EXHIBIT 2(a)
ASSET PURCHASE AGREEMENT
BY AND AMONG
ROCKY SHOES & BOOTS, INC.,
AS BUYER,
GATES-MILLS, INC.,
AS SELLER,
AND
ROBERT GATES,
AND
ELIZABETH GATES CAMARRA,
AS SHAREHOLDERS OF SELLER
DATED APRIL 14, 2003
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets...................................1
ARTICLE II
EXCLUDED ASSETS; RETAINED LIABILITIES; ASSUMED LIABILITIES
Section 2.1 Excluded Assets...............................................1
Section 2.2 Retained Liabilities..........................................1
Section 2.3 Assumed Liabilities...........................................2
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price................................................2
Section 3.2 Payment of the Initial Purchase Price.........................2
Section 3.3 Deferred Purchase Price.......................................2
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Seller and Shareholders.....2
Section 4.2 Representations and Warranties of Buyer.......................7
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Non-assignable Contracts and Permits..........................8
Section 5.2 Preservation of Books and Records; Post-Closing Access........8
Section 5.3 Further Assurances............................................8
Section 5.4 Sales and Transfer Taxes......................................9
Section 5.5 Name Change...................................................9
ARTICLE VI
EMPLOYEE MATTERS
Section 6.1 Employees.....................................................9
Section 6.2 Retained Obligations..........................................9
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ARTICLE VII
TAX MATTERS
Section 7.1 Tax Returns...................................................9
Section 7.2 Cooperation..................................................10
Section 7.3 Access to and Destruction of Books and Records...............10
Section 7.4 Confidentiality..............................................10
Section 7.5 Allocation of Total Purchase Price...........................10
Section 7.6 Tax Examinations.............................................11
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SHAREHOLDERS
Section 8.1 Certificates from Buyer......................................11
Section 8.2 No Legal Action..............................................11
Section 8.3 Initial Purchase Price.......................................12
Section 8.4 Escrow of Trademark Assignments..............................12
Section 8.5 Legal Opinion................................................12
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Section 9.1 Certificates from Seller and Shareholders....................12
Section 9.2 No Legal Action..............................................12
Section 9.3 Release of Encumbrances......................................13
Section 9.4 Bill of Sale.................................................13
Section 9.5 Required Consents............................................13
Section 9.6 Letters of Credit............................................13
Section 9.7 Liability Insurance Binder...................................13
Section 9.8 Assignment of License........................................13
Section 9.9 Non-Competition and Non-Solicitation Agreement with Seller...13
Section 9.10 Employment Relationships.....................................13
Section 9.11 Consulting Agreement.........................................13
Section 9.12 Non-Competition and Non-Solicitation Agreements..............13
Section 9.13 Legal Opinion................................................13
ARTICLE X
CLOSING
Section 10.1 Closing......................................................14
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 11.1 Survival.....................................................14
Section 11.2 Indemnification of Buyer.....................................15
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Section 11.3 Notice to Seller and Shareholders............................15
Section 11.4 Indemnification of Seller and Shareholders...................16
Section 11.5 Notice to Buyer..............................................16
Section 11.6 Right of Set-Off.............................................16
ARTICLE XII
MISCELLANEOUS
Section 12.1 Amendments...................................................17
Section 12.2 Waivers......................................................17
Section 12.3 Notices......................................................17
Section 12.4 Entire Agreement.............................................18
Section 12.5 Assignability; Third-Party Rights............................18
Section 12.6 Governing Law................................................18
Section 12.7 Headings; Definitions........................................18
Section 12.8 Counterparts.................................................18
Section 12.9 Bulk Transfer Waiver.........................................18
Section 12.10 Expenses.....................................................19
Section 12.11 Publicity....................................................19
ARTICLE XIII
DEFINITIONS
Section 13.1 Definitions..................................................19
SCHEDULES
2.1 Customers
4.1(c) Required Consents
7.5 Allocation of Total Purchase Price
9.6 Letters of Credit
9.11 Key Employees
13.1(a) Raw Materials Inventory
13.1(b) Finished Goods Inventory
EXHIBITS
8.4 Escrow of Trademark Assignments
9.4 Bill of Sale
9.9 Non-Competition and Non-Solicitation Agreement
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DISCLOSURE SCHEDULE
Section 4.1(b) Authority; No Conflicts
Section 4.1(c) Consents
Section 4.1(e) Undisclosed Liabilities
Section 4.1(f) Litigation; Governmental Order
Section 4.1(i) Contracts
Section 4.1(k) Intellectual Property
Section 4.1(l) Title; Encumbrances
Section 4.1(m) Condition of Assets
Section 4.1(q) Absence of Changes
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of this 14th day of April, 2003
(this "AGREEMENT"), by and among ROCKY SHOES & BOOTS, INC., an Ohio corporation
("BUYER"), GATES-MILLS, INC., a New York corporation ("Seller"), and ROBERT
GATES AND ELIZABETH GATES CAMARRA (individually, the "SHAREHOLDER" and
collectively, the "SHAREHOLDERS").
WHEREAS, Seller is a designer, sourcer and seller of gloves (such business,
as conducted by Seller as of the date of this Agreement is hereinafter referred
to as the "BUSINESS"); and
WHEREAS, Seller wishes to transfer the Business to Buyer, and Buyer desires
to acquire the Business, by purchasing the "Assets" (as hereinafter defined) in
exchange for the "Total Purchase Price" (as hereinafter defined), as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, mutual covenants, and agreements hereinafter set forth, and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer, Seller, and Shareholders hereby covenant and agree as
follows:
Capitalized terms not otherwise defined herein have the meanings assigned
to them in Section 13.1 of this Agreement.
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 PURCHASE AND SALE OF ASSETS. At the Closing, Seller shall
sell, assign, convey, transfer, and deliver to Buyer, and Buyer shall acquire
from Seller, all of Seller's right, title, interest, and claims in and to all of
the Assets, free and clear of all Encumbrances.
ARTICLE II
EXCLUDED ASSETS; RETAINED LIABILITIES; ASSUMED LIABILITIES
SECTION 2.1 EXCLUDED ASSETS. Following the Closing Date, Seller shall
retain all right, title and interest in and to the Excluded Assets, including
the Excluded Inventory. With respect to the Excluded Inventory, Seller may
dispose of any Excluded Inventory to (a) TJ Maxx, Winners, VF Uniform Services
or any other party not listed on Schedule 2.1 hereto, or (b) with Buyer's prior
consent, which consent shall be acted upon within 48 hours after notice and
shall not be unreasonably withheld, to any party listed on Schedule 2.1.
SECTION 2.2 RETAINED LIABILITIES. Buyer shall not assume, and shall not be
deemed to have assumed or otherwise be responsible for, any Retained
Liabilities, all of which shall remain the responsibility of Seller following
the Closing.
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SECTION 2.3 ASSUMED LIABILITIES. Buyer shall assume and agree to pay,
satisfy and discharge when due (subject to any defenses or offsets asserted in
good faith against the obligee to whom such Liabilities are owed) all Assumed
Liabilities.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 PURCHASE PRICE. The purchase price for the Assets shall be the
Total Purchase Price.
SECTION 3.2 PAYMENT OF THE INITIAL PURCHASE PRICE. Buyer shall deliver to
Seller the Initial Purchase Price at Closing.
SECTION 3.3 DEFERRED PURCHASE PRICE. In addition to the Initial Purchase
Price payable at the Closing pursuant to Section 3.2 hereof, Buyer shall pay the
Deferred Purchase Price to Seller only as follows:
(a) Twenty-five percent (25%) of Net Sales of the Seller's product line
invoiced by Buyer to the customers listed on Schedule 2.1 hereto between the
Closing Date and December 31, 2003, in excess of $5,125,000 and up to
$11,125,000; and
(b) Five percent (5%) of Net Sales of Seller's product line invoiced by
Buyer to the customers listed on Schedule 2.1 hereto between the Closing Date
and December 31, 2003, in excess of $11,125,000.
(c) The Deferred Purchase Price payable under this Section 3.3 shall be
paid monthly by the 20th day of each month and payment shall be accompanied by a
listing of applicable invoices and amounts during the prior month, which
information Seller shall keep confidential. Seller shall have the right to audit
Buyer's invoices during February 2004. If the audits demonstrate that the
Deferred Purchase Price paid to Seller is less than 95% of what should have been
paid as the Deferred Purchase Price, Buyer will pay the reasonable cost of such
audit up to a maximum of $2,500.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that:
(a) Organization and Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
is qualified to do business and in good standing under the laws of all other
states in which it is required to be so qualified, except where the failure to
be so qualified or in good standing would not reasonably be expected to have a
material adverse effect on the Business or the Assets, and has full power and
authority to own, operate and lease the Assets and carry on the Business as now
presently conducted and as proposed to be conducted.
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(b) Authority; No Conflicts.
(i) Seller has full power and authority to execute and deliver
the Seller Transaction Documents and to perform all of its obligations
pursuant to the Seller Transaction Documents. The execution, delivery
and performance of the Seller Transaction Documents by Seller have
been duly authorized and approved by the board of directors of Seller,
are within Seller's corporate powers and have been duly authorized by
all necessary corporate action on the part of Seller. The Seller
Transaction Documents have been duly executed and delivered by Seller
and assuming the enforceability of the Agreement (and each other
Seller Transaction Document) against Buyer, constitute (and, when
executed and delivered, each other Seller Transaction Document will
constitute) valid and binding obligations of Seller, enforceable
against Seller in accordance with its terms. Except as set forth in
Section 4.1(b) of the Disclosure Schedule, the execution, delivery and
performance of this Agreement by Seller do not result in, and the
consummation of the transactions contemplated hereby shall not result
in, (A) a violation of any provision of its Articles of Incorporation
or By-laws or similar organizational document, (B) a default (or event
which with notice or lapse of time or both would constitute a default)
under, or the acceleration of any obligation under, any indenture,
trust deed, loan agreement or other instrument relating to or
evidencing indebtedness for monies borrowed by or credit available to
it, (C) a violation of any provision of any lease, agreement,
instrument, court order, arbitration award, judgment or decree to
which it is a party or by which it is or its Assets are bound, (D) a
default (or event which with notice or lapse of time or both would
constitute a default) under, or the acceleration of any obligation
under, any contract, agreement, instrument or obligation to which it
is a party, (E) a violation of any other restriction of any kind or
character to which it or its property is subject, or (F) the creation
of any Encumbrance upon any of the Assets.
(ii) Shareholders have full legal right, capacity, power, and
authority to enter into, execute and deliver this Agreement and to
perform their duties hereunder. Shareholders have approved the
transactions contemplated hereunder pursuant to this Agreement and
each of the other agreements required to be entered into pursuant
hereto by Shareholders. Shareholders have taken all necessary
corporate action with respect to Seller to approve this Agreement and
the transactions contemplated hereunder and each of the Seller
Transaction Documents to be entered into by Seller. This Agreement has
been duly executed and delivered by Shareholders and constitutes the
valid and binding obligation of Shareholders, assuming the
enforceability of the Agreement against the Buyer, enforceable against
them in accordance with its terms. Except as set forth in Section
4.1(b) of the Disclosure Schedule, the execution and delivery of this
Agreement by Shareholders and the consummation of the transactions
contemplated hereby do not and will not (A) violate, conflict with, or
result in a breach or default under any of the terms, provisions, or
conditions of any Law,
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judgment, decree or ruling of any applicable court, Governmental
Authority, or any agreement or instrument to which any Shareholder is
a party, (B) result in the creation of any Encumbrance upon any of the
Assets, (C) accelerate or give any party thereto the right to
accelerate or modify the time within which, or the terms under which,
any Shareholder is to perform any such agreement or instrument
affecting the Assets, or (D) require the consent or approval of any
Person, Governmental Authority, or other entity, or any notice to or
filing with any such Person, Governmental Authority or entity, other
than consents to be obtained by Seller and delivered at the Closing.
Shareholders hereby represent and warrant that they have received
adequate and sufficient consideration for their execution and delivery
of this Agreement, including without limitation, the performance of
their obligations under Article XI hereof.
(c) Consents. Section 4.1(c) of the Disclosure Schedule sets forth (i) all
consents and approvals of Governmental Authorities required to be obtained by
Seller to enter into this Agreement and to consummate the transactions
contemplated hereby and (ii) all consents required to be obtained from third
parties to consummate the transactions contemplated hereby (including but not
limited to the assignment of the Contracts) (collectively, the "Consents"). Any
and all Required Consents are separately identified in Section 4.1(c) of the
Disclosure Schedule and are set forth on Schedule 4.1(c) hereto.
(d) Financial Statements. From and after December 31, 2000, Seller has
maintained its books of account in accordance with applicable Law and GAAP and
all such books and records are complete and correct in all material respects,
fairly and accurately reflect the income, expenses, assets, and liabilities of
Seller, including the nature thereof and the transactions giving rise thereto,
and provide a fair and accurate basis for the preparation of the Financial
Statements. Seller has delivered the Financial Statements to Buyer prior the
execution of this Agreement. The Financial Statements have been prepared in
conformity with applicable Law and GAAP and are complete and correct in all
material respects, fairly and accurately reflect the income, expenses, assets,
liabilities, financial position, results of operations and changes in financial
position of Seller for the periods covered thereby.
(e) No Undisclosed Liabilities. Except as set forth in Section 4.1(e) of
the Disclosure Schedule, Seller has no Liabilities, other than Liabilities (i)
disclosed or provided for in the 2002 Financial Statements; (ii) disclosed in or
arising under or relating to matters disclosed in this Agreement or on the
Disclosure Schedule; or (iii) incurred since the date of the 2002 Financial
Statements in the ordinary course of business consistent with past practice.
(f) Litigation; Governmental Order. Except as set forth in Section 4.1(f)
of the Disclosure Schedule, there is no litigation, at law or in equity, and
there are no Actions pending or, to the Knowledge of Seller or Shareholders,
threatened by or against the Business or affecting any of the Assets. Neither
the Business nor any of the Assets is subject to any Governmental Order (nor are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority). The Seller is not in default with respect to any Governmental Order
applicable to the Business.
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(g) Compliance with Laws. The Business and the Assets are, to the knowledge
of Seller and Shareholders, in compliance with and, within all applicable
statutes of limitation periods, have complied with, all Laws and Governmental
Orders applicable to the Business or any of the Assets. There is not any
judgment outstanding or, to the Knowledge of Seller or Shareholders, threatened
which affects the title or interest of Seller in or to any of the Assets or its
power or right to sell, convey, transfer or assign the same to Buyer or would
prevent or affect the operation of the Business and the use of the Assets by
Buyer, as presently operated and used by Seller. Seller has not received notice
of any violation of any Laws or Governmental Orders relating to the operation of
the Business or to the Assets and Seller is not aware of any threatened claim of
such a violation (including any investigation relating thereto).
(h) Environmental Matters. To the knowledge of Seller and Shareholders, (i)
the Business and the Assets comply and have complied with all applicable
Environmental Laws, and possess and comply with and have possessed and complied
with all Environmental Permits, except where the failure to comply with all
applicable Environmental Laws or possession and compliance with all
Environmental Permits would not reasonably be expected to have a material
adverse effect on the Business or the Assets; (ii) there are and have been no
Hazardous Materials at any property owned or operated by Seller or otherwise
used by the Business now or in the past, or at any other location, in conditions
or concentrations that could give rise to any liability to the owner of the
Business or the Assets or result in costs to the owner of the Business or the
Assets arising out of any Environmental Law; (iii) there are no past, present,
or anticipated future events, conditions, circumstances, practices, plans, or
legal requirements that could be expected to prevent, or materially increase the
burden on the owner of the Business or the Assets of complying with any
Environmental Law applicable to the Business or the Assets or obtaining,
renewing, or complying with any Environmental Permit required under such laws;
and (iv) Seller has provided to Buyer true and complete copies of all
Environmental Reports in Seller's possession or control.
(i) Contracts. True and complete copies of all Contracts and all
modifications, amendments and renewals thereof have been furnished to Buyer and
such Contracts represent all Contracts of Seller in conjunction with the
operation of the Business. Section 4.1(i) of the Disclosure Schedule lists all
such Contracts described in the immediately preceding sentence. Each Contract:
(i) is valid and binding and in full force and effect, (ii) is being complied
with and has not been breached by any other party thereto in any material
manner, and (iii) no event has occurred which, with notice or lapse of time,
would constitute a breach or default, or permit termination, modification, or
acceleration under the Contracts. Except as set forth in Section 4.1(i) of the
Disclosure Schedule, to the Knowledge of Seller or Shareholders, no Contract is
non-assignable or would, in the event it were assigned, constitute a violation
of any Law, contract, commitment or other agreement.
(j) Taxes. To the Knowledge of Seller and Shareholders, there are no
proposed assessments of additional Taxes or potential deficiencies affecting or
which could affect the Assets.
(k) Intellectual Property.
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(i) Section 4.1(k) of the Disclosure Schedule contains a list of
all IP Assets, together with a summary description and full
information in respect of any such items.
(ii) Except as disclosed on Section 4.1(k) of the Disclosure
Schedule: (A) Seller owns the entire right, title and interest in and
to, or has the right to use, all the Intellectual Property listed on
Section 4.1(k) of the Disclosure Schedule and all other Intellectual
Property necessary or desirable to conduct the Business as it
currently is being conducted and consistent with past practice; (B)
all of the IP Assets are valid, enforceable and unexpired, are free of
Encumbrances, have not been abandoned, do not infringe or otherwise
impair the Intellectual Property of any third party and are not being
infringed or impaired by any third party; (C) no Governmental Order
has been rendered or, to the Knowledge of Seller or Shareholders, is
threatened by any Governmental Authority which would limit, cancel or
question the validity of (or Seller, or any Affiliate's right to own
or use) any IP Assets; (D) no Action is pending or, to the Knowledge
of Seller or Shareholders, threatened that seeks to limit, cancel or
question the validity of (or Seller's, or an Affiliate's right to own
or use) any IP Assets; (E) Seller has taken all reasonable steps to
protect, maintain and safeguard the IP Assets, and has made all
filings and executed all agreements necessary or desirable in
connection therewith; (F) no party to an IP License is, or is alleged
to be, in breach or default thereunder; and (G) with regard to any IP
Licenses, the transactions contemplated by this Agreement do not
require the consent of any third party and will not cause any payments
to be due thereunder.
(l) Title; Encumbrances. Seller has, except as set forth in Section 4.1(l)
of the Disclosure Schedule, and will convey to Buyer at the Closing, good and
marketable title to all of the Assets, free and clear of all Encumbrances and
title defects.
(m) Condition of Assets. As to the inventory portion of the Assets which
Buyer is acquiring, the inventory has no defects, is merchandise of first
quality, and is saleable as such in the ordinary course of business. Except as
set forth in Section 4.1(m) of the Disclosure Schedule, (A) no customer has made
a claim or demand to Seller to return any portion of the inventory included in
the Assets, which inventory is set forth on Schedules 13.1(a) and 13.1(b)
hereto; (B) to the Knowledge of Seller and Shareholders, there are no claims,
and there is no basis for any claims, by a customer of Seller for the return of
any inventory sold to customers from April 1, 2002 through the Closing Date
based on the product not meeting specifications or unsatisfactory product
quality; and (C) Seller has not agreed to any returns of any product from any
customer sold from April 1, 2002 through the Closing Date which have not been
satisfied in full by Seller prior to the Closing Date.
(n) Brokers. Seller has retained no broker in connection with this
Agreement.
(o) Product Issues. There is no alleged or actual error, omission, or other
defect in the products sold by the Business which could reasonably be expect to
have a material adverse effect on the Business. There has not been any
occurrence involving any product
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warranty claims, recall, rework or retrofit relating to any product which has
been manufactured, shipped or sold in the Business which could reasonably be
expected to have a material adverse effect on the Assets or the Business.
(p) Permits. Seller holds all Permits that are required in order to permit
it to carry on the Business so as to comply in all material respects with all
applicable Laws.
(q) Absence of Changes. Except as set forth in Section 4.1(q) of the
Disclosure Schedule, since December 31, 2002, there has been no Material Adverse
Change to the Assets to be delivered by Buyer under the Contracts after Closing,
and there are no events with respect to any of the foregoing that, to the
Knowledge of Seller or Shareholders, threaten to disrupt, prevent or impair the
Assets in a materially adverse manner.
(r) Disclosure. Neither this Agreement, the Disclosure Schedule, nor any
certificate, schedule, list, or other instrument or information required to be
furnished by Seller pursuant to this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants that:
(a) Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio, is
qualified to do business and in good standing under the laws of all other states
in which it is required to be so qualified, except where the failure to be so
qualified or in good standing would not reasonably be expected to have a
material adverse effect on Buyer, and has full power and authority to own,
operate and lease the Assets and carry on the Business as now presently
conducted and as proposed to be conducted.
(b) Authority; No Conflicts. Buyer has full power and authority to execute
and deliver the Buyer Transaction Documents and to perform all of its
obligations pursuant to the Buyer Transaction Documents. The execution, delivery
and performance of the Buyer Transaction Documents by Buyer are within Buyer's
corporate powers and have been duly authorized by all necessary corporate action
on the part of Buyer. The Buyer Transaction Documents have been duly executed
and delivered by Buyer and assuming the enforceability of the Agreement (and
each other Buyer Transaction Documents) against Seller and Shareholders,
constitute (and, when executed and delivered, each other Buyer Transaction
Document will constitute) valid and binding obligations of Buyer, enforceable
against Buyer in accordance with its terms. The execution, delivery and
performance of this Agreement by Buyer do not result in, and the consummation of
the transactions contemplated hereby will not result in: (i) a violation of any
provision of its Articles of Incorporation or Code of Regulations or similar
organizational document, (ii) a default (or event which with notice or lapse of
time or both would constitute a default) under, or the acceleration of any
obligation under, any indenture, trust deed, loan agreement or other instrument
relating to or evidencing indebtedness for monies borrowed by or credit
available to it, (iii) a violation of any provision of any lease, agreement,
instrument, court order, arbitration award, judgment or decree to which it is a
party or by which it or its property is
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bound, (iv) a default (or event which with notice or lapse of time or both would
constitute a default) under, or the acceleration of any obligation under any
contract, agreement, instrument or obligation to which it is a party, or (v) a
violation of any other restriction of any kind or character to which it or its
property is subject except, in each case, any such violations or defaults which
would not materially impair the ability to perform under this Agreement and to
consummate the transactions contemplated hereby.
(c) Consents. Buyer has, or as of Closing will have, obtained all consents
and approvals required to be obtained by it to enter into and perform under this
Agreement and to consummate the transactions contemplated hereby.
(d) Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 NON-ASSIGNABLE CONTRACTS AND PERMITS. If, as of the Closing,
an attempted assignment of any contract, commitment or other agreement would be
ineffective or would affect Seller's rights thereunder so that Buyer would not
in fact receive all such rights, Seller shall cooperate with Buyer in a mutually
acceptable arrangement, at Seller's cost, to provide for Buyer the benefit
(including the economic benefit) of such contract, commitment, or other
agreement (other than legal title). If, and so long after the Closing as, such
assignment shall not have been made, Seller shall: (i) to the extent that such
action shall not result in violation of such contract, commitment or other
agreement, transfer to Buyer all assets and rights, including all monies,
received in respect of such contract and hold such contract, commitment or other
agreement in trust for Buyer, and (ii) to the extent that the provisions of
clause (i) above are not sufficient to transfer all of the benefits (including
the economic benefit) of such contract, commitment or other agreement (other
than legal title), or any of such contract, commitment or other agreement has
been canceled as a result of the attempted assignment, take such actions (which,
without limitation, may include entering into subcontracting arrangements with
Buyer) as are necessary to provide all of the benefits (or the equivalent
thereof, including the economic benefit) of such contract, commitment or other
agreement (other than legal title) to Buyer.
SECTION 5.2 PRESERVATION OF BOOKS AND RECORDS; POST-CLOSING ACCESS. From
and after the Closing Date, with respect to all matters, except for Tax matters
as covered in Article VII, Buyer and Seller agree that they shall preserve and
keep the books and records relating to the Business for a period equal to the
longer of seven years or the closing of all Tax years ending earlier than
January 1, 2003 and shall make their books and records and employees available
to each other, as the case may be, as may be reasonably required in connection
with any legal proceedings against or governmental investigations of Seller or
government reporting obligation of the parties hereunder or for any other
reasonable business purpose arising from or relating to
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the Business, during regular business hours and upon the prior written request
thereto by the other party, as the case may be. If any of the parties hereto
wish to move any such books or records, such party shall first give 10 days
prior written notice to the other party, including the address of the location
to which such books or records shall be moved.
SECTION 5.4 FURTHER ASSURANCES. After the Closing, Seller and Shareholders
shall, at Buyer's reasonable request and without further consideration, except
for reimbursement of reasonable out-of-pocket expenses incurred by Seller or
Shareholders, execute such additional instruments of conveyance and transfer and
provide to Buyer such additional documents as Buyer may require more effectively
to convey and transfer the Assets to Buyer.
SECTION 5.5 SALES AND TRANSFER TAXES. Seller and Shareholders shall be
responsible and liable for all sales and transfer taxes including the filings of
all necessary Tax Returns, if any, that may be due as a result of or arise from
the sale and transfer of the Assets to Buyer. Seller and Shareholders, jointly
and severally, hereby indemnify and shall hold Buyer harmless from any liability
or expense in connection with any such sales or transfer taxes.
SECTION 5.6 NAME CHANGE. Within 10 days after the Closing Date, Seller
shall change its corporate name to remove the word "Gates," provided, however,
that Seller is permitted use the remainder of its existing stock of forms,
letterhead, checks and similar stationary.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.1 EMPLOYEES. On or immediately after the Closing Date, Buyer
shall offer to employ certain Active Employees. Nothing in this Agreement shall
be construed as limiting in any way the right of Buyer at any time after the
Closing Date to terminate the employment of any Active Employee or to modify
benefits or other terms of employment of such employees.
SECTION 6.2 RETAINED OBLIGATIONS. Seller shall retain any and all
obligations in relation to Employees not offered employment with Buyer, and in
relation to such Active Employees offered employment, for any obligations
relating thereto arising during such Employees' employment with Seller, or
otherwise pursuant to any plan, program or arrangement sponsored by Seller or
its Affiliates including, but not limited to, the Employee Benefit Plans and
Seller shall retain any and all liabilities, including, but not limited to,
severance payments, pertaining to Employees. As of the Closing, Seller shall
have paid all outstanding compensation, bonuses, accrued vacation pay and
commissions to Employees, all of which shall be deemed vested at the Closing.
ARTICLE VII
TAX MATTERS
SECTION 7.1 TAX RETURNS. All material returns and reports of all Taxes of
Seller which constitute Retained Liabilities hereunder including, without
limitation, consolidated federal, state or foreign income Tax Returns and
declarations of estimated tax and tax reports, including any schedules or
attachments thereto and including any amendment thereof, required to be filed
after
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the Closing Date by Seller with respect to Taxes for periods prior to the
Closing Date which, if unpaid, might result in a lien on any of the Assets shall
be filed by Seller and all Taxes payable pursuant thereto shall be paid by
Seller.
SECTION 7.2 COOPERATION. Buyer and Seller and their respective Affiliates
shall cooperate in the preparation and defense of all Tax Returns relating in
whole or in part to taxable periods ending on or before or including the Closing
Date that are required to be filed after such date. Such cooperation shall
include, but not be limited to, furnishing prior years' returns or return
preparation packages illustrating previous reporting practices or containing
historical information relevant to the preparation of such returns, and
furnishing such other information within such party's possession requested by
the party filing such returns as is relevant to their preparation. In the case
of any state, local or foreign joint, consolidated, combined, unitary or group
relief system returns, such cooperation shall also relate to any other taxable
periods in which one party could reasonably require the assistance of the other
party in obtaining any necessary information. After the Closing Date, each of
Seller and Buyer shall furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any period beginning prior to the Closing
Date.
SECTION 7.3 ACCESS TO AND DESTRUCTION OF BOOKS AND RECORDS.
(a) For a period of time expiring 30 days after the expiration of the
applicable statute of limitations, Seller and Buyer shall provide the other with
reasonable access during normal business hours to its books and records to the
extent they relate to the condition or operation of the Business prior to the
Closing and are requested to prepare Tax Returns, to respond to third party
claims or for any other legitimate business purpose specified in writing. Seller
and Buyer shall each have the right, at its own expense, to make copies of any
such books and records.
(b) Neither Seller nor Buyer shall destroy any books or records during the
period described in (a) above to the extent that they relate to the condition or
operation of the Business prior to the Closing without first offering to turn
over possession to the other by written notice at least 90 days prior to the
proposed date of destruction.
SECTION 7.4 CONFIDENTIALITY. Each of Seller and Buyer may take such action
as it deems reasonably appropriate to separate or redact information unrelated
to the Business from documents and other materials requested and made available
pursuant to this Article VII and to condition access to materials that it deems
confidential to the execution and delivery of any agreement by the other party
not to disclose or misuse such information.
SECTION 7.5 ALLOCATION OF TOTAL PURCHASE PRICE. The parties hereto agree to
allocate the Total Purchase Price in accordance with Schedule 7.5 attached
hereto, consistent with the rules under Section 1060 of the Code and the
Treasury Regulations promulgated thereunder. Such allocation shall be mutually
agreed upon between the parties. The parties recognize that the Total Purchase
Price does not include the Buyer's acquisition expenses and that Buyer shall
allocate such expenses appropriately. The parties agree to act in accordance
with the computations and allocations as determined pursuant to this Section 7.5
in any relevant Tax
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Returns or filings, including any forms or reports required to be filed pursuant
to Section 1060 of the Code, the Treasury Regulations promulgated thereunder or
any provisions of local, state, and foreign law, and to cooperate in the
preparation of any such 1060 Forms and to file such 1060 Forms in the manner
required by applicable law. Buyer shall prepare and deliver to Seller within 120
days after the Closing Date a Form 8594, required to be filed under section 1060
of the Code.
SECTION 7.6 TAX EXAMINATIONS. Seller and its duly appointed
representatives, at Seller's expense, shall have the sole right to supervise or
otherwise coordinate any Tax examination process and to negotiate, resolve,
settle or contest any asserted adjustment to income or deficiency in any Tax, or
assert and prosecute any claim for refund of Taxes for taxable periods ending on
or before the Closing Date, provided that Seller shall not settle, resolve or
compromise such examination without the consent of Buyer if such settlement,
resolution or compromise could adversely affect the Business or the Assets.
Seller shall be entitled to participate at its expense in the defense of any
such claim relating to any taxable period that includes the Closing Date and,
with written consent of Buyer at Seller's sole expense, may assume the entire
defense of such claim.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SHAREHOLDERS
The obligations of Seller and Shareholders to be discharged under this
Agreement at the Closing are subject to satisfaction of the following conditions
at the Closing (unless expressly waived in writing by Seller or Shareholders, in
their discretion, at the Closing):
SECTION 8.1 CERTIFICATES FROM BUYER. Buyer shall deliver to Seller and
Shareholders:
(a) A certificate, dated as of the Closing Date, signed by an officer of
Buyer, certifying to the truth and accuracy of the representations and
warranties made by Buyer in Section 4.2 and the fulfillment of conditions set
forth in this Article VIII;
(b) Certified copy of the resolutions of the Board of Directors of Buyer
approving this Agreement and each of the documents to be delivered by Buyer
pursuant hereto, and authorizing Buyer to execute and deliver this Agreement and
the other documents to be delivered by Buyer pursuant hereto, and to perform the
transactions contemplated herein or therein; and
(c) An incumbency certificate for the officers signing documents on behalf
of Buyer pursuant to this Agreement.
SECTION 8.2 NO LEGAL ACTION. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any Governmental Authority which
presents a substantial risk of the restraint or prohibition of the transactions
contemplated hereby or the obtaining of material damages or other material
relief in connection therewith.
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SECTION 8.3 INITIAL PURCHASE PRICE. Buyer shall have delivered to Seller
the Initial Purchase Price.
SECTION 8.4 ESCROW OF TRADEMARK ASSIGNMENTS. Buyer shall have delivered to
Seller the Escrow of Trademark Assignments as security for Buyer's payment of
the Deferred Purchase Price, substantially in the form attached hereto as
Exhibit 8.4.
SECTION 8.5 LEGAL OPINION. Seller and Shareholders shall have received an
opinion of Porter, Wright, Morris & Arthur LLP, counsel for Buyer, dated the
Closing Date, in form satisfactory to Seller.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to be discharged under this Agreement at the
Closing are subject to satisfaction of the following conditions at the Closing
(unless expressly waived in writing by Buyer, in its discretion, at the
Closing):
SECTION 9.1 CERTIFICATES FROM SELLER AND SHAREHOLDERS. Seller and
Shareholders shall deliver to Buyer:
(a) With respect to Seller, a certificate, dated as of the Closing Date,
signed by an officer of Seller, and with respect to Shareholders, a certificate,
dated as of the Closing Date, signed by each Shareholder, certifying to (i) the
truth and accuracy of the representations and warranties given in Section 4.1
and the fulfillment of conditions set forth in this Article IX, and to (ii) the
payment of all amounts due to the three employees listed on Schedule 9.10;
(b) Certified copies of the resolutions of the Board of Directors and
Shareholders of Seller approving this Agreement and each of the documents to be
delivered by Seller pursuant hereto, and authorizing Seller and Shareholders to
execute and deliver this Agreement and the other documents to be delivered by
Seller and Shareholders pursuant hereto, and to perform the transactions
contemplated herein or therein;
(c) An incumbency certificate for the officers signing documents on behalf
of Seller pursuant to this Agreement;
(d) Payment of all amounts due from Seller to the three employees listed on
Schedule 9.10; and
(e) A receipt with respect to the Initial Purchase Price.
SECTION 9.2 NO LEGAL ACTION. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any Governmental Authority which
presents a substantial risk of the restraint or prohibition of the transactions
contemplated hereby or the obtaining of material damages or other material
relief in connection therewith.
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SECTION 9.3 RELEASE OF ENCUMBRANCES. Seller shall have obtained a release
or releases or other appropriate documents as may be necessary to cancel or
release any and all Encumbrances encumbering or otherwise affecting any of the
Assets.
SECTION 9.4 BILL OF SALE. Seller shall have delivered to Buyer an executed
Bill of Sale and Assignment substantially in the form attached hereto as Exhibit
9.4, and such other instruments of transfer and conveyance as shall reasonably
be requested by Buyer for the transfer of all of Seller's right, title, and
interest to the Assets.
SECTION 9.5 REQUIRED CONSENTS. All Required Consents shall have been
obtained in form and substance acceptable to Buyer and delivered to Buyer,
including the assignment with no material adverse change in the terms or
conditions of the Contracts, Permits, instruments or documents to which such
consents apply and the effectiveness of such consents shall be subject to no
condition except the written agreement of Buyer to be bound by the terms and
conditions of the Contracts, Permits, instruments or documents to which such
consents apply.
SECTION 9.6 LETTERS OF CREDIT. Seller and Buyer will request for the
transfer to Buyer of the letters of credit listed on Schedule 9.6 attached
hereto.
SECTION 9.7 LIABILITY INSURANCE BINDER. Seller shall have included Buyer as
an additional loss payee on Seller's liability insurance binder relating to
$550,000 of inventory at Seller's facility in Johnstown, which binder will be in
effect from April 11, 2003, until May 10, 2003.
SECTION 9.8 ASSIGNMENT OF LICENSE. Seller shall have delivered to Buyer an
assignment of its license to Harrison Technologies, Inc. relating to the mark
"Triad."
SECTION 9.9 NON-COMPETITION AND NON-SOLICITATION AGREEMENT. Seller shall
have delivered to Buyer an executed Non-Competition and Non-Solicitation
Agreement substantially in the form attached hereto as Exhibit 9.9.
SECTION 9.10 EMPLOYMENT RELATIONSHIPS. All of the Key Employees listed on
Schedule 9.10 attached hereto shall have accepted employment with Buyer, and
Buyer shall have entered into employment agreements, effective as of the Closing
Date, on terms acceptable to Buyer, with such Key Employees.
SECTION 9.11 CONSULTING AGREEMENT. Buyer shall have entered into a
consulting agreement, effective as of the closing date, on terms acceptable to
Buyer, with Robert Gates.
SECTION 9.12 NON-COMPETITION AND NON-SOLICITATION AGREEMENT. Buyer shall
have entered into non-competition and non-solicitation agreements, effective as
of the Closing Date, on terms acceptable to Buyer, with the Key Employees and
Robert Gates.
SECTION 9.13 LEGAL OPINION. Buyer shall have received an opinion of Shatz,
Schwartz and Fentin, P.C., counsel for Seller and the Shareholders, dated the
Closing Date, in
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form satisfactory to Buyer.
ARTICLE X
CLOSING
SECTION 10.1 CLOSING.
(a) The Closing will be deemed effective as of 12:01 a.m., local time, on
the Closing Date. The delivery of all documents and the performance of all acts
at the Closing shall be deemed to have occurred or to have been taken
simultaneously.
(b) Seller shall have the Assets available for removal by Buyer within five
days after Closing, and Buyer shall have 30 days from the Closing Date (the
"Interim Period") to remove the Assets from Seller's premises in Johnstown, New
York. Seller shall provide security for the Assets prior to removal in a manner
consistent with the security and protection of its own assets prior to the
Closing Date. There will be no charges to Buyer for the storage or security of
the Assets during the Interim Period, and Seller shall provide Buyer access to
the Assets during regular business hours. Expenses incurred in the removal of
the Assets shall be paid by Buyer, except that Seller will pay any and all
expenses related to the packing and loading of the Assets.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 11.1 SURVIVAL.
(a) The representations and warranties made by Seller and Shareholders
including, without limitation, statements contained in the Disclosure Schedule
or any certificate or schedule delivered by Seller or Shareholders to Buyer
pursuant to this Agreement shall be fully enforceable at law or in equity
against Seller and Shareholders, and their respective successors and assigns, by
Buyer and its successors and assigns, for 12 months after the Closing Date,
except for the representations and warranties set forth in Sections 4.1(a),
4.1(b) and 4.1(l) (with respect to title), which shall survive the Closing
without limitation.
(b) The representations and warranties made by Buyer, including, without
limitation, statements contained in any certificate delivered by Buyer to Seller
and Shareholders pursuant to this Agreement, shall survive the Closing, and
shall be fully enforceable at law or in equity against Buyer and its successors
and assigns, by Seller and Shareholders, and their respective successors and
assigns, for 12 months after the Closing Date.
(c) The covenants made by each of the parties, except as they may be fully
performed and discharged prior to or contemporaneously with the Closing, shall
survive the Closing, and shall be fully enforceable at law or in equity against
the respective party, and their respective successors and assigns, until fully
performed and discharged.
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SECTION 11.2 INDEMNIFICATION OF BUYER. Seller and Shareholders, jointly and
severally, shall indemnify and hold Buyer and its Affiliates and their
directors, officers, employees and agents harmless from:
(a) Any and all loss, liability, claim, or damage (i) arising out of or
related to the Retained Liabilities, (ii) resulting from the breach or alleged
breach by Seller or Shareholders of any representation or warranty set forth in
this Agreement or the documents delivered hereunder, (iii) resulting from any
breach or alleged breach by Seller or Shareholders of any covenant set forth in
this Agreement or the documents delivered hereunder, or (iv) resulting from the
waiver of compliance with or failure to comply with any bulk sale or bulk
transfer law, in any case whether or not arising out of any claim from any third
party; and
(b) Any cost or expense, including reasonable attorneys' fees and expenses
(except when Seller or Shareholders is defending the claim in accordance with
Section 11.3), of Buyer or any of its Affiliates incident to a loss, liability,
claim or damage for which Buyer or any of its Affiliates is indemnified pursuant
to Section 11.2(a), in any case whether or not arising out of any claim from any
third party.
Notwithstanding anything herein to the contrary:
(y) The Shareholders shall not have any liability hereunder in excess of
$1,500,000; and
(z) The Seller shall not have any liability hereunder in excess of the
Total Purchase Price.
SECTION 11.3 NOTICE TO SELLER AND SHAREHOLDERS. If Buyer becomes aware of
facts or events giving rise to obligations of Seller or Shareholders to
indemnify Buyer or any of its Affiliates or their directors, officers, employees
and agents under Section 11.2, including such amounts below the cumulative
amount set forth in Section 11.2 above, Buyer shall notify Seller and
Shareholders of such fact or event in writing, setting forth specifically the
obligation with respect to which the claim is made, the facts giving rise to and
the alleged basis for such claim and, if known or reasonably ascertainable, the
amount of the liability asserted or that may be asserted by reason thereof. Such
notice shall be given within a reasonable time of the discovery by Buyer or any
of its Affiliates of facts that constitute the basis for a claim against Buyer
or any of its Affiliates that may give rise to a right of indemnity, or promptly
following receipt of notice of the assertion of a claim against Buyer or any of
its Affiliates that may give rise to a right of indemnity, whichever shall occur
first; provided that failure to so notify Seller and Shareholders of any such
claim shall discharge Seller or Shareholders of its liabilities and obligations
hereunder only if and to the extent that Seller or Shareholders is materially
prejudiced thereby. If a claim is asserted against Buyer or any of its
Affiliates that may give rise to a right of indemnity, Buyer shall allow Seller
or Shareholders to, and Seller or Shareholders shall, at its expense, defend
against, compromise or settle such claim with counsel of Seller's or
Shareholders' selection subject, in any case, to Buyer's approval, not to be
unreasonably withheld or delayed. As a condition of Seller's and Shareholders'
obligation under Section 11.2,
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Buyer shall, at its own expense, provide such documents, records and other
evidence in its possession, and access to such employees, as Seller or
Shareholders may reasonably request, shall cooperate with Seller and
Shareholders in defending such claim, and shall take no other action with regard
to an indemnified claim or any investigation, proceeding or action relating
thereto, that is in derogation of Seller's or Shareholders' right of control or
that has not been specifically requested or approved in advance by Seller or
Shareholders.
SECTION 11.4 INDEMNIFICATION OF SELLER AND SHAREHOLDERS. Buyer shall
indemnify and hold harmless Seller and Shareholders from any loss, liability,
claim, damage, cost or expense, including reasonable attorneys' fees and
expenses (except when Buyer is defending the claim in accordance with Section
11.5) (i) resulting from the breach or alleged breach by Buyer of any
representation, covenant or warranty set forth in this Agreement, (ii) arising
out of or related to the Liabilities of the Business arising after the Closing;
(iii) resulting from any breach or alleged breach by Buyer of any covenant set
forth in this Agreement; or (iv) resulting from Buyer's failure to perform its
duties under any contracts assigned by Seller to Buyer under this Agreement.
SECTION 11.5 NOTICE TO BUYER. If Seller or any Shareholder becomes aware of
facts or events giving rise to obligations of Buyer to indemnify Seller or
Shareholders under Section 11.4, Seller or Shareholders shall notify Buyer of
such fact or event in writing, setting forth specifically the obligation with
respect to which the claim is made, the facts giving rise to and the alleged
basis for such claim and, if known or reasonably ascertainable, the amount of
the liability asserted or that may be asserted by reason thereof. Such notice
shall be given within reasonable time of the discovery by Seller or Shareholders
of facts that constitute the basis for a claim against Seller and Shareholders
that may give rise to a right of indemnity, or promptly following receipt of
notice of the assertion of a claim against such Seller or Shareholders that may
give rise to a right of indemnity, whichever shall occur first; provided, that
failure to so notify Buyer of any such claim shall discharge Buyer of its
liabilities and obligations hereunder only if and to the extent that Buyer is
materially prejudiced thereby. If a claim is asserted against Seller or
Shareholders that may give rise to a right of indemnity, Seller and Shareholders
shall allow Buyer to, and Buyer shall, at its expense, defend against,
compromise or settle such claim with counsel of Buyer's selection. As a
condition of Buyer's obligation under Section 11.4, Seller and Shareholders, at
their own expense, shall provide such documents, records and other evidence in
its possession, and access to such employees, as Buyer may reasonably request,
shall cooperate with Buyer in defending such claim, and shall take no other
action with regard to any indemnified claim or any investigation, proceeding or
action relating thereto, that is in derogation of Buyer's right of control or
that has not been specifically requested or approved in advance by Buyer.
SECTION 11.6 RIGHT OF SET-OFF. Buyer shall have the right to set-off from
the Deferred Purchase Price the amount, if any, necessary to fulfill the
indemnification obligations of Seller and Shareholders provided in Section 11.2
hereof. Buyer will give Seller 15 days advance written notice of its intent to
set-off any portion of the Deferred Purchase Price. If the precise amount of the
set-off cannot be determined prior to the payment date of any portion of the
Deferred Purchase Price, Buyer will provide Seller with an estimate of the
amount of the set-off and Buyer shall be entitled to retain such estimated
amount until the claim for set-off is resolved.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.1 AMENDMENTS. The parties may only amend, modify or supplement
this Agreement in such manner as may be agreed upon by both of them in writing
signed by an authorized officer or representative of such party.
SECTION 12.2 WAIVERS. Except as otherwise provided in Article XII, the
parties may only extend the time for, or waive the performance of, any of the
obligations of the other or waive compliance by the other with any of the
covenants or conditions contained in this Agreement in writing signed by an
authorized officer or representative of such party.
SECTION 12.3 NOTICES. Any notice, request, instruction or other document to
be given hereunder shall be in writing and delivered personally or sent by
telecopy or prepaid overnight courier:
(a) If to Buyer, to: Rocky Shoes & Boots, Inc.
39 East Canal Street ..
Nelsonville, Ohio 45704
Attention: Mike Brooks
President and Chief Executive Officer
With a copy to: Curtis A. Loveland, Esq.
Porter, Wright, Morris & Arthur LLP
41 South High Street
Columbus, Ohio 43215
(b) If to Seller, to: Gates-Mills, Inc.
Harrison Street, P.O. Box 547
Johnstown, New York 12095
Attention: Robert Gates
With a copy to: Steven J. Schwartz, Esq.
Shatz, Schwartz and Fentin, P.C.
1441 Main Street
Springfield, Massachusetts 01103
(c) If to Shareholders, to: Robert Gates
Elizabeth Gates Camarra
c/o Gates-Mills, Inc.
Harrison Street, P.O. Box 547
Johnstown, New York 12095
Any notice or other communication transmitted in accordance with this
Section 15.3 shall for all purposes of this Agreement be treated as given or
effective, if personally delivered, upon
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receipt, or, if sent by courier, upon the earlier of receipt or the end of the
business day following the date of delivery to such courier, or, if telecopied,
upon transmission and confirmation of receipt.
SECTION 12.4 ENTIRE AGREEMENT. The Disclosure Schedule and the Schedules
and Exhibits attached hereto are incorporated into this Agreement by reference.
This Agreement, the Disclosure Schedule and the Schedules and Exhibits hereto
embody the entire agreement between the parties and any and all prior oral or
written agreements, representations or warranties, contracts, understandings,
correspondence, conversations, and memoranda, whether written or oral, between
the parties or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest,
with respect to the subject matter hereof, are merged herein and replaced
hereby.
SECTION 12.5 ASSIGNABILITY; THIRD-PARTY RIGHTS. Neither this Agreement nor
any of the parties' rights hereunder shall be assignable by any party hereto
without the prior written consent of the other party; provided, notwithstanding
the preceding, Buyer may assign its rights and obligations under this Agreement
to a subsidiary of Buyer. Any attempted assignment of this Agreement in breach
of this provision shall be void and of no effect. In the event that any
assignment is validly made, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, shall be deemed to
confer upon any other person, including without limitation any Employees, any
rights or remedies under, or by reason of, this Agreement.
SECTION 12.6 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio, without regard to Ohio conflict of law
rules. The parties designate the state or federal courts sitting in Columbus,
Franklin County, Ohio, as the exclusive courts of competent jurisdiction and
venue of any actions or proceedings relating to this Agreement and hereby
irrevocably consent to such designation, jurisdiction and venue.
SECTION 12.7 HEADINGS; DEFINITIONS. The Section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement. Terms defined in this Agreement
in the plural shall mean the singular of such plural term where the context of
the Agreement indicates the propriety of such singular use, and vice versa.
SECTION 12.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
SECTION 12.9 BULK TRANSFER WAIVER. Seller and Shareholders hereby waive
compliance by Buyer with the requirements of Article 6 of the Uniform Commercial
Code (Bulk Transfers) as in effect in any jurisdiction and all other applicable
bulk sales or bulk transfer laws; provided, however, nothing in this Section
15.9 shall be construed to undermine Seller's absolute obligation to pay and
discharge all Retained Liabilities. Notwithstanding the foregoing, Seller and
Shareholders shall cooperate with Buyer to the extent Buyer chooses to comply
with the requirements of any applicable bulk sales or bulk transfer law.
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SECTION 12.10 EXPENSES. Except as otherwise specifically provided herein,
each party will pay its own expenses, fees and transaction costs in connection
with the transaction contemplated hereby and all fees payable to any advisors or
brokers retained by it in connection with the transaction.
SECTION 12.11 PUBLICITY. So long as this Agreement is in effect, each of
the parties hereto (i) shall not, and shall cause its Affiliates not to, issue
or cause the publication of any press release or other announcement to any
person with respect to this Agreement or the transactions contemplated hereby
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that nothing contained herein shall (A)
limit the right of each of the parties hereto and their Affiliates to make a
legally required filing or communication, provided, however, to the extent
possible, such party shall consult with the other party before making such
filing or communication, or responding to any communications initiated by any
non-affiliated person, including but not limited to, any Governmental Authority
or any person to whom a Required Consent relates, (B) prohibit either party
hereto (or its Affiliates) from initiating communications with, and making
presentations to any Governmental Authority relating to the transactions
contemplated hereby if such party gives prior notice thereof to the other party
hereto, (C) prohibit Buyer or Seller or any of their respective Affiliates from
communicating with any third party information in any way relating to the
transactions that have been made known to the general public, or (D) prohibit
Buyer or Seller from contacting a third party in connection with securing a
Required Consent or other consent or approval in connection with the
consummation of the transactions contemplated by this Agreement; (ii) shall
cooperate fully with the other party hereto with respect to issuing or
publishing any press release, or other announcement or other written
communication to any non-affiliated person and preparing written and oral
communications to the employees and agents of each party hereto with the purpose
of effectuating the transactions in the best interest of the parties and the
Business; and (iii) shall promptly notify the other party of any announcements
which are made to Affiliates and any communications received from and responses
provided to non-affiliated persons, in either case, with respect to this
Agreement or the transactions contemplated hereby.
ARTICLE XIII
DEFINITIONS
SECTION 13.1 DEFINITIONS. In addition to the capitalized terms defined
elsewhere in this Agreement, the following terms shall be defined as follows:
"ACTION" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"ACTIVE EMPLOYEES" means all current Employees as of the date of this
Agreement.
"AFFILIATE" means, with respect to any Person, any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person (including without limitation its respective officers,
directors and employees); provided that in no event shall Buyer or the Business
be treated as an Affiliate of Seller, nor shall any person
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directly or indirectly controlled by Buyer or the Business (including, without
limitation, its officers, directors and employees) as a result of such person's
relationship with Buyer or the Business be treated as an Affiliate of Seller.
For this purpose, "control" means the power to direct the management and
policies of a person through the ownership of securities, by contract or
otherwise and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"ASSETS" means the tangible and intangible assets set forth below:
(i) The raw materials inventory selected by Buyer and listed on
Schedule 13.1(a) attached hereto;
(ii) All finished goods inventory selected by Buyer and listed on
Schedule 13.1(b) attached hereto;
(iii) All advertising, promotional, and marketing materials
(historical and current);
(iv) All trade show booths and fixtures;
(v) All samples and sample boards;
(vi) All customer lists (names, addresses, telephone numbers and
contacts) and data, sales records, correspondence, and files
(electronic and paper versions);
(vii) All sales representative records, correspondence, and
files;
(viii) All product patterns and designs;
(ix) All fixtures, supplies, and equipment used in research and
development and in production at Seller's facility in Johnstown, New
York;
(x) All packaging materials on hand for distribution of the
finished goods inventory;
(xi) All Intellectual Property;
(xii) Subject to Section 5.1, all Contracts;
(xiii) Subject to Section 5.1, all Permits necessary for the
operation of the Business;
(xiv) All 800, 888 or similar long distance telephone numbers
used by Seller for any reason, including customer calls, order
facsimiles, and credit facsimiles;
(xv) All web site domain names or URLs used in Seller's business;
and
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(xvi) All UPC codes and manufacturing identification numbers used
in Seller's business.
"ASSUMED LIABILITIES" means only the liabilities associated with the
delivery of products under the Contracts acquired by Buyer at Closing.
"BUYER TRANSACTION DOCUMENTS" means this Agreement and each other document
to be executed and delivered by Buyer pursuant hereto.
"CLOSING" means the consummation of the transactions contemplated by this
Agreement.
"CLOSING DATE" means the date of this agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" means all customer purchase orders relating to the Assets to be
acquired by Buyer.
"COPYRIGHTS" means copyrights and works of authorship in any media,
including computer programs, hardware, software, systems, databases and related
items, Internet site content, catalogs, charts, diagrams, descriptive texts,
advertising and promotional materials and literature, manuals and reports and
other related documentation, drawings and models, and the materials or media
embodying the foregoing.
"DEFERRED PURCHASE PRICE" means the portion of the Total Purchase Price to
be determined in accordance with Section 3.3 hereof.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated as of the date
hereof, and updated through the Closing Date, and forming a part of this
Agreement.
"EMPLOYEE" means any former employee or Active Employee of the Business,
whether employed directly by Seller or Shareholders.
"EMPLOYEE BENEFIT PLAN" means each employee benefit plan as defined in
Section 3(3) of ERISA, pension, retirement, profit-sharing, deferred
compensation, bonus, incentive, performance, stock option, stock appreciation,
phantom stock, stock purchase, restricted stock, medical, hospitalization,
vision, dental or other health, life, disability, severance, termination,
employment or any other employee benefit plan, program, arrangement, agreement
or policy and any trusts related thereto, to which Seller contributes or is
obligated to contribute or under which Seller may have any liability with
respect to any of the Employees and, in each case, under which any Employee (or
their respective beneficiaries or dependents) is eligible to participate or to
accrue a benefit.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, or restriction of
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any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income, or other exercise of any attributes of ownership.
"ENVIRONMENTAL LAWS" means any and all laws, rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally enforceable
requirement (including without limitation, common law) of any foreign
government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, or employee health and safety.
"ENVIRONMENTAL LIABILITIES" means any loss, damage or expense of any kind
or nature (including without limitation fines, penalties, investigation
expenses, costs of remediation or removal, natural resource damages,
consequential or incidental damages, personal injury, including death, or
property damage) resulting from a claim, suit, cause of action, proceeding,
order, arbitration, request for information, administrative action or settlement
brought, or presented or threatened by any party whatsoever (including without
limitation any Governmental Authority, employees of the Business, purchasers or
users of products of the Business, and owners, lessees or occupants of any
properties) arising out of or based on the actual or alleged acts or omissions
of any person with respect to any (A) actual or alleged treatment, handling,
use, generation, transportation, incorporation into any product, presence,
recycling, storage, disposal or release (as these terms are defined under any
Environmental Law) of a Hazardous Material or any tanks, drums or containers
thereof or (B) actual or alleged violation of any Environmental Law and in
either case (A) or (B): (i) arising from the operations of the Business
(including, without limitation, recycling or disposing of Hazardous Materials
directly or indirectly, at any location); or (ii) with respect to any property
(including the air, soil, groundwater, surface water, or within any buildings or
structures) which is or has been owned, leased or occupied with respect to the
operations of the Business.
"ENVIRONMENTAL PERMITS" means any and all permits, licenses, registrations,
notifications, exemptions and any other authorization required under any
Environmental Law.
"ENVIRONMENTAL REPORT" means any report, study, assessment, audit, or other
similar document that addresses any issue of actual or potential non-compliance
with, or actual or potential liability under or cost arising out of, any
Environmental Law that may affect the Business or the Assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations of the Internal Revenue Service
promulgated thereunder.
"ERISA PLAN" means an employee benefit plan (other than a Multiemployer
Plan as defined in 4001(a)(3) of ERISA) that is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code or
Section 302 of ERISA and that is maintained or contributed to by Seller or any
corporation or trade or business that is a member of any group of organizations
described in Section 414(b), (c), (m) or (o) of the Code of which Seller is a
member, or with respect to which Seller could incur liability.
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"EXCLUDED ASSETS" means all assets of the Seller other than those defined
in "Assets" above.
"EXCLUDED INVENTORY" means all inventory of the Seller other than that
defined in "Assets" above.
"FINANCIAL STATEMENTS" means collectively (i) the 2002 Financial
Statements, (ii) the balance sheet of Seller as of December 31, 2001 and the
related statements of revenue, expenses, and retained earnings for the year
ended December 31, 2001, together with related notes, schedules, and
supplemental information.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"GOVERNMENTAL AUTHORITY" means any United States federal, state, or local
or any foreign government, governmental, regulatory, or administrative
authority, agency, or commission or any court, tribunal, judicial, or arbitral
body.
"GOVERNMENTAL ORDER" means any order, rules, writ, judgment, injunction,
decree, stipulation, determination, or award entered by or with any Governmental
Authority.
"HAZARDOUS MATERIAL" means a hazardous material or substance, petroleum or
petroleum product, toxic substance, hazardous, or special waste, contaminant,
chemical, pollutant, or any other substance as defined as such or regulated or
that could result in liability under any Environmental Law.
"INVENTORY PURCHASE PRICE" means the sum of (i) the actual cost of the raw
materials inventory, and (ii) the lower of the actual cost or market cost of the
finished goods inventory, which shall be agreed upon by the parties hereto at
the time of Closing.
"INITIAL PURCHASE PRICE" means $1,470,000 and the Inventory Purchase Price,
payable in cash in United States dollars, by wire transfer of immediately
available funds in accordance with written instructions provided to Buyer by
Seller.
"INTELLECTUAL PROPERTY" means all Patents, Trademarks, Copyrights, and U.S.
and foreign intellectual property, and the goodwill pertaining to the foregoing,
including without limitation (i) trade secrets, know-how, formulae, research
projects completed or in process, software codes, customer and supplier lists,
accounts and records, web site domain names and URLs, UPC codes and
manufacturing identification numbers, and other confidential information; (ii)
all registrations, applications, recordings and licenses or other agreements
related thereto; (iii) all rights to obtain renewals, extensions, continuations,
continuations-in-part, reissues, divisions or similar legal protections related
thereto; and (iv) the right to sue at law or in equity for any infringement or
other impairment of the foregoing, including the right to collect damages and
proceeds therefrom, including, without limitation, the Intellectual Property
listed in Section 4.1(k) of the Disclosure Schedule;
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"IP ASSETS" means all Intellectual Property that is used or usable by
Seller in connection with the Business, including (A) all registrations and
applications related thereto that have been submitted to any Governmental
Authority, and (B) all material unregistered IP Assets, and (C) each and every
IP License.
"IP LICENSE" means any license, sublicense, consent-to-use agreement and
other agreement concerning any IP Assets to which Seller and/or an Affiliate is
a party.
"KNOWLEDGE" means those facts that are known or should have been known
after reasonable investigation.
"LAW" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or other requirement or rule of law.
"LIABILITIES" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or not, or determined or
determinable, including, without limitation, those arising under any Law, Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"MATERIAL ADVERSE CHANGE" means any change in, or effect on the Business
that, individually or in the aggregate is, or could reasonably be expected to
be, materially adverse to the Business, Assets, prospects, employee relations,
management or customer relations, operations, or financial condition of the
Business, except for any change or effect resulting from general economic,
financial or market conditions or any enactment of Laws applicable to companies
in the same business as Seller.
"NET SALES" means sales less discounts, returns, and allowances in the
ordinary course of business and consistent with Buyer's normal business
practices.
"PATENTS" means inventions, discoveries, processes, designs, industrial
designs, techniques, manufacturing methods, processes, specifications, drawings,
sketches, tools, tooling devices, prototypes, molds, fixtures, developments,
technology, and related improvements and know-how, whether or not patented or
patentable.
"PERMITS" means any and all permits, licenses, certificates of authority,
orders, or approvals of, or filings, applications, or registrations with, all
Governmental Authorities.
"PERSON" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
"REQUIRED CONSENTS" means those Consents required to be obtained from third
parties as a condition to Closing to consummate the transactions contemplated by
this Agreement, as specifically identified in Schedule 4.1(c) attached hereto.
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"RETAINED LIABILITIES" means any and all Liabilities of Seller other than
the Assumed Liabilities, whether or not disclosed in the 2002 Financial
Statements, which shall include, without limitation, the following:
(i) Any Liabilities with respect to any Employees or third parties
arising under any of the Employee Benefit Plans, and any Liabilities to any
Employees arising out of any circumstances, events or actions occurring on,
prior to or as of the Closing Date, including but not limited to, wrongful
termination, breach of fiduciary duty, discrimination, sexual harassment,
workers' compensation, or other employment-related matters or any
Liabilities associated with severance payments due or to become due to the
Employees, whether arising from the consummation of the transactions
contemplated hereby, or otherwise;
(ii) Any Environmental Liabilities or any liabilities related to the
release, disposal, discharge, treatment or storage of Hazardous Materials
arising out of or relating to the Business or the Assets or relating to or
arising out of any circumstances, events or actions occurring on, prior to
or as of the Closing Date;
(iii) Any Liabilities relating to or arising out of Actions against
the Business or the Assets which are pending or threatened as of, or
relating to or arising out of any circumstances, events or actions
occurring on, prior to, or as of the Closing Date;
(iv) Any Liabilities, including warranty Liabilities, arising from
defects or alleged defects in the services performed or products made by
the Business on, prior to or as of the Closing Date or alleged or actual
failure to warn of any of the foregoing;
(v) Any Liabilities arising from infringement of Intellectual Property
Rights or breach of contract occurring at any time on, prior to or as of
the Closing Date;
(vi) Any Liabilities for Taxes arising out of or relating to the
Business or the Assets or relating to or arising out of any circumstances,
events or actions occurring on, prior to or as of the Closing Date; and
(vii) Any Liabilities in respect of any indebtedness of Seller,
whether payable or owing to a bank, any other financial institution, or any
third party (other than for trade payables incurred in the ordinary course
of business), including any Affiliate or any present or former Shareholders
of Seller arising out of any circumstances, events or actions occurring on,
prior to or as of the Closing Date.
"SELLER TRANSACTION DOCUMENTS" means this Agreement and each other document
to be executed and delivered by Seller pursuant hereto.
"TAXES" means federal, state, local, foreign and provincial income, capital
gains, gross receipts, profits, real property, personal property, payroll,
employment, social security, unemployment, stamp, severance, excise, license,
customs, duties, use, transfer, sales, mercantile, value added, capital stock,
franchise or other taxes, including, without limitation,
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estimated taxes relating thereto and any interest and penalties imposed thereon,
whether disputed or not.
"TAX RETURNS" means any return, declaration, report, claim for refund, or
information return or statement, estimated reports, including in each case any
schedule or attachment thereto, and including any amendment thereof.
"TOTAL PURCHASE PRICE" shall mean the sum of: (i) the Initial Purchase
Price and (ii) the Deferred Purchase Price.
"TRADEMARKS" means trademarks, service marks, trade names, brand names,
corporate names, domain names and URLs, logos and trade dress and all elements
thereof, the goodwill of any business symbolized thereby, and all common-law
rights relating thereto, as Seller or Shareholders may have.
"2002 FINANCIAL STATEMENTS" means the balance sheet of Seller as of
December 31, 2002 and for the year ended December 31, 2002 the related
statements of revenue, expenses, and retained earnings and cash flows, together
with related notes, schedules, and supplemental information.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed as of the day, month and year first above written.
BUYER:
ROCKY SHOES & BOOTS, INC.
By: /s/ Mike Brooks
--------------------------------------------
Name: Mike Brooks
------------------------------------------
Title: President and CEO
-----------------------------------------
SELLER:
GATES-MILLS, INC.
By: /s/ Robert S. Gates
-------------------------------------------
Name: Robert S. Gates
------------------------------------------
Title: President
-----------------------------------------
SHAREHOLDERS:
ROBERT GATES
/s/ Robert S. Gates
-------------------------------------------------
ELIZABETH GATES CAMARRA
/s/ Elizabeth Gates Camarra
-------------------------------------------------
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