ASSET PURCHASE AGREEMENT

Exhibit 10.1

 

EXECUTION COPY

 

 

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT

BETWEEN

SHARPER IMAGE CORPORATION

AND

A JOINT VENTURE OF

HILCO MERCHANT RESOURCES, LLC

HILCO CONSUMER CAPITAL, LLC

GORDON BROTHERS RETAIL PARTNERS, LLC

AND

GB BRANDS, LLC

_____________________

Dated as of May 13, 2008

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TABLE OF CONTENTS

 

 

 

 

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

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TABLE OF CONTENTS

(continued)

 

Schedules

 

 

 

 

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TABLE OF CONTENTS

(continued)

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Exhibits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of May 13, 2008 (this “ Agreemen t”), between Sharper Image Corporation, a Delaware corporation (together with any affiliates, “ Seller ”), and a joint venture formed among: (a) Gordon Brothers Retail Partners, (b) GB Brands, LLC, (c) Hilco Merchant Resources, LLC, and (d) Hilco Consumer Capital, LLC (collectively, the “ Purchaser ”).

W I T N E S S E T H:

WHEREAS, Seller is a debtor in possession under title 11 of the United States Code, 11 U.S.C. § 101 et seq. (the “ Bankruptcy Code ”), and filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on February 19, 2008, in the United States Bankruptcy Court for the District of Delaware (the “ Bankruptcy Court ”) (Case No. 08-10322(KG)) (the “ Bankruptcy Case ”);

WHEREAS, Seller presently conducts the Business;

WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase, acquire and assume from Seller, pursuant to Sections 105, 363 and 365 of the Bankruptcy Code, all of the Purchased Assets and Assumed Liabilities, all as more specifically provided herein;

WHEREAS, on or about April 25, 2008, Seller filed the Sale Motion in the Bankruptcy Case requesting, inter alia , authorization to (i) enter into this Agreement and (ii) sell certain of its remaining assets, subject to Seller’s solicitation and receipt of higher and/or better offers consistent with Section 7 hereof; and

WHEREAS, contemporaneously herewith, Seller and Purchaser have entered into that certain Agency Agreement (the “ Agency Agreement ”), dated of even date, substantially in the form attached hereto as Exhibit A ; and

WHEREAS, certain terms used in this Agreement are defined in Section 1.1 .

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:

 

 

 

 

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ARTICLE I

 

DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 :

“ Advertising and Marketing Materials ” means, to the extent owned by Seller as of the date hereof, any and all of Seller’s advertising materials and related designs, patterns, drawings and specifications, pricing and cost documentation, and marketing materials, including historical or archival materials held by Seller in inventory.

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“ Business ” means the business of Seller, including, without limitation, the sale of specialty retail products through retail stores, via catalog, and over the internet.

“ Business Day ” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

“ Contract ” means any written contract, indenture, note, bond, lease or other agreement.

“ Core IP Contract ” means the IP Contracts set forth on Schedule 2.6(a) hereto; provided , however , that Purchaser shall have the right to remove any of such IP Contracts from Schedule 2.6(a) prior to the Sale Hearing, which removal shall not result in a reduction in the Purchase Price.

“ Deposit ” means a cash deposit equal to $2.5 million to be delivered by the Purchaser to the Seller prior to the hearing before the Bankruptcy Court to approve the procedures relating to the Sale Motion, including, without limitation, approval of the Breakup Fee and Expense Reimbursement.

“ Documents ” means all files, documents, instruments, papers, books, reports, records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer lists, regulatory filings, operating data and plans, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web

 

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pages, etc.), and other similar materials related to the Business and the Purchased Assets in each case whether or not in electronic form.

“ Employees ” means all individuals, as of the date hereof, whether or not actively at work as of the date hereof, who are employed by Seller in connection with the Business, together with individuals who are hired in respect of the Business after the date hereof and prior to the Closing.

“ Excluded Contracts ” means any Contract to which the Seller is a party with the exception of the Purchased Contracts.

“ Governmental Body ” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, federal, state, or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

“ IP Contracts ” means all written agreements containing a grant, either from a third party to the Seller or from the Seller to any third party, of the right to use any Purchased Intellectual Property, Technology or Software.

“ Law ” means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation.

“ Legal Proceeding ” means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or claims or any proceedings by or before a Governmental Body.

“ Liability ” means any debt, liability or obligation (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto.

“ Lien ” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement or encumbrance.

“ Material Adverse Effect ” means (i) a material adverse effect on the business, assets, properties, results of operations or financial condition of Seller, or (ii) a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement or perform its obligations under this Agreement, other than an effect resulting from an Excluded Matter. “ Excluded Matter ” means any one or more of the following: (i) the effect of any change in the United States or foreign economies or securities or financial markets in general; (ii) the effect of any change that generally affects any industry in which Seller operates; (iii) the effect of any change arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway as of the date hereof; (iv) the effect of any action taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby or with respect to Seller, including its employees; (v) any matter of which Purchaser is aware on the date hereof; (vi) the effect of any changes in applicable Laws or accounting rules; or (vii) any effect resulting from the public announcement of this Agreement,

 

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compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement; or (viii) any effect resulting from the filing of the Bankruptcy Case and reasonably anticipated effects thereof.

“ Order ” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

“ Ordinary Course of Business ” means the ordinary and usual course of normal day-to-day operations of the Business through the date hereof consistent with past practice.

“ Permits ” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

“ Person ” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“ Products ” means any and all products developed, manufactured, marketed or sold by Seller, whether work in progress or in final form.

“ Procedures Order ” means an order of the Bankruptcy Court, as requested by the Seller, and reasonably acceptable to Purchaser, that, among other things, establishes a date by which Competing Offers must be submitted by bidders and establishes procedures for the auction process.

“ Purchased Contracts ” means the Contracts set forth on Schedule 1.1(a) , to be delivered by the Purchaser to the Seller no later than three (3) business days prior to the auction.

“ Purchased Intellectual Property ” means all of the Seller’s right, title and interest in and to any intellectual property and intellectual property rights, including, without limitation: (i) all patents, patent applications and patent disclosures, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon (collectively, “ Patents ”), (ii) all trademarks, service marks, trade names, service names, brand names, all trade dress rights, logos, Internet domain names and corporate names and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof (collectively, “ Marks ”), (iii) copyrights and registrations and applications therefor and works of authorship, and mask work rights, in each case used primarily in connection with the Business, (collectively, “ Copyrights ”), (iv) all Software and Technology and Advertising and Marketing Materials of Seller, (v) inventions, whether patentable or unpatentable and whether or not reduced to practice (to the extent any protectable right exists in any such invention not reduced to practice), and all improvements in existence at the Closing relating to the inventions, (vi) trade secrets and confidential business information, including, without limitation, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, databases, customer lists and contact information, supplier lists, and business and marketing plans and proposals; and (vii) other proprietary rights and copies and tangible expressions thereof.

 

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“ Sale Motion ” means the motion or supplements thereto of Seller seeking approval from the Bankruptcy Court for entry of the Procedures Order and Sale Order.

“ Sale Order ” shall be an order or orders of the Bankruptcy Court in form and substance reasonably acceptable to Purchaser and Seller approving this Agreement and all of the respective terms and conditions hereof, and approving and authorizing Seller to consummate the transactions contemplated hereby.

“ Software ” means, except to the extent generally available for purchase from a third Person, any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (iv) all documentation including user manuals and other training documentation related to any of the foregoing.

“ Subsidiary ” means any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by Purchaser.

“ Taxes ” means (i) all federal, state, local or foreign taxes, charges or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i).

“ Tax Return ” means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes.

“ Technology ” means, collectively, all designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or relate to, or are used or useful in the design, development, reproduction, maintenance or modification of, any of the Products.

 

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1.2        Terms Defined Elsewhere in this Agreement . For purposes of this Agreement, the following terms have meanings set forth in the sections indicated:

 

(a)       Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

Calculation of Time Period . When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

Dollars . Any reference in this Agreement to $ shall mean U.S. dollars.

Exhibits/Schedules . All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any matter or item disclosed on one schedule shall be deemed to have been disclosed on each other schedule. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.

 

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Gender and Number . Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

Headings . The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

Herein . The words such as “ herein ,” “ hereinafter ,” “ hereof ,” and “ hereunder ” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

Including . The word “ including ” or any variation thereof means “ including, without limitation ” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

(b)       The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

ARTICLE II

 

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

2.1        Purchase and Sale of Assets . On the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser shall purchase, acquire and accept from Seller, and Seller shall sell, transfer, assign, convey and deliver to Purchaser, all of Seller’s right, title and interest in, to and under the Purchased Assets. “ Purchased Assets ” shall mean the following assets of Seller (but excluding Excluded Assets) as of the Closing to the extent related to the Business:

(a)       the right, at Purchaser’s discretion, to sell or dispose, by means of a store closing sale (the “ Liquidation ”) of Seller’s inventory (the “ Merchandise ”), together with all furniture, fixtures and equipment (“ FFE ”) and supplies, in connection with the Business, on the terms and conditions set forth in the Agency Agreement;        

 

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2.2        Agency Agreement . Notwithstanding anything to the contrary set forth herein, all terms and conditions relating to the Merchandise, the FFE, and the Liquidation shall be governed by the Agency Agreement. In the event of any conflict between this Agreement and the Agency Agreement relating thereto, the Agency Agreement shall govern.

2.3        Excluded Assets . Nothing herein contained shall be deemed to sell, transfer, assign or convey the Excluded Assets to Purchaser, and Seller shall retain all right, title and interest to, in and under the Excluded Assets. “ Excluded Assets ” shall mean all assets, properties, interests and rights of Seller other than the Purchased Assets, including, without limitation, each of the following assets:

(a)       all cash, cash equivalents, bank deposits or similar cash items of Seller;

(b)       all of Seller’s deposits or prepaid charges and expenses paid in connection with or relating to any Excluded Assets;

(c)       the Excluded Contracts, including any accounts receivable arising out of or in connection with any Excluded Contract;

(d)       any (i) books and records that Seller is required by Law to retain or that Seller determines are necessary or advisable to retain including, without limitation, Tax Returns, financial statements, and corporate or other entity filings; provided , however , that Purchaser shall have the right to make copies of any portions of such retained books and records that relate to the Business or any of the Purchased Assets; (ii) information management systems of Seller, other than those used or held for use in the conduct of the Business; and (iii) documents relating to proposals to acquire the Business by Persons other than Purchaser.

(e)       any claim, right or interest of Seller in or to any refund, rebate, abatement or other recovery for Taxes, together with any interest due thereon or penalty rebate arising therefrom, for any Tax period (or portion thereof) ending on or before the Closing Date;

(f)        all insurance policies or rights to proceeds thereof relating to the assets, properties, business or operations of Seller; and

(g)       any rights, claims or causes of action of Seller against third parties relating to the assets, properties, business or operations of Seller arising out of events occurring on or prior to the Closing Date, including, but not limited to, commercial tort causes of action and all causes of action under chapter 5 of the Bankruptcy Code.

2.4        Assumption of Liabilities . On the terms and subject to the conditions set forth in this Agreement and the Agency Agreement, at the Closing, Purchaser shall assume, effective as of the Closing Date, the following Liabilities (the “ Assumed Liabilities ”):

(b)       all Liabilities arising from or relating to the Liquidation, on the terms and conditions set forth in the Agency Agreement;

 

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(c)       all Transfer Taxes, if any, but only to the extent not exempt under the Bankruptcy Code, as applicable to the transfer of the Purchased Assets pursuant to this Agreement and, further, solely to the extent applicable law may impose any Transfer Tax liability on the purchaser of such assets;

(d)       all Liabilities relating to amounts required to be paid by Purchaser hereunder; and

(e)       all other Liabilities with respect to the Purchased Assets arising after the Closing.

2.5        Excluded Liabilities . Except as specified in foregoing Section 2.4, Purchaser does not assume any other Liabilities or obligations of Seller.

2.6        Cure Amounts . At Closing and pursuant to Section 365 of the Bankruptcy Code, Seller shall assume and assign to Purchaser and Purchaser shall assume from Seller, the Purchased Contracts. Except as otherwise set forth in any Bankruptcy Court order approving this Agreement and authorizing the sale of the Purchased Assets, the cure amounts, as determined by the Bankruptcy Court, if any, necessary to cure all defaults, if any, (including, if any, and to the extent allowed by the Bankruptcy Court, all actual or pecuniary losses that have resulted from such defaults under the Purchased Contracts), shall be paid by Purchaser, on or before Closing, and not by Seller and Seller shall have no liability therefore; provided , however , that Purchaser shall not be obligated to cure any such default that is (a) (i) greater than 110% of the total amount set forth in the cure amounts schedule attached as Schedule 2.6(a) hereof or (ii) in excess of the total amount set forth in the cure amount schedule that is to be dated May 21, 2008, whichever is greater (with such excess being Seller’s sole responsibility), or (b) that is in dispute as of the Closing Date if an escrow or other commercially reasonable arrangement with respect thereto shall have been established at or following the Closing pursuant to an order of the Bankruptcy Court. Purchaser shall have the right to a reduction of the Purchase Price (with an amount agreed to by Seller and Purchaser or as determined by the Bankruptcy Court) as a result of the failure by Seller to assume and assign to Purchaser any Core IP Contract.

2.7        Rejection of Certain Executory Contracts . As part of the Sale Order, the Bankruptcy Court shall authorize the Seller’s rejection of the executory contracts and/or leases (other than non-residential real property leases) listed on Schedule 2.7 hereof.

(a)       From time to time following the Closing, Seller and Purchaser shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquaintances and such other instruments, and shall take such further actions, as may be reasonably necessary or appropriate to assure fully to Purchaser and its respective successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Purchaser under this Agreement and the Seller Documents and to assure fully to Seller and its Affiliates and their successors and assigns, the assumption of the liabilities and obligations intended to be assumed

 

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by Purchaser under this Agreement and the Seller Documents, and to otherwise make effective the transactions contemplated hereby and thereby.

2.9        Bulk Sales Laws . Purchaser hereby waives compliance by Seller with the requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the sale and transfer of any or all of the Purchased Assets to Purchaser.

ARTICLE III

 

CONSIDERATION

3.1        Consideration . The aggregate consideration for the Purchased Assets shall be (a) an amount in cash equal to $51,250,000, less all payments received by Seller on or after May 1, 2008 under the Core IP Contracts, and (b) the assumption of the Assumed Liabilities (collectively, the “ Purchase Price ”).

3.2        Payment of Purchase Price . On the Closing Date, Purchaser shall pay the Purchase Price minus the Deposit to Seller, which shall be paid by wire transfer of immediately available funds into an account designated by Seller, subject to the terms of the Agency Agreement.

ARTICLE IV

 

CLOSING AND TERMINATION

4.1        Closing Date . Subject to the satisfaction of the conditions set forth in Sections 10.1 , 10.2 and 10.3 hereof (or the waiver thereof by the party entitled to waive that condition), the sale of the Purchased Assets and the assumption of the Assumed Liabilities provided for in Article II hereof (the “ Closing ”) shall take place at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New York, New York (or at such other place as the parties may designate in writing) at 12 p.m. (eastern time) on the date that is two (2) Business Days following the satisfaction or waiver of the conditions set forth in Article X (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time or date, or both, are agreed to in writing by the parties hereto. The date on which the Closing shall be held is referred to in this Agreement as the “ Closing Date .” Unless otherwise agreed by the parties in writing, the Closing shall be deemed effective and all right, title and interest of Seller to be acquired by Purchaser hereunder shall be considered to have passed to Purchaser as of 12:01 a.m. (eastern time) on the Closing Date.

(a)       duly executed assumption and assignment agreements in the form of Exhibit B hereto and duly executed assignments of the U.S. trademark registrations and applications included in the Purchased Intellectual Property, in a form suitable for recording in the U.S. Trademark office, and general assignments of other Purchased Intellectual Property; and

 

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(b)       all other instruments of conveyance and transfer, in form and substance reasonably acceptable to Purchaser, as may be necessary to convey the Purchased Assets to Purchaser.

(a)       the Purchase Price in immediately available funds as set forth in Section 3.2 hereof;

(b)       duly executed counterparts to the Agreement, the Agency Agreement and the assignment and assumption agreements referred to in Section 4.2(a) ; and

(c)       such other documents, instruments and certificates as Seller may reasonably request.

4.4        Termination of Agreement . This Agreement may be terminated prior to the Closing as follows:

(a)       by Purchaser or Seller, if the Closing shall not have occurred by the close of business on June 6, 2008 (the “ Termination Date ”); provided , however , that if the Closing shall not have occurred on or before the Termination Date due to a material breach of any representations, warranties, covenants or agreements contained in this Agreement by Purchaser or Seller, then the breaching party may not terminate this Agreement pursuant to this Section 4.4(a) ;

(c)       by Purchaser, if any of the conditions to the obligations of Purchaser set forth in Sections 10.1 and 10.3 shall have become incapable of fulfillment other than as a result of a breach by Purchaser of any covenant or agreement contained in this Agreement, and such condition is not waived by Purchaser;

(d)       by Seller, if any condition to the obligations of Seller set forth in Sections 10.2 and 10.3 shall have become incapable of fulfillment other than as a result of a breach by Seller of any covenant or agreement contained in this Agreement, and such condition is not waived by Seller;

(e)       by Purchaser, if there shall be a breach by Seller of any representation or warranty, or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 10.1 or 10.3 and which breach cannot be cured or has not been cured by the earlier of (i) twenty (20) Business Days after the giving of written notice by Purchaser to Seller of such breach and (ii) the Termination Date;

(f)        by Seller, if there shall be a breach by Purchaser of any representation or warranty, or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 10.2 or 10.3 and which breach cannot be cured or has

 

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not been cured by the earlier of (i) twenty (20) Business Days after the giving of written notice by Seller to Purchaser of such breach and (ii) the Termination Date;

(g)       by Seller or Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction res