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Exhibit
10.3
Execution
Original
ASSET PURCHASE
AGREEMENT
BY AND
AMONG
NAUTILUS,
INC.
AND
LAND AMERICA
HEALTH & FITNESS CO., LTD.
MICHAEL C.
BRUNO
YANG LIN
QING
Dated as of
October 17, 2007
TABLE OF
CONTENTS
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GENERAL PROVISIONS
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1 |
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PURCHASE AND SALE OF BUSINESS AND
ASSETS
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5 |
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REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SHAREHOLDERS
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8 |
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REPRESENTATIONS
AND
WARRANTIES OF
NAUTILUS
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17 |
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ACTION PRIOR TO THE CLOSING
DATE
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18 |
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CONDITIONS PRECEDENT TO OBLIGATIONS OF
NAUTILUS
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20 |
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SELLER AND THE SHAREHOLDERS
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23 |
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INDEMNIFICATION
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23 |
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STAFF AND EMPLOYEE MATTERS
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24 |
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SUBSEQUENT TO THE CLOSING
DATE
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24 |
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TERMINATION
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26 |
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OTHER PROVISIONS
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27 |
LIST OF
SCHEDULES
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Assigned Contracts
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Schedule 2.1.5 |
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Land Use Rights
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Schedule 3.5.1 |
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Buildings
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Schedule 3.5.2 |
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Leased Premises
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Schedule 3.5.3 |
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Tangible Property Owned
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Schedule 3.5.4 |
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Tangible Property Leased
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Schedule 3.5.5 |
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Inventory Locations
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Schedule 3.5.6 |
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Intellectual Property
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Schedule 3.5.7 |
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Contracts
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Schedule 3.5.8 |
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Additional Required Assets
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Schedule 3.6 |
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Tangible Personal Property
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Schedule 3.7 |
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Compliance with Law
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Schedule 3.8 |
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Litigation
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Schedule 3.9 |
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Brokers’ or Finders’
Fees
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Schedule 3.10 |
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Subsidiaries and Branches
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Schedule 3.11 |
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Financial Statements
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Schedule 3.12 |
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Liabilities
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Schedule 3.13 |
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Taxes
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Schedule 3.14 |
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Material Changes
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Schedule 3.15 |
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Insurance
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Schedule 3.16 |
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Suppliers
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Schedule 3.17 |
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Environmental Matters
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Schedule 3.18 |
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Employees
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Schedule 3.19 |
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Labor Contracts
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Schedule 3.20.1 |
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Employee Plans
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Schedule 3.20.2 |
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Compliance with the Foreign Corrupt
Practices Act and Export Control and Anti-Boycott Laws
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Schedule 3.21 |
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Sales to Affiliates
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Schedule 3.22 |
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Services from Affiliates
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Schedule 3.23 |
-i-
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT
(hereinafter, “Agreement”) , dated as of
October 17, 2007, is entered into by and among the following
parties (each a “ Party ” and collectively, the
“ Parties ”):
| 1. |
NAUTILUS, INC. , a Washington corporation (
“Nautilus”) ; |
| 2. |
LAND AMERICA HEALTH & FITNESS CO., LTD. , a
wholly foreign-owned limited liability company duly organized and
existing under the laws of the PRC (“ Seller
”); |
| 3. |
MICHAEL C. BRUNO (“ Bruno” or a
“ Shareholder ”), who together with his spouse,
Yang Lin Qing, are the indirect sole shareholders of Seller;
and |
| 4. |
YANG LIN QING (“ Yang ” or a “
Shareholder ”), who together with her spouse, Michael
C. Bruno, are the indirect sole shareholders of Seller. |
PRELIMINARY
STATEMENTS
| 1. |
Seller is engaged in the manufacture of certain of
Nautilus’s proprietary line of health and fitness equipment
and other fitness equipment (the “Business”
). |
| 2. |
Nautilus and Seller have entered into a Purchase Option
Agreement, dated effective January 29, 2007 (the
“Option Agreement” ), pursuant to which Nautilus
was granted an option to purchase substantially all of the assets
related to the Business. Nautilus has previously given notice of
exercise of this option. |
| 3. |
Certain of the assets used in the Business and owned by Seller
were previously owned and operated by World Gear Sports Goods Co.,
Ltd. ( “World Gear” ). |
| 4. |
Upon the terms and subject to the conditions of this Agreement,
Seller is willing to sell substantially all of the moveable assets
of the Business to a wholly-owned direct or indirect subsidiary of
Nautilus to be formed in Xiamen, Fujian, PRC (“Buyer”),
and Nautilus is willing to cause Buyer to purchase such assets from
Seller. |
| 5. |
Together with this Agreement, the Parties are entering into
certain additional agreements as referenced herein. |
NOW, THEREFORE , the Parties
hereby agree as follows:
CHAPTER 1
GENERAL
PROVISIONS
| Article 1.1 |
Definitions . |
The following terms as used in this
Agreement shall have the meanings set forth below:
“Affiliate” means, as to any Person, any
other Person that, directly or indirectly, controls, is controlled
by or is under common control with, such Person. The term
“control” (including the terms “controlled
by” or “under the common control with”) means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether
through ownership of an equity interest or by contract or
otherwise.
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“Audited Closing
Financial Statements” has the meaning given such term in
Article 2.4.
“Agreement” means this Asset Purchase
Agreement and the Schedules hereto.
“Appraiser” has the meaning given in Article
5.2.
“Assets”
has the meaning given such term in Article 2.1.
“2006 Balance
Sheet” has the meaning given such term in Article
3.12.
“Books and
Records” shall mean all books, ledgers, files, reports,
plans and operating records of, or maintained by, the Business, in
both physical and electronic form, as the case may be.
“Bruno Consulting
Agreement” has the meaning given such term in
Section 6.16.
“Business”
has the meaning given such term in the Preliminary Statements
hereof.
“Business
Day” means any day when banks are open for business in
Xiamen, Fujian Province, PRC.
“Buyer”
has the meaning given such term in the Preliminary Statements
hereof.
“Closing” and
“Closing Date” have the meanings given such terms
in Article 2.5.
“Computer
Software” means all computer applications software, owned
or licensed, whether for general business usage (e.g., accounting,
word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage (e.g., order processing,
manufacturing, process control, design, shipping, etc.) and all
computer operating, security or programming software, owned or
licensed.
“Employee
Plans” shall mean all welfare and benefit plans
maintained by Seller for the benefit of the staff and workers of
Seller, including, without limitation, all bonus, retirement,
pension, health and medical, life insurance, disability and
accident insurance, vacation and/or annual leave, sick-leave and
housing plans.
“Escrow and
Indemnification Agreement” has the meaning given such
term in the Article 8.1.
2
“Excluded
Assets” shall mean all assets of Seller not used in or
relating to the Business, the Real Property, Inventory other than
work in progress inventory as described in Section 2.1.8, and
all cash and accounts receivable relating to the
Business.
“Facilities” means the Real Property and any
leasehold interests in land or buildings currently owned or
operated by Seller and any machinery or other equipment used or
operated by Seller at the respective locations of the land and
buildings specified in Articles 3.5.1, 3.5.2 and 3.5.3.
“Government
Authority” shall mean the government of the PRC, any
subdivision thereof and any provincial or local government
authority having jurisdiction over Seller, the Business or any
Assets.
“Improvements” means all buildings,
structures, fixtures, and other infrastructure located on the
Land.
“Intellectual
Property” shall mean trademarks, service marks, brand
names, certification marks, trade dress, trade names and other
indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including, without
limitation, divisions, continuations, continuations in-part and
renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; non-public information, trade secrets
and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not in any jurisdiction;
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; Computer
Software (including, but not limited to, data, source codes, object
codes, specifications and related documentation), any similar
intellectual property or proprietary rights; and any claims arising
out of or related to any infringement or misappropriation of any of
the foregoing.
“Interim Balance
Sheets” has the meaning given such term in Article
3.12.
“Inventory” means all inventories of Seller
relating to the Business, wherever located, including all finished
goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Seller in the
production of finished goods of the Business.
“Land”
means the land described in Article 3.5.1.
“ Lease
Agreement” has the meaning given such term in Article
2.8.
“Lien”
shall mean any mortgage, lien, pledge, security interest or other
type of charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien
or retained security title of a conditional vendor, any easement,
right of way or other encumbrance on title to real property,
options or any other restrictions or third party rights.
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“M&A
Regulations” has the meaning given such term in Article
5.1.
“Option
Agreement” has the meaning given such term in the
Preliminary Statements hereof.
“Party”
shall mean each of Nautilus, Seller, Bruno and Yang, who are
sometimes collectively referred to as the
“Parties”.
“Person”
shall mean an individual, partnership, corporation, joint stock
company, limited liability company, state-owned enterprise, joint
venture or other entity, or a government or any political
subdivision or agency thereof.
“Post-Closing Audit
Agreement” has the meaning given such term in Article
2.4.
“PRC” or
“China” shall mean the People’s Republic
of China.
“Purchase
Price” has the meaning given such term in Article
2.3.
“Real
Property” means the Land and Improvements.
“RMB,”
“Renminbi” or “¥”shall mean the
currency of the PRC.
“Seller”
has the meaning given such term in the Preliminary Statements
hereof.
“Seller’s
Non-Competition Agreement” shall mean the
Non-Competition, Non-Disclosure and Non-Solicitation Agreement,
between Seller and Nautilus in the form agreed to by the
Parties.
“Shareholder” shall mean each of Bruno and
Yang, who are sometimes collectively referred to as the
“Shareholders”
“Shareholders’
Non-Competition Agreement” shall mean the
Non-Competition, Non-Disclosure and Non-Solicitation Agreement,
among the Shareholders and Nautilus, in the form agreed to by the
Parties.
“Taxes”
shall mean all tax and stamp duties charges, tariffs or other
assessments charged by any Government Authority (including, without
limitation, business, income, capital gain, value added, use,
transfer, sales, deed and excise or custom tax, and stamp duties
and however termed).
“Tangible Personal
Property” all machinery, equipment, tools, dyes, molds,
furniture, fixtures, office equipment, computer hardware, supplies,
materials, vehicles and other items of tangible personal property
(other than Inventory) of every kind owned or leased by Seller
(wherever located and whether or not carried on Seller’s
books), together with any express or implied warranty by the
manufacturers or sellers or lessors of any item or component part
thereof and all maintenance records and other documents relating
thereto.
4
“Transaction
Documents” mean each of this Agreement, Seller’s
Non-Competition Agreement, the Shareholders’ Non-Competition
Agreement, the Escrow and Indemnification Agreement, the Bruno
Consulting Agreement, the Post-Closing Audit Agreement, the Lease
Agreement, and each of the documents to be delivered by Seller
pursuant to Section 2.6 below.
“U.S.
Dollars,” “US$” or “$”
shall mean the currency of the United States of America.
“U.S.
GAAP” shall mean United States generally accepted
accounting principles.
| Article 1.2 |
Construction of Certain Terms and Phrases . Unless the
context of this Agreement otherwise requires, (i) words of any
gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular
number, respectively; (iii) the terms “hereof,”
“herein,” “hereby” and derivative or
similar words refer to this entire Agreement; and (iv) the
terms “Article” or “Clause” refer to the
specified Article or Clause of this Agreement. Whenever this
Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified. |
| Article 1.3. |
Exchange Rate. In determining the U.S. Dollar
equivalent of an amount in RMB or vice versa, the exchange rate
used shall be the average of the buy and sell exchange rates (or
mid-rate) announced by the People’s Bank of China for U.S.
Dollars and RMB for the date on or as of which the determination is
made. |
CHAPTER 2
PURCHASE AND SALE OF
BUSINESS AND ASSETS
| Article 2.1 |
Purchase and Sale of the Business and Assets . Subject
to the terms and conditions of this Agreement, at the Closing,
Seller shall sell and transfer to Buyer, and Nautilus shall cause
Buyer to purchase from Seller, all of Seller’s interest in
the following assets (the “Assets”), free and clear of
all Liens: |
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2.1.1 |
Machinery and Equipment Owned by Seller . Good and
marketable title to all the Tangible Personal Property used in or
related to the Business owned by Seller, including those listed in
Schedule 3.5.4. |
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2.1.2 |
Machinery and Equipment Leased by Seller . All leasehold
interests in all the Tangible Personal Property used in or related
to the Business leased by Seller from a third party, including
those listed in Schedule 3.5.5. |
| |
2.1.3 |
Leasehold Interests . Seller’s leasehold interests
in the premises and leases listed in Schedule 3.5.3, including,
without limitation, any prepaid rent, security deposits and options
to renew or purchase thereunder and subject only to the respective
limitations and obligations of the leases, agreements, charges and
instruments listed in Schedule 3.5.3. |
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2.1.4 |
Intellectual Property . All interests of Seller in the
Intellectual Property used in or related to the Business,
including, without limitation that listed in Schedule
3.5.7. |
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2.1.5 |
Contracts Related to the Business . All rights and
interests of Seller in and to the agreements or contracts used in
or related to the Business that are listed in Schedule
2.1.5. |
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2.1.6 |
Warranties or Guarantees . All rights of Seller under or
pursuant to all warranties, representations and guarantees made by
third parties relating to items included in the Assets, including,
without limitation, warranties or guarantees given by manufacturers
and/or vendors in respect of the Assets. |
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2.1.7 |
Pre-Paid Expenses . All rights and interests of Seller
in and to all pre-paid expenses made to any supplier of goods,
utilities or services in respect of the Business. |
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2.1.8 |
Inventory . That portion of Seller’s Inventory
designated as work-in-progress in Seller’s accounting records
as of the Closing Date. |
Buyer shall not purchase any
Excluded Assets and Excluded Assets shall remain the property of
Seller after the Closing.
| Article 2.2 |
No Assumption of Liabilities by Buyer . Neither Nautilus
nor Buyer will assume, discharge or perform any liabilities or
obligations of Seller or the Shareholders incurred or arising prior
to or after the Closing, including, without limitation, those
liabilities listed below, all of which liabilities will remain with
Seller or the Shareholders and which Seller and the Shareholders
hereby agree to retain and discharge or perform: |
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2.2.1 |
subject to Article 12.3, liabilities for all Taxes; |
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2.2.2 |
any environmental, health or public safety claims,
liabilities or remedial expenses; |
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2.2.3 |
liabilities or obligations with respect to wages, severance or
termination, employee welfare benefits and pensions, workers
compensation and health care claims or other benefits or funds
payable to employees or former employees of the respective
Seller; |
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2.2.4 |
liabilities for money borrowed and accounts
payable; |
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2.2.5 |
liabilities arising from any product warranties;
and |
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2.2.6 |
liabilities or obligations to any supplier of goods, services
or utilities or to any customer and; |
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2.2.7 |
any other liabilities or obligations to any third party,
including, without limitation, liabilities to any Government
Authority. |
| Article 2.3 |
Purchase Price . The purchase price (the “Purchase
Price”) for the Assets shall be US$8,500,000 (EIGHT MILLION
FIVE HUNDRED THOUSAND U.S. DOLLARS) and shall be paid by wire
transfer of US$8,500,000 to Seller in accordance with Article
2.7.1. |
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| Article 2.4 |
Closing Audit; Inventory Purchase . |
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(a) |
Within sixty (60) calendar days after the Closing Date,
Deloitte Touche Tomatsu, or other independent auditors approved by
Buyer, will perform an independent audit of Seller’s balance
sheet of the Business, as at the Closing Date, and Seller’s
statement of income of the Business for the period beginning
January 1, 2007 and ending on the Closing Date (the
“Audited Closing Financial Statements”). The audit
shall be completed in accordance with the Post-Closing Audit
Agreement in the form agreed to by the parties (the
“Post-Closing Audit Agreement”), and after Closing
Nautilus shall cause Buyer to purchase Seller’s remaining
Inventory in accordance with the Post-Closing Audit Agreement.
Seller agrees to exercise its best efforts to complete such balance
sheet and statement of income within twenty (20) days
following the Closing Date and to fully cooperate with the
independent auditors in connection with completion of such
independent audit. |
| Article 2.5 |
Closing . The closing of the transactions contemplated
hereby (the “Closing”) shall take place at the offices
of Seller in Xiamen, Fujian, PRC on January 1, 2008, 10:00
a.m. Beijing time, or at such other date and place as the Parties
may agree in writing (the “Closing Date”). |
| Article 2.6 |
Deliveries by Seller . At the Closing, Seller shall
deliver to Buyer the following: |
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2.6.1 |
Duly executed bills of sale or other instruments of transfer,
in form and substance reasonably acceptable to Nautilus,
transferring ownership to Buyer of all tangible property listed in
Schedule 3.5.4; |
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2.6.2 |
Duly executed assignments or, where necessary, subleases, in
form and substance reasonably acceptable to Nautilus, assigning or
subleasing to Buyer all leasehold interests, if any, in the
tangible property listed in Schedule 3.5.5; |
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2.6.3 |
Duly executed assignments or other instruments of transfer, in
form and substance reasonably acceptable to Nautilus, assigning and
transferring to Buyer all of Seller’s interest in all
Intellectual Property used in and related to the Business,
including that listed in Schedule 3.5.7, including, without
limitation, an assignment of Seller’s trade name and
trademarks relating to the Business; |
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2.6.4 |
Duly executed assignments transferring to Buyer all of
Seller’s rights and obligations under all contracts, licenses
and similar instruments used in and relating to the Business to
which Seller is a party, in form and substance reasonably
acceptable to Nautilus, together with the written consent, if
required, of the other party to such contracts, licenses and
similar instruments; and |
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2.6.5 |
The certificates and other documents to be delivered pursuant
to Chapter 6 hereof. |
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2.6.6 |
Duly executed VAT invoices for the work in progress Inventory
as described in Section 2.1.8. |
| Article 2.7 |
Deliveries by Buyer . At the Closing, Buyer shall
deliver to Seller the following: |
| |
2.7.1 |
The Purchase Price to Seller, by wire transfer of US$8,500,000
to an account designated by Seller in writing not less than three
Business Days prior to the Closing Date; provided , that
Buyer may complete such wire transfer within three Business Days
following the Closing Date; and |
| |
2.7.2 |
The certificates and other documents to be delivered pursuant
to Chapter 7 hereof. |
| Article 2.8 |
Lease Agreement . At the Closing, Seller and Buyer shall
enter into a Lease Agreement in the form agreed to by the Parties
(the “Lease Agreement”), providing for the lease of the
Real Property. |
CHAPTER 3
REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE
SHAREHOLDERS
Seller and each Shareholder hereby
represent and warrant, jointly and severally, to Nautilus and Buyer
as follows:
| Article 3.1 |
Organization . Seller is a limited liability company
duly organized under the Law of the PRC Concerning Enterprises with
Sole Foreign Investment and validly existing with the status of a
legal person under the laws of the PRC. |
| Article 3.2 |
Power and Authority . The execution and performance by
Seller of this Agreement and each other Transaction Document to
which it is a party (i) are within its corporate power and
business scope, (ii) have been duly authorized by all
necessary corporate action, (iii) do not contravene its
articles of association and (iv) do not contravene any law or
contractual restriction binding on or affecting it. Each
Shareholder has the full legal right and authority to execute and
perform his/her obligations under this Agreement and the other
Transaction Documents to which he/she is a party and such execution
and performance does not contravene any laws or contractual
restrictions binding on or affecting him/her. |
| Article 3.3 |
Consents and Approvals . All authorizations, consents or
approvals or other actions by, and all notices to or filings with,
any Government Authority required for the due execution and
performance by Seller and the Shareholders of this Agreement and
the other Transaction Documents has been obtained. |
8
| Article 3.4 |
Binding Effect . This Agreement is, and the each other
Transaction Document to which Seller or a Shareholder will be a
party when executed by such Party will be, the legal, valid and
binding obligation of Seller or such Shareholder, enforceable
against Seller or such Shareholder in accordance with its
respective terms. |
| Article 3.5 |
Ownership of Assets . Seller owns leases or has the
legal right to use all of the Assets. Seller has good and
marketable title to, or, in the case of leases, valid and effective
leasehold interests in, all of the Assets, free and clear of all
Liens, except as noted in the Schedules hereto. |
| |
3.5.1 |
Land Use Rights . Schedule 3.5.1 sets forth all of the
land used in the Business for which Seller owns the land use rights
together with copies of the land use rights certificates evidencing
Seller’s ownership of the land use rights of such land. All
of the land use rights relating to such land are granted land use
rights and Seller has the right and power to transfer ownership of
such land use rights to Buyer in the event Buyer and Seller enter
into an agreement for the purchase and sale of such
rights. |
| |
3.5.2 |
Buildings . Schedule 3.5.2 sets forth the buildings
owned by Seller and used in the Business together with copies of
the building ownership certificates evidencing Seller’s
ownership of each such building. Seller has the right and power to
transfer ownership of such buildings to Buyer in the event Buyer
and Seller enter into an agreement for the purchase and sale of
such buildings. |
| |
3.5.3 |
Leased Premises . Schedule 3.5.3 sets forth the premises
used in the Business which are leased by Seller. There is no notice
of cancellation or termination under any option or right reserved
to the lessor under any such lease or any notice of default under
any such lease, and no event has occurred which, with notice or
lapse of time or both, would constitute a default under any such
lease. Each such lease is assignable or the premises subject
thereto may be subleased to a third party with the consent of the
lessor and no consent from any other Party is required. Seller has
not assigned or subleased its interest under any such
lease. |
| |
3.5.4 |
Machinery and Equipment Owned by Seller . Schedule 3.5.4
lists all of the Tangible Personal Property of the Business owned
by Seller having a book value exceeding Twelve Thousand Five
Hundred U.S. Dollars (U.S. $12,500) or the equivalent in RMB. Each
item of Tangible Personal Property included in the Assets is
suitable for the use in which it is currently employed, is in good
operating condition except for such minor defects as do not
interfere with the continued use of such equipment and properties
in the conduct of the normal operations of the Business, and the
Assets include supplies of spare parts for the equipment and
machinery included in the Assets in amounts consistent with
Seller’s past practices. |
| |
3.5.5 |
Machinery
and Equipment Leased by Seller . Schedule 3.5.5 sets forth the
machinery and equipment used in the Business in which Seller has a
leasehold interest. There is no notice of cancellation or
termination under any option or right reserved to the lessor under
any such lease or any notice of default under
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any such lease and no
event has occurred which, with notice or lapse of time or both,
would constitute a default under any such lease. Each such lease is
assignable with the consent of the lessor and no consent from any
other Party is required. Seller has not assigned its interest under
any such lease.
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3.5.6 |
Inventory . Schedule 3.5.6 is a complete list of the
addresses of all warehouses or other facilities in which Inventory
used in and relating to the Business are located as of the date
hereof. All Inventory to be reflected on the balance sheet included
in the Audited Closing Financial Statements were and will be usable
or saleable in the ordinary course of the business and operations
of the Business, and the levels of such Inventory to be reflected
on the balance sheet included in the Audited Closing Financial
Statements will be consistent with customary levels found in the
operations of the Business. |
| |
3.5.7 |
Intellectual Property . Schedule 3.5.7 sets forth all
domestic and foreign Intellectual Property used in or relating to
the Business, registered in the name of Seller, or of which Seller
is a licensor or licensee, used in, or which have been used in, or
which are under development or have been conceived in, or which
have or potentially have application to, the Business. Seller owns
all of the Intellectual Property to be transferred hereunder free
and clear of all Liens and pays no royalty to anyone under or with
respect to any of them, except as set forth in such Schedule 3.5.7.
All rights of Seller in and to each item of the Intellectual
Property listed on Schedule 3.5.7 and to all processes, lab
journals, toxicological and ecological data, trade secrets,
technology including know-how and show-how, product formulae,
manufacturing, engineering and other drawings, intellectual
property rights, agency agreements, technical information,
engineering data, design and engineering specifications and similar
materials recording or evidencing Seller’s proprietary
expertise used in or residing with the Business, whether purchased
or developed internally, included in the Assets are transferable to
Buyer as herein contemplated. There is no conflict with the rights
of others known to Seller, or any claim or formal charge of
infringement, with respect to any Intellectual Property of the
Business, or with respect to any license relating to the Business
under which Seller is licensor or licensee. Seller has no knowledge
of the possible infringement by any third party of any Intellectual
Property related to or used in the Business. |
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3.5.8 |
Contracts . Schedule 3.5.8 sets forth all of the
following contracts of Seller relating to the Business:
(a) all existing contracts for the purchase of raw materials,
commodities, merchandise, supplies, other materials or personal
property with any supplier under the terms of which Seller is
likely to pay more than US$100,000 or the equivalent in RMB during
the term of the contract, excluding purchase orders issued to
suppliers in the ordinary course of business; (b) all existing
contracts for the sale of raw materials, commodities, merchandise,
supplies, other materials or personal property or for the
furnishing of services by or to the Business which involve more
than the sum of US$100,000 or the equivalent thereof in RMB;
(c) to the extent not included in the foregoing, all broker,
distributor, dealer, manufacturer’s representative, sales,
agency, sales promotion, market research, marketing consulting or
advertising contracts used in or relating to the Business;
(d) all
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contracts of, or relating
to, employment of any officer or individual employee or contracts
of independent contractors or consultants relating to the Business
and not cancellable without penalty within 30 days of notice of
such cancellation; (e) all mortgages, notes, loan or credit
agreements or other contracts or obligations of Seller or to the
direct or indirect guaranty or assumption by Seller of obligations
of others with respect to the Business or the Assets; and
(f) all other contracts, whether or not made in the ordinary
course of business, which are material to the Business or the
Assets. Except as noted in Schedule 3.5.8, each contract listed
therein is in full force and effect and, subject to obtaining the
consent of the other Party thereto is assignable to Buyer without
penalty or other adverse consequence. Seller (in relation to the
Business) is not in default under the terms of any such contract or
in the payment of any principal of or interest on any indebtedness
for borrowed money. There are no contracts granting any Person any
preferential rights to purchase any of the Assets or any of the
properties or assets of the Business other than in the ordinary
course of the Business. All of the contracts listed in Schedule
3.5.8 are valid and binding.
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| Article 3.6 |
Sufficiency of Assets . Except as set forth in Schedule
3.6, the Assets (a) constitute all of the assets, tangible and
intangible, of any nature whatsoever, necessary to operate the
Business in the manner presently operated by Seller (it being
understood that Seller is not responsible for any operational or
management errors in the conduct of the Business after the
Closing), and (b) except for the Excluded Assets, include all
of the operating assets of Seller related to the
Business. |
| Article 3.7 |
Condition of Facilities . |
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(a) |
Use of the Real Property for the various purposes for which it
is presently being used is permitted as of right under all
applicable land and building use legal requirements. All
Improvements are in compliance with all applicable legal
requirements, are in good repair and in good condition, ordinary
wear and tear excepted, except for such minor defects as do not
interfere with the continued use of such Improvements in the
conduct of the normal operations of the Business. No part of any
Improvement encroaches on any land not included in the Real
Property, and there are no buildings, structures, fixtures or other
Improvements primarily situated on adjoining property which
encroach on any part of the Land. The Land for each owned Facility
abuts on and has direct vehicular access to a public road or has
access to a public road via a permanent arrangement benefiting such
Land and comprising a part of the Real Property, is supplied with
public or quasi-public utilities and other services appropriate for
the operation of the Facilities located thereon and is not located
within any area subject to special environmental regulation as an
environmentally sensitive area or any similar restriction. Seller,
after reasonable inquiry, is unaware of any plan or proposed plan
to modify or realign any street or highway or any existing or
proposed requisition proceeding that would result in the taking of
all or any part of any Facility or that would prevent or hinder the
continued use of any Facility as heretofore used in the conduct of
the Business. |
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(b) |
Each item of Tangible Personal Property is in good repair and
good operating condition, ordinary wear and tear excepted, is
suitable for immediate use in the ordinary course of business
except such minor defects as do not interfere with the continued
use of such Tangible Personal Property in the conduct of the normal
operations of the Business. No item of Tangible Personal Property
is in need of repair or replacement other than as part of routine
maintenance in the ordinary course of business. Except as disclosed
in Schedule 3.7(b), all Tangible Personal Property used in the
Business is in the possession of Seller. |
| Article 3.8 |
Compliance with Laws . Except as described in Schedule
3.8, Seller is in compliance, and there exists no alleged
non-compliance, with all applicable statutes, orders, rules and
regulations promulgated by any Government Authority relating in any
material respect to the Assets or the operation and conduct of the
Business, or the use of the properties of the Business and neither
Seller nor any Shareholder has received any notice of alleged
violation of any such statute, order, rule or regulation. Schedule
3.8 lists all material governmental licenses, permits, product
registrations, filings, authorizations and approvals and any
pending applications for any thereof relating to the conduct of the
Business or the use of properties held by Seller and such licenses,
permits, product registrations, filings, authorizations and
approvals are all the governmental licenses, permits, filings,
authorizations and approvals necessary to conduct the Business or
to use the Assets as currently conducted or used. |
| Article 3.9 |
Litigation . Except as set forth in Schedule 3.9, there
is no action, lawsuit, claim, proceeding, or investigation pending
or, to the best knowledge of Seller and the Shareholders,
threatened against or affecting Seller which, if decided adversely
against Seller, could have a material adverse effect upon the
Business or its financial condition, prospects or operations, or
upon the Assets. Seller is not in default, and no condition exists
that with notice or the lapse of time or both would constitute a
default, with respect to any order, writ, injunction or decree of
any court or Government Authority affecting or relating to the
Business. No condemnation proceeding has been commenced or, to the
knowledge of Seller or any Shareholder, is threatened to be
commenced against any of the Assets. |
| Article 3.10 |
Brokers’ or Finders’ Fees . Except as set
forth in Schedule 3.10, neither Seller nor any Shareholder has paid
or will become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the
transactions provided for in this Agreement. |
| Article 3.11 |
Subsidiaries . Except as set forth in Schedule 3.11,
Seller has no subsidiaries or branches. |
| Article 3.12 |
Financial
Statements . Seller has delivered to Nautilus: (a) a pro
forma unaudited balance sheet of the Business as at
December 31, 2006 (including the notes thereto, the
“2006 Balance Sheet”), and the related pro forma
unaudited statements of income, changes in shareholders’
equity and cash flows for the fiscal year then ended, including the
notes thereto, certified by the CEO/President and chief financial
officer of Seller; and (b) unaudited
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pro forma balance sheets of
the Business as at each of March 31, 2007 and June 30,
2007 (the “Interim Balance Sheets”) and the related
unaudited pro forma statements of income, changes in
shareholders’ equity, and cash flows for the fiscal quarters
then ended, including the notes thereto, certified by the
CEO/President and chief financial officer of Seller. Such financial
statements fairly present (and the financial statements delivered
pursuant to Section 5.11 will fairly present) the financial
condition and the results of operations, changes in
shareholders’ equity and cash flows of the Business, as at
the respective dates of and for the periods referred to in such
financial statements, all in accordance with U.S. GAAP. The
financial statements referred to in this Section 3.12 reflect
the consistent application of such accounting principles throughout
the periods involved. The financial statements have been prepared
from and are in accordance with the accounting records of Seller.
Seller has also delivered to Buyer copies of all letters from the
Seller’s auditors to the Seller’s board of directors or
the audit committee thereof dated during 2007, together with copies
of all responses thereto.
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| Article 3.13 |
No Undisclosed Liabilities. The Business has no material
liabilities except for liabilities r |
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