Advertisement

The Rockport Company Complaint Filed

Register, or to view the article

Advertisement

The Rockport Company filed with the U.S. Bankruptcy Court a complaint against adidas AG (“Adidas”) and Reebok International (“Reebok”). The complaint alleges, “This action arises from a sale objection filed by Adidas and Reebok that, if not resolved promptly, jeopardizes the Debtors’ pending asset sale and the significant value that has been created for parties in interest in these bankruptcy cases. Defendants Adidas and Reebok are the former owners of Rockport….This dispute is about which entities are liable to Adidas and Reebok under the Management Agreement. The only parties and signatories to the Management Agreement and to the Master Purchase Agreement are Rockport, Adidas and Reebok. The Rockport Entities (other than The Rockport Company, and Rockport (Europe) BY) did not even exist at the time these agreements were executed. Yet in a recently filed objection to Rockport’s proposed asset sale, Adidas and Reebok contend that the Rockport Entities are ‘jointly and severally’ liable for all amounts owed under the Management Agreement, which they allege is no less than $54 million. This allegation has led the proposed purchaser of Rockport’s assets to issue a prospective notice of breach of the asset purchase agreement….The allegation that the Rockport Entities are jointly liable with Rockport is incorrect. Adidas and Reebok base their allegation on a defined term in the Management Agreement, the term “Buyer.” That term is defined as Rockport and its ‘Affiliates.’ The term ‘Affiliate’ means entities that Rockport controlled at the time of the sale. The Rockport Entities did not exist at the time of the sale (they were formed later), and therefore do not fall within the contractual definition….When Rockport engaged in the stage two closings, the parties executed two agreements. First, an asset transfer agreement by which Adidas’ foreign subsidiaries transferred their assets to the newly formed Foreign Subsidiaries. With one exception, these agreements expressly provide that the Foreign Subsidiaries will assume no liabilities, or in some cases, only certain liabilities unrelated to the Management Agreement. Second, a ‘closing agreement’ that reconciled certain post-closing adjustments. The Foreign Subsidiaries were not made parties to the closing agreements.”

Read more bankruptcy news.