UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended April 1, 2000.
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______ to _______.
Commission File No. 000-20201
HAMPSHIRE GROUP, LIMITED
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-0967107
(State of Incorporation) (I.R.S. Employer Identification No.)
215 COMMERCE BOULEVARD
ANDERSON, SOUTH CAROLINA 29625
(Address, Including Zip Code, of Registrant's Principal Executive Offices)
(Registrant's Telephone Number, Including Area Code) (864) 225-6232
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Number of Shares Outstanding
Of Securities As of May 5, 2000
------------------------------ -----------------------------
Common Stock, $0.10 Par Value 4,117,007
1
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HAMPSHIRE GROUP, LIMITED
INDEX TO FORM 10-Q
April 1, 2000
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Unaudited Consolidated Balance Sheets as of April 1, 2000,
April 3, 1999 and audited December 31, 1999 3
Unaudited Consolidated Statements of Operations for the Three
Month Periods Ended April 1, 2000 and April 3, 1999 5
Unaudited Consolidated Statements of Comprehensive Loss
for the Three Month Periods Ended April 1, 2000 and
April 3, 1999 6
Unaudited Consolidated Statements of Cash Flows for the
Three Month Periods Ended April 1, 2000 and April 3, 1999 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 14
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 15
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signature Page 16
2
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<CAPTION>
April 1, April 3, Dec. 31,
2000 1999 1999*
------------------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ................ $ 20,053 $ 7,116 $ 23,831
Available-for-sale securities ............ 253 456 207
Accounts receivable trade - net .......... 9,876 17,029 16,732
Other accounts receivable ................ 1,795 4,202 2,294
Inventories .............................. 22,533 27,899 17,400
Deferred tax asset ....................... 4,185 4,066 4,202
Hosiery assets held for sale - net ....... -- 774 --
Other current assets ..................... 430 705 704
------------------------------
Total current assets ................ 59,125 62,247 65,370
Property, plant and equipment - net ........... 9,361 12,956 10,149
Real property investments - net ............... 17,512 9,012 16,538
Long-term investments - net ................... 4,890 5,502 4,537
Trading securities held in retirement trust ... 2,342 1,270 2,101
Deferred tax asset ............................ 1,969 2,416 1,969
Intangible assets - net ....................... 2,435 3,290 2,553
Other assets .................................. 796 133 377
------------------------------
Total assets ......................... $ 98,430 $ 96,826 $103,594
==============================
<FN>
* Derived from the December 31, 1999 audited consolidated balance sheet.
(The accompanying notes are an integral part of these unaudited financial
statements.)
</FN>
</TABLE>
3
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<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
April 1, April 3, Dec. 31,
2000 1999 1999*
------------------------------
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term debt ........ $ 1,088 $ 1,590 $ 1,418
Accounts payable ......................... 3,074 5,335 3,787
Accrued expenses and other liabilities ... 2,805 5,539 4,024
-------------------------------
Total current liabilities .............. 6,967 12,464 9,229
Long-term debt ............................. 23,701 20,390 24,170
Deferred compensation ...................... 2,435 1,943 2,869
-------------------------------
Total liabilities ...................... 33,103 34,797 36,268
-------------------------------
Commitments and Contingencies
Stockholders' equity:
Common stock ............................. 418 425 418
Additional paid-in capital ............... 27,762 28,276 27,762
Retained earnings ........................ 38,221 34,558 40,182
Accumulated other comprehensive loss ..... (395) (289) (334)
Treasury stock ........................... (679) (941) (702)
--------------------------------
Total stockholders' equity ............ 65,327 62,029 67,326
--------------------------------
Total liabilities and stockholders'
equity ............................. $98,430 $96,826 $103,594
================================
<FN>
* Derived from the December 31, 1999 audited consolidated balance sheet.
(The accompanying notes are an integral part of these unaudited financial
statements.)
</FN>
</TABLE>
4
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<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Three Month Periods Ended
April 1, April 3,
2000 1999
------------------------------
<S> <C> <C>
Net sales ........................... $14,580 $20,392
Cost of goods sold .................. 12,219 16,299
------------------------------
Gross profit .................... 2,361 4,093
Rental revenue ...................... 574 168
------------------------------
2,935 4,261
Selling, general and
administrative expenses......... 5,770 5,343
------------------------------
Loss from operations ................ (2,835) (1,082)
Other income (expense):
Interest expense ................ (478) (305)
Interest income ................. 377 153
Other ........................... 475 119
------------------------------
Loss before income taxes ............ (2,461) (1,115)
Benefit from income taxes ........... 500 175
------------------------------
Net loss ............................ ($ 1,961) ($ 940)
==============================
- -------------------------------------------------------------------------------
Net loss per share .................. ($0.48) ($0.22)
==============================
Weighted average number
of shares outstanding.............. 4,115 4,182
==============================
- -------------------------------------------------------------------------------
<FN>
(The accompanying notes are an integral part of these unaudited financial
statements.)
</FN>
</TABLE>
5
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<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
<CAPTION>
Three Month Periods Ended
April 1, April 3,
2000 1999
---------------------------
<S> <C> <C> <C> <C>
Net loss .................................... ($1,961) ($ 940)
Other comprehensive income (loss):
Foreign currency translation adjustment .. (91) --
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) on
securities arising during periods... $ 47 ($152)
Reclassification adjustment for amounts
included in net income -- (9)
------ ------
Other comprehensive gain (loss) on
securities.......................... 47 (161)
Income tax benefit (expense) on
securities ......................... (17) 60
------ ------
Unrealized gains (losses) on securities -
net of tax................................. 30 (101)
------ ------
Comprehensive (loss) ........................ ($2,022) ($1,041)
====== ======
<FN>
(The accompanying notes are an integral part of these unaudited financial
statements.)
</FN>
</TABLE>
6
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<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Three Month Periods Ended
April 1, 2000 April 3, 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 1,961) ($ 940)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ............. 1,151 1,092
Loss on sales of property and equipment ... -- 1
Gain on sales of available-for-sale securities -- (9)
Deferred compensation costs for executive
officers ................................ 40 34
Net change in operating assets and liabilities,
net of effects of acquired or disposed
companies:
Receivables ................................ 7,005 5,148
Inventories ................................ (5,133) (7,110)
Accounts payable ........................... (713) (437)
Accrued expenses and other liabilities ..... (1,166) (1,992)
Other assets ............................... 278 (108)
-------------------------
Net cash used in continuing operations ..... (499) (4,321)
Net cash provided by discontinued operations -- 451
-------------------------
Net cash used in operating activities ...... (499) (3,870)
-------------------------
Cash flows from investing activities:
Capital expenditures.......................... (70) (368)
Proceeds from sales of property and equipment 13 2
Purchases of available-for-sale securities ... -- (93)
Proceeds from sales of available-for-sale
securities ................................. -- 34
Purchase of real property and other investments (1,596) (660)
Loans and advances to investees .............. (899) (935)
Repayments of loans and advances by investees. 51 --
-------------------------
Net cash used in investing activities ...... (2,501) (2,020)
-------------------------
Cash flows from financing activities:
Repayment of long-term debt .................. (799) (545)
Payments of deferred compensation to executive
officers ............................. (2) (2)
Proceeds from issuance of treasury stock ..... 23 43
Purchases of treasury stock .................. -- (376)
-------------------------
Net cash used in financing activities ...... (778) (880)
-------------------------
Net decrease in cash and cash equivalents ...... (3,778) (6,770)
Cash and cash equivalents - beginning of
period....................................... 23,831 13,886
-------------------------
Cash and cash equivalents - end of period....... $20,053 $ 7,116
=========================
- -------------------------------------------------------------------------------
Supplementary cash flow information:
Cash paid during the period for:
Interest..................................... $198 $668
Income taxes................................. $ 87 ($600)
Sale of investments to related party, settled by
forgiveness of certain liabilites owed by the
Company....................................... 775 --
<FN>
(The accompanying notes are an integral part of these unaudited financial
statements.)
</FN>
</TABLE>
7
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HAMPSHIRE GROUP, LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements are unaudited and include the accounts of
Hampshire Group, Limited and its subsidiaries, substantially all of which are
wholly-owned (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation. These financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by such generally accepted accounting
principles for complete financial statements.
In the opinion of the management of the Company, the unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair statement of the results
of operations for the interim periods presented. The results of operations for
interim periods are not indicative of the results that may be expected for a
full year due to the seasonality of the business. These interim unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1999, included in the Company's Annual Report on Form 10-K.
Certain reclassifications have been made to data from the previous year to
conform with the presentation of the current year.
NOTE 2. INVENTORIES
- --------------------
A summary of inventories by component is as follows:
- -------------------------------------------------------------------------------
(in thousands)
April 1, 2000 April 3, 1999 Dec. 31, 1999
------------- ------------- -------------
Finished goods $18,265 $22,195 $14,072
Work-in-progress 2,310 3,898 2,503
Raw materials and supplies 3,648 3,745 2,626
------------- ------------- -------------
24,223 29,838 19,201
Less - LIFO reserve (1,690) (1,939) (1,801)
------------- ------------- -------------
Net inventories $22,533 $27,899 $17,400
============= ============= =============
- -------------------------------------------------------------------------------
NOTE 3. TRADING ASSETS HELD IN RETIREMENT TRUST
- ------------------------------------------------
Under a plan adopted by the Company in 1997, senior executives are permitted to
defer annually a portion of their compensation. These deferrals are invested in
certain mutual funds that have been classified as trading securities, classified
as a long-term asset, in equal amount to the related long- term deferred
compensation liability.
NOTE 4. CREDIT FACILITIES
- --------------------------
The Company has a revolving credit facility (the "Revolving Credit Agreement")
with three participating commercial banks. The credit facility consists of a $55
million combined line of credit and letter of credit facility through May 24,
2000, which the Company is currently in the process of re-negotiating. Advances
under the facility are limited to the lesser of: (1) $55 million, or (2) the sum
8
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of (a) 85% of the eligible accounts receivable, and (b) a seasonal adjustment,
based on inventory levels, of up to $12 million from March 1 to October 31.
Advances under the facility bear interest at the bank's prime rate or, at the
option of the Company, a fixed rate for a fixed term. The loan is collateralized
by the trade accounts receivable of Hampshire Designers, Inc. and its
subsidiaries, excluding certain factored trade accounts receivable. In addition,
letters of credit issued under the facility are collateralized by the inventory
shipped pursuant to the letters of credit. The Company has pledged as collateral
the common stock of its subsidiaries and such subsidiaries guarantee the
performance of the Company. The Revolving Credit Agreement contains covenants
which require certain financial performance and restrict certain payments by the
Company and the Restricted Subsidiaries, defined as Hampshire Designers, Inc.
and its subsidiaries. At April 1, 2000, the Company had approximately $21.7
million available under this facility, however no amounts were outstanding as of
this date.
The Company has other credit facilities, which in the aggregate allow the
Company to borrow up to $4.5 million. As of April 1, 2000 there were no amounts
outstanding against these lines. Additionally, the Company has available credit
facilities restricted in use for international letters of credit in the amount
of $8.5 million.
NOTE 5. SENIOR NOTES
- ---------------------
In June 1998, the Company sold senior notes (the "Senior Notes") in the
principal amount of $15 million to two insurance companies. The Senior Notes,
which bear interest at a rate of 7.05% per annum, are payable in equal annual
installments beginning January 2, 2002 through January 2, 2008. The Senior Notes
are collateralized pari passu with the Company's revolving credit facilities.
The Senior Notes agreement contains covenants which require certain financial
performance and restrict certain payments by the Company and the Restricted
Subsidiaries, defined as Hampshire Designers, Inc. and its subsidiaries.
NOTE 6. RECENT ACCOUNTING STANDARDS
- ------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, ("SFAS 133") "Accounting for
Derivative Instruments and Hedging Activities". SFAS 133 requires all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether the derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. SFAS No.
137 delayed implementation of the statement and as a result, it will not become
effective for the Company until January 1, 2001. Management of the Company has
not yet evaluated the effects of SFAS 133 on the Company's financial position,
results of operations or cash flows.
NOTE 7. SUBSEQUENT EVENTS
- --------------------------
On April 28, 2000 (the "Closing Date"), Hampshire Group, Limited (the "Company")
concluded a transaction whereby it sold all of its sweater manufacturing assets
to Glamourette/OG, Inc., a Puerto Rican corporation ("Glamourette/OG"), with its
principal executive offices at Guaynabo, Puerto Rico. Glamourette/OG is a
subsidiary of Olympic Mills Corporation, a Delaware corporation ("Olympic
Mills"), both of which are unrelated to the Company.
The assets sold include the sweater manufacturing facilities of the Company's
subsidiary Glamourette Fashion Mills, Inc., located in Quebradillas, Puerto Rico
9
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and the machinery and equipment of its subsidiaries San Francisco Knitworks,
Inc., located in San Francisco, California; and two plants owned by Hampshire
Designers, Inc., Natalie Knitting Mills, located in Chilhowie, Virginia and
Winona Knitting Mills, located in Winona, Minnesota; and certain of the
machinery and equipment on consignment to a contract manufacturer located in
Mexico. In addition to the machinery and equipment, assets sold include the
inventories, other than finished goods, and certain other assets of the
respective operations.
The sales price for the machinery and equipment was $10,460,500 consisting of
$4,000,000 cash and a promissory note in the amount of $6,460,500, bearing
interest at 8.75% per annum and due April 28, 2005 (the 8.75% Note"). The 8.75%
Note is payable by a deduction of $0.67 per sweater pur- chased from
Glamourette/OG or is payable in cash and is partially collateralized by the
machinery and equipment which was sold pursuant thereto and by the pledge of the
common stock of Glamourete/OG, Inc. Approximately $750,000 of the proceeds was
used to pay off loans out- standing against the machinery and equipment sold.
In order to avoid interruption of supply, Glamourette/OG took possession of only
the Puerto Rico facility on the Closing Date. The Asset Purchase Agreement
provides that the Company will continue to operate the three domestic
manufacturing facilities for a period of up to ten months. During the transition
period, the Company will continue to pay all related operating expenses and as
compensation for the use of the machinery and equipment, will credit the 8.75%
Note $0.67 per sweater manufactured in the facilities.
The inventories in Puerto Rico on the Closing Date, including work in process,
raw materials and supplies totaling $2,321,500, were transferred to
Glamourette/OG at standard cost and were paid 50% in cash and the balance to be
paid by deduction of 50% of purchase price of sweaters shipped to the Company in
May and June, 2000, after deduction of the $0.67 to be applied as a reduction of
the 8.75% Note.
Concurrently, the Company purchased a 1% equity interest in Glamourette/OG, Inc.
for $40,000, which purchase price was paid in full by an offset against the
balance of the 8.75% Note. The Company has an option to put its 1% interest at
anytime to Olympic Mills at cost and Olympic Mills has a right to purchase the
Company's 1% interest at cost at any time after the 8.75% Note is paid in full.
NOTE 8. INDUSTRY SEGMENTS AND DATA BY GEOGRAPHICAL AREAS
- ---------------------------------------------------------
The Company operates in two industry segments - Apparel and Investments. The
Apparel segment includes sales of apparel, primarily women's and men's tops,
both knitted and woven. The products are sold to customers throughout the United
States of America including major department stores, specialty retail stores and
catalog companies. Although the Company sells sweaters throughout the year, the
sweater business is highly seasonal, with approximately 75% of sales occurring
in the third and fourth quarters. The Investments segment makes investments both
domestically and internationally, principally in real property.
10
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<TABLE>
Industry Segment Data
<CAPTION>
Three Month Periods Ended
April 1, 2000 April 3, 1999
------------------------------
<S> <C> <C> <C>
Net sales Apparel $14,580 $20,392
Rental revenue Investments 574 168
-----------------------------
$15,154 $20,560
- -------------------------------------------------------------------------------
Gross profit Apparel $ 2,361 $4,093
(as percent of net sales) 16.2% 20.1%
- -------------------------------------------------------------------------------
Interest expense Apparel $ 42 $ 69
Investments 148 47
Corporate 288 189
-----------------------------
$478 $305
- -------------------------------------------------------------------------------
Income (loss) from operations Apparel ($2,311) ($597)
Investments 162 72
Corporate (686) (557)
-----------------------------
($2,835) ($1,082)
- -------------------------------------------------------------------------------
Total identifiable assets Apparel $45,009 $61,745
Investments 25,020 17,024
Corporate 28,402 13,525
-----------------------------
$98,430 $92,294
Discontinued
business -- 4,532
-----------------------------
$98,430 $96,826
- -------------------------------------------------------------------------------
Capital expenditures Apparel $66 $364
Corporate 4 4
-----------------------------
$70 $368
- -------------------------------------------------------------------------------
Depreciation and amortization Apparel $919 $1,023
Investments 183 63
Corporate 49 6
-----------------------------
$1,151 $1,092
- -------------------------------------------------------------------------------
Revenue by geographic area United States $14,901 $20,539
Russia 86 21
Europe 167 --
----------------------------
$15,154 $20,560
- -------------------------------------------------------------------------------
Long-lived assets United States $21,265 $18,885
Russia 2,897 2,381
Europe 2,711 702
----------------------------
$26,873 $21,968
- -------------------------------------------------------------------------------
Long-term investments - net United States $2,621 $2,147
Russia 131 131
Europe 2,138 3,224
----------------------------
$4,890 $5,502
- -------------------------------------------------------------------------------
</TABLE>
11
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This quarterly report on Form 10-Q contains forward-looking information and
statements that involve risks and uncertainties. Such forward-looking statements
include, but are not limited to, statements regarding the results of operations.
The Company's actual results, performance or achievements could differ
materially from the results expressed in or implied by these forward-looking
statements which are made only as of the date hereof.
RESULTS OF OPERATIONS
Three months ended April 1, 2000 and April 3, 1999
- --------------------------------------------------
Consolidated net sales of the Company for the three month period ended April 1,
2000, were $14,580,000 compared with $20,392,000 for the same period in 1999. Of
the 28.5% decrease, 21.2% resulted from reduced volume and 7.3% from lower
prices in a very competitive market. Influencing the decrease in volume, in all
lines of our sweater business, is the continuing shift of shipments of sweaters
to our customers in the third and fourth quarters. This concentration of
shipments in the second half of the year is due to the retailers' efforts to
have all of their suppliers in the "Quick Response" mode to maximize sales with
a quick inventory turn. Also, significantly impacting the amount of net sales
was the unusually warm winter experienced throughout the country. This led to a
very soft market and low demand for the Spring sweater season, experienced
equally across the Company in both the men's and women's lines. The final
primary factor contributing to the decline in sales during the first quarter of
2000 was the decision by the Company not to pursue branded knit shirt business
for the Spring season. This decision was based on the limited success due to
delivery problems and low margin experienced by the Company in the preceding
year.
Revenues of Hampshire Investments, Limited were $574,000 for the first quarter
of 2000, an increase of 242% from the $168,000 in revenues reported for the
first three month period of 1999. The increase resulted from additional property
acquisitions made after the first quarter of 1999 and the larger percentage of
the real estate units being renovated and leased in 2000, compared with the same
time period for 1999.
Gross margin for the Company's Apparel segment for the first quarter of 2000 was
16.2% percent of net sales, off 3.9 percentage points from the gross margin
achieved in the prior year for the same time period. The unusually low demand
for spring sweater products led to even more price pressure in an already very
competitive market, significantly reducing achieved margin. With lower volume,
the gross margin also deteriorated from the continued needs and costs related to
maintaining work flow in the Company's manufacturing facilities.
Selling, general and administrative expenses ("SG&A") for the Apparel segment of
the Company were $4,672,000 in 2000 compared with $4,690,000 in 1999. Variable
selling and shipping expenses were down due to the reduced sales volume. The
fixed general and administrative expenses and the increased expenses in the
Brands Division, related primarily to the launching of the Dockers line,
accounted for the 9 percentage points increase, as a percentage of net sales, to
32% for the first quarter of 2000, compared to 23% for the same period last
year.
SG&A expenses for the corporate office for the first quarter of 2000 were
$686,000 compared to $557,000 for the same quarter in 1999, an increase of
$129,000. In the first quarter of 1999, the Company recognized an expense for
the unrealized gain on the market value of securities held in the Company's
Deferred Compensation Plan in the amount of $62,000. For the same period in
2000, the Company reported an expense of $219,000, an increase of $157,000 from
the preceding year. An offsetting entry was reported as miscellaneous income for
both time periods, in the respective amounts, accounting for a significant
portion of the increase in miscellaneous income.
12
<PAGE>
Income from operations for Hampshire Investments was $162,000 in the first
quarter of 2000, compared with $72,000 for the same period in 1999. SG&A
expenses in the Investment segment were $412,000 and $96,000, for the first
quarters of 2000 and 1999, respectively. The increase resulted primarily from
additional operating expenses for acquired property and depreciation expense.
Depreciation in the first quarter of 2000 was $183,000, compared to $63,000 for
the same period in 1999.
Other income for the first quarter of 2000 was $475,000, compared to $119,000
for the first quarter of 1999. Other income for the first quarter of 2000
consisted primarily of the gains on market value of securities held in the
Company's Deferred Compensation Plan as indicated above, and income received and
recognized from the building and equipment leases to Vision Legwear, LLC, which
was not sold until June 1, 1999.
For the first quarter of 2000, the Company has reported a net loss of
$1,961,000, compared with a $940,000 net loss for the first quarter of 1999. The
loss was ($0.48) per share in the first quarter of 2000 and ($0.22) per share
for the same period in 1999.
SEASONALITY
- -----------
Approximately 75% of the Company's sweater sales occur in the second half of the
year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The liquidity and capital requirements of the Company relate to funding working
capital for current operations, principally to fund the buildup in inventories
and accounts receivable, which reach their maximum seasonal requirements in the
third quarter, servicing long-term debt and funding the investments of Hampshire
Investments. The primary resources to meet the liquidity and capital
requirements include funds generated by operations and borrowings under the
Company's revolving credit facilities and long-term notes.
Net cash used in operations for the three month period ended April 1, 2000
totaled $499,000, which was primarily for the build-up of inventory for planned
shipments later in the year. Capital expenditures for the first quarter of 2000
were $70,000, as compared to an annual budget of $650,000.
The Company, through its investment subsidiary, Hampshire Investments, Limited,
makes investments in assets unrelated to the Company's sweater business, for the
intended purpose of diversifying the earnings base of the Company. During the
first quarter of 2000 the Company, through Hampshire Investments, made
$1,596,000 of additional investments in such assets.
The Company is in the process of renewing its principal credit line which is
shared with three commercial banks. The credit facility consists of a $55
million line of credit and letter of credit facility. Advances under the line of
credit are limited to the lesser of: (1) $55 million; or (2) the sum of 85% of
the eligible accounts receivable and a seasonal adjustment of $12 million during
the period from March 1 to October 31. The facility is subject to renegotiation
on or before May 24, 2000. The Company expects to renew or replace the current
facility prior to its expiration with similar terms and conditions. At April 1,
2000, there were no amounts outstanding under this line of credit facility. As
of May 11, 2000, the Company had approximately $21.7 million available under
this line of credit.
Advances under the facility bear interest at the bank's prime rate or, at the
option of the Company, a fixed rate for a fixed term. The loans are
collateralized pari passu with the Senior Notes by the trade accounts receivable
of Hampshire Designers and the common stock of all the subsidiaries of the
Company. Letters of credit issued under the facility are collateralized by the
inventory shipped pursuant to the letters of credit.
The Company has other credit facilities, which in the aggregate allow the
Company to borrow up to $4.5 million. As of April 1, 2000 there were no amounts
outstanding against these lines. Additionally, the Company has available credit
facilities restricted in use for international letters of credit in the amount
of $8.5 million.
13
<PAGE>
During 1998, the Company sold $15 million of 7.05% long-term notes to two
insurance companies (the "Senior Notes") with repayment terms of seven equal
annual installments commencing January 2002. Interest is payable semi-annually
and the loan is collateralized pari passu with the Company's revolving credit
facility.
The Company's credit facility and Senior Notes contain certain covenants which
require certain financial performance, including minimum net worth and specified
current ratio and fixed charge coverage ratios, and which restrict the sale of
assets and certain payments, including dividends and investments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
The long term debt of the Company is at fixed interest rates which were at
market when the debt was issued, but are primarily below market at April 1,
2000. The short-term debt of the Company has variable rates based on the prime
interest rate of the lending institution. As of April 1, 2000 there was no
short-term indebtedness.
In purchasing sweaters from foreign manufacturers, the Company uses letters of
credit which require the payment of dollars upon receipt of bills of lading for
the sweaters. Prices are fixed at the time the letters of credit are issued.
With the exception of its 70% owned subsidiary, Hampshire Praha in the Czech
Republic, the Company does not issue or own foreign indebtedness. Hampshire
Investments either purchases foreign-based assets with dollars or with foreign
currency purchased with dollars. Real properties which are owned by Hampshire
Investments and which are located outside the United States are leased for
dollars and not in a foreign currency. The primary market risk which Hampshire
Investments has with respect to foreign currencies is the impact that
fluctuations in such currencies have on the businesses of the lessees of such
real property and on the foreign- based businesses and the foreign based funds
in which Hampshire Investments owns equity securities.
Hampshire Investments limits its risk in the common stock of publicly traded
apparel companies primarily by limiting the amount of its investments. In
addition to following all of its investments closely, Hampshire Investments
limits the market risk of its investments by limiting the amount of the
aggregate investments such that investments may not exceed 50% of annual net
income of the Company on a cumulative basis.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is from time to time involved in litigation incidental to the
conduct of its business. The Company believes that no currently pending
litigation, to which it is a party, will have a material adverse effect on its
consolidated financial condition, results of operations, or cash flows.
Item 2 and 3 are not applicable and have been omitted.
Item 4 - Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the quarter
ended April 1, 2000.
Item 5 is not applicable and has been omitted.
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Description
--------------- ----------------------------------------------------
(10)(V) Asset Purchase Agreement between Glamourette Fashion
Mills, Inc., San Francisco Knitworks, Inc. and
Hampshire Designers, Inc. (as "Seller") and
Glamourette/OG, Inc. (as "Purchaser"), dated
April 28, 2000
(27) Financial Data Schedule (electronic filing only)
b) Reports on Form 8-K filed during the quarter
There were no reports filed on Form 8-K during the quarter ended April 1, 2000.
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SIGNATURES
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 thereunto duly authorized.
HAMPSHIRE GROUP, LIMITED
(Registrant)
Date May 11, 2000 /s/ Ludwig Kuttner
- ----------------------- ------------------------------------
Ludwig Kuttner
President and Chief Executive Officer
(Principal Executive Officer)
Date May 11, 2000 /s/ Charles W. Clayton
- ----------------------- ------------------------------------
Charles W. Clayton
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
16
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, entered into this 28th day of April, 2000, by and among
Glamourette Fashion Mills, Inc. ("Glamourette"); San Francisco Knitworks, Inc.
("Knitworks"); Hampshire Designers, Inc. ("Hampshire Designers"), all three
having been organized under the general corporation laws of Delaware and having
their principal executive offices at 215 Commerce Boulevard, Anderson, South
Carolina 29625 (hereinafter referred to jointly as "Seller"); Glamourette/OG,
Inc., a corporation organized under the laws of the Commonwealth of Puerto Rico
with its principal executive offices at 40 Road 165, Guaynabo, Puerto Rico 00968
(hereinafter referred to as "Glamourette/OG" or "Purchaser"); and Olympic Mills
Corporation, a Delaware corporation with its principal executive offices at 40
Road 165, Guaynabo, Puerto Rico 00968 (hereinafter referred to as "Olympic
Mills").
W I T N E S S E T H
WHEREAS, Seller is dedicated to designing, marketing and distributing
branded and private label sweaters and, jointly with its subsidiaries, operates
five sweater factories under the names Glamourette Fashion Mills (Puerto Rico),
the largest factory, Natalie Knitting Mills (Virginia), San Francisco Knitworks
(California), Winona Knitting Mills (Minnesota) and Sueteres Gari
(Aguascalientes, Mexico);
WHEREAS, Seller is in the process of closing its sweater factory located in
Quebradillas, Puerto Rico and will sell the machinery and equipment and
inventories at that facility;
WHEREAS, Seller has a market for acrylic and cotton sweaters of the type
manufactured in the Quebradillas facility and is willing to continue sourcing
sweaters from that factory;
WHEREAS, Purchaser is willing to buy the machinery and equipment and
inventories of Seller located at its facility in Quebradillas, Puerto Rico, as
well as the machinery and equipment and inventories of Seller located at the
other above-mentioned factories;
WHEREAS, Purchaser is willing to operate a sweater manufacturing business
in Puerto Rico, including the manufacture of sweaters that Seller previously
manufactured;
WHEREAS, Purchaser is willing to consolidate all the sweater manufacturing
operations of Seller at the location in Quebradillas, Puerto Rico, and in order
to substantially reduce costs and remain competitive in the market, possibly
branch out with its manufacturing operations to the Dominican Republic;
WHEREAS, Seller is interested in minimizing the hardships that may be
caused by the unemployment of its work force in Quebradillas, Puerto Rico; and
WHEREAS, Purchaser is interested in acquiring trained and skilled workers
in the manufacture of sweaters and other apparel.
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NOW, THEREFORE, in consideration of the promises, representations,
warranties, and mutual agreements set forth herein, intending to be legally
bound hereby, the parties hereto agree as follows:
I. DEFINITIONS
A. "Assumed Contracts" shall mean collectively the Purchase Orders, Sales
Orders and other Contracts related to the operations of the Facilities.
B. "Closing" shall have the meaning set forth in Paragraph IV hereof.
C. "Closing Date" shall mean the date on which this Agreement is executed
and delivered by the parties hereto.
D. "Employees" shall mean the employees of Glamourette per the employment
roles as of the Purchase Date, identified on Exhibit 11 hereto.
E. "Facility(ies)" shall mean the manufacturing facilities operated by
Seller under the names Glamourette Fashion Mills, Natalie Knitting Mills, San
Francisco Knitworks, Winona Knitting Mills and Sueteres Gari, as more
specifically identified on Exhibit 1 hereto.
F. "Inventories" shall mean the Seller's total inventory of finished
Products, including production samples; work-in-process Products; trimmings and
findings; raw material and chemicals relating to the manufacture of Products;
fuel oil; needles; and manufacturing supplies, including packaging and other
supplies on hand at the Facilities on the Purchase Date. (See Exhibit 3 to be
completed after compilation of the physical inventory.)
G. "Machinery and Equipment" shall mean all of the machinery and equipment
used by the Seller in the manufacture of Products at the Facilities, excluding
leasehold improvements, which shall become the property of the lessor of each
individual Facility, as specifically identified on Exhibit 2, annexed hereto and
made a part hereof. Notwithstanding the above, Machinery and Equipment of
Glamourette shall include furniture and fixtures of that Facility.
H. "Other Contracts" shall mean those service contracts and other similar
agreements as specifically identified on Exhibit 7, to the extent that any such
contracts remains executory after the Possession Date.
I. "Pledge Agreement" shall mean the Pledge Agreement between Olympic Mills
and Seller substantially in the form set forth as Exhibit 19 hereto.
J. "Products" shall mean women's, men's and children's sweaters and
apparel.
K. "Purchase Date" shall have the following meaning:
1. for all Machinery and Equipment, 12:01 A.M. Eastern Standard Time
on the Closing Date of this Agreement, at which time title to the Machinery
and Equipment shall be transferred to Purchaser;
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2. for Inventories, 12:01 A.M. local time on the applicable Possession
Date (as defined below); and
3. for Assumed Contracts, 12:01 a.m. Eastern Standard Time on the
Closing Date, at which time the Assumed Contracts shall be assigned to
Purchaser by operation of this Agreement.
L. "Possession Date" shall mean 12:01 a.m. local time on the date Purchaser
takes possession and control of Machinery and Equipment and Inventories of each
Facility in accordance with the following schedule (for each facility, the
"Possession Date"):
1. Glamourette: on or about May 1, 2000, but in any event not later
than June 30, 2000;
2. Natalie: on or about August 2000, but in any event not later than
September 30,2000;
3. Winona and Gari: on or about November 2000, but in any event not
later than December 31, 2000; and
4. Knitworks: on or about February 2001, but in any event not later
than March 31, 2001.
Purchaser shall give written notice to Seller thirty (30) days in
advance of the Possession Date for Machinery and Equipment and the Purchase
Date for Inventories, and Seller shall deliver written acknowledgement of
said date.
M. "Purchase Orders" shall mean Seller's open purchase orders to purchase
raw materials, supplies or services listed on Exhibit 5, annexed hereto and made
a part hereof, copies of which have been delivered to the Purchaser, which
Purchase Orders shall have been placed by Seller after September 1, 1999 and
before the Closing Date, except as otherwise set forth in Paragraph VI.F.,
hereof.
N. "Promissory Note" shall have the meaning set forth in Paragraph
III.A.3.(b) hereof.
O. "Purchased Property" shall mean the Machinery and Equipment, Inventories
and Assumed Contracts transferred to Purchaser pursuant to Paragraph III.A.1.,
III.A.7., III.B. and III.D. hereof.
P. "Quebradillas Leases" shall mean the lease dated the 9th day of
September 1992 and the lease dated the 27th day of June, 1999 between
Glamourette Fashion Mills, Inc. and Puerto Rican Industrial Development
Corporation ("PRIDCO") for the manufacturing facilities located in Quebradillas,
Puerto Rico, copies of which are annexed hereto as Exhibit 13 A and B, and have
been delivered to Purchaser at least five (5) days prior to Closing.
Q. "Sales Orders" shall mean Seller's open sales orders to supply Products
listed on Exhibit 6, annexed hereto and made a part hereof, copies of which have
been delivered to the Purchaser.
R. "Security Agreement" shall mean the Security Agreement between Purchaser
and Seller substantially in the form set forth as Exhibit 18 hereto.
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S. "Standard Cost(s)" shall be based on conversion costs at direct labor
and overhead rates stated on the Year 2000 budget as submitted by Seller as set
forth on Exhibit 4, annexed hereto and made a part hereof.
II. COMMON STOCK OF GLAMOURETTE/OG
Glamourette/OG is authorized to issue Four Hundred (400) shares of Common
Stock, par value Ten Thousand Dollars ($10,000) per share. Such Common Stock
shall be owned Three Hundred Ninety Six (396) shares by Olympic Mills and Four
(4) shares by Hampshire Designers. Olympic Mills and Hampshire Designers shall
proportionally capitalize Glamourette/OG with Four Million Dollars ($4,000,000)
with Hampshire Designers' payment of Forty Thousand Dollars ($40,000) being paid
by an equal amount reduction of the principal balance of the Promissory Note as
indicated in Paragraph III.A.3.(c) hereof.
A. Olympic Mills shall have the right to acquire Hampshire Designers'
interest in Glamourette/OG at any time for book value, after the Promissory Note
has been paid in full. Hampshire Designers shall have the right to "Put" its
investment in Glamourette/OG to Olympic Mills at book value at any time by
written notification to Olympic Mills to which Olympic Mills shall have thirty
(30) days to respond.
B. After Closing and pursuant to Section VI. of this Agreement,
Glamourette/OG shall take possession and control of the Purchased Property and
shall be the sweater operating company.
III. SALE AND PURCHASE OF THE PURCHASED PROPERTY
A. Purchaser shall acquire the Purchased Property and other rights, title
and interest of the Seller in the Purchased Property pursuant to this Agreement,
upon the terms and conditions set forth in this Agreement:
1. Seller hereby sells, conveys, assigns and transfers with effect as
of the date hereof, all of Seller's rights and title to and interest in,
(i) the Machinery and Equipment listed in Exhibit 2 and (ii) the Assumed
Contracts, and Purchaser acquires and accepts from Seller such Machinery
and Equipment, "as is, where is" and the Assumed Contracts, for the total
purchase price (the "Purchase Price") of Twelve Million Dollars
($12,000,000), allocated to respective items in accordance with Paragraph
III.A.2. below.
2. Purchaser and Seller hereby agree that the allocation of the
Purchase Price for Machinery and Equipment located at each Facility shall
be as follows: Gross Imputed Net Facility Price Interest Price (a)
Glamourette $ 5,000,000 ($638,125) $4,361,875 (b) Natalie 3,000,000
(382,875) 2,617,125 (c) Knitworks 1,000,000 (127,625) 872,375 (d)
Winona/Gari 3,000,000 (382,875) 2,617,125 Total $12,000,000 ($1,531,500)
$10,468,500
3. Purchaser shall pay the Purchase Price for the Machinery and
Equipment at Closing by delivery of the following:
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(a) Four Million Dollars ($4,000,000) by bank check;
(b) Promissory Note for Eight Million Dollars ($8,000,000),
including interest, and shall be due in full on the fifth anniversary
of this Agreement if not accelerated or paid sooner as herein
provided, a copy of which is attached hereto as Exhibit 8 hereto; and
(c) Stock certificate representing four (4) shares of
Glamourette/OG Common Stock, $10,000 par value (a specimen copy which
is attached hereto as Exhibit 9), endorsed fully paid and
non-assessable, having been paid in full by an immediate setoff of
Forty Thousand Dollars ($40,000) against the principal balance of the
Promissory Note.
4. The Promissory Note may be repaid in part or in whole (i) in cash,
(ii) by a deduction from the payment by Seller to Purchaser of Sixty Seven
Cents ($0.67) per sweater sold to Seller and delivered by Purchaser, (iii)
in accordance with Paragraph III.A.4.(a) of this Agreement, (iv) in
accordance with the Promissory Note and/or (v) as otherwise agreed to by
the parties.
(a) Seller agrees to credit the Promissory Note annually in an
amount equal to Sixty Seven Cents ($0.67) per sweater unit that Seller
is obligated to purchase under Paragraph V.A. of this Agreement and
for which Seller has failed to place firm orders.
(b) Purchaser agrees that in the event that Seller is no longer
obligated to purchase sweater units in accordance with Section V.
hereof, Purchaser will pay the balance of the Promissory Note then
outstanding by bank check within thirty (30) days after all applicable
cure periods have expired.
(c) The parties agree that all payments on the Promissory Note
shall be made at the executive offices of Hampshire Designers, Inc.,
215 Commerce Boulevard, Anderson, SC 29625.
5. Until paid in full, the Promissory Note shall be secured by:
(a) a lien on the Machinery and Equipment transferred pursuant
hereto, with such security interest being subordinated in the amount
of four million dollars ($4,000,000) in favor of the Olympic Mills
Corporation, or its assignee, or the principal lender of
Glamourette/OG; and
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(b) a pledge of a number of shares of Common Stock of
Glamourette/OG, that will be calculated according to the following
formulas:
Percentage Pledged =
(outstanding balance of the Promissory Note/7,960,000) x 100
Number of Shares pledged = Percentage Pledged x 396 / 100
Any time that the Purchaser reduces the outstanding balance of the
Promissory Note, the Seller will release whatever shares are necessary to comply
with the above formula. Notwithstanding the above, shares shall be released in
increments of Five (5) shares after the proportionate payment has been made on
the Promissory Note, but Seller shall not be required to make such releases more
frequently than three (3) times each calendar quarter unless the release would
include the total shares of any one certificate held by Seller at that time.
6. For so long as a balance is outstanding on the Promissory Note,
Purchaser shall provide to Seller within thirty (30) days after the end of the
fiscal quarter, unaudited financial statements of Purchaser for the period then
ended and for the year-to-date. Further, for so long as a balance is outstanding
on the Promissory Note, Purchaser shall provide to Seller within one hundred
twenty (120) days after the last day of the fiscal year, a copy of the financial
statements of Purchaser, certified by an independent certified accountant
prepared in accordance with generally accepted accounting principles
consistently applied.
7. On the Purchase Date, as defined herein, Purchaser will purchase
existing Inventories of Glamourette, located in Quebradillas, Puerto Rico.
(a) The quantities of Inventories shall be determined by a
physical count performed by representatives of Purchaser and Seller
within Five (5) days of the Purchase Date and such quantities of
Products shall be priced at the Standard Cost set forth on the cost
sheets prepared for the Year 2000, at the average stage of completion
for such Products. The quantities of raw materials, trimmings and
findings and supplies shall be priced at the lower of invoice cost or
market. (b) Purchaser shall pay by bank check delivered on the
Purchase Date of the Inventories, an amount equal to Fifty Percent
(50%) of the estimated value of the Inventories, as agreed by
representatives of Purchaser and Seller, as a deposit against the
purchase price of the Inventories of Glamourette. The difference shall
be paid by deduction from the price for sweater units sold and
delivered to Seller by Purchaser (after the deduction of Sixty Seven
Cents ($0.67) from such price per sweater unit in accordance with
Paragraph V hereof). In the event that Purchaser fails to ship to
Seller during a period of ninety (90) days commencing with the
Inventory Possession Date, a quantity of sweater units with transfer
cost (after deduction of the Sixty Seven Cents ($0.67) per unit)
greater than the remaining balance due on the purchase price of the
Inventory, Purchaser shall pay to Seller by bank check the remainder
of the purchase price of the Inventory within thirty (30) days.
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B. Purchaser will purchase the Inventories at the Winona, Natalie and
Knitworks Facilities on the date that Purchaser takes possession and control of
the Machinery and Equipment and Inventories located at each respective Facility,
and under the same terms and conditions as the purchase of the Inventory at
Glamourette (Fifty Percent (50%) on the Purchase Date and the balance to be
deducted from invoices due to Purchaser of Products sold and delivered to Seller
after deduction of the Sixty-Seven Cents ($0.67) per sweater to be applied as
payment on the Promissory Note).
C. Seller will be responsible for any property tax or excise tax that may
have been assessed upon the Purchased Property on or before the date of this
Agreement.
D. On the Possession Date, Seller shall assign and transfer to Purchaser
and Purchaser shall acquire, all of Seller's right, title and interest in and to
the Assumed Contracts and all other warranties and other contractual rights as
to third parties held by or in favor of Seller with respect to the Purchased
Property. To the extent that the assignment of any Assumed Contract shall
require the consent of any other party thereto, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment, without
consent, would constitute a breach thereof. Seller will use its commercially
reasonable efforts to obtain the consent of the other parties to such contracts
for the assignment thereof to Purchaser. If such consent is not obtained in
respect of any such Assumed Contract, Seller will cooperate with Purchaser in
any reasonable arrangement requested by Purchaser to provide for Purchaser the
benefits under any such Assumed Contract, including enforcement, at the cost of
and for the benefit of Purchaser, of any and all rights of Seller against the
other party thereto with respect to such Assumed Contract.
IV. CLOSING
The closing under this Agreement (the "Closing") shall take place at 10:00
AM Eastern Standard time at the principal executive offices of Hampshire
Designers on April ___, 2000, or at such other place and time as may be mutually
agreed upon in writing by Purchaser and Seller.
V. PRODUCT PURCHASE/SUPPLY AGREEMENT
For each of the five (5) years following the execution of this Agreement:
A. Subject to the terms and conditions hereof, Seller agrees to purchase
from Glamourette/OG a minimum of Two Million, Four Hundred Thousand (2,400,000)
sweater units per year with a minimum number of Twelve Million (12,000,000)
sweater units to be purchased over the Five (5) year term.
B. The price per unit during the first twelve months of the Agreement shall
be the Seller's Standard Cost per unit as per the 2000 cost sheets calculated
for Glamourette at the Two Million (2,000,000) unit production level attached to
Exhibit 4 hereof, and the price per unit for the remainder of the term of this
Agreement shall be the Standard Cost set forth above adjusted for any change in
minimum wages as established by the government and any change in the cost of raw
material.
C. During the term of the Agreement, the Two Million, Four Hundred Thousand
(2,400,000) minimum annual sweater units to be purchased by the Seller must
include Six Hundred Fifty Thousand (650,000) sweater units purchased at the
Standard Cost of Natalie, Winona or Knitworks.
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D. Purchaser agrees that in the event Purchaser does not deliver the
sweater units requested by Seller, and the sweater units requested by Seller can
be manufactured on the Machinery and Equipment of Purchaser, and the quantities
so requested by Seller are within the quantities set forth in the quarterly
budget delivered to Purchaser pursuant to Paragraph V.N. below, the quantity of
sweater units so requested by Seller and not delivered by Purchaser shall be
credited to Seller's minimum purchase requirement. Notwithstanding the above,
crediting Seller's minimum purchase requirement shall not preclude Seller from
exercising other remedies for non-performance by Purchaser as set forth in this
Agreement.
E. Purchaser with the assistance of Seller, will make every effort to
reduce the Standard Cost in order to remain price competitive; provided, however
that such Standard Costs will be adjusted to reflect any increase in the minimum
wage or change in raw material costs.
F. Purchaser agrees to manufacture, sell and deliver to Seller sweaters
manufactured with existing equipment and present technology at the price and
terms set forth herein, and at the quality levels and design and delivery dates
consistent with existing levels as agreed to by Seller and Purchaser. Purchaser
shall send pre-production samples of each of the different styles to Seller for
Seller's approval, with the understanding that once approved by Seller, said
samples shall be adopted as the production standard.
G. Purchaser shall have the right of first refusal to manufacture any
existing or new styles of sweaters for Seller, provided that Seller shall not be
required to purchase any sweaters of new styles from Purchaser at prices greater
than that which Seller may obtain elsewhere. Upon written request by Seller,
Purchaser shall deliver to Seller (i) price quotes within one (1) week of such
request; and (ii) product samples within two (2) weeks of such request. In the
event Purchaser fails to deliver the required price quote and the product
samples in accordance with the above schedule, Purchaser shall be deemed to have
forfeited its right of first refusal to manufacture the products.
H. In order to reduce the Standard Cost, Purchaser may, at a future date,
transfer the labor intensive operations, including cutting, sewing, and
finishing, to a manufacturing facility in the Dominican Republic in an orderly
manner.
I. Purchaser will proceed to establish a research and development facility
in conjunction with the manufacturing facility at the location in Quebradillas,
Puerto Rico, to test yarns, to design and develop new machinery, and to improve
existing equipment for knitting and sewing.
J. Purchaser is committed with the Economic Development Administration of
Puerto Rico, and guarantees Seller, that it will offer comparable employment
with comparable benefits to a minimum of Ninety Five Percent (95%) of the
Employees of Glamourette released by Seller on the Possession Date of the
Glamourette Facility.
K. Seller shall indemnify and hold harmless Purchaser for any claim filed
by existing or former Employees of Seller, other than claims regarding severance
which is covered in Paragraph V.L. below, that pertain to the period in which
Seller operated the Facilities. Notwithstanding the above, Purchaser will
cooperate with Seller to handle any such claims.
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L. Seller shall indemnify and hold harmless Purchaser for any claims for
severance payment filed by any former Employees of Seller who was terminated
prior to April 6, 2000 (the announcement date). A reserve of Two Hundred
Thousand Dollars ($200,000) shall be established by Seller, in the form of an
agreed upon setoff against the Promissory Note for a period of Six (6) months,
to cover claims regarding severance of employees because of the closing of the
Quebradillas Facility. Purchaser shall indemnify Seller for any and all claims
filed during the term of this Agreement that pertain to or arise out of
Purchaser's operation at the Quebradillas Facility.
M. During the term of this Agreement, Purchaser agrees not to compete
directly with Seller in offering the same or substantially similar products that
Seller sells to its customers, with the exception of Olympic Mills Corporation
and Walmart Stores. A list of current customers of Seller is set forth on
Exhibit 10, annexed hereto and made a part hereof. Purchaser acknowledges that
Seller would not have an adequate remedy at law and would be irreparably harmed
if Purchaser fails to abide by this term. Accordingly, Seller shall be entitled
to temporary injunctive relief to prevent breaches of this term and to
specifically enforce this term, in addition to any other remedy to which it may
be entitled. Notwithstanding the above, Seller acknowledges that Purchaser may
sell the same or very similar products (i) to customers of Seller located in the
Commonwealth of Puerto Rico other than J C Penney and Sears and (ii) to other
customers who in turn may be competitors of Seller so long as the product being
sold is not with Seller's design or style, and that Purchaser shall in no way be
liable to Seller for such third-party competition. Purchaser may sell to the
customers of Seller other products from Purchaser's other factories not in
direct competition with Seller.
N. On a quarterly basis, Seller shall have the right of first refusal to
have up to the total manufacturing capacity of Glamourette/OG used in producing
Seller's sweater demand, provided that, Seller has submitted an estimated
quarterly budget of its sweater demand to Purchaser at least Thirty (30) days
before the beginning of each quarter. Purchaser may commit the balance of
Glamourette/OG capacity not budgeted for the Seller to manufacture other
products for other customers in compliance with Paragraph V.M. hereof.
O. If Purchaser substantially fails to meet the conditions in Section V.
hereof, due to circumstances under its control, Purchaser shall be deemed in
default under this Agreement and Seller shall provide written notice of default
specifying the deficiencies. In such event, Purchaser shall have a Sixty (60)
day period from receipt of the written notice to cure the default.
Notwithstanding the above, Purchaser shall have only Thirty (30) days from
receipt of the written notice to cure the default in the event the default
results from non delivery of products on order by Seller's customers. If the
default remains uncured after the cure period, Seller shall have the right to
take any of the following actions at the same time or different times: (i)
terminate its obligations under this Agreement; (ii) declare the balance of the
Promissory Note outstanding at the time to be due and payable in full, whereupon
said balance and all fees and other obligations of Purchaser so declared shall
become due and payable; and (iii) enforce rights or cause the enforcement of
rights, or exercise or cause the exercise of any remedies available under this
Agreement or the Promissory Note, and these shall be the sole remedies available
to Seller.
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If Purchaser fails to meet the conditions in Section V. hereof, due to
circumstances resulting from an Act of God, Purchaser shall proceed to cure the
default during the time period that is necessary and so long as such cure is
possible within one hundred and eighty (180) days. Seller is entitled to the
same remedies available to it when Purchaser fails to meet conditions due to its
circumstances.
P. Other terms and conditions that the parties have agreed to are:
Shipment: FOB Plant Credit Terms: Net 30 day.
VI. INTERIM OPERATION
A. From the Closing Date until the applicable Possession Date (the "Interim
Period"), Purchaser hereby leases (the "Lease") to Seller the Machinery and
Equipment purchased hereunder, but not possessed, by Purchaser (the "Leased
Machinery and Equipment"). Seller agrees to operate the Leased Machinery and
Equipment at the applicable Facility until the applicable Possession Date, at
which time the Lease shall terminate.
B. The payment price (the "Lease Payment Price") for the Leased Machinery
and Equipment shall be Sixty-Seven Cents ($0.67) per sweater unit manufactured
by Seller with the Leased Machinery and Equipment during the Interim Period (as
applicable to each Facility) as set forth on Exhibit 12 hereof. The Lease
Payment Price shall be paid by the reduction of the outstanding balance of the
Promissory Note in an amount equal to such Lease Payment Price. All sweater
units manufactured by Seller with the Leased Machinery and Equipment during the
Interim Period (as applicable to each Facility) will be included in satisfying
Seller's minimum purchase requirement pursuant to Paragraph V.A. hereof.
C. Purchaser will consolidate in Puerto Rico, Seller's entire sweater
manufacturing operations herein specified. Plans call for the move of the
Natalie Machinery and Equipment on or about August 2000, the Winona and Gari
Machinery and Equipment on or about November 2000, and the Knitworks Machinery
and Equipment on or about February 2001. Notwithstanding the above, such
transfers will be performed in an orderly manner to maintain production flow and
to ensure quality.
D. Seller shall maintain its casualty and liability insurance covering the
Machinery and Equipment covered by this Agreement until the earlier of the
Purchaser acquiring its own insurance or the Possession Date of the Machinery
and Equipment at each Facility. Purchaser shall reimburse Seller for such
insurance costs within thirty (30) days of the termination of Seller's
obligation to insure under this Paragraph VI.D. Up until the Possession Date,
Seller shall exercise all reasonable means necessary to take care of and
conserve the Machinery and Equipment and Seller shall use such Machinery and
Equipment in a reasonable manner.
E. In order to facilitate orderly shutdown of the stateside facilities and
assure orderly transition for consolidation, Purchaser shall give Seller written
notice of the date which Purchaser will take possession and control of the
Machinery and Equipment of each respective Facility and in the event Purchaser
has not removed the Machinery and Equipment from the Natalie Facility within
sixty (60) days and other Facilities within thirty (30) days from such notice
date, the Purchaser shall reimburse Seller for the occupancy expense incurred by
Seller, including the lease expense, insurance expense and property taxes
charged against Seller relating to such Machinery and Equipment.
10
<PAGE>
F. As per Paragraph I.M. hereof, on and after the Closing Date, Seller
shall be permitted to place new Purchase Orders under the following conditions:
(i) all such Purchase Orders shall be deemed reasonable and necessary by Seller
for the continued production at the Facilities until each applicable Possession
Date; (ii) a copy or other notice of each Purchase Order shall be sent to
Purchaser within three (3) business days of having been made; (iii) for any
Purchase Order that exceeds Fifty Thousand Dollars ($50,000), Seller shall
obtain the prior written consent of Purchaser, which shall not be unreasonably
denied; and (iv) in all cases Purchaser shall have the right to question the
need and reasonableness for new Purchase Orders and if Seller cannot
satisfactorily show otherwise, Purchaser shall not be held responsible for the
payment of said Purchase Order.
VII. DEFAULT BY SELLER
If Seller substantially fails to comply with any of its obligations herein
due to circumstances under its control, Seller shall be deemed in default under
this Agreement and Purchaser shall provide written notice of default specifying
the deficiencies. In such event, Seller shall have a sixty (60) day period from
receipt of the written notice to cure the default. If default remains uncured
after the cure period, Purchaser's sole remedy shall be the right to set off any
and all amounts due under the Promissory Note in respect of any claims it may
have against Seller.
VIII. OTHER DISPOSITIONS
A. The parties hereto shall at any time, and from time to time, after the
Closing Date, upon the reasonable request of either party, but at the expense of
the requesting party, execute, acknowledge and deliver, all such further acts,
assignments, transfers, conveyances and assurances as may be required for the
better documentation of the transaction set forth by this Agreement.
B. This Agreement and its Exhibits, shall be governed by and construed in
accordance with the Laws of the Commonwealth of Puerto Rico without regard to
the conflict of law principles thereof.
C. This Agreement may be executed simultaneously in several counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
D. All claims, disputes and other matters in question between the parties
arising out of or relating to this Agreement, or the breach thereof, shall be
decided by arbitration in accordance with the Industry Arbitration Rules of the
American Arbitration Association and fees for such arbitration shall be paid
fifty percent (50%) by Seller and fifty percent (50%) by Purchaser.
IX. REPRESENTATIONS AND WARRANTIES OF SELLER
A. Title - Seller has good and marketable title to the Machinery and
Equipment and has the right to sell, assign, convey, and deliver the same to
Purchaser pursuant to this Agreement, and shall do so, free and clear of any and
all liens on the Purchase Date other than liens contemplated in connection with
this transaction.
11
<PAGE>
B. Authority - Seller has the unconditional right to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
C. Absence of Conflict - The execution and delivery of this Agreement by
Seller, the performance of its obligations under this Agreement, the
consummation of the transaction contemplated hereby and the compliance with the
terms hereof by Seller will not (1) violate or conflict with any provisions of
law or any judgment, order or decree, or statute, law, ordinance, rule or
regulation applicable to Seller or the properties or assets, or (2) result in
any breach of, or constitute a default, or result in the creation of lien,
encumbrance or claim on any of the properties or assets of Seller.
D. Permits and Approvals - All actions, approvals, orders, permits,
consents, licenses and authorizations required to be taken, given or obtained,
as the case may be, by or from any governmental authority or agency of the
United States or the Commonwealth of Puerto Rico shall have been duly taken,
given or obtained, as the case may be and shall be in full force and effect on
the date hereof.
E. Corporate Power - Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, possesses
full corporate power and authority and all government franchises, licenses and
permits necessary to use its corporate name, to own and to dispose of its
properties and other assets, and to execute contracts, including the sale of
assets.
F. Bulk Sales Act - Purchaser and Seller hereby waive compliance with any
applicable bulk sale laws in connection with the transaction contemplated hereby
and Seller shall hold Purchaser harmless from Seller's failure to have complied
with any applicable bulk sales laws.
G. Environmental Matters -
1. Seller purchased the Glamourette business in 1977 after it had been
operating in the Quebradillas, Puerto Rico location for approximately
twenty years. The land and buildings were leased from PRIDCO in 1977 and
such leases have been continued through the Closing Date. In addition to
the manufacture of sweaters, a portion of the facilities was used for the
manufacture of other textile products during a portion of time since being
constructed by PRIDCO. During the term of operation of the facility, Seller
has not received notice of any environmental matters except as set forth on
Exhibit 14 hereof.
2. To the knowledge of Seller, there are no underground storage tanks
at the Glamourette Facility which have not been properly closed and such
closing having been approved by the appropriate governmental agency except
as set forth on Exhibit 14 hereof.
3. To the knowledge of Seller, there has been no asbestos incorporated
into or disposed of on the Glamourette Facility.
4. Seller has kept current the environmental permits required under
the Quebradillas Lease as listed on Exhibit 13, Annex B.
12
<PAGE>
5. Seller acknowledges that it retains the responsibility for any
contamination caused by its managers or employees during the term that it
operated the Glamourette Facility. Seller hereby agrees to reimburse
Purchaser's expenses incurred by Purchaser for cleanup of any contamination
caused by Seller's managers or employees during the term that it operated
the Glamourette Facility after Five Hundred Thousand Dollars ($500,000)
which shall be setoff against the principal balance of the Promissory Note.
Seller reserves the right to defend any claims charged against Seller and
shall hold Purchaser harmless from any such claims except as provided
herein.
H. Employee Claims - Seller represents and warrants that there are no
pending or threatened labor-related claims of Employees, except for those listed
on Exhibit 16.
I. Standard Cost - Seller represents and warrants that the cost sheets
prepared for the Year 2000 and that have been hereto delivered to Purchaser are
accurate in all material respects to the best of its ability.
J. Records of Seller - Purchaser shall preserve the material books and
records relating to the Transferred Employees and former employees of Seller,
the manufacture of Products, financial records and other matters relating to the
Seller's activities prior to the Closing Date for a period of four years after
the Closing Date and shall, during such period and upon reasonable written
notice, grant Seller access to such records during normal business hours for the
purpose of allowing Seller to verify information which Seller may require in
connection with the transfer from Seller to Purchaser of the operations and
employees or upon written request of Seller, release any such records to Seller.
K. Quebradillas Leases - Seller represents and warrants that it is in
compliance with all the terms and conditions of the Quebradillas Leases as of
the Closing Date and will be in compliance on the Possession Date.
IX. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND OLYMPIC MILLS
A. Authority - Purchaser and Olympic Mills have the right to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement, the Promissory Note, and the Security Agreement and the Pledge
Agreement have been duly executed by Purchaser and/or Olympic Mills, and each
constitutes its respective valid and binding obligation, enforceable against
each in accordance with their terms.
B. Absence of Conflict - The execution and delivery of this Agreement, the
Promissory Note and the Security and Pledge Agreement by Purchaser and Olympic
Mills, the performance of their obligations under such agreements, the
consummation of the transaction contemplated hereby and thereby, and the
compliance with the terms hereof by Purchaser and Olympic Mills will not (1)
violate or conflict with any provisions of law or any judgment, order or decree,
or statute, law, ordinance, rule or regulation applicable to Purchaser or
Olympic Mills or their properties or assets, or (2) result in any breach of, or
constitute a default, or result in the creation of a lien, encumbrance or claim
on any of the properties or assets of Purchaser or Olympic Mills, other than the
security interests contemplated herein or therein.
C. Permits and Approvals - All actions, approvals, orders, permits,
consents, licenses and authorizations required to be taken, given or obtained,
as the case may be, by or from any governmental authority or agency of the
United States or the Commonwealth of Puerto Rico shall have been duly taken,
given or obtained, as the case may be and shall be in full force and effect on
the date hereof.
13
<PAGE>
D. Corporate Power - Purchaser and Olympic Mills are corporations duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Puerto Rico and the State of Delaware, respectively, possess
full corporate power and authority and all government franchises, licenses and
permits necessary to use their corporate name, to own and to dispose of its
properties and other assets and to execute contracts, including the purchase of
assets.
X. CONDITIONS PRECEDENT OF PURCHASER
The obligations of Purchaser hereunder are subject to the conditions that
on or prior to the Closing Date:
A. Representations and Warranties True at Closing. The representations and
warranties of Seller contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true on and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except as otherwise contemplated herein.
B. Compliance with Agreement by Seller. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
C. Resolutions and Certificates of Seller. Seller shall have delivered to
Purchaser copies of the resolutions of the Board of Directors of Seller
authorizing the transactions contemplated herein, with such resolutions to be
certified to be true and correct by its Secretary or Assistant Secretary,
together with a certificate of the President and the Secretary or Assistant
Secretary of Seller, dated the Closing Date, certifying in such detail as the
Buyer may request to the fulfillment of the conditions specified in Paragraphs
X.A. and X.B. above.
D. Leases. Purchaser shall have received from PRIDCO a consent to its
assumption of the Quebradillas Leases.
E. Security Agreement and Lien.
1. Seller will cooperate with Purchaser and its principal lender to
facilitate UCC searches of the Machinery and Equipment at the Facilities.
2. Seller shall have delivered to Purchaser a properly executed
subordination agreement of Seller's lien on the Machinery and Equipment in
favor of the principal lender of Purchaser, or its assignee, as indicated
in Paragraph III.A.5.(a), supra, copie hereto attached as Exhibit 17.
F. Cost Sheets. Seller shall have delivered accurate Year 2000 Cost Sheets
for each Facility, copies of which are attached as part of Exhibit 4.
G. Opinion of Counsel. Seller shall have delivered an opinion of legal
counsel to Purchaser in the form hereto attached as Exhibit 20.
H. Environmental Permits. Seller shall have delivered to Purchaser copies
of all the current environmental permits required under the Quebradillas Lease,
and attached hereto as Exhibit 15.
14
<PAGE>
XI. CONDITIONS PRECEDENT OF SELLER
The obligations of Seller hereunder are subject to the conditions that on
or prior to the Closing Date:
A. Purchase Price. Purchaser shall have delivered to Seller a bank check in
the amount of Four Million Dollars ($4,000,000).
B. Promissory Note and Security Agreement. Purchaser shall have executed
and delivered to Seller the Promissory Note and Security Agreement.
C. Common Stock. Purchaser and Olympic Mills shall have delivered to Seller
a certificate representing the four (4) shares of Common Stock of Glamourette/OG
purchased by Seller and copies of the Certificate of Incorporation authorizing
such Common Stock.
D. Pledged Stock; Stock Power; and Pledge Agreement. Olympic Mills shall
have delivered to Seller the Pledged Stock and fully executed Stock Power and
Pledge Agreement.
E. Representations and Warranties True at Closing. The representations and
warranties of Purchaser and Olympic Mills contained in this Agreement or in any
certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby shall be true on and as of
the Closing Date as though such representations and warranties were made at and
as of such date, except as otherwise contemplated herein.
F. Compliance with Agreement by Purchaser and Olympic Mills. Purchaser and
Olympic Mills shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing.
G. Resolutions and Certificates of Purchaser and Olympic Mills. The
Purchaser and Olympic Mills shall have delivered to Seller copies of the
resolutions of the Board of Directors of the Purchaser and Olympic Mills
authorizing the transactions contemplated herein, with such resolutions to be
certified to be true and correct by their Secretary or Assistant Secretary,
together with a certificate of the President and the Secretary or Assistant
Secretary of each, dated the Closing Date, certifying in such detail as the
Seller may request to the fulfillment of the conditions specified in Paragraphs
XI.E. and XI.F. above.
H. Release of Quebradillas Leases by PRIDCO. Seller shall have received
from PRIDCO a written acknowledgement of the assumption of the Quebradillas
Leases by Glamourette/OG and the unconditional release of the Glamourette
Fashion Mills, Inc.
I. Release of Employment Grant Liability by the Economic Development
Administration. Seller shall have received from the Economic Development
Administration of the Commonwealth of Puerto Rico a written acknowledgement of
unconditional release of Glamourette Fashion Mills, Inc. with respect to any
liability to the Puerto Rican Government concerning grants conditional on
employment levels and duration.
J. Opinion of Counsel. Purchaser and Olympic Mills shall have delivered an
opinion of legal counsel to Seller in the form hereto attached as Exhibit 21.
XII. CONFIDENTIALITY
Between the date of this Agreement and the date when Purchaser takes
possession of the Machinery and Equipment of the last Facility, as contemplated
hereby, Purchaser and Seller shall hold, and shall use their best efforts to
cause their managing members, financial advisors, counsel and other agents to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of their counsel, by other
requirements of law, all documents and information concerning Purchaser and
Seller, as the case may be, furnished to the other in connection with the
transactions contemplated by this Agreement except to the extent that such
information can be shown to have been (i) in the public domain through no fault
of Purchaser or Seller, or any of their respective Affiliates; or (ii) later
lawfully acquired without the breach of any other agreement by Purchaser or
Seller, or their respective officers, directors, managing members, financial
advisors, counsel and other agents from other sources and will not release or
15
<PAGE>
disclose such information to any other Person, except their officers, directors,
managing members, financial advisors, counsel and other agents in connection
with this Agreement. Notwithstanding the above, Seller acknowledges the
requirement that the Agreement be disclosed by Purchaser to the Puerto Rican
government officials.
XIII. BROKERAGE
Purchaser and Seller represent and warrant to each other that all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by Purchaser and Seller directly through the managing
officers of their respective companies and without the intervention of any
broker, finder or other third party. Neither Purchaser nor Seller shall in any
way be responsible for, or be required to pay, any finder's fee or brokerage
fee.
XIV. ENTIRE AGREEMENT; MODIFICATIONS
This Agreement, together with all the Exhibits, constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or between any of them with respect to the subject matter
hereof, all of which are merged herein. All references to Paragraphs and
Exhibits shall be deemed references to such parts of this Agreement unless the
text requires otherwise. This Agreement shall not be modified or amended except
by an instrument in writing signed by or on behalf of the parties hereto.
XV. ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise
without the written consent of Purchaser and Seller and provided that such
assignee assumes the obligation of the assigning party, but such assignment
shall not relieve the assigning party of its obligations hereunder if such
assignee does not perform such obligations.
XVI. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing:
A. By mutual written agreement of Purchaser or Seller;
B. By either Purchaser or Seller, if the Closing shall not have occurred on
or before the 10th day of May, 2000 so long as the party terminating this
Agreement pursuant to this section has not made any material misrepresentation
or materially breached a covenant, agreement or warranty contained herein; or
C. By either Purchaser or Seller, in the event the other makes a material
misrepresetation or breaches a covenant, agreement or warranty set forth in
this Agreement, but such non-misrepresenting or non-breaching party's election
to terminate shall not limit, waive or prejudice such party's remedies at law or
in equity.
D. In the event this Agreement is terminated as provided in Paragraphs XVI.
A. B. or C. above, this Agreement shall become null and void and of no further
force and effect and no party hereto shall have any further liability to any
other party hereto, except that Paragraphs XII, XIII, XVII, XVIII, XIX and XX
shall survive and continue in full force and effect notwithstanding termination.
16
<PAGE>
XVII. VALIDITY; SEVERABILITY
If any provisions of this Agreement or the application thereof to any
person or circumstances shall be held void, illegal or unenforceable in any
respect by a court of competent jurisdicition, such invalidity, illegality or
unenforceability shall not affect the remaining terms and provisions hereof
unless such enforceability causes this Agreement to fail in its essential
purpose.
XVIII. CONSTRUCTION
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Nothing in the Exhibits shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
relates to the existence of the document or other item itself). The parties
intend that each representation, warranty and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
XIX. EXPENSES
The parties hereto shall bear their respective expenses in connection with
the transactions herein contemplated, including related attorneys' and
accountants' fees.
XX. NOTICES
All notices, requirements, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given upon delivery, if
delivered in person, or on the third business day after mailing, if mailed, by
registered mail, postage prepaid, return receipt requested, as follows:
If to Seller: With Copy to:
HAMPSHIRE DESIGNERS, INC. Mr. Ludwig Kuttner
ATTN: President Estouteville Farm
215 Commerce Boulevard Keene, VA 22946
Anderson, South Carolina 29625
TEL. (864) 225-6232, FAX (864) 225-4421
If to Purchaser: With Copy to:
GLAMOURETTE/OG, INC. Lasa, Monroig & Veve
Attn: Alejandro G. Asmar, President Attn: Debbie Bermudez, Esquire
Buchanan Office Center, Suite 212 Buchanan Office Center, Suite 304
40 Road 165 40 Road 165
Guaynabo, Puerto Rico 00968 Guaynabo, Puerto Rico
Tel. (787) 775-1009, Fax (787) 775-1026 Tel. (787) 774-0400 Fax
(787) 774-1564
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Agreement in Anderson,
South Carolina, as of the date first above written.
SELLER PURCHASER
GLAMOURETTE FASHION MILLS, INC. GLAMOURETTE/OG, INC.
By: /s/ Charles W. Clayton By: /s/ Alejandro Asmar
Its:Vice President Its: President
SAN FRANCISCO KNITWORKS, INC. OLYMPIC MILLS CORPORATION
By: /s/ Horace D. Padgett, Jr. By: /s/ Alejandro Asmar
Its: Vice President - Finance Its: President
HAMPSHIRE DESIGNERS, INC.
By: /s/ H. Edward Hurley
Its: Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet and the consolidated statement of
operations filed as a part of the quarterly report on Form 10Q and is qualified
in its entirety by reference to such quarterly report of Form 10-Q.
</LEGEND>
<CIK> 0000887150
<NAME> Charles Clayton
<MULTIPLIER> 1000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<EXCHANGE-RATE> 1
<CASH> 20,053
<SECURITIES> 253
<RECEIVABLES> 13,822
<ALLOWANCES> (3,067)
<INVENTORY> 22,533
<CURRENT-ASSETS> 59,125
<PP&E> 35,243
<DEPRECIATION> (25,882)
<TOTAL-ASSETS> 98,430
<CURRENT-LIABILITIES> 6,967
<BONDS> 26,136
0
0
<COMMON> 418
<OTHER-SE> 64,909
<TOTAL-LIABILITY-AND-EQUITY> 98,430
<SALES> 14,580
<TOTAL-REVENUES> 15,154
<CGS> 12,219
<TOTAL-COSTS> 12,219
<OTHER-EXPENSES> 5,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 478
<INCOME-PRETAX> (2,461)
<INCOME-TAX> (500)
<INCOME-CONTINUING> (1,961)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,961)
<EPS-BASIC> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
