EXHIBIT 2.2
SCHEDULE 10.7(b)
MARKETING AND DEVELOPMENT AGREEMENT
THIS AGREEMENT is made this 18th day of November, 1998, between PROFORMIX,
INC., a Delaware corporation ("PI"), 1320236 Ontario Inc., an Ontario
corporation ("1320236") and PROFORMIX SYSTEMS, INC., a Delaware corporation
("PSI").
RECITALS:
A. Pursuant to an asset purchase agreement made of even date herewith (the
"Purchase Agreement") between PI, 1320236 and PSI, PI agreed to sell and 1320236
agreed to purchase all right, title and interest of PI in and to all of PI's
hardware products including ergonomic hardware products such as keyboard
platforms, mouse platforms, mouse glidepoints, corner bridges, workstations,
document holders and all other mounting products, subject to the terms and
conditions set forth therein;
B. PI wishes to continue to market the aforementioned products; and
C. In order to facilitate the transition of the aforementioned products from PI
to 1320236, and the ongoing growth of 1320236's business, during the currency of
this Agreement PI will provide certain marketing and development services to
1320236 as hereinafter provided.
FOR VALUE RECEIVED the parties agree as follows:
SECTION 1 - INTERPRETATION
1.1 Caplitalized Terms. Each capitalized term not otherwise defined in this
Agreement has the meaning given to it in the Purchase Agreement.
1.2 Definitions. In this Agreement the following terms shall have the meanings
set out below.
"Affiliate" as to any Person means any other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person. The term "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control with" as used with respect to any Person) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through
ownership of voting securities, by contract or otherwise;
"Agreement" means this Marketing and Development Agreement, including all
schedules, and all instruments supplementing or amending or
-2-
confirming this Agreement and references to "Article" or "Section" mean
and refer to the specified Article or Section of this Agreement;
"Business" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banking institutions in the City of New Jersey are
authorized by law or executive order to close;
"Fees" means the fees payable by 1320236 to PI pursuant to Section 2.3
below;
"Net Sales" means the total invoice sale price of Products, excluding all
taxes, SPIFs, customer credits, allowances, discounts, volume rebates,
warehouse allowances, freight, insurance, export and import charges,
returns of goods, bad debts and consulting, support contract, training and
other non-Product charges;
"Products" shall mean those products currently or during the last five (5)
years designed, developed, manufactured, marketed, distributed or sold by
PI or in the process of design, development, manufacture, distribution or
sale by PI (including modified versions of such products provided such
products remain substantially similar), including the ergonomic hardware
products set forth in Schedule A hereto;
"Purchase Agreement" shall have the meaning ascribed thereto in Recital A;
"Target Sales" shall be $8.2 million for the Year ending April 30, 2000
and such amount shall increase for each Year thereafter at a compounded
rate of 30% per annum (being approximately $10.7 million for the Year
ending April 30, 2001, approximately $13.9 million for the year ended
April 30, 2002, approximately $18.1 million for the Year ended April 30,
2003 and so on);
"Termination Date" has the meaning set forth in Section 2.3;
"Territory" means North America and Europe; and
"Year" means the twelve month period commencing May 1st in a year and
ending on April 30th in the next succeeding year, commencing with the
twelve month period ending April 30, 2000.
-3-
1.3 Certain Rules of Interpretation. In this Agreement:
(a) Time - time is of the essence in the performance of the parties'
respective obligations.
(b) Currency - unless otherwise specified, all references to money
amounts are to United States currency.
(c) Headings - the descriptive headings of Articles and Sections are
inserted solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of such Articles or
Sections.
(d) Singular, etc. - the use of words in the singular or plural, or with
a particular gender, shall not limit the scope or exclude the
application of any provision of this Agreement to such Person or
Persons or circumstances as the context otherwise permits.
(e) Consent - whenever a provision of this Agreement requires an
approval or consent by a party to this Agreement and notification of
such approval or consent is not delivered within the applicable time
limited, then, unless otherwise specified, the party whose consent
or approval is required shall be conclusively deemed to have
withheld its approval or consent.
(f) Calculation of Time - unless otherwise specified, time periods
within or following which any payment is to be made or act is to be
done shall be calculated by excluding the day on which the period
commences and including the day on which the period ends and by
extending the period to the next Business Day following if the last
day of the period is not a Business Day.
(g) Business Day - whenever any payment is to be made or action to be
taken under this Agreement is required to be made or taken on a day
other than a Business Day, such payment shall be made or action
taken on the next Business Day following such day.
1.4 Severability. If any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, the illegality, invalidity or
unenforceability of that provision will not affect:
(a) the legality, validity or enforceability of the remaining provisions
of this Agreement; or
(b) the legality, validity or enforceability of that provision in any
other jurisdiction.
-4-
SECTION 2 - MARKETING AND DEVELOPMENT SERVICES BY PROFORMIX
2.1 Services Provided. PI, on behalf of itself and on behalf of its Affiliates,
agrees to render the following services to 1320236 and its Affiliates:
(a) to use its best efforts ancillary to its other business activities
during the term of this Agreement to generate leads and referrals
for Products and any other ergonomic hardware products marketed or
distributed by 1320236 or its Affiliates and to generally keep
1320236 informed of sales prospects;
(b) to cause Xxxxxxx Xxxxxx, an employee of PI, during the period ending
twelve (12) months after the date hereof, to provide development
support services for the keyboard and mouse Products and to assist
in the transition of the development initiatives for these Products
to 1320236's or its Affiliate's engineering group, all as reasonably
required by 1320236; and
(c) to provide such other transitional services as 1320236 may
reasonably require during the six months following the date hereof
including, without limitation, customer service training.
PI shall be responsible for all costs incurred by it in providing the foregoing
services provided that PI shall be reimbursed for reasonable travel expenses and
lodging incurred by Xx. Xxxxxx in connection with his duties under Section
2.1(b) above.
2.2 One Time Fee. In consideration of the entering into of this Agreement,
1320236 shall pay PI, or as PI may direct in writing, a one time non-refundable
fee of $541,000 on the date hereof.
2.3 Fees. 1320236 shall pay PI an ongoing Fee equal to 18% of Net Sales of
Products sold by 1320236 or its Affiliates (including Products sold pursuant to
the Customer Purchase Orders as such term is defined on the Purchase Agreement)
between the date hereof and April 30, 1999 (such Fee not to exceed $540,000 in
the aggregate) and 10% of such Net Sales for each Year thereafter commencing
with the Year ending April 30, 2000 provided that if Target Sales for a
particular Year after the Year ending April 30, 1999 are not achieved the Fee
for that Year shall be reduced to 6% of Net Sales for that Year; and provided
further that if Target Sales are not achieved for a further consecutive Year
(the last day of such Year is herein referred to as the "Termination Date"), the
Fee for that Year shall be $1.00 in the aggregate and PI's right to further Fees
hereunder shall immediately cease and terminate.
2.4 Payment of Fees. Fees shall be calculated on a monthly basis and payable
within thirty days of the end of the preceding month at the rate of 18% of Net
Sales for the period commencing the date hereof and ending on April 30, 1999.
Fees shall be calculated on a monthly basis for the Year ending April 30, 2000
and on a quarterly basis for each Year thereafter and such Fee shall be payable
within thirty days of the end of the preceding month or quarter, as applicable,
at the rate of 6% of Net
-5-
Sales unless the parties, acting in good faith, agree that the Sales Target for
the Year in question has been met in which case the monthly or quarterly
payments, as applicable, for the balance of the Year shall be adjusted to 10% of
Net Sales and any shortfall in the payment of Fees for such Year shall be
adjusted within thirty (30) days of the end of the Year in question; provided
that for any Year next succeeding a Year in which Target Sales were not met Fees
(if any) shall be payable within thirty (30) days of the end of the Year in
question. Appropriate details regarding the calculation of such Fees shall
accompany each payment.
2.5 Other Competitive Products. During the term of this Agreement and for a
period of one (1) year thereafter, PI and PSI, on behalf of themselves and their
Affiliates, shall be precluded by this Agreement from manufacturing,
distributing, selling, marketing and promoting products within the Territory
which are competitive with the Products and any other ergonomic hardware
products marketed or distributed by 1320236 and its Affiliates. For greater
certainty, PI, PSI and their Affiliates shall not be precluded from carrying on
the business heretofore and currently carried on by them consisting of the
design, development, manufacture, distribution and sale of software products.
SECTION 3 - GENERAL
3.1 Term. This Agreement shall continue in force from the date hereof until the
Termination Date, at which time this Agreement shall terminate.
3.2 Termination by 1320236. 1320236 shall be entitled at any time by notice to
PI to terminate this Agreement immediately if PI commits or permits any other
material breach of any of the provisions of this Agreement and fails to remedy
the breach within 30 days after notice thereof to PI but no such termination
shall limit the right of 1320236 to pursue any remedy in respect of a breach of
this Agreement by PI or PSI.
3.3 Termination by PI. PI shall be entitled at any time by notice to 1320236 to
terminate this Agreement immediately if 1320236 fails to pay any amount due
under this Agreement (except to the extent such amount is properly offset
against other amounts under the provisions of this Agreement, the Purchase
Agreement or the agreements and instruments executed in connection therewith)
and such failure continues for 15 days after notice thereof to 1320236 but no
such termination shall limit the right of PI to pursue any remedy in respect of
a breach of this Agreement by 1320236.
SECTION 4 - MISCELLANEOUS
4.1 Survival. Any payment obligations arising prior to the expiry or termination
of this Agreement shall survive the expiration or termination of this Agreement.
-6-
4.2 Further Assurances. Each party shall from time to time promptly execute and
deliver and have executed and delivered all further documents and take, and have
taken, all further action, as may be necessary or appropriate to give effect to
the terms and intent of this Agreement and to complete the transactions
contemplated by this Agreement.
4.3 Assignment and Enurement. Neither this Agreement nor any rights or
obligations hereunder may be assigned by any of the parties hereto except as
expressly provided in this section. 1320236 may assign this Agreement and all
benefit thereof to an Affiliate or to any successor of 1320236 which has
purchased all or substantially all of the assets of the Business and PI may
assign this Agreement and all benefits thereof to an Affiliate that is the
successor to the software product business of PI, provided that no such
assignment shall reduce or otherwise vitiate any of the obligations of 1320236
or PI hereunder. Furthermore, if 1320236 or its Affiliates sells all or
substantially all of the assets of the Business it shall require as a condition
to such sale that the purchaser assumes and agrees to be bound by the terms of
this Agreement. This Agreement enures to the benefit of and binds the parties
and their respective successors and permitted assigns.
4.4 Waivers. No waiver of any term of this Agreement is binding unless it is in
writing and signed by the party to this Agreement entitled to grant the waiver.
No failure to exercise, and no delay in exercising, any right or remedy under
this Agreement will be deemed to be a waiver of that right or remedy. No waiver
of any breach of any term of this Agreement will be deemed to be a waiver of any
subsequent breach of that term.
4.5 Character of Agreement. Nothing contained in this Agreement shall constitute
a party the agent or partner of another or shall empower a party to bind
another, nor shall PI have the authority or represent itself as having the
authority to establish pricing, grant credit and/or settle other terms of sale
for the Products.
4.6 Governing Law. This Agreement is governed by, and is to be construed and
interpreted in accordance with, the laws of the State of New Jersey and the laws
of the United Sates applicable in the State of New Jersey.
4.7 Amendments. No amendment, supplement, restatement or termination of any
provisions of this Agreement is binding unless it is in writing and signed by
each party to this Agreement.
4.8 Notices. Unless otherwise agreed by the parties, each notice under this
Agreement must be given in the same way as in the Purchase Agreement.
4.9 Counterparts. This Agreement may be executed and delivered in any number of
counterparts, each of which when executed and delivered is an original but all
of which together constitute one and the same instrument.
-7-
4.10 Authority. Each party to this Agreement hereby represents and warrants to
the others that the execution and delivery of this Agreement has been duly
authorized by such party, and that the individual signing this Agreement on
behalf of the party has all necessary authority to do so.
4.11 Offset. Any and all amounts owing or to be paid by 1320236 to PI pursuant
to this Agreement, shall be subject to offset and reduction by any amounts on a
dollar for dollar basis that may be owing at any time by PI or PSI to 1320236
pursuant to the Purchase Agreement, the agreements and instruments executed in
connection therewith or any other agreement between 1320236 and PI and/or PSI as
is reasonably determined by 1320236. 1320236 shall deposit any amounts it
proposes to offset into an escrow account maintained by 0000000's counsel
pending arbitration of the matter as provided in Section 4.12 below.
4.12 Arbitration. Any claim or dispute of any nature between the parties hereto
arising directly or indirectly from the relationship created by this Agreement
shall be resolved exclusively by arbitration pursuant to the provisions of
Section 12.11 of the Purchase Agreement.
The parties have executed this Agreement.
PROFORMIX, INC.
By:________________________________
Name:
Title:
1320236 ONTARIO INC.
By:________________________________
Name: Xxx Xxxxxxxx
Title: Assistant Secretary
PROFORMIX SYSTEMS, INC.
By:________________________________
Name:
Title:
FOR VALUE RECEIVED, the undersigned, Xxxxxxx Xxxxxx, a director,
shareholder, officer and employee of PI and PSI, agrees to make himself
available to provide the development services on behalf of PI referred to in
Section 2.1(b) above.
DATED this 18th day of November, 1998.
___________________________________
Xxxxxxx Xxxxxx
