Exhibit 10.14.5

 

WAIVER AND FOURTH AMENDMENT TO CREDIT AGREEMENT

 

This WAIVER AND FOURTH Amendment to Credit Agreement (this “Amendment”) is
entered into as of May 22, 2015, by and among Hampshire Group, Limited, a
Delaware corporation (the “Lead Borrower”), Hampshire Brands, Inc., a Delaware
corporation (“Hampshire Brands”), Hampshire International, LLC, a Delaware
limited liability company (“Hampshire International”), Scott James, LLC, a
Delaware limited liability company (“Scott James”) and Rio Garment S.A., a
Sociedad Anónima formed under the laws of Honduras (“Rio Garment”, together with
the Lead Borrower, Hampshire Brands, Hampshire International and Scott James
collectively, the “Borrowers”), Salus CLO 2012-1, LTD. (“Salus CLO”) and Salus
Capital Partners, LLC (“SCP”, together with Salus CLO, each a “Lender” and
collectively, the “Lenders”) and Salus Capital Partners, LLC, as Administrative
Agent and Collateral Agent for the Lenders party thereto (in such capacity, the
“Agent”).

 

RECITALS

 

WHEREAS, Borrowers, Lenders and Agent are party to that certain Credit
Agreement, dated as of September 26, 2013 (as amended, supplemented, modified
and in effect from time to time, the “Credit Agreement”; all capitalized terms
used but not specifically defined herein shall have the respective meanings
provided for such terms in the Credit Agreement); and

 

WHEREAS, the Events of Default described on Schedule I attached hereto have
occurred and are continuing under the Credit Agreement (such Event of Defaults
being referred to herein as to herein individually as a “Specified Default” and
collectively, the “Specified Defaults”); and

 

WHEREAS, the Lead Borrower, Hampshire International and Rio Garment have entered
into that certain Stock Purchase Agreement, dated as of April 10, 2015 (the “Rio
Garment Stock Purchase Agreement”), by and among David Gren and Minor Valle
(collectively the “Buyers”), the Lead Borrower and Hampshire International
(collectively, the “Sellers”) and Rio Garment, as amended by that certain
Amendment No.1 to Stock Purchase Agreement, dated as of May 14, 2015 (“Amendment
No. 1 to Rio Garment Stock Purchase Agreement”), pursuant to which the Sellers
have agreed to sell all of the equity interests in Rio Garment to the Buyers
pursuant to the terms and conditions set forth therein; and

 

WHEREAS, the Borrowers have requested that the Agent and Lenders (i) permanently
waive the Specified Defaults, and (ii) amend certain provisions of the Credit
Agreement, and the Agent and Lenders have agreed to do so on the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

 

1.            Waiver of Specified Defaults. Subject to the terms and conditions
of this Amendment, effective upon the Fourth Amendment Effective Date (as
defined below), the Agent and Lenders hereby waive the Specified Defaults and
their rights to pursue the remedies available to them solely on account of the
Specified Defaults. The waiver contained in this Section 1 shall (a) not
constitute or be deemed to constitute a waiver (except as otherwise expressly
set forth herein), of (i) any Default or Event of Default other than the
Specified Defaults, or (ii) any term or condition of the Credit Agreement except
as modified herein, (b) not constitute or be deemed to constitute consent by the
Agent and Lenders to anything other than the specific purpose set forth herein,
and (c) not constitute a custom or course of dealing among the parties hereto.

 

 
 

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2.            Amendments to the Credit Agreement. Effective as of the Fourth
Amendment Effective Date, the Credit Agreement is amended as follows:

 

A.           Section 1.01 of the Credit Agreement is hereby amended adding the
following defined terms, such terms to be inserted in the proper alphabetical
order:

 

“Fourth Amendment” means that certain Waiver and Fourth Amendment to Credit
Agreement, dated as of May 22, 2015, by and among the Borrowers, Lenders and
Agent.

 

“Fourth Amendment Effective Date” means May 22, 2015.

 

“Honduras Inventory Reserve” means, without duplication of any other Reserves or
items to the extent such items are otherwise addressed or excluded from
eligibility criteria, the following amounts: (i) for the period from the Fourth
Amendment Effective Date through June 5, 2015, zero ($0); (ii) for the period
from June 6, 2015 through July 30, 2015, the lesser of (x) $500,000, and (y) the
total contribution of Rio Garment Inventory to the Borrowing Base; (ii) for the
period July 31, 2015 through August 30, 2015, the lesser of (x) $1,000,000, and
(y) the total contribution of Rio Garment Inventory to the Borrowing Base; and
(iii) on August 31, 2015 and at all times thereafter, an amount equal to all
amounts included in the Borrowing Base attributable to Inventory of Rio Garment,
including without limitation, all amounts under clauses (b), (d) and (f) of the
definition of Borrowing Base.

 

B.            Section 1.01 of the Credit Agreement is hereby amended by deleting
the defined terms, “Availability Block” and “Borrowing Base”, in their entirety
and replacing such terms, respectively, with the following:

 

“Availability Block” means $1,500,000.

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)     seventy-five percent (75%) of the Appraised Value of Borrowers’ Eligible
Finished Goods Inventory (Locker Stock) (less the amount, if any, of Inventory
Reserves applicable thereto);

 

plus

 

(b)     seventy-five percent (75%) of the Appraised Value of Borrowers’ Eligible
Finished Goods Inventory (Honduras) (less the amount, if any, of Inventory
Reserves applicable thereto);

 

plus

 

 
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(c)     ninety percent (90%) of the Appraised Value of Borrowers’ Eligible
Finished Goods Inventory (Hampshire Brands) (less the amount, if any, of
Inventory Reserves applicable thereto);

 

plus

 

(d)     eighty percent (80%) of the Appraised Value of Borrowers’ Eligible Raw
Materials Inventory (less the amount, if any, of Inventory Reserves applicable
thereto);

 

plus

 

(e)     ninety percent (90%) of the Appraised Value of Borrower’ Eligible
In-Transit Inventory (less the amount, if any, of Inventory Reserves applicable
thereto), (provided, that in no event shall Eligible In-Transit Inventory
included in the Borrowing Base exceed fifteen percent (15%) of the Borrowing
Base);

 

plus

 

(f)     eight-five percent (85%) of the Appraised Value of Borrowers’ Eligible
Honduras In-Transit Inventory (less the amount, if any, of Inventory Reserves
applicable thereto);

 

plus

 

(g)     ninety percent (90%) of the Borrowers’ Eligible Insured Trade
Receivables (less the amount, if any, of Receivables Reserves applicable
thereto);

 

plus

 

(h)     eighty-five percent (85%) of the Borrowers’ Eligible Uninsured Trade
Receivables (less the amount, if any, of Receivables Reserves applicable
thereto);

 

minus

 

(i)     the Availability Block;

 

minus

 

(j)     the Honduras Inventory Reserve;

 

minus

 

(k)     the then amount of all Availability Reserves, if any.

 

 
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C.            Section 6.01(a) of the Credit Agreement is hereby amended by
adding the following proviso after the semi-colon in the last sentence:

 

“provided, however, such audited consolidated financial statements, independent
auditors’ report and unqualified opinion for the fiscal year ended December 31,
2014 shall be delivered no later than July 31, 2015;”

 

D.           Section 7.15 of the Credit Agreement is hereby amended by deleting
subsections Section 7.15(a) and Section 7.15(b) in their entirety and
substituting therefor, the following:

 

“(a)     Minimum Net Sales. With respect to each fiscal month of the Borrowers,
commencing with the fiscal month ending April 30, 2015, permit net sales of the
Borrowers, as calculated on a three (3) month rolling basis as measured on the
last day of each such fiscal month, to be less than eighty percent (80%) of
projected net sales of the Borrowers as set forth in the Business Plan for such
period.”

 

3.             Additional Agreements. In connection this Amendment, the
Borrowers covenant and agree as follows:

 

(a)     The Borrowers shall continue to retain GRL Capital Advisors LLC until
such time as a new permanent Chief Financial Officer is appointed, which Chief
Financial Officer shall be acceptable to the Agent, in its sole but reasonable
discretion.

 

(b)     The Borrowers shall continue to pursue in an expeditious manner a
transaction for a capital investment in the Borrowers, to yield no less than
$1,500,000 in net proceeds to the Borrowers, any such transaction to be on terms
and conditions satisfactory to the Agent, in its sole but reasonable discretion
(a “Capital Transaction”). No later than July 31, 2015, the Borrowers shall
close a Capital Transaction with an investor and pursuant to an agreement, which
investor, agreement and proposed transaction shall in all respects be acceptable
to the Agent, in its sole but reasonable discretion, and resulting in net cash
proceeds received by the Borrowers in an amount not less than $1,500,000. Unless
otherwise agreed by the Agent and Lenders, all net proceeds arising from any
Capital Transaction shall be paid directly to the Agent for application to the
outstanding Obligations.

 

(c)     The Lead Borrower shall receive from Rio Garment and/or the Buyers New
Accounts Receivable (as defined in Amendment No. 1 to Rio Garment Stock Purchase
Agreement) and/or cash in amounts no less the amounts, and by the corresponding
dates set forth in Section 2.1.2.2 of Amendment No. 1 to Rio Garment Stock
Purchase Agreement (as in effect as of the Fourth Amendment Effective Date).

 

(d)     The Borrowers acknowledge and agree that the failure of the Borrowers to
comply with the terms and conditions set forth in this Section 3 shall
constitute an immediate Event of Default (without need for notice of any kind or
any passage of time).

 

4.         Expenditures at Rio Garment. Pursuant to the terms of the Rio Garment
Stock Purchase Agreement, from and after April 10, 2015, all expenses associated
with Rio Garment (including, without limitation, costs of Inventory, payroll and
related labor expenses, rent and occupancy of Rio’s premises, insurance,
maintenance and repair and other operating expenses, but excluding, however (i)
compensation due to Pure Fresh Coast, LLC under the terms of the letter
agreement dated as of May 14, 2015, between the Lead Borrower and Pure Fresh
Coast, LLC, and (ii) financing costs, fees and expenses of Rio Garment under the
Credit Agreement and the other Loan Documents (amounts referred to in the
preceding clauses (i) and (ii) being referred to as “Excluded Rio Expenses”))
are the responsibility of the Buyer. The Borrowers agree that other than on
account of Excluded Rio Expenses, Borrowers shall not fund, or permit Rio
Garment to fund, any expenses of Rio Garment from and after the Fourth Amendment
Effective Date, without the Agent’s prior written consent.

 

 
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5.         Conditions Precedent. The effectiveness of this Amendment is subject
to the following conditions precedent (all documents to be in form and substance
satisfactory to the Agent):

 

(a)     Agent shall have received this Amendment properly executed by the
Borrowers;

 

(b)     Agent shall have received the revised Business Plan attached hereto as
Exhibit A;

 

(c)     After giving effect to this Amendment (i) all representations and
warranties of the Borrowers set forth herein and in the Loan Documents shall be
true and correct in all material respects, except to the extent such
representations and warranties speak as to an earlier date, in which case the
same are true, correct and complete as to such earlier date, (ii) no Event of
Default or any other event which, upon the lapse of time, service of notice, or
both, which would constitute an Event of Default under any of the Loan
Documents, shall have occurred and be continuing, and (iii) Borrowers shall be
in material compliance with the Credit Agreement and the other Loan Documents;
and Borrowers shall have certified the foregoing matters to Agent; and

 

(d)     The Borrowers shall have paid to the Agent, for the ratable benefit of
the Lenders, an amendment fee of $50,000, which fee shall be fully earned on the
date hereof.

 

6.            Representations, Warranties. Borrowers represent that, after
giving effect to this Amendment:

 

(a)     No consent or approval of, or exemption by any Person is required to
authorize, or is otherwise required in connection with the execution and
delivery of this Amendment which has not been obtained and which remains in full
force and effect; and

 

(b)     As of the date hereof, all of the representations and warranties of the
Borrowers set forth in the Credit Agreement and the other Loan Documents are
true, correct and complete in all material respects, except to the extent such
representations and warranties speak as to an earlier date, in which case the
same are true, correct and complete as to such earlier date; and no Default or
Event of Default exists under the Credit Agreement.

 

 
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7.             Confirmation of Security Interests. Borrowers hereby confirm the
security interests and liens granted by Borrowers to Agent, in and to the
Collateral in accordance with the Loan Documents as security for the
Obligations.

 

8.             Payment of Agent’s Fees and Expenses. Borrowers agree to pay any
and all fees and expenses, including reasonable counsel fees and disbursements,
incurred by Agent in connection with the preparation and execution of this
Amendment and all documents, instruments and agreements contemplated hereby.

 

9.             No Other Modifications, Conflicts with Loan Documents, etc. This
Amendment is intended to supplement and modify the Credit Agreement and the
rights and obligations of the parties under the Credit Agreement shall not in
any way be vacated, modified or terminated except as herein provided. All terms
and conditions contained in each and every agreement or promissory note or other
evidence of indebtedness of Borrowers to the Agent and Lenders are incorporated
herein by reference. If there is a conflict between any of the provisions of the
Credit Agreement and the provisions of this Amendment, then the provisions of
this Amendment shall govern.

 

10.          Limited Waiver. Except as expressly provided in Section 1 hereof,
this Amendment shall not constitute a waiver of any Default or Event of Default,
which may exist under the Credit Agreement, or a waiver or modification of any
of the Agent’s rights and remedies or of any of the terms, conditions,
warranties, representations, or covenants contained in the Credit Agreement.
Except as expressly provided in Section 1 hereof, the Agent hereby reserve all
of its rights and remedies pursuant to the Credit Agreement and the other Loan
Documents and applicable law. For the avoidance of doubt, the waiver set forth
in Section 1 hereof shall be effective only upon the Fourth Amendment Effective
Date.

 

11.          Full Force and Effect. Except as expressly amended hereby, all
terms and conditions of the Credit Agreement, and any and all Exhibits annexed
thereto and all other writings submitted by the Borrowers to the Agent and
Lenders pursuant thereto, shall remain unchanged and in full force and effect.

 

 
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12.          Governing Law. This Amendment shall be construed in accordance with
the substantive laws (other than conflict laws) of the State of New York.

 

13.          Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall be considered one and the same document. Delivery of an executed
counterpart of a signature page of this document by facsimile or by electronic
mail or e-mail file attachment shall be effective as delivery of a manually
executed counterpart of this document.

 

14.          RELEASE. EACH BORROWER, TOGETHER WITH ITS SUCCESSORS AND ASSIGNS,
HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET,
CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE
INDEBTEDNESS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM
THE AGENT OR LENDERS. EACH BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES
AND FOREVER DISCHARGES AGENT, EACH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
AFFILIATES SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, ASSERTED OR
UNASSERTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING
IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH
BORROWERS MAY NOW OR HEREAFTER (WHETHER OR NOT PRESENTLY SUSPECTED, CONTEMPLATED
OR ANTICIPATED) HAVE AGAINST AGENT OR ANY LENDER, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY LOAN OR ADVANCE, INCLUDING, WITHOUT LIMITATION,
ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING
INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY
RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT OR LOAN DOCUMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.

 

 

[Signature Page Follows.]

 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Fourth
Amendment to the Credit Agreement to be executed and delivered as of the day and
year first above written.

 

 

HAMPSHIRE GROUP, LIMITED

as Lead Borrower

 

 

 

 

 

 

 

By:

/s/ Paul M. Buxbaum 

 

Name:

  Paul M. Buxbaum 

 

Title

  CEO

 

 

HAMPSHIRE BRANDS, INC.

as a Borrower

 

 

 

 

 

 

 

By:

/s/ Paul M. Buxbaum 

 

Name:

  Paul M. Buxbaum 

 

Title

  CEO

 

 

HAMPSHIRE INTERNATIONAL, LLC

as a Borrower

 

 

 

 

 

 

 

By:

/s/ Paul M. Buxbaum 

 

Name:

  Paul M. Buxbaum 

 

Title

  CEO

 

 

SCOTT JAMES, LLC

as a Borrower

 

 

 

 

 

 

 

By:

/s/ Paul M. Buxbaum 

 

Name:

  Paul M. Buxbaum 

 

Title

  CEO

 

 

RIO GARMENT S.A.

as a Borrower

 

 

 

 

 

 

 

By:

/s/ Paul M. Buxbaum 

 

Name:

  Paul M. Buxbaum 

 

Title

  CEO

 

[Waiver and Fourth Amendment to Credit Agreement]

 

 
 

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SALUS CLO 2012-1, LTD.

as a Lender

 

 

 

 

 

 

By: Salus Capital Partners II, LLC,  

 

Its: Collateral Manager  

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kyle C. Shonak  

 

 

 

Name:

Kyle C. Shonak 

 

 

 

Title:

Co-President 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Macy L. Kiley  

 

 

 

Name: 

Macy L. Kiley

 

 

 

Title:

Executive Vice President  

 

 

 

 

SALUS CAPITAL PARTNERS, LLC

as a Lender, Administrative Agent

and Collateral Agent

 

 

 

 

 

         

 

By:

/s/ Kyle C. Shonak  

 

 

 

Name:

Kyle C. Shonak 

 

 

 

Title:

Co-President 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Christopher O’Connor

 

 

 

Name: 

Christopher O’Connor

 

 

 

Title:

Co-President

 

 

 

 

 

[Waiver and Fourth Amendment to Credit Agreement]

 

 
 

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Schedule I

 

Specified Defaults

 

 

1.

The failure of the Borrowers to achieve minimum Consolidated EBITDA for the
twelve-month period ending December 31, 2014 as required by Section 7.15(a) of
the Credit Agreement.

 

 

2.

The failure of the Borrowers to deliver monthly financial statements for the
months ending January 31, 2015, February 28, 2015 and March 31, 2015, as
required by Section 6.01 (b) of the Credit Agreement.

 

 

3.

The failure of the Borrowers to deliver audited financial statements for the
fiscal year ending December 31, 2014, as required by Section 6.01(a) of the
Credit Agreement.

 

 

4.

The delivery by the Borrowers to the Agent of Borrowing Base Certificates and/or
other reports prior to February 27, 2015 that included irregularities and/or
errors.

  

 
 

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Exhibit A

 

Business Plan

 

Attached