[We have omitted portions of this Exhibit pursuant to a request for
confidential treatment that we have filed pursuant to Rule 406 of the
Securities Act. We have separately filed a copy of this Exhibit with the
omitted portions intact with the Securities and Exchange Commission.]
EXCLUSIVE SALES AGREEMENT(1)
This Exclusive Sales Agreement (the "Agreement") is made as of the 1st day
of January, 1996 by and between Delta Consolidated Corporation, a New York
corporation doing business as Nautilus Marketing ("Nautilus Marketing"), and
NovaCare, Inc., a Delaware corporation, The Polaris Group division
("NovaCare").
WHEREAS, Nautilus Marketing is engaged in the business of marketing
products of Nautilus International, Inc., a Virginia corporation ("Nautilus"),
and
WHEREAS, Nautilus Marketing desires to engage NovaCare to solicit orders
for certain of the products of Nautilus for sale to customers in certain markets
and territory as described herein;
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein, the parties hereto agree as follows:
1. RIGHTS GRANTED
1.1 Except as limited hereby, Nautilus Marketing hereby grants to
NovaCare, subject to the terms and conditions set forth herein, the exclusive
right to solicit and submit orders for the Products from Senior Living
Industry purchaser locations within the Territory (as so defined, the
"Exclusive Market"), and the non-exclusive right to solicit and submit orders
for the Products from hospitals and outpatient medical clinics in the
Territory for Medical Purposes (such market, together with the Exclusive
Market, being sometimes referred to herein as the "NovaCare Market"). It is
expressly understood and agreed that the NovaCare Market shall not include
individuals purchasing for in-home or personal use of the Products, any
person or entity purchasing for resale, any health club or fitness center
outside the Senior Living Industry (whether a stand-alone facility or part of
another business or institution), any agency or department of the federal
government, or any entity purchasing through or under a contract with the
General Services Administration.
1.2 It is understood and agreed that the "Senior Living Industry" refers
only to nursing facilities, subacute care units, other long-term care units,
assisted living facilities and other non-hospital health care facilities that in
each case provide residential and day care to senior citizens and other patients
on premises. "Medical purposes," as used herein, refers to use of the Products
in a hospital or outpatient clinic for preventive, rehabilitative and
therapeutic medical purposes under the supervision of a physician, nurse,
clinician, or other health care provider. An "affiliate" of NovaCare, as used
herein, refers to any entity that controls, is
- ------------------------
(1) EXCEPT TO THE EXTENT THAT THE UNITED STATES ARBITRATION ACT APPLIES, THIS
AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO CHAPTER 48 OF TITLE 15 OF
THE CODE OF LAWS OF SOUTH CAROLINA
controlled by, or is under common control with NovaCare. "Territory" refers to
the United States of America.
1.3 Except as expressly limited by Section 1.4 hereof, nothing herein
contained shall be construed to limit the right of Nautilus or Nautilus
Marketing to sell the Products outside the Exclusive Market, or to sell other
Nautilus products in any market or manner whatsoever. Without limiting the
foregoing, Nautilus and Nautilus Marketing shall not be restricted from selling
any product under any existing or future Government Services Administration
contract or other contract with any agency or department of the federal
government, whether or not for use within the Senior Living Industry.
1.4 NovaCare shall not knowingly submit any order for Products from any
person or entity intending to resell or use the Products outside the NovaCare
Market, without the prior written consent of Nautilus Marketing. Except as
provided in Section 4.4 hereof, Nautilus Marketing shall not knowingly ship or
install any Product or any equipment product which is designed for the consumer
market or is part of the "Challenger" treadmill line to or within the Exclusive
Market, and shall not knowingly sell any Product or any such consumer or
Challenger equipment product to any party which intends to resell the same
within the Exclusive Market, unless pursuant to orders submitted by NovaCare.
2. PRODUCTS; DISCOUNT; COMMISSION AND MARKETING ALLOWANCE
2.1 PRODUCTS. As used herein, "Products" means the complete line of
Nautilus equipment, as such line is described on the retail price list published
by Nautilus and in effect on the date hereof, provided that "Products"
specifically does not include the line of Nautilus equipment designed for the
consumer market, the "Challenger" treadmill line, or any nonequipment product
of Nautilus which is not normally sold together with a Product.
2.2 DISCOUNT ON NOVACARE PURCHASES. Subject to the terms and conditions
of this Agreement, Nautilus Marketing hereby grants a discount of *
* off the List Price (defined below) of products SOLD pursuant to orders
submitted by NovaCare for its own account, or the account of any Affiliate
identified as such in the order, and accepted by both Nautilus and Nautilus
Marketing. Such discount shall be shown on the invoice for the Products sold,
and shall not apply with respect to taxes or to charges for shipping (including
insurance), special handling, crating, special paint and/or pad covers, and any
other special charges or allowances that may be applicable from time to time
(Special Charges), which shall be billed at the full amount thereof. NovaCare
represents and agrees that Products purchased by NovaCare or any Affiliate shall
be for use within the Territory by NovaCare or such Affiliate, and shall not be
purchased for resale or resold in any market.
2.3 SALES COMMISSION. Subject to the terms and conditions of this
Agreement, Nautilus Marketing agrees to pay NovaCare a sales commission on sales
of Products to Customers (as defined in Section 3.1 hereof), other than sales at
a discount pursuant to Section
2
2.2 hereof, in response to orders submitted by NovaCare and accepted by both
Nautilus and Nautilus Marketing and shipped to the Customer as further described
in this Section 2.3 (the "Sales Commission").
2.3.1 AMOUNT OF COMMISSION. For each sale of Products with
respect to which the Sales Commission is payable, the Sales Commission shall
be an amount equal to:
(1) the aggregate amount collected by Nautilus on the invoice(s)
rendered for that sale at the prices quoted for such Products
pursuant to Section 3.2.4 after deduction of the following:
applicable federal, state or local sales, excise, use or similar
taxes, if any; credits for returned or defective products, any
additional discounts and/or cancellations; and Special Charges
(collectively "Deductions"),
less
(2) * of the List Price of the Products shipped
pursuant to such order.
2.3.2 LIMITATIONS. There shall be no commissions due on orders that
are not accepted by Nautilus Marketing and Nautilus or that are received by
Nautilus Marketing on or after the effective date of any termination of this
Agreement. There shall be no commissions due for any product that is not a
Product at the time the order is received by Nautilus Marketing or that is
ordered by any person who is not a Customer at the time the order is received by
Nautilus Marketing.
2.3.3 TIME OF PAYMENT. The Sales Commission, if any, accrued to
NovaCare in respect of a sale shall be due and payable to NovaCare, subject to
adjustment as set forth in this Agreement, within thirty (30) days after the end
of the fiscal month during which the full payment for that sale is received by
Nautilus. In the case of orders financed by Nautilus in whole or in part
pursuant to Section 3.4.2 hereof, unless otherwise specified at the time of such
order, for purposes of determining the amount and the time of payment of the
Sales Commission payable with respect to such order, the amount so financed
shall be deemed collected in the month such financing is effected.
2.4 MARKETING ALLOWANCE. In addition to the Sales Commission, for each
year during which NovaCare meets the sales quota for such year described in
Section 4 hereof, Nautilus Marketing agrees to pay NovaCare a non-accountable
marketing allowance equal to * of the List Price of the Products
sold pursuant to orders submitted by NovaCare pursuant to this Agreement for
which the Sales Commission is payable or the discount described in Section 2.2
hereof is applicable, and for which payment in full is received by Nautilus
during such year (the "Marketing Allowance"). After NovaCare has met its sales
quota for any sales year defined in Section 4 hereof, Nautilus Marketing shall
pay the then-accrued Marketing Allowance for such year within thirty (30) days
after the end of the quarter during which such sales quota was met, and shall
pay any subsequently-accrued Marketing Allowance for such year
3
within thirty (30) days after the end of each quarter (if any) remaining in
such year. If, due to adjustments calculated pursuant to Section 2.7 hereof,
NovaCare has not met its sales goal for any such sales year at the end of
that year, to the extent any Marketing Allowance previously paid with respect
to such year has not been recovered pursuant to Section 2.7.2 hereof,
NovaCare shall refund to Nautilus Marketing any such unrecovered Marketing
Allowance within 30 days after the end of such year.
2.5 LIST PRICE. As used herein, "List Price" of a Product shall mean
the price of such Product as listed on the standard retail price lists
published by Nautilus Marketing or Nautilus from time to time for general
use. Such standard retail price lists may be changed, expanded, reduced or
modified, or the sale or distribution of any Product discontinued
unilaterally, from time to time and at any time during the term hereof, in
the sole and absolute discretion of Nautilus, without incurring any liability
whatsoever to NovaCare or others. Nautilus Marketing will use its best
efforts to give NovaCare sixty (60) days' notice in advance of any such
change in List Price or Products, which notice may be in the form of one or
more new price lists delivered in advance of their effective dates. It is
understood and agreed, for purposes of calculating the Sales Commission and
the Marketing Allowance, that List Price does not include Deductions, but
that the foregoing provisions regarding unilateral modification and notice by
Nautilus Marketing Nautilus shall apply to Deductions.
2.6 EXPLANATION OF PAYMENTS. On or before the end of each fiscal
quarter, Nautilus Marketing shall provide NovaCare with a schedule (an
"Explanation of Payments") summarizing the basis for the computation of the
Sales Commission and Marketing Allowance paid or accrued during the previous
fiscal quarter including without limitation in respect to the pertinent
period, the value of each shipment, the value of any credits, the commission
amount for each shipment and the amount of any Deductions, plus any other
information pertinent to the status of the orders submitted by NovaCare that
Nautilus Marketing may elect to include. NovaCare also agrees that, in the
event NovaCare has any question or objection regarding any information, or
the lack thereof, regarding any aspect of any Explanation of Payments or any
question regarding any order with an expiration date occurring during the
period to which any Explanation of Payments pertains, NovaCare will give
Nautilus Marketing in writing a detailed statement of such question or
objection and the basis for it within sixty (60) days of the date on which
NovaCare receives the Explanation of Payments (the "Receipt Date"). NovaCare
agrees that all payments in respect to an Explanation of Payments shall be
deemed to have been received by NovaCare, the information contained in such
Explanation of Payments shall be deemed complete and correct, and all
questions of NovaCare shall be deemed answered to the satisfaction of
NovaCare, for all invoices sent, all orders received, and all payments
received prior to the end of the period to which such Explanation of Payments
pertains (plus, in the event of a post termination Explanation of Payments,
all orders received, invoices sent and payments received prior to
termination) except to the extent specified by NovaCare to Nautilus Marketing
in a written objection or question within sixty days of the Receipt Date of
that Explanation of Payments.
4
2.7 ADJUSTMENTS AND REPAYMENTS.
2.7.1 OUTSTANDING ADVANCES. An advance on the payment due
NovaCare by Nautilus Marketing hereunder (an "Advance") shall be deemed to
have been made under any of the circumstances described in this subparagraph:
(1) In the event that a Deduction applicable to the calculation of any Sales
Commission or Marketing Allowance was not deducted in the calculation of such
amount at the time of payment by Nautilus Marketing (whether through error or
because the Deduction arose from events occurring after the initial
calculation of the amount), the reduction in such amount that would have
occurred if that Deduction had been deducted by Nautilus Marketing shall be
an Advance. (2) In the event that the Marketing Allowance paid with respect
to any sales year set forth in Section 4 hereof is determined not to have
been payable due to failure of NovaCare to achieve the sales quota for such
year, after adjusting for Deductions and making any other adjustments
required hereunder, such payment shall be an Advance. (3) In the event any
Customer fails to pay any amount due pursuant to an order financed by
Nautilus pursuant to Section 3.4.2 hereof, the payment of which is guaranteed
by NovaCare pursuant to Section 3.4.3 hereof, the amount of Sales Commission
and Marketing Allowance previously paid with respect to such sale shall be an
Advance, provided that such Sales Commission and Marketing Allowance shall be
deemed to have been earned to the extent the amount paid by the Customer or
by NovaCare pursuant to its guaranty obligation with respect to such sale,
less the amount of any Deductions related thereto, exceeds *
* of the aggregate List Price of all Products included in such sale. (4)
Whenever, for any reason, the amount of Sales Commission, Marketing
Allowance, or any other payment made in respect to a fiscal quarter exceeds
the amount of such payments due in respect of that fiscal quarter after the
adjustments set forth in this Agreement (whether as a result of an error in
calculation or events occurring after the initial calculation), the amount of
the overpayment shall be an Advance. (5) In the event NovaCare fails to pay
any amount due Nautilus or Nautilus Marketing under the guaranty provisions
set forth in Section 3.4.3 hereof, such unpaid amount may be treated as an
Advance at the election of Nautilus Marketing. That portion of the total of
all Advances made under this Agreement that, from time to time, has not been
recovered by Nautilus Marketing through an adjustment to amounts paid in
respect to any fiscal quarter shall be Outstanding Advances.
2.7.2 OFFSET AND REPAYMENT. To the maximum extent possible, any
Outstanding Advances shall be deducted at the earliest possible time from
future Sales Commission, Marketing Allowance, or other sums owed by Nautilus
or Nautilus Marketing to NovaCare, and shall continue to be deducted from any
such sums that may become due after termination of this Agreement. If on the
date any Sales Commission or Marketing Allowance becomes payable to NovaCare
under this Agreement, NovaCare is indebted to Nautilus or Nautilus Marketing
for any reason whatsoever, Nautilus or Nautilus Marketing, as the case may
be, shall have the right to deduct from the payment of such amount the amount
of such indebtedness. Further, in the event that NovaCare fails to earn or
repay, prior to the termination of this Agreement, sufficient Sales
Commission or Marketing Allowance to offset the amount of any portion of the
Outstanding Advances as of the termination of this Agreement, NovaCare shall
repay to Nautilus Marketing the amount of any Outstanding Advances remaining
on the termination date of this
5
Agreement within thirty (30) days of such date.
3. ORDERS AND TERMS
3.1 ORDERS. All sales to NovaCare or to other purchasers within the
NovaCare Market, (such purchasers, together with NovaCare, being referred to
herein as "Customers") shall be in accordance with the terms and conditions of
this Agreement, and in accordance with such other reasonable terms, conditions
and procedures (not inconsistent herewith) as are established by Nautilus
Marketing from time to time. Such other reasonable terms, conditions and
procedures may be set forth by Nautilus Marketing or Nautilus in written
communications, such as price lists, manuals, bulletins, letters, or the like.
NovaCare shall comply with all requirements of Nautilus Marketing which are in
effect from time to time regarding the submission of orders.
3.2 TERMS OF ACCEPTANCE. Without limiting the generality of the
foregoing, the following terms will be deemed incorporated in all orders
accepted by Nautilus Marketing and Nautilus, and such acceptance is expressly
made conditioned on the following:
3.2.1 No sale shall be effective until a purchase order is
delivered by NovaCare to Nautilus Marketing and accepted by Nautilus Marketing
and Nautilus. Nautilus Marketing and Nautilus each reserves the right to reject
any order in its sole discretion. Neither Nautilus Marketing nor Nautilus shall
be liable to NovaCare for any loss or damage resulting from any such action so
taken.
3.2.2 Except as provided in Section 3.2.3 hereof, upon acceptance
of a purchase order, after the number of days following such acceptance
indicated by the then-current delivery lead time schedule published by Nautilus
from time to time in its sole discretion (plus or minus ten business days),
Nautilus, to the extent possible using its best efforts, shall drop ship the
Products to the "ship to" address or addresses shown on the purchase order.
NovaCare shall furnish Nautilus, on a timely basis, full and adequate shipping
directions for each order.
3.2.3 Delivery dates given by Nautilus or Nautilus Marketing for
Product orders shall be considered estimates only. In the event of late
delivery (defined as a delivery not shipped within 45 days from date Nautilus
receives the order for said product), the ordering Customer may cancel the
order provided that such Customer shall give written notice thereof to
Nautilus Marketing and Nautilus, and further provided that the Products in
question may be delivered within (10) business days after such notice is
actually received by Nautilus Marketing and Nautilus, in which case the
cancellation notice shall be void. Cancellation by a Customer in accordance
with this subparagraph shall be without cost or penalty to NovaCare, and
shall terminate any obligation on the part of Nautilus or Nautilus Marketing
with respect to such canceled order, including without limitation any
obligation for payment of Sales Commission or Marketing Allowance with
respect to such canceled order.
6
3.2.4 Upon shipment, Nautilus will invoice the Customer for the
price of the Products ordered, (1) in the case of purchases made pursuant to
Section 2.2 hereof, at the discounted List Price described in that Section, or
(2) in the case of orders submitted by NovaCare pursuant to Section 3.1 hereof,
at the sales prices quoted by NovaCare for the Products ordered (which in no
event shall be lower than * of the List Price of such
Products), plus, in each case, applicable charges for shipping, special
handling, crating, special paint and/or pad covers, and applicable federal,
state or local sales, excise, use or similar taxes, and any other charges in
addition to the sales price for the Products ordered, the payment of which shall
be the responsibility of the Customer.
3.2.5 All Products Will be shipped F.O.B. Nautilus' manufacturing
facility, and the Customer shall bear all costs of freight, insurance and
associated costs.
3.2.6 In the event orders of Products by Customers and other
purchasers exceed Nautilus' ability to manufacture and deliver Products in a
timely manner, Nautilus Marketing reserves the right to apportion Products among
the Customers and its other customers in its reasonable discretion.
3.3 MODIFICATION OF ORDERS, SHIPPING, ETC. Nautilus Marketing and
Nautilus each has the right, in its sole discretion, to modify any of the
Products, to cancel or delay shipment of any order for any reason, to
discontinue the sale of all or some of the Products, or to allocate any of its
products during a period of shortage, without incurring any liability to
NovaCare, including without limitation any liability for the payment of the
Sales Commission or Marketing Allowance. In the event any Product is
discontinued by Nautilus or Nautilus Marketing (unless a substantially similar
product is available or made available to NovaCare hereunder), the quota
requirement set forth in Section 4 hereof for the year during which such
discontinuation takes place shall be reduced by the amount produced by
multiplying (1) the sales quota for the year of discontinuation, (2) the
percentage of the aggregate List Price of Products purchased and paid for by
Customers pursuant to orders submitted by NovaCare during the year preceding the
year of such discontinuation represented by sales of the discontinued Product in
such year, and (3) the percentage of days remaining in the year of
discontinuation following the date of such discontinuation. The sales quota for
each subsequent year will be reduced (if at all) by the amount produced by
multiplying (1) the sales quota for such subsequent year, (2) the percentage
described in clause (2) of the preceding sentence, and (3) the percentage of
days (if any) of such subsequent year during which no substantially similar
product to the discontinued Product is available or made available to NovaCare
hereunder. In the event an order for Products submitted by NovaCare is accepted
by Nautilus and Nautilus Marketing hereunder and is later canceled by Nautilus
or Nautilus Marketing, or is canceled by the customer in accordance with Section
3.2.3 hereof, the aggregate List Price of the Products ordered pursuant to such
order shall be deducted from the sales quota for the year during which such
cancellation takes place.
3.4 PAYMENT.
3.4.1 TERMS. Nautilus Marketing and Nautilus shall have sole and
absolute
7
discretion, at the time of and with respect to each order from a particular
Customer, to accept or reject any order made upon the condition of terms or
financing, or for any other reason, and no order shall be effective until
accepted by Nautilus and Nautilus Marketing. Without limiting the discretion
of Nautilus and Nautilus Marketing under the foregoing sentence, a Customer
may elect to submit an order specifying payment terms of either net thirty
(30) days or net ninety (90) days from the shipment date, provided that
Nautilus shall charge and the Customer will pay interest on any unpaid
balance, at four percent (4%) over the highest prime rate published by any
bank at which Nautilus maintains an account, beginning after thirty (30) days
from the shipment date until paid.
3.4.2 FINANCING. A Customer shall be permitted, but not obligated,
to apply for Nautilus in-house financing of any purchase of Products, which
financing shall be upon such terms and conditions as Nautilus shall establish in
its sole discretion for such Customer at the time of each such purchase. No sale
involving Nautilus in-house financing shall be effective until the Customer
makes application to Nautilus and is approved for such financing. Nautilus
reserves the right to refuse to finance any Customer or purchase of Products for
any reason whatsoever in its sole and absolute discretion exercised with respect
to each order for which financing is sought.
3.4.3 NOVACARE GUARANTY. In the event an order from a Customer
is rejected for terms or financing by Nautilus or Nautilus Marketing,
NovaCare may offer to guarantee to Nautilus Marketing and to Nautilus the
timely payment of all amounts due Nautilus or Nautilus Marketing from time to
time under any invoice or Nautilus in-house financing with respect to such
order, and if such order and guaranty is accepted by Nautilus and Nautilus
Marketing in its sole discretion, NovaCare shall be liable for the full and
timely payment thereunder. NovaCare shall promptly pay all amounts required
to be paid pursuant to any such guaranty, and if NovaCare fails promptly to
pay any such amount, Nautilus Marketing may, in addition to its other
remedies, elect to treat such amount (and the associated Sales Commission and
Marketing Allowance, to the extent paid) as an Advance deductible pursuant to
Section 2.7.2 hereof from amounts due NovaCare.
4. SALES QUOTAS
4.1 In consideration of the exclusive and non-exclusive rights to sell
the Products within the NovaCare Market granted hereby, NovaCare agrees to use
its best efforts to effect sales and purchases aggregating at least the
following minimum dollar volumes of Products within the NovaCare Market during
the time periods shown:
JANUARY 1, 1996 TO DECEMBER 31, 1996
------------------------------------
*
JANUARY 1, 1997 TO DECEMBER 31, 1997
------------------------------------
*
8
JANUARY 1, 1998 to DECEMBER 31, 1998
------------------------------------
*
JANUARY 1, 1999 TO DECEMBER 31, 2000
------------------------------------
*
JANUARY 1, 2001 TO DECEMBER 31, 2001 AND EACH YEAR THEREAFTER
-------------------------------------------------------------
the greater of:
(i) * of the prior year's quota
or
(ii) the prior year's quota plus one-half (1/2) the difference
between the prior year's quota and the prior year's actual sales
Notwithstanding the foregoing, the sales quota for any year hereunder
shall not exceed * , unless otherwise agreed in writing by the
parties hereto, during the ten (10) year period beginning on the date hereof
and ending on November 30, 2005.
4.2 Sales volumes for purposes of determining compliance with the
above quotas will be calculated at the end of each of the above periods by
adding together (1) the total List Price of Products, excluding Deductions,
purchased and paid for by Customers pursuant to orders submitted by NovaCare
for which the Sales Commission is payable with respect to such period, and
(2) the total List Price of Products, excluding Deductions, purchased and
paid for by NovaCare or any Affiliate prior to the end of such period, as to
which the discount set forth in Section 2.2 hereof is applicable.
4.3 In the event NovaCare exceeds its quota in any of the above periods,
NovaCare shall be entitled to carry over such excess and apply it toward the
quota for the next successive period up to and including ten percent (10%) of
the quota for such next successive period, provided that such excess shall be
excluded from the calculation of the Marketing Allowance for such next
successive period.
4.4 It is expressly understood and agreed that the failure of NovaCare
to meet the above sales quotas, as determined at the end of each of the above
periods during the term hereof, will give Nautilus Marketing the right, upon
written notice to NovaCare, to terminate the exclusivity of NovaCare's right to
sell under this Agreement.
5. REPRESENTATIONS AND COVENANTS
5.1 REPRESENTATIONS OF NOVACARE
5.1.1 CORPORATE STATUS. NovaCare is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, with all
requisite corporate power and
9
authority to conduct its business as presently conducted, to own, operate and
lease its properties and to enter into and perform this Agreement. NovaCare
is duly qualified to do business and is in good standing in all states in
which the nature of its business and properties makes such qualification
necessary.
5.1.2 AGREEMENT DULY AUTHORIZED, EXECUTED AND BINDING. NovaCare
has the full legal right and power and all authority required to enter into,
execute and deliver this Agreement and all instruments and documents to be
executed by it pursuant to this Agreement and to perform fully its or his
obligations hereunder and thereunder. This Agreement and all instruments and
documents to be executed pursuant to this Agreement have been duly authorized
by all corporate action required to be taken by NovaCare, have been duly
executed and delivered and are the legal, valid and binding obligation of
NovaCare, enforceable against it in accordance with their respective terms.
5.1.3 AGREEMENT CAUSES NO DEFAULT. Neither the execution and
the delivery of this Agreement nor the consummation of the transactions
contemplated herein will conflict with or result in any violation of or
constitute a default under any provision of the Articles of Incorporation,
by-laws or similar document of NovaCare, or any agreement, mortgage, note,
indenture, franchise, license, permit, authorization, lease or other
instrument, judgment, decree, order, law or regulation by which NovaCare is
or may be bound or which may affect any of its respective assets or
properties.
5.1.4 REQUIRED CONSENTS. No consent, approval or authorization of,
filing with or notice to any governmental authority or any person or entity is
required in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated herein.
5.2 COVENANTS OF NOVACARE.
5.2.1 NovaCare shall not have the authority to accept orders on
behalf of Nautilus Marketing or Nautilus. Nautilus Marketing and Nautilus
shall not be under any obligation to accept any order. The determination
whether to accept an order shall be made by Nautilus Marketing and Nautilus
in their sole discretion.
5.2.2 NovaCare shall have no authority to make quotations with
respect to purchase terms, other than prices (subject to the limitation set
forth in Section 3.2.4 hereof), except to the extent authorized by Nautilus
Marketing.
5.2.3 NovaCare shall not extend any warranty or guarantee, make
any other representation, or assume any liability on behalf of Nautilus
Marketing or Nautilus, provided, however, that NovaCare may distribute
literature supplied by Nautilus Marketing containing representations as to
Products.
5.2.4 NovaCare shall not have any authority to make, and shall
not make, any
10
commitment and/or obligation on behalf of Nautilus Marketing or Nautilus to
anyone for any purposes under any circumstances.
6. RESPONSIBILITIES OF NAUTILUS MARKETING AND NAUTILUS
In addition to and subject to the other provisions of this Agreement,
Nautilus Marketing or Nautilus shall:
6.1 Provide Products to Customers in response to orders submitted by
NovaCare and accepted by Nautilus Marketing and Nautilus, as set forth in this
agreement.
6.2 Use its best efforts to forward to NovaCare all leads received by it
from advertising, trade shows, and other sources, to the extent such leads
relate to potential sales into the Exclusive Market.
6.3 Provide NovaCare with such marketing literature, technical advice
and assistance and warranty literature as Nautilus Marketing and Nautilus
deem appropriate for the Products. Such literature shall be provided to
NovaCare with the cost of same to be borne by NovaCare, provided that
NovaCare has approved such charges in advance or accepts a shipment of such
literature. NovaCare shall not supply its employees or agents with any
literature or information regarding the Products which is not either provided
by Nautilus Marketing or Nautilus or approved by Nautilus Marketing or
Nautilus in advance of its use. Nautilus Marketing and Nautilus will use
their best efforts promptly to notify NovaCare of any literature errors.
6.4 Provide NovaCare with access to employees of Nautilus Marketing
and Nautilus for graphic design, marketing assistance and other support, if
such employees have sufficient time available for such support as determined
by Nautilus Marketing or Nautilus in their sole discretion. NovaCare shall
pay for such employee services at the cost of such employees to Nautilus
Marketing or Nautilus, as the case may be, as described in writing to
NovaCare before such support is provided. Such payment shall be made by
deduction from amounts payable pursuant to Section 2.3 hereof.
6.5 Provide sales and technical training to NovaCare employees,
trainers and/or representatives, upon reasonable request by NovaCare. In
addition, NovaCare may utilize existing training classes that may be provided
by Nautilus, based on availability and at Nautilus' reasonable discretion.
All such training shall be provided at such prices as Nautilus shall announce
from time to time.
7. RESPONSIBILITIES OF NOVACARE
In view of NovaCare's understanding that pre-sale and post-sale support
of the Products by NovaCare are critical to the reputation and success of the
Products in the marketplace, NovaCare acknowledges that its ability to
provide such support and to aggressively market the Products is a critical
element in Nautilus Marketing' decision to enter into this Agreement.
Accordingly, in addition to the sales quotas set forth in Section 4 hereof
and the other provisions of this Agreement, and in further consideration of
the Sales Commission and the Marketing
11
Allowance, and the exclusive rights granted hereunder, NovaCare agrees to
implement the sales and support program described below:
7.1 BEST EFFORTS. NovaCare shall exercise its best efforts to achieve,
in a manner consistent with other terms of this Agreement, maximum market
penetration for the Products in the NovaCare Market. NovaCare will forward all
leads for potential sales in the NovaCare Market received from Nautilus
Marketing or other sources to the appropriate Representative promptly after
receipt and will implement an appropriate follow-up system.
7.2 NOVACARE SYSTEM. NovaCare shall develop and market a complete
customized system (the "NovaCare System") respecting the sales of Products and
the provision of support to purchasers of Products. The NovaCare System will
include, but not be limited to:
i. Sale of appropriate Products.
ii. Training in use of the Products through on-site instruction,
using instructional manuals and other appropriate methods.
iii. Provision of brochures and literature to Customers to assist
in marketing through promotion of the strength training
concept.
iv. Follow-up support and assistance, including provision of
toll-free telephone support, and on-site consultation as
reasonably necessary.
7.3 REPRESENTATIVES. NovaCare will use its existing force of sales
representatives and any additional representatives as may be retained by
NovaCare (collectively, the "Representatives") to sell the Products and
implement the NovaCare System. NovaCare shall be solely responsible for the
hiring, compensation, termination and all other matters relating to the
Representatives and any other persons or entities employed or engaged by
NovaCare for any reason whatsoever, and shall indemnify Nautilus Marketing
and Nautilus against all injuries, actions, losses, damages, expenses or
proceedings arising from the employment or engagement of or the actions or
inactions of, any such persons or entities, except to the extent caused by
any defect of a Product manufactured by Nautilus.
7.4 LEADS. NovaCare agrees to promptly forward to Nautilus Marketing a
complete written description of any lead or other information generated by
NovaCare's advertising, trade shows, and other activities, or otherwise received
by Novacare, relating to potential sales outside the NovaCare Market.
7.5 TRADE SHOWS. NovaCare agrees to promote the Products by
independently participating in at least five (5) appropriate shows in the
Territory during each year of this Agreement. All travel and other expenses of
NovaCare or its employees or Representatives related to these shows will be paid
by NovaCare and/or the Representatives.
7.6 SALES TRAINING. NovaCare shall cause the Representatives to become
trained and knowledgeable with respect to functional capabilities and operation
of the Products.
7.7 LIMITATION ON EXTRA-TERRITORIAL AND UNSUPPORTED SALES. NovaCare
shall not ship,
12
sell, market or support any of the Products outside the Territory unless
specifically authorized by the prior written consent of Nautilus Marketing.
7.8 PROBLEM RESOLUTION. NovaCare will comply with all reasonable
requests by Nautilus Marketing for assistance in the collection of accounts
receivable, investigation of complaints and settlement of disputes regarding
sale of Products to any Customer. NovaCare shall attempt to resolve all
complaints of customers of NovaCare prior to involving Nautilus Marketing or
Nautilus personnel.
7.9 PRODUCT INFORMATION. NovaCare will immediately notify Nautilus
and Nautilus Marketing if at any time it obtains notice or knowledge of any
defect, dangerous condition, complaint, or other problem with respect to any
Product, will provide with such notification such information as it has in
its possession or can obtain without unreasonable effort or expense regarding
such defect, dangerous condition, complaint or other problem, and will
cooperate fully with Nautilus and Nautilus Marketing in their investigative
and remedial efforts in response thereto. NovaCare agrees that any such
information it obtains shall be deemed confidential information subject to
the non-disclosure requirements of Section 8.3 hereof.
7.10 CUSTOMER STATUS. NovaCare will provide Nautilus Marketing promptly
with all information that Nautilus Marketing reasonably requests in connection
with any order placed by a Customer, and will keep Nautilus Marketing apprised
of any changes that may affect a Customer's status from time to time. Changes
that may affect a Customer's status include, but are not limited to, a change in
address or the identity of the person or persons responsible for purchasing the
Products. NovaCare shall, on the request of Nautilus Marketing, assist Nautilus
Marketing in obtaining credit information relating to Customers or prospective
Customers.
7.11 REPORTS. NovaCare shall monitor its activities and those of the
Representatives with respect to the Products, and shall provide Nautilus
Marketing with such reports as Nautilus Marketing may reasonably request from
time to time.
7.12 TRAINING FEE. NovaCare agrees to pay a training fee (only upon
request to train from NovaCare) to Nautilus for any Nautilus employee who
trains any person who purchases Products pursuant to orders submitted by
NovaCare. Such training fee will be calculated as * of the
gross invoice amount, less Deductions, collected by Nautilus from the
purchaser of the Products sold. Payment will be made only after such
purchaser signs a Nautilus installation satisfaction sheet provided by
NovaCare.
7.13. EXPENSES. Except for such expenses as may be approved by Nautilus
Marketing from time to time for reimbursement by it, all expenses for travel,
entertainment, office, clerical, office and equipment maintenance expense,
general selling expense, and other expenses incurred by NovaCare, and all
disbursements made by it in the performance of duties hereunder, shall be borne
solely by NovaCare. In no case shall Nautilus Marketing be responsible or liable
for any such expenses not approved by it for reimbursement.
7.14. COMPLIANCE WITH COMMISSION AGREEMENTS, ETC. NovaCare agrees to
comply, and to cause all of its Representatives, employees and other agents
who are involved in NovaCare's performance under this Agreement to comply, in
all material respects (except to the extent any such agreement or arrangement
is inconsistent with this Agreement) with all agreements or
13
arrangements, written or oral, entered into by NovaCare with any party other
than or in addition to Nautilus or Nautilus Marketing, which in any way
relate to or affect the Products or NovaCare's fulfillment of its obligations
hereunder (a "Third Party Agreement"). Without limiting the generality of the
foregoing, NovaCare agrees to pay in a timely manner all commissions and
other amounts owed by NovaCare from time to time to any distributor or dealer
under any Third Party Agreement entered into with any such distributor or
dealer. NovaCare agrees that any such distributor or dealer shall look
solely to NovaCare for payment of such commissions or other amounts, and
agrees to indemnify Nautilus and Nautilus Marketing in accordance with
Section 12.1 hereof with respect to claims, liabilities and defense costs
arising out of any Third Party Agreement.
7.15. COMPLIANCE WITH LAWS. NovaCare agrees to comply, and to cause
all of its Representatives, employees and other agents to comply, in all
material respects with all applicable laws and regulations, including
applicable workers' compensation laws, and to pay the premiums and other
costs and expenses incident to the required workers' compensation coverage.
7.16. PROPERTY OF NAUTILUS. Any property of Nautilus received by NovaCare
under this Agreement shall be held by it for the account of Nautilus, and upon
request by Nautilus or upon termination or expiration of this Agreement such
property shall be returned to Nautilus in as good condition as when received by
NovaCare, ordinary wear and tear excepted. All records or papers of any kind
received from Nautilus Marketing or Nautilus related to their business shall
remain the property of Nautilus Marketing and Nautilus and, together with any
and all copies thereof, shall be surrendered to Nautilus Marketing or Nautilus,
as the case may be, upon their request and upon the termination or expiration of
this Agreement.
8. NON-COMPETITION AND NON-DISCLOSURE
8.1 Except as specifically authorized by Nautilus Marketing in writing
in advance, NovaCare and its representatives shall not during the term of this
Agreement represent or offer for sale any item of a similar nature to the
Products other than the Products, nor shall NovaCare or any Affiliate, except to
the extent authorized in writing by Nautilus Marketing, while this Agreement is
in effect, have a financial interest in the manufacture, production,
importation, sale or distribution of any item of a similar nature to any product
sold by Nautilus Marketing or manufactured by Nautilus. Notwithstanding the
foregoing, NovaCare may itself purchase any equipment, whether sold by Nautilus
or otherwise, for use in facilities it owns, operates, or manages.
8.2 Nautilus Marketing agrees not to solicit any Representative of
NovaCare for employment with or as contractors of Nautilus Marketing.
8.3 To the extent requested from time to time by Nautilus Marketing,
NovaCare agrees to keep confidential such information as Nautilus or Nautilus
Marketing may from time to time impart to NovaCare regarding Nautilus'
business affairs, operations, products and customers, and NovaCare will not,
in whole or in part, now or at any time, use such information except in
performing its obligations under this Agreement, or disclose said information
to any person without the prior approval of Nautilus or Nautilus Marketing,
except as required by law
14
(in which case Nautilus Marketing shall be given as much prior notice of the
terms of such disclosure as is reasonably practicable, along with a description
of the information proposed to be disclosed).
9. INTELLECTUAL PROPERTY: GOOD WILL
9.1 NovaCare hereby acknowledges that one or more affiliates of
Nautilus Marketing are the sole owners of the Products and the NAUTILUS,
NAUTILUS SHELL DESIGN, STRONG MEDICINE and other trademarks, trade names and
service marks now or hereafter affixed or related to the Products, and of all
the goodwill associated therewith, (the "Trademarks"). NovaCare hereby
acknowledges the validity of the Trademarks, that the same shall at all times
be and remain the sole and exclusive property of those affiliates, and that
NovaCare, by reason of this Agreement or otherwise, has not acquired any
right, title, interest, or claim of ownership therein. The use by NovaCare of
the Trademarks permitted hereunder and any and all goodwill arising from such
use shall inure solely to the benefit of those affiliates and shall be deemed
to be the sole property of those affiliates in the event of the termination
of this Agreement for any reason; and upon termination of this Agreement, any
and all rights in and to the Trademarks granted to NovaCare hereunder shall
automatically terminate. If, during the term of this Agreement, any such
right should become vested in NovaCare by operation of law or otherwise,
NovaCare agrees that it will promptly, on the request of Nautilus Marketing
or any affiliate and, in any event, upon termination or expiration of this
Agreement, forthwith irrevocably assign, without consideration, any and all
such rights, together with any good will appurtenant thereto, to Nautilus
Marketing or its designated affiliate. NovaCare will at no time contest
ownership of the rights or the goodwill associated with the Trademarks.
Nothing contained in this Agreement shall be construed to prevent those
affiliates from authorizing any other person, firm, or corporation to sell
the Products outside the Exclusive Market or use associated Trademarks in any
way.
9.2 NovaCare shall not, and shall use its reasonable efforts to cause
the Representatives not to, permit any Trademark, servicemark, or trade name
of any affiliate of Nautilus Marketing to be used in a manner that is
contrary to the instructions of Nautilus Marketing or that affiliate or that
may adversely affect Nautilus Marketing or that affiliate or be detrimental
to its good name and reputation, or which might adversely affect any other
businesses licensed by Nautilus Marketing or any of its affiliates; nor do
anything in any way, directly or indirectly, at any time during the term of
this Agreement or thereafter to infringe upon, impair, harm, or contest the
rights, title, and interests in or to the Products or Trademarks of Nautilus
Marketing or any of its affiliates. NovaCare will not use any trademarks or
other trade name in connection with the Products except those used by
Nautilus Marketing. NovaCare will use those trademarks only in their standard
form and style or as instructed by Nautilus Marketing. No other letter, word,
design or symbol, or other matter of any kind shall be superimposed upon,
associated with or shown in such proximity to the trademarks of affiliates of
Nautilus Marketing as to tend to alter or dilute them. NovaCare will not
combine or associate any trademark of Nautilus Marketing's affiliates with
any other trademark or trade name. The generic or common name of any Product
must always follow the trademark. Every use of any trademark of Nautilus
Marketing's affiliates must be accompanied by the appropriate indication that
the trademark is a trademark of the appropriate affiliate. Neither NovaCare
nor any Representative will use any trademark or trade name of any affiliate
of Nautilus Marketing or
15
any simulation of such marks or names as a part of NovaCare's or any
Representative's corporate or other trading name or designation of any kind.
Nautilus Marketing reserves the right to withdraw the right to the use of the
Trademarks if NovaCare or any Representative materially violates the provisions
of this paragraph.
9.3 If and to the extent each proposed use is submitted to and approved
in writing in advance by Nautilus Marketing in its sole discretion, NovaCare
will have the right to use of the Trademarks in marketing the Products in the
NovaCare Market. Without limiting the discretion of Nautilus Marketing described
in the foregoing sentence, such use may include, without limitation, business
cards, brochures, letterhead, advertising, and trade shows and promotions.
9.4 NovaCare shall give notice in writing to Nautilus Marketing of any
infringement of any Trademarks of any of Nautilus Marketing's affiliates or
misappropriation of any rights of any such affiliate which shall come to
NovaCare's knowledge at any time and, when requested, shall cooperate with the
appropriate affiliate in stopping such infringements. The appropriate affiliate
of Nautilus Marketing shall decide the need for instituting legal action with
respect to any infringement which may occur, and the cost of any such litigation
or the policing of rights granted by such affiliate hereunder shall be paid by
the affiliate.
9.5 NovaCare agrees to cooperate in the defense or prosecution of any
action involving infringement or misappropriation of any intellectual property
or proprietary or confidential information.
9.6 NovaCare hereby acknowledges the validity of all copyrights
registered by or in favor of Nautilus, its parent company, or any affiliate of
either of them in respect of literature, software and any other similar works
which may be copyrighted. NovaCare agrees that it will comply with any
licensing, sub-licensing or other program which Nautilus may from time to time
implement with respect to software used in connection with Products. NovaCare
shall not enhance or in any way alter any such software, and shall cause the
Representatives not to do so. Any alteration of the software voids any Nautilus
warranty with respect thereto.
10. SERVICE AND WARRANTY
10.1 NovaCare acknowledges that the Products require installation,
warranty and nonwarranty service, and maintenance by skilled, trained and fully
qualified Nautilus technicians (other than maintenance to be performed by the
end user in accordance with Nautilus' recommended maintenance instructions).
NovaCare will not, and will cause the Representatives to not, engage in any
installation, service, or maintenance of the Products.
10.2 NovaCare agrees to indemnify, defend and hold harmless Nautilus for
and against any claim or cause of action, including without limitation any claim
for loss or damages resulting from a voided warranty, arising solely out of any
violation of this subparagraph by NovaCare or any Representative.
10.3 The Nautilus new product Limited Warranty is as may be provided with
the Products by Nautilus from time to time (the "Limited Warranty"). Nautilus
agrees to double the normal term of the Limited Warranty applicable to each
Product sold hereunder, provided
16
that such doubling of the normal term shall apply to a particular Product only
so long as it remains installed in the location in which it is first installed
following sale hereunder. Nautilus reserves the right at any time to amend or
modify its warranty policy, including any limitations or exclusions applicable
thereto. All used or refurbished Products are sold "as is" and no Nautilus
warranty shall apply thereto.
THERE ARE NO OTHER WARRANTIES WHICH EXTEND BEYOND THE FACE OF THE LIMITED
WARRANTY. ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WITHOUT
LIMITATION THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
AND FITNESS FOR USE, ARE EXCLUDED.
10.4 Nautilus' sole responsibility shall be to repair or replace
Products under warranty, in accordance with the procedures set forth in the
Limited Warranty. Charges for out-of-warranty repairs by Nautilus will be at
the rates then in effect as charged to other Nautilus customers as Nautilus
may establish from time to time. NovaCare shall not make any representation
regarding cost, timing, availability or parts, or applicability of any
warranty, or assume any liability on behalf of Nautilus Marketing or
Nautilus, with respect to service or repair of the Products by Nautilus,
whether in or out of warranty.
10.5 NovaCare may not extend the Limited Warranty or modify it in any
respect. No modification or extension of the Limited Warranty is effective
unless it is contained in a writing signed by an authorized officer of
Nautilus. NovaCare shall not, and shall use its best efforts to cause the
Representatives to not, make any representation about the Products unless such
representation is contained in literature provided or approved by Nautilus with
respect to the Product in question.
10.6 NovaCare shall indemnify and hold harmless Nautilus, including
the payment of Nautilus' reasonable attorney fees and costs, in the event
NovaCare or any representative of NovaCare makes any unauthorized commitment
on behalf of Nautilus or Nautilus Marketing with respect to service and
repair of any Product or any other matter, or makes any express or implied
warranty or representation with respect to any Product which is inconsistent
with, different from, or in addition to the Limited Warranty or literature
provided or approved by Nautilus.
11. TERM AND TERMINATION
11.1 TERM. This Agreement shall continue for a term of five (5) years
from the date hereof, and shall be automatically renewed for three successive
five year periods thereafter, unless (1) NovaCare fails to meet or exceed its
sales quota set forth in Section 4 hereof for any two years hereunder,
whether or not such years are consecutive, in which case Nautilus Marketing
shall thereafter have the right to terminate this Agreement without notice,
or (2) this Agreement is otherwise earlier terminated pursuant to this
Section 11 or any other applicable provision of this Agreement.
11.2 TERMINATION FOR BREACH. Either party shall have the right to
terminate this Agreement with immediate effect if the other party hereto shall
default on or breach any of the
17
terms, conditions, or covenants undertaken by or binding on it under this
Agreement, and such default or breach shall continue for a period of sixty (60)
days after receipt of written notice of the default or breach, or if any
representation or warranty made by the other party in this Agreement shall
become untrue in any material respect.
11.3 BANKRUPTCY, ETC. This Agreement may also be terminated by Nautilus
Marketing if NovaCare makes an assignment for the benefit of creditors, files a
voluntary petition under the federal bankruptcy laws, or any state law of
similar import, is the subject of any involuntary petition under the federal
bankruptcy laws or any state law of similar import without having the same
dismissed within sixty (60) days of its filing, or makes any bulk transfer of
its assets.
11.4 PENDING SALES. Upon termination of this Agreement, other than as
a result of NovaCare's breach hereof, NovaCare shall be entitled to receive
the Sales Commission and the Marketing Allowance, in accordance with and
limited by the provisions of Sections 2.3 and 4 hereof, with respect to
orders ultimately accepted by Nautilus Marketing and Nautilus that were
submitted by NovaCare to Nautilus Marketing prior to the effective date of
such termination in compliance with all requirements regarding the submission
of orders then in effect. No other or further amounts, for any reason, shall
be payable by Nautilus Marketing to NovaCare after termination. NovaCare
agrees that after termination of this Agreement Nautilus Marketing may, in
its sole discretion, in order to assure payment of any amounts due Nautilus
Marketing in connection with Outstanding Advances, withhold up to one-third
of any amount due in respect to any fiscal quarter for an additional thirty
days from the date on which such amounts would otherwise be due and payable.
In the event that any order is accepted by Nautilus Marketing and Nautilus
but canceled after termination because of expiration of the order or the
creditworthiness of the Customer, or at the request of the Customer, or for
any similar reason, no Sales Commission or Marketing Allowance shall be due
in respect to that order even if it is later rebooked.
11.5 NO LIABILITY. Nautilus Marketing shall not, by reason of the
termination or expiration of this Agreement, be liable to NovaCare for
compensation, reimbursement, or damages either on account of present or
prospective profits on sales or anticipated sales, or on account of
expenditures, investments, or commitments made in connection therewith, or in
connection with the establishment, development, or maintenance of the
business or goodwill of NovaCare, provided that termination shall not affect
the rights or liabilities of the parties with respect to sales of Products
hereunder prior to such termination, or with respect to any Sales Commission,
Marketing Allowance, Outstanding Advances, or other amount or indebtedness
then owing by either party to the other at the time of termination.
11.6 RETURN OF MATERIAL. Upon termination or expiration of this
Agreement, any samples for which NovaCare has not paid in full, any equipment
(including without limitation computers), any price books, other pricing
data, catalogues, booklets, pamphlets, technical information, literature, and
any sales or advertising aids and materials provided to NovaCare by Nautilus
or Nautilus Marketing (including all copies or extracts) shall remain or
become the property of Nautilus or Nautilus Marketing, as the case may be,
and shall be promptly returned to Nautilus or Nautilus Marketing, as the case
may be, along with any documents containing any information regarding the
business of Nautilus or Nautilus Marketing.
11.7 DISCONTINUANCE OF USE OF NAMES. Upon termination or expiration of
this
18
Agreement, NovaCare will immediately discontinue every use of any Trademark and
the use of any language stating or suggesting that NovaCare is a sales
representative of Nautilus Marketing or affiliated in any way with Nautilus.
12. INDEMNIFICATION AND INSURANCE
12.1 NOVACARE.
12.1.1 NovaCare agrees to indemnify Nautilus and Nautilus
Marketing, their present and former agents, servants, officers, directors,
employees, attorneys, representatives, predecessors, successors, assigns,
shareholders, parent, subsidiaries and affiliates, and any and all other persons
or entities related thereto, against any and all claims, damages, losses and
expenses, including reasonable attorney's fees, arising in whole or in part out
of any action or inaction of NovaCare, any Representative of NovaCare or any of
NovaCare's employees or agents arising under or in connection with NovaCare's
performance under this Agreement, any deficiency in the performance under this
Agreement by NovaCare or any person or entity employed or engaged by NovaCare in
connection with this Agreement or any violation or breach by NovaCare of any
provision of this Agreement.
12.1.2 NovaCare shall carry general liability insurance
coverage in an amount of not less than $1,000,000 (combined single limit per
occurrence) with an insurance company satisfactory to Nautilus. NovaCare shall
provide Nautilus with a certificate of insurance evidencing such coverage within
thirty (30) days of the execution of this Agreement showing Nautilus
International, Inc. as an additional insured and certificate holder and
providing that such insurance shall not lapse or be canceled or modified unless
Nautilus has been given thirty (30) days' prior written notice of the intended
cancellation or modification.
12.2 NAUTILUS MARKETING.
12.2.1 Nautilus Marketing agrees to indemnify NovaCare, its
present and former agents, servants, officers, directors, employees, attorneys,
representatives, predecessors, successors, assigns, shareholders, parents,
subsidiaries and affiliates, and any and all other persons or entitles related
thereto, against any and all claims, damages, losses and expenses, including
reasonable attorney's fees, arising in whole or in part out of (i) claims by
previous sales agents, distributors or other resellers of the Products, (ii) any
action or inaction of Nautilus Marketing or any of its employees or agents
arising under or in connection with Nautilus Marketing' performance under this
Agreement, (iii) any deficiency in the performance under this Agreement by
Nautilus Marketing or any person or entity employed or engaged by Nautilus
Marketing in connection with this Agreement or (iv) any violation or breach by
Nautilus Marketing of any provision of this Agreement.
12.2.2 Nautilus shall carry general liability insurance
coverage in an amount of not less than $1,000,000 (combined single limit per
occurrence) with an insurance company reasonably satisfactory to NovaCare.
Nautilus shall provide NovaCare with a certificate of insurance evidencing such
coverage within thirty (30) days of the execution of this Agreement showing
NovaCare, Inc. as an additional insured and certificate holder and providing
that such insurance shall not lapse or be canceled or modified unless NovaCare
has been given
19
thirty (30) days' prior written notice of the intended cancellation or
modification.
13. RELATIONSHIP OF THE PARTIES
13.1 NovaCare specifically acknowledges and agrees that it is an
independent contractor hereunder. Nautilus Marketing is interested only in the
results to be achieved, and subject to the terms and conditions of this
Agreement, the conduct and control of the work will lie solely with NovaCare. It
is understood that Nautilus Marketing does not agree to use NovaCare exclusively
except as stated herein. It is further understood that NovaCare is free to
contract for similar services to be performed for other parties while under
contract with Nautilus Marketing, subject to the non-competition provisions
hereof. It is the express intention of Nautilus Marketing and NovaCare that
anything in this Agreement which may be construed as inconsistent with the
independent contractor relationship shall be disregarded.
13.2 Neither NovaCare, the Representatives, nor its or any of their
employees or agents are employees of Nautilus or Nautilus Marketing under the
meaning or application of any law. Neither NovaCare, the Representatives, nor
any of its or their employees, representatives, agents and independent
contractors shall be covered as employees of Nautilus or Nautilus Marketing
under the workers' compensation laws of any state, or any other laws pertaining
to employees of an employer or the employment relationship. NovaCare shall be
solely responsible for the reporting, for purposes of federal tax, state tax,
FICA and any other applicable law, of any payments made to it or its employees
or the Representatives or other agents or independent contractors by Nautilus
Marketing or NovaCare, and is solely responsible for any payments required by
the United States Internal Revenue Service or other governmental agencies with
respect to such payments.
13.3 NovaCare shall not hold itself out as an agent of Nautilus or
Nautilus Marketing. NovaCare shall not have, or represent itself as having,
any authority to make contracts in the name of Nautilus or Nautilus Marketing
or to bind Nautilus or Nautilus Marketing in any manner. NovaCare shall not
make any warranties or statements ostensibly on behalf of or approved by
Nautilus or Nautilus Marketing with respect to the Products other than those
set forth in the Limited Warranty or literature provided or approved by
Nautilus or Nautilus Marketing.
13.4 It is understood and agreed that no franchisor/franchisee
relationship is created by this Agreement or otherwise exists between the
parties. NovaCare expressly acknowledges that it has negotiated with Nautilus
Marketing as an independent contractor, and that is shall not be deemed a
franchisee of Nautilus or Nautilus Marketing under any circumstance whatsoever.
13.5 Any breach of the terms of this Section 13 shall be deemed a
material breach of this Agreement.
14. MISCELLANEOUS
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the matters set forth herein, and
there are no other Agreements
20
between the parties pertaining to the subject matter hereof, either oral or
written. Except as provided in Section 3.1 hereof, no contrary, different or
additional terms will apply to the transactions contemplated by this Agreement,
even if such terms are contained on purchase orders, order confirmations, or
other forms or documents sent by a Customer.
14.2 ASSIGNMENT. Either party hereto may assign its rights and
obligations under this Agreement to a successor corporation, to an affiliate
corporation controlling, controlled by, or under common control with such party,
or to a corporation to which it transfers substantially all of its assets,
upon written notice to the other party. In addition, NovaCare may assign its
rights and obligations to an entity designated by Gary Reinl upon obtaining the
prior written consent of Nautilus Marketing, which consent may be withheld for
any reason in the sole discretion of Nautilus Marketing. Any other assignment
hereof shall require the written consent of the other party. This Agreement
shall inure to the benefit of Nautilus Marketing and NovaCare and be binding
upon the parties hereto, and their respective successors and permitted assigns.
In each case of any assignment hereunder, the assigning party shall remain
liable for the performance of all of its obligations hereunder, provided that
Nautilus Marketing shall be released from such performance upon the sale of
substantially all of the assets of Nautilus or Nautilus Marketing in one or more
transactions, and NovaCare shall be released from such performance after an
assignment by it, with the consent of Nautilus Marketing, to an entity
designated by Gary Reinl.
14.3 MODIFICATION AND WAIVER. This Agreement may not be modified or
amended except by Nautilus Marketing as provided herein or in a writing signed
by NovaCare and by Nautilus Marketing. Either party may waive, in writing, a
provision in this Agreement which is for its benefit, but such provision shall
not otherwise be deemed waived. A waiver of any provision in any one instance
shall not be deemed a waiver of any provision in any other instance. No
provision contained in this Agreement shall be deemed to have been waived by
reason of any failure or delay to enforce the same, regardless of the number of
breaches or violations which may occur.
14.4 ENFORCEABILITY. In the event any provision of this Agreement shall
be invalid, illegal or unenforceable in any circumstance, the validity, legality
and enforceability of that provision in any other circumstance or of the
remaining provisions shall not in any way be affected or impaired thereby.
14.5 EXCUSE OF PERFORMANCE. Nautilus shall not be liable for failure
to deliver, delays in delivery or failure to perform under this Agreement
occasioned, in whole or in part, by strikes, lockouts, embargoes, war, or
other outbreak or hostilities, inability to obtain materials or shipping
space, machinery breakdown, delays of carriers or suppliers, governmental
acts and regulations, acts of God, receipt of orders in excess of Nautilus'
inventory or then scheduled delivery capacity, or any unforeseen
circumstances or cause beyond Nautilus' reasonable control. However, if
Products are not available on a commercially reasonable basis due to one or
more of the above circumstances, NovaCare will not be held to its quota
requirements during the period of such inability to deliver, but shall
reasonably and in good faith negotiate with Nautilus Marketing to establish
new objectives.
14.6 ARBITRATION. Any controversy or claim arising under or in relation
to this Agreement, or the breach thereof, or the relations between NovaCare and
either Nautilus Marketing or Nautilus shall be settled by arbitration by a panel
of three arbitrators (unless the
21
amount in dispute is less than $25,000 in which case there shall be only one
arbitrator) in the City of Greenville, South Carolina, administered by the
American Arbitration Association, except as specified otherwise in this
Agreement, under its Commercial Arbitration Rules. Judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
14.7 LIMITATION ON ARBITRATION REMEDIES. The arbitrators shall have
no power to extend this Agreement beyond its termination date, nor to order
reinstatement or other continuation of the parties' relationship after
termination, nor to award punitive, consequential, multiple, incidental or
any other damages in excess of the economic damages actually sustained by the
claimant.
14.8 CHOICE OF LAW AND FORUM; JURY TRIAL WAIVER. This Agreement shall be
governed, construed, and interpreted in accordance with the laws of the state of
South Carolina and the United States Arbitration Act without giving effect to
any choice or conflict of law provision or rule (whether of the state of South
Carolina or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the state of South Carolina. Any actions or
proceedings with respect to any matters, arising under or growing out of this
Agreement or the performance of this Agreement, shall be instituted and
prosecuted only in state or federal courts located in the City of Greenville,
South Carolina. Each party specifically consents to service of process by and
the jurisdiction of and venue in those courts. Each party further consents that
any process, notice of motion or other application to the court or any judge
thereof may be served in the manner provided for giving of notice under this
Agreement provided a reasonable time for appearance is allowed. NovaCare, to the
fullest extent permitted by law, hereby waives a jury trial with respect to any
litigation in regard to any matters arising under or growing out of this
Agreement, the performance of this Agreement, or NovaCare's relations with
Nautilus Marketing or Nautilus. The parties represent and warrant that they
understand the implications of this subparagraph, that they have comparable
bargaining power and access to counsel and have consulted such counsel in the
drafting of this subparagraph, together with any and all other terms and
conditions set forth in this Agreement, and that they intend to be fully bound
hereby.
14.9 HEADINGS. The headings in this Agreement are inserted for the
convenience of the parties hereto and shall not define, affect, limit, or
describe the scope or intent of this Agreement or any portion thereof in any
way.
14.10 SURVIVAL. After termination, this Agreement shall continue to
govern the rights and duties of the parties as to transactions made hereunder
and continuing covenants. Without limiting the generality of the foregoing,
all confidentiality and nondisclosure obligations under this Agreement shall
survive its termination.
14.11 AUTHORITY. The person executing this Agreement on behalf of
each party represents and warrants that he or she is duly authorized to bind
such party and that such party has authorized him or her to execute this
Agreement on behalf of such party.
14.12 CONFIDENTIALITY. Except as may be required by law, the terms of
this Agreement shall be kept in strict confidence by both parties. Neither
party may disclose the contents of this Agreement to any person except for
its employees, affiliates or agents who have a need to know
22
such information, without the prior written consent of the other (which consent
shall not be unreasonably withheld) except as may be required by law.
Notwithstanding anything herein to the contrary, upon execution of this
Agreement by both parties, NovaCare may issue a one-time Press Release regarding
the general terms of this Agreement, provided that the Press Release is reviewed
and approved by Nautilus Marketing in advance of release or other publication
and may advertise itself as a Nautilus distributor so long as the specific
details of this Agreement are kept confidential.
14.13 NOTICE. All notice given hereunder shall be in writing and shall
be validly given if delivered in person, by telex, by verbally confirmed
facsimile, by telegram, or by the United States mail, as follows:
If to Nautilus Marketing: ATTN: President
Delta Consolidated Corporation
Hammond Square, Suite 200
233 North Main Street
Greenville, SC 29601
With a copy to: ATTN: President
Nautilus International, Inc.
9800 West Kincey Avenue
Calhoun Building, Suite 150
Huntersville, NC 28078
and: Wyche Law Firm
Attn: Henry L. Parr, Jr.
P. 0. Box 728
44 East Camperdown Way
Greenville, South Carolina 29602
Facsimile No. (803) 235-8900
Verify No. 803-242-8200
If to NovaCare: NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, PA 19406
ATTN: C. Arnold Renschler, M.D.
IN WITNESS WHEREOF, the parties hereto have hereunder executed this
Agreement as of the date indicated on the first page of this Agreement.
DELTA CONSOLIDATED CORPORATION NOVACARE, INC.
By: /s/ Danny L. Stanton By: /s/ C. Arnold Renschler
--------------------------------- ------------------------------------
Name and title: Danny L. Stanton Name and title: Sr. VP, Nova Care Inc.
--------------------- -------------------------
Pres-Nautilus International President, The Polaris Group
23