Ohio 0-21026 31-1364046
----------------------------- -------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identifycation No.)
39 East Canal Street, Nelsonville, Ohio 45764
----------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On December 6, 2004, Rocky Shoes & Boots, Inc. (the "Company") entered into a Purchase and Sale of Equity Interests Agreement, by and among SILLC Holdings LLC, Rocky Shoes & Boots, Inc., and solely for the purposes of Section 5.13, Section 5.14, Article VII, Article IX and Article X thereof, Strategic Industries LLC (the "Agreement"). Pursuant to the Agreement, the Company will acquire 100% of the issued and outstanding voting limited liability interests of EJ Footwear LLC, Georgia Boot LLC, and HM Lehigh Safety Shoe Co. LLC (the "EJ Footwear Group").
The aggregate purchase price for the interests will be $87.7 million in cash plus 484,261 shares of the Company's common stock, which were valued at $10 million on the date of signing of the Agreement. The EJ Footwear Group will have no debt and working capital of at least $53.1 million at closing. In connection with the transaction, the Company has negotiated a term sheet for credit facilities totaling $148 million with GMAC Commercial Finance LLC ("GMAC") and American Capital, to fund a portion of the transaction and replace its existing credit facility.
The transaction, which is expected to close in early January 2005, is subject to a number of closing conditions, including the Company's receipt of firm financing commitments from GMAC and American Capital by mid-December 2004, audited financial statements of the EJ Footwear Group for the prior three years, the funding of the credit facilities at the time of closing of the transaction, and other customary conditions including Hart-Scott-Rodino Act approval.
The foregoing description of the Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement. A copy of the Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
On December 6, 2004, the Company issued a press release announcing that it had entered into the Agreement. A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by reference.
The information contained or incorporated by reference in this Form 8-K contains forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. A number of factors, including but not limited to those set forth under the heading "Business Risks" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, and other factors described from time to time in the Company's other filings with the Securities and Exchange Commission, could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements. All forward-looking statements included in this Form 8-K are based on information available at the time of the report. The Company assumes no obligation to update any forward-looking statement.
(c) EXHIBITS.
Exhibit No. Description
2.1 Purchase and Sale of Equity Interests Agreement, by and
among SILLC Holdings LLC, Rocky Shoes & Boots, Inc., and
solely for the purposes of Section 5.13, Section 5.14,
Article VII, Article IX and Article X thereof, Strategic
Industries LLC, dated as of December 6, 2004.
99 Press Release, dated December 6, 2004, entitled "Rocky
Shoes & Boots Signs Definitive Agreement to Acquire EJ
Footwear Group"
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 8, 2004 By: /s/ James E. McDonald
--------------------------
James E. McDonald, Vice President
and Chief Financial Officer
|
Exhibit No. Description
2.1 Purchase and Sale of Equity Interests Agreement, by and
among SILLC Holdings LLC, Rocky Shoes & Boots, Inc., and
solely for the purposes of Section 5.13, Section 5.14,
Article VII, Article IX and Article X thereof, Strategic
Industries LLC, dated as of December 6, 2004.
99 Press Release, dated December 6, 2004, entitled "Rocky
Shoes & Boots Signs Definitive Agreement to Acquire EJ
Footwear Group"
|
solely for purposes of Section 5.13, Section 5.14, Article
VII, Article IX and Article X hereof,
STRATEGIC INDUSTRIES LLC
PAGE
ARTICLE I DEFINITIONS.................................................... 1
Section 1.1. Definitions................................................ 1
ARTICLE II PURCHASE AND SALE OF EQUITY INTERESTS; CLOSING;
RELATED MATTERS................................................ 11
Section 2.1. Purchase and Sale of the Equity Interests.................. 11
Section 2.2. Closing; Delivery of the Equity Interests.................. 11
Section 2.3. Purchase Consideration..................................... 11
Section 2.4. Payment of Purchase Consideration.......................... 12
Section 2.5. Legend for Stock Consideration............................. 12
Section 2.6. Escrow Account............................................. 12
Section 2.7. Working Capital Estimate................................... 12
Section 2.8. Closing Statement; Adjustment to Net Purchase Price........ 12
Section 2.9. Adjustment to Purchase Consideration....................... 15
Section 2.10. Retained Liabilities....................................... 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER....................... 15
Section 3.1. Organization............................................... 15
Section 3.2. Authority.................................................. 15
Section 3.3. Organization and Related Matters........................... 15
Section 3.4. Authority; No Violation; Consents.......................... 16
Section 3.5. Financial Statements....................................... 17
Section 3.6. Absence of Undisclosed Liabilities......................... 17
Section 3.7. Compliance with Applicable Laws............................ 17
Section 3.8. Assets and Real Property................................... 18
Section 3.9. Contracts.................................................. 19
Section 3.10. Intellectual Property...................................... 20
Section 3.11. Legal Proceedings.......................................... 21
Section 3.12. Tax Matters................................................ 21
Section 3.13. Insurance.................................................. 23
Section 3.14. Benefit Plans.............................................. 23
Section 3.15. Environmental Matters...................................... 25
Section 3.16. Employee Relations......................................... 26
Section 3.17. Bank Accounts and Letters of Credit........................ 26
Section 3.18. Absence of Changes......................................... 26
Section 3.19. No Brokers................................................. 28
Section 3.20. Compensation Arrangements; Officers and Directors.......... 28
Section 3.21. Customers and Suppliers.................................... 28
Section 3.22. Disclaimer of Other Representations and Warranties......... 28
Section 3.23. Inventory.................................................. 29
Section 3.24. Accounts Receivable........................................ 29
Section 3.25. Warranty and Other Claims.................................. 29
Section 3.26. Disclosure................................................. 29
Section 3.27. Investment Intent.......................................... 29
Section 3.28. Investigation.............................................. 29
Section 3.29. Employment Agreements...................................... 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................ 30
Section 4.1. Organization............................................... 30
Section 4.2. Authority.................................................. 30
Section 4.3. Organization and Related Matters........................... 30
Section 4.4. Authority; No Violation; Consents.......................... 31
Section 4.5. Compliance with Applicable Laws............................ 32
Section 4.6. Legal Proceedings.......................................... 32
Section 4.7. Absence of Changes......................................... 32
Section 4.8. Disclosure................................................. 32
Section 4.9. No Brokers................................................. 33
Section 4.10. Financing.................................................. 33
Section 4.11. Investment Intent.......................................... 33
Section 4.12. Investigation.............................................. 33
Section 4.13. SEC Reports................................................ 33
Section 4.14. Disclaimer of Other Representations and Warranties......... 34
Section 4.15. Taxes...................................................... 34
ARTICLE V COVENANTS...................................................... 34
Section 5.1. Conduct of Business of Companies and their Subsidiaries.... 34
Section 5.2. Conduct of Business of Buyer and its Subsidiaries.......... 35
Section 5.3. Governmental Consents and Filings.......................... 36
Section 5.4. Additional Agreements...................................... 36
Section 5.5. Expenses................................................... 37
Section 5.6. Access; Certain Communications............................. 37
Section 5.7. Confidentiality............................................ 38
Section 5.8. Financing.................................................. 38
Section 5.9. Tax Matters................................................ 38
Section 5.10. Employee Matters.......................................... 41
Section 5.11. Termination of Affiliate Relations......................... 43
Section 5.12. Directors and Officers; Other Relationships................ 43
Section 5.13. Non-Solicitation of Employees.............................. 43
Section 5.14. Covenant Not to Compete.................................... 43
Section 5.15. Return of Documents........................................ 44
Section 5.16. Non-Solicitation of Buyers................................. 44
Section 5.17. Notification of Breach..................................... 44
Section 5.18. Audit...................................................... 45
Section 5.19. Monthly Financial Information Reporting.................... 45
Section 5.20. Debt Commitment Letter..................................... 45
Section 5.21. Payments................................................... 45
Section 5.22. Actions Subsequent to Closing.............................. 45
ARTICLE VI CONDITIONS TO CLOSING.......................................... 46
Section 6.1. Conditions to Buyer's Obligations.......................... 46
Section 6.2. Conditions to Seller's Obligations......................... 47
Section 6.3. Mutual Conditions.......................................... 48
ARTICLE VII SURVIVAL AND INDEMNIFICATION................................... 49
Section 7.1. Survival................................................... 49
Section 7.2. Indemnification............................................ 49
Section 7.3. Method of Asserting Claims, Etc............................ 49
Section 7.4. Indemnification Amounts.................................... 50
Section 7.5. Losses Net of Insurance, Etc............................... 51
Section 7.6. Satisfaction of Claims..................................... 52
Section 7.7. No Set-Off................................................. 52
Section 7.8. Losses for Environmental Liabilities....................... 52
Section 7.9. Sole Remedy................................................ 52
ARTICLE VIII TERMINATION.................................................... 53
Section 8.1. Termination................................................ 53
Section 8.2. Effect of Termination...................................... 54
ARTICLE IX PARENT GUARANTY................................................ 54
Section 9.1. Representations and Warranties of Parent.................. 54
Section 9.2. Guaranty.................................................. 55
ARTICLE X MISCELLANEOUS................................................. 56
Section 10.1. Amendments; Extension; Waiver............................. 56
Section 10.2. Entire Agreement.......................................... 56
Section 10.3. Interpretation............................................ 56
Section 10.4. Severability.............................................. 56
Section 10.5. Notices................................................... 56
Section 10.6. Binding Effect; Persons Benefiting; No Assignment......... 57
Section 10.7. Supplemental Disclosure................................... 57
Section 10.8. Counterparts.............................................. 58
Section 10.9. Governing Law............................................. 58
Section 10.10. Mutual Drafting........................................... 58
Section 10.11. Certain Understandings.................................... 58
|
Exhibits
Exhibit A -- Escrow Agreement
Exhibit B -- Debt Commitment Letter
Exhibit C -- Termination Agreement
Exhibit D -- Opinion of Dechert LLP
Exhibit E -- Registration Rights Agreement
Exhibit F -- Opinion of Porter, Wright, Morris & Arthur LLP
Exhibit G -- Beacon Letter
Schedule 1.1 Definitions - Knowledge of Seller
Schedule 1.1 Definitions - Permitted Encumbrances
Schedule 3.3 Organization and Related Matters
Schedule 3.4 Authority; No Violation; Consents - Third Party Consents
Schedule 3.4 Authority; No Violation; Consents - Governmental Consents
Schedule 3.5 Financial Statements
Schedule 3.6 Absence of Undisclosed Liabilities
Schedule 3.7 Compliance with Applicable Laws
Schedule 3.8 Real Property
Schedule 3.9 Contracts
Schedule 3.10(a) Intellectual Property
Schedule 3.10(b) Intellectual Property
Schedule 3.10(c) Infringement
Schedule 3.11 Legal Proceedings
Schedule 3.12 Tax Matters
Schedule 3.13 Insurance
Schedule 3.14 Benefit Plans
Schedule 3.15 Environmental Matters
Schedule 3.16 Employee Relations
Schedule 3.17 Bank Accounts and Letters of Credit
Schedule 3.18 Absence of Changes
Schedule 3.20 Compensation Arrangements; Officers and Directors
Schedule 3.21 Customers and Suppliers
Schedule 3.23 Inventory
Schedule 3.24 Accounts Receivable
Schedule 3.25 Warranty and Other Claims
Schedule 5.1 Conduct of Business of Companies and their Subsidiaries
Schedule 5.11 Termination of Affiliate Relations
Schedule 5.12 Directors and Officers; Other Relationships
Schedule 5.14 Restricted Territory
Schedule 6.1(l)(i) Conditions to Buyer's Obligations-Third Party and
Governmental Consents
Schedule 6.1(l)(ii) Conditions to Buyer's Obligations-Third Party and
Governmental Consents
Schedule 6.1(l)(iii) Conditions to Buyer's Obligations-Third Party and
Governmental Consents
Schedule 9.1(e) Parent's Balance Sheet
|
Buyer Disclosure Schedules
Schedule 1.1 Definitions - Knowledge of Buyer
PURCHASE AND SALE OF EQUITY INTERESTS AGREEMENT, dated as of December 6, 2004 (this "Agreement"), by and among ROCKY SHOES AND BOOTS, INC., an Ohio corporation ("Buyer") and SILLC HOLDINGS LLC, a Delaware limited liability company ("Seller"), and, solely for purposes of Section 5.13, Section 5.14, Article VII, Article IX and Article X hereof, STRATEGIC INDUSTRIES, LLC ("Parent").
WHEREAS, Seller owns beneficially and of record all of the outstanding limited liability interests (the "Equity Interests") of EJ Footwear LLC, a Delaware limited liability company ("EJ Footwear"), Georgia Boot LLC, a Delaware limited liability company ("Georgia Boot"), and HM Lehigh Safety Shoe Co. LLC, a Delaware limited liability company ("Lehigh Safety," and collectively with EJ Footwear and Georgia Boot, the "Companies");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase the Equity Interests on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Buyer and Seller desire to make certain representations, covenants and agreements in connection with the transactions contemplated by this Agreement; and
WHEREAS, as an inducement to Buyer to execute and deliver this Agreement, Parent desires to guarantee the payment when due of certain obligations and liabilities of Seller as provided herein.
NOW, THEREFORE, in consideration of and premised upon the various representations, warranties, covenants and other agreements and undertakings of the parties contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:
Section 1.1 Definitions.
(a) For all purposes in this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1:
"Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Equity Interests, by Contract or otherwise; and the terms "controlling" and "controlled" have correlative meanings to the foregoing. For purposes of the definition of "control," a general partner or managing member of a Person shall always be considered to control such Person.
"Aggregate Cash Consideration" means the cash amount equal to the Cash Consideration plus (x) the amount, if any, by which Estimated Working Capital exceeds the Reference Amount, minus (y) the amount, if any, by which the Reference Amount exceeds Estimated Working Capital.
"Applicable Law" means any statute, law, ordinance, rule, public administrative interpretation, published policy statement, regulation, order, writ, injunction, directive, judgment, decree or other requirement of any Governmental Authority applicable to the Person or Persons referenced.
"Business Day" means any day other than a Saturday, Sunday or a day on which the New York Stock Exchange is closed for regular business.
"Buyer 401(k) Plan" means the Rocky Shoes & Boots Non-Union
Employees 401(k) Plan, a defined contribution pension plan which is qualified
under
Section 401 (a) of the Code and meets the requirements of Section 401(k) of
the Code and the regulations thereunder.
"Buyer Disclosure Schedule" means the disclosure schedule previously delivered by Buyer to Seller.
"Buyer Option Plans" means the Buyer's 1992 Stock Option Plan, Second Amended and Restated 1995 Stock Option Plan, and 2004 Stock Incentive Plan, in each case as amended and in effect on the date hereof.
"Buyer Rights Agreement" means the Rights Agreement, dated as of November 5, 1997, by and between Buyer and The Fifth Third Bank, as Rights Agent.
"Cash Consideration" means that component of the Purchase Consideration consisting of Eighty Seven Million Seven Hundred Thousand Dollars ($87,700,000).
"Closing" means the completion of the transactions contemplated by this Agreement.
"Closing Date" means the date of the Closing.
"COBRA" means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies Disclosure Schedule" means the disclosure schedule previously delivered by Seller to Buyer.
"Contract" means with respect to any Person, any understanding or arrangement to the extent it is binding on such Person, and any agreement, indenture, debt instrument, contract, guarantee, loan, note, mortgage, license, lease or other binding commitment, oral or written, to which such Person is a party or by which it is bound or to which any of its assets or properties is subject.
"Credit Agreements" means: (i) the Loan and Security Agreement dated as of March 24, 2000 (as amended to date) among the financial institutions named therein, as lenders, Bank of America, N.A., as agent, the borrowers named therein and SILLC Holdings, LLC, as guarantor, and (ii) the First Amended and Restated Indenture dated as of August 18, 2000 (as amended and supplemented to date) by and between Strategic Finance Company, as agent and Wells Fargo Bank Minnesota, National Association, as trustee.
"Debt" means all obligations of the Companies and their Subsidiaries for borrowed money evidenced by notes, bonds, debentures or similar instruments and all accrued but unpaid interest (or interest equivalent) to the date of determination, and all prepayment premiums or penalties, related to any items of Debt of the type referred to herein; provided, however, that Debt shall not include any Debt incurred in connection with the Financing.
"Dollar" or "Dollars" or "$" means United States dollar currency in all cases, unless otherwise specified.
"Employee Benefit Plan" means each "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) and each other material employee benefit plan, program, contract, policy or arrangement, whether or not written and whether or not covered by ERISA, that is or was maintained, sponsored, administered or contributed to by any Company or any Subsidiaries or, where specified, Seller, any ERISA Affiliate of Seller, and any Company or any Subsidiary.
"Encumbrance" means any lien, pledge, security interest, charge, leases, levies, options, rights of first refusal, hypothecation, encumbrance, mortgage or adverse claims of any kind, except for restrictions constituting limits on transferability pursuant to applicable Securities Laws.
"Environmental Laws" means Applicable Laws relating to contamination of the environment (including ambient air, surface water, ground water, stream, river sediments, soil, land surface or subsurface strata) or the manufacture, distribution, treatment, storage, handling, disposal or management of Hazardous Substances including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act ("CERCLA"); the Resource Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution Control Act, as amended; the Federal Clean Air Act, as amended; the Toxic Substances Control Act, as amended; the Safe Drinking Water Act, as amended; the Pollution Control Act of 1990, as amended; and comparable state and local laws, in all of the foregoing cases, as in effect on the date hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" means any entity that is considered a single employer with any Company under Section 414 of the Code.
"Escrow Letter of Credit" means an Irrevocable Letter of Credit, dated as of the Closing Date, issued by Bank of America, NA in favor of the Escrow Agent in the initial face amount of $2,000,000.
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Exclusivity Agreement" means that letter agreement dated November 8, 2004, by and between Buyer and Seller.
"Final Closing Statement" shall mean (x) the Closing Statement if no Notice of Disagreement with respect thereto is duly and timely delivered pursuant to Section 2.8(c) or (y) if such a Notice of Disagreement is so delivered, the Closing Statement as agreed by Seller and Buyer pursuant to Section 2.8 or (z) if such Notice of Disagreement is so delivered and in the absence of such agreement, the Final Closing Date Statement as prepared by the Arbiter pursuant to Section 2.8.
"Final Working Capital" shall mean the Closing Date Working Capital as shown in the Final Closing Statement.
"Financial Releases" means the releases necessary to release the Companies and their Subsidiaries from the Encumbrances created as a result of any Debt, including the Credit Agreements.
"Financing Commitment Delivery Date" shall mean December 15, 2004.
"GAAP" means generally accepted accounting principles as used in the United States of America.
"GAAP Consistently Applied" means GAAP (A) using the same accounting methods, policies, practices, and procedures, with consistent classification, judgments, and estimation methodology, as were used by the Companies in preparing the Financial Information and (B) not taking into account any changes in circumstances or events occurring after the closing of business on the Closing Date.
"Governmental Authority" means any nation, state, territory, province, county, city or other unit or subdivision thereof or any entity, authority, agency, department, board, commission, instrumentality, court or other judicial body authorized on behalf of any of the foregoing to exercise legislative, judicial, regulatory or administrative functions of or pertaining to government, and any governmental or non-governmental self-regulatory organization.
"Hazardous Substances" shall mean any industrial, hazardous, toxic or polluting substance, chemicals, contaminants, material or waste, including petroleum or any derivative or by-products thereof, asbestos and asbestos-containing materials, radioactive materials, lead based paint, radon, urea formaldehyde, and polychlorinated biphenyls that are regulated by or for which standards of conduct are prescribed under or in included in the definition of "hazardous substances," "hazardous materials," "hazardous constituents," "toxic substances," "pollutants," "contaminants," or any similar denomination intended to classify or regulate carcinogenicity, ignitability, corrosivity or activity under Environmental Laws.
"Indemnified Party" shall mean the party entitled to indemnification pursuant to Article VII.
"Indemnifying Party" shall mean the party required to indemnify the other party pursuant to Article VII.
"IRS" means the Internal Revenue Service of the United States.
"Intellectual Property" means patents and patent applications; trademarks, service marks, trade dress, logos, trade names, Internet domain names, designs, slogans, tag lines and all registrations and applications for registrations of the foregoing; copyrights and all registrations and applications for registration of the foregoing; computer software (including source and object codes), computer programs, computer data bases, proprietary technology, trade secrets and confidential business information (including ideas, formulae, algorithms, models, methodologies, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, designs, plans, proposals and technical data, financial, marketing and business data and pricing and cost information).
"Inventory" means all inventories of raw materials, works-in-process, finished goods, products under research and development which are held at the locations of the Companies or their Subsidiaries, or are in transit from suppliers to the Companies or their Subsidiaries or in transit from the Companies or their Subsidiaries to customers, or located at a location of a customer by consignment, in each case, which are used or held for use by the Companies or their Subsidiaries in the conduct of their respective businesses.
"Knowledge" means, with respect to a natural person, the actual knowledge of a particular fact or other matter by that person, and (A) with respect to Seller, the actual knowledge of a particular fact or other matter by any of the individuals set forth on Section 1.1 of the Companies Disclosure Schedule; provided, whenever Seller makes any representation, warranty or other statement to its Knowledge, Seller will be deemed to have made due inquiry into the subject matter of such representation, warranty or other statement and (B) with respect to the Buyer, the actual knowledge of a particular fact or other matter by any of the individuals set forth on Section 1.1 of the Buyer Disclosure Schedule; provided, whenever Buyer makes any representation, warranty or other statement to its Knowledge, Buyer will be deemed to have made due inquiry into the subject matter of such representation, warranty or other statement.
"Material Adverse Effect" means, with respect to any Person, any change, effect, event, occurrence, state of facts or development that is materially adverse to the business, financial condition or results of operations of such Person and its Subsidiaries (or, in the case of any Company or any Subsidiary of the Companies, the Companies and their Subsidiaries) taken together as a whole, or the ability of such Person to consummate the transactions contemplated hereby on or before the Drop Dead Date, provided, however, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (a) any adverse change, effect, event, occurrence, state of facts or development to the extent attributable to, resulting from or relating to (i) any adverse conditions affecting the footwear industries generally, declines in any securities market or segment thereof, general national, international or regional economic or financial conditions, or any outbreaks of hostilities or terrorism or escalation thereof or other calamity or crisis; (ii) compliance with the terms of, or the taking of any action required by or consented to by the other party to this Agreement, pursuant to, this Agreement; (iii) seasonal fluctuations in the business of such Person; or (iv) actions required to be taken under Applicable Law, or Contracts binding on such Person.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.
"Permitted Encumbrances" means with regards to any Person the following encumbrances: (i) exceptions, objections, agreements, claims, defects, easements, rights of way, encroachments, encumbrances, covenants, reservations, restrictions, conditions, leases, tenancies and the like of record, (ii) zoning, building, subdivision and other statutory or regulatory conditions and restrictions, (iii) liens for Taxes and assessments not yet due and payable, and for which reserves are reflected on the books and records of such Person, (iv) Encumbrances disclosed on Section 1.1 of the Companies Disclosure Schedule (in the case of the Companies and their Subsidiaries) and (v) other exceptions, restrictions or limitations which do not materially restrict or impair the use of such property for the business of such Person.
"Person" means any natural person, corporation, company, limited liability company, partnership (limited or general), joint venture, association, trust, unincorporated organization or other entity.
"Reference Amount" shall mean $53,100,000.
"Retained Liabilities" means any indebtedness, obligations, and other liabilities of Seller, any Affiliates of Seller, the Companies or their Subsidiaries of any kind, character or description whatsoever with respect to:
(a) all liabilities associated with the Strategic Industries, LLC Group Pension Plan maintained by Seller (the "Seller's Pension Plan"), including without limitation, any claim with respect to the accrued benefits under the Seller's Pension Plan;
(b) except as expressly assumed by Buyer pursuant to Section 5.10(c) hereto, all liabilities associated with Seller's 401(k) Plan, including without limitation, any claim with respect to the accrued benefits under Seller's 401(k) Plan;
(c) all liabilities for any deferred compensation, phantom unit plans, or supplemental employee retirement income, including any requirements pursuant to any individual agreements;
(d) all liabilities associated with the employment and severance from employment of Gerald M. Cohn, including but not limited to, any executive deferred compensation, severance or bonus payment; and
(e) all liabilities to the extent arising from the conduct of the business of any of the Companies or any of their Subsidiaries, or any predecessor in interest thereto, on or before the Closing Date, arising from or otherwise relating to Environmental Laws or Environmental Permits; provided, Seller shall be entitled to any insurance, indemnity or other third party recoveries related to any actions undertaken to comply with Environmental Laws or Environmental Permits, whether or not such recoveries are sought before or after the Closing Date, so long as such insurance, indemnity or other third party recoveries relate to a Retained Liability hereunder.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means: (a) capital stock, partnership interests, membership interests, beneficial interests or any other equity or ownership interests in the Person referenced; (b) any instruments convertible into or exchangeable for, or whose value is determined by reference to, any such interests; or (c) any other rights, warrants or options to acquire or dispose of any of the foregoing.
"Securities Act" means the United States Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act; the Exchange Act; the published rules and regulations of the SEC promulgated thereunder; the securities or "blue sky" laws of any state or territory of the United States and the comparable laws, rules and regulations in effect in any other country.
"Seller 401(k) Plan" means the Strategic Industries, LLC Retirement Savings and Investment Plan.
"Stock Consideration" means 484,261 shares of common stock of Buyer ("Buyer Common Stock") (plus any additional shares as may be issued upon any stock split, stock dividend or recapitalization effected by Buyer after the date hereof with respect to the Stock Consideration).
"Subsidiary," and "Subsidiaries" of any Person means any entity or entities of which more than 50% of the effective voting power or Securities of such entity or entities is directly or indirectly owned by such Person.
"Tax" or "Taxes" means (i) any taxes, assessments, fees and other governmental charges imposed by any Governmental Authority, including without limitation income, profits, gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value added, turnover, sales, use, property, personal property (tangible and intangible), environmental, stamp, leasing, lease, user, excise, duty, franchise, capital, capital stock, transfer, registration, license, withholding, social security (or similar), unemployment, disability, payroll, employment, fuel, excess profits, occupational, premium, windfall profit, severance, estimated, or other charge of any kind whatsoever, (ii) any liability for payment of any amounts of the type described in (i) as a result of being a member of an affiliated, combined, consolidated, or unitary group for any period prior to the Closing, and (iii) any interest, penalty, or addition imposed in connection with any of the amounts described in (i) or (ii).
"Working Capital" means an amount equal to all "current assets" minus all "current liabilities," in each case as such "current assets" and "current liabilities" are accrued and reflected on the books and records of the Companies in accordance with GAAP Consistently Applied; provided, that (A) "current assets" shall not include (i) cash and cash equivalents of the Companies and their Subsidiaries, (ii) short-term deferred Taxes, or (iii) Inventory and Accounts Receivable in respect of Hummer-branded footwear, and (B) "current liabilities" shall not include (i) Debt or interest accrued in respect of Debt, (ii) income Taxes payable, (iii) accrued management fees payable to Seller, (iv) Retained Liabilities, (v) any out-of-pocket liabilities incurred in respect of the Financing, (vi) any accounts payable for which checks are outstanding as of the Closing and (vii) accrued professional fees relating to the transactions contemplated by this Agreement. Notwithstanding the foregoing, all Tax assets and Tax liabilities shall be disregarded for purposes of determining "Working Capital."
The following terms shall have the meaning specified on the indicated page of this Agreement:
Section 2.1. Purchase and Sale of the Equity Interests. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
shall sell, convey, transfer and deliver to Buyer, and Buyer shall purchase,
acquire and accept from Seller, all right, title and interest in and to the
Equity Interests, free and clear of any Encumbrances. The consideration to
be paid by Buyer for the Equity Interests is set forth in Section 2.3 hereof,
subject to the adjustments set forth in Section 2.8.
Section 2.2. Closing; Delivery of the Equity Interests. The Closing shall
take place (a) at the offices of Dechert LLP, 4000 Bell Atlantic Tower, 1717
Arch Street, Philadelphia, PA, at 10:00 a.m. on the second Business Day following
the date on which the last of the conditions set forth in Article VI (other
than conditions in respect of documents or agreements to be delivered at Closing)
are fulfilled or waived in accordance with this Agreement or (b) at such other
place, time or date as Buyer and Seller may agree. At the Closing, Seller
will deliver to Buyer one or more certificates representing all of the Equity
Interests, duly endorsed in blank or accompanied by instruments of transfer
duly executed in blank, in appropriate form and sufficient to transfer the
Equity Interests to Buyer, free and clear of any Encumbrances, other than
those Encumbrances created as a result of the transactions contemplated hereby.
Section 2.3. Purchase Consideration. The aggregate amount payable by Buyer
to Seller in respect of the Equity Interests (the "Purchase Consideration")
shall consist of (i) cash in an amount equal to the Cash Consideration, subject
to adjustment as contemplated by Section 2.8 hereof, and (ii) the Stock Consideration.
Section 2.4. Payment of Purchase Consideration. In consideration of the sale
of the Equity Interests to Buyer, the Purchase Consideration will be paid at
the Closing as follows:
(i) the Aggregate Cash Consideration shall be paid to Seller by wire transfer
of immediately available funds to an account designated in writing by Seller
to Buyer prior to the Closing; and
(ii) the Stock Consideration shall be delivered to Seller.
Section 2.5. Legend for Stock Consideration. The certificate(s) evidencing
the shares of Buyer Common Stock delivered to Seller as Stock Consideration
shall bear the following legend in conspicuous type:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION WITHOUT AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR QUALIFICATION
IS NOT REQUIRED.
Section 2.6. Escrow Account.
(a) On or prior to the Closing Date, Buyer and Seller shall establish an
escrow (the "Escrow Account") with PNC Bank, N.A. (the "Escrow
Agent"), by the execution and delivery of an Escrow Agreement substantially
in the form attached as Exhibit A hereto (the "Escrow Agreement").
(b) On or prior to Closing, Seller shall deliver to the Escrow Agent the
Escrow Letter of Credit. The Escrow Letter of Credit shall, on the terms set
forth in the Escrow Agreement, secure the performance of Seller's indemnity
obligations under Section 7.2(a) hereof, including but not limited to, payments
or other funding made with respect to the Retained Liabilities, and the Escrow
Agent shall be entitled to draw on the Escrow Letter of Credit to fund the
Escrow Account in accordance with the terms and subject to the conditions
set forth in the Escrow Agreement.
Section 2.7. Working Capital Estimate. No less than three (3) days prior
to the anticipated Closing Date, Seller shall deliver to Buyer a good faith
estimate of Working Capital as of the close of business on the Closing Date
("Estimated Working Capital") together with a statement of the calculation
of the Estimated Working Capital.
Section 2.8. Closing Statement; Adjustment to Net Purchase Price.
(a) Within 45 days after the Closing Date, Buyer shall cause to be prepared
and shall deliver to Seller a statement (the "Closing Statement"),
which shall include (i) a combined balance sheet (the "Closing Date Balance
Sheet") of the Companies and their Subsidiaries as of the Closing Date
prepared in accordance with GAAP Consistently Applied and (ii) a statement
based on such Closing Date Balance Sheet setting forth in reasonable detail
a calculation of the Working Capital as of the close of business on the Closing
Date ("Closing Date Working Capital").
(b) Each of Seller and Buyer agrees that it will, and it will use reasonable
efforts to cause its respective agents and representatives to, cooperate and
assist in the preparation of the Closing Statement and the calculation of
the Closing Date Working Capital and in the conduct of the reviews and dispute
resolution process referred to in this Section 2.8. Prior to the delivery
of the Closing Statement, Buyer shall afford Seller and its representatives
the ability to observe the preparation of the Closing Statement and shall
make Buyer's financial officers reasonably available to answer any questions
regarding such calculations and preparation of the Closing Statement.
(c) During the 30-day period following Seller's receipt of the Closing Statement,
Seller and its independent accountants shall at Seller's expense be permitted
to review, and Buyer shall make available to Seller, the supporting schedules,
analyses, working papers and other documentation of Buyer relating to the
Closing Statement and to ask questions, receive answers and request such other
data and information from each of them as shall be reasonable under the circumstances.
The Closing Statement shall become final and binding upon the parties on the
Business Day following the 30th day following delivery thereof (and the Working
Capital amounts reflected therein shall be deemed to be the Closing Date Working
Capital, unless Seller gives written notice of its disagreement with the Closing
Statement ("Notice of Disagreement") to Buyer prior to such date).
Any Notice of Disagreement shall specify in reasonable detail the nature of
any disagreement so asserted and only include disagreements based upon Closing
Date Working Capital not being calculated in accordance with this Section
2.8. Seller shall make available all supporting schedules, analyses, working
papers and other documentation with respect to the disputed items in the Notice
of Disagreement. Seller shall be deemed to have agreed with all items and
amounts included in the calculation of Closing Date Working Capital delivered
pursuant to Section 2.8(a) except such items that are specifically disputed
in the Notice of Disagreement.
During the 15-day period following the delivery of a Notice of Disagreement
that complies with the preceding paragraph or such longer period as Seller
and Buyer shall mutually agree, Seller and Buyer shall seek in good faith
to resolve in writing any differences that they may have with respect to the
matters specified in the Notice of Disagreement, and in the event Seller and
Buyer are able to reach such resolution then the amount so agreed by them
in writing shall be deemed to be the Closing Date Working Capital. If, at
the end of such 15-day period (or such longer period as mutually agreed between
Seller and Buyer), Seller and Buyer have not so resolved such differences,
Seller and Buyer shall submit the dispute for resolution to an independent
accounting firm (the "Arbiter") for review and resolution of any
and all matters which remain in dispute and which were properly included in
the Notice of Disagreement in accordance with this Section 2.8. The Arbiter
shall be a mutually acceptable independent public accounting firm of national
repute agreed upon by Seller and Buyer in writing; provided, that in the event
the parties are not able to mutually agree on an accounting firm, the Arbiter
shall be KPMG LLP. Seller and Buyer shall use reasonable efforts to cause
the Arbiter to render a decision resolving the matters in dispute within 30
days following the submission of such matters to the Arbiter, or such longer
period as Seller and Buyer shall mutually agree. Seller and Buyer agree that
the determination of the Arbiter shall be final and binding upon the parties
and that judgment may be entered upon the determination of the Arbiter in
any court having jurisdiction over the party against which such determination
is to be enforced; provided, that the scope of the disputes to be resolved
by the Arbiter is limited to only such items included in the Closing Statement
that Seller has disputed in the Notice of Disagreement based upon Closing
Date Working Capital not being calculated in accordance with this Section
2.8. The Arbiter shall determine, based solely on presentations by Buyer and
Seller and their respective representatives, and not by independent review,
only those issues in dispute specifically set forth on the Notice of Disagreement
and shall prepare the Final Closing Statement and render a written report
as to the dispute and the resulting calculation of Closing Date Working Capital,
which shall be conclusive and binding upon the parties. In resolving any disputed
item, the Arbiter: (i) shall be bound by the principles set forth in Section
2.8 hereof, (d) Upon determination of the Final Working Capital, the Cash Consideration
component of the Purchase Consideration shall be further adjusted as follows:
(i) In the event Final Working Capital exceeds the Estimated Working Capital,
the aggregate Cash Consideration shall be increased dollar for dollar by the
amount of such difference.
(ii) In the event the Final Working Capital is less than the Estimated Working
Capital, the aggregate Cash Consideration shall be decreased dollar for dollar
by the amount of such difference.
(e) The net adjustment to the Cash Consideration component of the Purchase
Consideration pursuant to Section 2.8(d) above, whether positive or negative,
is the "Final Adjustment Amount." Within 10 business days after
the Closing Statement becomes final and binding upon the parties (i) if the
net effect pursuant to this Section 2.8 is an increase in the Cash Consideration
component of the Purchase Consideration, Buyer shall make a cash payment to
Seller to an account designated in writing by Seller, by wire transfer of
immediately available funds, of the amount of such Final Adjustment Amount
and (ii) if the net effect pursuant hereto is a decrease in the Cash Consideration
component of the Purchase Consideration, Seller shall make a cash payment
to Buyer to an account designated in writing by Buyer, by wire transfer of
immediately available funds, of the amount of such Final Adjustment Amount,
in either case under clause (i) or (ii) of this Section 2.8(e), together with
interest thereon from the Closing Date to the date of actual payment at a
variable rate equal to the prime rate (as reported in the Wall Street Journal
"Money Rates") from and including the Closing Date to, but not including,
the date of payment.
Section 2.9. Adjustment to Purchase Consideration. Amounts paid or payable
pursuant to Section 2.8 shall be treated by the parties for Tax purposes as
adjustments to the Purchase Consideration.
Section 2.10. Retained Liabilities. Except by operation of law, Buyer shall
not be responsible by virtue of this Agreement or the transactions contemplated
hereby for any Retained Liabilities. Notwithstanding the immediately preceding
sentence, Seller shall be responsible for promptly paying or discharging such
Retained Liabilities on behalf of Buyer in a timely manner when due and shall
make adequate provision for all Retained Liabilities. Seller shall have the
right to contest, in good faith, any such claim for liability asserted in
respect thereof by any Person.
Seller represents and warrants to Buyer as follows:
Section 3.1. Organization. Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware. Seller has
the power and authority to carry on its business as it is now conducted and
to own, lease and operate all of its properties and assets, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on the Seller.
Section 3.2. Authority. Seller has all requisite limited liability company
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized by all necessary limited liability
company action on the part of Seller and has been duly and validly executed
and delivered by Seller. Assuming the due authorization, execution and delivery
of this Agreement by Buyer, this Agreement constitutes the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
its terms.
Section 3.3. Organization and Related Matters.
(a) Each of the Companies and their Subsidiaries is a limited liability
company or corporation duly organized, validly existing and, with respect
to jurisdictions in which such concept is recognized, and is in good standing
under the laws of its respective jurisdiction of organization. Copies of the
organizational documents of each of the Companies and their Subsidiaries,
with all amendments thereto to the date hereof, have been furnished to Buyer
or its representatives, and such copies are accurate and complete as of the
date hereof. Each of the Companies and their Subsidiaries has the requisite
power and authority to carry on its business as it is now being conducted
and to own, lease and operate all of its properties and assets. Each of the
Companies and their Subsidiaries is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned, leased or operated
by it makes such qualification or licensing necessary, except where the failure
to be so licensed or qualified would not have a Material Adverse Effect on
the Companies.
(b) All of the Equity Interests and the Securities of the Companies' Subsidiaries
are (i) duly authorized, validly issued, fully paid and nonassessable, (ii)
not subject to preemptive rights, (iii) not issued in violation of any preemptive
rights to which any Company or its Subsidiaries is subject, (iv) issued and
sold in compliance with Securities Laws, and (v) owned of record and beneficially
as set forth on Section 3.3 of the Companies Disclosure Schedule, and those
Equity Interests described on Section 3.3 of the Companies Disclosure Schedule
owned by Seller, a Company or a Company's Subsidiary, are free and clear of
any Encumbrances except as described on Section 3.3 of the Companies Disclosure
Schedule. None of the Companies or any of their Subsidiaries owns any Securities
(other than Securities issued by their Subsidiaries).
(c) Except as set forth on Section 3.3 of the Companies Disclosure Schedule,
there is no (i) outstanding option, subscription, "phantom" stock
right, put, call, commitment, preemptive right, warrant, conversion rights,
or agreement that is binding on any of the Companies or any of their Subsidiaries
for the purchase or acquisition from any of the Companies or any of their
Subsidiaries of any Equity Interests of such Company or such Subsidiary, or
(ii) contract, commitment or agreement that is binding on any of the Companies
or any of their Subsidiaries relating to the issuance of Equity Interests
of any of the Companies or any of their Subsidiaries, convertible or exchangeable
securities, or any subscriptions, options, warrants, or similar rights of
the any of the Companies or any of their Subsidiaries or granting to any Person
any right to participate in the equity or income of the any of the Companies
or any of their Subsidiaries or to participate in or direct the election of
any managing member of any of the Companies or any of their Subsidiaries or
the manner in which the Equity Interests of any of the Companies or any of
their Subsidiaries are voted.
Section 3.4. Authority; No Violation; Consents.
(a) Neither the execution and delivery of this Agreement by Seller, nor
the consummation of the transactions contemplated hereby and the performance
of this Agreement by Seller, assuming that the Governmental Consents have
been obtained prior to the Closing, will (i) (x) violate, conflict with, or
result in a breach of, or constitute a default (or in the event that, with
notice or lapse of time or both, would constitute a default) under, any provision
of the organizational documents or operating agreement of Seller or the limited
liability company agreement or other organizational documents of any of the
Companies or any of their Subsidiaries or (y) require consent under, violate,
conflict with, or result in a breach, in any material respect, of any provision
of, or constitute a default (or an event that, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of,
or accelerate or modify the performance or payment required by, or result
in a right of termination, acceleration or modification under, or result in
the creation of any Encumbrance upon any of the properties or assets of Seller,
any of the Companies or any of their Subsidiaries under any of the terms,
conditions or provisions of any Contract to which Seller, any of the Companies
or any of their Subsidiaries is a party or to which any of the Companies'
or any of their Subsidiaries' properties or assets may be subject, except
as set forth on Section 3.4 of the Companies Disclosure Schedule, or (ii)
violate any Applicable Law or conflict with any of the Seller's, Companies'
or their Subsidiaries' respective right to fully own and use its properties
or assets, except, with respect to clause (ii), for such violations which
would not have a Material Adverse Effect on Seller or the Companies.
(b) Except as set forth on Section 3.4 of the Companies Disclosure Schedule
(the "Governmental Consents"), no material notice to, filing with,
waiver from, authorization of, exemption by, or consent or approval of, registration,
declaration or filing with, or termination or expiration of waiting period
with respect to, any Governmental Authority is necessary for the sale of the
Equity Interests contemplated hereby.
Section 3.5. Financial Statements. Section 3.5 of the Companies Disclosure
Schedule sets forth the following financial statements of the Companies: (i)
the unaudited, combined balance sheet (the "Unaudited Balance Sheet"),
income statement, statements of cash flows and owner's equity of the Companies
and their Subsidiaries as of September 30, 2004 (the "Financial Information").
The Financial Information was derived from the internal books and records
of the Companies and has been prepared in a manner consistent with GAAP, and
fairly presents, in all material respects, the financial position of the Companies
and their Subsidiaries as of such dates and the results of operations of the
Companies and their Subsidiaries for the periods covered thereby, in each
case on a combined basis, and subject to the absence of footnotes and other
presentation items. The Financial Information was prepared solely for the
purpose of this Agreement and for the internal management purposes of the
Companies. None of the Companies was conducted on a stand-alone basis as a
separate entity during the periods indicated in the Financial Information
and the allocations and estimates included in the Financial Information are
not necessarily indicative of the costs that would have resulted if each of
the Companies had been operated and conducted on a stand-alone basis as a
separate entity during such periods.
Section 3.6. Absence of Undisclosed Liabilities. There exist no liabilities,
losses or obligations of the Companies or their Subsidiaries of any kind,
whether accrued, absolute, contingent, known or unknown, fixed, liquidated,
unliquidated, due or to become due, threatened or otherwise, which would be
required to be reflected, reserved for or disclosed under GAAP on a balance
sheet except (i) as and to the extent disclosed, reflected or reserved against
in the Financial Information, (ii) as disclosed on Section 3.6 of the Companies
Disclosure Schedule, or (iii) for liabilities and obligations incurred in
the ordinary course of business consistent with past practice since September
30, 2004.
Section 3.7. Compliance with Applicable Laws. Except as set forth on Section
3.7 of the Companies Disclosure Schedule, the Companies and each of their
Subsidiaries is duly complying and has duly complied since March 24, 2000,
with Applicable Law relating to their respective business, operations and
properties, except where the failure to be in compliance would not be expected
to have a Material Adverse Effect on the Companies or where such noncompliance
has been cured and is reasonably expected to have no material impact on the
future business or operations of the Companies and their Subsidiaries taken
as a whole. Except as set forth on Section 3.7 of the Companies Disclosure
Schedule, to Seller's Knowledge, there exists no present failure and no failure
since March 24, 2000 to comply, in any material respect, with Applicable Laws,
including the improper acceptance of corporate funds and the making of unlawful
payments or bribes to any Governmental Authority to obtain special treatment
by any Person acting on behalf of a Company or one of the Companies' Subsidiaries,
except where such noncompliance would not result in a Material Adverse Effect
on the Companies. Except as set forth on Section 3.7 of the Companies Disclosure
Schedule, all governmental approvals, permits and licenses required to conduct
the business of the Companies and each of their Subsidiaries have been duly
and lawfully obtained and are in full force and effect and are being complied
with in all respects, except for such failures to obtain, maintain or comply
with approvals, permits and licenses which would not have a Material Adverse
Effect on the Companies. No notice, citation, summons or order has been issued,
no complaint has been filed and served, no penalty has been assessed and notice
thereof given, and no investigation or review is pending or, to the Knowledge
of Seller, threatened, by a Governmental Authority with respect to any alleged
(i) violation by any of the Companies or any of their Subsidiaries of any
Applicable Law, or (ii) failure by any of the Companies or any of their Subsidiaries
to have any permit, license, or authorization required in connection with
the conduct of or otherwise applicable to the business conducted by each,
except where such violation or failure would not have a Material Adverse Effect
on the Companies. Each of the Companies and their Subsidiaries has duly obtained
all permits, concessions, grants, franchises, licenses and other authorizations
from Governmental Authorities, consents and approvals for the conduct of its
business, except where the failure to have the same would not result in a
Material Adverse Effect on the Companies.
Section 3.8. Assets and Real Property.
(a) Except as set forth on Section 3.8 of the Companies Disclosure Schedule,
neither any Company nor any Subsidiary of a Company owns any real property.
Section 3.8 of the Companies Disclosure Schedule sets forth all the material
real property leased by the Companies and their Subsidiaries (the "Leased
Real Property"). Either one of the Companies or their Subsidiaries has
a valid leasehold interest and is in possession of the Leased Real Property.
All Contracts governing the Leased Real Property (the "Real Property
Leases") are valid, binding and enforceable in accordance with their
terms and are in full force and effect, except where the failure to be valid,
binding and enforceable would not result in a Material Adverse Effect on the
Companies. Seller has provided to Buyer a copy of each Real Property Lease
that is complete and correct in all material respects. Except as set forth
on Section 3.8 of the Companies Disclosure Schedule and except as would not
have a Material Adverse Effect on the Companies, the Companies and their Subsidiaries
have valid and legal title to, a valid leasehold interest in, or rights to
the, assets and properties necessary to operate the business of the Companies
and their Subsidiaries in the ordinary course of business and consistent with
past practice. To Seller's Knowledge, except for Permitted Encumbrances of
the Companies and their Subsidiaries, the Leased Real Property is not subject
to any rights of way, building use restrictions, easements, reservations or
limitations which would restrict the Companies or their Subsidiaries from
conducting their business after the Closing consistent with past practice.
To Seller's Knowledge, neither the whole nor any portion of the Leased Real
Property is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor has any such condemnation, expropriation
or taken been proposed.
(b) Either one of the Companies or their Subsidiaries has good and valid
title to all personal property assets (tangible and intangible) owned by one
or more of the Companies or any of their Subsidiaries, free and clear of all
Encumbrances, except for Permitted Encumbrances of the Companies and their
Subsidiaries.
Section 3.9. Contracts. Section 3.9 of the Companies Disclosure Schedule
sets forth a complete and correct list as of the date of this Agreement of
all of the following Contracts to which any of the Companies or any of their
Subsidiaries is a party or under which any of the Companies or any of their
Subsidiaries may be liable:
(a) any Contract with any director, officer or employee of any of the Companies
or any of their Subsidiaries, including any employment bonus agreements, employee
non-competition agreements, or agreements or policies that contain any severance
or termination pay liabilities or obligations;
(b) any Contract that, after the Closing, will restrict the conduct of any
line of business by any of the Companies or any of their Subsidiaries in any
material respect or upon consummation of the transactions contemplated hereby,
will restrict the ability of the Companies and any of their Subsidiaries from
engaging in any line of business in which they may lawfully engage;
(c) each real estate lease or sublease with respect to each Leased Real
Property;
(d) any Contract with a labor union (including any collective bargaining
agreement);
(e) any Contract (other than Employee Benefit Plans) not otherwise disclosed
pursuant to this Section 3.9 calling for annual payments aggregating more
than $100,000, whether payable by or to any of the Companies or any of their
Subsidiaries;
(f) any Contract which includes or constitutes a power of attorney or any
obligations or liabilities as guarantor, surety, co-signor, endorser, or co-maker;
(g) any partnership, joint venture or other similar contract involving a
sharing of revenue, profits, losses, costs or liabilities by any of the Companies
or any of their Subsidiaries with any other Person;
(h) any Contract for financing or funding relating to the securing or borrowing
of money in an amount in excess of $100,000 pursuant to which any of the Companies
or any of their Subsidiaries is the obligor or guarantor;
(i) any Contract for the sale or purchase of footwear for which any of the
Companies or any of their Subsidiaries will be responsible after the Closing,
and having an unexpired term in excess of six (6) months;
(j) any distributorship agreement for which the distributor purchases more than
$100,000 in any calendar year, or any consignment, dealership, or sales representative
agreement between any of the Companies or any of their Subsidiaries and any
third party;
(k) any Contract for the performance of warehousing and fulfillment functions
for any Company or any Subsidiary of a Company; and
(l) any license or other agreement granting any Company or any Subsidiary
of a Company rights in, or to the use of, Intellectual Property.
All of the foregoing are collectively referred to in this Agreement as the
"Material Contracts." Each Material Contract is in full force and
effect and constitutes the legal, valid and binding obligation of each Company
and Subsidiary of a Company that is a party thereto, enforceable against each
Company and Subsidiary of a Company that is a party thereto in accordance
with its terms. Seller has provided to Buyer a complete and correct copy of
each Material Contract. There does not exist under any Material Contract any
violation, breach, default or condition or event that, after notice or lapse
of time or both, would constitute a violation, breach or default on the part
of any of the Companies or any of their Subsidiaries or, to the Knowledge
of Seller, on the part of any other parties to such Material Contracts, except
for such violations, breaches, defaults, conditions or events that would not
have a Material Adverse Effect on the Companies. Neither Seller nor any of
the Companies or their Subsidiaries has received from any other party to a
Material Contract any written notice of termination or intention to terminate
or not to honor the terms of such Material Contract, or to the Knowledge of
the Seller, any oral notice of termination or intention to terminate or not
to honor the terms of such Material Contract. The Material Contracts set forth
on Section 3.9 of the Companies Disclosure Schedule for which the failure
to obtain consent or approval for the transactions contemplated by this Agreement
would constitute a default by a Company or a Subsidiary of a Company are designated
with an asterisk.
Section 3.10. Intellectual Property.
(a) Set forth on Section 3.10(a) of the Companies Disclosure Schedule is
a list of all material Intellectual Property that is owned by or licensed
to any of the Companies or any of their Subsidiaries. Except as set forth
on Section 3.10(b) of the Companies Disclosure Schedule, no Company or any
Subsidiary of the Companies has any pending written, or, to the Knowledge
of Seller, oral notice from any other Person challenging or questioning the
right of such Company or Subsidiary to use in its business any of the items
of Intellectual Property listed on the Section 3.10(a) of the Companies Disclosure
Schedule.
(b) Except as set forth on Section 3.10(b) of the Companies Disclosure Schedule,
one of the Companies or their Subsidiaries owns or is licensed to use the
Intellectual Property set forth on Section 3.10(a) of the Companies Disclosure
Schedule, free and clear of all Encumbrances, other than Permitted Encumbrances
of the Companies and their Subsidiaries. Except as set forth on Section 3.10(b)
of the Companies Disclosure Schedule, the items of Intellectual Property set
forth on Section 3.10(a) of the Companies Disclosure Schedule are subsisting
and in good standing and are not subject to any proceeding challenging their
extent or validity, except as would not have a Material Adverse Effect on
the Companies.
(c) Except as set forth on Section 3.10(c) of the Companies Disclosure Schedule,
to the Knowledge of Seller (i) there is no existing or since March 24, 2000
has there been infringement by others of any of the material Intellectual Property
that is owned by or licensed to any Company or Subsidiary, (ii) the business
operations of the Companies and their Subsidiaries do not infringe, misappropriate
or otherwise violate, nor since March 24, 2000 have they infringed, misappropriated
or otherwise violated the Intellectual Property rights of any other Person,
and (iii) the Intellectual Property is adequate for the purposes for which it
is currently being used.
(d) To the Knowledge of Seller, there is no subsisting material breach nor
is there any fact or matter which would create a material breach by any of
the Companies or any of their Subsidiaries of any licenses or other agreements,
consents or undertakings which have been granted to or granted by such Company
or a Subsidiary of a Company in relation to Intellectual Property that is
used in the operation of the business of the Companies and any Subsidiary
of the Companies, other than that which would not have a Material Adverse
Effect on the Companies.
(e) That certain GMNAO License Agreement between General Motors Corporation
and Georgia Boot dated February 7, 2003, has been terminated pursuant to Agreement
to Terminate License Agreements ("GMNAO Termination Agreement")
dated effective May 17, 2004, and all obligations of Georgia Boot pursuant
to Paragraph 2 of the GMNAO Termination Agreement have been satisfied.
(f) The representations and warranties in this Section 3.10 are the sole
and exclusive representations and warranties of Seller concerning Intellectual
Property matters.
Section 3.11. Legal Proceedings. Except as set forth on Section 3.11 of
the Companies Disclosure Schedule, for the thirty six (36) months prior to
the date hereof there has not been, and as of the date hereof, there is no,
litigation, claim, action, suit, review, proceeding or investigation or any
other claim pending or, to the Knowledge of Seller, threatened against any
of the Companies or any of their Subsidiaries, at law, in equity or otherwise,
in, before, or by, any court or Governmental Authority that would, individually
or in the aggregate, have a Material Adverse Effect on the Companies or a
Material Adverse Effect on Seller or challenge the validity of this Agreement
or any action taken or to be taken by Seller pursuant to this Agreement or
in connection with the transactions contemplated hereby. Except as set forth
on Section 3.11 of the Companies Disclosure Schedule, there are no material
unsatisfied judgments or outstanding orders, rulings, judgments, decisions,
writs, injunctions, decrees, stipulations or awards (whether rendered by a
court, an administrative agency or by an arbitrator) against any of the Companies
or any of their Subsidiaries other than that which would not have a Material
Adverse Effect on the Companies.
Section 3.12. Tax Matters. Except as disclosed on Section 3.12 of the Companies
Disclosure Schedule:
(a) Each of the Companies and their Subsidiaries has filed or caused to
be filed in a timely manner (within any applicable extension periods) all
Tax returns, reports, statements, schedules, notices, forms and other documents
required to have been filed with or submitted to any Governmental Authority
by the Code or by applicable state, local or foreign Tax laws (collectively,
"Returns"); all Taxes shown to be due on such Returns have been
timely paid in full; and no tax liens have been filed and no material claims
are being asserted in writing with respect to any Taxes; in each case except
where the failure to file any such Return or pay any such tax would not have
a Material Adverse Effect on the Companies. All such Returns were correct
and complete in all material respects. Neither Seller, any Affiliate of Seller,
nor any of the Companies or any of their Subsidiaries is the beneficiary of
an extension of time within which to file any Return.
(b) No presently effective waivers or extensions of statutes of limitation
with respect to Taxes have been given by any of the Companies or any of their
Subsidiaries for any taxable years.
(c) As of the date of this Agreement, to the Knowledge of Seller, the Returns
filed by, or with respect to, the Companies and their Subsidiaries are not
being examined by, and no written notification of intention to examine has
been received from the IRS or any other taxing authority with respect to Taxes.
(d) None of the Companies nor their Subsidiaries has been a "member"
(as that term is defined in Reg. Section 1.1502-1(b)) of a group that filed
a consolidated federal income Tax Return.
(e) All amounts required to be withheld by any of the Companies or any of
their Subsidiaries from customers or from or on behalf of employees for income,
social security and unemployment insurance Taxes have been collected or withheld
and either paid to the appropriate Governmental Authority or set aside and,
to the extent required by Applicable Law, held in accounts for such purpose.
(f) Other than as reflected in the Financial Information or in the ordinary
course of business and consistent with past practice, neither a Company, any
Subsidiary of the Companies, nor Seller has taken any action that would have
the effect of deferring any Tax liability of any of the Companies or any of
their Subsidiaries with respect to the sales, income, business or operations
of any of the Companies or any of their Subsidiaries from a period ending
on or prior to the Closing Date to a period ending after the Closing Date.
Other than as reflected on the most recent Financial Information, there are
no deferred Taxes payable by any of the Companies or any of their Subsidiaries
as of the Closing Date.
(g) No material differences exist between the amounts of the book basis
and the Tax basis of assets that are not accounted for by an accrual or a
deferred Tax asset or a deferred Tax liability on the books of any of the
Companies or any of their Subsidiaries for federal income Tax purposes. Neither
any of the Companies nor any of their Subsidiaries will be required to recognize
for income Tax purposes in a taxable year beginning on or after the Closing
Date any amount of income or gain which it would have been required to recognize
under the accrual method of accounting for Tax purposes in a Tax period ending
on or before the Closing Date as a result of the installment method of accounting,
the completed contract method of accounting, the cash method of accounting
or a change in method of accounting.
(h) None of the Companies nor their Subsidiaries has received a tax opinion
with respect to any transaction other than in connection with (i) the formation
of the Companies, (ii) any election by each Company pursuant to Reg. Section
301.7701-3, or (iii) any transaction in the ordinary course of business.
Section 3.13. Insurance. The Companies and their Subsidiaries have in force
policies of fire, liability, property and casualty, workers compensation,
directors and officers liability, surety bonds, vehicular and other forms
of insurance with reputable insurance companies or associations in amounts
and with retentions and deductibles and covering such risks as are in accordance
with reasonable business practices and will continue in force to the Closing
Date policies of insurance of substantially the same character and coverage.
Set forth on Section 3.13 of the Companies Disclosure Schedule is a true and
complete list of such insurance policies (the "Insurance Policies"),
indicating the type of coverage, name of the policy holder, the insurer, the
amount of coverage, the deductibles, the premium, the expiration date. Section
3.13 of the Companies Disclosure Schedule also identifies the workers' compensation
and unemployment insurance ratings of the Companies and their Subsidiaries.
Set forth on Section 3.13 of the Companies Disclosure Schedule is a summary
of the paid, incurred and outstanding claims under each Insurance Policy,
as of the date hereof. All of the Insurance Policies are in full force and
effect, all premiums due with respect thereto covering all periods up to and
including the date of this Agreement have been paid current as of the date
hereof and will be paid current through the Closing Date prior to the Closing.
As of the date of this Agreement, none of the Companies or their Subsidiaries
has received any written notice of cancellation of any insurance policy maintained
in favor of such Companies or their Subsidiaries or been denied insurance
coverage, which, in either case, would have a Material Adverse Effect on the
Companies.
Section 3.14. Benefit Plans.
(a) Section 3.14 of the Companies Disclosure Schedule lists (i) all Employee
Benefit Plans of the Companies and their Subsidiaries and (ii) all Employee
Benefit Plans maintained by any ERISA Affiliate in which Employees of the
Companies participate.
(b) Except as set forth on Section 3.14 of the Companies Disclosure Schedule
no Employee Benefit Plan of any Company or any Subsidiary of the Companies
is a Multiemployer Plan or a plan that is subject to Title IV of ERISA, and
no Employee Benefit Plan of any Company or any Subsidiary of the Companies
provides health or other welfare benefits to former employees of any Company
or any Subsidiary of the Companies other than as required by COBRA.
(c) Except as set forth on Section 3.14 of the Companies Disclosure Schedule,
each Employee Benefit Plan is maintained and administered in compliance in
all material respects with the applicable requirements of the applicable plan
document, ERISA, the Code and any other applicable laws. Each Employee Benefit
Plan that is intended to be qualified under Section 401(a) of the Code has
received a determination from the IRS within the last three years that it
is so qualified and, to the Seller's Knowledge, there are no facts or circumstances
that will adversely affect the qualified status of any such Employee Benefit
Plan.
(d) Except as set forth on Section 3.14 of the Companies Disclosure Schedule,
no material liability under Title IV of ERISA, excluding for this purpose, liability
for benefits accrued by or for the Employees of the Companies under any Employee
Benefit Plan subject to Title IV of ERISA in which a Company or any Subsidiary
of a Company participates, has been, or will be incurred by any ERISA Affiliate
that will become a liability of any of the Companies or any of their Subsidiaries.
Except as set forth on Section 3.14 of the Companies Disclosure Schedule, after
the Closing Date, no material liability under an Employee Benefit Plan of an
ERISA Affiliate of Seller under which no Employee of the Companies or any of
their Subsidiaries participates or has participated, has been, or will be incurred
by any ERISA Affiliate that will become a liability of any of the Companies
or any of their Subsidiaries.
(e) The Companies, their Subsidiaries and the ERISA Affiliates have complied
with the requirements of COBRA.
(f) Except as set forth on Section 3.14 of the Companies Disclosure Schedule,
none of the Companies, their Subsidiaries or, to the Seller's Knowledge, any
other Person has engaged in any transaction with respect to any Employee Benefit
Plan that will subject the Companies or any of their Subsidiaries to any material
liability, tax or penalty (civil or otherwise) imposed by ERISA, the Code
or other Applicable Law. Payment has been made of all amounts which any Company
or any Subsidiary of a Company is required to have paid as contributions to
or benefits under any Employee Benefit Plan as of the end of the most recent
plan year thereof, and as of the end of the most recent plan year thereof,
there are no unfunded obligations under any Employee Benefit Plan that have
not been disclosed to Buyer in writing prior to the Closing. Except as set
forth on Section 3.14 of the Companies Disclosure Schedule, Seller, the Companies,
and the Subsidiaries of the Companies have complied with all reporting and
disclosure obligations to all Governmental Authorities and all participants
and beneficiaries with respect to each Employee Benefit Plan required by the
terms of such Employee Benefit Plan or Applicable Law. There is no pending
or threatened litigation, arbitration, disputed claim, adjudication, audit,
investigation, examination or other proceeding with respect to any Employee
Benefit Plan or any fiduciary or administrator thereof in their capacities
as such. No "reportable event," within the meaning of Section 4043
of ERISA, and no event described in Section 4041, 4042, 4062 or 4063 of ERISA
has occurred in connection with any Employee Benefit Plan.
(g) With respect to each Employee Benefit Plan, Seller has made available
to Buyer true, complete and correct copies, to the extent applicable, of (i)
the plan and trust documents, including all amendments, and the most recent
summary plan description, (ii) the most recent annual report (Form 5500 series),
(iv) the most recent financial statements, and (v) the most recent IRS determination
letter.
(h) Except as set forth on Section 3.14 of the Companies Disclosure Schedule,
(i) the execution of, and performance of the transactions contemplated by,
this Agreement will not constitute an event under any Employee Benefit Plan
that will result in any material payment (whether as severance pay or otherwise),
acceleration, vesting or increase in benefits, and (ii) there has been no
amendment, interpretation, announcement (whether or not written), which would
increase the expense of maintaining any Employee Benefit Plan in which employees
of any of the Companies or their Subsidiaries participate above the level
of expenses of such Employee Benefit Plan when compared to the fiscal year
or plan year ended immediately prior to the Closing Date or which made any
commitment to create any additional plan or offer any benefit that is not
yet effective.
(i) The representations and warranties in this Section 3.14 are the sole
and exclusive representations and warranties of Seller regarding employee
benefit plan matters.
Section 3.15. Environmental Matters. To Seller's Knowledge, except as set
forth on Section 3.15 of the Companies Disclosure Schedule:
(a) Each of the Companies and their Subsidiaries have all material permits,
licenses, and other authorizations required for the operations of their business
under applicable Environmental Laws (the "Environmental Permits"),
each of the Environmental Permits is in full force and effect, and each of
the Companies and their Subsidiaries is in compliance with all terms and conditions
of the Environmental Permits, and with all applicable Environmental Laws.
There are no past or present conditions or circumstances that could reasonably
be expected to interfere with or prevent the conduct of business of the Companies
or their Subsidiaries from being in compliance with all applicable Environmental
Laws or the terms and conditions of any Environmental Permit.
(b) Neither the Companies nor any of their Subsidiaries have received written
or oral notice of any citation, summons, order, complaint, penalty, investigation,
or review by any Governmental Authority with respect to any violation by any
such Company or Subsidiary of any Environmental Law which would be reasonably
likely to result in claims, liabilities, costs or causes of action against
the Companies or their Subsidiaries for correction of any violation, or any
fines or penalties, and there are no past or present conditions or circumstances
at, arising out of, or related to, any current or former business, assets
or properties of any of the Companies or any of their Subsidiaries which are,
individually or in the aggregate, reasonably likely to give rise to (i) liabilities
or obligations for any investigation, clean up, remediation, disposal, or
any other methods of corrective action or any monitoring requirements ("Remediation")
under Environmental Laws, or (ii) claims arising for personal injury, property
damage, or damage to natural resources.
(c) Neither any of the Companies nor any of their Subsidiaries has received
written or oral requests for information, notice of claim, demand, or notification
that it is, or may be, responsible with respect to any investigation or cleanup
of any threatened or actual Release of any Hazardous Substance, except for
such requests, notices, demands, or notifications. The term "Release"
has the meaning set forth in Section 101(22) of CERCLA.
(d) There is no action, suit, proceeding or investigation pending or threatened
against or involving any Company or any Subsidiary asserting liability under
Environmental Laws.
(e) There are no Persons whose liability, for any environmental matters
or under any applicable Environmental Law, a Company or Subsidiary has retained
or assumed contractually.
(f) The representations and warranties in this Section 3.15 are the sole and
exclusive representations and warranties of Seller concerning environmental
matters, Environmental Laws and Hazardous Substances.
Section 3.16. Employee Relations.
(a) Except as disclosed on Section 3.16 of the Companies Disclosure Schedule,
no Company: (i) is a party to or otherwise bound by any collective bargaining
or other type of union agreement, (ii) is a party to, involved in or, to the
Knowledge of Seller, threatened by, any labor dispute or unfair labor practice
charge, or (iii) has experienced any work stoppage during the last three (3)
years.
(b) Except as disclosed on Section 3.16 of the Companies Disclosure Schedules,
there are no outstanding claims against any of the Companies or any of their
Subsidiaries (whether under regulation, contract, policy or otherwise) asserted
by or on behalf of any present or former employee or job applicant of such
Company or Subsidiary on account of or for (i) overtime pay, other than overtime
pay for work done in the current payroll period, (ii) wages or salary for
a period other than the current payroll period, (iii) any amount of vacation
pay or pay in lieu of vacation time off, other than vacation time off or pay
in lieu thereof earned in or in respect of the current fiscal year, (iv) any
amount of severance pay or similar benefits, (v) unemployment insurance benefits,
(vi) workers' compensation or disability benefits, (vii) any violation of
any statute, ordinance, order, rule or regulation relating to plant closings,
employment terminations or layoffs, including but not limited to The Workers
Adjustment and Retraining Act, (viii) any violation of any statute, ordinance,
order, rule or regulation relating to employee "whistleblower" or
"right-to-know" rights and protections, (ix) any violation of any
statute, ordinance, order, rule or regulations relating to the employment
obligations of federal contractors or subcontractors or (x) any violation
of any regulation relating to minimum wages or maximum hours of work, in any
which case would have a Material Adverse Effect on the Companies.
Section 3.17. Bank Accounts and Letters of Credit. Section 3.17 of the Companies
Disclosure Schedule sets forth (a) the name and location of each bank in which
any of the Companies or any of their Subsidiaries has an account or safe deposit
box or standby letter of credit or maintains a banking, custodial, trading
or similar relationship and the identifying numbers or symbols thereof, (b)
each letter of credit issued on behalf of or for the benefit of any of the
Companies or any of their Subsidiaries (the "Letter of Credit"),
(c) a true and complete list of each account, safe deposit box and relationship,
and (d) the name of each Person authorized to draw thereon and having access
thereto.
Section 3.18. Absence of Changes. Except as set forth on Section 3.18 of
the Companies Disclosure Schedule, since September 30, 2004, the Companies
and their Subsidiaries have conducted their respective businesses only in
the regular and ordinary course consistent with past practice and there has
been no Material Adverse Effect on the Companies. Without limiting the foregoing,
except as set forth on Section 3.18 of the Companies Disclosure Schedules,
since September 30, 2004, the Companies and their Subsidiaries have not:
(i) disposed of any material assets (other than inventory);
(ii) declared or paid any dividend or distribution with respect to any Equity
Interests or the Securities of the Companies' Subsidiaries;
(iii) created an Encumbrance on any material asset or property, tangible
or intangible, or incurred a material amount of additional indebtedness or
entered into any other material transaction;
(iv) entered into any lease of real or personal property or any renewals
thereof involving a rental obligation exceeding $100,000 per annum per any
such lease, and $250,000 per annum in the aggregate;
(v) instituted any changes in its employee benefits or granted to any director,
officer, or other employee any increase in severance or termination pay, or
entered into any modification, amendment, waiver, or consent with respect
to any employment, severance, change of control, termination or similar agreement,
arrangement or plan (oral or otherwise) with any director, officer or employee,
or except for increases in the ordinary course of business consistent with
past practices or as may be required by any contracts or agreements existing
as of the date hereof, increased the rate of compensation, bonuses or the
benefits payable to any employee;
(vi) made any new commitment or increased any previous commitment for capital
expenditures in an amount exceeding $100,000 per any such capital expenditure,
and $250,000 in the aggregate;
(vii) suffered a Material Adverse Effect on the Companies (and no fact or
condition exists or to Seller's Knowledge, is contemplated or threatened that
would reasonably be expected to cause a Material Adverse Effect on the Companies),
entered into any transaction, contract or commitment, modified any Contract,
waived or permitted the loss of any right of substantial value, cancelled
any Debt or claim, or voluntarily suffered any extraordinary loss;
(viii) sold, assigned or conveyed any material Intellectual Property owned
by any of the Companies or any of their Subsidiaries;
(ix) made or proposed any change in its accounting or Tax methods, principles
or practices, except for changes required by GAAP or by Applicable Law and
are set forth on Section 3.18 of the Companies Disclosure Schedule;
(x) directly or indirectly redeemed, purchased or otherwise acquired any
of the Equity Interests or the Securities of the Companies' Subsidiaries or
authorized any reclassification or recapitalization or otherwise changed the
terms or provisions of any of the Equity Interests or the Securities of the
Companies' Subsidiaries;
(xi) paid, discharged, or satisfied any claim, liability, or obligation
other than the payment, discharge or satisfaction of liabilities and obligations
incurred in the ordinary course of business and consistent with past practice
which would not result in a Material Adverse Effect on the Companies;
(xii) canceled any Debts or waived any claims or rights other than in the ordinary
course of business consistent with past practice; or
(xiii) entered into any contract, agreement, commitment or arrangement to
take any of the actions prohibited in this Section 3.18.
Section 3.19. No Brokers. Other than Harris Williams & Co., whose fees
shall be paid by Seller, no broker, finder or similar intermediary has acted
for or on behalf of, or is entitled to any broker's, finder's or similar fee
or other commission from Seller or the Companies in connection with this Agreement
or the transactions contemplated hereby.
Section 3.20. Compensation Arrangements; Officers and Directors. Section
3.20 of the Companies Disclosure Schedule sets forth (a) the names, titles
and current annual salary, including any bonus, if applicable, of all present
officers and employees of the Companies and their Subsidiaries whose rate
of annual compensation, including any bonus, equals or exceeds $100,000, together
with a statement of the full amount of all remuneration paid by such Company
or Subsidiary to each such person, during the twelve (12)-month period ending
December 31, 2003 and the nine (9)-month period ending September 30, 2004,
and Section 3.21. Customers and Suppliers. Section 3.21 of the Companies Disclosure
Schedule sets forth a list of (a) each customer (a "Material Customer")
of Lehigh Safety and each customer of Georgia Boot, that accounted for more
than 5% of the combined revenues of all of the Companies and their Subsidiaries
during the last full fiscal year and the amount of combined revenues accounted
by such Material Customer during such period, and (b) each supplier that is
the sole supplier of any significant product or service to the Companies and
their Subsidiaries ("Material Supplier"). Since September 30, 2004,
the relationships of the Companies and their Subsidiaries with the Material
Customers and Material Suppliers are good commercial working relationships.
No Material Customer or Material Supplier has notified any of the Companies
or any of their Subsidiaries in writing or, to the Knowledge of Seller, orally,
that it intends to discontinue its business relationship with such Company
or Subsidiary or in the case of a Material Supplier, indicated that it will
not continue to be the supplier for the Companies and their Subsidiaries after
the Closing with substantially the same quantity and quality of goods at competitive
prices or, to the Knowledge of Seller, does any Material Customer or Material
Supplier have any plan or intention to do so.
Section 3.22. Disclaimer of Other Representations and Warranties. Seller
acknowledges and agrees that (i) Buyer does not make, and has not made, any
representations or warranties relating to Buyer or in connection with the
transactions contemplated hereby other than those expressly set forth in Article
IV and (ii) no Person has been authorized by Buyer to make any representation
or warranty relating to Buyer or any of its subsidiaries, the businesses of
Buyer or otherwise in connection with the transactions contemplated hereby
except as set forth in Article IV and, if made, any such representation or
warranty must not be relied upon as having been authorized by Buyer.
Section 3.23. Inventory. Except as set forth on Section 3.23 of the Companies
Disclosure Schedule, all of the Inventory of the Companies and their Subsidiaries
is valued at the lower of cost or market, the cost thereof being determined
on a first-in, first-out basis, except as disclosed in the Financial Information.
Section 3.24. Accounts Receivable. Section 3.24 of the Companies Disclosure
Schedule sets forth (a) the total amount of trade accounts receivable of the
Companies and each of their Subsidiaries (the "Accounts Receivable")
outstanding as of the last day of the calendar month immediately preceding
the present calendar month and (b) the agings of such receivables based on
the following schedule: 0-30 days, 31-60 days, 61-90 days and over 90 days,
from the due date thereof. Except as set forth in Section 3.24 of the Companies
Disclosure Schedule, all Accounts Receivable set forth in Section 3.24 of
the Companies Disclosure Schedule (a) represent amounts receivable for products
actually delivered or services actually provided (or, in the case of non-trade
accounts or notes representing amounts receivable in respect of other bona-fide
business transactions), (b) arose in the ordinary course of business consistent
with past practice, and (c) constitute amounts receivable, except to the extent
reserved on the financial statements included in the Financial Information
in accordance with GAAP.
Section 3.25. Warranty and Other Claims. Section 3.25 of the Companies Disclosure
Schedule sets forth the types of products and services sold by the Companies
or any of their Subsidiaries for which it provides warranties and describes
the material terms of such warranties. There are no existing or, to the Knowledge
of Seller, threatened, product liability, warranty, or similar claims, against
any of the Companies or their Subsidiaries for products or services which
are defective or fail to meet any product or service warranties except as
set forth on Section 3.25 of the Companies Disclosure Schedule. Neither any
of the Companies or any of their Subsidiaries has received any written, or,
to the Knowledge of Seller, oral notice of any claim against it for any renegotiation
or price redetermination of any Contract for products or services.
Section 3.26. Disclosure. No representation or warranty by Seller in this
Agreement or any statement contained in the Companies Disclosure Schedule
or any certificates delivered hereunder contains any untrue statement of material
fact or omits to state a material fact required to be stated therein or necessary
to make the statements contained therein in light of the circumstances under
which it was made, not false or misleading, except where such misstatement
or omission would not result in a Material Adverse Effect on the Companies.
Section 3.27. Investment Intent. The Stock Consideration is being acquired
by Seller solely for its own account, for investment and not with a view to
any distribution thereof that would violate Securities Laws; and Seller will
not distribute the Stock Consideration in violation of Securities Laws.
Section 3.28. Investigation. Seller acknowledges that, except for the matters
that are expressly covered by the provisions of this Agreement, Seller is
relying on its own investigation and analysis in entering into the transactions
contemplated hereby. Except to the extent Seller has otherwise advised Buyer
in writing, neither Seller, nor the Companies nor any of their Subsidiaries
or representatives is aware of any of the representations or warranties contained
in Article IV being untrue or incorrect.
Section 3.29. Employment Agreements. Seller has caused a Company or a Subsidiary
of the Companies to enter into employment and non-competition agreements with
Karen Brown, John Grzybowski, John M. Hull, David P. Mitchell, and Thomas R.
Morrison on terms acceptable to Buyer, which are conditioned upon the consummation
of the Closing.
Buyer represents and warrants to Seller as follows.
Section 4.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Ohio. Buyer has the power
and authority to carry on its business as it is now being or is currently
proposed to be conducted and to own, lease and operate all of its properties
and assets, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such qualification
or licensing necessary, except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a Material Adverse Effect
on Buyer.
Section 4.2. Authority. Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by all requisite action
on the part of Buyer and no other proceedings on the part of Buyer are necessary
to approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer.
Assuming the due authorization, execution and delivery of this Agreement by
the other parties hereto, this Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with
its terms.
Section 4.3. Organization and Related Matters.
(a) The authorized capital stock of the Buyer consists of (i) 10,000,000
shares of Buyer Common Stock, of which 4,620,170 are issued and outstanding
as of October 29, 2004, (ii) 250,000 shares of Voting Preferred Stock, without
par value (the "Buyer Voting Preferred Stock"), none of which is
issued and outstanding, and (iii) 250,000 shares of Non-Voting Preferred Stock,
without par value, consisting of (A) 125,000 shares of Series A Non-Voting
Convertible Preferred Stock, without par value, none of which is issued and
outstanding and (B) 125,000 shares of Series B Junior Participating Cumulative
Preferred Stock, without par value (the "Buyer Series B Preferred Stock"
and, together with the Buyer Voting Preferred Stock, the "Buyer Preferred
Stock"), none of which is issued and outstanding. No shares of Buyer
Common Stock are held in the Buyer's treasury as of September 30, 2004, and
no shares of Buyer Preferred Stock are held in the Buyer's treasury. As of
December 31, 2003, options to purchase 851,500 shares of Buyer Common Stock
are issued pursuant to the Buyer Option Plans with a weighted average exercise
price of $6.63 per share. 125,000 shares of Buyer Series B Preferred Stock
were reserved for issuance (but are not issued and outstanding) in connection
with the Buyer Rights Agreement. The Buyer Common Stock and the Buyer Preferred
Stock shall be referred to herein, collectively, as the "Buyer Capital
Stock." Except as set forth in the Buyer SEC Reports through the date
of such Buyer SEC Reports, no shares of Buyer Capital Stock or other equity
securities of the Buyer are issued, reserved for issuance, or outstanding.
(b) All of the issued and outstanding Buyer Capital Stock and upon issuance
in accordance with this Agreement, all Buyer Capital Stock including the Stock
Consideration, is (i) duly authorized, validly issued, fully paid and nonassessable,
(ii) not subject to preemptive rights and (iii) not issued in violation of
any preemptive rights to which the Buyer is subject.
(c) Except as set forth in the Buyer SEC Reports and through the date of
such Buyer SEC Reports, there is no (i) outstanding option, subscription,
"phantom" stock right, put, call, commitment, preemptive right,
warrant, conversion rights, or agreement of any kind that is binding on the
Buyer for the purchase or acquisition from Buyer of any capital stock of the
Buyer, or (ii) contract, commitment or agreement of any kind that is binding
on the Buyer relating to the issuance of capital stock of the Buyer, convertible
or exchangeable securities, or any subscriptions, options, warrants, or similar
rights of the capital the Buyer or granting to any Person any right to participate
in the equity or income of the Buyer or to participate in or direct the election
of any director of the Buyer or the manner in which the capital stock of the
Buyer are voted.
Section 4.4. Authority; No Violation; Consents.
(a) Neither the execution, delivery and performance of this Agreement by
Buyer, nor the consummation by Buyer of the transactions contemplated hereby
and the performance of this Agreement by Buyer, assuming that the Governmental
Consents have been obtained prior to the Closing, will (i) (x) violate, conflict
with, or result in a breach of, or constitute a default (or in the event that,
with notice or lapse of time or both, would constitute a default) under, any
provision of the articles of incorporation, code of regulations or other organizational
documents of Buyer or any of its Subsidiaries or (y) require consent under,
violate, conflict with, or result in a breach, in any material respect, of
any provision of, or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate or modify the performance or payment required
by, or result in a right of termination, acceleration or modification under,
or result in the creation of any material Encumbrance upon any of the properties
or assets of Buyer or any of its Subsidiaries under any of the terms, conditions
or provisions of any material Contract to which Buyer or any of its Subsidiaries
is a party or to which their properties or assets may be subject, or (ii)
violate any Applicable Law or conflict with any of the Buyer's or its Subsidiaries'
respective right to fully own and use its properties or assets, except, with
respect to clause (ii), for such violations which would not have a Material
Adverse Effect on Buyer.
(b) No material notice to, filing with, waiver from, authorization of, exemption
by, or consent or approval of, registration, declaration or filing with, or
termination or expiration of waiting period with respect to, any Governmental
Authority is necessary for the consummation by Buyer of the transactions contemplated
by this Agreement, other than the Governmental Consents.
Section 4.5. Compliance with Applicable Laws. Buyer and each of its Subsidiaries
is duly complying with Applicable Law relating to their respective business,
operations and properties, except where the failure to be in compliance would
not be expected to have a Material Adverse Effect on the Buyer or where such
noncompliance has been cured and is reasonably expected to have no material
impact on the future business or operations of the Buyer and its Subsidiaries
taken as a whole.
Section 4.6. Legal Proceedings. Except as set forth in the Buyer SEC Reports
filed on or prior to the date hereof, for the thirty six (36) months prior
to the date hereof there has not been, and as of the date hereof, there is
no, litigation, claim, action, suit, review, proceeding or investigation or
any other claim pending or, to the Knowledge of Buyer, threatened against
Buyer or any of its Subsidiaries, at law, in equity or otherwise, in, before,
or by, any court or Governmental Authority that would, individually or in
the aggregate, have a Material Adverse Effect on Buyer or challenge the validity
of this Agreement or any action taken or to be taken by Buyer pursuant to
this Agreement or in connection with the transactions contemplated hereby.
There are no material unsatisfied judgments or outstanding orders, rulings,
judgments, decisions, writs, injunctions, decrees, stipulations or awards
(whether rendered by a court, an administrative agency or by an arbitrator)
against Buyer or any of Subsidiaries other than that which would not have
a Material Adverse Effect on Buyer.
Section 4.7. Absence of Changes. Except as set forth in the Buyer SEC Reports
filed on or prior to the date hereof, since September 30, 2004, Buyer and
its Subsidiaries conducted their business only in the regular and ordinary
course consistent with past practice and there has been no Material Adverse
Effect on Buyer. Without limiting the foregoing, since September 30, 2004,
Buyer and its Subsidiaries have not:
(a) declared, set aside or paid any dividend, returns of capital or any
other distribution with respect to any Securities of Buyer or any of its Subsidiaries;
(b) split, combine or reclassify outstanding capital stock of Buyer or any
of its Subsidiaries;
(c) suffered a Material Adverse Effect on Buyer (and no fact or condition
exists or to Buyer's Knowledge, is contemplated or threatened that would reasonably
be expected to cause a Material Adverse Effect on the Buyer), entered into
any transaction, contract or commitment, modified any Contract, waived or
permitted the loss of any right of substantial value, cancelled any Debt or
claim, or voluntarily suffered any extraordinary loss; and
(d) entered into any contract, agreement, commitment or arrangement to take
any of the foregoing actions.
Section 4.8. Disclosure. No representation or warranty by Buyer in this Agreement
or any statement contained in any certificates delivered hereunder contains
any untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained therein in
light of the circumstances under which it was made, not false or misleading,
except where such misstatement or omission would not result in a Material Adverse
Effect on Buyer.
Section 4.9. No Brokers. Other than Robert W. Baird & Co., whose fees
shall be paid by Buyer, no broker, finder or similar intermediary has acted
for or on behalf of, or is entitled to any broker's, finder's or similar fee
or other commission from, Buyer or its Affiliates in connection with this
Agreement or the transactions contemplated hereby.
Section 4.10. Financing. Buyer expects to receive on or before the Financing
Commitment Delivery Date, a duly executed commitment letter from each of GMAC
Commercial Finance LLC and American Capital Strategies, Ltd, or their respective
affiliates, in a form reasonably satisfactory to both Buyer and Seller, to
provide senior debt financing in an amount necessary to pay the Aggregate
Cash Consideration component of the Purchase Consideration and to meet all
costs and expenses of Buyer associated with the transactions contemplated
by this Agreement (the letters, collectively, the "Debt Commitment Letter").
Upon Buyer's receipt of funds as contemplated by the Debt Commitment Letter,
Buyer will have sufficient cash and/or cash equivalents to pay the entire
Cash Consideration component of the Purchase Consideration and all related
transaction expenses incurred by or on behalf of Buyer (including all related
fees and expenses) at the Closing. The obligations to fund the commitment
under the Debt Commitment Letter will not be subject to any condition except
as expressly set forth in the Debt Commitment Letter.
Section 4.11. Investment Intent. The Equity Interests are being acquired
by Buyer solely for its own account, for investment and not with a view to
any distribution thereof that would violate Securities Laws; and Buyer will
not distribute Equity Interests in violation of Securities Laws.
Section 4.12. Investigation. Buyer acknowledges that, except for the matters
that are expressly covered by the provisions of this Agreement, Buyer is relying
on its own investigation and analysis in entering into the transactions contemplated
hereby. Except to the extent Buyer has otherwise advised Seller in writing,
neither Buyer nor any of its subsidiaries or representatives is aware of any
of the representations or warranties contained in Article III being untrue
or incorrect.
Section 4.13. SEC Reports.
(a) Buyer has filed all required forms, reports, schedules, statements and
other documents (including exhibits and other information incorporated therein)
with the SEC since December 31, 2001 (collectively, the "Buyer SEC Reports").
As of their respective dates, or, if amended, as of the date of the last such
amendment, each Buyer SEC Report, (a) complied in all material respects with
the applicable requirements of the Securities Act, the Securities Exchange
Act of 1934, and the rules and regulations thereunder applicable to such Buyer
SEC Reports and (b) did not, and in the case of such forms, reports, schedules,
statements and other documents filed after the date hereof will not as of
the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading. Each of the consolidated financial statements
included in or incorporated by reference into the Buyer SEC Reports (including
the related notes and schedules) were, and in the case of such consolidated
financial statements filed after the date hereof will be, prepared in accordance
with the published rules and regulations of the SEC, and fairly presents in
all material respects the consolidated financial position of Buyer and its
Subsidiaries as of its date, and each of the consolidated statements of operations,
stockholders' equity and cash flows included in or incorporated by reference
into the Buyer SEC Reports (including any related notes and schedules) fairly
presents in all material respects the financial position, results of operations
and cash flows, as the case may be, of Buyer and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments and the absence of footnotes), in each case
in accordance with GAAP consistently applied during the periods involved,
except as may be noted therein.
(b) There is no investigation by the SEC pending, or, to the Knowledge of
the Buyer, threatened with respect to any Buyer SEC Report. None of the Buyer
SEC Reports are the subject of open, unresolved comments from the SEC. To
the Knowledge of Buyer, there is no material unresolved violation of the Exchange
Act or the published rules and regulations of the SEC asserted by the SEC
with respect to the Buyer SEC Reports.
Section 4.14. Disclaimer of Other Representations and Warranties. Buyer
acknowledges and agrees that (i) Seller does not make, and has not made, any
representations or warranties relating to the Companies, their Subsidiaries,
the business of the Companies or their Subsidiaries or otherwise in connection
with the transactions contemplated hereby other than those expressly set forth
in Article III, and (ii) no Person has been authorized by Seller or the Companies
to make any representation or warranty relating to the Companies, their Subsidiaries,
the business of the Companies or their Subsidiaries or otherwise in connection
with the transactions contemplated hereby except as set forth in Article III
and, if made, such representation or warranty must not be relied upon as having
been authorized by Seller.
Section 4.15. Taxes. Neither Buyer nor any of its Subsidiaries has received
a tax opinion with respect to any transaction other than in connection with
any transaction in the ordinary course of business.
Section 5.1. Conduct of Business of Companies and their Subsidiaries.
(a) From the date hereof through the Closing, and except as otherwise contemplated
by this Agreement or consented to or approved by Buyer (which consent or approval
shall not be unreasonably withheld or delayed), Seller shall cause the Companies
and their Subsidiaries to operate their business only in the ordinary course
and use commercially reasonable efforts to preserve the properties, business
and relationships with suppliers and customers of the Companies and their
Subsidiaries and shall cause the Companies and their Subsidiaries not to,
other than in the ordinary course of business, undertake any of the following:
(i) sell any material assets (other than Inventory);
(ii) except as provided in Section 5.1(d), declare, set aside or pay any
dividend, returns of capital or any other distribution with respect to any
Equity Interests and their Subsidiaries;
(iii) create an Encumbrance on any material assets or incur a material amount
of additional indebtedness or enter into any other material transaction;
(iv) enter into any lease of real or personal property or any renewals thereof
involving a rental obligation exceeding $50,000 per annum per any such lease,
and $150,000 per annum in the aggregate;
(v) except for increases consistent with past practices or as may be required
by any Contracts, increase the rate of compensation, bonuses or the benefits
payable or to become payable to any director, officer or employee, or make
any changes to its employee benefits, or grant to any director, officer or
employee any increase in severance or termination pay, or enter into any modification,
amendment waiver or consent with respect to any employment, severance, change
of control, termination or similar agreement, arrangement or plan (oral or
otherwise) with any director, officer or employee;
(vi) make any new commitment or increase any previous commitment for capital
expenditures in an amount exceeding $25,000 per any such capital expenditure,
and $100,000 in the aggregate; provided that any commitment identified on
Section 5.1 of the Companies Disclosure Schedule or the capital budget previously
delivered to Buyer shall not require the consent or approval of Buyer;
(vii) except as would not have a Material Adverse Effect on the Companies,
enter into any transaction, contract or commitment, modify any Contract, waive
or permit the loss of any right of substantial value, cancel any debt or claim,
or voluntarily suffer any extraordinary loss;
(viii) sell, assign or convey any material Intellectual Property owned by
any Company or any Subsidiary; or
(ix) enter into any contract, agreement, commitment or arrangement to take
any of the actions prohibited in this Section 5.1.
(b) Nothing in this Agreement shall be construed to limit Seller's, any
of the Companies' or any of their Subsidiary's discretion to operate the business
of the Companies and their Subsidiaries in the ordinary course, or shall give
Buyer any ownership rights to Equity Interests, before the Closing Date.
(c) As of the Closing, the Companies shall repay or otherwise cause all Debt
then outstanding to be paid or otherwise satisfied and shall cause the execution
and filing, if applicable, of all Financial Releases relating thereto.
(d) Buyer acknowledges that notwithstanding anything to the contrary, the
Companies and their Subsidiaries may transfer, by way of a dividend or otherwise,
cash, cash equivalents, marketable securities and other financial instruments
to Seller or its Affiliates prior to Closing.
Section 5.2. Conduct of Business of Buyer and its Subsidiaries. From the
date hereof through the Closing, and except as otherwise contemplated by this
Agreement or consented to or approved by Seller (which consent or approval
shall not be unreasonably withheld or delayed), Buyer shall, and shall cause
its Subsidiaries to operate their business only in the ordinary course and
use commercially reasonable efforts to preserve the properties, business and
relationships with suppliers and customers of the Buyer and its Subsidiaries
and Buyer shall not, and shall cause its Subsidiaries not to undertake any
of the following:
(a) issue any capital stock, or rights, warrants or options to acquire shares
or such capital stock, or issue any securities convertible into such shares
or convertible into securities in turn so convertible, or grant any options,
warrants or rights to acquire any such convertible securities, except in accordance
with the Buyer Option Plans;
(b) declare, set aside or pay any dividend, returns of capital or any other
distribution with respect to any Securities of the Buyer or any of its Subsidiaries;
(c) split, combine or reclassify outstanding capital stock of Buyer or any
of its Subsidiaries; and
(d) enter into any contract, agreement, commitment or arrangement to take
any of the actions prohibited in this Section 5.2.
Section 5.3. Governmental Consents and Filings. Seller and Buyer shall duly
file with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice the premerger notification and
report form (the "HSR Filing") required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and regulations thereunder
(the "HSR Act") with respect to the transactions contemplated hereby
no later than the fifth Business Day following the date hereof. The HSR Filing
shall be in substantial compliance with the requirements of the HSR Act. Each
party shall use commercially reasonable efforts to cooperate with the other
party to the extent necessary to assist the other party in the preparation
of its HSR Filing, to request and secure early termination of the waiting
period required by the HSR Act and, if requested, to promptly amend or furnish
additional information thereunder. Each of Buyer and Seller shall as promptly
as practicable comply with Applicable Laws relating to any of the transactions
contemplated by this Agreement and pursuant to which any Governmental Consent
is necessary. Buyer and Seller shall furnish to each other all such information
as is necessary to prepare any such registration, declaration or filing. Buyer
and Seller shall keep each other apprised of the status of any communications
with, consult with each other in advance of any meeting or conference with
any, and shall keep each other apprised of any inquiries or requests for additional
information from, any Governmental Authority with respect to the transactions
contemplated by this Agreement.
Section 5.4. Additional Agreements. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, and to cooperate with each of the other parties hereto in connection
with the foregoing, including (i) to obtain, in addition to the approvals
discussed in Section 5.3, any other consents or approvals as are necessary
in connection with the consummation of the transactions contemplated hereby,
(ii) to effect, in addition to filings discussed in Section 5.3, all registrations
and filings as are necessary or desirable in connection with the consummation
of the transactions contemplated hereby, (iii) to defend any lawsuits or other
legal proceedings, whether judicial or administrative, whether brought by
private parties or Governmental Authorities or officials, challenging this
Agreement or the consummation of the transactions contemplated hereby, and
(iv) to furnish to each other such information and assistance and to consult
with respect to the terms of any registration, filing, application or undertaking
as may be reasonably requested in connection with the foregoing.
Section 5.5. Expenses. Except as provided elsewhere herein, each party hereto
shall bear the expenses incurred by it in connection with the negotiation
and preparation of this Agreement and the consummation of the transactions
contemplated hereby; provided, however, that Buyer shall pay all fees payable
under the HSR Act and all related expenses; and provided, further, that Seller
shall, except as otherwise provided in this Section 5.5, pay all fees, expenses
and penalties incurred in connection with obtaining any consent and waiver
from third parties contemplated by this Agreement; provided that it is understood
and agreed that nothing in this Section 5.5 shall expand the Seller's obligations
under Section 5.4 hereof.
Section 5.6. Access; Certain Communications.
(a) Between the date of this Agreement and the Closing Date, subject to
Applicable Laws relating to the exchange of information, Seller shall and
shall cause the Companies, their Subsidiaries and their respective counsel
and accountants to afford to Buyer and its authorized agents and representatives
reasonable access, upon reasonable prior notice and during normal business
hours, to contracts, documents, financial statements, working papers, books,
records, commitments, minutes, instruments and information relating to the
business of the Companies and their Subsidiaries as Buyer shall reasonably
request. Buyer and its agents and representatives shall not contact or have
access to customers, suppliers or employees of any of the Companies or any
of their Subsidiaries without the prior consent of Seller, which consent shall
not be unreasonably withheld. It is expressly understood by the parties hereto
that, notwithstanding the provisions of this Section 5.6(a), Seller, in its
sole discretion, may deny or restrict any access (i) involving possible breaches
of applicable confidentiality agreements with third parties or possible waivers
of any applicable attorney-client privileges or (ii) in the event Buyer is
in breach of this Agreement. It is further understood that Seller shall be
under no obligation to grant Buyer or its representatives any access if such
access would, under the circumstances, interfere with the operations, activities
or employees of any of the Companies or any of their Subsidiaries, or if such
access would, in the judgment of Seller, violate applicable antitrust or similar
laws.
(b) Between the date of this Agreement and the Closing Date, subject to Applicable
Laws relating to the exchange of information, Buyer shall and shall cause its
Subsidiaries and their respective counsel and accountants to afford to Seller
and its authorized agents and representatives reasonable access, upon reasonable
prior notice and during normal business hours, to contracts, documents, financial
statements, working papers, books, records, commitments, minutes, instruments
and information relating to the business of the Buyer and its Subsidiaries,
as Seller shall reasonably request. Seller and its agents and representatives
shall not contact or have access to customers, suppliers or employees of Buyer
or any of its Subsidiaries. It is expressly understood by the parties hereto
that, notwithstanding the provisions of this Section 5.6(b), Buyer, in its sole
discretion, may deny or restrict any access (i) involving possible breaches
of applicable confidentiality agreements with third parties or possible waivers
of any applicable attorney-client privileges or (ii) in the event Seller is
in breach of this Agreement. It is further understood that Buyer shall be under
no obligation to grant Seller or its representatives any access if such access
would, under the circumstances, interfere with the operations, activities or
employees of Buyer or any of its Subsidiaries, or if such access would, in the
judgment of Buyer, violate applicable antitrust or similar laws.
Section 5.7. Confidentiality.
(a) This Agreement, the transactions contemplated hereby and all information
disclosed pursuant to Section 5.6 hereof shall be subject to the Exclusivity
Agreement.
(b) Seller and Buyer shall agree with each other as to the form and substance
of any press release related to this Agreement or the transactions contemplated
hereby; provided, however, that this Section 5.7(b) shall not prohibit any
party, following notification to the other parties if practicable, from making
any disclosure required by Applicable Law.
Section 5.8. Financing.
(a) Buyer shall use its reasonable efforts to obtain the Debt Commitment
Letter on or prior to the Financing Commitment Delivery Date, such Debt Commitment
Letter to contain conditions to Closing reasonably satisfactory to Buyer and
Seller. Buyer will keep Seller informed on a reasonably current basis, in
reasonable detail of the status of the efforts to arrange financing and shall,
promptly following the receipt of any draft commitment letters for financing
the transactions contemplated by this Agreement, Buyer shall furnish such
drafts to Seller.
(b) Buyer shall use its reasonable efforts to obtain the financing described
in the Debt Commitment Letter and to maintain the Debt Commitment Letter in
full force and effect and shall keep Seller informed on a reasonably current
basis in reasonable detail of the status of its efforts to finance the Cash
Consideration portion of the Purchase Consideration and Buyer's expenses contemplated
by this Agreement. Buyer shall provide prompt written notice to Seller of
the lender's refusal or stated refusal to provide the financing described
in the Debt Commitment Letter.
(c) Once the Debt Commitment Letter is delivered to Seller pursuant to this
Agreement, Buyer shall not amend, modify, withdraw or rescind the Debt Commitment
Letter in any way which would cause the Closing not to occur or delay the consummation
of the transactions contemplated hereby.
(d) Buyer shall pay all fees in respect of the Debt Commitment Letter when
due.
Section 5.9. Tax Matters.
(a) Termination of Tax Sharing Agreements. Except as otherwise provided
in this Section 5.9, all Tax sharing agreements, arrangements, policies and
guidelines, formal or informal, express or implied, that may exist between
the Companies and their Subsidiaries, on the one hand, and Seller or its Affiliates,
on the other hand, and all obligations thereunder shall terminate as of the
Closing, and the Companies and their Subsidiaries shall have no liability
thereunder for any and all amounts due in respect of periods prior to the
Closing Date.
(b) Responsibility for Pre-Closing Taxes. In determining its liability for
Losses under Section 7.2, Seller shall be responsible only for Taxes (or the
non-payment thereof) of the Companies and their Subsidiaries for all taxable
periods ending on or before the Closing Date and the portion of the taxable
period through the end of the Closing Date for any taxable period that includes
(but does not end on) the Closing Date ("Pre-Closing Tax Period");
provided, however, that Seller shall be liable only to the extent that all
such Taxes exceed the amount, if any, reserved for such Taxes in the Financial
Information.
(c) Straddle Periods. Unless prohibited by Applicable Law, Buyer, Seller
and the Companies shall cause the taxable year of the Companies and their
Subsidiaries to close on the Closing Date. In the case of any taxable period
that includes (but does not end on) the Closing Date (a "Straddle Period"),
the amount of any Taxes based on or measured by income or receipts of a Company
or Subsidiary of a Company for the Pre-Closing Tax Period shall be determined
based on an interim closing of the books as of the close of business on the
Closing Date and the amount of other Taxes of a Company or Subsidiary for
a Straddle Period which relate to the Pre-Closing Tax Period shall be deemed
to be the amount of such Tax for the entire Straddle Period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the total number
of days in the Straddle Period.
(d) Preparation of Pre-Closing Consolidated Returns. Each of the Companies
(and all of their Subsidiaries eligible to be so included, together with the
Companies, the "Company Subgroup") shall continue to be included
for all taxable periods ending on or before the Closing in the federal income
Tax Return for the group of which each Company is the common parent (each,
a "Group") and any required state or local income or franchise Tax
Returns that include the Company Subgroup (all such Tax Returns including
taxable periods of the Company Subgroup ending on or before the Closing Date
are hereinafter referred to as "Pre-Closing Consolidated Returns").
For the avoidance of doubt, all management bonuses and other transaction costs
accrued by each Company on or before the Closing Date shall be included in
the Pre-Closing Consolidated Returns. All Pre-Closing Consolidated Returns
shall be prepared and filed in a manner consistent with prior practice, except
as required by a change in Applicable Law. Seller shall be responsible, at
its own expense, for the preparation of the Pre-Closing Consolidated Returns
in a timely fashion. Buyer and its authorized representative will have the
right to review and comment upon such Pre-Closing Consolidated Return for
thirty (30) days following Buyer's receipt of such Pre-Closing Consolidated
Return or any amendment thereto. If Buyer disagrees with the tax treatment
of items on a Pre-Closing Consolidated Return, Buyer shall notify Seller in
writing of such disagreement prior to the close of such 30-day period, and
Seller and Buyer shall consult and attempt to resolve in good faith the disagreement.
In the event that Seller and Buyer are unable to resolve the disagreement
within fifteen (15) days following the end of the such 30-day period, Seller
and Buyer shall submit the matter to KPMG LLP to resolve the dispute as promptly
as possible. Buyer agrees that it will cause the Companies to apply for extensions
of the time to file the Pre-Closing Consolidated Returns to the extent necessary
to resolve any disputed items before filing such Tax Returns.
(e) Preparation of Straddle Period Returns. Buyer shall prepare or cause to
be prepared and file or cause to be filed all Returns of the Companies and their
Subsidiaries for any Straddle Period (each a "Straddle Period Return").
Buyer shall provide a copy of each such Straddle Period Return to the Seller
for its review and comment not later than thirty (30) days prior to the deadline
for filing each such Tax Return, and shall make all changes to each such Tax
Return reasonably requested by the Seller; provided, that Seller provides such
comments to Buyer at least ten (10) days prior to the deadline for filing such
Tax Return. Concurrently with the provision to the Seller of any Straddle Period
Return (including any draft Return), Buyer shall provide a computation of the
Pre-Closing Taxes reflected in any such Straddle Period Return (such computation,
the "Statement"). If Buyer files or causes to be filed a Straddle
Period Return that reflects a different amount of Pre-Closing Taxes from the
version initially presented to Seller, then Buyer shall provide a copy of such
Straddle Period Return, together with an amended Statement, to Seller concurrently
with its filing (or causing to be filed) such Straddle Period Return. Seller
and its authorized representative will have the right to review such Statement
for thirty (30) days following Seller's receipt of such Statement or any amendment
thereto (the "30-Day Review Period"). If Seller disagrees with the
allocation in such Statement, Seller shall notify Buyer in writing of such disagreement
prior to the close of the 30-Day Review Period, and Seller and Buyer shall consult
and attempt to resolve in good faith the disagreement. In the event that Seller
and Buyer are unable to resolve the disagreement within fifteen (15) days following
the end of the 30-Day Review Period, Seller and Buyer shall submit the matter
to KPMG LLP to resolve the dispute as promptly as possible.
(f) Tax Cooperation. After the Closing Date, Seller shall submit to Buyer
blank tax return workpaper packages reasonably necessary for Seller to prepare
any Pre-Closing Consolidated Returns. Buyer shall prepare or cause to be prepared
completely and accurately all information that Seller shall reasonably request
in such workpaper packages and shall submit to Seller such packages within
the later of sixty (60) days after Buyer's receipt thereof or forty five (45)
days after the close of the taxable period to which a workpaper package relates.
Each party shall cooperate with the other in connection with any Tax filing,
investigation, audit or other proceeding. Buyer and Seller shall preserve
and cause to be preserved all information, Returns, books, records and documents
relating to any liabilities for Taxes with respect to a taxable period until
the later of the expiration of all applicable statutes of limitation and extensions
thereof, or the conclusion of all litigation with respect to Taxes for such
period.
(g) Audits. Notwithstanding any other provisions hereof, if, after the Closing
Date, Buyer, the Company, or any of their Affiliates receives any notice,
letter, correspondence, claim or decree relating to Pre-Closing Taxes from
any Tax authority ("Tax Notice") and, upon receipt of such Tax Notice,
believes it has suffered or potentially could suffer any Losses relating to
Pre-Closing Taxes, Buyer shall, and shall cause the Company to, promptly deliver
such Tax Notice to the Seller; provided, however, that the failure of Buyer
to provide the Tax Notice to the Seller shall not affect the indemnification
rights of Buyer, the Company or any affiliate of Buyer pursuant to this Section
5.9 and Article VII hereof, except to the extent that Seller is prejudiced
by Buyer's failure to deliver such Tax Notice. Notwithstanding any other provision
of Article VII to the contrary, Seller shall have the right to handle, defend,
conduct and control any Tax audit or other proceeding involving the Company
that relates to such Tax Notice (except to the extent that such Tax Notice,
Tax audit or other proceeding relates to a period other than a Pre-Closing
Tax Period, and except to the extent that Seller would have no indemnification
obligations pursuant to this Section 5.9 or Article VII hereof), but Buyer
shall have the right to participate in such Tax audit or proceeding at its
own expense. Seller shall also have the right to compromise or settle any
such Tax audit or other proceeding that it has the authority to control pursuant
to the preceding sentence subject to Buyer's consent, which consent shall
not be unreasonably withheld. If Seller fails within a reasonable time after
notice to defend any such Tax Notice or the resulting audit or proceeding
as provided herein, Seller shall be bound by the results obtained by Buyer
in connection therewith. Seller shall pay to Buyer the amount of any Losses
incurred by Buyer within fifteen (15) days after a Final Determination of
such Losses. For purposes of this Agreement, a "Final Determination"
shall have the meaning given to the term "determination" by Code
Section 1313 and the Treasury Regulations thereunder with respect to United
States federal Tax matters; and with respect to foreign, state and local Tax
matters Final Determination shall mean any final settlement with a relevant
Tax authority that does not provide a right to appeal or any final decision
by a court with respect to which no timely appeal is pending and as to which
the time for filing such appeal has expired. For the avoidance of doubt, a
Final Determination with respect to United States federal Tax matters shall
include any formal or informal settlement entered with the IRS with respect
to which the taxpayer has no right to appeal.
(h) Carrybacks. To the extent permitted by law, Buyer shall not, and shall
cause the Company or any of its Subsidiaries not to, carry back any Tax attribute
to a period ending on or before the Closing Date.
Section 5.10. Employee Matters.
(a) Continuation of Employment. At the Closing, Buyer shall cause the Companies
and their Subsidiaries to offer continued employment to all of their respective
employees, except for those officers of the Companies or Subsidiaries who
will resign prior to or as of the Closing pursuant to Section 5.12 or otherwise
disclosed in writing to Seller by Buyer prior to the Closing, and to adopt
appropriate benefit plans, programs and policies for their employees; provided
that the Companies and their Subsidiaries shall have the same right to terminate
the employment of any employee following the Closing and the same right to
amend or terminate any compensation plan, program, arrangement or policy as
the Companies and their Subsidiaries have on the date hereof. After Closing,
Seller shall, and to the extent necessary shall cause Parent to, perform such
actions as are reasonably necessary to assist Buyer and the Companies to adopt
such benefit plans, programs, and policies for the benefit of the acquired
employees.
(b) Benefit Plans. From and after the Closing Date, Buyer shall grant all
employees of the Companies and their Subsidiaries credit for any service with
the Companies and their Subsidiaries earned prior to the Closing Date:
(i) for eligibility, vesting and benefit accrual (other than with respect
to any defined benefit pension plan) purposes; and
(ii) for purposes of vacation accrual and severance benefits under any employee
benefit plan, program or arrangement established or maintained by the Companies
and their Subsidiaries on or after the Closing Date (the "Buyer Benefit
Plans"). In addition, Buyer shall (i) waive all pre existing condition
exclusion and actively at work requirements and similar limitations, eligibility
waiting periods and evidence of insurability requirements under any Buyer
Benefit Plans to the extent waived or satisfied by an employee under any Employee
Benefit Plan as of the Closing Date, and (ii) take into account any covered
expenses incurred on or before the Closing Date by any employee (or covered
dependent thereof) of the Companies or any of their Subsidiaries for purposes
of satisfying applicable deductible, coinsurance and maximum out of pocket
provisions after the Closing Date under any applicable Buyer Benefit Plan.
After the Closing Date, Buyer shall be responsible for providing continuation
coverage required under Section 4980B of the Code and Title I, Part 6 of ERISA
to all former employees of the Companies or their Subsidiaries who terminated
employment on or before such date.
(c) Defined Contribution Plan. As soon as reasonably practicable on or after
the Closing Date, Seller agrees to cause the trustee of the Seller 401(k)
Plan (the "Seller Trustee") to fully vest all employees of the Companies
and their Subsidiaries in their accounts in the Seller 401(k) Plan and, upon
written request from Buyer, which request shall be made within thirty (30)
days after Closing if Buyer elects to exercise this option, to transfer an
amount equal to the vested account balances in the Seller 401(k) Plan attributable
to the employees of the Companies and/or their Subsidiaries to the trustee
of the Buyer 401(k) Plan (the "Buyer Trustee"). Buyer shall cause
the Buyer 401(k) Plan to accept any outstanding loans of an employee of the
Companies or their Subsidiaries and shall arrange to administer such loans
in substantially the same manner as under the Seller 401(k) Plan. In addition,
with respect to any amounts attributable to a loan to an employee of the Companies
or their Subsidiaries payable prior to the transfer contemplated under this
Section 5.10(c), Buyer shall execute whatever actions and make whatever arrangements
may be necessary to permit the periodic repayment of such amounts through
payroll deduction and the remittance of the payments to the Seller 401(k)
Plan. Such transfer shall be made to the Buyer Trustee entirely in (a) cash
or other assets acceptable to the Buyer Trustee, and (b) notes which represent
the participant loans of the employees of the Companies or their Subsidiaries.
Seller agrees to prepare and provide to Buyer, as soon as practicable following
the Closing Date, a list of the employees of the Companies and their Subsidiaries
and their alternate payees who are entitled to benefits under the Seller 401(k)
Plan, such employees' account balances thereunder, and other information as
may be reasonably requested by Buyer to establish and administer the transferred
account balances of the employees of the Companies or their Subsidiaries.
(d) Medical, Dental Health Expenses. Buyer shall be solely responsible for
all claims submitted by the current or former employees of the Companies and
their Subsidiaries under any health, medical or dental plans with respect
to any such claim which occurs on or after the Closing Date. Buyer shall fully
and completely reimburse and indemnify Seller for all fees, premiums or claims
paid by the Seller to or on behalf of the current or former employees of the
Companies and their Subsidiaries with respect to occurrences before the Closing
Date (provided that any such claim was unpaid as of the Closing Date) under
any Employee Benefit Plan, which is a health, medical or dental plan, regardless
of when such fee, premium or claim is actually paid.
Section 5.11. Termination of Affiliate Relations.
(a) All agreements between the Companies or their Subsidiaries, on the one
hand, and Seller or its Subsidiaries, on the other hand (other than agreements
solely between the Companies and their Subsidiaries, agreements listed on
Section 5.11 of the Companies Disclosure Schedules), shall be terminated as
of the Closing, and all obligations and liabilities thereunder shall have
been paid off or otherwise satisfied.
(b) Buyer shall obtain, prior to the Closing Date and effective as of the
Closing Date, letters of credit that shall replace the Letters of Credit and
the Letters of Credit shall be terminated as of the Closing Date.
Section 5.12. Directors and Officers; Other Relationships. At the Closing,
Seller shall cause to be delivered to Buyer duly signed resignations, effective
immediately after the Closing, of any directors or officers of the Companies
and their Subsidiaries who are directors or officers of Seller or its Affiliates
(other than any Company or any Subsidiary of a Company), and the resignation
of Gerald M. Cohn. In addition, subject to the terms of this Agreement and
any agreement listed on the Companies Disclosure Schedules, at or after the
Closing, upon reasonable prior written notice to Buyer, Seller and its Affiliates
may terminate any activities relating to, or services provided to, the Companies
or its Subsidiaries. At the Closing, Buyer, effective immediately after the
Closing, shall appoint new directors, officers, managing members and other
replacements for the Companies and Subsidiaries who resign in accordance with
this Section 5.12.
Section 5.13. Non-Solicitation of Employees. During the period beginning
on the Closing Date and ending twelve (12) months after the Closing Date,
Parent and Seller agree that they shall not, and shall cause each of their
respective Subsidiaries not to, solicit or endeavor to entice away, employ
or offer to employ any employee employed by any of the Companies or any of
their Subsidiaries as of the Closing Date (excluding Gerald M. Cohn) and any
such employee who is also employed by Seller or any of the Seller's Subsidiaries
(other than any Company or any of the Companies' Subsidiaries) as of the Closing
Date).
Section 5.14. Covenant Not to Compete. Seller and Parent agree that, during
the twelve (12) month period immediately following the Closing, neither Seller,
Parent nor any of the their respective Subsidiaries shall, within the Restricted
Territory (as defined below), engage or participate in, acquire any ownership
interest in, manage, act as a consultant to, operate, control or be connected
as a partner, or make a loan to any Person that engages in a business in competition
with the business of the Companies and their Subsidiaries as is being conducted
on the date hereof by designing, sourcing and distributing footwear (a "Competing
Business"); provided, however, that it shall not be a violation of this
Section 5.15 for Seller or any of its Affiliates (i) to own, directly or indirectly,
solely as an investment, securities of any Person that are traded on a national
securities exchange or the NASDAQ Stock Market (or a recognized securities
exchange outside the U.S.) if Seller or any of its Subsidiaries (x) is not
a controlling Person or a member of a group that controls such Person and
(y) does not, directly or indirectly, own more than 5% or more of the voting
securities of such Person, or (ii) to operate a Competing Business that has
been acquired by such Person, provided that such Competing Business accounted
for less than 10% of the net revenues of the total business acquired by such
Person and such Competing Business is sold within twelve (12) months of such
acquisition. The term "Restricted Territory" shall mean those countries
set forth on Section 5.14 of the Companies Disclosure Schedule.
Section 5.15. Return of Documents. In the event that the transactions contemplated
by this Agreement are not consummated for whatever reason, promptly following
the termination of this Agreement pursuant to Article VIII hereof, Buyer shall,
and Buyer shall cause its representatives to return to Seller any and all
documents furnished to any of them relating to Seller, the Companies and their
Subsidiaries, and all copies of any such documents in their possession or
control.
Section 5.16. Non-Solicitation of Buyers. Until the Closing or the termination
of this Agreement in accordance with its terms, none of Seller, its Affiliates,
nor any of their respective representatives, including their officers, directors,
employees, advisors, agents, security holders or any Person acting on their
behalf, shall, directly or indirectly, through any director, officer, employee,
agent, representative (including, without limitation, investment bankers,
attorneys and accountants) or otherwise, (i) encourage, solicit, initiate,
or engage in discussions or negotiations with, or provide any information
to, or take any other action to facilitate, any inquiries, discussions or
the making of any proposal that constitutes, or would reasonably be expected
to lead to, any proposed or actual sale, lease or other disposition, directly
or indirectly, by merger, consolidation, share exchange or otherwise, of any
portion of the business, properties, assets (except for the sale of properties
or assets in the ordinary course of business not in violation of Section 5.1
hereof) or Equity Interests of the Companies or the Securities of their Subsidiaries,
or a tender offer, merger, consolidation, or other business combination involving
the Seller, or any transaction which is similar in form, substance or purpose
to any of the foregoing transactions (an "Acquisition Proposal"),
(ii) participate in any discussions or negotiations, or otherwise communicate
in any way with any Person (other than the Buyer or any of its representatives)
regarding an Acquisition Proposal, or (iii) enter into any agreement, arrangement,
or understanding regarding an Acquisition Proposal or requiring the Seller
to abandon, terminate or fail to consummate the transactions contemplated
herein. Without limiting the foregoing, it is understood by the Seller that
any violation of the restrictions set forth in this Section 5.16 by any officer,
director, or employee of the Seller or if directed by the Seller, any investment
banker, financial advisor, attorney, accountant or other representative retained
by the Seller shall be deemed a breach of this Section 5.16 by the Seller.
The Seller, its Affiliates or any of their respective representatives shall
immediately terminate all discussions and negotiations with any Person (other
than Buyer and its representatives) concerning any Acquisition Proposal.
Section 5.17. Notification of Breach. During the period from the date of this
Agreement and continuing until the Closing, Seller agrees to promptly advise
Buyer of any breach of this Agreement in any material respect by Seller, the
Companies or their Subsidiaries, or any inaccuracy of any representation or
warranty made by Seller under this Agreement. In addition, during the period
from the date of this Agreement and continuing until the Closing, Buyer agrees
to promptly advise Seller of any breach of this Agreement in any material respect
by Buyer, or any inaccuracy of any representation or warranty made by Buyer
under this Agreement. In no event shall any disclosure of such breach or inaccuracy
impair the rights and remedies of any party hereto with respect to any breach
or inaccuracy by the other party hereto arising prior to such disclosure.
Section 5.18. Audit. No later than three (3) Business Days prior to the
Closing, Seller shall provide to the Buyer an audited combined income statement
and statements of cash flows and owners' equity for the Companies and their
Subsidiaries for the fiscal year ending September 30, 2002, and a combined
balance sheet, income statement and statements of cash flows and owners' equity
for the Companies and their Subsidiaries for the fiscal years ending September
30, 2003 and 2004, in each case audited by Ernst & Young LLP (the "Closing
Financial Statements"). Promptly following the receipt of any draft of
the Closing Financial Statements, Seller shall furnish such drafts to Buyer.
At the Closing, Seller shall provide a certificate from a senior officer of
Seller certifying that the Closing Financial Statements have been prepared
in a manner consistent with GAAP, and fairly present, in all material respects,
the financial position of the Companies and their Subsidiaries as of such
dates and the results of operations of the Companies and their Subsidiaries
for the periods covered thereby, in each case on a combined basis, including
footnotes and other presentation items.
Section 5.19. Monthly Financial Information Reporting.
(a) No later than twenty (20) days after the end of each month commencing
after the date hereof, Seller shall deliver to Buyer the monthly reporting
information (in form and substance) customarily provided to Seller by the
Companies and their Subsidiaries and such other financial information as reasonably
requested by Buyer with respect to their combined and combining operations
for each month.
(b) Buyer will cause the Companies and their Subsidiaries to provide to
Seller, within forty-five (45) days of Closing, the monthly reporting information
(in form and substance) customarily provided to Seller by the Companies and
their Subsidiaries and such other financial information as reasonably requested
with respect to their combined operations for the period and/or periods up
to Closing. In addition, Buyer shall cause each of the Companies and their
Subsidiaries' employees, agents and representatives to cooperate and assist
Seller in the preparation of the Seller's financial statements for each period
prior to Closing, including in connection with the audit of the Seller's financial
statements for any such period.
Section 5.20. Debt Commitment Letter. Upon delivery to Seller of a true
and correct copy of the Debt Commitment Letter, such copy will be attached
hereto as Exhibit B.
Section 5.21. Payments. Seller shall pay all Retained Liabilities promptly as
they become due and payable, except to the extent subject to good faith disputes.
Section 5.22. Actions Subsequent to Closing. From and after the Closing,
assuming consummation of the Closing, each of Buyer and Seller shall, from
time to time, subject to Section 5.5 hereof and without any further consideration
take commercially reasonable efforts to do, execute, acknowledge, obtain and
deliver all such further acts, deeds, consents and approvals from third parties,
registrations and filings as is required by such other party more effectively
to effect the transactions contemplated by this Agreement; provided, however,
that following Closing Buyer shall have the responsibility for obtaining all
outstanding third party consents. Notwithstanding anything to the contrary,
Seller shall not be required to pay any costs or expenses associated with
obtaining third party consents following the Closing.
Section 6.1. Conditions to Buyer's Obligations. The obligations of Buyer
to effect the transactions contemplated hereby shall be subject to each of
the following conditions, any one or more of which may be waived in writing
by Buyer in whole or in part:
(a) each of the representations and warranties of Seller contained in this
Agreement, (i) to the extent qualified by materiality, shall be true and correct
and (ii) to the extent not qualified by materiality, shall be true and correct
in all material respects, when made and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and
as of the Closing Date (except (i) that representations and warranties that
are made as of a specific date need be true and correct only as of such date;
and (ii) as contemplated or permitted by this Agreement to change between
the date of this Agreement and the Closing Date);
(b) Seller shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by Seller at or prior to the Closing Date;
(c) Buyer shall have received no less than the Aggregate Cash Consideration
in debt financing pursuant to the Debt Commitment Letter (the "Financing");
(d) Seller shall have delivered to Buyer a certificate from a senior executive
officer of Seller dated as of the Closing Date, confirming the satisfaction
of the conditions contained in paragraphs (a) and (b) of this (e) The Financial Releases shall have been executed and delivered;
(f) Seller shall have executed and delivered to Buyer, a termination agreement,
in form substantially similar to the form attached as Exhibit C hereto (a
"Termination Agreement"), terminating the Companies' and their Subsidiaries'
obligations under the Amended and Restated Management Services Agreement,
dated as of April 7, 2003, by and among SILLC Management, Inc., Parent, EJ
Footwear, certain of the Companies, and certain other Subsidiaries of Parent;
(g) Buyer shall have received an opinion, dated the Closing Date, from Dechert
LLP, counsel to Seller, substantially in the form attached hereto as Exhibit
D;
(h) Seller shall have executed and delivered, and shall have caused ACE
Property & Casualty Insurance Co. and AIG Insurance Company (each, an
"Insurer") to execute, an Assumption Agreement, by and among Seller,
Buyer and each Insurer (the "Insurance Assumption Agreements"),
in form reasonably satisfactory to Buyer;
(i) Seller shall have executed and delivered to Buyer the Escrow Agreement;
(j) At the Closing, Seller shall have delivered to Buyer certificates representing
the Equity Interests in accordance with Section 2.2 above;
(k) Seller shall have delivered the Escrow Letter of Credit to the Escrow
Agent;
(l) Seller shall have obtained and delivered to Buyer (i) the consents from
third parties set forth on Section 6.1(l)(i) of the Companies Disclosure Schedule,
(ii) at least 75% of the consents from third parties set forth on Section
6.1(l)(ii) of the Companies Disclosure Schedule, and (iii) the Governmental
Consents set forth on Section 6.1(l)(iii) of the Companies Disclosure Schedule;
(m) Seller shall have paid to the employees of each of the Companies and
their Subsidiaries, any and all employee bonuses earned by such employees
for the fiscal year ended September 30, 2004;
(n) Seller shall have executed and shall have caused Gerald M. Cohn to have
executed a Termination Agreement, including a noncompete covenant, substantially
in the form previously agreed to by Buyer and Seller with such changes as
shall be reasonably satisfactory to Buyer;
(o) Seller shall have caused, and provided evidence of same reasonably satisfactory
to Buyer, all payments due and payable to be made to participants of the EJ
Footwear 2000 Phantom Unit Plan with respect to all outstanding vested phantom
units held by participants pursuant to Section 7.1(a) of the EJ Footwear 2000
Phantom Unit Plan;
(p) Seller shall have caused, and provided evidence of same reasonably satisfactory
to Buyer, EJ Footwear to deposit the aggregate amount due and payable with
respect to unvested phantom units into a trust for the benefit of the participants
pursuant to Section 7.2(a) of the EJ Footwear 2000 Phantom Unit Plan or at
Seller's option, shall have caused such amounts to be paid to the participants
as though such units were vested; and
(q) Seller shall have caused, and provided evidence of same reasonably satisfactory
to Buyer, its appropriate Subsidiaries to have paid, in a lump sum, all amounts
due and payable pursuant to Section 7(b) of the deferred compensation agreements
listed on Section 3.14 of the Companies Disclosure Schedules.
Section 6.2. Conditions to Seller's Obligations. The obligations of Seller to
effect the transactions contemplated hereby shall be subject to each of the
following conditions, any one or more of which may be waived in whole or in
part by Seller in writing:
(a) each of the representations and warranties of Buyer contained in this
Agreement, (i) to the extent qualified by materiality, shall be true and correct
and (ii) to the extent not qualified by materiality, shall be true and correct
in all material respects, when made and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and
as of the Closing Date (except (i) that representations and warranties that
are made as of a specific date need be true and correct only as of such date;
and (ii) as contemplated or permitted by this Agreement to change between
the date of this Agreement and the Closing Date);
(b) Buyer shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing Date;
(c) Buyer shall have delivered to Seller a certificate, dated as of the
Closing Date, from a senior executive officer of Buyer confirming the satisfaction
of the conditions contained in paragraphs (a) and (b) of this Section 6.2;
(d) The Financial Releases shall have been executed and delivered;
(e) The parties hereto shall have made and obtained the Governmental Consents;
(f) Buyer shall have executed and delivered to Seller the Escrow Agreement;
(g) Buyer shall have executed and delivered to Seller, and shall have caused
the Insurers to execute, and deliver to Seller the Insurance Assumption Agreements
in form reasonably satisfactory to Seller;
(h) Buyer shall have executed and delivered to Seller the Registration Rights
Agreement, substantially in the form attached as Exhibit E hereto (the "Registration
Rights Agreement");
(i) Seller shall have received an opinion, dated the Closing Date, from
Porter, Wright, Morris & Arthur LLP, counsel to Buyer, substantially in
the form attached hereto as Exhibit F;
(j) At the Closing, Buyer shall have paid to Seller the Aggregate Cash Consideration
as required by Section 2.4 above, delivered to Seller the Stock Consideration;
and
(k) Buyer shall have executed and delivered to Seller the Beacon Letter,
substantially in the form attached as Exhibit G hereto (the "Beacon Letter").
Section 6.3. Mutual Conditions. The obligations of Seller, on the one hand,
and Buyer, on the other hand, to effect the Closing shall be subject to the
condition that no order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated by this Agreement shall be
in effect, that no proceeding initiated by any Governmental Authority seeking
an injunction shall be pending and that no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any Governmental Authority which prohibits, restricts or makes illegal consummation
of the transactions contemplated hereby.
Section 7.1. Survival. Except as otherwise provided in this Agreement, the
representations, warranties and covenants contained in this Agreement shall
survive the Closing until the date that is fifteen (15) months after the Closing
Date (the "General Survival Period"); except (i) with respect to
representations dealing with the Retained Liabilities (Section 2.10), Organization
and Related Matters (Section 3.3 and Section 4.3), Expenses (Section 5.5),
Actions Subsequent to Closing (Section 5.22), and to the extent specified
in Article IX, the Parent Guaranty (Article IX) which shall survive indefinitely,
and (ii) with respect to Tax Matters (Sections 3.12 and 5.9) and Benefit Plans
(Section 3.14), which shall survive to the applicable statute of limitations.
Section 7.2. Indemnification.
(a) From and after the Closing Date and subject to this Article VII, Seller
agrees to indemnify and hold harmless Buyer and its Affiliates (including
after the Closing, the Companies and their Subsidiaries) and their respective
successors, against and in respect of any and all losses, claims, damages,
liabilities, costs and expenses, including reasonable legal fees and expenses
("Losses") sustained by Buyer or any Affiliate, resulting or arising
from or otherwise relating to (i) any breaches of Seller's representations
and warranties set forth in Article III of this Agreement or in any certificate
furnished pursuant hereto or in connection with the transactions contemplated
hereby, (ii) any nonfulfillment of or failure to comply with any covenant
of Seller set forth in this Agreement, (iii) the Retained Liabilities, or
(iv) any Pre-Closing Taxes as set forth in Section 5.9. Buyer's right to indemnification
hereunder shall not be limited or affected in any way by any pre-Closing investigation
by the Buyer.
(b) From and after the Closing Date and subject to this Article VII, Buyer
shall indemnify and hold harmless Seller and its Affiliates against and in
respect of any and all Losses sustained by Seller or any Affiliate resulting
or arising from or otherwise relating to (i) any breaches of Buyer's representations
and warranties set forth in Article IV of this Agreement or in any statement
or certificate furnished pursuant hereto or in connection with the transactions
contemplated hereby and (ii) any nonfulfillment of or failure to comply with
any covenant of Buyer set forth in this Agreement.
(c) Any payments pursuant to this Article VII shall be treated as an adjustment
to the Purchase Consideration.
Section 7.3. Method of Asserting Claims, Etc. The obligations and liabilities
of any party hereto against which indemnification is sought hereunder with respect
to Losses resulting from the assertion of liability by third parties shall be
subject to this Section 7.3.
(a) Promptly after receipt by any Indemnified Party of notice or Knowledge
of any demand or claim or the commencement of any action, proceeding or investigation
(an "Asserted Liability") that could reasonably be expected to result
in Losses, the Indemnified Party shall give notice thereof (a "Claims
Notice") to the other party obligated to provide indemnification pursuant
to Section 7.2(a) or Section 7.2(b) (the "Indemnifying Parties").
Each Claims Notice shall describe the nature and basis of the Asserted Liability
in reasonable detail, and shall indicate the amount (estimated, if necessary)
of the Losses that have been or may be suffered by the Indemnified Party.
The rights of any Indemnified Party to be indemnified hereunder shall not
be adversely affected by its failure to give, or its failure to timely give,
a Claims Notice with respect thereto unless, and if so, only to the extent
that, the Indemnifying Party is prejudiced thereby.
(b) The Indemnifying Party shall have the right, exercisable by written
notice to the Indemnified Party within sixty (60) days of receipt of a Claims
Notice from the Indemnified Party, to assume the exclusive defense, settlement,
adjustment and compromise of such Asserted Liability, using counsel selected
by the Indemnifying Party and reasonably acceptable to the Indemnified Party.
Should the Indemnifying Party elect to assume the exclusive defense of the
Asserted Liability, the Indemnifying Party shall not be liable to the Indemnified
Party for legal expenses incurred by the Indemnified Party in connection with
the defense thereof. Subject to the foregoing, if the Indemnifying Party elects
to compromise or defend such Asserted Liability, the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Asserted Liability. If the Indemnifying Party elects
not to compromise or defend the Asserted Liability or fails to notify the
Indemnified Party of its election as herein provided, the Indemnified Party
may pay, compromise or defend such Asserted Liability. The Indemnified Party
and the Indemnifying Party may participate, and to be represented by counsel,
at their own expense, in the defense of such Asserted Liability. If the Indemnifying
Party chooses to defend any claim, the Indemnified Party shall make available
to the Indemnifying Party any books, records or other documents within its
control, and the reasonable assistance of its employees, for which the Indemnifying
Party shall be obliged to reimburse the Indemnified Party the reasonable out-of-pocket
expenses of making them available.
(c) If any Indemnifying Party has assumed the exclusive defense of an Asserted
Liability in accordance with the terms hereof, the Indemnifying Party shall
have the right to consent to the entry of judgment with respect to, or otherwise
settle such Asserted Liability without the consent of the Indemnified Party
if (i) the settlement involves solely monetary damages and (ii) the Indemnifying
Party expressly agrees in writing to the Indemnified Party that, as between
the two, the Indemnifying Party is solely obligated to satisfy and discharge
the claim. If the foregoing conditions are not satisfied, the Indemnifying
Party shall have the right to consent to the entry of judgment with respect
to, or otherwise settle such Asserted Liability only upon receipt of the written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld. If the Indemnified Party does not give such consent, the Indemnifying
Party shall resume the diligent defense of the Asserted Liability. Regardless
of whether the Indemnifying Party elects to assume the exclusive defense of
the Asserted Liability in accordance with the terms hereof, the Indemnified
Party shall not admit any liability with respect to, consent to the entry
of judgment with respect to, or otherwise settle such Asserted Liability without
the prior written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.
Section 7.4. Indemnification Amounts. Seller shall not have liability under
Section 7.2(a) until the aggregate amount of Buyer's Losses attributable to
indemnification claims under such section for which a Claims Notice was properly
delivered to Seller pursuant to Section 7.3 exceeds $977,000 (the "Seller
Basket Amount"); provided, however, that once the aggregate amount of Buyer's
Losses attributable to indemnification claims under Section 7.2(a) equal or
exceed the Seller Basket Amount, all of Buyer's Losses attributable to such
indemnification claims will be indemnifiable by Seller. Seller's obligation
to indemnify pursuant to the foregoing shall be limited to $8,793,000 (the "Seller
Maximum Amount"). Notwithstanding the foregoing, neither the Seller Basket
Amount nor the Seller Maximum Amount shall apply to Losses resulting from (i)
the Retained Liabilities (Section 2.10), (ii) breaches by Seller with respect
to representations and warranties set forth in Organization and Related Matters
(Section 3.3), Tax Matters (Section 3.12), those sections of Benefit Plans (Section
3.14) that relate to Losses under an Employee Benefit Plan subject to Title
IV of ERISA or that relate to Losses under an Employee Benefit Plan of an ERISA
Affiliate of Seller under which no employees of the Companies or any of their
Subsidiaries participates or has participated, and Environmental Matters (Section
3.15), or for (iii) fraudulent or willful and intentional breaches with the
intent to deceive, for all of which Losses the Seller shall be liable whether
or not the Seller Basket Amount has been satisfied. Additionally and notwithstanding
the foregoing, the Seller Maximum Amount shall not apply to Losses resulting
from breaches by Seller with respect to representations and warranties set forth
in Benefit Plans (Section 3.14). Buyer shall not have liability under Section
7.2(b) until the aggregate amount of Buyer's Losses attributable to indemnification
claims under such section for which a Claims Notice was properly delivered to
Seller pursuant to Section 7.3 exceeds $977,000 (the "Buyer Basket Amount");
provided, however, that once the aggregate amount of Seller's Losses attributable
to indemnification claims under Section 7.2(b) equal or exceed the Buyer Basket
Amount, all of Seller's Losses attributable to such indemnification claims will
be indemnifiable by Buyer. The maximum liability of Buyer under Section 7.2(b)
is $8,793,000 (the "Buyer Maximum Amount"). Notwithstanding the foregoing,
neither the Buyer Basket Amount nor the Buyer Maximum Amount shall apply to
Losses resulting from (i) breaches by Buyer with respect to representations
and warranties set forth in Organization and Related Matters (Section 4.3) or
(ii) fraudulent or willful and intentional breaches with the intent to deceive,
for all of which Losses the Buyer shall be liable whether or not the Buyer Basket
Amount has been satisfied.
Section 7.5. Losses Net of Insurance, Etc. The amount of any Loss for which
indemnification is provided under Section 7.2 shall be net of (i) any amounts
recovered by the Indemnified Party pursuant to any indemnification by or indemnification
agreement with any third party, (ii) any insurance proceeds or other cash
receipts or sources of reimbursement recoverable in respect of such Loss (each
source named in clauses (i) and (ii), a "Collateral Source"), (iii)
an amount equal to the Tax benefit attributable to such Loss and (iv) any
specific accruals or reserves (or overstatement of liabilities in respect
of actual liability) included in the Financial Information. The parties shall
take and shall cause their Affiliates to take all reasonable steps to mitigate
any Loss upon becoming aware of any event that would reasonably be expected
to, or does, give rise thereto. Indemnification under this Article VII shall
not be available to Buyer or Seller, as the case may be, unless the party
seeking indemnification under this Article VII first uses all reasonable efforts
to seek recovery from all Collateral Sources. The parties acknowledge and
agree that no right of subrogation shall accrue or inure to the benefit of
any Collateral Source hereunder. The Indemnifying Party may require an Indemnified
Party to assign the rights to seek recovery from a Collateral Source; provided,
that the Indemnifying Party will then be responsible for pursuing such recovery
at its own expense. If the amount to be netted hereunder from any payment
required under Section 7.2 is determined after payment by the Indemnifying
Party of any amount otherwise required to be paid to an Indemnified Party
pursuant to this Article VII, the Indemnified Party shall repay to the Indemnifying
Party, promptly after such determination, any amount that the Indemnifying
Party would not have had to pay pursuant to this Article VII had such determination
been made at the time of such payment..
Section 7.6. Satisfaction of Claims. The parties acknowledge and agree that
Seller shall have the option to satisfy its obligations arising under Section 7.7. No Set-Off. No party shall have any right to set-off any Losses
against any payments to be made by either of them pursuant to this Agreement
or otherwise.
Section 7.8. Losses for Environmental Liabilities. With respect to any Losses
for Environmental Liabilities under subparagraph (e) of the definition of
Retained Liabilities or Losses for any breaches of Seller's representations
or warranties set forth in Section 3.15 of this Agreement, which require Remediation
of the Leased Real Property, Seller shall have the right, in its sole discretion,
to conduct and control the Remediation, and Seller's Losses shall only include
such Remediation necessary to achieve the "Remediation Standard,"
which shall be such Remediation that (i) complies with the minimum and least
stringent standards enforceable under applicable Environmental Laws, (ii)
is approved or authorized by Governmental Authorities with jurisdiction over
such matters, where such approval or authorization is required by applicable
Environmental Laws, (iii) complies with the standards (if any) in the leases
for the Leased Real Property as such leases are in effect as of the Closing
Date, and (iv) fully resolves any claim related to such Retained Liability.
Seller may use the most commercially reasonable and cost-effective method
of achieving the Remediation Standard, including the use of commercial, industrial
and/or other forms of non-residential cleanup criteria and the use of environmental
land use restrictions or similar institutional controls, so long as such restrictions
or controls are not prohibited by the leases for the Leased Real Property
or impair in any material respect, the Companies' or their Subsidiaries' operations.
Section 7.9. Sole Remedy.
(a) Buyer acknowledges and agrees that the remedies provided for in Article
VII of this Agreement shall be Buyer's sole and exclusive remedy for monetary
damages vis a vis Seller with respect to the subject matter of this Agreement.
(b) Seller acknowledges and agrees that the remedies provided for in Article
VII of this Agreement shall be Seller's sole and exclusive remedy for monetary
damages vis a vis Buyer with respect to the subject matter of this Agreement.
Section 8.1. Termination. (a) Notwithstanding anything herein or elsewhere
to the contrary, this Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time prior to the Closing as follows:
(i) by the mutual written consent of Buyer and Seller;
(ii) by either Seller or Buyer if there shall be any law or regulation that
materially restricts the consummation of the transactions contemplated by
this Agreement or makes the consummation of the transactions illegal or if
a judgment, injunction, order or decree of a court or other competent Governmental
Authority enjoining Seller or Buyer from consummating the transactions contemplated
by this Agreement shall have been entered, and such judgment, injunction,
order or decree shall have become final and nonappealable; provided that a
party may not terminate this Agreement pursuant to Section 8.1(a)(ii) if it
or its Affiliates' failure to perform its obligations under this Agreement
resulted in or substantially contributed to the issuance of such judgment,
injunction, order or decree;
(iii) by Seller, on the one hand, or by Buyer, on the other hand, if there
shall have been a material breach by the other of any of its representations
and warranties set forth in this Agreement, which breach would cause one or
more of the conditions set forth in Section 6.1 (in the case of a breach by
Seller), Section 6.2 (in the case of a breach by Buyer) or Section 6.3 not
to be satisfied; provided, that the party whose material breach caused such
condition not to be satisfied shall not be entitled to terminate this Agreement
pursuant to this Section 8.1(a)(iii); provided, further, that if such breach
is of a nature that it may be cured, the non-breaching party shall not be
entitled to terminate this Agreement pursuant to this Section 8.1(a)(iii)
unless such breach remains uncured 30 days after written notice thereof shall
have been received by the party alleged to be in breach;
(iv) by Seller, on the one hand, or by Buyer, on the other hand, if there
shall have been a material breach of any of the covenants or agreements set
forth in this Agreement, which breach would cause one or more of the conditions
set forth in Section 6.1 (in the case of a breach by Seller), Section 6.2
(in the case of a breach by Buyer) or Section 6.3 not to be satisfied; provided,
that the party whose material breach caused such condition not to be satisfied
shall not be entitled to terminate this Agreement pursuant to this Section
8.1(a)(iv); provided, further, that if such breach is of a nature that it
may be cured, the non-breaching party shall not be entitled to terminate this
Agreement pursuant to this Section 8.1(a)(iv) unless such breach remains uncured
30 days after written notice thereof shall have been received by the party
alleged to be in breach;
(v) at the election of the Buyer if, the Closing Financial Statements include
any information that (i) was not previously Known by the Buyer and (ii) would
be reasonably likely to cause a Material Adverse Effect on the Companies;
(vi) at the election of Seller, if the Debt Commitment Letter is not delivered
to Seller by the Financing Commitment Delivery Date; and
(vii) at the election of Buyer or Seller, if the Closing Date shall not
be on or before January 18, 2005 (the "Drop Dead Date").
Notwithstanding Sections 8.1(a)(ii)-(vii) hereof, a party who is in material
breach of any of its obligations or representations and warranties hereunder
shall not have the right to terminate this Agreement pursuant to Sections
8.1(a)(ii)-(vii).
(b) The termination of this Agreement shall be effectuated by the delivery
by the party terminating this Agreement to the other party of a written notice
of such termination. If this Agreement so terminates, it shall become null
and void and have no further force or effect, except as provided in Section
8.2.
Section 8.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement (other than Section 5.4)
shall forthwith become void and have no effect except that, notwithstanding
anything to the contrary contained in this Agreement, no party shall be relieved
or released from any liabilities or Losses arising out of its willful breach
of any provision of this Agreement.
Section 9.1. Representations and Warranties of Parent. Parent represents
and warrants to Buyer that:
(a) It is a limited liability company, duly organized, validly existing
and in good standing under the laws of its jurisdiction of its organization
and has all requisite authority to conduct its business in each jurisdiction
in which its business is conducted.
(b) It has all requisite limited liability company power and authority to
execute and deliver this Agreement and to perform its obligations under this
Article IX. This Agreement has been duly authorized by all necessary limited
liability company action on the part of Parent and has been duly and validly
executed and delivered by Parent. Assuming the due authorization, execution
and delivery of this Agreement by the other parties hereto, this Agreement
constitutes the legal, valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms.
(c) Neither the execution and delivery of this Agreement by Parent, nor
the consummation of the transactions contemplated hereby and the performance
of this Agreement by Parent, assuming that the Governmental Consents have
been obtained prior to the Closing, will (i) (x) violate, conflict with, or
result in a breach of, or constitute a default (or in the event that, with
notice or lapse of time or both, would constitute a default) under, any provision
of the organizational documents or operating agreement of Parent or (y) require
consent under, violate, conflict with, or result in a breach, in any material
respect, of any provision of, or constitute a default (or an event that, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate or modify the performance or payment
required by, or result in a right of termination, acceleration or modification
under, or result in the creation of any Encumbrance upon any of the properties
or assets of Parent, any of the Companies or any of the Subsidiaries of the
Companies under any of the terms, conditions or provisions of any material
Contract to which Parent, Seller, any of the Companies or any of the Subsidiaries
of the Companies is a party or to which any of the Parent's, Seller's, Companies'
or any of the Subsidiaries' of the Companies properties or assets may be subject,
except for such violations which would not have a Material Adverse Effect
on Parent, Seller or the Companies, or (ii) violate any Applicable Law or
conflict with any of the Parent's, Seller's, Companies' or their Subsidiaries'
respective right to fully own and use its properties or assets, except for
such violations which would not have a Material Adverse Effect on Parent,
Seller or the Companies.
(d) Set forth on Section 9.1(e) of the Companies Disclosure Schedules is
the unaudited balance sheet of Parent as of September 30, 2004 ("Parent's
Balance Sheet"). Parent's Balance Sheet was derived from the internal
books and records of Parent and fairly presents, in all material respects,
the financial position of Parent as of September 30, 2004.
Section 9.2. Guaranty. Parent hereby absolutely and unconditionally guarantees,
as primary obligor and not as surety, the full and punctual payment and performance
of all obligations and liabilities of Seller arising under Article VII (collectively,
the "Guaranteed Obligations"). Upon the failure of the Seller to
punctually pay any Guaranteed Obligations subject to the terms and conditions
of Article VII (including the Seller Basket Amount, the Seller Maximum Amount,
the survival period and the procedures set forth in Section 7.3), Parent agrees
that Buyer and its Affiliates shall be entitled to enforce directly against
Parent any of the Guaranteed Obligations. This guaranty is a guaranty of payment
and not of collection. Parent waives any right to require Buyer or its Affiliates
to sue the Parent, the Seller or any other Person to enforce its payment against
Losses relating to, arising out of or otherwise in connection with the Seller's
indemnity obligations under Article VII hereof; provided, that Buyer and its
Affiliates shall not be entitled to bring a claim against Parent so long as
funds are available in the Escrow Account Letter of Credit to pay such obligations.
Prior to any voluntary or involuntary dissolution of Parent, Parent shall
have caused with respect to Gerald M. Cohn, a participant of the Georgia Boot
Supplemental Executive Retirement Plan (the "SERP"), and provided
evidence of the same reasonably satisfactory to Buyer, (a) the payment to
such participant in the form of a lump sum equal to the present value of the
benefit payable to such participant pursuant to the SERP in lieu of the actual
benefit payable to such participant under the SERP or (b) the payment to such
participant in the form of an annuity contract, purchased from an independent
insurance company, which would provide for a benefit actuarially equivalent
to the benefit payable to such participant under the SERP, or (c) deposited
in escrow, on terms and with such financial institution reasonably acceptable
to Buyer, an amount equal to the benefit actuarially equivalent to the benefit
payable to such participant under the SERP to permit the payment of the benefit
payable to such participant pursuant to the SERP.
Section 10.1. Amendments; Extension; Waiver. Subject to compliance with
Applicable Law, this Agreement may be amended, altered or modified by written
instrument executed by each of the parties hereto.
Section 10.2. Entire Agreement. This Agreement, together with the Companies
Disclosure Schedule, the Exclusivity Agreement, and the other agreements and
instruments of the parties delivered herewith, constitute the entire understanding
and agreement of the parties hereto, and supersedes all prior agreements and
understandings, written or oral, among the parties with respect to the subject
matter hereof; provided, however, in the event of a conflict between the terms
of this Agreement and the Exclusivity Agreement, this Agreement shall control.
No representation, warranty, promise, inducement or statement of intention
has been made by any party that is not expressly embodied in this Agreement
or such other agreements and instruments, and none of the parties shall be
bound by, or be liable for, any alleged representation, warranty, promise,
inducement or statement of intention not embodied herein or therein.
Section 10.3. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of
or Exhibit or Schedule to this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." Whenever the context
may require, any pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms and the singular form of nouns and pronouns
shall include the plural and vice versa. The phrases "the date of this
Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date
set forth in the first paragraph of this Agreement.
Section 10.4. Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Agreement in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
Section 10.5. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (a) delivered in person, (b) transmitted
by telecopy (with confirmation), (c) mailed by certified or registered mail
(return receipt requested and obtained) or (d) delivered by an express courier
(with confirmation) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
Section 10.6. Binding Effect; Persons Benefiting; No Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and the
respective successors and permitted assigns of the parties. Except as set
forth in the preceding sentence, nothing in this Agreement is intended or
shall be construed to confer upon any Person other than the parties hereto
and their successors and permitted assigns any right, remedy or claim under
or by reason of this Agreement or any part hereof. Without the prior written
consent of each of the other parties hereto, this Agreement and the rights
hereunder may not be assigned by any of the parties hereto.
Section 10.7. Supplemental Disclosure.
(a) Seller may provide information to Buyer with respect to any matter hereafter
arising or discovered which, if existing or known at date of this Agreement,
would have been required to be set forth in the Companies Disclosure Schedule;
provided, that no such information shall constitute an amendment of the Companies
Disclosure Schedule or of any statement, representation or warranty in this
Agreement; provided, further, that if Buyer elects to proceed with the Closing,
the Companies Disclosure Schedule shall be deemed amended to include such
information effective upon the Closing and Buyer shall be precluded from making
any claim for Losses under Article VII hereof based on the Companies Disclosure
Schedule or any representation or warranty of Seller that has been so supplemented.
(b) Buyer may provide information to Seller with respect to any matter hereafter
arising or discovered which, if existing or known at date of this Agreement,
would have been required to be set forth in the Buyer Disclosure Schedule;
provided, that no such information shall constitute an amendment of the Buyer
Disclosure Schedule or of any statement, representation or warranty in this
Agreement; provided, further, that if Seller elects to proceed with the Closing,
the Buyer Disclosure Schedule shall be deemed amended to include such information
effective upon the Closing and Seller shall be precluded from making any claim
for Losses under Article VII hereof based on the Buyer Disclosure Schedule
or any representation or warranty of Buyer that has been so supplemented.
Section 10.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same agreement, it being understood
that all of the parties need not sign the same counterpart.
Section 10.9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without reference to
the choice of law principles thereof. To the fullest extent permitted by Applicable
Law, the parties hereby unconditionally and irrevocably waive any claim to
assert that the law of any other jurisdiction governs this Agreement. The
parties hereby agree and consent to be subject to the exclusive jurisdiction
of the United States District Court for the District of Delaware, and in the
absence of such Federal jurisdiction, the parties consent to be subject to
the exclusive jurisdiction of a court of the State of Delaware, and hereby
waive the right to assert the lack of personal or subject matter jurisdiction
or improper venue in connection with any such suit, action or other proceeding.
In furtherance of the foregoing, each of the parties (i) waives the defense
of inconvenient forum, (ii) agrees not to commence any suit, action or other
proceeding arising out of this Agreement or any transactions contemplated
hereby other than in any such court, and (iii) agrees that a final judgment
in any such suit, action or other proceeding shall be conclusive and may be
enforced in other jurisdictions by suit or judgment or in any other manner
provided by law.
Section 10.10. Mutual Drafting. The parties hereto have been represented
by counsel who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of any laws or rules relating
to the interpretation of contracts against the drafter of any particular clause
should be applied to this Agreement and therefore waive their effects.
Section 10.11. Certain Understandings. Each of the parties is a sophisticated
legal entity or person that was advised by experienced counsel and, to the
extent it deemed necessary, other advisors in connection with this Agreement.
Accordingly, each of the parties hereby acknowledges that (i) no party has
relied or will rely in respect of this Agreement or the transactions contemplated
hereby upon any document or written or oral information previously furnished
to or discovered by it or its representatives, other than this Agreement (including
the Companies Disclosure Schedule), (ii) there are no representations or warranties
by or on behalf of any party hereto or any of its respective affiliates or
representatives other than those expressly set forth in this Agreement, and
(iii) the parties' respective rights and obligations with respect to this
Agreement and the events giving rise thereto will be solely as set forth in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
$ 3
30-Day Review Period 40
Accounts Receivable 29
Acquisition Proposal 44
Affiliate 1
Aggregate Cash Consideration 2
Agreement 1
Applicable Law 2
Arbiter 13
Asserted Liability 50
Beacon Letter 48
Business Day 2
Buyer 1
Buyer 401(k) Plan 2
Buyer Basket Amount 51
Buyer Benefit Plans 42
Buyer Capital Stock 31
Buyer Common Stock 7
Buyer Disclosure Schedule 2
Buyer Maximum Amount 51
Buyer Option Plans 2
Buyer Preferred Stock 30
Buyer Rights Agreement 2
Buyer SEC Reports 33
Buyer Series B Preferred Stock 30
Buyer Trustee 42
Buyer Voting Preferred Stock 30
Cash Consideration 2
CERCLA 3
Claims Notice 50
Closing 2
Closing Date 2
Closing Date Balance Sheet 13
Closing Date Working Capital 13
Closing Financial Statements 45
Closing Statement 12
COBRA 2
Code 2
Collateral Source 51
Companies 1
Companies Disclosure Schedule 2
Company Subgroup 39
Competing Business 44
Contract 2
control 1
controlled 1
controlling 1
Credit Agreements 3
Debt 3
Debt Commitment Letter 33
Dollar 3
Dollars 3
Drop Dead Date 54
EJ Footwear 1
Employee Benefit Plan 3
Encumbrance 3
Environmental Laws 3
Environmental Permits 25
Equity Interests 1
ERISA 3
ERISA Affiliate 3
Escrow Account 12
Escrow Agent 12
Escrow Agreement 12
Escrow Letter of Credit 4
Estimated Working Capital 12
Exchange Act 4
Exclusivity Agreement 4
Final Adjustment Amount 14
Final Closing Statement 4
Final Determination 41
Final Working Capital 4
Financial Information 17
Financial Releases 4
Financing 46
Financing Commitment Delivery Date 4
GAAP 4
GAAP Consistently Applied 4
General Survival Period 49
Georgia Boot 1
GMNAO Termination Agreement 21
Governmental Authority 4
Governmental Consents 17
Group 39
Guaranteed Obligations 55
Hazardous Substances 4
HSR Act 36
HSR Filing 36
Indemnified Party 5
Indemnifying Parties 50
Indemnifying Party 5
Insurance Assumption Agreements 47
Insurance Policies 23
Insurer 47
Intellectual Property 5
Inventory 5
IRS 5
Knowledge 5
Leased Real Property 18
Lehigh Safety 1
Letter of Credit 26
Losses 49
Material Adverse Effect 5
Material Contracts 20
Material Customer 28
Material Supplier 28
Multiemployer Plan 6
Notice of Disagreement 13
Parent 1
Parent's Balance Sheet 55
Permitted Encumbrances 6
Person 6
Pre-Closing Consolidated Returns 39
Pre-Closing Tax Period 39
Purchase Consideration 11
Real Property Leases 18
Reference Amount 6
Registration Rights Agreement 48
Release 25
Remediation 25
Restricted Territory 44
Retained Liabilities 6
Returns 22
SEC 7
Securities 7
Securities Act 7
Securities Laws 7
Seller 1
Seller 401(k) Plan 7
Seller Basket Amount 51
Seller Maximum Amount 51
Seller Trustee 42
Seller's Pension Plan 6
SERP 55
Statement 40
Stock Consideration 7
Straddle Period 39
Straddle Period Return 40
Subsidiaries 7
Subsidiary 7
Tax 7
Tax Notice 41
Taxes 7
Termination Agreement 46
Unaudited Balance Sheet 17
Working Capital 7
(ii) shall limit its review to matters specifically set forth in the Notice
of Disagreement, (iii) shall further limit its review to whether Closing Date
Working Capital on the Closing Statement was calculated in accordance with
this Section 2.8, and (iv) shall not assign a value to any item greater than
the greatest value for such item claimed by either party or less than the
smallest value for such item claimed by either party. The fees, costs, and
expenses of the Arbiter (x) shall be borne by Seller in the proportion that
the aggregate dollar amount of such disputed items so submitted that are unsuccessfully
disputed by Seller (as finally determined by the Arbiter) bears to the aggregate
dollar amount of such items so submitted and (y) shall be borne by Buyer in
the proportion that the aggregate dollar amount of such disputed items so
submitted that are unsuccessfully disputed by Buyer (as finally determined
by the Arbiter) bears to the aggregate dollar amount of such items so submitted.
Whether any dispute is resolved by agreement among the parties or by the Arbiter,
changes to the Closing Statement shall be made hereunder only for items as
to which Seller has taken exception in the Notice of Disagreement. The fees
and expenses of Buyer incurred in connection with the preparation of the Closing
Statement and review of any Notice of Disagreement shall be borne by Buyer,
and the fees and expenses of Seller incurred in connection with review of
the Closing Statement shall be borne by Seller.
(b) the names and titles of all directors and officers of the Companies and
their Subsidiaries and of each trustee or plan administrator of Each Employee
Benefit Plan of each Company and Subsidiary of a Company.
Section 6.1;
Section 7.2(a) of this Agreement either through (a) the Escrow Agent's draw
of the Escrow Letter of Credit, (b) the payment of cash or (c) by the combination
of the forms of consideration described in clauses (a) and (b) hereof.
If to Parent: Strategic Industries LLC
If to Seller: SILLC Holdings LLC
Raritan Plaza 1
Raritan Center, 2nd Floor
Edison, NJ 08818
Attention: Peter F. Reilly
Facsimile: (732) 512-4858
With copies to: Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: John D. LaRocca
Facsimile: (215) 994-2222
If to Buyer: Rocky Shoes and Boots, Inc.
39 East Canal Street
Nelsonville, Ohio 45764
Attention: Mike Brooks
Chairman and Chief Executive Officer
Facsimile: (740) 753-5523
With a copy to: Porter, Wright, Morris & Arthur LLP
41 S. High Street
Columbus, Ohio 43215
Attention: Curtis A. Loveland
Facsimile: (614) 227-2100
By: /s/ Peter F. Reilly
---------------------------
Name: Peter F. Reilly
Title: VP
By: /s/ Mike Brooks
---------------------------
Name: Mike Brooks
Title: President /CEO
By: /s/ Peter F. Reilly
---------------------------
Name: Peter F. Reilly
Title: EVP and CFO
Company Contact: Jim McDonald
Chief Financial Officer
(740) 753-1951
Investor Relations: Integrated Corporate Relations, Inc.
Chad A. Jacobs/Brendon E. Frey
(203) 682-8200
|
NELSONVILLE, Ohio, December 6, 2004 - Rocky Shoes & Boots, Inc. (Nasdaq: RCKY) today announced it has signed a definitive agreement whereby Rocky Shoes & Boots will acquire privately-held EJ Footwear Group, a leading designer, developer, marketer, and licensee of branded footwear products.
The total purchase price for 100% of the equity interests of EJ Footwear will be $87.7 million in cash plus 484,261 shares of Rocky common stock, which were valued at $10 million at the date of the definitive agreement. EJ Footwear will have no debt and working capital of at least $53.1 million at the closing. In connection with the transaction, Rocky has negotiated a term sheet for credit facilities totaling $148 million with GMAC Commercial Finance LLC and American Capital, to fund the acquisition and replace its existing revolving credit facility.
The transaction has been approved by the board of directors of Rocky Shoes & Boots. The closing is expected in early January 2005 and is subject to Rocky's receipt of firm financing commitments from GMAC Commercial Finance and American Capital by mid-December 2004, audited financial statements of EJ Footwear for the prior three years, the funding of the credit facilities at the time of closing of the acquisition, and other customary conditions including Hart-Scott-Rodino Act regulatory approval.
Based on a successful and timely completion of the transaction, the Company expects fiscal 2005 combined revenues to range from $280 million to $285 million and combined earnings per share to range from $2.35 to $2.45.
Mike Brooks, Chairman and Chief Executive Officer of Rocky Shoes and Boots, stated, "We are extremely excited about joining forces with the EJ Footwear Group. With this acquisition, we will more than double the size of our business, further diversify our operating platform, reduce seasonality, and significantly enhance our prospects for growth. This deal represents a landmark event in the history of our company and we are fully committed to capitalizing on the many opportunities we have now created in the marketplace."
Headquartered in Franklin, Tennessee, EJ Footwear Group consists of three subsidiaries, EJ Footwear LLC, Georgia Boot LLC, and HM Lehigh Safety Shoe Co. LLC, all of which are owned by Strategic Industries LLC. The Company's products are sold under owned brands, including Georgia Boot, Durango, and Lehigh, and licensed brands, including Dickies and John Deere.
Mr. Brooks continued, "EJ Footwear fits all the criteria we identify as key for an acquisition. The company operates a portfolio of strong niche brands that ideally complement our existing businesses, and from a financial perspective, the deal is expected to be highly accretive right out of the gate. In addition, we have aligned ourselves with a strong management team at EJ Footwear that shares a similar merchandise philosophy and corporate culture with Rocky. Most importantly, we have the ability to leverage our platform across all of their businesses to drive synergies, realize operating efficiencies and accelerate growth into the future."
Mr. Brooks concluded, "Over the past several years, we have worked hard to develop our infrastructure, build our brand equity and create one of the leading outdoor footwear brands in the industry. At the same time, we have expanded revenues and profits and increased shareholder value. While we are confident that we still have significant growth potential in our core Rocky business, we believe that the addition of EJ Footwear will enhance the strategic development of our company, further strengthen our position in the market and provide meaningful, long-term growth opportunities."
Rocky Shoes & Boots was advised on the transaction by Robert W. Baird & Co. EJ Footwear Group was advised on the transaction by Harris Williams Advisors, Inc.
Rocky will hold a conference call on December 7, 2004 at 8:30 am Eastern Time to discuss the acquisition and answer investor questions. A webcast of the live call may be accessed through Rocky's website, www.rockyboots.com. To listen to the webcast, please go to the website at least 15 minutes prior to the start time to register and download any necessary software.
ABOUT ROCKY SHOES & BOOTS, INC.
Rocky Shoes & Boots, Inc. designs, develops, manufactures and markets premium quality rugged outdoor, occupational, and casual footwear, as well as branded apparel and accessories. The Company's footwear, apparel and accessories are marketed through several distribution channels, primarily under the brands, ROCKY(R)and GATES(R)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management, and include statements in this press release relating to the proposed acquisition and the projected fiscal 2005 combined revenues and earnings per share. These forward-looking statements involve numerous risks and uncertainties, including, without limitation, the risks that the acquisition, which is subject to various conditions, may not close as contemplated, that the audited financials of EJ Footwear are not as contemplated, that the financing for the acquisition is not completed, and that regulatory approval is not obtained. In addition, the forward-looking statements relating to the fiscal 2005 revenue and earnings per share projections are subject to various additional risks and uncertainties, including that the integration of EJ Footwear with the Company is not as successful as contemplated or planned, present sales plans will not be met, that present orders may be cancelled or delayed, that the general economy or consumer spending habits will depress the market for the Company's products, that there may be disruption in the shipment of products from overseas to the Company, that the weather in 2005 is drier and warmer than normal, that the actual results for 2005 are subject to audit by the Company's independent public accountants, and all of the other various risks inherent in the Company's business as set forth in periodic reports filed with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2003. One or more of these factors have affected historical results, and could in the future affect the Company's businesses and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the Company, or any other person should not regard the inclusion of such information as a representation, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.