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 June 28, 1997.
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. 33-47577
HAMPSHIRE GROUP, LIMITED
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-0967107
(State of Incorporation) (I.R.S. Employer Identification No.)
POST OFFICE BOX 2667
215 COMMERCE BOULEVARD
ANDERSON, SOUTH CAROLINA 29621
(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 August 4, 1997
- ---------------------------- ----------------------------
Common Stock, $.10 Par Value 3,885,269
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HAMPSHIRE GROUP, LIMITED
INDEX TO FORM 10-Q
June 28, 1997
PART I - FINANCIAL INFORMATION Page
----
Item 1 - Financial Statements
Consolidated Balance Sheet as of June 28, 1997,
June 29, 1996 and December 31, 1996 3
Consolidated Statement of Operations for the three
months and six months ended June 28, 1997 and June 29, 1996 5
Consolidated Statement of Cash Flows for the six months
ended June 28, 1997 and June 29, 1996 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signature Page 13
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
ASSETS
<CAPTION>
June 28, June 29, Dec. 31,
1997 1996 1996
--------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............. $ 659 $ 776 $20,385
Marketable securities ................. 560 -- 303
Accounts receivable trade - net ....... 15,405 13,827 13,101
Other receivables ..................... 957 766 412
Inventories ........................... 39,314 33,281 14,873
Deferred tax asset .................... 1,631 409 1,631
Other current assets .................. 344 512 401
------- ------- -------
Total current assets ............. 58,870 49,571 51,106
Property, plant and equipment - net ........ 13,622 13,968 13,596
Deferred tax asset ......................... 3,640 962 3,640
Intangible assets - net .................... 3,009 4,073 3,161
Long-term investments ...................... 2,323 -- 200
Other assets ............................... 115 111 227
------- ------- -------
$81,579 $68,685 $71,930
======= ======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
<CAPTION>
June 28, June 29, Dec. 31,
1997 1996 1996
--------- --------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current liabilities:
Borrowings under lines of credit ...... $ 9,365 $ 8,385
Current portion of long-term debt ..... 2,579 2,399 $ 2,618
Notes payable to related parties ...... 500 375 877
Accounts payable ...................... 6,906 4,862 3,722
Accrued liabilities ................... 7,059 7,103 6,876
------- ------- --------
Total current liabilities ........ 26,409 23,124 14,093
Long-term debt ............................ 5,370 7,423 6,643
Notes payable to related parties .......... 375 1,252 625
------- ------- -------
Total liabilities ................ 32,154 31,799 21,361
------- ------- -------
Redeemable, convertible preferred stock,
at redemption value...................... 3,089 3,294 3,294
------- ------- -------
Common stockholders' equity:
Common stock .......................... 392 387 389
Additional paid-in capital ............ 24,145 23,605 23,853
Retained earnings ..................... 22,481 10,183 23,111
Treasury stock ........................ (682) (583) (78)
------- ------- -------
Total common stockholders' equity 46,336 33,592 47,275
------- ------- -------
$81,579 $68,685 $71,930
======= ======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Three months ended Six months ended
-------------------- -------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales .......................... $21,466 $21,243 $45,077 $47,673
Cost of goods sold ................. 17,092 17,495 36,012 39,047
------- ------- ------- -------
Gross profit ................... 4,374 3,748 9,065 8,626
Commission revenue ................. 284 325
------- ------- ------- -------
4,374 4,032 9,065 8,951
Selling, general & administrative
expenses ....................... 4,629 4,405 9,412 9,586
------- ------- ------- -------
Loss from operations ............... (255) (373) (347) (635)
Other income (expense):
Interest expense ............... (210) (243) (432) (522)
Interest income ................ 161 23 241 135
Miscellaneous .................. 11 (14) (80) (19)
------- ------- ------- -------
Loss before income taxes ........... (293) (607) (618) (1,041)
Benefit (provision) for income taxes 58 10 122 (82)
------- ------- ------- -------
Net loss ........................... (235) (597) (496) (1,123)
Preferred dividend requirements .... (42) (45) (86) (93)
------- ------- ------- -------
Net loss applicable to common stock $ 277) ($ 642) ($ 582) ($1,216)
======= ======= ======= =======
Net loss per common share .......... ($0.07) ($0.17) ($0.15) ($0.32)
===== ===== ===== =====
Weighted average number
of shares outstanding ......... 3,851 3,755 3,851 3,753
===== ===== ===== =====
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
Six months ended
----------------------
June 28, June 29,
1997 1996
------- -------
(unaudited)
<S> <C> <C>
Cash flows from operating activities: ................
Net loss ......................................... ($ 496) ($ 1,123)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................. 1,870 1,915
Gain on sale of assets ........................ -- (4)
Net change in operating assets and liabilities:
Marketable securities .................... (257) --
Receivables .............................. (2,863) 2,892
Inventories .............................. (24,443) (13,901)
Other current assets ..................... 175 (111)
Accounts payable ......................... 3,186 150
Accrued liabilities ...................... 144 (1,296)
Other .................................... -- 50
------- -------
Net cash used in operating activities ......... (22,684) (11,428)
------- -------
Cash flows from investing activities:
Long-term investment ............................. (2,123)
Capital expenditures ............................. (1,802) (2,359)
Proceeds from sales of property and equipment .... 66 10
------- -------
Net cash used in investing activities ........ (3,859) (2,349)
------- -------
Cash flows from financing activities:
Net borrowings under lines of credit ............. 9,365 8,385
Repayment of long-term debt ...................... (1,313) (1,395)
Repayment of related party debt .................. (627) (2,123)
Treasury stock purchased ......................... (654) (583)
Proceeds from issuance of common stock ........... 90 636
Redemption of preferred stock .................... -- (308)
Payment of preferred stock dividends ............. (44) (93)
------- -------
Net cash provided by financing activities .... 6,817 4,519
------- -------
Net decrease in cash and cash equivalents ............ (19,726) (9,258)
Cash and cash equivalents at beginning of period ..... 20,385 10,034
------- -------
Cash and cash equivalents at end of period ........... $ 659 $ 776
======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
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HAMPSHIRE GROUP, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
In the opinion of the management of the Company, the unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods presented. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for a full year due
to the seasonality of the business. These interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1996, included in
the Company's Annual Report on Form 10-K.
Net loss per share is computed by dividing net loss by the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Conversion of the convertible preferred stock into common stock has not
been assumed because inclusion would be antidilutive.
Certain accounts previously reported have been reclassified to conform to
classifications used in 1997.
INVENTORIES
A summary of inventories by component is as follows:
(in thousands)
June 28, June 29, Dec. 31,
1997 1996 1996
------- ------- -------
Finished goods ........... $27,815 $23,461 $ 8,767
Work-in-progress ......... 10,976 8,751 6,063
Raw materials and supplies 5,239 5,428 4,176
------- ------- -------
44,030 37,640 19,006
Less-LIFO reserve ....... (4,716) (4,359) (4,133)
------- ------- -------
Net inventories ...... $39,314 $33,281 $14,873
======= ======= =======
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REVOLVING CREDIT FACILITY
The Company has renewed its principal credit facility through May 31, 1998.
The credit facility consists of a $20 million line of credit and an $8 million
letter of credit facility, not to exceed $25 million in the aggregate. Advances
under the line of credit are limited to the lesser of: (l) the amount available
set forth above; or (2) the sum of (i) 85% of the eligible accounts receivable
and (ii) a seasonal adjustment of $6 million during the period from March 1 to
October 31.
Loans 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 secured by
the trade accounts receivable of Hampshire Designers and are guaranteed by
Hampshire Group, Limited. Letters of credit issued under the facility are
secured by the inventory shipped pursuant to the letters of credit.
The Company also has two other credit facilities of $5 million in the
aggregate and an additional letter of credit facility in the amount of $3
million.
STOCK OPTIONS
In May 1997, pursuant to the Hampshire Group, Limited 1992 Stock Option
Plan, the Company granted to certain key employees options to acquire 50,000
shares of the Company's common stock at a price of $14.50 per share, including
the Chief Executive Officer who received non-qualified options to acquire 5,000
shares. The option price was equal to the fair market value as of the date of
the grant.
CAPITALIZATION
As of July 1, 1997, the Company purchased from a former director, for $1
million ($7.534 per share), warrants to purchase 132,728 shares of the Company's
common stock with an exercise price of $6.19 per share. The Board of Directors
has also authorized the Company to purchase from time to time in the open market
up to 100,000 shares of its common stock. The Company intends to use 50,000 of
such shares for employee benefit programs.
8
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<TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
BUSINESS SEGMENT DATA
Set forth below are the Company's results of operations by business segment
for the periods presented:
<CAPTION>
(in thousands)
Three months ended Six months ended
------------------- -------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales:
Sweaters ............ $16,055 $13,696 $34,936 $34,431
Hosiery ............. 5,411 7,547 10,141 13,242
------- ------- ------- -------
$21,466 $21,243 $45,077 $47,673
======= ======= ======= =======
Gross profit:
Sweaters ............ $ 3,528 $ 2,480 $ 7,772 $ 6,467
Hosiery ............. 846 1,268 1,293 2,159
------- ------- ------- -------
$ 4,374 $ 3,748 $ 9,065 $ 8,626
======= ======= ======= =======
Operating profit (loss):
Sweaters ............ $ 289 ($ 293) $ 991 ($ 202)
Hosiery ............. 34 342 (296) 389
------- ------- ------- -------
323 49 695 187
Less - Corporate expenses (578) (422) (1,042) (822)
------- ------- ------- -------
Loss from operations .... ($ 255) ($ 373) ($ 347) ($ 635)
======= ======= ======= =======
</TABLE>
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RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996
The Company's net sales for the first six months of 1997 decreased 5.4% to
$45,077,000. The decrease, in the six-month period, was primarily the result of
a 23.4% reduction in the net sales of the hosiery segment, which resulted
primarily from the loss of a major customer.
Net sales in the sweater segment increased 1.5% over the same period the
previous year due primarily to the increase in sales of the imported products
sold under the Designers Original Studio and Designers Originals Sport labels.
The net sales in 1996 reflected close-out sales of women's products and
close-out sales associated with the consolidation of two men's manufacturing
facilities. Unit volume was up 4.0% over the prior year but a corresponding
shift in product mix to lower price goods resulted in a 2.4% decrease over the
same period for the previous year.
The net sales decrease in the hosiery segment for the six months consisted
of a 16.3% reduction in unit volume and a 7.1% reduction in net sales resulting
from a shift to lower-priced products. The performance of the hosiery segment
reflected the over-capacity and the corresponding price pressures which have
resulted in the hosiery industry.
Gross profit, as a percentage of net sales, increased by 2.0% due to the
strong margins achieved in the sweater segment. In absolute dollars, gross
profit increased $439,000 to $9,065,000.
Gross profit of the sweater segment increased 20.2% to $7,772,000 on the
strength of the improvement in the men's sweater business and the absence of the
expense associated with the consolidation of the manufacturing facilities.
As a percentage of net sales, gross profit increased from 18.8% to 22.2% for
the six months.
Gross profit of the hosiery segment for the six months decreased in both
absolute dollars and as a percentage of net sales to 12.8% from 16.3% for the
same period of the previous year. The hosiery segment continues to be impacted
by the pricing pressures resulting from the over-capacity within the industry.
THREE MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996
The Company's net sales for the quarter ending June 28, 1997 were
$21,466,000 representing a 1.0% increase over the prior year. This increase was
the result of an $2,359,000 increase in sales in the sweater segment offset by a
$2,136,000 decrease in the hosiery segment.
The sweater segment's 17.2% increase was the result of a 21.6% increase in
unit volume offset by a 4.4% decrease in sale dollars due to a shift in product
mix to lower priced goods. The increase in unit volume occurred across all
product lines with the majority occurring in the ladies, traditional business
and the imported, branded business. The decrease in average selling price was
the result of a shift to lower priced products in the import products sold under
the Designers Originals Sport and Designers Original Studio labels.
In the hosiery segment, the decrease in sales was attributable to the loss
of a major customer resulting from their decision to reduce the number of
vendors. The loss of the customer resulted in reducing net sales by $2,136,000
to $5,411,000 with a corresponding decrease in both unit volume and
price/product mix of 23.3% and 5.0% respectively.
Gross profit for the quarter increased as a percentage of net sales from
17.6% to 20.4% with the increase attributable to the sweater segment offset by
the decrease in the hosiery segment.
10
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The sweater segments gross profit increased in absolute dollars by
$1,048,000 and as a percentage of net sales from 18.1% to 22.0%. This increase
was primarily attributable to the increase in the men's sweater business.
In the hosiery segment, competitive price pressures within the industry and
the loss of a major customer contributed to the decline in gross margin as a
percentage of net sales from 16.8% to 15.6%.
SEASONALITY
Approximately two-thirds of sweater sales occur in the second half of the
year. The hosiery segment sales are not highly seasonal.
LIQUIDITY AND CAPITAL RESOURCES
The primary liquidity and capital requirements of the Company are to fund
working capital for current operations consisting of funding the buildup in
inventories and accounts receivable (which reach their maximum requirements in
the third quarter), servicing long-term debt, funding capital expenditures for
machinery and equipment and investing, in 1997, approximately $5 million in
assets not used in the business of the Company. The primary sources to meet the
liquidity and capital requirements include funds generated from operations,
revolving credit lines and long-term equipment financing.
Net cash used in operations for the six months ended June 28, 1997 totaled
$22,684,000 of which the primary use was to produce inventory for shipments
later in the year.
Capital expenditures for 1997 are currently planned to be approximately
$3,000,000, of which $1,802,000 has been expended through June 28, 1997. The
planned expenditures are primarily for manufacturing equipment and facility
improvements.
The net cash provided by financing activities for the six months ended June
28, 1997 was $6,817,000. Besides funding the working capital needs, the
principal use was the repayment of debt of $1,940,000. Other uses were the
purchase of investments of $2,380,000 and the purchase of common stock in the
amount of $654,000 for funding of employee benefit programs and redemption of
preferred stock.
The Company renewed its principal credit facility which will extend through
May 31, 1998. The credit facility consists of a $20 million line of credit and
an $8 million letter of credit facility, not to exceed $25 million in the
aggregate. The Company also has two other credit facilities of $5 million in the
aggregate. The Company had letters of credit outstanding at June 28, 1997 in the
aggregate amount of $9,849,000.
The Company believes its cash flow from operations and borrowings under its
credit lines will provide adequate resources to meet its operational needs and
capital requirements for the foreseeable future.
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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 or results of operations.
Item 2 and 3 are not applicable and have been omitted.
Item 4 - Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders held on May 7, 1997, pursuant to the
Notice of Annual Meeting of Stockholders and Proxy Statement dated April 7,
1997:
1) Each of the five nominees standing for re-election (Ludwig Kuttner,
Herbert Elish, Harvey L. Sperry, Eugene Warsaw and Peter W. Woodworth)
were elected as Directors of the Company. Messrs. Kuttner, Elish,
Warsaw, and Woodworth each had 3,097,665 votes FOR, 0 votes AGAINST
and 0 votes WITHHELD; Mr. Sperry had 3,096,798 votes FOR, 867 votes
AGAINST and 0 votes WITHHELD.
2) The ratification of the appointment of Price Waterhouse LLP as
independent public accountants for the Company for the year ending
December 31, 1997 was approved 3,096,798 votes FOR, 0 votes AGAINST,
and 0 votes ABSTAINED.
Item 5 is not applicable and has been omitted.
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Description
----------- ---------------------------------------------------
(10)(D) Hampshire Group, Limited Voluntary Deferred Compensation
Plan for Directors and Executives effective January 1,
1997
(10)(H)(11) Amendment Number Two to Fourth Amended and Restated Loan
Agreement between Hampshire Designers, Inc., The Chase
Manhattan Bank and Fleet Bank (formally NatWest Bank
N.A.) dated June 1, 1997
(10)(S)(1) Revolving Line of Credit Agreement between Hampshire
Group Limited and Merchants National Bank
dated March 24, 1997
(11) Statement Re Computation of Loss Per Share
(27) Financial Data Schedule
b) Reports on Form 8-K filed during the quarter.
There were no reports filed by the Company on Form 8-K during the quarter ended
June 28, 1997.
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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: August 11, 1997 /s/ Ludwig Kuttner
----------------------------- ------------------------------
Ludwig Kuttner
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1997 /s/ Charles W. Clayton
----------------------------- ------------------------------
Charles W. Clayton
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
EFFECTIVE JANUARY 1, 1997
1
<PAGE>
TABLE OF CONTENTS
ARTICLE I Definitions 1
ARTICLE II Participation 4
ARTICLE III Deferred Compensation Account Credits 5
ARTICLE IV Deferred Compensation Accounts 5
ARTICLE V Vesting 6
ARTICLE VI Payment of Deferred Compensation; Withdrawals 6
ARTICLE VII Funding 8
ARTICLE VIII Administration 9
ARTICLE IX Amendment and Termination 10
ARTICLE X General Provisions 10
EXHIBIT 1 Election Form 12
-i-
2
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HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
ARTICLE I
Definitions
Section 1.1 As used in this Plan, the following terms shall have the
meanings hereinafter set forth:
Beneficiary means any person(s) or legal entity(ies) designated by the
Participant or otherwise in accordance with Section 10.7.
Board means the Board of Directors of the Company.
Bonus means the bonus paid by an Employer to a Key Employee during any Plan
Year excluding any bonus prepaid on a monthly basis.
Committee means the Committee appointed by the Board which administers the
Plan in accordance with Article VIII hereof.
Common Stock means the common stock of Hampshire Group, Limited, par value
$0.10 per share.
Company means Hampshire Group, Limited, a Delaware corporation, and its
successors and assigns.
Deferred Compensation Account means one or more accounts established and
maintained under the Plan to reflect deferrals made by a Participant hereunder.
Director means a member of the Board who is not also a Key Employee.
Disability means disability as defined under the long-term disability plan
of the Company, as amended from time to time.
Effective Date means January 1, 1997.
Employer means the Company and any subsidiary or affiliate thereof which
shall be designated by the Committee as a participating employer under the Plan.
Financial Hardship means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
a dependent, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
3
<PAGE>
constitute a Financial Hardship will depend upon the facts of each case and will
be determined by the Committee in its sole discretion; but distributions may not
be made to the extent that such hardship is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise or (ii) by liquidation
of the participant's assets, to the extent the liquidation of such assets would
not itself cause severe financial hardship.1
401(k) Plan means the Hampshire Group, Limited and Subsidiaries 401(k)
Retirement Savings Plan, as amended from time to time.
Installments means substantially equal payments payable semi-annually as of
the last day of June and December and as of the anniversary thereof in each
succeeding year over a period certain not to exceed eight (8) years, commencing
not later that two (2) years following the Participant's Separation from
Service, as elected by a Participant in accordance with Section 6.1, but subject
to Section 6.4 hereof.
Key Employee means an employee of an Employer who is (i) a member of a
select group of management or highly-compensated employees and (ii) designated
by the Committee as eligible to participate in the Plan.
Net Realizable Value means (i) if the share of Common Stock is to be
disposed of in the open market, the net value realized upon the sale of the
share, net of the brokerage fee, or (ii) if the share is to be retained in the
trust for the Stock Purchase Plan, net realizable value shall mean the last
quoted bid price on the National Association of Securities Dealers Automated
System (NASDAQ) on the date immediately preceding the date of determination, or
if not quoted on that day, then on the last preceding date on which the Common
Stock is quoted. If the Common Stock is not quoted on NASDAQ or listed on an
exchange, or representative quotes are not otherwise available, the net
realizable value shall mean the amount determined by the Committee to be the
fair market value of the Common Stock based upon a good faith attempt to value
the Common Stock accurately.
Notional Fund means the investment funds available under the 401(k) Plan
designated by the Committee from time to time and shall not be less than three
such funds, but shall not include the Hampshire Group, Limited Common Stock
Fund.
Participant for any Plan Year means a Key Employee or a Director who elects
to participate in the Plan in accordance with Article II hereof.
Plan means the Hampshire Group, Limited Voluntary Deferred Compensation
Plan for Directors and Executives, as embodied herein and as amended from time
to time.
1. This definition, along with the hardship distribution clause in
Section 6.8, constitute the IRS's view of allowable hardship distributions from
non-qualified deferred compensation plans.
4
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Plan Year means the calendar year, with the first Plan Year beginning on
January 1 and ending on December 31, 1997.
Qualified Stock Equivalents shall mean (i) with respect to the first Stock
Divestiture Date, up to seventy-five percent (75%) of the number of Common Stock
Equivalents which were credited to the Stock Deferral Account in respect to
compensation earned by a Participant in calendar years at least two years prior
to the Stock Divestiture Date (Common Stock Equivalents credited in respect of
1995 Bonus deferral and earlier years will be included in Qualified Stock
Equivalents on December 31, 1997), and which have not been distributed from his
Stock Deferral Account, and (ii) with respect to each subsequent Stock
Divestiture Date, up to seventy-five percent (75%) of the number of shares of
Common Stock Equivalents of the Participant that would have been credited to the
Participant's Stock Deferral Account on the Stock Divestiture Date had no Stock
Divestitures taken place, less all previous Stock Divestitures. Stock
Divestitures shall first be deducted from Common Stock Equivalents credited
under the Stock Purchase Plan for the year designated by the Participant, and
all Common Stock Equivalents credited during that year shall be applied to the
Stock Divestiture before a second year is designated. If the Participant does
not designate a specific year for divestitures, the Stock Divestitures shall be
applied on a first-in, first-out basis. Common Stock Equivalents credited to the
Participant's Stock Deferral Account for which a distribution election is in
effect within one year or less, shall not be included in Qualified Stock
Equivalents.
Salary means the base salary paid to a Key Employee for any Plan Year by
the Employer plus any bonus prepaid on a monthly basis.
Separation from Service means termination of a Participant's employment
with his Employer for any reason, unless such termination is in connection with
the transfer of the Participant to another Employer.
Stock Deferral Account means a Participant's deferral account under the
Hampshire Group, Limited Stock Purchase Plan for Directors and Executives.
Stock Divestiture Date means December 31, 1997 and June 30, 1998 and each
subsequent June 30th and December 31st, or such other date(s) as determined by
the Committee from time to time.
Stock Purchase Plan means the Hampshire Group, Limited and Affiliates
Common Stock Purchase Plan for Directors and Executives, as amended from time to
time.
Trust means a grantor trust, of which the Company is the grantor, within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the
United States Internal Revenue Code of 1986, as amended, and shall be construed
accordingly.
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Trustee shall mean the trustee of the Trust.
Wherever any words are used herein in the masculine gender, they shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
ARTICLE II
Participation
Section 2.1 To participate in the Plan:
(a) Prior to the December 15th preceding a Plan Year, or such other date(s)
as determined by the Committee, each Key Employee and each Director may
irrevocably elect to participate in the Plan for such Plan Year by delivering
written notice to the Committee; which notice must specify, subject to the
provisions of Sections 2.2, 6.1 and 6.2, (i) in the case of a Key Employee, the
percentage of Salary and Bonus and the number of Qualified Stock Equivalents to
be deferred and the time and form of payment, and (ii) in the case of a
Director, the number of Qualified Stock Equivalents to be deferred; provided,
however, that (x) the Committee may establish procedures and forms which are
applicable to all Key Employees and Directors under which Key Employees and
Directors may elect to participate in the Plan on a prospective basis as of some
other date(s) specified in such procedures; and (y) a Key Employee's election
with respect to Salary and Bonus shall remain in effect for subsequent Plan
Years unless revoked or changed by delivery of written notice to the Committee
by the Key Employee prior to the December 15th preceding the Plan Year with
respect to which such revocation or change is effective.
(b) Prior 15th day of the month preceding a quarter-end, or such other
date(s) as determined by the Committee, each Key Employee and each Director may
elect to change his Notional Fund election, both for current deferral and any
portion of the balance in his Deferred Compensation Account, and to specify the
number of Qualified Stock Equivalents to be deferred as of June 30th and
December 31st of such Plan Year by delivering written notice to the Committee.
The change in election shall be effective the first day of the following
quarter, or in the case of the transfer of a balance, shall be effective on the
date the trade is finalized.
(c) Paragraph (a) of this Section 2.1 notwithstanding, (i) each Key
Employee will have 30 days following the adoption of the Plan, by delivering
written notice to the Committee otherwise consistent with Section 2.1(a), and
(ii) a Key Employee who is first designated by the Committee as eligible to
participate in the Plan during any Plan Year will have 30 days following the
date of notification of eligibility, to elect to defer Salary and Bonus for such
Plan Year by written notice to the Committee otherwise consistent with Section
2.1(a).
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(d) Notwithstanding the above, upon application of any Participant and
approval thereof by the Committee in their sole discretion, the Participant may
at any time during a Plan Year revoke, by reason of Financial Hardship, his
election to participate in the Plan for such Plan Year. Upon such revocation,
any amount withheld for credit to his Deferred Compensation Account for such
year shall be paid to him without interest as soon as practicable thereafter.
Section 2.2 Participants may defer any whole number percentage of their
Salary and Bonus paid in the calendar year, from five percent (5%) to thirty
percent (30%), in the case of Key Employees, and any whole number of Qualified
Stock Equivalents; provided, however, that (i) no more than twenty percent (20%)
of a Participant's total annual compensation may be deferred for any Plan Year,
and (ii) the maximum number of Qualified Stock Equivalents which may be deferred
for any Plan Year shall be seventy-five percent (75%) of Qualified Stock
Equivalents available under the Participant's Stock Deferral Account with
respect to the Stock Divestiture Date immediately preceding such Plan Year, such
amount to be determined in accordance with the definition of Qualified Stock
Equivalents set forth above.
Section 2.3 A Participant shall cease to be a Participant on the date of
his Separation from Service. Notwithstanding the above, compensation earned
prior to Separation from Service which is to be paid subsequently, shall be
eligible for deferral in accordance with the Participant's duly filed election
form; except that if the Separation from Service is the result of termination
for cause, the Participant's balance may be paid at the sole discretion of the
Committee in a lump-sum payment within six months of the Separation from
Service.
ARTICLE III
Deferred Compensation Account Credits
Section 3.1 The Committee shall cause to be credited to each Participant's
Deferred Compensation Account for a Plan Year the amounts of Salary and Bonus
which he elected to defer in accordance with Article II. Such amounts shall be
so credited on a quarterly basis as of the end of each calendar quarter during
the Plan Year.
Section 3.2 Within ten (10) days following each Stock Divestiture Date, the
Commit- tee shall cause to be credited to a Participant's Deferred Compensation
Account for a Plan Year an amount equal to the number of Qualified Stock
Equivalents chosen to be deferred by the Participant on such Stock Divestiture
Date, multiplied by the Net Realizable Value of one share of Common Stock on
such Stock Divestiture Date.
Section 3.3 Notwithstanding any provisions herein to the contrary, the
Committee in its sole discretion may suspend any and all deferrals under the
Plan for such period of time as it determines, but in any event all deferrals
under the Plan shall be suspended after December 31, 2001 for compensation
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earned subsequent to that date; provided however, that no action taken shall
adversely affect the rights of any Participant hereunder to amount due and
payable to such Participant at the time such action is taken, unless the
Participant otherwise consents thereto.
ARTICLE IV
Deferred Compensation Accounts
Section 4.1 The Committee shall establish and maintain a Deferred
Compensation Account for each Participant and, in the case of Key Employees,
shall maintain separate sub-accounts within each Deferred Compensation Account
for (i) deferrals of Salary and Bonus, and (ii) deferrals of Qualified Stock
Equivalents.
Section 4.2 Amounts credited to a Deferred Compensation Account shall be
periodically adjusted for notional investment experience. In each case such
notional investment experience shall be determined by treating the Deferred
Compensation Account as though an equivalent dollar amount had been invested and
reinvested in one or more of the Notional Funds. The Notional Funds used as a
basis for determining notional investment experience with respect to any
Deferred Compensation Account shall be designated by the Participant by
delivering to the Company written instrument of election approved by the
Committee, and may be changed prospectively by similar delivered written
election before the 15th day of the month preceding a quarter-end, to be
effective as of the first day of the new quarter following such election as
presented in Section 2.1(b) hereof.
Section 4.3 The Committee may from time to time limit the Notional Funds
available for purposes of such election. If at any time any Notional Fund that
has previously been designated by a Participant as a notional investment shall
cease to exist or shall be unavailable for any reason, or if the Participant
fails to designate one or more Notional Funds pursuant to this Section 4.2, the
Committee may, at its discretion and upon notice to the Participant, treat any
amounts notionally invested in such Notional Fund (whether representing past
amounts credited to a Participant's Deferred Compensation Account or subsequent
deferrals or both) as having been invested in any such Notional Fund as the
Committee may from time to time designate, in all cases only until such time as
the Participant shall have made another investment election in accordance with
the foregoing procedures. Deferred Compensation Accounts shall continue to be
adjusted for notional investment experience until distributed in full in
accordance with the distribution method elected by the Participant pursuant to
Article VI hereof.
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ARTICLE V
Vesting
Section 5.1 A Participant shall be fully vested at all times in his
Deferred Compensation Account for any Plan Year.
ARTICLE VI
Payment of Deferred Compensation; Withdrawals
Section 6.1 Subject to the limitations set forth in Section 6.4, at the
time a Key Employee first elects to become a Participant in the Plan, he shall
elect in writing to the Committee, on a form attached hereto, to have the
portion of his Deferred Compensation Account which is attributable to deferrals
of Salary and Bonus and earnings credited thereon paid either:
(A) In a lump sum or in such number of Installments as are indicated on
such election;
(B) On (or, in the case of Installments, commencing on) any date on or
after such Participant's Separation from Service, but not later than two years
following the date of such Separation from Service. This distribution shall be
subject to Section 2.3 hereof providing the Separation from Service is a result
of termination for cause.
Section 6.2 Further, at the time a Key Employee first elects to become a
Participant in the Plan, he shall elect in writing delivered to the Committee,
on the form attached hereto, to have the portion of his Deferred Compensation
Account attributable to (i) dividend and capital gain distributions of
investments in Notional Funds which, in the aggregate on a per share basis,
exceed four (4%) of the per share value of the respective fund as of the current
year-end and (ii) realized gains resulting from the liquidation of investment(s)
in Notional Funds:
(A) Distributed by the Company to the Participant in the same Plan Year, or
(B) Held in his Deferred Compensation Account less twenty
percent (20%) of such amounts (or a percentage equal to the Company's current
income tax rate, if greater) which will be retained by the Company to pay
estimated current income taxes payable on the dividends and taxable capital
gains.
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Section 6.3 Amounts retained by the Company to pay estimated current income
taxes on dividends and taxable gains shall be credited to the Participants
Deferred Compensation Account as a non-invested balance and such amounts shall
be distributed in full to the Participant in accordance with regular
distribution election as provided for in Section 6.1 above. Such non-invested
balances shall not accrue any interest nor earnings and shall be the last
amounts distributed to the Participant in any distribution.
Section 6.4 Notwithstanding anything herein to the contrary, (i) in the
case of an election for a lump-sum distribution, such distribution shall be made
in full not later than December 31, 2004 and (ii) in the case of an election for
a distribution in Installments such Installments shall commence not later than
December 31, 2002.
Section 6.5 Notwithstanding anything herein to the contrary, in the case of
an election for distribution in Installments, if initially the portion of a
Participant's Deferred Compensation Account which is attributable to deferrals
of Salary and Bonus and earnings credited thereon is less than $50,000, the
number of Installments elected by the Participant shall be adjusted to not more
than eight (8) semi-annual distributions; and if initially the portion of his
Deferred Compensation Account which is attributable to deferrals of Salary and
Bonus and earnings credited thereon is less than $25,000, the number of
Installments elected by the Participant shall be adjusted to not more than four
(4) semi-annual distributions, in each case commencing on the designated
commencement date.
Section 6.6 The election made by a Participant pursuant to Section 6.1 and
Section 6.2 may not be changed unless the Committee specifically consents to
such a change in its sole discretion.
Section 6.7 The portion of each Participant's Deferred Compensation Account
which is attributable to the deferral of Qualified Stock Equivalents and
earnings credited thereon shall be paid at the time or times and in the same
manner as was chosen by the Participant with respect to such Qualified Stock
Equivalents in the deferral application filed with the Company pursuant to the
Stock Purchase Plan.
Section 6.8 If a Participant fails to deliver to the Committee a timely
payment election in accordance with procedures established by the Committee and
on the form provided by the Committee, a Participant shall have the amount
credited to his Deferred Compensation Account paid to him in a single lump sum
on a date which is within six-months following his Separation from Service.
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Section 6.9 Plan payments shall be considered cash compensation to the
Participant when paid, subject to all applicable federal, state and local income
taxes and withholding; and at the election of the Participant the distribution
shall be made in like-kind.
Section 6.10 Amounts paid under the Plan shall not be eligible for
further deferral under the Plan.
Section 6.11 If a Participant dies, at the request of his Beneficiary, the
Beneficiary shall be entitled to receive, as soon as administratively
practicable after the date of the Participant's death, the payment of his
Deferred Compensation Account in a lump-sum payment, less any applicable
federal, state and local income taxes and withholding, if any.
Section 6.12 Notwithstanding anything herein to the contrary, a Participant
may request and receive a hardship distribution, provided the Participant is
able to demonstrate, to the satisfaction of the Committee in their sole
discretion, that he has suffered a Financial Hardship. A hardship distribution
request must be made on the form provided by the Committee and is subject to the
rules established by the Committee governing hardship distributions. The amount
distributed cannot exceed the lesser of (a) the Participant's Deferred
Compensation Account, or (b) the amount necessary to satisfy the Participant's
Financial Hardship. No hardship distribution may be made prior to the time the
Committee approves the distribution.
Section 6.13 All payments shall be subject to the provisions of Section
10.4 hereof.
Section 6.14 Any payment made to a Participant or his Beneficiary or estate
pursuant to the terms of the Plan shall constitute a complete discharge of the
obligations of the Company and the Committee with respect thereto.
ARTICLE VII
Funding
Section 7.1 The Board of Directors of the Company shall cause the Trust to
be created, shall appoint the Trustee and shall authorize the appropriate
officers of the Company to execute all necessary trust agreements and other
instruments necessary therefor; provided, however, that (i) the terms of the
Trust shall be consistent with the status of the Plan as "unfunded" for purposes
of ERISA and (ii) the Trust shall conform to the terms of the model grantor
trust contained in Revenue Procedure 92-64,1992-33 I.R.B. 11.
Section 7.2 Not later than ten (10) days following each quarter on which
amounts are credited to Deferred Compensation Accounts, the Company shall
contribute to the Trust cash equal to the amounts so credited.
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Section 7.3 At each time payment of all or a portion of each Participant's
Deferred Compensation Account is due pursuant to an election made in accordance
with Article II (or pursuant to the death of a Participant in accordance with
Section 6.6), the Committee shall instruct the Trustee to distribute cash from
the Trust directly to such Participant or his Beneficiary in an amount equal to
the portion of his Deferred Compensation Account which is so payable. In the
absence of such an instruction to the Trustee by the Committee, a Participant
may directly instruct the Trustee to make such distribution, and the Trustee
shall do so if it determines that such distribution is in accordance with the
Participant's Article II election. If the Trustee fails to make any distribution
from the Trust required hereunder, the Company shall make such distribution
directly to the Participant entitled thereto from its general assets. If any
payment is made to a Participant by the Company pursuant to the preceding
sentence, the Participant shall be deemed to have assigned to the Company his
rights to receive such payment from the Trust, and the Company shall be
subrogated to all rights of the Participant therein.
ARTICLE VIII
Administration
Section 8.1 The Plan shall be administered by a three member Committee
appointed by the Board which shall consist of one member of the Compensation
Committee of the Board, the Chief Executive Officer of the Company and the
individual designated as the administrator.
Section 8.2 The complete authority to control and manage the operation and
administration of the Plan and the responsibility for carrying out its
provisions is vested in the Committee.
Section 8.3 The Committee shall from time to time establish rules of
administration and interpretation of the Plan. The determination of the
Committee as to any disputed questions shall be conclusive and binding on all
parties, including the Participant, his Beneficiary, the Company and each
Employer.
Section 8.4 Any act which the Plan authorizes or requires the Committee to
do may be done by a majority of its members. The action of such majority,
expressed by a vote at a meeting or in writing without a meeting, shall
constitute the action of the Committee and shall have the same effect for all
purposes as if assented by all members of the Committee.
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Section 8.5 The members of the Committee may authorize one or more of their
members to execute or deliver any instrument, make any payment or perform any
other act which the Plan authorizes or requires the Committee to do.
Section 8.6 The Committee may employ counsel and other agents and may
procure such clerical, accounting, and other services as they may require in
carrying out the provisions of the Plan. No member of the Committee shall
receive any compensation for his services as such. All expenses of administering
the Plan, including but not limited to, fees of accountants and counsel, shall
be paid by the Company up to $10,000 annually and any other costs are to be paid
by the Plan by prorating the amount to the individual Participants based on
aggregate investment in the Plan of each.
Section 8.7 The Company shall indemnify and save harmless each member of
the Committee against all expenses and liabilities arising out of membership on
the Committee, excepting only expenses and liabilities arising from his own
gross negligence or willful misconduct, as determined by the Board of Directors.
ARTICLE IX
Amendment and Termination
Section 9.1 The Company, by action of the Committee, may at any time or
from time to time modify or amend any or all of the provisions of the Plan or
may at any time terminate the Plan; provided, however, that no action taken
shall adversely affect the rights of any Participant hereunder to amounts due
and payable to such Participant at the time such action is taken, unless the
Participant otherwise consents thereto.
ARTICLE X
General Provisions
Section 10.1 No Participant, Key Employee or employee of the Company or any
Employer shall have any right to any payment or benefit hereunder except to the
extent provided in the Plan.
Section 10.2 The employment rights of any Participant shall not be
enlarged, guaranteed or affected by reason of any of the provisions of the Plan.
Section 10.3 Assignment, pledge or other encumbrance of any payments or
benefits under the Plan shall not be permitted or recognized and to the extent
permitted by law, no such payments or benefits shall be subject to legal process
or attachment for the payment of any claim of any person entitle to receive the
same.
Section 10.4 The Company shall have the right to retain or to use any
amounts payable under the Plan to satisfy or otherwise offset amounts the
Participant owes to the Company.
Section 10.5 If the Committee determines that any person to whom a payment
is due hereunder is a minor or incompetent by reason of physical or mental
disability, the Committee shall have the power to cause the payments then due to
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such person to be made to another for the benefit of the minor or incompetent,
without responsibility of the Company or the Committee to see to the application
of such payment, unless claim prior to such payment is made therefor by a duly
appointed legal representative. Payments made pursuant to such power shall
operate as a complete discharge of the Company and the Committee.
Section 10.6 The validity of the Plan or any of its provisions shall be
determined under, and it shall be construed and administered according to the
laws of the state in which the administrative offices of the Company are
maintained, which currently is South Carolina. In the event of a dispute with
results in a Participant filing suit against the Company, Employer, Board of
Directors, Committee or officers of the Company, the Participant shall have
agreed that the party which the decision is rendered against shall pay the legal
expenses of the prevailing party. Further, the Participant shall waive his right
to a jury trial.
Section 10.7 Each Participant may designate, in writing and on a form
provided by the Committee, any person(s) or legal entity(ies), including his
estate, as his Beneficiary under the Plan; provided, however, that a Participant
may designate a trust as his Beneficiary only with the prior written approval of
the Committee. A Participant may at any time revoke his designation of a
Beneficiary or change his Beneficiary at any time prior to his death by
delivering to the Committee the appropriate beneficiary designation form. If no
person or legal entity shall be designated by a Participant as his Beneficiary
or if no designated Beneficiary survives him, his Beneficiary shall be his
estate. To be effective, any designation or revocation of Beneficiary must be on
the appropriate form provided by the Committee and on file with the Committee
prior to the date of the Participant's death. The provisions of the Plan shall
be binding on the Participant, the Company, and their respective heirs,
executors, administrators, successors and assigns.
ADOPTED, this 6th day of December 1996, by the unanimous vote of the Board
of Directors of Hampshire Group, Limited.
/s/ Ludwig Kuttner
- ---------------------------------------
Ludwig Kuttner
Chairman and Chief Executive Officer
/s/ Charles W. Clayton
- ---------------------------------------
Charles W. Clayton
Secretary and Chief Financial Officer
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EXHIBIT I
HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
ELECTION FORM of ________________________________________________________
(Name of Participant) (Social Security No.)
In accordance with and subject to the Hampshire Group, Limited Voluntary
Deferred Compensation Plan (the "Plan"), I hereby request to defer the receipt
of compensation for the year ending December 31, 19__ as follows:
A. Amount to be Deferred: (not less than 5%, nor more than 30%)
Salary ____ % Bonus ____%
B. Number of Qualified Stock Deferral Number Date to be
Equivalents to be Deferred: Year Shares Converted
(not more than 75%of ________ ________ __________
Qualified Stock Equivalents) ________ ________ __________
C. Notional Fund for Investment: ________ %
(not less than 40% in any one fund) ________ %
D. Form of Distribution for Salary and Bonus Deferral:
_________ Lump sum (not later than two years following Separation from
Service or December 31, 2004); or
_________ Semi-annual Installments (not to exceed 8 yrs.) _______ Yrs.
E. Period of Deferral for Salary and Bonus:
Date on which payment should be made or commence _____________
(Not later than two years following Separation from Service. Installment
distributions must commence by December 31, 2002; lump sum distributions
must be made on or before December 31, 2004.)
NOTE: Once you have selected a Period of Deferral for Salary and Bonus, it
will apply to all subsequent deferrals and may not be changed without the
specific written consent of the Committee. If you do not select a specific date,
payment will be made or commence upon Separation from Service. Deferrals of
Qualified Stock Equivalents will be paid to you in accordance with your deferral
and distribution elections made under the Stock Purchase Plan.
F. Form of Distribution for Dividends and Gains:
_________ Lump sum in current Plan Year; or
_________ Held in Participant's Deferred compensation Account less 20% (or
an amount equal to the Company's current tax rate, if greater) returned to the
Company for current taxes, until regular distribution
Initial ______
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G. Designation of Beneficiary:
I hereby designate the following as my beneficiary(ies) in the event of
my death prior to receipt of all amounts credited to my Deferred Compensation
Account, to be paid in a lump sum.
________________________________________ ______________________
Primary Beneficiary Name Social Security No.
Address ________________________________________________
________________________________________________
________________________________________ ______________________
Contingent Beneficiary Name Social Security No.
Address ________________________________________________
________________________________________________
________________________________________ ______________________
Contingent Beneficiary Name Social Security No.
Address ________________________________________________
________________________________________________
A Participant should contact his/her tax advisor prior to making an
election to defer compensation and should be and should make their deferral
decision based exclusively on the professional advise of such independent
advisor and not on the advise of any member of the Board or the Plan Committee.
I acknowledge that I have received a copy of the Plan and have read it and
understand its terms. I have consulted a professional tax advisor in respect to
my decision to defer compensation under the Plan or I am professionally
qualified to understand the financial consequences of my deferral election and
my investment election.
I hereby agree that if there is a dispute which results in a lawsuit, that
I will pay the legal expenses of the prevailing party. Further, I hereby waive
my right to a jury trial.
Further, I understand that, in the event of my death prior to receipt of
all amounts payable to me pursuant to the Plan, all amounts credited to my
Deferred Compensation Account will be paid to my designated Beneficiary in the
form of a lump sum payment at the request of the Beneficiary.
I understand that this election will remain in effect for future years
unless I deliver a new election, or a revocation of this election, to the
Committee by December 15th preceding the Plan Year I wish such new election or
revocation to be effective.
Signed at ________ this _______ day of ________ , 19__ .
__________________________________________ ___________________________
Signature of Participant Signature of Witness
Address ___________________________________________________________________
16
AMENDMENT NUMBER TWO
TO
FOURTH AMENDED AND RESTATED
LOAN AGREEMENT
Amendment No. 2 ("Second Amendment") entered into as June 1, 1997 among
HAMPSHIRE DESIGNERS, INC. (the "Borrower"), THE CHASE MANHATTAN BANK, successor
by merger to The Chase Manhattan Bank, N.A. ("Chase"), FLEET BANK, N.A.
(formerly NATWEST BANK N.A.) ("Fleet"; Chase and Fleet are individually referred
to as a "Lender" and collectively as the "Lenders") and FLEET BANK, N.A.
(formerly NATWEST BANK N.A.), in the capacity as Agent for the Lenders (the
"Agent").
WHEREAS, the Borrower and Fleet are parties to a Fourth Amended and
Restated Loan Agreement dated as of March 31 , 1996, as amended by Amendment No.
1 thereto dated September 1, 1996 (the "Agreement");
WHEREAS, Fleet and Chase are parties to a certain Participation Agreement
dated as of March 31 , 1996, pursuant to which Chase has purchased a 40%
participation in Loans made and Letters of Credit issued by Fleet under the
Agreement;
WHEREAS, the Borrower and the Lenders desire to (i) extend the maturity of
the Agreement , (ii) amend certain other provisions of the Agreement, (iii)
transform the Agreement into an agented loan agreement, converting the existing
participation agreement between Fleet and Chase to an assignment enabling Chase
to be a holder of a note and a Lender party to the Agreement, as amended hereby;
and (iv) appoint the Agent as collateral agent for the benefit of the Lenders
with respect to the Collateral; and
WHEREAS, in order to effect the foregoing, (i) the parties hereto have
agreed to enter into this Second Amendment, and (ii) each of the Agent, Fleet
and Chase shall simultaneously herewith enter into a certain Agency Agreement
dated as of March 31 , 1 997 (as it may be amended from time to time, the
"Agency Agreement"), which agreement shall set forth the terms and mechanics
governing the relationship among the Lenders and the Agent, and shall provide,
inter alia for the appointment of Fleet (A) as Agent to handle all
administrative functions (such as paying and funding agent) under the Agreement,
as amended hereby, (B) issuing bank with respect to all Letters of Credit, and
(C) collateral agent on behalf of the Lenders with respect to the Collateral.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. All capitalized terms used herein, unless otherwise defined herein, have
the same meanings provided therefor in the Agreement.
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2. Effective as of March 31, 1997, the Agreement is hereby amended as
follows:
(a) The opening paragraph on the first page of the Agreement is amended and
restated in its entirety to read as follows:
"FOURTH AMENDED AND RESTATED LOAN AGREEMENT, dated as of March 31, 1996, by
and among HAMPSHIRE DESIGNERS, INC., a Delaware corporation with a place of
business at 215 Commerce Blvd., Anderson, South Carolina 29261 (the "Borrower"),
THE CHASE MANHATTAN BANK ("Chase"), FLEET BANK, N.A. (formerly NATWEST BANK
N.A.) ("Fleet" or the "Bank"; Chase and Fleet are individually referred to as a
"Lender" and collectively as the "Lenders") and FLEET BANK, N.A. (formerly
NATWEST BANK N.A.), in its capacity as Agent for the Lenders (the "Agent")."
(b) Section 1.1A. of the Agreement is amended as follows: (i) deleting the
words "the Bank shall extend a" and substituting the words "the Lenders,
severally (but not jointly) shall extend a $25,000,000"; and (ii) adding the
following immediately after the period at the end thereof: "Such Loans shall be
made by the Lenders on a pro rata basis, calculated for each Lender based on its
Percentage (the "Percentage") set forth opposite its signature on its signature
page to the Second Amendment hereto."
(c) Section 1.lB. of the Agreement is amended and restated in its entirety
to read as follows:
"1.1B. LIMITATIONS OF LINE OF CREDIT. Except as otherwise permitted or
limited by the Lenders from time to time, the aggregate amount of (i) Loans and
Letters of Credit outstanding at any time to the Borrower shall not exceed the
lesser of $25,000,000 or the Total Borrowing Base (the "Working Capital Line
Limit"); (ii) Letters of Credit outstanding at any time issued for the account
of the Borrower (or pursuant to a third party side letter heretofore delivered
to the Agent, are available for the use of Segue), shall not exceed $8,000,000;
and (iii) Loans outstanding at any time to the Borrower shall not exceed
$20,000,000, and of the Loans outstanding at any time, as provided in Section 5,
not more than $2,500,000 of the proceeds thereof shall be available to San
Francisco Knitworks, Inc. ("Knitworks"), not more than $6,000,000 of the
proceeds thereof shall be available to Segue, and not more than $4,000,000 of
the proceeds thereof shall be available to Winona."
(d) Section 1.1C. (a) of the Agreement is amended and restated in its
entirety to read as follows:
"(a) The Loans made by each Lender shall mature, subject to earlier
acceleration, on the Maturity Date, and, together with the
Letters of Credit (and the participations therein), shall be
evidenced by, and be repayable with interest in accordance with
the terms of, a single promissory note made by the Borrower and
payable to the order of such Lender in a principal amount equal
to such Lender's Percentage of the Working Capital Line and
otherwise duly completed, in substantially the form of Exhibits A
and A-1 hereto (individually, a "Note" and collectively, the
"Notes"; it being understood that each reference in this
Agreement to the "Note" shall be deemed to mean the "Notes" to
the extent the context requires.). The Notes shall be dated as of
March 31, 1997, shall be duly executed by the Borrower and shall
replace the existing Note of the Borrower (but to the extent of
the current principal balance thereof presently outstanding shall
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<PAGE>
represent the same indebtedness). The Notes are subject to
payment and prepayment as provided in Section 2. The Borrower
hereby authorizes the Lenders to make notations of all payments
and prepayments made on account of the principal of the Loans and
interest thereon on the schedule attached to the applicable Note
and such notations shall, in the absence of manifest error, be
conclusive; provided, however, that any failure by any Lender to
make any such notation shall not limit or otherwise affect the
obligations of the Borrower hereunder or under the Notes in
respect of the Loans.
(e) Section 1.1C.(b) (v) of the Agreement is amended by deleting all of the
language therein following the words "for the account of the Borrower" on the
second line thereof and inserting the words " or its subsidiary, Segue." in lieu
thereof.
(f) Section 1.1C. of the Agreement is further amended by adding the
following paragraph (c) at the end thereof:
"(c) Each Letter of Credit shall be issued by Fleet as issuing bank, and
Fleet hereby grants to Chase a participation in each Letter of Credit pursuant
to the terms of the Agency Agreement."
(g) Except as may be otherwise specifically provided herein, all references
in the Agreement (and in each ancillary agreement (including but not limited to
the Security Agreements and the Guarantees) heretofore or hereafter delivered in
connection therewith) to the word "Bank" shall be deemed to mean the "Agent";
provided, however, that (i) each reference to (or related to) the making of
Loans by the "Bank" shall be deemed to mean the making of Loans by the
"Lenders", (ii) each reference to (or related to) the issuing of Letters of
Credit by the "Bank" shall be deemed to mean the issuance of Letters of Credit
by "Fleet" (and, to the extent the context requires, the purchase of a
participation therein by Chase), (iii) each reference to (or related to)
indebtedness or obligations owing to the "Bank" shall be deemed to mean
indebtedness or obligations owing to the "Agent and the Lenders"), and (iv) each
reference to (or related to) representations, covenants or agreements made to
the "Bank" shall be deemed to mean representations, covenants or agreements made
to the "Agent and the Lenders
(h) Sections 1.2. and 2.3. of the Agreement are amended by deleting the
number "1133" from the address therein and substituting "1185" in lieu thereof.
(i) Sections 2.4, 4.6, 4.7, 6.1, 7.3, 7.4, 7.6, 9.1(f), 9.1(k), 13.14, the
first sentence of Sections 6 and 7, the last line of Section 9. 1(c), and the
first line of Section 10 of the Agreement are amended by deleting all references
therein to "the Bank" and substituting "each Lender" in lieu thereof.
(j) The references in each of Sections 4.1., 10.6 and clause (i) of the
definition of "Effective Net Worth" in Section 12 to "December 31, 1995" are
deleted and "December 31, 1996" is substituted therefor.
(k) The proviso to Section 5 is amended and restated in its entirety to
read as follows:
";provided, however, that Borrower may downstream, to Knitworks, Segue and
Winona, up to $2.5MM, $6.0MM and $4.0MM respectively, of the proceeds of
Borrower's Loans hereunder, to be applied solely for the working capital
purposes of each, as the case may be."
3
<PAGE>
(1) Section 6 is amended by adding the following new Section 6.4 at the end
thereof:
6.4 COMPLIANCE WITH LAWS. The Borrower and each Guarantor shall comply
with all applicable laws, rules, regulations and orders to which it or its
properties or assets are subject, and duly observe all valid requirements of
governmental authorities, and all applicable statutes, rules, regulations, and
orders relating to environmental protection and to public and employee health
and safety to which it or its properties or assets are subject, except where the
failure to do so would not have a materially adverse effect on the operations,
properties taken as a whole, business or financial condition of the Borrower and
the Guarantors.
(m) Section 7.2 is amended as follows: (i) immediately following the comma
after the words "no Event of Default exists or is continuing", the parenthetical
(ii) shall be deleted and the words "both before and after giving effect
thereto,"; and (ii) the numbers "$3,000,000" and "$1,000,000" shall be deleted
and the respective numbers "$4,000,000" and "$2,500,000" are substituted in lieu
thereof.
(n) Section 7.3 is amended as follows: (i) clause (iii) thereof is amended
by deleting the number "$3,000,000" and substituting "$3,500,000" in lieu
thereof; and (ii) effective as of March 31, 1996, the period at the end of
clause (v) is deleted and the following clause (vi) and subsequent proviso are
hereby added thereto:; and (vi) $3,500,000 owing to MTB Bank for the issuance
of letters of credit; provided that all indebtedness permitted under the
foregoing clauses (i), (iii), (iv) and (vi) is and remains unsecured (except for
the indebtedness permitted under clause (vi) to the extent it is secured by
inventory imported under the letters of credit issued by MTB Bank).
(o) Section 7.4 is amended by deleting the opening clause thereof prior to
the first comma, and substituting the following language in lieu thereof: "
Except for obligations owing to the Agent and the Lenders, and for the
obligations described in clause (vi) of Section 7.3".
(p) Section 7.5 is amended as follows: (i) clause (i) thereof is amended by
deleting the number "$3,800,000" and substituting "$4,000,000" in lieu thereof;
and (ii) clause (iii) is amended by adding the following proviso at the end
thereof: "provided, that, so long as no Event of Default exists or is continuing
both before and after giving effect thereto, the Borrower may purchase up to
$2,500,000 of its outstanding stock during the term of this Agreement commencing
with the first quarter of 1997;".
(q) Section 7.8 (a) is amended by deleting the number "$25,000,000" and
substituting the following in lieu thereof: "$32,000,000".
(r) Section 7.9 is amended and restated in its entirety to read as follows:
"7.9 INVESTMENTS. Make, or suffer to exist, any Investment in any person,
except (a) Investments in: (i) obligations issued or guaranteed by the United
States of America; (ii) certificates of deposit, bankers acceptances and other
"money market instruments" issued by any bank or trust company organized under
the laws of the United States of America or any State thereof and having capital
and surplus in an aggregate amount of not less than $100,000,000 and a credit
rating of no less than "investment grade"; (iii) open market commercial paper
bearing the highest credit rating issued by Standard & Poor's Ratings Group or
by another nationally recognized credit rating firm; (iv) repurchase agreements
4
<PAGE>
entered into with any bank or trust company organized under the laws of the
United States of America or any State thereof and having capital and surplus in
an aggregate amount of not less than $100,000,000 relating to United States of
America government obligations and a credit rating of no less than "investment
grade"; (v) shares of "money market funds", each having net assets of not less
than $100,000,000; in each case maturing or being due or payable in full not
more than 180 days after the Borrower's acquisition thereof; and (b) Investments
in any person not covered by the foregoing clauses (a) (i)-(v), provided that
such Investments (i) do not exceed $4,000,000 in aggregate outstanding amount at
any time, (ii) do not result in a potential liability to the Borrower in excess
of the Investment amount, and (iii) do not otherwise conflict with any provision
of this Agreement.
(s) Remedies Paragraph (A) of Section 9.1 is amended by inserting
immediately after the words "at its option," in each of clauses (i) and (ii)
thereof the following words: "and shall, upon the written request of the
Lenders,".
(t) The words, "no Letters of Credit are outstanding," are inserted in the
opening sentences of Sections 6 and 7 immediately following the words "until the
Obligations are paid in full".
(u) Section 12 is amended as follows: (i) the definition of "Maturity Date"
is amended by deleting "March 31, 1997" and substituting "May 31 , 1998;
provided, however, that Letters of Credit may have an expiration date not later
than September 30, 1998" in lieu thereof; (ii) the definition of "Security
Agreements" is amended by (A) inserting the words "and any warehouse notices,
bailee letters and the like" immediately following the words "security
agreements" on the first line thereof, and (B) inserting the following
parenthetical immediately following the words "Section 3.2 hereof": "(and shall
include, without limitation, on a collective and cumulative basis, all of those
certain Security Agreements entered into by the Grantors, dated as of March 31,
1995 and as of March 31, 1996, as all such Security Agreements are assigned
pursuant to the terms of the Second Amendment from Fleet Bank, N.A. (formerly
NatWest Bank N.A.) to Fleet Bank, N.A., as Agent for the Lenders hereunder)";
(iii) the definition of "Effective Net Worth" is amended by inserting the words
(A)", deferred tax assets" immediately following the words "copyrights and
licenses, in clause (v) thereof, and (B) "and preferred stock" immediately
following the words "all Indebtedness" in clause (iv) thereof; (iv) the
definition of "Indebtedness" is amended by deleting therefrom the words "letters
of credit and all obligations relating thereto,"; and (v) the following new
definitions are inserted in the appropriate alphabetical order:
"Investment" - any investment in any person by means of purchase of shares
of stock or Indebtedness, capital contribution, loan, advance or guarantee, or
any acquisition of all or the part of the business or assets of any person, or
any commitment or option to make any Investment.
"Second Amendment" - shall mean that certain Amendment No. 2 to Fourth
Amended and Restated Loan Agreement dated as of March 31, 1997 among the
Borrower, the Lenders and the Agent."
5
<PAGE>
(v) Section 13 is amended as follows: (i) Sections 13.1, 13.5 and 13.10 are
amended by deleting the words "the Bank or the Participant" and "the Bank and
the Participant" each time they appear therein and substituting either the words
"the Agent or any Lender" or "the Agent and each Lender", as the context
requires; (ii) Section 13.2 is amended by deleting the words "the Bank" each
time they appear therein and substituting the words "the Agent and each Lender"
in lieu thereof; (iii) Section 13.4 is amended by deleting the words "to NatWest
Bank N.A. at 1133 Avenue of the Americas, New York, New York 10036 (Attention:
Cynthia E. Sachs)" and substituting the following in lieu thereof: "if to the
Agent or, in its capacity as a Lender, Fleet, to Fleet Bank, N.A., 1185 Avenue
of the Americas, New York, New York 10036 (Attention: Tami Cohen), or if to
Chase, to The Chase Manhattan Bank, 1411 Broadway - 5th Floor, New York, New
York 10018 (Attention: Abby Parsonnet)"; (iv) Section 13.5 is amended by
inserting immediately after the word "hereunder," the words "including the
preparation, execution and delivery, administration, interpretation and
enforcement hereof and all documents delivered in connection herewith and any
amendments, consents and waivers delivered or requested in connection herewith
or therewith, and further..."; (v) Section 13.6 of the Agreement is amended by
deleting the reference therein to "the Bank" and substituting "the Agent and
each Lender" in lieu thereof; and (vi) the signature page of the Agreement is
amended as follows: (A) the paragraph at the top of the page is amended by
deleting the words "and the Bank" and substituting the words", the Agent and
each Lender" in lieu thereof; and (B) the signature of Chase on the signature
page hereto shall be deemed to be effective so as to add Chase as a Lender and
signatory to the Agreement, as amended hereby.
(w) Exhibit 1.1C to the Agreement is hereby deleted and replaced by
Exhibits A and A-1 to this Second Amendment.
(x) Section 13.8 of the Agreement is amended by inserting the words (i)
"and no Letters of Credit or Obligations remain outstanding" before the period
at the end of the first and third sentences thereof, and (ii) "and no Letters of
Credit remain outstanding" immediately following the words "termination hereof"
in the penultimate sentence thereof.
(y) Section 13.10 of the Agreement is amended by adding the following
sentence at the end thereof:
"The Borrower hereby acknowledges that any Lender purchasing a
participation (or direct interest) in the Loans made by other Lenders (or in
interest due thereon, as the case may be) pursuant to the Sharing Section in the
Agency Agreement may exercise any and all rights of set-off, Lender's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans in the amount of such participation."
3. (a) All references in the Agreement, the Security Agreements, the
Guarantees and in each document, instrument, agreement and certificate delivered
in connection therewith to "National Westminster Bank USA" or "NatWest" or
"NatWest Bank N.A." shall be deemed to be references to "Fleet Bank, N.A."
(b) All references in the Security Agreements and the Guarantees and to the
extent applicable, each ancillary document, instrument and certificate delivered
in connection therewith to "National Westminster Bank USA" or "NatWest" or
"NatWest Bank N.A." or "Fleet Bank, N.A." as the "Bank" in whose favor each such
Security Agreement, Guaranty or other document is made, shall be deemed to be
references to "Fleet Bank, N.A., as Agent".
6
<PAGE>
4. Elevation of Chase from Participant to Lender
(a) Upon the effective date hereof, all of the Lenders' respective rights,
title, interest and obligations in and under the Participation Agreement between
Fleet and Chase dated as of March 31, 1996 (the "Participation Agreement") shall
terminate and the Participation Agreement, together with any participation
certificates or letters delivered thereunder, if any, evidencing the
participation, shall be deemed null and void and of no further force and effect
except as provided in Section 6 of the Participation Agreement (the language of
which Section 6 shall survive the termination of the Participation Agreement and
is incorporated herein by reference as if fully and completely recited herein).
Upon the effective date hereof, Fleet shall be deemed to have repurchased the
40% participation in the Debt (as defined in the Participation Agreement) in its
entirety from Chase. The amount of such repurchase shall be applied by Fleet to
(and shall constitute full consideration for) the purchase by Chase of a 40%
share of the Loans and participations in Letters of Credit and all corresponding
rights and obligations under the Agreement, as amended hereby.
(b) Accordingly, on the effective date hereof, Chase shall become a party
to the Agreement as amended hereby as a Lender, and from and after the effective
date hereof, Chase shall have all the rights and obligations of, and be subject
to the duties and restrictions applicable to, a Lender thereunder to the same
extent and with the same effect as if it had been an original signatory thereto.
Chase hereby appoints and authorizes the Agent under the Agreement, as amended
hereby, to take such action on its behalf and to exercise such powers under the
Agreement, as amended hereby, as are delegated to the Agent, and agrees that it
will perform all its obligations that by the terms of the Agreement, as amended
hereby, are required to be performed by it as a Lender.
5. Assignment to Agent.
(a) Each Grantor hereby acknowledges, confirms and agrees that Fleet has a
lien upon all Collateral heretofore granted by such Grantor to Fleet to secure
the Obligations as defined under the Agreement, and that such Grantor's
respective Security Agreement continues in full force and effect.
(b) Fleet, without representation, warranty or recourse, hereby assigns all
of its right, title and interest in and to, such liens, the Collateral and the
Security Agreements, to the Agent for the ratable benefit of the Lenders to
secure the prompt and complete payment and performance to Agent and Lenders of
the Obligations. Other than the assignment of the liens, Collateral and Security
Agreements by Fleet to the Agent for the ratable benefit of the Lenders, nothing
contained in this Second Amendment shall impair, limit or affect the liens and
Collateral heretofore granted, pledged and/or assigned by each Grantor as
security for the Obligations (all capitalized terms in this paragraph are used
as defined in the Agreement, as amended hereby).
(c) Fleet, without representation, warranty or recourse, hereby assigns all
of its right, title and interest in and to, the Guarantees, to the Agent for the
ratable benefit of the Lenders, to secure the prompt and complete payment and
performance to Agent and Lenders of the Obligations as more fully described
therein. Other than the assignment of the Guarantees by Fleet to the Agent for
the ratable benefit of the Lenders, nothing contained in this Second Amendment
shall impair, limit or affect the Guarantees made by each Guarantor as security
for the Obligations (all capitalized terms in this paragraph are used as defined
in the Agreement, as amended hereby).
7
<PAGE>
6. Representations and Warranties.
The Borrower hereby represents and warrants to the Lenders and the Agent that:
(a) Each of the representations and warranties set forth in the Agreement,
as amended hereby, is true as of the date hereof and with the same effect as
though made on the date hereof, and is hereby incorporated herein in full by
reference as if fully restated herein in its entirety.
(b) No Event of Default and no event or condition which, with the giving of
notice or lapse of time or both, would constitute such an Event of Default now
exists or would exist after giving effect to this Second Amendment.
(c) It has full power and authority to enter into, and has taken all proper
and necessary corporate action to authorize this Second Amendment.
(d) This Second Amendment has been duly executed and delivered and
constitutes the valid and legally binding obligation of the Borrower,
enforceable in accordance with its terms.
(e) Attached hereto on Exhibit B is a true and correct list, for each
Grantor, of the locations of its inventory and its principal place of business
at which the records relating to its accounts receivable are located.
(f) All of the Indebtedness, liabilities and obligations of the Borrower,
to the Lenders and the Agent now existing or hereafter arising under the terms
of the Agreement, as amended hereby, and pursuant to all other Obligations (as
such term is defined in the Agreement, as amended hereby) are and shall be fully
secured by the Borrower's prior grant to Fleet which pursuant hereto is being
assigned to the Agent, for the ratable benefit of the Lenders, pursuant to the
terms of the Security Agreements, as amended and assigned, acknowledged and
confirmed herein.
(g) The liens which have, simultaneously with the execution and delivery of
this Second Amendment, been assigned, acknowledged and confirmed constitute,
except as otherwise provided in the Security Agreements, valid first liens on
the assets covered by the Security Agreements.
7. Each of the Grantors (other than the Borrower) hereby acknowledges and
confirms that all of the Obligations are and shall be fully secured by its prior
grant to Fleet which pursuant hereto is being assigned to the Agent, for the
ratable benefit of the Lenders, pursuant to the terms of their respective
Security Agreements, as amended and assigned, acknowledged and confirmed herein.
8. This Second Amendment shall become effective as of the date hereof, upon the
satisfaction of the following conditions precedent:
(a) The Borrower, the Agent, each Lender and each Guarantor shall have
executed and delivered to the Agent a copy of this Second Amendment.
(b) The Borrower shall deliver the Notes, in the forms of Exhibits A and A-
I hereto executed by an authorized officer on behalf of the Borrower, to the
respective Lenders, and Fleet shall promptly deliver its existing original
outstanding Note to the Agent for forwarding to the Borrower, marked canceled by
Fleet, promptly after its receipt of its replacement Note.
8
<PAGE>
(c) UCC-3 Assignments shall have been executed by Fleet reflecting the
assignment of the liens, Collateral and rights of Fleet under the Security
Agreements to the Agent.
(d) Each of the Grantors and the Guarantors shall have executed and
delivered to the Agent this Second Amendment thereby (i) indicating its consent
hereto, (ii) confirming that its Security Agreement and Guaranty, respectively,
is deemed amended and assigned to run in favor of the Agent and its grant of any
security interest or other encumbrance extends to the Obligations of the
Borrower to the Agent and the Lenders including without limitation those
Obligations arising under the Agreement as amended hereby, and (iii) confirming
that such Security Agreement and Guaranty continue in full force and effect.
(e) The foregoing documents, all other documents as the Agent may require,
and all legal matters in connection with the transactions contemplated by this
Second Amendment (including the form and substance of all documents delivered in
connection with this Second Amendment) shall be satisfactory to the Agent and
its counsel.
9. Except as modified hereby, all of the terms and provisions of the Agreement
shall continue in full force and effect. This Second Amendment may be executed
in any number of counterparts, all of which taken together, shall constitute one
and the same instrument. Any signature delivered by a party by a facsimile
transmission shall be deemed to be an original signature hereto. This Second
Amendment shall be governed by and construed in accordance with the laws of the
State of New York.
10. The Borrower will promptly pay all costs of the Agent in preparing this
Second Amendment including, without limitation, the fees and expenses of counsel
to the Agent in connection with the preparation, execution and delivery,
administration, interpretation and enforcement hereof.
11. The amendments set forth herein are limited precisely as written and
shall not be deemed to (a) be a consent to or a waiver of any other term or
condition of the Agreement or any of the documents referred to therein or (b)
prejudice any right or rights which the Agent or the Lenders may now have or may
have in the future under or in connection with the Agreement or any documents
referred to therein. Whenever the Agreement is referred to in the Agreement, as
amended, or any of the instruments, agreements or other documents or papers
executed and delivered in connection therewith, it shall be deemed to mean the
Agreement as modified by this Second Amendment. All documents in place with the
Borrower and the Guarantors in connection with the Agreement shall be deemed
amended to conform to the provisions of this Second Amendment. In all other
respects, such documents remain unchanged and in full force and effect.
9
<PAGE>
IN WITNESS HEREOF, the parties hereto have caused this Second Amendment to
be duly executed and delivered by their respective duly authorized officers as
of the date first above written.
HAMPSHIRE DESIGNERS, INC.
/s/ Charles W. Clayton
- ------------------------------------------------
By: Charles W. Clayton
Vice President
Percentages FLEET BANK, N.A. (formerly NatWest Bank N.A.),
60% as a Lender and as Agent
/s/ Tami Cohen
- ------------------------------------------------
By: Tami Cohen
Vice President
THE CHASE MANHATTAN BANK, successor by
40% merger to THE CHASE MANHATTAN BANK, N.A.
/s/ Paul O'Neill
- ------------------------------------------------
By: Paul O'Neill
Vice President
Accepted and Agreed:
HAMPSHIRE GROUP, LTD.
/s/ Charles W. Clayton
- ----------------------------------------------
Name: Charles W. Clayton
Title: Vice President
GLAMOURETTE FASHION MILLS, INC.
/s/ Charles W. Clayton
- ----------------------------------------------
Name: Charles W. Clayton
Title: Vice President
SAN FRANCISCO KNITWORKS, INC.
/s/ Charles W. Clayton
- ----------------------------------------------
Name: Charles W. Clayton
Title: Vice President
SEGUE (AMERICA), LTD.
/s/ Charles W. Clayton
- ----------------------------------------------
Name: Charles W. Clayton
Title: Vice President
HAMPSHIRE DESIGNERS, INC, as guarantor of the obligations of Segue and Knitworks
/s/ Charles W. Clayton
- ----------------------------------------------
Name: Charles W. Clayton
Title: Vice President
10
<PAGE>
EXHIBIT A
FORM OF FLEET NOTE
11
<PAGE>
PROMISSORY NOTE
$15,000,000 New York, New York
as of March 31, 1997
FOR VALUE RECEIVED, Hampshire Designers, Inc., a Delaware corporation with
an office at 215 Commerce Boulevard, Anderson, South Carolina 29621 (the
"Debtor"), hereby promises to pay to the order of Fleet Bank, N.A. (formerly
NatWest Bank N.A.), a national banking association (the "Payee"), at its office
located at 1185 Avenue of the Americas, New York, New York, or at such other
place as the Payee or any holder hereof may from time to time designate, on the
Maturity Date (as defined in the Loan Agreement (as defined below), or earlier
as hereinafter referred to, the principal sum of Fifteen Million and 00/100
dollars ($15,000,000) (or such lesser principal sum as may be indicated as
outstanding on the grid sheet attached hereto), in lawful money of the United
States, and to pay interest in like money at said office or place from the ate
hereof on the unpaid principal balance hereof from time to time outstanding in
accordance with the provisions of the Loan Agreement (as defined below). In no
event shall the rate of interest hereunder exceed the maximum interest rate
permitted by applicable law.
This Note is in replacement of and substitution for the promissory note
dated as of March 31, 1996 by the Debtor, and, to the extent of any outstanding
principal amount not assigned to The Chase Manhattan Bank, evidences the same
indebtedness incurred thereunder.
This note is referred to in the Loan Agreement and is secured by one or
more Continuing General Security Agreements (as amended, modified, supplemented
or replaced from time to time, collectively, the "Security Agreement") by the
Debtor in favor of Fleet Bank, N.A., as Agent and covering certain collateral
(the "Collateral") all as more particularly described and provided therein, and
is entitled to the benefits thereof. Reference is made to the Loan Agreement and
the Security Agreement for certain rights of the Lenders (as defined therein),
including, without limitation, the right of the Lenders to accelerate the
principal balance hereunder and interest hereon upon the occurrence of an "Event
of Default" as defined in the Loan Agreement.
The Payee is hereby authorized to enter on the grid sheet attached hereto
all loans made by the Payee to the Debtor pursuant to the Fourth Amended and
Restated Loan Agreement dated as of March 31, 1996, as amended by Amendment Nos.
1 and 2 thereto (as it may be further amended, modified or supplemented from
time to time, the "Loan Agreement"; unless otherwise defined herein, capitalized
terms are used as defined in the Loan Agreement) among the Payee, The Chase
Manhattan Bank, the Agent and the Debtor and all repayments of principal
hereunder, which entries, in the absence of manifest error, shall be conclusive
and binding on the Debtor; provided, however that the failure of the Payee to
make any such entries shall not relieve the Debtor from paying any amount due
hereunder nor affect the Payee's recognition of any repayment of principal.
Whenever any payment to be made hereunder shall become due and payable on a
Saturday, Sunday or a legal holiday under the laws of the State of New York,
such payment shall be made on the next succeeding business day and such
extension of time shall in such case be included in computing interest on such
payment.
The Debtor hereby waives diligence, demand, presentment, protest and notice
of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgents,
without notice.
This Note shall be subject to payment and prepayment as provided in Section
2 of the Loan Agreement.
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<PAGE>
This Note may not be changed, modified or terminated orally, but only by an
agreement in writing signed by the party to be charged.
In the event the Payee or any holder hereof shall refer this Note to an
attorney for collection, the Debtor agrees to pay, in addition to unpaid
principal and interest, all the costs and expenses incurred in attempting or
effecting collection hereunder, including reasonable attorneys fees, whether or
not suit is instituted.
In the event of any litigation with respect to any of the Obligations or
Collateral, the Debtor waives the right to a trial by jury. The Debtor hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal court located in such State in connection with any action or
proceeding arising out of or relating to any Obligation or Collateral. In any
such litigation, the Debtor waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by certified or
registered mail directed to the Debtor at its address set forth herein. within
30 days after such mailing, the Debtor shall appear, answer or move in respect
of such summons complaint or other process. Should the Debtor fail to appear or
answer within said 30-day period, the Debtor shall be deemed in default and
judgment may be entered by the Payee against the Debtor for the amount as
demanded in any summons, complaint or other process so served. This Note, the
other Obligations and the Collateral shall be governed by and construed in
accordance with the laws of the State of New York, and shall be binding upon the
heirs, executors, administrators, successors and assigns of the Debtor and inure
to the benefit of the Payee, its successors, endorsees and assigns. If any term
or provision of this Note shall be held invalid, illegal or unenforceable the
validity of all other terms and provisions hereof shall in no way be affected
thereby.
HAMPSHIRE DESIGNERS, INC.
By: /s/ Charles W. Clayton
- -------------------------------------------
Name: Charles W. Clayton
Title: Vice President
Date: 5/27/97
13
<PAGE>
BORROWINGS AND PAYMENT OF PRINCIPAL
Date Interest Interest Amount of Amount of Unpaid Notation
Rate Period Borrowing Principal Paid Principal Made By
or Prepaid Balance
_____ ________ ________ _________ ______________ _________ _________
14
<PAGE>
EXHIBIT A-1
FORM OF CHASE NOTE
15
<PAGE>
PROMISSORY NOTE
$10,000,000 New York, New York
as of March 31, 1997
FOR VALUE RECEIVED, Hampshire Designers, Inc., a Delaware corporation with
an office at 215 Commerce Boulevard, Anderson, South Carolina 29621 (the
"Debtor"), hereby promises to pay to the order of The Chase Manhattan Bank, a
New York State banking corporation (the "Payee"), at the office of the Agent
under the Loan Agreement (as defined below) located at 1185 Avenue of the
Americas, New York, New York, or at such other place as the Payee or any holder
hereof may from time to time designate, on the Maturity Date (as defined in the
Loan Agreement as defined below), or earlier as hereinafter referred to, the
principal sum of Ten Million and 00/100 dollars ($10,000,000) (or such lesser
principal sum as may be indicated as outstanding on the grid sheet attached
hereto), in lawful money of the United States, and to pay interest in like money
at said office or place from the ate hereof on the unpaid principal balance
hereof from time to time outstanding in accordance with the provisions of the
Loan Agreement (as defined below). In no event shall the rate of interest
hereunder exceed the maximum interest rate permitted by applicable law.
This Note is referred to in the Loan Agreement and is secured by one or
more Continuing General Security Agreements (as amended, modified, supplemented
or replaced from time to time, collectively, the "Security Agreement") by the
Debtor in favor of Fleet Bank, N.A., as Agent and covering certain collateral
(the "Collateral") all as more particularly described and provided therein, and
is entitled to the benefits thereof. Reference is made to the Loan Agreement and
the Security Agreement for certain rights of the Lenders (as defined therein),
including, without limitation, the right of the Lenders to accelerate the
principal balance hereunder and interest hereon upon the occurrence of an "Event
of Default" as defined in the Loan Agreement.
The Payee is hereby authorized to enter on the grid sheet attached hereto
all loans made by the Payee to the Debtor pursuant to the Fourth Amended and
Restated Loan Agreement dated as of March 31, 1996, as amended by Amendment Nos.
1 and 2 thereto (as it may be further amended, modified or supplemented from
time to time, the "Loan Agreement"; unless otherwise defined herein, capitalized
terms are used as defined in the Loan Agreement) among the Payee, Fleet Bank,
N.A., the Agent and the Debtor and all repayments of principal hereunder, which
entries, in the absence of manifest error, shall be conclusive and binding on
the Debtor; provided, however that the failure of the Payee to make any such
entries shall not relieve the Debtor from paying any amount due hereunder nor
affect the Payee's recognition of any repayment of principal.
Whenever any payment to be made hereunder shall become due and payable on a
Saturday, Sunday or a legal holiday under the laws of the State of New York,
such payment shall be made on the next succeeding business day and such
extension of time shall in such case be included in computing interest on such
payment.
The Debtor hereby waives diligence, demand, presentment, protest and notice
of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgents,
without notice.
This Note shall be subject to payment and prepayment as provided in Section
2 of the Loan Agreement.
This Note may not be changed, modified or terminated orally, but only by an
agreement in writing signed by the party to be charged.
In the event the Payee or any holder hereof shall refer this Note to an
attorney for collection, the Debtor agrees to pay, in addition to unpaid
principal and interest, all the costs and expenses incurred in attempting or
effecting collection hereunder, including reasonable attorneys fees, whether or
not suit is instituted.
16
<PAGE>
In the event of any litigation with respect to any of the Obligations or
Collateral, the Debtor waives the right to a trial by jury. The Debtor hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal court located in such State in connection with any action or
proceeding arising out of or relating to any Obligation or Collateral. In any
such litigation, the Debtor waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by certified or
registered mail directed to the Debtor at its address set forth herein. within
30 days after such mailing, the Debtor shall appear, answer or move in respect
of such summons complaint or other process. Should the Debtor fail to appear or
answer within said 30-day period, the Debtor shall be deemed in default and
judgment may be entered by the Payee against the Debtor for the amount as
demanded in any summons, complaint or other process so served. This Note, the
other Obligations and the Collateral shall be governed by and construed in
accordance with the laws of the State of New York, and shall be binding upon the
heirs, executors, administrators, successors and assigns of the Debtor and inure
to the benefit of the Payee, its successors, endorsees and assigns. If any term
or provision of this Note shall be held invalid, illegal or unenforceable the
validity of all other terms and provisions hereof shall in no way be affected
thereby.
HAMPSHIRE DESIGNERS, INC.
By: /s/ Charles W. Clayton
- -------------------------------------------
Name: Charles W. Clayton
Title: Vice President
Date: 5/27/97
17
<PAGE>
BORROWINGS AND PAYMENT OF PRINCIPAL
Date Interest Interest Amount of Amount of Unpaid Notation
Rate Period Borrowing Principal Paid Principal Made By
or Prepaid Balance
_____ ________ ________ _________ ______________ _________ _________
18
<PAGE>
EXHIBIT B
PRINCIPAL OFFICE AND COLLATERAL LOCATIONS
Hampshire Group, Limited Mary Jane Marcasiano
215 Commerce Blvd. 55 Avenue of the Americas
Anderson, SC 29621 New York, NY 10013
San Francisco Knitworks Glamourette Fashion Mills-Plant No. 1
365 Alabama St. 113 KM 10.9
San Francisco, CA 94110 Quebradillas, PR 00678
Natalie Knitting Mills Glamourette Fashion Mills-Plant No. 2
Rouse Industrial Park Road No. 2 KM 100.9
P.O. Box 722 Quebradillas, PR 00678
Chilhowie, VA 24319
Hampshire Hosiery - Plant No. 2
Designers Knitting Mills 103 Cross Street
305 New Court Road Spruce Pine, NC 28777
Anderson, SC 29621
Hampshire Hosiery - Plant No. 1
Segue Ltd. US Hwy. 19-E
c/o Gilbert West Inc. Spruce Pine, NC 28777
4940 Triggs Street
Commerce, CA 90022
19
MERCHANTS NATIONAL BANK
102 East 3rd Street
Post Office Box 248
Winona, Minnesota 55987-0248
(507) 457-1100
"Lender"
COMMERCIAL/AGRICULTURAL REVOLVING OR
DRAW NOTE-VARIABLE RATE
Borrower: Hampshire Group, Limited
Address: 215 Commerce Blvd.
P. O. Box 2667
Anderson, SC 29621
Identification No.: 06-0967107
Officer Initials: 007
Interest Rate: Variable
Principal Amount/Credit Limit: $3,000,000.00
Funding/Agreement Date: 03/24/97
Maturity Date: Demand
Customer Number:
Loan Number: 994267298-01
PROMISE TO PAY For value received, Borrower promises to pay to the order of
Lender indicated above the principal amount of THREE MILLION AND NO/100 Dollars
($3,000,000.00) or, if less, the aggregate unpaid principal amount of all loans
or advances made by the Lender to the Borrower, plus interest on the unpaid
principal balance at the rate and in the manner described below. All amounts
received by Lender shall be applied first to late payment charges and expenses,
then to accrued interest, and then to principal or in any other order as
determined by Lender, in Lender's sole discretion, as permitted by law.
INTEREST RATE: This Note has a variable rate feature. Interest on the Note
may change from time to time if the Index Rate identified below changes.
Interest shall be computed on the basis of 360 days per year. Interest on this
Note shall be calculated at a variable rate equal to * percent ( * %) per annum
over the Index Rate. The initial Index Rate is currently * percent (* %) per
annum. The initial interest rate on this Note shall be * percent (* %) per
annum. Any change in the interest rate resulting from a change in the Index Rate
will be effective on: SEE ATTACHED INTEREST RATE OPTION SCHEDULE
INDEX RATE: The Index Rate for this Note shall be: WALL STREET PRIME OR
LIBOR RATE PLUS 1.95% - SEE ATTACHED INTEREST RATE OPTION SCHEDULE
MINIMUM RATE/MAXIMUM RATE: The minimum interest rate on this Note shall be
n/a percent (n/a%) per annum. The maximum interest rate on this Note shall not
exceed TWENTY-ONE AND 750/1000 percent ( 21.750 %) per annum or the maximum
interest rate Lender is permitted to charge by law, whichever is less.
POST-MATURITY RATE: X If checked, this loan is for a binding commitment of
at least $100,000.00 and after maturity, due to scheduled maturity or
acceleration, past due amounts shall bear interest at the lesser of: THE
INTEREST RATE AT THE TIME OF MATURITY, or the maximum interest rate Lender is
permitted to charge by law.
1
<PAGE>
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according
to the following schedule:
INTEREST ONLY PAYMENTS BEGINNING APRIL 15, 1997 AND CONTINUING AT MONTHLY
TIME INTERVALS THEREAFTER. A FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS
ACCRUED INTEREST IS DUE AND PAYABLE ON APRIL 15, 1998.
All payments will be made to Lender at its address described above and in
lawful currency of the United States of America.
RENEWAL: If checked X this Note is a renewal of loan number 994267298 , and
is not in payment of that Note.
SECURITY: To secure the payment and performance of obligations incurred
under this Note, Borrower grants Lender a security interest in and pledges and
assigns to Lender all of Borrower's rights, title, and interest, in all monies,
instruments, savings, checking and other deposit accounts of Borrower's,
(excluding IRA, Keogh and trust accounts and deposits subject to tax penalties
if so assigned) that are now or in the future in Lender's custody or control.
Upon default, and to the extent permitted by applicable law, Lender may exercise
any or all of its right or remedies as a secured party with respect to such
property which rights and remedies shall be in addition to all other rights and
remedies granted to Lender including, without limitation, Lender's common law
right of set off. [ ] If checked, the obligations under this Note are also
secured by a lien and/or security interest in the property described in the
documents executed in connection with this Note as well as any other property
designated as security now or in the future.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. If this Note contains more than one installment, all prepayments
will be credited as determined by Lender and as permitted by law. If this Note
is prepaid in full, there will be: X No prepayment penalty. ______ A prepayment
penalty of ____% of the principal prepaid.
LATE PAYMENT CHARGE: If a payment is received more than n/a days late,
Borrower will be charged a late payment charge of n/a% of the unpaid late
installment.
REVOLVING OR DRAW FEATURE: X This Note possesses a revolving feature, Upon
satisfaction of the conditions set forth in this Note, Borrower shall be
entitled to borrow up to the full principal amount of the Note and to repay and
reborrow from time to time during the term of this Note. _____ This Note
possesses a draw feature. Upon satisfaction of the conditions set forth in this
Note, Borrower shall be entitled to make one or more draws under this Note. The
aggregate amount of such draws shall not exceed the full principal amount of
this Note.
Lender shall maintain a record of the amounts loaned to and repaid by
Borrower under this Note. The aggregate unpaid principal amount sown on such
record shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on this Note. The Lender's failure to record the date and amount of
any loan or advance shall not limit or otherwise affect the obligations of the
Borrower under this Note to repay the principal amount of the loans or advances
together with all interest accruing thereon. Lender shall not be obligated to
provide Borrower with a copy of the record on a periodic basis. Borrower shall
be entitled to inspect or obtain a copy of the record during Lender's business
hours.
2
<PAGE>
*CONDITIONS FOR ADVANCES: If there is no default under this Note, Borrower
shall be entitled to borrow monies or make draws under this Note (subject to the
limitations described above) under the following conditions:
THE CUSTOMER HAS THE FOLLOWING INTEREST RATE OPTIONS PER ADVANCE:
1. WALL STREET PRIME FLOATING
2. LIBOR RATE ONE MONTH RATE AS QUOTED IN THE WALL STREET JOURNAL, PLUS 1.95%.
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO
THE TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE
SIDE. BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
NOTE DATE: MARCH 24, 1997
BORROWER: HAMPSHIRE GROUP, LIMITED BORROWER:
/s/ Charles W. Clayton, Vice President
- ----------------------------------------- --------------------------------
BORROWER: BORROWER:
- ----------------------------------------- --------------------------------
BORROWER: BORROWER:
- ----------------------------------------- --------------------------------
BORROWER: BORROWER:
- ----------------------------------------- --------------------------------
TERMS AND CONDITIONS
1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower or any guarantor or any other third party: (a) fails to make any
payment on this Note or any other indebtedness to Lender when due: (b) fails to
perform any obligation or breaches any warranty or covenant to Lender contained
in this Note or any other present or future written agreement regarding this or
any indebtedness of Borrower to Lender; (c) provides or causes any false or
misleading signature or representation to be provided to Lender: (d) allows the
collateral securing this Note (if any) to be lost, stolen, destroyed, damaged in
any material respect, or subjected to seizure or confiscation; (e) permits the
entry or service of any garnishment, judgment, tax levy, attachment or lien
against Borrower, any guarantor, or any of their property or the Collateral; (f)
dies, becomes legally incompetent, is dissolved or terminated, ceases to operate
its business, becomes insolvent, makes an assignment for the benefit of
creditors, fails to pay debts as they become due, or becomes the subject of any
bankruptcy, insolvency or debtor rehabilitation proceeding: or (g) causes Lender
to deem itself insecure for any reason, or Lender, for any reason, in good faith
deems itself insecure.
3
<PAGE>
2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note,
Lender will be entitled to exercise one or more of the following remedies
without notice or demand (except as required by law): (a) to cease making
additional advances under this Note: (b) to declare the principal amount plus
accrued interest under this Note and all other present and future obligations of
Borrower immediately due and payable in full; (c) to collect the outstanding
obligations of Borrower with or without resorting to judicial process; (d) to
take possession of any collateral in any manner permitted by law; (e) to require
Borrower to deliver and make available to Lender any collateral at a place
reasonably convenient to Borrower and Lender; (f) to sell, lease or otherwise
dispose of any collateral and collect any deficiency balance with or without
resorting to legal process; (g) to set-off Borrower's obligations against any
amounts due to Borrower including, but not limited to monies, instruments, and
deposit accounts maintained with Lender; and (h) to exercise all other rights
available to Lender under any other written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and in
any order. Lender's remedies under this paragraph are in addition to those
available at common law, including, but not limited to, the right of set-off.
3. DEMAND FEATURE: If this Note contains a demand feature, Lender's right
to demand payment, at any time, and from time to time, shall be in Lender's sole
and absolute discretion, whether or not any default has occurred.
4. FINANCIAL INFORMATION: Borrower will provide Lender with current
financial statements and other financial information (including, but not limited
to, balance sheets and profit and loss statements) upon request.
5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.
6. SEVERABILITY AND INTEREST LIMITATION: If any provision of this Note is
invalid, illegal or unenforceable, the validity, legality. and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Notwithstanding anything contained in this Note to the contrary, in no event
shall interest accrue under this Note, before or after maturity, at a rate in
excess of the highest rate permitted by applicable law, and if interest
(including any charge or fee held to be interest by a court of competent
jurisdiction) in excess thereof be paid, any excess shall constitute a payment
of, and be applied to, the principal balance hereof, and if the principal
balance has been fully paid, then such interest shall be repaid to the Borrower.
7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower in any manner.
8. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
9. APPLICABLE LAW: This Note shall be governed by the laws of the state
indicated in Lender's address. Borrower consents to the jurisdiction and venue
of any court located in the state indicated in Lender's address in the event of
any legal proceeding pertaining to the negotiation, execution, performance or
4
<PAGE>
enforcement of any term or condition contained in this Note or any related loan
document and agrees not to commence or seek to remove such legal proceeding in
or to a different court.
10. COLLECTION COSTS: If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Note, Borrower agrees
to pay Lender's attorney's fees, to the extent permitted by applicable law, and
collection costs.
11. RETURNED CHECK: if a check for payment is returned to Lender for any
reason, Lender will charge an additional fee of $15.00.
12. MISCELLANEOUS: This Note is being executed for commercial/agricultural
purposes. Borrower and Lender agree that time is of the essence. Borrower waives
presentment, demand for payment, notice of dishonor and protest. If Lender
obtains a judgment for any amount due under this Note interest will accrue on
the judgment at the judgment rate of interest permitted by law. All references
to Borrower in this Note shall include all of the parties signing this Note. If
there is more than one Borrower, their obligations will be joint and several.
This Note and any related documents represent the complete and integrated
understanding between Borrower and Lender pertaining to the terms and conditions
of those documents.
13. JURY TRIAL WAIVER: BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL
SECURING THIS NOTE.
14. ADDITIONAL TERMS: PURPOSE: RENEW LINE OF CREDIT
5
<PAGE>
INTEREST RATE OPTION SCHEDULE
INTEREST RATE OPTION 1:
Interest shall be calculated at a variable rate equal to no/100 percent
(0%) per annum over the Index Rate. The initial Index Rate on this note shall be
eight and 50/100 percent (8.50%) per annum. Any change in the Index Rate will be
effective on the date the Index Rate changes.
INTEREST RATE OPTION 2:
The Index Rate is the LIBOR (London Inderbank Offering Rate) one month rate
as quoted in the Wall Street Journal. Interest shall be calculated at a variable
rate equal to 195/100 percent (1.95%) per annum over the Index rate. The initial
Index Rate on this note shall be 5.71875% per annum. Any change in the interest
rate resulting from a change in the Index Rate will be effective on the first
business day of each month as published in the Wall Street Journal.
6
<TABLE>
EXHIBIT 11
HAMPSHIRE GROUP, LIMITED
STATEMENT RE COMPUTATION OF LOSS PER SHARE
(in thousands, except per share data)
<CAPTION>
Three months ended Six months ended
------------------ ----------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Weighted average number of common and
common equivalent shares outstanding . 3,851 3,755 3,851 3,753
===== ===== ===== =====
Net loss ............................... ($235) ($597) ($496) ($1,123)
Less - preferred dividend requirements (42) (45) (86) (93)
Net loss applicable to common stock .. ($277) ($642) ($582) ($1,216)
===== ===== ===== =======
Net loss per share applicable to
common stock........................ ($0.07) ($0.17) ($0.15) ($0.32)
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENT OF
INCOME FILED AS A PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTELRY REPORT ON FORM 10-Q
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-28-1997
<EXCHANGE-RATE> 1
<CASH> 659
<SECURITIES> 560
<RECEIVABLES> 19,431
<ALLOWANCES> (3,069)
<INVENTORY> 39,314
<CURRENT-ASSETS> 58,870
<PP&E> 35,223
<DEPRECIATION> (21,601)
<TOTAL-ASSETS> 81,579
<CURRENT-LIABILITIES> 26,409
<BONDS> 5,745
3,089
0
<COMMON> 392
<OTHER-SE> 45,944
<TOTAL-LIABILITY-AND-EQUITY> 81,579
<SALES> 45,077
<TOTAL-REVENUES> 45,077
<CGS> 36,012
<TOTAL-COSTS> 36,012
<OTHER-EXPENSES> 9,412
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (432)
<INCOME-PRETAX> (618)
<INCOME-TAX> 122
<INCOME-CONTINUING> (496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (496)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
