ASSET PURCHASE AGREEMENT BY AND AMONG SHANE HUNTER, LLC, SHANE HUNTER, INC. AND HAMPSHIRE GROUP, LIMITED DATED AS OF APRIL 15, 2008
Exhibit 2.1
Execution Version
BY AND AMONG
▇▇▇▇▇ ▇▇▇▇▇▇, LLC,
▇▇▇▇▇ ▇▇▇▇▇▇, INC.
AND
HAMPSHIRE GROUP, LIMITED
DATED AS OF APRIL 15, 2008
TABLE OF CONTENTS
TABLE
OF CONTENTS
(continued)
(continued)
ASSET PURCHASE AGREEMENT, dated as of April 15, 2008 (this “Agreement”), by and among
▇▇▇▇▇ ▇▇▇▇▇▇, LLC, a California limited liability company (“Buyer”), ▇▇▇▇▇ ▇▇▇▇▇▇, Inc., a
Delaware corporation (“Seller”) and Hampshire Group, Limited, a Delaware corporation
(“Hampshire,” and together with Seller, the “Selling Parties”).
WHEREAS, Seller is engaged in the business of designing, sourcing, marketing and selling
apparel products to, among others, Target Corporation and Wal-Mart Stores Inc. (the
“Business”);
WHEREAS, Hampshire is sole shareholder of Seller; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell, assign, transfer,
convey and deliver to Buyer, certain of the assets of Seller related to the Business, together with
certain obligations and liabilities relating thereto, on the terms and subject to the conditions
set forth herein.
NOW THEREFORE, in consideration of the premises and the covenants, agreements, representations
and warranties contained herein, intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets.
(a) Acquired Assets. Upon the terms and subject to the satisfaction or waiver of the
conditions set forth in this Agreement, at the Closing and effective as of the Closing, Seller
shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire
from Seller, all of Seller’s right, title and interest in and to all of the following assets of
Seller (collectively, the “Assets”):
(i) all goodwill of the Business as a going concern;
(ii) all contracts, agreements, leases, instruments, obligations, arrangements or other
understandings (whether written or oral) (including amendments and supplements, modifications, and
side letters or agreements) (the “Business Contracts”), identified in Section 1.1(a)(ii) of
the written statement delivered to Buyer by Seller herewith and dated as of the date hereof (the
“Seller Disclosure Schedule”);
(iii) all marketing, sales and promotional literature, books, records, files, documents,
financial records, bills, accounting, internal and audit records, operating manuals, personnel
records, customer and supplier lists and files, preprinted materials and similar materials
primarily related to the Assets or those employees of Seller who become Transferred Employees;
(iv) all rights, title and interests in and to the Los Angeles Lease, including Seller’s right
to any improvements, fixtures, fittings thereon and appurtenances thereto;
(v) all rights to all telephone numbers related to the Business and the rights to the name
“▇▇▇▇▇ ▇▇▇▇▇▇” and the corporate name “▇▇▇▇▇ ▇▇▇▇▇▇, Inc.”;
(vi) all intangible assets related to the Business, including the Business Intellectual
Property;
(vii) all deposits (including security deposits) and prepaid expenses as set forth on Section
1.1(a)(vii) of the Seller Disclosure Schedule;
(viii) all raw materials, components, fabric, trim, work-in-progress, finished products,
inventory (other than inventory that have been billed and are being held for customers’ accounts),
inventory in-transit, pre-paid deposits for inventory, packaging materials, samples and other
accessories related thereto, related to the Business, wherever located;
(ix) all furnishings, furniture, fixtures, equipment, tools, machinery, art work, office and
other supplies, spare parts and other tangible personal property located at Seller’s Los Angeles
facility covered by the Los Angeles Lease (other than vehicles) as set forth on Section 1.1(a)(ix)
of the Seller Disclosure Schedule;
(x) all rights under warranties, representations and guarantees made by suppliers,
manufacturers or contractors related to the Assets;
(xi) all vendor numbers related to the Business;
(xii) all sales orders related to the Business as set forth on Section 1.3(a) of the Seller
Disclosure Schedule except for sales orders for any portion of inventory included in the
calculation of Inventory Value for the purposes of the Estimated Inventory Value Statement that are
not included in the calculation of Inventory Value in the Final Closing Statement; and
(xiii) the Business’ enterprise resource planning (the “ERP”) software and associated data, to
the extent transferable by the Selling Parties.
Section 1.2 Excluded Assets. Notwithstanding anything contained herein to the
contrary, Seller shall not sell, assign, transfer, convey or deliver to Buyer, and Buyer shall not
purchase from Seller any receivables, cash and other assets of Seller not specifically set forth in
the definition of Assets above (the “Excluded Assets”).
Section 1.3 Assumption of Liabilities. Upon the terms and subject to the satisfaction
or waiver of the conditions set forth in this Agreement, at the Closing and effective as of the
Closing, Buyer shall assume, and agree to pay, perform and discharge when due, the following
Liabilities of Seller (collectively, the “Assumed Liabilities”):
(a) The obligations under purchase orders and sales orders relating to the Business either
actually known to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or set forth on Section 1.3(a) of the Seller Disclosure
Schedule, except for any liabilities arising out of (A) the failure of Seller or any of its
affiliates to
2
comply with the terms of any such orders during the period prior to Closing; (B) indemnity
obligations of Seller and its affiliates under orders arising primarily out of events occurring
prior to the Closing; or (C) purchase orders for any portion of the inventory included in the
calculation of Inventory Value which is included in the Purchase Price;
(b) obligations under the Los Angeles Lease with respect to the period from and after the
Closing;
(c) the accrued vacation, sick pay and paid time off owing to the employees of Seller located
in Seller’s Los Angeles facility covered by the Los Angeles Lease (the “LA Employees”) and
located in Seller’s San Francisco facility (the “SF Employees”), in each case, who become
Transferred Employees as set forth on Section 1.3(c) of the Seller Disclosure Schedule for each
such Transferred Employee;
(d) the obligations of Seller under the Business Contracts, but only to the extent such
obligations arise from and after the Closing; and
(e) any Liability of Buyer which relates to, or arises out of, directly or indirectly, the
operation of the Business or Buyer’s use of the Assets from and after the Closing.
Section 1.4 Excluded Liabilities.
Except as expressly provided in Section 1.3, Buyer shall not assume or be liable for any other
Liabilities of Seller or any other Person, whether or not relating to the Business (the
“Excluded Liabilities”), including the following:
(a) except as otherwise specifically provided herein, all Liabilities relating to Taxes
attributable to or imposed upon Seller or any of its affiliates (or for which Seller or any of its
affiliates may otherwise be liable) for any period (or portion thereof) ending on or prior to the
Closing Date;
(b) any Liability of Seller for any fees, costs or expenses of the type referred to in Section
8.2;
(c) any Liability relating to any Excluded Asset;
(d) indebtedness, including amounts loaned or advanced by any lender, or loaned or advanced to
Seller by Hampshire or any related party;
(e) except expressly as set forth in Section 1.3 above, any Liability that relates to, or
arises out of, directly or indirectly, the operation of the Business or Seller’s ownership, control
or use of the Assets prior to the Closing;
(f) except expressly as set forth in Sections 1.3, 1.5(b) and 4.2(c), any Liability under or
otherwise attributable to the Benefit Plans (as defined in Section 2.8(a)), including any Liability
for benefits payable thereunder;
3
(g) except as expressly set forth in Section 1.3, 1.5(b) and 4.2(c), any Liability for salary,
commission, bonuses, expense reimbursement or other compensation earned by ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ or any other employee of Seller for periods prior to the Closing;
(h) any Liabilities with respect to chargebacks, returns, allowances or promotional agreements
entered into or regarding sales shipped by Seller prior to the Closing; and
(i) except expressly as set forth in Sections 1.3 and 1.5(b), any Liability in any way
attributable to the performance of services for Seller prior to the Closing by any employee,
independent contractor or agent of Seller or any other individuals rendering services to Seller.
Section 1.5 Purchase Price; Allocation.
(a) Upon the terms and subject to the conditions set forth herein, in consideration for the
aforesaid sale, assignment, transfer and conveyance of the Assets and the assumption of the Assumed
Liabilities, Buyer shall deliver or cause to be delivered to Seller the Purchase Price.
(b) For purposes of this Agreement, “Purchase Price” shall mean an amount equal to the
sum of: (i) $386,218.41 (the “Non-Inventory Value”); (ii) the Inventory Value as of the
open of business on the Closing Date and (iii) the accrued vacation, sick pay and paid time off
owing, as of the Closing Date, to the LA Employees who do not become Transferred Employees at or
following the Closing as a result of or arising out of the termination of the employment of such
employees. The term “Inventory Value” for purposes of this Agreement means the value based
on the actual landed cost of Seller’s raw materials, components, fabric, trim, work in progress,
finished products, inventory, inventory in-transit, packaging materials, samples and other
accessories related thereto and Seller’s pre-paid deposits for inventory on order, in each case
determined in accordance with GAAP in effect on such date applied on a consistent basis.
(c) The Purchase Price (plus the Assumed Liabilities assumed pursuant to Section 1.3 to the
extent properly taken into account) will be allocated among the Assets and the restrictive covenant
contained in Section 4.10 as set forth in Exhibit 1.5(c) attached hereto and in the manner
consistent with Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”).
(d) Seller and Buyer shall (i) be bound by the allocation for all Tax purposes; (ii) prepare
and file all Tax Returns in a manner consistent with the allocation; and (iii) take no position
inconsistent with the allocation in any Tax Return, any proceeding before any taxing authority or
otherwise unless required to do so pursuant to a determination as defined in Section 1313 of the
Code or a similar provision of state or local Law. In the event that the allocation is disputed by
any taxing authority, the party receiving notice of such dispute shall promptly notify and consult
with the other party and keep the other party apprised of material developments concerning
resolution of such dispute.
Section 1.6 Payment of Purchase Price.
(a) At or prior to the Closing, Seller shall prepare, in good faith, and deliver to Buyer a
statement (the “Estimated Inventory Value Statement”) setting forth in reasonable detail
the calculation of the estimated Inventory Value as of the open of business on the Closing Date.
At
4
the Closing, Buyer shall deliver or cause to be delivered to Seller the Closing Payment by
wire transfer of immediately available federal funds to an account or accounts designated by
Seller. The term “Closing Payment” shall mean an amount equal the sum of: (i) the
Non-Inventory Value and (ii) 90% of the Inventory Value set forth on the Estimated Inventory Value
Statement (the “Closing Inventory Payment”).
(b) Within seven (7) days of the Closing, Buyer shall deliver or cause to be delivered to
Seller, by wire transfer of immediately available federal funds to an account or accounts
designated by Seller, an amount equal to the accrued vacation, sick pay and paid time off owing, as
of the Closing Date, to the LA Employees who do not become Transferred Employees as a result of or
arising out of the termination of the employment of such employees and actually paid to such
employees by Seller.
Section 1.7 Adjustments to Closing Payment.
(a) As soon as practicable (but not later than 30 days) following the Closing, Buyer shall
prepare and deliver to Seller a statement (the “Closing Statement”) setting forth in
reasonable detail the calculation of the Inventory Value as of the open of business on the Closing
Date. The Closing Statement shall be prepared in good faith.
(b) After receipt of the Closing Statement, Seller shall have 30 days to review it. Seller
and its representatives shall have full access to all relevant books and records and employees of
Buyer in connection with its review of the Closing Statement. Unless Seller delivers written
notice to Buyer on or prior to the 30th day after receipt of the Closing Statement of its
disagreement as to any amount included in or omitted from the Closing Statement specifying in
reasonable detail the basis for its disagreement, Seller shall be deemed to have accepted and
agreed to the Closing Statement. If Seller so notifies Buyer of such an objection to the Closing
Statement, Seller and Buyer shall within 30 days following the date of such notice (the
“Resolution Period”) attempt to resolve their differences. Any resolution by them as to
any disputed amount shall be final, binding, conclusive and nonappealable.
(c) If at the conclusion of the Resolution Period there are amounts on the Closing Statement
still remaining in dispute, then all such amounts remaining in dispute shall be submitted to a firm
of independent public accountants reasonably acceptable to Buyer and Seller (the “Neutral
Auditor”). Buyer and Seller agree to execute, if requested by the Neutral Auditor, a
reasonable engagement letter. The Neutral Auditor shall act as an arbitrator to determine, based
solely on presentations by Buyer and Seller, and not by independent review, only those amounts on
the Closing Statement still in dispute. The Neutral Auditor’s determination shall be made within
30 days of its engagement, shall be set forth in a written statement delivered to Buyer and Seller
and shall be final, binding, conclusive and nonappealable. The fees and expenses of the Neutral
Auditor shall be allocated between Buyer and Seller so that Seller’s share of such fees and
expenses shall be equal to the product of (i) and (ii), where (i) is the aggregate amount of such
fees and expenses of such Neutral Auditor, and where (ii) is a fraction, the numerator of which is
the amount on the Closing Statement in dispute that is ultimately unsuccessfully disputed by Seller
(as determined by the Neutral Auditor) and the denominator of which is the total amount in dispute
submitted to the Neutral Auditor arbitration. The balance of any such fees and expenses shall be
paid by Buyer. The term “Final Closing Statement,” means
5
the definitive Closing Statement deemed accepted by Seller or agreed to by Buyer and Seller in
accordance with Section 1.7(b) or the definitive Closing Statement resulting from the
determinations made by the Neutral Auditor in accordance with this Section 1.7(c) (in addition to
those items theretofore accepted by Seller or agreed to by Buyer and Seller).
(d) Within five (5) business days of the determination of the Final Closing Statement:
(i) if the Inventory Value on the Final Closing Statement is less than the Closing Inventory
Payment, the Seller shall pay to Buyer an amount equal to such difference, by wire transfer of
immediately available federal funds to an account designated by Buyer; or
(ii) if the Inventory Value on the Final Closing Statement is greater than the Closing
Inventory Payment, Buyer shall pay to Seller an amount equal to such difference, by wire transfer
of immediately available federal funds to an account designated by Seller.
Section 1.8 Closing. Unless this Agreement shall have been terminated pursuant to its
terms, the closing of the purchase and sale of the Assets and the other transactions contemplated
hereby (the “Closing”) shall take place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on April 15, 2008 subject to the satisfaction
or waiver of the conditions set forth in Article 6 or such other time and date that is
agreed to in writing by the parties hereto (the date on which the Closing occurs, the “Closing
Date”).
Section 1.9 Deliveries by Seller. At the Closing, Seller shall deliver, or cause to
be delivered, to Buyer the following:
(a) one or more assignments and bills of sale for the Assets, in a form reasonably
satisfactory to Buyer;
(b) instruments of assignment with respect to the Intellectual Property included in the
Assets;
(c) a lease assignment with respect to the Los Angeles Lease, in a form reasonably
satisfactory to Buyer, Seller and the landlord under such Los Angeles Lease;
(d) copies of all necessary consents and approvals of governmental bodies, lenders of the
Seller, lessors and other third parties listed on Section 6.1(d) of the Seller Disclosure; and
(e) the certificates required to be delivered pursuant to Sections 6.2(a) and 6.2(b).
Section 1.10 Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause to be
delivered, to Seller the following:
(a) the Closing Payment;
(b) an assumption agreement with respect to the Assumed Liabilities, in a form reasonably
satisfactory to Seller;
6
(c) a lease assumption with respect to the Los Angeles Lease, in a form reasonably
satisfactory to Buyer, Seller and the landlord under such Los Angeles Lease;
(d) the certificates required to be delivered pursuant to Sections 6.1(a) and 6.1(b); and
(e) copy of the ▇▇▇▇▇▇▇▇▇ Standby Letter of Credit.
Section 1.11 Consents.
(a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not
constitute an agreement to sell, assign, transfer, convey or deliver any Asset or any benefit
arising under or resulting from such Asset if the sale, assignment, transfer, conveyance or
delivery thereof, without the consent of a third party, (i) would constitute a breach or other
contravention of the rights of such third party, (ii) would be ineffective with respect to any
party to a Business Contract concerning such Asset, or (iii) would, upon transfer, in any way
adversely affect the rights of Buyer under such Asset. If the sale, assignment, transfer,
conveyance or delivery by Seller to, or any assumption by Buyer of, any interest in, or Liability
under, any Asset requires the consent of a third party, then such sale, assignment, transfer,
conveyance, delivery or assumption shall be subject to such consent being obtained; it being
understood that no adjustment to the Purchase Price shall be made as a result of the failure to
transfer or assign any such Asset.
(b) To the extent any Asset may not be sold, assigned, transferred, conveyed or delivered to
Buyer by reason of the absence of any such consent (“Restricted Assets”), Buyer and Seller,
to the extent not prohibited by Law, shall take such action so that the performance obligations of
Seller thereunder shall be deemed to be subleased or subcontracted to Buyer, or cause to be taken
such other actions in order to place Buyer, insofar as reasonably possible, in the same position as
if such Restricted Asset had been transferred as contemplated hereby and so that all the benefits
and burdens (including all obligations thereunder) relating to such Restricted Asset, including
possession, use, risk of loss, potential for gain, control and command over such Restricted Asset,
are to inure from and after the Closing to Buyer. Buyer shall use its reasonable best efforts to
assist Seller in obtaining any necessary approvals to such subleases, subcontracts or such other
actions. As soon as a consent for the sale, assignment, transfer, conveyance, delivery or
assumption of a Restricted Asset is obtained, the applicable Restricted Asset shall be deemed to
have been automatically and without further action transferred to Buyer in accordance with the
terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
The Selling Parties jointly and severally represent and warrant to Buyer that:
Section 2.1 Corporate Organization; Subsidiaries. Seller (a) is validly existing and
in good standing under the laws of its jurisdiction of formation or organization; (b) has full
power and authority to carry on the Businesses as it is now being conducted by it and to own the
properties and assets used in the Business it now owns; and (c) is duly qualified or licensed to do
business as a foreign Person in good standing in all the jurisdictions in which such qualification
7
or licensing is required, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect.
Section 2.2 Authorization. Each Selling Party has the full power and authority to
execute and deliver this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by each Selling Party of this Agreement and the consummation of
the transactions contemplated hereby, have been duly authorized and no other corporate or
securityholder actions on the part of such Selling Party are necessary to authorize the execution
and delivery by such Selling Party of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each Selling Party,
and (assuming due and valid authorization, execution and delivery hereof by the other parties to
this Agreement) is a valid and binding obligation of such Selling Party enforceable against such
Selling Party in accordance with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar Laws affecting creditors’ rights generally and by the
availability of equitable remedies.
Section 2.3 Consents and Approvals; No Violation. Except as disclosed in Section 2.3
of the Seller Disclosure Schedule, neither the execution, delivery or performance of this Agreement
by such Selling Party nor the consummation by such Selling Party of the transactions contemplated
hereby will (i) conflict with or violate any provision of the organizational documents of such
Selling Party; (ii) conflict with or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any right of notice,
modification, payment, termination, cancellation or acceleration) under, or result in the creation
of any Lien upon any of the Assets under, any of the terms, conditions or provisions of any
Business Contract or the Los Angeles Lease; (iii) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation or other similar authoritative matter (“Law”)
applicable to such Selling Party or any of their properties or assets except for violations which
would not have a Material Adverse Effect or (iv) require on the part of such Selling Party any
material filing or registration with, notification to, or authorization, consent or approval of,
any court, legislative, executive or regulatory authority or agency (a “Governmental
Authority”) or, to the knowledge of Seller, any other Person, except, in each case, such
filings, registrations, notifications, authorizations, consents or approvals the failure of which
to obtain or make would not have a Material Adverse Effect.
Section 2.4 Leased Real Property. The lease with respect to Seller’s Los Angeles
facility located at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
“Los Angeles Lease”) is legal, valid, binding, enforceable, and, to the knowledge of
Seller, is in full force and effect, except as enforcement may be limited by bankruptcy,
insolvency, reorganization and similar Laws affecting creditors generally and by the availability
of equitable remedies. To the knowledge of Seller, (i) neither Seller nor any other party is in
default, violation or breach in any material respect under the Los Angeles Lease, and (ii) no event
has occurred and is continuing that constitutes or, with notice or the passage of time or both,
would constitute a default, violation or breach either by a Seller, or any other party, in any
material respect under the Los Angeles Lease.
Section 2.5 Intellectual Property. Seller either owns, or is licensed to use, all
Intellectual Property used or held for use in connection with the operation of the Business (the
8
“Business Intellectual Property”). Section 2.5(a) of the Seller Disclosure Schedule
lists (by name, owner and, where applicable, registration number and jurisdiction of registration,
application, certification or filing) all Business Intellectual Property that are registered, or
for which an application for registration is pending, in the name of Seller that is owned by Seller
(whether solely or jointly with another Person). Section 2.5(b) of the Seller Disclosure Schedule
lists each Business Contract in which any Business Intellectual Property is licensed to or from any
third party (except for agreements for the use of commercially available, off-the-shelf software).
There are no oppositions, cancellations, invalidity proceedings, interferences or re-examination
proceedings presently pending with respect to the Business Intellectual Property owned by Seller.
Except as set forth on Section 2.5(c) of the Seller Disclosure Schedule, to the knowledge of
Seller, the conduct of the Business and the Business Intellectual Property owned by Seller does not
infringe on any Intellectual Property or other proprietary rights of any Person.
Section 2.6 Business Contracts. Each Business Contract is a legal, valid and binding
obligation of the applicable Seller and, to the knowledge of Seller, the other parties thereto
enforceable against the Seller, and to the knowledge of Seller, such other parties in accordance
with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization
and similar Laws affecting creditors generally and by the availability of equitable remedies. To
the knowledge of Seller, neither Seller nor any other party to such Business Contract is in
default, violation or breach in any material respect under any Business Contract, and to Seller’s
knowledge, no event has occurred and is continuing that constitutes or with notice or the passage
of time would constitute, a material default, violation or breach in any respect under any Business
Contract.
Section 2.7 Assets. Except as set forth on Section 2.7 of the Seller Disclosure
Schedule, Seller owns all of the Assets free and clear of all Liens, except Permitted Liens.
Section 2.8 Benefit Plans; ERISA.
(a) For purposes of this Agreement, “Benefit Plan” shall mean each deferred
compensation plan, each incentive compensation or equity compensation plan, “welfare” plan,
fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”)); “pension” plan, fund or program (within the meaning
of Section 3(2) of ERISA); each employment, retention, termination or severance agreement; and each
other employee benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by a Seller.
(b) No Benefit Plan is or ever has been subject to Title IV or Section 302 of ERISA. No
liability under Title IV or Section 302 of ERISA has been incurred by Seller that has not been
satisfied in full, and no condition exists that presents a material risk to Seller incurring any
such liability.
(c) Each Benefit Plan has been operated and administered in all material respects in
accordance with its terms and applicable Law, including but not limited to ERISA and the Code.
9
(d) No event has occurred and no condition exists that would subject Seller by reason of its
affiliation with any or by any trade or business, whether or not incorporated, that together with a
Seller would be deemed a “single employer” within the meaning of Section 414(b), (c), (m)
or (o) of the Code to any material liability imposed by ERISA, the Code or other applicable Laws.
Section 2.9 Litigation. Except as set forth on Section 2.9 of the Seller Disclosure
Schedule, there is no action, claim, suit, inquiry, judicial or administrative proceeding, audit or
investigation by or before any Governmental Authority or arbitral body pending or to Seller’s
knowledge, threatened against or involving the Assets.
Section 2.10 No Other Representations or Warranties. EXCEPT AS EXPRESSLY SET FORTH IN
THIS ARTICLE 2, NEITHER SELLER NOR HAMPSHIRE MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY, REGARDING SELLER, HAMPSHIRE, THE BUSINESS OR ANY OF ITS RESPECTIVE
ASSETS, LIABILITIES, OPERATIONS OR PRACTICES OR THE CONDUCT OF ANY EMPLOYEES OR CONTRACTORS OF
SELLER. EACH OF SELLER AND HAMPSHIRE EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR ITS REPRESENTATIVES (INCLUDING ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇▇▇▇) OF ANY DOCUMENTATION OR OTHER INFORMATION.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Selling Parties that:
Section 3.1 Corporate Organization. Buyer is a limited liability company duly formed,
validly existing and in good standing under the laws of California. Buyer has delivered to Seller
all documents requested by Seller relating to the existence of Buyer, the authority of Buyer to
enter into this Agreement and in furtherance of the transactions contemplated by this Agreement,
including any financing documents.
Section 3.2 Authorization. Buyer has the full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized and no other corporate or shareholder
actions on the part of Buyer are necessary to authorize the execution and delivery by Buyer of this
Agreement and the consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer and (assuming due and valid authorization, execution and
delivery hereof by the Selling Parties) is a valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar Laws affecting creditors’ rights generally and by the
availability of equitable remedies.
10
Section 3.3 No Violation; Consents. Neither the execution, delivery or performance of
this Agreement by Buyer nor the consummation by Buyer of the transactions contemplated hereby will
(i) conflict with or violate any provision of the certificate of formation or the operating
agreement of Buyer; (ii) conflict with or result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any right of notice,
modification, payment, termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture, lease, license, permit,
contract, agreement or other instrument, obligation, arrangement or understanding to which Buyer is
a party or by which it or any of its properties or assets may be bound; (iii) violate any Law
applicable to Buyer or any of its properties or assets or (iv) require on the part of Buyer any
material filing or registration with, notification to, or authorization, consent or approval of,
any Governmental Authority, except in the case of clause (ii) or (iv) for such violations, breaches
or defaults which, or filings, registrations, notifications, authorizations, consents or approvals
the failure of which to obtain would prevent Buyer from consummating the transactions contemplated
by this Agreement.
Section 3.4 Financial Capacity. Buyer has sufficient cash on hand or financing to
consummate the transactions contemplated by this Agreement and to pay all fees and expenses of
Buyer related to the transactions contemplated by this Agreement.
Section 3.5 Brokers. Buyer is not a party to any agreement with any finder, broker or
consultant, or in any way obligated to any finder, broker or consultant for any commissions, fees
or expenses, in connection with the origin, negotiation, execution or performance of this
Agreement.
ARTICLE 4
COVENANTS
Section 4.1 Taxes; Post-Closing Access.
(a) All sales, use, documentary and/or transfer Taxes, and other similar Taxes, if any,
imposed in connection with the transactions contemplated by this Agreement shall be borne 50% by
Seller and 50% by Buyer.
(b) All real estate Taxes, personal property Taxes and similar ad valorem obligations levied
with respect to the Assets for a taxable period that includes (but does not end on) the Closing
Date shall be apportioned between Seller, on the one hand, and Buyer, on the other hand, as of the
Closing Date based on the number of days of such taxable period included in the period ending with
and including the Closing Date (with respect to any such taxable period, the “Pre-Closing Tax
Period”), and the number of days of such taxable period beginning after the Closing Date (with
respect to any such taxable period, the “Post-Closing Tax Period”). Seller shall be liable
for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period, and
Buyer shall be liable for the proportionate amount of such Taxes that is attributable to the
Post-Closing Tax Period.
11
(c) After the Closing, upon reasonable notice, Buyer, on the one hand, and Seller, on the
other hand, agree to furnish or cause to be furnished to each other and their representatives,
employees, counsel and accountants access, during normal business hours, to such information
(including access to books and records) and assistance relating to the Assets as are reasonably
necessary for financial reporting and accounting matters relating to the Assets, the preparation
and filing of any Tax Returns, reports or forms relating to the Assets, the making of any election
relating to Taxes, the preparation for any audit by any taxing authority, the defense of any Tax or
other claim or assessment relating to the Assets or, in the case of Seller, for any lawful purpose
relating to the conduct of the Business prior to the Closing, provided, however, that such access
and assistance do not unreasonably disrupt the normal operations of Buyer, in the case of access
and assistance given to Seller, or Seller, in the case of access and assistance given to Buyer.
(d) Each party hereto hereby waives compliance by each Seller and Buyer with the provisions of
the “bulk sales,” “bulk transfer” or similar Laws of any state or political
subdivision.
Section 4.2 Employees.
(a) Prior to the Closing, Buyer shall not be prohibited from soliciting any of Seller’s
employees and the Selling Parties shall reasonably cooperate with the Buyer in connection with any
employment offers contemplated under this Section 4.2.
(b) Prior to the Closing, the Buyer shall offer employment to all the LA Employees and to the
SF Employees listed on Section 4.2(b) of the Seller Disclosure Schedule on terms (including salary)
substantially similar to currently offered terms to such employees by Seller. LA Employees and SF
Employees receiving offers of employment from the Buyer and who accept such employment offer are
hereinafter referred to as “Transferred Employees”.
(c) For each SF Employee (other than any SF Employee who is a Transferred Employee as of
immediately following the Closing) who performs services for Buyer (whether as an employee,
consultant, independent contractor or otherwise) at any time during the Outside Period (each such
employee being, a “Rehired Employee”), Buyer shall promptly pay Seller an amount equal to
any and all of the following amounts paid or payable (including any amounts withheld or to be
withheld by the Selling Parties pursuant to applicable tax law) by the Selling Parties to such
Rehired Employee in connection with the termination of such Rehired Employee’s employment from
Seller: (i) 50% of any severance payments, (ii) 50% of any payments in respect of accrued but
unused vacation, sick days, or other paid time off, and (iii) any amounts paid or payable
(including any amounts withheld or to be withheld by the Selling Parties pursuant to applicable tax
law) by the Selling Parties to, or for the benefit of, such Rehired Employee (including the cost of
any benefits provided to such Rehired Employee) relating to the Worker Adjustment and Retraining
Notification Act (the “WARN Act”), including, without limitation, all amounts paid in lieu
of providing notice under the WARN Act and all amounts paid or payable pursuant to any such notice.
If more than 4 Rehired Employees perform services for the Buyer at any time during the Outside
Period, Buyer shall promptly pay Seller an amount equal to the aggregate amounts paid or payable
(including any amounts withheld or to be withheld by the Selling Parties pursuant to applicable tax
law) by the Selling Parties (including the cost of providing benefits to such SF Employees) to, or
for the benefit of,
12
any and all SF Employees (other than any Transferred Employee or any SF Employee who became a
Rehired Employee prior to such time), relating to the WARN Act, including, without limitation, all
amounts paid in lieu of providing notice under the WARN Act and all amounts paid or payable
pursuant to any such notice. For purposes of this Agreement, “Outside Period” shall mean
the period between the date that is 60 days after the Closing Date and the eighteen month
anniversary of the Closing Date.
Section 4.3 Publicity. Except as may be required by Law, no public announcements
relating to the Agreement or the transaction shall be made without the prior consent of the other
party. Buyer acknowledges that the Selling Parties will issue a press release relating to the
transactions contemplated by this Agreement and will file a Form 8-K with the United States
Securities and Exchange Commission which will include a copy of this Agreement, provided, that
Buyer will have an opportunity to review and comment on the Form 8-K and press release prior
thereto.
Section 4.4 Information and Access. Prior to the Closing, Seller shall permit
representatives of Buyer to have reasonable access during normal business hours, and in a manner so
as not to interfere with the normal operations, to all premises, properties, personnel,
accountants, books, records, contracts and documents of or pertaining to the Business. Buyer shall
and shall cause each of its representatives to treat and hold as confidential such information.
Section 4.5 Confidentiality. The Selling Parties agree that, from and after the
Closing, except as otherwise consented to in writing by Buyer or to comply with this Agreement or
applicable Laws, (i) they will not directly or indirectly disclose or use in a manner adverse to
Buyer or the Business, any confidential information related to the Business or the Assets, and (ii)
if any of the Selling Parties receive a request to disclose all or any part of such confidential
information in connection with a legal proceeding, such party will (A) promptly notify Buyer of the
existence, terms and circumstances surrounding such request, to the extent permitted by Law, (B) if
requested by Buyer, seek a protective order with respect to the disclosure of such confidential
information at the expense of Buyer, and (C) in the event no such protective order or other remedy
is obtained and disclosure of such information is required, exercise their reasonable best efforts,
if requested by Buyer, to obtain an order or other reliable assurance that confidential treatment
will be accorded to such confidential information required to be disclosed, at the reasonable
expense of Buyer.
Section 4.6 Further Assurances. After the Closing, the Selling Parties shall, from
time to time, at the request of Buyer, and without further expense to Buyer, execute and deliver
such other instruments of conveyance and transfer (including powers of attorney) as Buyer may
reasonably request, in order to more effectively consummate the transactions contemplated hereby
and to vest in Buyer good and marketable title to the Assets (or in the case of the Los Angeles
Lease, valid leasehold interests), including assistance in the collection or reduction to
possession of any such Assets.
Section 4.7 Change of Name. On the Closing Date, Seller shall amend its
organizational documents so as to delete therefrom the words “▇▇▇▇▇ ▇▇▇▇▇▇” or “Aqua
Blues” as applicable and will file, as promptly as practicable, such documents as are necessary
to reflect such name change in its state of formation or organization and the other jurisdictions
where it is
13
qualified to do business as a foreign Person. Seller further agrees that, from and after the
Closing, Seller will not adopt any name that is confusingly similar to “▇▇▇▇▇ ▇▇▇▇▇▇” or
“Aqua Blues.”
Section 4.8 Discharge of Excluded Liabilities; Post-Closing Operations of Seller.
From and after the Closing, Hampshire shall cause Seller to pay and discharge, when due, the
Excluded Liabilities.
Section 4.9 San Francisco Facility. Buyer shall be entitled to reasonable regular
access, subject to the terms and conditions of Seller’s lease for such facility, the premises of
Seller’s facility located in San Francisco, California, and use Seller’s fixed assets and property
located therein for a transitional period of up to 90 days following the Closing. The first 60 days
of such transitional period shall be at no cost for the Buyer, and for the last 30 days of such
transitional period, to the extent used, Buyer shall pay half of all rent and utilities paid by
Seller for the use such facility promptly following receipt from Seller of an invoice with respect
thereto.
Section 4.10 Non-Competition.
(a) Each Selling Party covenants that, commencing on the Closing Date and ending on the first
anniversary of the Closing Date, such Selling Party shall not, and shall cause its respective
direct and indirect subsidiaries not to, directly or indirectly, in any capacity, engage in or have
any direct or indirect ownership interest exceeding 10% of the equity interest in, a business
located anywhere in the world which is engaged, either directly or indirectly, in the business of
sales of merchandise of the type engaged in by Seller prior to the Closing to Target Corporation.
(b) Each Selling Party covenants that, commencing on the Closing Date and ending on the second
anniversary of the Closing Date, it will not solicit the employment of or hire any person who at
the time of such solicitation or hiring is employed by Buyer on a full or part-time basis,
provided, however, that the placement of advertisements in newspapers or journals of general
circulation not directed or targeted to employees of the Buyer shall not constitute solicitation
for purposes of this Section 4.10(b).
(c) Each Selling Party acknowledges that the restrictions contained in this Section 4.10 are
reasonable and necessary to protect the legitimate interests of Buyer and constitute a material
inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by
this Agreement. Each Selling Party acknowledges that any violation of this Section 4.10 will
result in irreparable injury to the other party and agrees that the other party shall be entitled
to seek preliminary and permanent injunctive relief, without the necessity of proving actual
damages, which rights shall be cumulative and in addition to any other rights or remedies to which
the other party may be entitled. Without limiting the generality of the foregoing, but subject to
the last sentence of Section 4.10, all periods of time set forth in 4.10(a) and 4.10(b) above shall
be extended for an additional period equal to any period during which a Selling Party is in breach
of its obligations under this Section 4.10.
14
(d) In the event that any covenant contained in this Section 4.10 should ever be adjudicated
to exceed the time, geographic, product or service or other limitations permitted by applicable Law
in any jurisdiction, then any court is expressly empowered to reform such covenant, and such
covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or
service or other limitations permitted by applicable Law. The covenants contained in this Section
4.10 and each provision thereof is severable and distinct covenants and provisions. The invalidity
or unenforceability of any such covenant or provision as written shall not invalidate or render
unenforceable the remaining covenants or provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or
provision in any other jurisdiction.
Section 4.11 Letters of Credit. Prior to the Closing, Buyer shall cause ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ or one of its affiliates to issue a standby letter of credit in the name of HSBC Bank
USA, National Association in the amount of $577,507.24 (the “▇▇▇▇▇▇▇▇▇ Standby Letter of
Credit”) with respect to the those letters of credit issued under Seller’s senior credit
agreement set forth on Section 4.11 of the Seller Disclosure Schedule (the “Outstanding Letters
of Credit”) with terms reasonably acceptable to HSBC Bank USA, National Association and Seller.
Seller shall not waive any discrepancy between the documents presented for payment by the
beneficiaries of the Outstanding Letters of Credit and the Outstanding Letters of Credit without
the prior written approval of Buyer, which approval shall not be unreasonably withheld. In
addition, promptly following the Closing, Buyer shall replace the Outstanding Letters of Credit
with comparable letters of credit that are acceptable to the beneficiary of such Outstanding
Letters of Credit and to obtain a full and unconditional release of Seller and its affiliates from
all liability under such Outstanding Letters of Credit.
Section 4.12 “As Is” Condition. Subject to the representations and warranties of the
Selling Parties set forth in Article 2 with respect to the Assets, Buyer agrees that it shall
accept all Assets in an “As Is” “Where Is” condition at the Closing. Seller makes no warranty with
respect to the resale value, condition or use of the Assets, whether expressed or implied,
including, without limitation, any implied warranty of merchantability or fitness for a particular
purpose.
Section 4.13 Computer Access. For a period of up to 60 days following the Closing,
the Buyer shall be entitled to access, via any of the computers located in either the Seller’s San
Francisco facility or the Seller’s Los Angeles facility covered by the Los Angeles Lease on the
Closing Date, all software and data then accessible through those computers; it being understood
that such all software other than the ERP is an Excluded Asset. Notwithstanding the foregoing, the
Buyer shall not be entitled to use Seller’s MAS 90 accounting software, provided, however, Seller
shall permit the Buyer read only access to the data contained therein related to the Assets for a
period of up to 60 days following the Closing.
Section 4.14 Administration of Accounts and Related Matters.
(a) All payments and reimbursements made in the ordinary course of business by any third party
in the name of or to Seller or any affiliate thereof in connection with or arising out of the
Assets or the Assumed Liabilities after the Closing Date, or any inventory that is part of the
Assets that is returned to Seller or any affiliate thereof, shall be held by such Person in trust
for
15
the benefit of Buyer and, immediately upon receipt by such Person of any such payment,
reimbursement or inventory such Person shall pay over to Buyer the amount of such payment or
reimbursement or deliver to Buyer such inventory without right of set off.
(b) All payments and reimbursements made in the ordinary course of business by any third party
in the name of or to Buyer or any affiliate thereof in connection with or arising out of the
Excluded Assets or Excluded Liabilities after the Closing Date shall be held by such Person in
trust for the benefit of Seller and, immediately upon receipt by such Person of any such payment or
reimbursement, such Person shall pay over Seller the amount of such payment or reimbursement
without right of set off.
ARTICLE 5
SURVIVAL AND INDEMNIFICATION
Section 5.1 Survival of Representations, Warranties and Covenants. All
representations and warranties of each party contained in this Agreement shall survive the Closing,
for a period ending twelve months from the Closing Date, except that: (a) the representations and
warranties set forth in Sections 2.1, 2.2, 2.7, 2.8, 3.1 and 3.2 shall survive until the applicable
statute of limitations has run plus 30 days; and (c) all representations or warranties shall
survive beyond such period with respect to any inaccuracy therein or breach thereof, notice of
which shall have been duly given within such applicable period in accordance with Section 5.3(a)
hereof. The covenants and agreements contained herein shall survive the Closing without limitation
as to time unless the covenant or agreement specifies a term, in which case such covenant or
agreement shall survive for such specified term.
Section 5.2 Indemnification.
(a) Subject to the limits set forth in this Article 5, the Selling Parties agree to
jointly and severally indemnify, defend and hold Buyer, its officers, directors, employees, agents,
representatives and affiliates, harmless from and in respect of any and all actual losses, damages,
costs and expenses (including, demands, suits, claims, actions, assessments, Liabilities,
judgments, expenses of investigation and reasonable fees and disbursements of counsel)
(collectively, “Losses”), that they may incur arising out of or due to (i) the breach of
any representation or warranty of any of the Selling Parties contained in this Agreement, (ii) the
breach by any of the Selling Parties of any covenant, undertaking or other agreement of any of the
Selling Parties contained in this Agreement, (iii) the Excluded Liabilities and (iv) enforcing the
indemnification rights of Buyer pursuant to this Article 5.
(b) Subject to the limits set forth in this Article 5, Buyer agrees to indemnify,
defend and hold the Selling Parties and their respective officers, directors, employees, agents,
representatives and affiliates, harmless from and in respect of any and all Losses that they may
incur arising out of or due to (i) the breach of any representation or warranty of Buyer contained
in this Agreement, (ii) the breach by Buyer of any covenant, undertaking or other agreement of
Buyer contained in this Agreement, (iii) the Assumed Liabilities, (iv) the actions of Buyer, its
employees or its representatives with respect to the occupancy and the use of Seller’s San
16
Francisco facility by Buyer pursuant to Section 4.9, (v) the Outstanding Letters of Credit and
(vi) enforcing the indemnification rights of the Selling Parties pursuant to this Article
5.
(c) Neither the Selling Parties nor Buyer shall have any liability with respect to matters
described in Sections 5.2(a) or 5.2(b), respectively, for Losses (other than in the case of fraud)
until the total of all Losses exceeds $25,000 and then the full amount of such Losses shall be
subject to indemnification hereunder. The parties hereby acknowledge and agree that their sole and
exclusive remedy with respect to any and all claims (other than in the case of fraud) relating to
the subject matter of this Agreement and the transactions contemplated hereby shall be pursuant to
the indemnification provisions set forth in this Article 5. In no event shall a party be entitled
to recover any consequential or punitive damages of any kind under this Agreement. For the
purposes of computing the amount of any Losses incurred under this Article 5 there shall be
deducted an amount equal to the amount of any insurance proceeds, indemnification payments,
contribution payment or reimbursements actually received in the respect of such Losses or any of
the circumstances giving rise thereto, other than pursuant to this Agreement. The indemnification
obligations of the Selling Parties under Sections 5.2(a)(i) and 5.2(a)(ii) and the indemnification
obligations of Buyer under Section 5.2(b)(i) and 5.2(b)(ii) shall survive the Closing Date for only
the periods specified in Section 5.1 and no claim for the recovery of Losses may be asserted by
either the Selling Parties or Buyer after such periods specified in Section 5.1. The parties agree
that any indemnification payments made pursuant to this Agreement shall be treated for tax purposes
as an adjustment to the Purchase Price, unless otherwise required by applicable Law.
Section 5.3 Claims for Indemnification.
(a) The parties intend that all indemnification claims be made as promptly as practicable by
the party seeking indemnification (the “Indemnified Party”). Whenever any claim shall
arise for indemnification, the Indemnified Party shall promptly notify the party from whom
indemnification is sought (“Indemnifying Party”) of the claim, and the facts constituting
the basis for such claim. The failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability that it may have to the Indemnified Party, except to the extent
the Indemnifying Party demonstrates that the defense of such action is materially prejudiced
thereby.
(b) With respect to claims made by third parties, the Indemnifying Party, upon acknowledgement
of its obligations under the terms of the indemnity hereunder in connection with such third party
claim, shall be entitled to assume the defense of such action or claim with counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement without the consent of the Indemnified Party (A) if such
judgment or settlement does not include as an unconditional term thereof the giving by each
claimant or plaintiff to each Indemnified Party of a release from all liability in respect to such
claim, (B) if such judgment or settlement would result in the finding or admission of any violation
of Law, or (C) if as a result of such consent or settlement, injunctive or other equitable relief
would be imposed against the Indemnified Party or such judgment or settlement would interfere with
or adversely affect the business, operations or assets of the Indemnified Party. The Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in the defense against any
such asserted claim. The Indemnified Party shall have the right to
17
participate at its own expense in the defense of such asserted claim, but shall not be
entitled to settle or compromise such asserted claim without the prior written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. Notwithstanding the foregoing,
if (i) the claim for indemnification is with respect to a criminal proceeding, action, indictment,
allegation or investigation against the Indemnified Party, (ii) the Indemnified Party has been
advised by counsel that a reasonable likelihood exists of a conflict of interest between the
Indemnifying Party and the Indemnified Party, (iii) the Indemnifying Party has failed or is failing
to vigorously prosecute or defend such claim or shall have failed to have engaged counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of time or (iv) the
claim seeks an injunction or other equitable relief against the Indemnified Party, then (A) the
Indemnifying Party shall not be entitled to assume the defense of any such claim or action, (B) the
Indemnified Party shall have the right to conduct and control the defense of such action or claim
with counsel of its choosing and the reasonable legal and other expenses incurred by the
Indemnified Party shall be borne by the Indemnifying Party and (C) the Indemnifying Party shall not
be bound by any defense or settlement that the Indemnified Party shall make in respect to such
action or claim without the consent of the Indemnifying Party.
Section 5.4 Guaranty. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ hereby absolutely, unconditionally and
irrevocably guarantees, as primary obligor and not merely as a surety, the obligation of Buyer with
respect to the punctual payment of the Purchase Price in accordance with the terms of this
Agreement. This is a guaranty of payment and performance, and not of collection.
ARTICLE 6
CONDITIONS TO CLOSING
Section 6.1 Conditions to Seller’s Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the satisfaction (unless
waived in writing by Seller) of each of the following conditions on or prior to the Closing Date:
(a) the representations and warranties of Buyer contained in this Agreement shall be true and
correct, without giving effect to any qualification as to materiality (or any variation of such
term) contained in any particular representation or warranty, on and as of the Closing Date, as
though such representations and warranties were made on and as of the Closing Date, except to the
extent that any such breach together with all other such breaches does not materially impair
Buyer’s ability to perform its obligations hereunder. Buyer shall have delivered to Seller a
certificate of its Manger, dated the Closing Date, to the foregoing effect;
(b) Buyer shall have performed and complied in all material respects with all covenants to be
performed or complied with by it on or prior to the Closing Date. Buyer shall have delivered to
Seller a certificate of its Manager, dated the Closing Date, to the foregoing effect;
(c) no Law shall have been enacted, issued, promulgated, enforced or entered which is in
effect and has the effect of making the sale of the Assets by Seller to Buyer or any of the other
transaction contemplated by this Agreement illegal or otherwise restraining or prohibiting
18
the consummation of the sale of the Assets by Seller to Buyer or any of the other transactions
contemplated by this Agreement;
(d) the consents, authorizations, approvals and waivers set on Section 6.1(d) of the Seller
Disclosure Schedule shall have been obtained; and
(e) the ▇▇▇▇▇▇▇▇▇ Standby Letter of Credit shall be in full force and effect and Buyer shall
have delivered such ▇▇▇▇▇▇▇▇▇ Standby Letter of Credit to HSBC Bank USA, N.A.
Section 6.2 Conditions to Buyer’s Obligations. The obligation of Buyer to consummate
the transactions contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by Buyer) of each of the following conditions on or prior to the Closing Date:
(a) the representations and warranties of Seller and Hampshire contained in this Agreement
shall be true and correct, without giving effect to any qualification as to materiality or Material
Adverse Effect (or any variation of such terms) contained in any particular representation or
warranty, on and as of the Closing Date with the same force and effect as though made on and as of
the Closing Date, except to the extent any such breach together with all other such breaches does
not, or could not reasonably be expected to constitute a Material Adverse Effect. Seller shall
have delivered to Buyer a certificate of its President, a Vice President or Secretary, dated the
Closing Date, to the foregoing effect;
(b) Seller shall have performed and complied in all material respects with all covenants to be
performed or complied with by it on or prior to the Closing Date. Seller shall have delivered to
Buyer a certificate of its President, a Vice President or Secretary, dated the Closing Date, to the
foregoing effect; and
(c) no Law shall have been enacted, issued, promulgated, enforced or entered which is in
effect and has the effect of making the sale of the Assets by Seller to Buyer or any of the other
transaction contemplated by this Agreement illegal or otherwise restraining or prohibiting the
consummation of the sale of the Assets by Seller to Buyer or any of the other transactions
contemplated by this Agreement.
ARTICLE 7
TERMINATION
Section 7.1 Termination. This Agreement and the transactions contemplated hereby may
be terminated in any of the following ways at any time before the Closing and in no other manner:
(a) by mutual written consent of Buyer, Seller and Hampshire;
(b) by Buyer, Seller or Hampshire (if such terminating party is not then in default of any of
its obligation hereunder), by written notice to the other parties, if the Closing shall not have
occurred on or before April 16, 2008;
19
Section 7.2 Effect of Termination. In the event this Agreement is terminated pursuant
to Section 7.1, all further obligations of the parties hereunder shall terminate, except for the
obligations set forth in Sections 4.4, 7.2 and 8.2, and except that nothing in this Section 7.2
shall relieve any party hereto of any liability for breach of this Agreement prior to such
termination.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Amendment, Extension and Waiver. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the
case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
Section 8.2 Expenses. Each party shall pay its own legal, accounting and other
miscellaneous expenses incident to the negotiation, preparation and execution of this Agreement and
the consummation of the transactions contemplated by this Agreement.
Section 8.3 Entire Agreement; No Third-Party Beneficiaries. This Agreement, and the
Seller Disclosure Schedule constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the subject matter hereof.
Section 8.4 Headings. The Article and Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 8.5 Notices. All notices, requests, demands and other communications made
under or by reason of the provisions of this Agreement shall be in writing and shall be given by
hand delivery, overnight air courier or facsimile transmission to the parties at the addresses set
forth below.
If to any of the Selling Parties:
Hampshire Group, Limited
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
20
With a copy (which shall not constitute notice)
given in the manner prescribed above, to:
given in the manner prescribed above, to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer:
▇▇▇▇▇ ▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Manager
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Manager
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice)
given in the manner prescribed above, to:
given in the manner prescribed above, to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, A Professional Corporation
Suite 1500
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Suite 1500
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice, request, demand or other communication shall be deemed to have been received (i)
when delivered, if delivered by hand or sent by facsimile, or (ii) on the second (2nd) business day
after dispatch, if sent by overnight air courier.
Section 8.6 Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, legal representatives and assigns, but this
Agreement may not be assigned by any party without the written consent of the other parties.
Section 8.7 Severability. Any term or provision of this Agreement that is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall have the power to
reduce the scope, duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
21
Section 8.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without giving effect to
the conflict of laws provisions thereof.
Section 8.9 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the
words “include”, “includes” or “including” are used in this Agreement they
shall be deemed to be followed by the words “without limitation.” As used in this
Agreement, the term “affiliate” shall have the meaning set forth in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended. The words describing the singular number shall
include the plural and vice versa, and words denoting any gender shall include all genders and
words denoting natural persons shall include corporations and partnerships and vice versa.
Section 8.10 Jurisdiction. Each of the parties hereto hereby expressly and
irrevocably submits to the non-exclusive personal jurisdiction of the United States District Court
for the Southern District of New York, and to the jurisdiction of any other competent court of the
State of New York located in the County of New York (collectively, the “New York Courts”),
preserving, however, in each case, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of or in connection with this Agreement
or the transactions contemplated hereby and agrees not to commence any litigation relating thereto
except in the New York Courts. If the aforementioned court does not have subject matter
jurisdiction, then the proceeding shall be brought in any other state or federal court located in
the State of New York preserving, however, all rights of removal to such federal court under 28
U.S.C. Section 1441. Each party hereby waives the right to any other jurisdiction or venue for any
litigation arising out of or in connection with this Agreement or the transactions contemplated
hereby to which any of them may be entitled by reason of its present or future domicile. Each
party hereby waives, to the fullest extent it may legally and effectively do so (i) any objection
which it may now or hereafter have to the laying of venue of any action or proceeding arising out
of or relating to this Agreement or any related matter in any New York Court, as applicable, and
(ii) the defense of an inconvenient forum to the maintenance of such action or proceeding in any
New York Court, as applicable. Notwithstanding the foregoing, each of the parties hereto agrees
that each of the other parties shall have the right to bring any action or proceeding for
enforcement of a judgment entered by the New York Courts, as applicable, in any other court or
jurisdiction.
Section 8.11 Service of Process. Each party irrevocably consents to the service of
process outside the territorial jurisdiction of the courts referred to in Section 8.10 hereof in
any such action or proceeding by mailing copies thereof by registered United States mail, postage
prepaid, return receipt requested, to its address as specified in or pursuant to Section 8.5.
However, the foregoing shall not limit the right of a party to effect service of process on the
other party by any other legally available method.
Section 8.12 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
22
IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND
THAT EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
Section 8.13 Specific Performance. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties agrees that the other party shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in any New York Court,
in addition to any other remedy to which it may be entitled, at law or in equity.
Section 8.14 Counterparts. This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
ARTICLE 9
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings:
“Code” means the Internal Revenue Code of 1986, as amended.
“GAAP” means generally accepted accounting principles, as in effect in the United
States.
“Intellectual Property” means all patents and patent rights, trademarks and trademark
rights, trade names and trade name rights, service marks and service ▇▇▇▇ rights, service names and
service name rights, brand names, inventions, copyrights and copyright rights, processes, formulae,
trade dress, business and product names, logos, slogans, trade secrets, industrial models,
patterns, designs, methodologies, computer programs (including all source codes) and
23
related documentation, technical information, manufacturing, engineering and technical
drawings and all pending applications for and registrations of patents, trademarks, service marks
and copyrights.
“Liabilities” means any and all debts, losses, expenses, liabilities, damages, fines,
costs, royalties, proceedings, deficiencies or obligations of any nature (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated,
due or to become due, and whether or not resulting from third-party claims) and any out-of-pocket
costs and expenses (including attorneys, accountants or other fees) including any liability for
Taxes.
“Liens” means all mortgages, pledges, security interests, deeds of trust, liens,
charges, options, conditional sales contracts, restrictions, easements, rights of way, title
defects or other encumbrances or restrictions of any nature whatsoever.
“Material Adverse Effect” means any event, change, development, effect or occurrence
that has a material adverse effect on (i) the business, customers, operations, properties,
condition (financial or otherwise), assets or Liabilities of Seller or the Business, or (ii) the
ability of any of the Selling Parties to consummate the transactions contemplated by this
Agreement.
“Permitted Liens” means (a) Liens for Taxes, assessments and governmental charges or
levies not yet due and payable, or if due, (A) not delinquent or (B) being contested in good faith
by appropriate proceedings; (b) materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s
Liens and other similar Liens arising in the ordinary course of business that are not, individually
or in the aggregate, material or if the underlying obligations are not past due; (c) with respect
to real property only, survey exceptions, Liens, and all matters of record (including, but not
limited to, easements, rights of way, zoning and building codes and ordinances) that do not,
individually or in the aggregate, materially adversely affect the value of such real property or
the use of such real property; or (d) Liens set forth on Section 9.1 of the Seller Disclosure
Schedule.
“Person” means any corporation, individual, joint stock company, joint venture,
partnership, limited liability company, unincorporated association, Governmental Authority,
country, state or political subdivision thereof, trust or other entity.
“Seller’s knowledge” or “knowledge of Seller” means the actual knowledge of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
“Tax” or “Taxes” means all taxes, assessments, charges, duties, fees, levies,
imposts or other governmental charges, including all federal, state, local, foreign and other
income, environmental, add-on, minimum, franchise, profits, capital gains, capital stock, capital
structure, transfer, sales, gross receipt, use, ad valorem, service, service use, lease, recording,
customs, occupation, property, excise, gift, severance, windfall profits, premium, stamp, license,
payroll, social security, employment, unemployment, disability, value-added, withholding, escheat
and other taxes, assessments, charges, duties, fees, levies, imposts or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the
filing of a return) and all estimated taxes, deficiency assessments, additions to tax, additional
24
amounts imposed by an governmental authority (domestic or foreign), penalties, fines and
interest, and shall include any liability for such amounts as a result either of being a member of
a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify
any person, regardless of whether disputed.
“Tax Return” means any return, report, declaration, information return, filing or
other document (including any amendments thereto or related or supporting information) filed or
required to be filed with respect to Taxes.
[Remainder of page intentionally left blank;
signatures appear on immediately following page]
signatures appear on immediately following page]
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by the duly authorized officer of each of the Seller, Hampshire and Buyer as of the day
and year first above written.
| HAMPSHIRE GROUP, LIMITED |
||||
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Title: | Vice President, General Counsel and Secretary | |||
| ▇▇▇▇▇ ▇▇▇▇▇▇, INC. |
||||
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Title: | Secretary | |||
26
| ▇▇▇▇▇ ▇▇▇▇▇▇, LLC |
||||
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Title: | Manager | |||
The undersigned joins as a party to the foregoing Agreement for the purposes provided in
Section 5.4 of the Agreement.
| /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | ||||
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | ||||
27