ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of November 10,
1998, by and among Direct Focus, Inc., a Washington corporation ("Buyer"), Delta
Woodside Industries, Inc., a South Carolina corporation ("Delta Woodside"),
Alchem Capital Corporation, a Delaware corporation ("Alchem"), and Nautilus
International, Inc., a Virginia corporation (the "Company"). Delta Woodside,
Alchem and the Company are referred to collectively herein as "Sellers."
RECITALS
WHEREAS, the Company is a direct wholly-owned subsidiary of Alchem and an
indirect wholly-owned subsidiary of Delta Woodside; and
WHEREAS, the Company is engaged in the business of manufacturing,
marketing and distributing fitness products and accessories and licensing of
certain trademarks and other intellectual property (the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which Buyer will
purchase substantially all of the assets of the Company and certain assets owned
by Alchem.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the parties agree as follows:
AGREEMENT
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED ASSETS" -- as defined in Section 2.1.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.6.
"APPLICABLE CONTRACT" -- any Contract (a) under which the Company or any
of its Subsidiaries has or may acquire any rights, (b) under which the Company
or any of its Subsidiaries has or may become subject to any obligation or
liability, or (c) by which the Company or any of its Subsidiaries or any of the
assets owned or used by it is or may become bound.
"AUDITED FINANCIAL STATEMENTS" -- as defined in Section 5.8.
"BALANCE SHEET" -- as defined in Section 5.8.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; PROVIDED, HOWEVER, that an obligation to
use Best Efforts under this Agreement does not
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require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions or that would require such Person to incur any
material cost.
"XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT" -- as defined in
Section 2.5(a)(i).
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any other occurrence or circumstance that is or was inconsistent with
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach, failure, occurrence, or
circumstance.
"BUSINESS" -- as defined in the recitals of this Agreement.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.4.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"COMPANY" -- as defined in the first paragraph of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CLOSING FINANCIAL STATEMENTS" -- as defined in Section 2.6.
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Acquired Assets by the Company and Alchem to
Buyer;
(b) the execution, delivery, and performance of the Escrow Agreement;
(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Acquired Assets.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 10.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
Final 11/10/98 2
"ENCUMBRANCE" -- any charge, claim, community property interest,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous
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characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to the Environment.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" -- as defined in Section 2.5.
"EXCLUDED ASSETS" -- as defined in Section 2.1.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company or any of its
Subsidiaries and any buildings, plants, structures, or equipment (including
motor vehicles, tank cars, and rolling stock) currently or formerly owned or
operated by the Company or any of its Subsidiaries.
"GAAP" -- generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in the first sentence of Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
franchise, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
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(e) body legally exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may adversely affect the value of the Facilities or the
Acquired Assets.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR ACT" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.22.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code
or any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of
a particular fact or other matter if any individual who is currently serving as
a director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"NONCOMPETITION AGREEMENT" -- as defined in Section 2.5(a)(v).
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"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons of a similar size as
such Person that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"OWNED PROPERTY" -- as defined in Section 2.1(a).
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company or
partnership, joint venture, estate, trust, association, organization, labor
union, or other entity or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
Final 11/10/98 6
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general, partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SUBSIDIARY"-- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency
Final 11/10/98 7
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee, or payable as a result of
transferee liability, or payable as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise payable
through operation of law.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF ACQUIRED ASSETS; CLOSING
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date the Company and Alchem (to the
extent Alchem immediately prior to the Closing owns any portion of the
Intellectual Property Assets) will sell, convey, transfer, assign and deliver to
Buyer all of the Company's right, title and interest in and to all of the
assets, rights, properties and goodwill of the Company (including without
limitation the Marks and Patents to be transferred by Alchem to the Company
prior to the Closing) of every kind and description, wherever located, used in
or relating to the Business other than the assets and property listed on
Schedule 2.1 (the "Excluded Assets")(the assets, rights, properties and goodwill
so acquired, the "Acquired Assets"). The Acquired Assets include, without
limitation, the following assets, rights, properties and goodwill of the Company
(unless they are Excluded Assets):
(a) all real property, leaseholds and subleaseholds therein,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenances thereto, including, without limitation, the real property
(including all buildings, improvements and structures located thereon and all
rights, privileges, easements and appurtenances thereto)
Final 11/10/98 8
located at Independence, Virginia and Huntersville, North Carolina described on
Schedule 2.1(a) (the "Owned Property");
(b) all tangible personal property, including, without limitation,
furnishings, furniture, office supplies, vehicles, rolling stock, tools,
machinery, equipment, and computer equipment (including software);
(c) all inventory, including without limitation, raw materials,
work-in process, finished goods, packaging materials, spare parts and supplies;
(d) all Intellectual Property Assets, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringement thereof, and rights to protection of
interests therein under the laws of all jurisdictions;
(e) the Contracts listed on Schedule 2.1(e), Applicable Contracts that
involve the performance of services or delivery of goods or materials by one or
more of the Company and its Subsidiaries entered into in the Ordinary Course of
Business, and such Contracts entered into by the Company after the date of this
Agreement and prior to the Closing Date as Buyer expressly elects to acquire at
Closing by written addendum to this Agreement;
(f) all Governmental Authorizations, franchises, approvals, permits,
licenses, orders, registrations, certificates, variances and similar rights
obtained from any Governmental Body;
(g) all books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, surveys, title
policies, creative materials, advertising and promotional materials, studies,
reports, product information, employment records and files and all other
information and/or data;
(h) all accounts and other receivables;
(i) all claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment, including without limitation the actions listed on Schedule 2.1 (i);
(j) all telephone, telex and telecopier numbers and all existing
listings in all telephone books and directories; and
(k) all warranties and guaranties received from vendors, suppliers or
manufacturers.
2.2 NONASSUMPTION OF LIABILITIES; OBLIGATIONS ASSUMED. Except as
expressly set forth in this Agreement, the sale and conveyance of the Acquired
Assets hereunder shall be free and clear of any and all claims, liabilities,
security interests, liens, mortgages, pledges, encumbrances, charges, equities,
options, restrictive agreements or assessments of any kind whatsoever. Buyer is
not assuming, nor shall it be deemed to
Final 11/10/98 9
assume, any liabilities of Sellers of any nature whatsoever, whether accrued,
absolute, contingent or otherwise and whether known or unknown; except Buyer
shall assume as of the Closing Date (a) the Company's obligations under the
Contracts described in Section 2.1(e) and all Governmental Authorizations
assigned to Buyer to be performed from and after the Closing Date, but only to
the extent that such obligations do not arise out of any default or breach by
the Company of any such Contract or any such Governmental Authorization or any
term thereof, (b) the Company's trade accounts payable as of the Closing Date
incurred in the Ordinary Course of Business as and to the extent set forth on
the Closing Financial Statements, (c) the Company's "other accrued expenses"
(excluding the "accrued loss on receivables") as of the Closing Date incurred in
the Ordinary Course of Business, as and to the extent set forth on the Closing
Financial Statements, (d) accrued employee compensation as and to the extent set
forth in the Closing Financial Statements, and (e) any counterclaim in any legal
action listed in Schedule 2.1 (i).
2.3 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Acquired Assets will be
Sixteen Million Dollars ($16,000,000), plus the Adjustment Amount, plus the
liabilities assumed by Buyer pursuant to Section 2.2 hereof.
2.4 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
take place at the offices of Delta Woodside Industries, Inc. in Greenville,
South Carolina, at 10:00 am. (local time) on the date that is such date agreed
to by the parties that is no later than five (5) business days after the
satisfaction or waiver of the conditions set forth in Sections 7.3, 7.7 and
8.3, or at such other time and place as the parties may agree. Subject to the
provisions of Section 9, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.4 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
2.5 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver, or cause to be delivered, to Buyer:
(i) a xxxx of sale, assignment and assumption agreement in form
reasonably acceptable to Buyer and Sellers (the "Xxxx of Sale, Assignment and
Assumption Agreement");
(ii) warranty deeds in recordable form for the Owned Property
that is owned by the Company;
(iii) such other instruments of transfer and documents as Buyer
may reasonably request;
(iv) an affidavit in form and substance reasonably satisfactory
to Buyer, duly
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executed and acknowledged, certifying that none of Sellers is a foreign person
within the meaning of Section 1445(f)(3) of the Code, and any corresponding
affidavit required for state tax purposes;
(v) a noncompetition agreement in the form of Exhibit
2.5(a)(v), executed by Sellers (the "Noncompetition Agreement"); and
(vi) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all material respects as of the date of this Agreement
and is accurate in all material respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by Sellers to Buyer prior to the Closing Date in accordance
with Section 5.5); and
(b) Buyer will deliver to Sellers:
(i) Thirteen Million Dollars ($13,000,000) by wire transfer to
an account specified by Sellers;
(ii) the sum of Three Million Dollars ($3,000,000), which the
Buyer will deliver, on behalf of the Company, to the escrow agent referred to in
Section 2.5(c) (the "Escrow Agent") by bank cashier's or certified check;
(iii) the Xxxx of Sale, Assignment and Assumption Agreement; and
(iv) a certificate executed by Buyer representing and warranting
to Sellers that each of Buyer's representations and warranties in this Agreement
was accurate in all material respects as of the date of this Agreement and is
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
(c) Buyer and Sellers will enter into an escrow agreement in the form
of Exhibit 2.5(c) (the "Escrow Agreement") with a mutually agreeable financial
institution ____________.
The parties agree that the amount delivered to the Escrow Agent pursuant to
Section 2.5 (b) (ii) constitutes funds of the Company, received by the Company
as a portion of the Purchase Price, that are delivered to the Escrow Agent on
behalf of the Company to provide the Buyer with assurance of certain payments
that may become due to the Buyer from the Company, as provided in the Escrow
Agreement.
2.6 ADJUSTMENT AMOUNT; ADJUSTMENT PROCEDURE
(a) The Adjustment Amount (which may be a positive or negative number)
will be determined in accordance with this Section 2.6. Sellers will prepare and
will cause KPMG Peat Marwick, the Company's certified public accountants, to
audit consolidated financial statements ("Closing Financial Statements") of the
Company as of the Closing Date and for the period from the date of the Balance
Sheet through the Closing Date. The Company will deliver the Closing Financial
Statements to Buyer and Sellers within sixty (60) days after the
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Closing Date. The Closing Financial Statements will be used to compute the
Adjustment Amount, which shall be equal to the excess of (A) the excess of (i)
the sum of the Company's accounts receivable (excluding financed notes), net of
associated allowance for doubtful accounts, inventory and prepaids and other
current assets, over (ii) the sum of accounts payable, accrued employee
compensation, other accrued expenses (excluding the accrued loss on sale of
receivables) and Reserves (as defined below), over (B) $4,009,000. For purposes
of this Section 2.6(a), Reserves shall be defined as the sum of (x) to the
extent not taken into account in determining other accrued expenses in the
Closing Financial Statements, an additional product warranty reserve in the
amount of $300,000, and (y) to the extent not taken into account in determining
inventory in the Closing Financial Statements, an additional reserve for
cardio-equipment and other slow-moving and obsolete inventory in the amount of
$1,000,000. The parties agree that Exhibit 2.6(a) sets forth the methodology
used to calculate the $4,009,000 amount. The Adjustment Amount will be
determined mutually by Sellers and Buyer, reasonably and in good faith and
using their respective best efforts on the basis of the Closing Financial
Statements.
(b) If the Adjustment Amount is a positive number (i.e., the amount
determined under clause 2.6(a)(A) exceeds $4,009,000), Buyer will pay the
Adjustment Amount to the Company; if the Adjustment Amount is a negative number
(i.e., the amount determined under clause 2.6(a)(A) is less than $4,009,000),
then first, the Escrow Agent shall pay the Adjustment Amount to Buyer and the
Escrow Amount will be reduced accordingly, and, second, if the Adjustment Amount
exceeds the Escrow Amount, Sellers will pay, or cause to be paid, such excess to
Buyer. All payments will be made on the tenth business day following the final
determination by Sellers and Buyer (or the arbitrator, if paragraph (c) below
applies) of the Adjustment Amount, together with interest at 10% compounded
daily beginning on the Closing Date and ending on the date of payment. Payments
must be made in immediately available funds. Payments to the Company must be
made in the manner set forth in Section 2.5(b)(i). Payments to Buyer must be
made by wire transfer to such bank account as Buyer will specify.
(c) In the event that by the 30th day following delivery of the
Closing Financial Statements Sellers and Buyer have not agreed on the Adjustment
Amount and delivered the notice provided for in Section 3(a) of the Escrow
Agreement, determination of the Adjustment Amount shall be resolved by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Arbitration shall be by a single arbitrator experienced
in financial accounting matters and selected by Buyer and Sellers in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration shall be held in such place in Richmond, Virginia as may be
specified by the arbitrator (or any place agreed to by Buyer, Sellers and the
arbitrator). The decision of the arbitrator shall be final and binding as to the
Adjustment Amount; provided, however, if necessary, such decision may be
enforced by either the Buyer or Sellers in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. The determination of which party or parties bears the costs and
expenses (including reasonable attorneys' fees) incurred in connection with any
such arbitration proceeding shall be made by the arbitrator on the basis of the
arbitrator's assessment of the relative merits of the parties' positions.
Final 11/10/98 12
2.7 TAX ALLOCATION
Sellers shall allocate the Purchase Price to broad categories
constituting components of the Acquired Assets and the noncompetition Agreement
in accordance with the allocation adopted by Buyer following Closing. Buyer and
Sellers shall report the purchase and sale of the Acquired Assets in accordance
with such allocation for all Tax purposes (including the filing of the forms
prescribed under Section 1060 of the Code and the Treasury Regulations
promulgated thereunder), but such allocation shall not constrain reporting for
other purposes.
2.8 SALES AND USE TAX
Buyer and Sellers shall cooperate in preparing, executing and filing
sales and use Tax returns relating to the purchase and sale of the Acquired
Assets, and at the Closing, Buyer shall pay, or cause to be paid, any and all
sales, real estate, transfer or use Tax due with regard to the purchase and sale
of the Acquired Assets. To the extent such Taxes cannot be accurately computed
at the Closing, Buyer shall pay, or cause to be paid, such Taxes when they are
due. Such Tax Returns shall be prepared in a manner that is consistent with the
allocation of the Purchase Price contemplated by Section 2.7. Buyer shall also
furnish Sellers with a form of resale certificate that complies with the
requirements of applicable state taxation laws.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
Part 3.1 of the Disclosure Letter contains a complete and accurate list
for the Company and each of its Subsidiaries of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each). Each of the Company and each of its Subsidiaries is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. Each of the Company and each of its
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the lack
of such qualification would not have a material adverse effect on the financial
condition of the Company and its Subsidiaries.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of each of Sellers, enforceable against each of Sellers in accordance
with its terms. Upon the execution and delivery by Sellers of the Escrow
Agreement and the Noncompetition Agreement (collectively, the "Sellers' Closing
Documents", the Sellers' Closing Documents will
Final 11/10/98 13
constitute the legal, valid, and binding obligations of each of Sellers,
enforceable against each of Sellers in accordance with their respective terms.
Each of Sellers has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform its obligations under this Agreement and the Sellers'
Closing Documents.
(b) Except as set forth in Part 3.2(b) of the Disclosure Letter,
neither the execution nor delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions by any of Sellers, directly
or indirectly (with or without notice or lapse of time) will:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of any of Sellers, or (B) any
resolution adopted by the board of directors or the stockholders of any of
Sellers;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any of Sellers or the Acquired
Assets may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or any of its Subsidiaries or that
otherwise relates to the Business or the Acquired Assets;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Acquired Assets.
(c) Except as set forth in Part 3.2(c) of the Disclosure Letter, no
Seller is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions, except
where the failure to give notice or to obtain any Consent would not affect the
ability of the parties to this Agreement to consummate the Contemplated
Transactions.
3.3 CAPITALIZATION
All of the outstanding equity securities of the Company are owned of
record and beneficially by Alchem, free and clear of all Encumbrances (other
than a pledge in favor of General Electric Capital Corporation ("GECC") as
agent.
3.4 FINANCIAL STATEMENTS
Final 11/10/98 14
The Audited Financial Statements fairly present the financial condition
and results of operations, changes in stockholders' equity, and cash flow of the
Company and its Subsidiaries as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP as
consistently applied throughout the periods involved. Sellers have delivered to
Buyer unaudited consolidating financial statements of the Company and its
Subsidiaries as of the fiscal period ended October 31, 1998 (the "Unaudited
Financials"). The Unaudited Financials have been prepared in a manner consistent
with prior unaudited financial statements prepared by the Company and fairly
present the Company's financial condition and results of operations as of
October 31, 1998 and for the period referred to therein.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records
of the Company and its Subsidiaries, all of which will be made available to
Buyer prior to Closing, are complete and correct and have been maintained in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Subsidiaries are subject to that Section), including the
maintenance of an adequate system of internal controls. The minute books of the
Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list
of all real property, real property leaseholds, or other real property interests
therein owned by the Company and its Subsidiaries and included with the Acquired
Assets. Sellers have delivered or made available to Buyer copies of the deeds
and other instruments (as recorded) by which the Company and its Subsidiaries
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Sellers or the
Subsidiaries and relating to such property or interests. The Company and its
Subsidiaries own or by Closing will own (with good and marketable title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own located in the
facilities owned or operated by the Company and its Subsidiaries or reflected as
owned in the books and records of the Company and its Subsidiaries, including
all of the properties and assets reflected in the Balance Sheet (except for
assets held under capitalized leases disclosed or not required to be disclosed
in Part 3.6 of the Disclosure Letter and personal property sold since the date
of the Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Company and its Subsidiaries since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice) which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) were purchased or
Final 11/10/98 15
acquired for an aggregate consideration of less than $50,000. All properties and
assets reflected in the Balance Sheet (and still owned by the Company or any of
its Subsidiaries) are free and clear of all Encumbrances and are not, in the
case of real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the Balance Sheet or Part 3.6 of the Disclosure Letter as securing
specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(b) mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Balance Sheet (such mortgages and
security interests being limited to the property or assets so acquired), with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) liens for current Taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from the value
or impairs the use of the property subject thereto, or impairs the operations of
the Company or any of its Subsidiaries, and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. All buildings, plants, and structures owned by the Company and
its Subsidiaries lie wholly within the boundaries of the real property owned by
the Company and its Subsidiaries and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Company and its
Subsidiaries are generally adequate for the continued conduct of the Company's
and its Subsidiaries' businesses after the Closing in substantially the same
manner as conducted prior to the Closing; provided, however, that Sellers do
not provide any representation or warranty as to the physical condition of any
of the tangible personal property of any of the Company and its
Subsidiaries.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company and its Subsidiaries that are
reflected on the Balance Sheet or on the accounting records of the Company and
its Subsidiaries as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or on the accounting records of the Company and its
Subsidiaries as of the Closing Date (which reserves are adequate and calculated
consistent with past practice). Except as covered by any reserve, there is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Account Receivable
relating to the amount or validity of such Account Receivable.
3.9 INVENTORY
All inventory of the Company and its Subsidiaries, whether or not
reflected in the
Final 11/10/98 16
Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or on the accounting records of the
Company and its Subsidiaries as of the Closing Date, as the case may be. All
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The quantities of each general type of inventory
(i.e., raw materials, work-in-process, or finished goods) are not excessive, but
are reasonable in the present circumstances of the Company and its Subsidiaries.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Company
and its Subsidiaries have no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise) except
for liabilities or obligations reflected or reserved against in the Balance
Sheet and current liabilities incurred in the Ordinary Course of Business since
the date thereof.
3.11 TAXES
(a) The Company and its Subsidiaries have filed or caused to be filed
(on a timely basis since January 20, 1993) all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Legal Requirements.
The Company and its Subsidiaries have paid, or made provision for the payment
of, all Taxes that have or may have become due from any of the Company or its
Subsidiaries pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or any Subsidiary, except such Taxes, if any, as
are listed in Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet. Part 3.11 of the Disclosure Letter
lists all federal, state, local and foreign income Tax Returns filed with
respect to or including the Company or any of its Subsidiaries for taxable
periods ended after July 3, 1993, indicates those income Tax Returns that have
been audited, and indicates those income Tax Returns that currently are the
subject of audit. Sellers have delivered or made available to Buyer correct and
complete copies of all information respecting the Company and its Subsidiaries
that was included in the consolidated federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by any of
the Company and its Subsidiaries with respect to any period since July 3, 1993.
Sellers have made available copies of all other Tax Returns of the Company and
its Subsidiaries filed since July 3, 1993.
(b) Except as described in Part 3.11 of the Disclosure Letter, neither
the Company nor any Subsidiary has given waivers or extensions (or is or would
be subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or any of its
Subsidiaries or for which the Company or any of its Subsidiaries may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company and each of its Subsidiaries are adequate
(determined in accordance
Final 11/10/98 17
with GAAP) and are at least equal to that company's liability for Taxes. There
exists no proposed tax assessment against the Company or any of its
Subsidiaries, except as disclosed in the Balance Sheet or in Part 3.11 of the
Disclosure Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired, or to be
acquired by the Company or any of its Subsidiaries. All Taxes that the Company
or any of its Subsidiaries is or was required by Legal Requirements to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person. There are no
liens for Taxes (other than for current Taxes not yet due and payable) upon the
assets of the Company or any of its Subsidiaries.
(d) All Tax Returns filed by (or that include on a consolidated,
combined or unitary basis) the Company or any of its Subsidiaries are true,
correct, and complete in all respects insofar as concerns the Company and its
Subsidiaries. Neither the Company nor any of its Subsidiaries is, or within the
five-year period preceding the Closing Date has been, an "S" corporation.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Unaudited Financials, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"EMPLOYEE BENEFIT PLAN" means (a) nonqualified deferred compensation or
retirement plan or arrangement that is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan (including any Multiemployer Plan), (c) qualified
defined benefit retirement plan or arrangement that is an Employee Pension
Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit
Plan, or (e) any other practice, arrangement, obligation or benefit for the
benefit of employees other than salary or wages.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"PBGC" means the Pension Benefit Guaranty Corporation.
Final 11/10/98 18
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
(b) Part 3.13 of the Disclosure Letter lists each Employee Benefit
Plan that any of the Company and its Subsidiaries maintains or to which any of
the Company and its Subsidiaries contributes.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the IRC.
(ii) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been paid to
each such Employee Benefit Plan that is an Employee Pension Benefit Plan.
(iii) The latest determination letter respecting the 401(k) plan
in which the Company participates to the effect that the plan meets the
requirements of IRC Sec. 401(a) that has been received from the
Internal Revenue Service is dated August 8, 1996.
(iv) As of the last day of the most recent prior plan year, the
market value of assets under each such Employee Benefit Plan that is an
Employee Pension Benefit Plan equaled or exceeded the present value of
liabilities thereunder (determined in accordance with then current
funding assumptions).
(v) Sellers have delivered or made available to Buyer correct
and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements that
implement each such Employee Benefit Plan.
(vi) No such Employee Benefit Plan that is an Employee Pension
Benefit Plan has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan has been instituted.
(vii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is
pending.
(viii) Neither the Company nor any of its Subsidiaries has
incurred any liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal liability)
with respect to any such Employee Benefit Plan that is an Employee
Pension Benefit Plan.
(ix) Except to the extent required under ERISA Section 601, ET.
SEQ., and IRC Section 4980B, and except for limited medical coverage
provided for certain retirees under the Delta Woodside Industries, Inc.
Group Benefit Plan, neither the Company nor any
Final 11/10/98 19
Subsidiary provides health or welfare benefits for any retired or former
employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other
termination of service.
(x) Sellers, the Company and its Subsidiary have complied with
the provisions of ERISA Section 601 ET. SEQ., and IRC Section 4980B.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) The Company and each of its Subsidiaries is, and at all
times since January 20, 1993 has been, in full compliance in all respects with
each Legal Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets.
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Company or any of its Subsidiaries of, or a failure on the part of the
Company or any of its Subsidiaries to comply with, any Legal Requirement, or (B)
may give rise to any obligation on the part of the Company or any of its
Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature pursuant to any Legal Requirement; and
(iii) neither the Company nor any of its Subsidiaries has
received, at any time since January 20, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company or any of its
Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature pursuant to any Legal Requirement.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
any of its Subsidiaries or that otherwise relates to the Business or any of the
Acquired Assets, except for those Governmental Authorizations the failure to
possess would not have an adverse effect on the financial condition of the
Company and its Subsidiaries, taken as a whole. Each Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter is valid
and in full force and effect. Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the Company and each of its Subsidiaries is, and at all
times since January 20, 1993 has been, in full compliance in all respects with
all of the terms and requirements of each Governmental Authorization identified
or required to be identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a
Final 11/10/98 20
failure to comply with any term or requirement of any Governmental
Authorization, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization;
(iii) neither the Company nor any of its Subsidiaries has
received, at any time since January 20, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there
is no pending Proceeding:
(i) that has been commenced by or against the Company or any of
its Subsidiaries or that otherwise relates to or may affect the Business or any
of the Acquired Assets; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
(1) Except as set forth in Part 3.15 of the Disclosure Letter, no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers will cause the attorneys representing the Company to
furnish Buyer, upon request by Buyer, with copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company or any of its
Subsidiaries.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company or any of its
Subsidiaries, or any of the assets owned or used by the Company or any of its
Subsidiaries, is subject;
(ii) neither Seller is subject to any Order that relates to the
Business or any of the Acquired Assets; and
(iii) no officer, director, or employee of the Company or any of
its
Final 11/10/98 21
Subsidiaries is subject to any Order that prohibits such officer, director, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company or any of its Subsidiaries.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each of the Company and each of its Subsidiaries is, and at
all times since January 20, 1993 has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company or any of its Subsidiaries, or any of the assets owned or used by the
Company or any of its Subsidiaries, is subject; and
(iii) neither the Company nor any of its Subsidiaries has
received, at any time since January 20, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order to which the Company or
any of its Subsidiaries, or any of the assets owned or used by the Company or
any of its Subsidiaries, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the date
of the Balance Sheet, the Company and its Subsidiaries have conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in the Company's or any of its Subsidiaries' authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of the Company or any of its Subsidiaries; issuance of any
security convertible into such capital stock; grant of any registration rights
with respect to such capital stock; purchase, redemption, retirement, or other
acquisition by the Company or any of its Subsidiaries of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of such capital stock;
(b) amendment to the Organizational Documents of the Company or any of
its Subsidiaries;
(c) payment or increase by the Company or any of its Subsidiaries of
any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director, officer, or
(except in the Ordinary Course of Business) employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company or any of its Subsidiaries;
Final 11/10/98 22
(e) damage to or destruction or loss of any asset or property of the
Company or any of its Subsidiaries, whether or not covered by insurance,
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company and its Subsidiaries, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction that, in the
case of clause (i) or (ii) involves a total remaining commitment by or to the
Company or any of its Subsidiaries of at least $50,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or any of its Subsidiaries (other than the sale or other disposition of assets
that are not inventory for an aggregate consideration of less than $50,000) or
mortgage, pledge, or imposition of any lien or other encumbrance on any asset or
property of the Company or any of its Subsidiaries, including the sale, lease,
or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
Company or any of its Subsidiaries in excess of $10,000 individually or $50,000
in the aggregate;
(i) change in the accounting methods used by the Company or any of its
Subsidiaries; or
(j) agreement, whether oral or written, by the Company or any of its
Subsidiaries to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list (excluding in each case Applicable Contracts that will be fully
performed by all parties as of the Closing Date), and Sellers have made
available to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more of the Company and its
Subsidiaries of an amount or value in excess of $50,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more of the Company and its
Subsidiaries of an amount or value in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more of the Company and its Subsidiaries in excess of $50,000;
(iv) each Applicable Contract in the form of a lease, rental or
occupancy agreement, or license, installment and conditional sale agreement, and
other Applicable Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal property (except
any such agreement having a value per item
Final 11/10/98 23
or aggregate payments of less than $50,000);
(v) each Applicable Contract that is a licensing agreement or
other Applicable Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each Applicable Contract with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company or any of its Subsidiaries with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict in any material respect the business activity of the
Company or any of its Subsidiaries or limit in any material respect the freedom
of the Company or any of its Subsidiaries to engage in any line of business or
to compete with any Person;
(ix) each material Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney granted by the Company or any of its
Subsidiaries that is currently effective and outstanding;
(xi) each Applicable Contract for capital expenditures in excess
of $50,000;
(xii) each material written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by the
Company or any of its Subsidiaries other than in the Ordinary Course of
Business; and
(xiii) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) neither Delta Woodside nor Alchem (and no Related Person of
either of them other than the Company) has or may acquire any rights under, and
neither Seller has or may become subject to any obligation or liability under,
any Contract that relates to the Business or any of the Acquired Assets; and
(ii) no officer, director, or employee of the Company or any of
its Subsidiaries is bound by any Contract that purports to limit in any respect
the ability of such officer, director, or employee to (A) engage in or continue
any conduct, activity, or practice relating to the business of the Company or
any of its Subsidiaries, or (B) assign to the Company or any of its
Subsidiaries any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract
Final 11/10/98 24
identified or required to be identified in Part 3.17(a) of the Disclosure Letter
is in full force and effect and is valid and enforceable in accordance with its
terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company and each of its Subsidiaries is, and at all
times since January 20, 1993 has been, in full compliance in all respects with
all applicable terms and requirements of each Contract under which such company
has or had any obligation or liability or by which the Company or any of its
Subsidiaries or any of the assets owned or used by such company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company or any of its Subsidiaries
has or had any rights is, and at all times since January 20, 1993 has been, in
full compliance in all respects with all applicable terms and requirements of
such Contract;
(iii) no event has occurred since January 20, 1993 or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Company or any of its Subsidiaries or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) neither the Company nor any of its Subsidiaries has given
to or received from any other Person, at any time since January 20, 1993, any
notice or other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any amounts paid or payable to the Company or
any of its Subsidiaries under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company and its Subsidiaries have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Legal Requirement.
3.18 INSURANCE
(a) Sellers shall deliver to Buyer prior to Closing:
(i) true and complete copies of all policies of general liability
insurance to which the Company or any of its Subsidiaries is a party or under
which the Company or any of its Subsidiaries is or has been covered at any time
since January 20, 1993; and
(ii) any statement since January 20, 1993 by the auditor of the
Company's or any of its Subsidiaries' financial statements with regard to the
adequacy of such entity's
Final 11/10/98 25
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the Company
or any of its Subsidiaries, including any reserves established thereunder; and
(ii) any material contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by the Company or any of
its Subsidiaries.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the preceding policy years since January 20,
1993:
(i) a summary of the loss experience under each general
liability policy;
(ii) a statement describing each claim under a general liability
insurance, policy for an amount in excess of $50,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All general liability policies to which the Company or any
of its Subsidiaries is a party or that provide coverage to the Company or any of
its Subsidiaries:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Company and its Subsidiaries for all
risks to which the Company and its Subsidiaries are normally exposed;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company or any of its Subsidiaries is a
party or by which any of them is bound; and
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions.
(ii) Neither the Company nor any Subsidiary has received any
notice of cancellation of any insurance policy currently in effect to which the
Company or any of its Subsidiaries is a party or that provides coverage to the
Company or any of its Subsidiaries or any other indication that any such
insurance policy is no longer in full force or effect or will
Final 11/10/98 26
not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) Since January 20, 1993, the Company and its Subsidiaries
have paid all premiums due, and have otherwise performed all of their respective
obligations, under each policy to which the Company or any of its Subsidiaries
is a party or that provides coverage to the Company or any of its Subsidiaries.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) The Company and each of its Subsidiaries is, and at all times
has been, in full compliance in all respects with, and has not been and is
not in violation of or liable under, any Environmental Law. No Seller or
Subsidiary has any basis to expect, nor has any of them or any other Person
for whose conduct they are or may be held to be responsible, received any
actual or Threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply in any respect by the Company or any
of its Subsidiaries with any Environmental Law, or of any actual or
Threatened obligation of the Company or any of its Subsidiaries to undertake
or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Company or any of its Subsidiaries has
had an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by the Company, any of its Subsidiaries, or any
other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received by the Company, any of its
Subsidiaries, or any other Person for whose conduct they are or may be held
responsible.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which the Company or any of its
Subsidiaries has or had an interest.
(c) No Seller or Subsidiary has any basis to expect, nor has any of
them or any other Person for whose conduct they are or may be held responsible,
received any citation, directive, inquiry, notice, Order, summons, or warning
that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual,
or potential violation or failure to comply with any Environmental Law, or of
any alleged, actual, or potential obligation to undertake or bear the cost of
any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company or any of its Subsidiaries had an interest, or with respect
to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the Company,
any Subsidiary, or any other Person for whose conduct they are
Final 11/10/98 27
or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Neither the Company, any Subsidiary, nor any other Person for
whose conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect
to any other properties and assets (whether real, personal, or mixed) in which
the Company or any Subsidiary (or any predecessor), has or had an interest, or
at any property geologically or hydrologically adjoining the Facilities or any
such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment
at the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon,
except for such Hazardous Materials listed in Part 3.19(e) of the Disclosure
Letter as are present and used at the Facilities in, and in quantities no
greater than reasonably necessary for, the Ordinary Course of Business. Except
as stated in the immediately preceding sentence, neither the Company, any
Subsidiary, nor any other Person for whose conduct they are or may be held
responsible has permitted of conducted, or has Knowledge of, any Hazardous
Activity conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Sellers or any Subsidiary has
or had an interest.
(f) There has been no Release or Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which the
Company or any Subsidiary has or had an interest, or any geologically or
hydrologically adjoining property, by the Company, any Subsidiary, or any other
Person for whose conduct they are or may be held responsible.
(g) Sellers shall make available to Buyer prior to Closing true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Sellers or any Subsidiary pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Company, any Subsidiary, or any other Person for
whose conduct they are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee of the Company and
its Subsidiaries, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since June 1, 1997; vacation accrued; sick leave or any other
paid leave accrued; and service credited for purposes of vesting and
eligibility to participate under the Company's or any of its Subsidiaries'
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option,
Final 11/10/98 28
cash bonus, employee stock ownership (including investment credit or payroll
stock ownership), severance pay, insurance, medical, welfare, or vacation plan,
other Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan of the Company or any of its Subsidiaries.
(b) No employee of the Company or any of its Subsidiaries is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will adversely affect (i) the performance of his duties as
an employee of the Company and its Subsidiaries, or (ii) the ability of the
Company or any of its Subsidiaries to conduct its business, including any
Proprietary Rights Agreement with Sellers or the Subsidiaries by any such
employee. To Sellers' Knowledge, no key employee of the Company or any of its
Subsidiaries intends to terminate his employment with such company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee of the
Company and its Subsidiaries, or their dependents, receiving benefits or
scheduled to receive benefits from the Company or any of its Subsidiaries in the
future: name, such pension benefit, such pension option election, such retiree
medical insurance coverage, such retiree life insurance coverage, and other such
benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since January 20, 1993, neither the Company nor any of its Subsidiaries
has been or is a party to any collective bargaining or other similar labor
Contract. Except as set forth in Part 3.21 of the Disclosure Letter, with
respect to the Company or any of its Subsidiaries, since January 20, 1993, there
has not been, there is not presently pending or existing, and there is not
Threatened, (a) any strike, general work slowdown, picketing, general work
stoppage, or material employee grievance process, (b) any Proceeding against or
affecting the Company or any of its Subsidiaries relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Sellers or any of its Subsidiaries,
or (c) any application for certification of a collective bargaining agent. No
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any employees by
the Company or any of its Subsidiaries, and no such action is contemplated by
the Company or any of its Subsidiaries. The Company and each of its
Subsidiaries has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar Taxes, occupational safety and health, and plant closing. Neither
the Company nor any of its Subsidiaries is liable for the payment of any
compensation, damages, Taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
Final 11/10/98 29
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS -- The term "Intellectual Property
Assets" includes:
(i) the name "Nautilus International, Inc."; all fictional
business names, trading names, registered and unregistered trademarks, service
marks, domain names and applications used in the Business, all of which are
listed in Part 3.22 (e) of the Disclosure Letter (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable used in the Business, all of which are listed
in Part 3.22 (d) of the Disclosure Letter (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works used in the Business, all of which are listed in Part 3.22 (f) of the
Disclosure Letter (collectively, "Copyrights");
(iv) all rights in mask works used in the Business
(collectively, "Rights in Mask Works"); and
(v) all know-how, trade secrets, confidential information,
technical information, data, process technology, plans, drawings, and blue
prints used exclusively in the Business (collectively, "Trade Secrets"); owned,
used, or licensed by the Company or any of its Subsidiaries as licensee or
licensor.
(b) AGREEMENTS -- Part 3.22(b) of the Disclosure Letter contains a
complete and accurate list and summary description, including any royalties paid
or received by the Company and its Subsidiaries, of all material Contracts
relating to the Intellectual Property Assets to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs with a value of less
than $50,000 under which the Company or any of its Subsidiaries is the licensee.
There are no outstanding and, to Sellers' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
(i) The Intellectual Property Assets are all those necessary
for the operation of the Company's and its Subsidiaries' businesses as they are
currently conducted. Except as set forth in Part 3.22 (c) of the Disclosure
Letter, one or more of the Company and its Subsidiaries is, or by the Closing
will be, the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has, or by
Closing will have, the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure
Letter, since August 1, 1996, all employees of the Company and each of its
Subsidiaries have executed written Contracts with one or more of the Company and
its Subsidiaries that assign to one or more of
Final 11/10/98 30
the Company and its Subsidiaries all rights to any inventions, improvements,
discoveries, or information relating to the business of the Company or any of
its Subsidiaries. No employee of the Company or any of its Subsidiaries has
entered into any Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than one or more of the Company and its Subsidiaries.
(d) PATENTS
(i) Part 3.22(d) of the Disclosure Letter contains a complete
and accurate list and summary description of all Patents. One or more of the
Company and its Subsidiaries is, or by Closing will be, the owner of all right,
title, and interest in and to each of the Patents, free and clear of all liens,
security interests, charges, encumbrances, entities, and other adverse claims.
(ii) All of the issued Patents are currently in compliance in
all respects with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or Taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. There is no potentially
interfering patent or patent application of any third party with respect to any
Patent.
(iv) No Patent is infringed or has been challenged or threatened
in any way. None of the products manufactured and sold, nor any process or
know-how used, by the Company or any of its Subsidiaries infringes or is alleged
to infringe any patent or other proprietary right of any other Person.
(v) All products made, used, or sold by the Company or any of
its Subsidiaries under the Patents have been marked with the proper patent
notice.
(e) TRADEMARKS
(i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks. One or more of the Company
and its Subsidiaries is, or by Closing will be, the owner of all right, title,
and interest in and to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office or with similar foreign authorities are currently in
compliance in all respects with all formal legal requirements (including the
timely post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or Taxes or actions falling due within ninety days after the
Closing Date.
Final 11/10/98 31
(iii) Except as set forth in Part 3.22 (e) of the Disclosure
Letter, no Xxxx has been or is now involved in any opposition, invalidation, or
cancellation and no such action is Threatened with the respect to any of the
Marks.
(iv) There is no potentially interfering trademark or trademark
application of any third party with respect to any Xxxx.
(v) No Xxxx is infringed or has been challenged or threatened
in any way. None of the Marks used by the Company or any of its Subsidiaries
infringes or is alleged to infringe any trade name, trademark, or service xxxx
of any third party.
(vi) All products and materials of the Company or any of its
Subsidiaries containing a Xxxx xxxx the proper federal registration notice where
permitted by law.
(f) COPYRIGHTS
(i) Part 3.22(f) of the Disclosure Letter contains a complete
and accurate list and summary description of all Copyrights. One or more of the
Company and its Subsidiaries is the owner of all right, title, and interest in
and to each of the Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are currently
in compliance in all respects with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or Taxes or actions
falling due within ninety days after the date of Closing.
(iii) No copyright is infringed or has been challenged or
threatened in any way. None of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
(iv) All works of the Company or any of its Subsidiaries
encompassed by the Copyrights have been marked with the proper copyright
notice.
(g) TRADE SECRETS
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) The Company and its Subsidiaries have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their
confidential Trade Secrets.
(iii) One or more of the Company and its Subsidiaries has good
title and an absolute (but not necessarily exclusive) right to use the Trade
Secrets. The confidential Trade Secrets are not part of the public knowledge or
literature, and have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Company
Final 11/10/98 32
and its Subsidiaries) or to the detriment of the Company and its Subsidiaries.
No Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
(h) Y2K COMPLIANT
Except as set forth in Part 3.22(h) of the Disclosure Letter, all Company
Intellectual Property Assets in the form of computer software that are owned,
developed or utilized by the Company in the operation of its business or
licensed by the Company to others as part of the Company's business have been
tested and are fully capable in all respects of providing accurate results using
data having data ranges spanning the twentieth ("20th") and twenty-first
("21st") centuries. Without limiting the generality of the foregoing, except as
set forth in Part 3.22(h) of the Disclosure Letter, all software licensed from
and/or developed by the Company, in all respects, (a) manages and manipulates
data involving all dates from the 20th and 21st centuries without functional or
data abnormality related to such dates; (b) manages and manipulates data
involving all dates from the 20th or 21st centuries without inaccurate results
related to such dates; (c) has user interfaces and data fields formatted to
distinguish between dates from the 20th and 21st centuries; and (d) represents
all data related to include indications of the millennium, century, and decade
as well as the actual year.
3.23 CERTAIN PAYMENTS
Since January 20, 1993, neither the Company, its Subsidiaries, nor any
director, officer, agent, or employee thereof, acting for or on behalf of the
Company or any of its Subsidiaries, or any other Person acting for or on behalf
of the Company or any of its Subsidiaries, has directly or indirectly in
violation of any Legal Requirement (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company or
any of its Subsidiaries or any Affiliate thereof, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company and its Subsidiaries.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Letter omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to either Sellers that has specific
application to either the Company or any Subsidiary of the Company (other than
general economic or industry conditions) and that materially adversely affects
the assets, business, prospects, financial condition, or results of operations
of the Company and its Subsidiaries (on a consolidated basis) that has not been
set forth in this Agreement or the Disclosure Letter.
Final 11/10/98 33
(d) The information that would be included in the Disclosure Letter in
order to make each representation and warranty in Section 3 true and correct,
but is not included solely by reason of the various provisions in this Section 3
permitting the omission of information that is not material to the Company and
its Subsidiaries, taken as a whole, does not, viewed in the aggregate,
constitute information material to the Company and its Subsidiaries, taken as a
whole.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, no Related
Person of the Company or any of its Subsidiaries has, or since January 1, 1996
has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company or any
businesses of the Company and its Subsidiaries. Except as set forth in Part 3.25
of the Disclosure Letter, no Related Person of the Company or any of its
Subsidiaries is, or since January 1, 1996 has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had material business dealings or a financial interest
in any transaction with the Company or any of its Subsidiaries, or (ii) engaged
in competition with the Company or any of its Subsidiaries with xxxxxxx.xx any
line of the products or services (other than the licensing of one or more of the
Marks) of such company (a "Competing Business") in any market presently served
by company. Except as set forth in Part 3.25 of the Disclosure Letter, no
Related Person of the Company or any of its Subsidiaries is a party to any
Contract with, or has any claim or right against, the Company or any of its
Subsidiaries.
3.26 BROKERS OR FINDERS
Except for the fee payable to Chase Securities, Inc. (which fee
Sellers shall pay), Sellers and their agents have by their actions incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement and the
Promissory Note (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this
Final 11/10/98 34
Agreement and the Buyer's Closing Documents and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
(c) Except as set forth in Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(d) Neither the execution and delivery of this Agreement by Buyer nor
the consummation or performance of any of the Contemplated Transactions by Buyer
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, degree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of
Buyer's charter or bylaws, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any material agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which Buyer is bound or to which any
of Buyer's assets is subject.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions or that may
reasonably have a material adverse effect on Buyer. To Buyer's Knowledge, no
such Proceeding has been Threatened.
4.4 BROKERS OR FINDERS
Except for the fee payable to D.A. Davidson, Buyer's investment banker
(which fee Buyer shall pay), Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold harmless Sellers from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
Final 11/10/98 35
4.5 FINANCING
Buyer has adequate funds immediately available to fulfill its obligations
under this Agreement, either in the form of cash on hand or in the form of a
binding commitment by a suitable commercial lender to provide Buyer with
adequate credit.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause each Subsidiary and its Representatives to, (a) afford Buyer and
its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company and its Subsidiaries, to the Company's and each of its Subsidiaries'
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
Buyer's Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between June 28, 1998 and the date of this Agreement Sellers
have caused, and from the date of this Agreement to the Closing Date Sellers
will cause, the Company and each Subsidiary to:
(a) conduct the business of the Company and each of its Subsidiaries
only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of the Company and each of its Subsidiaries, keep available the
services of the current employees, and agents of the Company and each of its
Subsidiaries, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with the Company and each of its Subsidiaries;
(c) from and after the date of this Agreement, confer with Buyer
concerning anticipated material changes with respect to operational matters of a
material nature; and
(d) from and after the date of this Agreement, otherwise report
periodically to Buyer concerning the status of the business, operations, and
finances of the Company and each of its Subsidiaries.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Sellers will not, and will cause
each Subsidiary not to, without the prior consent of Buyer (which consent shall
not be unreasonably withheld), take
Final 11/10/98 36
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause each Subsidiary to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions and shall pay the costs associated with any such filing (including
all filings under the HSR Act). Between the date of this Agreement and the
Closing Date, Sellers will, and will cause each Subsidiary to, (a) cooperate
with Buyer with respect to all filings that Buyer elects to make or are required
by Legal Requirements to make in connection with the Contemplated Transactions,
and (b) cooperate with Buyer in obtaining all consents identified in Schedule
4.2 (including taking all reasonable actions requested by Buyer to cause early
termination of any applicable waiting period under the HSR Act).
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Subsidiary becomes aware
of any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if such
Seller or any Subsidiary becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Sellers will not, and will cause each Subsidiary and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of the Company or any of its Subsidiaries, or any of the capital
stock of the Company or any of its Subsidiaries, or any merger, consolidation,
business combination, or similar transaction involving the Company or any of its
Subsidiaries.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use
their Best
Final 11/10/98 37
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.8 AUDITED FINANCIAL STATEMENTS
Sellers have obtained, at Buyer's expense, and delivered to Buyer audited
consolidated balance sheets of the Company and its Subsidiaries as of fiscal
year end 1996 through 1998, and the related audited consolidated statements of
income, changes in stockholders' equity and cash flow for each of the fiscal
years then ended, together with the report thereon of KPMG Peat Marwick,
independent certified public accountants (the "Audited Financial Statement");
PROVIDED, that Buyer shall not be obligated to pay any fees and costs related to
such audit in excess of $90,000. The balance sheet for fiscal year 1998,
including the notes thereto, is referred to in this Agreement as the "Balance
Sheet."
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will use
its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied;
provided that this Agreement will not require Buyer to dispose of or make any
material change in any material portion of its business or to incur any other
material burden to obtain a Governmental Authorization.
6.2 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Buyer will
make all filings required by Legal Requirements to be made by it in order to
consummate the Contemplated Transactions and shall pay the costs associated with
any such filing (excluding the filing fee under the HSR Act, which shall be paid
by Sellers). Between the date of this Agreement and the Closing Date, Buyer will
(a) cooperate with Sellers with respect to all filings that Sellers elect to
make or are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (b) will use its Best Efforts to obtain all
consents identified in Schedule 4.2 (including taking all actions reasonably
requested by Sellers to cause early termination of any applicable waiting period
under the HSR Act).
6.3 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's representations
and warranties as of the date of this Agreement, or if Buyer becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in Buyer's
representations and warranties in this Agreement if this Agreement were dated
the date of the occurrence or discovery of any such fact or condition, Buyer
will promptly deliver to Sellers a supplement to this Agreement
Final 11/10/98 38
specifying such change. During the same period, Buyer will promptly notify
Sellers of the occurrence of any Breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Acquired Assets and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
(b) Each of Sellers' representations and warranties in Sections 3.3,
3.4, 3.10, 3.12, and 3.24 must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects as of the Closing
Date as if made on the Closing Date, without giving effect to any supplement to
the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.5
must have been delivered and each of the other covenants and obligations in
Article 5 must have been performed and complied with in all material respects.
7.3 CONSENTS
Each of the Consents identified in Schedule 7.3 must have been obtained
and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A., counsel to
Sellers, with respect to certain matters governed by the Delaware General
Corporation Law or South Carolina law, dated the Closing Date, in the form of
Exhibit 7.4(a);
(b) an opinion of Xxxxx, Xxxxxx & Xxxxxxxxxx PLC, special Virginia
counsel to
Final 11/10/98 39
the Company, with respect to certain matters governed by Virginia Law, dated the
Closing Date, in the form of Exhibit 7.4(b);
(c) estoppel certificate executed on behalf of the landlord of the
Huntersville, North Carolina leased real estate, in form reasonably acceptable
to Buyer;
(d) good standing or comparable certificates for the Company, dated
within ten (10) days of the Closing Date, issued by the States of Virginia,
California, Massachusetts, New Jersey, New York, North Carolina and Texas;
(e) an opinion of Xxxxxx & Bird, patent and trademark counsel to
Sellers, with respect to the transfer of the Intellectual Property Assets, in
form and substance reasonably acceptable to Buyer; and
(f) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Sellers' representations
and warranties, (iii) evidencing the performance by Sellers of, or the
compliance by Sellers with, any covenant or obligation required to be performed
or complied with by Sellers, (iv) evidencing the satisfaction of any condition
referred to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body that would
be applicable to Buyer or the Contemplated Transactions and Buyer concludes
reasonably and in good faith that there is a reasonable likelihood that such
Legal Requirement or Order will be enacted or issued.
7.7 REGULATORY APPROVALS
Buyer shall have obtained any approvals required under the rules of the
Toronto Stock Exchange for completion of the Contemplated Transactions.
Final 11/10/98 40
7.8 TRANSFER OF MARKS AND PATENTS; CANCELLATION OF AGREEMENTS
Alchem shall have transferred to the Company or Buyer all of its right,
title and interest in and to the Intellectual Property Assets owned by it as of
the date of this Agreement, and all agreements between the Company, on the one
hand, and Alchem, Delta Woodside or any affiliate of Alchem or Delta Woodside,
on the other hand, relating to Intellectual Property Assets shall have been
terminated.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell or to cause the Company to sell the
Acquired Assets and to take the other actions required to be taken by Sellers at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers, in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.5(b)(i) and 2.5(b)(ii) and
each of the other covenants and obligations in Article 6 must have been
performed and complied with in all material respects.
8.3 CONSENTS
The filing and completion or waiver of waiting period under the HSR Act
has occurred without the objection of any governmental body.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Sellers:
(a) an opinion of Xxxxxx, Xxxxxxxx & Xxxxx, dated the Closing Date, in
the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of
Final 11/10/98 41
(i) enabling their counsel to provide the opinions referred to in Section 7.4(a)
and (b), (ii) evidencing the accuracy of any representation or warranty of
Buyer, (iii) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied with by
Buyer, (iv) evidencing the satisfaction of any condition referred to in this
Section 8, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect or Threatened any Legal Requirement or any
injunction or other Order that (a) prohibits the sale of the Acquired Assets by
the Company to Buyer or the consummation and performance of the Contemplated
Transactions, and (b) has been adopted or issued, or has otherwise become
effective or been made, since the date of this Agreement.
8.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Sellers or any of the Subsidiaries to suffer any material
adverse consequence under, (a) any applicable Legal Requirement or Order, or (b)
any Legal Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Body that would be applicable to Sellers,
or any of the Subsidiaries or the Contemplated Transactions and Sellers
conclude reasonably and in good faith that there is a reasonable likelihood that
such Legal Requirement or Order will be enacted or issued.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its
Final 11/10/98 42
obligations under this Agreement) on or before January 4, 1999, or such later
date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1
and 11.3 will survive; provided, however, that if this Agreement is terminated
by a party because of the Breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.5(a)(vi) or 2.5(b)(iv), and any
other certificate or document delivered pursuant to this Agreement will survive
the Closing. The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer
and its Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, Taxes, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
- (a) any Breach of any representation or warranty made by Sellers in
this Agreement (giving effect to any supplement to the Disclosure Letter), the
Disclosure Letter (giving effect to any supplement to the Disclosure Letter),
the supplements to the Disclosure Letter, or any other certificate or document
delivered by Sellers pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Sellers in
this Agreement as if such representation or warranty were made on and as of the
Closing Date,
Final 11/10/98 43
giving effect to any supplement to the Disclosure Letter, other than any such
Breach that is disclosed in a supplement to the Disclosure Letter;
(c) any Breach by Sellers of any covenant or obligation of Sellers in
this Agreement;
(d) the conduct of the Business, or the ownership of assets by the
Sellers or any Subsidiary of the Company, prior to the Closing;
(e) any product shipped or manufactured by, or any services provided
by, the Company or any of its Subsidiaries prior to the Closing Date;
(f) any matter disclosed in Part 3.15 of the Disclosure Letter but not
included in Schedule 2.1 (i);
(g) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either the Company or any of
its Subsidiaries (or any Person acting on their behalf) in connection with any
of the Contemplated Transactions;
(h) the failure of the parties to this Agreement to comply with the
provisions of the Bulk Sales laws with respect to the Contemplated Transactions;
or
(i) except to the extent assumed by Buyer pursuant to Section 2.2,
the employment or termination of employment of any employee of Sellers on or
prior to the Closing, including without limitation any claim for wages, salary,
severance pay, health, welfare or retirement benefits, vacation pay or any
other form of compensation or damages, whether based on contract, statute,
regulation, common law or otherwise;
provided, however, that except for a claim for indemnification by reason of a
breach of Sections 3.1, 3.2, 3.3, 3.24(c) or 3.26 or by reason of clauses (e),
(f), (g), (h) and (i) of this Section 10.2 (collectively, the "Non-Limited
Claims"), no Seller shall have any obligation to indemnify, hold harmless or pay
any Indemnified Person pursuant to this Section 10.2 until the Indemnified
Persons have suffered aggregate Damages encompassed by this Section 10.2 for
claims that are not Non-Limited Claims in excess of a $500,000 aggregate
deductible (after which point Sellers will be obligated only to indemnify, hold
harmless and pay the Indemnified Persons from and against further such Damages
(i.e. in excess of such $500,000 aggregate deductible) up to the aggregate
amount of $3,000,000).
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons; provided, however, that Buyer acknowledges and agrees that, except for
damages recoverable by Buyer following termination pursuant to Section 9.1 of
this Agreement due to a Breach by Sellers, the foregoing indemnification
provisions in this Section 10.2 shall be the exclusive remedy of Buyer and the
other Indemnified Persons for any Breach of Section 5 or of the representations
and warranties of Sellers in Section 3 of this Agreement.
Final 11/10/98 44
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS -- ENVIRONMENTAL
MATTERS
(a) In addition to (and not limited by) the provisions of Section
10.2, Sellers, jointly and severally, will indemnify and hold harmless Buyer and
the other Indemnified Persons for, and will pay to Buyer and the other
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation) incurred by them arising, directly or
indirectly, from or in connection with any Hazardous Materials that may have
been caused to be delivered to any of the following sites by the Company, any
Subsidiary or any other Person for whose conduct they are or may be held
responsible or any predecessor thereto or Nautilus Sports/Medical Industries,
Inc.:
(i) Aqua-Tech Environmental Site, Spartanburg, South Carolina;
(ii) Seaboard Chemical Corporation Site, Jamestown, North
Carolina;
(iii) Enterprise Recovery Systems Site, Byhalia, Xxxxxxxx County,
Mississippi; or
(iv) any other site that is not all or part of the Facilities.
(b) In addition to (and not limited by) the provisions of Section
10.2, Sellers, jointly and severally, will indemnify and hold harmless Buyer and
the other Indemnified Persons for, and will pay to Buyer and the other
Indemnified Persons the amount of, any Damages incurred by them arising,
directly or indirectly, from or in connection with the liquidation of Nautilus,
B.V. (a private limited company organized under the laws of the Netherlands) and
any liabilities of Nautilus, B.V. existing as of, or arising with respect to the
period prior to and including, the Closing Date.
(c) Sellers will be entitled to have exclusive control of any
Proceeding and any Cleanup with respect to which indemnity may be sought under
this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers
the amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement,
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions,
Final 11/10/98 45
(d) any product shipped or manufactured by, or any services provided
by, Buyer or its assigns, or
(e) the conduct of the Business, or the ownership of assets by Buyer
or its assigns, after the Closing.
10.5 TIME LIMITATIONS
(a) Except as provided in Section 10.5(b), Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before the date that is eighteen (18) months
after the Closing Date Buyer notifies Sellers of a claim, which notice shall
specify the factual basis of that claim in reasonable detail to the extent then
known by Buyer.
(b) A claim with respect to Sections 3.3, 3.11, 3.24(c) or 5.5, or a
claim for indemnification or reimbursement not based upon any representation or
warranty or any covenant or obligation to be performed and complied with prior
to the Closing Date (including, without limitation, a claim pursuant to any of
Sections 10.2(d)-(i)), or a claim for indemnification or reimbursement under
Section 10.3, may be made at any time. A claim with respect to Section 3.19 may
be made at any time on or before the date that is ten (10) years after the
Closing Date.
(c) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before the date that is eighteen (18) months after the
Closing Date Sellers notify Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Sellers; a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date (including, without limitation, a claim pursuant to any of Sections
10.4 (c)-(e)) may be made at any time.
10.6 ESCROW
Upon notice to Sellers specifying in reasonable detail the basis for such
claim, Buyer may give notice of a Claim in such amount under the Escrow
Agreement. The failure to give a notice of a Claim under the Escrow Agreement
will not constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
10.7 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2,
10.3 or 10.4 of notice of the COMMENCEMENT of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to
Final 11/10/98 46
any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.7(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent (which consent shall not be
unreasonably withheld or delayed) unless (A) there is no finding or admission
of any violation by the indemnified party of Legal Requirements or any violation
by the indemnified party of the rights of any Person and no effect adverse to
the indemnified party on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent (which consent shall not be unreasonably withheld
or delayed); and (iv) no compromise or settlement of such claims may be
effected by the indemnified party without the indemnifying party's consent
(which consent shall not be unreasonably withheld or delayed). If notice is
given to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten (10) business days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party with the consent of the indemnifying party
(which consent shall not be unreasonably withheld or delayed).
(c) Notwithstanding the foregoing, if an indemnified party determines
reasonably and in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
participate with the indemnifying party in the defense, compromise, or
settlement of such Proceeding, but the indemnifying party will not be bound by
any determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld or
delayed).
Final 11/10/98 47
(d) Each of the parties to this Agreement hereby consents to the
non-exclusive jurisdiction of any court in which a Proceeding is brought against
any indemnified party for purposes of any claim that an indemnified party may
have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agrees that process may be served on such party with respect to
such a claim anywhere in the world.
(e) This Section 10.7 is subject to Section 10.3 with respect to a
claim for indemnification or reimbursement under Section 10.3.
(f) In no event shall an indemnifying party be liable for the fees and
expenses of more than one counsel in addition to its own counsel in connection
with a matter covered by this Section 10.7.
10.8 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers will pay all HSR Act filing fees for filings
required by Buyer or Sellers in connection with this Agreement or the
Contemplated Transactions. Sellers will cause the Company and its Subsidiaries
not to incur any material out-of-pocket expenses in connection with this
Agreement. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Public announcement with respect to this Agreement and the Contemplated
Transactions will be issued upon execution and delivery of this Agreement by all
parties to this Agreement. Sellers and Buyer will consult with each other
concerning the means by which the Company's and its Subsidiaries' employees,
customers, and suppliers and others having dealings with the Company and its
Subsidiaries will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication to the extent prior
notice thereof to Buyer is reasonably practicable.
11.3 CONFIDENTIALITY
(a) Buyer will treat and hold as confidential any Confidential
Information that it receives from any of Sellers or the Subsidiaries in
connection with this Agreement and the Contemplated Transactions, will not use
any of the Confidential Information at any time
Final 11/10/98 48
except in connection with this Agreement, and, if this Agreement is terminated
for any reason whatsoever, will return to the Sellers and the Subsidiaries all
tangible embodiments (and all copies) of the Confidential Information that are
in its possession. For purposes of this paragraph (a), "Confidential
Information" shall mean information concerning the businesses and affairs of any
of Sellers or the Subsidiaries, unless (a) such information is already known to
Buyer or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of Buyer, (b) the use of such
information is necessary in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions, or (c)
the furnishing or use of such information is required by or necessary in
connection with legal proceedings.
(b) In addition to Buyer's obligations under paragraph (a) of this
Section 11.3, between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Subsidiaries to maintain in
confidence, written information stamped "confidential" when originally furnished
by another party or the Company or any of its Subsidiaries in connection with
this Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary in making any filing or obtaining
any consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary in connection with legal proceedings.
(c) In addition to Buyer's obligations under paragraph (a) of this
Section 11.3, if the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the other party
may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
certified or registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopoier numbers as a
party may designate by notice to the other parties):
Sellers: Delta Woodside Industries, Inc.
Alchem Capital Corporation
Nautilus International, Inc.
000 - 0/0 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile No. 000-000-0000
with copy to: Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A.
Final 11/10/98 49
00 Xxxx Xxxxxxxxxx Xxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile No. 000-000-0000
Buyer: Direct Focus, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: X. Xxxx Xxxxx
Facsimile No. 000-000-0000
with copy to: Xxxxxx, Xxxxxxxx & Xxxxx
Second & Seneca Bldg., 18th Floor
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No. 000-000-0000
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Sellers dated August 21, 1998, but excluding the confidentiality agreement
executed by Buyer on or about the
Final 11/10/98 50
commencement of negotiations or document production by Sellers) and constitutes
(along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended or waived
except by a written agreement executed by the party to be charged with the
amendment or waiver.
11.8 DISCLOSURE LETTER
The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior written consent of the other parties, which will not be unreasonably
withheld, except that Buyer may assign any of its rights, but not its
obligations, under this Agreement to any Subsidiary of Buyer and except that any
party may grant to any of its lenders a security interest in its rights in this
Agreement. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreernent or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their respective successors and assigns.
11.10 SEVERABABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number, as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
Final 11/10/98 51
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the Commonwealth of
Virginia without regard to conflicts of laws principles.
11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
11.15 LITIGATION SUPPORT
In the event and for so long as any party to this Agreement actively is
pursuing, contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
Contemplated Transaction or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action, or
failure to act, or transaction on or prior to the Closing Date involving any of
Sellers or any of Sellers' Subsidiaries, each of the other parties to this
Agreement shall cooperate with the first party and its counsel in the pursuit,
defense or contest, make available such other party's personnel, and provide
such testimony and access to such other party's books and records as shall be
reasonably necessary in connection with the pursuit, defense or contest, all at
the sole cost and expense of the pursuing, contesting or defending party (unless
the pursuing, contesting or defending party is entitled to indemnification
therefor from the other party under Section 10).
Final 11/10/98 52
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
DIRECT FOCUS, INC. NAUTILUS INTERNATIONAL, INC.
By: /s/ [Illegible] By: /s/ [Illegible]
--------------------- -----------------------------------------------
Title: President Title: Executive Vice President, Treasurer and CFO
------------------ ---------------------------------------------
ALCHEM CAPITAL CORPORATION
By: /s/ [Illegible]
------------------------------------------------
Title: Executive Vice President, Treasurer and CFO
DELTA WOODSIDE INDUSTRIES, INC.
By: /s/ [Illegible]
------------------------------------------------
Title: Executive Vice President, Treasurer and CFO
---------------------------------------------
53
