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Exhibit
10.4
Execution
Original
ASSET PURCHASE
AGREEMENT
BY AND
AMONG
NAUTILUS,
INC.
AND
TREURIVER INVESTMENTS
LIMITED
MICHAEL C.
BRUNO
YANG LIN
QING
Dated as of
October 17, 2007
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Description
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Tab |
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GENERAL PROVISIONS
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2 |
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PURCHASE AND SALE OF BUSINESS AND
ASSETS
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6 |
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SELLER, BRUNO AND YANG
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9 |
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REPRESENTATIONS AND WARRANTIES OF
NAUTILUS
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15 |
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ACTION PRIOR TO THE CLOSING
DATE
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CONDITIONS PRECEDENT TO OBLIGATIONS OF
NAUTILUS
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SELLER, BRUNO AND YANG
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19 |
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INDEMNIFICATION
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20 |
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STAFF AND EMPLOYEE MATTERS
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23 |
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SUBSEQUENT TO THE CLOSING
DATE
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23 |
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TERMINATION
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25 |
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OTHER PROVISIONS
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26 |
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LIST OF SCHEDULES AND
EXHIBITS
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Assigned Contracts
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Schedule 2.1.8 |
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Certain Fixed Assets
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Schedule 2.4 |
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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 3.5.2 |
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Contracts
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Schedule 3.5.3 |
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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 |
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| Exhibit A: |
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Form of
Seller Non-Competition Agreement |
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| Exhibit B: |
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Form of
Shareholders Non-Competition Agreement |
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| Exhibit C: |
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Form of
Opinion of The Universal Legal Corp., PRC counsel to Seller and the
Shareholders |
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| Exhibit D: |
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Form of
Opinion of Reed Brown, counsel to Seller and the
Shareholders |
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. |
TREURIVER INVESTMENTS LIMITED , a British Virgin Islands
company (“ Seller ”); |
| 3. |
MICHAEL C. BRUNO (“ Bruno” ), the
spouse of Yang Lin Qing; and |
| 4. |
YANG LIN QING (“ Yang ” or a “
Shareholder ”), the sole shareholder of
Seller. |
PRELIMINARY
STATEMENTS
| 1. |
Seller is engaged in the procurement and distribution 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. |
| 3. |
In accordance with the terms of the Option Agreement, Nautilus
has given notice of exercise and the Parties have entered into an
Escrow Agreement dated July 2, 2007, as amended by First
Amendment dated October 17, 2007 (the “Escrow
Agreement”), pursuant to which, following the release of
US$25,000,000 in accordance with the Joint Instruction Letter
referenced in such First Amendment, Nautilus has deposited with the
escrow agent US$ 5,000,000 (the “Option Exercise
Deposit”), to be held and disbursed in accordance with the
terms of the Escrow Agreement. |
| 4. |
This Agreement is being entered in conjunction with the
following additional agreements: (a) Nautilus, Bruno and Yang
are entering into that certain Asset Purchase Agreement, of even
date herewith (the “Land America Agreement”), pursuant
to which substantially all of the assets of Land America
Health & Fitness Co., Ltd. (“Land America”)
are being acquired by Nautilus (Xiamen) Fitness Co., Ltd., a
wholly-owned direct or indirect subsidiary of Nautilus to be formed
in Xiamen, Fujian, PRC (“Nautilus WOFE”);
(b) Nautilus, Seller, Bruno (as Representative of Seller) and
U.S. Bank National Association are entering into that certain First
Amendment to Escrow Agreement of even date herewith;
(c) Nautilus and Bruno (as Representative of Seller) are
executing and delivering a Joint Instruction Letter, of even date
herewith, directing U.S. Bank National Association to release
US$12,500,000 from escrow to each of Seller and Nautilus, and to
deliver certain accrued interest to Seller, in each case pursuant
to the Escrow Agreement; and (d) Nautilus, Land America, Bruno
and Yang are entering into a Post-Closing Audit Agreement, of even
date herewith. |
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| 5. |
Upon the terms and subject to the conditions of this Agreement
and the other agreements referenced in Preliminary Statement 4
above, Seller is willing to sell substantially all of the assets of
the Business to Nautilus or a direct or indirect wholly-owned
subsidiary of Nautilus (“Buyer”), and Nautilus is
willing to purchase the Assets or, at Nautilus’s option, to
cause Buyer to purchase such assets from Seller. |
NOW, THEREFORE , the Parties
hereby agree as follows:
CHAPTER 1
GENERAL
PROVISIONS
Article 1.1 Definitions
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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.
“After Acquired
Assets” has the meaning given such term in Article 2.4
(c).
“Audit
Report” has the meaning given such term in Article 2.4
(a).
“Audited Closing
Financial Statements” has the meaning given such term in
Article 2.4 (a).
“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.
“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.
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“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.
“Customer
Complaint” has the meaning given such term in Article
10.7.
“Disposed
Assets” has the meaning given such term in Article 2.4
(c).
“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.
“Excluded
Assets” shall mean all assets of Seller not used in or
relating to the Business and all cash and accounts receivable
relating to the Business.
“Escrow
Agent” has the meaning given such term in the Escrow
Agreement.
“Escrow
Agreement” has the meaning given such term in the
Preliminary Statements hereof.
“Escrow
Property” has the meaning given such term in the Escrow
Agreement.
“Facilities” means the land and buildings
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.
“Final Inventory
Value” has the meaning given such term in Article 2.4
(b).
“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
described in Article 3.5.1.
“Indemnity Cut-Off
Date” has the meaning given such term in Article 8.2
hereof.
“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
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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
Sheet” 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.
“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.
“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.
“Option Exercise
Deposit” has the meaning given such term in the
Preliminary Statements hereof.
“Party”
shall mean each of Nautilus, Buyer, 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.
“PRC” or
“China” shall mean the People’s Republic
of China.
“Purchase
Price” has the meaning given such term in Article
2.3.
“Purchase Price
Adjustment Amount” has the meaning given such term in
Article 2.4(d).
“Real
Property” means the Land and Improvements.
“RMB,”
“Renminbi” or “¥” shall
mean the currency of the PRC.
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“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 Land America, Nautilus and Nautilus WOFE, in substantially
the form of Exhibit A hereto.
“Shareholder” shall mean Yang.
“Shareholders’
Non-Competition Agreement” shall mean the
Non-Competition, Non Disclosure and Non-Solicitation Agreement,
among Bruno, Yang, Nautilus and Nautilus WOFE, in substantially the
form of Exhibit B hereto.
“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.
“Transaction
Documents” mean each of this Agreement, Seller’s
Non-Competition Agreement, the Shareholders’ Non-Competition
Agreement, the Escrow Agreement, the Bruno Consulting 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. |
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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 Nautilus or Buyer, and Nautilus
shall purchase or 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 |
Intellectual Property . All interests of Seller in
the Intellectual Property used in or related to the Business,
including, without limitation that listed in Schedule
3.5.2. |
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2.1.2 |
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
2.1.3. |
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2.1.3 |
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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2.1.4 |
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. |
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$43,000,000 (FORTY THREE
MILLION U.S. DOLLARS). The Purchase Price shall be paid or credited
as paid by or on behalf of Buyer as follows: |
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(a) |
the US$14,500,000 option fee previously paid to Seller
(including the US$12,500,000 released from escrow as described in
the third Preliminary Statement of this Agreement) and the
US$4,000,000 option fee paid pursuant to the Land America Agreement
shall be credited against the Purchase Price; |
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(b) |
US$8,500,000 of the Purchase Price shall be paid at Closing by
wire transfer to a bank account designated by Seller in writing not
less than three Business Days prior to the Closing
Date; |
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(c) |
US$5,000,000 of the Purchase Price shall be paid to Seller by
release of the Option Exercise Deposit in accordance with the terms
of the Escrow Agreement at Closing. Seller acknowledges and agrees
that US$1,000,000 of the US$5,000,000 to be released from escrow
shall be placed into escrow pursuant to the terms of the
Indemnification and Escrow Agreement, as defined in the Land
America Agreement; and |
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(d) |
US$11,000,000 of the Purchase Price shall be paid to Seller on
the earlier of October 31, 2008 or the date on which Nautilus
or its subsidiary completes the purchase of the Land America land
and buildings pursuant to the Lease Agreement entered into in
connection with the Land America Agreement. |
| Article 2.4 |
Closing Audit . Within sixty (60) calendar days
after the Closing Date, Deloitte Touche Tomatsu
(“Deloitte”), or other independent auditors approved by
Buyer will prepare an audited balance sheet of the Business, as at
the Closing Date, and an audited statement of income of the
Business for the period beginning January 1, 2007 and ending
on the Closing Date. The fees and expenses of such audit shall be
paid by Seller; provided , that Buyer will reimburse Seller
for the incremental audit fees as compared to the fees associated
with Seller’s previous statutory audit. Promptly after
completion of such audit Deloitte shall supply Seller with copies
of the Audited Closing Financial Statements and Deloitte’s
opinion thereon (together with the Audited Closing Financial
Statements, the “Audit Report”) stating that the
Audited Closing Financial Statements have been prepared in
accordance with U.S. GAAP on a going concern basis consistently
applied. |
| Article 2.5 |
Closing . The completion of the transactions
contemplated hereby (the “Closing”) shall take place at
a location mutually approved by Nautilus and Seller on
January 1, 2008, 10:00 a.m. Beijing time, or on such other
date as the Parties may agree in writing (the “Closing
Date”). |
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| 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 3.5.2, 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. |
| Article 2.7 |
Deliveries by Buyer . At the Closing, Buyer shall
deliver to Seller the following: |
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2.7.1 |
That portion of the Purchase Price payable at Closing (as set
forth in Article 2.3 above) to Seller, by (i) crediting the
US$14,500,000 option fee previously paid to Seller,
(ii) crediting the US$4,000,000 option fee paid pursuant to
the Land America Agreement, (iii) wire transfer of
US$8,500,000 to a bank account designated by Seller in writing not
less than three Business Days prior to the Closing Date,
(iv) delivery of US$4,000,000 by transfer of funds from the
Option Exercise Deposit to an account designated by Seller in
writing not less than three Business Days prior to the Closing
Date, and (v) transfer of US$1,000,000 into escrow as
described in Article 2.3(b) above; provided , that the
delivery of such payments may be completed within three Business
Days following the Closing Date and shall be completed on the same
date as delivery of the Purchase Price under the Land America
Agreement; and |
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2.7.2 |
The certificates and other documents to be delivered
pursuant to Chapter 7 hereof. |
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| Article 2.8 |
Coordination of Closing Activities. The Parties hereby
agree that Closing hereunder shall be conducted in conjunction
with, and conditioned upon, completion of the transactions
described in the Land America Purchase Agreement. As part of such
Closing activities, in addition to the actions to be taken pursuant
to the terms of this Agreement, the following actions shall be
taken: (a) Nautilus shall cause Buyer to purchase certain
inventory from Land America in accordance with that certain
Post-Closing Audit Agreement, of even date herewith, by and among
Nautilus, Land America, Bruno and Yang; (b) Nautilus WOFE and
Land America shall enter into the Lease Agreement, as defined in
the Land America Agreement; (c) Nautilus, Nautilus WOFE, Land
America, Bruno and Yang shall enter into the Indemnification and
Escrow Agreement, as defined in the Land America Agreement;
(d) Land America shall execute and deliver the Seller’s
Non-Competition Agreement, as defined in the Land America
Agreement; (e) Bruno and Yang shall execute and deliver the
Shareholders’ Non-Competition Agreement, as defined in the
Land America Agreement; and (f) Bruno and Nautilus and/or
Nautilus WOFE shall enter into the Bruno Consulting Agreement, as
defined in the Land America Agreement. |
CHAPTER 3
REPRESENTATIONS AND
WARRANTIES OF
SELLER, BRUNO AND
YANG
Seller, Bruno and Yang hereby represent
and warrant, jointly and severally, to Nautilus as
follows:
| Article 3.1 |
Organization . Seller is a limited liability company
duly organized under the Law of the British Virgin
Islands. |
| 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. Bruno and Yang
have 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, Bruno and Yang of this Agreement and the
other Transaction Documents has been obtained. |
| Article 3.4 |
Binding Effect . This Agreement is, and the each other
Transaction Document to which Seller, Bruno or Yang will be a party
when executed by such Party will be, the legal, valid and binding
obligation of such Party, enforceable against such Party in
accordance with its respective terms. |
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| 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. |
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3.5.1 |
[Intentionally left blank] |
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3.5.2 |
Intellectual Property . Schedule 3.5.2 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 3.5.2.
All rights of Seller in and to each item of the Intellectual
Property listed on Schedule 3.5.2 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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3.5.3 |
Contracts . Schedule 3.5.3 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, (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
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 3.5.3,
each contract listed therein is in full force and effect
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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 3.5.3 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 |
Compliance with Laws . Except as described in Schedule
3.7, 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
3.7 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 3.8 |
Litigation . Except as set forth in Schedule 3.8, there
is no action, lawsuit, claim, proceeding, or investigation pending
or, to the best knowledge of Seller, Bruno and Yang, 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, Bruno or Yang, is threatened to be commenced against any of
the Assets. |
| Article 3.9 |
Brokers’ or Finders’ Fees . Except as set
forth in Schedule 3.9, neither Seller, Bruno nor Yang 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. |
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| Article 3.10 |
Subsidiaries . Except as set forth in Schedule 3.10,
Seller has no subsidiaries or branches. |
| Article 3.11 |
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 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 3.11 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. |
| Article 3.12 |
No Undisclosed Liabilities. The Business has no material
liabilities except for liabilities reflected or reserved against in
the 2006 Balance Sheet or the Interim Balance Sheets and current
liabilities incurred in the ordinary course of business of the
Business since June 30, 2007. |
| Article 3.13 |
Books and Records; Tax Returns . Seller’s books of
account reflect all items of income and expense and all assets and
liabilities of the Business required to be reflected therein in
accordance with U.S. GAAP and neither Seller nor any Affiliate of
Seller has failed to file any material report or return with
respect to the Business which may be required by any law or
regulation of the British Virgin Islands or political subdivision
thereof to be filed, and, except as set forth in Schedule 3.13,
Seller has duly paid or accrued on it’s books of account all
taxes, duties and charges pursuant to such reports and returns or
assessed against Seller. Seller has fully filed, on or before the
due date therefor or the expiration of any extended period for
filing, all returns or reports with respect to any Taxes required
to be filed by Seller, which returns or reports disclose
as |
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