EXECUTION COPY
EXHIBIT 10.20
ASSET PURCHASE AGREEMENT
dated as of November 10, 1999
among
STAIRMASTER SPORTS/MEDICAL PRODUCTS, INC.
and
▇▇▇▇▇▇▇ INSTRUMENT COMPANY
and
▇▇▇▇▇▇▇ FITNESS, INC.
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions ................................................. 1
Section 1.2. Miscellaneous Terms and Usage ............................... 8
ARTICLE II
PURCHASE AND SALE
Section 2.1. Purchased Assets ............................................ 9
Section 2.2. Excluded Assets ............................................. 9
Section 2.3. Assumed Liabilities ......................................... 9
Section 2.4. Excluded Liabilities ........................................ 9
ARTICLE III
PURCHASE PRICE
Section 3.1. Purchase Price .............................................. 9
Section 3.2. Post-Closing Adjustment to Purchase Price ................... 9
Section 3.3. Allocation of Purchase Price ................................ 10
ARTICLE IV
CLOSING
Section 4.1. Closing Date ................................................ 11
Section 4.2. Payment on the Closing Date ................................. 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1. Authorization, etc. ......................................... 11
Section 5.2. Corporate Status ............................................ 12
Section 5.3. No Conflicts, etc. .......................................... 12
Section 5.4. Financial Statement, Etc .................................... 13
Section 5.5. Absence of Undisclosed Liabilities .......................... 13
Section 5.6. Taxes ....................................................... 13
Section 5.7. Absence of Changes .......................................... 14
Section 5.8. Litigation .................................................. 16
Section 5.9. Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts ...................................... 16
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Section 5.10. Operation of the Fitness Business ........................... 16
Section 5.11. Purchased Assets ............................................ 16
Section 5.12. Contracts ................................................... 17
Section 5.13. Territorial Restrictions .................................... 19
Section 5.14. Inventories ................................................. 19
Section 5.15. Customers ................................................... 19
Section 5.16. Products .................................................... 20
Section 5.17. Intellectual Property ....................................... 20
Section 5.18. Environmental Matters ....................................... 22
Section 5.19. Employees, Labor Matters, etc. .............................. 23
Section 5.20. Employee Benefit Plans and Related Matters .................. 23
Section 5.21. Brokers, Finders, etc. ...................................... 24
Section 5.22. Disclosure .................................................. 24
Section 5.23. Receivables ................................................. 24
Section 5.24. Purchase of StairMaster Common Stock ........................ 24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1. Representations and Warranties of Buyer ..................... 26
ARTICLE VII
ACTIONS PRIOR TO THE CLOSING DATE
Section 7.1. Investigation by Buyer ...................................... 27
Section 7.2. Preserve Accuracy of Representations and Warranties ......... 27
Section 7.3. Consents of Third Parties ................................... 27
Section 7.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification .............................. 28
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1. Use of Trademarks ........................................... 28
Section 8.2. Confidentiality ............................................. 28
Section 8.3. Taxes ....................................................... 29
Section 8.4. Delivery of Possession ...................................... 29
Section 8.5. Further Assurances .......................................... 30
Section 8.6. Financing ................................................... 30
Section 8.7. Non-Solicitation ............................................ 30
Section 8.8. Conduct of Business ......................................... 30
Section 8.9. Covenant Not to Compete ..................................... 31
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ARTICLE IX
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER, MEDICAL ▇▇▇▇▇▇▇ AND FITNESS ▇▇▇▇▇▇▇
Section 9.1. Conditions to Obligations of Buyer .......................... 32
Section 9.2. Conditions to Obligations of Sellers ........................ 34
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification by Sellers .................................. 35
Section 10.2. Sellers' Indemnity Limitations .............................. 36
Section 10.3. Indemnification by Buyer .................................... 36
Section 10.4. Buyer's Indemnity Limitations ............................... 37
Section 10.5. Indemnification Procedures .................................. 37
Section 10.6. Sole and Exclusive Remedy ................................... 38
Section 10.7. Tax Treatment of the Indemnity Payments ..................... 39
ARTICLE XI
TERMINATION
Section 11.1. Termination ................................................. 39
Section 11.2. Notice of Termination ....................................... 39
Section 11.3. Effect of Termination ....................................... 39
Section 11.4. Liquidated Damages .......................................... 39
ARTICLE XII
GENERAL PROVISIONS
Section 12.1. No Public Announcement ...................................... 40
Section 12.2. Notices ..................................................... 40
Section 12.3. Successors and Assigns ...................................... 42
Section 12.4. Entire Agreement: Amendments, etc. ......................... 42
Section 12.5. Interpretation .............................................. 42
Section 12.6. Waivers ..................................................... 42
Section 12.7. Expenses .................................................... 43
Section 12.8. Execution in Counterparts ................................... 43
Section 12.9. Governing Law ............................................... 43
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EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment
Exhibit B Form of Assumption Agreement
Exhibit C Form of Note
Exhibit D Form of Sublease Agreement
Exhibit E Form of Supply Agreement
Exhibit F Form of Technology License
Exhibit G Form of Trademark License
Exhibit H Form of Escrow Agreement
Exhibit I Form of Opinion of ▇▇▇▇▇▇ Radovsky ▇▇▇▇▇▇▇ & Share LLP
Exhibit J Form of Opinion of Debevoise & ▇▇▇▇▇▇▇▇
Schedule 1.1-1 Assumed Liabilities
Schedule 1.1-2 Excluded Assets
Schedule 1.1-3 Purchased Assets
Schedule 1.1-4 September 30,1999 Balance Sheet of the Fitness Business
Schedule 5.2(b) Corporate Status
Schedule 5.3 Conflicts
Schedule 5.5 Liabilities
Schedule 5.7 Changes
Schedule 5.8 Litigation, etc.
Schedule 5.9(a) Compliance with Laws
Schedule 5.9(b) Consents
Schedule 5.10 Operation of Fitness Business
Schedule 5.11 Title to Purchased Assets
Schedule 5.12(a) Contracts
Schedule 5.12(c) Defaults, Required Consents, etc., under Contracts
Schedule 5.12(d) Powers of Attorney
Schedule 5.13 Territorial Restrictions
Schedule 5.14 Inventories
Schedule 5.15 Customers
Schedule 5.16(a) Warranties Product Liability
Schedule 5.16(b) Product Liability
Schedule 5.17(a) Owned Intellectual Property
Schedule 5.17(c) Intellectual Property Infringement
Schedule 5.17(d) Intellectual Property Litigation
Schedule 5.17(e) Licensing Arrangements
Schedule 5.17(g) Use of Name and ▇▇▇▇
Schedule 5.18(a) Environmental Permits
Schedule 5.18(c) No Actions with Respect to Environmental Matters
Schedule 5.23 Receivables
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated as of November 10,
1999, among StairMaster Sports/Medical Products, Inc., a Delaware corporation,
as purchaser ("Buyer"), ▇▇▇▇▇▇▇ Instrument Company, a Washington corporation
("Medical ▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ Fitness, Inc., a Delaware corporation and wholly
owned subsidiary of Medical ▇▇▇▇▇▇▇ ("Fitness ▇▇▇▇▇▇▇"). Medical ▇▇▇▇▇▇▇ and
Fitness ▇▇▇▇▇▇▇ are sometimes referred to herein individually as a "Seller" and
collectively as "Sellers".
RECITALS:
A. Fitness ▇▇▇▇▇▇▇ is engaged in the business of designing, manufacturing,
and selling certain treadmills and certain related products to the fitness,
rehabilitation, and medical communities;
▇. ▇▇▇▇▇▇▇ desire to sell to Buyer, and Buyer desires to purchase from
Sellers, substantially all their assets and properties associated with the
Fitness Business, subject to and as more fully described below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, Buyer, Medical
▇▇▇▇▇▇▇ and Fitness ▇▇▇▇▇▇▇ hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. In this Agreement, in addition to the defined
terms used elsewhere, the following terms have the following meanings:
"Adjusted Net Current Assets" means the excess of (i) the sum of the
inventory, receivables, prepaid expenses plus other current assets of the
Fitness Business over (ii) the sum of the following liabilities (excluding,
however, any payables attributable to employee benefits and wage expenses,
intercompany accounts payable, product liability claims or taxes other than
sales taxes and state income taxes relating to sales of products of the Fitness
Business): accounts payable, royalties payable, accrued expenses, deferred
service revenue plus accrued warranty of the Fitness Business computed on an
accrual basis in accordance with GAAP, applied on a consistent basis with the
prior application of GAAP and using the same accounting methods, policies,
practices, principles and classifications as were used in the preparation of the
balance sheet as of September 30, 1999 attached hereto as Schedule 1.1-4.
"Adjusted Net Current Assets Computation" has the meaning given such term
in Section 3.2(b).
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Aggregate Threshold" has the meaning given to such term in Section
10.2(b).
"Applicable Law" means all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), or Consents, rules,
regulations, ordinances, codes or orders of, with or to any Governmental Body
and (ii) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Body.
"Assignment" means the assignment pursuant to which the Purchased Assets
are transferred to Buyer, substantially in the form attached hereto as Exhibit
A.
"Assumed Liabilities" means those liabilities and obligations to be
assumed by Buyer, as set forth on Schedule 1.1-1, but excluding the Excluded
Liabilities.
"Assumption Agreement" means the assumption agreement, to be delivered by
Buyer, pursuant to which Buyer assumes the Assumed Liabilities, substantially in
the form attached hereto as Exhibit B.
"Buyer" has the meaning given to it in the preamble to this Agreement.
"Buyer Indemnitees" has the meaning given to it in Section 10.1.
"Buyer Protected Information" means any information concerning the Fitness
Business that is proprietary, confidential, and not otherwise publicly
available, including without limitation Fitness Quinton's or Medical Quinton's
patents, pending patent applications, costs of manufacturing and financial data
relating to treadmill models ▇▇▇▇, ▇▇▇▇, ▇▇▇▇, and ST65, the Products or the
Predecessor Versions, except as such information (x) becomes generally available
to the public other than as a result of a disclosure by Medical ▇▇▇▇▇▇▇, Fitness
▇▇▇▇▇▇▇ or any of their Affiliates, or (y) is required to be disclosed by law or
legal process by Medical ▇▇▇▇▇▇▇, Fitness ▇▇▇▇▇▇▇ or any of their Affiliates,
and except to the extent such information relates to the Excluded Assets.
"Closing" means the closing of the transfer of the Purchased Assets to
Buyer and the assumption of the Assumed Liabilities by Buyer.
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"Closing Date" means the time and date on which the Closing actually
occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Documents" means, collectively, the Assignment, the Assumption
Agreement, the Escrow Agreement, the Sublease Agreement, the Supply Agreement,
the Trademark License, the Technology License, the Transition Services Agreement
and any other agreements, instrument and documents being or to be executed and
delivered under this Agreement or in connection herewith, including any
assignment of patents or patent applications or related documents to be filed
with the U.S. Patent and Trademark Office.
"Computer Systems" has the meaning given to it in Section 5.17(h).
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Body.
"Contract" has the meaning given to it in Section 5.12(a).
"Environmental Laws" means (i) all Applicable Laws relating to the
protection of the environment (including natural resources), to human health and
safety, to natural resources, or to any emission, discharge, generation,
processing, storage, holding, abatement, existence, Release, threatened Release
or transportation of any Hazardous Substances, (ii) all other requirements
pertaining to reporting, licensing, permitting, investigation or remediation of
emissions, discharges, releases or threatened releases of Hazardous Materials,
and (iii) all other requirements pertaining to the protection of the health and
safety of employees or the public.
"Environmental Permits" means any federal, state and local permit,
license, registration, consent, order, administrative consent order,
certificate, approval or other authorization with respect to either Fitness
▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ necessary for the conduct of the Fitness Business as
currently conducted or previously conducted under any Environmental Law.
"Escrow Agreement" means the Escrow Agreement in the form attached as
Exhibit H.
"Excluded Assets" means those assets of Sellers excluded from the
Purchased Assets, as provided in Schedule 1.1-2.
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"Excluded Liabilities" means any liability or obligation of Sellers or any
liability or obligation with respect to the Fitness Business, in each case not
described or set forth on Schedule 1.1-1.
"Fitness Business" means that portion of the business and operations of
Sellers primarily related to (x) the treadmill and related fitness business
(including the Monark bicycle business) and (y) the manufacture by Fitness
▇▇▇▇▇▇▇ of components supplied to Medical ▇▇▇▇▇▇▇.
"Fitness ▇▇▇▇▇▇▇" has the meaning given to it in the preamble to this
Agreement.
"GAAP" means United States generally accepted accounting principles.
"Governmental Body" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
"Hazardous Substances" means any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials (ii) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as "hazardous" or "toxic"
thereunder.
"Indemnifying Party" has the meaning given to it in Section 10.5.
"Indemnitee" has the meaning given to it in Section 10.5.
"Intellectual Property" means any and all United States and foreign: (a)
patents (including design patents, industrial designs and utility models) and
patent applications (including docketed patent disclosures awaiting filing,
reissues, divisions, continuations-in-part and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto; (b)
trademarks, service marks, trade names, trade dress, logos, business and product
names, slogans, and registrations and applications for registration thereof; (c)
copyrights and registrations thereof; (d) Software and firmware; (e) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential, business and technical information, manufacturing, engineering and
technical drawings and product specifications; (f) mask work and other
semiconductor chip rights and registrations thereof; (g) intellectual property
rights similar to any of the foregoing;
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(h) copies and tangible embodiments thereof (in whatever form or medium,
including electronic media).
"Intellectual Property Assets" means all Intellectual Property and all
rights thereunder or in respect thereof primarily relating to (or used or held
for use) in connection with the Fitness Business, including, but not limited to,
rights to ▇▇▇ for and remedies against past, present and future infringements
thereof, and rights of priority and protection of interests therein under the
laws of any jurisdiction worldwide and all tangible embodiments thereof.
"Inventories" means all inventories of raw materials, work in process,
finished products, goods, spare parts, replacement and component parts,
including inventories held at any location controlled by Fitness ▇▇▇▇▇▇▇ or
Medical ▇▇▇▇▇▇▇ or any of their Affiliates and inventories previously purchased
and in transit to Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or any of their Affiliates
at such location, in each case related to the Fitness Business;
"Lien" means any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to such as may
arise under any Contracts.
"Loss" and "Losses" have the respective meanings given to them in Section
10.1.
"Material Adverse Effect" means any event, occurrence, fact, condition,
change or effect that is materially adverse to the business, operations, sales
prospects, results of operations, financial condition, properties (including
intangible properties), assets including intangible assets) or liabilities of
the Fitness Business.
"Medical ▇▇▇▇▇▇▇" has the meaning given to it in the preamble to this
Agreement.
"Non-Fitness Business" means all of the business and operations of Sellers
other than the Fitness Business.
"Note" means the note payable to Fitness ▇▇▇▇▇▇▇ in the amount of
$1,000,000, in the form attached as Exhibit C hereto.
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"Permitted Liens" means (a) liens for taxes and other governmental charges
and assessments which are not yet due and payable, (b) liens of landlords and
liens of carriers, warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business for sums not yet due and payable, and
(c) liens granted to Silicon Valley Bank as of the date hereof.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Predecessor Versions" means treadmill products in the Q-Series, Club
Track, Club Track Plus, Club Track H.R., Club Track H.R. Plus, SR60, CR60, ST55,
and ST65 product lines which were but are no longer produced by Medical ▇▇▇▇▇▇▇
as of the date of this Agreement.
"Products" means the current Q-65, Club Track, Club Track Plus, Club Track
H.R. and Club Track H.R. Plus treadmill products designed or manufactured by
Sellers.
"Purchased Assets" means the assets of Fitness ▇▇▇▇▇▇▇, and, to the extent
owned by it, Medical ▇▇▇▇▇▇▇, wherever located, tangible or intangible, used
primarily in connection with the Fitness Business as the same shall exist on the
Closing Date, including those set forth on Schedule 1.1-3, but excluding the
Excluded Assets.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of September 5, 1997, between StairMaster Holdings, Inc. and the
parties listed therein.
"Release" means any releasing, disposing, discharging, leaking, leaching,
dumping, seeping, migration, placing and the like, including without limitation,
the moving of any materials through, into or upon, any land, soil, surface
water, ground water or air, or otherwise entering into the environment.
"Remedial Action" means all actions required to investigate, clean up,
remove, treat or in any other way remediate any Hazardous Substances, or prevent
the release of Hazardous Substances into the environment.
"Seller Indemnitees" has the meaning given to it in Section 10.3.
"Seller Protected Information" means any information concerning the
Non-Fitness Business that is proprietary, confidential, and not otherwise
publicly available, including without limitation business or technical
information concerning Seller's costs of manufacturing and financial data
relating to any products or business of Sellers relating
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to the Non-Fitness Business, except as such information (x) becomes generally
available to the public other than as a result of a disclosure by any of the
Sellers or (y) is required to be disclosed by law or legal process by the
Sellers and except to the extent such information relates to the Purchased
Assets.
"Shares" has the meaning given it in Section 3.1.
"Software" means all computer software, including but not limited to,
application software and system software, including all source code and object
code versions thereof, in any and all forms and media, whether recorded on
paper, magnetic media or other electronic or non-electronic media (including
data and related documentation, user manuals, training materials, flow charts,
diagrams, descriptive tests and programs, computer print-outs, underlying tapes,
computer databases and similar items), integrated circuits, embedded systems,
and other electro-mechanical or processor based systems.
"Stock Subscription Agreement" means the Stock Subscription Agreement
between StairMaster Holding, Inc. and Fitness ▇▇▇▇▇▇▇ in the form as the parties
shall mutually agree.
"Sublease Agreement" means a sublease agreement for a portion of the
facility located in Bothell, Washington, leased by Medical ▇▇▇▇▇▇▇ to be entered
into as of the Closing Date between Medical ▇▇▇▇▇▇▇, as sublessor, and Buyer, as
sublessee, in substantially the form attached as Exhibit D hereto.
"Subleased Premises" means the premises at the facility located in
Bothell, Washington, leased by Medical ▇▇▇▇▇▇▇, which are to be subleased by
Buyer from Medical ▇▇▇▇▇▇▇ in accordance with the terms of and pursuant to the
Sublease Agreement.
"Supply Agreement" means the Supply and Distributorship Agreement to be
entered into as of the Closing Date between Buyer and Medical ▇▇▇▇▇▇▇, in the
form attached as Exhibit E hereto.
"Tax" means any federal, state, provincial, local, foreign or other
income, alter-native, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental (including taxes under Section 59A of the
Code), real property, personal property, ad valorem, intangibles, rent,
occupancy, license, occupational, employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care,
7
withholding, estimated or other similar tax, duty or other governmental charge
or assessment or deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
"Tax Return" means any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technology License" means the Technology License Agreement to be entered
into as of the Closing Date between Buyer and Medical ▇▇▇▇▇▇▇ in the form
attached as Exhibit F hereto.
"Territory" means medical diagnostic testing and rehabilitation facilities
where subjects are monitored with medical equipment by medical personnel. These
facilities can be a hospital, medical research facility, doctor's office or
rehabilitation center. Hospital wellness centers and community-based wellness
centers are not considered part of the Territory except for segregated locations
within such wellness centers where cardiac or cardio-pulmonary rehabilitation is
monitored with medical equipment by medical personnel.
"Trademark License" means the Trademark License Agreement relating to use
of the "▇▇▇▇▇▇▇" ▇▇▇▇ to be entered into as of the Closing Date between Buyer,
as licensee, and Medical ▇▇▇▇▇▇▇, as licensor, in the form attached as Exhibit G
hereto.
"Transition Services Agreement" means the Transition Services Agreement to
be entered into as of the Closing Date between Buyer and Medical ▇▇▇▇▇▇▇, in
such form as the parties shall mutually agree.
"Year 2000 Compliant" means that Software, hardware and embedded
microcontrollers in non-computer equipment (x) correctly perform date data
century recognition, and calculations that accommodate same century and
multi-century formulas and date values; (y) operate or are expected to operate
on a basis comparable to their current operation during and after calendar year
A.D. 2000, including but not limited to leap years; and (z) shall not end
abnormally or provide invalid or incorrect results as a result of date data
which represents or references different centuries or more than one century.
Section 1.2. Miscellaneous Terms and Usage. The term "or" is disjunctive;
the term "and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. The term "including" is by way of example and not a limitation. All
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter gender or singular or plural, as the context requires. All terms defined
herein shall be equally applicable to
8
both the singular and plural forms. Any agreement referred to Section 1.1 shall
mean such agreement as amended, supplemented and modified from time to time to
the extent permitted by the applicable provisions thereof and by this Agreement.
The term "herein" means this Agreement, including the Schedules and Exhibits
hereto. The term "business day" means any day, other than Saturday, Sunday or a
federal or State of Washington legal holiday.
ARTICLE II
PURCHASE AND SALE
Section 2.1. Purchased Assets. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, Fitness ▇▇▇▇▇▇▇ and, to the
extent that Medical ▇▇▇▇▇▇▇ owns any Purchased Assets, Medical ▇▇▇▇▇▇▇ shall
sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase
from such Sellers, the Purchased Assets.
Section 2.2. Excluded Assets. The Purchased Assets shall not include any
of the Excluded Assets.
Section 2.3. Assumed Liabilities. On the Closing Date, pursuant to the
Assumption Agreement, Buyer shall assume and agree to pay, perform, or otherwise
discharge the Assumed Liabilities.
Section 2.4. Excluded Liabilities. Notwithstanding Section 2.3, Buyer
shall not assume or incur or be obligated or become liable to pay, perform or
otherwise discharge any Excluded Liabilities.
ARTICLE III
PURCHASE PRICE
Section 3.1. Purchase Price. On the terms and subject to the conditions
set forth in this Agreement, in consideration for the Purchased Assets and the
covenant not to compete set forth in Section 8.9, Buyer agrees to cause to be
paid to Sellers at the Closing: (x) TWELVE MILLION DOLLARS ($12,000,000), (y) a
$1,000,000 Subordinated Promissory Note in the form of Exhibit C and (z) 23,077
shares (the "Shares") of common stock, par value $.01 per share, of StairMaster
Holding, Inc. (collectively the "Purchase Price"), and to assume the Assumed
Liabilities as provided in Section 2.3. The Purchase Price shall be payable at
the Closing pursuant to Section 4.2, and later shall be adjusted pursuant to
Section 3.2.
Section 3.2. Post-Closing Adjustment to Purchase Price. The Purchase Price
provided for in Section 3.1 hereof has been determined on the assumption that
the
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amount of Adjusted Net Current Assets of the Fitness Business as of the Closing
Date and immediately prior to the Closing is not less than $3,600,00 and not
greater than $4,200,000.
(b) As soon as reasonably practical following (but not more than 45 days
after) the Closing Date, Sellers shall cause to be prepared and delivered to
Buyer the Adjusted Net Current Assets of the Fitness Business as of the Closing
Date and immediately prior to the Closing (the "Adjusted Net Current Assets
Computation"). All expenses incurred in connection with the preparation of the
Adjusted Net Current Assets Computation shall be the responsibility of Sellers.
To assist the Buyer in its review of the Adjusted Net Current Assets
Computation, Sellers shall make available to the Buyer simultaneously with the
Adjusted Net Current Assets Computation, all work papers prepared in connection
therewith.
(c) The Adjusted Net Current Assets Computation shall become final and
binding upon the parties unless, within 30 days following its submittal to the
Buyer, the Buyer notifies Sellers of its objection thereto in reasonable detail.
If the Buyer does so notify Sellers of its objection to the Adjusted Net Current
Assets Computation, Sellers and Buyer shall negotiate in good faith to resolve
any differences. If within 15 days following the receipt of such notice by
Sellers, such differences have not been resolved, they shall be resolved by an
independent "big five" accounting firm (other than Sellers accountants). If
Buyer and the Sellers cannot agree on the independent accounting firm to be
retained, Buyer, on the one hand, and the Sellers, on the other hand, shall each
submit the name of one accounting firm that satisfies the qualifications set
forth in this Section 3.2(c), and the independent accounting firm shall be
selected by lot from those two firms. Such accounting firm's opinion thereon and
the resulting Adjusted Net Current Assets Computation shall be final, binding
and not subject to any appeal. The fees and expenses of such accounting firm
shall be paid by one-half by Sellers and one-half by Buyer.
(d) Within 10 days following the final determination of the Adjusted Net
Current Assets Computation, (i) if the Adjusted Net Current Assets Computation
is less than $3,600,000, the Sellers shall pay Buyer, as a reduction in the
Purchase Price paid at the Closing, the amount of such deficiency or (ii) if the
Adjusted Net Current Assets Computation is greater than $4,200,000, the Buyer
shall pay Sellers, as an increase in the Purchase Price paid at the Closing, the
amount of such excess. Such amounts shall be paid by wire transfer of
immediately available funds.
Section 3.3. Allocation of Purchase Price. The aggregate amount of the
Purchase Price and the Assumed Liabilities shall be allocated among the
Purchased Assets in accordance with section 1060 of the Code and the Treasury
regulations thereunder. In connection with the preparation of the foregoing
allocations, the parties
10
shall cooperate with each other and provide such information as any of them
shall reasonably request. Each of the parties shall (and shall cause its
Affiliates to) report the federal, state and local and other Tax consequences of
the purchase and sale contemplated hereby (including the filing of IRS Form
8594) in a manner consistent with the forgoing allocations.
ARTICLE IV
CLOSING
Section 4.1. Closing Date. The Closing shall take place at such location
as the parties shall agree at 9:00 a.m., San Francisco, California time, on
December 17, 1999, or at such other time as the parties hereto shall agree,
provided that all conditions set forth in Article IX shall have been satisfied
or waived.
Section 4.2. Payment on the Closing Date. Subject to fulfillment or waiver
of the conditions set forth in Article IX, at Closing, Buyer shall pay
$11,900,000 by wire transfer of immediately available funds to the bank account
specified by Fitness ▇▇▇▇▇▇▇ in writing to Buyer, shall pay $100,000 by wire
transfer of immediately available funds to the Escrow Agent specified in the
Escrow Agreement, shall execute and deliver the Note provided for in Section
3.1(y) payable to Fitness ▇▇▇▇▇▇▇ and shall deliver the Shares provided for in
Section 3.1(z) to Fitness ▇▇▇▇▇▇▇.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
As of the date hereof and as of the Closing Date, each of Medical ▇▇▇▇▇▇▇
and Fitness ▇▇▇▇▇▇▇ represents and warrants to Buyer as follows:
Section 5.1. Authorization, etc. Each of Fitness ▇▇▇▇▇▇▇ and Medical
▇▇▇▇▇▇▇ has the corporate power and authority to execute and deliver this
Agreement and each of the Collateral Documents to which it will be a party, to
perform fully its obligations thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each of Fitness
▇▇▇▇▇▇▇ of this Agreement, and the consummation of the transactions contemplated
hereby have been, and on the Closing Date the execution and delivery by each of
Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ of each of the Collateral Documents to which
it will be a party and the consummation of the transactions contemplated thereby
will have been, duly authorized by all requisite corporate action of Fitness
▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇, as the case may be. Each of Medical ▇▇▇▇▇▇▇ and
Fitness ▇▇▇▇▇▇▇ has duly executed and delivered this Agreement and on the
Closing Date each of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ will have duly
11
executed and delivered each of the Collateral Documents to which it is a party.
This Agreement is, and on the Closing Date, each of the Collateral Documents to
which Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ is a party will be, legal, valid and
binding obligations of Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇, as the case may be,
enforceable against it in accordance with their respective terms.
Section 5.2. Corporate Status. (a) Each of Fitness ▇▇▇▇▇▇▇ and Medical
▇▇▇▇▇▇▇ is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, with full corporate
power and authority to carry on its business as currently conducted and to own
or lease and to operate its properties as and in the places where such business
is conducted and such properties are owned, leased or operated.
(b) Each of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ is duly qualified or
licensed to do business and is in good standing in each of the jurisdictions
specified opposite its name in Schedule 5.2(b) which are the only jurisdictions
in which the operation of the Fitness Business, or the character of the
properties owned, leased or operated by it in connection with Fitness Business
makes such qualification or licensing necessary except where the failure to be
so qualified or licensed would not have a Material Adverse Effect.
(c) Each of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ has delivered to Buyer
complete and correct copies of its certificate of incorporation and by-laws or
other organizational documents, in each case, as amended and in effect on the
date hereof. Neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ is in violation of any
of the provisions of its certificate of incorporation or by-laws or other
organizational documents.
Section 5.3. No Conflicts, etc. The execution, delivery and performance by
each of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ of, as the case may be, this
Agreement and each of the Collateral Documents to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not materially conflict with, contravene, result in a material violation or
breach of or default under (with or without the giving of notice or the lapse of
time or both), give rise to a right or claim of termination, amendment,
modification, vesting, acceleration or cancellation of any right or obligation
or loss of any material benefit under, or result in the creation of any Lien (or
any obligation to create any Lien) under (i) to Sellers' knowledge any
Applicable Law applicable to either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or any
Affiliate thereof or any of the properties or assets of either Fitness ▇▇▇▇▇▇▇
or Medical ▇▇▇▇▇▇▇ (relating to the Purchased Assets), (ii) the certificate of
incorporation or by-laws or other organizational documents of either Fitness
▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or (iii) except as set forth in Schedule 5.3, any
Contract or other contract, agreement or other instrument relating to the
Fitness Business to which either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or any
Affiliate
12
thereof is a party or by which any Seller or any of their properties or assets,
including but not limited to the Purchased Assets, may be bound or affected.
Except as specified in Schedule 5.3, no Consent is required to be obtained or
made by either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ in connection with the
execution and delivery of this Agreement and the Collateral Documents or the
consummation of the transactions contemplated hereby and thereby except where
the failure to obtain such consent would not have a Material Adverse Effect.
Section 5.4. Financial Statement, Etc. Fitness ▇▇▇▇▇▇▇ has delivered to
Buyer an unaudited statement of Fitness ▇▇▇▇▇▇▇ as of and for the nine months
ended September 30, 1999 (the "Financial Statement"), including a balance sheet,
a statement of income and a statement of cash flows. The Financial Statement has
been prepared in accordance with GAAP and is consistent in all material respects
with the financial statements prepared for QIC Holding Corp. To the best
knowledge of Fitness ▇▇▇▇▇▇▇, the Financial Statement presents fairly the
financial condition of Fitness ▇▇▇▇▇▇▇ for the period indicated and reflects all
costs that have historically been incurred by Fitness ▇▇▇▇▇▇▇.
Section 5.5. Absence of Undisclosed Liabilities. To the Sellers'
knowledge, neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has any liabilities or
obligations of any nature, absolute, accrued, contingent or otherwise and
whether due or to become due, arising out of or relating to the Fitness
Business, except (a) as set forth in Schedule 5.5, (b) as and to the extent
disclosed or reserved against in the Financial Statement (excluding the notes
thereto), and (c) for liabilities and obligations that (i) were incurred after
the date of the Financial Statement in the ordinary course of business
consistent with prior practice and (ii) individually and in the aggregate are
not material to the Fitness Business and have not had or resulted in, and will
not have or result in, a Material Adverse Effect. None of Fitness Quinton's
employees is now or will by the passage of time hereinafter become entitled to
receive any vacation time, vacation pay or severance pay attributable to
services rendered prior to such date except as disclosed on the Financial
Statement (excluding the notes thereto).
Section 5.6. Taxes. (a) Except as shown on Schedule 5.6, all Tax Returns
with respect to the Purchased Assets or Fitness Business required to be filed
have been filed. All Taxes (whether or not reflected on such Tax Returns) with
respect to the Purchased Asset or Fitness Business required to be paid have been
paid.
(b) The Buyer will not be required to deduct or withhold any consideration
or amount paid to the Sellers pursuant to Section 1445(a) of the Code or any
U.S. state or local tax law in connection with or resulting from the transaction
contemplated by this Agreement.
13
Section 5.7. Absence of Changes. Except as set forth in Schedule 5.7,
since September 30, 1999, Fitness ▇▇▇▇▇▇▇ has conducted the Fitness Business
only in the ordinary course consistent with prior practice and has not, on
behalf of, in connection with or relating to the Fitness Business or the
Purchased Assets:
(a) suffered any Material Adverse Effect;
(b) incurred any obligation or liability, absolute, accrued, contingent
or otherwise, whether due or to become due, except current liabilities for trade
or business obligations incurred in connection with the purchase of goods or
services in the ordinary course of business consistent with prior practice, none
of which liabilities, in any case or in the aggregate, has had or could have a
Material Adverse Effect;
(c) discharged or satisfied any Lien other than those then required to
be discharged or satisfied, or paid any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, other than
current liabilities shown on the Financial Statement and current liabilities
incurred since the thereof in the ordinary course of business consistent with
prior practice;
(d) assigned, mortgaged, pledged or otherwise subjected to Lien, any
property, business or assets, tangible or intangible, held in connection with
the Fitness Business;
(e) sold, transferred, leased to others or otherwise disposed of any of
the Purchased Assets, except for inventory sold in the ordinary course of
business, or forgiven, canceled or compromised any debt or claim, or waived or
released any right of substantial value;
(f) received any notice of termination of any contract, lease or other
agreement or suffered any damage, destruction or loss (whether or not covered by
insurance) which termination or loss, in any case or in the aggregate, has had
or could have a Material Adverse Effect;
(g) transferred or granted any rights or licenses under, or entered
into any settlement regarding the breach or infringement of, any Intellectual
Property, or modified any existing rights with respect thereto;
(h) made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, incentive, retention or
other compensation, retirement, welfare, fringe or severance benefit or vacation
pay, to or in respect of any shareholder, director, officer, employee, salesman,
distributor or agent of any Seller relat-
14
ing to the Business, except in the ordinary course of business consistent with
past practice;
(i) encountered any labor union organizing activity, had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts, or had any
material change in its relations with its employees, agents, customers or
suppliers;
(j) failed to replenish the inventories and supplies in a normal and
customary manner consistent with its prior practice, or made any purchase
commitment in excess of the normal, ordinary and usual requirements of its
business or at any price in excess of the then current market price, or made any
change in its selling, pricing, advertising or personnel practices inconsistent
with its prior practice;
(k) made any capital expenditures or capital additions or improvements
in excess of an aggregate of $50,000;
(l) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to the Fitness
Business or the Purchased Assets other than in the ordinary course of business
consistent with past practices but not in any case involving amounts in excess
of $50,000;
(m) (i) entered into any transaction, contract or commitment other than
in the ordinary course of business, (ii) breached any material contract or
commitment or (iii) paid or agreed to pay any legal, accounting, brokerage,
finder's fee, Taxes or other expenses in connection with, or incurred any
severance pay obligations by reason of, this Agreement or the transactions
contemplated hereby;
(n) made any material changes in policies or practices relating to
selling practices, returns, discounts or other terms of sale or accounting
therefor or in policies of employment;
(o) made any prepayment of any accounts payable, delayed payment of any
trade payables or other obligations other than in the ordinary course of
business consistent with past practice, or made any other cash payments other
than in the ordinary course of business;
(p) failed to maintain all of the tangible Purchased Assets and all
other tangible properties and assets owned, leased, occupied, operated or used
in connection with the Fitness Business in good repair, working order and
operating condition subject only to ordinary wear and tear;
15
(q) failed to keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried in connection with the
Fitness Business; or
(r) taken any action or omitted to take any action that would result in
the occurrence of any of the foregoing.
Section 5.8. Litigation. Except as set forth on Schedule 5.8, there is
no action, claim, demand, suit, proceeding, arbitration, grievance, citation,
summons, subpoena, inquiry or investigation of any nature, civil, criminal,
regulatory or otherwise, in law or in equity, pending or, to Sellers' knowledge,
threatened against or relating to Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ in
connection with the Purchased Assets or the Fitness Business or against or
relating to the transactions contemplated by this Agreement, and neither Fitness
▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ knows or has reason to be aware of any basis for the
same. Except as set forth in such Schedule 5.8, no citations, fines or penalties
have been asserted against either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ with
respect to the Fitness Business since June 5, 1998, under any Environmental Law
or any foreign, federal, state or local law relating to occupational health or
safety.
Section 5.9. Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts. (a) Except as disclosed in Schedule 5.9(a) since June 5,
1998, Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ have complied in all material respects
with all Applicable Laws applicable to the Fitness Business or the Purchased
Assets, and neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has received any notice
alleging any such conflict, violation, breach or default.
(b) Schedule 5.9(b) sets forth all Consents necessary for, or otherwise
material to, the conduct of the Fitness Business as conducted by Sellers prior
to the Closing. Except as set forth in Schedule 5.9(b), all such Consents have
been duly obtained and are in full force and effect, and each of Fitness ▇▇▇▇▇▇▇
and Medical ▇▇▇▇▇▇▇ is in compliance with each of such Consents held by it with
respect to the Purchased Assets and the Fitness Business.
Section 5.10. Operation of the Fitness Business. Except as set forth in
Schedule 5.10, (a) the Fitness Business has been conducted only through Fitness
▇▇▇▇▇▇▇ and not through any other divisions or any direct or indirect subsidiary
or affiliate of Fitness ▇▇▇▇▇▇▇ and (b) no part of the Fitness Business is
operated by Fitness ▇▇▇▇▇▇▇ through any entity other than Sellers.
Section 5.11. Purchased Assets. Except as disclosed in Schedule 5.11,
Fitness ▇▇▇▇▇▇▇ has good title to all the Purchased Assets free and clear of any
and all Liens other than Permitted Liens. The Purchased Assets comprise all
assets required for the continued conduct of the Fitness Business by Buyer as
now being conducted. The
16
Purchased Assets, taken as a whole, constitute all the properties and assets
relating to or used or held for use in connection with the Fitness Business
during the past twelve months (except Inventory sold, cash disposed of, accounts
receivable collected, prepaid expenses realized, Contracts fully performed,
properties or assets replaced by functionally equivalent properties or assets,
in each case in the ordinary course of business, employees not to be hired by
Buyer, and the Excluded Assets). Except for Excluded Assets, there are no
material assets or properties used primarily in the operation of the Fitness
Business and owned by any Person other than Fitness ▇▇▇▇▇▇▇ that will not be
leased or licensed to Buyer under valid, current leases or license arrangements.
The Purchased Assets are in all material respects adequate for the purposes for
which such assets are currently used or are held for use, and are in reasonably
good repair and operating condition (subject to normal wear and tear) and, to
Sellers' knowledge, except as disclosed in this Agreement, there are no facts or
conditions affecting the Purchased Assets which could, individually or in the
aggregate, interfere in any material respect with the use, occupancy or
operation thereof as currently used, occupied or operated, or their adequacy for
such use.
Section 5.12. Contracts. (a) Schedule 5.12(a) contains a complete and
correct list of all agreements, contracts, commitments and other instruments and
arrangements (whether written or oral) of the types described below (x) by which
any of the Purchased Assets are bound or affected or (y) to which either Fitness
▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ is a party or by which it is bound, in each case in
connection with the Fitness Business or the Purchased Assets (the "Contracts"):
(i) employment, termination, retention, severance,
change-of-control, consulting, agency, collective bargaining or other
similar contracts, agreements, and other instruments and arrangements
relating to or for the benefit of current, future or former employees,
officers, directors, sales representatives, distributors, dealers,
agents, independent contractors or consultants;
(ii) loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit;
(iii) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use of,
any Intellectual Property;
(iv) brokerage or finder's agreements;
17
(v) joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including but not limited to joint
research and development and joint marketing contracts);
(vi) stock purchase agreements, asset purchase agreements and
other acquisition or divestiture agreements, including but not limited
to any agreements relating to the acquisition, sale, lease or disposal
of any Purchased Assets (other than sales of inventory in the ordinary
course of business) or involving continuing indemnity or other
obligations;
(vii) orders and other contracts for the purchase or sale of
materials, supplies, products or services, each of which involves
aggregate payments in excess of $100,000 in the case of purchases or
$250,000 in the case of sales;
(viii) contracts with respect to which the aggregate amount that
could reasonably expected to be paid or received thereunder in the
future exceeds $100,000 per annum or $500,000 in the aggregate;
(ix) sales agency, manufacturer's representative, marketing or
distributorship agreements;
(x) contracts, agreements or arrangements with respect to the
representation of the Fitness Business in foreign countries;
(xi) master lease agreements providing for the leasing of both
(A) personal property primarily used in, or held for use primarily in
connection with, the Fitness Business and (B) other personal property;
(xii) contracts, agreements or commitments with any employee,
director, officer, stockholder or Affiliate of Fitness ▇▇▇▇▇▇▇ or
Medical ▇▇▇▇▇▇▇; and
(xiii) any other contracts, agreements or commitments that are
or will be material to the Fitness Business.
(b) Buyer has been afforded access to complete and correct copies of
all written Contracts, together with all amendments thereto, set forth or
required to be set forth in Schedule 5.12(a).
(c) To Sellers' knowledge, all Contracts are in full force and effect
and enforceable against each party thereto. There does not exist under any
Contract any event of default or event or condition that, after notice or lapse
of time or both, would constitute a violation, breach or event of default
thereunder on the part of either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or, to the
best knowledge of either Fitness ▇▇▇▇▇▇▇ or
18
Medical ▇▇▇▇▇▇▇, any other party thereto except as set forth in Section 5.12(c)
and except for such events or conditions that, individually and in the
aggregate, (i) have not had or resulted in, and will not have or result in, a
Material Adverse Effect and (ii) have not and will not materially impair the
ability of either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ to perform its obligations
under this Agreement and under the Collateral Documents to which it is a party.
Except as set forth in Schedule 5.12(c), no consent of any third party is
required under any Contract as a result or in connection with, and the
enforceability of any Contract will not be affected in any manner by, the
execution, delivery and performance of this Agreement or any of the Collateral
Documents or the consummation of the transactions contemplated hereby and
thereby.
(d) Except as set forth in Schedule 5.12(d), none of the Sellers has
outstanding any power of attorney relating to the Fitness Business except for
customary and limited powers of attorney issued for customs forwarding purposes.
Section 5.13. Territorial Restrictions. Except as set forth on Schedule
5.13, Fitness ▇▇▇▇▇▇▇ is not restricted by any written agreement or
understanding with any other Person from carrying on the Fitness Business
anywhere in the world.
Section 5.14. Inventories. All Inventories are of good, usable and
merchantable quality in all material respects. Except as set forth on Schedule
5.14, (a) all Inventories are of such quality as to meet the quality control
standards of Fitness ▇▇▇▇▇▇▇ and any applicable quality control standards of any
Governmental Body, (b) all Inventories that are finished goods are saleable as
current inventories at the current prices thereof in the ordinary course of
business and (c) all Inventories are recorded on the books of the Fitness
Business at the lower of cost or market value determined in accordance with
GAAP. Schedule 5.14 lists the locations of all Inventories and reflects the book
to physical inventory variance recorded pursuant to the physical inventory taken
on June 1, 1999.
Section 5.15. Customers. Schedule 5.15 sets forth (a) the names of all
customers of the Fitness Business that ordered goods and services with an
aggregate value for each such customer of $100,000 or more during the nine-month
period ended September 30, 1999 and (b) the amount for which each such customer
was invoiced during such period. Neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has
received any notice that any significant customer of the Fitness Business (i)
has ceased, or will cease, to use the products, goods or services of the Fitness
Business, (ii) has substantially reduced or will substantially reduce, the use
of products, goods or services of the Fitness Business or (iii) will reduce the
price it will pay for products, goods or services of the Fitness Business,
including in each case after the consummation of the transactions contemplated
hereby.
19
Section 5.16. Products. (a) Warranties. Buyer has been furnished with
complete and correct copies of the standard terms and conditions of sale for
each of the products or services of the Fitness Business (containing guaranty,
warranty and indemnity provisions). Except as provided under Applicable Law or
as set forth on Schedule 5.16(a), no product manufactured, sold, or delivered
by, or service rendered by or on behalf of, Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇
in connection with the Fitness Business is subject to any guaranty, warranty or
other indemnity, express or implied, beyond such standard terms and conditions.
(b) Product Liability. To Sellers' knowledge, except as set forth on
Schedule 5.5, 5.8 and 5.16(b), neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has
any liability or obligation of any nature (whether known or unknown, accrued,
absolute, contingent or otherwise, and whether due or to become due), whether
based on strict liability, negligence, breach of warranty (express or implied),
breach of contract, infringement or otherwise, in respect of any product,
component or other item manufactured, sold, designed or produced in connection
with the Fitness Business prior to the Closing by, or service rendered prior to
the Closing by or on behalf of, Fitness ▇▇▇▇▇▇▇, Medical ▇▇▇▇▇▇▇ or any
predecessor thereto, that (i) is not adequately covered by policies of insurance
or by indemnity, contribution, cost sharing or similar agreements or
arrangements by or with other Persons, (ii) is not otherwise adequately reserved
against as reflected in the Financial Statement and (iii) will not otherwise be
adequately reserved against.
Section 5.17. Intellectual Property. (a) Title. Schedule 5.17(a)
contains a complete and correct list of all Intellectual Property that is owned
by Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ and primarily related to, used in, held
for use in connection with, or necessary for the conduct of, or otherwise
material to the Fitness Business (the "Owned Intellectual Property"), provided
that the term "Owned Intellectual Property" shall include but Schedule 5.17(a)
need not set forth (i) inventions, trade secrets, processes, formulae,
compositions, know-how, designs and confidential business and technical
information and (ii) Intellectual Property that is both not registered or
subject to application for registration and not material to the Fitness
Business. Fitness ▇▇▇▇▇▇▇ owns or has the exclusive right, other than as noted
on Schedule 5.17(a), to use pursuant to license, sublicense, agreement or
permission all Intellectual Property Assets, free from any Liens (other than
Permitted Liens) and free from any requirement of any past, present or future
royalty payments, license fees, charges or other payments, or conditions or
restrictions whatsoever. The Intellectual Property Assets comprise all of the
Intellectual Property necessary for Buyer to conduct and operate the Fitness
Business as now being conducted by Fitness ▇▇▇▇▇▇▇.
(b) Transfer. Immediately after the Closing, Buyer will own all of the
Owned Intellectual Property and will have a right to use all other Intellectual
Property Assets,
20
free from any Liens (other than Permitted Liens) and on the same terms and
conditions as in effect prior to the Closing, subject to any contrary actions
taken by or against Buyer or conditions or restrictions imposed upon Buyer by
itself or third parties.
(c) No Infringement. To Sellers' knowledge, except as set forth on
Schedule 5.17(c), the conduct of the Fitness Business does not infringe or
otherwise conflict with any rights of any Person in respect of any Intellectual
Property. To the knowledge of the Sellers, none of the Intellectual Property
Assets is being infringed or otherwise used or available for use, by any other
Person.
(d) Licensing Arrangements. Schedule 5.17(d) sets forth all agreements,
arrangements or laws (i) pursuant to which either Fitness ▇▇▇▇▇▇▇ or Medical
▇▇▇▇▇▇▇ has licensed Intellectual Property Assets to, or the use of Intellectual
Property Assets is otherwise permitted (through non-assertion, settlement or
similar agreements or otherwise) by, any other Person and (ii) pursuant to which
either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ has had Intellectual Property relating
to the Fitness Business licensed to it, or has otherwise been permitted to use
Intellectual Property (through non-assertion, settlement or similar agreements
or otherwise). All of the agreements or arrangements set forth on Schedule
5.17(d) (x) are in full force and effect in accordance with their terms and no
default exists thereunder by either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇, or to
the knowledge of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇, by any other party
thereto, (y) are free and clear of all Liens, and (z) do not contain any change
in control or other terms or conditions that will become applicable or
inapplicable as a result of the consummation of the transactions contemplated by
this Agreement. Fitness ▇▇▇▇▇▇▇ has delivered to Buyer true and complete copies
of all licenses and arrangements (including amendments) set forth on Schedule
5.17(d). All royalties, license fees, charges and other amounts payable by, on
behalf of, to, or for the account of, either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇
or the Fitness Business in respect of any Intellectual Property are disclosed in
the Financial Statement.
(e) No Intellectual Property Litigation. Except at set forth on
Schedule 5.17(e), no claim or demand of any Person has been made nor is there
any proceeding that is pending, or to the knowledge of either Fitness ▇▇▇▇▇▇▇ or
Medical ▇▇▇▇▇▇▇, threatened, which (i) challenges the rights of either Fitness
▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ in respect of any Intellectual Property Assets, (ii)
asserts that either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ is infringing or
otherwise in conflict with, or is, except as set forth in Schedule 5.17(d),
required to pay any royalty, license fee, charge or other amount with regard to,
any Intellectual Property, or (iii) claims that any default exists under any
agreement or arrangement listed on Schedule 5.17(d), which default has been
noticed, if required under the applicable agreement or arrangement, and has not
been cured. None of the Intellectual Property Assets is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any court,
arbitrator, or administrative agency, or has been the
21
subject of any litigation within the last eighteen months, whether or not
resolved in favor of either Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇.
(f) Due Registration, Etc. To Sellers' knowledge, the Owned
Intellectual Property has been duly registered with, filed in or issued by, as
be case may be, the United States Patent and Trademark Office, United States
Copyright Office or such other filing offices, domestic or foreign, and Fitness
▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ have taken such other actions, to ensure full
protection under any applicable laws or regulations, and such registrations,
filings, issuances and other actions remain in full force and effect, in each
case to the extent material to the Fitness Business.
(g) Use of Name and ▇▇▇▇. Except as set forth in Schedule 5.17(g),
there are, and immediately after the Closing will be, no contractual restriction
or limitations pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on Buyer's right to use the name and
▇▇▇▇ "▇▇▇▇▇▇▇" in the conduct of the Fitness Business as presently carried on by
Fitness ▇▇▇▇▇▇▇ or as the Fitness Business may be carried on by Buyer after the
Closing.
(h) Year 2000 Compliance. Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ have
conducted an inventory of all Software used in or on behalf of the Fitness
Business as well as the hardware and embedded microcontrollers in non-computer
equipment used by or for the benefit of the Fitness Business (collectively, such
Software, hardware, and other equipment shall be the "Commuter Systems") in
order to determine which parts of the Computer Systems are not Year 2000
Compliant. Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ have developed, funded and
commenced a plan to modify or replace any Computer Systems that are not Year
2000 Compliant and have adequate resources to do so. Based on such review and
plan, the Sellers believe that all Computer Systems are Year 2000 Compliant or
will be Year 2000 Compliant by December 15, 1999. Fitness ▇▇▇▇▇▇▇ and Medical
▇▇▇▇▇▇▇ have also conducted a reasonable investigation into Year 2000 Compliant
status of the operations of materials providers and service providers material
to the Fitness Business. Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ have a reasonable
basis to believe, and do believe, that all such third parties will timely be
Year 2000 Compliant and will be able to continue to conduct business with the
Fitness Business without material disruption. Fitness ▇▇▇▇▇▇▇ and Medical
▇▇▇▇▇▇▇ have provided the Buyer copies of the inventory, Year 2000 Compliance
Plan, a current Year 2000 Compliance status report and other documents related
to the Year 2000 Compliant status of the Fitness Business.
Section 5.18. Environmental Matters. (a) Permits. All Environmental
Permits are identified in Schedule 5.18(a), and either Fitness ▇▇▇▇▇▇▇ or
Medical ▇▇▇▇▇▇▇ currently holds all such Environmental Permits necessary to the
Fitness Business except where the lack of an Environmental Permit would not have
a Material Adverse Effect,
22
and all such Environmental Permits shall be validly transferred to Buyer on the
Closing Date. Neither Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has been notified by
any relevant Governmental Authority that any Environmental Permit will be
modified, suspended, canceled or revoked, or cannot be renewed in the ordinary
course of business.
(b) No Violations. Each of Fitness ▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇ and
their Affiliates has complied and is in compliance in all material respects with
all Environmental Permits and all applicable Environmental Laws pertaining to
the Fitness Business (and the use or transferability thereof) and the Fitness
Business. To Sellers' knowledge, no Person has alleged any violation by either
Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or any of their Affiliates of any
Environmental Permits or any applicable Environmental Law relating to the
conduct of the Fitness Business.
(c) No Actions. Except as set forth in Schedule 5.18(c), neither
Fitness ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ nor any of their Affiliates has caused or
taken any action that has resulted or may result in, or has been or is subject
to, any liability or obligation relating to (i) the environmental conditions on,
under or about the Purchased Assets or other properties or assets owned, leased
or used in connection with, necessary for the conduct of, or otherwise material
to, the Fitness Business, or (ii) the past or present use, management, handling,
transport, treatment, generation, storage or Release of any Hazardous
Substances, except for any such liabilities and obligations that, individually
and in the aggregate, are not material to the Fitness Business and have not had
or resulted in, and will not have or result in, a Material Adverse Effect.
Section 5.19. Employees, Labor Matters, etc. There are no labor
disputes currently subject to any grievance procedure, arbitration or litigation
and there is no representation petition pending or, to the best knowledge of any
Seller after due inquiry, threatened with respect to any employee employed in
the operation of the Fitness Business. Each Seller has materially complied with
all provisions of Applicable Law pertaining to the employment of employees,
including, without limitation, all such Applicable Laws relating to labor
relations, equal employment, fair employment practices, entitlements, prohibited
discrimination or other similar employment practices or acts, except for any
failure so to comply that, individually or together with all such other
failures, has not and will not result in a material liability or obligation on
the part of Buyer or the Fitness Business, and has not had or resulted in, and
will not have or result in, a Material Adverse Effect.
Section 5.20. Employee Benefit Plans and Related Matters. Schedule 5.20
lists each pension, retirement, profit-sharing, deferred compensation, bonus or
other incentive plan or other employee benefit program, arrangement, agreement
or understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan"
23
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (" ERISA"), to which Seller contributes or is a party or is
bound or under which it may have liability and under which employees or former
employees of the Fitness Business (or their beneficiaries) are eligible to
participate or derive a benefit ("Employee Benefit Plans"). Seller has delivered
to the Buyer true, correct and complete copies of all Employee Benefit Plans.
None of the assets of the Fitness Business are subject to any lien in favor of,
or enforceable by, the Pension Benefit Guaranty Corporation. No Employee Benefit
Plan is subject to section 412 of the Code or section 302 or Title IV of ERISA.
Section 5.21. Brokers, Finders, etc. All negotiations relating to this
Agreement, the Collateral Documents, and the transactions contemplated hereby
and thereby, have been carried on without the participation of any Person acting
on behalf of Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ or any of their Affiliates in
such manner as to give rise to any valid claim against Buyer or any of its
subsidiaries for any brokerage or finder's commission, fee or similar
compensation, or for any bonus payable to any officer, director, employee, agent
or sales representative of or consultant to Fitness ▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇
or any of their Affiliates upon consummation of the transactions contemplated
hereby or thereby.
Section 5.22. Disclosure. No representation or warranty by Fitness
▇▇▇▇▇▇▇ or Medical ▇▇▇▇▇▇▇ contained in this Agreement nor any statement or
certificate furnished or to be furnished by or on behalf of Fitness ▇▇▇▇▇▇▇ or
Medical ▇▇▇▇▇▇▇ to Buyer or its representatives in connection herewith or
pursuant hereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact required to make the
statements contained herein or therein not misleading.
Section 5.23. Receivables. All of Fitness Quinton's receivables
(including accounts receivable, loans receivable and advances) which have arisen
in connection with the Fitness Business and which are reflected in the Financial
Statement, and all such receivables which will have arisen since September 30,
1999, shall have arisen only from bona fide transactions in the ordinary course
of business. Neither ▇▇▇▇▇▇▇ nor Medical ▇▇▇▇▇▇▇ has any knowledge of any facts
or circumstances generally which would result in any material increase in the
uncollectability of such receivables as a class in excess of the reserves
therefor set forth on the Financial Statement. Schedule 5.23 hereto accurately
lists as of September 30, 1999, all receivables arising out of or relating to
the Fitness Business in excess of $50,000.00, the amount owing and the aging of
such receivable, the name and last known address of the party from whom such
receivable is owing.
Section 5.24. Purchase of StairMaster Common Stock. (a) Fitness ▇▇▇▇▇▇▇
agrees that it will not, directly or indirectly, offer, transfer, sell, pledge,
hypothecate or
24
otherwise dispose of any of the Shares (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any Shares), except in compliance with
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state securities or "blue sky"
laws.
(b) Legends. Fitness ▇▇▇▇▇▇▇ acknowledges that the certificate or
certificates representing the Shares shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A STOCK SUBSCRIPTION AGREEMENT, DATED AS OF DECEMBER __,
1999, AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED BY IT
ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH STOCK SUBSCRIPTION AGREEMENT AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS
AND MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS (i)(A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE COMPANY AN OPINION
OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF SUCH ACT OR (C) A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL
FOR THE COMPANY, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO REGISTRATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM."
25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1. Representations and Warranties of Buyer. As an inducement
to each Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, as of the date hereof and as of the Closing Date, Buyer
represents and warrants to each Seller that:
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
(b) Authority of Buyer. (a) Buyer has full power and authority to
execute and deliver this Agreement and any Collateral Document to be executed by
it, to perform fully its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby; (b) the execution, delivery
and performance of this Agreement and any Collateral Document to be executed by
Buyer have been duly authorized and approved by Buyer's board of directors and
do not require any further authorization or consent of Buyer or, except for the
waiver of certain preemptive rights, its shareholders; and (c) Buyer has duly
executed and delivered this Agreement and on the Closing Date Buyer will have
duly executed and delivered each Collateral Document to which it is a party.
This Agreement is, and on the Closing Date, each of the Collateral Documents to
which Buyer is a party will be, the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with their respective terms.
(c) No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each of the Collateral Documents that it has executed, and
the consummation of the transactions contemplated hereby and thereby, do not and
will not conflict with or result in a violation of or a default under (with or
without the giving of notice or the lapse of time or both): (i) to Buyer's
knowledge, any Applicable Law applicable to Buyer or any of the properties or
assets of Buyer (other than the Purchased Assets), (ii) the certificate of
incorporation or by-laws or other organizational documents of Buyer or (iii)
except for the consent of lenders required under the Buyer's Credit Facility,
dated as of September 5,1997, as amended, and the waiver of certain preemptive
rights, any contract, agreement or other instrument to which Buyer or any
Affiliate thereof is a party or by which Buyer's, or any of its Affiliates',
properties or assets (other than the Purchased Assets) may be bound or affected.
To Buyer's knowledge, except for Consents under the HSR Act and the consent of
lenders required under the Buyer's Credit Facility, dated September 5, 1997, as
amended, and the waiver of certain preemptive rights, no Consent is required to
be obtained or made by Buyer in connection with the execution and delivery of
this Agreement or any Collateral Documents executed by Buyer or the consummation
of the transactions contemplated hereby or thereby, except for Consents which
have been obtained and except Consents
26
that Buyer would not reasonably expect the failure to obtain to have a Material
Adverse Effect on Buyer's ability to: (x) consummate the transactions
contemplated hereby or by the Collateral Documents or (y) perform its
obligations hereunder or thereunder.
(d) No Finder. Neither Buyer nor any Person acting on its behalf has
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
ARTICLE VII
ACTIONS PRIOR TO THE CLOSING DATE
The parties hereto respectively covenant and agree to take the
following actions between the date hereof and the Closing Date:
Section 7.1. Investigation by Buyer. Medical ▇▇▇▇▇▇▇ and Fitness
▇▇▇▇▇▇▇ shall afford to the employees and authorized representatives of Buyer
(including independent public accountants and attorneys) reasonable access at
times mutually agreeable to Buyer and Sellers to the offices, properties,
employees and business and financial records (including computer files,
retrieval programs and similar documentation) of Fitness ▇▇▇▇▇▇▇ and Medical
▇▇▇▇▇▇▇ to the extent Buyer shall deem necessary, and shall furnish to Buyer or
its authorized representatives such additional information concerning the
Purchased Assets, the Sublease Agreement and Subleased Premises, the Assumed
Liabilities, Consents, the business and the operations of Sellers, and the
Transition Services Agreement, as shall be reasonably requested. No
investigation made by Buyer or its representatives hereunder shall affect in any
way the representations and warranties of Sellers hereunder.
Section 7.2. Preserve Accuracy of Representations and Warranties. Each
of the parties hereto shall refrain from taking any action which would render
any representation or warranty contained in Article V or (vi) of this Agreement
materially inaccurate as of the Closing Date. Each party shall promptly notify
the other of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement.
Section 7.3. Consents of Third Parties. Sellers shall act diligently
and reasonably, and Buyer shall cooperate with Sellers, to attempt to secure,
after a public announcement of the transactions contemplated hereby and before
the Closing Date:
(a) The consent, approval or waiver, in form and substance reasonably
satisfactory to Buyer, from each other Person party to each contract identified
by Sellers in writing prior to the date hereof.
27
(b) To the extent any Consent issued to Medical ▇▇▇▇▇▇▇ or Fitness
▇▇▇▇▇▇▇ necessary for the operation of the Fitness Business is assignable or
transferable, any Consents of any Person (including any Governmental Body)
required to be obtained in order to assign or transfer any such Consents to
Buyer.
(c) Notwithstanding foregoing Sections 7.3(a) and (b): (i) none of the
parties hereto shall have any obligation to offer or pay any consideration in
order to obtain any such Consents or related waivers (except for indemnification
obligations as otherwise provided in Article X), (ii) the Purchase Price shall
not be affected by failure to obtain any such Consents or waivers and (iii)
Sellers shall have no liability or indemnification obligation whatsoever
hereunder except for losses arising out of the failure of each Seller to act
diligently and reasonably (from the date it becomes bound hereby) to assist in
obtaining such Consents or waivers and except for liability an indemnity
obligations arising out of a breach of representation and warranty hereunder.
Section 7.4. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification. Each of Buyer and Sellers,
shall make the filings required to be made by such party under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust Improvements Act of 1976, as amended (the "HSR
Act"), except to the extent such required filings have already been made, and
shall request early termination. Buyer shall be responsible for all filing fees
in connection with the filings required by the HSR Act.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1. Use of Trademarks. After the Closing, neither of the
Sellers will, directly or indirectly, use or do business, and neither of the
Sellers will allow any of their Affiliates to use or do business, or assist any
other Person other than Buyer in using or doing business, under any name or
trademark the same or similar to the trademarks identified in Schedule 5.17(a)
(other than "▇▇▇▇▇▇▇"), which are being transferred to Buyer in connection
herewith. Notwithstanding any other provision hereof, Sellers shall retain
ownership of all rights to the trademarks, servicemarks, and tradenames of
"▇▇▇▇▇▇▇" and "Medtrack," and any variations thereof; provided, however, that
Sellers shall license the right to use the tradename "▇▇▇▇▇▇▇" pursuant to the
terms of the Trademark License.
Section 8.2. Confidentiality. (a) Subject to Section 12.1: (i) neither
Seller shall disclose, and shall not permit any of their Affiliates, or any of
its or their Affiliates', officers, directors, employees or agents
(collectively, the "Seller Parties") to disclose, to any Persons, other than
other parties hereunder, any Buyer Protected Information that is known to any of
the Seller Parties on the Closing Date; and (ii) Buyer shall not disclose,
28
and shall not permit any of its Affiliates, or any of its or its Affiliates',
officers, directors, employees or agents (collectively, the "Buyer Parties") to
disclose, to any Persons, other than other parties hereunder, any Seller
Protected Information that is known to any of the Buyer Parties on the Closing
Date. In the event the transaction contemplated hereby shall not be consummated,
each party will return to the other parties all copies of nonpublic documents
and materials which have been furnished in connection therewith. The obligation
of a party to treat such documents, materials and other information in
confidence shall not apply to any information which such party reasonably deems
necessary to disclose to obtain any Consents contemplated hereby.
(b) Each of the Sellers acknowledges that the Buyer Parties hereto
would be irreparably damaged in the event of a breach or a threatened breach of
any of their respective obligations under this Section 8.2, and agrees (and each
of Medical ▇▇▇▇▇▇▇ and Fitness ▇▇▇▇▇▇▇ shall cause each of their respective
Affiliates to agree) that, in the event of a breach or a threatened breach of
any such obligation, Buyer shall, in addition to any other rights and remedies
available to it in respect of such breach, be entitled to an injunction from a
court of competent jurisdiction granting it specific performance of the
provisions of this Section 8.2. In addition, each of the Buyer Parties
acknowledges that the Sellers hereto would be irreparably damaged in the event
of a breach or a threatened breach of any of their respective obligations under
this Section 8.2, and agrees (and Buyer shall cause each of its Affiliates to
agree) that, in the event of a breach or a threatened breach of any such
obligation, each Seller shall, in addition to any other rights and remedies
available to them in respect of such breach, be entitled to an injunction from a
court of competent jurisdiction granting it specific performance of the
provisions of this Section 8.2.
Section 8.3. Taxes. With respect to taxes relating to or arising out of
the transactions contemplated hereby, any sales tax, use tax, documentary stamp
tax or similar tax attributable to the sale or transfer of the Purchased Assets,
or any tax penalties or interest charges related to the same, shall be borne by
Buyer. Buyer shall timely satisfy or otherwise discharge such taxes and file any
necessary report with respect thereto.
Section 8.4. Delivery of Possession. After the Closing, Sellers shall
promptly take all steps and actions as Buyer may reasonably request to turn over
actual possession and control of the Purchased Assets and, to the extent
required by the Sublease Agreement, the Subleased Premises, and any documents
and information required by Buyer in connection therewith. In addition, subject
to the last sentence of Section 8.5, Sellers shall provide reasonable assistance
including providing information necessary to comply with any rules or
regulations of any Governmental Body or any law relating thereto; provided,
that, Sellers shall have no obligation to expend any amount of funds in
providing such assistance.
29
Section 8.5. Further Assurances. Each of the Parties shall execute and
deliver such other instruments and documents as the other parties hereto may
reasonably request. In furtherance of the foregoing, the Sellers shall (i)
provide reasonable cooperation to Buyer at its request in endeavoring to
promptly obtain licenses, certificates, approvals, authorizations, agreements,
contracts, leases, and other commitments included in the Purchased Assets which
cannot be obtained prior to the Closing, and (ii) use their reasonable efforts
jointly with Buyer to secure to Buyer the benefits thereof in some other manner
where such rights are not transferable or assignable. Notwithstanding the
foregoing and the provisions of Section 8.4, neither of the Sellers shall be
required to expend any amount of funds or more than reasonable amounts of time
(unless reasonably compensated therefor) to carry out the provisions of this
Section 8.5 or Section 8.4.
Section 8.6. Financing. Buyer shall use its commercially reasonable
efforts to obtain sufficient financing to consummate the transactions
contemplated by this Agreement. Buyer agrees to keep Sellers regularly informed
as to its progress with respect to obtaining commercially reasonable financing.
Section 8.7. Non-Solicitation. Prior to any termination of this
Agreement, pursuant to Section 11.1, Sellers agree to deal exclusively with
Buyer with respect to the matters referred to in this Agreement and that they
will not, and they will cause their stockholders, directors and agents not to,
directly or indirectly, entertain, solicit or otherwise encourage any offer or
negotiate or offer to negotiate or enter into any agreement relating to the sale
of the Fitness Business, the stock of Fitness ▇▇▇▇▇▇▇ or any material portion of
the assets of Fitness ▇▇▇▇▇▇▇ or give any potential buyer of the Fitness
Business access to the books, records, facilities, assets and management of the
Fitness business.
Section 8.8. Conduct of Business. From the date hereof to the Closing
Date, except as otherwise disclosed in this Agreement or as expressly permitted
or required by this Agreement or as otherwise consented to by the Buyer in
writing, Sellers will:
(a) carry on the Fitness Business in, and only in, the ordinary course,
in substantially the same manner as heretofore conducted, and use all reasonable
efforts to preserve intact its present business organization, maintain its
properties in good operating condition and repair, keep available the services
of its present officers and significant employees, and preserve its relationship
with customers, and others having business dealings with it, to the end that its
goodwill and going business shall be in all material respects unimpaired
following the Closing;
(b) pay accounts payable and other obligations of the Business when
they become due and payable in the ordinary course of business consistent with
prior practice;
30
(c) as and when they become due, perform in all material respects all
of its obligations under all Contracts and other agreements and instruments
relating to or affecting the Fitness Business or the Purchased Assets, and
comply in all material respects with all Applicable Laws applicable to it, the
Purchased Assets or the Fitness Business;
(d) not enter into or assume any material agreement, contract or
instrument relating to the Fitness Business, or enter into or permit any
material amendment, supplement, waiver or other modification in respect thereof;
and
(e) not grant (or commit to grant) any increase in the compensation
(including incentive or bonus compensation) of any employee employed in the
operation of the Fitness Business or institute, adopt or amend (or commit to
institute, adopt or amend) any compensation or benefit plan, policy, program or
arrangement or collective bargaining agreement applicable to any such employee,
except in the ordinary course of business, consistent with past practice.
Section 8.9. Covenant Not to Compete. (a) Each Seller acknowledges that
the Fitness Business has significant potential for expansion, that Buyer intends
to operate the Fitness Business throughout the world (including, without
limitation, the United States, Canada, Australia, Western Europe and South
America) and that the operation of any same, similar or directly competitive
business by any Seller anywhere in the world would materially detract from the
value of the Fitness Business and the Purchased Assets transferred hereunder.
(b) In furtherance of the sale of the Fitness Business and the
Purchased Assets to Buyer, for a period commencing on the Closing Date and
ending ten years thereafter, no Seller, or QIC Holding Corp. or any subsidiary
thereof, will, directly or indirectly (including, without limitation, as a
shareholder), (i) engage anywhere in the world in any business activity which is
the same, or similar to, or directly competitive with, the Fitness Business now
being conducted by the Sellers, for sale of any product or service now supplied
by Sellers, (ii) use any customer list or other confidential information used in
connection with the Fitness Business for any purpose competitive with the
Fitness Business, or (iii) tamper with or induce any employee, agent,
salesperson, contractor or any customer, supplier, manufacturer or dealer of
Buyer to leave, to stop selling to or stop buying from Buyer or otherwise cease
dealing with Buyer, provided that Sellers and their Affiliates shall not be
prohibited from selling treadmills that are part of a stress test system or are
used for medical or diagnostic testing in the Territory.
(c) Each Seller acknowledges that the covenants contained in this
Section 8.9 were a material and necessary inducement for the Buyer to agree to
the transactions contemplated hereby, that each Seller realized significant
monetary benefit from these
31
transactions, that violation of any of the covenants contained in this Section
8.9 will cause irreparable and continuing damage to Buyer, that Buyer shall be
entitled to injunctive or other equitable relief from any court of competent
jurisdiction restraining any further violation of such covenants and that such
injunctive relief shall be cumulative and in addition to any other rights or
remedies to which Buyer may be entitled.
(d) In case any one or more of the terms or provisions contained in
this Section 8.9 shall for any reason be held invalid, illegal or unenforceable,
such invalidity, illegality or unenforceability shall not affect any other terms
or provisions hereof, but such term or provision shall be deemed modified or
deleted as or to the extent required by applicable law, and such modification or
deletion shall not affect the validity of the other terms or provisions of this
Section 8.9. In addition, if any one or more of the restrictions contained in
this Section 8.9 shall for any reason be held to be unreasonable with regard to
time, duration, geographic scope or activity, the parties contemplate and hereby
agree that such restriction shall be modified and shall be enforced to the
extent compatible with applicable law.
ARTICLE IX
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER, MEDICAL ▇▇▇▇▇▇▇ AND FITNESS ▇▇▇▇▇▇▇
Section 9.1. Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Buyer) on or prior to the Closing Date of the
following conditions, which conditions Sellers agree to use reasonable good
faith efforts to cause to be fulfilled:
(a) Representations, Performance, etc.
(i) The representations and warranties of Sellers contained in Article
V shall be true and correct in all respects (in the case of any representation
or warranty containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without any materiality
qualification) as of the Closing Date with the same effect as though made at and
as of such time;
(ii) Each Seller shall have in all material respects duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date; and
(iii) Each Seller shall have delivered to Buyer a certificate dated the
Closing Date and signed by its President or one of its Vice Presidents to the
effect set forth above in this Section 9.1(a):
32
(b) Termination of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Waiting Period. The applicable
waiting period, including any extension thereof, under the HSR Act shall have
expired or been terminated, and neither the Department of Justice nor the
Federal Trade Commission shall have instituted any proceeding or litigation to
enjoin or delay the consummation of the transactions contemplated hereby;
(c) No Restraint or Litigation. No action, suit, investigation or
proceeding shall have been instituted, which has not been dismissed, by a third
party to restrain or prohibit or otherwise challenge the legality or validity of
the transactions contemplated hereby;
(d) Consents. Sellers shall have obtained, assigned and delivered to
Buyer (x) the consent of Monark Exercise AB to the assignment to Buyer of the
Distribution Agreement with Monark Exercise AB, dated June 30, 1999 and (y) all
other Consents reasonably necessary to operate the Fitness Business;
(e) Collateral Documents. Each Seller shall have entered into and
delivered each of the Collateral Documents to which it is intended to be party;
(f) Filings. Sellers shall have obtained duly executed UCC-3 statements
in form and substance reasonably satisfactory to Buyer and its counsel, as shall
be effective to vest in Buyer valid and marketable title to the Purchased
Assets, free and clear of any liens and encumbrances other than liens and
encumbrances created by Buyer and the Permitted Liens listed in clauses (a) and
(b) of the definition of such term;
(g) Assignment of Patents and Patent Applications. An assignment of the
patents and patent applications listed on Schedule 5.17(a) pursuant to
reasonably acceptable form(s) prepared by Buyer for filing with the U.S. Patent
and Trademark Office.
(h) Opinions of Counsel. Buyer shall have received an opinion,
addressed to it and dated the Closing Date, of ▇▇▇▇▇▇ Radovsky ▇▇▇▇▇▇▇ & Share
LLP, special counsel to Sellers, in the form of Exhibit I;
(i) Secretary's Certificate. Each Seller shall have delivered to Buyer
a certificate of its secretary, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to incumbency and signatures of its
officers executing this Agreement and any Collateral Document that such Seller
has executed; and
(j) Section 1445 Tax Certificate. A certificate pursuant to Internal
Revenue Service Code Section 1445, executed by each Seller, indicating that it
is not a foreign Person.
33
(k) No Material Adverse Change. No event, occurrence, fact, condition,
change, development or effect shall have occurred, exist or come to exist since
the date of this Agreement that, individually or in the aggregate, has
constituted or resulted in, or could reasonably be expected to constitute or
result in a Material Adverse Effect on the value of the Purchased Assets taken
as a whole.
(l) Financing. Buyer shall have obtained funds sufficient, after using
its commercially reasonable efforts to do so, to enable Buyer to consummate the
transactions contemplated by this Agreement on such terms as are satisfactory to
Buyer.
(m) Purchase of Common Stock of StairMaster Holding, Inc. Fitness
▇▇▇▇▇▇▇ shall have executed and delivered the Stock Subscription Agreement.
(n) Satisfactory Review. Buyer and its accountants, legal counsel and
other authorized representatives shall have been given reasonable and
appropriate access to and been permitted to review the assets, books and records
and to interview the management of the Sellers and such other information as
shall have been reasonably requested by Buyer, in order that Buyer may have the
opportunity to make such investigation as it shall desire to make of the affairs
and the assets of the Fitness Business, and Buyer shall be satisfied with the
results thereof.
(o) Washington State Tax Exemption Certificate. Sellers shall have
executed and delivered a resale exemption certificate indicating those assets
which constitute inventory or other assets held for resale, a manufacturing
equipment exemption certificate with respect to manufacturing equipment, and
such other certificates with respect to exemptions to Washington State sales and
transfer taxes as Buyer may reasonably request.
Section 9.2. Conditions to Obligations of Sellers. The obligation of
each Seller to consummate the transactions contemplated hereby shall be subject
to the fulfillment (or waiver by such Seller), on or prior to the Closing Date,
of the following conditions, which the Buyer agrees to use reasonable good faith
efforts to cause to be fulfilled:
(a) Representations, Performance, etc.
(i) The representations and warranties of Buyer contained in Article VI
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) as of the Closing Date, with the same effect as though made at
and as of such time;
34
(ii) Buyer shall have in all material respects duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date; and
(iii) Buyer shall have delivered to Sellers a certificate dated the
Closing Date and signed by its President or a Vice President to the effect forth
above in this Section 9.2(a);
(b) Termination of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Waiting Period. The applicable
waiting period, including any extension thereof, under the HSR Act shall have
expired or been terminated, and neither the Department of Justice nor the
Federal Trade Commission shall have instituted any proceeding or litigation to
enjoin or delay the consummation of the transactions contemplated hereby;
(c) No Restraint or Litigation. No action, suit, investigation or
proceeding shall have been instituted, which has not been dismissed, by a third
party to restrain or prohibit or otherwise challenge the legality or validity of
the transactions contemplated hereby;
(d) Collateral Documents. Buyer shall have entered into and delivered
each of the Collateral Documents to which it is intended to be a party;
(e) Opinions of Counsel. Sellers shall have received an opinion,
addressed to it and dated the Closing Date, of Debevoise & ▇▇▇▇▇▇▇▇, special
counsel to Buyer, in the form described at Exhibit J;
(f) Secretary's Certificate. Buyer shall have delivered to Sellers a
certificate of its secretary, dated the Closing Date, in form and substance
reasonably satisfactory to Sellers, as to incumbency and signatures of the
officers of Buyer executing this Agreement and any Collateral Document executed
by it; and,
(g) Stock Subscription Agreement and Registration Rights Agreement.
StairMaster Holding, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ Partners II, L.P. and ▇▇▇▇ ▇▇▇▇▇▇▇▇
Partners II - Parallel Fund, L.P. shall have executed and delivered the Stock
Subscription Agreement and an amendment to the Registration Rights Agreement
adding Fitness ▇▇▇▇▇▇▇ and its permitted assignees as a party thereto.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification by Sellers. The Sellers, jointly and
severally, covenant and agree to defend, indemnify and hold harmless Buyer, its
officers, directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Buyer
35
Indemnitees") from and against, and pay or reimburse Buyer Indemnitees for, any
and all claims, demands, liabilities, obligations, losses, fines, costs,
expenses, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of their respective rights hereunder (collectively, "Losses",
and, individually, a "Loss") incurred or suffered by Buyer, in connection with,
resulting from or arising out of:
(a) any inaccuracy of any representation or warranty made by any Seller
herein or under any Collateral Document which it has executed and delivered
(without reference to any qualifications as to knowledge or materiality);
(b) any failure of Sellers to perform any covenant or agreement
hereunder or under any Collateral Document executed and delivered by it;
(c) any Excluded Liabilities or Excluded Assets;
(d) subject to Section 10.3(c) ownership of the Purchased Assets or
operation of the Fitness Business for the period prior to the Closing Date; or
(e) any failure to comply with any applicable bulk sales law.
Section 10.2. Sellers Indemnity Limitations.
(a) Survival. The indemnification provided for: (i) in Section 10.1(a)
shall survive for a period of eighteen months from the Closing Date; (ii) in
Section 10.1(e) shall survive for the applicable statute of limitations period;
and (iii) in Sections 10.1(b), 10.1(c) and 10.1(d) shall not expire.
(b) Deductibles and Threshold. Notwithstanding any other provision
hereof, the Sellers shall not have any obligation under Section 10.1(a) to any
indemnified party thereunder until the Losses arising therefrom exceed $250,000
in the aggregate (the "Aggregate Threshold"). The Buyer shall be liable under
Section 10.1(a) for all losses up to the Aggregate Threshold without any right
to indemnification or damages from the Sellers for such amounts.
(c) Aggregate Liability. The aggregate liability of the Sellers
(including the liability of any successor, assign, or Affiliate thereto, if any)
for all claims and Losses under Sections 10.1(a) and 10.1(e), together, shall
not exceed $2,000,000.
Section 10.3. Indemnification by Buyer. Buyer covenants and agrees to
defend, indemnify and hold harmless each Seller, its respective officers,
directors, employees,
36
agents, advisers, representatives and Affiliates (collectively, the "Seller
Indemnitees") from and against any and all Losses incurred or suffered by any
Seller in connection with, resulting from or arising out of:
(a) any inaccuracy of any representation or warranty made by Buyer
herein or under any Collateral Document executed and delivered by Buyer (without
reference to any qualifications as to knowledge or materiality);
(b) any failure of Buyer to perform any covenant or agreement hereunder
or under any Collateral Document executed and delivered by Buyer;
(c) any Assumed Liabilities; or
(d) ownership of the Purchased Assets or operation of the Fitness
Business on or after the Closing Date except to the extent such Losses result
from or arise out of the Excluded Liabilities or constitute Losses for which
Sellers are required to indemnify Buyer under Section 10.1 and except to the
extent such Losses result from a breach by Seller of its obligations under the
Transition Services Agreement.
Section 10.4. Buyer's Indemnity Limitations.
(a) Survival. The indemnification provided for: (i) in Section 10.3(a)
shall survive for a period of eighteen months from the Closing Date; and (ii) in
Section 10.3(b), 10.3(c) and 10.3(d) shall not expire.
(b) Deductibles and Threshold. Notwithstanding any other provision
hereof, Buyer shall not have any obligation under Section 10.3(a) to Sellers
thereunder until the Losses arising therefrom exceed the Aggregate Threshold.
The Sellers shall be liable under Section 10.3(a) for all losses up to the
Aggregate Threshold without any right to indemnification or damages from Buyer
for such amounts.
(c) Aggregate Liability. The aggregate liability of Buyer (including
the liability of any successor, assign, or Affiliate thereto, if any) for all
claims and Losses under Section 10.3(a), shall not exceed $2,000,000.
Section 10.5. Indemnification Procedures. In the case of any claim
asserted by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), written notice shall be given by the
Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and the Indemnified Party
shall permit the Indemnifying Party (at the expense of such Indemnifying Party)
to assume the defense of any claim or any litigation resulting
37
therefrom; provided that (i) the counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be reasonably satisfactory
to the Indemnified Party, (ii) the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and (iii) the omission by any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its indemnification obligation under this Agreement except
to the extent that such omission results in such Indemnifying Party being
damaged as a result of such failure to give notice. Except with the prior
written consent of the Indemnified Party, no Indemnifying Party, in the defense
of any such claim or litigation, shall consent to entry of any judgment or enter
into any settlement that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation. In the
event that the Indemnified Party may have available to it one or more defenses
or counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto or the claim or litigation is likely to have a material adverse
effect on the Indemnified Party, if determined adversely to such Indemnified
Party, the Indemnified Party shall have the right at all times to take over and
assume control over the defense, settlement, negotiations or litigation relating
to any such claim at the sole cost of the Indemnifying Party (subject to
Sections 10.1, 10.2, 10.3 and 10.4), provided that if the Indemnified Party does
so take over and assume control, the Indemnified Party shall not settle such
claim or litigation without the written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. In the event that the Indemnifying
Party does not accept the defense of any matter as above provided, the
Indemnified Party shall have the full right to defend against any such claim or
demand and shall be entitled to settle or agree to pay in full such claim or
demand. In any event, the Indemnifying Party and the Indemnified Party shall
reasonably cooperate in the defense of any claim or litigation subject to this
Section 10.5 and the records of each shall be reasonably available to the other
with respect to such defense.
Section 10.6. Sole and Exclusive Remedy. The provisions of this Article
X shall provide the sole and exclusive remedy of all Buyer Indemnitees and
Seller Indemnitees for breach of any provisions of this Agreement or any untrue
representation or warranty with respect to any matter within the scope or
addressed by Sections 10.1(a), (b), (c), (d) or (e) or 10.3(a), (b), (c), or
(d), without reference to any limitations imposed on such indemnification rights
under Section 10.2 or 10.4 (i.e., assuming no Aggregate Threshold, no aggregate
liability, and no time limited existed on the bringing of such claim); except
with respect to injunctive relief. In furtherance of the foregoing, the parties
hereto hereby irrevocably waive their right to bring an action for damages or to
enforce any other rights or claims whatsoever with respect to matters so
addressed by Sections 10.1(a), (b), (c), (d) and (e) and 10.3(a), (b), (c) or
(d), except as expressly set
38
forth in this Article X and except for claims with respect to the Collateral
Documents. In the event an Indemnified Party becomes entitled to assert a claim
for indemnification under Section 10.1 or 10.3, as applicable, regardless of the
nature of the Loss, any action on the claim shall be commenced within one year
after the date on which the Indemnified Party first had actual knowledge of the
occurrence or existence of the claim, and if an action thereon is not commenced
within such one year period, such claim shall thereafter be forever barred and
the Indemnifying Party shall have no further indemnification obligation with
respect to such Loss.
Section 10.7. Tax Treatment of the Indemnity Payments. The parties
agree that any indemnity payment made under this Article X shall be treated as
an adjustment to the Purchase Price for Tax purposes unless otherwise required
by law.
ARTICLE XI
TERMINATION
Section 11.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Buyer, on the one hand, and Fitness
▇▇▇▇▇▇▇ and Medical ▇▇▇▇▇▇▇, on the other hand; or
(b) by Buyer, Medical ▇▇▇▇▇▇▇ or Fitness ▇▇▇▇▇▇▇, if the Closing shall
not have occurred on or before December 17, 1999.
Section 11.2. Notice of Termination. Any party terminating this
Agreement pursuant to Section 11.1 shall give prompt written notice of such
termination to the other party to this Agreement.
Section 11.3. Effect of Termination. In the event that this Agreement
shall be terminated prior to the Closing pursuant to Section 11.1, all further
obligations of the parties under this Agreement (other than Sections 8.2, 12.1
and 12.7) shall be terminated without further liability of any party to the
other.
Section 11.4. Liquidated Damages. Notwithstanding anything contained
herein to the contrary, if the Closing has not occurred prior to December 17,
1999 for any reason other than because the conditions set forth in Section 9.1
(other than clauses (l) or (n) thereof) have not been fulfilled, within ten (10)
days of demand therefor Buyer shall pay to Medical ▇▇▇▇▇▇▇, as liquidated
damages and not as a penalty, and as the sole and exclusive remedy for such
failure, $l,000,000. The parties acknowledge that in the event
39
of such a failure to close the transaction, the damages to Sellers would be
significant but extremely difficult or impractical to determine. Therefore, the
parties acknowledge that, after negotiation, they have agreed on the above
amount as a reasonable estimate of Sellers' damages. If Buyer should challenge
the applicability on efficacy of this provision, Sellers shall be entitled to
any and all other damages and remedies otherwise provided by law.
/s/ HB /s/ MB /s/ MB
------------------------ ------------------------- -------------------------
Buyer's Initials Fitness Quinton's Medical Quinton's
Initials Initials
ARTICLE XII
GENERAL PROVISIONS
Section 12.1. No Public Announcement. Prior to the Closing, no party
hereto shall, and each party hereto shall to the extent possible ensure that
none of its Affiliates shall, without the prior written approval of the other
parties hereto make any press release or other public announcement concerning
the transactions contemplated by this Agreement or take any other action that
would result in the disclosure of such matters, except as and to the extent that
any such party shall be so obligated by law or court or administrative order (in
which case the party obligated to make such disclosure shall advise the other
parties hereto in advance). The parties hereto shall use their best efforts to
cause a mutually agreeable release or announcement to be issued in the event:
(a) a disclosure prior to Closing is required to be made by law or court or
administrative order or (b) any party hereto reasonably wishes to make an
announcement to its employees or to the public generally.
Section 12.2. Notices. All notices, waivers, consents, approvals or
other communications required or permitted hereunder shall be in writing and
shall be deemed given or delivered when delivered personally or by recognized
overnight courier, or by facsimile, (in each case during regular business hours
on a business day), or shall be deemed given on the third business day after
sending when sent by registered or certified mail, addressed as follows:
If to Buyer, to:
StairMaster Sports/Medical Products, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇ ▇▇▇▇▇▇
President & CEO
with a copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Medical ▇▇▇▇▇▇▇, to:
▇▇▇▇▇▇▇ Instrument Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇ Radovsky ▇▇▇▇▇▇▇ & Share LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Fitness ▇▇▇▇▇▇▇, to:
▇▇▇▇▇▇▇ Fitness, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇ Radovsky ▇▇▇▇▇▇▇ & Share LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
Section 12.3. Successors and Assigns. A party's rights under this
Agreement shall not be assignable without the written consent of the other
parties hereto. This Agreement, including the indemnification provisions set
forth in Article X, shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any Person other than the parties and their successors and permitted
assigns any right, remedy or claim under or by reason of this Agreement and this
Agreement shall not be interpreted or enforced as a third-party beneficiary
contract.
Section 12.4. Entire Agreement: Amendments, etc. This Agreement and the
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, may not be contradicted by evidence
of any prior or contemporaneous agreement and supersede all prior agreements,
understandings or letters of intent or among any of the parties hereto,
including any letter of intent. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by each of the parties hereto
or its successor in interest. The rights and remedies herein are cumulative with
and not exclusive of any rights or remedies that any party may otherwise have at
equity to seek an injunction or specific performance. The rights and remedies of
any party based upon, arising out of, or otherwise in respect of any inaccuracy
or breach or any representation, warranty, covenant or agreement or failure to
fulfill any condition shall in no way be limited by the fact that the act,
omission, concurrence or other state of facts upon which any claim of any
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach.
Section 12.5. Interpretation. Article titles and section headings
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement. The
Exhibits and Schedules attached and referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein.
Section 12.6. Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for
42
the purposes of this Agreement if, as to any party, it is authorized in writing
by an authorized representative of such party. The failure of any party hereto
to enforce at any time any provision of this Agreement shall not be construed to
be a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach.
Section 12.7. Expenses. Each party hereto will pay (whether or not the
transactions contemplated hereby shall be consummated) all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
Section 12.8. Execution in Counterparts. This Agreement may be executed
by facsimile and in one or more counterparts, each of which shall be considered
an original instrument, but all of which shall be considered one and the same
agreement.
Section 12.9. Governing Law. This Agreement shall be governed by and
construed in accordance, including as to validity, interpretation and effect,
with the internal laws of the State of Washington, without giving effect to the
conflicts of laws rules thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
▇▇▇▇▇▇▇ INSTRUMENT COMPANY ▇▇▇▇▇▇▇ FITNESS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------ ---------------------------------
Its President Its President
STAIRMASTER SPORTS/MEDICAL
PRODUCTS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
Its President
44
