfix an Agreement Not To Compete in form to be attached
hereto as Exhibit 2.3.
9.8 OTHER DOCUMENTS. Sellers shall have executed and delivered to
Selfix such documents as counsel for Selfix shall reasonably request to carry
out the purpose of this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and all of the obligations of Sellers to consummate the
transactions contemplated by this Agreement are subject to fulfillment, prior
to or as of the date of Closing, of the following conditions precedent (any of
which may be waived in writing by Sellers):
10.1 ACCURACY OF WARRANTIES, PERFORMANCE OF COVENANTS. The
representations and warranties of Selfix contained herein shall be accurate in
all material respects as if made on and as of the date of Closing. Selfix shall
have performed each and all of the obligations and complied with each and all
of the covenants, agreements and conditions specified herein to be performed or
complied with on or prior to the date of Closing.
10.2 NO PENDING ACTION. No action or proceeding (nor investigation
preliminary thereto) shall be instituted at any time prior to or as of the date
of Closing before any court or other governmental body or by any person or
public authority seeking to restrain or prohibit, or seeking damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
10.3 DELIVERIES BV SELFIX. At the Closing. Selfix shall deliver to
the Sellers the following:
(a) Certificate of Accuracy. A certificate of the President of
Selfix certifying as to the continued accuracy of the
representations and warranties, the performance and
observance of the covenants and
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compliance with the conditions precedent contained in
Articles VI, VIII, and X, respectively, of this Agreement;
(b) Corporate Documents. Corporate documents including: (i)
resolutions of the Board of Directors of Selfix authorizing
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby which
have been adopted and a certificate of Selfix's Secretary
or Assistant Secretary certifying that such resolutions
have not been amended or rescinded and remain in full force
and effect as of the date of Closing; and (ii) a
Certificate of Incumbency of Selfix's officers who will be
executing the Closing documents;
(c) Certificate of Good Standing. Selfix Certificate of
Good Standing issued by the Delaware Secretary of State no
more than two (2) weeks prior to the Closing;
(d) Merger Shares. The Merger Shares as set forth on
Schedule 2.1;
(e) Other Documents. All other documents either necessary
or applicable to consummate the transactions set forth
in this Agreement;
(f) Cash. The monetary consideration, in United States
currency, for the Covenant Not to Compete and the License
Agreement, by cashiers check or by wire transfer to an
account or accounts selected by Sellers.
(g) Consulting Agreement. Consulting Agreement in the form
attached hereto as Exhibit 2.2;
(h) License Agreement. License Agreement in the form
attached hereto as Exhibit 2.5; and
(i) Research & Development Agreement. Research & Development
Agreement in the form attached hereto as Exhibit 2.6.
10.4 OPINION LETTER OF SELFIX'S COUNSEL. Selfix shall deliver to
Sellers an opinion letter from legal counsel for Selfix, Much Shelist Freed
Xxxxxxxxx Xxxxx Xxxx and Xxxxxxxxxx, P.C., with respect to Section 6.2, 6.3 and
6.9, and to the best of its actual knowledge 6.5, in form acceptable to
Sellers' counsel.
10.5 OTHER DOCUMENTS. Selfix shall have executed and delivered to
Sellers such documents as counsel for Sellers shall reasonably request to carry
out the purpose of this Agreement.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 SURVIVAL. All representations and warranties contained in this
Agreement or in any document delivered pursuant hereto shall survive the
Closing and shall be fully effective and enforceable for a period of eighteen
(18) months following the date of Closing; provided, however, that
notwithstanding the foregoing (i) the Sellers' representations and warranties
set forth in Section 5.4 shall survive the Closing in perpetuity and shall be
fully effective and enforceable, and (ii) Sellers's representations
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and warranties set forth in Sections 5.8 and 5.9 and Selfix's representations
and warranties set forth in Section 6.5 shall survive the Closing and shall be
fully effective and enforceable for a period of the applicable statute of
limitation. All covenants and agreements contained in this Agreement or in any
document delivered pursuant hereto shall survive the Closing until satisfied,
or in perpetuity, as applicable.
11.2 LOSS. For the purposes of this Article 11, "LOSS" shall mean, with
respect to any party, any diminution in value, damage, liability, demand,
claim, action, cause of action, cost, deficiency, tax, penalty, fine or other
loss or expense, (whether or not arising out of a third party claim), including
all interest, penalties, reasonable attorney's fees and expenses and all amounts
paid or incurred in connection with any: (a) action, (b) demand, (c) cause of
action, (d) proceeding, (e) investigation, or (f) claim by any third party
against or affecting such party ((a) through (f) collectively "CLAIM"), and the
investigation, defense or settlement of any Claim, together with interest
thereon from the date incurred through and including the date on which the
total amount of the Loss, including such interest, is recovered or recouped
pursuant to this Article 11.
11.3 INDEMNIFICATION OBLIGATIONS OF SELLERS. Sellers hereby indemnify
Selfix and its stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the "SELFIX
INDEMNITEES") in respect of, and save and hold each Selfix Indemnitee harmless
against and pay on behalf of or reimburse each Selfix Indemnitee as and when
incurred, any Claim or Loss which any Selfix Indemnitee suffers, sustains or
becomes subject to as a result of or by virtue of:
(a) any facts or circumstances which constitute a
misrepresentation or breach of any warranty by Sellers or
Mericon Shareholders as set forth in this Agreement
(including any exhibit or schedule), or any document
delivered by any of the Sellers or Mericon prior to or at
Closing pursuant to this Agreement, provided, however, that
the Sellers are given written notice of such Loss during
the survival period specified in Section 11.1; and
(b) any nonfulfillment or breach of any covenant or
agreement of Mericon or Sellers as set forth in this
Agreement (including any exhibit or schedule).
11.4 INDEMNIFICATION OBLIGATIONS OF SELFIX. Selfix shall indemnify
Sellers and their stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"SELLERS INDEMNITEES") in respect of, and save and hold each of Sellers
Indemnitees harmless against and pay on behalf of or reimburse each Sellers
Indemnitee as and when incurred, with respect to any Claim or Loss which such
Sellers Indemnitee suffers, sustains or becomes subject to as a result of or by
virtue of:
(a) any facts or circumstances which constitute a
misrepresentation or breach of any warranty by Selfix as
set forth in this Agreement (including any exhibit or
schedule) or any document delivered by Selfix prior to or
at Closing pursuant to this Agreement, provided, however,
that Selfix is given written notice of such Loss during the
survival period specified in Section 11.1); and
(b) any nonfulfillment or breach or any covenant or
agreement of Selfix as set forth in this Agreement
(including any exhibit or schedule).
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11.5 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any person seeking indemnification pursuant to
Sections 11.3 or 11.4 (an "INDEMNIFYING PARTY") must give the party from whom
indemnification is sought (an "INDEMNIFYING PARTY") written notice of such
claim (an "INDEMNIFICATION CLAIM NOTICE") promptly after the Indemnified party
receives any written notice of any Claim against or involving the Indemnified
Party or otherwise discovers the liability, obligation or facts giving rise to
such Claim for indemnification; provided that the failure to notify or delay in
notifying an Indemnifying Party will not relieve the Indemnifying Party of its
obligations pursuant to Section 11.3 or 11.4, as applicable, except to the
extent that such failure actually xxxxx the Indemnifying Party (it being
understood that any indemnity sought pursuant to Sections 11.3(a) and 11.4(a)
must be made by notice given within the applicable time period specified
therein). Such notice must contain a description of the Claim and the nature
and amount of such Loss (to the extent that the nature and amount of such Loss
is known at such time).
(b) Control of Defense; Conditions. With respect to the defense of any
Claim in which a third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 11.3 or 11.4, at its
option an Indemnifying Party may appoint as lead counsel of such defense any
legal counsel selected by the Indemnifying Party; provided that before the
Indemnifying Party assumes control of such defense it must first enter into an
agreement with the Indemnified Party (in form and substance reasonably
satisfactory to the Indemnified Party) pursuant to which the Indemnifying Party
agrees to be fully responsible (with no reservation of any rights other than
the right to be subrogated to the rights of the Indemnified Party) for all
Losses relating to such Claim, unconditionally guarantees the payment and
performance of any liability or obligation which may arise with respect to such
Claim or the facts giving rise to such Claim for indemnification, and secures
such guarantee with collateral which is acceptable to the Indemnified Party, in
its sole discretion.
(c) Control of Defense; Exceptions, etc. Notwithstanding Section
11.5(b): (i) the Indemnified Party will be entitled to participate in the
defense of such Claim and to employ counsel of its choice for such purpose at
its own expense (provided that the Indemnifying Party will bear and pay the
reasonable fees and expenses of such separate counsel incurred prior to the
date upon which the Indemnifying Party effectively assumes control of such
defense); and (ii) the Indemnifying Party will not be entitled to assume
control of the defense of such Claim, and will pay the reasonable fees and
expenses of legal counsel retained by the Indemnified Party, if:
(1) the Indemnified Party reasonably believes that an
adverse determination of such Proceeding could be
detrimental to or injure the Indemnified Party's reputation
or future business prospects,
(2) the Indemnified Party reasonably believes that
there exists or could arise a conflict of interest which,
under applicable principles of legal ethics, could prohibit
a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such
Proceeding, or
(3) a court of competent jurisdiction rules that the
Indemnifying Party has failed or is failing to prosecute or
defend vigorously such Claim.
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(d) Settlement. Either Party must obtain the prior written consent of
the other Party (which consent shall not be unreasonably withheld) prior to
entering into any settlement of any Claim or proceeding or ceasing to defend
such Claim.
11.6 LIMITATION. The respective indemnification obligations of the
Sellers and Selfix identified in Sections 11.3 and 11.4 of this agreement shall
be subject to the following limitations: except for the Sellers Indemnitees
related to Taxes (pursuant to the representations and warranties of
Section 5.9), neither party shall be liable to indemnify the other party if the
aggregate value of the indemnification obligation is less than or equal to
Twenty-Five Thousand Dollars ($25,000.00); but done of the foregoing
limitations shall apply in the event of the fraud or willful dishonesty of the
party with the indemnification obligation. Sellers' floor on claims under this
Article XI is subject to increase under Section 5.13.
11.7 TAXES. Selfix and Sellers shall treat any indemnification payment
made pursuant to Section 11.3 or 11.4 as an adjustment to the Purchase Price.
11.8 PRODUCT LIABILITY. With respect to Claims, demands,
administrative proceedings or suits based on the manufacture or sale of
products, or for alleged breach of an express or implied warranty, Sellers
shall be responsible for demands and liabilities with respect to services
rendered or goods that were manufactured prior to the date of Closing,
regardless of whether such goods may have been sold or shipped subsequent to
the date of Closing.
11.9 LIMITATION OF LIABILITY. Notwithstanding any other provision of
this Agreement, the liability of any individuals shall not exceed the value of
the Selfix stock received by them pursuant to this Agreement.
11.10 RIGHT OF SETOFF. The Parties agree that Royalty Payments may be
setoff to satisfy claims in excess of the warranty basket as set forth in
Paragraph 11.6 above and as provided below. In the event that Selfix has a bona
fide claim in excess of such warranty basket, all Royalty Payments, up to the
amount of such bona fide claim, shall be paid in escrow. As soon as reasonably
possible, such claim shall be resolved by arbitration conducted in Cleveland,
Ohio in accordance with the rules of the American Arbitration Association. The
prevailing party shall be entitled to the escrowed funds as determined by the
Arbitrator in addition to reasonable attorney fees.
ARTICLE XII
GENERAL PROVISIONS
12.1 AMENDMENT AND WAIVER. No amendment or waiver of any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by Selfix and Sellers, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
12.2 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid, or by facsimile, as follows:
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(a) If to any Sellers:
(Name of Party)
c/o Xxxxxx Xxxxxxxx
00000 Xxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
R. Xxxxx Xxxxxx
Xxxxxxx & Xxxxxx, P.C.
Attorneys and Counselors
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
(b) If to Selfix:
Selfix, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
With a copy to:
Xxxxxxx X. Xxxxxxxxxx
Much Shelist Freed Xxxxxxxxx Xxxxx
Xxxx and Xxxxxxxxxx, P.C.
000 X. XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
FAX: (000) 000-0000
Any party may change its address for receiving notice by written notice given
to the others named above.
12.3 PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors, assigns
and any personal representatives. Nothing in the Agreement, express or implied,
is intended to confer on any person other than the parties and their respective
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement.
12.4 ENTIRE TRANSACTION. This Agreement including any attachments,
exhibits, and schedules hereto, and the other documents referred to herein and
therein contain the entire understanding between the parties with respect to
the transactions contemplated hereby and supersede all other agreements and
understandings between the parties with respect to the subject matter hereof,
including but not limited to the Memorandum Agreement dated the 26th day of
May, 1995.
12.5 SPECIFIC PERFORMANCE. The breach of any provision of this
Agreement may cause irreparable harm to the non-breaching parties. Accordingly,
each party to this Agreement shall have the remedies which are available to him
or it for the violation of
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any of the terms of this Agreement, including but not limited to the equitable
remedy of specific performance.
12.6 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, exclusive of its
principles of conflict of laws.
12.7 SEVERABILITY. Should any provision of this Agreement be declared
invalid, void or unenforceable for any reason, the remaining provisions hereof
shall remain in full force and effect.
12.8 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 EXHIBITS. All the exhibits, attachments and schedules attached
hereto are incorporated herein and made a part of this Agreement by reference
thereto.
12.10 ASSIGNMENT. Neither Mericon, Sellers nor Selfix shall have the
authority to assign its rights or obligations under this Agreement without the
prior written consent of the other party, except that, without such consent,
Selfix may assign this Agreement or any interest herein, by operation of law or
otherwise to (i) any wholly-owned subsidiary of Selfix; or (ii) any successor
to all or substantially all of Selfix's capital stock, assets or business, by
dissolution, merger, consolidation, transfer of assets or otherwise.
12.11 EXPENSES. Except as otherwise expressly provided herein, each
party to this agreement shall pay its own costs and expenses in connection with
the transactions contemplate hereby.
12.12 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day and year first above written.
MERICON CORPORATION SELFIX, INC.
By: /s/ Xxxxxx Xxxxxxxx BY: /s/ Xxxxx X. Xxxxxxx
------------------------------ -------------------------------
Xxxxxx Xxxxxxxx, President Xxxxx X. Xxxxxxx, President
CLAW, L.L.C.
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Xxxxxx Xxxxxxxx, Manager
/s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx, Individually
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With respect to Paragraphs 5.9 and 5.13, Denshaw Corporation, a
Michigan corporation, hereby joins the Sellers with respect to the warranties
and representations made therein.
DENSHAW CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx, President
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