<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TROPICAL SPORTSWEAR INT'L CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
FLORIDA 2325 59-3424305
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4902 WEST WATERS AVENUE
TAMPA, FLORIDA 33634-1302
(813) 249-4900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
MICHAEL KAGAN
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
TROPICAL SPORTSWEAR INT'L CORPORATION
4902 WEST WATERS AVENUE
TAMPA, FLORIDA 33634-1302
(813) 249-4900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
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<C> <C>
MARTIN A. TRABER, ESQ. STEPHEN A. OPLER, ESQ.
TODD B. PFISTER, ESQ. MARK F. MCELREATH, ESQ.
FOLEY & LARDNER ALSTON & BIRD LLP
100 NORTH TAMPA STREET, SUITE 2700 ONE ATLANTIC CENTER
TAMPA, FLORIDA 33602 1201 WEST PEACHTREE STREET
(813) 229-2300 ATLANTA, GEORGIA 30309-3424
(404) 881-7000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] ____
---------------------
CALCULATION OF REGISTRATION FEE
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==============================================================================================================
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, $.01 par value................................ $70,000,000 $21,213.00
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED AUGUST 15, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
4,000,000 Shares
[LOGO] TROPICAL SPORTSWEAR INT'L CORPORATION
Common Stock
- --------------------------------------------------------------------------------
Of the 4,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby, 1,600,000 shares are being sold by Tropical Sportswear
Int'l Corporation (the "Company") and 2,400,000 shares are being sold by certain
selling shareholders of the Company (the "Selling Shareholders"). The Company
will not receive any proceeds from the sale of shares of Common Stock by the
Selling Shareholders. See "Principal and Selling Shareholders."
Prior to this offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price for the Common
Stock will be between $13.00 and $15.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
The Company has applied for inclusion of the Common Stock in The Nasdaq Stock
Market's National Market (the "Nasdaq National Market") under the symbol "TSIC."
SEE "RISK FACTORS" ON PAGES 6 TO 11 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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==================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(3).......................... $ $ $ $
==================================================================================================================
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(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $320,000
and expenses payable by the Selling Shareholders estimated to be $480,000.
(3) The Selling Shareholders have granted the several Underwriters 30-day
over-allotment options to purchase, in the aggregate, up to 600,000
additional shares of Common Stock on the same terms and conditions set forth
above. If all such additional shares are purchased by the Underwriters, the
total Price to Public will be $ , the total Underwriting Discounts
and Commissions will be $ , the total Proceeds to Company will be
$ and the total Proceeds to Selling Shareholders will be
$ . See "Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Shareholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about , 1997.
PRUDENTIAL SECURITIES INCORPORATED OPPENHEIMER & CO., INC.
, 1997
<PAGE> 3
[Cover of Prospectus: Background picture containing close-up of several pairs of
white pants, one of which bears the TSI logo over the back pocket.]
[Cover Flap: Picture of mens' casual shirt bearing the Banana Joe(TM) label. Two
snapshots, one of a PC computer and several pairs of pants and another of the
Company's cutting facility with several stacks of pants in the foreground, are
inlaid on the left-hand and right-hand sides of the shirt. The TSI logo is at
the top of the page.]
[Inside Spread Left: Picture of two men wearing casual dress wear standing next
to a seated woman. The TSI logo is above the picture and the Bill Blass(R),
Michelangelo Buonarroti(R), Bay to Bay(R) and Generra(R) labels surround the
picture.]
[Inside Spread Right: Picture of two men wearing casual wear standing beside an
off-road vehicle containing a woman reading a map. The TSI logo is above the
picture and the Bay to Bay(R), Flyers(TM), Bill Blass(R), and Authentic Chino
Casuals(R) labels border the other three sides of the picture.]
[Inside Back Cover: Picture of man and dog sitting on the front of a truck. The
man is wearing blue jeans and a tee-shirt. The TSI logo is above the picture and
the Bill Blass(R), Texas Jeans(TM) and Two Pepper(TM) jeanswear labels are on
the lower left-hand and right-hand sides of the picture].
[Back Cover: Faint background picture of a man and a woman wearing casual
outdoor wear, with tags for Tahoe River Outfitters(TM) and U.S. Trading
Company(TM) in the lower left-hand corner and upper right-hand corner,
respectively. The TSI patch logo is set forth in the upper right-hand corner of
the page.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS, AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus (i) reflects the consummation of a tax-free
reorganization of the Company (the "Reorganization") to become effective prior
to the closing of this offering (the "Offering") and (ii) assumes that the
Underwriters' over-allotment options will not be exercised. See
"Business -- Reorganization."
THE COMPANY
The Company produces high quality casual and dress men's apparel and
provides major apparel retailers with comprehensive brand management programs.
The Company's programs currently feature pants, shorts and denim jeans that are
marketed under Company brands, private brands and licensed brand names. The
Company distinguishes itself from traditional private label manufacturers by
providing apparel retailers with customer, product and market analysis, apparel
design, merchandising, and inventory forecasting. The Company markets its
apparel through all major retail distribution channels, including department and
specialty stores, catalog retailers, discount merchants and wholesale clubs. Key
customers include Dayton Hudson, Federated Department Stores (including
Bloomingdale's and Macy's), JC Penney, May Co., Nordstrom, Phillips-Van Heusen,
Price/Costco and Sam's Club (a division of Wal-Mart). The Company's mission is
to provide total customer satisfaction through a combination of quality, value
and technology. Management believes that the Company provides its customers with
high quality apparel and services supported by a commitment to advanced
information, design and production technologies, and unique merchandising and
operating strategies.
The Company's apparel line focuses on basic, recurring styles that the
Company believes are less susceptible to fashion obsolescence and less seasonal
in nature than fashion styles. All of the Company's products are derived from
six production platforms, or "chassis," each of which incorporates basic
features requiring distinct manufacturing processes, such as inclusion of an
elastic waistband, jeansband or button-flap pockets. The six basic chassis are
modified to produce separate styles through variations in cut, fabric and
finish. This process enables the Company to achieve manufacturing simplicity and
efficiencies while producing a wide variety of products through distinctions in
color and style. All products receive customer-specific labeling and packaging
upon receipt of confirmation of a customer order. As a result, a common SKU
(i.e. style, color and size), differentiated only by labeling and packaging, can
be sold by both a high-end department store and a mass merchant at different
retail price points. This merchandising strategy offers quick-response execution
of customer orders without the associated risk of carrying customer-specific
inventories. During the fiscal year ended September 28, 1996 ("Fiscal 1996"),
fifteen styles marketed under approximately 80 labels accounted for over 90% of
the Company's net sales. These labels include Company brands such as Bay to
Bay(R) and Banana Joe(TM), private brands such as Flyers(TM) and Flying A(R) and
licensed brand names such as Bill Blass(R) and Generra(R).
The Company manages the manufacture of substantially all of its products
utilizing its approximately 300,000 square foot state-of-the-art fabric cutting,
product labeling and distribution facilities located in Tampa, Florida, and
independent garment assembly contractors located primarily in the Dominican
Republic. The Company also sources certain finished garments from independent
manufacturers located in Mexico, the Pacific Rim and the Middle East. The
Company believes that its commitment to the use of independent contractors in
the Dominican Republic anticipated the trend in the industry toward the use of
the Caribbean and Mexico for production. The Company believes the establishment
of its name and reputation in this area gives it a distinct competitive
advantage. The Company utilizes advanced technology in all aspects of its
business, including apparel design, materials sourcing, production planning and
logistics, customer order entry and sales demand forecasting. The Company's
dedication to technology produces greater efficiencies throughout the production
process and results in high-quality products, low-cost production and enhanced
customer order execution.
3
<PAGE> 5
The Company seeks to become "The Leader in Private Brand"(TM) by being the
leading marketer of private brand sportswear in its product categories across
all retail channels. The key elements of the Company's business strategy are:
(i) a focus on providing private brand programs to major retailers; (ii) a
commitment to superior quality operations; (iii) an adherence to standard
operating procedures; (iv) the application of advanced technology; (v) a focus
on core production chassis; (vi) the use of low-cost production; (vii) a
commitment to total customer satisfaction; and (viii) the minimization of
inventory risk. The Company intends to grow sales and earnings through both
internal growth and acquisitions. The Company believes that it is well
positioned to take advantage of current industry trends including: (i) greater
demand for high quality private brand apparel; (ii) a shift toward consumer
casual dress; (iii) an inflow of manufacturers into the Dominican Republic in
order to take advantage of relatively inexpensive labor, better quality
production, and shorter transportation periods; and (iv) a trend among retailers
to outsource their inventory management while still demanding quick response
time for their customers.
Over the past five years, the Company has experienced significant financial
growth. The Company's net sales increased from $66.7 million in the fiscal year
ended October 3, 1992 ("Fiscal 1992") to $117.4 million in Fiscal 1996, a
compound annual growth rate of 15.2%. Net sales through the first thirty-nine
weeks of the fiscal year ending September 27, 1997 ("Fiscal 1997") increased
33.5% to $115.6 million from $86.6 million for the comparable period in Fiscal
1996. Net income increased at a compound annual growth rate of 21.2% from $2.4
million in Fiscal 1992 to $5.2 million in Fiscal 1996. Net income through the
first thirty-nine weeks of Fiscal 1997 was $6.2 million as compared to $3.5
million for the comparable period in Fiscal 1996.
The Company was founded in 1927. Pursuant to a tax-free reorganization
consummated prior to the closing of the Offering, the Company was merged into a
newly-formed corporation organized under the laws of the State of Florida on
January 27, 1997. See "Business -- Reorganization." The Company's executive
offices are located at 4902 West Waters Avenue, Tampa, Florida 33634-1302, and
its telephone number is (813) 249-4900.
THE OFFERING
Common Stock Offered by the Company......... 1,600,000 shares
Common Stock Offered by the Selling
Shareholders................................ 2,400,000 shares
Common Stock to be Outstanding after the
Offering.................................... 7,600,000 shares(1)
Use of Proceeds............................. To redeem the Company's
outstanding preferred stock and
to repay outstanding
indebtedness. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol...... TSIC
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(1) Excludes (i) 60,000 shares of Common Stock issuable upon exercise of stock
options granted in December 1996 and January 1997, (ii) 500,000 shares of
Common Stock reserved for issuance under the Company's 1997 Employee Stock
Option Plan, pursuant to which options to purchase 300,000 shares will be
granted immediately upon the completion of the Offering, and (iii) 200,000
shares of Common Stock reserved for issuance under the Company's 1997
Non-Employee Director Stock Option Plan, pursuant to which options to
purchase 60,000 shares will be granted immediately upon the completion of
the Offering. See "Management -- Stock Option Plans."
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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THIRTY-NINE WEEKS
FISCAL YEAR ENDED ENDED
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OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1992(1) 1993 1994 1995 1996 1996 1997
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STATEMENT OF INCOME DATA:
Net sales................. $ 66,683 $ 74,271 $ 100,359 $ 110,064 $ 117,355 $ 86,593 $ 115,608
Gross profit.............. 13,354 16,545 24,682 22,206 26,223 18,626 27,281
Selling, general and
administrative
expenses................ 9,886 11,071 14,291 15,060 15,189 10,754 14,745
Operating income.......... 3,468 5,474 10,391 7,146 11,034 7,872 12,536
Interest expense.......... 1,530 1,644 2,115 3,160 2,498 1,880 2,263
Income before income
taxes................... 1,125 2,314 8,591 2,985 7,916 5,359 9,685
Net income(2)............. $ 2,397 $ 1,368 $ 4,978 $ 2,160 $ 5,171 $ 3,527 $ 6,167
Net income per share(2)... $ 0.40 $ 0.23 $ 0.83 $ 0.36 $ 0.86 $ 0.59 $ 1.03
Weighted average number of
shares used in the
calculation(3).......... 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000
</TABLE>
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JUNE 28, 1997
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ACTUAL AS ADJUSTED(4)
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BALANCE SHEET DATA:
Working capital............................................. $33,904 $33,904
Total assets................................................ 71,412 71,412
Long-term debt and obligations under capital leases,
excluding current maturities.............................. 29,740 13,091
Total shareholders' equity.................................. 24,549 41,198
</TABLE>
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(1) Operating results for Fiscal 1992 contain 53 weeks. All other fiscal years
contain 52 weeks.
(2) Net income for the fiscal year ended October 3, 1992 includes the $350,000
($0.06 per share) positive impact of a change in accounting method for
income taxes.
(3) Computed on the basis described in Notes to Consolidated Financial
Statements.
(4) As adjusted to give effect to the sale of the 1,600,000 shares of Common
Stock being offered by the Company hereby (assuming an initial public
offering price of $14.00 per share) after deducting underwriting discounts
and commissions and the estimated Offering expenses payable by the Company
and the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
5
<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, as well as the other information set forth in this Prospectus, in
evaluating an investment in the Common Stock offered hereby.
This Prospectus contains statements that constitute forward-looking
statements. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers with respect to, among other things: (i)
the Company's backlog and sales; (ii) potential acquisitions by the Company;
(iii) the use of the proceeds of the Offering; (iv) the Company's financing
plans; (v) trends affecting the Company's financial condition or results of
operations; (vi) the Company's growth strategy, operating strategy and financing
strategy; (vii) the declaration and payment of dividends; (viii) regulatory
matters affecting the Company; and (ix) the outcome of certain litigation
involving the Company. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward looking statements as a result of various
factors. The accompanying information contained in this Prospectus, including,
without limitation, the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," identifies important factors that could cause such
differences.
RELIANCE ON KEY CUSTOMERS. Sales to the Company's five largest customers
represented approximately 69.4%, 72.4% and 66.6% of net sales during the
thirty-nine weeks ended June 28, 1997 and the fiscal years ended September 28,
1996 ("Fiscal 1996") and September 30, 1995 ("Fiscal 1995"), respectively. Sales
to Wal-Mart Stores, Inc. ("Wal-Mart"), including its Sam's Clubs Division
("Sam's Club"), Costco Companies, Inc. ("Price/Costco") and Phillips-Van Heusen
Corporation ("Phillips-Van Heusen") accounted for approximately 30.5%, 17.7% and
9.9%, respectively, of net sales during the thirty-nine weeks ended June 28,
1997. Sales to Wal-Mart (including Sam's Club), Price/Costco and Phillips-Van
Heusen accounted for approximately 25.9%, 16.6% and 13.8%, respectively, of net
sales during Fiscal 1996. Sales to Phillips-Van Heusen, Wal-Mart (including
Sam's Club), JC Penney Company, Inc. ("JC Penney") and Price/Costco accounted
for approximately 18.3%, 15.4%, 15.3% and 13.9%, respectively, of net sales
during Fiscal 1995. The Company does not have long-term contracts with any of
its customers, and sales to customers generally occur on an order-by-order
basis. These customer orders are subject to certain rights of cancellation and
rescheduling by the customer or by the Company. Accordingly, the level of
unfilled orders at any given time may not be indicative of eventual actual
shipments. In addition, the Company's inability to timely fulfill customer
orders may cause it to cancel or reschedule such orders, which may materially
and adversely affect the Company's relationships with its customers. A decrease
in business from, or the loss of, any of its major customers could have a
material adverse effect on the Company's business and results of operations. The
Company's future financial condition and results of operations will depend to a
significant extent upon the commercial success of its major customers and their
continued willingness to purchase the Company's products. Any significant
downturn in the business of the Company's major customers or their commitment to
the Company's programs could cause those customers to reduce or discontinue
their purchases from the Company, which could have a material adverse effect on
the Company's business and results of operations. See "Business -- Customers and
Customer Service."
APPAREL INDUSTRY. The apparel industry has historically been subject to
cyclical variations, and a recession in the general economy or uncertainties
regarding future economic prospects that affect consumer spending habits could
have a material adverse effect on the Company's business and results of
operations. The Company believes that its success depends in large part upon its
ability to anticipate, gauge and respond to changing consumer demands and
fashion trends in a timely manner. Failure by the Company to identify and
respond appropriately to changing consumer demands and fashion trends could
adversely affect consumer acceptance of the Company's products and may have a
material adverse effect on the Company's business and results of operations.
Additionally, apparel retailers have experienced significant changes and
difficulties over the past several years, including consolidation of ownership,
increased centralization of buying decisions, restructurings, bankruptcies and
liquidations. During past years, various apparel retailers, including some of
the Company's customers, have experienced financial problems that have increased
the risk of extending
6
<PAGE> 8
credit to such retailers. Financial problems with respect to any of the
Company's customers could cause the Company to reduce or discontinue business
with such customers or require the Company to assume more credit risk relating
to such customers' receivables, either of which could have a material adverse
effect on the Company's business and results of operations. See
"Business -- Industry."
COMPETITION. The apparel industry is highly competitive and the Company
competes with numerous apparel manufacturers, including brand name and private
label producers, and retailers that have established, or may establish, internal
product development and sourcing capabilities. The Company's products also
compete with a substantial number of designer and non-designer product lines.
Many of the Company's competitors and potential competitors have greater
financial, manufacturing and distribution resources than the Company. Although
factors may differ by product line, the Company believes that it competes
primarily on the basis of quality of design and workmanship, price and customer
service. Any increased competition from manufacturers or retailers, or any
increased success by existing competition, could result in reductions in unit
sales or prices, or both, which could have a material adverse effect on the
Company's business and results of operations.
DEPENDENCE ON INTELLECTUAL PROPERTY; RISK OF INFRINGEMENT CLAIMS. The
Company uses a number of trademarks, certain of which the Company has registered
with the United States Patent and Trademark Office. The Company believes that
its registered and common law trademarks and other proprietary rights are
important to its success and its competitive position. The Company experiences,
from time to time, challenges to the use or registration of certain of its
trademarks. A major manufacturer and retailer of sportswear recently brought
suit against the Company alleging, among other things, that a Company trademark
and the trade dress used in the labeling and packaging of certain of the
Company's products infringe upon certain of such third party's proprietary
trademark and trade dress rights. Although the outcome of the litigation cannot
be determined at this time, the Company intends to vigorously defend against the
alleged infringement. Nevertheless, in an attempt to limit the Company's
liability, if any, with respect to such alleged infringement, the Company has
unilaterally altered the trademark and trade dress which are the subject of this
lawsuit. There can be no assurance, however, that the modifications made to the
subject trademark and trade dress do not infringe upon such third party's rights
or that such third party will not continue to seek to recover damages and
attorneys' fees from the Company with respect to the use of this modified
trademark and trade dress, or with respect to the trademark and trade dress
prior to modification. See "Business -- Legal Proceedings." Additionally, there
can be no assurance that the Company's other trademarks and proprietary rights
do not or will not violate the proprietary rights of others, that they would be
upheld if challenged or that the Company would not be prevented, in such an
event, from using its trademarks or other proprietary rights, any of which could
have a material adverse effect on the Company's business and results of
operations. In the event of litigation arising from alleged infringement, any
claiming party may have significantly greater resources than the Company to
pursue litigation of such claims, and the Company could be forced to incur
substantial costs to defend legal actions taken against it relating to the
Company's use of trademarks or other proprietary rights. In addition, if any
such third party is successful in challenging the Company's trademarks or use of
trade dress, the Company could be forced to pay significant damages or required
to enter into expensive royalty or licensing arrangements with such third party.
Accordingly, the Company's involvement in such litigation could have a material
adverse effect on the Company's business and results of operations.
In addition, the Company uses various trademarks owned by other companies
in the promotion, distribution and sale of its products. It uses these
trademarks pursuant to licensing agreements. There can be no assurance that any
of the licensing agreements will not be terminated or will be renewed in the
future. In the event the Company is unable to use the trademarks of such other
companies in the future, the Company's business and results of operations may be
materially and adversely effected. See "Business -- Trademarks and Licenses."
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on its executive
officers, in particular William W. Compton, the Company's Chairman of the Board
and Chief Executive Officer, Richard J. Domino, the Company's President, and
Michael Kagan, the Company's Executive Vice President, Chief Financial Officer,
Treasurer and Secretary. These executives are each a party to an employment
agreement with the Company. The employment agreement for each of Messrs. Compton
and Kagan expires on the fifth
7
<PAGE> 9
anniversary of the Offering. The employment agreement for Mr. Domino expires on
the third anniversary of the Offering. The Company maintains $5.0 million in key
man insurance on the life of Mr. Compton and $2.5 million in key man insurance
on the life of each of Messrs. Domino and Kagan. The Company's continued success
is also dependent upon its ability to attract and retain qualified management,
administrative and sales personnel to support its future growth. The loss of the
services of any of these individuals, or the inability to attract and retain
other qualified personnel, could have a material adverse effect on the Company's
business and results of operation. See "Management."
RAPID EXPANSION OF THE BUSINESS. During the past five years, the Company
has experienced rapid growth in sales, expansion of its product offerings and an
increase in its customer base. Any future growth will require increasing amounts
of working capital and financing and may place a significant strain on the
Company's management and on its financial resources and information processing
systems. The failure to recruit additional staff and key personnel, to obtain
additional financing, to maintain or upgrade its information systems, or to
respond effectively to other difficulties associated with rapid expansion could
have a material adverse effect on the Company's business and results of
operations. The Company depends on independent manufacturers for the assembly
and/or production of all of its products. Accordingly, the Company's ability to
expand is dependent upon the capacity and availability of suitable independent
manufacturers. The Company's ability to continue to grow in the future will also
be dependent upon its ability to expand into new product lines and categories,
such as men's shirts. No assurances can be given that such efforts, if made,
will be successful. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Growth Strategy."
PRICE AND AVAILABILITY OF RAW MATERIALS. The principal fabrics used in the
Company's apparel consist of cotton, wool, synthetic and blended fabrics. These
fabrics, with the quality the Company requires, are available from a limited
number of suppliers. The prices paid by the Company for such fabrics are largely
dependent on the market prices for the raw materials used to produce them,
namely cotton, wool, rayon and polyester. The price and availability of such raw
materials and, in turn, the fabrics used in the Company's apparel may fluctuate
significantly, depending on a variety of factors, including crop yields and
weather patterns. In the event that the Company is required to obtain fabrics
from sources other than its current suppliers, the quality of available fabrics
also may fluctuate significantly. Fluctuations in the price, availability and
quality of the fabrics or other raw materials used by the Company could have a
material adverse effect on the Company's cost of sales or its ability to meet
its customers' demands and, as a result, could have a material adverse effect on
the Company's business and results of operations. There also can be no assurance
that the Company will be able to pass along to its customers all, or any portion
of, any future increases in the prices paid for the fabrics used in the
manufacture of the Company's products. See "Business -- Operations."
DEPENDENCE ON INDEPENDENT MANUFACTURERS. The Company utilizes independent
manufacturers to assemble or produce all of its products. The Company is
dependent upon the ability of its independent manufacturers to adequately
finance the assembly or production of goods ordered and maintain sufficient
manufacturing capacity. The use of independent manufacturers to assemble or
produce finished goods and the resulting lack of direct control could subject
the Company to difficulty in obtaining timely delivery of products of acceptable
quality. The Company does not have contracts with any of its independent
manufacturers. Alternative manufacturers, if available, may not be able to
provide the Company with products or services of a comparable quality at an
acceptable price. There can be no assurance that there will not be disruption in
the supply of the Company's products from its independent manufacturers or, in
the event of a disruption, that the Company would be able to locate suitable
alternative manufacturers, and therefore the failure of any independent
manufacturer to perform or the loss of any independent manufacturer could have a
material adverse effect on the Company's business and results of operations. See
"Business -- Operations."
INTERNATIONAL SOURCING. During Fiscal 1996 and the thirty-nine weeks ended
June 28, 1997, all of the Company's products were assembled or produced by
independent manufacturers operating outside the United States. During Fiscal
1996, approximately 88.2%, 10.2% and 1.6% of the Company's products were
assembled or produced in the Dominican Republic, Mexico and Costa Rica,
respectively. During the thirty-nine weeks ended June 28, 1997, approximately
81.6%, 12.5% and 5.9% of the Company's products were assembled or
8
<PAGE> 10
produced in the Dominican Republic, Mexico and the Pacific Rim, respectively. In
addition, the Company is beginning to use independent suppliers in the Middle
East and other regions of the world. Because all of the Company's products are
assembled or produced abroad, the Company is required to order products further
in advance to account for additional transportation time. If the Company
overestimates customer demand, it may be required to hold goods in inventory
which it may be unable to sell at historical margins; if it underestimates
customer demand, the Company may not be able to fill orders on a timely basis.
The Company currently uses approximately 25 manufacturers in the Dominican
Republic and has, in effect, exclusive arrangements with 12 of them. In several
cases, the manufacturer's operating facility carries the Company's name and/or
contains equipment that is owned by the Company. In addition, the Company
previously has loaned funds to certain developers and operators of manufacturing
facilities in the Dominican Republic and may guarantee loans to such developers
from time to time. The Company's involvement with and support of these
manufacturers could result in claims against the Company from vendors, employees
or other customers of such manufacturers. Any such claims could have a material
adverse effect on the Company's business and results of operations.
International manufacturing is subject to a number of other risks including
work stoppages, transportation delays and interruptions, delays and
interruptions resulting from natural disasters, political instability, economic
disruptions, the imposition of tariffs and import and export controls, changes
in governmental policies and other events. Any such adverse change could result
in loss of revenues, customer orders and customer goodwill and could have a
material adverse effect on the Company's business and results of operations.
Although the Company has historically contracted to assemble or produce
substantially all of its goods in U.S. dollars, reductions in the value of the
U.S. dollar could increase the prices that the Company pays for its products,
which increases the Company may not be able to pass on to its customers and,
therefore, could have a material adverse effect on the Company's business and
results of operations. See "Business -- Operations."
IMPORTS AND IMPORT RESTRICTIONS. Substantially all of the Company's import
operations are subject to the terms of bilateral textile agreements between the
United States and a number of countries, which agreements impose quotas on the
amount and type of goods that can be imported into the United States from these
countries. These agreements allow the United States to impose restraints at any
time on the importation of certain categories of merchandise. The Company's
imported products are also subject to United States customs duties, which in
Fiscal 1996 and the thirty-nine weeks ended June 28, 1997, represented
approximately 8.0% and 6.6%, respectively, of the Company's cost of sales. The
United States and the countries in which the Company's products are manufactured
may from time to time impose new quotas, duties, tariffs or other restrictions
or adversely adjust presently prevailing quotas, duties or tariffs. In addition,
the United States may impose penalties on imported products that are found to
have been manufactured by convict, forced or indentured labor and may withdraw
the "most favored nation" status of certain countries, which could result in the
imposition of reduced quotas and/or higher tariffs on products imported from
such countries. Any such new or adjusted restrictions could have a material
adverse effect on the Company's business and results of operations. See
"Business -- Imports and Import Regulations."
CONTROL BY PRINCIPAL SHAREHOLDERS; ANTI-TAKEOVER CONSIDERATIONS. After the
Offering, William W. Compton, the Company's Chairman of the Board and Chief
Executive Officer, and Michael Kagan, the Company's Executive President and
Chief Financial Officer, will own or control approximately 12.3% and 7.4%,
respectively, of the outstanding shares of Common Stock. Moreover, Accel, S.A.
de C.V., a Mexican corporation ("Accel"), will own approximately 21.1% of the
outstanding shares of the Common Stock and Shakale Internacional, S.A., a
corporation organized under the laws of Costa Rica ("Shakale"), will own
approximately 6.6% of the outstanding shares of the Common Stock (0.0%, assuming
that the Underwriters' over-allotment options are exercised in full). In
addition, pursuant to the Company's Amended and Restated Articles of
Incorporation, Accel currently has the right to nominate two persons to stand
for election to the Company's eight-member Board of Directors, and Shakale and
separate family limited partnerships controlled by Messrs. Compton and Kagan,
respectively, each currently has the right to nominate one person to stand for
election to the Company's eight-member Board of Directors. (In the event the
Underwriters' over-allotment options are exercised to such an extent that
Shakale's ownership falls below 5.0% of the outstanding Common
9
<PAGE> 11
Stock, the Company's Board of Directors will be reduced automatically to seven
members and Shakale will not have any special nomination rights. As a result of
such reduction in the size of the Board, the seat presently occupied by David
Garza would cease to exist and, hence, Mr. Garza would no longer be a director
of the Company.) Moreover, Accel, Shakale and Messrs. Compton and Kagan and
their respective family limited partnerships have entered into a shareholder's
agreement pursuant to which, among other things, each of them has agreed to vote
the shares of Common Stock owned or controlled thereby for the election as
directors of the nominees of the other parties pursuant to their special
nomination rights. In light of the foregoing, such persons will effectively have
the ability to significantly influence the election of the Company's directors
and the outcome of all other issues submitted to the Company's shareholders.
Such persons, together with the staggered Board of Directors and the
anti-takeover effects of certain provisions contained in the Florida Business
Corporation Act and in the Company's Articles of Incorporation and Bylaws
(including, without limitation, the ability of the Board of Directors of the
Company to issue shares of Preferred Stock and to fix the rights and preferences
thereof), also may have the effect of delaying, deferring or preventing an
unsolicited change in the control of the Company, which may adversely affect the
market price of the Common Stock or the ability of shareholders to participate
in a transaction in which they might otherwise receive a premium for their
shares. See "Management," "Principal and Selling Shareholders" and "Description
of Capital Stock."
CREDIT FACILITIES. The Company needs significant working capital to
purchase inventory and finance accounts receivable and, consistent with industry
practice, is often required to post letters of credit when placing an order with
certain international manufacturers. Currently, a substantial portion of the
Company's working capital requirements are met through a $48 million credit
agreement with a bank (the "Credit Agreement"), which expires on September 30,
1998. Although the Company intends to use the proceeds that it receives from the
Offering to reduce the outstanding indebtedness under the Credit Agreement, the
Company's inability to extend or renew the Credit Agreement, or its inability to
secure similar credit arrangements or letters of credit in the future, could
have a material adverse effect on the Company's business or results of
operations. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE ON FACTORING OF ACCOUNTS RECEIVABLE. Historically, the Company
has sold substantially all of its trade accounts receivable to a factor which
assumes virtually all of the credit risk with respect to collection of such
accounts. The factor pays the Company the receivable amount upon the earlier of
(i) receipt by the factor of payment from the Company's customer or (ii) 120
days past the due date for such payment. The factor approves the credit of the
Company's customers prior to sale. If the factor disapproves a sale to a
customer and the Company decides to proceed with the sale, the Company bears the
credit risk. The factoring agreement expires on September 30, 1998. The
expiration of such agreement could have a material adverse effect on the
Company's business and results of operations if it could not be replaced
promptly. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
SEASONALITY. Historically, the Company's business has been seasonal, with
slightly higher sales and income in the second and fourth quarters, just prior
to and during the two peak retail selling seasons for spring and fall
merchandise. In addition, certain of the Company's products, such as shorts and
corduroy pants, tend to be seasonal in nature. In the event such products
represent a greater percentage of the Company's sales in the future, the
seasonality of the Company's sales may be increased. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Seasonality."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have a total of 7,600,000 shares of Common Stock outstanding. Of
these shares, the 4,000,000 shares of Common Stock offered hereby (4,600,000
shares if the Underwriters' over-allotment options are exercised in full) will
be freely tradeable without restriction or registration under the Securities Act
by persons other than "affiliates" of the Company, as defined under the
Securities Act. The remaining shares of Common Stock outstanding will be
"restricted securities" as that term is defined by Rule 144 as promulgated under
the Securities Act. Upon completion of the Offering, the Company will have
options outstanding to purchase 420,000 shares of Common Stock. In addition,
options for the purchase of 200,000 and 140,000 additional shares will remain
10
<PAGE> 12
available for issuance under the Company's Employee Stock Option Plan and
Non-Employee Director Stock Option Plan, respectively. See "Management -- Stock
Option Plans" and "Shares Eligible for Future Sale."
Under Rule 144 (and subject to the conditions thereof, including volume
limitations), all 3,600,000 restricted shares (3,000,000 restricted shares if
the Underwriters' over-allotment options are exercised in full) will become
eligible for sale after the Offering. However, all of such restricted shares are
also subject to lockup restrictions as described below. The holders of these
shares, which include certain of the Company's executive officers and directors,
have agreed that they will not, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise dispose of or transfer (or announce any offer, sale, offer
of sale, contract of sale, pledge, grant of any option to purchase or other
disposition or transfer of) any shares of Common Stock or any other securities
convertible into, or exercisable or exchangeable for, shares of Common Stock or
other similar securities of the Company, currently beneficially owned or
hereafter acquired by such holders, for a period of 180 days from the date of
this Prospectus. After such 180-day period, this restriction will expire and
shares permitted to be sold under Rule 144 would be eligible for sale.
Prudential Securities Incorporated, on behalf of the Underwriters, may, in its
sole discretion, at any time and without prior notice, release all or any
portion of the shares of Common Stock subject to such agreements.
Prior to the Offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of additional shares of Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities. See "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE. Prior to the Offering,
there has been no public market for the Common Stock, and there can be no
assurance that an active trading market will develop or continue following the
Offering, or that the market price of the Common Stock will not decline below
the initial public offering price. The initial public offering price for the
Common Stock will be determined by negotiations among the Company, the Selling
Shareholders and the Underwriters based on several factors, and may not be
indicative of the market price for the Common Stock after the Offering. See
"Underwriting." The Company believes that various factors unrelated to the
Company's performance, such as general economic conditions, changes or
volatility in the financial markets and changing market conditions in the
apparel industry, as well as various factors related to the Company's
performance, such as quarterly or annual variations in the Company's financial
results, could cause the market price of the Common Stock to fluctuate
substantially.
DILUTION. Purchasers of the Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the initial public offering price set forth on the cover of
this Prospectus. Assuming an initial offering price of $14.00 per share, such
dilution to new investors will be $8.65 per share, while the net tangible book
value of the shares of Common Stock owned by the existing shareholders will
increase by $1.99 per share. See "Dilution."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,600,000 shares of Common
Stock offered by the Company hereby (assuming an initial public offering price
of $14.00 per share), after deducting the underwriting discounts and commissions
and estimated Offering expenses payable by the Company, are estimated to be
approximately $20.5 million. The Company will not receive any proceeds from the
sale of shares of Common Stock by the Selling Shareholders. See "Principal and
Selling Shareholders."
The Company intends to use the net proceeds of the Offering as follows: (a)
approximately $3.9 million to redeem the Company's outstanding preferred stock;
and (b) the remaining approximately $16.6 million to repay amounts outstanding
under the $40 million revolving credit line (the "Facility") constituting part
of the Credit Agreement. The Credit Agreement, including the Facility, expires
on September 30, 1998. As of August 2, 1997, $17.3 million was outstanding under
the Facility, and the Company had approximately $11.5 million available for
additional borrowings. The interest rate on unpaid principal amounts outstanding
under the Facility is prime plus 0.50% or LIBOR plus 2.75%. Pending such uses,
the net proceeds will be invested in short-term, investment grade,
interest-bearing securities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Growth Strategy."
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on the Common Stock
since 1989. The Company currently anticipates that all of its earnings will be
retained for development and expansion of the Company's business and does not
anticipate declaring or paying any cash dividends in the foreseeable future.
Additionally, financial covenants in the Credit Agreement prohibit the payment
of cash dividends.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 28, 1997, and (ii) as adjusted to reflect the receipt and application of
the proceeds (after deducting the underwriting discounts and commissions and
estimated Offering expenses payable by the Company) from the issuance and sale
by the Company of 1,600,000 shares of Common Stock in the Offering (assuming an
initial public offering price of $14.00 per share). See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 28, 1997
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current installments of long-term debt and obligations under
capital leases(1)......................................... $ 1,511 $ 1,511
Long-term debt and obligations under capital leases, less
current installments(1)................................... 29,740 13,091
Shareholders' equity:
Preferred Stock, $.01 par value; 10,000,000 shares
authorized; 38,630 shares issued and outstanding; no
shares issued and outstanding as adjusted(2)........... 3,863 --
Common Stock, $.01 par value; 50,000,000 shares
authorized; 6,000,000 shares issued and outstanding;
7,600,000 shares issued and outstanding as
adjusted(2)(3)......................................... 60 76
Additional paid-in capital................................ -- 20,496
Retained earnings......................................... 20,626 20,626
------- -------
Total shareholders' equity........................ 24,549 41,198
------- -------
Total capitalization.............................. $55,800 $55,800
======= =======
</TABLE>
- ---------------
(1) See Notes 6 and 7 of Notes to Consolidated Financial Statements.
(2) See Note 13 of Notes to Consolidated Financial Statements.
(3) Excludes an aggregate of 60,000 shares of Common Stock issuable upon the
exercise of outstanding stock options and an aggregate of 360,000 shares of
Common Stock issuable upon stock options to be granted upon the completion
of the Offering. See "Management -- Stock Option Plans."
13
<PAGE> 15
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of their Common Stock
from the initial public offering price. The net tangible book value of the
Company (excluding outstanding preferred stock) as of June 28, 1997 was $20.2
million, or $3.36 per share of Common Stock. Net tangible book value per share
represents the amount of the Company's tangible net worth divided by the total
number of shares of Common Stock outstanding as of June 28, 1997. After giving
effect to the sale of 1,600,000 shares of Common Stock by the Company in the
Offering (assuming an initial public offering price of $14.00 per share) and the
application of the net proceeds therefrom (after deduction of underwriting
discounts and commissions and estimated Offering expenses payable by the
Company), the pro forma net tangible book value of the Company as of June 28,
1997 would have been $40.7 million or $5.35 per share of Common Stock. This
represents an immediate increase in net tangible book value of $1.99 per share
to existing shareholders and an immediate dilution of $8.65 per share to
purchasers of shares in the Offering. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $14.00
Net tangible book value per common share before the
Offering............................................... $3.36
Increase attributable to new investors.................... 1.99
Pro forma net tangible book value after the Offering........ 5.35
------
Dilution in net tangible book value to new investors........ $ 8.65
======
</TABLE>
The following table sets forth on a pro forma basis as of June 28, 1997 the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the Company's
existing shareholders and to be paid by new investors in the Offering (assuming
an initial public offering price of $14.00 per share) and before deduction of
underwriting discounts and commissions and estimated Offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 6,000,000 78.9% $ 1,000 --% $.00017
New investors..................... 1,600,000 21.1 22,400,000 100.0 $ 14.00
--------- ----- ----------- -----
Total............................. 7,600,000 100.0% $22,401,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Does not reflect the sale of 2,400,000 shares of Common Stock by the Selling
Shareholders in the Offering and does not include 60,000 shares of Common
Stock issuable upon the exercise of outstanding stock options and an
aggregate of 360,000 shares of Common Stock issuable upon the exercise of
stock options to be granted upon the completion of the Offering. See
"Management -- Stock Option Plans."
Sales by the Selling Shareholders in the Offering will reduce the number of
shares held by existing shareholders to 3,600,000, or approximately 47.4% of the
total number of shares of Common Stock outstanding after the Offering, and will
increase the number of shares held by new investors to 4,000,000, or
approximately 52.6% of the total number of shares of Common Stock outstanding
after the Offering.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA)
The following table sets forth selected income statement, operating and
balance sheet data of the Company. The selected income statement and balance
sheet data for each of the five fiscal years in the period ended September 28,
1996 are derived from the audited financial statements of the Company, which in
the case of the three most recent fiscal years appear elsewhere herein. The
financial statements for each of the five years in the period ended September
28, 1996 were audited by Ernst & Young LLP. The selected income statement and
balance sheet data for the thirty-nine weeks ended June 29, 1996 and June 28,
1997 are derived from unaudited financial statements prepared by the Company. In
the opinion of management, the unaudited financial data for the thirty-nine
weeks ended June 29, 1996 and June 28, 1997 include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
such data. Operating results for the thirty-nine weeks ended June 28, 1997 are
not necessarily indicative of the results that may be expected for the entire
fiscal year. The data presented below should be read in conjunction with the
consolidated financial statements of the Company, including the related notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-NINE WEEKS ENDED
-------------------------------------------------------------------- ---------------------------
OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1992(1) 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................... $ 66,683 $ 74,271 $ 100,359 $ 110,064 $ 117,355 $ 86,593 $ 115,608
Cost of goods sold.......... 53,329 57,726 75,677 87,858 91,132 67,967 88,327
--------- --------- --------- --------- --------- --------- ---------
Gross profit................ 13,354 16,545 24,682 22,206 26,223 18,626 27,281
Selling, general and
administrative expenses... 9,886 11,071 14,291 15,060 15,189 10,754 14,745
--------- --------- --------- --------- --------- --------- ---------
Operating income............ 3,468 5,474 10,391 7,146 11,034 7,872 12,536
Interest expense............ 1,530 1,644 2,115 3,160 2,498 1,880 2,263
Factoring expense........... 501 463 668 708 373 409 589
Other, net.................. 312 1,053 (983) 293 247 224 (1)
--------- --------- --------- --------- --------- --------- ---------
Income before income
taxes..................... 1,125 2,314 8,591 2,985 7,916 5,359 9,685
Provision for income
taxes..................... (922) 946 3,613 825 2,745 1,832 3,518
Change in accounting
method.................... 350 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ 2,397 $ 1,368 $ 4,978 $ 2,160 $ 5,171 $ 3,527 $ 6,167
========= ========= ========= ========= ========= ========= =========
Net income per common
share(2).................. $ 0.40 $ 0.23 $ 0.83 $ 0.36 $ 0.86 $ 0.59 $ 1.03
========= ========= ========= ========= ========= ========= =========
Weighted average number of
shares used in the
calculation............... 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000
SELECTED OPERATING DATA:
Average number of days in
the production cycle...... * * 64 52 43 42 39
Average inventory days...... 96 115 103 94 90 80 65
Net sales per employee
(000's)................... $ 101 $ 97 $ 112 $ 116 $ 151 $ 111 $ 177
Customer returns (000's).... $ 2,276 $ 770 $ 1,998 $ 2,258 $ 1,230 $ 888 $ 1,627
Units shipped, net
(000's)................... 6,273 6,154 8,973 10,400 10,467 8,090 10,491
</TABLE>
<TABLE>
<CAPTION>
JUNE 28, 1997
OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, ------------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)
---------- ---------- ---------- ------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......... $ 5,130 $ 4,714 $23,600 $31,655 $25,483 $33,904 $33,904
Total assets............. 21,763 41,522 52,023 55,237 63,415 71,412 71,412
Long-term debt and
obligations under
capital leases,
excluding current
maturities............. 2,790 1,677 20,973 27,175 24,162 29,740 13,091
Total shareholders'
equity................. 4,705 6,073 11,050 13,211 18,382 24,549 41,198
</TABLE>
- ---------------
* Not available
(1) Operating results for Fiscal 1992 contain 53 weeks. All other fiscal years
contain 52 weeks.
(2) Computed on the basis described in Notes to Consolidated Financial
Statements.
(3) As adjusted to give effect to the sale of the 1,600,000 shares of Common
Stock being offered by the Company hereby (assuming an initial public
offering price of $14.00 per share) after deducting underwriting discounts
and commissions and the estimated Offering expenses payable by the Company
and the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company manages the production of substantially all of its products
utilizing Company-owned facilities in Tampa, Florida and independent assembly
manufacturers located in the Dominican Republic and Mexico. The Company also
sources a limited volume of finished goods from independent suppliers located in
Mexico, the Pacific Rim and the Middle East. With respect to goods assembled by
independent manufacturers, the Company purchases and inventories all of its raw
materials and cuts all of its fabric in its Tampa cutting facility based on
customer orders. The Company ships cut fabric parts and other product components
via common carrier to the Dominican Republic and Mexico. Independent
manufacturers assemble components into finished garments (except for labeling
and packaging) and perform certain finishing processes. The Company pays its
independent manufacturers based on a specified unit price for actual
first-quality units produced. Accordingly, a substantial portion of the
Company's production labor and overhead is variable. The Company has no material
contractual arrangements with its manufacturers. The Company ships assembled
goods from the Dominican Republic and Mexico to its Tampa distribution center
via common carrier. Upon receipt of a customer order confirmation, the Company
attaches designated labels and point-of-sale packaging and ships orders F.O.B.
Tampa.
The apparel retail market experienced a down cycle during Fiscal 1995 and
the first thirteen weeks of Fiscal 1996, with a recovery beginning in the second
thirteen weeks of Fiscal 1996. The Company observed a weakening apparel market
beginning in October 1994 and, as a result, began to reduce its inventories. In
Fiscal 1995 and the first thirteen weeks of Fiscal 1996, the Company received a
significant number of order cancellations. In an effort to control the cost of
rising inventories and in anticipation of a continued weak retail market,
management decided to offer products at amounts below normal selling prices and,
in some cases, below cost. In addition, the Company recorded markdown reserves
for remaining excess inventory. The result of the weak retail market was only
small sales increases from the fiscal year ended October 1, 1994 ("Fiscal 1994")
to Fiscal 1995 and from Fiscal 1995 to Fiscal 1996. In addition, the Company's
gross margin weakened in Fiscal 1995 but improved slightly in Fiscal 1996. The
Company believes that historical market conditions have resumed during 1997.
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the Company's
consolidated financial statements and notes thereto.
16
<PAGE> 18
RESULTS OF OPERATION
The following table sets forth, for the periods indicated, selected items
in the Company's consolidated statements of operations expressed as a percentage
of net sales:
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
FISCAL YEAR ENDED ENDED
------------------------------------------ -------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................... 75.4 79.8 77.7 78.5 76.4
----- ----- ----- ----- -----
Gross profit......................... 24.6 20.2 22.3 21.5 23.6
Selling, general and administrative
expenses........................... 14.2 13.7 12.9 12.4 12.8
----- ----- ----- ----- -----
Operating income..................... 10.4 6.5 9.4 9.1 10.8
Interest expense..................... 2.1 2.9 2.1 2.2 2.0
Factoring expense.................... 0.7 0.6 0.3 0.5 0.5
Other (income) expense, net.......... (1.0) 0.3 0.3 0.2 --
----- ----- ----- ----- -----
Income before income taxes........... 8.6 2.7 6.7 6.2 8.3
Provision for income taxes........... 3.6 0.7 2.3 2.1 3.0
----- ----- ----- ----- -----
Net income................. 5.0% 2.0% 4.4% 4.1% 5.3%
===== ===== ===== ===== =====
</TABLE>
THIRTY-NINE WEEKS ENDED JUNE 28, 1997 COMPARED TO THIRTY-NINE WEEKS ENDED JUNE
29, 1996
Net Sales. Net sales through the first thirty-nine weeks of Fiscal 1997
were $115.6 million as compared to net sales of $86.6 million for the comparable
period in Fiscal 1996, an increase of $29.0 million, or 33.5%. This increase was
attributable to a 29.7% increase in the number of units shipped and a 3.0%
increase in the average selling price per unit. These increases were primarily
the result of increased market penetration and brand acceptance coupled with the
recovery of the soft retail market during the second quarter of Fiscal 1996.
Gross Profit. Gross profit through the first thirty-nine weeks of 1997 was
$27.3 million, or 23.6% of net sales, as compared with $18.6 million, or 21.5%
of net sales, during the comparable period in Fiscal 1996. The increase in gross
profit percentage resulted primarily from a significant reduction in the level
of markdowns that were required during the first thirteen weeks of Fiscal 1996.
During the first several weeks of Fiscal 1996, a significant number of orders
were canceled due to the soft retail market experienced by most major retailers.
In an effort to control the cost of rising inventories and in anticipation of a
continued weak retail market, the Company sold products below its normal selling
prices and in some cases below its cost. Also, the Company recorded additional
markdown allowances for any remaining excess inventory. During the latter part
of Fiscal 1996, the retail market strengthened and the level of markdowns
decreased significantly. This trend continued during the first thirty-nine weeks
of Fiscal 1997 and the gross profit percentage returned to historical levels.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses through the first thirty-nine weeks of Fiscal 1997 were
$14.7 million, or 12.8% of net sales, as compared to $10.8 million, or 12.4% of
net sales, during the comparable period in Fiscal 1996. The increase in selling,
general and administrative expenses was principally due to increases in
distribution center labor and overhead cost, including increased amortization
and depreciation related to the Company's new distribution center and other
general and administrative expenses incurred as the Company's business grew.
Additionally, accrued incentive based compensation for key employees was $1.3
million during the thirty-nine weeks ended June 28, 1997 as compared to $500,000
during the comparable period in Fiscal 1996. The increase in selling, general
and administrative expenses as a percentage of net sales was primarily due to
increases in the provision for doubtful accounts and consulting fees related to
improvements in the Company's information systems.
Interest Expense. Interest expense through the first thirty-nine weeks of
Fiscal 1997 was $2.3 million as compared to $1.9 million for the comparable
period in Fiscal 1996. The increase in interest expense was the result of higher
average outstanding borrowings, offset in part by a lower average interest rate
due to a re-negotiation of the Credit Agreement in November 1996.
17
<PAGE> 19
Income Taxes. The Company's effective income tax rate through the first
thirty-nine weeks of Fiscal 1997 was 36.3% as compared with 34.2% in the
comparable period in Fiscal 1996. The lower effective rate in the Fiscal 1996
period was due to the Company receiving the remaining benefit of previously
unrecognized losses of an international subsidiary which was closed in Fiscal
1995.
Net Income. As a result of the above factors, net income was $6.2 million
through the first thirty-nine weeks of Fiscal 1997 as compared to $3.5 million
for the comparable period in Fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales for Fiscal 1996 were $117.4 million as compared to
net sales of $110.1 million for Fiscal 1995, an increase of $7.3 million, or
6.6%. The increase was primarily the result of a 6.0% increase in the average
selling price per unit. During the final thirty-nine weeks of Fiscal 1996, the
retail market strengthened and the Company was able to significantly reduce the
level of markdown and close out sales experienced during Fiscal 1995 and the
first thirteen weeks of Fiscal 1996.
Gross Profit. Gross profit for Fiscal 1996 was $26.2 million, or 22.3% of
net sales, as compared to $22.2 million, or 20.2% of net sales, during Fiscal
1995. The increase in gross profit percentage was primarily attributable to an
increase in the average selling price per unit without a corresponding increase
in the average cost per unit. As a result of a progressive weakening of the
retail market in 1995, the Company sold selected products at selling prices
below normal sales prices. These markdowns were concentrated in the first
thirteen weeks of Fiscal 1996 when significant amounts of orders were canceled.
In limited cases, to control the costs of rising inventories, the Company sold
products at prices that were below its costs. Also, the Company recorded
additional markdown allowances for any remaining excess inventory. In addition,
during Fiscal 1995, the Company incurred an increased amount of labor expense,
including significant overtime, due to a shift toward smaller individual orders
from customers. During the latter part of Fiscal 1996, order sizes returned to
historical levels, which increased the average order size and led to a favorable
impact on gross profit.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for Fiscal 1996 were $15.2 million, or 12.9% of net
sales, as compared to $15.1 million, or 13.7% of net sales, for Fiscal 1995.
Selling, general and administrative expenses as a percentage of net sales
decreased slightly due to the Company's ability to leverage certain fixed
overhead costs against the increased level of sales.
Interest Expense. Interest expense for Fiscal 1996 was $2.5 million as
compared to $3.2 million for Fiscal 1995. The decrease was due principally to
lower average outstanding borrowings resulting from the reduction of working
capital requirements, caused primarily by the reduction in average inventory
levels throughout the year.
Factoring Expense. Factoring expense for Fiscal 1996 was $373,000, or 0.3%
of net sales, as compared to $708,000, or 0.6% of net sales, for Fiscal 1995.
The decrease was primarily the result of a more favorable factoring arrangement
entered into in October 1995.
Income Taxes. The Company's effective income tax rate for Fiscal 1996 was
34.7% as compared with 27.6% for Fiscal 1995. The lower effective rate during
Fiscal 1995 was primarily the result of the Company receiving the benefit of
previously unrecognized losses of an international subsidiary. Management made
the decision to cease the operation of this subsidiary in September 1995. Prior
to this decision, these losses were not deductible for U.S. income tax purposes.
Net Income. As a result of the above factors, net income for Fiscal 1996
was $5.2 million, or 4.4% of net sales, as compared to $2.2 million, or 2.0% of
net sales, for Fiscal 1995.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales for Fiscal 1995 were $110.1 million as compared to
$100.4 million for Fiscal 1994, an increase of $9.7 million, or 9.7%. The
increase was primarily due to a 15.9% increase in the number of units shipped
which was offset, in part, by a 5.4% decrease in the average selling price per
unit. Management believes that the increase in the number of units shipped was
due to a combination of increased market
18
<PAGE> 20
penetration due to increased brand recognition, a trend of major retailers
towards private label products as well as a shift in consumer preferences
towards a more casual lifestyle. The Company also experienced a significant
increase in the level of product sales at prices below its normal selling
prices, which in turn caused a decrease in the average selling price per unit.
Gross Profit. Gross profit for Fiscal 1995 was $22.2 million, or 20.2% of
net sales, as compared to $24.7 million, or 24.6% of net sales, during Fiscal
1994. A progressive weakening of the retail market in 1995 had an adverse impact
on gross profit by forcing the Company to offer more products at prices below
normal selling prices. In an effort to control the cost of rising inventories
and in anticipation of a continued weak retail market, the Company sold selected
products below its cost. Also, the Company recorded additional markdown
allowances for any excess inventory. In addition, during Fiscal 1995, the
Company incurred an increased amount of labor expense, including significant
overtime, due to a shift toward smaller individual orders from customers.
Selling, General and Administrative Expense. Selling, general and
administrative expenses for Fiscal 1995 were $15.1 million, or 13.7% of net
sales, as compared to $14.3 million, or 14.2% of net sales, for Fiscal 1994. The
increase in selling, general and administrative expenses was principally due to
increased expenses in the areas of distribution center labor, overhead cost, and
other general and administrative expenses due to the increased level of sales.
Selling, general and administrative expenses as a percentage of net sales
decreased slightly due to the Company's ability to leverage certain fixed
overhead costs against the increased level of sales.
Interest Expense. Interest expense for Fiscal 1995 was $3.2 million as
compared to $2.1 million for Fiscal 1994. The increase was due to higher average
outstanding borrowings due to the increase in working capital requirements,
primarily caused by the increase in inventory levels.
Other (Income) Expense. Other expense for Fiscal 1995 was $293,000, or
0.3% of net sales, as compared to other income of $983,000, or (1.0%) of net
sales, for Fiscal 1994. The approximately $1.3 million change from Fiscal 1994
to Fiscal 1995 was primarily the result of a $1.1 million gain recorded in
Fiscal 1994 related to the settlement of arbitration proceedings related to the
original purchase of the Company.
Income Taxes. The Company's effective income tax rate for Fiscal 1995 was
27.6% as compared with 42.1% for Fiscal 1994. During Fiscal 1994, the Company's
effective tax rate was negatively impacted by the non-deductible nature of
certain expenses related to the arbitration settlement. During Fiscal 1995, the
Company's effective rate was positively impacted by its ability to deduct
previously unrecognized losses of its international subsidiary.
Net Income. As a result of the above factors, net income for Fiscal 1995
was $2.2 million, or 2.0% of net sales, as compared to $5.0 million, or 5.0% of
net sales, for Fiscal 1994.
QUARTERLY RESULTS
The following tables set forth, for the periods indicated, certain items in
the Company's income statement in millions of dollars and as a percentage of net
sales:
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
------------------------------------- ---------------------------------------
DEC. 31 APRIL 1 JULY 1 SEPT. 30 DEC. 30 MARCH 30 JUNE 29 SEPT. 28
------- ------- ------ -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $21.9 $31.6 $27.8 $28.8 $20.4 $32.4 $33.8 $30.8
Gross profit................ 5.0 6.7 5.5 5.0 3.1 7.5 8.0 7.6
Operating income............ 1.7 2.8 1.7 1.0 0.1 3.8 4.0 3.1
Net income.................. 0.5 0.9 0.3 0.5 (0.5) 1.8 2.2 1.7
<CAPTION>
QUARTER ENDED
----------------------------
FISCAL 1997
----------------------------
DEC. 28 MARCH 28 JUNE 28
------- -------- -------
<S> <C> <C> <C>
Net sales................... $30.7 $40.6 $44.3
Gross profit................ 6.7 10.0 10.6
Operating income............ 2.3 4.9 5.3
Net income.................. 0.9 2.5 2.8
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
------------------------------------- ---------------------------------------
DEC. 31 APRIL 1 JULY 1 SEPT. 30 DEC. 30 MARCH 30 JUNE 29 SEPT. 28
------- ------- ------ -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................ 22.8 21.1 19.8 17.4 15.2 23.1 23.7 24.7
Operating income............ 7.8 8.8 6.1 3.5 0.5 11.7 11.8 10.1
Net income.................. 2.3 2.8 1.1 1.7 (2.5) 5.6 6.5 5.5
<CAPTION>
QUARTER ENDED
----------------------------
FISCAL 1997
----------------------------
DEC. 28 MARCH 29 JUNE 28
------- -------- -------
<S> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0%
Gross profit................ 21.8 24.6 23.9
Operating income............ 7.5 12.1 12.0
Net income.................. 2.9 6.2 6.3
</TABLE>
19
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements have been the funding of the
growth in operations and capital expenditures. The Company has historically
financed its growth in sales and the resulting increase in inventory and
receivables through a combination of operating cash flow and borrowings under
the Credit Agreement.
The Company generated (used) cash flows from operations of $12.6 million,
$(4.8 million) and $4.6 million during Fiscal Years 1996, 1995 and 1994,
respectively. The use of cash from operations during Fiscal 1995 was principally
due to an increase in accounts receivable and a decrease in accounts payable.
During Fiscal 1996, the Company was able to increase the amount of inventory
financed by vendors, with accounts payable increasing $3.8 million while
inventories increased only $848,000. This was due to an effort by management to
decrease the production cycle time.
During the thirty-nine weeks ended June 28, 1997, the Company generated
$826,000 of cash from operations. This was primarily the result of net income of
$6.2 million and a decrease in inventories of $3.7 million, offset by an
increase in accounts receivable of $8.4 million and a decrease in accounts
payable of $3.8 million. The increase in accounts receivable was primarily the
result of a 44% increase in net sales in the thirteen weeks ended June 28, 1997
as compared to the thirteen weeks ended September 28, 1996. The decreases in
accounts payable and inventories were primarily due to a seasonal reduction in
production activity.
The Credit Agreement consists of a $40 million revolving credit line (the
"Facility"), a $3 million term note and a $5 million equipment loan facility.
The amount available for borrowing under the Facility is determined pursuant to
a formula based upon the levels of qualifying accounts receivable and eligible
inventory, subject to the $40 million maximum ($5.5 million of which can be
utilized for the issuance of letters of credit). As of September 28, 1996, $15.1
million, $1.0 million and $1.6 million were outstanding under the Facility, the
term note and the equipment loan facility, respectively. As of September 28,
1996, the Company had approximately $7.2 million and $3.4 million available for
additional borrowings under the Facility and the equipment loan facility,
respectively. No additional borrowings are available under the term note. As of
June 28, 1997, $17.9 million, $250,000 and $2.2 million were outstanding under
the Facility, the term note and the equipment loan facility, respectively. As of
June 28, 1997, the Company had approximately $11.0 million and $2.8 million
available for additional borrowings under the Facility and the equipment loan
facility, respectively. On a pro forma basis as of June 28, 1997, after giving
effect to the Offering, including the application of the net proceeds to the
Company therefrom, the Company would have approximately $27.6 million and $2.8
million available for additional borrowings under the Facility and the equipment
loan facility, respectively. The Company's credit agreements contain significant
financial and operating covenants, including requirements that the Company
maintain minimum net worth levels and certain financial ratios, prohibitions on
the ability of the Company to incur certain additional indebtedness and
restrictions on its ability to make capital expenditures or to pay dividends.
The Company is currently in compliance with all covenants under its credit
agreements. On June 30, 1997, the Credit Agreement was automatically extended to
September 30, 1998.
The Company has historically financed its capital expenditures through a
combination of operating cash flow and long-term borrowings. Capital
expenditures were $10.1 million and $1.5 million for Fiscal 1996 and Fiscal
1995, respectively. During Fiscal 1996 the Company spent $6.1 million to acquire
the building and land in Tampa, Florida which houses the distribution and
administration functions as well as additional adjacent property for the purpose
of constructing an approximately 110,000 square foot cutting facility. The
resulting consolidated administration, distribution and cutting facilities are
expected to increase efficiencies and accommodate anticipated increases in
volume. The building and land acquisitions and construction of the new cutting
facility were financed primarily through a new construction loan (the "Loan
Agreement"). As of September 28, 1996 and June 28, 1997 outstanding borrowings
under the Loan Agreement amounted to $6.3 million and $9.6 million,
respectively. On July 18, 1997, the Company converted borrowings under the Loan
Agreement to a ten-year term loan, having a 19-year amortization period. The
Company expects capital expenditures to be approximately $6.0 million during
Fiscal 1997, including $4.4 million spent during the first
20
<PAGE> 22
thirty-nine weeks of Fiscal 1997 primarily on building and land improvements
($2.0 million) and machinery and equipment additions ($2.0 million). The Company
anticipates that the amounts available under the Credit Agreement will be
sufficient to fund its remaining capital expenditures in Fiscal 1997.
Pursuant to a factoring agreement (the "Factoring Agreement"), the Company
factors substantially all of its accounts receivable. The Factoring Agreement
provides that the factor will pay the Company an amount equal to the gross
amount of the Company's accounts receivable from customers reduced by certain
offsets, including among other things, discounts, returns and a commission
payable by the Company to the factor. The commission equals 0.30% of the gross
amount factored. For Fiscal 1996 and the thirty-nine weeks ended June 28, 1997,
the Company paid commissions to the factor aggregating $373,000 and $589,000,
respectively. The factor subjects all sales to its credit review process and
assumes 99.85% of the credit risk for amounts factored. Funds are transferred to
reduce outstanding borrowings under the Credit Agreement once payment is
received from the factor. The factor pays the Company the receivable amount upon
the earlier of (i) receipt by the factor of payment from the Company's customer
or (ii) 120 days past the due date for such payment. The Factoring Agreement
expires on September 30, 1998.
At September 28, 1996 and at June 28, 1997, the Company had working capital
of $25.5 million and $33.9 million, respectively. The increase in working
capital was due primarily to an $8.4 million increase in accounts receivable, a
$3.8 million reduction in accounts payable and a $1.1 million reduction in
current installments of long-term debt and obligations under capital lease,
offset, in part, by a $3.7 million reduction in inventories. The Company expects
its working capital needs will continue to fluctuate based on seasonal increases
in sales and accounts receivable and seasonal decreases in trade accounts
payable.
Management believes that the combination of existing working capital, funds
anticipated to be generated from operating activities and the borrowing
availability under the current and anticipated credit agreements will be
sufficient to fund both short-term and long-term capital and liquidity needs of
the Company.
BACKLOG
At June 28, 1997, the Company had unfilled customer orders of approximately
$93.3 million. Of such orders, approximately $41.0 million consist of orders
scheduled for shipment in the current fiscal year and $52.3 million consist of
orders scheduled for shipment in the fiscal year ending October 3, 1998 ("Fiscal
1998"). At June 30, 1996, the Company had unfilled customer orders of
approximately $87.0 million. Of such orders, approximately $34.6 million
consisted of orders scheduled for shipment during the then current fiscal year
and $52.4 million consisted of orders scheduled for shipment during Fiscal 1997.
Fulfillment of orders is affected by a number of factors, including revisions in
the scheduling of manufacture and shipment of the product which, in some
instances, depends on the demands of the retail consumer. Accordingly, a
comparison of unfilled orders from period to period is not necessarily
meaningful, and the level of unfilled orders at any given time may not be
indicative of eventual actual shipments. See "Risk Factors -- Reliance on Key
Customers."
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation has significantly affected its
results of operations. The Company's purchases from foreign suppliers are made
in U.S. dollars. Accordingly, the Company to date has not been materially
adversely affected by foreign currency fluctuations.
SEASONALITY
Historically, the Company's business has been seasonal, with slightly
higher sales and income in the second and fourth thirteen week periods, just
prior to and during the two peak retail selling seasons for spring and fall
merchandise.
21
<PAGE> 23
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share. The
overall objective of Statement 128 is to simplify the calculation of earnings
per share ("EPS") and achieve comparability with the recently issued
International Accounting Standard No. 33, Earnings Per Share. Statement 128 is
effective for both interim and annual financial statements for periods ending
after December 15, 1997. Earlier application is not permitted. The new standard,
which will be implemented by the Company in the first thirteen weeks of Fiscal
1998, is not expected to have a significant impact on the Company's EPS.
22
<PAGE> 24
BUSINESS
GENERAL
The Company produces high quality casual and dress men's apparel and
provides major apparel retailers with comprehensive brand management programs.
The Company's programs currently feature pants, shorts and denim jeans that are
marketed under Company brands, private brands and licensed brand names. The
Company distinguishes itself from traditional private label manufacturers by
providing apparel retailers with customer, product and market analysis, apparel
design, production, merchandising, and inventory forecasting. The Company
markets its apparel through all major retail distribution channels, including
department and specialty stores, national chains, catalog retailers, discount
and mass merchants and wholesale clubs. Key customers include Dayton Hudson
Corporation ("Dayton Hudson"), Federated Department Stores, Inc. (including
Bloomingdale's and Macy's) ("Federated Department Stores"), JC Penney, May
Department Stores Company ("May Co."), Nordstrom, Inc. ("Nordstrom"),
Phillips-Van Heusen, Price/Costco and Sam's Club (a division of Wal-Mart). The
Company's mission is to provide total customer satisfaction through a
combination of quality, value and technology. Management believes that the
Company provides its customers with high quality apparel and services supported
by a commitment to advanced information, design and production technologies, and
unique merchandising and operating strategies.
The Company's apparel line focuses on basic, recurring styles that the
Company believes are less susceptible to fashion obsolescence and less seasonal
in nature than fashion styles. All of the Company's products are derived from
six production platforms, or "chassis," each of which incorporates basic
features requiring distinct manufacturing processes, such as inclusion of an
elastic waistband, a jeansband or button-flap pockets. The six basic chassis are
modified to produce separate styles through variations in cut, fabric and
finish. This process enables the Company to achieve both manufacturing
simplicity and efficiencies while producing a wide variety of products through
distinctions in color and style. All products receive customer-specific labeling
and packaging upon receipt of confirmation of a customer order. As a result, a
common SKU, differentiated only by labeling and packaging, can be sold by both a
high-end department store and a mass merchant at different retail price points.
This merchandising strategy offers quick-response execution of customer orders
without the associated risk of carrying customer-specific inventories. In Fiscal
1996, fifteen styles marketed under approximately 80 labels accounted for over
90% of the Company's net sales. These labels include Company brands such as Bay
to Bay(R) and Banana Joe(TM), private brands such as Flyers(TM) and Flying A(R)
and licensed brand names such as Bill Blass(R) and Generra(R).
The Company manages the manufacture of substantially all of its products
utilizing its approximately 300,000 square foot state-of-the-art fabric cutting,
product labeling and distribution facilities located in Tampa, Florida, and
independent garment assembly contractors located primarily in the Dominican
Republic. The Company also sources certain finished garments from independent
manufacturers located in Mexico, the Pacific Rim and the Middle East. The
Company believes that its commitment to the use of independent contractors in
the Dominican Republic anticipated the trend in the industry toward the use of
the Caribbean and Mexico for production. The Company believes the establishment
of its name and reputation in this area gives it a distinct competitive
advantage.
The Company utilizes advanced technology in all aspects of its business,
including apparel design, materials sourcing, production planning and logistics,
customer order entry and sales demand forecasting. The Company's dedication to
technology produces greater efficiencies throughout the production process and
results in high-quality products, low-cost production and enhanced customer
order execution. The Company typically designs its apparel lines and customer
programs by tracking its customers' store-level POS system data and responding
to retail demand and trends on a per SKU basis. Apparel products are developed
using a computer-aided-design ("CAD") system integrated with fabric cutting to
maximize product quality and materials yield. Management believes that the
Company's 92% average fabric utilization rate is among the highest in the
apparel industry. The Company employs stringent quality control procedures
throughout its operations, from raw materials production at supplier mills
through finished goods shipping. In Fiscal 1996, the return rate for quality
defects was less than one percent, evidencing the impact of the Company's
quality control procedures.
23
<PAGE> 25
Accurate and timely order execution is achieved through electronic data
interchange ("EDI") order entry and quick replenishment of core SKUs. In Fiscal
1996, substantially all orders were placed via EDI. Orders generally are shipped
to the retailer within three working days of receipt of shipping instructions.
The Company's systems enable it to further assist the retailer by tracking
point-of-sale activity by SKU and forecasting consumer demand and seasonal
inventory requirements on a daily basis.
The Company was founded in 1927 and has been in continuous operation for
seventy years. In 1989, the Company was acquired by members of senior management
and an affiliate of the Selling Shareholders. Following the acquisition,
management implemented the Company's current operating strategies. For Fiscal
1996, the Company reported net sales of $117.4 million and operating income of
$11.0 million, representing five-year compound annual growth rates of 21% and
39%, respectively.
INDUSTRY
According to The NPD Group, Inc., a retail industry research firm, the U.S.
apparel industry totaled approximately $174.9 billion in retail sales in 1996.
The industry grew approximately 2.3% and 5.8% in 1995 and 1996, respectively. In
1996, the men's bottoms (i.e., pants and shorts) business represented
approximately 7.5% of the total apparel market. The men's bottoms segment tends
to be relatively less cyclical than the apparel industry at large. In 1995 and
1996 retail sales of men's bottoms grew approximately 6.0% and 9.1%,
respectively. In Fiscal 1995, Fiscal 1996 and the thirty-nine weeks ended June
28, 1997, the Company's net sales grew 9.7%, 6.6% and 33.5%, respectively, over
comparable prior periods.
Trend Toward High Quality Private Brand Apparel. The Company believes that
there is an increased trend toward high quality, private brand apparel. Private
brand apparel bears the retailer's own name or a proprietary brand name
exclusive to the retailer. Producers are able to sell these garments at lower
wholesale prices due to certain economies, including lower advertising and
promotional costs, lack of brand name license fees and royalties, and the
absence of "markdown" and other risks and expenses inherent in the brand-name
apparel industry. As a result of the lower wholesale prices, private brand
apparel generally provides higher margins for the retailer than brand name or
designer products. Sales of private brand apparel represented 41.0% of total
sales of men's apparel in Fiscal 1996, up from 39.3% in Fiscal 1995 and 37.0% in
Fiscal 1994. The Company believes that this shift is due primarily to the
education of consumers and retailers as to the benefits of private brand
products. The Company believes consumers increasingly regard private brand
products as less expensive than brand name products, but of equal or better
quality. This increase in consumer demand for private brand garments, coupled
with retailers' demands for higher margins, has resulted in retailers allocating
more space to private brand products.
Trend Toward Casual Dress. The Company believes that there is a growing
trend in the United States toward casual dress, as reflected in the
implementation of policies such as "casual Fridays." In addition, the Company
believes that the number of people who work at home is increasing substantially
and that outside of the workplace, people's social activities are focusing on a
more casual lifestyle.
Expansion of Caribbean and Mexican Production. Until recently, apparel was
produced predominantly domestically or in the Pacific Rim countries. Since the
passage of Section 807 of the Harmonized Tariff Schedule of the United States
(now found under tariff subheading 9802.00.80, but herein referred to as
"Section 807"), American apparel companies have increasingly utilized production
facilities located in the Caribbean Basin, including the Dominican Republic. The
Company believes that the Dominican Republic offers certain competitive
advantages, including favorable pricing and better quality production, a long-
standing and relatively stable production network, and much shorter
transportation periods as compared to goods assembled in the Pacific Rim. Under
Section 807, customs duties on apparel products assembled in the Caribbean Basin
may be offset by the costs incurred in the production of components in the
United States (plus freight and insurance). More recently, the North American
Free Trade Agreement ("NAFTA"), effective 1994, has permitted Mexican
manufacturers to ship finished apparel products into the United States duty-free
or at reduced duties. According to Sandler & Travis Trade Advisory Services,
Inc., 1996 marked the first year in which apparel products exported to the
United States from Mexico exceeded products exported from any other country,
including China.
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<PAGE> 26
BUSINESS STRATEGY
The Company seeks to become "The Leader in Private Brand"(TM) by being the
leading marketer of private brand sportswear in its product categories across
all retail channels. The key elements of the Company's business strategy are as
follows:
Focus on Private Brand Programs for Major Retailers. The apparel
market is highly competitive, with a trend toward greater emphasis on
private brand programs to improve retail margins. See
"Business -- Industry." Retailers are increasingly finding it advantageous
to outsource many aspects of their private brand programs. The Company
believes it has positioned itself to take advantage of these trends by
offering retailers customized comprehensive private brand programs
encompassing: (i) merchandise planning and support; (ii) consistently high
quality products; (iii) value-added services, such as custom labeling and
packaging design, just-in-time electronic order execution, and retail
profitability analysis; and (iv) access to state-of-the-art sales
forecasting and inventory management systems. In addition, the Company will
continue to promote these capabilities to increase sales of Company brands
and licensed brand name apparel offered to multiple retail accounts.
Commitment to Superior Quality Operations. The Company adheres to
strict quality standards in every aspect of its operations, from sourcing
of raw materials to providing continuing service following shipment to its
customers. Product content and construction specifications, including the
generous use of fabric to produce a fuller, more comfortable fit, are
designed to minimize costly customer returns. The Company believes that its
use of advanced technology and standard operating procedures results in the
production of high quality products for its customers.
Application of Advanced Technology. The Company employs advanced
technology in every aspect of its operations. A CAD system is used to
develop products and program fabric cutting to ensure color consistency and
maximize material yield. The Company employs air table handling systems and
the latest generation Gerber cutters in the cutting process to improve
efficiency and significantly enhance output volumes. In addition, the
Company's EDI system significantly enhances customer order execution and
point-of-sale merchandise tracking. Sales forecasting, production planning
and logistics and inventory management are performed on a proprietary
system. The Company's production system is integrated with its customers'
systems and enables the Company to track store level retail sell-through
trends by SKU.
Adherence to Standard Operating Procedures. Management has instituted
comprehensive operating procedures for each stage of operations, from
customer planning and marketing strategies through apparel design,
materials costing, production planning and logistics, manufacturing,
customer order execution, point of sale analysis and accounting and
financial reporting. These procedures integrate each operating function to
eliminate inefficiencies and maximize productivity. The Company's detailed
operating procedures and extensive information systems enable management to
monitor the performance of most operations on a daily basis, with daily
exception reporting to identify and resolve deviations from forecast
results.
Focus on Core Production Chassis. The Company designs a core line of
products suitable for marketing through virtually every apparel retail
channel, differentiated among channels and customers only through
customer-specific labeling, packaging and other brand identification
techniques. The core line is developed from six standardized production
chassis that enable the Company to maximize manufacturing productivity and
product quality and minimize unit production costs and inventory risk. In
Fiscal 1996, products derived from each of the Company's six production
chassis were sold to customers in multiple distribution channels under
approximately 80 different labels and point-of-sale packaging concepts.
Maintain Low-Cost Production. The Company is committed to
cost-sensitive, cost-controlled operations. To minimize unit production
costs and mitigate inventory risks, the Company is organized to effect the
shortest possible production cycle from receipt of raw materials through
shipping of a customer order. The Company's unique chassis production
strategy and focus on core product lines enable it to concentrate materials
purchases, minimize materials inventories, dedicate assembly operations to
25
<PAGE> 27
individual styles and execute cost-effective production runs per style. The
Company contracts for garment assembly on a standard cost-per-unit-produced
basis with independent manufacturers that adhere to the Company's strict
quality specifications and standard operating procedures. In Fiscal 1996,
the Company's production cycle averaged 43 days and average inventory
turnover was approximately four times.
Commitment to Total Customer Satisfaction. The Company's key customer
service capabilities include designing the customer's product line
composition by SKU; developing brand, packaging and point-of-sale
merchandising programs; determining the per store sales plan by SKU; and
automatically replenishing store inventory and recommending changes to
pricing and planned sales volumes based on store-level retail trends. These
capabilities, leveraging the chassis-based product strategy, offer quick-
response execution of customer orders without the cost and risk of carrying
customer-specific inventories.
Minimize Inventory Risk. Management regards inventory as a liability
rather than an asset. The Company minimizes its inventory risks by (i)
producing a focused line of core products that can be labeled and packaged
upon receipt of a customer order confirmation, (ii) minimizing the
production cycle and maximizing production flexibility, and (iii) tracking
consumer demand trends by SKU on a per store basis. Management uses
detailed cost specifications to monitor unit production cost variances.
GROWTH STRATEGY
Internal Growth. The Company intends to grow internally through increased
sales of core products to current customers, sales to new customers and
expansion into complementary apparel product lines.
Greater Penetration of Existing Accounts. The Company believes it has
a significant opportunity to increase sales to existing customers. The
Company believes that a majority of its customers are seeking to maintain a
balance between brand name apparel items and private label items,
recognizing that brand name items draw customer traffic and private label
products provide a low-cost, high-quality alternative to brand name
apparel. The Company believes that it can increase sales to existing
customers by (i) offering a broader selection of men's casual, dress and
denim pants, shorts and shirts, and (ii) increasing sales of specific
proprietary or retailer-owned labels for customers seeking to build the
breadth of their own private label lines. Management believes that its
customers place a high degree of value on the Company's quality standards
as well as the Company's commitment to its customer's inventory management
and forecasting.
New Account Growth. The Company currently sells to approximately 75
national and regional retailers in North America, and believes that there
is significant opportunity to selectively increase its customer base. The
Company continually evaluates potential customers based on the customer's
(i) commitment to retailing high quality apparel, (ii) utilization of
electronic commerce that will allow the Company's technological advantages
to be realized, and (iii) potential sales volume of core products. The
Company believes that retailers increasingly are adding private-brand
programs and seeking vendor-managed inventory programs. The Company
believes that its primary overseas competitors are unable to match the
Company's ability to provide and test samples, respond via EDI, track unit
production and shipment and monitor SKU sell through.
New Product Introductions. While the Company is committed to
providing its customers with a stable "core" product line, management does
invest significant resources to remain current with the latest colors,
fabrics and finishes. Management is continuously developing test products
based on its research, and believes that its efforts to remain current are
extremely important to building trust between the retailer and the
retailer's customers. All new product lines are produced using the
Company's "chassis" production concept and are designed to be complementary
to existing product lines. In Fiscal 1995, the Company introduced dress
pants, which through the first thirty-nine weeks of Fiscal 1997 represented
approximately 6.5% of the Company's total revenues and were sold to
approximately 26.7% of the Company's active customer base. Product lines
introduced in Fiscal 1997 include men's casual shirts, which the Company
believes are an attractive complement to its men's pants and shorts lines.
Similarly, the Company has introduced a line of coordinated men's shirts,
pants and shorts under a Company owned
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<PAGE> 28
label, "Banana Joe." The management team has significant previous
experience running businesses in these complementary product lines.
Growth Through Acquisitions. A key element of the Company's growth
strategy is to: (i) acquire established brands to expand the distribution of the
Company's core products to existing and new customers; (ii) acquire
complementary new product lines, such as men's shirts, suitable for the
Company's brands and/or customer base; or (iii) enter into newly targeted areas
of the apparel market, such as women's sportswear, through acquisition of
targeted companies. The Company expects to expand into categories of the apparel
market in which it can exploit its business strategies. The Company continually
monitors acquisition opportunities, but currently has no arrangements or
understandings with respect to any acquisitions.
PRODUCTS
The Company produces a core line of high quality men's casual and dress
pants, shorts and denim jeans. Most of the Company's apparel line focuses on
basic, recurring styles that the Company believes are less susceptible to
fashion obsolescence and less seasonal in nature than fashion styles. Key
fabrics include 100% cotton and synthetic blends utilizing rayon, wool and
polyester. Key fabric constructions include twill, denim, corduroy and
wrinkle-free fabrication. The table below sets forth sales mix, expressed as a
percentage of net sales, and retail price points per product category:
<TABLE>
<CAPTION>
FISCAL THIRTY-NINE WEEKS ENDED
----------------------- ----------------------------- CURRENT RETAIL
1994 1995 1996 JUNE 29, 1996 JUNE 28, 1997 PRICE RANGE
----- ----- ----- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Casual Pants................. 53.9% 48.5% 56.8% 49.2% 48.8% $17.99-$39.99
Dress Pants.................. -- 0.9 1.7 0.4 6.5 24.99- 39.99
Denim Jeans.................. 7.6 7.8 7.1 7.0 5.0 16.99- 24.99
Shorts (including denim)..... 38.5 42.8 34.4 43.4 39.7 11.99- 24.99
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
The Company's design staff examines domestic and international trends in
the apparel industry as well as industries completely outside the sphere of
clothing manufacture, including the automobile, grocery and home furnishings
industries, to determine trends in styling, color, consumer preferences and
lifestyle. Virtually all of the Company's products are designed by its in-house
staff utilizing CAD technology, which enables the Company to produce computer
simulated samples that display how a particular style will look in a given color
and fabric. The Company can quickly generate samples and alter the simulated
samples in response to customer input. The use of CAD technology minimizes the
time and costs associated with producing actual sewn samples prior to customer
approval and allows the Company to create custom designed products meeting the
specific needs of a customer. The Company's product content and construction
specifications require the use of matched finish thread throughout the garment,
surge seaming of all pockets, rigorous attention to seam construction, color
matching of all components and the generous use of fabric to produce a fuller,
more comfortable fit and minimize costly customer returns.
CUSTOMERS AND CUSTOMER SERVICE
The Company markets its products across all major apparel retail channels
to approximately 75 finer department and specialty stores, catalog retailers,
discount merchants and wholesale clubs. The Company's products are sold at over
6,000 outlets throughout the United States, Canada, Mexico and Central America.
Sales to the Company's five largest customers represented approximately 72.4%
and 69.4% of net sales during Fiscal 1996 and the first thirty-nine weeks of
Fiscal 1997, respectively. Sales to Wal-Mart (including Sam's Club, the nation's
largest chain of wholesale clubs), Price/Costco and Phillips-Van Heusen
accounted for approximately 25.9%, 16.6% and 13.8%, respectively, of net sales
during Fiscal 1996 and 30.5%, 17.7% and 9.9%, respectively, of net sales during
the first thirty-nine weeks of Fiscal 1997. The Company also sells its products
to other major retailers, including Dayton Hudson, Federated Department Stores,
JC Penney, May Co. and Nordstrom. Net sales to the Company's ten largest
customers in Fiscal 1996 increased at a compound annual rate of 13.5% from
Fiscal 1994 to Fiscal 1996, and 26.0% for the thirty-nine weeks ended June 28,
1997 as compared to the corresponding period in Fiscal 1996.
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<PAGE> 29
Set forth below are comparative sales mix data, expressed as a percentage
of net sales, by marketing channel:
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL -----------------------------
----------------------- JUNE 29, JUNE 28,
CHANNEL 1994 1995 1996 1996 1997
- ------- ----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Wholesale club..................... 40.0% 29.8% 42.3% 44.6% 48.5%
Discount and mass merchant......... 30.1 31.3 21.4 19.9 20.3
National chain..................... 11.4 20.9 14.5 16.5 14.3
Department store................... 8.2 8.8 14.4 13.7 11.4
Specialty store.................... 5.6 4.9 4.7 4.1 4.9
Catalog............................ 3.1 2.5 1.1 0.9 0.2
Other.............................. 1.6 1.8 1.6 0.3 0.4
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
The Company offers its customers comprehensive brand management programs,
which provide: (i) merchandise planning and support; (ii) consistently high
quality products; (iii) value-added services, such as custom labeling and
packaging design, just-in-time electronic order execution, and retail
profitability analysis; and (iv) access to state-of-the-art sales forecasting
and inventory management systems. In addition, the Company will continue to
promote these capabilities to increase sales of Company brands and licensed
brand name apparel offered to multiple retail accounts. The Company believes
that close collaboration with its customers provides the Company's employees the
opportunity to better understand the fashion, fabric and pricing strategies of
the customer and leads to the generation of products that are more consistent
with each customer's expectations. At the same time, the customer is given the
opportunity, at minimal expense and risk, to benefit from the Company's
substantial expertise in designing, packaging and labeling high quality products
with a brand name look, but at a private label price.
PRODUCT LABELING AND PACKAGING
The Company differentiates its products through customized labeling,
point-of-sale packaging and other brand identification techniques. For most of
its customers, the Company manages the design and production of labeling and
packaging materials. Management regularly analyzes consumer product labeling and
packaging and consumer targeting trends evident in other retailing formats,
including the automobile, grocery and home furnishings industries. The Company
can ship products directly to its customers' retail stores in floor-ready form
and offers innovative packaging and display techniques, such as the "Big Pack,"
a floor-ready display developed especially for Sam's Club.
For Fiscal 1996, the Company sold products bearing approximately 80
different labels to over 75 different customers. Of the $117.4 million in net
sales for this period, 56.0% represented sales of private brands unique to a
single retail customer and 44.0% represented sales of Company brands and
licensed brand name apparel to multiple customers. Of the approximately 80
labels and brands active during this period, approximately 30 are controlled by
the Company and approximately 50 are controlled by retailers.
MARKETING AND SALES
The Company's products are sold by eleven sales representatives located in
California, Florida, Illinois, Kansas, Massachusetts, Ohio, New York,
Pennsylvania and Texas, each of whom has over eight years of experience in the
apparel industry. One of such sales representatives is devoted exclusively to
the sale and marketing of the Company's recently introduced Banana Joe(R) line
of men's sportswear coordinates. The Company also maintains a sales and
marketing support staff of six employees in Tampa dedicated to analyzing sales
and marketing data.
The Company offers each of its existing and prospective customers a
marketing plan tailored to the customer's market niche. Using its marketing data
and industry experience, the Company is able to create for each existing and
prospective customer and each particular product a market plan that outlines
optimum volume, timing and pricing strategies, markdown and sell-through trends
and profit margins.
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<PAGE> 30
The Company operates an EDI system, whereby the Company can accept EDI
orders 24 hours a day and typically ship orders within three working days. In
Fiscal 1996, substantially all orders were placed via EDI.
OPERATIONS
The Company principally cuts its fabric at its Tampa facility for offshore
finishing and assembly. The Company also imports finished goods, principally
denim jeans and shorts from Mexico, the Pacific Rim and the Middle East. The
Company believes that the use of numerous independent international suppliers to
assemble components cut at the Company's facilities enables it to provide
customers with high quality goods at significantly lower prices than if it
operated its own assembly facilities. In Fiscal 1996, products originating from
the Company's Tampa cutting facility and imported finished goods represented
approximately 92.9% and 7.1%, respectively, of the products sold by the Company.
Overview. The Company inventories, spreads, marks and cuts virtually all
of the fabric used in the manufacture of its products at its own facility in
Tampa, Florida. The components are then assembled outside the United States,
principally in the Dominican Republic, and shipped back to the Company's Tampa
facilities for labeling, packaging and distribution. In Fiscal 1996, the
production cycle from receipt of raw materials through the availability for
shipping of finished goods averaged 43 days, including raw materials inventory,
transit and assembly. The Company customarily prepares, packs and ships customer
orders within three working days of receipt of shipping instructions.
Raw Materials Sourcing. The Company purchases raw materials, including
fabrics, thread, trim and labeling and packaging materials, from domestic
sources based on quality, pricing and availability. Prior to shipment, the
Company undertakes a quality audit at its major suppliers to assure that quality
standards are met. An additional quality audit is performed upon receipt of all
raw materials. The Company maintains a laboratory at its Tampa, Florida facility
in order to test the quality of raw materials. The Company has no long-term
agreements with any of its suppliers. The Company projects raw material
requirements through a series of planning sessions taking into account orders
received and future projections by style and color. This data is then translated
to the raw material components needed by production time frame in order to meet
customers' requirements.
Cutting. The Company believes that its domestic cutting facility provides
it with substantial advantages over many of its competitors. Since 1989, the
Company has invested in state-of-the-art computerized equipment for spreading,
marking and cutting fabric. The Company's CAD system positions all component
parts of a single garment in close proximity on the same bolt of fabric to
ensure color consistency. This process also enables the Company to utilize
approximately 92% of the fabric. The Company also has invested in air-table
fabric handling equipment that reduces by more than one-half the number of
workers required to handle a bolt of fabric in the cutting process. Two Gerber
cutting systems, which include a state-of-the-art, computerized submerged-rail
cutting component, significantly enhance the Company's production output.
Quality audits in the cutting facility are performed during various stages, from
spreading of fabric through preparation for shipment to independent
manufacturers for assembly.
Assembly. After the component parts are marked and cut, they are shipped
by common carrier to independent foreign manufacturers, principally in the
Dominican Republic, for assembly and finishing. The Company currently uses
approximately 25 manufacturers in the Dominican Republic that specialize in
assembling products on one or more chassis and adhere to the Company's specific
operating procedures. The Company has used these manufacturers for an average of
more than three years and enjoys, in effect, exclusive relations with 12 of
them. Several of the Company's independent manufacturers utilize various
equipment, including wrinkle-free processing ovens, owned by the Company. The
Company is among relatively few U.S. apparel companies to use the Dominican
Republic as its principal production base for assembling component parts. The
Company believes that the Dominican Republic offers the Company certain
competitive advantages, including favorable pricing and better quality
production, a long-standing and relatively stable production network, and much
shorter transportation periods than goods assembled in the Pacific Rim. In
addition, U.S. customs duties programs, such as Section 807, facilitate assembly
in the Caribbean Basin by
29
<PAGE> 31
completely eliminating or substantially reducing the customs duties on the
import of assembled U.S. components.
There are no material formal arrangements between the Company and any of
its contractors, but the Company believes that its relations with its
contractors are generally good. The Company is able to shift its sources of
supply depending upon production and delivery requirements and cost, while at
the same time reducing the need for significant capital expenditures,
work-in-process inventory and a large production work force. The Company
arranges for the assembly or production of its products primarily based on
orders received. The Company has traditionally received a significant portion of
its customers' orders prior to placement of its initial manufacturing orders.
Many of these customer orders may change with respect to colors, sizes,
allotments or assortments prior to the delivery date. The Company utilizes such
orders and its experience to estimate production requirements in order to secure
necessary assembly or manufacturing capacity. The Company inspects prototypes of
each product before production runs are commenced. The Company also performs
random in-line quality control checks during and after assembly before the
garments leave the contractor. The Company currently has 21 full-time quality
control personnel on-site in the Dominican Republic.
Labeling, Packaging and Shipping. Upon confirmation of a customer order,
the Company picks the appropriate items from its common inventory. Thereafter,
the appropriate tags and labels, such as pocket flashers, jokers, woven labels,
hang tags and leg tape, are sewn on or applied. The product is then packaged
(e.g., placed on hangers or put in plastic packaging) and prepared for shipment
in accordance with the customer's specifications. The Company generally ships
orders within three days of receipt. Orders are shipped F.O.B. Tampa by customer
or common carrier directly to the customer's individual stores or to its
centralized distribution center. The customer pays the applicable freight
charges. Final quality inspections occur when the finished garments are returned
to the Company's Tampa facilities for labeling and packaging. The Company
currently has 24 full-time quality control personnel employed in its Tampa
facilities. As a result of its extensive quality control program, less than one
percent of the products shipped by the Company during Fiscal 1996 were returned
by its customers due to defects.
IMPORTS AND IMPORT REGULATIONS
The Company presently imports garments under three separate scenarios
having distinct customs and trade consequences: (i) imports of finished goods
(mostly from the Pacific Rim and the Middle East); (ii) imports from the
Caribbean Basin and Central America; and (iii) imports from Mexico.
For direct importations (mostly from the Pacific Rim and the Middle East),
imported garments are normally taxed at most favored nation ("MFN") tariffs and
are subject to a series of bilateral quotas that regulate the number of garments
that may be imported annually into the United States. The tariffs for most of
the countries from which the Company currently imports or intends to import have
been set by international negotiations under the auspices of the World Trade
Organization ("WTO"). These tariffs generally range between 17% and 35%,
depending upon the nature of the garment (e.g., shirt, pant), its construction
and its chief weight by fiber. The principal sourcing alternatives that do not
enjoy MFN rates in the Far East are Vietnam and Laos.
In addition to these tariff rates, merchandise from virtually all the
countries from which the Company imports is also subject to bilateral quota
restraints, pursuant to U.S. domestic law or the multi-lateral Agreement on
Textile and Clothing, which is under the auspices of the WTO. Most bilateral
quotas are negotiated on a calendar year basis. After the United States and a
particular country agree to a particular level of exports in a particular quota
category (for instance, cotton men's bottoms (category 347)), the country that
receives the quota has the right to determine the method by which such quota is
assigned to its manufacturers. Some jurisdictions, such as Hong Kong, have a
free market under which quotas are bought and sold. Most countries, however,
assign it to the factories that actually produce the garments. Shipments which
are exported to the United States must, in addition to the usual commercial
documentation, have appropriate and official textile visas, in either an
electronic or paper format, which confirm their quota status. This
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<PAGE> 32
documentation must be filed prior to the admission and clearance of the
merchandise into the United States. Accordingly, the Company usually demands
that this paperwork be submitted prior to payment.
The Company also imports garments from countries in the Caribbean Basin and
Central America, most notably the Dominican Republic. Although much merchandise
imported from these jurisdictions is subject to the identical tariff and quota
consequences described above for Far Eastern importations, there are special
circumstances which provide a unique tariff and quota preference for some
merchandise sourced from the Caribbean Basin or Central America. The principal
tariff advantage is the so-called "807" program. Under this program, merchandise
produced under tariff subheading 9802.00.80, HTS, is admitted into the United
States with a substantial tariff reduction. Specifically, this tariff provision
provides a reduction in duty based on the value of exported U.S. components
assembled into a product in a foreign jurisdiction which is subsequently
reimported into the United States. In essence, the duty reduction is equal to
the value of U.S. components incorporated into these assembled goods plus
southbound international freight and insurance. For apparel products, such U.S.
components normally consist of cut-to-shape U.S. fabric parts, finishing and
trim (buttons, thread, etc.). In addition, if the fabric which is cut to create
the cut component parts is also knitted, woven or formed in the United States,
there is a special quota provision which provides for more liberalized access to
the U.S. marketplace. This special quota provision is applicable only to certain
Caribbean Basin, Central American and northern Latin American countries which
have signed special agreements with the United States. Under the terms of these
agreements, such products, known in the trade as "807A" or "Super 807" or
"Guaranteed Access Level" products, are controlled through a much more liberal
quota system. Accordingly, a country such as the Dominican Republic would have a
regular quota for men's cotton bottoms produced through a normal cut, make and
trim operation or through the traditional 807 process; at the same time, it
would have a much bigger and, therefore, more liberal quota for merchandise
produced from U.S. cloth under this Super 807 or 807A program. The Company
produces significant garments under one or both of these particular programs. In
those circumstances where garments qualify for both preferences, "807" and
"807A," the merchandise is accorded both substantial and significant quota and
tariff advantage over Pacific Rim, Middle Eastern or non-qualifying Western
hemisphere goods.
The Company also imports finished goods from Mexico under the North
American Free Trade Agreement, commonly known as NAFTA. Under NAFTA, merchandise
which qualifies is accorded reduced or duty-free access, depending upon the type
of merchandise selected. The key requirement for NAFTA qualification for such
garments is that the yarn, cloth, cut, sew and finish of the garments all take
place within North America. This is commonly known as the "yarn-forward rule."
Merchandise produced pursuant to these rules enters the United States at a
preferential or at a zero rate and is not subject to any quota.
In addition to the regular NAFTA program, certain imports made by the
Company are also subject to a tariff preference which was created and enacted as
part of the NAFTA-enabling legislation. This tariff provision, subheading
9802.00.90, HTS, provides for immediate duty-free and quota-free entry into the
United States from Mexico of garments made from components which are cut to
shape in the United States from U.S. knit, woven or formed cloth. This
duty-free, quota-free entry would be available for pant products sourced from
U.S. components cut from U.S. knitted/woven fabric. This merchandise, therefore,
has an even more favorable treatment than merchandise being imported from the
Caribbean Basin. The Company currently imports a limited amount of such
merchandise from Mexico.
Finally, non-NAFTA qualifying goods may be imported from Mexico. Such
merchandise could be imported at reduced duty rates under the 807 (9802.00.80)
program (cut in the U.S.), or special tariff rate quotas called "TPLs."
Otherwise, it is subject to full duty. Such merchandise may also be subject to
Mexican quotas which are effective for some products until 2004.
PERSONNEL
At June 28, 1997, the Company had 714 employees, including 21 in the
Dominican Republic. Of the total, approximately 102 hold executive and
administrative positions, approximately 15 are engaged in design and
merchandising, approximately 410 are engaged in production (e.g., marking,
cutting and labeling), approximately 19 are engaged in sales, approximately 130
are engaged in distribution and approximately 38
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<PAGE> 33
are engaged in quality control. None of the Company's employees is subject to a
collective bargaining agreement, and the Company considers its relations with
its employees to be generally good.
The Company is committed to developing and maintaining a well-trained
workforce. The Company provides or pays for in excess of 20,000 hours of
continuing education annually for its employees on subjects ranging from
computers to foreign languages. The Company is equally committed to the
well-being of its employees. The Company offers its full-time employees and
their families a comprehensive benefits package that includes a 401(k) plan, a
choice of group health insurance plans, term life insurance (with an option to
purchase additional coverage), a choice of dental plans, and a vision plan. The
Company also offers tuition reimbursement for business-related courses and pays
a retirement bonus to persons employed by the Company for twenty-five years or
more. The Company maintains a recreation area and health club facilities for the
use and enjoyment of its employees and their families. The Company also enjoys
long-standing relationships with certain of its independent assembly contractors
in the Dominican Republic and has contributed financial resources to improving
conditions for their employees.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that advanced information processing is important to
maintain its competitive position. Consequently, the Company continues to
upgrade its management information systems in order to maintain better control
of its inventory and to provide management with information that is both more
current and more accurate than was available previously. The Company's
management information systems provide, among other things, comprehensive order
processing, production, accounting and management information for the marketing,
manufacturing, importing and distribution functions of the Company's business.
The Company has purchased and implemented a software program that enables the
Company to track, among other things, orders, manufacturing schedules, inventory
and unit sales of its products. In addition, to support the Company's flexible
inventory replenishment program, the Company has an EDI system through which
customer inventories can be tracked and orders automatically placed by the
retailer with the Company.
COMPETITION
The apparel industry is highly competitive and the Company competes with
numerous apparel manufacturers, including brand name and private label
producers, and retailers which have established, or may establish, internal
product development and sourcing capabilities. The Company's products also
compete with a substantial number of designer and non-designer product lines.
Many of the Company's competitors and potential competitors have greater
financial, manufacturing and distribution resources than the Company. The
Company believes that it competes favorably on the basis of quality and value of
its programs and products, price, the production flexibility that it enjoys as a
result of its cutting and labeling capabilities and its sourcing network, and
the long-term customer relationships it has developed. Nevertheless, any
increased competition from manufacturers or retailers, or any increased success
by existing competition, could result in reductions in unit sales or prices, or
both, which could have a material adverse effect on the Company's business and
results of operations.
TRADEMARKS AND LICENSES
The Company holds or has applied for over 75 U.S. trademark registrations
covering its various brand names. The Company believes that its Flyers(TM),
Flying A(R) and Bay to Bay(R) trademarks are material to its business. The word
marks Flying A(R) and Bay to Bay(R) are registered with the United States Patent
and Trademark Office. These registrations expire in 2005 and 2001, respectively,
and are subject to renewal. There are applications pending with the United
States Patent and Trademark Office for trademarks which include the Flyers(TM)
and Flying A(R) names. Two of these applications have been opposed. Pursuant to
separate license agreements, the Company has the exclusive rights to use (i) the
Bill Blass(R) trademark with respect to casual pants and shorts, jeans and
pre-hemmed dress pants distributed or sold in the United States, Mexico and
Canada and (ii) the Generra(R) trademark with respect to the design, manufacture
and wholesale in the United States and Canada of men's casual pants, shorts and
dress slacks (excluding open bottom construction) and men's jean-constructed
bottoms made of denim or heavy weight fabrics (excluding open bottom construc-
32
<PAGE> 34
tion). These licenses expire in 2000 and 1999, respectively. The license
agreement with respect to the Generra(R) trademark is subject to two renewal
options that expire September 30, 2002 and 2005, respectively. The Company
believes that it has the exclusive use of all of its owned and licensed
trademarks.
FACILITIES
The Company's corporate headquarters, cutting and warehouse facilities are
situated on over 18 acres in Tampa, Florida and are owned by the Company. The
Company has recently completed an approximately 110,000 square foot
state-of-the-art cutting facility to provide an environment that will increase
efficiencies and accommodate the Company's increasing volume. The new facility
is located adjacent to the Company's administration and distribution facility
(approximately 190,000 square feet). The Company's facilities are subject to a
mortgage securing the Loan Agreement, which had an outstanding balance of $9.6
million at June 28, 1997. See Note 6 to the Consolidated Financial Statements.
The Company also leases approximately 4,000 square feet of showroom offices in
New York City. This lease expires in April 2004. The Company believes that its
existing facilities are adequate to meet its current and foreseeable needs. The
Company also believes its existing facilities are well maintained and in good
operating condition.
LEGAL PROCEEDINGS
On March 21, 1997, Levi Strauss & Co. brought suit against the Company in
U.S. District Court for the Northern District of California. The complaint
alleges, among other things, that the Company's Flyers(TM) trademark and certain
trade dress used in the labeling and packaging of the Company's Flyers(TM) and
Bay to Bay(R) products infringe upon certain of plaintiff's proprietary
trademark and trade dress rights in violation of the federal Lanham Act and
California law. The complaint seeks injunctive relief, as well as treble damages
and attorneys' fees. Although the outcome of the litigation cannot be determined
at this time, the Company believes it has meritorious defenses to, and intends
to vigorously defend against, such allegations. Nevertheless, in an attempt to
limit the Company's liability, if any, with respect to such alleged
infringement, the Company has unilaterally altered the trademark and trade dress
which are the subject of this litigation.
On July 3, 1997, Out-of-Mexico Apparel, Ltd. brought suit against the
Company in California Superior Court for, among other things, breach of
contract, breach of an implied covenant of good faith and fair dealing, and
violation of the California Unfair Business Practices Act. The complaint alleges
that the Company entered into contracts for the manufacture of apparel with
certain manufacturers in contravention of a customer non-disclosure and
non-circumvention agreement between Out-of-Mexico Apparel, Ltd. and the Company.
The complaint seeks compensatory damages and prejudgment interest, punitive
damages and the costs of suit. Although the outcome of the litigation cannot be
determined at this time, the Company intends to vigorously defend against such
allegations.
The Company is not involved in any other pending or threatened legal
proceedings which the Company believes could reasonably be expected to have a
material adverse effect on the Company's business or results of operations.
REORGANIZATION
The Company was founded in 1927 under the name Tropical Garment
Manufacturing Company. In 1989, the Company was acquired by William W. Compton,
Michael Kagan and a predecessor in interest to Accel and Shakale through the
purchase of the Company's outstanding capital stock by Tropical Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Apparel
International Group, Inc., a Delaware corporation. A majority of Accel's shares
are owned by Eloy S. Vallina-Laguera. See "Management" and "Principal and
Selling Shareholders." On August , 1997, Apparel International Group, Inc. was
merged into Tropical Sportswear Int'l Corporation, a Florida corporation
incorporated on January 27, 1997. Prior to the consummation of the Offering, the
Company and Tropical Acquisition Corporation will be merged into Tropical
Sportswear Int'l Corporation, which will become the Company.
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<PAGE> 35
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors consists of eight members divided into
three classes, with the members of each class serving three-year terms. (The
size of the Board of Directors will be automatically reduced to seven members if
the Underwriters' over-allotment options are exercised to such an extent that
Shakale's ownership falls below 5.0% of the outstanding Common Stock). The
following table sets forth information, as of the date of this Prospectus,
regarding the directors and executive officers of the Company.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION EXPIRES
- ---- --- -------- --------
<S> <C> <C> <C>
William W. Compton....... 53 Chairman of the Board, Chief Executive Officer and 2000
Director
Richard J. Domino........ 48 President
Michael Kagan............ 58 Executive Vice President, Chief Financial Officer, 1998
Treasurer, Secretary and Director
Jesus Alvarez-Morodo..... 51 Director 2000
Eloy S. 59 Director 1999
Vallina-Laguera........
Leslie J. Gillock........ 41 Director 1999
Donald H. Livingstone.... 54 Director 1999
Leon H. Reinhart......... 55 Director 1998
David Garza.............. 35 Director* 1998
</TABLE>
- ---------------
* In the event the Underwriters' over-allotment options are exercised to such an
extent that Shakale's ownership falls below 5.0% of the issued and outstanding
shares of Common Stock and the size of the Board of Directors is automatically
reduced to seven, the seat presently occupied by Mr. Garza would cease to
exist and, hence, Mr. Garza would no longer be a director.
William W. Compton has served as Chairman of the Board, Chief Executive
Officer and a Director of the Company since November 1989. He also served as
President of the Company from November 1989 to November 1994. Mr. Compton has
over 28 years of experience in the apparel industry. Prior to joining the
Company, he served as President and Chief Operating Officer of Munsingwear,
Inc., an apparel manufacturer and marketer, President/Executive Vice President
of Corporate Marketing for five apparel divisions of McGregor/Faberge
Corporation and President, U.S.A. and a director of Farah Manufacturing
Corporation, a men's apparel manufacturer. Mr. Compton currently serves on the
Board of Directors of the Brigham Young University Marriott School of
Management.
Richard J. Domino joined the Company in 1988 and has served as President of
the Company since November 1994. Mr. Domino served as Senior Vice President of
Sales and Marketing from January 1994 to October 1994 and Vice President of
Sales from December 1989 to December 1993. He has over 23 years experience in
apparel-related sales and marketing. Before joining the Company, Mr. Domino was
employed by Thompson Sportswear, Inc., a men's apparel manufacturer and
marketer, as its Sales Manager for the Northwest Territory, and by Haggar Corp.,
a men's apparel manufacturer and marketer, as its New Jersey Salesman.
Michael Kagan has served as Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of the Company since November 1989.
Mr. Kagan has more than 30 years experience in the apparel industry. Prior to
joining the Company, Mr. Kagan served as Senior Vice President of Finance for
Munsingwear, Inc. and as Executive Vice President and Chief Operating Officer of
Flexnit Company, Inc., a manufacturer of women's intimate apparel.
Jesus Alvarez-Morodo has served as a Director of the Company since November
1989. Mr. Alvarez-Morodo has been Vice Chairman of the Board of Elamex, S.A. de
C.V., a manufacturing company controlled by Accel ("Elamex"), since 1995 and
President and Chief Executive Officer of Accel since 1992. Accel is a publicly
traded Mexican holding company having subsidiaries engaged in warehousing,
distribution and
34
<PAGE> 36
manufacturing. He has been a director of Elamex since 1990. Mr. Alvarez-Morodo
has held various positions with Accel and its predecessor, Grupo Chihuahua S.A.
de C.V. ("Grupo Chihuahua"), and its subsidiaries since 1982, including Vice
President from 1989 to 1992.
Eloy S. Vallina-Laguera has served as a Director of the Company since
November 1989. Mr. Vallina-Laguera has been Chairman of the Board of Accel and
its predecessor, Grupo Chihuahua, since its inception in 1979, and Chairman of
the Board of Elamex since 1990. He is also Chairman of Kleentex Corp., and an
advisory director of Norwest Bank El Paso. Mr. Vallina-Laguera was Chairman of
Banco Commercial Mexicano, later Multibanco Comermex, one of Mexico's largest
commercial banks at that time, from 1971 until its expropriation in 1982.
Leslie J. Gillock has served as a Director of the Company since August
1997. Ms. Gillock has served in various capacities with Fruit of the Loom, Inc.
since 1978, including Vice President of Marketing since March 1995, Director of
Marketing from January 1993 through February 1995, and Marketing Manager for
Intimate Apparel from January 1989 through December 1992. She has over 19 years
experience in the apparel industry.
Donald H. Livingstone has served as a Director of the Company since August
1997. He has been a Teaching Professor at the Brigham Young University Marriott
School of Management and the Director of its Center for Entrepreneurship since
September 1994. From 1976 through March 1995, he was a partner with Arthur
Andersen LLP. He joined Arthur Andersen LLP in 1966.
Leon H. Reinhart has served as a Director of the Company since August 1997.
Mr. Reinhart has been President, Chief Executive Officer and a director of First
National Bank based in San Diego, California since May 1996. Prior to such time,
he served as Chief Credit Officer and Deputy General Manager of Citibank Mexico
from 1988 through April 1996. Mr. Reinhart's experience includes more than
twenty years as a financial executive with Citibank, N.A. and its affiliates in
a variety of domestic and international positions.
David Garza has served as a Director of the Company since November 1989.
Mr. Garza also has served as Chief Executive Officer of Madisa, S.A., a heavy
equipment distributor, since 1990 and Industrias Intercontinental, S.A., a
manufacturer of glazed tile, since 1986. He currently serves on the boards of
directors of various corporations, including Madisa, S.A. and Industrias
Intercontinental, S.A. since 1983 and Promotora Ambiental, S.A., a waste
management company, and Desarrollos Inmobiliarios Delta, S.A., a real estate
company, since 1991.
KEY EMPLOYEES
Paul Anders has served as Senior Vice President of Information Systems of
the Company since May 1992. Mr. Anders has over 23 years experience in
information systems. Prior to joining the Company, Mr. Anders was Marketing
Support Manager of Amdahl Corporation and Systems Supporting Manager of
McDonnell Douglas.
Thomas E. Bland, II joined the Company in January 1997 as Senior Vice
President of Corporate Quality. Mr. Bland has over 15 years experience in
strategic planning, quality, reengineering and operations analysis. Prior to
joining the Company, Mr. Bland was a Strategic Operations Practice Leader for
the Management Consulting Division of Grant Thornton, L.L.P. from January 1996
to January 1997. He previously spent seven years with Coopers and Lybrand
L.L.P., where he was responsible for the Quality and Strategic Planning Practice
for Coopers and Lybrand, L.L.P.'s Florida Management Consulting Practice. Mr.
Bland is a past member of the Board of Directors of the Florida Sterling
Council, a Certified Quality Engineer (as awarded by the American Society of
Quality Control), an ISO 9000 Lead Auditor and a member of the Planning Forum.
Garff Bryson has served as Senior Vice President of Sales & Marketing of
the Company since January 1995. From December 1989 to December 1994, he served
as Regional Vice President of Sales & Marketing of the Company. Mr. Bryson has
over 34 years experience in sales and marketing. Prior to joining the Company,
Mr. Bryson was Western Regional Sales Manager of Munsingwear, Inc., President of
Marks Work Wearhouse Ltd. and Vice President of Sales & Marketing of Farah
Manufacturing Corporation.
35
<PAGE> 37
Vicki Cortez has served as Vice President of Human Resources of the Company
since February 1990. Ms. Cortez has over 25 years experience in employee and
management development. Prior to joining the Company, Ms. Cortez owned and
operated Cortez and Associates, an employee development consulting firm located
in Phoenix, Arizona. Ms. Cortez also has 10 years experience in banking
management and sales development. Ms. Cortez is the sister-in-law of Mr.
Compton.
Radhames Fernandez has served as Senior Vice President of 807 Operations of
the Company since November 1993. Prior to that time, he served as Vice President
of 807 Operations from 1992 to October 1993, Vice President of Dominican
Operations from 1991 to 1992, and Contract Administrative Manager from 1988 to
1991. Mr. Fernandez joined the Company in 1983 as Quality Auditor in the
Dominican Republic. Mr. Fernandez has over 13 years experience in the apparel
industry.
Thomas E. Lewis has served as Senior Vice President of Merchandising and
Design of the Company since July 1996. Mr. Lewis has over 15 years experience in
the apparel industry. Mr. Lewis joined the Company in May 1996 as Director of
Merchandising and Sourcing. Prior to joining the Company, Mr. Lewis served as
Vice President of Merchandising of North Bay Apparel, a men's apparel importer,
from May 1995 to April 1996 and as a Buyer for Today's Man, a men's retail
apparel chain, from May 1989 to March 1995.
Sharon L. Perdue has served as Senior Vice President of Finance of the
Company since October 1994. Prior to that time, she served as Vice President of
Finance from October 1993 to September 1994, Vice President and Controller from
June 1993 to September 1993 and Controller from July 1992 to May 1993. Ms.
Perdue joined the Company in October 1990 as Assistant Controller. Prior to
joining the Company, Ms. Perdue was Controller and Business Manager of Westside
Communications/Dial Page and a Senior Auditor with Ernst & Young, LLP. Ms.
Perdue has over 14 years experience in finance.
Michael Straka has served as Senior Vice President of Manufacturing of the
Company since September 1995. Mr. Straka joined the Company in January 1994 as
Senior Vice President of Operations. Mr. Straka has over 26 years experience in
the apparel industry. Prior to joining the Company, Mr. Straka was Vice
President of 807 Operations for Perry Manufacturing Co. from December 1992 to
December 1993. He also has served as Executive Vice President of Willis Geiger
Inc. (a division of VF Corp.) and as Director of Product Development, Quality
and Technical Service of Hanes Fabric Company, Inc.
John Taylor has served as Senior Vice President of Operations of the
Company since September 1995. Mr. Taylor has over 18 years experience in all
aspects of manufacturing management, manufacturing automation, computer systems
and software. Mr. Taylor joined the Company in August 1995 as Senior Vice
President of Advance Technology & Logistics. Prior to joining the Company, Mr.
Taylor was an Executive Engineer for Western Atlas, Inc., an automated
production equipment manufacturer, from September 1994 to August 1995, and was
engaged as an independent consultant for Hagans Ziegler Ltd. from December 1991
to September 1994. Mr. Taylor also has worked for Septor Electronics Corp., part
of AEG Aktiengesellschaft, a division of Daimler-Benz, and the Consulting
Division of Arthur Andersen LLP.
36
<PAGE> 38
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid to or earned by the Company's Chief Executive Officer and each of the
Company's two other most highly compensated executive officers who earned more
than $100,000 for the fiscal year ended September 28, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
William W. Compton
Chairman of the Board and
Chief Executive Officer.................................. $336,985 $387,200 $31,522(1)(2)
Richard J. Domino
President................................................ 184,615 200,000 --
Michael Kagan
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary.................................. 192,000 153,600 19,343(2)(3)
</TABLE>
- ---------------
(1) Includes $25,000 in director's fees and $6,522 in grossed up premiums for
term life insurance for the benefit of Mr. Compton and his family.
(2) After the completion of the Offering, directors who are executive officers
of the Company will receive no compensation as such for service as members
of either the Board of Directors or committees thereof.
(3) Includes $15,000 in director's fees and $4,343 in grossed up premiums for
term life insurance for the benefit of Mr. Kagan and his family.
EMPLOYMENT AGREEMENTS
Prior to the Offering, the Company had separate employment agreements with
each of Messrs. Compton, Kagan and Domino. Under these agreements, Messrs.
Compton, Kagan and Domino were entitled to annual base salaries of $390,000,
$215,000, and $225,000, respectively, in Fiscal 1997. In addition, Mr. Compton
and Mr. Kagan were entitled to receive annual bonuses based on the Company's
earnings before interest payments and income taxes.
The Company has entered into new employment agreements with each of Messrs.
Compton, Kagan and Domino, which shall become effective as of the completion of
the Offering. The employment agreement with Mr. Compton provides for an initial
term of five years, with automatic renewals beginning at the end of the third
year such that there shall remain at all times thereafter a rolling two-year
term of employment. Notwithstanding the foregoing, in the event the agreement
has not otherwise been terminated, it will terminate automatically at the end of
the Company's fiscal year in which Mr. Compton reaches age 65. The agreement
provides for an initial annual base salary of $390,000, subject to a minimum
annual increase equal to the increase in the Consumer Price Index for all Urban
Consumers -- All Items Index for Tampa, Florida ("CPI") for the immediately
preceding twelve months. Mr. Compton is also entitled to an annual performance
bonus of up to 110% of his base salary based on a comparison of the Company's
average return on total capital employed over a four-year period as compared to
an average target return on total capital as calculated for a select group of
publicly traded apparel companies over the same period. To the extent authorized
by the Board, Mr. Compton also shall be entitled to participate in such bonus
programs and other benefit plans as are generally made available to other
executive officers of the Company.
The agreement may not be terminated by the Company prior to January 1, 1999
for any reason other than cause (as defined therein) or Mr. Compton's death or
disability. If the agreement is terminated by the Company on or after January 1,
1999, for any reason other than cause or Mr. Compton's death or disability, the
Company shall pay Mr. Compton a one-time, lump sum severance payment equal to
the product of (i) the greater of two and the number of years (rounded to the
nearest 1/12th of a year) remaining in the initial five-
37
<PAGE> 39
year term and (ii) the sum of Mr. Compton's average annual base salary and
average annual bonus for the preceding three years. During the two-year period
following termination of employment, Mr. Compton shall not engage in or have any
impermissible financial interest in any business that is engaged in the
merchandising, manufacturing, distribution or marketing of men's casual pants,
shorts and jeans.
The agreement also provides for a one-time, lump sum severance payment, in
lieu of any other severance payment, if Mr. Compton elects to terminate his
employment with the Company either for "good reason" (as defined therein) or
upon a "change of control" of the Company. Upon termination for "good reason,"
the severance payment will equal the product of (i) the greater of two and the
number of years (rounded to the nearest 1/12th of a year) remaining in the
initial five-year term and (ii) the sum of Mr. Compton's average annual base
salary and average annual bonus for the preceding three years. Upon termination
upon a "change of control," the severance payment will equal, depending on the
extent of the change of control, either (a) two times Mr. Compton's average
annual base salary for the preceding three years or (b) two times the sum of Mr.
Compton's average annual base salary and average annual bonus for the preceding
three years. Under the agreement, a "change of control" shall be deemed to have
occurred if (i) any person (other than certain exempt persons, including Messrs.
Compton and Kagan, Accel, Shakale, the Company and their respective affiliates
and associates) beneficially owns 25% or more of the outstanding shares of
voting capital stock or (ii) immediately following the sale or transfer of
substantially all of the Company's assets, or the merger or consolidation of the
Company with or into another person, any person (other than certain exempt
persons) shall beneficially own 25% or more of the surviving or acquiring
person.
The Company's employment agreement with Mr. Kagan is substantially the same
as Mr. Compton's except that Mr. Kagan's initial annual base salary is $215,000
and his maximum annual performance bonus equals 80% of his base salary.
The Company's employment agreement with Mr. Domino provides for an initial
term of three years, with automatic renewals beginning at the end of the second
year such that there shall remain at all times thereafter a rolling one-year
term of employment. Notwithstanding the foregoing, in the event the agreement
has not been otherwise terminated, it will terminate automatically at the end of
the Company's fiscal year in which Mr. Domino reaches age 65. The agreement
provides for an initial annual base salary of $225,000, subject to a minimum
annual increase equal to the increase in the CPI for the immediately preceding
twelve months. Mr. Domino is also entitled to an annual performance bonus up to
100% of his base salary. To the extent authorized by the Board, Mr. Domino also
shall be entitled to participate in such bonus programs and other benefit plans
as are generally made available to other executive officers of the Company.
The agreement also provides for monthly severance payments if Mr. Domino's
employment is terminated without cause (as defined therein) by the Company. The
total severance payments will equal the product of (i) the greater of one and
the number of years (rounded to the nearest 1/12th of a year) remaining in the
initial three-year term and (ii) Mr. Domino's annual base salary at the time of
termination.
STOCK OPTION PLANS
The Company currently maintains two stock option plans to attract, motivate
and retain key employees and members of the Board of Directors who are not
employees of the Company. These stock option plans have been adopted by Board of
Directors and were approved by the shareholders of the Company on August ,
1997.
Employee Stock Option Plan. The Company's Employee Stock Option Plan (the
"Employee Plan") provides for the grant of incentive or nonqualified stock
options to purchase up to 500,000 shares of Common Stock. Upon the completion of
the Offering, the executive officers named in the Summary Compensation Table
will be granted options to purchase a total of 196,800 shares of Common Stock at
the initial public offering price as follows: William W. Compton, 101,900
shares; Michael Kagan, 59,600 shares; and Richard J. Domino, 35,300 shares. All
employees of the Company as a group, including these executive officers, will be
granted options to purchase a total of 300,000 shares of Common Stock at the
initial public offering price.
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<PAGE> 40
Non-Employee Director Stock Option Plan. The Company's Non-Employee
Director Stock Option Plan (the "Non-Employee Plan") provides for the grant of
nonqualified stock options to purchase up to 200,000 shares of Common Stock to
members of the Board of Directors who are not employees of the Company. As of
the date of this Prospectus, such members held no options under the Non-Employee
Plan. Each non-employee director shall be granted options to purchase 10,000
shares of Common Stock at the initial public offering price as of the effective
date of the registration statement to which the Prospectus relates. Thereafter,
on the date on which an outside director is initially elected or appointed, he
or she shall automatically be granted options to purchase 10,000 shares of
Common Stock. Each outside director also shall be granted options to purchase
10,000 shares of Common Stock on the day following each annual meeting of
shareholders at which such outside director is re-elected. All options granted
will have an exercise price equal to the then fair market value of the Common
Stock. Options shall become exercisable over a period of three years in equal
amounts.
1996 Stock Option Grants. On December 18, 1996, the Company adopted the
1996 Stock Option Plan (the "1996 Plan"). Pursuant to the 1996 Plan, options to
purchase (after giving effect to the reorganization of the Company) 60,000
shares of Common Stock at a price per share of $10.50 were granted to employees
of the Company, including the executive officers named in the Summary
Compensation Table. The executive officers named in the Summary Compensation
Table received options to purchase a total of 44,500 shares of Common Stock as
follows: William W. Compton, 23,000 shares; Michael Kagan, 13,500 shares; and
Richard J. Domino, 8,000 shares.
DIRECTOR COMPENSATION
Directors who are executive officers of the Company receive no compensation
as such for service as members of either the Board of Directors or committees
thereof. Directors who are not executive officers of the Company receive $1,000
per Board and/or committee meeting attended, plus reimbursement of reasonable
expenses. The outside directors are also eligible to receive options to purchase
Common Stock under the Company's Non-Employee Director Stock Option Plan. See
"Management -- Stock Option Plans -- Non-Employee Director Stock Option Plan."
COMMITTEES OF THE BOARD
The Board of Directors has established committees whose responsibilities
are summarized as follows:
Audit Committee. The Audit Committee is comprised of Messrs.
Alvarez-Morodo and Livingstone and Ms. Gillock, and is responsible for reviewing
the independence, qualifications and activities of the Company's independent
certified public accountants and the Company's financial policies, control
procedures and accounting staff. The Audit Committee recommends to the Board the
appointment of the independent certified public accountants and reviews and
approves the Company's financial statements. The Audit Committee is also
responsible for the review of transactions between the Company and any Company
officer, director or entity in which a Company officer or director has a
material interest.
Compensation Committee. The Compensation Committee is comprised of Messrs.
Compton, Reinhart and Vallina-Laguera and Ms. Gillock, and is responsible for
establishing the compensation of the Company's directors, officers and other
managerial personnel, including salaries, bonuses, termination arrangements, and
other executive officer benefits.
Stock Option Committee. The Stock Option Committee is comprised of Ms.
Gillock and Messrs. Reinhart and Vallina-Laguera. The Stock Option Committee is
responsible for the administration of the Employee Plan, including the
recipients, amounts and terms of stock option grants, and the 1996 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee recently was established in connection
with the Offering. The members of the Compensation Committee are Messrs.
Compton, Reinhart and Vallina-Laguera and
39
<PAGE> 41
Ms. Gillock. Except for Messrs. Compton and Kagan, no officer or employee of the
Company has participated in deliberations of the Board of Directors prior to the
Offering concerning executive officer compensation.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the date of this Prospectus, and as adjusted to
reflect the sale of Common Stock offered hereby, with respect to: (i) each of
the Company's directors and the executive officers named in the Summary
Compensation Table; (ii) all directors and officers of the Company as a group;
(iii) the Selling Shareholders; and (iv) each person known by the Company to own
beneficially more than 5% of the Common Stock. Unless otherwise indicated, each
of the shareholders listed below has sole voting and investment power over the
shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING
------------------- BEING -------------------
NAME SHARES PERCENT OFFERED SHARES PERCENT
- ---- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
William W. Compton(1)........................ 937,500 15.6% -- 937,500 12.3%
Richard J. Domino(2)......................... -- -- -- -- --
Michael Kagan(3)............................. 562,500 9.4 -- 562,500 7.4
Jesus Alvarez-Morodo(4)(5)................... -- -- -- -- --
Eloy S. Vallina-Laguera(4)(5)................ 2,250,450 37.5 650,000 1,600,450 21.1
Leslie J. Gillock(4)......................... -- -- -- -- --
Donald H. Livingstone(4)..................... -- -- -- -- --
Leon H. Reinhart(4).......................... -- -- -- -- --
David Garza(4)(6)............................ -- -- -- -- --
Accel(5)..................................... 2,250,450 37.5 650,000 1,600,450 21.1
Shakale(6)................................... 2,249,550 37.5 1,750,000 499,550 6.6
All directors and officers as a group (9
persons)................................... 3,750,450 62.5% 650,000 3,100,450 40.8%
</TABLE>
- ---------------
(1) Includes 228,000 shares held by the Compton Family Limited Partnership. Does
not include 23,000 shares of Common Stock issuable upon the exercise of
outstanding stock options or 101,900 shares of Common Stock issuable upon
the exercise of stock options to be granted upon completion of the Offering.
See "Management -- Stock Option Plans." The business address of Mr. Compton
is 4902 West Waters Avenue, Tampa, Florida 33634.
(2) Does not include 8,000 shares of Common Stock issuable upon the exercise of
outstanding stock options or 35,300 shares of Common Stock issuable upon the
exercise of stock options to be granted upon the completion of the Offering.
See "Management -- Stock Option Plans."
(3) Includes 562,500 shares held in the Kagan Family Limited Partnership. Does
not include 13,500 shares of Common Stock issuable upon the exercise of
outstanding stock options or 59,600 shares of Common Stock issuable upon the
exercise of stock options to be granted upon the completion of the Offering.
See "Management -- Stock Option Plans." The business address of Mr. Kagan is
4902 West Waters Avenue, Tampa, Florida 33634.
(4) Does not include 10,000 shares of Common Stock issuable upon the exercise of
stock options to be granted upon the completion of the Offering. See
"Management -- Stock Option Plans."
(5) Consists of shares held by Accel. Mr. Vallina-Laguera owns directly
146,791,192 shares, or 42.1%, of the outstanding common stock of Accel. In
addition, he controls companies that hold 30,486,616 shares, or 8.8%, of the
outstanding common stock of Accel. Mr. Alvarez-Morodo is the President and
Chief Executive Officer of Accel. The business address of Mr.
Vallina-Laguera is Av. Zarco No. 2401, Col. Zarco, Chihuahua, Chih., Mexico,
and the business address of Mr. Alvarez-Morodo and Accel is Virginia
Fabregas No. 80, Col. San Rafael, 06470 Mexico, D.F.
(6) Shakale is controlled by the father of Mr. Garza. The business address of
Shakale is 1555 de la avenida 3 bis, calles 15 y 17, Apto. 1756-1000, San
Jose, Costa Rica.
CERTAIN TRANSACTIONS
The Audit Committee of the Board of Directors is responsible for reviewing
all transactions between the Company and any officer or director of the Company
or any entity in which an officer or director has a material interest. Any such
transactions must be on terms no less favorable than those that could be
obtained on an arms-length basis from independent third parties.
40
<PAGE> 42
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $.01 per share, and 10,000,000 shares of Preferred
Stock, par value $.01 per share. As of the date of this Prospectus, there were
issued and outstanding 6,000,000 shares of Common Stock and 38,630 shares of
Preferred Stock.
The following description is qualified in its entirety by reference to the
Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws, which are filed as exhibits to the Registration Statement of
which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Cumulative voting in
the election of directors is not permitted. Subject to preferences that may be
granted to holders of Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference, if any, which may be granted to the
holders of Preferred Stock. Holders of Common Stock have no conversion,
preemptive or other rights to subscribe for additional shares or other
securities, and there are no redemption or sinking fund provisions with respect
to such shares. The issued and outstanding shares of Common Stock are, and the
shares offered hereby will be upon payment therefor, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 10,000,000 shares
of Preferred Stock in one or more series and to fix the number of shares
constituting any such series and the rights and preferences thereof, including
dividend rates, terms of redemption (including sinking fund provisions),
redemption price or prices, voting rights, conversion rights and liquidation
preferences of the shares constituting such series, without any further vote or
action by the Company's shareholders. The issuance of Preferred Stock by the
Board of Directors could adversely affect the rights of holders of Common Stock.
For example, an issuance of Preferred Stock could result in a class of
securities outstanding that would have preferences over the Common Stock with
respect to dividends and liquidations, and that could (upon conversion or
otherwise) enjoy all of the rights appurtenant to Common Stock.
As of the date of this Prospectus, there were issued and outstanding 38,630
shares of Special Preferred Stock. Shares of this Special Preferred Stock are
redeemable at the option of the Company at a redemption price of $100 per share.
The Company intends to use a portion of the net proceeds from the Offering to
redeem all of said shares.
CERTAIN ANTI-TAKEOVER EFFECTS
The Florida Business Corporation Act (the "Florida Act"), the Company's
Amended and Restated Articles of Incorporation (the "Articles of Incorporation")
and the Company's Amended and Restated Bylaws (the "Bylaws") contain provisions
that could have an anti-takeover effect. These provisions are
41
<PAGE> 43
intended to enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and to
discourage certain types of transactions described below, which may involve an
actual or threatened change of control of the Company. The provisions are
designed to encourage any person interested in acquiring the Company to
negotiate with and obtain the approval of the Board in connection with the
transaction. However, certain of these provisions may discourage a future
acquisition of the Company not approved by the Board in which shareholders might
receive the maximum value for their shares or which a substantial number and
perhaps even a majority of the Company's shareholders believes to be in the best
interests of all shareholders. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so. See
"Risk Factors -- Anti-Takeover Provisions."
Statutory Provisions. The Company is subject to several anti-takeover
provisions under Florida law that apply to a public corporation organized under
Florida law unless the corporation has elected to opt out of such provisions in
its articles of incorporation or (depending on the provision in question) its
bylaws. The Company has not elected to opt out of these provisions. The Florida
Act contains a provision that prohibits the voting of shares in a publicly held
Florida corporation which are acquired in a "control share acquisition" unless
the board of directors approves the control share acquisition or the holders of
a majority of the corporation's voting shares (exclusive of shares held by
officers of the corporation, inside directors or the acquiring party) approve
the granting of voting rights as to the shares acquired in the control share
acquisition. A control share acquisition is defined as an acquisition that
immediately thereafter entitles the acquiring party to vote in the election of
directors within each of the following ranges of voting power: (i) one-fifth or
more but less than one-third of such voting power; (ii) one-third or more but
less than a majority of such voting power; and (iii) a majority or more of such
voting power. This statutory voting restriction is not applicable in certain
circumstances set forth in the Florida Act.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has owned at least 80% of the Company's
outstanding voting shares for at least five years, or (iii) the transaction is
approved by the holders of two-thirds of the Company's voting shares other than
those owned by the interested shareholder. An interested shareholder is defined
as a person who, together with affiliates and associates thereof, beneficially
owns (as defined in Section 607.0901(1)(e), Florida Statutes) more than 10% of
the Company's outstanding voting shares.
Classified Board of Directors. Under the Company's Articles of
Incorporation and Bylaws, the Board of Directors of the Company is divided into
three classes, with staggered terms of three years each. Each year the term of
one class expires. In addition, pursuant to the Company's Articles of
Incorporation, Accel currently has the right to nominate two persons to stand
for election to the Company's eight-member Board of Directors, and Shakale and
separate family limited partnerships controlled by Messrs. Compton and Kagan,
respectively, each currently has the right to nominate one person to stand for
election to the Company's eight-member Board of Directors. (In the event the
Underwriters' over-allotment options are exercised to such an extent that
Shakale's ownership falls below 5.0% of the outstanding Common Stock, the
Company's Board of Directors will be reduced automatically to seven members and
Shakale will not have any special nomination rights. As a result of such
reduction in the size of the Board, the seat presently occupied by David Garza,
Jr. would cease to exist and, hence, Mr. Garza would no longer be a director of
the Company.) Moreover, Accel, Shakale and Messrs. Compton and Kagan and their
respective family limited partnerships have entered into a shareholder's
agreement pursuant to which, among other things, each of them has agreed to vote
the shares of Common Stock owned or controlled thereby for the election as
directors of the nominees of the other parties pursuant to their special
nomination rights. In light of the foregoing, such persons will effectively have
the ability to significantly influence the election of the Company's directors
and the outcome of all other issues submitted to the Company's shareholders.
The Company's Articles of Incorporation also provide that any vacancies on
the Board of Directors shall be filled only by the affirmative vote of a
majority of the directors then in office, even if less than a quorum, and that
any director may be removed from office, but only for cause.
42
<PAGE> 44
Special Voting Requirements. The Company's Articles of Incorporation
provide that actions by the shareholders may be taken at an annual or special
meeting of the shareholders or by written consents executed by the holders of
outstanding voting shares having not less than the minimum number of votes
necessary to authorize or take such action at a meeting at which all voting
shares were present and voted. The Articles of Incorporation provide that
special meetings of the shareholders may be called by only a majority of the
members of the board of directors, the Chairman of the Board, the Chief
Executive Officer of the Company, or the holders of not less than 25% of the
Company's outstanding voting shares. Under the Company's Bylaws, shareholders
will be required to comply with advance notice provisions with respect to any
proposal submitted for shareholder vote, including nominations for elections to
the Board of Directors. The Articles of Incorporation and Bylaws of the Company
contain provisions requiring the affirmative vote of the holders of at least
two-thirds of the Common Stock to amend certain provisions thereof.
The foregoing provisions of the Florida Act and the Company's Amended and
Restated Articles of Incorporation and Bylaws could have the effect of
preventing or delaying a person from acquiring or seeking to acquire a
substantial equity interest in, or control of, the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Firstar Trust
Company, Milwaukee, Wisconsin.
43
<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offering, the Company will have 7,600,000 shares
of Common Stock outstanding. Of these shares, the 4,000,000 shares of Common
Stock sold in the Offering (4,600,000 shares if the Underwriters' over-allotment
options are exercised in full) will be freely tradeable by persons other than
affiliates of the Company, without restriction under the Securities Act.
The remaining 3,600,000 shares of Common Stock (3,000,000 shares if the
Underwriters' over-allotment options are exercised in full) will be "restricted"
securities within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemptions contained in
Rule 144. All 3,600,000 (3,000,000 if the Underwriters' over-allotment options
are exercised in full) of the restricted shares will be beneficially owned by
persons who are affiliates of the Company and after the date of this Prospectus,
will be eligible for public sale pursuant to Rule 144, subject to the volume
restrictions discussed below. However, all of such restricted shares are subject
to lockup restrictions. Pursuant to these restrictions the holders of these
restricted shares, including certain of the Company's executive officers and
directors, have agreed that they will not, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other disposition or transfer of) any shares of Common Stock or any other
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock or other similar securities of the Company, currently beneficially
owned or hereafter acquired by such persons, for a period of 180 days from the
date of this Prospectus. After such 180-day period, this restriction will expire
and shares permitted to be sold under Rule 144 would be eligible for sale.
Prudential Securities Incorporated may, in its sole discretion, at any time and
without prior notice, release all or any portion of the shares of Common Stock
subject to such agreements.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares for at least one year (including the prior
holding period of any prior owner other than an affiliate) is entitled to sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the outstanding shares of the Common Stock, or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not or has not
been deemed an "affiliate" of the Company for at least three months, and who has
beneficially owned shares for at least two years (including the holding period
of any prior owner other than an affiliate) would be entitled to sell such
shares under Rule 144 without regard to the limitations discussed above.
Upon the completion of the Offering, there will be outstanding options to
purchase 420,000 shares of Common Stock, of which options to purchase 60,000
shares granted under the 1996 Plan are vested and will become exercisable from
1998 through 2000 at $10.50 per share. The remaining 360,000 options to be
granted under the Employee Plan and the Non-Employee Plan will vest and become
exercisable from 1998 through 2000 at a price per share equal to the initial
public offering price. In addition, options for the purchase of 200,000 and
140,000 additional shares of Common Stock will remain available for issuance
under the Employee Plan and Non-Employee Plan, respectively, following the
completion of the Offering. The Company intends to file one or more Registration
Statements on Form S-8 to register under the Securities Act all of the 760,000
shares of Common Stock that are issuable upon the exercise of outstanding stock
options and that may be subject to stock options that are issuable in the future
under the Employee Plan and the Non-Employee Plan. These registration statements
are expected to be filed as soon as practicable after the Offering and are
expected to become effective immediately upon filing. Shares covered by the
registration statements will be eligible for sale in the public market after the
effective date of the registration statements, subject to Rule 144 limitations
applicable to affiliates of the Company. See "Management -- Stock Option Plans."
Prior to the Offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
44
<PAGE> 46
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Oppenheimer & Co., Inc. are acting as
Representatives, have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Shareholders, the number of shares of Common Stock set forth below
opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Prudential Securities Incorporated..........................
Oppenheimer & Co., Inc......................................
---------
Total............................................. 4,000,000
=========
</TABLE>
The Company and the Selling Shareholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby if any are purchased.
The Underwriters, through the Representatives, have advised the Company and
the Selling Shareholders that they propose to offer the shares of Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the initial public
offering, the offering price and the concessions may be changed by the
Representatives.
The Selling Shareholders have granted to the Underwriters options,
exercisable for 30 days from the date of this Prospectus, to purchase up to
600,000 additional shares of Common Stock at the initial public offering price
less underwriting discounts and commissions, as set forth on the cover page of
this Prospectus. The Underwriters may exercise such options solely for the
purpose of covering over-allotments incurred in the sale of the shares of Common
Stock offered hereby. To the extent such options to purchase are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriters' name in the preceding table bears
to 4,000,000.
The Company, its executive officers and directors, and the Selling
Shareholders have agreed that they will not, without the prior written consent
of Prudential Securities Incorporated, on behalf of the Underwriters, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase, or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other disposition or transfer of) any shares of Common Stock or any other
securities convertible into, or exercisable for shares of Common Stock or other
similar securities of the Company, currently beneficially owned or hereafter
acquired by such persons, for a period of 180 days after the date of this
Prospectus. Prudential Securities Incorporated may, in its sole discretion, at
any time and without prior notice, release all or any portion of the shares of
Common Stock subject to such agreements.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters or to contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M promulgated by the Securities and Exchange
Commission, pursuant to which such
45
<PAGE> 47
persons may bid for or purchase Common Stock for the purpose of stabilizing its
market price. The Underwriters also may create a short position for the account
of the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company, and in such case may
purchase Common Stock in the open market following the closing of the Offering
to cover all or a portion of such short position. The Underwriters may also
cover all or a portion of such short position, up to 600,000 shares of Common
Stock, by exercising the Underwriters' over-allotment options referred to above.
In addition, Prudential Securities Incorporated, on behalf of the Underwriters,
may impose "penalty bids" under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or selling group member
participating in the Offering) for the account of the other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined through negotiation among the Company, the Selling
Shareholders and the Representatives of the Underwriters. Among the factors to
be considered in making such determination will be the prevailing market
conditions, the results of operations of the Company in recent periods relevant
to its prospects and the prospects for its industry in general, the management
of the Company and the market prices of securities for companies in businesses
similar to that of the Company.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
by the Company will be passed upon for the Company by Foley & Lardner, Tampa,
Florida. Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Selling Shareholders by Winthrop,
Stimson, Putnam & Roberts, New York, New York, and for the Underwriters by
Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Tropical Sportswear Int'l
Corporation at September 28, 1996 and September 30, 1995, and for each of the
three years in the period ended September 28, 1996, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part)
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Statements contained in the Prospectus as to
the contents of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants, including the Company, that file
electronically with the Commission. The address of such web site is
http://www.sec.gov.
46
<PAGE> 48
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Tropical Sportswear Int'l Corporation
We have audited the accompanying consolidated balance sheets of Tropical
Sportswear Int'l Corporation as of September 30, 1995 and September 28, 1996,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended September 28, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tropical
Sportswear Int'l Corporation at September 30, 1995 and September 28, 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended September 28, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
November 27, 1996,
except as to the third paragraph of Note 13, as to which the date is August ,
1997
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 13 to the financial
statements.
/s/ ERNST & YOUNG LLP
--------------------------------------
Tampa, Florida
August 12, 1997
F-2
<PAGE> 50
TROPICAL SPORTSWEAR INT'L CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 68 $ 261 $ 502
Accounts receivable..................................... 20,901 20,197 28,294
Inventories............................................. 22,434 23,282 19,546
Deferred income taxes................................... 1,498 1,816 1,708
Prepaid income taxes.................................... 1,167 269 --
Prepaid expenses........................................ 186 163 564
------- ------- -------
Total current assets............................ 46,254 45,988 50,614
Property and equipment.................................... 11,004 20,145 24,606
Less accumulated depreciation and amortization.......... 2,691 3,475 4,424
------- ------- -------
8,313 16,670 20,182
Other assets.............................................. 252 350 219
Excess of cost over fair value of net assets of acquired
subsidiary, less accumulated amortization of $57, $68
and $78 at September 30, 1995, September 28, 1996 and
June 28, 1997, respectively............................. 418 407 397
------- ------- -------
Total assets.................................... $55,237 $63,415 $71,412
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $10,086 $13,949 $10,169
Accrued expenses........................................ 1,654 1,581 2,549
Accrued incentive compensation.......................... 789 2,365 1,852
Income taxes payable.................................... -- -- 629
Current installments of long-term debt.................. 1,573 2,155 986
Current installments of obligations under capital
leases............................................... 497 455 525
------- ------- -------
Total current liabilities....................... 14,599 20,505 16,710
Long-term debt............................................ 26,231 23,676 28,999
Obligations under capital leases.......................... 944 486 741
Deferred income taxes..................................... 252 366 413
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; 38,630 shares issued and outstanding..... 3,863 3,863 3,863
Common stock, $.01 par value; 50,000,000 shares
authorized; 6,000,000 shares issued and
outstanding.......................................... 60 60 60
Retained earnings....................................... 9,288 14,459 20,626
------- ------- -------
Total shareholders' equity...................... 13,211 18,382 24,549
------- ------- -------
Total liabilities and shareholders' equity...... $55,237 $63,415 $71,412
======= ======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 51
TROPICAL SPORTSWEAR INT'L CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------ -----------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ------------- ------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................. $ 100,359 $ 110,064 $ 117,355 $ 86,593 $ 115,608
Cost of goods sold.................... 75,677 87,858 91,132 67,967 88,327
--------- --------- --------- --------- ---------
Gross profit.......................... 24,682 22,206 26,223 18,626 27,281
Selling, general and administrative
expenses............................ 14,291 15,060 15,189 10,754 14,745
--------- --------- --------- --------- ---------
Operating income...................... 10,391 7,146 11,034 7,872 12,536
Other (income) expense:
Interest expense.................... 2,115 3,160 2,498 1,880 2,263
Factoring expense................... 668 708 373 409 589
Other, net.......................... (983) 293 247 224 (1)
--------- --------- --------- --------- ---------
1,800 4,161 3,118 2,513 2,851
--------- --------- --------- --------- ---------
Income before income taxes............ 8,591 2,985 7,916 5,359 9,685
Provision for income taxes............ 3,613 825 2,745 1,832 3,518
--------- --------- --------- --------- ---------
Net income............................ $ 4,978 $ 2,160 $ 5,171 $ 3,527 $ 6,167
========= ========= ========= ========= =========
Net income per common share........... $ 0.83 $ 0.36 $ 0.86 $ 0.59 $ 1.03
========= ========= ========= ========= =========
Weighted average number of shares used
in the calculation.................. 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 52
TROPICAL SPORTSWEAR INT'L CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- --------------- RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
------ ------ ------ ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 2, 1993..................... 39 $3,863 6,000 $60 $ 2,150 $ 6,073
Net income........................... -- -- -- -- 4,978 4,978
-- ------ ----- --- ------- -------
Balance at October 1, 1994..................... 39 3,863 6,000 60 7,128 11,051
Net income........................... -- -- -- -- 2,160 2,160
-- ------ ----- --- ------- -------
Balance at September 30, 1995.................. 39 3,863 6,000 60 9,288 13,211
Net income........................... -- -- -- -- 5,171 5,171
-- ------ ----- --- ------- -------
Balance at September 28, 1996.................. 39 3,863 6,000 60 14,459 18,382
Net income (Unaudited)............... -- -- -- -- 6,167 6,167
-- ------ ----- --- ------- -------
Balance at June 28, 1997 (Unaudited)........... 39 $3,863 6,000 $60 $20,626 $24,549
== ====== ===== === ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 53
TROPICAL SPORTSWEAR INT'L CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
YEAR ENDED ENDED
------------------------------------------ -------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ------------- ------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................ $ 4,978 $ 2,160 $ 5,171 $ 3,527 $ 6,167
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Gain on settlement of purchase
price............................ (1,863) -- -- -- --
Loss on disposal of property and
equipment........................ 13 215 152 152 47
Depreciation and amortization....... 953 1,226 1,431 1,027 1,541
Provision for doubtful accounts..... -- -- -- -- 331
Deferred income taxes............... (229) 327 (204) (153) 155
Changes in operating assets and
liabilities:
(Increase) decrease in assets:
Accounts receivable............ (882) (3,396) 704 (3,592) (8,428)
Inventories.................... (3,549) 1,060 (848) 4,806 3,736
Prepaid income taxes........... -- (1,167) 898 1,235 269
Prepaid expenses and other
assets...................... (324) 94 (119) (1,002) (296)
Increase (decrease) in
liabilities:
Accounts payable............... 4,621 (4,476) 3,863 1,813 (3,780)
Accrued expenses............... (157) 689 (73) 63 968
Accrued incentive
compensation................ 709 (758) 1,576 642 (513)
Income taxes payable........... 335 (732) -- -- 629
------- ------- -------- ------- -------
Net cash provided (used) by operating
activities.......................... 4,605 (4,758) 12,551 8,518 826
INVESTING ACTIVITIES
Capital expenditures.................. (5,089) (1,467) (10,119) (7,894) (4,407)
Proceeds from sale of property and
equipment........................... 19 39 234 234 9
------- ------- -------- ------- -------
Net cash used by investing
activities.......................... (5,070) (1,428) (9,885) (7,660) (4,398)
FINANCING ACTIVITIES
Proceeds of long-term debt............ 3,104 803 7,330 6,964 4,246
Principal payments of long-term
debt................................ (394) (1,750) (1,628) (1,147) (2,860)
Principal payments of capital
leases.............................. (272) (540) (500) (394) (341)
Net proceeds from (repayment of) long-
term revolving credit line
borrowings.......................... (1,897) 7,333 (7,675) (6,217) 2,768
------- ------- -------- ------- -------
Net cash provided (used) by financing
activities.......................... 541 5,846 (2,473) (794) 3,813
------- ------- -------- ------- -------
Net increase (decrease) in cash....... 76 (340) 193 64 241
Cash at beginning of period........... 332 408 68 68 261
------- ------- -------- ------- -------
Cash at end of period................. $ 408 $ 68 $ 261 $ 132 $ 502
======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 54
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED SEPTEMBER 28, 1996 AND
THIRTY-NINE WEEKS ENDED JUNE 28, 1997 (UNAUDITED)
(IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tropical
Sportswear Int'l Corporation (the Company) and its wholly-owned subsidiary,
Apparel Network Corporation (see Note 13). All significant intercompany balances
and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
The Company's principal line of business is the marketing, design,
manufacture and distribution of men's casual pants and shorts. The principal
markets for the Company include major retailers within the United States. The
Company subcontracts the assembly of substantially all of its products with
independent manufacturers in the Dominican Republic and Mexico and, at any point
in time, a majority of the Company's work-in-process inventory is located in
those countries.
INTERIM RESULTS
The accompanying balance sheet at June 28, 1997, the statements of income
and cash flows for the thirty-nine weeks ended June 29, 1996 and June 28, 1997,
and the statement of shareholders' equity for the thirty-nine weeks ended June
28, 1997 are unaudited. In the opinion of management, these statements have been
prepared on the same basis as the annual financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of results of the interim periods. The data disclosed in these
notes to the consolidated financial statements for those periods are also
unaudited. Operating results for the thirty-nine weeks ended June 28, 1997 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.
ACCOUNTING PERIOD
The Company operates on a 52/53 week annual accounting period ending on the
Saturday nearest September 30th. Each of the years ended October 1, 1994,
September 30, 1995 and September 28, 1996 contains 52 weeks.
NET INCOME PER SHARE
Net income per common share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
83, common equivalent shares issued by the Company at prices below the public
offering price during the period beginning one year prior to the filing date of
the initial public offering have been included in the calculation as if they
were outstanding for all periods prior to the offering.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (Statement 128).
The overall objective of Statement 128 is to simplify the calculation of
earnings per share (EPS) and achieve comparability with the recently issued
International Accounting Standard No. 33, Earnings Per Share. Statement 128 is
effective for both interim and annual financial statements for periods ending
after December 15, 1997. Earlier application is not permitted. Adoption of the
new standard will have no impact on the Company's EPS for the periods presented
herein.
F-7
<PAGE> 55
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company records sales upon the shipment of finished product to the
customer.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
The Company records provisions for markdowns and losses on excess and
slow-moving inventory to the extent the cost of inventory exceeds estimated net
realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company primarily uses
straight-line depreciation methods over periods that approximate the assets'
estimated useful lives.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS OF ACQUIRED SUBSIDIARY
The excess of cost over fair value of net assets of the acquired subsidiary
is amortized on the straight-line basis over a period of 40 years.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from the estimates.
FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts receivable,
accounts payable, long-term debt and obligations under capital leases. The
carrying amount of these financial instruments approximate their fair value.
STATEMENT OF CASH FLOWS
Supplemental cash flow information:
<TABLE>
<CAPTION>
THIRTY-NINE
YEAR ENDED WEEKS ENDED
----------------------------- -------------------
SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1995 1996 1996 1997
------------- ------------- -------- --------
<S> <C> <C> <C> <C>
Cash paid for:
Interest................................... $3,160 $2,439 $1,806 $2,263
Income taxes............................... 2,373 2,051 770 2,462
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
Capital lease obligations of $1,141, $349 and $666 were incurred when the
Company entered into leases for new equipment in the years ended October 1,
1994, September 30, 1995 and the thirty-nine weeks ended June 28, 1997,
respectively.
During the year ended October 1, 1994, the Company incurred debt to
refinance factor advances of $13,004, and to repay acquisition debt of $181
and notes payable to $2,200.
F-8
<PAGE> 56
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In fiscal 1994, the settlement relating to the purchase of the Company
(Note 2) resulted in a gain of $1,863 comprised of a reduction in the
original purchase price of $1,730 and a $133 reduction in deferred
compensation.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (SFAS 121). This pronouncement requires impairment
losses to be recorded on long-lived assets used in operations when impairment
indicators are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. The Company adopted
the provisions of SFAS 121 during fiscal 1996 with no impact on the financial
statements.
2. SETTLEMENT OF ACQUISITION CONTINGENCIES
On July 8, 1994, the Company entered into a settlement agreement in
resolution of all claims and differences arising out of the purchase of the
Company on November 15, 1989. Under the settlement agreement, the Company is no
longer obligated to pay deferred compensation of $133 and the original purchase
price was reduced by $1,730. The settlement of these contingencies resulted in a
net gain of $1,113 after deducting arbitration expenses and related professional
fees of $750. The net gain is included in other income for the year ended
October 1, 1994.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Receivable from factor.............................. $20,429 $19,627 $28,025
Receivable from trade accounts...................... 954 1,094 1,344
Reserve for returns and allowances and bad debts.... (482) (524) (1,075)
------- ------- -------
$20,901 $20,197 $28,294
======= ======= =======
</TABLE>
On October 1, 1995, the Company entered into a factoring agreement whereby
substantially all of the Company's trade receivables are assigned on an ongoing
basis, without recourse, except for credit losses on the first .15% of amounts
factored. The factoring agreement is with a national company which, in
management's opinion, is highly creditworthy. The purchase price of each
receivable is the net face amount, less a factoring discount of .30%. Prior to
October 1, 1995, the Company factored its trade receivables without recourse and
under this agreement, the purchase price of each receivable was the net face
amount less a factoring discount of .65%.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Raw materials....................................... $ 2,488 $ 2,399 $ 1,119
Work in process..................................... 6,467 5,946 6,306
Finished goods...................................... 13,479 14,937 12,121
------- ------- -------
$22,434 $23,282 $19,546
======= ======= =======
</TABLE>
F-9
<PAGE> 57
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has made provisions for inventory loss of approximately $1,780,
$2,200 and $2,700 at September 30, 1995, September 28, 1996 and June 28, 1997,
respectively, to reflect a write down of excess and slow-moving inventory to net
realizable value.
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28, LIFE
1995 1996 1997 (YEARS)
------------- ------------- -------- -------
<S> <C> <C> <C> <C>
Land....................................... $ -- $ 3,976 $ 3,976 --
Land improvements.......................... -- 6 1,579 15
Building and improvements.................. -- 6,243 9,208 39.5
Machinery and equipment.................... 6,970 7,824 9,785 5
Leasehold improvement...................... 4,034 64 58 15-39.5
Construction in progress................... -- 2,032 -- --
------- ------- -------
$11,004 $20,145 $24,606
======= ======= =======
</TABLE>
During the year ended September 28, 1996 and the thirty-nine weeks ended
June 28, 1997, the Company capitalized $71 and $72 of interest expense,
respectively.
6. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Note payable to former owners....................... $ 2,208 $ 1,827 $ --
Revolving credit line............................... 22,822 15,147 17,915
Equipment loan facility............................. 737 1,557 2,220
Term note........................................... 2,000 1,000 250
Construction and term loan.......................... -- 6,292 9,600
Other notes payable................................. 37 8 --
------- ------- -------
27,804 25,831 29,985
Less current maturities............................. 1,573 2,155 986
------- ------- -------
$26,231 $23,676 $28,999
======= ======= =======
</TABLE>
The note payable to former owners (the Acquisition Note) was issued on July
8, 1994 in conjunction with the settlement of the final purchase price to be
paid for the Company (Note 2). The Acquisition Note bears no interest and is,
therefore, recorded at its net present value using a discount rate of 9%. The
outstanding face value amounted to $2,550 and $2,000 as of September 30, 1995
and September 28, 1996, respectively. The Acquisition Note was repaid on January
31, 1997.
On September 28, 1994, the Company entered into a secured revolving credit
and term loan agreement (the Credit Agreement). The Credit Agreement, as
amended, consists of a $40,000 revolving credit line ($5,500 of which can be
utilized for letters of credit), a $3,000 term note and a $5,000 equipment loan
facility. The Credit Agreement expires on September 30, 1998, at which time any
outstanding balances become due. Borrowings under the revolving credit line are
limited to the lesser of $40,000 or qualifying accounts receivable and eligible
inventory. Available borrowings under the revolving credit line were
approximately $7,233 and $10,970 at September 28, 1996 and June 28, 1997,
respectively. The revolving credit line bears interest at a
F-10
<PAGE> 58
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
variable rate of prime or LIBOR plus an applicable margin (8.75% and 8.0% at
September 28, 1996 and June 28, 1997, respectively).
The equipment loan facility is payable in monthly installments of $31 and
bears interest at a variable rate of prime or LIBOR plus an applicable margin
(9.25% and 8.46% at September 28, 1996 and June 28, 1997, respectively).
Available borrowings under the equipment loan facility were approximately $3,400
and $2,800 at September 28, 1996 and June 28, 1997, respectively.
The term note is payable in monthly installments of $83 and bears interest
at prime plus an applicable margin (11.0% and 10.25% at September 28, 1996 and
June 28, 1997, respectively). No additional borrowings are available under the
term note.
On May 7, 1996, the Company entered into a construction and term loan
agreement (the Loan Agreement). The Loan Agreement consists of a $9,600
construction loan, which is secured by a mortgage. The construction loan was
utilized to purchase the Company's previously leased operating facility and to
finance the construction of a new adjacent cutting facility. Interest is payable
monthly at prime plus an applicable margin (8.75% and 9.0% at September 28, 1996
and June 28, 1997, respectively). On July 18, 1997, the construction loan was
converted to a term loan which will mature on May 7, 2006. Principal and
interest at 8.88% are due monthly based on a 19-year amortization.
The Company's debt agreements contain certain covenants, the most
restrictive of which are as follows: (i) maintenance of consolidated net worth
at specified levels, (ii) achievement of specified adjusted net earnings from
operations, (iii) maintenance of debt service coverage ratio at specified
levels, (iv) limitations on annual capital expenditures, (v) limitations on
liens, and (vi) prohibition of the payment of dividends. The Company is in
compliance with all such covenants. The Credit Agreement is secured by
substantially all of the assets of the Company.
The scheduled maturities of long-term debt as of September 28, 1996 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------- -------
<S> <C>
1997........................................................ $ 2,155
1998........................................................ 17,598
1999........................................................ 145
2000........................................................ 160
2001........................................................ 175
Thereafter.................................................. 5,598
</TABLE>
F-11
<PAGE> 59
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LEASES
The Company leases administrative facilities and certain equipment under
noncancelable leases.
Future minimum lease payments under operating leases and the present value
of future minimum capital lease payments are:
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 28, 1996 JUNE 28, 1997
------------------- -------------------
OPERATING CAPITAL OPERATING CAPITAL
FISCAL YEAR LEASES LEASES LEASES LEASES
- ----------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
1997............................................... $ 439 $ 527 $ 96 $ 135
1998............................................... 171 304 310 617
1999............................................... 129 226 239 375
2000............................................... 129 -- 231 132
2001............................................... 129 -- 192 132
Thereafter......................................... 333 -- 350 63
------ ------ ------ ------
Total minimum lease payments............. $1,330 1,057 $1,418 1,454
====== ======
Less amount representing interest.................. 116 188
------ ------
Present value of minimum capital lease payments.... 941 1,266
Less current installments.......................... 455 525
------ ------
$ 486 $ 741
====== ======
</TABLE>
The following summarizes the Company's assets under capital leases:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Machinery and equipment............................. $2,548 $2,253 $2,929
Accumulated amortization............................ 1,026 1,242 1,473
</TABLE>
Amortization of assets under capital leases has been included in
depreciation.
Total rental expense for operating leases for the years ended October 1,
1994, September 30, 1995, September 28, 1996, and for the thirty-nine weeks
ended June 28, 1997 was approximately $1,118, $982, $859, and $368,
respectively.
8. CLOSURE OF INTERNATIONAL SUBSIDIARY
In September 1995, a decision was made to close the Company's international
subsidiary, Confecciones Siglo, S.A., and, at September 30, 1995, the Company
had accrued $500 for costs associated with the closing. These costs included
employee severance, relocation of certain equipment and estimated losses on
disposals of property and equipment. During fiscal 1996, the assets of the
subsidiary were liquidated.
F-12
<PAGE> 60
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------ ------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current:
Federal....................... $3,434 $ 375 $2,713 $1,829 $3,094
State......................... 408 123 236 156 269
------ ------ ------ ------ ------
3,842 498 2,949 1,985 3,363
Deferred expense (benefit):
Federal....................... (190) 309 (188) (141) 143
State......................... (39) 18 (16) (12) 12
------ ------ ------ ------ ------
(229) 327 (204) (153) 155
------ ------ ------ ------ ------
$3,613 $ 825 $2,745 $1,832 $3,518
====== ====== ====== ====== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
A reconciliation of the difference between the effective income tax rate
and the statutory federal tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------ ------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income tax expense at federal
statutory rate (34%).......... $2,921 $1,015 $2,691 $1,822 $3,293
State income taxes, net of
federal benefit............... 269 90 144 105 212
Losses of international
subsidiary.................... 26 (312) (162) (162) --
Amortization of goodwill........ 6 4 48 44 --
Arbitration settlement and
expenses...................... 379 -- -- -- --
Other items..................... 12 28 24 23 13
------ ------ ------ ------ ------
$3,613 $ 825 $2,745 $1,832 $3,518
====== ====== ====== ====== ======
</TABLE>
In fiscal 1995 and 1996, as a result of closing the Company's international
subsidiary, the Company recorded tax benefits for losses of the international
subsidiary which were previously not deductible for income tax purposes.
F-13
<PAGE> 61
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28, JUNE 28,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Deferred tax assets:
Inventory related................................. $1,057 $1,060 $1,148
Accounts receivable related....................... 157 185 309
Various accrued expenses.......................... 327 599 270
Deferred tax liabilities:
Depreciation...................................... (252) (366) (413)
Other items....................................... (43) (28) (19)
------ ------ ------
Net deferred tax asset.............................. $1,246 $1,450 $1,295
====== ====== ======
Classified as follows:
Current asset..................................... $1,498 $1,816 $1,708
Noncurrent liability.............................. (252) (366) (413)
------ ------ ------
$1,246 $1,450 $1,295
====== ====== ======
</TABLE>
10. SIGNIFICANT CUSTOMERS
In fiscal 1994, the Company had three significant customers who
individually accounted for approximately 25%, 14% and 13% of sales. In fiscal
1995, four customers accounted for approximately 18%, 15%, 15% and 14% of sales.
In fiscal 1996, three customers accounted for approximately 26%, 17% and 14% of
sales.
11. COMMITMENTS AND CONTINGENCIES
As of September 28, 1996 and June 28, 1997, the Company had approximately
$4,704 and $2,890, respectively, of outstanding letters of credit with various
expiration dates through August 1997.
On March 21, 1997, Levi Strauss & Co. brought suit against the Company in
U.S. District Court for the Northern District of California. The complaint
alleges, among other things, that the Company's Flyers(TM) trademark and certain
trade dress used in the labeling and packaging of the Company's Flyers(TM) and
Bay to Bay(R) products infringe upon certain of plaintiff's proprietary
trademark and trade dress rights in violation of the federal Lanham Act and
California law. The complaint seeks injunctive relief, as well as treble damages
and attorneys' fees. Although the outcome of the litigation cannot be determined
at this time, the Company believes it has meritorious defenses to, and intends
to vigorously defend against, such allegations. Nevertheless, in an attempt to
limit the Company's liability, if any, with respect to such alleged
infringement, the Company has unilaterally altered the trademark and trade dress
which are the subject of this litigation.
On July 3, 1997, Out-of-Mexico Apparel, Ltd. brought suit against the
Company in California Superior Court for, among other things, breach of
contract, breach of an implied covenant of good faith and fair dealing, and
violation of the California Unfair Business Practices Act. The complaint alleges
that the Company entered into contracts for the manufacture of apparel with
certain manufacturers in contravention of a customer non-disclosure and
non-circumvention agreement between Out-of-Mexico Apparel, Ltd. and the Company.
The complaint seeks compensatory damages and prejudgment interest, punitive
damages and the costs of suit. Although the outcome of the litigation cannot be
determined at this time, the Company intends to vigorously defend against such
allegations.
The Company is not involved in any other pending or threatened legal
proceedings which the Company believes could reasonably be expected to have a
material adverse effect on the Company's business, financial position or results
of operations.
F-14
<PAGE> 62
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLAN
The Company has established a 401(k) profit sharing plan under which all
employees are eligible to participate. Employee contributions are voluntary and
subject to Internal Revenue Service limitations. The Company matches, based on
annually determined factors, employee contributions provided the employee
completes 1,000 hours of service annually and is employed as of December 31 of
each plan year. For the years ended October 1, 1994, September 30, 1995 and
September 28, 1996, and for the thirty-nine weeks ended June 28, 1997, the
Company charged to expense $88, $86, $112, and $86, respectively, related to
this plan.
13. SUBSEQUENT EVENTS
The Board of Directors contemplates an initial public offering (the
Offering) of the Company's common stock. In connection with the Offering, the
Board formed a new corporation, Tropical Sportswear Int'l Corporation (the
Company). Outstanding common and preferred stock of the predecessor company,
Apparel International Group, Inc. (AIG), was exchanged for an equal amount of
common and preferred stock of the Company. Immediately preceding the closing of
the Offering, the subsidiaries of AIG, Tropical Acquisition Corporation and
Tropical Sportswear International Corporation, will be merged into the Company.
The preferred stock of AIG had a par value of $100 per share. These shares
were exchanged for a special class of preferred stock which has a $.01 par value
and a $100 per share liquidation preference. These shares are expected to be
redeemed upon the closing of the Offering.
Effective August , 1997, the Board of Directors approved a change in the
Company's capital stock to authorize 50,000,000 shares of $.01 par value common
stock and 10,000,000 shares of $.01 par value preferred stock. At this time, the
Board also authorized a 6,000-for-1 stock split for holders of its common stock.
The accompanying consolidated financial statements have been restated to reflect
this change in capitalization.
The Board of Directors has adopted two stock option plans, which are to
take effect upon the closing of the Offering. The Employee Stock Option Plan
(the Employee Plan) and the Non-Employee Director Stock Option Plan (the
Director Plan) reserve 700,000 shares of common stock for future issuance under
the plans. The per share exercise price of each stock option granted under the
plans will be equal to the quoted fair market value of the stock on the date of
grant. Under the Employee Plan, the Board has authorized that upon the closing
of the Offering, options to purchase 300,000 shares of common stock of the
Company at an exercise price equal to the Offering per share price will be
granted to key employees. Under the Director Plan, options to purchase 60,000
shares of common stock of the Company at an exercise price equal to the Offering
per share price will be granted upon the effectiveness of the registration
statement relating to the Offering to non-employee directors.
In December 1996 and January 1997, the Board of Directors granted to key
members of management nonqualified options to purchase 60,000 shares of common
stock of the Company at an exercise price of $10.50 per share, its estimated
fair value at the date of grant. The options vest and become exercisable over a
three-year period.
F-15
<PAGE> 63
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 6
Use of Proceeds........................... 12
Dividend Policy........................... 12
Capitalization............................ 13
Dilution.................................. 14
Selected Consolidated Financial Data...... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 16
Business.................................. 23
Management................................ 34
Principal and Selling Shareholders........ 40
Certain Transactions...................... 40
Description of Capital Stock.............. 41
Shares Eligible for Future Sale........... 44
Underwriting.............................. 45
Legal Matters............................. 46
Experts................................... 46
Available Information..................... 46
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>
======================================================
======================================================
Shares
[LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
PRUDENTIAL SECURITIES INCORPORATED
OPPENHEIMER & CO., INC.
, 1997
======================================================
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $ 21,213.00
NASD filing fee............................................. 7,500.00
Nasdaq listing fee.......................................... 25,000.00
Transfer agent expenses and fees............................ 2,500.00
Printing and engraving...................................... 100,000.00
Accountants' fees and expenses.............................. 200,000.00
Legal fees and expenses..................................... 440,000.00
Miscellaneous............................................... 3,787.00
-----------
Total............................................. $800,000.00
===========
</TABLE>
- ---------------
* All of the above fees, costs and expenses above will be paid by the Company
and the Selling Shareholders in proportion to the respective number of shares
being offered and sold hereby. Other than the SEC filing fee and NASD filing
fee, all fees and expenses are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act (the "Florida Act") permits a Florida
corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the corporation
in related capacities) for liabilities, including legal expenses, arising by
reason of service in such capacity if such person shall have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful. However, in the case of
actions brought by or in the right of the corporation, no indemnification may be
made with respect to any matter as to which such director or officer shall have
been adjudged liable, except in certain limited circumstances.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall indemnify directors and executive officers to the fullest extent now or
hereafter permitted by the Florida Act. In addition, the Company may enter into
Indemnification Agreements with its directors and executive officers in which
the Company agrees to indemnify such persons to the fullest extent now or
hereafter permitted by the Florida Act.
The indemnification provided by the Florida Business Corporation Act and
the Company's Bylaws is not exclusive of any other rights to which a director or
officer may be entitled. The general effect of the foregoing provisions may be
to reduce the circumstances in which an officer or director may be required to
bear the economic burden of the foregoing liabilities and expense.
The Company may obtain a liability insurance policy for its directors and
officers as permitted by the Florida Act which may extend to, among other
things, liability arising under the Securities Act of 1933, as amended (the
"Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On August , 1997, the Company issued 100 shares of Common Stock, $1.00
par value, to Apparel International Group, Inc., a Delaware corporation ("AIG"),
in a transaction exempt under Section 4(2) of the Securities Act of 1933, as
amended. On August , 1997, AIG was merged with and into the Company as part of
a tax-free restructuring. Pursuant to such merger, holders of issued and
outstanding shares of common stock and preferred stock of AIG received an equal
number of shares of common stock and preferred stock, respectively, of the
Company. Prior to the completion of the Offering, the Company will merge two
wholly-
II-1
<PAGE> 65
owned subsidiaries, Tropical Acquisition Corporation, a Delaware corporation,
and Tropical Sportswear International Corporation, a Florida corporation, with
and into the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Agreement and Plan of Merger by Tropical Sportswear Int'l
Corporation, as the Surviving Corporation, and Apparel
International Group, Inc., as the Merging Corporation.
2.2 -- Agreement and Plan of Merger by Tropical Sportswear Int'l
Corporation, as the Surviving Corporation, and Tropical
Acquisition Corporation and Tropical Sportswear
International Corporation, as the Merging Corporations.
3.1 -- Amended and Restated Articles of Incorporation of Tropical
Sportswear Int'l Corporation.
3.2 -- Amended and Restated Bylaws of Tropical Sportswear Int'l
Corporation.
4.1 -- Specimen certificate for the Common Stock of Tropical
Sportswear Int'l Corporation.*
4.2 -- Shareholders' Agreement by and among Tropical Sportswear
Int'l Corporation, William W. Compton, the Compton Family
Limited Partnership, Michael Kagan, the Kagan Family Limited
Partnership, Shakale Internacional, S.A. and Accel, S.A. de
C.V.*
5.1 -- Opinion of Foley & Lardner.*
10.1 -- Loan and Security Agreement, dated September 28, 1994,
between Tropical Sportswear Int'l Corporation and Fleet
Capital Corporation (Formerly Barclays Business Credit,
Inc.).
10.2 -- Construction and Term Loan Agreement, dated as of May 7,
1996, by and between Tropical Sportswear Int'l Corporation
and SouthTrust Bank of Alabama, National Association, as
amended.
10.3 -- Retail -- Domestic Collection Factoring Agreement, dated
October 1, 1995, by and between Heller Financial, Inc. and
Tropical Sportswear Int'l Corporation.
10.4 -- Employment Agreement between William W. Compton and Tropical
Sportswear Int'l Corporation.
10.5 -- Employment Agreement between Michael Kagan and Tropical
Sportswear Int'l Corporation.
10.6 -- Employment Agreement between Richard J. Domino and Tropical
Sportswear Int'l Corporation.
10.7 -- Tropical Sportswear Int'l Corporation Employee Stock Option
Plan.
10.8 -- Tropical Sportswear Int'l Corporation Non-Employee Director
Stock Option Plan.
10.9 -- 1996 Apparel International Group, Inc. Stock Option Plan.
11.1 -- Statement re: computation of per share earnings.
21.1 -- List of subsidiaries of Tropical Sportswear Int'l
Corporation.
23.1 -- Consent of Foley & Lardner (included in Exhibit (5.1)).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney relating to subsequent amendments
(included on the signature page of this Registration
Statement).
27.1 -- Financial Data Schedule for the year ended September 28,
1996 (filed for SEC purposes only).
27.2 -- Financial Data Schedule for the thirty-nine weeks ended June
28, 1997 (filed for SEC purposes only).
</TABLE>
- ---------------
* To be filed by amendment.
II-2
<PAGE> 66
(b) Financial Statement Schedules.
Report of Independent Auditors
Schedule II -- Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, and State of
Florida, on this 15th day of August, 1997.
TROPICAL SPORTSWEAR INT'L CORPORATION
By: /s/ WILLIAM W. COMPTON
------------------------------------
William W. Compton
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints William W. Compton and Michael Kagan, and each of them
individually, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement (as well as any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933), and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM W. COMPTON Chairman of the Board, Chief August 15, 1997
- --------------------------------------------------- Executive Officer and Director
William W. Compton (Principal Executive Officer)
/s/ MICHAEL KAGAN Executive Vice President, Chief August 15, 1997
- --------------------------------------------------- Financial Officer, Treasurer,
Michael Kagan Secretary and Director
/s/ ELOY S. VALLINA-LAGUERA Director August 15, 1997
- ---------------------------------------------------
Eloy S. Vallina-Laguera
/s/ JESUS ALVAREZ-MORODO Director August 15, 1997
- ---------------------------------------------------
Jesus Alvarez-Morodo
/s/ LESLIE J. GILLOCK Director August 15, 1997
- ---------------------------------------------------
Leslie J. Gillock
/s/ DONALD H. LIVINGSTONE Director August 15, 1997
- ---------------------------------------------------
Donald H. Livingstone
/s/ LEON H. REINHART Director August 15, 1997
- ---------------------------------------------------
Leon H. Reinhart
/s/ DAVID GARZA-SANTOS Director August 15, 1997
- ---------------------------------------------------
David Garza-Santos
</TABLE>
II-4
<PAGE> 68
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE
We have audited the consolidated financial statements of Tropical
Sportswear Int'l Corporation as of September 28, 1996 and September 30, 1995 and
for each of the three years in the period ended September 28, 1996, and have
issued our report thereon dated November 27, 1996, except as to the third
paragraph of Note 13 as to which the date is August , 1997 (included elsewhere
in this Registration Statement). Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Tampa, Florida
August , 1997
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 13 to the financial
statements.
/s/ Ernst & Young LLP
Tampa, Florida
August 12, 1997
<PAGE> 69
TROPICAL SPORTSWEAR INT'L CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Reserve for returns and allowances and bad debts:
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended:
October 1, 1994........................... $350 $ 711 -- $ 145 $916
==== ====== ==== ====== ====
September 30, 1995........................ $916 $3,061 -- $3,495 $482
==== ====== ==== ====== ====
September 28, 1996........................ $482 $3,022 -- $2,980 $524
==== ====== ==== ====== ====
</TABLE>
Reserve for Excess and Slow-Moving Inventory:
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended:
October 1, 1994........................... $ 600 $1,341 -- $ -- $1,941
====== ====== ==== ====== ======
September 30, 1995........................ $1,941 $ 468 -- $ 629 $1,780
====== ====== ==== ====== ======
September 28, 1996........................ $1,780 $ 798 -- $ 378 $2,200
====== ====== ==== ====== ======
</TABLE>
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Agreement and Plan of Merger by Tropical Sportswear Int'l
Corporation, as the Surviving Corporation, and Apparel
International Group, Inc., as the Merging Corporation.
2.2 -- Agreement and Plan of Merger by Tropical Sportswear Int'l
Corporation, as the Surviving Corporation, and Tropical
Acquisition Corporation and Tropical Sportswear
International Corporation, as the Merging Corporations.
3.1 -- Amended and Restated Articles of Incorporation of Tropical
Sportswear Int'l Corporation.
3.2 -- Amended and Restated Bylaws of Tropical Sportswear Int'l
Corporation.
4.1 -- Specimen certificate for the Common Stock of Tropical
Sportswear Int'l Corporation.*
4.2 -- Shareholders' Agreement by and among Tropical Sportswear
Int'l Corporation, William W. Compton, the Compton Family
Limited Partnership, Michael Kagan, the Kagan Family Limited
Partnership, Shakale Internacional, S.A. and Accel, S.A. de
C.V.*
5.1 -- Opinion of Foley & Lardner.*
10.1 -- Loan and Security Agreement, dated September 28, 1994, by
and between Tropical Sportswear Int'l Corporation and Fleet
Capital Corporation (formerly Barclays Business Credit,
Inc.).
10.2 -- Construction and Term Loan Agreement, dated as of May 7,
1996, by and between Tropical Sportswear Int'l Corporation
and SouthTrust Bank of Alabama, National Association, as
amended.
10.3 -- Retail-Domestic Collection Factoring Agreement, dated
October 1, 1995, by and between Heller Financial, Inc. and
Tropical Sportswear Int'l Corporation.
10.4 -- Employment Agreement between William W. Compton and Tropical
Sportswear Int'l Corporation.
10.5 -- Employment Agreement between Michael Kagan and Tropical
Sportswear Int'l Corporation.
10.6 -- Employment Agreement between Richard J. Domino and Tropical
Sportswear Int'l Corporation.
10.7 -- Tropical Sportswear Int'l Corporation Employee Stock Option
Plan.
10.8 -- Tropical Sportswear Int'l Corporation Non-Employee Director
Stock Option Plan.
10.9 -- 1996 Apparel International Group, Inc. Stock Option Plan.
11.1 -- Statement re: computation of per share earnings.
21.1 -- List of subsidiaries of Tropical Sportswear Int'l
Corporation.
23.1 -- Consent of Foley & Lardner (included in Exhibit (5.1)).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney relating to subsequent amendments
(included on the signature page of this Registration
Statement).
27.1 -- Financial Data Schedule for the year ended September 28,
1996 (filed for SEC purposes only).
27.2 -- Financial Data Schedule for the thirty-nine weeks ended June
28, 1997 (filed for SEC purposes only).
</TABLE>
- ---------------
* To be filed by amendment.
S-1
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as
of the ______ day of ___________, 1997, by Tropical Sportswear Int'l
Corporation, a Florida corporation (the "Surviving Corporation"), and Apparel
International Group, Inc., a Delaware corporation (the "Merging Corporation")
(The Merging Corporation and the Surviving Corporation are sometimes
collectively referred to herein as the "Constituent Corporations").
RECITALS
The Merging Corporation is a Delaware corporation having (i)
one thousand (1,000) authorized shares of common stock, par value $1.00 per
share ("Merging Corporation Common Stock"), of which one thousand (1,000) shares
are issued and outstanding as of the date hereof, and (ii) forty-nine thousand
nine hundred and ninety (49,990) authorized shares of preferred stock, par value
$100.00 per share ("Merging Corporation Preferred Stock"), of which thirty-eight
thousand six hundred and thirty (38,630) shares are issued and outstanding as of
the date hereof.
The Surviving Corporation is a Florida corporation having (i)
one thousand and fifty (1,050) authorized shares of common stock, par value $.01
per share ("Surviving Corporation Common Stock"), of which one hundred (100)
shares are issued and outstanding as of the date hereof, and (ii) forty-nine
thousand nine hundred and ninety (49,990) authorized shares of Preferred Stock,
par value $.01 per share ("Surviving Corporation Preferred Stock"), of which no
shares are issued and outstanding as of the date hereof.
The Merging Corporation holds one hundred percent (100%) of
the issued and outstanding stock of the Surviving Corporation
The Merging Corporation and the Surviving Corporation have
determined it to be desirable for the Merging Corporation to merge with and into
the Surviving Corporation pursuant to the applicable provisions of the Delaware
General Corporation Law (the "Delaware Law") and the Florida Business
Corporation Act (the "Florida Act"), on the terms hereinafter set forth, and the
Boards of Directors of the Merging and Surviving Corporations have each approved
this Agreement and Plan of Merger and authorized the execution and delivery
hereof.
PLAN OF MERGER
In consideration of the premises and the agreements herein
contained, and in accordance with the Delaware Law and the Florida Act, the
parties hereto adopt and make this Agreement and Plan of Merger and prescribe
the terms and conditions of such Merger and the manner of carrying the same into
effect, which shall be as follows:
<PAGE> 2
1. On the date of the filing of Articles of Merger with the
Secretary of State of the State of Florida (the "Effective Time"), the Merging
Corporation shall be merged with and into the Surviving Corporation (the
"Merger"). The terms and conditions of the Merger and the mode of carrying the
same into effect are set forth in this Agreement and Plan of Merger.
2. At the Effective Time, all of the issued and outstanding
shares of Surviving Corporation Common Stock immediately prior to the Effective
Time shall no longer be issued or outstanding and shall automatically be
cancelled and retired, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto.
3. (a) At the Effective Time, all of the issued and
outstanding shares of Merging Corporation Common Stock, and all shares of
Merging Corporation Common Stock and stock held in the treasury of the Merging
Corporation (if any), immediately prior to the Effective Time shall
automatically be cancelled and deemed to have been converted into an equal
number of shares of Surviving Corporation Common Stock. Accordingly, each holder
of shares of Merging Corporation Common Stock which are issued and outstanding
immediately prior to the Effective Time shall be issued an equal number of
shares of Surviving Corporation Common Stock.
(b) At the Effective Time, all of the issued and
outstanding shares of Merging Corporation Preferred Stock, and all shares of
Merging Corporation Preferred Stock held in the treasury of the Merging
Corporation (if any), immediately prior to the Effective Time shall
automatically be cancelled and deemed to have been converted into an equal
number of shares of Surviving Corporation Preferred Stock. Accordingly, each
holder of shares of Merging Corporation Preferred Stock which are issued and
outstanding immediately prior to the Effective Time shall be issued an equal
number of shares of Surviving Corporation Preferred Stock.
(c) Holders of shares of Merging Corporation Common
and/or Preferred Stock shall be issued certificates for Surviving Corporation
Common and/or Preferred Stock, as the case may be, upon their surrender of their
certificates for shares in the Merging Corporation.
4. The Surviving Corporation shall assume all duties and
obligations of the Merging Corporation under its 1996 Stock Option Plan so that
options to purchase shares of Merging Corporation Common Stock under the Merging
Corporation's 1996 Stock Option Plan shall be converted to options to purchase
an equal number of shares of Surviving Corporation Common Stock upon the
identical terms and conditions.
5. At the Effective Time, the Merging Corporation shall be
merged into the Surviving Corporation, which shall continue its corporate
existence under the laws of the State of Florida. The separate existence and
corporate organization of the Merging Corporation shall cease at the Effective
Time, and the Surviving Corporation shall possess all of the rights,
-2-
<PAGE> 3
privileges, immunities and franchisees, of a public as well as of a private
nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest, of or belonging to or due to each of the Constituent Corporations,
shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed; and the title to any real estate, or
any interest therein, vested in either of the Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger. The Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of each of the Constituent Corporations, and any claims existing
or action or proceeding pending by or against the Constituent Corporations may
be prosecuted to judgment as if the Merger had not taken place. Neither the
rights of creditors nor any liens upon the property of either Constituent
Corporation shall be impaired by the Merger.
6. The officers and directors of the Surviving Corporation at
the Effective Time shall be and continue to be the officers and directors of the
Surviving Corporation thereafter, until their successors are duly appointed or
elected.
7. The Articles of Incorporation and Bylaws of the Surviving
Corporation in effect immediately prior to the Effective Time shall remain in
effect as the Articles of Incorporation and Bylaws of the Surviving Corporation
thereafter, unaffected by the Merger.
8. If, at any time, the Surviving Corporation shall consider
or be advised that any further assignments or assurances in law or any things
are necessary or desirable to vest in the Surviving Corporation, according to
the terms hereof, the title to any property or rights of the Merging
Corporation, the proper officers and directors of the Merging Corporation shall
and will execute and make all such proper assignments and assurances in law and
do all things necessary or proper to vest title in such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement and Plan of Merger.
9. This Agreement and Plan of Merger shall be submitted to the
shareholders of each of the parties hereto in accordance with the applicable
provisions of law, and the consummation of this Agreement and Plan of Merger and
the Merger herein provided for are conditioned upon the approval hereof by the
shareholders of the respective parties as provided by law.
10. This Agreement and Plan of Merger and the Merger herein
contemplated may be abandoned upon the mutual agreement of the parties at any
time prior to the Effective Time. This Agreement and Plan of Merger may be
amended, modified or supplemented at any time (before or after shareholder
approval) prior to the Effective Time of the Merger with the mutual consent of
the Boards of Directors of the Merging Corporation and the Surviving
Corporation; provided, however, that this Agreement and Plan of Merger may not
be amended,
-3-
<PAGE> 4
modified or supplemented after it has been approved by the shareholders in any
manner which, in the judgment of the Board of Directors of the Surviving
Corporation, would have a material adverse effect on the rights of such
shareholders or in any manner not permitted under applicable law.
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be executed by their duly authorized officers, all as of the
day and year first above written.
TROPICAL SPORTSWEAR INT'L CORPORATION
By:_________________________________
William W. Compton,
Chief Executive Officer
Attest:______________________________
Michael Kagan, Secretary
APPAREL INTERNATIONAL GROUP, INC.
By:__________________________________
William W. Compton
Chief Executive Officer
Attest:_________________________
Michael Kagan, Secretary
-4-
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as
of the ____ day of _____________, 1997, by Tropical Sportswear Int'l
Corporation, a Florida corporation (the "Surviving Corporation"), Tropical
Acquisition Corporation, a Delaware corporation ("TAC"), and Tropical Sportswear
International Corporation, a Florida corporation ("TSI") (TAC and TSI sometimes
referred to collectively as the "Merging Corporations", and the Merging
Corporations and the Surviving Corporation sometimes referred to collectively as
the "Constituent Corporations").
RECITALS
The Surviving Corporation is a Florida corporation having (i)
one thousand and fifty (1,050) authorized shares of Common Stock, par value $.01
per share, of which one thousand (1,000) shares are issued and outstanding as of
the date hereof, and (ii) forty-nine thousand nine hundred and ninety (49,990)
authorized shares of Preferred Stock, par value $.01 per share, of which
thirty-eight thousand six hundred and thirty (38,630) shares are issued and
outstanding as of the date hereof.
TAC is a Delaware corporation having one thousand (1,000)
authorized shares of Common Stock, par value $1.00 per share, of which one
thousand (1,000) shares are issued and outstanding as of the date hereof.
TSI is a Florida corporation having (i) ten thousand (10,000)
authorized shares of Common Stock, par value $10.00 per share, of which five
thousand (5,000) shares are issued and outstanding as of the date hereof, and
(ii) twenty thousand (20,000) authorized shares of Preferred Stock, par value
$100.00 per share, of which twenty thousand (20,000) shares are issued and
outstanding as of the date hereof.
The Surviving Corporation holds one hundred percent (100%) of
the issued and outstanding common stock of TAC, and TAC holds one hundred
percent (100%) of the issued and outstanding common and preferred stock of TSI.
The Merging Corporations and the Surviving Corporation have
determined it to be desirable for the Merging Corporations to merge with and
into the Surviving Corporation pursuant to the applicable provisions of the
Delaware General Corporation Law (the "Delaware Law") and the Florida Business
Corporation Act (the "Florida Act"), on the terms hereinafter set forth, and the
Boards of Directors of the Merging and Surviving Corporations have each approved
this Agreement and Plan of Merger, and authorized the execution and delivery
hereof.
<PAGE> 2
PLAN OF MERGER
In consideration of the premises and the agreements herein
contained, and in accordance with the Delaware Law and the Florida Act, the
parties hereto adopt and make this Agreement and Plan of Merger and prescribe
the terms and conditions of such Merger and the manner of carrying the same into
effect, which shall be as follows:
1. On the date of the filing of Articles of Merger with the
Secretary of State of the State of Florida (the "Effective Time"), the Merging
Corporations shall be merged with and into the Surviving Corporation (the
"Merger"). The terms and conditions of the Merger and the mode of carrying the
same into effect are set forth in this Agreement and Plan of Merger.
2. At the Effective Time, (a) all of the issued and
outstanding shares of common stock of TAC, (b) all of the issued and outstanding
shares of common and preferred stock of TSI, and (c) all shares of common and
preferred stock held in the treasury of either Merging Corporation (if any),
immediately prior to the Effective Time shall no longer be issued or outstanding
and shall automatically be cancelled and retired, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto. No shares of capital stock of the Surviving Corporation or
other consideration shall be issued in connection with the Merger.
3. At the Effective Time, the Merging Corporations shall be
merged into the Surviving Corporation, which shall continue its corporate
existence under the laws of the State of Florida. The separate existence and
corporate organization of the Merging Corporations shall cease at the Effective
Time, and the Surviving Corporation shall possess all of the rights, privileges,
immunities and franchises, of a public as well as of a private nature, of each
of the Constituent Corporations; and all property, real, personal and mixed, and
all debts due on whatever account, and all other choses in action, and all and
every other interest, of or belonging to or due to each of the Constituent
Corporations, shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger.
The Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities and obligations of each of the Constituent Corporations, and any
claims existing or action or proceeding pending by or against the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place.
Neither the rights of creditors nor any liens upon the property of any
Constituent Corporation shall be impaired by the Merger.
4. The officers and directors of the Surviving Corporation at
the Effective Time shall be and continue to be the officers and directors of the
Surviving Corporation thereafter, until their successors are duly appointed or
elected.
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<PAGE> 3
5. At the Effective Time, the Articles of Incorporation of the
Surviving Corporation shall be amended and restated in their entirety in the
form attached hereto as Exhibit A. The Articles of Incorporation of the
Surviving Corporation, as so amended and restated, shall remain in effect as the
Amended and Restated Articles of Incorporation of the Surviving Corporation
after the Merger.
6. At the Effective Time, the Bylaws of the Surviving
Corporation shall be amended and restated in their entirety, and the Bylaws of
the Surviving Corporation, as so amended and restated, shall remain in effect as
the Amended and Restated Bylaws of the Surviving Corporation after the Merger.
7. At the Effective Time, each share of Surviving Corporation
Common Stock issued and outstanding immediately prior to the Effective Time
shall automatically be cancelled and deemed to have been converted into Six
Thousand (6,000) shares of Surviving Corporation Common Stock (the "Stock").
Certificate representing such increased number of shares shall be issued to the
holders of such shares, in accordance with the foregoing sentence, upon the
surrender of their stock certificates.
8. If, at any time, the Surviving Corporation shall consider
or be advised that any further assignments or assurances in law or any things
are necessary or desirable to vest in the Surviving Corporation, according to
the terms hereof, the title to any property or rights of the Merging
Corporations, the proper officers and directors of the Merging Corporations
shall and will execute and make all such proper assignments and assurances in
law and do all things necessary or proper to vest title in such property or
rights in the Surviving Corporation and otherwise to carry out the purposes of
this Agreement and Plan of Merger.
9. This Agreement and Plan of Merger shall be submitted to the
shareholders of each of the parties hereto in accordance with the applicable
provisions of law, and the consummation of this Agreement and Plan of Merger and
the Merger herein provided for are conditioned upon the approval hereof by the
shareholders of the respective parties as provided by law.
10. This Agreement and Plan of Merger and the Merger herein
contemplated may be abandoned upon the mutual agreement of the parties at any
time prior to the Effective Time. This Agreement and Plan of Merger may be
amended, modified or supplemented at any time (before or after shareholder
approval) prior to the Effective Time of the Merger with the mutual consent of
the Boards of Directors of the Merging Corporations and the Surviving
Corporation; provided, however, that this Agreement and Plan of Merger may not
be amended, modified or supplemented after it has been approved by the
shareholders in any manner which, in the judgment of the Board of Directors of
the Surviving Corporation, would have a material adverse effect on the rights of
such shareholders or in any manner not permitted under applicable law.
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<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be executed by their duly authorized officers, all as of the
day and year first above written.
TROPICAL SPORTSWEAR INT'L CORPORATION
By:_________________________________
William W. Compton
Chief Executive Officer
Attest:______________________________
Michael Kagan, Secretary
TROPICAL ACQUISITION CORPORATION
By:_________________________________
William W. Compton
Chief Executive Officer
Attest:______________________________
Michael Kagan, Secretary
TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
By:_________________________________
William W. Compton
Chief Executive Officer
Attest:______________________________
Michael Kagan, Secretary
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<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TROPICAL SPORTSWEAR INT'L CORPORATION
TROPICAL SPORTSWEAR INT'L CORPORATION (the "Corporation"), under the
Florida Business Corporation Act, Chapter 607 of the Florida Statutes, as
hereafter amended and modified (the "FBCA"), hereby adopts the following Amended
and Restated Articles of Incorporation of the Corporation, effective as of
_______________, 1997, pursuant to Sections 607.1006 and 607.1007 of the FBCA:
ARTICLE 1
NAME
The name of the Corporation is:
TROPICAL SPORTSWEAR INT'L CORPORATION
ARTICLE 2
BUSINESS AND ACTIVITIES
The Corporation may, and is authorized to, engage in any activity or
business now or hereafter permitted under the laws of the United States and of
the State of Florida.
ARTICLE 3
CAPITAL STOCK
3.1 Authorized Shares. The total number of shares of all classes of
capital stock that the Corporation shall have the authority to issue shall be
60,000,000 shares, of which 50,000,000 shares shall be Common Stock having a par
value of $0.01 per share ("Common Stock") and 10,000,000 shares shall be
Preferred Stock, par value of $0.01 per share ("Preferred Stock"). The Board of
Directors is expressly authorized, pursuant to Section 607.0602 of the FBCA, to
provide for the classification and reclassification of any unissued shares of
Common Stock or Preferred Stock and the issuance thereof in one or more classes
or series without the approval of the shareholders of the Corporation, all
within the limitations set forth in Section 607.0601 of the FBCA.
3.2 Common Stock.
(A) Relative Rights. The Common Stock shall be subject to all
of the rights, privileges, preferences and priorities of the Preferred Stock as
set forth in the Articles of Amendment to these Amended and Restated Articles of
Incorporation that may hereafter be filed pursuant to Section 607.0602 of the
FBCA to establish the respective class or series of the
<PAGE> 2
Preferred Stock. Except as otherwise provided in these Amended and Restated
Articles of Incorporation, each share of Common Stock shall have the same rights
as and be identical in all respects to all the other shares of Common Stock.
(B) Voting Rights. Except as otherwise provided in these
Amended and Restated Articles of Incorporation, except as otherwise provided by
the FBCA and except as may be determined by the Board of Directors with respect
to the Preferred Stock, only the holders of Common Stock shall be entitled to
vote for the election of directors of the Corporation and for all other
corporate purposes. Upon any such vote, each holder of Common Stock shall,
except as otherwise provided by the FBCA, be entitled to one vote for each share
of Common Stock held by such holder.
(C) Dividends. Whenever there shall have been paid, or
declared and set aside for payment, to the holders of the shares of any class of
stock having preference over the Common Stock as to the payment of dividends,
the full amount of dividends and of sinking fund or retirement payments, if any,
to which such holders are respectively entitled in preference to the Common
Stock, then the holders of record of the Common Stock and any class or series of
stock entitled to participate therewith as to dividends, shall be entitled to
receive dividends, when, as, and if declared by the Board of Directors, out of
any assets legally available for the payment of dividends thereon.
(D) Dissolution, Liquidation, Winding Up. In the event of any
dissolution, liquidation, or winding up of the Corporation, whether voluntary or
involuntary, the holders of record of the Common Stock then outstanding, and all
holders of any class or series of stock entitled to participate therewith in
whole or in part, as to the distribution of assets, shall become entitled to
participate in the distribution of assets of the Corporation remaining after the
Corporation shall have paid, or set aside for payment, to the holders of any
class of stock having preference over the Common Stock in the event of
dissolution, liquidation, or winding up, the full preferential amounts (if any)
to which they are entitled, and shall have paid or provided for payment of all
debts and liabilities of the Corporation.
3.3 Preferred Stock.
(A) Issuance, Designations, Powers, Etc. The Board of
Directors is expressly authorized, subject to the limitations prescribed by the
FBCA and the provisions of these Amended and Restated Articles of Incorporation,
to provide, by resolution and by filing Articles of Amendment to these Amended
and Restated Articles of Incorporation, which, pursuant to Section 607.0602 of
the FBCA shall be effective without shareholder action, for the issuance from
time to time of the shares of the Preferred Stock in one or more classes or
series, to establish from time to time the number of shares to be included in
each such class or series, and to fix the designations, powers, preferences and
other rights of the shares of each such class or series and to fix the
qualifications, limitations and restrictions thereon, including, but without
limiting the generality of the foregoing, the following:
(1) the number of shares constituting that class
or series and the distinctive designation of
that class or series;
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<PAGE> 3
(2) the dividend rate on the shares of that class
or series, whether dividends shall be
cumulative, noncumulative or partially
cumulative and, if so, from which date or
dates, and the relative rights of priority, if
any, of payments of dividends on shares of
that class or series;
(3) whether that class or series shall have voting
rights, in addition to the voting rights
provided by the FBCA, and, if so, the terms of
such voting rights;
(4) whether that class or series shall have
conversion privileges, and, if so, the terms
and conditions of such conversion, including
provision for adjustment of the conversion
rate in such events as the Board of Directors
shall determine;
(5) whether or not the shares of that class or
series shall be redeemable, and, if so, the
terms and conditions of such redemption,
including the dates upon or after which they
shall be redeemable, and the amount per share
payable in case of redemption, which amount
may vary under different conditions and at
different redemption dates;
(6) whether that class or series shall have a
sinking fund for the redemption or purchase of
shares of that class or series, and, if so,
the terms and amount of such sinking fund;
(7) the rights of the shares of that class or
series in the event of voluntary or
involuntary liquidation, dissolution, or
winding up of the Corporation, and the
relative rights of priority, if any, of
payment of shares of that class or series; and
(8) any other relative powers, preferences, and
rights of that class or series, and
qualifications, limitations or restrictions on
that class or series.
(B) Dissolution, Liquidation, Winding Up. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Preferred Stock of each class or series shall be
entitled to receive only such amount or amounts as shall have been fixed by the
Articles of Amendment to these Amended and Restated Articles of Incorporation or
by the resolution or resolutions of the Board of Directors providing for the
issuance of such class or series.
3.4 No Preemptive Rights. Except as the Board of Directors may
otherwise determine, no shareholder of the Corporation shall have any
preferential or preemptive right to
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<PAGE> 4
subscribe for or purchase from the Corporation any new or additional shares of
capital stock, or securities convertible into shares of capital stock, of the
Corporation, whether now or hereafter authorized.
3.5 Special Classes of Stock Prior to Initial Public Offering. Each
share of preferred stock of the Corporation that was issued and outstanding
immediately prior to the adoption of these Amended and Restated Articles of
Incorporation shall be canceled and deemed to constitute one share of Preferred
Stock hereunder, having the rights, preferences, qualifications, limitations and
restrictions set forth below (the "Special Preferred Stock"). Anything in
Section 3.3 to the contrary notwithstanding, the Board of Directors shall not be
required to file Articles of Amendment to these Amended and Restated Articles of
Incorporation in order to issue shares of Special Preferred Stock. The
Corporation shall not have authority to issue any additional shares of Special
Preferred Stock.
(1) Voting Rights. Except as otherwise provided by
the FBCA, the holders of issued and outstanding shares of Special
Preferred Stock ("Special Preferred Holders") shall not be entitled to
vote for the election of directors of the Corporation or for all other
corporate matters.
(2) Dividend Rights. The Special Preferred Holders
shall not be entitled to receive dividends.
(3) Dissolution, Liquidation, Winding Up. In the
event of any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, before any assets of the Corporation
shall be paid to, set aside for or distributed to holders of issued and
outstanding shares of Common Stock or other Preferred Stock, each
Special Preferred Holder shall be entitled to receive out of the assets
of the Corporation or the proceeds thereof, a preferential payment in
an amount equal to $100.00 per share. Except as provided herein, the
Special Preferred Holders shall not be entitled to participate in any
further distribution of the assets of the Corporation or otherwise. If
the assets distributable upon a liquidation shall be insufficient to
permit the distribution to the Special Preferred Holders of the full
preferential amounts to which such Special Preferred Holders shall be
entitled, then such amounts shall be distributed ratably to such
Special Preferred Holders in proportion to the full amounts to which
they respectively are entitled. Neither the consolidation or merger of
the Corporation with or into any other corporation or corporations, nor
the sale or transfer by the Corporation of all or any part of its
assets or stock, shall be deemed to be a liquidation of the Corporation
for purposes of this Section.
(4) Redemption Rights.
(i) At the option of the Corporation, as evidenced by
resolution of its Board of Directors, the Corporation may at
any time, and from time to time, redeem the entire amount or
any part of the shares of issued and outstanding Special
Preferred Stock, without any redemption premium or penalty, at
an amount equal to $100.00 per share.
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<PAGE> 5
(ii) If less than all the issued and outstanding
shares of Special Preferred Stock are to be redeemed by the
Corporation, the particular shares to be redeemed shall be
conclusively selected or determined by the Board of Directors
of the Corporation pro rata or by such other equitable manner
as the Board of Directors of the Corporation shall designate
and prescribe by resolution.
(iii) In case less than all the shares of Special
Preferred Stock represented by any surrendered certificate are
redeemed by the Corporation, a new certificate shall be issued
representing the unredeemed shares.
(iv) All shares of Special Preferred Stock redeemed
as hereinabove provided or otherwise shall be retired and
canceled and shall not be reissued.
(5) Other Rights. Holders of the Special Preferred Stock shall
not be entitled to any conversion rights, preemptive rights, or any
other rights not specified in this Section 3.5.
ARTICLE 4
Board of Directors
4.1 Classification. Except as otherwise provided in these Amended and
Restated Articles of Incorporation or Articles of Amendment filed pursuant to
Section hereof relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect additional
directors under specified circumstances, the number of directors of the
Corporation shall be fixed from time to time by or pursuant to these Amended and
Restated Articles of Incorporation or by bylaws of the Corporation (the
"Bylaws"). The directors, other than those who may be elected by the holders of
any class or series of Preferred Stock voting separately by class or series,
shall be classified, with respect to the time for which they severally hold
office, into three classes, Class I, Class II and Class III, each of which shall
be as nearly equal in number as possible, and shall be adjusted from time to
time in the manner specified in the Bylaws to maintain such proportionality.
Each initial director in Class I shall hold office for a term expiring at the
2000 annual meeting of the shareholders; each initial director in Class II shall
hold office for a term expiring at the 1999 annual meeting of the shareholders;
and each initial director in Class III shall hold office for a term expiring at
the 1998 annual meeting of the shareholders. Notwithstanding the foregoing
provisions of this Section , each director shall serve until such director's
successor is duly elected and qualified, or until such director's earlier death,
resignation or removal. At each annual meeting of the shareholders, the
successors to the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of the
shareholders held in the third year following the year of their election and
until their successors shall have been duly elected and qualified, or until such
director's earlier death, resignation or removal.
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<PAGE> 6
4.2 Special Nomination Rights. Notwithstanding the provisions of these
Amended and Restated Articles of Incorporation or the Corporation's Bylaws as in
effect from time to time, (i) Accel, S.A. de C.V. ("Accel") shall be entitled to
nominate for election to the Board of Directors of the Corporation two persons,
one of whom shall be a Class I director and one of whom shall be a Class II
director; (ii) Shakale Internacional, S.A. ("Shakale") shall be entitled to
nominate for such election one person, who shall be a Class III director; (iii)
the Compton Family Limited Partnership ("Compton") shall be entitled to nominate
for such election one person, who shall be a Class I director; and (iv) the
Kagan Family Limited Partnership ("Kagan") shall be entitled to nominate for
such election one person, who shall be a Class III director; provided, however,
that (y) should at any time the percentage of Common Stock beneficially owned by
Accel fall below twelve percent (12%) of the aggregate number of shares of
Common Stock issued and outstanding, then Accel shall, automatically and without
any right of reinstatement, forfeit the right pursuant to this Section 4.2 to
nominate for election to the Board a Class I director, and (z) should at any
time the percentage of Common Stock beneficially owned by any of Accel,
Shakale, Compton or Kagan fall below five percent (5%) of the aggregate number
of shares of Common Stock issued and outstanding, then such party so falling
below shall forfeit, automatically and without any right of reinstatement, the
right pursuant to this Section 4.2 to nominate any person for election to the
Board. The failure of any person nominated by any party pursuant to this Section
4.2 to be elected or qualified shall not in any way affect such party's future
nomination rights under this Section 4.2. For purposes of calculating the
foregoing percentages, the number of shares of Common Stock beneficially owned
by each of Accel, Shakale, Compton or Kagan shall include any shares of Common
Stock owned beneficially and of record by any of its affiliates, or members of
their immediate families, in each case as such term is defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Except as set
forth in the immediately following sentence, and notwithstanding any other
provision in these Amended and Restated Articles of Incorporation to the
contrary, at the time for nomination to fill a vacancy resulting from the death,
resignation or removal of a director who was elected pursuant to a nomination
under this Section 4.2 (or who was an opponent of such a nominee and was elected
instead) (a "Ceasing-to-be Director"), then Accel, Shakale, Compton or Kagan,
whichever initially nominated such Ceasing-to-be-Director (or whichever
nominated the defeated opponent of such director), shall have the right
(provided such right has not been forfeited as set forth in this Section 4.2) to
nominate another person for election to the Board of Directors of the
Corporation at the next annual meeting of shareholders to complete such
director's term. Notwithstanding the foregoing, the Board of Directors shall be
entitled to fill or leave vacant the seat of any Ceasing-to-be-Director between
the time that such Director ceases to be a director and the next annual meeting
of shareholders. To be timely, nomination pursuant to this Section 4.2 must be
delivered to or mailed and received at the principal business office of the
Corporation not more than ten (10) days after notice of the date of the annual
meeting of shareholders is given to such shareholders or prior public disclosure
of the date of the meeting is made, except that, in the case of a sitting
director previously so nominated under this Section 4.2, the Corporation shall
communicate with such director on a timely basis for the purpose of confirming
that such director is to be nominated again and requesting the information
requested of nominees indicated below. Any nomination pursuant to this Section
4.2 shall set forth (a) as to the person such party proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such proposed nominee, (ii) the principal occupation or
employment of such person,
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(iii) the class and number of shares of capital stock of the Corporation which
are beneficially owned by such person, and (iv) any other information relating
to such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including without limitation such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (b) as to the party making such
nomination (i) the name and address, as they appear on the Corporation's books,
of the party proposing such nomination, and (ii) the class and number of shares
of stock of the Corporation which are beneficially owned by the shareholder, as
calculated in accordance herewith. Notwithstanding the foregoing, no person
shall be nominated for election as a director of the Corporation by any party
pursuant to this Section 4.2 if such person has previously been removed as a
director for cause as provided in Section 4.3 below. Notwithstanding the
provisions of the Company's Bylaws as in effect from time to time, in the event
a person is properly nominated to stand for election as a director of the
Corporation pursuant to this Section 4.2, such person shall be regarded as a
nominee of the Board of Directors for purposes of Regulation 14A under the
Exchange Act. The forfeiture by any party of any special nomination rights
pursuant to this Section 4.2 shall not affect such party's rights as a
shareholder of the Corporation generally (it not being the intent hereof to
deprive any party hereto of any right otherwise incident to share ownership).
4.3 Removal.
(A) Removal For Cause. Except as otherwise provided pursuant
to the provisions of these Amended and Restated Articles of Incorporation or
Articles of Amendment relating to the rights of the holders of any class or
series of Preferred Stock, voting separately by class or series, to elect
directors under specified circumstances, any director or directors may be
removed from office at any time, but only for cause (as defined in Section
4.3(B) hereof) and only by the affirmative vote, at a special meeting of the
shareholders called for such a purpose, of not less than sixty-six and
two-thirds percent (66-2/3%) of the total number of votes of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposed removal was contained in the notice of such
meeting. At least thirty (30) days prior to such special meeting of
shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. Except as provided by Section 4.2,
any vacancy on the Board of Directors resulting from such removal or otherwise
shall be filled only by vote of a majority of the directors then in office,
although less than a quorum, and any director so chosen shall hold office until
the next election of the class for which such director shall have been chosen
and until his or her successor shall have been elected and qualified or until
any such director's earlier death, resignation or removal.
(B) "Cause" Defined. For the purposes of this Section 4.3,
"cause" shall mean (i) misconduct as a director of the Corporation or any
subsidiary of the Corporation which involves dishonesty with respect to a
substantial or material corporate activity or corporate assets, or (ii)
conviction of an offense punishable by one (1) or more years of imprisonment
(other than minor regulatory infractions and traffic violations which do not
materially and adversely affect the Corporation).
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4.4 Change of Number of Directors. In the event of any
increase or decrease in the authorized number of directors, no decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
4.5 Directors Elected by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the Corporation shall have the right,
voting separately by class or series, to elect one or more directors at an
annual or special meeting of shareholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of these Amended and Restated Articles of Incorporation, as amended by
Articles of Amendment applicable to such classes or series of Preferred Stock.
4.6 Exercise of Business Judgment. In discharging his or her
duties as a director of the Corporation, a director may consider such factors as
the director considers relevant, including the long-term prospects and interests
of the Corporation and its shareholders, the social, economic, legal, or other
effects of any corporate action or inaction upon the employees, suppliers,
customers of the Corporation or its subsidiaries, the communities and society in
which the Corporation or its subsidiaries operate, and the economy of the State
of Florida and the United States.
4.7 Initial Number of Directors. The number of directors
constituting the initial Board of Directors of the Corporation is eight (8);
provided, however, that in the event the percentage of Common Stock beneficially
owned by Schakale immediately following the last to occur of (i) the expiration
of the over-allotment options granted to the underwriters in connection with the
initial public offering of shares of Common Stock and (ii) the closing of the
last sale pursuant to any exercise thereof, falls below five percent (5%) of the
aggregate number of shares of Common Stock issued and outstanding, then,
notwithstanding any other provision of these Amended and Restated Articles of
Incorporation, David Garza-Santos (or his successor, if any) shall be
automatically removed as a director of the Corporation and the number of
directors constituting the Board of Directors of the Corporation shall be
reduced to seven (7) without the need for any further action by either the Board
of Directors or shareholders of the Corporation. The number of directors may be
increased or decreased from time to time as provided in the Bylaws, but in no
event shall the number of directors be less than five (5) nor more than fifteen
(15); provided, however, that, unless required by law, the number of directors
shall not be increased or decreased without the consent of each party remaining
entitled to special nomination rights pursuant to Section 4.2 above.
ARTICLE 5
ACTION BY SHAREHOLDERS
5.1 Call For Special Meeting. Special meetings of the shareholders of
the Corporation may be called at any time, but only by (a) the Chairman of the
Board of the Corporation, (b) the Chief Executive Officer of the Corporation,
(c) a majority of the directors then in office, and (d) the holders of not less
than twenty-five percent (25%) of the total number of votes of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
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5.2 Shareholder Action By Written Consent. Any action required or
permitted by the FBCA to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more written consents describing the action taken shall be signed
and dated by the holders of outstanding capital stock of the Corporation of each
voting group entitled to vote thereon having not less than the minimum number of
votes with respect to each voting group that would be necessary to authorize or
take such action at a meeting at which all voting groups and shares entitled to
vote thereon were present and voted. Such consents must be delivered to the
principal office of the Corporation in Florida, the Corporation's principal
place of business, the Secretary, or another officer or agent of the Corporation
having custody of the books in which proceedings of meetings of shareholders are
recorded. No written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the date of the earliest dated
consent delivered in the manner required herein, written consents signed by the
number of holders required to take action are delivered to the Corporation by
delivery as set forth in this Section.
ARTICLE 6
INDEMNIFICATION
6.1 Provision of Indemnification. The Corporation shall, to the fullest
extent permitted or required by the FBCA, including any amendments thereto (but
in the case of any such amendment, only to the extent such amendment permits or
requires the Corporation to provide broader indemnification rights than prior to
such amendment), indemnify its Directors and Executive Officers against any and
all Liabilities, and advance any and all reasonable Expenses, incurred thereby
in any Proceeding to which any such Director or Executive Officer is a Party or
in which such Director or Executive Officer is deposed or called to testify as a
witness because he or she is or was a Director or Executive Officer of the
Corporation. The rights to indemnification granted hereunder shall not be deemed
exclusive of any other rights to indemnification against Liabilities or the
advancement of Expenses which a Director or Executive Officer may be entitled
under any written agreement, Board of Directors' resolution, vote of
shareholders, the FBCA, or otherwise. The Corporation may, but shall not be
required to, supplement the foregoing rights to indemnification against
Liabilities and advancement of Expenses by the purchase of insurance on behalf
of any one or more of its Directors or Executive Officers whether or not the
Corporation would be obligated to indemnify or advance Expenses to such Director
or Executive Officer under this Article. For purposes of this Article, the term
"Directors" includes former directors of the Corporation and any director who is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of another Corporation, partnership, joint venture, trust, or
other enterprise, including, without limitation, any employee benefit plan
(other than in the capacity as an agent separately retained and compensated for
the provision of goods or services to the enterprise, including, without
limitation, attorneys-at-law, accountants, and financial consultants). The term
"Executive Officers" includes those individuals who are or were at any time
"executive officers" of the Corporation as defined in Securities and Exchange
Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as
amended. All other capitalized terms used in this Article and not otherwise
defined herein have the meaning set forth in FBCA Section 607.0850. The
provisions of this Article are intended solely for the benefit of the
indemnified
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parties described herein, their heirs and personal representatives and shall not
create any rights in favor of third parties. No amendment to or repeal of this
Article VI shall diminish the rights of indemnification provided for herein
prior to such amendment or repeal.
ARTICLE 7
AMENDMENTS
7.1 Amended and Restated Articles of Incorporation. Notwithstanding any
other provision of these Amended and Restated Articles of Incorporation or the
Bylaws of the Corporation (and notwithstanding that a lesser percentage may be
specified by law) the affirmative vote of sixty-six and two-thirds percent
(66-2/3%) of the total number of votes of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required (unless separate
voting by classes is required by the FBCA, in which event the affirmative vote
of sixty-six and two-thirds percent (66-2/3%) of the number of shares of each
class or series entitled to vote as a class shall be required), to amend or
repeal, or to adopt any provision inconsistent with the purpose or intent of,
Articles , , or this Article of these Amended and Restated Articles of
Incorporation. Notice of any such proposed amendment, repeal or adoption shall
be contained in the notice of the meeting at which it is to be considered.
Subject to the provisions set forth herein, the Corporation reserves the right
to amend, alter, repeal or rescind any provision contained in these Amended and
Restated Articles of Incorporation in the manner now or hereafter prescribed by
law. Notwithstanding the foregoing, Sections 4.1 and 4.2 of Article 4 of these
Amended and Restated Articles of Incorporation may not be amended without the
consent of each party remaining entitled to any special nomination rights
pursuant to Section 4.2 hereof.
7.2 Bylaws. The shareholders of the Corporation may adopt or amend a
bylaw which fixes a greater quorum or voting requirement for shareholders (or
voting groups of shareholders) than is required by the FBCA. The adoption or
amendment of a bylaw that adds, changes or deletes a greater quorum or voting
requirement for shareholders must meet the same quorum or voting requirement and
be adopted by the same vote and voting groups required to take action under the
quorum or voting requirement then in effect or proposed to be adopted, whichever
is greater.
ARTICLE 8
INITIAL REGISTERED OFFICE AND AGENT
The address of the initial Registered Office of the Corporation is 4902
West Waters Avenue, Tampa, FL 33634, and the initial Registered Agent at such
address is ______________________.
ARTICLE 9
PRINCIPAL OFFICE AND MAILING ADDRESS
The address of the Principal Office of the Corporation and its mailing
address is 4902 West Waters Avenue, Tampa, FL 33634. The location of the
Principal Office and the mailing
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address shall be subject to change as may be provided in the Bylaws.
IN WITNESS WHEREOF, these Amended and Restated Articles of
Incorporation have been signed this _____ day of ____________, 1997.
_______________________________________
William W. Compton
Chief Executive Officer
ATTEST:
_______________________________________
Michael Kagan, Secretary
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<PAGE> 12
ACCEPTANCE OF APPOINTMENT
BY REGISTERED AGENT
THE UNDERSIGNED, having been named in Article 8 of the foregoing
Amended and Restated Articles of Incorporation as the Registered Agent at the
office designated therein, hereby accepts such appointment and agrees to act in
such capacity. The undersigned hereby states that he is familiar with, and
hereby accepts, the obligations set forth in Section 607.0505, Florida
Statutes, and the undersigned will further comply with any other provisions of
law made applicable to him as Registered Agent of the Corporation.
DATED this _____ day of ______________, 1997.
__________________________________
Registered Agent
12
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
TROPICAL SPORTSWEAR INT'L CORPORATION
(A FLORIDA CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS
<S> <C> <C>
Section 1.1 Definitions......................................................... 1
ARTICLE 2
OFFICES
Section 2.1 Principal and Business Offices...................................... 1
Section 2.2 Registered Office................................................... 1
ARTICLE 3
SHAREHOLDERS
Section 3.1 Annual Meeting...................................................... 1
Section 3.2 Special Meetings.................................................... 2
Section 3.3 Place of Meeting.................................................... 3
Section 3.4 Notice of Meeting................................................... 3
Section 3.5 Waiver of Notice.................................................... 3
Section 3.6 Fixing of Record Date............................................... 4
Section 3.7 Shareholders' List for Meetings..................................... 5
Section 3.8 Quorum.............................................................. 5
Section 3.9 Voting of Shares.................................................... 6
Section 3.10 Vote Required....................................................... 6
Section 3.11 Conduct of Meeting.................................................. 6
Section 3.12 Inspectors of Election.............................................. 6
Section 3.13 Proxies............................................................. 7
Section 3.14 Action by Shareholders Without Meeting.............................. 7
Section 3.15 Acceptance of Instruments Showing Shareholder Action................ 8
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 General Powers and Number........................................... 9
Section 4.2 Qualifications...................................................... 9
Section 4.3 Term of Office...................................................... 9
Section 4.4 Nominations of Directors.............................................10
Section 4.5 Removal............................................................. 10
Section 4.6 Resignation......................................................... 11
Section 4.7 Vacancies........................................................... 11
Section 4.8 Compensation........................................................ 11
Section 4.9 Regular Meetings.................................................... 12
Section 4.10 Special Meetings.................................................... 12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.11 Notice.............................................................. 12
Section 4.12 Waiver of Notice.................................................... 12
Section 4.13 Quorum and Voting................................................... 12
Section 4.14 Conduct of Meetings................................................. 13
Section 4.15 Committees.......................................................... 13
Section 4.16 Action Without Meeting.............................................. 14
ARTICLE 5
OFFICERS
Section 5.1 Number.............................................................. 14
Section 5.2 Election and Term of Office......................................... 15
Section 5.3 Removal............................................................. 15
Section 5.4 Resignation......................................................... 15
Section 5.5 Vacancies........................................................... 15
Section 5.6 Chairman of the Board and Chief Executive Officer................... 15
Section 5.7 Vice Chairman of the Board and Executive Vice President............. 16
Section 5.8 President........................................................... 16
Section 5.9 Vice Presidents..................................................... 17
Section 5.10 Secretary........................................................... 17
Section 5.11 Treasurer........................................................... 17
Section 5.12 Assistant Secretaries and Assistant Treasurers...................... 18
Section 5.13 Other Assistants and Acting Officers................................ 18
Section 5.14 Salaries............................................................ 18
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
Section 6.1 Contracts........................................................... 18
Section 6.2 Checks, Drafts, etc................................................. 18
Section 6.3 Deposits............................................................ 19
Section 6.4 Voting of Securities Owned by Corporation........................... 19
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
Section 7.1 Consideration for Shares............................................ 19
Section 7.2 Certificates for Shares............................................. 19
Section 7.3 Transfer of Shares.................................................. 20
Section 7.4 Restrictions on Transfer............................................ 20
Section 7.5 Lost, Destroyed, or Stolen Certificates............................. 20
Section 7.6 Stock Regulations................................................... 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 8
SEAL
Section 8.1 Seal................................................................ 20
ARTICLE 9
BOOKS AND RECORDS
Section 9.1 Books and Records................................................... 21
Section 9.2 Shareholders' Inspection Rights..................................... 21
Section 9.3 Distribution of Financial Information............................... 21
Section 9.4 Other Reports....................................................... 21
ARTICLE 10
INDEMNIFICATION
Section 10.1 Provision of Indemnification........................................ 21
ARTICLE 11
AMENDMENTS
Section 11.1 Power to Amend...................................................... 22
</TABLE>
iii
<PAGE> 5
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the following
meanings for purposes of these Amended and Restated Bylaws:
"Act" means the Florida Business Corporation Act, as it may be amended
from time to time, or any successor legislation thereto.
"Corporation" means Tropical Sportswear Int'l Corporation, a Florida
corporation.
"Deliver" or "delivery" includes delivery by hand; United States mail;
facsimile, telegraph, teletype or other form of electronic transmission, with
written confirmation or other acknowledgment of receipt; and private mail
carriers handling nationwide mail services.
"Principal office" means the office (within or without the State of
Florida) where the Corporation's principal executive offices are located, as
designated in the Amended and Restated Articles of Incorporation until an annual
report has been filed with the Florida Department of State, and thereafter as
designated in the annual report.
ARTICLE 2
OFFICES
Section 2.1 Principal and Business Offices. The Corporation may have
such principal and other business offices, either within or without the State of
Florida, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
Section 2.2 Registered Office. The registered office of the Corporation
required by the Act to be maintained in the State of Florida may but need not be
identical with the principal office if located in the State of Florida, and the
address of the registered office may be changed from time to time by the Board
of Directors or by the registered agent. The business office of the registered
agent of the Corporation shall be identical to such registered office.
ARTICLE 3
SHAREHOLDERS
Section 3.1 Annual Meeting.
(a) Call by Directors. The annual meeting of shareholders
shall be held within four months after the close of each fiscal year of the
Corporation on a date and at a time and place designated by the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the election of directors
shall not be held on the day fixed as herein provided for any annual meeting of
shareholders, or at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of shareholders as soon thereafter
as is practicable. The failure to hold the annual meeting of the shareholders
within the time stated in these Amended
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and Restated Bylaws shall not affect the terms of office of the officers or
directors of the Corporation or the validity of any corporate action.
(b) Business At Annual Meeting. At an annual meeting of the
shareholders of the Corporation, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (1) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (2)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (3) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice shall be
received at the principal business office of the Corporation no later than the
date designated for receipt of shareholders' proposals in a prior public
disclosure made by the Corporation. If there has been no such prior public
disclosure, then to be timely, a shareholder's notice must be delivered to or
mailed and received at the principal business office of the Corporation not less
than sixty (60) days nor more than ninety (90) days prior to the annual meeting
of shareholders; provided, however, that in the event that less than seventy
(70) days' notice of the date of the meeting is given to shareholders by notice
or prior public disclosure, notice by the shareholders, to be timely, must be
received by the Corporation not later than the close of business on the tenth
day following the day on which the Corporation gave notice or made a public
disclosure of the date of the annual meeting of the shareholders. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's stock books, of the shareholders proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, (d) any material interest of the
shareholder in such business, and (e) the same information required by clauses
(b), (c) and (d) above with respect to any other shareholder that, to the
knowledge of the shareholder proposing such business, supports such proposal.
Notwithstanding anything in these Amended and Restated Bylaws to the contrary,
no business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section . The Chairman of an annual meeting
shall, if the facts warrant, determine and declare to the annual meeting that a
matter of business was not properly brought before the meeting in accordance
with the provisions of this Section , and if the Chairman shall so determine,
the Chairman shall so declare at the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 3.2 Special Meetings.
(a) Call by Directors or Executive Officers. Special meetings
of shareholders of the Corporation, for any purpose or purposes, may be called
by any four (or more) members of the Board of Directors or the Chairman of the
Board and Chief Executive Officer of the Corporation.
(b) Call by Shareholders. The Corporation shall call a special
meeting of shareholders in the event that the holders of not less than
twenty-five percent (25%) of the total number of votes of the then outstanding
shares of capital stock of the Corporation
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<PAGE> 7
entitled to vote generally in the election of directors, voting together as a
single class, sign, date, and deliver to the Secretary one or more written
demands for the meeting describing one or more purposes for which it is to be
held. The Corporation shall give notice of such a special meeting within sixty
(60) days after the date that the demand is delivered to the Corporation.
Section 3.3 Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the Corporation.
Section 3.4 Notice of Meeting.
(a) Content and Delivery. Written notice stating the date,
time, and place of any meeting of shareholders and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty days before the date of the
meeting by or at the direction of the Chief Executive Officer, the President,
the Executive Vice President or the Secretary, or the officer or persons duly
calling the meeting, to each shareholder of record entitled to vote at such
meeting and to such other persons as required by the Act. Unless the Act
requires otherwise, notice of an annual meeting need not include a description
of the purpose or purposes for which the meeting is called. If mailed, notice of
a meeting of shareholders shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the Corporation, with postage thereon
prepaid.
(b) Notice of Adjourned Meetings. If an annual or special
meeting of shareholders is adjourned to a different date, time, or place, the
Corporation shall not be required to give notice of the new date, time, or place
if the new date, time, or place is announced at the meeting before adjournment;
provided, however, that if a new record date for an adjourned meeting is or must
be fixed, the Corporation shall give notice of the adjourned meeting to persons
who are shareholders as of the new record date who are entitled to notice of the
meeting.
(c) No Notice Under Certain Circumstances. Notwithstanding the
other provisions of this Section, no notice of a meeting of shareholders need be
given to a shareholder if: (1) an annual report and proxy statement for two
consecutive annual meetings of shareholders, or (2) all, and at least two,
checks in payment of dividends or interest on securities during a twelve-month
period have been sent by first-class, United States mail, addressed to the
shareholder at his or her address as it appears on the share transfer books of
the Corporation, and returned undeliverable. The obligation of the Corporation
to give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the Corporation has received a new address for such shareholder
for entry on its share transfer books.
Section 3.5 Waiver of Notice.
(a) Written Waiver. A shareholder may waive any notice
required by the Act or these Amended and Restated Bylaws before or after the
date and time stated for the
3
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meeting in the notice. The waiver shall be in writing and signed by the
shareholder entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of shareholders need be specified in any written waiver of notice.
(b) Waiver by Attendance. A shareholder's attendance at a
meeting, in person or by proxy, waives objection to all of the following: (1)
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (2) consideration of a particular matter at the meeting that
is not within the purpose or purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
Section 3.6 Fixing of Record Date.
(a) General. The Board of Directors may fix in advance a date
as the record date for the purpose of determining shareholders entitled to
notice of a shareholders' meeting, entitled to vote, or take any other action.
In no event may a record date fixed by the Board of Directors be a date
preceding the date upon which the resolution fixing the record date is adopted
or a date more than seventy days before the date of meeting or action requiring
a determination of shareholders.
(b) Special Meeting. The record date for determining
shareholders entitled to demand a special meeting shall be the close of business
on the date the first shareholder delivers his or her demand to the Corporation.
(c) Shareholder Action by Written Consent. If no prior action
is required by the Board of Directors pursuant to the Act, the record date for
determining shareholders entitled to take action without a meeting shall be the
close of business on the date the first signed written consent with respect to
the action in question is delivered to the Corporation, but if prior action is
required by the Board of Directors pursuant to the Act, such record date shall
be the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action unless the Board of Directors otherwise
fixes a record date. Any action of the shareholders of the Corporation taken
without a meeting shall be effected only upon the written consent of the holders
of outstanding capital stock of the Corporation of each voting group entitled to
vote thereon having not less than the minimum number of votes with respect to
each voting group that would be necessary to authorize or take such action at a
meeting at which all voting groups and shares entitled to vote thereon were
present and voted.
(d) Absence of Board Determination for Shareholders' Meeting.
If the Board of Directors does not determine the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall be the close of business on the
day before the first notice with respect thereto is delivered to shareholders.
(e) Adjourned Meeting. A record date for determining
shareholders entitled to notice of or to vote at a shareholders' meeting is
effective for any adjournment of the
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meeting unless the Board of Directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
Section 3.7 Shareholders' List for Meetings.
(a) Preparation and Availability. After a record date for a
meeting of shareholders has been fixed, the Corporation shall prepare an
alphabetical list of the names of all of the shareholders entitled to notice of
the meeting. The list shall be arranged by class or series of shares, if any,
and show the address of and number of shares held by each shareholder. Such list
shall be available for inspection by any shareholder for a period of ten days
prior to the meeting or such shorter time as exists between the record date and
the meeting date, and continuing through the meeting, at the Corporation's
principal office, at a place identified in the meeting notice in the city where
the meeting will be held, or at the office of the Corporation's transfer agent
or registrar, if any. A shareholder or his or her agent may, on written demand,
inspect the list, subject to the requirements of the Act, during regular
business hours and at his or her expense, during the period that it is available
for inspection pursuant to this Section. A shareholder's written demand to
inspect the list shall describe with reasonable particularity the purpose for
inspection of the list, and the Corporation may deny the demand to inspect the
list if the Secretary determines that the demand was not made in good faith and
for a proper purpose or if the list is not directly connected with the purpose
stated in the shareholder's demand, all subject to the requirements of Section
607.1602(3) of the Act. Notwithstanding anything herein to the contrary, the
Corporation shall make the shareholders' list available at any annual meeting or
special meeting of shareholders and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any adjournment
thereof.
(b) Prima Facie Evidence. The shareholders' list is prima
facie evidence of the identity of shareholders entitled to examine the
shareholders' list or to vote at a meeting of shareholders.
(c) Failure to Comply. If the requirements of this Section
have not been substantially complied with, or if the Corporation refuses to
allow a shareholder or his or her agent or attorney to inspect the shareholders'
list before or at the meeting, on the demand of any shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until such
requirements are complied with.
(d) Validity of Action Not Affected. Refusal or failure to
prepare or make available the shareholders' list shall not affect the validity
of any action taken at a meeting of shareholders.
Section 3.8 Quorum.
(a) What Constitutes a Quorum. Shares entitled to vote as a
separate voting group may take action on a matter at a meeting only if a quorum
of those shares exists with respect to that matter. If the Corporation has only
one class of stock outstanding, such class shall constitute a separate voting
group for purposes of this Section. Except as otherwise provided in the Act, a
majority of the votes entitled to be cast on the matter shall constitute a
quorum of the voting group for action on that matter.
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(b) Presence of Shares. Once a share is represented for any
purpose at a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must be
set for the adjourned meeting.
(c) Adjournment in Absence of Quorum. Where a quorum is not
present, the holders of a majority of the shares represented and who would be
entitled to vote at the meeting if a quorum were present may adjourn such
meeting from time to time.
Section 3.9 Voting of Shares. Except as provided in the Amended and
Restated Articles of Incorporation or the Act, each outstanding share,
regardless of class, is entitled to one vote on each matter voted on at a
meeting of shareholders.
Section 3.10 Vote Required.
(a) Matters Other Than Election of Directors. If a quorum
exists, except in the case of the election of directors, action on a matter
shall be approved by a majority of the votes cast at such meeting, unless the
Act or the Amended and Restated Articles of Incorporation require a greater
number of affirmative votes.
(b) Election of Directors. Except as provided in the Amended
and Restated Articles of Incorporation, each director shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Each shareholder who is
entitled to vote at an election of directors has the right to vote the number of
shares owned by him or her for as many persons as there are directors to be
elected. Shareholders do not have a right to cumulate their votes for directors.
Section 3.11 Conduct of Meeting. The Chairman of the Board of Directors
and Chief Executive Officer, or in his or her absence, the Vice Chairman of the
Board of Directors and Executive Vice President, or in his or her absence, the
President, or in his or her absence, a Vice President in the order provided
under the Section of these Amended and Restated Bylaws titled "Vice Presidents,"
or in their absence, any person chosen by the shareholders present shall call a
shareholders' meeting to order and shall act as presiding officer of the
meeting, and the Secretary of the Corporation shall act as secretary of all
meetings of the shareholders, but, in the absence of the Secretary, the
presiding officer may appoint any other person to act as secretary of the
meeting. The presiding officer of the meeting shall have broad discretion in
determining the order of business at a shareholders' meeting. The presiding
officer's authority to conduct the meeting shall include, but in no way be
limited to, recognizing shareholders entitled to speak, calling for the
necessary reports, stating questions and putting them to a vote, calling for
nominations, and announcing the results of voting. The presiding officer also
shall take such actions as are necessary and appropriate to preserve order at
the meeting. The rules of parliamentary procedure need not be observed in the
conduct of shareholders' meetings.
Section 3.12 Inspectors of Election. Inspectors of election
may be appointed by the Board of Directors to act at any meeting of shareholders
at which any vote is taken. If
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inspectors of election are not so appointed, the presiding officer of the
meeting may, and on the request of any shareholder shall, make such appointment.
Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his or her
ability. The inspectors of election shall determine the number of shares
outstanding, the voting rights with respect to each, the shares represented at
the meeting, the existence of a quorum, and the authenticity, validity, and
effect of proxies; receive votes, ballots, consents, and waivers; hear and
determine all challenges and questions arising in connection with the vote;
count and tabulate all votes, consents, and waivers; determine and announce the
result; and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. No inspector, whether appointed by the Board of
Directors or by the person acting as presiding officer of the meeting, need be a
shareholder. The inspectors may appoint and retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors. On
request of the person presiding at the meeting, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them.
Section 3.13 Proxies.
(a) Appointment. At all meetings of shareholders, a
shareholder may vote his or her shares in person or by proxy. A shareholder may
appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either personally or by his or her attorney-in-fact. If an
appointment form expressly provides, any proxy holder may appoint, in writing, a
substitute to act in his or her place. A telegraph, telex, or a cablegram, a
facsimile transmission of a signed appointment form, or a photographic,
photostatic, or equivalent reproduction of a signed appointment form is a
sufficient appointment form.
(b) When Effective. An appointment of a proxy is effective
when received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes. An appointment is valid for up to eleven (11)
months unless a longer period is expressly provided in the appointment form. An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
Section 3.14 Action by Shareholders Without Meeting.
(a) Requirements for Written Consent. Any action required or
permitted by the Act to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more written consents describing the action taken shall be signed
and dated by the holders of outstanding capital stock of the Corporation of each
voting group entitled to vote thereon having not less than the minimum number of
votes with respect to each voting group that would be necessary to authorize or
take such action at a meeting at which all voting groups and shares entitled to
vote thereon were present and voted. Such consents must be delivered to the
principal office of the Corporation in Florida, the Corporation's principal
place of business, the Secretary, or another officer or agent of the Corporation
having custody of the books in which proceedings of meetings of shareholders are
recorded. No written consent shall be effective to take the corporate action
referred to therein unless, within sixty (60) days of the date of the earliest
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dated consent delivered in the manner required herein, written consents signed
by the number of holders required to take action are delivered to the
Corporation by delivery as set forth in this Section.
(b) Revocation of Written Consents. Any written consent may be
revoked prior to the date that the Corporation receives the required number of
consents to authorize the proposed action. No revocation is effective unless in
writing and until received by the Corporation at its principal office in Florida
or its principal place of business, or received by the Secretary or other
officer or agent having custody of the books in which proceedings of meetings of
shareholders are recorded.
(c) Same Effect as Vote at Meeting. A consent signed under
this Section has the effect of a meeting vote and may be described as such in
any document. Whenever action is taken by written consent pursuant to this
Section, the written consent of the shareholders consenting thereto or the
written reports of inspectors appointed to tabulate such consents shall be filed
with the minutes of proceedings of shareholders.
Section 3.15 Acceptance of Instruments Showing Shareholder Action. If
the name signed on a vote, consent, waiver, or proxy appointment corresponds to
the name of a shareholder, the Corporation, if acting in good faith, may accept
the vote, consent, waiver, or proxy appointment and give it effect as the act of
a shareholder. If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of a shareholder, the Corporation,
if acting in good faith, may accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the shareholder if any of the
following apply:
(a) The shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
(b) The name signed purports to be that of a administrator,
executor, guardian, personal representative, or conservator representing the
shareholder and, if the Corporation requests, evidence of fiduciary status
acceptable to the Corporation is presented with respect to the vote, consent,
waiver, or proxy appointment;
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy, or assignee for the benefit of creditors of the
shareholder and, if the Corporation requests, evidence of this status acceptable
to the Corporation is presented with respect to the vote, consent, waiver, or
proxy appointment;
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's authority to
sign for the shareholder is presented with respect to the vote, consent, waiver,
or proxy appointment; or
(e) Two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
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The Corporation may reject a vote, consent, waiver, or proxy appointment if the
Secretary or other officer or agent of the Corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 General Powers and Number. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of Directors. The
Corporation shall have eight (8) directors initially (seven (7) if David
Garza-Santos is automatically removed as a director pursuant to Section 4.7 of
the Corporation's Amended and Restated Articles of Incorporation). The number of
directors may be increased or decreased from time to time by vote of a majority
of the Board of Directors, but shall never be less than five (5) nor more than
fifteen (15); provided, however, that, unless required by law and except as
provided in Section 4.7 of the Corporation's Amended and Restated Articles of
Incorporation, the number of directors shall not be increased or decreased
without the consent of each party remaining entitled to special nomination
rights pursuant to Section 4.2 of the Amended and Restated Articles of
Incorporation of the Corporation.
Section 4.2 Qualifications. Directors must be natural persons who are
eighteen years of age or older but need not be residents of the State of Florida
or shareholders of the Corporation.
Section 4.3 Term of Office. The directors shall be classified, with
respect to the time for which they severally hold office, into three (3)
classes, Class I, Class II and Class III, each of which shall be as nearly equal
in number as possible. Class I shall be established for a term expiring at the
annual meeting of shareholders to be held in 2000 and shall consist initially of
two (2) directors. Class II shall be established for a term expiring at the
annual meeting of shareholders to be held in 1999 and shall consist initially of
three (3) directors. Class III shall be established for a term expiring at the
annual meeting of shareholders to be held in 1998 and shall consist initially of
three (3) directors (two (2) directors if David Garza-Santos, or his successor,
is automatically removed as provided in Section 4.7). Each director shall hold
office until his or her successors are elected and qualified, or until such
director's earlier death, resignation or removal as hereinafter provided. At
each annual meeting of the shareholders of the Corporation, the successors of
the class of directors whose terms expire at that meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election. Unless otherwise provided
in the Amended and Restated Articles of Incorporation, when the number of
directors of the Corporation is changed, the Board of Directors shall determine
the class or classes to which the increased or decreased number of directors
shall be apportioned; provided, however, that no decrease in the number of
directors shall affect the term of any director then in office, and that, unless
required by law, the number of directors shall not be increased or decreased
without the consent of each party remaining entitled to special nomination
rights pursuant to Section 4.2 of the Amended and Restated Articles of
Incorporation of the Corporation.
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Section 4.4 Nominations of Directors. Except as otherwise provided
pursuant to the provisions of the Amended and Restated Articles of Incorporation
or Articles of Amendment relating to the rights of the holders of any class or
series of Preferred Stock, voting separately by class or series, to elect
directors under specified circumstances, nominations of persons for election to
the Board of Directors may be made by the Chairman of the Board and Chief
Executive Officer on behalf of the Board of Directors or by any shareholder of
the Corporation entitled to vote for the election of directors at the annual
meeting of the shareholders who complies with the notice provisions set forth in
this Section 4.4. To be timely, a shareholder's notice shall be received at the
principal business office of the Corporation no later than the date designated
for receipt of shareholders' proposals in a prior public disclosure made by the
Corporation. If there has been no such prior public disclosure, then to be
timely, a shareholder's nomination must be delivered to or mailed and received
at the principal business office of the Corporation not less than sixty (60)
days nor more than ninety (90) days prior to the annual meeting of shareholders;
provided, however, that in the event that less than seventy (70) days' notice of
the date of the meeting is given to the shareholders or prior public disclosure
of the date of the meeting is made, notice by the shareholder to be timely must
be so received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. A shareholder's notice to the Secretary shall
set forth (a) as to each person the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such proposed nominee, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of capital stock
of the Corporation which are beneficially owned by such person, and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the shareholder giving notice (i) the name and address,
as they appear on the Corporation's books, of the shareholder proposing such
nomination, and (ii) the class and number of shares of stock of the Corporation
which are beneficially owned by the shareholder. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 4.4. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the annual meeting that a
nomination was not made in accordance with the provisions of this Section 4.4,
and if the Chairman shall so determine, the Chairman shall so declare at the
meeting and the defective nomination shall be disregarded.
Section 4.5 Removal.
(a) Generally. Except as otherwise provided pursuant to the
provisions of the Amended and Restated Articles of Incorporation or Articles of
Amendment relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office at
any time, but only for cause (as defined in Section 4.5(b) hereof) and only by
the affirmative vote, at a special meeting of the shareholders called for such a
purpose, of not less than sixty-six and two-thirds percent (66-2/3%) of the
total number of votes of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice of
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such proposed removal was contained in the notice of such meeting. At least
thirty (30) days prior to such special meeting of shareholders, written notice
shall be sent to the director or directors whose removal will be considered at
such meeting. Except as provided in the Amended and Restated Articles of
Incorporation of the Corporation, any vacancy on the Board of Directors
resulting from such removal or otherwise shall be filled only by vote of a
majority of the directors then in office, although less than a quorum, and any
director so chosen shall hold office until the next election of the class for
which such directors shall have been chosen and until his or her successor shall
have been elected and qualified or until any such director's earlier death,
resignation or removal.
(b) "Cause" Defined. For the purposes of this Section 4.5,
"cause" shall mean (i) misconduct as a director of the Corporation or any
subsidiary of the Corporation which involves dishonesty with respect to a
substantial or material corporate activity or corporate assets, or (ii)
conviction of an offense punishable by one (1) or more years of imprisonment
(other than minor regulatory infractions and traffic violations which do not
materially and adversely affect the Corporation).
Section 4.6 Resignation. A director may resign at any time by
delivering written notice to the Board of Directors or the Chairman of the Board
and Chief Executive Officer of the Corporation. A director's resignation is
effective when the notice is delivered unless the notice specifies a later
effective date.
Section 4.7 Vacancies.
(a) Who May Fill Vacancies. Except as provided below, and
subject to the provisions of Sections 4.1 and 4.2 of the Amended and Restated
Articles of Incorporation of the Corporation, whenever any vacancy occurs on the
Board of Directors, including a vacancy resulting from an increase in the number
of directors, it may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. Any
director elected in accordance with the preceding sentence shall hold office
until his or her successor is duly elected and qualified, and such successor
shall complete such director's remaining term.
(b) Directors Electing by Voting Groups. Whenever the holders
of shares of any voting group are entitled to elect a class of one or more
directors by the provisions of the Amended and Restated Articles of
Incorporation, vacancies in such class may be filled by holders of shares of
that voting group or by a majority of the directors then in office elected by
such voting group or by a sole remaining director so elected. If no director
elected by such voting group remains in office, unless the Amended and Restated
Articles of Incorporation provide otherwise, directors not elected by such
voting group may fill vacancies.
(c) Prospective Vacancies. A vacancy that will occur at a
specific later date, because of a resignation effective at a later date or
otherwise, may be filled before the vacancy occurs, but the new director may not
take office until the vacancy occurs.
Section 4.8 Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the Corporation as directors, officers, or
otherwise, or may delegate such authority
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to an appropriate committee. The Board of Directors also shall have authority to
provide for or delegate authority to an appropriate committee to provide for
reasonable pensions, disability or death benefits, and other benefits or
payments, to directors, officers, and employees and to their families,
dependents, estates, or beneficiaries on account of prior services rendered to
the Corporation by such directors, officers, and employees. Directors shall be
entitled to reimbursement for reasonable expenses incurred in connection with
attending meetings of the Board of Directors (and committees thereof) and
performing their duties as directors, including reimbursement of expenses
attributable to first-class air travel and first-class hotel occupancy while
traveling on Company business.
Section 4.9 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after
the annual meeting of shareholders and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the date, time, and place, either within or without the State of
Florida, for the holding of additional regular meetings of the Board of
Directors without notice other than such resolution.
Section 4.10 Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board and Chief Executive
Officer, the Vice Chairman of the Board and Executive Vice President, the
President, or not less than one-third (1/3) of the members of the Board of
Directors. The person or persons calling the meeting may fix any place, either
within or without the State of Florida, as the place for holding any special
meeting of the Board of Directors, and if no other place is fixed, the place of
the meeting shall be the principal office of the Corporation in the State of
Florida.
Section 4.11 Notice. Special meetings of the Board of Directors must be
preceded by at least two days' notice of the date, time, and place of the
meeting. The notice need not describe the purpose of the special meeting.
Section 4.12 Waiver of Notice. Notice of a meeting of the Board of
Directors need not be given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Section 4.13 Quorum and Voting. A quorum of the Board of Directors
consists of a majority of the number of directors prescribed by these Amended
and Restated Bylaws (or if no number is prescribed, the number of directors in
office immediately before the meeting begins). If a quorum is present when a
vote is taken, the affirmative vote of a majority of directors present is the
act of the Board of Directors. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding it or transacting
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specified business at the meeting; or (b) he or she votes against or abstains
from the action taken.
Section 4.14 Conduct of Meetings.
(a) Presiding Officer. The Chief Executive Officer shall serve
as the Chairman of the Board of Directors and the Executive Vice President shall
serve as the Vice Chairman of the Board of Directors. The Chairman shall preside
at meetings of the Board of Directors. In the absence of the Chairman, the Vice
Chairman of the Board, or in his or her absence, any director chosen by the
directors present, shall call meetings of the Board of Directors to order and
shall act as presiding officer of the meeting.
(b) Minutes. The Secretary of the Corporation shall act as
secretary of all meetings of the Board of Directors but in the absence of the
Secretary, the presiding officer may appoint any other person present to act as
secretary of the meeting. Minutes of any regular or special meeting of the Board
of Directors shall be prepared and distributed to each director.
(c) Adjournments. A majority of the directors present, whether
or not a quorum exists, may adjourn any meeting of the Board of Directors to
another time and place. Notice of any such adjourned meeting shall be given to
the directors who are not present at the time of the adjournment and, unless the
time and place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
(d) Participation by Conference Call or Similar Means. The
Board of Directors may permit any or all directors to participate in a regular
or a special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
Section 4.15 Committees. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, shall designate from among its
members a Compensation Committee (for the purpose of establishing and
implementing an executive compensation policy) and an Audit Committee (for the
purpose of examining and considering matters relating to the financial affairs
of the Corporation). The Board of Directors, by resolution adopted by a majority
of the full Board of Directors, may designate from among its members one or more
other committees, which may include, by way of example and not as a limitation,
an Executive Committee. Each committee shall have two or more members, who serve
at the pleasure of the Board of Directors, provided that the Compensation
Committee and the Audit Committee each shall consist of three members, at least
two of which are Independent Directors, that the Chairman of the Board and Chief
Executive Officer shall be a member of the Compensation Committee, and that no
member of the Audit Committee shall be an officer or employee of the
Corporation. For purposes of this section, "Independent Director" shall mean a
person other than an officer or employee of the Corporation or any subsidiary of
the Corporation or any other individual having a relationship which, in the
opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. To the
extent provided in the resolution of the Board of Directors establishing and
constituting such committees, such committees shall have and may exercise
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all the authority of the Board of Directors, except that no such committee shall
have the authority to:
(a) approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders;
(b) fill vacancies on the Board of Directors or any committee
thereof;
(c) adopt, amend, or repeal these Amended and Restated Bylaws;
(d) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale or contract for
the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a voting group except that the Board of
Directors may authorize a committee (or a senior executive officer of the
Corporation) to do so within limits specifically prescribed by the Board of
Directors.
The Board of Directors, by resolution adopted in accordance with this Section,
may designate one or more directors as alternate members of any such committee,
who may act in the place and stead of any absent member or members at any
meeting of such committee. The provisions of these Amended and Restated Bylaws
which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well. Notwithstanding the foregoing sentence, all directors (i) shall be
entitled to receive notice of all meetings of the Compensation Committee and the
Audit Committee, (ii) may attend any committee meeting, unless the committee has
voted to go into executive session, and (iii) shall be entitled to receive
copies of the minutes of all committee meetings.
Section 4.16 Action Without Meeting. Any action required or permitted
by the Act to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if the action is taken by all members of
the Board or of the committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director or
committee member and retained by the Corporation. Such action shall be effective
when the last director or committee member signs the consent, unless the consent
specifies a different effective date. A consent signed under this Section has
the effect of a vote at a meeting and may be described as such in any document.
ARTICLE 5
OFFICERS
Section 5.1 Number. The principal officers of the Corporation shall be
a Chairman of the Board and Chief Executive Officer, a Vice Chairman of the
Board and Executive Vice President, a President, the number of Vice Presidents,
if any, as authorized from time to time by the Board of Directors, a Secretary,
and a Treasurer, each of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the Board of Directors. The Board of Directors may also
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authorize any duly appointed officer to appoint one or more officers or
assistant officers. The same individual may simultaneously hold more than one
office.
Section 5.2 Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as is
practicable. Each officer shall hold office until his or her successor shall
have been duly elected or until his or her prior death, resignation, or removal.
Section 5.3 Removal. The Board of Directors may remove any officer and,
unless restricted by the Board of Directors, an officer may remove any officer
or assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
Section 5.4 Resignation. An officer may resign at any time by
delivering notice to the Corporation. The resignation shall be effective when
the notice is delivered, unless the notice specifies a later effective date and
the Corporation accepts the later effective date. If a resignation is made
effective at a later date and the Corporation accepts the future effective date,
the pending vacancy may be filled before the effective date but the successor
may not take office until the effective date.
Section 5.5 Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification, or otherwise, shall be filled as
soon thereafter as practicable by the Board of Directors for the unexpired
portion of the term.
Section 5.6 Chairman of the Board and Chief Executive Officer. The
Chairman of the Board (the "Chairman") and Chief Executive Officer shall be a
member of the Board of Directors of the Corporation and shall preside over all
meetings of the Board of Directors and shareholders of the Corporation. The
Chairman and Chief Executive Officer shall be the principal executive officer of
the Corporation and, subject to the direction of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
Corporation. The Chairman and Chief Executive Officer shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to appoint
such agents and employees of the Corporation as he or she shall deem necessary,
to prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
Chairman and Chief Executive Officer. The Chairman and Chief Executive Officer
shall have authority to sign certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors, and to execute and acknowledge, on behalf of the Corporation, all
deeds, mortgages, bonds, contracts, leases, reports, and all other documents or
instruments necessary or proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board of
Directors, the Chairman and Chief Executive Officer may authorize the Vice
Chairman and Executive Vice President, the President, any Vice President or
other officer or agent of the Corporation to execute and acknowledge such
documents or instruments in his or her place and stead. In general he or she
shall perform all duties incident to the office of Chairman and
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Chief Executive Officer and such other duties as may be prescribed by the Board
of Directors from time to time.
Section 5.7 Vice Chairman of the Board and Executive Vice President.
The Vice Chairman of the Board (the "Vice Chairman") and Executive Vice
President shall be a member of the Board of Directors of the Corporation and, if
the Chairman and Chief Executive Officer is not present, shall preside over all
meetings of the Board of Directors and shareholders of the Corporation. In the
absence of the Chairman and Chief Executive Officer or in the event of the
Chairman and Chief Executive Officer's death, inability or refusal to act, or in
the event for any reason it shall be impracticable for the Chairman and Chief
Executive Officer to act personally, the Vice Chairman and Executive Vice
President shall perform the duties of the Chairman and Chief Executive Officer,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Chairman and Chief Executive Officer. If the Chairman of
the Board and Chief Executive Officer is not present, the Vice Chairman and
Executive Vice President shall preside at all meetings of the Board of Directors
and shareholders. The Vice Chairman and Executive Vice President shall have
authority, subject to such rules as may be prescribed by the Board of Directors,
to appoint such agents and employees of the Corporation as he or she shall deem
necessary, to prescribe their powers, duties and compensation, and to delegate
authority to them. Such agents and employees shall hold office at the discretion
of the Vice Chairman and Executive Vice President. The Vice Chairman and
Executive Vice President shall have authority to sign certificates for shares of
the Corporation, the issuance of which shall have been authorized by resolution
of the Board of Directors, and to execute and acknowledge, on behalf of the
Corporation, all deeds, mortgages, bonds, contracts, leases, reports, and all
other documents or instruments necessary or proper to be executed in the course
of the Corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by law
or the Board of Directors, the Vice Chairman and Executive Vice President may
authorize the President, any Vice President or other officer or agent of the
Corporation to execute and acknowledge such documents or instruments in his or
her place and stead. In general he or she shall perform all duties incident to
the office of Vice Chairman and Executive Vice President and such other duties
as may be prescribed by the Board of Directors from time to time.
Section 5.8. President. In the absence of both the Chairman and Chief
Executive Officer and the Vice Chairman and Executive Vice President, or in the
event of their deaths, inability or refusal to act, or in the event for any
reason it shall be impracticable for the Chairman and Chief Executive Officer
and Vice Chairman and Executive Vice President to act personally, the President
shall perform the duties of the Chairman and Chief Executive Officer, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Chairman and Chief Executive Officer. If the Chairman of the Board and
Chief Executive Officer and the Vice Chairman of the Board and Executive Vice
President are not present, the President shall preside at all meetings of the
Board of Directors and shareholders. The President shall have authority, subject
to such rules as may be prescribed by the Board of Directors, to appoint such
agents and employees of the Corporation as he or she shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
President. The President shall have authority to sign certificates for shares of
the Corporation the issuance of which shall have been authorized by resolution
of the Board of Directors, and to execute
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and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds,
contracts, leases, reports, and all other documents or instruments necessary or
proper to be executed in the course of the Corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, the President may
authorize any Vice President or other officer or agent of the Corporation to
execute and acknowledge such documents or instruments in his or her place and
stead. In general he or she shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 5.9 Vice Presidents. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President, if any (or in the event there be more than one Vice President,
the Vice Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Each Vice President
shall perform such duties and have such authority as from time to time may be
delegated or assigned to him or her by the Chairman of the Board and Chief
Executive Officer, the Vice Chairman of the Board and Executive Vice President,
the President or by the Board of Directors. The execution of any instrument of
the Corporation by any Vice President shall be conclusive evidence, as to third
parties, of his or her authority to act in the stead of the President. The
Corporation may have one or more Senior Vice Presidents, who shall be Vice
Presidents for purposes hereof.
Section 5.10 Secretary. The Secretary shall: (a) keep, or cause to be
kept, minutes of the meetings of the shareholders and of the Board of Directors
(and of committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) be custodian of the
corporate records and of the seal of the Corporation, if any, and if the
Corporation has a seal, see that it is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (c)
authenticate the records of the Corporation; (d) maintain a record of the
shareholders of the Corporation, in a form that permits preparation of a list of
the names and addresses of all shareholders, by class or series of shares and
showing the number and class or series of shares held by each shareholder; (e)
have general charge of the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of Secretary and have such
other duties and exercise such authority as from time to time may be delegated
or assigned by the Chief Executive Officer or by the Board of Directors.
Section 5.11 Treasurer. The Treasurer shall: (g) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(h) maintain appropriate accounting records; (i) receive and give receipts for
moneys due and payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in such banks, trust
companies, or other depositaries as shall be selected in accordance with the
provisions of these Amended and Restated Bylaws; and (j) in general perform all
of the duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
by the Chief Executive Officer or by the Board of Directors. If required by the
Board of Directors, the Treasurer shall give
17
<PAGE> 22
a bond for the faithful discharge of his or her duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 5.12 Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties and have such authority as
shall from time to time be delegated or assigned to them by the Secretary or the
Treasurer, respectively, or by the Chief Executive Officer or the Board of
Directors.
Section 5.13 Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any duly appointed
officer of the Corporation to appoint, any person to act as assistant to any
officer, or as agent for the Corporation in his or her stead, or to perform the
duties of such officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting officer or other agent
so appointed by the Board of Directors or an authorized officer shall have the
power to perform all the duties of the office to which he or she is so appointed
to be an assistant, or as to which he or she is so appointed to act, except as
such power may be otherwise defined or restricted by the Board of Directors or
the appointing officer.
Section 5.14 Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a director of the Corporation.
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
Section 6.1 Contracts. The Board of Directors may authorize any officer
or officers, or any agent or agents to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the Chairman and Chief Executive Officer, the Vice Chairman and Executive
Vice President, the President or one of the Vice Presidents; the Secretary or an
Assistant Secretary, when necessary or required, shall attest and affix the
corporate seal, if any, thereto; and when so executed no other party to such
instrument or any third party shall be required to make any inquiry into the
authority of the signing officer or officers.
Section 6.2 Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.
18
<PAGE> 23
Section 6.3 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies, or other depositaries as may be selected by or
under the authority of a resolution of the Board of Directors.
Section 6.4 Voting of Securities Owned by Corporation. Subject always
to the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by the
Corporation may be voted at any meeting of security holders of such other
corporation by the Chairman and Chief Executive Officer, the Vice Chairman and
Executive Vice President, or the President, and (b) whenever, in the judgment of
the Chairman and Chief Executive Officer, the Vice Chairman and Executive Vice
President, or the President, it is desirable for the Corporation to execute a
proxy or written consent in respect of any such shares or other securities, such
proxy or consent shall be executed in the name of the Corporation by the
Chairman and Chief Executive Officer, the Vice Chairman and Executive Vice
President, or the President, without necessity of any authorization by the Board
of Directors, affixation of corporate seal, if any, or countersignature or
attestation by another officer. Any person or persons designated in the manner
above stated as the proxy or proxies of the Corporation shall have full right,
power, and authority to vote the shares or other securities issued by such other
corporation and owned or controlled by the Corporation the same as such shares
or other securities might be voted by the Corporation.
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
Section 7.1 Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, promises to perform services evidenced by a written
contract, or other securities of the Corporation. Before the Corporation issues
shares, the Board of Directors shall determine that the consideration received
or to be received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of consideration
for the issuance of shares relates to whether the shares are validly issued,
fully paid, and nonassessable. The Corporation may place in escrow shares issued
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against their purchase price, until the services are performed,
the note is paid, or the benefits are received. If the services are not
performed, the note is not paid, or the benefits are not received, the
Corporation may cancel, in whole or in part, the shares escrowed or restricted
and the distributions credited.
Section 7.2 Certificates for Shares. Every holder of shares in the
Corporation shall be entitled to have a certificate representing all shares to
which he or she is entitled unless the Board of Directors authorizes the
issuance of some or all shares without certificates. Any such authorization
shall not affect shares already represented by certificates until the
certificates are surrendered to the Corporation. If the Board of Directors
authorizes the issuance of any shares without certificates, within a reasonable
time after the issue or transfer of any such shares, the Corporation shall send
the shareholder a written statement of the information required by the Act or
the Amended and Restated Articles of Incorporation to be
19
<PAGE> 24
set forth on certificates, including any restrictions on transfer. Certificates
representing shares of the Corporation shall be in such form, consistent with
the Act, as shall be determined by the Board of Directors. Such certificates
shall be signed (either manually or in facsimile) by the Chairman and Chief
Executive Officer, the Vice Chairman and Executive Vice President, the President
or any other persons designated by the Board of Directors and may be sealed with
the seal of the Corporation or a facsimile thereof. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. Unless the Board of Directors authorizes shares without
certificates, all certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except as
provided in these Amended and Restated Bylaws with respect to lost, destroyed,
or stolen certificates. The validity of a share certificate is not affected if a
person who signed the certificate (either manually or in facsimile) no longer
holds office when the certificate is issued.
Section 7.3 Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer, the Corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications, and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
Corporation with a request to register a transfer, the Corporation shall not be
liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the Corporation had no duty to inquire into
adverse claims or has discharged any such duty. The Corporation may require
reasonable assurance that such endorsements are genuine and effective and
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
Section 7.4 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation as required by
the Act or the Amended and Restated Articles of Incorporation of the
restrictions imposed by the Corporation upon the transfer of such shares.
Section 7.5 Lost, Destroyed, or Stolen Certificates. Unless the Board
of Directors authorizes shares without certificates, where the owner claims that
certificates for shares have been lost, destroyed, or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the Corporation has notice that such shares have been acquired by a bona fide
purchaser, (b) files with the Corporation a sufficient indemnity bond if
required by the Board of Directors or any principal officer, and (c) satisfies
such other reasonable requirements as may be prescribed by or under the
authority of the Board of Directors.
Section 7.6 Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with law as they may deem expedient concerning the issue, transfer,
and registration of shares of the Corporation.
20
<PAGE> 25
ARTICLE 8
SEAL
Section 8.1 Seal. The Board of Directors may provide for a corporate
seal for the Corporation.
ARTICLE 9
BOOKS AND RECORDS
Section 9.1 Books and Records.
(a) The Corporation shall keep as permanent records minutes of
all meetings of the shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors in place of the
Board of Directors on behalf of the Corporation.
(b) The Corporation shall maintain accurate accounting
records.
(c) The Corporation or its agent shall maintain a record of
the shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(d) The Corporation shall keep a copy of all written
communications within the preceding three years to all shareholders generally or
to all shareholders of a class or series, including the financial statements
required to be furnished by the Act, and a copy of its most recent annual report
delivered to the Department of State.
Section 9.2 Shareholders' Inspection Rights. Shareholders are entitled
to inspect and copy records of the Corporation as permitted by the Act.
Section 9.3 Distribution of Financial Information. The Corporation
shall prepare and disseminate financial statements to shareholders as required
by the Act.
Section 9.4 Other Reports. The Corporation shall disseminate such other
reports to shareholders as are required by the Act, including reports regarding
indemnification in certain circumstances and reports regarding the issuance or
authorization for issuance of shares in exchange for promises to render services
in the future.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Provision of Indemnification. The Corporation shall, to
the fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the Corporation to provide broader indemnification
rights than prior to such amendment), indemnify its Directors and Executive
Officers against any and all Liabilities, and advance any and all reasonable
Expenses, incurred thereby in any Proceeding to which any such Director or
Executive Officer is a Party or in which such Director or Executive Officer is
deposed or called to testify as a
21
<PAGE> 26
witness because he or she is or was a Director or Executive Officer of the
Corporation. The rights to indemnification granted hereunder shall not be deemed
exclusive of any other rights to indemnification against Liabilities or the
advancement of Expenses which a Director or Executive Officer may be entitled
under any written agreement, Board of Directors' resolution, vote of
shareholders, the Act, or otherwise. The Corporation may, but shall not be
required to, supplement the foregoing rights to indemnification against
Liabilities and advancement of Expenses by the purchase of insurance on behalf
of any one or more of its Directors or Executive Officers whether or not the
Corporation would be obligated to indemnify or advance Expenses to such Director
or Executive Officer under this Article. For purposes of this Article, the term
"Directors" includes former directors of the Corporation and any director who is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of another Corporation, partnership, joint venture, trust, or
other enterprise, including, without limitation, any employee benefit plan
(other than in the capacity as an agent separately retained and compensated for
the provision of goods or services to the enterprise, including, without
limitation, attorneys-at-law, accountants, and financial consultants). The term
"Executive Officers" includes those individuals who are or were at any time
"executive officers" of the Corporation as defined in Securities and Exchange
Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as
amended. All other capitalized terms used in this Article and not otherwise
defined herein have the meaning set forth in Section 607.0850, Florida Statutes
(1995). The provisions of this Article are intended solely for the benefit of
the indemnified parties described herein, their heirs and personal
representatives and shall not create any rights in favor of third parties. No
amendment to or repeal of this Article shall diminish the rights of
indemnification provided for herein prior to such amendment or repeal.
ARTICLE 11
AMENDMENTS
Section 11.1 Power to Amend. These Amended and Restated Bylaws may be
amended or repealed by either the Board of Directors or the shareholders, unless
the Act reserves the power to amend these Amended and Restated Bylaws generally
or any particular bylaw provision, as the case may be, exclusively to the
shareholders or unless the shareholders, in amending or repealing these Amended
and Restated Bylaws generally or any particular bylaw provision, provide
expressly that the Board of Directors may not amend or repeal these Amended and
Restated Bylaws or such bylaw provision, as the case may be. The shareholders of
the Corporation may adopt or amend a bylaw provision which fixes a greater
quorum or voting requirement for shareholders (or voting groups of shareholders)
than is required by the Act. The adoption or amendment of a bylaw provision that
adds, changes or deletes a greater quorum or voting requirement for shareholders
must meet the same quorum or voting requirement and be adopted by the same vote
and voting groups required to take action under the quorum or voting requirement
then in effect or proposed to be adopted, whichever is greater. Notwithstanding
the foregoing, (i) Article 5 of these Amended and Restated Articles of
Incorporation may only be amended or repealed by the shareholders of the
Corporation, and (ii) none of Sections 4.1, 4.3, 4.4 and 4.7(a) of these Amended
and Restated Bylaws may be amended or repealed without the consent of each party
remaining entitled to special nomination rights pursuant to Section 4.2 of the
Amended and Restated Articles of Incorporation of the Corporation.
22
<PAGE> 1
EXHIBIT 10.1
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
LOAN AND SECURITY AGREEMENT
Dated: September 28, 1994
$48,000,000.00
BARCLAYS BUSINESS CREDIT, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. CREDIT FACILITY ...............................................1
1.1. Revolver Loans ................................................1
1.2. Term and Equipment Loans ......................................1
SECTION 2. INTEREST, FEES AND CHARGES ....................................1
2.1. Interest ......................................................1
2.2. Computation of Interest and Fees ..............................2
2.3. Closing Fee ...................................................2
2.4. Unused Line Fee ...............................................2
2.5. Audit Expenses ................................................2
2.6. Reimbursement of Expenses .....................................2
2.7. Bank Charges .................. ...............................3
SECTION 3. LOAN ADMINISTRATION ...........................................3
3.1. Manner of Borrowing Revolver Loans ............................3
3.2. Payments ......................................................4
3.3. Mandatory Prepayments .........................................5
3.4 Application of Payments and Collections .......................5
3.5. All Loans to Constitute One Obligation ........................5
3.6. Loan Account ..................................................5
3.7. Statements of Account .........................................5
SECTION 4. TERM AND TERMINATION ..........................................5
4.1. Term of Agreement .............................................5
4.2. Termination ...................................................6
SECTION 5. SECURITY INTERESTS ............................................6
5.l. Security Interest in Collateral ...............................6
5.2. Lien Perfection; Further Assurances ...........................7
SECTION 6. COLLATERAL ADMINISTRATION .....................................7
6.1. General .......................................................7
6.2. Administration of Accounts ....................................8
6.3. Administration of Inventory ...................................9
6.4. Administration of Equipment ...................................9
6.5. Payment of Charges ...........................................10
SECTION 7. REPRESENTATIONS AND WARRANTIES ...............................10
7.1. General Representations and Warranties .......................10
7.2. Continuous Nature of Representation and Warrants .............14
7.3. Survival of Representation and Warranties ....................14
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS ..........................14
8.1. Affirmative Covenants ........................................14
8.2. Negative Covenant ............................................16
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
8.3 Specific Financial Covenants ..................................17
SECTION 9. CONDITIONS PRECEDENT ..........................................20
9.1. Documentation .................................................20
9.2. No Default ....................................................21
9.3. Other Loan Documents ..........................................21
9.4. Availability ..................................................21
9.5. No Litigation .................................................21
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT .............21
10.1. Events of Default .............................................21
10.2. Acceleration of the Obligations ...............................23
10.3. Other Remedies ................................................23
10.4. Remedies Cumulative; No Waiver ................................24
SECTION ll. MISCELLANEOUS .................................................24
11.1. Power of Attorney .............................................24
11.2. Indemnity .....................................................25
11.3. Modification of Agreement; Sale of Interest ...................25
11.4. Severability ..................................................26
11.5. Successors and Assigns ........................................26
11.6. Cumulative Effect; Conflict of Terms ..........................26
11.7. Execution in Counterparts .....................................26
11.8. Notices .......................................................26
11.9. Lender's Consent ..............................................27
11.10. Credit Inquires ...............................................27
11.11. Time of Essence ...............................................27
11.12. Entire Agreement; Appendix A and Exhibits .....................27
11.13. Interpretation ................................................27
11.14. Governing Law; Consent To Forum ...............................27
11.15. WAIVERS BY BORROWER ...........................................27
</TABLE>
(ii)
<PAGE> 4
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A-l Term Note
Exhibit A-2 Equipment Note
Exhibit B Borrower's and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit D Capital Structure of Borrower
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Liens
</TABLE>
<PAGE> 5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 28th day of September,
1994, by and between BARCLAYS BUSINESS CREDIT, INC. ("Lender"), a Connecticut
corporation with an office at 300 Galleria Parkway, N.W., Suite 800, Atlanta,
Georgia 30339; and TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION ("Borrower"), a
Florida corporation with its chief executive office and principal place of
business at 2508 Ivy Street, Tampa, Florida 33607. Capitalized terms used in
this Agreement have the meanings assigned to them in Appendix A, General
Definitions. Accounting terms not otherwise specifically defined herein shall be
construed in accordance with GAAP consistently applies.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $48,000,000,
available upon Borrower's request therefor, as follows:
1.1. Revolver Loans. Lender agrees, for so long as no Default or Event
of Default exists, to make Revolver Loans to Borrower from time to time, as
requested by Borrower in the manger set forth in subsection 3.1.1 hereof, up to
a maximum principal amount at any time outstanding equal to the Borrowing Base
at such time. The Revolver Loans shall be used solely for the satisfaction of
existing Indebtedness of Borrower to CIT, for payments under the Settlement
Agreement, for Borrower's general operating capital needs in a manner consistent
with the provisions of this Agreement and Applicable Law and for any other
purpose not inconsistent with this Agreement.
1.2. Term and Equipment Loans.
1.2.1. Term Loan. Lender agrees to make a term loan to
Borrower on the Closing Dare in the principal amount of $3,000,000, which shall
be repayable in accordance with the terms of the Term Note and shall be secured
by all of the Collateral. The proceeds of the Term Loan shall be used solely for
purposes for which the proceeds of the Revolver Loans are authorized to be used.
In no event shall Borrower be entitled to reborrow any amounts repaid with
respect to the Term Loan.
1.2.2. Equipment Loans. For so long as no Default or Event
of Default exists, Lender shall, during the period from and after the Closing
Due through the Original Term or (subject to Lender's prior written consent and
the execution of appropriate amendments) any Renewal Term, make Equipment Loans
to Borrower, In an aggregate amount not to exceed $5,000,000, to fee Borrower's
purchase of Eligible Equipment; provided, however, thus the principal amount of
Equipment Loans made during the period from the Closing Date through September
30, 1995, shall be limited to $2,000,000 in the aggregate. Each Equipment Loan
shall be in an amount that is not less than $100,000 but shall not exceed the
lesser of 80% of the Equipment Purchase Price of new Eligible Equipment so
purchased or 80% of the appraised value (under an appraisal methodology and by
appraisals acceptable to Lender) of any used Eligible Equipment so purchased.
Borrower may not request more than 1 Equipment Loan per fiscal month of
Borrower. Each Equipment Loan and Borrower's obligation to repay same shall be
evidenced by and repaid in accordance with the Equipment Note and shall be
secured by the Collateral, and shall bear interest at the variable rate
specified in subsection 2.1.1 hereof. In no event shall Lender have any
obligation to honor a request of Borrower for an Equipment Loan unless each of
the Equipment Loan Conditions is satisfied and in no event shall Borrower be
entitled to reborrow any amounts repaid with respect to the Equipment Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Interest shall accrue on the Term
Loan in accordance with the terms of the Term Note. Interest shall accrue on the
principal amount of the Equipment Loans and the Revolver Loans outstanding at
the end of each day at a variable rate per annum equal to 1% plus the Base
Rate. On the date
<PAGE> 6
hereof, the Base Rate is 7-3/4% and therefore the rate of interest in effect
hereunder on the date hereof with respect to Resolver Loans and Equipment
Loans, expressed in simple interest terms is 8-3/4%. The rate of interest shall
increase or decrease by an amount equal to any increase or decrease in the Base
Rate, effective as of the opening of business on the day that any such change in
the Base Rate occurs.
2.1.2. Default Rate of Interest. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
principal amount of all Loans shall bear interest at a rate per annum equal to
2% above the interest rate otherwise applicable thereto (the "Default Rate").
2.2. Computation of Interest and Fees. Interest and unused line fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days. For the purpose of computing interest
hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items)
after receipt by Lender of such items in Lender's account at Harris Trust &
Savings Bank located in Chicago, Illinois, and Lender shall be deemed to have
received such item of payment on the date specified in Section 3.4 hereof.
2.3. Closing Fee. Borrower shall pay to Lender an a closing fee of
$60,000, which shall be fully earned and (except to the extent otherwise
required by Applicable Law) nonrefundable on the Closing Date and shall be paid
concurrently with the initial Loan hereunder.
2.4. Unused Line Fee. In consideration of Lender's establishment and
maintenance of the credit facilities hereunder during the term hereof, Borrower
agrees that, if the Average Monthly Revolver Loan Balance for any month is less
than $40,000,000 (minus the amount of any proceeds of the Life Insurance
Assignment applied by Lender to the Revolver Loans), then, to the extent of the
difference (the "Deficiency.), Borrower shall pay to Lender a fee equal to (i)
.25% per annum of the first $10,000,000 of the Deficiency, and (ii) .125% per
annum of that portion of the Deficiency in excess of $10,000,000. The unused
line fee shall be payable monthly, in arrears, on the first day of each calendar
month hereafter.
2.5. Audit Expenses. Borrower shall pay to Lender all out-of-pocket
expenses incurred by Lender in connection with any audits and appraisals of
Borrower's books and records and such other matters as Lender shall deem
appropriate; provided, however, that Borrower shall not be obligated to pay any
such expenses in excess of $7,500 during any fiscal year in which no Default or
Event of Default shall have occurred; and provided, further, that such expenses
shall not include general administrative expenses and overhead of Lender. Audit
expenses shall be payable on the first day of the month following the date of
issuance by Lender of a request for payment thereof to Borrower and if payment
is due to a Person other than Lender, such request shall specify the dare on
which such payment is due.
2.6. Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender or any Participant incurs
legal or accounting expenses or any other costs or out-of-pocket expenses in
connection with (i) the negotiation and preparation of this Agreement or any of
the other Loan Documents, any amendment of or modification of this Agreement or
any of the other Loan Documents for any sale or attempted sale of any interest
herein to a Participant, not to exceed at any time $10,000 in the aggregate with
respect to any sale or attempted sale of any interest to a Participant; (ii) the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower or
any other Person) in any way relating to the Collateral, this Agreement or any
of the other Loan Documents or Borrower's affairs and to which Lender is a
party; (iv) any attempt to enforce any rights of lender or any Participant
against Borrower or any other Person which may be obligated to Lender by virtue
of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then all such legal and accounting expenses, other costs
and out of pocket expenses of Lender shall be charged to Borrower. All amounts
chargeable to Borrower under this Section 2.6 shall be Obligations secured by
all of the Collateral, shall be payable on demand to lender or to such
Participant, as the case may be, and shall bear interest from the date such
demand is made until paid in full at the rate applicable to Revolver Loans from
time to time. Borrower shall also reimburse Lender for
-2 -
<PAGE> 7
expenses incurred by Lender in its administration of the Collateral to the
extent And in the manner provided in Section 6 hereof.
2.7. Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any Participant pays to a bank or other
similar institution (including, without limitation, any fees paid by Lender to
any Participant arising out of or in connection with (i) the forwarding to
Borrower or Any other Person on behalf of Borrower, by Lender or any
Participant, of proceeds of loans made by lender to Borrower pursuant to this
Agreement and (ii) the depositing for collection, by lender or any Participant,
of any check or item of payment received or delivered to lender or any
Participant on account of the Obligations.
2.8. Maximum Interest. Regardless of any provision contained in this
Agreement or any of the other Loan Documents, in no contingency or event
whatsoever shall the aggregate of all amounts that are contracted for, charged
or collected pursuant to the terms of this Agreement, the Term Note, any
Equipment Note or Any of the other Loan Documents and that Me deemed interest
under Applicable Law exceed the highest rate permissible under Any Applicable
Law. No agreements, conditions, provisions or stipulations contained in this
Agreement or any of the other Loan Documents or the exercise by lender of the
right to accelerate the payment or the maturity of all or any portion of the
Obligations, or the exercise of any option whatsoever contained in any of the
Loan Documents, or the prepayment by Borrower of any of the Obligations, or the
occurrence of Any contingency whatsoever, shall entitle Lender to charge or
receive in any event, interest or any charges, amounts, premiums or fees deemed
interest by Applicable Law (such interest, charges amounts, premiums and fees
referred to herein collectively as "Interest") in excess of the Maximum Rate and
in no event shall Borrower be obligated to pay Interest exceeding such Maximum
Rate, And all agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel Borrower to
pay Interest exceeding the Maximum Rate shall be without binding force or
effect, at law or in equity, to the extent only of the excess of Interest over
such Maximum Rate. If any Interest is charged or received in excess of the
Maximum Rate ("Excess"), Borrower acknowledges and stipulates that any such
charge or receipt shall be the result of an accident and bona fide error, and
such Excess, to the extent received, shall be applied first to reduce the
principal Obligations And the balance, if any, returned to Borrower, it being
the intent of the parties hereto not to enter into a usurious or otherwise
illegal relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate Any interest that has not
otherwise accrued on the date of such acceleration, and Lender does not intend
to collect any unearned interest in the event of Any such acceleration. Borrower
recognizes that, with fluctuations in the rates of interest set forth in
subsection 2.1.1 of this Agreement, or in the Term Note or any Equipment Note
and the Maximum Rate, such an unintentional result could inadvertently occur.
All monies paid to Lender hereunder or under any of the other Loan Documents,
whether at maturity or by prepayment, shall be subject to any rebate of unearned
interest as and to the extent required by Applicable Law. By the execution of
this Agreement, Borrower covenants that (i) the credit or return of any Excess
shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower
shall not seek or pursue any other remedy, legal or equitable, against Lender,
based in whole or in pan upon contracting for, charging or receiving any
Interest in excess of the Maximum Rate. For the purpose of determining whether
or not any Excess has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received from Borrower in
connection with any of the Loan Documents shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower and Lender shall, to the
maximum extent permitted under Applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof. The provisions of
this Section shall be deemed to be incorporated into every Loan Document
(whether or not any provision of this Section is referred to therein). All such
Loan Documents and communications relating to any Interest owed by Borrower and
all figures set forth therein shall, for the sole purpose of computing the
extent of Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 3. LOAN ADMINISTRATION
3.1. Manner of Borrowing Revolver Loans. Borrowings under the credit
facility established pursuant to Section 1 hereof shall be as follows:
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3.1.1. Loan Requests. A request for a Revolver Loan shall be made,
or shall be deemed to be made, in the following manner: (i) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall specify
the amount of the proposed borrowing and the proposed borrowing date, no later
than 12:00 noon Atlanta, Georgia time on the proposed borrowing date; provided,
however, that no such request may be made at a time when there exists a Default
or an Event of Default; and (ii) unless payment is otherwise timely made by
Borrower, the becoming due of any amount required to be paid under this
Agreement, the Term Note, any Equipment Note or any of the other Loan
Documents, as principal, accrued interest, fees or other charges, shall be
deemed irrevocably to be a request by Borrower from Lender for a Revolver Loan
on the due date of, and in an aggregate amount required to pay, such principal,
accrued interest, fees or other charges and the proceeds of each such Revolver
Loan may be disbursed by Lender by way of direct payment of the relevant
Obligation and shall bear interest at the rate of interest applicable to
Revolver Loans. As an accommodation to Borrower, Lender may permit telephonic
requests for loans and electronic transmittal of instructions, authorizations,
agreements or reports to Lender by Borrower. Unless Borrower specifically
directs Lender in writing not to accept or act upon telephonic or electronic
communications from Borrower, Lender shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of Lender's honoring of any
requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to Lender telephonically or electronically
and purporting to have been sent to Lender by Borrower and Lender shall have no
duty to verify the origin of any such communication or the authority of the
person sending it.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes Lender
to disburse the proceeds of each Revolver Loan requested, or deemed to be
requested, pursuant to this subsection 3.1.2 as follows: (i) the proceeds of
each Revolver Loan requested under subsection 3.1.1(i) shall be disbursed by
Lender in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrower, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by
Borrower and Lender from time to time or elsewhere if pursuant to a written
direction from Borrower; and (ii) the proceeds of each Revolver Loan requested
under subsection 3.1.1(ii) shall be disbursed by Lender by way of direct payment
of the relevant Obligation.
3.2. Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment provisions
which are in conflict with this Section 3.2 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
Obligations shall be payable as follows:
3.2.1. Principal. Principal payable on account of Revolver Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Lender or Borrower of any proceeds of any of the Collateral other
than Equipment or real Property, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement pursuant to Section 4 hereof; provided, however, that if an
Overadvance shall exist at any time, Borrower shall, on demand repay the
Overadvance.
3.2.2. Interest. Interest accrued on the Revolver Loans shall be
due on the earliest of (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month (ii) the occurrence of an Event of Default in consequence of
which Leader elects to accelerate the maturity and payment of the Obligations or
(iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Leader or to any other Person designated by Lender in
writing.
3.2.4. Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Lender
as and when provided in this Agreement, the Other
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Agreements or the Security Documents, or, if no date of payment is otherwise
specified in the Loan Documents, on demand.
3.3. Mandatory Prepayments. If Borrower sells any of the Equipment, or
if any of the Collateral is lost or destroyed or taken by condemnation, Borrower
shall pay to Lender, unless otherwise agreed by Lender, as and when received by
Borrower and as a mandatory prepayment of the Term Loan or the Equipment Loans,
as determined by Lender, a sum equal to the Net Proceeds (including insurance
payments) received by Borrower from such sale, loss, destruction or
condemnation.
3.4. Application of Payments and Collections. All items of payment
received by Lender by 12:00 noon, Atlanta, Georgia time, on any Business Day
shall be deemed received on that Business Day. All items of payment received
after 12:00 noon, Atlanta, Georgia time, on any Business Day shall be deemed
received on the following Business Day. Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or
times hereafter received by Lender from or on behalf of Borrower, and Borrower
does hereby irrevocably agree that Lender shall have the continuing exclusive
right to apply and reapply any and all such payments and collections received at
any time or times hereafter by Lender or its agent against the Obligations in
such manner as Lender may deem advisable; provided, however, that for so long as
no Default or Event of Default exists, Lender shall apply all proceeds received
by it from the Accounts and Inventory to the Revolver Loans unless otherwise
requested by Borrower in writing (but Lender will have no obligation to apply
any such proceeds to any Loans other than the Revolver Loans if an Overadvance
exists or would result therefrom). If as the result of collections of Accounts
as authorized by subsection 6.2.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists. Such credit balance shall not be applied or be deemed
to have been applied as a prepayment of the Term Loan or any Equipment Loan,
except that Lender may, at its option, offset such credit balance against any of
the Obligations upon and after the occurrence of an Event of Default.
3.5. All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower, and shall be secured by Lender's Lien upon
all of the Collateral.
3.6. Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practices, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.7. Statements of Account. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless lender is notified by Borrower in writing to the
contrary within 30 days of the date each accounting is mailed to Borrower. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement. Subject to Lender's right to cease making Loans
to Borrower upon or after the occurrence of any Default or Event of Default,
this Agreement shall be in effect for a period of 3 years from the date hereof,
through and including September 30, 1997 (the "Original Term"), and this
Agreement shall automatically renew itself for one-year periods thereafter (each
a "Renewal Term"), unless terminated as provided in Section 4.2 hereof.
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4.2. Termination.
4.2.1. Termination by Lender. Upon at least 90 days prior written
notice to Borrower. Lender may terminate this Agreement as of the last day of
the Original Term or the then current Renewal Term and Lender may terminate this
Agreement without notice upon or after the occurrence of an Event of Default.
4.2.2. Termination by Borrower. Upon at least 90 days prior
written notice to Under, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds. Any notice of
termination given by Borrower shall be irrevocable unless Lender otherwise
agrees in writing, and Lender shall have no obligation to make any Loans on or
after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3. Termination Charges. At the effective date of termination
of this Agreement for any reason, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other charges owing under
the terms of this Agreement and any of the other Loan Documents), as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to
.5% of the Average Monthly Loan Balances for the preceding twelve-month period
if termination occurs during the Original Term. If termination occurs on the
last day of the Original Term or during any Renewal Term, no termination charge
shall be payable.
4.2.4. Effect of Termination. All of the Obligations (including,
without limitation, the Term Loan and each Equipment Loan) shall be immediately
due and payable Upon the termination date stated in any notice of termination of
this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Lender shall retain its Liens in the Collateral and all of
its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to lender, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Lender may incur as a result of dishonored checks
or other items of payment received by Lender from Borrower or any Account Debtor
and applied to the Obligations, Lender shall, at its option, (i) have received a
written agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing security interest in and Lien upon all of Borrower's assets,
including all of the following Property and interests in Property of Borrower,
whether now owned or existing or hereafter creased acquired or arising arid
wheresoever located:
(i) All Accounts;
(ii) All Chattel Paper;
(iii) All Documents;
(iv) All Instruments;
(v) All Inventory;
(vi) All Equipment;
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(vii) All General Intangibles;
(viii) All Securities;
(ix) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Lender
or a bailee or Affiliate of Lender;
(x) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (ix)
above, including, without limitation, proceeds of and unearned premiums
with respect to insurance policies insuring any of the Collateral; and
(xi) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (x) above.
Notwithstanding anything to the contrary in this Agreement, Borrower does not
grant to Lender a Lien upon any "margin stock" (within the meaning of
Regulations G or U of the Board of Governors) and Borrower shall not be
prohibited by this Agreement or any of the other Loan Documents from granting a
Lien in "margin stock" (as so defined) to any other Person.
5.2. Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by Applicable Law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreement deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General
6.1.1. Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by Borrower
and its Subsidiaries at one or more of the business locations set forth in
Exhibit B hereto and shall not, without the prior written approval of Lender, be
moved therefrom except, prior to an Event of Default and Lender's acceleration
of the maturity of the Obligations in consequence thereof, for (i) sales of
Inventory in the ordinary course of business and (ii) removals in connection
with dispositions of Equipment that are authorized by subsection 6.4.2 hereof.
6.1.2. Insurance of Collateral. Borrower shall maintain
and pay for insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such other
risk in Such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver the originals or certified
copies of such policies to Lender with satisfactory lender's loss payable
endorsements, naming Lender as sole loss payee, assignee or additional insured,
as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Lender in the event of cancellation of the policy for any reason whatsoever and
a clause specifying that the interest of Lender shall not be implied or
invalidated by any act or neglect of Borrower or the owner of the Property or by
the occupation of the premises for purposes more hazardous than are permitted by
said policy. If Borrower fails to provide and pay for such insurance, Lender
may, at its option, but shall not be required to, procure the same and charge
Borrower therefor. Borrower agrees to deliver to Lender, promptly as rendered,
true copies of all reports made in any reporting forms to insurance companies.
In addition to the insurance required herein with respect to the Collateral,
Borrower shall maintain, with financially sound and reputable insurers,
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insurance with respect to its Properties and business against such casualties
and contingencies of such type (including product liability, business
interruption, larceny, embezzlement, or other criminal misappropriation
insurance) and in such amounts as is customary in the business of Borrower or as
otherwise required by Lender.
6.1.3. Protection of Collateral. All expenses of
protecting, storing, warehousing, insuring, handling, maintaining and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any Applicable Law on any of the Collateral or in respect of the sale thereof
shall be borne and paid by Borrower. If Borrower fails to promptly pay any
portion thereof when due, Lender may, at its option but shall not be required
to, pay the same and charge Borrower therefor. Lender shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
6.2. Administration of Accounts.
6.2.1. Records, Schedules and Assignments of Accounts.
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. On or before the fifteenth day of each
month from and after the date hereof, Borrower shall deliver to Lender, in form
acceptable to Lender, a detailed aged trial balance of all Accounts existing as
of the last day of the preceding month, specifying the names, addresses, face
value, dates of invoices and due dates for each Account Debtor obligated on an
Account so listed ("Schedule of Accounts"), and, upon Lender's request
therefor, copies of proof of delivery to be delivered within 30 days after such
request by Lender and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of $250,000 become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Accounts or otherwise
established by Lender, Borrower shall notify Lender of such occurrence on the
first Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. In addition, at least once a
month, unless sooner requested by Lender, Borrower shall provide Lender with a
statement of all Accounts that constitute Client Risk Accounts. If requested by
Lender at any time after the Factoring Agreements have been terminated, Borrower
shall execute and deliver to Lender formal written assignments of all of its
Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of invoices
or invoice registers related thereto.
6.2.2. Discounts, Allowances, Disputes. If Borrower
grants any discounts, allowances or credits that are not shown on the face of
the invoice for the Account involved, Borrower shall report such discounts,
allowances or credits, as the case may be, to Lender as pan of the next required
Schedule of Accounts. If any amounts due and owing in excess of $250,000 are in
dispute between Borrower and any Account Debtor, Borrower shall provide Lender
with written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence of an Event
of Default, Lender shall have the right to settle or adjust all disputes and
claims directly with the Account Debtor and to compromise the amount or extend
the time for payment of the Accounts upon such terms and conditions as Lender
may deem advisable, and to charge the deficiencies, costs and expenses thereof,
including attorney's fees, to Borrower.
6.2.3. Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however that
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.2.4. Account Verification. Whether or not a Default or
an Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating
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to any Accounts by mail, telephone, telegraph or otherwise. Borrower shall
cooperate fully with Lender in an effort to facilitate and promptly conclude any
such verification process.
6.2.5. Maintenance of Dominion Account. Borrower shall
maintain a Dominion Account acceptable to Lender with such banks as may be
selected by Borrower and be acceptable to Lender. Borrower shall issue to any
such banks an irrevocable letter of instruction directing such banks to remit
all payments or other remittance to Lender. All funds deposited in the Dominion
Account shall immediately become the property of Lender and Borrower shall
obtain the agreement by such banks in favor of Lender to waive any offset rights
against the funds so deposited. Upon termination of the Factoring Agreements,
Borrower shall establish a lockbox arrangement in forte and substance
satisfactory to Lender.
6.2.6. Collection of Accounts; Proceeds of Collateral.
Borrower shall instruct CIT to remit payment with respect to all amounts at any
time payable to Borrower from CIT under the Factoring Agreements to the
Depository Account, and Borrower hereby irrevocably authorizes Lender to
transfer all credit balances in the Depository Account to the Obligations in
accordance with the terms of this Agreement. Any remittances received by
Borrower from an Account Debtor on account of Accounts (other than Factored
Accounts), together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Lender retains the right at all times after the occurrence of a
Default or an Event of Default to notify Account Debtors that Accounts have been
assigned to Lender and to collect Accounts directly in its own name and to
charge the collection costs and expenses, including attorneys' fees to Borrower.
6.2.7. Information Regarding Factoring Agreements.
Borrower shall promptly provide Lender with copies of all reports, statements of
account and other communications received by Borrower from CIT with reference to
either of the Factoring Agreements, including, without limitation, all Factor
Status Statements, all notices of default or termination, and all amendments
thereto. Borrower shall identify to Lender each month the Client Risk Accounts
and amount thereof. Borrower shall provide to Lender on a daily basis, a Due
From Factor Report, together with copies of all data and other information
requested by Lender from which such Due From Factor Reports are derived.
6.3. Administration of Inventory.
6.3.1. Records and Reports of Inventory. Borrower shall
keep accurate and complete records of its Inventory. Borrower shall furnish
Lender Inventory reports in form and detail satisfactory to Lender at such
times as Lender may request, but at least once each month, not later than the
twentieth day of such month. Borrower shall conduct a physical inventory no
less frequently than annually and shall provide to Lender a report based on
each such physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
6.3.2. Return of Inventory. Borrower shall not return any
of its Inventory to a supplier or vender thereof, or any other Person, whether
for cash, credit against future purchases or then existing payables, or
otherwise, unless (i) such return is in the ordinary course of business of
Borrower and such Person, (ii) no Default or Event of Default exists or would
result therefrom, (iii) the return of such Inventory will not result in an
Overadvance, (iv) if the value of all Inventory returned in any month exceeds
$250,000, Borrower promptly notifies Lender thereof, and (v) any payments
received by Borrower in connection with any such return is promptly turned over
to Lender for application to the Obligations.
6.4. Administration of Equipment.
6.4.1. Records and Schedules of Equipment. Borrower shall
keep accurate records itemizing and describing the kind, type, quality, quantity
and value of its Equipment and all dispositions made in accordance with
subsection 6.4.2 hereof, and shall furnish Lender with a current schedule
containing the foregoing information on at least an annual basis and more often
if requested by Lender. Immediately on request therefor by Lender, Borrower
shall deliver to Lender any and all evidence of ownership, if any, of any of the
Equipment.
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6.4.2. Dispositions of Equipment. Borrower will not sell,
lease or otherwise dispose of or transfer any of the Equipment or any part
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment (other than Eligible Equipment
or any part thereof unless the Equipment Loan that was made to finance
Borrower's acquisition of such Eligible Equipment has been paid in full) which,
in the aggregate during any consecutive twelve-month period, has a fair market
value or book value, whichever is more, of $100,000 or less, provided that all
proceeds thereof are remitted to Lender for application to the Loans, or
(ii) replacements of Equipment that is substantially worn, damaged or obsolete
with Equipment of like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with any disposition of the
Equipment that is to be replaced, the replacement Equipment shall be free and
clear of Liens other than Permitted Liens that are not Purchase Money Liens, and
Borrower shall have given Lender at least 5 days prior written notice of such
disposition.
6.4.3 Condition of Equipment. The Equipment is in good
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved, reasonable wear and tear excepted.
Borrower will not permit any of the Equipment to become affixed to any real
Property leased to Borrower so that an interest arises therein under the real
estate laws of the applicable jurisdiction unless the landlord of such real
Property has executed a landlord waiver or leasehold mortgage in favor of and in
form acceptable to Lender, and Borrower will not permit any of the Equipment
to become an accession to any personal Property that is subject to a Lien unless
the Lien is a Permitted Lien (other than a Purchase Money Lien).
6.5. Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Revolver Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
7.1.1. Organization and Qualification. Each of Borrower
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on EXHIBIT C hereto and in all other states and jurisdictions where the
character of its Properties or the tenure of its activities make such
qualification necessary.
7.1.2. Corporate Power and Authority. Each of Borrower
and its Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this Agreement
and each of the other Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the shareholders of Borrower or any of its Subsidiaries; (ii) contravene
Borrower's or any of its Subsidiaries' charter, articles or certificate of
incorporation or by-laws; (iii) violate, or cause Borrower or any of its
Subsidiaries to be in default under, any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to Borrower or any of its Subsidiaries; (iv) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower or any
of its Subsidiaries is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by Borrower or any of its Subsidiaries.
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<PAGE> 15
7.1.3. Legally Enforceable Agreement. This Agreement is,
and each of the other Loan Documents when delivered under this Agreement will
be, a legal, valid and binding obligation of each of Borrower and its
Subsidiaries enforceable against each of them.
7.1.4. Capital Structure. Exhibit D hereto states
(i) the correct name of each of the Subsidiaries of Borrower, its jurisdiction
of incorporation and the percentage of its Voting Stock owned by Borrower,
(ii) the name of each of Borrower's corporate or joint venture Affiliates and
the nature of the affiliation, (iii) the number, nature and holder of all
outstanding Securities of Borrower and each Subsidiary of Borrower and (iv) the
number of authorized, issued and treasury shares of Borrower and each Subsidiary
of Borrower. Borrower has good title to all of the shares it purports to own of
the stock of each of its Subsidiaries, free and clear in each case of any
Lien other than Permitted Liens. All such shares have been duly issued and are
fully paid and nonassessable. There are no outstanding options to purchase, or
any rights or warrants to subscribe for, or any commitments or agreements to
issue or sell, or any Securities or obligations convertible into, or any powers
of attorney relating to, shares of the capital stock of Borrower or any of its
Subsidiaries. There are no outstanding agreements or instruments binding upon
any of Borrower's shareholders relating to the ownership of its shares of
capital stock.
7.1.5. Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit E hereto. Except as set forth on EXHIBIT E,
neither Borrower nor any of its Subsidiaries has been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person.
7.1.6. Business Locations; Agent for Process. Each of
Borrower's and its Subsidiaries' chief executive office and other places of
business are as listed on EXHIBIT B hereto. During the preceding five-year
period, neither Borrower nor any of its Subsidiaries has had an office, place of
business or agent for service of process other than as listed on EXHIBIT B.
Except as shown on EXHIBIT B, no inventory is stored with a bailee,
warehouseman or similar party, nor is any Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. Each of
Borrower and its Subsidiaries has good, indefeasible and marketable title to and
fee simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might become
a Lien against any of Borrower's Properties that is not a Permitted Lien. The
Liens granted to Lender under Section 5 hereof are first priority Liens, subject
only to those Permitted Liens which are expressly stated to have priority over
the Liens of Lender.
7.1.8. Accounts. Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts. Unless otherwise indicated in
writing to Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide, sale and
delivery of goods or rendition of services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions of
all purchase orders, contracts or other documents relating thereto and
forming a part of the contract between Borrower and the Account Debtor;
(iii) It is for a liquidated amount manuring as stated in
the duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein,
is not, and will not (by voluntary act or omission of Borrower) be in the
future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for disputes resulting
in returned goods where
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<PAGE> 16
the amount in controversy is deemed by Lender to be immaterial, and each
such Account is absolutely owing to Borrower and is not contingent in any
respect or for any reason;
(v) Borrower has made no agreement with any Account
Debtor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, except
discounts or allowances which are granted by Borrower in the ordinary
course of its business for prompt payment and which are reflected in the
calculation of the net amount of each respective invoice related thereto
and are reflected in the Schedules of Accounts submitted to Lender
pursuant to subsection 6.2.1 hereof;
(vi) There are no facts, events or occurrences which in
any way impair the validity or enforceability of any Accounts or tend to
reduce the amount payable thereunder from the face amount of the invoice
and statements delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (2) such
Account Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9. Financial Statements; Fiscal Year. The
Consolidated and consolidating balance sheets of Apparel, Parent, Borrower and
such other Persons described therein (including the accounts of all Subsidiaries
of Borrower for the respective periods during which a Subsidiary relationship
existed) as of October 2, 1993, and the related statements of income, changes in
stockholder's equity, and changes in financial position for the periods ended on
such dates, have been prepared in accordance with GAAP, and present fairly the
financial positions of Apparel, Parent, Borrower and such Persons at such dates
and the results of their respective operations for such periods. Since
October 2, 1993, there has been no material change in the condition, financial
or otherwise, of Apparel, Parent, Borrower and such other Persons as shown on
the Consolidated balance sheet as of such date and no change in the aggregate
value of Equipment and real Property owned by Apparel, Parent, Borrower or such
other Persons, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse. The fiscal year
of Borrower and each of its Subsidiaries ends on the Saturday closest to
September 30th of each year.
7.1.10. Full Disclosure. The financial statements
referred to in subsection 7.1.9 hereof do not, nor does this Agreement or any
other written statement of Borrower to Lender, contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
failed to disclose to Lender in writing which materially affects adversely or,
so far as Borrower can now foresee, will materially effect adversely the
Properties, business, prospects, profits or condition (financial or otherwise)
of Borrower or any of its Subsidiaries or the ability of Borrower or its
Subsidiaries to perform this Agreement or the other Loan Documents.
7.1.11. Solvent Financial Condition. Each of Borrower and
its Subsidiaries is now and, after giving effect to the Loans to be made
hereunder, at all times will be, Solvent.
7.1.12. Surety Obligations. Neither Borrower nor any of
its Subsidiaries is obligated as surety or indemnitor under any surety or
similar bond or other contract issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
7.1.13. Taxes. Borrower's federal tax identification
number is 59-0486590. The federal tax identification number of each of
Borrower's Subsidiaries is shown on EXHIBIT F hereto. Borrower and each of its
Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees, levies and other governmental charges
upon
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<PAGE> 17
it, its income and Properties as and when such taxes, assessments, fees, levies
and charges that are due and payable except to the extent being Properly
Contested. The provision for taxes on the books of Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current fiscal year.
7.1.14. Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees by or through Borrower or
any of its agents, Subsidiaries or Affiliates in connection with the
transactions contemplated by this Agreement.
7.1.15. Patents, Trademarks, Copyrights and Licenses.
Each of Borrower and its Subsidiaries owns or possesses all the patents,
trademarks, service marks, trade names, copyrights and licenses necessary for
the present and planned future conduct of its business without any known
conflict with the rights of others. All such patents, trademarks, service
marks, tradenames, copyrights, licenses and other similar rights are listed on
Exhibit G hereto.
7.1.16. Governmental Consents. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it.
7.1.17. Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all Applicable Laws and there have been no citations, notices or orders of
noncompliance issued to Borrower or any of its Subsidiaries under any such law,
rule or regulation. Each of Borrower and its Subsidiaries has established and
maintains an adequate monitoring system to insure that it remains in compliance
with all federal, state and local laws, rules and regulations applicable to it.
No Inventory has been produced in violation of the Fair Labor Standards Act
(29 U.S.C. sec. 201 et seq.), as amended.
7.1.18. Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its
business or the use or ownership of any of its Properties. Neither Borrower nor
any of its Subsidiaries is a party or subject to any contract or agreement which
restricts its right or ability to incur Indebtedness, other than as set forth on
Exhibit H hereto, none of which prohibit the execution of or compliance with
this Agreement or the other Loan Documents by Borrower or any of its
Subsidiaries, as applicable.
7.1.19. Litigation. Except as set forth on Exhibit I
hereto, there are no actions, suits, proceedings or investigations pending, or
to the knowledge of Borrower, threatened, against or affecting Borrower or any
of its Subsidiaries, or the business, operations, Properties, prospects, profits
or condition of Borrower or any of its Subsidiaries. Neither Borrower nor any
of its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.20. No Defaults. No event has occurred and no
condition exists which would, upon or after the execution and delivery of this
Agreement or Borrower's performance hereunder, constitute a Default or an
Event of Default. Neither Borrower nor any of its Subsidiaries is in default,
and no event has occurred and no condition exists which constitutes, or which
with the passage of time or the giving of notice or both would constitute, a
default in the payment of any Indebtedness to any Person for Money Borrowed.
7.1.21. Leases. EXHIBIT J hereto is a complete listing of
all capitalized leases of Borrower and its Subsidiaries and EXHIBIT K hereto is
a complete listing of all operating leases of Borrower and its Subsidiaries.
Each of Borrower and its Subsidiaries is in full compliance with all of the
terms of each of its respective capitalized and operating leases.
7.1.22. Pension Plans. Except as disclosed on EXHIBIT L
hereto, neither Borrower nor any of its Subsidiaries has any Plan. To the best
of their knowledge, Borrower and each of its Subsidiaries is in full compliance
with the requirements of ERISA and the regulations promulgated thereunder with
respect to each
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<PAGE> 18
Plan. No fact or situation could result in a material adverse change in the
financial condition of Borrower or any of its Subsidiaries exists in connection
with any Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal
liability in Connection with a Multiemployer Plan.
7.1.23. Trade Relations. To the best of their knowledge,
there exists no actual or threatened termination, cancellation or limitation of,
or any modification or change in, the business relationship between Borrower or
any of its Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower or any of its Subsidiaries, or with any material supplier, and there
exists no present condition or state of facts or circumstances which would
materially affect adversely Borrower or any of its Subsidiaries or prevent
Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transaction contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted.
7.1.24. Labor Relations. Except as described on EXHIBIT M
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.2. Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement.
7.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by
Lender and the parties thereto and the closing of the transactions described
therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing. it shall:
8.1.1. Visits and Inspections. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower
and each of its Subsidiaries, inspect, audit and make extracts from its books
and records, and discuss with its offices, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations.
8.1.2. Notices. Notify Lender in writing (i) of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading; (ii) promptly after Borrower's learning
thereof, of the commencement of any litigation affecting Borrower or any of its
Properties, whether or not the claim is considered by Borrower to be covered by
insurance, and of the institution of any administrative proceeding which may
have a Material Adverse Effect; (iii) at least sixty (60) days prior thereto,
of Borrower's opening of any new office or place of business or Borrower's
closing of any existing office or place of business; (iv) promptly after
Borrower's learning thereof, of any labor dispute to which Borrower may become a
party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (v) promptly after Borrower's learning thereof, of any
material default by any Loan Party under any note indebtedness, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any
Indebtedness
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<PAGE> 19
of Borrower exceeding $100,000; (vi) promptly after the occurrence thereof, of
any Default or Event of Default; (vii) promptly after the occurrence thereof, of
any default by any obliger under any note or other evidence of Indebtedness
payable to Borrower; (viii) promptly after the rendition thereof, of any
judgment rendered against any Loan Party in an amount exceeding $100,000;
(ix) the termination or expiration of any License Agreements or Borrower's
execution of any new License Agreements or amendments, extensions or
modifications of any License Agreements and Borrower shall provide Lender with
copies of any such License Agreements or amendments, extensions or
modifications; and (x) the occurrence of a default or an event of default under
any of the Seller Documents.
8.1.3. Financial Statements. Keep, and cause each
Subsidiary to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's certified public accountants
concur in any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(i) not later than 90 days after the close of each fiscal
year of Borrower, unqualified audited financial statements of Apparel,
Parent, Borrower and Borrower's Subsidiaries as of the end of such year, on
a Consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by Borrower
but acceptable to Lender (except for a qualification for a change in
accounting principles with which the accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of Apparel, Parent, Borrower and Borrower's
Subsidiaries as of the end of such month and of the portion of Borrower's
financial year then elapsed, on a Consolidated and consolidating basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the Consolidated financial
position and results of operations of Apparel, Parent, Borrower and
Borrower's Subsidiaries for such month and period subject only to changes
from audit and year-end adjustments and except that such statements need
not contain notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which Borrower has made available to its shareholders and copies of
any regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(iv) promptly after the filing thereof, copies of any
annual report to be filed in accordance with ERISA in connection with each
Plan; and
(v) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's and each of its
Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements described
in clause (i) of this subsection 8.1.3, Borrower shall forward to Lender a copy
of the accountants' letter to Borrower's management that is prepared in
connection with such financial statements. Concurrently with the delivery of
the financial statements described in clauses (i) and (ii) of this subsection
8.1.3, or more frequently if requested by Lender, Borrower shall cause to be
prepared and furnished to Lender a Compliance Certificate in the form of
EXHIBIT N hereto executed by the chief financial officer of Borrower.
8.1.4. Landlord and Storage Agreements. Provide Lender
with copies of all agreements between Borrower or any of its Subsidiaries and
any landlord or warehouseman which owns any premises at which any Inventory may,
from time to time, be kept.
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<PAGE> 20
8.1.5. Projections. No later than 30 days prior to the
end of each fiscal year of Borrower, deliver to Lender Projections of Borrower
for the forthcoming 3 years, year by year, and for the forthcoming fiscal year,
month by month.
8.1.6 Key-Man Insurance. Obtain and keep in full force
and effect a life insurance policy insuring the life of William W. Compton in an
amount of not less than $2,000,000, the owner and beneficiary of which policy
shall be Borrower and the proceeds (to the extent of $2,000,000) and benefits of
which policy shall be collaterally assigned to Lender pursuant to the Life
Insurance Assignment. Any monies due or to become due under such policy may be
applied by Lender to such of the Obligations as Lender in its sole discretion
elects whether or not any of such Obligations are then due or any Event of
Default exists.
8.1.7. Taxes. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes prior to the date on which such taxes
become delinquent or penalties attach thereto, except and to the extent only
that such taxes are being Properly Contested.
8.1.8. Compliance With Laws. Comply, and cause each
Subsidiary to comply, with all Applicable Law, including, without limitation,
all laws, statutes, regulations and ordinances regarding the collection,
payment and deposit of employees' income, unemployment, Social Security, sales
and excise taxes, and all ERISA and Environmental Laws, and obtain and keep in
force any and all licenses, permits, franchises, or other governmental
authorizations necessary to the ownership of its Properties or to the conduct of
its business, which violation or failure to obtain might have a Material Adverse
Effect.
8.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it
will not:
8.2.1. Mergers; Consolidations; Acquisitions. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor acquire, nor permit any of its Subsidiaries to acquire, all or
any substantial part of the Properties of any Person.
8.2.2. Loans. Make, or permit any Subsidiary of Borrower
to make, any loans or other advances of money (other than for salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business) to any Person.
8.2.3. Reserved.
8.2.4. Affiliate Transactions. Enter into, or be a party
to, or permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or stockholder, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary.
8.2.5. Limitation on Liens. Create or suffer to exist, or
permit any Subsidiary of Borrower to create or suffer to exist, any Lien upon
any of its Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant
to any of the provisions of ERISA) not yet due or are being Properly
Contested;
(iii) Statutory Liens arising in the ordinary course of
Borrower's business by operation of law or regulation, but only if payment
in respect of any such Lien is not at the time required
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<PAGE> 21
or such Liens are being Properly Contested and do not, in the aggregate,
materially detract from the value of the Property of Borrower or
materially impair the use thereof in the operation of Borrower's business:
(iv) Purchase Money Liens securing Permitted Purchase
Money Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such subsidiary;
(vi) Liens in favor of Sellers which are expressly
subordinated to Lender's Liens pursuant to the Seller Intercreditor
Agreement;
(vii) such other Liens as appear on EXHIBIT O hereto; and
(viii) such other Liens as Lender may hereafter approve in
writing.
8.2.6. Subordinated Debt. Make, or permit any Subsidiary
of Borrower to make, any payment of any part or all of any Subordinated Debt or
take any other action or omit to take any other action in respect of any
Subordinated Debt, except in accordance with a subordination agreement relative
thereto in form and substance reasonably satisfactory to Lender.
8.2.7. Distributions. Declare or make, or permit any
Subsidiary of Borrower to declare or make, any Distributions.
8.2.8. Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to Borrower and its Subsidiaries, exceed $3,000,000 during any
fiscal year of Borrower.
8.2.9. Disposition of Assets. Sell, lease or otherwise
dispose of any of, or permit any Subsidiary of Borrower to sell, lease or
otherwise dispose any of, its Properties, including any disposition of Property
as part of a sale and leaseback transaction, to or in favor of any Person,
except (i) sales of Inventory in the ordinary course of business for so long as
no Event of Default exists hereunder, (ii) a transfer of Property to Borrower by
a Subsidiary of Borrower, (iii) sales of Accounts in the ordinary course of
business pursuant to the Factoring Agreements, or (iv) dispositions expressly
authorized by this Agreement.
8.2.10. Stock of Subsidiaries. Permit any of its
Subsidiaries to issue any additional shares of its capital stock except
director's qualifying shares.
8.2.11. Restricted Investment. Make or have, or permit
any Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.12. Leases. Become, or permit any of its Subsidiaries
to become, a lessee under any operating lease (other than a lease under which
Borrower of its Subsidiaries is lessor) of Property if the aggregate Rentals
payable during any current or future period of 12 consecutive months under the
lease in question and all other leases under which Borrower or any of its
Subsidiaries is then lessee would exceed $1,500,000. The term "Rentals" means,
as of the date of determination, all payments which the lessee is required to
make by the terms of any lease.
8.2.13. Tax Consolidation. File or consent to the filing
of any consolidated income tax return with any Person other than Apparel, Parent
or a Subsidiary of Borrower.
8.3. Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
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<PAGE> 22
8.3.1 Tangible Net Worth; Maintain at all times Tangible Net
Worth of not less than the amount shown below for the period corresponding
thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Closing Date through $12,800,000
December 30, 1994
December 31, 1994 through $13,100,000
March 31, 1995
April 1, 1995 through $14,500,000
June 30, 1995
July 1, 1995 through $15,600,000
September 29, 1995
September 30, 1995 through $16,200,000
December 29, 1995
December 30, 1995 through $17,300,000
March 29, 1996
March 30, 1996 through $18,500,000
June 28, 1996
June 29, 1996 through $19,500,000
September 27, 1996
September 28, 1996 through $20,000,000
December 27, 1996
December 28 1996 through $21,000,000
March 28, 1997
March 29, 1997 through $22,000,000
June 27, 1997
June 28, 1997 and $23,000,000
thereafter
</TABLE>
8.3.2 Profitability. Achieve Adjusted Net Earnings From
Operations each fiscal year of not less than the amount shows below for the
period corresponding thereto
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
October 2, 1994 through $ 900,000
December 31, 1994
October 2, 1994 through $3,700,000
April 1, 1995
October 2, 1994 through $5,250,000
July 1, 1995
</TABLE>
-18-
<PAGE> 23
<TABLE>
<S> <C>
October 2, 1994 through $6,300,000
September 30, 1995
October 1, 1995 through $1,300,00
December 30, 1995
October 1, 1995 through $3,500,000
March 30, 1996
October 1, 1995 through $5,000,000
June 29, 1996
October 1, 1995 through $6,500,000
September 28, 1996
September 29, 1996 through $1,300,000
December 28, 1996
September 29, 1996 through $3,500,000
March 29, 1997
September 29, 1996 through $5,000,000
June 28, 1997
September 29, 1996 through $6,500,000
September 27, 1997
</TABLE>
8.3.3 Debt Service Coverage Ratio. Maintain a Debt Service
Coverage Ratio of not less than the ratio shown below for the period
corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 2, 1994 through .10 to 1.0
December 31, 1994
October 2, 1994 through 1.30 to 1.0
April 1, 1995
October 2, 1994 through 1.30 to 1.0
July 1, 1995
October 2, 1994 through 1.30 to 1.0
September 30, 1995
October 1, 1995 through 1.30 to 1.0
December 30, 1995
October 1, 1995 through 1.30 to 1.0
March 30, 1996
October 1, 1995 through 1.30 to 1.0
June 29, 1996
October 1, 1995 through 1.30 to 1.0
September 28, 1996
</TABLE>
-19-
<PAGE> 24
<TABLE>
<S> <C>
September 29, 1996 through 1.30 to 1.0
December 28, 1996
September 29, 1996 through 1.30 to 1.0
March 29, 1997
September 29, 1996 through 1.30 to 1.0
June 1997
September 29, 1996 through 1.30 to 1.0
September 27, 1997
</TABLE>
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1. Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement,
together with the following additional documentation:
9.1.1. Copies of Borrower's casualty insurance policies, together
with loss payable endorsements on Lender's standard form of Loss Payee
endorsement naming Lender as loss payee, and copies of Borrower's liability
insurance policies, together with endorsements naming Lender as a co-insured;
9.1.2. Copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in a form acceptable
to Lender that such Liens constitute valid and perfected first priority security
interests and Liens;
9.1.3. Landlord or warehouseman agreements with respect to all
premises leased by Borrower and which are disclosed on EXHIBIT B;
9.1.4. A copy of the Articles or Certificate of Incorporation of
Borrower, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation;
9.1.5. Good standing certificates for Borrower, issued by the
Secretary of State or other appropriate official of Borrower's jurisdiction of
incorporation and each jurisdiction where the conduct of Borrower's business
activities or the ownership of its Properties necessities qualification;
9.1.6. A closing certificate signed by the President and
Secretary of Borrower dated as of the date hereof, seating that (i) the
representations and warranties set forth in Section 7 hereof are true and
correct on and as of such date, (ii) Borrower is no such date in compliance with
all the terms and provisions set forth in this Agreement and (iii) on such date
no Default or Event of Default has occurred or is continuing;
9.1.7. The Security Documents duly executed, accepted and
acknowledged by or on behalf of each Loan Party thereto;
9.1.8. The Other Agreements duly executed and delivered by
Borrower;
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<PAGE> 25
9.1.9. The favorable, written opinion of Smith, Williams and
Bowles counsel to Borrower and Guarantors, as to the transactions contemplated
by this Agreement and any of the other Loan Documents, in form and substance
satisfactory to Lender;
9.1.10. Written instructions from Borrower directing the
application of proceeds of the initial Loan made pursuant to this Agreement, and
an initial Borrowing Base certificate from Borrower;
9.1.11. Duly executed agreement establishing the Dominion Account
with a financial institution acceptable to Lender for the collection or
servicing of the Accounts;
9.1.12. The Seller Intercreditor Agreement duly executed by the
Sellers;
9.1.13. The Factor Intercreditor Agreements duly executed by CIT
and Lender;
9.1.14. A payoff letter from CIT that sets forth the amount of
Indebtedness owing by Borrower to CIT on such date and contains the agreement of
CIT to release its Liens on all of the Collateral upon receipt of such amount
(except as provided in the Factor intercreditor Agreement); and
9.1.15. Such other documents, instruments and agreements as
Lender shall reasonably request in connection with the foregoing matters.
9.2. No Default. No Default or Event of Default shall exist.
9.3. Other Loan Documents. Each of the conditions precedent set forth
in the other Loan Documents shall have been satisfied.
9.4. Availability. Lender shall have determined that immediately after
Lender has made the initial Loans contemplated hereby (including, without
limitation, Loans in an amount of $2,500,000 to pay a like amount owing to
Sellers on the Closing Date pursuant to the Settlement Agreement), and Borrower
has paid all closing costs incurred in connection with the transactions
contemplated hereby, Availability shall not be less than $2,000,000.
9.5. No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises Out of this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default. The occurrence of one or more of the
following events shall constitute an "Event of Default":
10.1.1. Payment of Notes. Borrower shall fail to pay any
installment of principal, interest or premium, if any, owing on the Term Note or
any Equipment Note on or within 10 days after the due date of such installment.
10.1.2. Payment of Other Obligations. Borrower shall fail to
pay any of the Obligations that are not evidenced by the Term Note or any
Equipment Note on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
10.1.3. Misrepresentations. Any representation, warranty or
other statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
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<PAGE> 26
10.1.4. Breach of Specific Covenants. Borrower shall fail
or neglect to perform. keep or observe any covenant contained in Sections 5.2,
6.2, 8.2 or 8.3 or subsections 6.1.1, 8.1.1 or 8.1.3 hereof on the date that
Borrower is required to perform, keep or observe such covenant.
10.1.5. Breach of Other Covenants. Borrower shall fail or
neglect to perform. keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
10.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 15 days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of Borrower.
10.1.6. Default Under Security Documents/Other Agreements.
Any event of default shall occur under, or Borrower shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the Security Documents or the Other Agreements and such
default shall continue beyond any applicable grace period.
10.1.7. Other Defaults. There shall occur any default or
event of default on the part of Borrower under any agreement, document or
instrument to which Borrower is a party or by which Borrower or any of its
Property is bound, creating or relating to any Indebtedness (other than the
Obligations) if the payment or maturity of such Indebtedness is accelerated in
consequence of such event of default or demand for payment of such Indebtedness
is made.
10.1.8. Uninsured Losses. Any material loss, theft, damage
or destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9. Adverse Changes. There shall occur any material
adverse change in the financial condition or business prospects of any Loan
Party.
10.1.10. Insolvency and Related Proceedings. Any Loan Party
shall cease to be Solvent or shall suffer the appointment of a receiver,
trustee, custodian or similar fiduciary, or shall make an assignment for the
benefit of creditors, or any petition for an order for relief shall be filed by
or against any Loan Parry under the Bankruptcy Code (if against a Loan Party,
the continuation of such proceeding for more than 30 days), or any Loan Party
shall make any offer of settlement, extension or composition to such Loan
Party's unsecured creditors generally.
10.1.11. Business Disruption; Condemnation. There shall
occur a cessation of a substantial pan of the business of Borrower, any
Subsidiary of Borrower or any Guarantor for a period which significantly affects
Borrower's or such Guarantor's capacity to continue its business, on a
profitable basis; or Borrower, any Subsidiary of Borrower or any Guarantor shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by Borrower or such Guarantor which is necessary to the continued or
lawful operation of its business; or Borrower or any Guarantor shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which Borrower or any
Guarantor leases, uses or occupies any Property shall be canceled or terminated
prior to the expiration of its stated term; or any pan of the Collateral shall
be taken through condemnation or the value of such Property shall be impaired
through condemnation.
10.1.12. Change of Ownership. Inpar Limited, William W.
Compton, and Michael Kagan shall cease to own and control beneficially and of
record, at least 51% of the issued and outstanding capital stock of Apparel; or
Apparel shall cease to own and control, beneficially and of record, all of the
issued and outstanding capital stock of Parent; or Parent shall cease to own and
control, beneficially and of record, all of the issued and outstanding capital
stock of Borrower.
10.1.13. ERISA. A Reportable Event shall occur which Lender,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed. or if Borrower, any Subsidiary
-22-
<PAGE> 27
of Borrower or any Guarantor is in defaults defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrowers, such Subsidiary's or such Guarantor's complete or partial
withdrawal from such Plan.
10.1.14. Challenge to Agreement. Borrower, any Subsidiary of
Borrower or any Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to
Lender.
10.1.15. Repudiation of or Default Under Guaranty Agreement.
Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof
10.1.16. Criminal Forfeiture. Borrower, any Subsidiary of
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of Borrower, any Subsidiary
of Borrower or any Guarantor.
10.1.17. Judgments. Any money judgment, writ of attachment
or similar process is filed against Borrower, any Subsidiary of Borrower or any
Guarantor, or any of their respective Property and results in the creation or
imposition of any Lien that is not a Permitted Lien and which Lien is not
immediately paid or bonded by Borrower within 5 days after entry of such
judgment or attachment.
10.1.18. Seller Documents. Any default or event of default
shall occur under, or Borrower shall default in the performance or observance of
any term, covenant, condition or agreement contained in the any of the Seller
Documents.
10.1.19 Judgement in Favor of Sellers. A judgment shall be
entered against Borrower or Parent in favor of Sellers pursuant to the Seller
Documents or otherwise.
10.1.20 Payments on Seller Debt. Borrower shall make any
payments on the Indebtedness owing to the Sellers that are not expressly
permitted to be made by Borrower or received by Sellers under the Seller
Subordination Agreements.
10.2. Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith
pay to Lender, the full amount of such Obligations; provided, however, that upon
the occurrence of an Event of Default specified in subsection 10.1.10 hereof,
all of the Obligations shall become automatically due and payable without
declaration, notice or demand by Lender except to the extent provided herein.
10.3. Other Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
10.3.1. All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2. The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designate by Lender which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
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<PAGE> 28
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition. Or after any further manufacturing or
processing thereof. at public or private sale or sales. with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that any requirement of
notice to Borrower of any proposed public or private sale or other disposition
of Collateral by Lender shall be deemed reasonable notice thereof if given at
least 10 days prior thereto, and such sale may be at such locations as Lender
may designate in said notice. Lender shall have the right to conduct such sales
on Borrower's premises, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Lender shall have the right
to sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Lender may purchase all or any part
of the Collateral at public or, if permitted by law, private sale and, in lieu
of actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing 2 Business Days for collection, first to the
Costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising
for sale, selling and delivering any Collateral, second to the interest due upon
any of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrower and each Guarantor shall remain jointly and
severally liable to Lender therefor.
10.3.4. Lender is hereby granted a license or other right to use,
without charge. Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
10.3.5. RESERVED.
10.4. Remedies Cumulative: No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents. or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or in any Guaranty Agreement given to Lender or contained in
any other agreement between Lender and Borrower. heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, ant remedies shall continue in
full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and no
Event of Default by Borrower under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived BY Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the Cost and expense of Borrower:
11.1.1. At such time or times as Lender or said agent, in its
sole discretion. may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
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<PAGE> 29
11.1.2. At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement.
11.2. Indemnity. Borrower hereby agrees to indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure to observe, perform
or discharge Borrower's duties hereunder. In addition, Borrower shall defend
Lender against and save Lender harmless from all claims of any Person with
respect to the Collateral. Without limiting the generality of the foregoing,
these indemnities shall extend to any claims asserted against Lender by any
Person under any Environmental Laws or similar laws by reason of Borrower's or
any other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Additionally, if any taxes (excluding
taxes imposed upon or measured by the net income of Lender, but including,
without limitation, any intangibles tax, stamp tax, recording tax or franchise
tax) shall be payable by Lender, Borrower or any Guarantor on account of the
execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any of the other Loan Documents, or the creation of any of the
Obligations hereunder, by reason of any existing or hereafter enacted federal,
state, foreign or local statute, rule or regulation, Borrower will pay (or will
promptly reimburse Lender for the payment of) all such taxes, including, but not
limited to, any interest and penalties thereon, and will indemnify and hold
Lender harmless from and against liability in connection therewith.
Notwithstanding any contrary provision in this Agreement, the obligation of
Borrower under this Section 11.2 shall survive the payment in full of the
Obligations and the termination of this agreement.
11.3. Modification of Agreement: Sale of Interest. Minis Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this agreement, any of the other loan documents, or any of the obligations, or
any portion thereof, including, without limitation, borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition. at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were Lender. hereunder and Lender shall be relieved of all
obligations hereunder upon any such Assignments. Borrower agrees that it will
use its best efforts to assist and cooperate with Lender in any manner
reasonably requested by Lender to effect the sale of participations in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation. assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential participant or assignee.
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<PAGE> 30
11.4. Severability. Wherever possible. each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5. Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6. Cumulative Effect: Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8. Notices. All notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, personal delivery against receipt or by telecopier or other
facsimile transmission and shall be deemed to have been validly served, given or
delivered when delivered against receipt or two Business Days after deposit in
the U.S. mail, postage prepaid, or, in the case of facsimile transmission, when
received at the office where the noticed party's telecopier is located,
addressed as follows:
If to Lender: Barclays Business Credit, Inc.
300 Galleria Parkway, N.W., Suite 800
Atlanta, Georgia 30339
Attention: Loan Administration Manager
Facsimile No.: (404) 859-2483
With a copy to: Parker, Hudson, Rainer & Dobbs
1500 Marquis Two Tower
285 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: C. Edward Dobbs, Esq.
Facsimile No.: (404)522-8409
If to Borrower: Tropical Sportswear International
Corporation
2508 Ivy Street
Tampa, Florida 33607
Attention: Mr. Michael Kagan
Facsimile No.: (813) 876-8027
With a copy to: Smith, Williams & Bowles
712 South Oregon Avenue
Tampa, Florida 33606
Attention: David Smith, Esq.
Facsimile No.: (813) 254-3459
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2
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<PAGE> 31
hereof shall not be effective until received by Lender. Any written notice or
demand that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party.
11.9. Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations the payment of money or any other
matter.
11.10. Credit Inquiries. Borrower hereby authorizes and permits Lender (but
Lender shall have no Obligation) to respond to usual and customary credit
inquiries from third parties concerning Borrower or any of its Subsidiaries.
11.11. Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the
11.12. Entire Agreement: Appendix A and Exhibits. This Agreement and the
other Loan Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or with reference
thereto, embody the entire understanding and agreement between the parties
hereto and thereto with respect to the subject matter hereof and thereof and
supersede all prior agreements understandings and inducements, whether express
or implied, oral or written. Appendix A and each of the Exhibits attached hereto
are incorporated into this Agreement and by this reference made a part hereof.
11.13. Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
11.14. GOVERNING LAW: CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN ATLANTA,
GEORGIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF GEORGIA: PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN GEORGIA, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF GEORGIA. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF FULTON COUNTY,
GEORGIA, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO BEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROVE BY SUCH COURT.
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT OR REFUSAL THEREOF. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15. WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
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<PAGE> 32
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (II) PRESENTMENT, DEED AND PROTEST AND NOTICE
OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND GUARANTIES AT ANY
TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFERS WHATEVER LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR
TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (IV) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND
TENT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning of this Agreement.
ATTEST: TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
("Borrower")
/s/Michael Kagan By:/s/Sharon L. Perdue
- ----------------------- ------------------------------
Secretary SHARON L. PERDUE, Vice President
[CORPORATE SEAL]
ACCEPTED IN ATLANTA, GEORGIA:
BARCLAYS BUSINESS CREDIT, INC.
("Lender")
By:/s/
------------------------------
Title: Vice President
------------------------
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<PAGE> 33
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 26th day of May, 1995, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower") with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302, and SHAWMUT
CAPITAL CORPORATION, a Connecticut corporation (hereinafter referred to as
"Shawmut") with an office at 300 Galleria Parkway, N.W., Suite 800, Atlanta,
Georgia 30339.
RECITALS:
Barclays Business Credit, Inc. ("Barclays") and Borrower entered into a
certain Loan and Security Agreement dated September 28, 1994 (the "Loan
Agreement") pursuant to which Barclays made certain revolving credit and term
loans to Borrower. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given such terms in the Loan Agreement.
Barclays has assigned to Shawmut, and Shawmut has thereby acquired, all
right, title and interest of Barclays in, to and under the Loan Agreement and
the other Loan Documents and all of the Obligations.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration,
<PAGE> 34
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as
follows:
(a) By deleting Section 8.3.2 in its entirety and by substituting the
following in lieu thereof:
8.3.2 Profitability. Achieve Adjusted Net Earnings From Operations
each fiscal year of not less than the amount shown below for the
period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
October 2, 1994 through $ 900,000
December 31, 1994
October 2, 1994 through $3,700,000
April 1, 1995
October 2, 1994 through $3,200,000
July 1, 1995
October 2, 1994 through $4,000,000
September 30, 1995
October 1, 1995 through $1,300,000
December 30, 1995
October 1, 1995 through $3,500,000
March 30, 1996
October 1, 1995 through $5,000,000
June 29, 1996
October 1, 1995 through $6,500,000
September 28, 1996
September 29, 1996 through $1,300,000
December 28, 1996
September 29, 1996 through $3,500,000
March 29, 1997
</TABLE>
-2-
<PAGE> 35
<TABLE>
<S> <C>
September 29, 1996 through $5,000,000
June 28, 1997
September 29, 1996 through $6,500,000
September 27, 1997
</TABLE>
(b) By deleting the address for Borrower that is contained in Section
11.8 of the Loan Agreement and by substituting the following new address
for Borrower in lieu thereof:
(a) If to Borrower: Tropical Sportswear
International Corporation
4902 West Waters Avenue
Tampa, Florida 33634-1302
Attention: Mr. Michael Kagan
Telecopy: (813) 249-4901
2. REFERENCES TO LENDER OR BARCLAYS. Effective January 31, 1995, any and
all references to "Lender" or "Barclays" contained in the Loan Agreement or any
of the other Loan Documents shall be deemed to mean Shawmut Capital Corporation
and its successors and assigns, and Borrower acknowledges, consents and agrees
that from and after the opening of business on February 1, 1995, Shawmut is and
shall be deemed to be substituted for Barclays under the Loan Agreement and all
of the other Loan Documents.
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and reaffirms
each of the Loan Documents and all of Borrower's covenants, duties and
liabilities thereunder.
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with
-3-
<PAGE> 36
the terms thereof; all of the Obligations are owing and payable without defense,
offset or counterclaim (and to the extent there exists any such defense, offset
or counterclaim on the date hereof, the same is hereby waived by Borrower); the
security interests and liens granted by Borrower in favor of Shawmut are duly
perfected, first priority security interests and liens; the unpaid principal
amount of the Revolver Loans on and as of May 23, 1995, totalled $29,410,583.09;
the unpaid principal amount of the Term Loan on and as of May 23, 1995, totalled
$2,416,666.69; and the unpaid principal amount of the Equipment Loans on and as
of May 23, 1995, totalled $607,500.00
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Shawmut, to induce Shawmut to enter into this Amendment, that, except as set
forth in Section 6 below, no Default or Event of Default exists on the date
hereof; the execution, delivery and performance of this Amendment have been duly
authorized by all requisite corporate action on the part of Borrower and this
Amendment has been duly executed and delivered by Borrower; and except as may
have been disclosed in writing by Borrower to Shawmut prior to the date hereof,
all of the representations and warranties made by Borrower in the Loan Agreement
are true and correct on and as of the date hereof.
6. LIMITED WAIVER OF EVENT OF DEFAULT. An Event of Default has occurred
under the Loan Agreement as a result of Borrower's failure to meet the
profitability covenant contained in Section 8.3.2 for the six-month period
ending April 1, 1995. Shawmut
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<PAGE> 37
hereby waives this Event of Default, but this waiver shall be effective only for
the specific Event of Default specified above and in no event shall this waiver
be deemed to be a waiver of (a) enforcement of Shawmut's rights with respect to
any other Events of Default now existing (and Borrower represents that none
exist) or hereafter arising, (b) Borrower's compliance with the other covenants
or provisions of the Loan Agreement or (c) Borrower's compliance with Sections
8.3.2 of the Loan Agreement on and after the date hereof. Nothing contained in
this Section 6 nor any communications between Shawmut and Borrower shall be a
waiver of any rights or remedies Shawmut has or may have against Borrower except
as specifically provided herein. Shawmut hereby reserves and preserves all of
its rights and remedies against the Borrower under the Loan Agreement and
Applicable Law.
7. EXPENSES OF SHAWMUT. Borrower agrees to pay, on demand, all costs and
expenses incurred by Shawmut in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and Fees of Shawmut's legal counsel.
8. RELEASE OF CLAIMS. To induce Shawmut to enter into this Amendment,
Borrower hereby releases, acquits and forever discharges Shawmut, and the
officers, directors, agents, employees, successors and assigns of Shawmut from
all liabilities, claims, demands, actions or causes or actions of any kind (if
there be any), whether absolute or contingent, disputed or undisputed, at law or
in
-5-
<PAGE> 38
equity, or known or unknown that it now has or ever had against Shawmut arising
under or in connection with any of the Loan Documents or otherwise.
9. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Shawmut in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
10. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
11. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
12. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature
-6-
<PAGE> 39
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
13. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
("Borrower")
By: /s/Sharon L. Perdue
- ------------------------------ ------------------------------
Secretary Title: Vice President
[CORPORATE SEAL] ------------------------
Accepted in Atlanta, Georgia:
SHAWMUT CAPITAL CORPORATION
By:
------------------------------
Title:
------------------------
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Shawmut hereby (i) acknowledge receipt of a copy of the foregoing First
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
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<PAGE> 40
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such First Amendment to Loan and Security
Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
By:/s/Sharon L. Perdue
- ------------------------------ ------------------------------
Secretary
[CORPORATE SEAL] Title: Vice President
------------------------
ATTEST:
By:/s/Sharon L. Perdue
- ------------------------------ ------------------------------
Secretary
[CORPORATE SEAL] Title: Vice President
------------------------
-8-
<PAGE> 41
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this Amendment") is
made and entered into as of the 1st day of October, 1995, by and between
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation
(hereinafter referred to as "Borrower") with its chief executive office and
principal place of business at 4902 West Waters Avenue, Tampa, Florida
33634-1302, and SHAWMUT CAPITAL CORPORATION, a Connecticut corporation
(hereinafter referred to, together with its successors and assigns, as "Lender")
with an office at 300 Galleria Parkway, N.W., Suite 800, Atlanta, Georgia 30339.
RECITALS:
Borrower and Lender are parties to a certain Loan and Security Agreement
dated September 28, 1994, (as amended, the "Loan Agreement"), which was amended
by a certain First Amendment to Loan and Security Agreement dated May 26, 1995,
pursuant to which Lender has made and may continue to make from time to time
certain revolving credit and term loans to Borrower.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given such terms in the Loan Agreement.
<PAGE> 42
2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as
follows:
(a) By deleting the last sentence of Section 6.2.1 of the Loan
Agreement and by substituting in lieu thereof the following:
If requested by Lender at any time after the Factoring
Agreement has been terminated, Borrower shall execute and
deliver to Lender formal written assignments of all of its
Accounts weekly or daily, which shall include all Accounts
that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related
thereto.
(b) By deleting the last sentence of Section 6.2.5 of the Loan
Agreement and by substituting in lieu thereof the following:
Upon termination of the Factoring Agreement, Borrower shall
establish a lockbox arrangement in form and substance
satisfactory to Lender.
(c) By deleting Section 6.2.6 in its entirety and by substituting
in lieu thereof the following:
6.2.6. Collection of Accounts: Proceeds of Collateral.
Borrower shall instruct Factor to remit payment with respect
to all amounts at any time payable to Borrower from Factor
under the Factoring Agreement to the Depository Account, and
Borrower hereby irrevocably authorizes Lender to transfer all
credit balances in the Depository Account to the Obligations
in accordance with the terms of this Agreement. Any remittances
received by Borrower from an Account Debtor with respect to any
Accounts (other than Factored Accounts), together with the
proceeds of any other Collateral, shall be held as Lender's
property by Borrower as trustee of an express trust for Lender's
benefit and (except to the extent such remittances relate to
Factored Accounts) Borrower shall immediately deposit same in
kind in the Dominion Account. Lender
-2-
<PAGE> 43
retains the right at all times after the occurrence of a Default
or an Event of Default to notify Account Debtors that Accounts
have been assigned to Lender and to collect Accounts directly in
its own name and to charge the collection costs and expenses,
including attorneys' fees to Borrower.
(d) By deleting Section 6.2.7 of the Loan Agreement in its entirety
and by substituting in lieu thereof the following:
6.2.7. Information Regarding Factoring Agreement. Borrower
shall promptly provide Lender with copies of all reports,
statements of account and other communications received by
Borrower from Factor with reference to the Factoring Agreement,
including, without limitation, all Factor Status Statements, all
notices of default or termination, and all amendments thereto.
Borrower shall identify to Lender each month the Client Risk
Accounts and amount thereof. Borrower shall provide to Lender on
a daily basis a Due From, Factor Report, together with copies of
all data and other information requested by Lender from which
such Due From Factor Reports are derived.
(e) By deleting the reference to "proceeds" that is contained in
Section 6.4.2 of the Loan Agreement and by substituting a reference to "Net
Proceeds" in lieu thereof.
(f) By adding the following additional event of default to Section
10.1 of the Loan Agreement to read as follows:
10.1.21 Factoring. Any default or event of default shall
occur under or Borrower shall default in the observance or
performance of any term, covenant, condition or agreement
contained in the Factoring Agreement, the Factor Intercreditor
Agreement or the Factor Assignment Agreement and such default
shall continue beyond any applicable grace period.
(g) By deleting the definition of "Borrowing Base" contained in
Appendix A to the Loan Agreement and by substituting in lieu thereof the
following:
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<PAGE> 44
Borrowing Base - at any date of determination thereof, an
amount equal to the lesser of:
(i) $40,000,000; or
(ii) an amount equal to:
(a) the sum of: (1) 90% of the Factor Credit Balances
on such date minus the amount of overbilling, and (2) 85%
of the Client Risk Accounts which would be Eligible Accounts
on the date of determination if such Accounts were not
Factored Accounts;
PLUS
(b) 85% of the net amount of Eligible Accounts
outstanding on such date;
PLUS
(c) the least of (1) $22,500,000, (2) during the
month of December, January and February, 80% the value
of Eligible Inventory at such date, or (3) at any date
(other than the months of December, January and February),
60% of the value of Eligible Inventory at such date,
calculated on the basis of the lower of cost or market
with the cost of raw materials and finished goods
calculated on a first-in, first-out basis;
MINUS (subtract from the sum of clauses
(a), (b) and (c) above)
(d) an amount equal to the sum of (1) any amounts
received by Lender from the Life Insurance Assignment
and applied to the Obligations, (2) the Factor Reserve
on such date and (3) the Availability Reserve on such date.
For purposes hereof, the "net amount" when used with
reference to any Account shall mean the face amount of
such Account less any and all returns, rebates, discounts
(which may, at Lender's option be calculated on shortest
terms), overbillings, credits, allowances or excise or
sales taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or
payable in connection with such Account at such date.
-4-
<PAGE> 45
(h) By deleting the definitions of "Client Risk Account," "Depository
Account," "Due From Factor Report," "Factor Assignment Agreements," "Factor
Intercreditor Agreements," "Factor Reserve," "Factored Account," "Factor Status
Statement" and "Factoring Agreements" from Appendix A to the Loan Agreement and
by substituting the following definitions in lieu thereof:
Client Risk Account - a Factored Account with respect
to which Borrower bears the Credit Risk.
Depository Account - the depository account established
and owned by Lender with Harris Trust and Savings Bank in
Chicago, Illinois, and to which Factor shall remit all sums
payable by Factor to Borrower under the Factoring Agreement.
Due From Factor Report - a report prepared by Borrower
on a daily basis that reflects the amount of Factored Accounts
on such date.
Factor Assignment Agreement - the Assignment of Factoring
of Proceeds dated as of October 1, 1995, between Borrower and
Lender, and consented to by Factor, pursuant to which, among
other things, Borrower has collaterally assigned to Lender
and Factor has acknowledged the assignment to Lender of, all
sums at any time or times due or to become due from Factor
under the Factoring Agreement.
Factor Intercreditor Agreement - the Factor Intercreditor
Agreement dated as of October 1, 1995, between Factor and
Lender by which, among other things, such parties have
established the relative priorities of their Liens with respect
to Borrower's Accounts.
Factor Reserve - the amount which at any time may be
charged to Borrower under the Factoring Agreement or withheld
from sums otherwise due to Borrower under the Factoring
Agreement, including without limitation, interest, fees,
commissions, ledger debt and other charges due Factor under
the Factoring Agreement and the amount of any actual or
-5-
<PAGE> 46
anticipated disputes or claims arising with respect to any
Factored Account.
Factored Account - an Account factored by Factor under
the Factoring Agreement.
Factor Status Statement - an account current statement
or similar report issued by Factor on a monthly basis under
the Factoring Agreement and setting forth the status of the
Factored Accounts under the Factoring Agreement.
Factoring Agreement - that certain Factoring Agreement
dated as of October 1, 1995 between Borrower and Factor.
(i) By deleting the definition of "Amount Due From Factor" from
Appendix A to the Loan Agreement and by substituting in lieu thereof the
following:
Factor Credit Balances - on any date of determination
thereof, an amount equal to the aggregate of all outstanding
Factored Accounts with respect to which Factor bears the
Credit Risk on such date, minus the sum of any fees,
commissions or other charges due from Borrower to Factor on
such date under the Factoring Agreement, including, without
limitation, any deductions for credit loss sharing, which
amount, on any date of determination thereof, shall be deemed
to be, when the date of determination is the date of a Factor
Status Statement, the amount reflected on such Factor Status
Statement as the aggregate balance standing to the credit of
Borrower, and when the date of determination is any other
date, an amount equal to the aggregate balances standing to
the credit of Borrower as reflected on the Due From Factor
Report delivered to Lender by Borrower on such date, or, in
the absence of the delivery of a Due From Factor Report on
any date, an amount determined by Lender in its sole and
absolute discretion.
(j) By adding the following new definitions to Appendix A to the Loan
Agreement in proper alphabetical sequence:
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<PAGE> 47
Credit Risk - as defined in the Factoring Agreement.
Factor - Heller Financial, Inc., a Delaware Corporation.
3. Ratification and Reaffirmation. Borrower hereby ratifies and reaffirms
each of the Loan Documents and all of Borrowers covenants, duties and
liabilities thereunder.
4. Acknowledgements and Stimulations. Borrower acknowledges and stipulates
that the Loan Agreement and the other Loan Documents executed by Borrower are
legal, valid and binding obligations of Borrower that are enforceable against
Borrower in accordance with the terms thereof; all of the Obligations are owing
and payable without defense, offset or counterclaim (and to the extent there
exists any such defense, offset or counterclaim on the date hereof, the same is
hereby waived by Borrower); the security interests and liens granted by Borrower
in favor of Lender are duly perfected, first priority security interests and
liens; the unpaid principal amount of the Revolver Loans on and as of September
20, 1995, totalled $25,645,456.81; the unpaid principal amount of the Term Loan
on and as of September 20, 1995, totalled $2,083,333.37; and the unpaid
principal amount of the Equipment Loans on and as of September 20, 1995,
totalled $750,500.
5. Representations and Warranties. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof other than Events of Default arising from
the breach by Borrower of the tangible net worth covenant set forth in Section
8.3.1 of the Loan Agreement for the periods ending July 1, 1995, July 29, 1995
and
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<PAGE> 48
September 2, 1995 and as of the date hereof; the execution, delivery and
performance of this Amendment have been duly authorized by all requisite
corporate action on the part of Borrower and this Amendment has been duly
executed and delivered by Borrower; and except as may have been disclosed in
writing by Borrower to Lender prior to the date hereof, all of the
representations and warranties made by Borrower in the Loan Agreement are true
and correct on and as of the date hereof.
6. Expenses of Lender. Borrower agrees to pay, on demand, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable attorney's fees of
Lender's legal counsel.
7. Release of Claims. To induce Lender to enter into this Amendment,
Borrower hereby releases, acquits and forever discharges Lender, and the
officers, directors, agents, employees, successors and assigns of Lender from
all liabilities, claims, demands, actions or causes or actions of any kind (if
there be any), whether absolute or contingent, disputed or undisputed, at law or
in equity, or known or unknown that it now has or ever had against Lender
arising under or in connection with any of the Loan Documents or otherwise.
8. Effectiveness: Governing Law. This Amendment shall be effective upon
acceptance by Lender in Atlanta. Georgia whereupon
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<PAGE> 49
the same shall be governed by and construed in accordance with the internal laws
of the State of Georgia.
9. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10. No Novation, etc.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
11. Counterparts; Telecopied Signatures. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
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<PAGE> 50
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
ATTEST: ("Borrower")
/s/ By: /s/ Sharon L. Perdue
- ------------------------- ------------------------------------
Secretary Title: Sr. Vice President of Finance
[CORPORATE SEAL] -----------------------------
Accepted in Atlanta, Georgia:
SHAWMUT CAPITAL CORPORATION
By:
------------------------------------
Title:
------------------------------
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Second
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall
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<PAGE> 51
modify in any respect whatsoever its respective guaranty of the Obligations and
reaffirm that such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Second Amendment to Loan and
Security Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/ Michael Kagan By:/s/Sharon L. Perdue
- --------------------------- ------------------------------
Secretary Title: Vice President
[CORPORATE SEAL] ------------------------
ATTEST: TROPICAL ACQUISITION COMPANY
/s/ Michael Kagan By:/s/ Sharon L. Perdue
- --------------------------- ------------------------------
Secretary Title: Vice President
[CORPORATE SEAL] ------------------------
<PAGE> 52
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 4th day of December, 1995, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower") with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302; and SHAWMUT
CAPITAL CORPORATION, a Connecticut corporation (hereinafter referred to,
together with its successors and assigns, as "Lender") with an office at 300
Galleria Parkway, N.W., Suite 800, Atlanta, Georgia 30339.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, and that certain Second Amendment to Loan
and Security Agreement dated as of October 1, 1995, between Lender and Borrower
(as at any time amended, the "Loan Agreement"), pursuant to which Lender has
made and may from time to time hereafter make loans and other extensions of
credit to Borrower.
The parties desire to further amend the Loan Agreement as hereinafter set
forth;
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the
<PAGE> 53
parties hereto, intending to be legally bound hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follow:
(a) By adding the following new Sections 1.3 and 1.4 to the Loan
Agreement:
1.3. Letters of Credit. Lender agrees, during the term of this
Agreement and for so long as no Default or Event of Default exists, to
endeavor to procure from Issuer one or more Letters of Credit on Borrower's
request therefor, subject to the following terms and conditions:
(i) Borrower acknowledges that Issuer's willingness to issue any
Letter of Credit is conditioned upon Issuer's receipt of (A) the LC
Guaranty duly executed and delivered to Issuer by Lender, (B) an LC
Application with respect to the requested Letter of Credit and (C) such
other instruments and agreements as Issuer may customarily require for the
issuance of a letter of credit of equivalent type and amount as the
requested Letter of Credit. Lender shall have no obligation to execute any
LC Guaranty or to join with Borrower in executing an LC Application unless
(x) Lender receives from Borrower, at least two (2) Business Days prior to
the date on which Borrower desires to submit such LC Application to Issuer,
an LC Request and (y) each of the LC Conditions is satisfied on the date of
Lender's receipt of the LC Request. Any Letter of Credit issued on the date
hereof shall be for an amount in U.S. Dollars that is greater than
$250,000.
(ii) In no event shall Lender have any liability or obligation to
Borrower for any failure or refusal by Issuer to issue, for Issuer's delay
in issuing, or for any error of Issuer in issuing any Letter of Credit.
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<PAGE> 54
(iii) Borrower agrees to reimburse Issuer for any draw under any
Letter of Credit immediately upon demand, and to pay Issuer the amount of
all other liabilities and obligations payable to Issuer under or in
connection with any Letter of Credit immediately when due, irrespective of
any claim, setoff, defense or other right that Borrower may have at any
time against Issuer or any other Person. If Lender shall pay any amount
under the LC Guaranty with respect to any Letter of Credit, then Borrower
shall pay to Lender, in U.S. Dollars on the first Business Day following
the date on which payment was made by Lender under such LC Guaranty, an
amount equal to the U.S. Dollar amount paid by Lender under such LC
Guaranty at the time of Lender's payment under such LC Guaranty, together
with interest from and after the date of Lender's payment under such LC
Guaranty until payment in full is made by Borrower at the variable rate per
annum in effect from time to time hereunder for Revolver Loans.
(iv) Borrower assumes all risks of the acts, omissions or misuses
of any Letter of Credit by the beneficiary thereof. The obligation of
Borrower to reimburse Lender for any payment made by Lender under the LC
Guaranty shall be unconditional and irrevocable and shall be paid without
regard to any lack of validity or enforceability of any Letter of Credit,
the existence of any claim, setoff, defense or other right which Borrower
may have at any time against a beneficiary of any Letter of Credit, or an
untimely or improper honor by Issuer of any draw request under a Letter of
Credit. Without limiting the generality of the foregoing, if presentation
of a demand, draft, certificate or other document does not comply with the
terms of a Letter of Credit and Borrower contends that, as a consequence of
such noncompliance it has no obligation to reimburse Issuer for any payment
made with respect thereto, Borrower shall nevertheless be obligated to
reimburse Lender for any payment made under the LC Guaranty with respect to
such Letter of Credit, but without waiving any claim Borrower may have
against Issuer in connection therewith.
(v) If any LC Obligations, whether or not then due or payable,
shall for any reason be outstanding (i) at any time that an Event of
Default exists, (ii) any date on which Availability is less than zero, or
(iii) on the effective date of termination of this Agreement pursuant to
Section 4 hereof, Borrower, upon the request of Lender, shall deposit with
Lender, in cash, an amount equal to the maximum aggregate amount of all LC
Obligations then outstanding. Such cash shall be held by
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<PAGE> 55
Lender as security for the LC Obligations in a cash collateral account
(the "Cash Collateral Account") bearing interest at the then applicable
money market rates for deposits for like amount and tenor and maintained at
such financial institution as Lender shall from time to time designate.
Such Cash Collateral Account shall be in the name of Lender (as a cash
collateral account) and be under the sole dominion and control of Lender.
Borrower hereby pledges, and grants to Lender a security interest in, all
such cash held in the Cash Collateral Account from time to time and all
proceeds thereof, as security for the payment of the LC Obligations,
whether or not then due or payable. From time to time after funds are
deposited in the Cash Collateral Account, Lender may apply such funds then
held in the Cash Collateral Account to the payment of any amounts, in such
order as Lender may elect, as shall be or shall become due and payable by
Borrower to Lender with respect to the LC Obligations which may then be
outstanding. Neither Borrower nor any other Person claiming by, through or
under or on behalf of Borrower shall have any right to withdraw any of the
funds held in the Cash Collateral Account, including any accrued interest,
provided that upon termination of all Letters of Credit and the payment and
satisfaction of the LC Obligations, any funds remaining in the Cash
Collateral Account shall be returned to Borrower unless an Event of Default
then exists (in which event Lender may apply such funds to the payment of
any other Obligations outstanding). All interest earned upon the Cash
Collateral Account shall be the Property of Borrower, but shall be subject
to the security interest therein held by Lender.
(vi) No Letter of Credit shall be extended or amended in any
respect that is not solely ministerial, unless all of the LC Conditions are
met as though a new Letter of Credit were being requested and issued.
1.4. Indemnification. In addition to any other indemnity which
Borrower may have to Issuer or Lender under this Agreement, any of the
other Loan Documents or any of the LC Documents and without limiting such
other indemnification provisions, Borrower hereby agrees to indemnify
Issuer and Lender from and to defend and hold Issuer and Lender harmless
against any and all claims, liabilities, losses, costs and expenses
(including reasonable attorneys' fees and expenses) which Issuer or Lender
may (other than as the result of its own gross negligence or willful
misconduct) incur or be subject to as a consequence, directly or
indirectly, of (i) the
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<PAGE> 56
issuance of, payment or failure to pay or any performance or failure to
perform under any Letter of Credit or LC Guaranty or (ii) any suit,
investigation or proceeding as to which Issuer or Lender is or may become a
party to as a consequence, directly or indirectly, of the issuance of any
Letter of Credit, any LC Guaranty or the payment or failure to pay
thereunder. This indemnity shall survive payment in full of the Obligations
and termination of this Agreement.
(b) By deleting Section 2.2 of the Loan Agreement in entirety and by
substituting in lieu thereof the following:
2.2. Computation of Interest and Fees. Interest, LC Guaranty fees and
unused line fees hereunder shall be calculated daily and shall be computed
on the actual number of days elapsed over a year of 360 days. For the
purpose of computing interest hereunder, all items of payment received by
Lender shall be deemed applied by Lender on account of the Obligations
(subject to final payment of such items) after receipt by Lender of such
items in Lender's account at Harris Trust & Savings Bank located in
Chicago, Illinois, and Lender shall be deemed to have received such item of
payment on the date specified in Section 3.4 hereof.
(c) By adding after the last sentence of Section 2.8 of the Loan
Agreement the following:
If, in any month, the effective rate of interest hereunder would have
exceeded the Maximum Rate, then the effective interest rate for that month
shall be the Maximum Rate, and, if in future months the effective interest
rate would otherwise be less than the Maximum Rate, then the effective
interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would
have been paid if the same had not been limited by the Maximum Rate.
(d) By adding new Section 2.9 to the Loan Agreement as follows:
2.9. LC Guaranty Fees. In addition to Borrower's obligation to pay to
Issuer all fees and normal and customary charges associated with the
issuance and administration of each Letter of Credit, Borrower shall pay to
Lender, for Lender's LC Guaranty of each Letter of
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<PAGE> 57
Credit, a fee equal to 2.5% per annum of the aggregate face amount of such
Letter of Credit outstanding from time to time during the term of this
Agreement, and an additional fee equal to 2.5% per annum of the face amount
of such Letter of Credit payable upon each renewal and each extension
thereof, which fees and shall be deemed fully earned upon issuance, renewal
or extension (as the case may be) of each such Letter of Credit, shall be
payable on the date of issuance of such Letter of Credit and shall not be
subject to rebate or proration upon the termination of this Agreement for
any reason.
(e) By deleting Section 4.2.2 of the Loan Agreement in its entirety
and by substituting in lieu thereof the following:
4.2.2. Termination by Borrower. Upon at least 90 days prior written
notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination by Borrower shall be effective until
Borrower has paid all of the Obligations in immediately available federal
funds and each Letter of Credit and LC Guaranty has expired or has been
cash collateralized to Lender's satisfaction. Any notice of termination
given by Borrower shall be irrevocable unless Lender otherwise agrees in
writing, and Lender shall have no obligation to make any Loans on or after
the termination date stated in such notice. Borrower may elect to terminate
this Agreement in its entirety only. No section of this Agreement or type
of Loan available hereunder may be terminated singly.
(f) By deleting the first sentence of Section 4.2.4 of the Loan
Agreement in its entirety and by substituting in lieu thereof the following:
4.2.4. Effect of Termination. All of the Obligations (including,
without limitation, the Term Loan and each Equipment Loan) shall be
immediately due and payable upon the termination date stated in any notice
of termination of this Agreement, and on the effective date of any
termination (whether by Lender or Borrower) Lender shall have no obligation
to make my Loans, join in any LC Application or issue any LC Guaranty to or
for the direct or indirect benefit of Borrower.
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<PAGE> 58
(g) By deleting the reference to "and" at the end of subsection (vii)
of Section 7.1.8 of the Loan Agreement, by deleting the period and adding
references to a comma and "and" at the end of subsection (viii) of Section 7.1.8
and by adding a new subsection (ix) to Section 7.1.8 of the Loan Agreement as
follows:
(ix) There are no restrictions on Borrower's right to assign to Lender
the right to payment represented by the Account or any Lien upon the
Account.
(h) By adding a new Section 8.1.9 to the Loan Agreement as follows:
8.1.9. License Agreements. Keep each License Agreement in full force
and effect for so long as Borrower has any Inventory the manufacture, sale
or distribution of which is in any manner governed by or subject to such
License Agreement.
(i) By adding a new Section 9.6 to the Loan Agreement as follows:
9.6. Conditions Precedent to Execution of LC Application.
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender
under other sections of this Agreement, Lender shall not be required to
execute any LC Application requested by Borrower, unless and until each of
the following conditions has been and continues to be satisfied:
9.6.1. Letter of Credit Documentation. Issuer shall have
received, in form and substance satisfactory to Issuer and its counsel,
duly executed LC Documents with respect to the Letters of Credit requested
to be issued by Issuer.
9.6.2. LC Request. Lender shall have received a LC Request from a
Borrower.
9.6.3. LC Conditions. Each of the LC Conditions shall have been
satisfied.
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<PAGE> 59
9.6.4. Satisfaction of Other Conditions. Each of the conditions
set forth in Section 9.2 and Section 9.4 hereof shall have been satisfied.
(j) By deleting Section 10.3.5 of the Loan Agreement and by
substituting in lieu thereof the following:
10.3.5. The right to require Borrower to deposit with Lender funds
equal to the LC Obligations and, if Borrower fails promptly to make such
deposit, Lender may advance such amount as a Revolver Loan (whether or not
an Overadvance exists or is created thereby). Any such deposit or advance
shall be held by Lender as a reserve to fund future payments on the LC
Guaranty. At such time as the LC Guaranty been paid or terminated and all
Letters of Credit have been drawn upon or expired, any amounts remaining in
such reserve shall be applied against any outstanding Obligations, or, if
all Obligations have been indefeasibly paid in full, returned to Borrower.
(k) By deleting the definitions of "Availability Reserve," "Average
Monthly Revolver Balance," "Obligations," and "Solvent" from Appendix A to the
Loan Agreement and by substituting the following new definitions in lieu
thereof in proper alphabetical sequence:
Availability Reserve - on any date of determination thereof, an amount
equal to the sum of ti) a reserve for general inventory shrinkage, whether
as a result of theft or otherwise, that is determined by Lender from time
to time in its sole credit judgment based upon Borrower's historical losses
due to such shrinkage; (ii) the aggregate amount of all customer credits
issued by Borrower for future merchandise purchases and outstanding at such
time; (iii) all amounts of past due rent or other charges owing at such
time by Borrower to any landlord of any premises where any of the
Collateral is located; (iv) any amounts which Borrower is obligated to pay
pursuant to the provisions of the Loan Documents but does not pay when due
and which Lender elects to pay pursuant to any of the Loan Documents for
the account of Borrower; (v) the LC Obligations outstanding; and (vi) for
so long as any Event of Default exists, such additional reserves as Lender
in its sole and absolute discretion may elect to impose from time to time,
without waiving any such Event
-8-
<PAGE> 60
of Default or Lender's entitlement to accelerate the maturity of the
Obligations as a consequence thereof.
Average Monthly Revolver Loan Balance - for any month, the amount
obtained by adding the aggregate of the unpaid balance of the Revolver
Loans and all LC Obligations outstanding at the end of each day during the
month in question and by dividing such sum by the number of days in such
month that the Agreement is in effect.
Obligations - all Loans, the LC Obligations and all other advances,
debts, liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable
from Borrower to Lender of any kind or nature, present or future, whether
or not evidenced by any note, guaranty or other instrument, whether arising
under the Agreement or any of the other Loan Documents or otherwise and
whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, joint
or several, now existing or hereafter arising and however acquired.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage, and (iv) is not "insolvent"
within the meaning of Section 101(32) of the Bankruptcy Code.
(1) By adding the following new definitions to Appendix A to the Loan
Agreement in proper alphabetical sequence:
Bankruptcy Code - title 11 of the United States Code.
Issuer - Shawmut Bank Connecticut, National Association, and its
successors.
LC Application - an application to Issuer, in the form approved by
Issuer and duly executed by Borrower and Lender as co-applicants, for the
issuance of a Letter of Credit.
LC Conditions - the following conditions, the satisfaction of each of
which is required before Lender shall be obligated to execute any LC
Application in
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<PAGE> 61
connection with a request for the issuance of a Letter of Credit: (i) no
Default or Event of Default exists; (ii) after giving effect to the
issuance of the requested Letter of Credit and each Letter of Credit for
which an LC Application has been signed by Lender, the LC Obligations would
not exceed $500,000 and no Overadvance would exist; (iii) the expiry date
of the Letter of Credit does not extend beyond the earlier to occur of 365
days from the date of issuance or 30 days prior to the last day of the
Original Term or of any effective Renewal Term; and (iv) the currency in
which payment is to be made under the Letter of Credit is U.S. Dollars.
LC Documents - any and all agreements, instruments and documents
(other than an LC Application or an LC Guaranty) required by Issuer to be
executed by Borrower or any other Person and delivered to Issuer for the
issuance of a Letter of Credit.
LC Guaranty - a guaranty executed by Lender in favor of Issuer
pursuant to which Lender shall guarantee the payment or performance by
Borrower of Borrower's reimbursement obligation under each Letter of Credit
in respect of which Lender has joined with Borrower in executing an LC
Application.
LC Obligations - on any date of determination thereof, an aggregate
U.S. Dollar amount equal to (i) all amounts which Lender has theretofore
paid to Issuer under the LC Guaranty and for which Lender has not received
reimbursement under Section 1.3(iii) hereof, plus (ii) the aggregate
undrawn amount of all Letters of Credit then outstanding or to be issued by
Issuer under an LC Application theretofore submitted to Issuer.
LC Request - a written request from Borrower to Lender for Lender to
join with Borrower in the execution of an LC Application for the issuance
of a Letter of Credit, which request shall specify the identity and address
of the intended beneficiary of the requested Letter of Credit, the purpose
for issuance of the requested Letter of Credit, the proposed amount and
expiry date of the requested Letter of Credit, the conditions to payment
under the requested Letter of Credit, and whether the requested Latter of
Credit may be drawn upon in a single or multiple draws.
Letter of Credit - a standby or documentary letter of credit issued by
Issuer for the account of Borrower.
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<PAGE> 62
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and reaffirms
each of the Loan Documents and all of Borrower's covenants, duties and
liabilities thereunder.
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); the security interests and liens
granted by Borrower in favor of Lender are duly perfected, first priority
security interests and liens; and the unpaid principal amount of the Revolver
Loans on and as of November 29, 1995, totalled $17,304,963.01, the unpaid
principal amount of the Term Loan on and as of November 29, 1995, totalled
$1,916,666.71, and the unpaid principal amount of the Equipment Loans on and as
of November 29, 1995, totalled $723,733.34.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof other than Events of Default arising from
the breach by Borrower of (a) the tangible net worth covenant set forth in
Section 8.3.1 of the Loan Agreement for the periods ending July 1, 1995, July
29, 1995, September 2, 1995, September 30, 1995, November 4, 1995 and December
2, 1995 and as of the date hereof, and (b) the Debt
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<PAGE> 63
Service Coverage Ratio set forth in Section 8.3.3 of the Loan Agreement for the
fiscal year ending September 30, 1995 and (c) the profitability covenant set
forth in Section 8.3.2 of the Loan Agreement for the fiscal year ending
September 30, 1995; the execution, delivery and performance of this Amendment
have been duly authorized by all requisite corporate action on the part of
Borrower and this Amendment has been duly executed and delivered by Borrower;
and except as may have been disclosed in writing by Borrower to Lender prior to
the date hereof, all of the representations and warranties made by Borrower in
the Loan Agreement are true and correct on and as of the date hereof.
6. EXPENSES OF LENDER. Borrower agrees to pay, on demand, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable fees of Lender's legal
counsel.
7. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
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<PAGE> 64
9. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement, any of the Other Agreements, any of the Security Documents
or any of the other Loan Documents, each of which shall remain in full force and
effect. This Amendment is not intended to be, nor shall it be construed to
create, a novation or accord and satisfaction, and the Loan Agreement as herein
modified shall continue in full force and effect. Notwithstanding any prior
mutual temporary disregard of any of the terms of any of the Loan Documents,
the parties agree that the terms of each of the Loan Documents shall be strictly
adhered to on and after the date hereof.
10. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
11. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED
OR UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER
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<PAGE> 65
NOW HAS OR EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS OR OTHERWISE.
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: TROPICAL SPORTSWEAR INTERNATIONAL
CORPORATION ("Borrower")
/s/ Michael Kagan
- --------------------------- By: /s/ Sharon L. Perdue
Secretary ------------------------------------
[CORPORATE SEAL] Title: SR. VICE PRESIDENT OF FINANCE
------------------------------
Accepted in Atlanta, Georgia:
SHAWMUT CAPITAL CORPORATION
("Lender")
By: /s/ Elizabeth L. Waller
------------------------------------
Title: VICE PRESIDENT
------------------------------
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Third
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall
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<PAGE> 66
modify in any respect whatsoever its respective guaranty of the Obligations and
reaffirm that such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such first written above.
ATTEST: TROPICAL ACQUISITION CORPORATION
/s/ Michael Kagan By:/s/Sharon L. Perdue
- ---------------------------- ------------------------------
Secretary Title:SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] ------------------------
ATTEST: APPAREL INTERNATIONAL GROUP,
INC.
/s/ Michael Kagan By/s/SHARON L. PERDUE
- ---------------------------- ------------------------------
Secretary Title:SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] ------------------------
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FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 18th day of January, 1996, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower") with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302, and FLEET
CAPITAL CORPORATION f/k/a Shawmut Capital Corporation, a Connecticut corporation
(hereinafter referred to as "Lender") with an office at 300 Galleria Parkway,
N.W., Suite 800, Atlanta, Georgia 30339.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, that certain Second Amendment to Loan and
Security Agreement dated October 1, 1995, and that certain Third Amendment to
Loan and Security Agreement dated December 4, 1995, between Lender and Borrower
(as at any time amended, the "Loan Agreement"), pursuant to which Lender has
made and may from time to time hereafter make loans and other extensions of
credit to Borrower.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENTS TO AGREEMENT. The Loan Agreement is hereby amended as
follows:
(a) By adding the following sentence to the end of Section 1.1 of the Loan
Agreement:
Borrower may request from time to time that Lender release all or any
portion of the Availability Reserve in an aggregate amount of up to
$1,500,000, in Lender's sole discretion. If any portion of the Availability
Reserve is released by Lender in its sole discretion and, advanced to
Borrower in the form of Revolver Loans in a manner consistent with the
terms of this Agreement, then such Revolver Loans shall not constitute
Overadvances.
<PAGE> 68
(b) By adding the following new sentence to the end of Section 2.7 of the
Loan Agreement:
Borrower acknowledges and agrees that Lender may charge such costs, fees
and expenses to Borrower based upon Lender's good faith estimate of such
costs, fees and expenses as they are incurred by Lender.
(c) By deleting the proviso contained in Section 3.2.1 of the Loan
Agreement and by substituting the following in lieu thereof:
; provided, however, that if an Overadvance shall exist at any time,
Borrower shall, ON DEMAND, repay the Overadvance and such Overadvance shall
bear interest as provided in this Agreement for Revolver Loans generally or
at such higher rate of interest that Lender may elect as a condition to its
willingness to honor such Overadvance.
(d) By deleting Sections 8.3.1, 8.3.2 and 8.3.3 of the Loan Agreement in
their entirety and by substituting the following in lieu thereof:
8.3.1. Tangible Net Worth. Maintain at all times Tangible Net Worth of
not less than the amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Closing Date through $12,800,000
December 30, 1994
December 31, 1994 through $13,100,000
March 31, 1995
April 1, 1995 through $14,500,000
June 30, 1995
July 1, 1995 through $15,600,000
September 29, 1995
September 30, 1995 through $14,600,000
December 29, 1995
December 30, 1995 through $14,250,000
March 29, 1996
March 30, 1996 through $14,600,000
June 28, 1996
June 29, 1996 through $14,800,000
September 27, 1996
</TABLE>
-2-
<PAGE> 69
<TABLE>
<S> <C>
September 28, 1996 through $15,000,000
December 27, 1996
December 28 1996 through $16,000,000
March 28, 1997
March 29, 1997 through $17,000,000
June 27, 1997
June 28, 1997 and $18,000,000
thereafter
</TABLE>
8.3.2. Profitability. Achieve Adjusted Net Earnings From Operations
each fiscal year of not less than the amount shown below for the period
corresponding thereto Period
<TABLE>
<S> <C>
October 2, 1994 through $ 900,00
December 31, 1994
October 2, 1994 through $ 3,700,00
April 1, 1995
October 2, 1994 through $ 3,200,00
July 1, 1995
October 2, 1994 through $ 4,000,000
September 30, 1995
October 1, 1995 through $(1,400,000)
December 30, 1995
October 1, 1995 through $ (375,000)
March 30, 1996
October 1, 1995 through $ 250,000
June 29, 1996
October 1, 1995 through $ 865,000
September 28, 1996
September 29, 1996 through $ 1,300,000
December 28, 1996
September 29, 1996 through $ 3,500,000
March 29, 3997
September 29, 1996 through $ 5,000,000
June 28, 1997
September 29, 1996 through $ 6,500,000
September 27, 1997
</TABLE>
-3-
<PAGE> 70
8.3.3. Debt Service Coverage Ratio. Maintain a Debt Service Coverage
Ratio of not less than the ratio shown below for the period corresponding
thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 2, 1994 through .10 to 1.0
December 31, 1994
October 2, 1994 through 1.30 to 1.0
April 2, 1995
October 2, 1994 through 1.3 to 1.0
July 1, 1995
October 2, 1994 through 1.3 to 1.0
September 30, 1995
October 1, 1995 through Not Applicable
December 30, 1995
October 1, 1995 through Not Applicable
March 30, 1996
October 1, 1995 through Not Applicable
June 29, 1996
October 1, 1995 through .5 to 1.0
September 28, 1996
September 29, 1996 through 1.30 to 1.0
December 28, 1996
September 29, 1996 through 1.3 to 1.0
March 29, 1997
September 29, 1996 through 1.30 to 1.0
June 28, 1997
September 29, 1996 through 1.30 to 1.0
September 27, 1997
</TABLE>
(e) By deleting the definition of "Availability Reserve" that is set forth
in Appendix A of the Loan Agreement and by substituting the following in lieu
thereof:
Availability Reserve - on any date of determination thereof, an amount
equal to the sum of (i) a reserve for general inventory shrinkage, whether
as a result of theft or otherwise, that is determined by Lender from time
to time in its sole credit judgment based upon Borrower's historical losses
due to such shrinkage; (ii) the aggregate amount of all customer credits
issued by Borrower for future merchandise purchases and outstanding
-4-
<PAGE> 71
at such time; (iii) all amounts of past due rent or other charges owing at
such time by Borrower to any landlord of any premises where any of the
Collateral is located; (iv) any amounts which Borrower is obligated to pay
pursuant to the provisions of the Loan Documents but does not pay when due
and which Lender elects to pay pursuant to any of the Loan Documents for
the account of Borrower; (v) the LC Obligations outstanding; (vi) for so
long as any Event of Default exists, such additional reserves as Lender in
its sole and absolute discretion may elect to impose from time to time,
without waiving any such Event of Default or Lender's entitlement to
accelerate the maturity of the Obligations as a consequence thereof; and
(vii) $1,500,000.
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and reaffirms
each of the Loan Documents and all of Borrower's covenants, duties and
liabilities thereunder.
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and stipulates
that the Loan Agreement and the other Loan Documents executed by Borrower are
legal, valid and binding obligations of Borrower that are enforceable against
Borrower in accordance with the terms thereof; all of the Obligations are owing
and payable without defense, offset or counterclaim (and to the extent there
exists any such defense, offset or counterclaim on the date hereof, the same is
hereby waived by Borrower); the security interests and liens granted by Borrower
in favor of Lender are duly perfected, first priority security interests and
liens; and the unpaid principal amount of the Revolver Loans on and as of
January 17, 1996, totalled $22,111,378.45 and the unpaid principal amount of
the Term Loan on and as of January 17, 1996, totalled $2,850,966.73.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that, except as set forth
in Section 6 below, no Default or Event of Default exists on the date hereof;
the execution, delivery and performance of this Amendment have been duly
authorized by all requisite corporate action on the part of Borrower and this
Amendment has been duly executed and delivered by Borrower; and all of the
representations and warranties made by Borrower in the Loan Agreement are true
and correct on and as of the date hereof.
6. LIMITED WAIVER OF EVENTS OF DEFAULT. The following Events of Default
have occurred and continue to exist under the Loan Agreement: (a) Borrower has
breached the Tangible Net Worth covenant that is set forth in Section 8.3.1 of
the Loan Agreement for the periods ending July 1, 1995, July 29, 1995, September
2, 1995, September 30, 1995, November 4, 1995, December 2, 1995 and December 30,
1995; (b) Borrower has breached the profitability covenant that is set forth in
Section 8.3.2 of the Loan Agreement for the fiscal year ending September 30,
1995 and for the fiscal quarter of Borrower ending December 30, 1995; (c)
Borrower has breached the Debt Service Coverage Ratio that is set forth in
-5-
<PAGE> 72
Section 8.3.3 of the Loan Agreement for the fiscal quarter of Borrower ending
December 30, 1995; and (d) Borrower has failed to deliver audited financial
statements of Borrower for the fiscal year ending September 30, 1995, within 90
days after such date as required by Section 8.1.3(i) of the Loan Agreement
(collectively, the "Designated Defaults"). Borrower represents and warrants that
the Designated Defaults are the only Defaults or Events of Default that exist
under the Loan Agreement and the other Loan Documents as of the date hereof.
Lender hereby waives those Designated Defaults in existence on the date hereof.
In no event shall any such waiver be deemed to be a waiver of (a) any Default or
Event of Default other than Designated Defaults in existence on the date of this
Agreement or (b) Borrower's obligation to comply with all of the terms and
conditions of the Loan Agreement and the other Loan Documents from and after the
date hereof. Notwithstanding any prior, temporary mutual disregard of the terms
of any contracts between the parties, Borrower agrees that it shall be required
strictly to comply with all of the terms of the Loan Documents on and after the
date hereof. If Borrower shall fail to deliver audited financial statements to
Lender for the fiscal year of Borrower ending September 30, 1995 on or before
January 30, 1996, then such failure shall constitute an Event of Default under
the Loan Agreement.
7. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable fees of Lender's legal
counsel.
8. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
9. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10. NO NOVATION. ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
-6-
<PAGE> 73
11. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
12. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
13. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR INTERNATIONAL
ATTEST: CORPORATION ("Borrower")
/s/ Michael Kagan By:/s/Sharon L. Perdue
- ---------------------- ------------------------------------
Secretary
[CORPORATE SEAL] Title: SR. VICE PRESIDENT OF FINANCE
------------------------------
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
f/k/a Shawmut Capital
Corporation ("Lender")
By: Elizabeth L. Waller
------------------------------------
Title: Vice President
------------------------------
[Signatures continued on next page]
-7-
<PAGE> 74
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Fourth
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Fourth Amendment to Loan and
Security Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/ Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary --------------------------------
[CORPORATE SEAL] Title: SR. VICE PRESIDENT
--------------------------
ATTEST: TROPICAL ACQUISITION COMPANY
/s/ Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary --------------------------------
[CORPORATE SEAL] Title: SR. VICE PRESIDENT
--------------------------
-8-
<PAGE> 75
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 27th day of February, 1996, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida CORPORATION (HEREINAFTER
REFERRED TO AS "BORROWER") WITH its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, FLORIDA 33634-1302, AND FLEET
CAPITAL CORPORATION f/k/a Shawmut Capital Corporation, a Connecticut corporation
(hereinafter referred to as "Lender") with an office at 300 Galleria Parkway,
N.W., Suite 800, Atlanta, Georgia 30339.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, that certain Second Amendment to Loan and
Security Agreement dated October 1, 1995, that certain Third Amendment to Loan
and Security Agreement dated December 4, 1995, and that certain Fourth Amendment
to Loan and Security Agreement dated January 18, 1996, between Lender and
Borrower (as at any time amended, the "Loan Agreement"), pursuant to which
Lender has made and may from time to time hereafter make loans and other
extensions of credit to Borrower.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENTS TO AGREEMENT. The Loan Agreement is hereby amended as
follows:
(a) By deleting Section 2.9 of the Loan Agreement in its entirety and by
substituting the following new Section 2.9 in lieu thereof:
2.9. LC Guaranty Fees. In addition to Borrower's obligation to pay to
Issuer all fees and normal and customary charges associated with the
issuance and
<PAGE> 76
administration of each Letter of Credit, Borrower shall pay to Lender (i)
for Lender's LC Guaranty of each Documentary Letter of Credit, a fee equal
to 2.0% per annum of the aggregate face amount of such Documentary Letter
of Credit outstanding from time to time during the term of this Agreement,
and an additional fee equal to 2.0% per annum of the face amount of such
Documentary Letter of Credit payable upon each renewal thereof and each
extension thereof and (ii) for Lender's LC Guaranty of each Standby Letter
of Credit, a fee equal to 2.5% per annum of the aggregate face amount of
such Standby Letter of Credit outstanding from time to time during the term
of this Agreement, and an additional fee equal to 2.5% per annum of the
face amount of such Standby Letter of Credit payable upon each renewal
thereof and each extension thereof. All such fees and charges shall be
deemed fully earned upon issuance, renewal or extension (as the case may
be) of each such Letter of Credit, and shall be payable on the date of
issuance of such Letter of Credit and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
(b) By deleting the definition of "Borrowing Base" that is contained in
Appendix A to the Loan Agreement and by substituting the following new
definition in lieu thereof:
Borrowing Base - at any date of determination thereof, an amount equal
to the lesser of:
(i) $40,000,000 minus the LC Obligations at such date; or
(ii) an amount equal to:
(a) the sum of: (1) 90% of the Factor Credit Balances on
such date minus the amount of overbilling, and (2) 85% of the Client
Risk Accounts which would be Eligible Accounts on the date of
determination if such Accounts were not Factored Accounts;
PLUS
(b) 85% of the net amount of Eligible Accounts outstanding
on such date;
-2-
<PAGE> 77
PLUS
(c) the least of (1) $22,500,000, (2) during the month of
December, January and February, 80% of the value of Eligible Inventory
at such date, or (3) at any date (other than the months of December,
January and February), 60% of the value of Eligible Inventory at such
date, calculated on the basis of the lower of cost or market with the
cost of raw materials and finished goods calculated on a first-in,
first-out basis;
MINUS (subtract from the sum of clauses (a), (b) and (c)
above)
(d) an amount equal to the sum of (1) any amounts received
by Lender from the Life Insurance Assignment and applied to the
Obligations, (2) the Factor Reserve on such date and (3) the
Availability Reserve on such date.
For purposes hereof, the "net amount" when used with
reference to any Account shall mean the face amount of such Account
less any and all returns, rebates, discounts (which may, at Lender's
option be calculated on shortest terms), overbillings, credits,
allowances or excise or sales taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Account at such date.
(c) By deleting the definition of "LC Conditions" that is contained in
Appendix A to the Loan Agreement and by substituting the following new
definition in lieu thereof:
LC Conditions - the following conditions, the satisfaction of each of
which is required before Lender shall be obligated to execute any LC
Application in connection with a request for the issuance of a Letter of
Credit: (i) no Default or Event of Default exists; (ii) after giving effect
to the issuance of the requested Letter of Credit and each Letter of Credit
for which an LC Application has been signed by Lender, the LC Obligations
would not exceed $4,000,000 in the aggregate and no Overadvance would
exist; (iii) the expiry date of the Letter of Credit does not extend beyond
the earlier
-3-
<PAGE> 78
to occur of 365 days from the date of issuance or 30 days prior to the last
day of the Original Term or of any effective Renewal Term; and (iv) the
currency in which payment is to be made under the Letter of Credit is U.S.
Dollars.
(d) By deleting the definition of "Letter of Credit" from Appendix A to
the Loan Agreement and by substituting the following new definition in lieu
thereof:
Letter of Credit - Standby Letters of Credit and Documentary Letters
of Credit.
(e) By adding the following new definitions to Appendix A to the Loan
Agreement in proper alphabetical sequence:
Documentary Letter of Credit - a documentary letter of credit issued
by Issuer for the account of Borrower.
Standby Letter of Credit - a standby letter of credit issued by Issuer
for the account of Borrower.
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and reaffirms
each of the Loan Documents and all of Borrower's covenants, duties and
liabilities thereunder.
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); the security interests and liens
granted by Borrower in favor of Lender are duly perfected, first priority
security interests and liens; and the unpaid principal amount of the Revolver
Loans on and as of February 26, 1996, totalled $22,271,741.78 and the unpaid
principal amount of the Term Loan on and as of February 26, 1996, totalled
$2,754,250.07.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof; the execution, delivery and performance of
this Amendment have been duly authorized by all requisite corporate action on
the part of Borrower and this Amendment has been duly executed and delivered by
Borrower; and all of the representations and warranties made by Borrower in the
Loan Agreement are true and correct on and as of the date hereof.
-4-
<PAGE> 79
6. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable fees of Lender's legal
counsel.
7. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
9. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of that the terms of each of adhered to on and after the Loan Documents, the
parties agree the Loan Documents shall be strictly date hereof.
10. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
11. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
-5-
<PAGE> 80
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR INTERNATIONAL
ATTEST: CORPORATION ("BORROWER")
/s/ Michael Kagan By:/s/Sharon L. Perdue
- ------------------------------ ------------------------------------
Secretary Title: SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] ------------------------------
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
f/k/a Shawmut Capital
Corporation ("Lender")
By: Elizabeth L. Waller
----------------------------------
Title: Vice President
----------------------------
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Fifth
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the
-6-
<PAGE> 81
Obligations and reaffirm that such guaranty is and shall remain in full force
and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent
and Reaffirmation on and as of the date of such Fifth Amendment to Loan and
Security Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/ Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary ------------------------------------
[CORPORATE SEAL] Title: SR. VICE PRESIDENT
------------------------------
ATTEST: TROPICAL ACQUISITION COMPANY
/s/ Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary ------------------------------------
[CORPORATE SEAL] Title: SR. VICE PRESIDENT OF FINANCE
------------------------------
-7-
<PAGE> 82
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 7th day of May, 1996, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower"), with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302; and FLEET
CAPITAL CORPORATION f/k/a Shawmut Capital Corporation, a Connecticut corporation
(hereinafter referred to as "Lender"), with an office at 300 Galleria Parkway,
N.W., Suite 800, Atlanta, Georgia 30339.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, that certain Second Amendment to Loan and
Security Agreement dated October 1, 1995, that certain Third Amendment to Loan
and Security Agreement dated December 4, 1995, that certain Fourth Amendment to
Loan and Security Agreement dated January 18, 1996, and that certain Fifth
Amendment to Loan and Security Agreement dated February 27, 1996 (as at any time
amended, the "Loan Agreement"), pursuant to which Lender has made and may from
time to time hereafter make loans and other extensions of credit to Borrower.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such
terms in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as
follows:
(a) By deleting subsection (viii) of Section 8.2.5 of the Loan Agreement
and by substituting the following new provisions in lieu thereof:
(viii) Lien in favor of SouthTrust with respect to certain real
Property of Borrower located at 4924 West
<PAGE> 83
Waters Avenue and 4902 West Waters Avenue, Tampa, Hillsborough County,
Florida; and
(ix) such other Liens as Lender may hereafter approve in writing.
(b) By deleting Section 8.2.8 of the Loan Agreement in its entirety and by
substituting the following new Section 8.2.8 in lieu thereof:
8.2.8. Capital Expenditures. Make Capital Expenditures (including,
without limitation, by way of capitalized leases) which, in the aggregate,
as to Borrower and its Subsidiaries, exceed $3,000,000 during any fiscal
year of Borrower; provided, however, that the Capital Expenditures made by
Borrower during its fiscal year ending September 28, 1996, in connection
with the purchase of the real property and certain other property that is
to be encumbered by the SouthTrust Mortgage shall not be included in the
foregoing limitation.
(c) By deleting Sections 8.3.1, 8.3.2 and 8.3.3 of the Loan Agreement in
their entirety and by substituting the following new Sections 8.3.1, 8.3.2 and
8.3.3 in lieu thereof:
8.3.1. Tangible Net Worth. Maintain at all times Tangible Net Worth of
not less than the amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
-------------------------- -----------
<S> <C>
Closing Date through $12,800,000
December 30, 1994
December 31, 1994 through $13,100,000
March 31, 1995
April 1, 1995 through $14,500,000
June 30, 1995
July 1, 1995 through $15,600,000
September 29, 1995
September 30, 1995 through $14,600,000
December 29, 1995
December 30, 1995 through $14,250,000
March 29, 1996
</TABLE>
-2-
<PAGE> 84
<TABLE>
<S> <C>
March 30, 1996 through $16,000,000
June 28, 1996
June 29, 1996 through $17,000,000
September 27, 1996
September 28, 1996 through $18,000,000
December 27, 1996
December 28 1996 through $19,000,000
March 28, 1997
March 29, 1997 through $20,000,000
June 27, 1997
June 28, 1997 and $21,000,000
thereafter
</TABLE>
8.3.2. Profitability. Achieve Adjusted Net Earnings From Operations
each fiscal year of not less than the amount shown below for the period
corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
----------------------- -----------
<S> <C>
October 2, 1994 through $ 900,000
December 31, 1994
October 2, 1994 through $ 3,700,000
April 1, 1995
October 2, 1994 through $ 3,200,000
July 1, 1995
October 2, 1994 through $ 4,000,000
September 30, 1995
October 1, 1995 through $(1,400,000)
December 30, 1995
October 1, 1995 through $ (375,000)
March 30, 1996
October 1, 1995 through $ 3,350,000
June 29, 1996
October 1, 1995 through $ 5,000,000
September 28, 1996
</TABLE>
-3-
<PAGE> 85
<TABLE>
<S> <C>
September 29, 1996 through $ 700,000
December 28, 1996
September 29, 1996 through $2,700,000
March 29, 1997
September 29, 1996 through $4,500,000
June 28, 1997
September 29, 1996 through $6,500,000
September 27, 1997
</TABLE>
8.3.3. Debt Service Coverage Ratio. Maintain a Debt Service Coverage
Ratio of not less than the ratio shown below for the period corresponding
thereto:
<TABLE>
<CAPTION>
Period Ratio
------------------------ ------------
<S> <C>
October 2, 1994 through .10 to 1.0
December 31, 1994
October 2, 1994 through 1.30 to 1.0
April 2, 1995
October 2, 1994 through 1.30 to 1.0
July 1, 1995
October 2, 1994 through 1.30 to 1.0
September 30, 1995
October 1, 1995 through Not Applicable
December 30, 1995
October 1, 1995 through Not Applicable
March 30, 1996
October 1, 1995 through 1.30 to 1.0
June 29, 1996
October 1, 1995 through 1.30 to 1.0
September 28, 1996
September 29, 1996 through .30 to 1.0
December 28, 1996
September 29, 1996 through 1.30 to 1.0
March 29, 1997
September 29, 1996 through 1.30 to 1.0
June 28, 1997
September 29, 1996 through 1.30 to 1.0
September 27, 1997
</TABLE>
-4-
<PAGE> 86
(d) By adding a new Section 10.1.21 to Section 10 of the Loan Agreement
that reads as follows:
10.1.21. SouthTrust Loan Documents. A default or event of default
shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any
of the SouthTrust Loan Documents.
(e) By adding the following new definitions to Appendix A to the Loan
Agreement in proper alphabetical sequence:
SouthTrust - SouthTrust Bank of Alabama, National Association.
SouthTrust Loan Agreement - the Construction and Term Loan Agreement
dated May 7, 1996, between Borrower and SouthTrust, pursuant to which
SouthTrust has agreed to extend a term loan to Borrower in the original
principal amount of $9,600,000.
SouthTrust Loan Documents - collectively, the SouthTrust Loan
Agreement, the SouthTrust Mortgage and any and all other documents,
agreements or instruments executed in connection with any of the foregoing.
SouthTrust Mortgage - the Real Estate Mortgage dated May 7, 1996,
between Borrower and SouthTrust, pursuant to which Borrower has conveyed to
SouthTrust a Lien upon certain real Property and the improvements thereon
owned by Borrower and located at 4924 West Waters Avenue and 4902 West
Waters Avenue, Tampa, Hillsborough County, Florida.
3. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); the Liens granted by Borrower
in favor of Lender are duly perfected, first priority Liens; the unpaid
principal amount of the Revolver Loans on and as of May 6, 1996, totalled
$14,563,025.23; the unpaid principal amount of the Term Loan on and as of May
6, 1996, totalled $1,416,666.73; and the unpaid principal amount of the
Equipment Loans on and as of May 6, 1996, totalled $1,144,966.70.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof; the execution, delivery and performance of
this Amendment have been duly authorized by all requisite corporate action on
the part of
-5-
<PAGE> 87
Borrower, and this Amendment has been duly executed and delivered by Borrower;
and all of the representations and warranties made by Borrower in the Loan
Agreement are true and correct on and as of the date hereof.
5. CONDITIONS PRECEDENT. The effectiveness of the amendments contained in
paragraphs (a) and (b) of Section 2 hereof are subject to the satisfaction of
each of the following conditions precedent, in form and substance satisfactory
to Lender, unless satisfaction thereof is specifically waived in writing by
Lender:
(a) Borrower shall have delivered to Lender a Mortgagee Waiver from
SouthTrust Bank of Alabama, National Association ("SouthTrust"), with
respect to the Real Property of Borrower located in Hillsborough County,
Florida (the "Real Property");
(b) Lender shall have received an opinion letter from Florida counsel
to Borrower, pursuant to which such counsel shall opine as to, among other
things, the due execution and enforceability of this Amendment; and
(c) Lender shall have received and reviewed final executed copies of
the loan documentation between SouthTrust and Borrower, and Lender shall
have confirmed, to its satisfaction, that SouthTrust has no Lien on any
Property of Borrower other than the Real Property.
6. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable attorney's fees of
Lender's legal counsel.
7. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
9. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree
-6-
<PAGE> 88
that the terms of each of the Loan Documents shall be strictly adhered to on and
after the date hereof.
10. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
11. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR INTERNATIONAL
ATTEST: CORPORATION ("Borrower")
/s/Michael Kagan By:/s/Sharon L. Perdue
- ------------------------- ------------------------------------
Secretary Title:SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] ------------------------------
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
f/k/a Shawmut Capital
Corporation ("Lender")
By:/s/ Robert G. Rose
------------------------------------
Title: VICE PRESIDENT
------------------------------
[Consent and Reaffirmation of following page]
-7-
<PAGE> 89
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Sixth
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Sixth Amendment to Loan and Security
Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/Michael Kagan By:/s/Sharon L. Perdue
- ------------------------------- -----------------------------------
Secretary Title:SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] -----------------------------
ATTEST: TROPICAL ACQUISITION CORPORATION
/s/Michael Kagan By:/s/Sharon L. Perdue
- ------------------------------- -----------------------------------
Secretary Title:SR. VICE PRESIDENT OF FINANCE
[CORPORATE SEAL] -----------------------------
-8-
<PAGE> 90
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 10th day of September, 1996, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower"), with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302; and FLEET
CAPITAL CORPORATION, a Rhode Island corporation (hereinafter referred to as
"Lender"), successor-by-merger to Fleet Capital Corporation, a Connecticut
corporation ("Old Fleet"), with an office at 300 Galleria Parkway, N.W., Suite
800, Atlanta, Georgia 30339.
R E C I T A L S:
Borrower entered into a certain Loan and Security Agreement with Old Fleet
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, that certain Second Amendment to Loan and
Security Agreement dated October 1, 1995, that certain Third Amendment to Loan
and Security Agreement dated December 4, 1995, that certain Fourth Amendment to
Loan and Security Agreement dated January 18, 1996, that certain Fifth Amendment
to Loan and Security Agreement dated February 27, 1996 and that certain Sixth
Amendment to Loan and Security Agreement dated May 7, 1996 (as at any time
amended, the "Loan Agreement").
Effective May 1, 1996, Old Fleet merged into Fleet Credit Corporation, a
Rhode Island corporation ("Fleet Credit") with Fleet Credit being the surviving
corporation and having changed its name to "Fleet Capital Corporation."
The parties now desire to amend the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as
follows:
<PAGE> 91
(a) By deleting clause (ii) under the definition of "LC Conditions" that
is contained in Appendix A to the Loan Agreement, and by substituting the
following new clause (ii) in lieu thereof:
(ii) after giving effect to the issuance of the requested
Letter of Credit and each Letter of Credit for which an LC
Application has been signed by Lender, the LC Obligations
would not exceed $5,500,000 in the aggregate and no
Overadvance would exist:
(b) By deleting the last sentence of Section 1.1 of the Loan Agreement (as
amended by the Fourth Amendment) in its entirety.
(c) By deleting clause (vii) of the definition of "Availability Reserve"
that reads "(vii) $1,500,000" in its entirety and by inserting a period in lieu
thereof.
3. REFERENCES TO LENDER. Effective May 1, 1996, any and all references
contained in the Loan Agreement or any of the other Loan Documents to "Fleet
Capital Corporation" or "Lender" shall mean and refer to "Fleet Capital
Corporation, a Rhode Island corporation."
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and stipulates
that the Loan Agreement and the other Loan Documents executed by Borrower are
legal, valid and binding obligations of Borrower that are enforceable against
Borrower in accordance with the terms thereof; all of the Obligations are owing
and payable without defense, offset or counterclaim (and to the extent there
exists any such defense, offset or counterclaim on the date hereof, the same is
hereby waived by Borrower); the Liens granted by Borrower in favor of Lender are
duly perfected, first priority Liens; the unpaid principal amount of the
Revolver Loans on and as of September 6, 1996, totalled $15,153,370.93; the
unpaid principal amount of the Term Loan on and as of September 6, 1996,
totalled $1,083,333.41; the unpaid principal amount of the Equipment Loans on
and as of September 6, 1996, totalled $1,587,500.06; and the unpaid principal
amount of the LC Obligations on and as of September 6, 1996, totalled
$3,952,372.67.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof; the execution, delivery and performance of
this Amendment have been duly authorized by all requisite corporate action on
the part of Borrower, and this Amendment has been duly executed and delivered by
Borrower; and all of the representations and warranties made by Borrower in the
Loan Agreement are true and correct on and as of the date hereof.
-2-
<PAGE> 92
6. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable attorney's fees of
Lender's legal counsel.
7. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender in Atlanta, Georgia, whereupon the same shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
9. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
10. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
11. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF
OR RELATED TO THIS AMENDMENT.
-3-
<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR INTERNATIONAL
ATTEST: CORPORATION ("Borrower")
/s/ Michael Kagan By:/s/Sharon L. Perdue
- -------------------------- ------------------------------
Secretary SHARON L. PERDUE
[CORPORATE SEAL] Vice President
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
("Lender")
By:/s/Elizabeth L. Waller
------------------------------
Title: Vice President
------------------------
[Signatures continued on next page]
-4-
<PAGE> 94
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Seventh
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Seventh Amendment to Loan and
Security Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, NC.
/s/ Michael Kagan By:/s/Sharon L. Perdue
- -------------------------- ------------------------------
Secretary Title: SR. VICE PRES OF FINANCE
[CORPORATE SEAL] ------------------------
ATTEST: TROPICAL ACQUISITION CORPORATION
/s/ Michael Kagan By:/s/Sharon L. Perdue
- -------------------------- ------------------------------
Secretary Title: SR. VICE PRES OF FINANCE
[CORPORATE SEAL] ------------------------
-5-
<PAGE> 95
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 25th day of November, 1996, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower"), with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302; and FLEET
CAPITAL CORPORATION, a Rhode Island corporation (hereinafter referred to,
together with its successors and assigns, as "Lender"), with an office at 300
Galleria Parkway, N.W., Suite 800, Atlanta, Georgia 30339.
R E C I T A L S:
Borrower and Lender are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan and
Security Agreement dated May 26, 1995, that certain Second Amendment to Loan and
Security Agreement dated October 1, 1995, that certain Third Amendment to Loan
and Security Agreement dated December 4, 1995, that certain Fourth Amendment to
Loan and Security Agreement dated January 18, 1996, that certain Fifth Amendment
to Loan and Security Agreement dated February 27, 1996, that certain Sixth
Amendment to Loan and Security Agreement dated May 7, 1996 and that certain
Seventh Amendment to Loan and Security Agreement dated September 10, 1996 (as at
any time amended, the "Loan Agreement").
The parties now desire to amend the Loan Agreement further as hereinafter
set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENT TO SECTION 1 OF THE LOAN AGREEMENT. Section 1 of the Loan
Agreement is hereby amended by adding the following new sentence to the end of
Section 1.1 of the Loan Agreement:
<PAGE> 96
The Revolver Loans shall bear interest as set forth in Section 2.1 hereof.
Each Revolver Loan shall, at the option of Borrower, be made or continued
as, or converted into, a Base Rate Loan or a LIBOR Loan.
3. AMENDMENTS TO SECTION 2 OF THE LOAN AGREEMENT. Section 2 of the Loan
Agreement is hereby amended as follows:
(a) By deleting the second and fourth sentences that are contained in
Section 2.1.1 of the Loan Agreement that read:
Interest shall accrue on the principal amount of the equipment Loans and
the Revolver Loans outstanding at the end of each day at a variable rate
per annum equal to 1% plus the Base Rate.
and
The rate of interest shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate, effective as of the opening of
business on the day that any change in the Base Rate occurs.
and by substituting in lieu thereof the following:
Borrower agrees to pay interest in respect of all unpaid principal amounts
of the Revolver Loans and Equipment Loans from the respective dates such
principal amounts are advanced until paid (whether at stated maturity, on
acceleration or otherwise) at a rate per annum equal to the following
applicable rate: (a) for Revolver Loans or Equipment Loans outstanding as
Base Rate Loans, the Base Rate in effect from time to time plus .50%; or
(b) for Revolver Loans or Equipment Loans outstanding as LIBOR Loans, the
relevant Adjusted LIBOR Rate for the applicable Interest Period selected by
Borrower in conformity with this Agreement plus 2.75%.
Upon determining the Adjusted LIBOR Rate for any Interest Period
requested by Borrower, Lender shall promptly notify Borrower thereof by
telephone and, if so requested by Borrower, confirm the same in writing.
Such determination shall, absent manifest error, be final, conclusive and
binding on all parties and for all purposes. The applicable rate of
interest for all Loans bearing interest based upon the Base Rate shall be
increased or decreased, as the case may be, by an amount equal to any
increase or decrease in the Base Rate, with such adjustments to be
effective as of the opening of business on the day that any such change in
the Base Rate becomes effective. Interest on each Loan shall accrue
-2-
<PAGE> 97
from and including the date of such Loan to but excluding the date of any
repayment thereof; provided, however, that, if a Loan is repaid on the same
day made, one day's interest shall be paid on such Loan.
(b) By adding the following new Sections to Section 2.1 of the Loan
Agreement:
2.1.3. Conversions and Continuations.
(i) Borrower may on any Business Day, subject to the giving of a
proper Notice of Conversion/Continuation as hereinafter described, elect
(A) to continue all or any part of a LIBOR Loan by selecting a new Interest
Period therefor, to commence on the last day of the immediately preceding
Interest Period, or (B) to convert all or any part of a Revolver Loan or
Equipment Loan of one Type into a Revolver Loan or Equipment Loan of
another Type; provided, however, that no outstanding Revolver Loans or
Equipment Loans may be converted into or continued as LIBOR Loans when any
Default or Event of Default has occurred and is continuing. Any conversion
of a LIBOR Loan into a Base Rate Loan shall be made on the last day of the
Interest Period for such LIBOR Loan.
(ii) Whenever Borrower desires to convert or continue Revolver Loans
or Equipment Loans under Section 2.1.3(i), Borrower shall give Lender
written notice (or telephonic notice promptly confirmed in writing)
substantially in the form of EXHIBIT P. signed by an authorized officer of
Borrower, on the requested conversion date by 12:00 p.m., in the case of a
conversion into Base Rate Loans, and by 12:00 p.m. at least 2 Business Days
before the requested conversion or continuation date, in the case of a
conversion into or continuation of LIBOR Loans. Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the
aggregate principal amount of the Revolver Loans or Equipment Loans to be
converted or continued, the date of such conversion or continuation (which
shall be a Business Day) and whether the Revolver Loans or Equipment Loans
are being converted into or continued as LIBOR Loans (and, if so, the
duration of the Interest Period to be applicable thereto) or Base Rate
Loans. If, upon the expiration of any Interest Period in respect of any
LIBOR Loans, Borrower shall have failed to deliver the Notice of
Conversional/Continuation, Borrower shall be deemed to have elected to
convert such LIBOR Loans to Base Rate Loans.
-3-
<PAGE> 98
2.1.4. Interest Periods. In connection with the making or continuation
of, or conversion into, each Borrowing of LIBOR Loans, Borrower shall
select an interest period (each an "Interest Period") to be applicable to
such LIBOR Loan, which interest period shall commence on the date such
LIBOR Loan is made and shall end on a numerically corresponding day in the
first, second or third month thereafter; provided, however, that:
(i) the initial Interest Period for a LIBOR Loan shall commence on
the date such Loan is made (including the date of any conversion from a
Loan of another Type) and each Interest Period occurring thereafter in
respect of such Loan shall commence on the date on which the next
preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
LIBOR Loans would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(iii) any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period shall expire on the last Business Day of such calendar
month;
(iv) no Interest Period with respect to any portion of principal of a
Revolver Loan or Equipment Loan shall extend beyond a date on which
Borrower is required to make a scheduled payment of such portion of
principal;
(v) no Interest Period shall extend beyond the last day of the
Original Term; and
(vi) there shall be no more than 4 Interest Periods in effect at any
one time.
2.1.5. Interest Rate Not Ascertainable. If Lender shall determine
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties) that on any date for determining the Adjusted
LIBOR Rate for any Interest Period, by reason of any changes arising after
the date of this Agreement affecting the London interbank market or
Lender's or Bank's position in such market, adequate and fair means
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do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted LIBOR Rate, then, and in any
such event, Lender shall forthwith give notice (by telephone confirmed in
writing) to Borrower of such determination. Until Lender notifies Borrower
that the circumstances giving rise to the suspension described herein no
longer exist, the obligation of lender to make libor loans shall be
suspended, and such affected Loans then outstanding shall, at the end of
the then applicable Interest Period or at such earlier time as may be
required by Applicable Law, bear the same interest as Base Rate Loans.
(c) By adding the following new Sections 2.10, 2.11, 2.12 and 2.13 to
Section 2 of the Loan Agreement:
2.10. Illegality. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or
in the interpretation thereof by any governmental authority charged with
the administration thereof shall make it unlawful for Lender to make or
maintain a LIBOR Loan or to give effect to its obligations as contemplated
hereby with respect to a LIBOR Loan or (ii) at any time Lender determines
that the making or continuance of any LIBOR Loan has become impracticable
as a result of a contingency occurring after the date hereof which
adversely affects the London interbank market or the position of Lender or
Bank in such market, then, by written notice to Borrower, Lender may (l)
declare that LIBOR Loans will not thereafter be made by Lender, whereupon
any request by Borrower for a LIBOR Loan shall be deemed a request for a
Base Rate Loan unless Lender's declaration shall be subsequently withdrawn;
and (2) require that all outstanding LIBOR Loans made by Lender be
converted to Base Rate Loans, under the circumstances of clause (i) or (ii)
of this Section 2.10 insofar as Lender determines the continuance of LIBOR
Loans to be impracticable, in which event all such LIBOR Loans shall be
automatically converted to Base Rate Loans as of the date of Borrower's
receipt of the aforesaid notice from Lender.
2.11. Increased Costs. If, by reason of (a) the introduction of or
any change (including any change by way of imposition or increase of
Statutory Reserves or other reserve requirements) in or in the
interpretation of any law or regulation, or (b) the compliance with any
guideline or request from any central bank or other governmental authority
or quasi-governmental authority
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<PAGE> 100
exercising control over banks or financial institutions generally (whether
or not having the force of law):
(i) Lender shall be subject after the date hereof to any Tax, duty or
other charge with respect to any LIBOR Loan or its obligation to make LIBOR
Loans, or a change shall result in the basis of taxation of payment to
Lender of the principal of or interest on its LIBOR Loans or its obligation
to make LIBOR Loans (except for changes in the rate of tax on the overall
net income of Lender imposed by the jurisdiction in which Lender's
principal executive office is located); or
(ii) any reserve (including any imposed by the Board of Governors),
special deposits or similar requirement against assets of, deposits with or
for the account of, or credit extended by, Lender shall be imposed or
deemed applicable or any other condition affecting its LIBOR Loans or its
obligation to make LIBOR Loans shall be imposed on Lender or the London
interbank market;
and as a result thereof there shall be any increase in the cost to Lender
of agreeing to make or making, funding or maintaining LIBOR Loans (except
to the extent already included in the determination of the applicable
Adjusted LIBOR Rate for LIBOR Loans), or there shall be a reduction in the
amount received or receivable by Lender, then Borrower shall from time to
time, upon written notice from and demand by Lender (with a copy of such
notice and demand to Lender), pay to Lender, within 5 Business Days after
the date specified in such notice and demand, an additional amount
sufficient to indemnify Lender against such increased cost. A certificate
as to the amount of such increased cost, submitted to Borrower by Lender,
shall be final, conclusive and binding for all purposes.
If Lender shall advise Borrower at any time that, because of the
circumstances described hereinabove in this Section 2.11 or any other
circumstances arising after the date of this Agreement affecting Lender or
the London interbank market or Lender's or Bank's position in such market,
the Adjusted LIBOR Rate, as determined by Lender, will not adequately and
fairly reflect the cost to Lender of funding LIBOR Loans, then, and in
any such event:
(i) Lender shall forthwith give written notice to Borrower of such
advice;
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(ii) Borrower's right to request and Lender's obligation to make
LIBOR Loans shall be immediately suspended and Borrower's right to
continue a LIBOR Loan as such beyond the then applicable Interest Period
shall also be suspended; and
(iii) Lender shall make a Base Rate Loan as part of the requested
Borrowing of LIBOR Loans, which Base Rate Loan shall, for all purposes, be
considered part of such Borrowing.
For purposes of this Section 2.11, all references to Lender shall be deemed
to include any bank holding company or bank parent of Lender.
2.12. Capital Adequacy. If after the date hereof Lender determines
that (a) the adoption of any Applicable Law regarding capital requirements
for banks or bank holding companies or the subsidiaries thereof, (b) any
change in the interpretation or administration of any such Applicable Law,
any governmental authority, central bank, or comparable agency charged with
the interpretation or administration thereof, or (c) compliance by Lender
or its holding company with any request or directive of any such
governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of
reducing the return on Lender's capital to a level below that which Lender
could have achieved (taking into consideration Lender's and its holding
company's policies with respect to capital adequacy immediately before such
adoption, change or compliance and assuming that Lender's capital was fully
utilized prior to such adoption, change or compliance) but for such
adoption, change or compliance as a consequence of Lender's commitment to
make the Loans pursuant hereto by any amount deemed by Lender to be
material:
(i) Lender shall promptly give notice thereof to Borrower; and
(ii) Borrower shall pay to Lender, as an additional fee from time to
time, on demand, such amount as Lender certifies to be the amount that will
compensate Lender for such reduction.
A certificate of Lender claiming entitlement to compensation as set
forth above will be conclusive in the absence of manifest error. Such
certificate will set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid
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to Lender (including the basis for Lender's determination of such amount),
and the method by which such amounts were determined. In determining such
amount, Lender may use any reasonable averaging and attribution method. For
purposes of this Section 2.12, all references to Lender shall be deemed to
include any bank holding company or bank parent of Lender.
2.13. Funding Losses. Borrower shall be obligated to compensate
Lender, upon Lender's written request (which request shall set forth the
basis for requesting such amounts and which request shall, absent manifest
error, be final, conclusive and binding upon all of the parties hereto),
for all losses, expenses and liabilities (including any interest paid by
Lender to lenders of funds borrowed by Lender to make or carry its LIBOR
Loans to the extent not recovered by Lender in connection with the
re-employment of such funds), which Lender may sustain: (i) if for any
reason (other than a default by Lender) a Borrowing of, or conversion to or
continuation of, LIBOR Loans does not occur on the date specified therefor
in a Notice of Borrowing or Notice of Conversion/ Continuation (whether or
not withdrawn), (ii) if any repayment (including any conversions pursuant
to Section 2.1.3 hereof) of any its LIBOR Loans occurs on a date that is
not the last day of an Interest Period applicable thereto, or (iii) if, for
any reason, Borrower defaults in its obligation to repay LIBOR Loans when
required by the terms of this Agreement. For purposes of this Section 2.13,
all references to Lender shall be deemed to include any bank holding
company or bank parent of Lender. The calculations of all amounts payable
to Lender under this Section 2.13 shall be made as though Lender had
actually funded or committed to fund its LIBOR Loan through the purchase
for an underlying deposit in an amount equal to the amount of such LIBOR
Loan and having a maturity comparable to the relevant Interest Period for
such LIBOR Loan; provided, however, Lender may fund its LIBOR Loans in any
manner it deems fit and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this Section 2.13.
4. AMENDMENTS TO SECTION 3 OF THE LOAN AGREEMENT. Section the Loan
Agreement is hereby amended as follows:
(a) By deleting Section 3.1.1 of the Loan Agreement and by substituting
the following in lieu thereof:
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3.1.1. Notice of Borrowing.
(i) Whenever Borrower desires to obtain a Revolver Loan under
Section 1.1 of this Agreement (other than a Borrowing resulting from a
conversion or continuation pursuant to Section 2.1.3), Borrower shall give
Lender notice of such Borrowing request (a "Notice of Borrowing") which
notice shall be in writing if the Revolver Loan requested by Borrower is
to bear interest as a LIBOR Loan unless a telephonic request for such Loan
is expressly approved by Lender pursuant to Section 3.1.1(iii) below. Such
Notice of Borrowing shall be given by Borrower to Lender no later than
12:00 p.m. (a) on the Business Day of the requested funding date of such
Borrowing, in the case of a Base Rate Loan, and (b) at least 2 Business
Days prior to the requested funding date of such Borrowing, in the case of
LIBOR Loans. Notices received after 12:00 p.m. shall be deemed received on
the next Business Day. Each Notice of Borrowing shall be irrevocable and
shall specify (a) the principal amount of the Borrowing, (b) the date of
Borrowing (which shall be a Business Day), (c) whether the Borrowing is to
consist of Base Rate Loans or LIBOR Loans, (d) in the case of LIBOR Loans,
the duration of the Interest Period to be applicable thereto, and (e) the
account of Borrower to which the proceeds of such Borrowing are to be
disbursed. Borrower may not request any LIBOR Loans if a Default or Event
of Default exists.
(ii) Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or any
of the other Loan Documents as principal, accrued interest, fees or other
charges shall be deemed irrevocably to be a request for Revolver Loans on
the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the proceeds of
such Revolver Loans may be disbursed by way of direct payment of the
relevant Obligation and shall bear interest as Base Rate Loans. Lender
shall have no obligation to Borrower to honor any deemed request for a
Revolver Loan under this Section 3.1.1(ii), but may do so in its
discretion and without regard to the existence of, and without being
deemed to have waived, any Default or Event of Default and without regard
to the existence or creation of an Overadvance.
(iii) As an accommodation to Borrower, Lender may permit telephonic
requests for Borrowings and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by Borrower; provided,
however,
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that, if requested to do so by Lender at any time, Borrower shall confirm
each such telephonic request for a Borrowing of LIBOR Loans in writing.
Unless Borrower specifically directs Lender in writing not to accept or act
upon telephonic or electronic communications from Borrower, Lender shall
not have any liability to Borrower for any loss or damage suffered by
borrower as a result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have
been sent to Lender by Borrower and Lender shall not have any duty to
verify the origin of any such communication or the identity or authority of
the Person sending it.
(b) By deleting Sections 3.2.1 and 3.2.2 of the Loan Agreement and by
substituting the following in lieu thereof:
3.2.1. Payment of Principal. The outstanding principal amounts with
respect to the Revolver Loans shall be due and payable as follows:
(i) Any portion of the Revolver Loans consisting of the principal
amount of Base Rate Loans shall be paid by Borrower to Lender, unless
converted to a LIBOR Loan in accordance with this Agreement, immediately
upon the earlier of (a) the receipt by Borrower or Lender of any proceeds
or payments of any of the Collateral, to the extent of such proceeds or
payments, or (b) the Termination Date.
(ii) Any portion of the Revolver Loans consisting of the principal
amount of LIBOR Loans shall be paid by Borrower to Lender, unless converted
to a Base Rate Loan or continued as a LIBOR Loan in accordance with the
terms of this Agreement, upon the earlier of (a) the last day of the
Interest Period applicable thereto or (b) the Termination Date. In no event
shall Borrower be authorized to pay any LIBOR Loan prior to the last day of
the Interest Period applicable thereto unless (x) otherwise agreed in
writing by Lender or Borrower are otherwise expressly authorized or
required by any other provision of this Agreement to pay any LIBOR Loan
outstanding on a date other than the last day of the Interest Period
applicable thereto, and (y) Borrower pays to Lender concurrently with any
prepayment of a LIBOR Loan any amount due Lender under Section 2.13 hereof
as a result of such prepayment.
(iii) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, if an Overadvance
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shall exist, Borrower shall, ON DEMAND, repay the outstanding Revolver
Loans that are Base Rate Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of all Revolver Loans by an amount equal
to such Overadvance; and, if such payment of Base Rate Loans is not
sufficient to cure the Overadvance, then Borrower shall immediately either
(a) deposit with lender for application to any outstanding revolver loans
bearing interest as LIBOR Loans as the same become due and payable at the
end of the applicable Interest Periods, cash in an amount sufficient to
cure such Overadvance, or (b) pay the Revolver Loans outstanding that bear
interest as LIBOR Loans to the extent necessary to cure such Overadvance
and also pay to Lender any and all amounts required by Section 2.13 hereof
to be paid by reason of the prepayment of a LIBOR Loan prior to the last
day of the Interest Period applicable thereto.
3.2.2. Payment of Interest. Interest accrued on the Revolver Loans and
each Equipment Loan shall be due and payable on (i) the first calendar day
of each month (for the immediately preceding month), computed through the
last calendar day of the preceding month, with respect to any Revolver Loan
or any Equipment Loan (whether a Base Rate Loan or LIBOR Loan) and (ii) the
last day of the applicable Interest Period in the case of a LIBOR Loan.
Accrued interest shall also be paid by Borrower on the Termination Date.
With respect to any Base Rate Loan converted into a LIBOR Loan pursuant to
Section 2.1.3 on a day when interest would not otherwise have been payable
with respect to such Base Rate Loan, accrued interest to the date of such
conversion on the amount of such Base Rate Loan so converted shall be paid
on the conversion date.
(c) By adding a new Section 3.8 to the Loan Agreement that reads as
follows:
3.8. Special Provisions Governing LIBOR Loans.
3.8.1. Number of LIBOR Loans. In no event may the number of LIBOR
Loans outstanding at any time to Lender exceed 4.
3.8.2. Minimum Amounts. Each election of LIBOR Loans pursuant to
Section 3.1.1(i), and each continuation of or conversion to LIBOR Loans
pursuant to Section 2.1.3 hereof, shall be in a minimum amount of
$1,000,000 with respect to any portion of the Loans that bear interest as a
LIBOR Loan and integral multiples of $500,000 in excess of that amount.
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3.8.3. LIBOR Lending Office. Lender's initial LIBOR Lending Office
shall be at 300 Galleria Parkway, Suite 800, Atlanta, Georgia 30339. Lender
shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Loans to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on
the part of Borrower for increased costs or expenses resulting solely from
such designation or transfer. Increased costs for expenses resulting FROM A
change in Applicable Law occurring subsequent to any such designation or
transfer shall be deemed not to result solely from such designation or
transfer.
5. AMENDMENTS TO APPENDIX A TO THE LOAN AGREEMENT. Appendix A to the Loan
Agreement is hereby amended as follows:
(a) By adding the following new definitions to Appendix A to the Loan
Agreement in proper alphabetical sequence:
Adjusted LIBOR Rate - with respect to each Interest Period for a LIBOR
Loan, an interest rate per annum (rounded upwards, to the next 1/16th of
1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest
Period divided by (b) a percentage (expressed as a decimal) equal to 100%
minus Statutory Reserves.
Base Rate Loan - a Loan, or portion thereof, during any period in
which it bears interest at a rate based upon the Base Rate.
Board of Governors - the Board of Governors of the Federal Reserve
Board.
Borrowing - a borrowing consisting of Loans made on the same day and
of the same Type by Lender.
Dollars and the sign $ - lawful money of the United States of America.
Interest Period - shall have the meaning ascribed to it in Section
2.1.4 of the Agreement.
LIBOR Loan - a Loan, or portion thereof, during any period in which it
bears interest at a rate based upon the applicable Adjusted LIBOR Rate.
LIBOR Rate - with respect to an Interest Period, the rate per annum
determined by Lender on the basis of the offered rate for deposits in
Dollars in the London
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Interbank Market of amounts equal to or comparable to the amount of the
LIBOR Loan to which such Interest Period relates offered for a term
comparable to such Interest Period, which rate appears on the Telerate
Screen LIBOR Page (or as published by a comparable service selected by
Lender) as of 11:00 a.m., London time, 2 Business Days prior to the first
day of such Interest Period.
Notice of Borrowing. - as defined in Section 3.1.1(i)
Notice of Conversion/Continuation - as defined in Section 2.1.3(ii) of
the Agreement.
Regulation D - Regulation D of the Board of Governors
Statutory Reserves - on any date, the percentage (expressed as a
decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including, but not limited to, any
emergency, supplemental or other marginal reserve requirements) applicable
to any member bank of the Federal Reserve System in respect to Eurocurrency
Liabilities (or any successor category of liabilities under Regulation D).
Such reserve percentage shall include, without limitation, those imposed
pursuant to said Regulation D. The Statutory Reserve shall be adjusted
automatically on and as of the effective date of any change in such
percentage.
Tax - any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, transfer, license,
payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States, or any state, local or foreign
government or by any department, agency or other political subdivision or
taxing authority thereof or therein and all interest, penalties, additions
to tax and similar liabilities with respect thereto.
Termination Date - the date on which the Loan Agreement is terminated
pursuant to Section 4.2 of the Agreement.
Type - the type of a Loan, which shall be either a LIBOR Loan or a
Base Rate Loan.
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(b) By deleting the definition of "Business Day" from Appendix A to the
Loan Agreement and by substituting the following new definition in lieu thereof:
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of Georgia or is a day on which
banking institutions located in such state are closed; provided, however,
that when used with reference to a LIBOR Loan (including the making,
continuing, prepaying or repaying of any LIBOR Loan), the term "Business
Day" shall also exclude any day on which banks are not open for dealings in
Dollar deposits on the London interbank market.
6. ADDITION OF EXHIBIT TO LOAN AGREEMENT. Exhibit P attached to this
Amendment is hereby added to the Loan Agreement in proper sequence.
7. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower acknowledges and stipulates
that the Loan Agreement and the other Loan Documents executed by Borrower are
legal, valid and binding obligations of Borrower that are enforceable against
Borrower in accordance with the terms thereof; all of the Obligations are owing
and payable without defense, offset or counterclaim tend to the extent there
exists any such defense, offset or counterclaim on the date hereof, the same is
hereby waived by Borrower); the Liens granted by Borrower in favor of Lender are
duly perfected, first priority Liens; the unpaid principal amount of the
Revolver Loans on and as of November 21, 1996, totalled $18,053,881; the unpaid
principal amount of the Term Loan on and as of November 21, 1996, totalled
$916,667; the unpaid principal amount of the Equipment Loans on and as of
November 21, 1996, totalled $1,526,133; and the unpaid principal amount of the
LC Obligations on and as of November 21, 1996, totalled $3,736,764.
8. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Default or Event
of Default exists on the date hereof; the execution, delivery and performance of
this Amendment have been duly authorized by all requisite corporate action on
the part of Borrower, and this Amendment has been duly executed and delivered by
Borrower; and all of the representations and warranties made by Borrower in the
Loan Agreement are true and correct on and as of the date hereof.
9. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including,
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without limitation, the costs and reasonable attorney's fees of Lender's legal
counsel.
10. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective
upon acceptance by Lender in Atlanta, Georgia, whereupon the same shall be
governed by and construed in accordance with the internal laws of the State of
Georgia.
11. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
12. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
13. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be
executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
14. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
15. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed under seal, and delivered by their
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respective duly authorized officers on the date first written above.
ATTEST: TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
("Borrower")
/s/Michael Kagan
- ---------------------- By:/s/Sharon L. Perdue
Secretary --------------------------------
[CORPORATE SEAL] Sharon L. Perdue
Vice President
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
("LENDER")
By:/s/Elizabeth L. Waller
--------------------------------
Title: VICE PRESIDENT
--------------------------
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CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Eighth
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Eighth Amendment to Loan and
Security Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary --------------------------------
[CORPORATE SEAL] Title: SR. VICE PRES. OF FINANCE
--------------------------
ATTEST: TROPICAL ACQUISITION COMPANY
/s/Michael Kagan
- --------------------------- By:/s/Sharon L. Perdue
Secretary --------------------------------
[CORPORATE SEAL] Title: SR. VICE PRES. OF FINANCE
--------------------------
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EXHIBIT P
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date ______________, __________
Fleet Capital Corporation
300 Galleria Parkway
Suite 800
Atlanta, Georgia 30339
Attention: Loan Administration Officer
Re: Loan and Security Agreement dated September 28, 1994, by and between
Tropical Sportswear International Corporation and Fleet Capital
Corporation (as at any time amended, the "Loan Agreement")
Gentlemen:
This Notice of Conversion/Continuation is delivered to you pursuant to
Section 2.1.3 of the Loan Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings attributable thereto in
the Loan Agreement. Borrower hereby gives notice of its request as follows:
Check as applicable
A conversion of Loans from one Type to another, as follows:
(i) The requested date of the proposed conversion is _________, 19 _
(the "Conversion Date");
(ii) The Type of Loans to be converted pursuant hereto are presently
__________________ [select either LIBOR Loans or Base Rate
Loans] in the principal amount of $_____________ outstanding
as of the Conversion Date;
(iii) The portion of the aforesaid Loans to be converted on the
Conversion Date is $___________ (the "Conversion Amount");
(iv) The Conversion Amount is to be converted into a
__________________[select either a LIBOR Loan or a Base Rate
Loan] (the "Converted Loan") on the Conversion Date.
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(v) [In the event Borrower selects a LIBOR Loan:] Borrower hereby
requests that the Interest Period for such Converted Loan be for
a duration of _____________ [insert length of Interest Period].
[ ] A continuation of LIBOR Loans for new Interest Period, as follows:
(i) The requested date of the proposed continuation is
_____________, 19___ (the "Continuation Date");
(ii) The aggregate amount of the LIBOR Loans subject to such
continuation is $ _________________;
(iii) The duration of the selected Interest Period for the LIBOR Loans
which are the subject of such continuation is: _________
[select duration of applicable Interest Period];
Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the Loan Documents and certifies that no Default or Event of
Default exists on the date hereof.
Borrower has caused this Notice of Conversion/Continuation to be executed
and delivered by its duly authorized representative, this ______________ day of
______________________, 19___ .
TROPICAL SPORTSWEAR INTERNATIONAL
CORPORATION
By:
--------------------------------
Title:
-----------------------------
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<PAGE> 114
NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 18th day of July, 1997, by and between TROPICAL
SPORTSWEAR INTERNATIONAL CORPORATION, a Florida corporation (hereinafter
referred to as "Borrower"), with its chief executive office and principal place
of business at 4902 West Waters Avenue, Tampa, Florida 33634-1302; and FLEET
CAPITAL CORPORATION, a Rhode Island corporation (hereinafter referred to,
together with its successors and assigns, as "Lender"), with an office at 300
Galleria Parkway, N.W., Suite 800, Atlanta, Georgia 30339.
R E C I T A L S:
Borrower and Lender are parties to a certain Loan and Security Agreement
dated September 28, 1994, as amended by that certain First Amendment to Loan
and Security Agreement dated May 26, 1995, that certain Second Amendment to
Loan and Security Agreement dated October 1, 1995, that certain Third Amendment
to Loan and Security Agreement dated December 4, 1995, that certain Fourth
Amendment to Loan and Security Agreement dated January 18, 1996, that certain
Fifth Amendment to Loan and Security Agreement dated February 27, 1996, that
certain Sixth Amendment to Loan and Security Agreement dated May 7, 1996, that
certain Seventh Amendment to Loan and Security Agreement dated September 10,
1996 and that certain Eighth Amendment to Loan and Security Agreement dated
November 25, 1996 (as at any time amended, the "Loan Agreement").
The parties now desire to amend the Loan Agreement further as hereinafter
set forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is hereby
amended by deleting Section 10.1.9 of the Loan Agreement in its entirety.
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3. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); the Liens granted by Borrower in
favor of Lender are duly perfected, first priority Liens; the unpaid principal
amount of the Revolver Loans on and as of July 16, 1997, totaled $17,054,867.95;
the unpaid principal amount of the Term Loan on and as of July 16, 1997, totaled
$250,000.11; the unpaid principal amount of the Equipment Loans on and as of
July 16, 1997, totaled $2,220,666.86; and the unpaid principal amount of the LC
Obligations on and as of July 16, 1997, totaled $2,865,989.90.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to Lender, to induce Lender to enter into this Amendment, that no Default or
Event of Default exists on the date hereof; the execution, delivery and
performance of this Amendment have been duly authorized by all requisite
corporate action on the part of Borrower, and this Amendment has been duly
executed and delivered by Borrower; and all of the representations and
warranties made by Borrower in the Loan Agreement are true and correct on and as
of the date hereof.
5. EXPENSES OF LENDER. Borrower agrees to pay, on DEMAND, all costs
and expenses incurred by Lender in connection with the preparation, negotiation
and execution of this Amendment and any other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including, without limitation, the costs and reasonable attorneys fees of
Lender's legal counsel.
6. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective
upon acceptance by Lender in Atlanta, Georgia, whereupon the same shall be
governed by and construed in accordance with the internal laws of the State of
Georgia.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8. NO NOVATION; ETC. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the
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Loan Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
9. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be
executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
10. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, or known or UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE.
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11. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING
OUT OF OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
TROPICAL SPORTSWEAR INTERNATIONAL
ATTEST: CORPORATION ("Borrower")
/s/ Michael Kagan By: /s/Sharon L. Perdue
- ------------------------- ---------------------------
Secretary SHARON L. PERDUE
[CORPORATE SEAL] Vice President
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
("Lender")
By:/s/Elizabeth L. Waller
------------------------------
Title: V.P.
---------------------------
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CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Ninth
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Ninth Amendment to Loan and Security
Agreement.
ATTEST: APPAREL INTERNATIONAL GROUP, INC.
/s/ Michael Kagan By:/s/Sharon L. Perdue
- ------------------------- ---------------------------
Secretary
[CORPORATE SEAL] Title: SR. VICE PRESIDENT
---------------------------
ATTEST: TROPICAL ACQUISITION CORPORATION
/s/ Michael Kagan By:/s/Sharon L. Perdue
- ------------------------- ---------------------------
Secretary
[CORPORATE SEAL] Title: SR. VICE PRESIDENT
---------------------------
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EXHIBIT 10.2
================================================================================
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
CONSTRUCTION LOAN TO
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
$9,600,000.00
CONSTRUCTION AND TERM LOAN AGREEMENT
May 7, 1996
================================================================================
<PAGE> 2
CONSTRUCTION AND TERM LOAN AGREEMENT
This is a Construction Loan Agreement (this "Agreement") dated as of May 7,
1996, by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION ("Borrower"), 4902 West
Waters Avenue, Tampa, Florida 33634, and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION ("Bank"), with its principal office in Birmingham, Alabama. This
Agreement has been executed by the parties to document their understandings
relative to extensions of credit by Bank to Borrower. The parties agree as
follows:
1. DEFINITIONS. As used in this Agreement, the capitalized terms defined below
have the respective meanings ascribed to them:
"Accountants" mean any certified public accounting firm that Bank accepts in
writing.
"Advance" means any disbursement by Bank under the Note of a portion of the
proceeds of the Loan described in this Agreement.
"Affiliate" means a Person who, directly or indirectly, is controlled by, or
is under common control with, the spouse or any relative of, any officer,
director, or employee of, and any entity that is a member, officer,
director, employee, or a direct or indirect owner of any equity interest of
Borrower or Guarantor, including, without limitation, any subsidiary or
parent corporation.
"Agreement" means this Construction and Term Loan Agreement as originally
executed and as amended or supplemented from time to time in accordance with
its terms.
"Architect" means Smallwood, Reynolds, Stewart, Stewart & Associates of
Florida, Inc., or any other architect employed by Borrower and approved by
Bank in writing in connection with the design and construction of the
Improvements.
"Architect Agreement" means the architect agreement between Borrower and
Architect which must be in form and substance satisfactory to Bank.
"Bank" means SouthTrust Bank of Alabama, National Association, its
successors and assigns, a party to this Agreement.
"Bank's Consultant" jointly and severally means each contractor, architect,
engineer, or consultant
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<PAGE> 3
employed, hired, or consulted by Bank to monitor the progress of the
Construction.
"Bank's Counsel" means the law firm of Glenn Rasmussen & Fogarty, P.A.
"Base Rate" means the interest rate set and published from time to time by
Bank as its "Base Lending Rate," which rate is an index rate for the
guidance of loan officers, but does not necessarily preclude the
application of a lesser rate for particular loans.
"Borrower" means Tropical Sportswear International Corporation, a Florida
corporation, a party to this Agreement.
"Borrower's Counsel" means the law firm of Smith, Williams & Bowles, P.A.
"Borrower's Counsel's Final Opinion" means an opinion in form and substance
satisfactory to Bank.
"Budget" means a statement satisfactory to Bank in the form of attached
Exhibit "A" describing the intended and authorized use of the Loan
proceeds. Borrower must use all proceeds from the Note described by
this Agreement in a manner consistent with this Budget, as the same may be
modified from time to time with the Bank's consent. The Budget attached as
Exhibit "A" shall be converted to the Bank's approved format, a copy of
which is attached as Exhibit "D" to this Agreement.
"Capitalized Lease Obligations" means any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Closing Date" means May 7, 1996, unless otherwise agreed in writing by all
parties to this Agreement.
"Collateral" means the property described in the Security Documents and
pledged by Borrower to secure the prompt payment and performance of
Borrower's obligations under this Agreement and the Loan Documents.
"Collateral Assignment of Rents and Leases" means the Collateral Assignment
of Rents and Leases to be executed by Borrower in favor of Bank in form and
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<PAGE> 4
substance satisfactory to Bank, as amended or supplemented from time to
time.
"Collateral Assignment of Construction Contracts and Other Rights" means the
Collateral Assignment of Construction Contracts and Other Rights executed by
Borrower in favor of Bank in form and substance satisfactory to Bank, as
amended or supplemented from time to time.
"Completion Date" means the earlier of May 7, 1997, or the date construction
of the Improvements has been completed in accordance with the Plans and
Specifications, as evidenced by a Certificate of Occupancy issued by the
appropriate local government entity having jurisdiction over the Project.
"Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in
the current period are comparable in all material respects to those applied
in the preceding period.
"Consolidated" means the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
"Construction Contracts" means the Contractor Agreement, the Engineer's
Agreement, the Architect Agreement, and other agreements related to the
construction of the Improvements.
"Construction Costs" means all costs for labor, materials, fixtures and
furnishings, and other costs incurred and to be incurred in the development
of the Property, estimates of which are more particularly described in the
Budget.
"Construction Loan" means the loan (or the disbursements under the Note) to
be made by Bank to Borrower pursuant to this Agreement in connection with
the acquisition of the Land and existing Improvements and the construction
of additional Improvements commencing at the Loan Closing Date and
terminating 12 months thereafter or otherwise upon payoff or conversion to
the Term Loan as provided in this Agreement.
"Contractor Agreement" means the contractor agreement in form and substance
satisfactory to Bank to be executed by the General Contractor.
"Current Maturities of Capitalized Lease Obligations" means all payments in
respect of Capitalized
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<PAGE> 5
Lease Obligations that are required to be made within one year from the date
of determination, whether or not the obligation to make such payment will
constitute a current liability of the obligor under GAAP.
"Current Maturities of Long Term Debt" means all payments in respect of
long-term debt that are required to be made within one year from the date of
determination, whether or not the obligation to make such payment will
constitute a current liability of the obligor under GAAP.
"Debt" means the sum of (i) indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) Capitalized Lease
Obligations, (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as at the date as of which Debt is to be determined.
"Debt Service Coverage" means a ratio in which the numerator is the sum of
the net income (after provision for federal and state taxes and excluding
any extraordinary income) calculated based upon the 12-month period
preceding the applicable date, plus the interest expenses for said period,
plus the sum of non-cash expenses or allowances for such period (including,
without limitation, amortization or write-down of intangible assets,
depreciation, depletion, and deferred taxes and expenses), less any
dividends or other distributions for such period, and the denominator is the
sum of the Current Maturities of Long Term Debt and Current Maturities of
Capitalized Lease Obligations as of the applicable date, plus the interest
expenses for the 12-month period preceding the applicable date.
"Default" means any event of default described in this Agreement.
"Engineer" means Mills & Associates, Inc., or any other engineer employed by
Borrower and approved in writing by Bank in connection with the design and
construction of the Improvements.
"Engineer's Agreement" means the engineer's agreement in form and substance
satisfactory to Bank to be executed by the Engineer.
"Environmental Regulations" means all federal, state, and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders, and
consent decrees relating to the environment or
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<PAGE> 6
to public health, safety, and environmental matters, including, but not
limited to, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Toxic
Substances Control Act, the Clean Water Act, the Clean Air Act, the River
and Harbor Act, the Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, the DeepWater Port Act, the Safe Drinking
Water Act, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Insecticide, Fungicide and Rodenticide Act, the Mineral Lands and
Leasing Act, the Surface Mining Control and Reclamation Act, the Oil
Pollution Act of 1990, state and federal superlien and environmental cleanup
programs and laws, U.S. Department of Transportation regulations, laws
regulating hazardous, radioactive, and toxic materials and underground
petroleum products storage tanks, and all similar state, federal, and local
laws and regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or supplemented from time to time.
"Escrow Account" means the interest bearing escrow account held in the name
of SouthTrust Bank of Alabama, National Association, for the Borrower at
SouthTrust Bank of Florida, N.A., in satisfaction of the escrow requirements
relating to Project equity contributions set forth in Section 3.3(A) of this
Agreement.
"Estimated Gross Earnings" means the estimated sum of (a) total net sales
value of production, (b) total net sales of merchandise, and (c) other
earnings derived from operation of the business, less the cost of (i) raw
stock from which such production is derived, (ii) supplies consisting of
materials consumed directly in the conversion of such raw stock into
finished stock or in supplying the services sold by the Borrower, (iii)
merchandise sold, including related packaging materials, and (iv) services
purchased from others (not employees of the Borrower) for resale that do not
continue under contract.
"Fixed Charge Coverage" means a fraction in which the numerator is the sum
of the net income (after provision for federal and state taxes) for the
12-month period preceding the applicable date, plus the interest, lease, and
rental expenses for said period, plus the sum of non-cash expenses or
allowances for such period (including, without limita-
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<PAGE> 7
tion, amortization or write down of intangible assets, the net addition or
net decrease in the loan loss reserves for customer Accounts, depreciation,
depletion, and deferred taxes and expenses), less dividends and other
distributions for such period, and the denominator is the sum of the Current
Maturities of Long Term Debt as of the applicable date, plus the Current
Maturities of Capitalized Lease Obligations as of the applicable date, plus
any payment made of dividends on any shares of capital stock and cash
expenditures made for the redemption of any class of capital stock during
the 12-month period preceding the applicable date, plus the interest, lease,
and rental expenses for the 12-month period preceding the applicable date.
"General Contractor" means Ed Taylor Construction South, Inc., or any other
general contractor employed by Borrower and approved by Bank in writing in
connection with the construction of the Improvements.
"Generally Accepted Accounting Principles" or "GAAP" mean generally
accepted accounting principles in effect at the time any calculation is
required to be made under this Agreement or any financial statement or
report is prepared pursuant to it. However, Bank has the option to elect
in writing, at any time and from time to time, that generally accepted
accounting principles in effect as of the date of this Agreement be used
for the purposes of this Agreement, in any case in which the application of
accounting principles in effect at a later date would make the covenants
contained in this Agreement less restrictive.
"Governmental Authority" means any municipal, county, state or federal
governmental authority or other governmental authority (domestic or foreign)
having or claiming jurisdiction over the Land, the Improvements, Bank, or
Borrower.
"Guarantor" or "Guarantors" means jointly and severally each of the
following: Apparel International Group, Inc., and Tropical Acquisition
Corporation, both Delaware corporations.
"Guaranty" means the continuing and unconditional guaranty agreement in
form and substance satisfactory to Bank that has been or is to be executed
by Guarantor in favor of Bank.
"Hard Construction Costs" means the following line items listed in the
Budget: Building Construction,
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<PAGE> 8
Signage, Ornamental Gates & Fence, Chain Link Fence, Vacuum Security,
Security System, Outside Associates Break Areas, Wall Hung Storage Racks 200
L/FT, Awnings, and Change orders 10%.
"Improvements" means the improvements existing on the Land as of the date of
this Agreement, consisting of, among other things, a 187,500 square foot
(MOL) office/warehouse facility, and the Improvements to be made to the
Land, consisting of the construction of a 111,000 square foot (MOL)
office/warehouse facility and all other improvements relating to such
buildings now existing or hereafter erected upon the Land, all of which are
more particularly described in the Plans.
"Land" means the real property described in the Mortgage and legally
described in attached Exhibit "C."
"Liabilities" means all liabilities, obligations, and indebtedness
(including interest thereon) of Borrower to Bank pursuant to this Agreement
and every promissory note, security agreement, mortgage, and other
instrument or agreement executed at any time pursuant to it, all loans and
advances now or in the future made by Bank to Borrower and all other
liabilities, obligations, and indebtedness of Borrower to Bank, however and
whenever incurred or contracted, whether primary, secondary, direct,
contingent, sole, joint, or several, whether now due or to become due, and
whether now existing or later acquired, advanced, or contracted and includes
without limitation the Note.
"Lien" or "Liens" means any restriction on the use or transferability of
property and a claim or charge on any interest in property securing an
obligation owed to, or claimed by, a person other than the owner of the
property, whether the claim or charge exists by reason of statute (including
any federal, state, or local tax statute or ordinance), contract, or common
law, and includes a lien or security interest arising from a mortgage,
indenture, security agreement, encumbrance, pledge, hypothecation,
conditional sale, trust receipt, or collateral assignment and a lease,
bailment, or consignment for security purposes.
"Loan" means both the Construction Loan and the Term Loan (or the
disbursements under the Note) to be made by Bank to Borrower pursuant to
this Agreement.
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<PAGE> 9
"Loan Documents" means jointly and severally this Agreement and the
documents described in attached Exhibit "B," together with each other
document, agreement, or instrument required or executed in connection with
this Agreement.
"Mortgage" means the mortgage in form and substance satisfactory to Bank to
be executed by Borrower in favor of Bank, granting to Bank a first-priority
Lien on the Property.
"Note" means the $9,600,000 Real Estate Promissory Note in form and
substance satisfactory to Bank to be executed by Borrower in favor of Bank.
"Notice of Commencement" means a notice of commencement prepared and filed
by or on behalf of Borrower in the Public Records of Hillsborough County,
Florida, in accordance with Section 713.13(2), Florida Statutes (1995),
relating to the new Improvements to be constructed on the Land.
"Permitted Encumbrances" means the encumbrances affecting the Property and
expressly approved in writing by Bank, including those set forth in
Mortgagee Title Commitment No. 10188110000025 issued by Borrower's Counsel,
as agent for Chicago Title Insurance Company.
"Person" means an individual, partnership, corporation, joint stock company,
firm, land trust, business trust, unincorporated organization, or other
business entity, or a government or agency or political subdivision thereof.
"Plan" means an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
"Plans" or "Plans and Specifications" means the plans and specifications
pertaining to the Construction of the Improvements and all related
documents.
"Project" means the construction of the new Improvements on the Land, and
refers jointly to the Land and the Improvements.
"Property" means the Land and all Improvements.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA.
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"Request for Advance" means a draw request in the form and substance
satisfactory to Bank.
"Security Documents" means the Note, Mortgage, and Guaranty executed by each
Guarantor, Hazardous Materials Certificate and Environmental Indemnity,
Assignment of Contract Rights, and UCC Financing Statements.
"Senior Debt" means all Debt of Borrower, excluding Subordinated Debt.
"Subordinated Debt" means (i) all the Debt of the Borrower owed to any
Affiliate that is not a Guarantor, all of which is fully subordinated to the
Loan (including principal, interest, and agreed charges) in a manner
satisfactory to the Bank (which may be either according to its terms or by
separate agreement) and which Debt arises from the Borrower's actual receipt
of cash and not from "in kind" or non-cash consideration, and (ii) all the
Debt of the Guarantor owed to the former shareholders of Borrower.
"Subsidiary" means any corporate entity or partnership, or other business
entity, controlling interest of which is owned by the Borrower.
"Tangible Net Worth" means the aggregate of the (a) par or stated value of
all outstanding capital stock; (b) capital surplus; and (c) retained
earnings; and (d) Subordinated Debt; less (t) amounts due from Affiliates
who are not Guarantors of the Loan, (u) any surplus resulting from any
write-up of assets subsequent to the date of this Agreement; (v) deferred
assets (excluding deferred income taxes, but including deferred development
costs other than prepaid insurance and prepaid taxes; (w) goodwill or other
amounts representing the excess of the purchase price of assets or stock
over the value assigned to them on the books of such Person; (x) the book
value of any patents, trademarks, trade names, copyrights, noncompete
agreements, franchises, experimental expenses, and other intangible assets;
(y) the amount paid for any treasury stock reflected as a reduction of the
capital surplus or retained earnings accounts; and (z) any other amounts
classified as intangible assets under GAAP. Notwithstanding subsection (t),
Bank may, in its sole discretion, include in Tangible Net Worth
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<PAGE> 11
amounts due from Affiliates that are evidenced by a promissory note and in
its judgment adequately secured by collateral and the general credit of the
Affiliate.
"Term Loan" means the term loan being made upon completion of construction
of the Improvements, compliance with all conditions precedent contained in
this Agreement, and conversion of the Construction Loan to a term loan with
a maturity date of ten years from the loan closing date.
"Unavoidable Delays" means the delays due to strikes, blackouts, acts of
God, governmental restrictions, failure or inability to secure materials or
labor by reason of priority or similar regulation or order of any
governmental or regulatory body, enemy action, civil disturbance, fire, or
any other act beyond the reasonable control of Borrower.
2. FORM AND INTERPRETATION. Words of the masculine gender are to be construed
to include correlative words of the feminine and neuter genders, and words of
the neuter gender are to be construed to include correlative words of the
masculine and feminine genders. Words in the singular number include words of
the plural number, and words in the plural number include words of the singular
number. The word "Person" includes a trust, corporation, partnership, joint
venture, association, unincorporated organization, public body, government, and
any governmental agency or department, as well as a natural person. Accounting
terms used, but not otherwise defined, in this Agreement will have the meanings
given to them under, and are to be construed in accordance with, Generally
Accepted Accounting Principles. Whenever possible, each provision of this
Agreement is to be construed and interpreted so that it is valid and enforceable
under applicable law. The words "including" or "includes" are not limiting. The
word "or" is not exclusive. The parties intend for this Agreement to be governed
by and construed in accordance with the laws of the State of Florida.
3. THE LOAN, FEES, SECURITY, GUARANTY AND MISCELLANEOUS PROVISIONS. Subject to
the terms and conditions of this Agreement, Bank shall make the following Loans
to Borrower:
3.1 The Loan. When every condition specified in this Agreement has been
either satisfied or waived in writing by Bank, Borrower may borrow a principal
amount not to exceed $9,600,000 in accordance with the terms of this Agreement.
To evidence the Loans, Borrower shall execute, issue, and deliver to Bank the
Note payable to the order of Bank.
3.2 Loan Purpose. Borrower may use the Loan proceeds exclusively in
connection with the acquisition of the Land and
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the existing Improvements, the Construction of additional Improvements, and
related costs in a manner consistent with the Budget. The parties acknowledge
that a portion of the Land being acquired is currently leased to Borrower and is
being acquired through the exercise of a purchase option right in those leases.
3.3 Multiple Phase Construction Funding. The Construction Loan shall be
funded in two or more phases as follows:
A. On the initial Loan Closing Date, Bank shall fund up to $6,178,490.04
for the acquisition of the Land and existing Improvements as Phase I of the
Construction Loan funding. If on the Loan Closing Date Borrower is unable to
close the purchase of all of the four parcels of real property comprising the
Land, however, then the purchase of any parcel or parcels of real property that
are not purchased on the initial Loan Closing Date shall be purchased no later
than 15 business days following the initial Closing Date. In that event, on the
initial Closing Date, Borrower shall pay to Bank the sum of Eight Hundred Thirty
Thousand Two Hundred and Twenty-Eight and 04/100ths Dollars $830,228.04), which
sum Bank shall hold in the Escrow Account to be disbursed in accordance with the
Budget or, in the event all or part of the remaining portion of the Land is not
purchased within the 15-business day period provided above, Bank may apply all
or part of the $830,228.04 amount to reduce the total indebtedness of Borrower
to Bank. Also, if one or more parcels of the Land is purchased after the Loan
Closing Date as provided above, then the Security Documents shall initially
relate only to the portion of the Land purchased on the Closing Date, but shall
be extended by spreader agreement or other appropriate modification document
acceptable to Bank, in its sole discretion, to the remaining portion of the Land
on the date it is purchased by Borrower. The purchase of all parcels comprising
the Land shall be an absolute condition precedent to Phase II funding as
provided in Section 3.3(B). If all the Land is not purchased within 15 business
days following the Closing Date, then on that date, the Loan shall mature and
become immediately due and payable.
In addition to the foregoing requirements, within 45 days of the initial
Loan Closing Date, Borrower must provide to Bank evidence satisfactory to Bank,
in Bank's sole discretion, that all permits and approvals necessary for the
construction of the Improvements in accordance with the Plans and Specifications
approved by Bank have been properly obtained and must satisfy all other
post-closing requirements set forth in Section 5.26. Within 60 days following
the initial Loan Closing Date, Borrower must have (i) filed in the Public
Records of Hillsborough County, Florida, the Notice of Commencement, in form and
substance satisfactory to Bank, (ii) materially commenced site work on the Land
in preparation for the construction of the new Improvements, and (iii) used its
best efforts to obtain from or on behalf of each former shareholder
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of Borrower who is a creditor of Guarantor a signed subordination agreement, in
form and substance acceptable to Bank, subordinating to the Loan the
Guarantor's indebtedness to the former shareholders of Borrower. If the
requirement set forth as item (iii) of this paragraph relating to the
subordination of indebtedness is not satisfied within 60 days following the
Loan Closing Date, then Borrower shall pay to Bank on the 61st calendar day
following the Closing Date a fee of $10,000. On the Closing Date, Borrower
shall tender the $10,000 fee to Lender's Counsel, which shall hold that sum in
its non-interest bearing trust account until the earlier of (1) the date
Lender's Counsel receives notice that the required subordination agreement has
been delivered to Bank, in which case Lender's Counsel shall promptly refund
the $10,000 deposit to Borrower, or (2) the 61st calendar day after the Closing
Date, on which date Lender's Counsel shall remit the $10,000 deposit to Bank,
or (3) the date Lender's Counsel receives joint instructions from Bank and
Borrower to disburse the $10,000 deposit in accordance with those written
instructions, in which case Lender's Counsel shall promptly comply with those
instructions.
If any of the requirements set forth in the preceding paragraph other
than (iii) are not satisfied within the times provided, then, notwithstanding
any other provision of this Agreement, the remainder of the Construction Loan
will not be funded and the Phase I amount funded will convert to the Term Loan
in accordance with Sections 3.4-.7 of this Agreement as of August 1, 1996. In
that event, then upon conversion on August 1, 1996, to the Term Loan, the Bank
shall refund to Borrower the Escrow Account balance. Moreover, during the term
of the Term Loan, in addition to the amortized payments of principal and
interest otherwise due in accordance with this Agreement and the Note, Borrower
shall make an additional $100,000 principal payment annually on the Loan
anniversary date until the Term Loan has been repaid in full. Borrower
acknowledges that, as a further condition precedent to Phase II funding, unless
the amount was funded into the Escrow Account on the initial Loan Closing Date
in accordance with the first paragraph of subsection 3.3(A) (in which event
this requirement will not apply), Borrower must either provide evidence
acceptable to Bank that Borrower has paid (in addition to its original
$4,000,000 equity contribution made before the Closing Date) $830,228.04 in
"soft" construction costs, or deposit into the Escrow Account that amount to be
disbursed during the course of the Project for that purpose. Borrower also must
provide to Bank before Phase II funding lien waivers from all architects,
engineers, contractors, subcontractors, suppliers, and materialmen who, within
120 days before the funding date, have provided material or services to the
Property in connection with the design or construction of the Improvements.
Additionally, if, in the judgment of Bank's Consultant, the total estimated
Hard Construction Costs in the Budget exceed $3,900,000, then, as a condition
precedent to
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<PAGE> 14
Bank's approval of the Budget and Bank's obligation to fund Phase II of the
Loan, Bank may require Borrower to increase Borrower's equity as provided in
section 5.10 of this Agreement.
B. If the requirements set forth in subsection (A) above are satisfied
within the schedules provided above and all other prerequisites to disbursement
as set forth in this Agreement are satisfied, then, ten calendar days after the
last of the requirements is satisfied, Bank shall fund as Phase II of the
Construction Loan up to $3,900,000 for the purpose of financing Hard
Construction Costs in accordance with the Budget and Article 6 of this
Agreement.
3.4 Loan Conversion. The Conversion of the Construction Loan to the
Term Loan will occur provided that the Borrower is not in Default and if all
the following conditions have been fulfilled to Bank's satisfaction, in Bank's
sole discretion: (i) the construction of the Improvements has been completed in
accordance with the Plans and Specifications and a Certificate of Occupancy for
the Improvements has been issued by the local Governmental Authority with
jurisdiction; (ii) all the conditions precedent to the final disbursement of
Loan proceeds under the terms of the Loan Documents have been fully satisfied;
(iii) Bank has been furnished with an endorsement to Bank's title insurance
policy assuring Bank that all contractors, subcontractors, materialmen, and
suppliers working on the construction of the Improvements have been paid in
full and that the Property and the Improvements are free of all liens and
encumbrances other than those approved by Bank; (iv) the Improvements comply
with all applicable private restrictions and governmental requirements, codes,
and other standards, and may be utilized for their intended purposes; (v) there
has been no material adverse change in the financial condition of Borrower, or
any Guarantor. To exercise this option to convert the Construction Loan to the
Term Loan, Borrower must notify Bank in writing at least 30 days before the
maturity of the Construction Loan. Borrower's written notice must be
accompanied by a commitment fee in the amount of $24,000. Such fee shall be by
cashier's check or wire transfer.
3.5 Interest Rate.
A. Principal outstanding under the Construction Loan shall accrue
interest at a variable rate equal to one-half of one percent (1/2%) per annum
above the Bank's Base Rate, adjusted daily (the "Payment Rate").
The Payment Rate shall be calculated based on a year of 360 days, but
charged for the actual number of days elapsed.
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<PAGE> 15
B. Principal outstanding under the Term Loan shall accrue interest at
either of the following Payment Rates, at the Borrower's Option to be selected
on the date the loan converts from the Construction Loan to the Term Loan.
Option #1. a variable Payment Rate equal to one-half of one percent
(1/2%) per annum above Bank's "Base Rate," adjusted daily.
OR
Option #2. 275 basis points over the five year Treasury bill Rate
to be adjusted five years after the loan converts from the Construction Loan to
the Term Loan.
3.6 Term of the Loan. The term of the Construction Loan shall commence
on the Loan Closing Date and shall either convert to the Term Loan or mature
one year following the Loan Closing Date, unless the Construction Loan converts
on August 1, 1996, pursuant to subsection 3.3(A) of this Agreement. The
maturity date of the Term Loan will be ten years from the initial Loan Closing
Date.
3.7 Payment of the Loan. Principal and interest shall be payable as
follows:
A. Construction Loan. Interest accrued on the principal amount from
time to time outstanding at the Payment Rate shall be due and payable beginning
on the 1st day of the first full calendar month following the Closing Date, and
continuing on the same day of each calendar month thereafter, until the
maturity date of the Construction Loan, at which time, if the Construction Loan
has not been converted per the provisions outlined in this Agreement, all
indebtedness of Borrower to Bank (including, without limitation, all interest
accrued and all outstanding principal) shall be due and payable.
B. Term Loan. If the Borrower satisfies the requirements of section
3.4 and elects to convert the Construction Loan to the Term Loan, the amount of
principal and interest to be paid each month until the maturity date of the
Term Loan will be based on a 19-year amortization. The interest rate will be
determined at the date of conversion based on the interest option selected by
the Borrower.
3.8 Prepayment. Prepayment of the Loan, in full or in part, shall be
permitted at any time; provided, however, that the Borrower shall pay a
termination fee in the amount of (a) 1% of any amount prepaid within one year
from the Closing Date of the Construction Loan, (b) one-half percent (.5%) of
any amount prepaid during the second year following the Closing Date of the
Construction Loan, and (c) one-quarter percent
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<PAGE> 16
(.25%) of any amount prepaid during the third year following the Closing Date of
the Construction Loan.
3.9 Late Charges and Default Interest Rate. If any payment is not made
within ten days of the date when due, Borrower shall pay Bank a late charge
equal to 2% of the late payment. At Bank's sole option, in the event of a
failure by Borrower to make any payment within ten days of the date payment is
due, the Payment Rate shall be increased to the maximum interest rate allowed by
applicable law on the date the late payment was due (the "Default Rate"). The
Default Rate shall apply beginning on the date the late payment was due and
continuing until the payment is made or, in the event a Default is declared by
Bank, until all indebtedness of Borrower to Bank is fully paid.
3.10 Restriction on Secondary Financing and Sale of Property. Borrower's
rights under the Loan documents shall be personal as Bank has evaluated this
Loan and has agreed to make this Loan based on the unique qualifications of
Borrower both financial and otherwise. So long as this Agreement or any part of
the Loan is outstanding, the Property shall remain free and clear of all
encumbrances, liens, mortgages, security interests, and secondary financing,
except those that may be specifically set forth herein, or otherwise approved in
writing by Bank, which may be refused in Bank's sole discretion.
3.11 Loan Fees. In addition to the $24,000 Construction Loan commitment fee
Borrower paid to Bank on or before the Closing Date, Borrower shall pay Bank an
additional nonrefundable $24,000 commitment fee on the date of conversion from
the Construction Loan to the Term Loan.
3.12 Security for the Liabilities. To secure the punctual performance and
payment of all its Liabilities to Bank, Borrower shall execute the following in
favor of Bank on or before the Closing Date (subject to the provisions of
Section 3.3(A) relating to staged purchases of the Land):
A. Mortgage. A Real Estate Mortgage granting to Bank a perfected
first-priority security interest in the real property and fixtures described in
the Mortgage and located in Hillsborough County, Florida.
B. Collateral Assignment of Rents and Leases. The Collateral Assignment of
Rents and Leases granting to Bank a perfected first-priority security interest
in all rents and leases described in that document.
C. Collateral Assignment of Construction Contracts and Other Rights. A
Collateral Assignment of Construction Contracts granting to Bank a perfected
first-priority security
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<PAGE> 17
interest in all contract rights, general intangibles, and other rights and
interests described in the document.
D. Guaranty of Payment and Performance. A joint and several,
unlimited, continuing and unconditional guaranty of payment and performance of
the Loan and all other obligations of Borrower to Bank by each Guarantor
(together, the "Guaranty"). The Guaranty is not conditioned upon Bank first
proceeding against Borrower or any of the Collateral securing the Loan.
E. Hazardous Materials Certificate and Environmental Indemnity. A Hazardous
Materials Certificate and Environmental Indemnity executed by Borrower and
Guarantor, assuring Bank that the Property does not presently contain hazardous
materials or toxic substances and indemnifying Bank against all losses arising
as a result of the presence of hazardous materials or toxic substances in, on,
or under the Property, or emitted from the Property.
4. REPRESENTATIONS AND WARRANTIES. Borrower and Guarantors represent and
warrant to Bank as follows:
4.1 Organization and Authority. Borrower is a Florida corporation duly
organized and in good standing under the laws of the State of Florida and
authorized to do business in Florida. Guarantors are corporations duly organized
and in good standing under the laws of the State of Delaware. Borrower and
Guarantor have all requisite power and authority to execute, deliver, and
perform this Agreement and the Loan Documents, to borrow under this Agreement,
to own their assets and to conduct their businesses as now conducted, and
Borrower and Guarantor possess all governmental franchises, licenses, and
permits that are necessary to own or lease their assets and to carry on their
businesses as now conducted.
4.2 Validity. This Agreement and the Loan Documents when executed in favor
of and delivered to Bank will be effective, valid, and binding obligations of
Borrower and the other parties to them.
4.3 Financial Condition. The financial statements of Borrower and Guarantors
previously submitted to Bank fairly represent the financial condition of
Borrower and Guarantors as of the date of each report, and, since the date of
each financial statement, there has been no material adverse change in the
financial condition of Borrower or Guarantors.
4.4 Title to Property. Borrower has good and marketable title to all real
estate or interests in real estate owned by it and pledges as Collateral
for the Loan, subject to such imperfections of title that are accepted by Bank
in writing or that do not materially interfere with the continued use of the
real estate in the manner and for the purposes it is now used
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<PAGE> 18
and other contemplated uses. There is no Lien on any property owned by Borrower
and pledged as Collateral for the Loan, except (a) liens for taxes and
assessments of governmental authorities that are not yet due and for which
adequate reserves are reflected in Borrower's books of account and (b) security
interests granted in favor of Bank or authorized in writing by Bank. Borrower
has not filed any financing statements in any public office covering the
property pledged as Collateral in the Security Documents, except those allowed
by Bank in writing. Borrower warrants and covenants that it will not pledge the
Collateral to any Person other than Bank, that the Collateral will remain free
of all Liens except those permitted by this subparagraph or otherwise by Bank,
and that Borrower will defend the Collateral against the claims and demands of
all Persons at any time claiming an interest in the collateral except as set
forth in Mortgagee Title Commitment No. 10188110000025 issued by Borrower's
Counsel, as agent for Chicago Title Insurance Company.
4.5 Tax Liabilities. Except as disclosed in the financial statements
referred to in this Agreement: (a) Borrower and Guarantors have filed with the
appropriate taxing agencies all tax returns and reports that are required to be
filed as of the date of this Agreement; (b) all taxes that have become due and
payable with respect to the periods covered by the foregoing returns have been
fully paid; (c) no agreement for the extension of time or waiver of any statute
of limitations has been given or is in effect with respect to the assessment or
payment of any tax; (d) there is no unpaid tax deficiency that has been assessed
against Borrower or Guarantor by any taxing authority; and (e) all taxes that
have been assessed against Borrower or Guarantor have been fully paid or
adequate reserves for them are reflected in the financial statements furnished
to Bank, except for taxes that have accrued or been incurred as a result of
transactions in the ordinary course of business since the date of the financial
statements, which are not yet due and payable.
4.6 Litigation. There is no legal, administrative, or other proceeding that
is pending or known by Borrower or Guarantor to be threatened against Borrower
or Guarantor or any of Borrower's or Guarantor's property which might adversely
affect Borrower's ability to perform under this Agreement.
4.7 Materials for Construction. All materials delivered to the Land for the
purpose of being used in the construction of the Improvements shall be
considered annexed to the Land and shall become a part of the Land as if
actually incorporated in the Improvements and shall be subject, as against
Borrower and all parties acting or claiming under them, to the rights,
conditions and covenants to which the Land and Improvements are subject under
this Agreement and the Mortgage. Nothing in this Agreement is to be construed to
make Bank
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responsible for any loss, damage or injury to such materials nor for the payment
of the same.
4.8 Compliance With Applicable Laws. Neither Borrower nor Guarantor is
in default under in violation of any law or any decree, order, or judgment in
any court or Governmental Authority that is applicable to it or its properties
and business.
4.9 Agreements. Neither Borrower nor any Guarantor has been declared to be
in default in the performance, observance, or fulfillment of any obligation,
covenant, or condition contained in any agreement or instrument to which it is a
party. Neither Borrower nor Guarantor is a party to any agreement or instrument
that materially and adversely affects its present or proposed business, assets,
operations, or condition (financial or otherwise).
4.10 Third Party Approvals. The execution, delivery, and performance of this
Agreement and the other Loan Documents do not require the consent or approval of
any Person, except which has been obtained.
4.11 Accuracy of Statements. Neither this Agreement, any exhibit to it,
nor any certificate delivered pursuant to it by Borrower or Guarantor contains
or will contain an untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements in this Agreement or in
the exhibit or certificate, in light of the circumstances under which they were
made, not misleading. Borrower and Guarantor have disclosed to Bank all
material adverse facts concerning their respective assets, business, and
financial condition.
4.12 Violations of Judicial or Governmental Orders, Laws, Ordinances, or
Regulations. Borrower is not in violation and has no notice of a violation of
any court order or of any law, regulation, ordinance, rule, order, code, or
requirement of any Governmental Authority having jurisdiction over the Property.
4.13 Other Financing. Except for the Permitted Encumbrances, Borrower has
not received any other financing for the acquisition of the Land and existing
Improvements or the construction of the proposed Improvements.
4.14 Moratorium. There is no moratorium or like governmental order or
restriction now in effect with respect to the Property and, to the best of the
knowledge and information of Borrower, no moratorium or similar ordinance or
restriction is now contemplated.
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4.15 Environmental Regulations. All Environmental Regulations which are
applicable to the Property and the use thereof have been satisfied.
4.16 Condition of Land. The Property is not damaged as a result of any fire,
explosion, accident, flood or other casualty.
4.17 Labor and Materials. All labor and materials to be paid for from the
proceeds of the Loan must be employed or used solely for the project.
4.18 Commencement of Construction. No notice of commencement has been filed
of record with respect to the land or the improvements, and no construction has
been or will be performed on the Property, no materials have or will be
delivered to the Property and no other act or thing has been or will be done
with respect to the Property or the Improvements which could, under any
circumstances, give rise to any Lien, including a lien of a materialmen,
contractor, subcontractor, sub-subcontractor, or laborer, prior to the recording
of the Mortgage.
4.19 Reaffirmation of Representation and Warranties. Each Request for
Advance by Borrower (a) shall constitute a reaffirmation that the
representations and warranties by Borrower and Guarantor remain true and correct
as of the date of such Request for Advance, unless Bank is notified to the
contrary prior to the disbursement of the requested Advance, and (b) shall
constitute Borrower's representation and warranty that the information in any
certificate, statement, or document supplied in connection with the Request for
Advance is true and complete and does not omit a material fact.
4.20 Fixtures Related To Construction. During the term of this Agreement, no
bill of sale, chattel mortgage, security agreement, financing statement, or
other title retention agreement (except those executed in favor of Bank) has
been or will be executed by Borrower with respect to fixtures owned by Borrower
and used in conjunction with the construction, operation, or maintenance of the
Improvements. The foregoing shall not limit the purchase of fixtures by
Borrower.
4.21 Compliance With Declaration of Covenants, Conditions and Restrictions,
Etc. The proposed construction of the Improvements and use of the Property
complies with, and will continue to comply with throughout the term of the Loan,
every requirement and standard set forth in the Public Records of Hillsborough
County, Florida, affecting the Property, including any Declaration of Covenants
and Restrictions relating to the Property.
5. COVENANTS. From the date of this Agreement and so long as any of the
Liabilities remain unpaid, unless Bank consents
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otherwise in writing, Borrower shall comply and where indicated cause Guarantor
to comply fully with the following provisions:
5.1 Construction Contracts. Borrower shall permit no default under the terms
of the Construction Contracts, enforce all of the obligations of the parties to
the Construction Contracts, do no act that will relieve the parties to the
Construction Contracts of the obligation to construct the Improvements according
to the Plans and Specifications, and make no amendments (other than change
orders permitted by this Agreement) to the Construction Contracts without Bank's
prior written consent.
5.2 Investigation of Borrower and Guarantor. Borrower and Guarantor shall:
(a) give Bank full and unrestricted access from time to time during normal
business hours to Borrower's and Guarantor's business property, offices,
properties, books, records, and information; (b) permit Bank to make such
examination thereof, and conduct such other investigation as Bank considers
appropriate to determine and verify the business or condition (financial or
otherwise) of Borrower and Guarantor and to consummate the transactions
contemplated by this Agreement; and (c) furnish to Bank such additional
information with respect to the business and affairs of Borrower as Bank
reasonably requests from time to time.
5.3 Financial Statements and Periodic Reports. Borrower and Guarantor shall
keep true books, records, and accounts that completely, accurately, and fairly
reflect all dealings and transactions relating to their assets, business, and
activities and shall record all transactions in such manner as is necessary to
permit preparation of its financial statements in accordance with Generally
Accepted Accounting Principles ("GAAP") applied on a Consistent Basis. Borrower
shall furnish to Bank the following financial information:
A. Borrower will provide Bank within 30 days after the end of each calendar
quarter consolidated and consolidating operating financial statements of
Borrower and Guarantor as of the end of such quarter, all in reasonable detail
and satisfactory in scope to Bank and certified by the chief financial officer
of Borrower to have been prepared in accordance with GAAP, subject to changes
resulting from normal, recurring year-end adjustments;
B. Borrower will provide Bank within 90 days after the end of each fiscal
year, consolidated and consolidating financial statements of Borrower and
Guarantor as at the end of such fiscal year, setting forth, in each case,
comparative form figures for the corresponding period in the preceding fiscal
year, all in reasonable detail and satisfactory in scope to Bank and prepared in
accordance with GAAP, certified by and containing an unqualified opinion of
independent Certi-
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<PAGE> 22
fied Public Accountants selected by Borrower and each Guarantor and satisfactory
to Bank, and together with such statements, a certificate from such Accountants
to the effect that in making their examination they obtained no knowledge of any
default of the Borrower or any Guarantor in the fulfillment of any provision of
this Agreement pertaining to financial or accounting matters, or any event which
after notice or the lapse of time, or both, would constitute a default of any
provision pertaining to financial or accounting matters, or any statement
specifying the nature and period of existence of any such default;
C. Together with each delivery of the items required by above, Borrower
will deliver to Bank a certificate executed by the chief financial officer of
Borrower, stating that to the best of the officer's knowledge (i) Borrower has
performed every agreement binding on it contained in the Loan Documents and is
not at the time in default of any of the provisions thereof, and (ii) no event
of default has occurred; and
D. With reasonable promptness, Borrower will deliver to Bank such
additional financial or other data as Bank may request.
5.4 Financial Covenants. During the term of the Loan, Borrower (based upon
Consolidated financial statements of Borrower and Guarantor) shall maintain:
(a) a ratio of Senior Debt to Tangible Net Worth of not more than three to one;
(b) Debt Service Coverage of not less than 1.10 to 1; (c) Fixed Charge Coverage
of not less than 1.10 to 1; and (d) Tangible Net Worth of $15,500,000 during
the period from April 1, 1996, through September 27, 1996; $18,000,000 during
the period from September 28, 1996, through September 26, 1997; $22,000,000
during the period from September 27, 1997, through October 2, 1998; and
increasing $4,000,000 at each fiscal year end, through the balance of the term
of the Loan. Each of these Fixed Charge and Debt Service Coverage Ratios will
be measured as of the end of each fiscal quarter based on the preceding 12
months. Minimum Tangible Net Worth and Senior Debt to Tangible Net Worth
covenants will be measured monthly.
5.5 No Transfer of Property; Creation of Subsidiaries. The Property or any
part thereof shall not be sold, leased, conveyed, mortgaged or encumbered in
any way, and neither Borrower nor any Guarantor shall create any subsidiary,
without the prior written consent of Bank.
5.6 Payment of Indebtedness, Taxes, and Other Obligations. Borrower shall:
(a) promptly perform and pay all of its liabilities, obligations, and
indebtedness in normal terms; and (b) promptly pay and discharge when due all
taxes, assessments, and other governmental charges or levies imposed on it or
its income, profits, property, or business, as well
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as all lawful claims for labor, material and supplies. However, any tax,
assessment, charge, levy, or claim need not be paid if the validity of it is
being contested in good faith by appropriate steps and if Borrower has made
adequate reserves on its books with respect to it.
5.7 Notices. Borrower and Guarantor promptly shall notify Bank of: (a) the
acceleration of the maturity of any indebtedness of Borrower or Guarantor; (b) a
default in the performance of, or compliance with, a term of any instrument
evidencing any liability, obligation, or indebtedness of Borrower or Guarantor;
(c) any litigation that is pending or known to be threatened against Borrower or
Guarantor and that might involve a claim for damages or a request for injunctive
or other relief that, if granted, might materially and adversely affect the
business, operations, properties, prospects, or condition (financial or
otherwise) of Borrower or Guarantor; and (d) a change in either the name or the
principal place of business of Borrower or Guarantor (or home address of each
individual Guarantor) or the office where its books and records are kept.
5.8 Insurance. Borrower shall keep the Collateral adequately insured at all
times by financially sound and reputable insurers (having a current Best's
rating of at least "A" according to the most current edition of Best's Key
Rating Guide). In particular, Borrower shall obtain, maintain, and prepay all
including, but insurance policies reasonably required by Bank, not limited to
the types of insurance listed below, in amounts satisfactory to Bank and
sufficient to avoid the application of any coinsurance provisions, issued by
underwriters approved by Bank. Upon Bank's request, Borrower shall deliver to
Bank the originals of all required policies and receipts evidencing payment of
all premiums. At minimum, Borrower shall obtain or cause to be obtained the
following insurance:
A. Builder's Risk Insurance. During the Construction Loan term, Borrower
shall maintain builder's risk insurance in form and substance approved by Bank
with a policy limitation of not less than 100% of the full insurable completed
value of the proposed Improvements. The builder's risk policy must insure
against such perils as are typically insured under an "all risk" builder's risk
policy in the State of Florida, including, but not limited to, sinkhole
coverage, wind damage coverage, and, if the Property is located in a flood-prone
area, flood insurance in an amount equal to the lesser of the full replacement
cost of the full insurable value of all existing and proposed Improvements
(including foundations) or the maximum amount of flood insurance available. The
builder's risk policy shall include a standard mortgagee loss payee clause.
Additionally, the builder's risk policy shall not include a deductible greater
than $5,000 or any other coinsurance feature. Upon conversion to the Term Loan,
the builder's
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<PAGE> 24
risk insurance must be converted to a comparable Standard Form Insurance Policy
with an Extended Coverage Endorsement.
B. Hazard Insurance. At all times during the term of the Loan, Borrower
shall keep all completed Improvements insured against loss or damage by fire,
windstorm, lightning, and other perils that are customarily insured under an
"extended coverage" insurance policy or is reasonably requested by Bank, in the
full insurable value of the completed Improvements (or such lesser amount as the
Bank authorizes in writing). The policy must contain a standard mortgagee loss
payee clause in favor of the bank.
C. Comprehensive General Liability Insurance. Borrower, at all times during
the term of the Loan, and General Contractor, during the term of the
construction Loan, shall obtain and maintain commercial general liability in
form and substance approved by Bank, which insurance policies shall name Bank as
additional insured.
D. Statutory Workers' Compensation Insurance. At all times during the term
of the Loan, Borrower and the General Contractor shall obtain and maintain
adequate Workers' Compensation coverage for their respective employees,
including Employer's Liability Coverage, meeting or exceeding the requirements
of the Workers' Compensation laws of the State of Florida with a limit of
liability of not less than $1,000,000.
E. Business Interruption Insurance. On the Closing Date, Borrower shall
provide to Bank a certificate confirming that it has obtained, and Borrower
thereafter shall maintain business interruption, and loss of income
(and loss of rental income if the Property is leased) insurance against loss of
income by reason of any hazard covered by the "all risk" casualty insurance
policy, in form and substance acceptable to Bank, in an amount not less than
100% of the Estimated Gross Earnings generated by the Borrower during an average
historical three-month period, as approved by Bank. This coverage shall be
updated and adjusted upon substantial completion of the Project. Although Bank
shall be named as loss payee, Bank acknowledges that so long as the Borrower
owes Senior Debt to Fleet Capital Corporation, a Connecticut corporation
("Fleet"), Bank shall be junior to Fleet as loss payee under the Borrower's
business interruption insurance policy.
In the event any insurance required to be in force under this Agreement is
provided for in an umbrella policy covering the Borrower, the Borrower shall
furnish a certificate setting forth the applicable insurance coverage under this
Agreement, plus a certified copy of the umbrella insurance policy.
All insurance policies required in this Agreement shall contain an agreement
by the insured to notify Bank in writing at least 30 days prior to the
cancellation of such policy.
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Borrower shall pay all charges and premiums for the renewal and maintenance of
all insurance. If Borrower fails to pay any premiums or other charges to renew
or maintain the insurance required by this section, the Bank may, but is not
required to, do so for the protection of Bank, and the Borrower will pay all
premiums thereon promptly upon demand by the Bank, and until such payment is
made by the Borrower, the amount of all such premiums together with interest at
the Default Rate, will be deemed to be a part of the indebtedness secured by the
Security Documents.
5.9 Insurance Proceeds and Condemnation Awards. So long as there exists any
indebtedness to Bank, all insurance proceeds and condemnation awards shall be
paid directly to Bank for application to the restoration of the Improvements
located on the Property or for payment of the Loan, whether or not then due, all
as Bank, in its sole discretion, may deem appropriate. Notwithstanding the
foregoing, provided that no default has occurred under the Loan Documents, and
provided that Borrower provides such additional reasonable assurances as Bank
may require in the Loan Documents, Bank agrees to make the net proceeds of
insurance or condemnation available to Borrower for restoration of the
Improvements located on the Property. In the event that Bank elects to or is
required under the terms of the Loan Documents to disburse the net proceeds of
insurance or condemnation to Borrower for the restoration of the Improvements,
the Loan Documents will provide that Borrower's use of such funds shall be
conditioned upon such terms and conditions as Bank may reasonably establish.
5.10 Additional Equity Contributions. If during the term of the
Construction Loan Bank determines, in its sole discretion, that the total of all
line items in the Budget, including, without limitation, all Hard Construction
Costs and "soft" costs and expenses of the acquisition of the Property and the
design, permitting, and construction of the Improvements, will exceed the sum of
Borrower's equity in the Property and the Loan amount, then Bank may require
Borrower to immediately deposit the shortfall with the Bank, until Bank
determines, in Bank's sole discretion, the remaining undisbursed portion of the
Loan proceeds will be sufficient to fund the remaining costs and expenses of
construction of the Improvements as set forth in the Budget. The funds paid by
Borrower pursuant to this section shall be disbursed in accordance with the
Budget and the terms and conditions of this Agreement. Any remaining funds
available to be drawn under the Loan shall be paid to Borrower on the Completion
Date.
5.11 Commencement of Construction. Borrower shall commence construction of
the Improvements within 60 days after the Closing Date and all conditions
precedent to commencement of construction set forth herein have been satisfied
and diligently pursued to completion. Borrower shall continuously construct the
Improvements and substantially complete the
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Improvements within 365 days after the Loan Closing Date (a) in accordance with
the Plans; (b) in accordance with existing zoning ordinances or existing
variances and in compliance with all building and use restrictions applicable to
the Project and all other applicable laws, rules, permits, ordinances,
regulations or restrictive covenants or requirements of Governmental
Authorities; and (c) free and clear of all Liens other than those that Bank has
expressly accepted in writing.
5.12 Inspection of Construction. Borrower shall permit Bank, Bank's
Consultant, or any interested Governmental Authority to enter upon the Property
at any reasonable time and from time to time to inspect the same and all
materials used in the Project or stored on the Property and examine and copy:
(a) all Plans, shop drawings and work details which are or may be kept on the
Property; (b) all of the Borrower's books, records and accounts relating to work
contracted for and materials ordered and received and all disbursements and
accounts payable in connection with the Improvements; (c) certificates and
reports of inspecting architects, engineers and public officials; and (d) all
subcontracts, bills, bank accounts and records pertaining to same, and papers
pertaining to the Improvements.
5.13 Periodic Environmental Audits of Property. Bank may periodically
request, but no more frequently than once every five years, that Borrower obtain
at its sole cost an updated Phase I Environmental Assessment of the Property.
The updated environmental audit shall be prepared in accordance with Bank's
written instructions and shall be performed by professional
engineer/environmental audit firm or consultant selected by Bank. If the updated
environmental audit indicates the presence of hazardous materials or other toxic
substances in, on, or under the Property, Bank may be entitled to declare a
default under this Agreement, at its sole option. However, Bank shall not
declare a Default so long as Borrower promptly initiates within 30 days
following notice from Bank such assessment and remediation efforts as Bank
reasonably deems appropriate to eliminate the hazardous materials or toxic
substances from the site and diligently pursues those efforts until the problem
is remedied to Bank's satisfaction.
5.14 Appraisal Updates. Upon request of Bank, Borrower shall obtain at its
sole cost an updated appraisal of the Property on the fifth anniversary of the
conversion of the Construction Loan to the Term Loan. The Loan to Value Ratio
may not exceed 75%. If the updated appraisal indicates the Loan to Value Ratio
exceeds 75%, then the Borrower will make the applicable principal paydown
necessary to bring the Loan into margin.
5.15 Bank Consultants. Borrower shall pay all costs associated with
services of each consultant (including, without
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limitation, Bank's Consultant) hired or consulted by Bank in connection with the
Project or this Agreement, including, without limitation, fees charged for
certification of estimated construction costs, review of plans, specifications
and soil tests and approval of each Advance.
5.16 Leases of the Improvements or Property. Submit to Bank for its review
and approval copies of all proposed leases of the Improvements or the Property,
if any.
5.17 Compliance with Construction Lien Law. Borrower shall notify Bank
immediately and in any event within five days of receipt of any and all notices
to owner as that term is defined in chapter 713 of the Florida Statutes, and
shall comply with all provisions of the Florida construction lien law, including
but not limited to payment and notice provisions. Borrower shall save and hold
the Bank harmless from the claims of any construction liens or equitable liens
and pay promptly upon demand any loss or losses that Bank may incur as a result
of the filing of any such liens, including reasonable attorneys' fees and
expenses. Borrower may, to the extent permitted by law, agree at its sole cost
and expense to have any construction liens or equitable liens that are filed
against the Project or undisbursed funds of the Loan released or transferred to
a bond within 15 days after the claim of lien is filed or the lien is perfected
whichever is first. Bank shall have no obligation to make any Advance while any
such lien remains outstanding against the Premises. If Borrower fails, after
demand, to cause any such lien or liens to be released or bonded, Bank may take
such steps as it deems necessary, and any funds expended shall be charged to the
Loan and shall bear interest as provided by the Note. Borrower hereby authorizes
Bank to demand on Borrower's behalf a statement of account as described in
section 713.16(2) of the Florida Statutes of any potential lienor filing a
notice to owner. It is specifically understood and agreed, however, that Bank's
rights to request such statements of account will not impose any obligation on
Bank to use such authority. Borrower shall file a notice of commencement
conforming to the Florida construction lien law before commencing construction
of the Improvements.
5.18 Materials, Fixtures, Etc. Borrower shall not use or permit the use of
any materials, furnishings, fixtures or equipment intended to become a part of
the Improvements that are under lease or have been purchased upon a conditional
bill of sale or to which the Borrower does not have absolute and unencumbered
title.
5.19 Change to Plans. Borrower shall not make any single change to the
Plans involving in excess of $25,000 or which would cause the aggregate of all
prior changes that did not
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require approval to exceed $75,000 for all buildings without first obtaining
Bank's written approval of such change.
5.20 Other Financing. Borrower shall not obtain other financing in
connection with the Construction on the Project without the prior consent of
Bank.
5.21 Maintenance of Improvements. Borrower shall keep and maintain the
Improvements in good order and repair.
5.22 Impairment of Property. Borrower shall not allow to continue any
action that would result in any material impairment of the value of the Project.
5.23 Breach of Any Contract. Neither Borrower nor Guarantor shall commit
any act, suffer or permit any act to occur which in any manner gives rise to the
material breach of any term, covenant or condition on Borrower's part to be
performed under any material contract to which it is bound and results in the
declaration of default against Borrower or Guarantor.
5.24 Permitted Encumbrances and Prior Liens. Without Bank's prior written
consent, Borrower shall not amend, modify or permit to be modified or amended
any provision of any document evidencing or creating or affecting any of the
Permitted Encumbrances.
5.25 Subordinated Debt. All Debt owed by Borrower to any Guarantor is and
shall be deemed Subordinated Debt. However, Borrower may repay to Guarantor any
Subordinated Debt in accordance with its terms so long as neither Borrower nor
Guarantor is in default under the Agreement or any other Loan Document.
5.26 Post-Closing Requirements.
A. The Borrower commits to provide to Bank within 20 days following the
Loan Closing Date the following:
i. Contractor's Agreement. A photocopy of a complete, fully executed
AIA Contractor's Agreement between Borrower and the General Contractor for
the construction of the proposed Improvements, which must be in form and
substance acceptable to Bank.
ii. General Contractor's Joinder Letter. The original fully executed
joinder and consent letter in form and substance acceptable to Bank and
confirming, among other things, that, if Borrower defaults under the Loan
Documents, the General Contractor will, at Bank's request, continue to
perform for Bank the General Contractor's duties under the Construction
Agreement at no additional cost
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to Bank, provided Bank pays the contract price for all services the General
Contractor renders to Bank after Bank's request.
iii. Architect's and Engineer's Agreements. A photocopy of a complete,
fully executed AIA supervising Architect's Agreement between Borrower and
the Architect, and the AIA supervising Engineer's Agreement between
Borrower and the Engineer for the design and construction of the proposed
Improvements, which contracts must be in form and substance acceptable to
Bank. Among other things, it may be required by Bank, for a fixed fee based
upon the amount of the Construction Agreement, that these contracts require
the Architect and the Engineer to prepare the Plans and Specifications, to
assist Borrower in obtaining and maintaining all permits required in
connection with the construction of the proposed Improvements, and to
supervise the construction of the proposed Improvements.
iv. Architect's and Engineer's Joinder Letters. The original fully
executed joinder and consent letters, in form and substance acceptable to
Bank, executed by the Architect and the Engineer confirming, among other
things, that, if Borrower defaults under the Loan Documents, the Architect
and the Engineer will, at the Bank's request, continue to perform for Bank
their respective duties under their respective contracts, at no additional
cost to Bank, provided Bank pays Architect and Engineer the contract price
for all services they render to Bank after Bank's request. In addition, the
Architect and the Engineer shall agree that Bank may use the Plans and
Specifications for the proposed Improvements without additional charge,
should a default occur under the Loan Documents.
B. The Borrower commits to provide to Bank within 45 days following the
Loan Closing Date the following:
i. Site Plan. Confirmation acceptable to Bank that all Governmental
Authorities having jurisdiction over the Property and the construction of
the Improvements have approved the final site plan for the Project. Upon
approval of the site plan by Bank and Bank's Consultant, the site plan
shall not be modified without Bank's prior written approval.
ii. Final Plans and Specifications. Two complete sets of final Plans
and Specifications for the Improvements sealed by a licensed, qualified
Architect acceptable to Bank, and approved by Bor-
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rower, all Governmental Authorities having jurisdiction over the Property,
and the General Contractor. The final Plans and Specifications must include
detailed drawings and specifications for all architectural features,
structural components, mechanical, plumbing, electrical, sewer, and
stormwater drainage systems, site development plans, grading plans, paving
plans, tree removal plans, and landscaping plans, and must incorporate the
design and specification features suggested by the soils conditions
revealed in any soil tests required by Bank. Upon approval of the Bank's
Consultant, the final Plans and Specifications shall not be changed without
Bank's prior written approval.
iii. Zoning. Evidence satisfactory to Bank that the zoning
classification of the Property permits the construction of the Improvements
on the Property in accordance with the Plans and Specifications, as well as
the uses of the Property proposed by Borrower after the Improvements are
constructed.
iv. Access. Evidence satisfactory to Bank of pedestrian and vehicular
access from the Property to the adjacent public rights-of-way sufficient in
Bank's sole opinion to facilitate the construction of the Improvements and
to serve the uses of the Property proposed by Borrower after the
Improvements are complete.
v. Utilities. Evidence satisfactory to Bank of the availability and
sufficiency of all utilities and municipal services (including, without
limitation, electricity, potable water, sanitary sewer service, telephone
service, garbage pickup and disposal service, police and fire service, and
stormwater drainage) that are necessary or desirable in connection with the
construction of the Improvements and the uses of the Property proposed by
Borrower after the Improvements are complete. Borrower also shall provide
Bank with evidence satisfactory to Bank that the service lines and
equipment for all utilities and municipal services presently serving the
Property, or required in connection with the construction of the
Improvements or with the proposed use of the Property after the
Improvements are complete, are located in public rights-of-way adjacent to
and contiguous with the boundaries of the Property and have been or may be
connected to the service lines located within the Property without the
payment or any charge of fee other than the usual and customary
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hookup or connection fees to be allocated in the Budget and which are
charged to all customers of the utilities or municipal services suppliers.
vi. Permits. Complete copies of all building permits and all other
governmental permits, licenses, consents, and approvals required in
connection with the construction of the Improvements, including, without
limitation, excavation permits, dredge and fill permits, stormwater
drainage permits, land alteration or grading permits, demolition permits,
tree removal permits, and the building permit for the Improvements.
vii. Updated Professional Opinion Letters. Opinion in form and
substance acceptable to Bank from the Architect and Engineer stating, among
other things as may be required by Bank, that the Plans and Specifications
meet or exceed the minimum requirements set forth in all applicable
governmental laws, regulations, rules, ordinances, orders, and codes (such
as, by way of illustration but not limitation, all building codes, water
management district requirements, tree and landscaping ordinances,
environmental protection laws, development orders, insurance requirements
and fire codes, health and safety codes, and the like), and that
Improvements, if constructed substantially in accordance with the Plans and
Specifications, will comply with all such requirements.
viii. Facilities for the Disabled. Evidence satisfactory to Bank that
the Improvements will comply with all applicable governmental requirements
regarding access and facilities for handicapped or disabled persons,
including without limitation the Americans With Disabilities Act and
Sections 553.501 to 553.513, Florida Statutes (1995).
ix. Subcontracts. Complete, fully executed photocopies of the
following subcontracts: concrete, electrical, roofing, and plumbing
(collectively, the "Subcontracts") between General Contractor and
subcontractors that are acceptable to Bank, which Subcontracts must be in
form and substance acceptable to Bank.
x. Soil Conditions. Evidence in the form of a soils test report
and an opinion of a licensed Florida structural engineer or soils engineer
indicating that the soils will adequately support the Improvements and
making specific recommendations concerning the design and specification of
materials and for the construction of the Improvements in
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light of the soils condition on the Property and that no further soil tests
are necessary. Should the Architect's or Engineer's opinion indicate that
the soils are not sufficient to adequately support the Improvements or that
the Improvements will not meet or exceed all applicable governmental
requirements, Bank may, at its sole discretion, cancel its commitment to
fund Phase II of the Construction Loan. If Bank elects not to cancel this
Commitment, promptly upon Bank's written request and, in any event, within
60 days following the Loan Closing Date, Borrower shall promptly initiate
and complete to Bank's satisfaction, in Bank's sole discretion, any and
all corrective measures that Bank considers to be necessary or advisable
under the circumstances.
xi. Bonds. A Performance Bond and a satisfactory Unconditional Labor
and Material Payment Bond in an amount of not less than 100% of the
aggregate amount of the Construction Contract, including the amount of all
Subcontracts. The bonds must be issued by a surety company acceptable to
Bank, must be in form and substance acceptable to Bank, and must name Bank
as an additional obligee.
C. Additionally, in the event any lease applies to the Property during the
term of this Agreement, the Borrower shall promptly provide to Bank a photocopy
of the recorded notice complying with section 713.10(2) of the Florida Statutes,
notifying all contractors, subcontractors, suppliers, materialmen, and laborers
that all leases affecting the Property prohibit the attachment of tenant-related
construction liens.
5.27 Additional Assurances. As additional assurances, Borrower shall:
A. Construction. Furnish to Bank when available or upon request all
existing certificates of occupancy, initial boundary surveys, footing or
foundation surveys, "as-built" surveys, certificates, Plans and Specifications,
appraisals, title and other insurance policies, reports, endorsements, and
agreements, the names of all persons with whom Borrower has contracted or
intends to contract in connection with the construction of the Improvements,
schedules of all statements for labor and materials for the construction of the
Improvements, together with copies of all statements, copies of all budgets and
all budget revisions concerning the construction of the Improvements indicating
the funds required at any given time to complete the construction, and all other
documents required to be furnished to Bank under the Commitment.
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B. Preservation of Security. Upon Bank's request, execute and deliver to
Bank all instruments and to do all other acts necessary or desirable to preserve
and protect the Collateral securing or intended to secure the Loan.
C. Other Assurances. Do all other lawful and reasonable acts requested from
time to time by Bank to better assure the full realization of the intents and
purposes of this Agreement.
D. Construction Schedule. Furnish a construction progress schedule
including an estimate of each draw of construction funds.
E. Other Tests. Furnish Bank with copies of all other tests or reports
concerning the condition of the Land, the Improvements, or any of the materials
used in the construction of the Improvements which have been made or as Bank may
reasonably require, at Borrower's expense.
F. Certificate of Occupancy. Furnish, when available, a certificate of
occupancy and all other similar certificates required to be issued by any
governmental agency in connection with the construction of the Improvements.
G. Concrete Tests. Borrower shall retain an independent concrete design and
testing firm reasonably acceptable to Bank which shall not be any of the
contractors working on the Improvements to perform periodic tests upon the
concrete used in the Improvements at the times such concrete is poured. The
frequency of the concrete tests shall be in accordance with the recommendations
of the concrete testing firm under the circumstances and given the nature of the
Improvements, but shall, at a minimum, be made for every 50 cubic yards of
concrete poured. Borrower will cause the concrete testing firm to submit a copy
of each concrete test report to Bank at the time such reports are provided to
Borrower. Additionally, upon request, Borrower shall furnish Bank with an
engineers report on the condition of the concrete used in the construction of
the Improvements based upon the results of the periodic tests on the concrete.
H. Updated Surveys. Upon completion of the foundation of the Improvements,
Borrower shall provide Bank with an updated survey of the Property showing the
location of the foundation and its relationship to the boundaries of the
Property, and certifying to Bank as to the absence of any encroachments of any
improvements from, or onto, the Property, and as to the compliance of the
foundation with all private restrictions and all applicable building setback
requirements, zoning regulations, and other relevant restrictions, and otherwise
in the form required by Bank for the Closing Survey (the "Foundation Survey").
Further, upon completion of the Improvements, Borrower shall provide Bank with
an updated sur-
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vey of the Property showing the location of the completed Improvements
(including all parking areas, drives, walkways, curb cuts, stormwater drainage
facilities, and the like), certifying to Bank as to the absence of any
encroachments of the Improvements form, or of any other improvements onto, the
Property, and as to the compliance of the Improvements with all private
restrictions and all applicable building setback requirements, zoning
regulations, and other relevant restrictions, certifying to Bank the number of
completed parking spaces located on the Property, and otherwise in the form
required by Bank for the prior survey delivered to Bank at or before the Closing
Date (the "As-Built Survey").
5.28 Indemnification Regarding Taxes. Borrower agrees to pay when due any
and all state, local, and federal taxes now or later determined due in
connection with the Note, including without limitation all Florida documentary
stamp tax, intangible tax, or other excise and ad valorem taxes together with
any interest or penalty assessed if these taxes are not paid when due. If any
such tax is not paid when due, Bank, in its sole discretion, may pay any tax,
penalty, or interest assessed by any state, and Borrower shall immediately
reimburse Bank to the extent of such payment by Bank regardless of whether
Borrower contests the validity or applicability of any tax. Bank, however, in
that event may, in its sole discretion, contest the applicability or assessment
of any tax, and Borrower shall immediately repay Bank for all costs, including
attorneys' fees relating to any investigation, negotiation, challenge, or appeal
of any such assessment. Borrower agrees that any contest as to the validity or
legality of any such assessment, tax, levy, or other charge, interest, or
penalty shall be between Borrower and the appropriate state and that Borrower
shall first pay all amounts claimed due by the state before challenging the
applicability of the tax. Borrower agrees to indemnify and hold Bank harmless
from and against each and every loss and expense (including attorneys' fees and
costs) incurred by Bank in connection with the levy or assessment of any tax,
including documentary stamp, intangible, or other excise taxes (including any
penalty or interest relating to any such tax) and any challenge by Bank of the
assessment, validity, or applicability of any such tax.
5.29 ERISA Compliance. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to each Plan; (ii) promptly after the filing thereof, furnish to
Bank copies of an annual report required to be filed pursuant to ERISA in
connection with each Plan and any other employee benefit plan of it and its
Affiliates; (iii) notify Bank as soon as practicable of any Reportable Event and
of any additional act or condition arising in connection with any Plan which
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States district court of
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a trustee to administer the Plan; and (iv) furnish to Bank, promptly upon Bank's
request therefor, such additional information concerning any Plan or any other
such employee benefit plan as may be reasonably requested.
5.30 Limitation on Cash Capital Expenditures. During the term of the Loan,
the Borrower and Guarantor, collectively, shall not make during any fiscal year
of Borrower or Guarantor, respectively, more than an aggregate amount of
$1,500,000 in expenditures from cash or proceeds from a revolving line of credit
for the acquisition of any fixed assets or improvements, replacements,
substitutions, or additions thereto having a useful life of more than one year,
including the direct or indirect acquisition of such assets by way of increased
product or service charges, offset Items, or otherwise. The limitation set
forth in this section shall not apply to term loan or purchase money financing,
including without limitation the Loan.
6. METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS. So long as Borrower
is not in default, upon Borrower's satisfaction of all the conditions set forth
in this Agreement, Bank agrees to make disbursements to Borrower under the Note
up to the remaining principal amount of the Note in accordance with the Budget
and in accordance with this Agreement. The obligation of Bank to make Advances
under the Loan is subject to the following conditions precedent, which must be
satisfied unless waived in writing by Bank:
6.1 Method of Disbursement of Loan Proceeds. Borrower shall establish with
Bank a checking account for the construction of the Improvements. All Loan
Proceeds disbursed to Borrower shall be deposited in the account, and all
disbursements for construction of the proposed Improvements shall be made from
this account. In no event shall Borrower commingle Loan proceeds with any other
funds of Borrower.
6.2 Bank's Consultant. Bank will retain one or more Bank Consultants with
respect to the review and approval of the Plans and Specifications and all
change orders, the Budget, all permits, the Construction Contract, all
Subcontracts, the Payment and Performance Bond, the Architect's Contract, the
Engineer's Contract, all requests for Loan disbursements, the construction of
the proposed Improvements, and all other aspects of the construction of other
Improvements.
6.3 Recommendation By Bank's Consultant. Bank's obligation to make Loan
disbursements is absolutely conditioned upon the certifications of Bank's
Consultant that the proposed Improvements have been constructed in accordance
with the Plans and Specifications and applicable governmental requirements.
However, Bank's Consultant shall provide to Bank and
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Borrower in writing the reasons for declining to render this certification.
6.4 Request for Advance. To request a disbursement, subject to the
provisions of this Agreement, Borrower shall complete, execute, and deliver to
both Bank and Bank's Consultant a Request for Advance. The Request for Advance
must include the amount of funds requested, the date requested, and funding
instructions, and shall include a requisition of the Contractor on AIA Form
G-702 and Form G-703, approved by the Architect. All attachments to the Request
for Advance must be itemized in the body of the Request for Advance. In
addition, Borrower shall pay all Bank's costs (including all attorneys' fees,
other professional fees, and Bank Consultant's fees) incurred by Bank in
reviewing a Request for Advance.
6.5 Evidence Regarding Progress of Construction. Each Request for Advance
must include certificates and documents, in form and substance satisfactory to
Bank, from Borrower, Architect, Engineer, Contractor, and any other Persons
required by Bank, or including:
A. Certificates stating that: (1) the portion of the proposed Improvements
then completed has been constructed in a good and workmanlike manner and in
substantial compliance with the Plans and all applicable laws, ordinances, and
building codes; (2) the value of the construction completed at that time; (3)
sufficient work has been completed to warrant the Advance requested; (4) the
remaining undisbursed funds of the Loan are adequate to complete the proposed
Improvements; (5) all claims for labor and materials have been paid, and that
partial lien waivers executed by each subcontractor and supplier are attached;
(6) there are no liens outstanding against the Property except Banks lien and
inchoate liens for property taxes not yet due; (7) all governmental permits,
approvals, consents, and other authorizations required in connection with the
construction of the proposed Improvements have been obtained and are in full
force and effect (subject to no conditions or contingencies that have not been
fully satisfied); (8) all surety bonds required by Bank are in full force and
effect; (9) all funds previously disbursed by Bank have been applied in
accordance with the Budget; (10) all change orders requiring Bank's approval as
provided in this Agreement have been approved, and
B. Documents requested by Bank including the following:
i. all waivers, releases, and satisfactions showing that all
outstanding claims for labor and materials by the General Contractor,
subcontractors sub-subcontractors, materialmen, architects, engineers, and
laborers have been paid up to and through the date 30 days prior to the
date of the requested advance, and have been waived in writing,
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and that there are no Liens outstanding on the Project except those
expressly approved in writing by Bank;
ii. as applicable pursuant to Section 5.27(I), a current Foundation
Survey, showing the proposed or actual location of all the Improvements on
the Land and showing the location of the completed Improvements and stating
that they are within the building lines and in compliance with any
restrictions of record or ordinances;
iii. in addition to any other updated title insurance policy
endorsements Bank may require from time to time as a condition to each
disbursement of Loan Proceeds, Borrower shall provide Bank with an
endorsement to the title insurance policy delivered to Bank in connection
with the initial closing, updating the effective date of that policy,
assuring Bank that, as to all advances of Loan proceeds made by Bank
through the date of the endorsement, Bank's mortgage lien is a
first-priority lien, subject only to those matters acceptable to Bank, and
identifying as subordinate matters any claims or interests in the Property
or affecting Borrower's title to the Property arising since the effective
date of the last endorsement to the policy; and
iv. all other certificates, instruments, plans, reports, and
information that Bank reasonably requests.
Where the Request for Advance requests payment for items other than work
performed or materials furnished under the Construction Contract, the Request
for Advance shall also include an explanation of the purposes for which the
Advance is desired together with all applicable invoices.
6.6 Prohibited Conditions. Bank will not be obligated to disburse funds
(although Bank may, if it so desires in its sole discretion, advance funds) if
any of the following conditions exist:
A. Borrower has not fully complied with the terms, covenants, and
conditions set forth in the Loan Documents;
B. Bank, based upon the advice of Bank's Consultants or other advisors,
believes that the construction of the proposed Improvements cannot be completed
within 30 days after the time required by this Agreement (in which event, Bank's
Consultant must provide to Bank and Borrower in writing the reasons for that
belief);
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C. In Bank's sole opinion, the estimated remaining cost of
completing construction of any Budget line item in accordance with the
Plans and Specifications exceeds the undisbursed funds allocated to that
Budget line item, or the Budget is otherwise out of balance and Borrower
has not made arrangements satisfactory to Bank, in Bank's sole discretion,
to correct the deficiency via additional contributions to Project equity;
D. The Property is damaged by fire or other casualty and Bank has
not received insurance proceeds sufficient, in Bank's sole opinion, to
restore the Improvements to substantially the condition existing
immediately before the casualty, and Borrower has not made arrangements
satisfactory to Bank, in Bank's sole discretion, to both pay the
insufficiency in the insurance proceeds and to complete the construction of
the improvements on or before the completion date set forth in this
Agreement; however, Bank, at its option, may continue to fund required
interest payments so long as Borrower satisfies all other condition
precedent to each disbursement.
E. Any lien is filed against the Property (other than the lien of
the Mortgage) and is not satisfied or transferred to bond within 15 days as
permitted by Chapter 713 of the Florida Statutes.
F. A condemnation proceeding is threatened or commenced against all
or any portion of the Project.
G. Bank's Consultant refuses to approve any aspect of the Request
for Advance or the Improvements installed to date of the Request for
Advance and provides a written explanation documenting the reason for the
refusal.
6.7 Final Advance. Before the final advance is made at the completion
of all the Improvements, Borrower must provide to Bank at least ten days
prior to the final advance such additional information as it may reasonably
request. Without limiting the generality of the foregoing, Borrower shall
deliver to Bank the following in form and substance satisfactory to Bank
(in addition to the items required for each Request for Advance):
A. Certificates from the Architect, the General Contractor, and
Bank's Consultant, and other evidence satisfactory to Bank, in Bank's sole
discretion, that the Improvements on which the final advance is requested
are completed substantially consistent with the Plans and Specifications;
B. Certificates or opinions from the Architect, the General
Contractor, Bank's Consultant, or Borrower's Counsel, and other evidence
satisfactory to Bank, in Banks sole discretion, that the Improvements
comply with all applicable governmental requirements, including but not
limited to all permit
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requirements, zoning and land use regulations, and the then applicable
Construction Control Line laws and regulations, and the Florida Department
of Natural Resources and the Florida Department of Environmental Resource
dredge and fill, submerged sovereign land, mangrove, and wetlands laws and
regulations. This evidence shall include a photocopy of the final
certificate of occupancy;
C. Three sets of a satisfactory As-Built Survey certified by a
licensed Florida surveyor, including striping of parking areas, as
applicable, and a statement as to the number of parking spaces, a
satisfactory description of the boundary of the land, the areas of the Land
and of the Improvements, the locations and dimensions of any easements, and
the dimensions of the Improvements. The surveyor must certify to the Bank
and the title insurance underwriter that the Improvements are located on
the Land consistent with the Plans and Specifications and the existence or
non-existence of any encroachments from, or into, the Property;
D. Two sets of "as built" Plans and Specifications for the
Improvements, identified as such by Borrower, General Contractor, the
Engineer, and the Architect, including plans and specifications for
architectural, structural, mechanical, plumbing, electrical, site
development, stormwater drainage, utility lines, and landscaping;
E. An affidavit from the General Contractor and from all
subcontractors as required by Florida construction lien law, sufficient in
the opinion of Bank's counsel to dissolve any construction and
materialmen's liens (inchoate or otherwise) affecting title to the
Property. The Affidavit from the General Contractor must have attached to
it original final lien waivers executed by each subcontractor and supplier,
stating that all subcontractors, suppliers, and materialmen have been paid
in full;
F. All other materials required under this Agreement in connection
with a Request for Advance;
G. Bank's Consultant's written approval of the completed Improvement
in accordance with the Plans and Specifications and applicable governmental
requirements and written approval of Borrower's final Request for Advance;
H. Letter from Borrower stating that Borrower has inspected the
Improvements and is satisfied that they have been completed in accordance
with the Plans; accepts the work as completed in accordance with the Plans;
waives any claim or action against Bank (except that such waiver or
acceptance shall not be deemed a waiver of any claims against the General
Contractor, Architect, Engineer, or any subcontractor);
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I. General Contractor's affidavit required under section
713.06(3)(d) of the Florida Statutes;
J. If deemed appropriate by Bank and Bank's Legal Counsel, a
Borrower's Counsel final opinion, in form and substance acceptable to Bank,
confirming as of the date of the Final Advance the opinions rendered in the
Borrower's Counsel opinion letter delivered on the initial Closing Date;
and
K. Such other instruments, documents, and certificates as Bank may
reasonably request.
6.8 Representations and Warranties. At the time of each Advance, the
representatives and warranties set forth in this agreement just be true and
correct on and as of such time with the same effect as though the
representations and warranties had been made on and as of such time, except
to the extent that such representations and warranties expressly relate to
an earlier date.
6.9 Notice, Frequency, and Place of Disbursements. Borrower shall
submit a complete Request for Advance to Bank each month at least five
business days before the date the disbursement is required. Bank shall make
disbursements no more frequently than monthly.
6.10 Advances to General Contractor. If Borrower is in default under
this Agreement, at Bank's option, Bank may make any of all subsequent Loan
Advances directly to the General Contractor. Borrower's execution of this
Agreement constitutes an irrevocable authorization for Bank to make Loan
Advances directly to the General Contractor if Bank chooses to do so.
Borrower and Guarantor agree that all Loan Advances made to the General
Contractor shall constitute full performance of Bank's obligations to
Borrower under this Agreement and shall be secured by the Mortgage,
regardless of the General Contractor's disposition of the funds.
6.11 Advances to Title Insurance Company. If, for any reason, Bank
considers itself Insecure, at Bank's option, Bank may make any or all
subsequent Loan Advances through the title insurance company insuring the
lien of the Mortgage, and any Loan disbursement TO made shall be effective
as of the date it is received by the title insurance company. Borrower's
execution of this Agreement constitutes an irrevocable authorization for
Bank to make Loan Advances through the title insurance company. Borrower
agrees that all Loan disbursements made to the title insurance company
shall constitute full performance of Bank's obligations to Borrower under
this Agreement and shall be secured by the Mortgage, regardless of the
title insurance company's disposition of the funds.
6.12 Advances Do Not Constitute a Waiver. Banks decision to make a
Loan Advance shall not constitute a waiver of any of
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the provisions of this Agreement. If Borrower is in Default and Borrower is
unable to cure the Default, Bank's decision to make a Loan Advance shall
not preclude Bank from declaring Borrower in Default of this Agreement.
6.13 Retainage. Bank reserves the right to withhold and retain a
percentage of certain costs according to the following:
A. Construction Work. Advances may be made on the basis of 90% of
the value of work and material in place ("hard costs") on the
Improvements, minus the amount of previous disbursements and shall retain
the remaining 10%. After Borrower satisfies all conditions of this
Agreement, Bank shall release the funds held back with the final advance
for the building.
B. Non-Construction Items. Advance may be made for the caste of
non-construction ("soft costs") items on the basis of 100% of the amounts
of all approved invoices up to the amounts of such costs listed on the
Request for Advance to the extent the requested advance is consistent with
the Budget required in this Agreement.
C. Materials Stored On-Site. Bank is not obligated to make advances
for construction materials stored on-site until Bank's Consultant certifies
to Bank that such materials are incorporated into the improvements. Bank
will make Loan disbursements or construction materials properly stored on
the Property based upon photocopies of the paid invoices for such materials
provided that: (i) Bank's Consultant approves the invoices for all such
materials; (ii) Borrower provides Bank with evidence satisfactory to Bank
that Bank will have a first priority perfected lien and security interest
in such materials; (iii) Borrower provides Bank with evidence satisfactory
to Bank that all such materials are fully insured against all perils in an
amount equal to their full replacement value; (iv) Borrower and Contractor
certify to Bank that such material will be incorporated into the
improvements within 45 days after they are delivered to the Property; and
(v) Borrower provides Bank with such other assurances as Bank may require,
in Bank 'a sole discretion.
D. Materials Stored Off-Site. Bank is under no obligation to make
Advances based on materials not stored on the Property.
6.14 Approval of Documents and Proceedings. The validity of all
transactions contemplated by this Agreement, and the for and substance of
all agreements, certificates, instruments, and other documents required by
this Agreement to be delivered to Bank by Borrower must be satisfactory to
Bank and Bank's Counsel. Bank will not be obligated to disburse funds
under the Loans if in the sole discretion or opinion of Bank: (a) the
progress of the Project is not in compliance with the
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construction schedule or the Plans and Specification.; (b) the estimated
remaining caste of the Project in accordance with the plane exceeds the
remaining undisbursed portion of the Loan; (c) the actual or estimated coot
of the Project differs materially from that as shown on the Budget; (d) the
percentage of progress of the Project differ. materially from that as
shown on any request for an Advance; or (e) if the Improvements have been
damaged by fire or other casualty and Bank has not received sufficient
insurance proceeds to satisfactorily restore the Improvements and complete
the Project prior to the outside Completion Date in accordance with the
Plans.
7. DEFAULT. The occurrence of one or more of the following events
constitutes a Default under this Agreement and with respect to each of the
Loan Documents.
7.1 Nonpayment of Liabilities. The nonpayment within ten days of the
date due of any Installment of interest or principal under the Note when
due, whether at maturity, by acceleration, or otherwise, or a default after
the expiration of any applicable grace period in the payment of any other
Liability of Borrower or Guarantor to Bank.
7.2 Fees and Expenses. The nonpayment within ten days of the date
when due of any expense, fee, or charge provided for in this Agreement.
7.3 Other Defaults. Borrower or Guarantor fails to perform, keep, or
observe any covenant, agreement, or provision of the Note or of this
Agreement (other than those set forth in sections 7.1 and 7.2) or of any
certificate, agreement, instrument, mortgage, deed of trust, or report
executed in connection with the Loan, or if Borrower or Guarantor breaches
any representation or warranty contained in any Loan Document, and such
failure or breach continues for a period of 30 days, or if any warranty,
representation, or other statement made or furnished to Bank by or on
behalf of Borrower or any Guarantor or in any of the Loan Documents proves
to be false or misleading in any material respect when made or furnished.
7.4 Financial Difficulty. Borrower or Guarantor becoming involved in
financial difficulty as evidenced by one or more of the following events:
A. Borrower, Guarantor, or one or more shareholders of Borrower
owning in the aggregate a majority of Borrower's outstanding capital stock
becoming insolvent, as defined in any bankruptcy, insolvency, or other
debtor relief law, or filing a petition in bankruptcy or a petition seeking
a reorganization or an arrangement of creditors under any bankruptcy,
insolvency, or other debtor relief law, or Reeking to take advantage of any
bankruptcy, insolvency, or debtor relief law, or filing an answer admitting
or not contesting the material allegations of a petition filed against it
or him in such a
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proceeding, or the entry of an order for relief in any such proceeding, or
Borrower or Guarantor taking any action (formal or informal) leading to the
winding-up, dissolution or liquidation of Borrower, or Borrower or
Guarantor is discontinued as a going concern;
B. Borrower or Guarantor (i) making a general assignment for the
benefit of its or his creditors, (ii) admitting in writing its inability to
pay its or his debt. generally as they mature, (iii) seeking, consenting,
or acquiescing to the appointment of a trustee, receiver, liquidator, or
fiscal agent for all or a substantial part of its or his property, or (iv)
suffering the appointment without its or his consent or acquiescence of a
trustee, receiver, liquidator, or fiscal agent for all or a substantial
part of its property;
C. The assumption of custody or sequestration by a court of
competent Jurisdiction of all or a substantial part of the property of
Borrower or Guarantor; or
D. An attachment after judgment being made on all or a substantial
part of the property of Borrower or Guarantor.
7.5 Cancellation of Guaranty. Any Guarantor cancels, terminates, or
limits its guaranty of Borrower's obligations under this Agreement or the
Loans, or if any Guarantor defaults under or breaches the terms of its
Guaranty; or if any Guarantor is dissolved or transfers any material
portion of it. assets; or if any subordination agreement or commitment
relating to Subordinated Debt is cancelled, terminated, or breached.
7.6 Actions. If Borrower or any Guarantor shall be criminally
indicted or convicted under any law that could lead to a forfeiture of any
property of the Borrower or the Guarantor.
7.7 Collateral. If a creditor of Borrower other than Bank obtains
possession of any of the Collateral by any legal means.
7.8 Change in Control. If during the term of the Loan either Michael
Kagan or William Compton resign or are removed as executive officers of
Borrower or their percentage of ownership in Borrower or any Guarantor
declines.
7.9 Subordination Agreements. If a breach or default shall occur with
respect to any subordination agreement executed by any creditor of Borrower
(including any Affiliate), or if any such agreement shall otherwise
terminate or cease to have legal effect.
7.10 Other Documents. If a default or event of default or breach
occur under any Loan Document, or under or with
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respect to any of the Liabilities, or under any other note, evidence of
indebtedness, loan agreement, security agreement, guaranty, pledge,
mortgage, assignment, or security document executed by Borrower or
Guarantor and delivered to the Bank, then and in each and every such case,
Bank or the holder of the Note may at its option proceed to protect and
enforce its rights by suit in equity, action at law and/or the appropriate
proceeding either for specific performance of any covenant or condition
contained in the Note or in any Loan Document, and/or declare the unpaid
balance of the Loans and Note, together with all accrued interest to be
forthwith due and payable, and thereupon such balance shall become no due
and payable without presentation, protest, or further demand or notice of
any kind, all of which are hereby expressly waived. The Borrower agrees
that a default under any Loan Document shall constitute default with
respect to all Loan Documents and vice versa.
7.11 Final Judgment. The rendition during the term of the Loan of one
or more final judgments against Borrower or Guarantor for the payment of
money or damages in the aggregate amount of $250, 000 or more if the
judgment is not discharged or the issuance of a writ of execution or
similar process with respect to the judgment is not stayed within the time
allowed by law for filing notice of appeal of the judgment.
7.12 Issuance of Writ. The issuance of one or more writs of execution,
garnishment, levy, attachment, or similar process against Borrower or
Guarantor (whether or not pursuant to a final judgment) in connection with
one or more claims for the payment of money or damages in excess of
$250,000 in the aggregate, if the writ or writs are not stayed or vacated
within five days after the issuance of it.
7.13 Liens Imposed by Law. The violation of any law, or any act or
omission, by Borrower or Guarantor that results in the imposition of a Lien
by operation of law on the Property (or in the use of other property of
Borrower or Guarantor, a Lien with a claim for the payment of money or
damages in excess of $250,000), if the Lien is not discharged or bonded
within 15 days after it attached.
7.14 Dissolution. The dissolution of Borrower.
7.15 Delay in Construction. If, in the opinion of Bank, Borrower is
not proceeding continuously and diligently towards completion of the
Project, subject to Unavoidable Delays; or the Project is discontinued or
abandoned for a period of 15 days, unless the same is due to Unavoidable
Delays.
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7.16 Unauthorized Work. Borrower, without Bank's prior written
approval, undertakes work on the Property beyond the scope of the Plans.
7.17 Failure to Complete Construction. Borrower fails to complete the
Project in accordance with the Plans on or before the Completion Date.
7.18 Improper Materials. If any of the materials, fixtures or articles
used in the construction of the Improvements or the appurtenances thereto,
or to be used in the operation thereof, are not substantially in accordance
with the Plane as approved by Bank and are not replaced within 30 days
after notice of the defect from Bank or Bank's Consultant.
7.19 Cancellation of Building Permit. Borrower shall neglect, fail or
refuse to keep in full force and effect any building permit required in
connection with the Project or notice shall be given that any such permit
has been cancelled.
7.20 Destruction of Improvements. The Improvements shall be damaged or
destroyed by fire or other casualty and Bank shall determine that there is
reasonable doubt, by reason of such lost or damage or of delays in making
settlements with insurers, as to Borrower's ability to complete
Construction within 12 months after the Closing Date.
7.21 Condemnation of the Property. If a condemnation of any portion of
the Property occurs, is pending, or is threatened during the Construction
Loan period.
7.22 Execution of Additional Security Agreements. Borrower executes
any conditional bill of sale, security agreement or other security
instrument in favor of anyone other than Bank covering any materials,
fixtures, or articles intended to be incorporated in the Improvements or
the appurtenances thereto, or files or has filed against it a financing
statement publishing notice of such security instrument, or any of such
materials, fixtures or articles is not purchased so that the ownership
thereof will vest unconditionally in Borrower, free from encumbrances, on
delivery at the Project site, or Borrower does not produce to Bank upon
demand the contracts, bills of sale, statements, receipted vouchers or
agreements, or any of them, under which Borrower claims title to such
materials, fixtures and articles.
7.23 Encroachments and Permits. The Improvements encroach upon any
street or road setback or easement or upon any adjoining property or
violate any applicable governmental law, ordinance, regulation, rule, or
code, or any building permit is revoked, suspended, or lapse, and is not
reinstated
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within 15 days or, if any permit is conditional, Borrower falls to
punctually satisfy all the required conditions.
7.24 Adverse Change. Bank determines that a material adverse change
has occurred in the financial condition of Borrower or Guarantor since the
financial condition of Borrower or Guarantor wee most recently disclosed to
Bank; or the condition Of title to the Property is not satisfactory to Bank
for any reason other than the Permitted Encumbrances.
7.25 Default Under Other Obligations. The declaration against Borrower
of a default by Borrower of the terms and conditions of any Senior Debt
obligation to a third party that has not been cured or waived in accordance
with the Terms of those applicable loan documents and in any event within
30 days from the date of default shall constitute a default of the terms
and conditions of any obligation of Borrower to Bank. Upon such default,
Borrower's and any Guarantor's monies, securities, or other property
deposited with Bank shall be subject to Bank's right of setoff and shall be
immediately and irrevocably assigned to Bank to apply against any of
Borrower's obligations to Bank whether or not then due, in any manner Bank
deem appropriate.
8. REMEDIES. If a Default occurs, Bank may (but is not obligated to)
exercise the following remedies:
8.1 Acceleration. Bank may elect to make no further Advance. under
the Loan. In addition, Bank may declare the entire unpaid principal amount
of the Note and all interest accrued thereon to be, and the same thereupon
will become, immediately due and payable, and Bank also may proceed
otherwise to protect its rights as provided by applicable law. Borrower
shall pay all costs and expenses (including attorneys' fees and expenses)
incurred by Bank in connection with the collection of the Liabilities of
Borrower to Bank. No right, power, or remedy conferred on Bank by this
Agreement, or any instrument or agreement executed pursuant to it, is
exclusive of any other right, power, or remedy now or later available to
Bank at law or in equity.
8.2 Immediate Possession; Completion of Construction. Bank shall have
the right, but not the duty, in addition to the rights or remedies afforded
to Borrower under the Security Documents: (a) to enter on the Property and
take possession thereof, complete the Improvements, if they have not
already been completed, and take all action it deems necessary to protect
the Property, all at the risk, cost and expense of Borrower; (b) at any
time discontinue any work commenced in respect to the Improvements or
abandon the Improvements or change any course of action undertaken by it;
or (c) assume (but not be obligated to) any construction contract made by
Borrower in any way relating to the Improvements and take over and use all
or any part of the labor,
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material, supplies and equipment contracted for by Borrower whether or not
previously incorporated into the Improvements. In connection with any
construction undertaken by Bank pursuant to the provisions of this
subsection, Bank may: (i) employ builders, contractors, subcontractors,
architects, engineers, inspectors and others for the purpose of furnishing
labor, Materials and equipment in connection with the Improvements; (ii)
purchase all materials necessary or proper or convenient for completing the
Improvements; (iii) pay, settle, or compromise all bills or claim. that are
or may become liens against the Property, or any portion thereof, or which
have been or may be incurred in any manner in connection with the
completion of the improvement or for the discharge of liens or
encumbrances on, or defects in, the title of the Property, or any portion
thereof; (iv) execute all applications and certificates in the name of
Borrower which may be required by any construction contract; (v) institute
such legal or other proceedings, and defend such actions or proceeds, as
Bank shall deem appropriate in connection with the Property; and (vi) take,
delay in, or refrain from taking, such action hereunder as Bank may from
time to time determine.
8.3 Continuation of Advances to Complete Construction. If Bank
undertakes any of its rights in connection with the completion of the
Construction, Borrower agrees that Bank may continue to make Advances to
Persons other than Borrower that need not be in accord with this Agreement
in some manner and for such purposes as Bank deems advisable in order to
complete the Construction of the Improvements in accordance with the Plan.
or to protect Bank's security. Borrower and Guarantor shall be liable for
and shall repay Bank for all such Advances. All disbursements by Bank to
complete the Improvements are to be considered disbursements made to or on
behalf of the Borrower and will be secured by the Mortgage and guaranteed
by Guarantor.
9. MISCELLANEOUS.
9.1 Disbursement of Loan Proceeds is Bank's Only Responsibility. Bank
is not obliged to anyone to ascertain whether Borrower is using the Loan
proceeds to pay the costs of constructing the Improvements. Borrower is
solely responsible for paying for all labor and materials in connection
with the construction of the Improvements whether or not Bank disburses
Loan proceeds and whether or not the Loan proceeds are sufficient to pay
the costs of construction. Bank's sole obligation is to make Loan
disbursements. Borrower and Guarantor agree that they are responsible for
repaying all advances made by Bank under this Agreement even if any Advance
or Advances were made while there existed a Default under this Agreement or
for some other reason Bank was not obligated to make any Advance.
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9.2 No Partnership or Joint Venture. This Agreement does not create or
evidence the creation of a partnership or joint venture between Borrower and
Bank.
9.3 Complete Agreement and Modification. This Agreement contains the final,
complete, and exclusive expression of the understandings between the parties
regarding the transactions contemplated by it and supersedes any prior or
contemporaneous agreement or representation (including but not limited to any
commitment letter sent to and accepted by Borrower prior to this Agreement),
oral or written, by any of them. A waiver, amendment, or modification of this
Agreement will be valid and effective only if it is in writing and signed by
each party.
9.4 Non-waiver. Neither a failure nor a delay by Bank to exercise any
right, power, or privilege under this Agreement will operate as a waiver of this
Agreement, nor will any singular or partial exercise of any right, power, or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power, or privilege.
9.5 Titles and Headings. The titles and headings preceding the text of the
sections and subsections of this Agreement have been inserted solely for
convenience of reference and neither constitute a part of this Agreement nor
affect its meaning, interpretation, or effect.
9.6 Interest. No provision of this Agreement, the Loan Documents or any
other agreement between Borrower and Bank will require the payment or permit
interest in excess of the maximum rate of interest allowed by applicable law. If
any payment of interest or in the nature of interest would cause the foregoing
interest rate limitation to be exceeded then, at the payor's option, such excess
amount will either be credited as a payment of principal or returned to the
payor.
9.7 Rights of Third Parties. Bank makes no representations and assumes no
obligation. as to third parties concerning the quality of the Project by
Borrower of the Improvements or the absence of any defects. In this regard,
Borrower agrees to and shall indemnify Bank from any liability, claim or losses
resulting from the disbursement of the Loan or from the condition of the
Property whether related to the quality of the Project or otherwise and whether
arising during or after the term of the Loan. This subsection shall survive the
repayment of the Loans and shall continue in full force and effect so long as
the possibility of any liability, claim or loss exists.
9.8 Conflict with Loan Documents. The parties intend for the rights of Bank
and obligations of Borrower and Guarantor under the Loan Documents to be
supplemental and cumula-
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tive. However, in the event of an irreconcilable (considered in a manner most
favorable to Bank) conflict between any of the other Loan Documents and this
Agreement, the terms of this Agreement shall control and govern. Whenever
possible, the provisions of this Agreement shall be deemed supplemental to and
not in derogation of the other Loan Documents.
9.9 Indemnification. Without limiting any of the other provisions
contained in this Agreement or the Loan Documents, Borrower agrees to
indemnify and hold Bank harmless against and with respect to any and all
liability, deficiency, damage, coat or expense resulting from any
misrepresentations, material omission, breach of warranty or representation, or
the failure to fulfill any covenant or agreement on the part of Borrower under
or relating to this Agreement or the Loan Documents, and any and all actions,
suits, proceedings, demands, assessments, judgments, costs, legal and
accounting fees or other expenses incident to the indemnification of Borrower
pursuant to this subsection. The indemnity contemplated herein shall not apply
to loss or damage resulting from Bank's own willful misconduct or gross
negligence but shall apply to loss or damage resulting from Bank's negligence.
Additionally, Borrower shall indemnify, defend, at its own cost, and hold Bank
harmless from any action, proceedings or claim affecting the value of the Note
or any other instrument or document evidencing any of the Liabilities.
9.10 Assignment. Bank may assign its rights and obligations under this
Agreement and any other agreement between Bank and Borrower. Bank shall have the
right to participate the Loans with other lending institutions. The rights and
obligations of Borrower under this Agreement and the Loan Documents are not
assignable, and Borrower shall not assign this Agreement or the proceeds of the
Loan. Notwithstanding the foregoing, in the event Borrower makes an assignment
of this Agreement or the Loan Documents, Bank may, at Bank's option, continue to
make Advances hereunder to Borrower or Borrower's successors in interest in the
Property, and all sums so advanced shall be deemed Advances made pursuant to and
not in modification thereof and shall be evidenced and secured by Note and
Mortgage.
9.11 Costs and Expenses. Borrower shall pay directly or indemnify and
reimburse Bank promptly upon Bank's demand for all coats and expenses incurred
by Bank in connection with (a) negotiation and consummation of the Loan; (b)
administration, renewal, modification, extension, or replacement of the Loan or
any of the Loan Documents; (c) interpretation of the Loan Documents; (d)
enforcement or collection of the Loan or the enforcement of any the Bank's
rights or remedies under the Loan Documents or otherwise available under
applicable law; (e) protection of or preservation of any portion of Property, or
the protection of the existence of or priority
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of Bank's lien and security interest in the Property; and (f) the enforcement
and collection of any insurance claim or condemnation claim. Without limiting
the generality of the foregoing, Borrower shall pay fees and costs of Bank's
advisers, consultants, attorneys, legal assistants, and paralegals in all
negotiations and in all proceedings (including, without limitation, bankruptcy
and post-judgement collection proceedinga) whether or not suit is filed, and if
suit is filed, through all appeals. Borrower also will indemnify Bank against
and promptly pay to Bank upon Bank's demand all documentary stamp taxes,
intangible taxes, and other taxes (together with all penalties and interest)
charged or assessed against Bank in connection with the consummation of the Loan
or any modification, extension, renewal, consolidation, or replacement of the
Loan or any related Loan Documents, and any future advances made pursuant to
those documents.
9.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, other than the laws of that
state governing the resolution of conflicts with the laws of other
jurisdictions; provided, however, that if any of the Collateral shall be located
in any jurisdiction other than Florida, the laws of such jurisdiction shall
govern the method, manner, and procedure for foreclosure of Bank's lien upon
such Collateral and the enforcement of Bank's other remedies in respect of such
Collateral to the extent that the laws of such jurisdiction are different from
or inconsistent with the laws of Florida.
9.13 Venue and Jurisdiction. Borrower agrees that any legal action brought
by Bank to collect the Loan or any obligation or to assert any claim against
Borrower under any Loan Document, or any part thereof, may be brought in any
court in the State of Alabama having subject matter jurisdiction and that any
such court will have nonexclusive jurisdiction, waives its right to object to
any such action on grounds it is brought in the improper venue, and irrevocably
consents that any legal action or proceeding against it under, out of, or in any
manner relating to the Loan, the obligation, or any Loan Document may be brought
in the Circuit Court of Jefferson County, Alabama, or in any other Circuit Court
of the State of Alabama, or in the U.S. District Court for the Northern District
of Alabama. Any judicial proceeding by Borrower against Bank under any Loan
Document shall be brought only in one of the foregoing courts in Alabama.
Borrower, by the execution of this Agreement, expressly and irrevocably assents
and submits to the nonexclusive personal jurisdiction of any such court in any
such action or proceeding. Borrower consents to the service of process relating
to any such action or proceeding by mail to the address set forth in this
Agreement.
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9.14 Notices. Every notice, consent, demand, election, request, and other
communication required or permitted by this Agreement or by any agreement or
instrument executed pursuant to it, must be in writing and will be duly given
and effective on the earlier of its receipt or its deposit in a United States
postal service latter box for dispatch by first class, postage prepaid, United
States Mail and addressed by the sender to the proper party at the following
address:
(i) If to Bank:
SouthTrust Bank of Alabama, National Association
Post Office Box 2554
Birmingham, Alabama 35290
Attention: Asset-Based Lending Department
With copies to:
SouthTrust Bank of Alabama, National Association
201 North Franklin Street, Suite 2950
Tampa, Florida 33602
Attention: Sie Kamide, Vice President
and
Glenn Rasmussen & Fogarty, P.A.
Post Office Box 3333
Tampa, Florida 33601-3333
Attention: Robert W. Bivins
(ii) If to Borrower:
Tropical Sportswear International Corporation
4902 West Waters Avenue
Tampa, Florida 33634
Attention: Michael Kagan
With a copy to:
Smith, Williams & Bowles, P.A.
712 South Oregon Avenue
Tampa, Florida 33606-2543
Attention: Carole T. Kirkwood
or to such other address as the intended recipient may have designated by prior
written notice to the sender.
9.15 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND BANK HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SHUTOFF, DEMAND, ACTION, OR
CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR RELATING TO THIS
AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT
OR (B) IN ANY WAY CON-
-50-
<PAGE> 52
NECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE
PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE OTHER LOAN
DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH OR IN CONNECTION WITH THE TRANSACTIONS RELATED THERETO OR
CONTEMPLATED THEREBY OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND REMEDIES
THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. BORROWER AND BANK
AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY
COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT
BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/ By: /s/ Sharon L. Perdue
- ------------------------------ ------------------------------
Name: Name: Sharon L. Perdue
------------------------- -------------------------
Title:
/s/ ------------------------
- ------------------------------
Name:
-------------------------
ATTEST: [CORPORATE SEAL]
By: /s/
---------------------------
Name:
----------------------
Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
/s/ Robert W. Bivins By: /s/
- ------------------------------ ------------------------------
Name: Robert W. Bivins Name:
------------------------- -------------------------
Title:
/s/Carole T. Kirkwood ------------------------
- ------------------------------
Name: Carole T. Kirkwood
-------------------------
-51-
<PAGE> 53
FIRST AMENDMENT TO
CONSTRUCTION AND TERM LOAN AGREEMENT
This First Amendment to Construction and Term Loan Agreement (this
"Amendment") is executed by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation ("Borrower"), and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, a national banking association ("Bank"), to amend the Construction
and Term Loan Agreement executed by them on May 7, 1996 (the "Agreement").
1. Definitions. Unless otherwise expressly defined in this Amendment, all
terms used in this Amendment have the same meanings ascribed to them in the
Agreement, and the definitions of those terms contained in the Agreement are
incorporated by reference into this Amendment for all purposes.
2. Amendment to Section 3.3. Subsection 3.3(A) of the Agreement is
revised to increase each reference to the $830,228.04 escrow requirement set
forth in that subsection to $840,800.00.
3. Amendment to Section 5.26. The introductory phrase of Subsection 5.26(A)
of the Agreement is revised to extend to 34 days following the Loan Closing Date
the time period within which Borrower must deliver to Bank all documents listed
as items i-iv in that subsection.
4. Amendment to Budget. Exhibit "A" of the Agreement, which is defined in
Section 1 of the Agreement as the Budget for the Project, is replaced in its
entirety with attached Exhibit "A" of this Amendment.
5. Continued Effectiveness. Except as modified by this Amendment, the
Agreement continues in full force and effect in accordance with its terms, and
Borrower and Bank reserve all their respective rights and remedies under the
Agreement.
6. Complete Agreement. This Amendment contains the final, complete, and
exclusive expression of the understanding between the parties regarding the
modification of the Agreement described in this Amendment and supersedes any
prior or contemporaneous agreement or understanding regarding that subject, oral
or written, by either of them.
7. Execution. Borrower and Bank may execute this Amendment in counterparts.
Each executed counterpart will be considered an original document, and all
executed counterparts, together, will constitute the same agreement. This
Amendment
Page 1 of 3
<PAGE> 54
will become effective when each party has executed and delivered to the other
party a counterpart of it.
EXECUTED: June 7, 1996.
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/Billie Walker By: /s/Sharon L. Perdue
- -------------------------------- ------------------------------
Name: Billie Walker SHARON L. PERDUE
--------------------------- Senior Vice President
/s/
- --------------------------------
Name:
---------------------------
ATTEST: [CORPORATE SEAL]
By: /s/Michael Kagan
-----------------------------
Michael Kagan, Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
/s/Leanne Rutherford By: /s/Sie Kamide
- -------------------------------- ------------------------------
Name: Leanne Rutherford SIE KAMIDE
--------------------------- Vice President
/s/Lisa Millman
- --------------------------------
Name:
---------------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 7th day of June,
1996, by Sharon L. Perdue, as Senior Vice President of Tropical Sportswear
International Corporation, a Florida corporation, on behalf of the corporation,
who is personally known to me (or who has produced __________________ as
identification).
/s/Jane C. Marlow
My commission expires: 10/10/99 --------------------------------------
Name: Jane C. Marlow
---------------------------------
Notary Public, State of Florida
Commission No.
------------------------
[NOTARIAL SEAL]
JANE C MARLOW
My Commission CC500756
Expires Oct. 10, 1999
Page 2 of 3
<PAGE> 55
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 28th day of May,
1996, by Sie Kamide, as Vice President of SouthTrust Bank of Alabama, National
Association, a national banking association, on behalf of the association, who
is personally known to me.
/s/ Kathaleen Benke
My commission expires: --------------------------------------
Name:
KATHALEEN BENKE ---------------------------------
MY COMMISSION # CC 366041 Notary Public, State of Florida
EXPIRES: August 28, 1996 Commission No.
Bonded Thru Notary Public Underwriters ------------------------
[NOTARIAL SEAL]
Page 3 of 3
<PAGE> 56
5/22/96
PROPOSED CUTTING FACILITY EXHIBIT "A" 105,000 SQ. FT.
ESTIMATED COST - BUILDING & LAND
RFC X 1230 4/17/96 Rev. C
<TABLE>
<CAPTION>
Exist & New New Bldg. County, City, TSI
Building Construct State Direct Other
ITEM & Land & Engineer Impact Fees Bldg. Costs Costs
<S> <C> <C> <C> <C> <C>
Exercise Option, Parcel A $466,749.32
Exercise Option, Parcels B & C $4,550,807.00
Lease Reimburse, Parcels B & C $108,457.00
Refinancing fee, Parcels B & C $147,890.36
Purchase, Parcel D $715,847.33
$6,119,751.01
Building Construction (see attached) $3,456,763.00
Civil Engineer $28,000.00
Arch. & Structural $53,000.00
Building Inspection $15,000.00
Site Permit - SWFWMP $5,500.00
$3,558,263.00
Impact Rates
A. Building - County $137,970.00
@ 1314.00/thousand
B. Fire - County $1,660.00
@ 15.81/thousand
C. Sewage - County $7,648.00
@ 20 gal/emp = 40 emp
= 800 gals @ 9.56
D. Water - City - Fire Valve $30,000.00
New meter $7,856.00
Hook up $800.00
$185,934.00
TSI - Sub-Contractors
Signage $15,000.00
Ornamental Gates & Fence $39,371.00
Chain Link Fence 8 ft x 2200 ft
@ 14.50 $31,900.00
Vacuum System -
Security System $60,000.00
Outside Associates Break Areas $35,000.00
Wall Hung Storage Racks 200 L/FT -
Awnings $10,000.00
$191,271.00
Contractors Bond Cost $36,686.00
Change orders 10% $348,895.00
* Not including Bond Premium
TOTAL ALL $10,371,489.01
</TABLE>
<PAGE> 57
SECOND AMENDMENT TO
CONSTRUCTION AND TERM LOAN AGREEMENT
This Second Amendment to Construction and Term Loan Agreement (this
"Amendment") is executed by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation ("Borrower"), and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, a national banking association ("Bank"), to amend the construction
and Term Loan Agreement executed by them on May 7, 1996, as amended by the First
Amendment to Construction and Term Loan Agreement dated as of May 10, 1996 (as
amended, the "Agreement").
1. Definitions. Unless otherwise expressly defined in this Amendment, all
terms used in this Amendment have the same meanings ascribed to them in the
Agreement, and the definitions of those terms contained in the Agreement are
incorporated by reference into this Amendment for all purposes.
2. Amendment to Section 5.26. The introductory phrase of Subsection 5.26(A)
of the Agreement is revised to extend until July 17, 1996, the deadline for
Borrower to deliver to Bank all documents listed under subsection (B) (iii)
(zoning), (v) (utilities), (vi) (permits), (vii) (updated professional letters),
(viii) (facilities for the disabled), and (ix) (subcontracts) of that section.
3. Amendment to Section 3.3. Paragraph two of subsection 3.3(A) is amended
to extend until August 2, 1996, the deadline for either (i) Borrower to obtain
signed subordination agreements from each former shareholder or Borrower who is
a creditor of Guarantor, or (ii) Bank to receive the $10,000 payment
contemplator by that subsection.
4. Continued Effectiveness. Except as modified by this Amendment, the
Agreement continues in full force and effect in accordance with its terms, and
Borrower and Bank reserve all their respective rights and remedies under the
Agreement.
5. Complete Agreement. This Amendment contains the final, complete, and
exclusive expression of the understanding between the parties regarding the
modification of the Agreement described in this Amendment and supersedes any
prior or contemporaneous agreement or understanding regarding that subject, oral
or written, by either of them.
6. Execution. Borrower and Bank may execute this Amendment in counterparts.
Each executed counterpart will be considered an original document, and all
executed counterparts, together, will constitute the same agreement. This
Amendment
<PAGE> 58
will become effective when each party has executed and delivered to tile other
party a counterpart of it.
EXECUTED: July 2, 1996.
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/John R. Glance By:/s/Sharon L. Perdue
- -------------------------------- ------------------------------
Name:John R. Glance SHARON L. PERDUE
--------------------------- Senior Vice President
/s/
- --------------------------------
Name:
---------------------------
ATTEST: [CORPORATE SEAL]
By:/s/Michael Kagan
-----------------------------
Michael Kagan, Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
/s/Leanne Rutherford By:/s/Sie Kamide
- -------------------------------- ------------------------------
Name: Leanne Rutherford SIE KAMIDE
--------------------------- Vice President
/s/Lisa Millman
- --------------------------------
Name: Lisa Millman
---------------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 3rd day of July,
1996, by Sharon L. Purdue, as Senior Vice President of Tropical Sportswear
International Corporation, a Florida corporation, on behalf of the corporation,
who is personally known to me (or who has produced __________________ as
identification).
/s/Jane C. Marlow
--------------------------------
My commission expires: Name: Jane C. Marlow
---------------------------
Notary Public, State of Florida
Commission No.
-------------------
(NOTARIAL SEAL)
JANE C MARLOW
My Commission CC500756
Expires Oct. 10, 1999
-2-
<PAGE> 59
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this ___ day of July,
1996, by Sie Kamide, as Vice President of SouthTrust Bank of Alabama, National
Association, a national banking association, on behalf of the association, who
is personally known to me (or who has produced FL DL as identification).
/s/ Karrie J. Hargot
---------------------------------
My commission expires: Name:
----------------------------
Notary Public, State of Florida
Commission No.
-------------------
(NOTARIAL SEAL)
KARRIE J. HARGOT
MY COMMISSION # CC 465823
EXPIRES: May 21, 1989
Bonded Thru Notary Public Underwriters
-3-
<PAGE> 60
THIRD AMENDMENT TO
CONSTRUCTION AND TERM LOAN AGREEMENT
This Third Amendment to Construction and Term Loan Agreement (this
"Amendment") is executed by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation ("Borrower"), and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, a national banking association ("Bank"), to amend the Construction
and Term Loan Agreement executed by them on May 7, 1996, as amended by the First
Amendment to Construction and Term Loan Agreement dated as of May 10, 1996 (as
amended, the "Agreement"), and as further amended by the Second Amendment to
Construction and Term Loan Agreement dated as of July 2, 1996.
1. Definitions. Unless otherwise expressly defined in this Amendment, all
terms used in this Amendment have the same meanings ascribed to them in the
Agreement, and the definitions of those terms contained in the Agreement are
incorporated by reference into this Amendment for all purposes.
2. Amendment to Section 3.3. Paragraph two of subsection 3.3(A) is amended
to extend until October 31, 1996, the deadline for either (i) Borrower to obtain
signed subordination agreements from each former shareholder of Borrower who is
a creditor of Guarantor, or (ii) Bank to receive the $10,000 payment
contemplated by that subsection.
3. Continued Effectiveness. Except as modified by this Amendment, the
Agreement continues in full force and effect in accordance with its terms, and
Borrower and Bank reserve all their respective rights and remedies under the
Agreement.
4. Complete Agreement. This Amendment contains the final, complete, and
exclusive expression of the understanding between the parties regarding the
modification of the Agreement described in this Amendment and supersedes any
prior or contemporaneous agreement or understanding regarding that subject, oral
or written, by either of them.
5. Execution. Borrower and Bank may execute this Amendment in counterparts.
Each executed counterpart will be considered an original document, and all
executed counterparts, together, will constitute the same agreement. This
Amendment will become effective when each party has executed and delivered to
the other party a counterpart of it.
EXECUTED: September 30, 1996.
[signatures begin on next page]
<PAGE> 61
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/Phyllis Schainholtz By:/s/Sharon L. Perdue
- -------------------------------- ------------------------------
Name:PHYLLIS SCHAINHOLTZ SHARON L. PERDUE
--------------------------- Senior Vice President
/s/Billie Walker
- --------------------------------
Name:Billie Walker
---------------------------
ATTEST: [CORPORATE SEAL]
By:/s/Michael Kagan
-----------------------------
Michael Kagan, Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
/s/David S. Felman By:/s/Sie Kamide
- -------------------------------- ------------------------------
Name: David S. Felman SIE KAMIDE
--------------------------- Vice President
/s/Becky R. Jarrett
- --------------------------------
Name: Becky R. Jarrett
---------------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 30th day of
September, 1996, by Sharon L. Purdue, as Senior Vice President of Tropical
Sportswear International Corporation, a Florida corporation, on behalf of the
corporation, who is personally known to me.
/s/Jane C. Marlow
---------------------------------
My commission expires: Name: Jane C. Marlow
----------------------------
Notary Public, State of Florida
Commission No.
-------------------
(NOTARIAL SEAL)
JANE C MARLOW
My Commission CC500756
Expires Oct. 10, 1999
-2-
<PAGE> 62
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 7th day of
October, 1996, by Sie Kamide, as Vice President of SouthTrust Bank of Alabama,
National Association, a national banking association, on behalf of the
association, who is personally known to me.
/s/Becky Jarrett
---------------------------------
My commission expires: Name:Becky Jarrett
----------------------------
BECKY R. JARRETT Notary Public, State of Florida
MY COMMISSION # CC 29637 Commission No.
EXPIRES: June 22, 1997 -------------------
Bonded Thru Notary Public Underwriters
[NOTARIAL SEAL]
-3-
<PAGE> 63
FOURTH AMENDMENT TO
CONSTRUCTION AND TERM LOAN AGREEMENT
This Fourth Amendment to Construction and Term Loan Agreement (this
"Amendment") is executed by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation (the "Borrower"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION,
a national banking association formerly known as SouthTrust Bank of Alabama,
National Association (the "Bank"), to amend the Construction and Term Loan
Agreement executed by them on May 7, 1996, as amended by the First Amendment to
Construction and Term Loan Agreement dated as of May 10, 1996, as further
amended by the Second Amendment to Construction and Term Loan Agreement dated as
of July 2, 1996, and as further amended by the Third Amendment to Construction
and Term Loan Agreement dated as of September 30, 1996 (as amended, the
"Agreement").
BACKGROUND
On about May 7, 1996, the Borrower and the Bank executed the Agreement to
record the terms of their agreement concerning the $9.6 million Construction
Loan, which, at the election of the Borrower and upon the satisfaction of
certain terms and conditions stated in the Agreement, could be converted into
the Term Loan. Construction of the Project has been completed, and the Borrower
desires to (a) obtain from the Bank an increase in the outstanding loan amount
to $9.8 million and (b) convert the Construction Loan into a Term Loan as
generally contemplated by the Agreement, but subject to certain revised terms.
The Borrower and the Bank execute this Amendment to record their mutual
understandings regarding this future advance and conversion transaction.
1. DEFINITIONS. Unless otherwise expressly defined in this Amendment, all
terms used in this Amendment have the same meanings ascribed to them in the
Agreement, and the definitions of those terms contained in the Agreement are
incorporated by reference into this Amendment for all purposes.
2. AMENDMENT TO ARTICLE 1. The definition of "Note" contained in Article
1 of the Agreement is amended to read entirely as follows:
"Note" means the $9.8 million Renewal Consolidation Real Estate
Promissory Note executed by the Borrower in favor of the Bank,
renewing and consolidating the principal balance outstanding under (i)
the $9.6 million Renewal Real Estate Promissory Note and the (ii)
$200,000 Future Advance Promissory Note, each dated on about the date
of the Fourth Amendment to this Agreement. The $9.6 million Renewal
Real Estate Promissory Note referenced as (i) above renewed the
principal balance outstanding under the
<PAGE> 64
$9.6 million Real Estate Promissory Note dated May 7, 1996, executed
by the Borrower in favor of the Bank.
3. AMENDMENT TO SECTION 3.4. Section 3.4 of the Agreement is amended to
increase the amount of the Loan to $9.8 million. The increase shall be
documented as provided in the Modification of Mortgage executed by the Borrower
and the Bank and dated the same date as this Amendment.
4. LOAN CONVERSION. The parties acknowledge the conversion of the
Construction Loan into the Term Loan as contemplated under Section 3.4 of the
Agreement, as amended.
5. INTEREST RATE FOR TERM LOAN. The parties acknowledge the Borrower has
selected Option No. 2 as the interest rate for the term loan pursuant to Section
3.5 of the Agreement. Accordingly, for a period of five years from the date of
Loan conversion, interest shall be fixed at an annual rate of 8.8%, which rate
is equal to 275 basis points above the five-year Treasury Bill rate on the date
of the Loan conversion. The interest rate shall be adjusted in accordance with
the Agreement five years from the Loan conversion date.
6. AMENDMENT TO SECTION 3.6. Section 3.6 of the Agreement is amended to
read entirely as follows:
Term of the Loan. The term of the Construction Loan shall commence on
the Loan Closing Date and shall convert to the Term Loan as of July
18, 1997. The maturity date of the Term Loan will be May 7, 2006.
7. AMENDMENT TO SECTION 3.11. Section 3.1 1 of the Agreement is amended
to add the following sentence to the end of that section:
Notwithstanding the foregoing, Borrower shall be entitled to a credit
of $10,000.00 against the $24,000 commitment fee otherwise payable to
the Bank on the date of conversion pursuant to this Section 3.11. The
$10,000.00 credit represents the deposit held by the Bank pursuant to
Section 3.3 of this Agreement, which deposit shall be paid to the Bank
on the Loan conversion date.
8. PAYMENT OF THE LOAN. Borrower's first payment under the Note shall
begin on August 1, 1997. All subsequent payments shall be made in accordance
with Section 3.7 of the Agreement. In accordance with Section 5 of this
Addendum, the amortized monthly payment of principal and interest shall be
$89,125 during the first five years following Loan conversion.
2
<PAGE> 65
9. REAFFIRMATION. Borrower reaffirms each warranty, covenant, and
representation contained in the Agreement, and any of the other Loan Documents,
except to the extent that a warranty, covenant, or representation expressly
applies only to an earlier date or time period and from its context clearly is
no longer applicable. The Borrower acknowledges that the Bank has not waived or
modified any requirement in the Agreement, except as expressly provided in this
Amendment.
10. CONTINUED EFFECTIVENESS. Except as modified by this Amendment, the
Agreement continues in full force and effect in accordance with its terms, and
the Borrower and the Bank reserve all their respective rights and remedies under
the Agreement.
11. COMPLETE AGREEMENT. This Amendment contains the final, complete, and
exclusive expression of the understanding between the parties regarding the
modification of the Agreement described in this Amendment and supersedes any
prior or contemporaneous agreement or understanding regarding that subject, oral
or written, by either of them.
12. EXECUTION. The Borrower and the Bank may execute this Amendment in
counterparts. Each executed counterpart will be considered an original document,
and all executed counterparts, together, will constitute the same agreement.
This Amendment will become effective when each party has executed and delivered
to the other party a counterpart of it.
EXECUTED: July 18, 1997.
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/Carole T. Kirkwood By:/s/Sharon L. Perdue
- ------------------------------ ------------------------------
Name: Carole T. Kirkwood Name:SHARON L. PERDUE
------------------------- -------------------------
Title:SR. VICE PRES OF FINANCE
------------------------
/s/
- ------------------------------
Name:
-------------------------
[CORPORATE SEAL]
ATTEST:
By:/s/Michael Kagan
---------------------------
Secretary
3
<PAGE> 66
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
/s/ Robert W. Bivins By:/s/W.H. Pitts, Jr.
- ------------------------------ ------------------------------
Name: Robert W. Bivins Name:W.H. Pitts, Jr.
------------------------- -------------------------
Title:Vice President
/s/ Dean Chakalas ------------------------
- ------------------------------
Name: Dean Chakalas
-------------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 18th day of July,
1997, by SHARON L. PERDUE as Sr. Vice President of Tropical Sportswear
International Corporation, a Florida corporation, on behalf of the corporation.
She is personally known to me or produced Florida Driver's License as
identification.
/s/JACQUELINE E. RHODES
---------------------------------
My commission expires: Name: JACQUELINE E RHODES
----------------------------
[Notarial Seal} Notary Public, State of
Commission No.
-------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing instrument was acknowledged before me this 18th day of July,
1997, by W.H. PITTS, JR. as Vice President of SouthTrust Bank, National
Association, formerly known as SouthTrust Bank, National Association, a national
banking association, on behalf of the association. He is personally known to me
or produced Alabama Driver's License as identification.
/s/JACQUELINE E RHODES
---------------------------------
My commission expires: Name:JACQUELINE E RHODES
----------------------------
[Notarial Seal] Notary Public, State of
Commission No.
Jacqueline E. Rhodes -------------------
MY COMMISSION #CC643551 EXPIRES
April 30, 2001
BONDED THRU TROY FARM INSURANCE, INC.
4
<PAGE> 67
FIFTH AMENDMENT TO
CONSTRUCTION AND TERM LOAN AGREEMENT
This Fifth Amendment to Construction and Term Loan Agreement (this
"Amendment") is executed as of July 18, 1997, by TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION, a Florida corporation ("Borrower"), and SOUTHTRUST
BANK, NATIONAL ASSOCIATION, a national banking association formerly known as
SouthTrust Bank of Alabama, National Association ("Bank"), to amend the
Construction and Term Loan Agreement executed by them on May 7, 1996, as amended
by the First Amendment to Construction and Term Loan Agreement dated as of May
10, 1996, as further amended by the Second Amendment to Construction and Term
Loan Agreement dated as of July 2, 1996, as further amended by the Third
Amendment to Construction and Term Loan Agreement dated as of September 30,
1996, and as further amended by the Fourth Amendment to Construction and Term
Loan Agreement dated as of July 18, 1997 (as amended, the "Agreement").
1. DEFINITIONS. Unless otherwise expressly defined in this Amendment, all
terms used in this Amendment have the same meanings ascribed to them in the
Agreement, and the definitions of those terms contained in the Agreement are
incorporated by reference into this Amendment for all purposes.
2. AMENDMENT TO INTEREST RATE. Section 5 of the Fourth Amendment to
Construction and Term Loan Agreement dated as of July 18, 1997, is amended to
read entirely as follows:
INTEREST RATE FOR TERM LOAN. The parties acknowledge the Borrower has
selected Option No. 2 as the interest rate for the term loan pursuant to
Section 3.5 of the Agreement. Accordingly, for a period of five years from
the date of the Loan conversion, interest shall be fixed at an annual rate
of 8.88%, which rate is equal to 275 basis points above the five-year
Treasury Bill rate on the date of the Loan conversion. The interest rate
shall be adjusted in accordance with the Agreement five years from the Loan
conversion date.
3. CONTINUED EFFECTIVENESS. Except as modified by this Amendment, the
Agreement continues in full force and effect in accordance with its terms, and
Borrower and Bank reserve all their respective rights and remedies under the
Agreement.
4. COMPLETE AGREEMENT. This Amendment contains the final, complete, and
exclusive expression of the understanding between the parties regarding the
modification of the Agreement described in this Amendment and supersedes any
prior or contemporaneous agreement or understanding regarding that subject, oral
or written, by either of them.
<PAGE> 68
5. EXECUTION. Borrower and Bank may execute this Amendment in
counterparts. Each executed counterpart will be considered an original document,
and all executed counterparts, together, will constitute the same agreement.
This Amendment will become effective when each party has executed and delivered
to the other party a counterpart of it.
EXECUTED: July 31, 1997.
WITNESSES: TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
/s/Carrie Sewell By:/s/Sharon L. Perdue
- ------------------------------ ------------------------------
Name: Carrie Sewell Sharon L. Perdue
------------------------- Senior Vice President
/s/Kary D. Simcox
- ------------------------------
Name:Kary D. Simcox
-------------------------
ATTEST:
By:/s/Michael Kagan
---------------------------
Michael Kagan, Secretary
SOUTHTRUST BANK, NATIONAL
ASSOCIATION
By:
- ------------------------------ ------------------------------
Name: Name:
------------------------- -------------------------
Title:
------------------------
- ------------------------------
Name:
-------------------------
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this 31st day of July,
1997, by Sharon L. Perdue, as Senior Vice President of Tropical Sportswear
International
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Corporation, a Florida corporation, on behalf of the corporation. She is
personally known to me or produced __________________ as identification.
/s/DEBORAH M. CHARTRAND
---------------------------------
Print Name:DEBORAH M. CHARTRAND
----------------------
Notary Public, State at Large
Notarial Seal or Stamp:
[NOTARIAL SEAL]
DEBORAH M CHARTRAND
My Commission CC493358
Expires Sep. 05, 1999
STATE OF ________________
COUNTY OF _______________
The foregoing instrument was acknowledged before me this ___ day of July,
1997, by _____________________________, as ________________________ of
SouthTrust Bank, National Association, a national banking association, on behalf
of the association. He/She is personally known to me or produced ______________
as identification.
---------------------------------
Print Name:
----------------------
Notary Public, State at Large
Notarial Seal or Stamp:
3
<PAGE> 1
EXHIBIT 10.3
HELLER FINANCIAL, INC.
RETAIL - DOMESTIC
COLLECTION FACTORING AGREEMENT
Tropical Sportswear International Corporation
4902 West Waters Avenue
Tampa, FL 33634
Gentlemen:
The following shall constitute the terms upon which me shall act as your sole
factor (see Section 12 for the definitions of certain capitalized terms)
SECTION 1. Sale And Approval of Accounts
1.1 You hereby sell, assign and transfer to us and we hereby purchase from you
all of your now owned and hereafter created or acquired Accounts (excluding
Accounts (i) which you have received a letter of credit from your customer,
(ii) sold cash on delivery ("COD"), or (iii) sold cash before delivery
("CBD")), with full power to collect and otherwise deal therewith as the
sole and exclusive owner thereof.
1.2 (a) You will submit for our credit approval your customers' credit
requirements, a description of your Standard Terms and such other
information as we may request concerning your customers. We may, in our
sole credit judgment, establish credit approval limits for sales to your
customers on your Standard Terms and all sales to such customers within the
established credit approval limits on Standard Terms will be Approved
Accounts provided that delivery or performance is completed while the
credit approval limits remains in effect. You may also submit for credit
approval, specific orders from your customers and we may, in our sole
credit judgment, approve such orders on a single order approval basis. All
of our credit approvals will be in writing.
(b) We reserve the right to amend or withdraw a credit line at any time by
advice to you, which advice will be promptly confirmed in writing. A credit
approval limits will be suspended (i.e., temporarily withdrawn) during any
period that the customer is 60 or more days past due, upon notice be us to
you.
(c) We may withdraw a single order credit approval by notifying you
verbally and/or in writing at any time prior to the delivery of goods or
performance of services. A single order credit approval will be
automatically withdrawn: (i) in the event delivery or performance is not
made within forty-five (45) days after the date specified for delivery or
performance in your request for credit approval or within forty-five (45)
days from the date of our approval if no delivery or performance date is
specified; or (ii) in the event any change is made in the payment terms or
delivery date of the Account or in the event that the dollar amount of the
Account is increased without our prior written approval.
(d) We shall have no liability to you or to any customer for our refusal to
credit approve an Account or our withdrawal of a credit approval.
1.3 We will assume the Credit Risk on all Approved Accounts, provided, however,
that during each contract year, liability for the Credit Loss will be
shared by you and us as follows (a) you shall be liable and we shall have
recourse against you for that portion of the Credit Loss up to an amount
equal to 0.15% of the Aggregate Net Amount; and (b) if the Credit Loss
exceeds an amount equal to 0.15% of the Aggregate Net Amount, we shall be
liable for that portion of the Credit Loss in excess of such amount. We
shall have full recourse to you for all Non-Approved Accounts.
<PAGE> 2
1.4 In the event that monies shall, at any time, be owing from one of your
customers for both Approved Accounts and Non-Approved Accounts, we will
apply all payments received as follows
(a) all payments received will be first applied to Approved Accounts;
(b) if an insolvency proceeding has been instituted by or against the
customer, me shall share all payments pro rata.
SECTION 2. Payment and Fees
2.1 We will purchase each Account on the longest or shortest selling terms, at
our option, and will pay you as the purchase price the net amount thereof
calculated by deducting from the gross amount of each Account the discount,
if any, our factoring commission and all credits, including, without
limitation, merchandise returns, allowances and chargebacks and all other
charges provided for hereunder. Dine purchase price less interest and any
other amounts due us will be paid to you on the Collection Date.
2.2 You will pay us a factoring commission of three tenths of one percent
(0.3%) of the Net Amounts. On Accounts bearing terms in excess of Standard
Terms, the factoring commission will be increased by fifteen one-hundredths
of one (0.15%) for each 30 days or part thereof that the stated terms
exceed the Standard Terms.
2.3 We will charge your account our standard wire transfer fee on all wire
transfers, and you will reimburse us for exchanges on checks, charges for
returned items and all other bank charges. We may also, at our option,
charge your account for all amounts outing by you to us under this
Agreement and all other Obligations.
SECTION 3. Interest
3.1 [RESERVED]
3.2 If funds remain with us past the Collection Date ("matured funds"), we will
pay you interest on such matured funds at the rate per annum equal to the
Base Rate minus three (3%) percent. Any change in the Base Rate shall
result in an adjustment in the matured funds rate on the next business day.
3.3 If an Account or any payment is charged back to you after the Collection
Date and such chargeback results in a debit balance or funds employed, you
will pay us interest at the Interest Rate on such Net Amount on such
payment from the Collection Date to the chargeback date.
SECTION 4. Representations, Warranties and Covenants
4.1 You represent, warrant and covenant as to each Account sold and assigned
hereunder that, at the time of its creation, the Account is a valid, bona
fide account, representing an undisputed indebtedness incurred by the named
account debtor for goods actually sold and delivered or for services
completely rendered, there are no setoffs, offsets or counterclaims,
genuine or otherwise, against the Account; the Account does not represent a
sale to a parent, subsidiary or affiliate or a consignment, sale or return
or a bill and hold transaction; no agreement exists permitting any
deduction or discount (other than the discount stated on the invoice); you
are the lawful owner of the Account and have the right to sell and assign
the same to us; the Account is free of all security interests. liens and
encumbrances (including tax liens) other than those in our favor, and the
Account is due and payable in accordance with its terms.
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4.2 Other than liens existing in favor of Shawmut Capital Corporation and
Arnold C. Kotler, Lawrence L. Falk, Lucile K. Falk, and Lee R Falk, you
shall not grant or suffer to exist any lien upon or security interest in
your inventory in favor of any party other than us without our written
consent.
4.3 All books and records pertaining to the Accounts or to any inventory owned
by you shall be maintained solely and exclusively at the above address or
the addresses listed in Section 4.8 hereof and no such books and records
shall be moved or transferred without giving us thirty (30) days prior
written notice.
4.4 After our request, you shall hold all returned, replevied or reclaimed
goods coming into your possession in trust for us and all such goods shall
be segregated and identified as held in trust for our benefit and you
shall, at our request, and at your expense, deliver such goods to such
place or places as we may designate.
4.5 The tradenames or styles set forth on Exhibit A are the only tradenames or
styles under which you transact business; Accounts sold to us hereunder and
represented by invoices bearing such tradenames or styles are wholly owned
by you; the undertakings, representations and warranties made in connection
therewith shall be identical to and of the same force and effect as those
made with respect to invoices bearing your corporate name.
4.6 No discounts, credits or allowances trill be issued, granted or allowed by
you to customers and no returns will be accepted without our prior written
consent; provided, however, that until we notify you to the contrary, you
may presume our consent. Discounts, credits or allowances once issued may
be claimed only by the customer.
4.7 You are a solvent corporation; duly incorporated and in good standing under
the laws of the State of Florida and qualified in all States where such
qualification is required, the execution, delivery and performance of this
Agreement have been duly authorized and are not in contravention of any
applicable law, your corporate charter or by-laws or any agreement or
order by which you are bound.
4.8 You shall not change your corporate name or the location of your office or
open any new offices without giving us at least thirty (30) days prior
written notice. At the present time, you carry on business only at the
above address and the addresses set forth below.
Other Storage Facility: 8430 Sunstate Street, Tampa, FL 33634
Hanna-Cutting Room - 5806 North 53rd St., Tampa, FL 33610
Sales Office - 350 Fifth Avenue, Suite 5707, New York, NY 10118
4.9 You shall not sell, lease, transfer or otherwise dispose of all or
substantially all of your property or assets, or consolidate with or merge
into or with any corporation or entity without our prior written consent.
4.10 In order to induce us to enter into this Agreement, you represent and
warrant to us that the following statements are and at all times hereafter
trill be true, correct, and complete:
(a) Litigation: Adverse Facts. There are no judgments outstanding against
or affect any of your property nor, except as set forth on Schedule 4.10
attached hereto, is there any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration now pending
or, to the best of your knowledge after due inquiry, threatened against you
or any of your property which could reasonably be expected to result in any
material adverse effect. You have not received any opinion or memorandum or
legal ad\ice from legal counsel to the effect that you are exposed to
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any liability disadvantage which could reasonably be expected to result in
any material adverse effect.
(b) Payment of Taxes. All of your material tax returns and reports required
to be filed have been timely filed, and all taxes, assessments, fees, and
other governmental charges upon such persons and upon their respective
properties, assets, income, and franchises which are shown on such returns
as due and payable have been paid when due and payable. Other than your
1991 tax returns, none of your United States income tax returns are under
audit. No tax liens have been Sled and no claims are being asserted with
respect to any such taxes. The charges, accruals, and reserves on your
books in respect of any taxes or other governmental charges are in
accordance with generally accepted accounting principles.
(c) Compliance with Laws. Neither you nor any of your subsidiaries are in
violation of any law, ordinance, rule, regulation, order, policy,
guideline, or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct
of your business or the ownership of your properties, including, without
limitation, any violation relating to any use, release, storage, transport
or disposal of any hazardous material, which violation would subject you or
any of your subsidiaries, or any of your respective officers to criminal
liability or have a material adverse eject and no such violation has been
alleged.
SECTION 5. Disputes, Chargebacks and Reserves
5.l With respect to any Account, upon the occurrence of a breach of any of the
representations or warranties contained in Sections 4.1 and 4.2, or the
assertion by a customer of a Dispute or other defense to payment, other
than financial inability, an Approved Account shall automatically become a
Non-Approved Account and me may charge back the invoices that are subject
of such breach of representation or warranty or Dispute to you.
5.2 You shall notify us immediately in the event that a customer alleges any
Dispute, or returns or desires to return any goods purchased from you. We
may, but are not obligated to settle, compromise, adjust or litigate all
such Disputes or returns upon such terms as me deem reasonable in light of
the facts pertinent to the Dispute or return. If an unadjusted reasonable
Dispute delays the payment of any Approved Account when due, our credit
approval is automatically withdrawn and we shall have the right to charge
back to you that Account.
5.3 We may, at our option, charge back to you all amounts owing on Non-Approved
Accounts which are not paid when due.
5.4 We shall have the right to charge back to you any payment which we receive
with respect to a Non-Approved Account if such payment is subsequently
disgorged by us, whether as a result of any proceeding in bankruptcy or
otherwise.
5.5 A chargeback shall not constitute a resale to you of said Accounts;
however, upon payment by you to us of all monies due with respect to such
charged back Account, title thereto shall revert to you, subject, however,
to our security interest therein. You agree to indemnify and save us
harmless from and against any and all loss, costs and expenses, caused by
or arising out of disputed Accounts, including, but not limited to,
collection expenses and attorney's fees incurred with respect thereto.
SECTION 6. Administration
6.1 (a) You shall, from time to time, execute and deliver to us confirmatory
schedules of Accounts sold to us, together with one copy of each invoice
and upon request, acceptable evidence of shipment
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and such other documentation and proofs of delivery as we may require. Each
invoice shall bear a notice, in form reasonably satisfactory us, that it
has been sold and assigned to and is payable only to us. You agree to
prepare and mail all invoices, but we may do so at our option. You agree to
execute and deliver to us such further instruments of assignment, financing
statements and instruments of further assurance as we may reasonably
require. You authorize us to execute on your behalf and file such UCC
financing statements as we may deem necessary in order to perfect and
maintain the security interests granted by you in accordance with this and
any other agreement between you and us, and you further agree that we may
file this Agreement or a copy thereof as such UCC financing statement. You
agree to bear the cost of all filing fees, filing taxes, search reports,
legal fees and other charges incurred by us in the perfection, protection
and preservation of the rights and collateral security herein granted to
us.
(b) If any remittances are made directly to you, your employees or agents, you
shall act as trustee of an express trust for our benefit, hold the same as
our property and deliver the same to us forthwith in kind. We and/or such
designee as we may from time to time appoint, are hereby appointed your
attorney-in-fact to endorse your name on any and all checks or other forms
of remittances received by us where such endorsement is required to effect
collection; this power, being coupled with an interest is irrevocable,
until such time as all Accounts purchased by us hereunder are collected.
(c) We may, at all times, have access to, inspect and make extracts from all
your records, files and books of account. We may, at any time after default
by you hereunder, remove from your premises all such records, files and
books relating to Accounts. You will promptly furnish us with all
statements prepared by or for you showing your financial condition and the
results of your operations and such other statements as we may reasonably
require. You authorize us to communicate directly with your independent
certified public accountants and authorize such accountants to discuss your
financial condition and statements directly with us.
6.2 If eve determine that the credit standing of a customer has deteriorated
after we have assumed the Credit Risk on an Account, you shall, at our
request, exercise such rights as you may have to reclaim or stop the goods
in transit, and you hereby grant us the right to take such steps in your
name or ours.
6.3 We shall render a monthly Statement of Account to you within twenty (20)
days after the end of each month. Such Statement of Account shall
constitute an account stated unless you make mitten objection thereto
within forty-five (45) days from the date such statement is mailed to you.
SECTION 7. Collateral Security
As collateral security for all Obligations, you hereby assign and grant to us a
continuing security interest in: (i) all of your presently existing and
hereafter created Accounts and general intangibles and the proceeds thereof;
(ii) all monies, securities and other property now or hereafter held or received
by, or in transit to us from or for you, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of your deposits and
credit balances in our possession; (iii) all returned, reclaimed or repossessed
goods and the documents evidencing or relating to such goods; (iv) all books,
records and other property at any time evidencing or relating to the Accounts;
(v) the proceeds of any insurance policies covering any of the foregoing; and
(vi) proceeds of the foregoing. Recourse to the collateral security herein
provided shall not be required, and you shall at all times remain liable for the
payment and performance of all of your Obligations upon demand by us.
SECTION 8. Events of Default
The occurrence of any of the following acts or events shall constitute an Event
of Default: (a) if you fail to make payment of any of your Obligations when due,
(b) if you fail to make any remittance required by this
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Agreement, (c) if you commit any breach of any of the material terms,
representations, warranties, material covenants, material conditions or
provisions of this Agreement, or of any present or future supplement or
amendment hereto or of any other material agreement between us, (d) if you
become insolvent or unable to meet your debts as they mature, (e) if you deliver
to us a false financial statement which in a material and adverse way overstates
your financial condition so that it appears more favorable than it is, (f) if
you call, or have called by a third party, a meeting of creditors, (g) if you
have commenced by or against you any bankruptcy proceeding, insolvency
arrangement or similar proceeding, (h) if you suspend or discontinue doing
business for any reason, (i) if a receiver or trustee of any kind is appointed
for you or any of your property, (j) if any guarantor of your Obligations shall
become insolvent or have commenced by or against such guarantor any bankruptcy
proceeding, insolvency arrangement, or similar proceeding, or (k) if any
guaranty of your Obligations is terminated.
Upon the occurrence of an Event of Default, we shall have the right to terminate
this Agreement and all other arrangements existing between us forthwith and
without notice, and all of your Obligations to us shall mature and become
immediately due and payable and we shall have the right to withhold any further
payments to you until all such Obligations have been paid in full. In addition,
we shall have all the rights of a secured party under the Uniform Commercial
Code, including, without limitation, the fight to take possession of any
collateral in which me have a security interest and to dispose of same at public
or private sale and you will be liable for any deficiency. We shall not be
required to proceed against any collateral but may proceed against you directly.
In the event we institute suit against you, you agree to pay our costs and
reasonable attorneys' fees.
SECTION 9. Term and Termination
This Agreement shall continue in full force and effect until September 30, 1998
and shall continue thereafter until terminated by either party hereto giving the
other part, not less than 30 days prior written notice thereof. Notice of
termination shall be given by messenger, registered or certified mail or
commercial delivery, service; provided, however, that you shall not terminate
this Agreement so long as you are indebted or obligated to us in connection with
any other financing arrangements. Notwithstanding such notice of termination,
our respective rights and obligations arising out of transactions having their
inception prior to the specified date of termination shall not be affected by
such termination and all terms, provisions, and conditions hereof, including,
but not limited to, the security interests hereinabove granted to us, shall
continue in full force and effect until all Obligations have been paid in full.
The security interests hereinabove granted to us shall continue in full force
and effect in all Accounts and other collateral including those Accounts arising
on and after the termination of this Agreement until all Obligations have been
paid in full. All of the representations, warranties and covenants made herein
shall survive the termination of this Agreement.
SECTION 10. Modifications
This Agreement cannot be changed or terminated orally; it constitutes the entire
agreement between us and shall be binding upon our respective successors and
assigns, but may not be assigned by you without our prior smitten consent. No
delay or failure on our part in exercising any right, privilege, or option
hereunder shall operate as a waiver thereof or of any other right, privilege or
option. No waiver whatsoever shall be valid unless in writing, signed by us, and
then only to the extent therein set forth. If any term or provision of this
Agreement is held invalid under any statute, rule or regulation of any
jurisdiction competent to make such a decision, the remaining terms and
provisions shall not be affected, but shall remain in full force and effect.
SECTION 11. Governing Law, Venue and Waiver of Jury
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Illinois. You hereby consent to the jurisdiction of any local,
state or federal court located within the State of
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Illinois. If you presently are, or in the future become, a non-resident of the
State of Illinois, you hereby waive personal service of any and all process and
agree that all such service of process may be made by certified or registered
mail, return receipt requested, directed to you, at your address appearing in
our records and service so made shall be complete ten (10) days after the same
has been posted as aforesaid. YOU HEREBY WAIVE YOUR RIGHT TO TRIAL BY JURY IN
ANY SUIT OR PROCEEDING ARISING UNDER OR RELATING TO THIS AGREEMENT.
SECTION 12. Definitions
"Accounts" - All presently existing and hereafter created accounts, contract
rights and general intangibles relating thereto, notes, drafts and other forms
of obligations owed to or owned by you arising or resulting from the sale of
goods or the rendering of services, all proceeds thereof, all guaranties and
security therefor, and all goods and rights represented thereby or arising
therefrom including, but not limited to, the right of stoppage in transit,
repletion and reclamation (but the foregoing shall exclude Accounts arising from
COD or CBD).
"Aggregate Net Amount" - The aggregate Net Amount of all Approved Accounts
purchased by us from you during a contract year.
"Approved Account" - An Account with respect to which we have issued a credit
approval which has not subsequently been withdrawn.
"Base Rate" - The rate of interest publicly announced from time to time by The
Chase Manhattan Bank, N.A. as its prime or base rate (or equivalent).
"Collection Date" - The earlier to occur of (a) two (2) days after the receipt
by us of payment of the Account unless such payment is received by wire transfer
in which case it shall be one (1) business day after receipt of such wire
transfer or (b) 120 days after the due date of the Account, provided that the
account debtor has not asserted a Dispute.
"Contract Year" - The 12 month period ending on each anniversary of this
effective date.
"Credit Loss" - The gross amount of all losses during a contract year resulting
from the non-payment of Approved Accounts if such non-payment is due solely to
the financial inability of a customer to pay and if such customer has fully and
finally accepted, without Dispute, the merchandise or services, the sale of
which resulted in such Accounts.
"Credit Risk" - The risk that a customer will be financially unable to pay an
Account at maturity, provided that the merchandise has been received or services
rendered and accepted by the customer without Dispute.
"Dispute" - A dispute or claim, bona fide or otherwise, as to price, terms,
quantity, quality or any cause or defense to payment whatsoever other than
financial inability to pay.
"Net Amounts" - The gross face amount of an Account less the discount offered by
you and taken by us.
"Non-Approved Account" - An Account with respect to which we have either not
issued a credit approval or have subsequently withdrawn a credit approval as a
result of a Dispute or otherwise.
"Obligations" - All debts, liabilities, obligations, covenants and duties owing
by you to us, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, including, without limitation, indebtedness
arising under any guaranty made by you or issued by us on your behalf.
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"Standard Terms" - Your normal selling terms whereby payment is due from your
customer no later than Net 90 days from the invoice date.
SECTION 13. Acceptance
This proposal is submitted to you unsigned and shall constitute an agreement
between us only when signed by us.
HELLER FINANCIAL, INC.
By: /s/ Kenneth W. Monckton
-----------------------------------
Title: Senior Vice President
--------------------------------
Effective Date: October 1, 1995
-----------------------
ACCEPTED AND AGREED TO:
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
By: /s/ Michael Kagan
-----------------------------------
Title: Executive Vice President
--------------------------------
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
,___________________1997, to become effective as of the Effective Date (as
herein defined) by and between TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation (the "Company"), and WILLIAM W. COMPTON (the "Employee").
RECITALS:
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's business plan and to manage the Company's future growth and
development and to maximize the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms have the
meanings assigned to them below:
"Acquiring Person (Type A)" means any Person who or which,
together with all Affiliates and Associates of such Person, is or are the
Beneficial Owner(s) of a minimum of twenty five (25%) or more of the shares of
Common Stock then outstanding, but does not include any Exempt Person; provided,
however, that a Person shall not be or become an Acquiring Person if such
Person, together with its Affiliates and Associates, shall become the Beneficial
Owner of a minimum of twenty five percent (25%) or more of the shares of Common
Stock then outstanding solely as a result of a reduction in the number of shares
of Common Stock outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any Affiliate or Associate
of such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting one percent (1%) or more of the
then outstanding shares of Common Stock or any other Person (or Persons) who is
(or collectively are) the Beneficial Owner of shares of Common Stock
constituting one percent (1%) or more of the then outstanding shares of Common
Stock shall become an Affiliate or Associate of such Person, unless, in either
such case, such Person, together with all Affiliates and Associates of such
Person, is not then the Beneficial Owner of a minimum of twenty five percent
(25%) or more of the shares of Common Stock then outstanding.
"Acquiring Person (Type B)" means any Person who or which,
together with all Affiliates and Associates of such Person, is or are the
Beneficial Owner(s) of a minimum of thirty three and one half percent (33.5%) or
more of the shares of Common Stock then outstanding, but does not include any
Exempt Person; provided, however, that a Person shall not be or become an
Acquiring Person if such Person, together with its Affiliates and Associates,
shall become the Beneficial Owner of a minimum of thirty
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three and one half percent (33.5%) or more of the shares of Common Stock then
outstanding solely as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of Common Stock by the Company, unless
and until such time as such Person or any Affiliate or Associate of such Person
shall purchase or otherwise become the Beneficial Owner of additional shares of
Common Stock constituting one percent (1%) or more of the then outstanding
shares of Common Stock or any other Person (or Persons) who is (or collectively
are) the Beneficial Owner of shares of Common Stock constituting one percent
(1%) or more of the then outstanding shares of Common Stock shall become an
Affiliate or Associate of such Person, unless, in either such case, such Person,
together with all Affiliates and Associates of such Person, is not then the
Beneficial Owner of a minimum of thirty three and one half percent (33.5%) or
more of the shares of Common Stock then outstanding. If a Person becomes an
Acquiring Person (Type B) he shall not also be considered an Acquiring Person
(Type A).
"Active Status" means the Employee's Employment status from
the Effective Date to the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"Annual Cash Bonus" is the cash bonus calculated pursuant to
the methodology set forth in paragraph 4.B. and paid to Employee annually during
the term of this Agreement.
"Annual Cash Compensation" of the Employee for any
Compensation Year means the sum of the Base Salary and Annual Cash Bonus earned
by the Employee during that Compensation Year, including all amounts deferred at
the election of the Employee pursuant to a Compensation Plan intended to qualify
as a plan under Section 401(k) of the Code or otherwise. If salary or bonus is
paid in whole or in part in property other than cash (such as Common Stock) the
amount so paid shall be the fair market value thereof on the date of payment.
"Average Annual Bonus" is the average (mean) of the annual
bonuses earned by Employee during the three year period ending on or preceding
the Termination Date (including any Compensation Years that end on or precede
the Effective Date). If, for purposes of a termination payment, the annual bonus
for the most recent year cannot be calculated because necessary information is
not yet available, the annual bonus for the preceding year will be counted twice
instead. If any annual bonus was to be paid in whole or in part in property
other than cash (such as Common Stock) the amount so earned and included for
purposes of this calculation shall be the fair market value thereof on the date
for the determination of such fair market value that is specified in the
agreement that such payment be so paid, and if no such date is therein specified
for such determination, then on the date of such agreement, and , if there is no
such agreement, then on the date of payment.
"Average Annual Compensation" means the sum of the Employee's
Average Base Salary and the Average Annual Bonus.
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"Average Base Salary" is the average (mean) of the base
salaries earned by the Employee during the three year period ending on or
preceding the Termination Date (including any Compensation Years that precede or
end on the Effective Date). If any base salary was to be paid in whole or in
part in property other than cash (such as Common Stock) the amount so earned and
included for purpose of this calculation shall be the fair market value thereof
on the date for determination of such fair market value that is specified in the
agreement that such payment be so paid, and if no such date is therein specified
for such determination then on the date of such agreement, and if there is no
such agreement, then on the date of payment.
"Associate" means, with reference to any Person,
(a) any corporation, firm, partnership, association,
unincorporated organization or other entity (other than the Company or a
subsidiary of the Company) of which that Person is an officer or general partner
(or officer or general partner of a general partner) or is, directly or
indirectly, the Beneficial Owner of 15% or more of any class of its equity
securities,
(b) any trust or other estate in which that Person
has a substantial beneficial interest or for or of which that Person serves as
trustee or in a similar fiduciary capacity and
(c) any relative or spouse of that Person, or any
relative of that spouse, who has the same home as that Person.
"Base Salary" means the guaranteed minimum annual salary
payable by the Company to the Employee pursuant to Section 4(A).
"Beneficial Owner" a specified Person is deemed the
"Beneficial Owner" of, and is deemed to "beneficially own," any securities.
(a) of which that Person or any of that Person's
Associates or controlled Affiliates, directly or indirectly, is the "beneficial
owner" (as determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (a) as a result of an agreement, arrangement or
understanding to vote that security if that agreement, arrangement or
understanding: 1) arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act (that is, the
exclusions in these subparagraphs (a) and (b) give effect to the exemption for a
proxy or consent solicitation in Exchange Act rule 14a-2(b) (2); and (2) is not
then reportable by such Person on Exchange Act Schedule 13D (or any comparable
or successor report);
(b) which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, has the right or obligation to
acquire (provided that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an event)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or on the exercise of conversion rights,
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exchange rights, other rights, warrants or options, with an exercise price equal
to or below the public trading price at the time of calculation; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," securities tendered pursuant to a tender or exchange offer
made by that Person or any of that Person's Affiliates or Associates until those
tendered securities are accepted for purchase or exchange; or
(c) which are beneficially owned, directly or
indirectly, by (1) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's Affiliates or
Associates has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, or holding with the right to vote or of
voting (except pursuant to a revocable proxy or consent as described in the
provisio to subparagraph (a) of this definition) or disposing of any voting
securities of the Company or (2) any group (as that term is used in Exchange Act
Rule 13d-5(b)) of which that specified Person is a member; provided, however,
that nothing in this definition shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such a Person's participation in good
faith in a firm commitment underwriting until the expiration of forty (40) days
after the date of that acquisition and the security has been placed in an
investment account. For purposes of this Agreement, "voting" a security shall
include voting, granting a proxy, acting by consent, making a request or demand
relating to corporate action (including, without limitation, calling a
stockholder meeting) or otherwise giving an authorization (within the meaning of
Section 14(a) of the Exchange Act) in respect of such security.
"Board" means herein the entire Board of Directors of the
Company, except when less than the entire Board is specified herein.
"Business Reason" for the Company's termination of the
Employee's Employment means any reason other than Cause.
"Business Reason Termination Payment During Initial Term"
means at any time during the Initial Term (which begins on the Effective Date
and ends on the fifth anniversary thereof) an amount equal to the Employee's
Average Annual Compensation calculated as of the Termination Date multiplied by
the greater of 2 or the remaining number of years (rounded to the nearest 1/12th
of a year) in such five year Initial Term. For example, if the Company were to
terminate the Employee for a Business Reason two and seven-twelfths (2 7/12)
years from the Effective Date, the Employee would be entitled to an amount equal
to two and five twelfths (2 5/12) times the Employee's Average Annual
Compensation on such Termination Date. If the Company were to terminate the
Employee for a Business Reason four and six-twelfths (4 6/12) years from the
Effective Date, the Employee would be entitled to an amount equal to two times
the Employee's Average Annual Compensation on such Termination Date.
"Business Reason Termination Payment During Renewal Term"
means at any time after the Initial Term and during any Renewal Term an amount
equal to two (2) times the Employee's then Average Annual Compensation
calculated as of the Termination Date.
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"Cause" for the Company's termination of the Employee's
Employment means:
(a) the Employee's final conviction of a felony, as
evidenced by a binding and final judgment, order or decree of a court of
competent jurisdiction, which in the opinion of the Required Board Majority
(excluding Employee) substantially impairs the Employee's ability to perform his
duties and obligations to the Company; or
(b) a determination by the Required Board Majority
(excluding Employee) that the Employee has continued to engage in conduct which
has caused or is reasonably likely to cause, demonstrable and serious injury to
the Company after having been given written notice of such determination by the
Required Board Majority and a reasonable opportunity to cure, which curative
period shall not be less than ninety (90) days: or
(c) the Required Board Majority's determination
(excluding Employee) of Employee's continuing failure to substantially perform
his duties and responsibilities in accordance with the provisions of this
Agreement (except by reason of the Employee's incapacity due to physical or
mental illness or injury) for a period of ninety (90) days (the "Grace Period")
after the Required Board Majority (excluding Employee) has delivered to the
Employee a written demand for substantial performance hereunder which
specifically identifies the provision of this Agreement which the Required Board
Majority contends that Employee has continually failed to substantially perform,
the bases for the Required Board Majority's determination that the Employee has
continually failed to substantially perform his duties and responsibilities
under such provision and the specific nature of the corrective action that the
Required Board Majority proposes that Employee take during the Grace Period;
provided, that for purposes of this clause (c), the Company shall not have Cause
to give such notice or thereafter terminate the Employee's Employment if such
act or omission was taken or omitted to be taken by an officer or employee of
the Company other than Employee or the act or omission was taken or omitted by
Employee with the concurrence of a majority of the Board or the act or omission
was taken or omitted by the Employee in good faith with a reasonable belief that
the act or omission was authorized by a majority of the Board or otherwise in
the interest of the Company. If, during such Grace Period, Employee takes the
corrective action specified by the Required Board Majority Termination for cause
under this provision shall require the approval of the Required Board Majority
(excluding Employee).
"Change of Control (Type A)" means the occurrence of any of
the following events that occurs after the Closing Date:
(a) any Person becomes an Acquiring Person (Type A);
(b) a merger of the Company with or into, or a sale
by the Company of its properties and assets substantially as an entirety to,
another Person occurs and, immediately after that occurrence, any Person, other
than any Exempt Person, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of twenty five percent (25%), but no more
than thirty three and one half percent (33.5%) or more of the total voting power
of the then outstanding Voting
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Shares of the Person surviving that transaction (in the case of a merger or
consolidation) or the Person acquiring those properties and assets substantially
as an entirety.
"Change of Control (Type B)" means the occurrence of any of
the following events that occurs after the Closing Date:
(a) any Person becomes an Acquiring Person (Type B);
(b) a merger of the Company with or into, or a sale
by the Company of its properties and assets substantially as an entirety to,
another Person occurs and, immediately after that occurrence, any Person, other
than any Exempt Person, together with all Affiliates and Associates of such
Person, other than Exempt Persons, shall be the Beneficial Owner of more than
thirty three and one half percent (33.5%) or more of the total voting power of
the then outstanding Voting Shares of the Person surviving that transaction (in
the case of a merger or consolidation) or the Person acquiring those properties
and assets substantially as an entirety.
"Change of Control (Type A) Payment Upon Voluntary Termination
By Employee" means that if within 365 days after a Change of Control (Type A)
the Employee gives Notice of Termination of this Agreement, the Employee shall
be paid an amount equal to the Employee's Average Base Salary calculated as of
the Termination Date multiplied by two (2.0).
"Change of Control (Type B) Payment Upon Voluntary Termination
By Employee" means that if within 365 days after a Change of Control (Type B)
the Employee terminates this Agreement, the Employee shall be paid an amount
equal to the sum of the Employee's Average Base Salary calculated as of the
Termination Date multiplied by two (2.0) plus the Employee's Average Annual
Bonus calculated as of the Termination Date multiplied by two (2.0).
"Closing Date" means the completion of the closing of the sale
of shares of the Common Stock to the underwriters in the Company's initial
public offering.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock or any other voting
securities of the Company.
"Company" means
(a) Tropical Sportswear International Corporation, a
Florida corporation, and any successor thereto;
(b) any Person that assumes the obligations of "the
Company" hereunder, by operation of law, pursuant to Section 7(I) or otherwise,
including but not limited to Tropical Sportswear International Corporation, a
Florida corporation.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or
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<PAGE> 7
any subsidiary of the Company, or to which the Company or any subsidiary of the
Company contributes, on behalf of any Executive Officer or any member of the
family of any Executive Officer,
(a) including
(i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee benefit plan" (as defined
in Section 3(3) of ERISA),
(ii) any other retirement and savings plan,
including any supplemental benefit arrangement relating to any plan intended to
be qualified under Section 401 (a) of the Code or whose benefits are limited by
the Code or ERISA,
(iii) any "employee welfare plan" (as
defined in Section 3(l) of ERISA),
(iv) any arrangement, plan, policy, practice
or program providing for severance pay, deferred compensation or insurance
benefit,
(v) any Incentive Plan and
(vi) any arrangement, plan, policy, practice
or program
(A) authorizing and providing for
the payment or reimbursement of expenses attributable to first-class air travel
and first-class hotel occupancy while on travel or
(B) providing for the payment of
business luncheon and country club dues, long-distance charges, mobile phone
monthly air time or other recurring monthly charges or any other fringe benefit,
allowance or accommodation of employment, but
(b) excluding any compensation arrangement, plan,
policy, practice or program to the extent it provides for annual Base Salary or
Annual Cash Bonus.
"Compensation Year" means the fiscal year of the Company.
"Confidential Information" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other confidential,
non-public/proprietary information of that Person, including information derived
from reports, investigations, research, work in progress, codes, marketing and
sale programs, customer lists, records of customer service requirements, capital
expenditure projects, cost summaries, pricing formulae, contract analyses,
financial information, projections, confidential filings with any governmental
authority and all other confidential, nonpublic concepts, methods of doing
business, materials or information prepared or performed for, by or on behalf of
that Person.
"CPI" means for any period the Consumer Price Index for All
Urban Consumers--All Items Index for Tampa, Florida (or any substantially
similar index
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<PAGE> 8
published for the same area), as published by the United States Department of
Labor, Bureau of Labor Statistics (or its successor) for that period.
"Disability" of the Employee means the Employee has been
determined (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred (including illness or injury resulting from any substance
abuse), by a Qualified Physician (who may be the doctor treating or otherwise
acting as the Employee's doctor in connection with the illness or injury in
question) selected by the Employee with the consent of the Company, or by the
Company at its expense and with the consent of the Employee (which consent shall
not be unreasonably withheld in either case), to be unable to perform, at the
time of that determination and, in all reasonable medical likelihood,
indefinitely thereafter, the normal duties then most recently assigned, under
and in accordance with the terms hereof, to the Employee while on Active Status;
provided that, the determination whether the Employee has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians,
(a) one (1) of whom shall be selected by the
Employee,
(b) one (1) of whom shall be selected by the Company
and
(c) the remaining one (1) of whom shall be selected
by the Qualified Physicians selected by the Employee and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Employee and the Company if:
(1) (A) the Company has reasonably withheld
its consent to the Qualified Physician, if any, selected by the Employee or
(B) the Employee has reasonably
withheld his consent to the Qualified Physician, if any, selected by the Company
and
(2) the Qualified Physicians selected by the
Employee and the Company disagree as to whether the Employee has incurred a
Disability. For purposes of this definition, if the Employee is unable by reason
of illness or injury to give an informed consent to the performance of the
treatment of that illness or injury, a Qualified Physician selected by any
Person who is authorized by applicable law to give that consent will be deemed
to have been selected by the Employee.
"Effective Date" means the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"Employment" means the employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means any of the chairman of the board,
the chief executive officer, the chief operating officer, the chief financial
officer, the president, any
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<PAGE> 9
'executive or senior vice president or the general counsel of the Company.
"Exempt Person" means
(a) (1) the Company, any subsidiary of the Company,
any employee benefit plan of the Company or of any subsidiary of the Company,
and
(2) any Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other employee benefits for
employees of the Company or any subsidiary of the Company and
(b) the Employee, any Affiliate or Associate of the
Employee or any group (as that term is used in Exchange Act Rule 1 3d-5(b)) of
which the Employee or any Affiliate or Associate of the Employee is a member.
(c) Michael Kagan, any Affiliate or Associate of
Michael Kagan or any group (as that term is used in Exchange Act Rule 1 3d-5(b))
of which Michael Kagan or any Affiliate or Associate of Michael Kagan is a
member.
(d) Accel, S.A. de C.V., any Affiliate or Associate
of said Accel or any group (as that term is used in said rule) of which said
Accel or any Affiliate or Associate of said Accel is a member.
(e) Shakale Internacional S.A., any Affiliate of
Associate of said Shakale or any group (as that term is used in said rule) of
which said Shakale or any Affiliate or Associate of said Shakale is a member.
"Good Reason" for the Employee's termination of his Employment
means any of the following that occurs before the Employee gives a Notice of
Termination for Good Reason and which has not been cured by the Company
reasonably promptly after receipt of such notice of Good Reason from the
Employee; provided that any such cure that occurs after ninety (90) days of such
notice shall not be considered reasonably prompt and any such cure that occurs
within 90 days of such notice shall be considered reasonably prompt and provided
further that if such cure occurs Employee shall not be required to give a
subsequent notice if the same or a substantially similar Good Reason again
occurs within one year of the occurrence giving rise to such cure:
(a) any violation or breach of any provision hereof
in any material respect by the Company including but not limited to failure of
the Company to comply with the provisions of paragraphs 4,5, and 6 of this
Agreement in any material respect
(b) either
(1) a failure of the Company to continue in
effect for Employee any Compensation Plan in which the
Employee was participating as of the Termination Date or
(2) the taking of any action by the Company
which would materially and adversely affect the Employee's
participation in or materially
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<PAGE> 10
reduce the Employee's benefits under, any such Compensation
Plan in effect as of the date of such action,
without, in each such case, providing a substantially equivalent substitute
reasonably acceptable to Employee; or
(c) the assignment to the Employee of duties
inconsistent in any material respect with the Employee's then current positions
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities or any other action by the Company which results in a
material diminution in those positions, authority, duties or responsibilities or
the taking of any action that is the equivalent of a constructive discharge.
(d) the failure of the shareholders to elect Employee
as a member of the board of directors at any time during the Initial Term or any
Renewal Term of this Agreement.
(e) the failure of the Board to elect the Employee as
Chairman of the Board and Chief Executive Officer, without his express consent,
at any time during the Initial Term or any Renewal Term of this Agreement.
"Good Reason Payment During Initial Term" means the amount
calculated as of the Termination Date by multiplying the greater of 2 or the
number of years (rounded to the nearest 1/12th of a year) remaining in the
Initial Term (which begins on the Effective Date and ends on the fifth
anniversary thereof) by the Employee's Average Annual Compensation calculated as
of the Termination Date. For example, if the Employee terminates for Good Reason
two and seven-twelfths (2 7/12) years from the Effective Date, the Employee
would be entitled to an amount equal to two and five-twelfths (2-5/12) years
times the Employee's then Average Annual Compensation. If the Employee
terminates for Good Reason four and seven-twelfths (4-7/12) years from the
Effective Date, the Employee would be entitled to an amount equal to two times
the Employee's then Average Annual Compensation.
"Good Reason Payment During Renewal Term" means at any time
after the Initial Term during the Renewal Term an amount equal to two (2) times
the Employee's then Average Annual Compensation, calculated as of the
Termination Date, whether the termination is during the last two years of the
Initial Term or during any Renewal Term.
"Incentive Plan" means any compensation arrangement, plan,
policy, practice or program, other than the Annual Cash Bonus provision of this
agreement set forth in paragraph 4 B, established, maintained or sponsored by
the Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive Officer and
which provides for awards of securities or the phantom equivalent of securities,
including any stock option, stock appreciation right and restricted stock plan,
but excluding any plan intended to qualify as a plan under any one or more of
Sections 401 (a), 401(k) or 423 of the Code.
"Initial Term" means the first full five year term of this
Agreement commencing with the Effective Date and ending five (5) years from the
Effective Date
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<PAGE> 11
(notwithstanding the fact that the Renewal Term commences three years from the
Effective Date).
"Nonterminating Party" means the Employee or the Company, as
the case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a
written notice that:
(a) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's Employment, and if the Termination Date is other
than the date of receipt of the notice,
(b) sets forth that Termination Date.
"Person" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union or
employee organization or governmental authority.
"Publicly Traded" with respect to shares of stock of a company
means traded on a national securities exchange or listed for quotation on
NASDAQ.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician
(a) holding an M.D. degree from a medical school
located in the United States,
(b) specializing and board certified in the treatment
of the injury or illness that has or may have caused that Disability and
(c) having admission privileges to one or more
hospitals located in Florida or in the state in which the Employee then is
domiciled.
"Renewal Term" means the automatic and continually renewing
term of two (2) years, commencing three (3) years from the Effective Date
(during the Initial Term) and renewing each day thereafter for an additional day
without any further action by the Company or the Employee, it being the
intention of the parties that from the Effective Date there shall be a five (5)
year duration of the Initial Term and from the third anniversary of the
Effective Date there shall be a continuously remaining Renewal Term of two (2)
years duration of the Employee's Employment, subject to the termination
provisions hereof.
"Required Board Majority" means at any time at least a
sixty-six percent (66%) majority of the members of the Board voting at that
time.
"Securities Act" means the Securities Act of 1933.
"Terminating Party" means the Employee or the Company, as the
case
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<PAGE> 12
may be, who or which terminates the Employee's Employment by means of a Notice
of Termination.
"Termination Date" means:
(a) if the Employee's Employment is terminated by
reason of the Employee's death during the term of this Agreement or retirement
at the age of 65, the date of that death or retirement;
(b) if the Employee's Employment is terminated by
reason of the Employee's giving a Notice of Termination following a Change of
Control pursuant to Section 5(B)(i)(b) or (c), sixty (60) days from the Notice
of Termination; provided that the Termination Date shall be no earlier than 275
days after the Change of Control and further provided that the Notice of
Termination shall be no later than 365 days after the Change of Control.
(c) if the Employee's Employment is terminated by
reason of the Employee's giving a Notice of Termination without Good Reason
pursuant to Section 5(B)(i)(d), the Termination Date shall be a date, designated
by the Company, not sooner than the third business day after the Company
receives the applicable Notice of Termination nor later than sixtieth (60th)
day.
(d) if the Employee's Employment is terminated by
reason of the Employee's disability the Termination Date shall be as specified
in Section 5(c).
(e) if the Employee's Employment is terminated by
Employee for any other reason, the elapse of the sixtieth (60th) day after the
Company receives the Notice of Termination;
(f) If the Employee's Employment is terminated by the
Company for Cause, three business days from the date the Employee receives the
Company's Notice of Termination for Cause;
(g) if the Employee's Employment is terminated by the
Company for any other reason, the Termination Date shall be a date designated by
the Company, not sooner than the third business day after the Employee received
the applicable Notice of Termination nor later than the sixtieth (60th) day.
"Type I Cause" means Cause of the type referred to in clause
(a) of the definition of Cause herein.
"Type II Cause" means Cause of the type referred to in clause
(b) or (c) of the definition of Cause herein.
"Voting" shall include, in respect of a security, voting,
granting a proxy, acting by consent, making a request or demand relating to
corporate action (including calling a stockholder meeting) or otherwise giving
an authorization (within the meaning of Section 14 (a) of the Exchange Act) in
respect of such security.
"Voting Shares" means:
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<PAGE> 13
(a) in the case of any corporation, stock of that
corporation of the class or classes having general voting power under ordinary
circumstances to elect a majority of that corporation's board of directors; and
(b) in the case of any other entity, equity interests
of the class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
B. Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein to any statute defined or referred to herein, including the Code, ERISA
and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same may have been or may be amended or supplemented
from time to time, and any rules or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes each
other gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set forth,
and beginning as of the Effective Date, the Company will employ the Employee as
Chairman of the Board and Chief Executive Officer of Company and the Employee
will serve in the Company's employ in that position. The Employee shall perform
such duties, and have such powers, authority, functions, duties and
responsibilities for the Company and corporations Affiliated with the Company as
are commensurate and consistent with the employment as Chairman of the Board and
Chief Executive Officer of the Company. The Employee also shall have such
additional powers, authority, functions, duties and responsibilities as may be
assigned to him by the Board (excluding the voting participation of Employee);
provided that, without the Employee's written consent, such additional powers,
authority, functions, duties and responsibilities shall not be inconsistent or
interfere with, or detract from, those herein vested in, or otherwise then being
performed for the Company by, the Employee.
B. The Employee shall not, at any time during the Employment, engage in
any other activities unless these activities do not interfere materially with
the Employee's duties and responsibilities for the Company at that time, except
that the Employee shall be entitled, subject to the provisions of Section 7,
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(a) to continue with such activities as the Employee has
carried on prior to the Effective Date, including making and managing his
personal investments and participating in other business, church or civic
activities provided that such activities do not include a Beneficial Ownership
interest in a competitor, supplier or customer of the Company other than an
investment in a Publicly Traded company of which Employee is not an employee,
officer, director or partner that does not exceed 5% of the outstanding voting
shares of voting stock.
(b) to serve on civic boards, non-profit boards, charitable
boards or committees and trade associations or similar boards of committees.
(c) to serve on for-profit business boards of directors if
Employer's consent shall have been obtained, which consent shall not
unreasonably be withheld.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the Initial Term of the
Employee's Employment shall be for a period of five (5) years commencing on the
Effective Date. The Renewal Term shall commence three (3) years from the
Effective Date and renew each day thereafter for an additional day without any
further action by the Company or the Employee, it being the intention of the
parties that from the Effective Date there shall be a five (5) year duration and
from the third anniversary of the Effective Date there shall be a continuously
remaining term of two (2) years duration of the Employee's Employment. Subject
to the provisions of Section 5, Employee shall be employed hereunder for the
Initial Term and the Renewal Term. In the event that Employee's Employment
hereunder shall not have otherwise been terminated, such Employment shall
terminate at the end of the Compensation Year in which Employee reaches age 65.
4. COMPENSATION
A. Base Salary. A Base Salary shall be payable to the Employee by the
Company as a guaranteed minimum annual amount hereunder for each Compensation
Year during the period from the Effective Date to the Termination Date. That
Base Salary shall be payable in the intervals consistent with the Company's
normal payroll schedules (but in no event less frequently than semi-monthly),
shall be payable initially at the annual rate of $390,000 and shall be increased
(but not decreased or adjusted other than as provided in Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the greater of the same percentage increase (if any) in the
CPI for the twelve (12) month period immediately preceding such anniversary or
such amount that the majority of the Board (for this purpose excluding Employee)
shall determine.
(ii) if the Employee is required by reason of his Employment
to relocate from a state without a personal income tax at the time of his
relocation to a state having a personal income tax, the Base Salary and Annual
Cash Bonus in effect at the time of such relocation, shall immediately be
increased by the amount equal to the Base Salary and Annual Cash Bonus
immediately prior to this increase multiplied by seventy percent (70%) of the
highest personal income tax rate of such state; for
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example, if the Employee relocates from a state without a personal income tax to
a state having a personal income tax and the highest rate of that tax is six
percent (6%) when the Base Salary is $400,000 and the Annual Cash Bonus is
$440,000, then the Base Salary will be increased by $16,400 (computed at 70% x
6% x $400,000) and the Annual Cash Bonus will be increased by $18,480 (computed
at 70% x 6% x$440,000).
B. Annual Cash Bonus. The Annual Cash Bonus shall be calculated as of
the end of the Compensation Year. (The first such calculation will be made as of
September 30, 1997, the first fiscal year end of the Company after the Effective
Date.) The Annual Cash Bonus shall be paid to the Employee within one hundred
and eighty (180) days of the beginning of each Compensation Year. The Employee's
target Annual Cash Bonus shall be fifty-five percent (55%) of Base Salary.
However, Employee may earn an actual Annual Cash Bonus of between fifty percent
(50%) and two hundred percent (200%) of the target Annual Cash Bonus. If the
Company does not meet the threshold level of performance, the Annual Cash Bonus
will be zero percent (O%) of Base Salary. At the minimum performance threshold,
the Annual Cash Bonus will be fifty percent (50%) of the target Annual Cash
Bonus. If the Company reaches or exceeds the maximum level of performance,
Employee's Annual Cash Bonus will be two-hundred percent (200%) of the target
Annual Cash Bonus (said 200% times the aforesaid 55% resulting in a capping of
the Annual Cash Bonus at 110% of Base Salary.
For purposes of determining the Employee's Annual Cash Bonus, the Company's
average Return on Total Capital Employed (ROCE), as determined over a four year
period, will be calculated and then compared against an average target ROCE as
calculated for a select group of companies over the same period. The select
group of companies shall be those listed on Exhibit B; provided, however that
if the parties agree that one or more of the selected companies becomes
unrepresentative or otherwise unsuitable or unavailable for comparison, the
parties shall select a reasonable substitute. If the parties are unable to agree
upon a reasonable substitute they shall agree on a third party such as a
disinterested and nationally recognized accounting firm that shall make the
recommendation which shall be binding. The average target ROCE for the select
group of twenty (20) publicly traded apparel companies, excluding the Company,
for which financial data are readily available will be calculated by determining
the ROCE each year for each company in the select group and then determining the
average ROCE for each company over the four year period. Next, the companies are
ranked based upon the four year average ROCE for each company. The seventy-fifth
percentile of the four year average ROCE of the select group is the average ROCE
for a company on the list which, excluding the Company, results in five
companies from the select group being above and fifteen companies for the select
group being below the Company's average ROCE. That average ROCE (i.e. the
seventy-fifth percentile) then becomes the target ROCE ("TROCE") for purposes of
comparing the Company's average ROCE.
A four year average ROCE for the Company is then calculated in the same fashion
that the average ROCE is calculated for the select group of companies. If the
four year average ROCE for the Company is equal to or greater than eighty-five
percent (85%) of the TROCE, Employee's Annual Cash Bonus is fifty percent (50%)
of the target Annual Cash Bonus. If the four year average ROCE for the Company
is at least one-hundred
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<PAGE> 16
and thirty percent (130%) of the TROCE, Employee's Annual Cash Bonus is
two-hundred percent (200%) of the target Annual Cash Bonus. If the four year
average ROCE for the Company is between eighty-five percent (85%) of the TROCE
and one-hundred and thirty percent (130%) of the TROCE, the Annual Cash Bonus
will be determined by straight line interpolation (as more particularly
described in the formula attached as Exhibit A and incorporated herein by
reference. Exhibit B attached hereto and incorporated by reference is an example
of the foregoing methodology, correctly applied. The seventy-fifth percentile of
the average ROCE's is 16.58. This is the TROCE. The Company's average ROCE is
20.16% or 122% of the TROCE. Accordingly, the Employee's Annual Cash Bonus is
94.66% of Base Salary.
ROCE is defined as net income plus tax adjusted interest expense divided by
beginning shareholder equity plus average total debt. The average total debt
will be calculated on an annual basis and will reflect all interest bearing
liabilities, including off balance sheet items. Net income will be final net
income as reported under GAAP and will not exclude any unusual or extraordinary
items such as gains or losses recognized from the sale of assets, write downs,
etc. The interest expense will include all interest paid by the Company and will
be adjusted to reflect the Company's tax rate for the performance year.
C. Other Compensation. To the extent authorized by a majority of the
Board (excluding Employee) the Employee shall also be entitled to participate in
any additional Compensation Plans from time to time in effect during the term of
this Agreement, regardless of whether the Employee is an Executive Officer. All
awards to the Employee under all Incentive Plans shall take into account the
Employee's positions with and duties and responsibilities to the Company and its
subsidiaries.
D. Limitations on Payments. Notwithstanding any other provision of
this Agreement, if any portion of any payment under this Agreement, or under any
other agreement with or plan of the Company or its affiliates (in the aggregate
"Total Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Employee shall be reduced such that the value
of the aggregate Total Payments that the Employee is entitled to receive shall
be One Dollar ($1) less than the maximum amount which the Employee may receive
without becoming subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or which the Company may pay
without loss of deduction under Section 280G(a) of the Code. For purposes of
this Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meaning assigned to them in Section 280G of the Code, and such
"parachute payments" shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in accordance with Section
1274(b) (2) of the Code. Within fifteen (15) days following the Date of
Termination or notice by the Company to the Employee of its belief that there is
a payment or benefit due the Employee which will result in an excess parachute
payment as defined in Section 280G of the Code, the Employee and the Company, at
the Company's expense, shall obtain the opinion (which need not be unqualified)
of nationally recognized tax counsel selected by the Company's independent
auditors and acceptable to the Employee in his sole discretion (which may be
regular outside counsel to the Company), which opinion sets forth (i) the amount
of the Base Period Income, (ii) the amount and
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<PAGE> 17
present value of Total Payments and (iii) the amount and present value of any
excess parachute payments determined without regard to the limitations of this
paragraph. As used in this Agreement, the term "Base Period Income" means an
amount equal to the Employee's "annualized includible compensation for the base
period" as defined in Section 280G(d) (1) of the Code. For purposes of such
opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d) (3) and (4) of the Code, which determination
shall be evidenced in a certificate of such auditors addressed to the Company
and the Employee. If such opinion determines that there would be an excess
parachute payment, any payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified by the
Employee in writing delivered to the Company within five (5) days of his receipt
of such opinion or, if the Employee fails to so notify the Company, then as the
Company shall reasonably determine, so that under the bases of calculations set
forth in such opinion there will be excess parachute payment. If such legal
counsel so requests in connection with the opinion required by this paragraph,
the Employee and the Company shall obtain at the Company's expense, and the
legal counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation to be received by the Employee. If the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, then this paragraph shall be of no further force or effect.
5. TERMINATION, DISABILITY AND DEATH
A. Termination of Employment by the Company.
(i) The Company shall be entitled, if acting at the direction
of the Required Board Majority, to terminate the Employee's Employment
(a) at any time for Type I or Type II Cause, or
(b) at any time after December 31,1998 for any
Business Reason.
The Company's termination of the Employee's Employment for Cause will be
effective on the date the Company delivers a Notice of Termination for Cause to
the Employee pursuant to this Section, while the Company's termination of the
Employee's Employment for a Business Reason will be effective not less than
three (3) business days and not more than sixty (60) days from the date the
Company delivers a Notice of Termination for a Business Reason to the Employee
pursuant to this Section 5(A)(i). Between the time that the Company delivers a
Notice of Termination for a Business Reason and the effective date of such
termination, Employee shall continue to receive all of the payments and
consideration provided for in the Agreement.
(ii) If the Company terminates the Employee's Employment for
Cause, the Company promptly thereafter, and in any event within five (5)
business days thereafter, shall pay the Employee, without right of set off,
except for liquidated sums, or counterclaim, his Base Salary to and including
the Termination Date and the amount of all compensation previously deferred by
the Employee (together with any accrued
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<PAGE> 18
interest or earnings thereon), in each case to the extent not theretofore paid,
and, when that payment is made, the Company shall, notwithstanding Section 3,
have no further or other obligations hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for
a Business Reason at any time during the first three years of the Initial Term
(which commences on the Effective Date and ends five years from the Effective
Date), the Company shall promptly thereafter, and in any event within five (5)
business days of the Termination Date, pay the Employee, without right of set
off, except for liquidated sums, or counterclaim, his Base Salary to and
including the Termination Date and the amount of all compensation previously
deferred by the Employee, if any, (together with any accrued interest or
earnings thereon) together with the Business Reason Termination Payment During
Initial Term, in each case to the extent not theretofore paid, and when all such
payments are made, the Company shall, notwithstanding Section 3, have no further
or other obligations hereunder to the Employee.
(iv) If the Company terminates the Employee's Employment for a
Business Reason after the Initial Term and during the Renewal Term, including
during the portion of the Initial Term that is after the first three years of
such Initial Term, the Company shall promptly thereafter, and in any event
within five (5) business days of the Termination Date, pay the Employee, without
right of set off, except for liquidated sums, or counterclaim, his Base Salary
to and including the Termination Date and the amount of all compensation
previously deferred by the Employee, if any, (together with any accrued interest
or earnings thereon) together with the Business Reason Termination Payment
During Renewal Term, in each case to the extent not theretofore paid, and, when
all such payments are made, the Company shall, notwithstanding Section 3, have
no further or other obligations hereunder to the Employee.
B. Termination of Employment by the Employee.
(i) The Employee shall be entitled to terminate the Employment
(a) For Good Reason. Subject to the provision for cure
described in the definition of the term "Good Reason", the Employee shall be
entitled to terminate his Employment for a Good Reason at any time within one
hundred eighty (180) days after the facts or circumstances constituting that
Good Reason first exist and are known to the Employee, provided that at least
ninety (90) days prior to such Termination the Employee has notified Employer
that Employee believes that Good Reason exists and sets forth in reasonable
detail the basis therefor and, at the time of any Notice of Termination therefor
Good Reason continues to exist. Such termination for Good Reason shall be
effective on the applicable Termination Date. In the event that the Employee
terminates his Employment for Good Reason during the Initial Term, the Employee,
without right of set off, except for liquidated sums, or counterclaim, upon the
Date of Termination. In the event that the Employee terminates his Employment
for Good Reason during any Renewal Term, including any portion of the Initial
Term that is after the first three years of such term, the Good Reason Payment
During Renewal Term shall become due and payable to the Employee, without right
of set off, except for liquidated sums, or counterclaim, upon the Date of
Termination.
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<PAGE> 19
(b) Change of Control (Type A). The Employee shall be entitled
to terminate the Employment as a result of Change of Control (Type A), by reason
of the Employee's giving a Notice of Termination following a Change of Control
(Type A) at any time within three hundred sixty-five (365) days after that
Change of Control (Type A) occurs. Such termination shall be effective on the
applicable Termination Date. If the Employee terminates his Employment by reason
of a Change of Control (Type A), except as provided in subparagraph (iv), the
Company shall pay to the Employee in a cash lump sum within five (5) business
days after the Termination Date the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon),
(iii) any accrued but unpaid vacation pay,
(iv) any Annual Cash Bonus earned but not yet paid
for fiscal years ending prior to the Termination Date (such Annual Bonus to be
paid as soon as practicable after the information required to calculate such
Annual Bonus is available to the Company in no event later than sixty (60) days
after the required information is available to the Company) and
(v) the Change of Control Payment (Type A) Upon
Voluntary Termination By Employee calculated as of the Termination Date.
(c) Change of Control (Type B). The Employee shall be entitled
to terminate the Employment as a result of Change of Control (Type B), by reason
of the Employee's giving a Notice of Termination following a Change of Control
(Type B) at any time within three hundred sixty-five (365) days after that
Change of Control (Type B) occurs. Such termination shall be effective on the
applicable Termination Date. If the Employee terminates his Employment by reason
of a Change of Control (Type B), except as provided in subparagraph (iv), the
Company shall pay to the Employee in a cash lump sum within five (5) business
days after the Termination Date the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon),
(iii) any accrued but unpaid vacation pay;
(iv) any Annual Cash Bonus earned but not yet paid
for fiscal years ending prior to the Termination Date (such Annual Bonus to be
paid as soon as practicable after the information required to calculate such
Annual Bonus is available to the Company in no event later than nine (9) months
after the Termination Date) and
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<PAGE> 20
(v) the Change of Control Payment (Type B) Upon
Voluntary Termination By Employee calculated as of the Termination Date.
(d) Without Good Reason. The Employee's termination
of his Employment without Good Reason and other than for Disability will be
effective on the applicable Termination Date. If the Employee terminates his
Employment Without Good Reason and other than for Disability, the Company shall
pay to the Employee, in a cash lump sum within five (5) business days after the
Termination Date, the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon)
which has not yet been paid, and
(iii) any accrued but unpaid vacation pay.
C. Termination by Reason of Disability. During the term of this
Agreement and the period following Termination of this Agreement (for any cause
whatsoever other than Type I cause), (the "policy period") the Company shall
maintain, at its expense and at the current expense level, the individual,
long-term non-cancelable guaranteed renewal individual disability plan now in
place, until such time, not to exceed three (3) years, as Employee has commenced
to have earned annual income in excess of 50% of his most recent Base Salary. In
the event the Employee retires while in the employ of the Company, the Company
shall maintain at its expense but at the current level of premium payments, the
individual, long-term non-cancelable guaranteed renewal individual disability
plan more particularly described in Exhibit D for a period of three (3) years
from the date of retirement. If after retirement, the policy premium exceeds the
level of the premium on the retirement date the Employee shall pay the
difference. If the Employee incurs any Disability during the policy period,
either the Employee or the Company may terminate the Employee's Employment. If
the Employee's Employment is terminated by reason of the Employee's disability
and Notice of Termination of such, the Termination Date shall be the date set in
such notice. If the Employee's Employment is terminated by reason of the
Employee's disability, the Employee shall not be subject to the Non-Compete
paragraph 7(b), but shall be remain subject to the paragraph 7(a) and 7(c).
D. Termination of Employment by Death. Upon the death of the Employee,
the Employment will be terminated on the applicable Termination Date. If the
Employee's Employment is terminated by reason of the Employee's death, the
Company shall pay to the Person the Employee has designated in a written notice
delivered to the Company as his beneficiary entitled to such payment, if any, or
to the Employee's estate, as applicable, in a cash lump sum within thirty (30)
days after the Termination Date, the amount equal to the sum of
(i) the portion of the Base Salary through the end of the
month in which
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the Termination Date occurs which has not yet been paid,
(ii) all compensation previously deferred by the Employee, if
any, (together with any accrued interest or earnings thereon) which has not yet
been paid, and
(iii) any accrued but unpaid vacation pay.
E. Return of Property. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee.
F. Stock Options. Notwithstanding any provision of this Agreement to
the contrary:
(i) except in the case of a termination of the Employee's
Employment for Cause, as described in sub paragraphs (a) and (b) of the Cause
definition, all stock options previously granted to the Employee under Incentive
Plans that have not been exercised and are outstanding as of the time
immediately prior to the Termination Date shall, notwithstanding any contrary
provision of any applicable Incentive Plan, remain outstanding (and continue to
become exercisable pursuant to their respective terms) until exercised or the
expiration of their term, whichever is earlier; and
(ii) in the case of a termination of the Employee's Employment
for Cause, as described in sub paragraphs (a) and (b) of the Cause definition,
all stock options previously granted to Employee under Incentive Plans that have
not been exercised and are outstanding as of the time immediately prior to the
Termination Date shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding and continue to be exercisable until
exercised or the date that is ten (10) days after the Termination Date,
whichever is earlier.
Notwithstanding any provision of this Agreement to the contrary, for purposes of
all Incentive Plans, the term "Cause" shall mean Cause (subparagraphs (a) and
(b)) as defined herein.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be entitled to not less
than six (6) weeks of annual vacation and all legal holidays during which times
his applicable compensation shall be paid in full.
B. Fringe Benefits. During the term of this agreement, the Employee is
entitled to the same level of fringe benefits previously and currently provided
to Employee by the Company including but not limited to a company car for
business and personal use, health insurance, dental insurance, disability
insurance, and life insurance; provided further that the Company shall increase
the life insurance benefit to Employee's specified beneficiary to $2.5 million.
C. Business Expenses. The Employee is authorized to incur, and will be
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<PAGE> 22
entitled to receive prompt reimbursement for, all reasonable expenses incurred
by the Employee in performing his duties and carrying out his responsibilities
hereunder, including first class air fare and hotels, business meal,
entertainment and travel expenses, provided that the Employee complies with the
applicable policies, practices and procedures of the Company relating to the
submission of expense reports, receipts or similar documentation of those
expenses. The Company shall either pay directly or promptly reimburse the
Employee for such expenses not more than twenty (20) days after the submission
to the Company by the Employee from time to time of an itemized accounting of
such expenditures for which direct payment or reimbursement is sought. Unpaid
reimbursements after such 20-day period shall accrue interest in accordance with
Section 7(K).
D. Support. During the Employment, the Employee shall be provided by
the Company with office space, furnishings, and facilities, reserved parking,
secretarial and administrative assistance, supplies and other support equipment
(including a computer, facsimile machine and photocopier).
E. No Forced Relocation. The Employee shall not be required to move
Employee's principal place of residence from the central Florida area or to
perform regular duties that could reasonably be expected to require either such
move against his wish or to spend amounts of time each week outside the central
Florida area which are unreasonable in relation to the duties and
responsibilities of the Employee hereunder , and the Company agrees that, if it
requests the Employee to make such a move and the Employee declines that
request,
(i) that declination shall not constitute any basis for a
determination that Type II Cause exists unless the business of Employer is
materially put at risk by such refusal as determined by the Required Majority
Board and
(ii) no animosity or prejudice will be held against Employee.
7. GENERAL PROVISIONS
A. Confidentiality. The Employee shall not divulge or communicate to
any person (except in performing his duties under this agreement) or use for his
own purpose Confidential Information which is not generally known to the public
and shall use his best efforts to prevent the publication or disclosure by and
other person of any such Confidential Information. Information shall be deemed
not to be Confidential Information if it has become known to the public
generally through no act or fault of the Employee. All documents and objects
made, complied, received or held or used by Employee in connection with the
business of the Company during the employment shall be and remain the Company's
property.
B. Non-Competition. The Employee agrees that, except as otherwise
provided herein, during the Employment and for a period of two years after the
applicable Termination Date Employee will not directly or indirectly, whether or
not for compensation and whether or not as an employee, be engaged in or have
any impermissible financial interest in any business that is engaged in the
merchandising, manufacturing, distribution or marketing of men's casual pants,
shorts and jeans (a
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<PAGE> 23
"competing business"). For purpose of this Agreement, the Employee shall not be
deemed to be engaged in a competing business if Employee is employed by a
division or subsidiary or similar business unit of a company or other business
entity that would otherwise be deemed a competing business so long as the
division, subsidiary or similar business unit by which the Employee is employed
is accounted for as a separate profit center and does not engage in a competing
business, and Employee's ownership interest, if any, is not an impermissable
financial interest. For purposes of this Agreement, the Employee shall be deemed
to be engaged in a competing business if Employee is an employee, officer,
director, partner or consultant of such competing business or has an
impermissible financial interest therein. For purposes of this Agreement, the
Employee shall be deemed to have an impermissible financial interest in
competing business if Employee is a partner or shareholder directly or
indirectly, therein, except as provided hereafter. Employee shall not be deemed
to have an impermissible financial interest in any competing publicly traded or
privately held business so long as Employee owns less than five percent (5%) of
any class of securities of such publicly traded or privately held company and is
not an officer, director, partner, employee or consultant thereto, except as to
holding an office or being an employee, as otherwise provided in the "employed
by a division . . ." sentence above.
C. Non-Solicitation. The Employee agrees that during the Employment and
for a period of two (2) years after the Date of Termination, Employee shall not
employ any person who was employed by the Company or any of its controlled
Affiliates on the Termination Date, or induce such Person to accept employment
other than with the Company or its subsidiaries.
D. The Employee recognizes that a breach of his obligations under this
paragraphs (A) through (C) above would cause irreparable harm to the Company
and, provided that as a pre-condition the Company has previously tendered all
sums that are due and payable to the Employee under the terms of this Agreement,
the Company shall be entitled to preliminary and permanent injunctions enjoining
violations as a non-exclusive remedy.
E. Severability. If any one or more of the provisions of this Agreement
shall, for any reason, be held or found by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
(i) such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement,
(ii) this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein (except that
this clause (ii) shall not prohibit any modification allowed under Section 7(B))
and
(iii) if the effect of a holding or finding that any such
provision is invalid, illegal or unenforceable is to modify to the Employee's
detriment, reduce or eliminate any compensation, reimbursement, payment,
allowance or other benefit to the Employee intended by the Company and Employee
in entering into this Agreement, the Company shall, within thirty (30) days
after the date of such finding or holding,
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<PAGE> 24
negotiate and expeditiously enter into an agreement with the Employee which
contains alternative provisions (reasonably acceptable to the Employee and the
Company) that will restore to the Employee (to the extent lawfully permissible)
substantially the same economic, substantive and income tax benefits and legal
rights the Employee would have enjoyed had such provision been upheld as legal,
valid and enforceable; and
(iv) if any provision of this Agreement or portion hereof is
so broad, in scope or duration, as to be unenforceable, such provision or
portions thereof shall be interpreted to be only so broad as to be legal, valid
and enforceable.
F. Nonexclusivity of Rights. Nothing herein shall prevent or
limit the Employee's continuing or future participation in any Compensation Plan
or, subject to Section 9(N), limit or otherwise affect such rights as the
Employee may have under any other contract or agreement with the Company. Vested
benefits and other amounts to which the Employee is or becomes entitled to
receive under any Compensation Plan on or after the Termination Date shall be
payable in accordance with that Compensation Plan, except as expressly modified
hereby.
G. Full Settlement. The Company's obligations to make the payments
provided for in, and otherwise to perform its undertakings in, this Agreement
shall not be affected by any right of set-off (other than as to liquidated
amounts), counterclaim, recoupment, defense or other action, claim or right the
Company may have against the Employee or others. Except as stated in Section
5(c), in no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any provision hereof, and those amounts shall not be reduced,
regardless of whether the Employee obtains other employment or becomes
self-employed.
H. Judicial Review. Any determination as to the existence of Cause by
the Board or Required Board Majority is reviewable by the trier of fact to
determine whether such determination was made in good faith versus bad faith and
whether such determination was reasonable versus arbitrary or capricious.
I. Successors.
(i) This Agreement is personal to the Employee and, without the prior
written consent of the Company, is not assignable or delegable by the Employee
otherwise than by transfer of rights by will or the laws of descent and
distribution.
(ii) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns and this Agreement shall inure to the
benefit and be enforceable by the Employee's legal representatives acting in
their capacities as such pursuant to applicable law.
(iii) The Company shall require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
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<PAGE> 25
J. Amendments; Waivers. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
K. Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person get forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(i) if to the Employee, addressed as follows:
William W. Compton
7225 N. Mobley Road
Odessa, FL 33556
; and
(ii) if to the Company, addressed as follows:
Tropical Sportswear Int'l Corporation
4902 West Waters Avenue
Tampa, FL 33634
Attn: Michael Kagan
In the case of any Notice of Termination or of Good
Reason, with copies to each member of the Board
L. No Waiver. The failure of the Company or the Employee to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee or the right of the Company to
terminate the Employment for Good Reason or by reason of a Change of Control
pursuant to Section, 5(B) (i)) shall not be deemed a waiver of that provision or
of any other provision of or right under this Agreement.
M. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Florida, without reference to any
principles of conflicts of laws.
N. Jurisdiction and Venue. The Company and the Employee irrevocably
consents with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of the
Company's or the Employee's right hereunder to service of process in the State
of Florida and hereby waives any right to contest or oppose receipt of such
service of process in Florida provided such Person actually received such
process by mail or electronic communication. The Company and the Employee
revocably
(i) agrees that any such action, suit or other legal
proceeding may be brought in Hillsborough County, Florida; and
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<PAGE> 26
(ii) consents to the jurisdiction of any appropriate court in
such county in any such action, suit or other legal proceeding and
(iii) waives any objection it may have to the laying of venue
of any such action, suit or other legal proceeding in any of such courts and
(iv) WAIVES ANY RIGHT TO TRIAL BY JURY.
O. Headings. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
P. Interest. If any amounts required to be paid or reimbursed to the
Employee hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections 6 and
10, those amounts shall accrue interest compounded daily at the annual
percentage rate which is one and one half percentage points (1.5%) above the
interest rate announced by NationsBank, Tampa, Florida (or its successor) from
time to time, as its Base Rate (or prime lending rate), from the date those
amounts were required to have been paid or reimbursed to the Employee until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event shall the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
Q. Publicity. The Company agrees with the Employee that, except to the
extent required by law or legal process (including reporting and public
disclosure contemplated under the Exchange Act and the Securities Act) and any
other law giving any Person a private right of action or suit, neither the
Company nor the Employee will not make or publish, without the prior written
consent of the other, any written or oral statement concerning the terms of the
Employee's employment relationship with the Company and will not, if a Notice of
Termination is given by either the Company or the Employee for any reason,
publish or cause to be published any statement concerning the Company's
relationship with the Employee or the Employee's relationship with the Company,
including Employee's work-related performance or the reasons or basis for the
giving of that Notice of Termination.
R. Tax Withholding. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
S. Entire Agreement. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participate prior to the
Effective Date.
T. Effective Date. This Agreement shall be effective on the Closing
Date.
8. LITIGATION COSTS In the event of litigation over the terms or breach of this
Agreement, the prevailing party shall be entitled to recover litigation costs
and attorneys fees from the non-prevailing party.
-26-
<PAGE> 27
9. INDEMNIFICATION
The Employee shall be indemnified by the Company to the maximum extent
permitted by the law of Florida, the state of the Company's incorporation, and
the law of the state of incorporation of any subsidiary of the Company of which
the Employee is a director or an officer or employee, as the same may be in
effect from time to time.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
By:_____________________________________
Its:____________________________________
EMPLOYEE
________________________________________
William W. Compton
Employee's Permanent Address:
7225 N. Mobley Road
Odessa, FL 33556
-27-
<PAGE> 28
EXHIBIT A
INCENTIVE CALCULATION FOR BILL COMPTON 2/4/97
for the FYE 9/95
<TABLE>
<CAPTION>
Target
Award
ROCE ROCE Incentive Bonus
Value Performance Opportunity Percentage
----- ----------- ----------- ----------
<S> <C> <C> <C> <C>
130% 21.55% 200.00% 110.00%
129% 21.39% 196.67% 108.17%
128% 21.22% 193.33% 106.33%
127% 21.06% 190.00% 104.50%
126% 20.89% 186.67% 102.67%
125% 20.73% 183.33% 100.83%
124% 20.56% 180.00% 99.00%
123% 20.39% 176.67% 97.17%
122% 20.23% 173.33% 95.33%
- --------------------------------------------------------------------------------------------------------------
121.59% 20.16% 171.97% 94.59%
- --------------------------------------------------------------------------------------------------------------
121% 20.06% 170.00% 93.50%
120% 19.90% 166.67% 91.67%
119% 19.73% 163.33% 89.83%
118% 19.56% 160.00% 88.00%
117% 19.40% 156.67% 86.17%
116% 19.23% 153.33% 84.33%
115% 19.07% 150.00% 82.50%
114% 18.90% 146.67% 80.67%
113% 18.74% 143.33% 78.83%
112% 18.57% 140.00% 77.00%
111% 18.40% 136.67% 75.17%
110% 18.24% 133.33% 73.33%
109% 18.07% 130.00% 71.50%
108% 17.91% 126.67% 69.67%
107% 17.74% 123.33% 67.83%
106% 17.57% 120.00% 66.00%
105% 17.41% 116.67% 64.17%
104% 17.24% 113.33% 62.33%
103% 17.08% 110.00% 60.50%
102% 16.91% 106.67% 58.67%
101% 16.75% 103.33% 56.83%
100% 16.58% 100.00% 55.00%
</TABLE>
Note: 100% = 75th percentile
Bill Compton bonus is $320,000 X 94.59% = $302,673
Page 1
<PAGE> 29
EXHIBIT B
RETURN ON CAPITAL EMPLOYED
<TABLE>
<CAPTION>
(1992-
1995)
FYE AVERAGE
PERCENTILE COMPANY MONTH 1992 1993 1994 1995 ROCE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 100 Marisa Christina Inc 3 Dec 218.29% 95.69% 70.07% 29.34% 103.35%
-----------------------------------------------------------------------------------------------------------------------------
2 95 Tommy Hilfiger Mar 46.64% 63.30% 32.30% 23.23% 41.37%
-----------------------------------------------------------------------------------------------------------------------------
3 90 Nautica Feb 17.84% 20.94% 28.58% 20.96% 22.08%
-----------------------------------------------------------------------------------------------------------------------------
4 85 Supreme International Jan N/A 25.13% 25.51% 12.92% 21.19%
-----------------------------------------------------------------------------------------------------------------------------
TSI SEPT 34.20% 11.86% 21.87% 12.71% 20.16%
-----------------------------------------------------------------------------------------------------------------------------
5 80 Donnkenny Inc 1 Nov 28.04% 21.13% 15.32% 7.35% 17.96%
-----------------------------------------------------------------------------------------------------------------------------
6 75 Ashworth Inc Oct 27.42% 17.72% 16.53% 4.65% 16.58%
-----------------------------------------------------------------------------------------------------------------------------
7 70 Tandy Brands June 20.32% 19.70% 16.63% 3.28% 14.98%
-----------------------------------------------------------------------------------------------------------------------------
8 65 Haggar Corp Sept 12.34% 16.40% 18.29% 6.25% 13.32%
-----------------------------------------------------------------------------------------------------------------------------
9 60 Garan Inc Sept 18.95% 18.73% 9.65% 5.72% 13.26%
-----------------------------------------------------------------------------------------------------------------------------
10 55 First Years Dec 10.56% 4.10% 14.91% 14.90% 11.12%
-----------------------------------------------------------------------------------------------------------------------------
11 50 Hampshire Group Dec 13.79% 10.77% 25.87% 18.76% 11.91%
-----------------------------------------------------------------------------------------------------------------------------
12 45 Kleinert's Inc Nov 4.14% 8.39% 16.05% 14.92% 10.88%
-----------------------------------------------------------------------------------------------------------------------------
13 40 Quiksilver Oct 1.15% 10.45% 15.37% 15.92% 10.72%
-----------------------------------------------------------------------------------------------------------------------------
14 35 Chic by HIS inc Nov 4.60% 10.31% 8.67% 1.95% 6.38%
-----------------------------------------------------------------------------------------------------------------------------
15 30 Osh Kosh B'Gosh Dec 8.98% 2.68% 4.39% 7.48% 5.88%
-----------------------------------------------------------------------------------------------------------------------------
16 25 Biscayne Apparel Inc Dec -1.10% 17.86% 8.77% -6.66% 4.72%
-----------------------------------------------------------------------------------------------------------------------------
17 20 Danskin Inc 1 Mar 24.87% 9.47% -8.82% -9.27% 4.06%
-----------------------------------------------------------------------------------------------------------------------------
18 15 Hampton Industries Dec 3.58% -0.86% 3.68% 0.72% 1.78%
-----------------------------------------------------------------------------------------------------------------------------
19 10 Farah Inc Oct -12.21% 2.39% 16.68% -7.54% -0.17%
-----------------------------------------------------------------------------------------------------------------------------
20 5 Jalate Ltd 2 Dec N/A N/A N/A -28.01% -28.01%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnote 1. Danskin & Donnkenny 1992 results based on ending debt only -
beginning debt not available
2. Jalate: IPO 1994. 1992 and 1993 not available
3. Marisa Christina able to obtain all information - company went
public in 1994
Page 1
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
,___________________1997, to become effective as of the Effective Date (as
herein defined) by and between TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a
Florida corporation (the "Company"), and MICHAEL KAGAN (the "Employee").
RECITALS:
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's business plan and to manage the Company's future growth and
development and to maximize the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms have the
meanings assigned to them below:
"Acquiring Person(Type A)" means any Person who or which,
together with all Affiliates and Associates of such Person, is or are the
Beneficial Owner(s) of a minimum of twenty five (25%) or more of the shares of
Common Stock then outstanding, but does not include any Exempt Person; provided,
however, that a Person shall not be or become an Acquiring Person if such
Person, together with its Affiliates and Associates, shall become the Beneficial
Owner of a minimum of twenty five percent (25%) or more of the shares of Common
Stock then outstanding solely as a result of a reduction in the number of shares
of Common Stock outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any Affiliate or Associate
of such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting one percent (1%) or more of the
then outstanding shares of Common Stock or any other Person (or Persons) who is
(or collectively are) the Beneficial Owner of shares of Common Stock
constituting one percent (1%) or more of the then outstanding shares of Common
Stock shall become an Affiliate or Associate of such Person, unless, in either
such case, such Person, together with all Affiliates and Associates of such
Person, is not then the Beneficial Owner of a minimum of twenty five percent
(25%) or more of the shares of Common Stock then outstanding.
"Acquiring Person (Type B)" means any Person who or which,
together with all Affiliates and Associates of such Person, is or are the
Beneficial Owner(s) of a minimum of thirty three and one half percent (33.5%) or
more of the shares of Common Stock then outstanding, but does not include any
Exempt Person; provided, however, that a Person shall not be or become an
Acquiring Person if such Person, together with its Affiliates and Associates,
shall become the Beneficial Owner of a minimum of thirty
-1-
<PAGE> 2
three and one half percent (33.5%) or more of the shares of Common Stock then
outstanding solely as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of Common Stock by the Company, unless
and until such time as such Person or any Affiliate or Associate of such Person
shall purchase or otherwise become the Beneficial Owner of additional shares of
Common Stock constituting one percent (1%) or more of the then outstanding
shares of Common Stock or any other Person (or Persons) who is (or collectively
are) the Beneficial Owner of shares of Common Stock constituting one percent
(1%) or more of the then outstanding shares of Common Stock shall become an
Affiliate or Associate of such Person, unless, in either such case, such Person,
together with all Affiliates and Associates of such Person, is not then the
Beneficial Owner of a minimum of thirty three and one half percent (33.5%) or
more of the shares of Common Stock then outstanding. If a Person becomes an
Acquiring Person (Type B) he shall not also be considered an Acquiring Person
(Type A).
"Active Status" means the Employee's Employment status from
the Effective Date to the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
"Annual Cash Bonus" is the cash bonus calculated pursuant to
the methodology set forth in paragraph 4.B. and paid to Employee annually during
the term of this Agreement.
"Annual Cash Compensation" of the Employee for any
Compensation Year means the sum of the Base Salary and Annual Cash Bonus earned
by the Employee during that Compensation Year, including all amounts deferred at
the election of the Employee pursuant to a Compensation Plan intended to qualify
as a plan under Section 401(k) of the Code or otherwise. If salary or bonus is
paid in whole or in part in property other than cash (such as Common Stock) the
amount so paid shall be the fair market value thereof on the date of payment.
"Average Annual Bonus" is the average (mean) of the annual
bonuses earned by Employee during the three year period ending on or preceding
the Termination Date (including any Compensation Years that end on or precede
the Effective Date). If, for purposes of a termination payment, the annual bonus
for the most recent year cannot be calculated because necessary information is
not yet available, the annual bonus for the preceding year will be counted twice
instead. If any annual bonus was to be paid in whole or in part in property
other than cash (such as Common Stock) the amount so earned and included for
purposes of this calculation shall be the fair market value thereof on the date
for the determination of such fair market value that is specified in the
agreement that such payment be so paid, and if no such date is therein specified
for such determination, then on the date of such agreement, and , if there is no
such agreement, then on the date of payment.
"Average Annual Compensation" means the sum of the Employee's
Average Base Salary and the Average Annual Bonus.
-2-
<PAGE> 3
"Average Base Salary" is the average (mean) of the base
salaries earned by the Employee during the three year period ending on or
preceding the Termination Date (including any Compensation Years that precede or
end on the Effective Date). If any base salary was to be paid in whole or in
part in property other than cash (such as Common Stock) the amount so earned and
included for purpose of this calculation shall be the fair market value thereof
on the date for determination of such fair market value that is specified in the
agreement that such payment be so paid, and if no such date is therein specified
for such determination then on the date of such agreement, and if there is no
such agreement, then on the date of payment.
"Associate" means, with reference to any Person,
(a) any corporation, firm, partnership, association,
unincorporated organization or other entity (other than the Company or a
subsidiary of the Company) of which that Person is an officer or general partner
(or officer or general partner of a general partner) or is, directly or
indirectly, the Beneficial Owner of 15% or more of any class of its equity
securities,
(b) any trust or other estate in which that Person
has a substantial beneficial interest or for or of which that Person serves as
trustee or in a similar fiduciary capacity and
(c) any relative or spouse of that Person, or any
relative of that spouse, who has the same home as that Person.
"Base Salary" means the guaranteed minimum annual salary
payable by the Company to the Employee pursuant to Section 4(A).
"Beneficial Owner" a specified Person is deemed the
"Beneficial Owner" of, and is deemed to "beneficially own," any securities.
(a) of which that Person or any of that Person's
Associates or controlled Affiliates, directly or indirectly, is the "beneficial
owner" (as determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (a) as a result of an agreement, arrangement or
understanding to vote that security if that agreement, arrangement or
understanding: 1) arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act (that is, the
exclusions in these subparagraphs (a) and (b) give effect to the exemption for a
proxy or consent solicitation in Exchange Act rule 14a-2(b) (2); and (2) is not
then reportable by such Person on Exchange Act Schedule 13D (or any comparable
or successor report);
(b) which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, has the right or obligation to
acquire (provided that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an event)
pursuant to any agreement, arrangement or
-3-
<PAGE> 4
understanding (whether or not in writing) or on the exercise of conversion
rights, exchange rights, other rights, warrants or options, with an exercise
price equal to or below the public trading price at the time of calculation;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," securities tendered pursuant to a tender or exchange
offer made by that Person or any of that Person's Affiliates or Associates until
those tendered securities are accepted for purchase or exchange; or
(c) which are beneficially owned, directly or
indirectly, by (1) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's Affiliates or
Associates has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, or holding with the right to vote or of
voting (except pursuant to a revocable proxy or consent as described in the
provision to subparagraph (a) of this definition) or disposing of any voting
securities of the Company or (2) any group (as that term is used in Exchange Act
Rule 13d-5(b)) of which that specified Person is a member; provided, however,
that nothing in this definition shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such a Person's participation in good
faith in a firm commitment underwriting until the expiration of forty (40) days
after the date of that acquisition and the security has been placed in an
investment account. For purposes of this Agreement, "voting" a security shall
include voting, granting a proxy, acting by consent, making a request or demand
relating to corporate action (including, without limitation, calling a
stockholder meeting) or otherwise giving an authorization (within the meaning of
Section 14(a) of the Exchange Act) in respect of such security.
"Board" means herein the entire Board of Directors of the
Company, except when less than the entire Board is specified herein.
"Business Reason" for the Company's termination of the
Employee's Employment means any reason other than Cause.
"Business Reason Termination Payment During Initial Term"
means at any time during the Initial Term (which begins on the Effective Date
and ends on the fifth anniversary thereof) an amount equal to the Employee's
Average Annual Compensation calculated as of the Termination Date multiplied by
the greater of 2 or the remaining number of years (rounded to the nearest 1/12th
of a year) in such five year Initial Term. For example, if the Company were to
terminate the Employee for a Business Reason two and seven-twelfths (2 7/12)
years from the Effective Date, the Employee would be entitled to an amount equal
to two and five twelfths (2 5/12) times the Employee's Average Annual
Compensation on such Termination Date. If the Company were to terminate the
Employee for a Business Reason four and six-twelfths (4 6/12) years from the
Effective Date, the Employee would be entitled to an amount equal to two times
the Employee's Average Annual Compensation on such Termination Date.
"Business Reason Termination Payment During Renewal Term"
means at any time after the Initial Term and during any Renewal Term an amount
equal to two (2) times the Employee's then Average Annual Compensation
calculated as of the
-4-
<PAGE> 5
Termination Date.
"Cause" for the Company's termination of the Employee's
Employment means:
(a) the Employee's final conviction of a felony, as
evidenced by a binding and final judgment, order or decree of a court of
competent jurisdiction, which in the opinion of the Required Board Majority
(excluding Employee) substantially impairs the Employee's ability to perform his
duties and obligations to the Company; or
(b) a determination by the Required Board Majority
(excluding Employee) that the Employee has continued to engage in conduct which
has caused or is reasonably likely to cause, demonstrable and serious injury to
the Company after having been given written notice of such determination by the
Required Board Majority and a reasonable opportunity to cure, which curative
period shall not be less than ninety (90) days: or
( c) the Required Board Majority's determination
(excluding Employee) of Employee's continuing failure to substantially perform
his duties and responsibilities in accordance with the provisions of this
Agreement (except by reason of the Employee's incapacity due to physical or
mental illness or injury) for a period of ninety (90) days (the "Grace Period")
after the Required Board Majority (excluding Employee) has delivered to the
Employee a written demand for substantial performance hereunder which
specifically identifies the provision of this Agreement which the Required Board
Majority contends that Employee has continually failed to substantially perform,
the bases for the Required Board Majority's determination that the Employee has
continually failed to substantially perform his duties and responsibilities
under such provision and the specific nature of the corrective action that the
Required Board Majority proposes that Employee take during the Grace Period;
provided, that for purposes of this clause (c), the Company shall not have Cause
to give such notice or thereafter terminate the Employee's Employment if such
act or omission was taken or omitted to be taken by an officer or employee of
the Company other than Employee or the act or omission was taken or omitted by
Employee with the concurrence of a majority of the Board or the act or omission
was taken or omitted by the Employee in good faith with a reasonable belief that
the act or omission was authorized by a majority of the Board or otherwise in
the interest of the Company. If, during such Grace Period, Employee takes the
corrective action specified by the Required Board Majority Termination for cause
under this provision shall require the approval of the Required Board Majority
(excluding Employee).
"Change of Control (Type A)" means the occurrence of any of
the following events that occurs after the Closing Date:
(a) any Person becomes an Acquiring Person (Type A);
(b) a merger of the Company with or into, or a sale
by the Company of its properties and assets substantially as an entirety to,
another Person occurs and, immediately after that occurrence, any Person, other
than any Exempt Person, together with all Affiliates and Associates of such
Person, shall be the
-5-
<PAGE> 6
Beneficial Owner of twenty five percent (25%), but no more than thirty three and
one half percent (33.5%) or more of the total voting power of the then
outstanding Voting Shares of the Person surviving that transaction (in the case
of a merger or consolidation) or the Person acquiring those properties and
assets substantially as an entirety.
"Change of Control (Type B)" means the occurrence of any of
the following events that occurs after the Closing Date:
(a) any Person becomes an Acquiring Person (Type B);
(b) a merger of the Company with or into, or a sale
by the Company of its properties and assets substantially as an entirety to,
another Person occurs and, immediately after that occurrence, any Person, other
than any Exempt Person, together with all Affiliates and Associates of such
Person, other than Exempt Persons, shall be the Beneficial Owner of more than
thirty three and one half percent (33.5%) or more of the total voting power of
the then outstanding Voting Shares of the Person surviving that transaction (in
the case of a merger or consolidation) or the Person acquiring those properties
and assets substantially as an entirety.
"Change of Control (Type A) Payment Upon Voluntary Termination
By Employee" means that if within 365 days after a Change of Control (Type A)
the Employee gives Notice of Termination of this Agreement, the Employee shall
be paid an amount equal to the Employee's Average Base Salary calculated as of
the Termination Date multiplied by two (2.0).
"Change of Control (Type B) Payment Upon Voluntary Termination
By Employee" means that if within 365 days after a Change of Control (Type B)
the Employee terminates this Agreement, the Employee shall be paid an amount
equal to the sum of the Employee's Average Base Salary calculated as of the
Termination Date multiplied by two (2.0) plus the Employee's Average Annual
Bonus calculated as of the Termination Date multiplied by two (2.0).
"Closing Date" means the completion of the closing of the sale
of shares of the Common Stock to the underwriters in the Company's initial
public offering.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock or any other voting
securities of the Company.
"Company" means
(a) Tropical Sportswear International Corporation, a
Florida corporation, and any successor thereto;
(b) any Person that assumes the obligations of "the
Company" hereunder, by operation of law, pursuant to Section 7(I) or otherwise,
including but not limited to Tropical Sportswear International Corporation, a
Florida corporation.
-6-
<PAGE> 7
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any subsidiary of the Company, or to which the Company or any subsidiary of
the Company contributes, on behalf of any Executive Officer or any member of the
family of any Executive Officer,
(a) including
(i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee benefit plan" (as defined
in Section 3(3) of ERISA),
(ii) any other retirement and savings plan,
including any supplemental benefit arrangement relating to any plan intended to
be qualified under Section 401 (a) of the Code or whose benefits are limited by
the Code or ERISA,
(iii) any "employee welfare plan" (as
defined in Section 3(l) of ERISA),
(iv) any arrangement, plan, policy, practice
or program providing for severance pay, deferred compensation or insurance
benefit,
(v) any Incentive Plan and
(vi) any arrangement, plan, policy, practice
or program
(A) authorizing and providing for
the payment or reimbursement of expenses attributable to first-class air travel
and first-class hotel occupancy while on travel or
(B) providing for the payment of
business luncheon and country club dues, long-distance charges, mobile phone
monthly air time or other recurring monthly charges or any other fringe benefit,
allowance or accommodation of employment, but
(b) excluding any compensation arrangement, plan,
policy, practice or program to the extent it provides for annual Base Salary or
Annual Cash Bonus.
"Compensation Year" means the fiscal year of the Company.
"Confidential Information" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other confidential,
non-public/proprietary information of that Person, including information derived
from reports, investigations, research, work in progress, codes, marketing and
sale programs, customer lists, records of customer service requirements, capital
expenditure projects, cost summaries, pricing formulae, contract analyses,
financial information, projections, confidential filings with any governmental
authority and all other confidential, nonpublic concepts, methods of doing
business, materials or information prepared or performed for, by or on behalf of
that Person.
-7-
<PAGE> 8
"CPI" means for any period the Consumer Price Index for All
Urban Consumers--All Items Index for Tampa, Florida (or any substantially
similar index published for the same area), as published by the United States
Department of Labor, Bureau of Labor Statistics (or its successor) for that
period.
"Disability" of the Employee means the Employee has been
determined (which determination shall be final and binding on all Persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred (including illness or injury resulting from any substance
abuse), by a Qualified Physician (who may be the doctor treating or otherwise
acting as the Employee's doctor in connection with the illness or injury in
question) selected by the Employee with the consent of the Company, or by the
Company at its expense and with the consent of the Employee (which consent shall
not be unreasonably withheld in either case), to be unable to perform, at the
time of that determination and, in all reasonable medical likelihood,
indefinitely thereafter, the normal duties then most recently assigned, under
and in accordance with the terms hereof, to the Employee while on Active Status;
provided that, the determination whether the Employee has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians,
(a) one (1) of whom shall be selected by the
Employee,
(b) one (1) of whom shall be selected by the Company
and
(c) the remaining one (1) of whom shall be selected
by the Qualified Physicians selected by the Employee and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Employee and the Company if:
(1) (A) the Company has reasonably withheld
its consent to the Qualified Physician, if any, selected by the Employee or
(B) the Employee has reasonably withheld
his consent to the Qualified Physician, if any, selected by the Company and
(2) the Qualified Physicians selected by the
Employee and the Company disagree as to whether the Employee has incurred a
Disability. For purposes of this definition, if the Employee is unable by reason
of illness or injury to give an informed consent to the performance of the
treatment of that illness or injury, a Qualified Physician selected by any
Person who is authorized by applicable law to give that consent will be deemed
to have been selected by the Employee.
"Effective Date" means the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"Employment" means the employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"Exchange Act" means the Securities Exchange Act of 1934.
-8-
<PAGE> 9
"Executive Officer" means any of the chairman of the board,
the chief executive officer, the chief operating officer, the chief financial
officer, the president, any executive or senior vice president or the general
counsel of the Company.
"Exempt Person" means
(a) (1) the Company, any subsidiary of the Company,
any employee benefit plan of the Company or of any subsidiary of the Company,
and
(2) any Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other employee benefits for
employees of the Company or any subsidiary of the Company and
(b) the Employee, any Affiliate or Associate of the
Employee or any group (as that term is used in Exchange Act Rule 1 3d-5(b)) of
which the Employee or any Affiliate or Associate of the Employee is a member.
(c) William W. Compton, any Affiliate or Associate of
William W. Compton or any group (as that term is used in Exchange Act Rule 1
3d-5(b)) of which William W. Compton or any Affiliate or Associate of William W.
Compton is a member.
(d) Accel, S.A. de C.V., any Affiliate or Associate
of said Accel or any group (as that term is used in said rule) of which said
Accel or any Affiliate or Associate of said Accel is a member.
(e) Shakale Internacional S.A., any Affiliate of
Associate of said Shakale or any group (as that term is used in said rule) of
which said Shakale or any Affiliate or Associate of said Shakale is a member.
"Good Reason" for the Employee's termination of his Employment
means any of the following that occurs before the Employee gives a Notice of
Termination for Good Reason and which has not been cured by the Company
reasonably promptly after receipt of such notice of Good Reason from the
Employee; provided that any such cure that occurs after ninety (90) days of such
notice shall not be considered reasonably prompt and any such cure that occurs
within 90 days of such notice shall be considered reasonably prompt and provided
further that if such cure occurs Employee shall not be required to give a
subsequent notice if the same or a substantially similar Good Reason again
occurs within one year of the occurrence giving rise to such cure:
(a) any violation or breach of any provision hereof
in any material respect by the Company including but not limited to failure of
the Company to comply with the provisions of paragraphs 4,5, and 6 of this
Agreement in any material respect
(b) either
(1) a failure of the Company to continue in
effect for Employee any Compensation Plan in which the Employee was
participating as of the Termination Date or
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<PAGE> 10
(2) the taking of any action by the Company
which would materially and adversely affect the Employee's participation in or
materially reduce the Employee's benefits under, any such Compensation Plan in
effect as of the date of such action,
without, in each such case, providing a substantially equivalent substitute
reasonably acceptable to Employee; or
(c) the assignment to the Employee of duties
inconsistent in any material respect with the Employee's then current positions
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities or any other action by the Company which results in a
material diminution in those positions, authority, duties or responsibilities or
the taking of any action that is the equivalent of a constructive discharge.
(d) the failure of the shareholders to elect Employee as a
member of the board of directors at any time during the Initial Term or any
Renewal Term of this Agreement.
(e) the failure of the Board to elect the Employee as Vice
Chairman of the Board, Chief Financial Officer, Executive Vice President and
Secretary, without his express consent, at any time during the Initial Term or
any Renewal Term of this Agreement.
"Good Reason Payment During Initial Term" means the amount
calculated as of the Termination Date by multiplying the greater of 2 or the
number of years (rounded to the nearest 1/12th of a year) remaining in the
Initial Term (which begins on the Effective Date and ends on the fifth
anniversary thereof) by the Employee's Average Annual Compensation calculated as
of the Termination Date. For example, if the Employee terminates for Good Reason
two and seven -twelfths (2 7/12) years from the Effective Date, the Employee
would be entitled to an amount equal to two and five-twelfths (2-5/12) years
times the Employee's then Average Annual Compensation. If the Employee
terminates for Good Reason four and seven-twelfths (4-7/12) years from the
Effective Date, the Employee would be entitled to an amount equal to two times
the Employee's then Average Annual Compensation.
"Good Reason Payment During Renewal Term" means at any time
after the Initial Term during the Renewal Term an amount equal to two (2) times
the Employee's then Average Annual Compensation, calculated as of the
Termination Date, whether the termination is during the last two years of the
Initial Term or during any Renewal Term.
"Incentive Plan" means any compensation arrangement, plan,
policy, practice or program, other than the Annual Cash Bonus provision of this
agreement set forth in paragraph 4 B, established, maintained or sponsored by
the Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive Officer and
which provides for awards of securities or the phantom equivalent of securities,
including any stock option, stock appreciation right and restricted stock plan,
but excluding any plan intended to qualify
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<PAGE> 11
as a plan under any one or more of
Sections 401 (a), 401(k) or 423 of the Code.
"Initial Term" means the first full five year term of this
Agreement commencing with the Effective Date and ending five (5) years from the
Effective Date (notwithstanding the fact that the Renewal Term commences three
years from the Effective Date).
"Nonterminating Party" means the Employee or the Company, as
the case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a
written notice that:
(a) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's Employment, and if the Termination Date is other
than the date of receipt of the notice,
(b) sets forth that Termination Date.
"Person" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union or
employee organization or governmental authority.
"Publicly Traded" with respect to shares of stock of a company
means traded on a national securities exchange or listed for quotation on
NASDAQ.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician
(a) holding an M.D. degree from a medical school
located in the United States,
(b) specializing and board certified in the treatment
of the injury or illness that has or may have caused that Disability and
(c) having admission privileges to one or more
hospitals located in Florida or in the state in which the Employee then is
domiciled.
"Renewal Term" means the automatic and continually renewing
term of two (2) years, commencing three (3) years from the Effective Date
(during the Initial Term) and renewing each day thereafter for an additional day
without any further action by the Company or the Employee, it being the
intention of the parties that from the Effective Date there shall be a five (5)
year duration of the Initial Term and from the third anniversary of the
Effective Date there shall be a continuously remaining Renewal Term of two (2)
years duration of the Employee's Employment, subject to the termination
provisions hereof.
"Required Board Majority" means at any time at least a
sixty-six percent
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<PAGE> 12
(66%) majority of the members of the Board voting at that
time.
"Securities Act" means the Securities Act of 1933.
"Terminating Party" means the Employee or the Company, as the
may be, who or which terminates the Employee's Employment by means of a Notice
of Termination.
"Termination Date" means:
(a) if the Employee's Employment is terminated by
reason of the Employee's death during the term of this Agreement or retirement
at the age of 65, the date of that death or retirement;
(b) if the 'Employee's Employment is terminated by
reason of the Employee's giving a Notice of Termination following a Change of
Control pursuant to Section 5(B)(i)(b) or (c), sixty (60) days from the Notice
of Termination; provided that the Termination Date shall be no earlier than 275
days after the Change of Control and further provided that the Notice of
Termination shall be no later than 365 days after the Change of Control.
(c) if the Employee's Employment is terminated by
reason of the Employee's giving a Notice of Termination without Good Reason
pursuant to Section 5(B)(i)(d), the Termination Date shall be a date, designated
by the Company, not sooner than the third business day after the Company
receives the applicable Notice of Termination nor later than sixtieth (60th)
day.
(d) if the Employee's Employment is terminated by
reason of the Employee's disability the Termination Date shall be as specified
in Section 5(c).
(e) if the Employee's Employment is terminated by
Employee for any other reason, the elapse of the sixtieth (60th) day after the
Company receives the Notice of Termination;
(f) If the Employee's Employment is terminated by the
Company for Cause, three business days from the date the Employee receives the
Company's Notice of Termination for Cause;
(g) if the Employee's Employment is terminated by the
Company for any other reason, the Termination Date shall be a date designated by
the Company, not sooner than the third business day after the Employee received
the applicable Notice of Termination nor later than the sixtieth (60th) day.
"Type I Cause" means Cause of the type referred to in clause
(a) of the definition of Cause herein.
"Type II Cause" means Cause of the type referred to in clause
(b) or (c) of the definition of Cause herein.
"Voting" shall include, in respect of a security, voting,
granting a proxy,
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<PAGE> 13
acting by consent, making a request or demand relating to corporate action
(including calling a stockholder meeting) or otherwise giving an authorization
(within the meaning of Section 14 (a) of the Exchange Act) in respect of such
security.
"Voting Shares" means:
(a) in the case of any corporation, stock of that
corporation of the class or classes having general voting power under ordinary
circumstances to elect a majority of that corporation's board of directors; and
(b) in the case of any other entity, equity interests
of the class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
B. Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein to any statute defined or referred to herein, including the Code, ERISA
and the Exchange Act, shall be deemed references to that statute or any
successor statute, as the same may have been or may be amended or supplemented
from time to time, and any rules or regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes each
other gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set forth,
and beginning as of the Effective Date, the Company will employ the Employee as
Vice Chairman of the Board, Chief Financial Officer, Executive Vice President
and Secretary of Company and the Employee will serve in the Company's employ in
that position. The Employee shall perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and
corporations Affiliated with the Company as are commensurate and consistent with
the employment as Vice Chairman of the Board, Chief Financial Officer, Executive
Vice President and Secretary of the Company. The Employee also shall have such
additional powers, authority, functions, duties and responsibilities as may be
assigned to him by the Board (excluding the voting participation of Employee);
provided that, without the Employee's written consent, such additional powers,
authority, functions, duties and responsibilities shall
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<PAGE> 14
not be inconsistent or interfere with, or detract from, those herein vested in,
or otherwise then being performed for the Company by, the Employee.
B. The Employee shall not, at any time during the Employment, engage in
any other activities unless these activities do not interfere materially with
the Employee's duties and responsibilities for the Company at that time, except
that the Employee shall be entitled, subject to the provisions of Section 7,
(a) to continue with such activities as the Employee has
carried on prior to the Effective Date, including making and managing his
personal investments and participating in other business, church or civic
activities provided that such activities do not include a Beneficial Ownership
interest in a competitor, supplier or customer of the Company other than an
investment in a Publicly Traded company of which Employee is not an employee,
officer, director or partner that does not exceed 5% of the outstanding voting
shares of voting stock.
(b) to serve on civic boards, non-profit boards, charitable
boards or committees and trade associations or similar boards of committees.
(c) to serve on for-profit business boards of directors if
Employer's consent shall have been obtained, which consent shall not
unreasonably be withheld.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the Initial Term of the
Employee's Employment shall be for a period of five (5) years commencing on the
Effective Date. The Renewal Term shall commence three (3) years from the
Effective Date and renew each day thereafter for an additional day without any
further action by the Company or the Employee, it being the intention of the
parties that from the Effective Date there shall be a five (5) year duration and
from the third anniversary of the Effective Date there shall be a continuously
remaining term of two (2) years duration of the Employee's Employment. Subject
to the provisions of Section 5, Employee shall be employed hereunder for the
Initial Term and the Renewal Term. In the event that Employee's Employment
hereunder shall not have otherwise been terminated, such Employment shall
terminate at the end of the Compensation Year in which Employee reaches age 65.
4. COMPENSATION
A. Base Salary. A Base Salary shall be payable to the Employee by the
Company as a guaranteed minimum annual amount hereunder for each Compensation
Year during the period from the Effective Date to the Termination Date. That
Base Salary shall be payable in the intervals consistent with the Company's
normal payroll schedules (but in no event less frequently than semi-monthly),
shall be payable initially at the annual rate of $215,000 and shall be increased
(but not decreased or adjusted other than as provided in Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the greater of the same percentage increase (if any) in the
CPI for the twelve (12)
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<PAGE> 15
month period immediately preceding such anniversary or such amount that the
majority of the Board (for this purpose excluding Employee) shall determine.
(ii) if the Employee is required by reason of his Employment
to relocate from a state without a personal income tax at the time of his
relocation to a state having a personal income tax, the Base Salary and Annual
Cash Bonus in effect at the time of such relocation, shall immediately be
increased by the amount equal to the Base Salary and Annual Cash Bonus
immediately prior to this increase multiplied by seventy percent (70%) of the
highest personal income tax rate of such state; for example, if the Employee
relocates from a state without a personal income tax to a state having a
personal income tax and the highest rate of that tax is six percent (6%) when
the Base Salary is $400,000 and the Annual Cash Bonus is $440,000, then the Base
Salary will be increased by $16,400 (computed at 70% x 6% x $400,000) and the
Annual Cash Bonus will be increased by $18,480 (computed at 70% x 6% x$440,000).
B. Annual Cash Bonus. The Annual Cash Bonus shall be calculated as of
the end of the Compensation Year. (The first such calculation will be made as of
September 30, 1997, the first fiscal year end of the Company after the Effective
Date.) The Annual Cash Bonus shall be paid to the Employee within one hundred
and eighty (180) days of the beginning of each Compensation Year. The Employee's
target Annual Cash Bonus shall be forty percent (40%) of Base Salary. However,
Employee may earn an actual Annual Cash Bonus of between fifty percent (50%) and
two hundred percent (200%) of the target Annual Cash Bonus. If the Company does
not meet the threshold level of performance, the Annual Cash Bonus will be zero
percent (O%) of Base Salary. At the minimum performance threshold, the Annual
Cash Bonus will be fifty percent (50%) of the target Annual Cash Bonus. If the
Company reaches or exceeds the maximum level of performance, Employee's Annual
Cash Bonus will be two-hundred percent (200%) of the target Annual Cash Bonus
(said 200% times the aforesaid 40% resulting in a capping of the Annual Cash
Bonus at 80% of Base Salary.
For purposes of determining the Employee's Annual Cash Bonus, the Company's
average Return on Total Capital Employed (ROCE), as determined over a four year
period, will be calculated and then compared against an average target ROCE as
calculated for a select group of companies over the same period. The select
group of companies shall be those listed on Exhibit B; provided, however that
if the parties agree that one or more of the selected companies becomes
unrepresentative or otherwise unsuitable or unavailable for comparison, the
parties shall select a reasonable substitute. If the parties are unable to agree
upon a reasonable substitute they shall agree on a third party such as a
disinterested and nationally recognized accounting firm that shall make the
recommendation which shall be binding. The average target ROCE for the select
group of twenty (20) publicly traded apparel companies, excluding the Company,
for which financial data are readily available will be calculated by determining
the ROCE each year for each company in the select group and then determining the
average ROCE for each company over the four year period. Next, the companies are
ranked based upon the four year average ROCE for each company. The seventy-fifth
percentile of the four year average ROCE of the select group is the average ROCE
for a company on the list which, excluding the Company, results in five
companies from the select group being above and fifteen
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<PAGE> 16
companies for the select group being below the Company's average ROCE. That
average ROCE (i.e. the seventy-fifth percentile) then becomes the target ROCE
("TROCE") for purposes of comparing the Company's average ROCE.
A four year average ROCE for the Company is then calculated in the same fashion
that the average ROCE is calculated for the select group of companies. If the
four year average ROCE for the Company is equal to or greater than eighty-five
percent (85%) of the TROCE, Employee's Annual Cash Bonus is fifty percent (50%)
of the target Annual Cash Bonus. If the four year average ROCE for the Company
is at least one-hundred and thirty percent (130%) of the TROCE, Employee's
Annual Cash Bonus is two-hundred percent (200%) of the target Annual Cash Bonus.
If the four year average ROCE for the Company is between eighty-five percent
(85%) of the TROCE and one-hundred and thirty percent (130%) of the TROCE, the
Annual Cash Bonus will be determined by straight line interpolation (as more
particularly described in the formula attached as Exhibit A and incorporated
herein by reference. Exhibit B attached hereto and incorporated by reference is
an example of the foregoing methodology, correctly applied. The seventy-fifth
percentile of the average ROCE's is 16.58. This is the TROCE. The Company's
average ROCE is 20.16% or 122% of the TROCE. Accordingly, the Employee's Annual
Cash Bonus is 94.66% of Base Salary.
ROCE is defined as net income plus tax adjusted interest expense divided by
beginning shareholder equity plus average total debt. The average total debt
will be calculated on an annual basis and will reflect all interest bearing
liabilities, including off balance sheet items. Net income will be final net
income as reported under GAAP and will not exclude any unusual or extraordinary
items such as gains or losses recognized from the sale of assets, write downs,
etc. The interest expense will include all interest paid by the Company and will
be adjusted to reflect the Company's tax rate for the performance year.
C. Other Compensation. To the extent authorized by a majority of the
Board (excluding Employee) the Employee shall also be entitled to participate in
any additional Compensation Plans from time to time in effect during the term of
this Agreement, regardless of whether the Employee is an Executive Officer. All
awards to the Employee under all Incentive Plans shall take into account the
Employee's positions with and duties and responsibilities to the Company and its
subsidiaries.
D. Limitations on Payments . Notwithstanding any other provision of
this Agreement, if any portion of any payment under this Agreement, or under any
other agreement with or plan of the Company or its affiliates (in the aggregate
"Total Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Employee shall be reduced such that the value
of the aggregate Total Payments that the Employee is entitled to receive shall
be One Dollar ($1) less than the maximum amount which the Employee may receive
without becoming subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or which the Company may pay
without loss of deduction under Section 280G(a) of the Code. For purposes of
this Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meaning assigned to them in Section 280G of the Code, and such
"parachute payments" shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in
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<PAGE> 17
accordance with Section 1274(b) (2) of the Code. Within fifteen (15) days
following the Date of Termination or notice by the Company to the Employee of
its belief that there is a payment or benefit due the Employee which will result
in an excess parachute payment as defined in Section 280G of the Code, the
Employee and the Company, at the Company's expense, shall obtain the opinion
(which need not be unqualified) of nationally recognized tax counsel selected by
the Company's independent auditors and acceptable to the Employee in his sole
discretion (which may be regular outside counsel to the Company), which opinion
sets forth (i) the amount of the Base Period Income, (ii) the amount and present
value of Total Payments and (iii) the amount and present value of any excess
parachute payments determined without regard to the limitations of this
paragraph. As used in this Agreement, the term "Base Period Income" means an
amount equal to the Employee's "annualized includible compensation for the base
period" as defined in Section 280G(d) (1) of the Code. For purposes of such
opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d) (3) and (4) of the Code, which determination
shall be evidenced in a certificate of such auditors addressed to the Company
and the Employee. If such opinion determines that there would be an excess
parachute payment, any payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified by the
Employee in writing delivered to the Company within five (5) days of his receipt
of such opinion or, if the Employee fails to so notify the Company, then as the
Company shall reasonably determine, so that under the bases of calculations set
forth in such opinion there will be excess parachute payment. If such legal
counsel so requests in connection with the opinion required by this paragraph,
the Employee and the Company shall obtain at the Company's expense, and the
legal counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation to be received by the Employee. If the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, then this paragraph shall be of no further force or effect.
5. TERMINATION, DISABILITY AND DEATH
A. Termination of Employment by the Company.
(i) The Company shall be entitled, if acting at the direction
of the Required Board Majority, to terminate the Employee's Employment
(a) at any time for Type I or Type II Cause, or
(b) at any time after December 31,1998 for any
Business Reason.
The Company's termination of the Employee's Employment for Cause will be
effective on the date the Company delivers a Notice of Termination for Cause to
the Employee pursuant to this Section, while the Company's termination of the
Employee's Employment for a Business Reason will be effective not less than
three (3) business days and not more than sixty (60) days from the date the
Company delivers a Notice of Termination for a Business Reason to the Employee
pursuant to this Section 5(A)(i).
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<PAGE> 18
Between the time that the Company delivers a Notice of Termination for a
Business Reason and the effective date of such termination, Employee shall
continue to receive all of the payments and consideration provided for in the
Agreement.
(ii) If the Company terminates the Employee's Employment for
Cause, the Company promptly thereafter, and in any event within five (5)
business days thereafter, shall pay the Employee, without right of set off,
except for liquidated sums, or counterclaim, his Base Salary to and including
the Termination Date and the amount of all compensation previously deferred by
the Employee (together with any accrued interest or earnings thereon), in each
case to the extent not theretofore paid, and, when that payment is made, the
Company shall, notwithstanding Section 3, have no further or other obligations
hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for
a Business Reason at any time during the first three years of the Initial Term
(which commences on the Effective Date and ends five years from the Effective
Date), the Company shall promptly thereafter, and in any event within five (5)
business days of the Termination Date, pay the Employee, without right of set
off, except for liquidated sums, or counterclaim, his Base Salary to and
including the Termination Date and the amount of all compensation previously
deferred by the Employee, if any, (together with any accrued interest or
earnings thereon) together with the Business Reason Termination Payment During
Initial Term, in each case to the extent not theretofore paid, and when all such
payments are made, the Company shall, notwithstanding Section 3, have no further
or other obligations hereunder to the Employee.
(iv) If the Company terminates the Employee's Employment for a
Business Reason after the Initial Term and during the Renewal Term, including
during the portion of the Initial Term that is after the first three years of
such Initial Term, the Company shall promptly thereafter, and in any event
within five (5) business days of the Termination Date, pay the Employee, without
right of set off, except for liquidated sums, or counterclaim, his Base Salary
to and including the Termination Date and the amount of all compensation
previously deferred by the Employee, if any, (together with any accrued interest
or earnings thereon) together with the Business Reason Termination Payment
During Renewal Term, in each case to the extent not theretofore paid, and, when
all such payments are made, the Company shall, notwithstanding Section 3, have
no further or other obligations hereunder to the Employee.
B. Termination of Employment by the Employee.
(i) The Employee shall be entitled to terminate the Employment
(a) For Good Reason. Subject to the provision for
cure described in the definition of the term "Good Reason", the Employee shall
be entitled to terminate his Employment for a Good Reason at any time within one
hundred eighty (180) days after the facts or circumstances constituting that
Good Reason first exist and are known to the Employee, provided that at least
ninety (90) days prior to such Termination the Employee has notified Employer
that Employee believes that Good Reason exists and sets forth in reasonable
detail the basis therefor and, at the time of any Notice of Termination therefor
Good Reason continues to exist. Such termination for Good
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<PAGE> 19
Reason shall be effective on the applicable Termination Date. In the event that
the Employee terminates his Employment for Good Reason during the Initial Term,
the Employee, without right of set off, except for liquidated sums, or
counterclaim, upon the Date of Termination. In the event that the Employee
terminates his Employment for Good Reason during any Renewal Term, including any
portion of the Initial Term that is after the first three years of such term,
the Good Reason Payment During Renewal Term shall become due and payable to the
Employee, without right of set off, except for liquidated sums, or counterclaim,
upon the Date of Termination.
(b) Change of Control (Type A). The Employee shall be entitled
to terminate the Employment as a result of Change of Control (Type A), by reason
of the Employee's giving a Notice of Termination following a Change of Control
(Type A) at any time within three hundred sixty-five (365) days after that
Change of Control (Type A) occurs. Such termination shall be effective on the
applicable Termination Date. If the Employee terminates his Employment by reason
of a Change of Control (Type A), except as provided in subparagraph (iv), the
Company shall pay to the Employee in a cash lump sum within five (5) business
days after the Termination Date the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon),
(iii) any accrued but unpaid vacation pay,
(iv) any Annual Cash Bonus earned but not yet paid
for fiscal years ending prior to the Termination Date (such Annual Bonus to be
paid as soon as practicable after the information required to calculate such
Annual Bonus is available to the Company in no event later than sixty (60) days
after the required information is available to the Company) and
(v) the Change of Control Payment (Type A) Upon
Voluntary Termination By Employee calculated as of the Termination Date.
(c) Change of Control (Type B). The Employee shall be entitled
to terminate the Employment as a result of Change of Control (Type B), by reason
of the Employee's giving a Notice of Termination following a Change of Control
(Type B) at any time within three hundred sixty-five (365) days after that
Change of Control (Type B) occurs. Such termination shall be effective on the
applicable Termination Date. If the Employee terminates his Employment by reason
of a Change of Control (Type B), except as provided in subparagraph (iv), the
Company shall pay to the Employee in a cash lump sum within five (5) business
days after the Termination Date the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
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<PAGE> 20
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon),
(iii) any accrued but unpaid vacation pay;
(iv) any Annual Cash Bonus earned but not yet paid
for fiscal years ending prior to the Termination Date (such Annual Bonus to be
paid as soon as practicable after the information required to calculate such
Annual Bonus is available to the Company in no event later than nine (9) months
after the Termination Date) and
(v) the Change of Control Payment (Type B) Upon
Voluntary Termination By Employee calculated as of the Termination Date.
(d) Without Good Reason. The Employee's termination of his
Employment without Good Reason and other than for Disability will be effective
on the applicable Termination Date. If the Employee terminates his Employment
Without Good Reason and other than for Disability, the Company shall pay to the
Employee, in a cash lump sum within five (5) business days after the Termination
Date, the amount equal to the sum of
(i) the portion of the Base Salary to and including
the Termination Date which has not yet been paid,
(ii) all compensation previously deferred by the
Employee, if any, (together with any accrued interest and earnings thereon)
which has not yet been paid, and
(iii) any accrued but unpaid vacation pay.
C. Termination by Reason of Disability. During the term of this Agreement and
the period following Termination of this Agreement (for any cause whatsoever
other than Type I cause), (the "policy period") the Company shall maintain, at
its expense and at the current expense level, the individual, long-term
non-cancelable guaranteed renewal individual disability plan now in place, until
such time, not to exceed three (3) years, as Employee has commenced to have
earned annual income in excess of 50% of his most recent Base Salary. In the
event the Employee retires while in the employ of the Company, the Company shall
maintain at its expense but at the current level of premium payments, the
individual, long-term non-cancelable guaranteed renewal individual disability
plan more particularly described in Exhibit D for a period of three (3) years
from the date of retirement. If after retirement, the policy premium exceeds the
level of the premium on the retirement date the Employee shall pay the
difference. If the Employee incurs any Disability during the policy period,
either the Employee or the Company may terminate the Employee's Employment. If
the Employee's Employment is terminated by reason of the Employee's disability
and Notice of Termination of such, the Termination Date shall be the date set in
such notice. If the Employee's Employment is terminated by reason of the
Employee's disability, the Employee shall not be subject to the Non-Compete
paragraph 7(b), but shall be remain subject to the
-20-
<PAGE> 21
paragraph 7(a) and 7(c).
D. Termination of Employment by Death. Upon the death of the Employee,
the Employment will be terminated on the applicable Termination Date. If the
Employee's Employment is terminated by reason of the Employee's death, the
Company shall pay to the Person the Employee has designated in a written notice
delivered to the Company as his beneficiary entitled to such payment, if any, or
to the Employee's estate, as applicable, in a cash lump sum within thirty (30)
days after the Termination Date, the amount equal to the sum of
(i) the portion of the Base Salary through the end of the
month in which the Termination Date occurs which has not yet been paid,
(ii) all compensation previously deferred by the Employee, if
any, (together with any accrued interest or earnings thereon) which has not yet
been paid, and
(iii) any accrued but unpaid vacation pay.
E. Return of Property. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) shall promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee.
F. Stock Options. Notwithstanding any provision of this Agreement to
the contrary:
(i) except in the case of a termination of the Employee's
Employment for Cause, as described in sub paragraphs (a) and (b) of the Cause
definition, all stock options previously granted to the Employee under Incentive
Plans that have not been exercised and are outstanding as of the time
immediately prior to the Termination Date shall, notwithstanding any contrary
provision of any applicable Incentive Plan, remain outstanding (and continue to
become exercisable pursuant to their respective terms) until exercised or the
expiration of their term, whichever is earlier; and
(ii) in the case of a termination of the Employee's Employment
for Cause, as described in sub paragraphs (a) and (b) of the Cause definition,
all stock options previously granted to Employee under Incentive Plans that have
not been exercised and are outstanding as of the time immediately prior to the
Termination Date shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding and continue to be exercisable until
exercised or the date that is ten (10) days after the Termination Date,
whichever is earlier.
Notwithstanding any provision of this Agreement to the contrary, for the
purposes of all Incentive Plans, the term "Cause" shall mean cause (subparagraph
(a) and (b)) as defined herein.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be entitled to not less
than
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<PAGE> 22
six (6) weeks of annual vacation and all legal holidays during which times his
applicable compensation shall be paid in full.
B. Fringe Benefits. During the term of this agreement, the Employee is
entitled to the same level of fringe benefits previously and currently provided
to Employee by the Company including but not limited to a company car for
business and personal use, health insurance, dental insurance, disability
insurance, and life insurance; provided further that the Company shall increase
the life insurance benefit to Employee's specified beneficiary to $2.5 million.
C. Business Expenses. The Employee is authorized to incur, and will be
entitled to receive prompt reimbursement for, all reasonable expenses incurred
by the Employee in performing his duties and carrying out his responsibilities
hereunder, including first class air fare and hotels, business meal,
entertainment and travel expenses, provided that the Employee complies with the
applicable policies, practices and procedures of the Company relating to the
submission of expense reports, receipts or similar documentation of those
expenses. The Company shall either pay directly or promptly reimburse the
Employee for such expenses not more than twenty (20) days after the submission
to the Company by the Employee from time to time of an itemized accounting of
such expenditures for which direct payment or reimbursement is sought. Unpaid
reimbursements after such 20-day period shall accrue interest in accordance with
Section 7(K).
D. Support. During the Employment, the Employee shall be provided by
the Company with office space, furnishings, and facilities, reserved parking,
secretarial and administrative assistance, supplies and other support equipment
(including a computer, facsimile machine and photocopier).
E. No Forced Relocation. The Employee shall not be required to move
Employee's principal place of residence from the central Florida area or to
perform regular duties that could reasonably be expected to require either such
move against his wish or to spend amounts of time each week outside the central
Florida area which are unreasonable in relation to the duties and
responsibilities of the Employee hereunder, and the Company agrees that, if it
requests the Employee to make such a move and the Employee declines that
request,
(i) that declination shall not constitute any basis for a
determination that Type II Cause exists unless the business of Employer is
materially put at risk by such refusal as determined by the Required Majority
Board and
(ii) no animosity or prejudice will be held against Employee.
7. GENERAL PROVISIONS
A. Confidentiality. The Employee shall not divulge or communicate to
any person (except in performing his duties under this agreement) or use for his
own purpose Confidential Information which is not generally known to the public
and shall use his best efforts to prevent the publication or disclosure by and
other person of any such Confidential Information. Information shall be deemed
not to be Confidential
-22-
<PAGE> 23
Information if it has become known to the public generally through no act or
fault of the Employee. All documents and objects made, complied, received or
held or used by Employee in connection with the business of the Company during
the employment shall be and remain the Company's property.
B. Non-Competition. The Employee agrees that, except as otherwise
provided herein, during the Employment and for a period of two years after the
applicable Termination Date Employee will not directly or indirectly, whether or
not for compensation and whether or not as an employee, be engaged in or have
any impermissible financial interest in any business that is engaged in the
merchandising, manufacturing, distribution or marketing of men's casual pants,
shorts and jeans (a "competing business"). For purpose of this Agreement, the
Employee shall not be deemed to be engaged in a competing business if Employee
is employed by a division or subsidiary or similar business unit of a company or
other business entity that would otherwise be deemed a competing business so
long as the division, subsidiary or similar business unit by which the Employee
is employed is accounted for as a separate profit center and does not engage in
a competing business, and Employee's ownership interest, if any, is not an
impermissible financial interest. For purposes of this Agreement, the Employee
shall be deemed to be engaged in a competing business if Employee is an
employee, officer, director, partner or consultant of such competing business or
has an impermissible financial interest therein. For purposes of this Agreement,
the Employee shall be deemed to have an impermissible financial interest in
competing business if Employee is a partner or shareholder directly or
indirectly, therein, except as provided hereafter. Employee shall not be deemed
to have an impermissible financial interest in any competing publicly traded or
privately held business so long as Employee owns less than five percent (5%) of
any class of securities of such publicly traded or privately held company and is
not an officer, director, partner, employee or consultant thereto, except as to
holding an office or being an employee, as otherwise provided in the "employed
by a division . . ." sentence above.
C. Non-Solicitation. The Employee agrees that during the Employment and
for a period of two (2) years after the Date of Termination, Employee shall not
employ any person who was employed by the Company or any of its controlled
Affiliates on the Termination Date, or induce such Person to accept employment
other than with the Company or its subsidiaries.
D. The Employee recognizes that a breach of his obligations under this
paragraphs (A) through (C) above would cause irreparable harm to the Company
and, provided that as a pre-condition the Company has previously tendered all
sums that are due and payable to the Employee under the terms of this Agreement,
the Company shall be entitled to preliminary and permanent injunctions enjoining
violations as a non-exclusive remedy.
E. Severability. If any one or more of the provisions of this Agreement
shall, for any reason, be held or found by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
(i) such invalidity, illegality or unenforceability shall not
affect any other
-23-
<PAGE> 24
provisions of this Agreement,
(ii) this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein (except that
this clause (ii) shall not prohibit any modification allowed under Section 7(B))
and
(iii) if the effect of a holding or finding that any such
provision is invalid, illegal or unenforceable is to modify to the Employee's
detriment, reduce or eliminate any compensation, reimbursement, payment,
allowance or other benefit to the Employee intended by the Company and Employee
in entering into this Agreement, the Company shall, within thirty (30) days
after the date of such finding or holding, negotiate and expeditiously enter
into an agreement with the Employee which contains alternative provisions
(reasonably acceptable to the Employee and the Company) that will restore to the
Employee (to the extent lawfully permissible) substantially the same economic,
substantive and income tax benefits and legal rights the Employee would have
enjoyed had such provision been upheld as legal, valid and enforceable; and
(iv) if any provision of this Agreement or portion hereof is
so broad, in scope or duration, as to be unenforceable, such provision or
portions thereof shall be interpreted to be only so broad as to be legal, valid
and enforceable.
F. Nonexclusivity of Rights. Nothing herein shall prevent or limit the
Employee's continuing or future participation in any Compensation Plan or,
subject to Section 9(N), limit or otherwise affect such rights as the Employee
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Employee is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date shall be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
G. Full Settlement. The Company's obligations to make the payments
provided for in, and otherwise to perform its undertakings in, this Agreement
shall not be affected by any right of set-off (other than as to liquidated
amounts), counterclaim, recoupment, defense or other action, claim or right the
Company may have against the Employee or others. Except as stated in Section
5(c), in no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any provision hereof, and those amounts shall not be reduced,
regardless of whether the Employee obtains other employment or becomes
self-employed.
H. Judicial Review. Any determination as to the existence of Cause by
the Board or Required Board Majority is reviewable by the trier of fact to
determine whether such determination was made in good faith versus bad faith and
whether such determination was reasonable versus arbitrary or capricious.
I. Successors.
(i) This Agreement is personal to the Employee and, without
the prior written consent of the Company, is not assignable or delegable by the
Employee otherwise than by transfer of rights by will or the laws of descent and
distribution.
-24-
<PAGE> 25
(ii) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns and this Agreement shall
inure to the benefit and be enforceable by the Employee's legal representatives
acting in their capacities as such pursuant to applicable law.
(iii) The Company shall require any successor (direct or
indirect and whether by purchase, merger, consolidation, share exchange or
otherwise) to the business, properties and assets of the Company substantially
as an entirety expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required to
perform it had no such succession taken place.
J. Amendments; Waivers. This Agreement may not be amended or modified
except by a written agreement executed and delivered by the parties hereto or
their respective successors or legal representatives acting in their capacities
as such pursuant to applicable law.
K. Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
appropriate Person at the address of such Person get forth below (or at such
other address as such Person may designate by written notice to each other party
in accordance herewith):
(i) if to the Employee, addressed as follows:
Michael Kagan
7706 Lake Cypress Drive
Odessa, FL 33556
; and
(ii) if to the Company, addressed as follows:
Tropical Sportswear Int'l Corporation
4902 West Waters Avenue
Tampa, FL 33634
Attn: William W. Compton
In the case of any Notice of Termination or of Good
Reason, with copies to each member of the Board
L. No Waiver. The failure of the Company or the Employee to insist on
strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee or the right of the Company to
terminate the Employment for Good Reason or by reason of a Change of Control
pursuant to Section, 5(B) (i)) shall not be deemed a waiver of that provision or
of any other provision of or right under this Agreement.
M. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Florida, without reference to any
principles of
-25-
<PAGE> 26
conflicts of laws.
N. Jurisdiction and Venue. The Company and the Employee irrevocably
consents with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of the
Company's or the Employee's right hereunder to service of process in the State
of Florida and hereby waives any right to contest or oppose receipt of such
service of process in Florida provided such Person actually received such
process by mail or electronic communication. The Company and the Employee
irrevocably
(i) agrees that any such action, suit or other legal
proceeding may be brought in Hillsborough County, Florida; and
(ii) consents to the jurisdiction of any appropriate court in
such county in any such action, suit or other legal proceeding and
(iii) waives any objection it may have to the laying of venue
of any such action, suit or other legal proceeding in any of such courts and
(iv) WAIVES ANY RIGHT TO TRIAL BY JURY.
O. Headings. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
P. Interest. If any amounts required to be paid or reimbursed to the
Employee hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections 6 and
10, those amounts shall accrue interest compounded daily at the annual
percentage rate which is one and one half percentage points (1.5%) above the
interest rate announced by NationsBank, Tampa, Florida (or its successor) from
time to time, as its Base Rate (or prime lending rate), from the date those
amounts were required to have been paid or reimbursed to the Employee until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event shall the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
Q. Publicity. The Company agrees with the Employee that, except to the
extent required by law or legal process (including reporting and public
disclosure contemplated under the Exchange Act and the Securities Act) and any
other law giving any Person a private right of action or suit, neither the
Company nor the Employee will not make or publish, without the prior written
consent of the other, any written or oral statement concerning the terms of the
Employee's employment relationship with the Company and will not, if a Notice of
Termination is given by either the Company or the Employee for any reason,
publish or cause to be published any statement concerning the Company's
relationship with the Employee or the Employee's relationship with the Company,
including Employee's work-related performance or the reasons or basis for the
giving of that Notice of Termination.
-26-
<PAGE> 27
R. Tax Withholding. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
S. Entire Agreement. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participate prior to the
Effective Date.
T. Effective Date. This Agreement shall be effective on the Closing
Date.
8. LITIGATION COSTS In the event of litigation over the terms or breach of this
Agreement, the prevailing party shall be entitled to recover litigation costs
and attorneys fees from the non-prevailing party.
9. INDEMNIFICATION
The Employee shall be indemnified by the Company to the maximum extent
permitted by the law of Florida, the state of the Company's incorporation, and
the law of the state of incorporation of any subsidiary of the Company of which
the Employee is a director or an officer or employee, as the same may be in
effect from time to time.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
By:_____________________________________
Its:____________________________________
EMPLOYEE
________________________________________
Michael Kagan
Employee's Permanent Address:
7706 Lake Cypress Drive
Odessa, FL 33556
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<PAGE> 28
EXHIBIT A
INCENTIVES
Incentive Calculation for Mike Kagan 2/4/97
for the FYE 9/95
<TABLE>
<CAPTION>
Target
Award
ROCE ROCE Incentive Bonus
Value Performance Opportunity Percentage
----- ----------- ----------- ----------
<S> <C> <C> <C> <C>
130% 21.55% 200.00% 80.00%
129% 21.39% 196.67% 78.67%
128% 21.22% 193.33% 77.33%
127% 21.06% 190.00% 76.00%
126% 20.89% 186.67% 74.67%
125% 20.73% 183.33% 73.33%
124% 20.56% 180.00% 72.00%
123% 20.39% 176.67% 70.67%
122% 20.23% 173.33% 69.33%
- ------------------------------------------------------------------------------------------------------------
121.59% 20.16% 171.97% 68.79%
- ------------------------------------------------------------------------------------------------------------
121% 20.06% 170.00% 68.00%
120% 19.90% 166.67% 66.67%
119% 19.73% 163.33% 65.33%
118% 19.56% 160.00% 64.00%
117% 19.40% 156.67% 62.67%
116% 19.23% 153.33% 61.33%
115% 19.07% 150.00% 60.00%
114% 18.90% 146.67% 58.67%
113% 18.74% 143.33% 57.33%
112% 18.57% 140.00% 56.00%
111% 18.40% 136.67% 54.67%
110% 18.24% 133.33% 53.33%
109% 18.07% 130.00% 52.00%
108% 17.91% 126.67% 50.67%
107% 17.74% 123.33% 49.33%
106% 17.57% 120.00% 48.00%
105% 17.41% 116.67% 46.67%
104% 17.24% 113.33% 45.33%
103% 17.08% 110.00% 44.00%
102% 16.91% 106.67% 42.67%
101% 16.75% 103.33% 41.33%
100% 16.58% 100.00% 40.00%
</TABLE>
Note: 100% = 75th percentile
Mike Kagan bonus is $192,000 X 68.79% = $132,076
Page 1
<PAGE> 29
EXHIBIT B
RETURN ON CAPITAL EMPLOYED
<TABLE>
<CAPTION>
(1992-
1995)
FYE AVERAGE
PERCENTILE COMPANY MONTH 1992 1993 1994 1995 ROCE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 100 Marisa Christina Inc 3 Dec 218.29% 95.69% 70.07% 29.34% 103.35%
-----------------------------------------------------------------------------------------------------------------------------
2 95 Tommy Hilfiger Mar 46.64% 63.30% 32.30% 23.23% 41.37%
-----------------------------------------------------------------------------------------------------------------------------
3 90 Nautica Feb 17.84% 20.94% 28.58% 20.96% 22.08%
-----------------------------------------------------------------------------------------------------------------------------
4 85 Supreme International Jan N/A 25.13% 25.51% 12.92% 21.19%
-----------------------------------------------------------------------------------------------------------------------------
TSI SEPT 34.20% 11.86% 21.87% 12.71% 20.16%
-----------------------------------------------------------------------------------------------------------------------------
5 80 Donnkenny Inc 1 Nov 28.04% 21.13% 15.32% 7.35% 17.96%
-----------------------------------------------------------------------------------------------------------------------------
6 75 Ashworth Inc Oct 27.42% 17.72% 16.53% 4.65% 16.58%
-----------------------------------------------------------------------------------------------------------------------------
7 70 Tandy Brands June 20.32% 19.70% 16.63% 3.28% 14.98%
-----------------------------------------------------------------------------------------------------------------------------
8 65 Haggar Corp Sept 12.34% 16.40% 18.29% 6.25% 13.32%
-----------------------------------------------------------------------------------------------------------------------------
9 60 Garan Inc Sept 18.95% 18.73% 9.65% 5.72% 13.26%
-----------------------------------------------------------------------------------------------------------------------------
10 55 First Years Dec 10.56% 4.10% 14.91% 14.90% 11.12%
-----------------------------------------------------------------------------------------------------------------------------
11 50 Hampshire Group Dec 13.79% 10.77% 25.87% 18.76% 11.91%
-----------------------------------------------------------------------------------------------------------------------------
12 45 Kleinert's Inc Nov 4.14% 8.39% 16.05% 14.92% 10.88%
-----------------------------------------------------------------------------------------------------------------------------
13 40 Quiksilver Oct 1.15% 10.45% 15.37% 15.92% 10.72%
-----------------------------------------------------------------------------------------------------------------------------
14 35 Chic by HIS inc Nov 4.60% 10.31% 8.67% 1.95% 6.38%
-----------------------------------------------------------------------------------------------------------------------------
15 30 Osh Kosh B'Gosh Dec 8.98% 2.68% 4.39% 7.48% 5.88%
-----------------------------------------------------------------------------------------------------------------------------
16 25 Biscayne Apparel Inc Dec -1.10% 17.86% 8.77% -6.66% 4.72%
-----------------------------------------------------------------------------------------------------------------------------
17 20 Danskin Inc 1 Mar 24.87% 9.47% -8.82% -9.27% 4.06%
-----------------------------------------------------------------------------------------------------------------------------
18 15 Hampton Industries Dec 3.58% -0.86% 3.68% 0.72% 1.78%
-----------------------------------------------------------------------------------------------------------------------------
19 10 Farah Inc Oct -12.21% 2.39% 16.68% -7.54% -0.17%
-----------------------------------------------------------------------------------------------------------------------------
20 5 Jalate Ltd 2 Dec N/A N/A N/A -28.01% -28.01%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnote 1. Danskin & Donnkenny 1992 results based on ending debt only -
beginning debt not available
2. Jalate: IPO 1994. 1992 and 1993 not available
3. Marisa Christina able to obtain all information - company went
public in 1994
Page 1
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of,
August 8, 1997, to become effective as of the Effective Date (as herein defined)
by and between TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION, a Florida
corporation (the "Company"), and RICHARD J. DOMINO (the "Employee").
RECITALS:
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's business plan and to manage the Company's future growth and
development and to maximize the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
1. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set forth,
and beginning as of the Effective Date, the Company will employ the Employee as
President of Company and the Employee will serve in the Company's employ in that
position. The Employee shall perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and
corporations Affiliated with the Company as are commensurate and consistent with
the employment as President of the Company. The Employee also shall have such
additional powers, authority, functions, duties and responsibilities as may be
assigned to him by the Chief Executive Officer.
B. The Employee shall not, at any time during the Term of Employment,
engage in any other activities unless these activities do not interfere
materially with the Employee's duties and responsibilities for the Company at
that time.
2. TERM OF EMPLOYMENT
The Effective Date means the closing date of the sales of shares of the
Common Stock to the underwriters in the Company's initial public offering.
3. TERM OF EMPLOYMENT
The Initial Term of the Employee's Employment shall be for a period of
three (3) years commencing on the Effective Date. The Renewal Term shall
commence two (2) years from the Effective Date and renew each day thereafter for
an additional day without further action
-1-
<PAGE> 2
by the Company or the Employee, it being the intention of the parties that from
the Effective Date there shall be a three (3) year duration and from the second
(2nd) anniversary of the Effective Date there shall be a continuously remaining
term of one (1) year duration of the Employee's Employment. In the event that
Employee's Employment hereunder shall not have otherwise been terminated, such
Employment shall terminate at the end of the Company's fiscal year in which the
Employee reaches age sixty-five (65).
4. COMPENSATION
A. Base Salary. A Base Salary shall be payable to the Employee by the
Company as a guaranteed minimum annual amount hereunder for each Compensation
Year during the period from the Effective Date to the Termination Date. That
Base Salary shall be payable in the intervals consistent with the Company's
normal payroll schedules (but in no event less frequently than semi-monthly),
shall be payable initially at the annual rate of $225,000.
On the first and each subsequent anniversary of the Company's fiscal
year, the Base Salary shall be increased by the greater of the same percentage
increase (if any) in the CPI for the twelve (12) month period immediately
preceding such anniversary or such amount that the Board of Directors shall
determine. The first such increase will be made on September 30, 1997.
B. Annual Cash Bonus. The Annual Cash Bonus shall be calculated as of
the end of the Company's fiscal year. The first such calculation will be made as
of September 30, 1997. The Employee may earn an actual Annual Cash Bonus, not to
exceed one hundred percent (100%) of the Base Salary, if the Company meets
certain threshold levels of performance.
5. TERMINATION
A. Termination by Company with Cause. The Company may terminate
Employee at any time with notice for "cause." "Cause" shall mean and be limited
to
(1) any willful and persistent material breach by the
Employee of the performance of his duties pursuant to
this Agreement which continues after written notice from
the Company;
(2) the Employee's conviction (which, through lapse of time
or otherwise is not subject to appeal) of any crime or
offense involving money or other property of the Company
or others or which constitutes a felony in the
jurisdiction involved;
(3) any disclosure by the Employee to any person, firm or
corporation other than the Company and its directors,
officers, and employees of any material confidential
information or trade secrets of the Company which is
materially detrimental to the interests of the Company
and made outside the scope of the Employee's duties to
the Company;
-2-
<PAGE> 3
(4) engaging by the Employee, without prior consent of the
Board of Directors of the Company, in any other business
other than the business of the Company which interferes
in any material respect with the performance of
Employee's duties;
(5) fraud on the Company;
(6) material misrepresentation by the Employee to any
officer or director of the Company;
(7) theft of any property of the Company;
(8) Chronic alcoholism;
(9) or drug addiction.
"Cause" does not include substandard performance or nonperformance by the
Employee. If the employment of the Employee is terminated by the Company for
cause, the Employee will not be entitled to any separation benefits and
Employee's salary, bonus, benefits and business expense reimbursements shall
cease as of the date of termination. All salary, bonuses on a prorata basis,
benefits and business expense reimbursements that are due to the Employee
hereunder and not paid up to the date of such termination shall be paid to the
Employee within forty-five (45) days of such termination.
B. Termination by the Company Without Cause. In the event the Employee
is terminated without cause by the Company, the Employee shall be entitled to
receive Annual Base Salary through the term, and any extension thereto of this
Agreement at Employee's then present Annual Base Salary rate. The Employee shall
also be entitled to the medical benefits he was receiving on the date of such
termination for an additional twelve (12) months from the date of termination,
provided, however, such medical benefits shall cease immediately upon the
subsequent employment or self-employment of the Employee, whichever first
occurs. No other benefits other than those specified herein will be available to
the Employee if the Employee is terminated without cause by the Company.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be entitled to not
less than four (4) weeks of annual vacation and all legal
holidays during which times his applicable compensation shall be
paid in full.
B. Fringe Benefits. During the term of this agreement, the Employee
is entitled to the same level of fringe benefits previously and
currently provided to Employee by the Company including but not
limited to a company car for business and personal use, health
insurance, dental insurance, disability insurance, and life
insurance.
C. Business Expenses. The Employee is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable
expenses incurred by the Employee in performing his duties and
carrying out his responsibilities hereunder,
-3-
<PAGE> 4
including air fare and hotels, business meals, entertainment and
travel expenses, provided that the Employee complies with the
applicable policies, practices and procedures of the Company
relating to the submission of expense reports, receipts or
similar documentation of those expenses. The Company shall either
pay directly or promptly reimburse the Employee for such expenses
not more than twenty (20) days after the submission to the
Company by the Employee from time to time of an itemized
accounting of such expenditures for which direct payment or
reimbursement is sought.
7. GENERAL PROVISION
A. Governing Law. This Agreement shall be construed and regulated
under and by the laws of the State of Florida. Personal
jurisdiction for any proceeding brought pursuant to this
Agreement shall be vested in the appropriate County or Circuit
Court of the Thirteenth Judicial Circuit in and for Hillsborough
County, Florida, or the Federal District Court of the Middle
District of Florida, Hillsborough County Division. Venue for any
legal action authorized hereunder shall be in Hillsborough
County, Florida.
B. Severability. If any provision of this Agreement is deemed to be
unenforceable in accordance with its term, but would be
considered enforceable if the time period or geographic area of
its effect is reduced, then such provision shall be so reduced
with the excessive aspects of the offending provisions deemed
severed and deleted from this Agreement with the Agreement
enforceable in full in accordance with its terms as so modified.
C. Notices. Whenever notice is required to be given hereunder,
written notice mailed or delivered to the Company at 4902 West
Waters Avenue, Tampa, Florida 33634 (if intended for the
Company), or such other address as the Company shall furnish in
writing, shall constitute sufficient notice to the Company; and
written notice mailed or delivered to Employee at 12018 Brewster
Drive, Tampa, FL 33676, or such other place as may be designated
by Employee in writing, shall constitute sufficient notice to
Employee. Where "the Company" or "Employee" consists of more than
one party, notice to one shall constitute notice to all.
D. Waiver or Modification. No waiver or modification of this
Agreement or of any covenant, condition or limitation herein
contained shall be valid unless in writing and duly executed by
the party to be charged therewith. Furthermore, no evidence of
any waiver or modification shall be offered or received in
evidence in any proceeding, arbitration or litigation between the
parties arising out of or affecting this Agreement or the rights
or obligations of any party hereunder, unless such waiver or
modification is in writing and duly executed as aforesaid. The
provisions of this paragraph may not be waived except as herein
set forth.
E. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter of this
Agreement, and supersedes any and all previous agreements,
negotiations and promises between the parties,
-4-
<PAGE> 5
whether written or oral, with respect to such subject matter.
F. Amendment. No amendment of any provision of this Agreement shall
be effective unless it is in writing and signed by the party
against whom it is sought to be enforced, and then such waiver or
amendment shall be effective only in the specific instance and
for the specific purpose for which it is given.
G. Assignment. Employee may not directly or indirectly transfer or
assign any of its rights or obligations hereunder without prior
written consent of the Company, which consent may be given or
withheld in Employee's sole and exclusive discretion, and any
such attempted assignment or transfer by Employee without the
Company's consent shall be void. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of the
Company and its successors and assigns and Employee and its
successors, permitted assigns, heirs, devisees and legal
representatives, as the case may be.
H. Section Headings. Section, subsection and similar headings
contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION
By:__________________________________________
Its:_________________________________________
EMPLOYEE
_____________________________________________
Richard J. Domino
Employee's Permanent Address:
12018 Brewster Drive
Tampa, FL 33676
-5-
<PAGE> 1
EXHIBIT 10.7
TROPICAL SPORTSWEAR INT'L
CORPORATION
EMPLOYEE STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. PURPOSE OF PLAN............................................................................... 1
2. DEFINITIONS................................................................................... 1
3. LIMITS ON OPTIONS............................................................................. 2
4. GRANTING OF OPTIONS........................................................................... 3
5. TERMS OF STOCK OPTIONS........................................................................ 3
6. EFFECT OF CHANGES IN CAPITALIZATION........................................................... 5
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS.......................................... 6
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS........................................ 7
9. ADMINISTRATION................................................................................ 8
10. NO OBLIGATION TO RESERVE OR RETAIN SHARES..................................................... 8
11. AMENDMENT OF PLAN............................................................................. 9
12. TERMINATION OF PLAN........................................................................... 9
13. EFFECTIVE DATE................................................................................ 9
</TABLE>
i
<PAGE> 3
TROPICAL SPORTSWEAR INT'L CORPORATION
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this Plan is to enable Tropical Sportswear Int'l
Corporation (the "Company") and its Subsidiaries to compete successfully in
attracting, motivating and retaining Employees with outstanding abilities by
making it possible for them to purchase Shares on terms that will give them a
direct and continuing interest in the future success of the businesses of the
Company and its Subsidiaries and encourage them to remain in the employ of the
Company or one or more of its Subsidiaries. Each Option is intended to be an
Incentive Stock Option, except to the extent that (a) any such Option would
exceed the limitations set forth in Section 3.(c) hereof and (b) for Options
specifically designated at the time of grant as not being Incentive Stock
Options.
2. DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the United States Internal Revenue Code of
1986, as amended.
(c) "Committee" means the Committee described in Section 9
hereof.
(d) "Effective Date" means the later of (i) the effective date
of any registration statement with respect to the Shares under the
Securities Exchange Act of 1934, as amended, and (ii) the time the
underwriting agreement has been executed and delivered by all parties
thereto, where the "underwriting agreement" is that underwriting
agreement referred to in the prospectus included in such registration
statement when it first became effective. Such execution and delivery
shall be definitively evidenced by any certificate to such effect by
any officer of the Company.
(e) "Employee" means a person who is regularly employed on a
salary basis by the Company or any Subsidiary, including an officer or
director of the Company or any Subsidiary who is also an employee of
the Company or a Subsidiary.
(f) "Fair Market Value" means, with respect to a Share, if the
Shares are then listed and traded on a registered national or regional
securities exchange, or quoted on The National Association of
Securities Dealers' Automated Quotation System (including The Nasdaq
National Market), the average closing price of a Share on such exchange
or quotation system for the five trading days immediately preceding the
date of grant of an Option, or, if Fair Market Value is used herein in
connection with any event other than
<PAGE> 4
the grant of an Option, then such average closing price for the five
trading days immediately preceding the date of such event. If the
Shares are not traded on a registered securities exchange or quoted in
such a quotation system, the Committee shall determine the Fair Market
Value of a Share.
(g) "Incentive Stock Option" means an option granted under
this Plan and which is an incentive stock option within the meaning of
section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute.
(h) "Option" means an option granted under this Plan, whether
or not such option is an Incentive Stock Option.
(i) "Optionee" means any person who has been granted an Option
which Option has not expired or been fully exercised or surrendered.
(j) "Plan" means the Company's Employee Stock Option Plan.
(k) "Rule 16b-3" means Rule 16b-3 promulgated pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
any successor rule.
(l) "Share" means one share of voting common stock, par value
$.01 per share, of the Company, and such other stock or securities that
may be substituted therefor pursuant to Section 6 hereof.
(m) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Corporation. For Incentive Stock Options, the term
shall have the meaning set forth in Section 424(f) of the Code.
3. LIMITS ON OPTIONS
(a) The total number of Shares with respect to which Options
may be granted under the Plan shall not exceed in the aggregate 500,000
Shares, subject to adjustment as provided in Section 6 hereof. If any
Option expires, terminates or is terminated for any reason prior to its
exercise in full, the Shares that were subject to the unexercised
portion of such Option shall be available for future grants under the
Plan.
(b) No Incentive Stock Option shall be granted to any Employee
who at the time such option is granted, owns capital stock of the
Company possessing more than 10% of the total combined voting power or
value of all classes of capital stock of the Company or any Subsidiary,
determined in accordance with the provisions of Section 422(b)(6) and
424(d) of the Code, unless the option price at the time such Incentive
Stock Option is granted is at least 110 percent (110%) of the Fair
Market Value
2
<PAGE> 5
of the Shares subject to the Incentive Stock Option and such Incentive
Stock Option is not exercisable by its terms after the expiration of
five (5) years from the date of grant.
(c) An Incentive Stock Option shall be granted hereunder only
to the extent that the aggregate Fair Market Value (determined at the
time the Incentive Stock Option is granted) of the Shares with respect
to which such Incentive Stock Option and any other "incentive stock
option" (within the meaning of Section 422 of the Code) are exercisable
for the first time by any Optionee during any calendar year (under the
Plan and all other plans of the Optionee's employer corporation and its
parent and subsidiary corporations within the meaning of Section 422(d)
of the Code) does not exceed $100,000. This limitation shall be applied
by taking Incentive Stock Options and any such other "incentive stock
options" into account in the order in which such Incentive Stock
Options and any such other "incentive stock options" were granted.
(d) No Optionee shall, in any calendar year, be granted
Options to purchase more than ___________ Shares. Options granted to
the Optionee and cancelled during the same calendar year shall be
counted against such maximum number of Shares. In the event that the
number of Options which may be granted is adjusted as provided in the
Plan, the above limit shall automatically be adjusted in the same
ratio.
4. GRANTING OF OPTIONS
The Committee is authorized to grant Options to selected Employees
pursuant to the Plan beginning on the Effective Date. Subject to the provisions
of the Plan, the Committee shall have exclusive authority to select the
Employees to whom Options will be awarded under the Plan, to determine the
number of Shares to be included in such Options, and to determine such other
terms and conditions of Options, including terms and conditions which may be
necessary to qualify Incentive Stock Options as "incentive stock options" under
Section 422 of the Code. The date on which the Committee approves the grant of
an Option shall be considered the date on which such Option is granted, unless
the Committee provides for a specific date of grant which is subsequent to the
date of such approval.
5. TERMS OF STOCK OPTIONS
Subject to Section 3 hereof, the terms of Options granted under this
Plan shall be as follows:
(a) The exercise price of each Share subject to an Option
shall be fixed by the Committee. Notwithstanding the prior sentence,
the option exercise price of an Incentive Stock Option shall be fixed
by the Committee but shall in no event be less than 100% of the Fair
Market Value of the Shares subject to such Option.
(b) Options shall not be assignable or transferable by the
Optionee other than by will or by the laws of descent and distribution
except that the Optionee may, with the
3
<PAGE> 6
consent of the Committee, transfer without consideration Options that
do not constitute Incentive Stock Options to the Optionee's spouse,
children or grandchildren (or to one or more trusts for the benefit of
any such family members or to one or more partnerships in which any
such family members are the only partners).
(c) Each Option shall expire and all rights thereunder shall
end at the expiration of such period (which shall not be more than ten
(10) years) after the date on which it was granted as shall be fixed by
the Committee, subject in all cases to earlier expiration as provided
in subsections (d) and (e) of this Section 5.
(d) During the life of an Optionee, an Option shall be
exercisable only by such Optionee (or Optionee's permitted assignee in
the case of Options that do not constitute Incentive Stock Options) and
only prior to the end of one (1) month after the termination of the
Optionee's employment with the Company or a Subsidiary, other than by
reason of the Optionee's death, permanent disability or retirement with
the consent of the Company or a Subsidiary as provided in subsection
(e) of this Section 5, but only if and to the extent the Option was
exercisable immediately prior to such termination, and subject to the
provisions of subsection (c) of this Section 5. If the Optionee's
employment is terminated for cause, or the Optionee terminates his
employment with the Company, all Options granted to date by the Company
to the Optionee (including any Options that have become exercisable)
shall terminate immediately on the date of termination of employment.
Cause shall have the meaning set forth in any employment agreement then
in effect between the Optionee and the Company or any of its
Subsidiaries, or if the Optionee does not have any employment
agreement, cause shall mean (i) if the Optionee engages in conduct
which has caused, or is reasonably likely to cause, demonstrable and
serious injury to the Company, or (ii) if the Optionee is convicted of
a felony, as evidenced by a binding and final judgment, order or decree
of a court of competent jurisdiction, which, in the opinion of the
Board, substantially impairs the Optionee's ability to perform his or
her duties to the Company.
(e) If an Optionee: (i) dies while employed by the Company or
a Subsidiary or within the period when an Option could have otherwise
been exercised by the Optionee; (ii) terminates employment with, or has
his employment terminated by, the Company or a Subsidiary by reason of
the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Optionee; or (iii) terminates employment
with the Company or a Subsidiary as a result of such Optionee's
retirement, provided that the Company or such Subsidiary has consented
in writing to such Optionee's retirement, then, in each such case, such
Optionee, or the duly authorized representatives of such Optionee (or
Optionee's permitted assignee in the case of Options that do not
constitute Incentive Stock Options), shall have the right, at any time
within three (3) months after the death, disability or retirement of
the Optionee, as the case may be, and prior to the termination of the
Option pursuant to subsection (c) of this Section 5, to exercise any
Option to the extent such Option was exercisable by the Optionee
4
<PAGE> 7
immediately prior to such Optionee's death, disability or retirement.
In the discretion of the Committee, the three-month period referenced
in the immediately preceding sentence may be extended for a period of
up to one year.
(f) Subject to the foregoing terms and to such additional
terms regarding the exercise of an Option as the Committee may fix at
the time of grant, an Option may be exercised in whole at one time or
in part from time to time.
(g) Options granted pursuant to the Plan shall be evidenced by
an agreement in writing setting forth the material terms and conditions
of the grant, including, but not limited to, the number of Shares
subject to options. Option agreements covering Options need not contain
similar provisions; provided, however, that all such option agreements
shall comply with the terms of the Plan.
(h) The Committee is authorized to modify, amend or waive any
conditions or other restrictions with respect to Options, including
conditions regarding the exercise of Options.
6. EFFECT OF CHANGES IN CAPITALIZATION
(a) If the number of outstanding Shares is increased or
decreased or changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares,
exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected,
in each case without receipt of consideration by the Company, a
proportionate and appropriate adjustment shall be made by the Committee
in (i) the aggregate number of Shares subject to the Plan, (ii) the
maximum number of Shares for which Options may be granted to any
Employee during any calendar year, and (iii) the number and kind of
shares for which Options are outstanding, so that the proportionate
interest of the Optionee immediately following such event shall, to the
extent practicable, be the same as immediately prior to such event. Any
such adjustment in outstanding Options shall not change the aggregate
option price payable with respect to Shares subject to the unexercised
portion of the Options outstanding but shall include a corresponding
proportionate adjustment in the option price per Share.
(b) Subject to Section 6.(c) hereof, if the Company shall be
the surviving corporation in any reorganization, merger, share exchange
or consolidation of the Company with one or more other corporations or
other entities, any Option theretofore granted shall pertain to and
apply to the securities to which a holder of the number of Shares
subject to such Option would have been entitled immediately following
such reorganization, merger, share exchange or consolidation, with a
corresponding proportionate adjustment of the option price per Share so
that the aggregate option price thereafter shall be the same as the
aggregate option price of the Shares remaining subject
5
<PAGE> 8
to the Option immediately prior to such reorganization, merger, share
exchange or consolidation.
(c) In the event of: (i) the adoption of a plan of
reorganization, merger, share exchange or consolidation of the Company
with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive less than
fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the
adoption of a plan of liquidation or the approval of the dissolution of
the Company; (iii) the approval by the Board of an agreement providing
for the sale or transfer (other than as a security for obligations of
the Company or any Subsidiary) of substantially all of the assets of
the Company; or (iv) the acquisition of more than twenty percent (20%)
of the outstanding Shares by any person within the meaning of Rule
13(d)(3) under the Securities Exchange Act of 1934, as amended, if such
acquisition is not preceded by a prior expression of approval by the
Board, then, in each such case, any Option granted hereunder shall
become immediately exercisable in full, subject to any appropriate
adjustments in the number of Shares subject to such Option and the
option price, regardless of any provision contained in the Plan or any
stock option agreement with respect thereto limiting the exercisability
of the Option for any length of time. Notwithstanding the foregoing, if
a successor corporation or other entity as contemplated in clause (i)
or (iii) of the preceding sentence agrees to assume the outstanding
Options or to substitute substantially equivalent options, then the
outstanding Options issued hereunder shall not be immediately
exercisable, but shall remain exercisable in accordance with the terms
of the Plan and the applicable stock option agreements.
(d) Adjustments under this Section 6 relating to Shares or
securities of the Company shall be made by the Committee, whose
determination in that respect shall be final and conclusive. Options
subject to grant or previously granted under the Plan at the time of
any event described in this Section 6 shall be subject to only such
adjustments as shall be necessary to maintain the proportionate
interest of the options and preserve, without exceeding, the value of
such options. No fractional Shares or units of other securities shall
be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding
upward to the nearest whole Share or unit.
(e) The grant of an Option pursuant to the Plan shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or
assets.
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS
(a) No Shares shall be delivered upon the exercise of an
Option until the option price for the Shares acquired has been paid in
full. No Shares shall be issued or
6
<PAGE> 9
transferred under the Plan unless and until all legal requirements
applicable to the issuance or transfer of such Shares have been
complied with to the satisfaction of the Committee and adequate
provision has been made by the Optionee for satisfying any applicable
federal, state or local income or other taxes incurred by reason of the
exercise of the Option. Any Shares issued by the Company to an Optionee
upon exercise of an Option may be made only in strict compliance with
and in accordance with applicable state and federal securities laws.
(b) Payment of the option price for the Shares purchased
pursuant to the exercise of an Option and of any applicable withholding
taxes shall be made, as determined by the Committee and set forth in
the option agreement pertaining to such Option: (i) in cash or by check
payable to the order of the Company; (ii) through the tender to the
Company of Shares, which Shares shall be valued, for purposes of
determining the extent to which the option price has been paid thereby,
at their Fair Market Value on the date of exercise; or (iii) by a
combination of the methods described in (a) and (b) hereof; provided,
however, that the Committee may in its discretion impose and set forth
in the option agreement pertaining to an Option such limitations or
prohibitions on the use of Shares to exercise Options as it deems
appropriate. The Committee also may authorize payment in accordance
with a cashless exercise program under which, if so instructed by the
Optionee, Shares may be issued directly to the Optionee's broker upon
receipt of the option price in cash from the broker.
(c) To the extent that the payment of the exercise price for
the Shares purchased pursuant to the exercise of an Option is made with
Shares as provided in Section 7.(b) hereof, then, at the discretion of
the Committee, the Optionee may be granted a replacement Option under
the Plan to purchase a number of Shares equal to the number of Shares
tendered as permitted in Section 7.(b) hereof, with an exercise price
per Share equal to the Fair Market Value on the date of grant of such
replacement Option and with a term extending to the expiration date of
the original Option.
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or option agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain a director or in the employ of either the Company
or any Subsidiary, or to interfere in any way with the right and authority of
the Company or any Subsidiary either to increase or decrease the compensation of
any individual at any time, or to terminate any employment or other relationship
between any individual and the Company or any Subsidiary. The Plan shall in no
way be interpreted to require the Company to transfer any amounts to a third
party trustee or otherwise hold any amounts in trust or escrow for payment to
any Optionee or beneficiary under the terms of the Plan. An Optionee shall have
none of the rights of a shareholder of the Company until and to the extent all
or some of the Shares covered by an Option are fully paid and issued to such
Optionee.
7
<PAGE> 10
9. ADMINISTRATION
(a) Subject to the provisions of subsection (b) of this
Section 9, the Plan shall be administered by the Committee which shall
interpret the Plan and make all other determinations necessary or
advisable for its administration, including such rules and regulations
and procedures as it deems appropriate. The Committee shall consist of
not fewer than two members of the Board each of whom shall qualify (at
the time of appointment to the Committee and during all periods of
service on the Committee) in all respects as a "non-employee director"
as defined in Rule 16b-3 and as an "outside director" as defined in
Section 162(m) of the Code and regulations thereunder. The deduction
limits of Section 162(m) of the Code and the regulations thereunder do
not apply to the Company until such time, if any, as any class of the
Company's common equity securities is registered under Section 12 of
the Securities and Exchange Act of 1934, as amended, or the Company
otherwise meets the definition of a "publicly held corporation" under
Treasury Regulation 1.162-27(c) or any successor provision. Upon
becoming a publicly held corporation, the deduction limits of Section
162(m) of the Code and the regulations thereunder shall not apply to
compensation payable under this Plan until the expiration of the
reliance period described in Treasury Regulation 1.162-27(f) or any
successor regulation. Subject to the provisions of subsection (b) of
this Section 9, in the event of a disagreement as to the interpretation
of the Plan or any amendment hereto or any rule, regulation or
procedure hereunder or as to any right or obligation arising from or
related to the Plan, the decision of the Committee shall be final and
binding upon all persons in interest, including the Company, the
Optionee and the Company's shareholders.
(b) Notwithstanding any provision of the Plan to the contrary,
any determination or interpretation to be made by the Committee with
regard to any question arising under the Plan or any option agreement
entered into hereunder may be made by the Board (excluding any Optionee
whose Options or the grant to whom is at issue) and shall be final and
binding upon all persons in interest, including the Company, the
Optionee and the Company's shareholders.
(c) No member of the Committee or the Board shall be liable
for any action taken or decision made, or any failure to take any
action, in good faith with respect to the Plan or any Option granted or
option agreement entered into hereunder.
10. NO OBLIGATION TO RESERVE OR RETAIN SHARES
The Board adopted, as of the Effective Date, a resolution initially
reserving authorized but unissued Shares for the Plan. The Company will be under
no further obligation to reserve, or to retain in its treasury, any particular
number of Shares in connection with its obligations hereunder.
8
<PAGE> 11
11. AMENDMENT OF PLAN
The Board, without further action by the shareholders, may amend this
Plan from time to time as it deems desirable and shall make any amendments which
may be required so that Options intended to be Incentive Stock Options shall at
all times continue to be Incentive Stock Options for purpose of the Code;
provided, however, that the Board or Committee may condition any amendment or
modification on the approval of stockholders of the Company if such approval is
necessary or deemed advisable with respect to tax, securities or other
applicable laws, policies or regulations.
12. TERMINATION OF PLAN
This Plan shall terminate ten (10) years from the Effective Date. The
Board may, in its discretion, suspend or terminate the Plan at any time prior to
such date, but such termination or suspension shall not adversely affect any
right or obligation with respect to any outstanding Option.
13. EFFECTIVE DATE
The Plan shall become effective on the Effective Date and Options
hereunder may be granted at any time on or after that date. If the shareholders
of the Company fail to approve the Plan prior to, or within one year after, the
Effective Date, any Incentive Stock Option granted hereunder shall be
automatically converted to non-qualified stock options without any further act.
9
<PAGE> 1
EXHIBIT 10.8
TROPICAL SPORTSWEAR INT'L
CORPORATION
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. PURPOSE OF PLAN............................................................................... 1
2. DEFINITIONS................................................................................... 1
3. LIMITS ON OPTIONS............................................................................. 2
4. GRANTING AND TERMS OF OPTIONS................................................................. 2
5. EFFECT OF CHANGES IN CAPITALIZATION........................................................... 4
6. DELIVERY AND PAYMENT FOR SHARES............................................................... 5
7. NO CONTINUATION AS A DIRECTOR AND DISCLAIMER OF RIGHTS........................................ 6
8. ADMINISTRATION................................................................................ 6
9. NO OBLIGATION TO RESERVE OR RETAIN SHARES..................................................... 6
10. AMENDMENT OF PLAN............................................................................. 6
11. TERMINATION OF PLAN........................................................................... 6
12. EFFECTIVE DATE................................................................................ 6
</TABLE>
i
<PAGE> 3
TROPICAL SPORTSWEAR INT'L CORPORATION
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this Plan is to enable Tropical Sportswear Int'l
Corporation (the "Company") and its Subsidiaries to compete successfully in
attracting, motivating and retaining Non-Employee Directors with outstanding
abilities by making it possible for them to purchase Shares on terms that will
give them a direct and continuing interest in the future success of the
businesses of the Company and its Subsidiaries and encourage them to remain as
directors of the Company or one or more of its Subsidiaries.
2. DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(c) "Effective Date" means the later of (i) the effective date of any
registration statement with respect to the Shares under the Securities Exchange
Act of 1934, as amended, and (ii) the time the underwriting agreement has been
executed and delivered by all parties thereto, where the "underwriting
agreement" is that underwriting agreement referred to in the prospectus included
in such registration statement when it first became effective. Such execution
and delivery shall be definitively evidenced by any certificate to such effect
by any officer of the Company.
(d) "Fair Market Value" means, with respect to a Share, if the Shares
are then listed and traded on a registered national or regional securities
exchange, or quoted on The National Association of Securities Dealers' Automated
Quotation System (including The Nasdaq National Market), the average closing
price of a Share on such exchange or quotation system for the five trading days
immediately preceding the date of grant of an Option, or, if Fair Market Value
is used herein in connection with any event other than the grant of an Option,
then such average closing price for the five trading days immediately preceding
the date of such event. If the Shares are not traded on a registered securities
exchange or quoted in such a quotation system, the Board shall determine the
Fair Market Value of a Share.
(e) "Non-Employee Director" shall mean any member of the Company's
Board of Directors who is not an employee of the Company or any Subsidiary at
the time Options are granted to such person.
<PAGE> 4
(f) "Option" means an option granted under this Plan, which Option
shall not be an incentive stock option within the meaning of Section 422 of the
Code, or the corresponding provision of any subsequently enacted tax statute.
(g) "Optionee" means any person who has been granted an Option which
Option has not expired or been fully exercised or surrendered.
(h) "Plan" means the Company's Non-Employee Director Stock Option Plan.
(i) "Rule 16b-3" means Rule 16b-3 promulgated pursuant to Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any successor rule.
(j) "Share" means one share of voting common stock, par value $.01 per
share, of the Company, and such other stock or securities that may be
substituted therefor pursuant to Section hereof.
(k) "Subsidiary" means any "subsidiary corporation" within the meaning
of Section 424(f) of the Code.
3. LIMITS ON OPTIONS
The total number of Shares with respect to which Options may be granted
under the Plan shall not exceed in the aggregate 200,000 Shares, subject to
adjustment as provided in Section 5 hereof. If any Option expires, terminates or
is terminated for any reason prior to its exercise in full, the Shares that were
subject to the unexercised portion of such Option shall be available for future
grants under the Plan.
4. GRANTING AND TERMS OF OPTIONS
(a) Each Non-Employee Director shall on the Effective Date
automatically be granted an Option to purchase 10,000 Shares. Thereafter, on the
date on which a Non-Employee Director, other than a Non-Employee Director who is
serving as such on the Effective Date, is first elected or appointed as a
Non-Employee Director during the existence of the Plan, such Non-Employee
Director shall automatically be granted an Option to purchase 10,000 Shares.
(b) Each Non-Employee Director (if he or she continues to serve in such
capacity) shall, on the day following his or her reelection to the Board at an
annual meeting of shareholders held during the time the Plan is in effect,
automatically be granted an Option to purchase 10,000 Shares; provided, however,
that no person shall be entitled to receive more than one such grant under this
Section 4(b) during any consecutive three-year period.
(c) Notwithstanding the provisions of Section 4.(a) and 4.(b) hereof,
Options shall be automatically granted to Non-Employee Directors under the Plan
only for so long as the Plan
2
<PAGE> 5
remains in effect and a sufficient number of Shares are available hereunder for
the granting of such Options.
(d) The exercise price of each Share subject to an Option shall be
equal to 100% of the Fair Market Value of the Shares on the date of grant of
such Option.
(e) Options shall not be assignable or transferable by the Optionee
other than by will or by the laws of descent and distribution except that the
Optionee may, with the consent of the Board of Directors, transfer without
consideration Options to the Optionee's spouse, children or grandchildren (or to
one or more trusts for the benefit of any such family members or to one or more
partnerships in which any such family members are the only partners).
(f) Each Option shall expire and all rights thereunder shall end at the
expiration of ten (10) years after the date on which it was granted, subject in
all cases to earlier expiration as provided in subsections (g) and (h) of this
Section 4.
(g) During the life of an Optionee, an Option shall be exercisable only
by such Optionee or by someone duly authorized to act for the Optionee in the
case of disability or legal incompetence.
(h) In addition to the rights granted in subsection (i) of this Section
4, if an Optionee: (i) dies while a Director of the Company; (ii) ceases to be a
Director of the Company as a result of such Optionee's resignation from the
Board, provided that the Company has consented in writing to such Optionee's
resignation; (iii) resigns or is removed by reason of a disability; or (iv)
ceases to be a Director of the Company other than as described in clauses (i),
(ii) or (iii) and other than for cause as described in the next following
sentence, then such Optionee, or the duly authorized representatives of such
Optionee, shall have the right, at any time prior to the end of one (1) year
after the death or after such resignation of the Optionee, as the cases
described in clause (i), (ii) or (iii) may be; or at any time prior to the end
of one (1) month after the date on which the Optionee ceases-to-be a Director of
the Company for reasons within clause (iv), but in each such case only prior to
the termination of the Option pursuant to subsection (f) of this Section 4, to
exercise any Option to the extent such Option was exercisable by the Optionee
immediately prior to such Optionee's death, disability, resignation, or
ceasing-to-be a Director of the Company as referred to in clause (iv) of the
first sentence of this subsection (h), as the case may be. If the Optionee is
removed as a Director of the Company for cause (as defined in the Company's
Amended and Restated Articles of Incorporation, as amended from time to time)
other than disability, all Options of the Optionee shall terminate immediately
on the date of such removal.
(i) The Optionee may exercise the Option (subject to the limitations on
exercise set forth in subsection (f) of this Section 4), in whole or in part, as
follows: (i) the Option may not be exercised to any extent prior to one (1) year
following the date of grant; and (ii) the Option may be exercised to the extent
of 33 1/3% of the Shares subject to such Option after one year following the
date of grant and may be exercised to the extent of an additional 33 1/3% of the
3
<PAGE> 6
Shares subject to such Option after each of the second and third years following
the date of grant.
(j) An Option may be exercised in whole at one time or in part from
time to time, subject to subsection (i) of this Section 4.
(k) Options granted pursuant to the Plan shall be evidenced by an
agreement in writing setting forth the material terms and conditions of the
grant, including, but not limited to, the number of Shares subject to Options.
5. EFFECT OF CHANGES IN CAPITALIZATION
(a) If the number of outstanding Shares is increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or decrease in such
shares effected, in each case without receipt of consideration by the Company, a
proportionate and appropriate adjustment shall be made by the Board of Directors
in (i) the number and type of Shares subject to the Plan and which thereafter
may be made the subject of Options under the Plan, and (ii) the number and kind
of shares for which Options are outstanding, so that the proportionate interest
of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such adjustment
in outstanding Options shall not change the aggregate option price payable with
respect to Shares subject to the unexercised portion of the Options outstanding
but shall include a corresponding proportionate adjustment in the option price
per Share.
(b) Subject to Section 5. (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, share exchange or
consolidation of the Company with one or more other corporations or other
entities, any Option theretofore granted shall pertain to and apply to the
securities to which a holder of the number of Shares subject to such Option
would have been entitled immediately following such reorganization, merger,
share exchange or consolidation, with a corresponding proportionate adjustment
of the option price per Share so that the aggregate option price thereafter
shall be the same as the aggregate option price of the Shares remaining subject
to the Option immediately prior to such reorganization, merger, share exchange
or consolidation.
(c) In the event of: (i) the adoption of a plan of reorganization,
merger, share exchange or consolidation of the Company with one or more other
corporations or other entities as a result of which the holders of the Shares as
a group would receive less than fifty percent (50%) of the voting power of the
capital stock or other interests of the surviving or resulting corporation or
entity; (ii) the adoption of a plan of liquidation or the approval of the
dissolution of the Company; (iii) the approval by the Board of an agreement
providing for the sale or transfer of the assets of the Company; or (iv) the
acquisition of more than twenty percent (20%) of the outstanding shares by any
person within the meaning of Rule 13(d)(3) under the Securities
4
<PAGE> 7
Exchange Act of 1934 if such acquisition is not preceded by a prior expression
of approval by the Board, then, in each such case, any Option granted hereunder
shall become immediately exercisable in full, subject to any appropriate
adjustments in the number of Shares subject to such Option and the option price,
regardless of any provision contained in the Plan with respect thereto limiting
the exercisability of the Option for any length of time. Notwithstanding the
foregoing, if a successor corporation or other entity as contemplated in clause
(i) or (iii) of the preceding sentence agrees to assume the outstanding Options
or to substitute substantially equivalent options, then the outstanding Options
issued hereunder shall not be immediately exercisable, but shall remain
exercisable in accordance with the terms of the Plan and the applicable stock
option agreements.
(d) Adjustments under this Section 5 relating to Shares or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final and conclusive. Options subject to grant or previously granted
under the Plan at the time of any event described in this Section 5 shall be
subject to only such adjustments as shall be necessary to maintain the
proportionate interest of the Options and preserve, without exceeding, the value
of such Options. No fractional Shares or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding upward to the
nearest whole Share or unit.
(e) The grant of an Option pursuant to the Plan shall not affect or
limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
6. DELIVERY AND PAYMENT FOR SHARES
(a) No Shares shall be delivered upon the exercise of an Option until
the option price for the Shares acquired has been paid in full. No shares shall
be issued or transferred under the Plan unless and until all legal requirements
applicable to the issuance or transfer of such Shares have been complied with to
the satisfaction of the Board. Any Shares issued by the Company to an Optionee
upon exercise of an Option may be made only in strict compliance with and in
accordance with applicable state and federal securities laws.
(b) Payment of the option price for the Shares purchased pursuant to
the exercise of an Option shall be made: (i) in cash or by check payable to the
order of the Company; (ii) through the tender (or attestation) to the Company of
Shares, which Shares shall have been held by the Optionee for at least six
months and shall be valued, for purposes of determining the extent to which the
option price has been paid thereby, at their Fair Market Value on the date of
exercise; or (iii) by a combination of the methods described in (i) and (ii)
hereof. Payment also may be made in accordance with a cashless exercise program
under which, if so instructed by the Optionee, Shares may be issued directly to
the Optionee's broker upon receipt of the option price in cash from the broker.
5
<PAGE> 8
7. NO CONTINUATION AS A DIRECTOR AND DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or option agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain a director (or employee, if he should become such
after the date of grant) of the Company or any Subsidiary. The Plan shall in no
way be interpreted to require the Company to transfer any amounts to a third
party trustee or otherwise hold any amounts in trust or escrow for payment to
any Optionee or beneficiary under the terms of the Plan. An Optionee shall have
none of the rights of a shareholder of the Company until and to the extent all
or some of the Shares covered by an Option are fully paid and issued to such
Optionee.
8. ADMINISTRATION
The Plan is intended to be a formula plan and accordingly is intended
to be self-governing. To the extent, if any, that any questions of
interpretation arise, these shall be resolved by the Board.
9. NO OBLIGATION TO RESERVE OR RETAIN SHARES
The Board adopted, as of the Effective Date, a resolution initially
reserving authorized but unissued Shares for the Plan. The Company will be under
no further obligation to reserve, or to retain in its treasury, any particular
number of Shares in connection with its obligations hereunder.
10. AMENDMENT OF PLAN
The Board, without further action by the shareholders, may amend this
Plan from time to time as it deems desirable.
11. TERMINATION OF PLAN
This Plan shall terminate ten (10) years from the Effective Date. The
Board may, in its discretion, suspend or terminate the Plan at any time prior to
such date, but such termination or suspension shall not adversely affect any
right or obligation with respect to any outstanding Option.
12. EFFECTIVE DATE
The Plan shall become effective on the Effective Date and Options
hereunder shall be granted on and after that date as provided in the Plan and
subject to approval of the Plan by the Company's shareholders prior to, or
within one year after, the Effective Date. Upon approval of the Plan by the
shareholders of the Company as set forth above, all Options granted under the
Plan on or after the Effective Date shall be fully effective as if the
shareholders of the Company had approved the Plan on the Effective Date.
6
<PAGE> 1
EXHIBIT 10.9
APPAREL INTERNATIONAL GROUP, INC.
1996 STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. PURPOSE OF PLAN............................................................................... 1
2. DEFINITIONS................................................................................... 1
3. LIMITS ON OPTIONS............................................................................. 2
4. GRANTING OF OPTIONS........................................................................... 2
5. TERMS OF STOCK OPTIONS........................................................................ 2
6. EFFECT OF CHANGES IN CAPITALIZATION........................................................... 4
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS.......................................... 5
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS........................................ 6
9. ADMINISTRATION................................................................................ 7
10. NO RESERVATION OF SHARES...................................................................... 7
11. AMENDMENT OF PLAN............................................................................. 7
12. TERMINATION OF PLAN........................................................................... 8
13. EFFECTIVE DATE................................................................................ 8
</TABLE>
i
<PAGE> 3
APPAREL INTERNATIONAL GROUP, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this Plan is to enable Apparel International Group, Inc.
(the "Company") and its Subsidiaries to compete successfully in attracting,
motivating and retaining Employees with outstanding abilities by making it
possible for them to purchase Shares on terms that will give them a direct and
continuing interest in the future success of the businesses of the Company and
its Subsidiaries and encourage them to remain in the employ of the Company or
one or more of its Subsidiaries.
2. DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the United States Internal Revenue Code of
1986, as amended.
(c) "Committee" means the Committee described in Section 9
hereof.
(d) "Effective Date" means December 18, 1996.
(e) "Employee" means a person who is regularly employed on a
salary basis by the Company or any Subsidiary, including an officer or
director of the Company or any Subsidiary who is also an employee of
the Company or a Subsidiary.
(f) "Fair Market Value" means, with respect to a Share, if the
Shares are then listed and traded on a registered national or regional
securities exchange, or quoted on The National Association of
Securities Dealers' Automated Quotation System (including The Nasdaq
Stock Market's National Market System), the average closing price of a
Share on such exchange or quotation system for the five trading days
immediately preceding the date of grant of an Option, or, if Fair
Market Value is used herein in connection with any event other than the
grant of an Option, then such average closing price for the five
trading days immediately preceding the date of such event. If the
Shares are not traded on a registered securities exchange or quoted in
such a quotation system, the Committee shall determine the Fair Market
Value of a Share.
(g) "Option" means an option granted under this Plan.
(h) "Optionee" means any person who has been granted an Option
which Option has not expired or been fully exercised or surrendered.
<PAGE> 4
(i) "Plan" means the Company's 1996 Stock Option Plan.
(j) "Rule 16b-3" means Rule 16b-3 promulgated pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
any successor rule.
(k) "Share" means one share of voting common stock, par value
$1.00 per share, of the Company, and such other stock or securities
that may be substituted therefor pursuant to Section hereof.
(l) "Subsidiary" means any "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
3. LIMITS ON OPTIONS
The total number of Shares with respect to which Options may
be granted under the Plan shall not exceed in the aggregate ten (10)
Shares, subject to adjustment as provided in Section hereof. If any
Option expires, terminates or is terminated for any reason prior to its
exercise in full, the Shares that were subject to the unexercised
portion of such Option shall be available for future grants under the
Plan.
4. GRANTING OF OPTIONS
The Committee is authorized to grant Options to selected Employees
pursuant to the Plan beginning on the Effective Date. Subject to the provisions
of the Plan, the Committee shall have exclusive authority to select the
Employees to whom Options will be awarded under the Plan, to determine the
number of Shares to be included in such Options, and to determine such other
terms and conditions of Options. The date on which the Committee approves the
grant of an Option shall be considered the date on which such Option is granted,
unless the Committee provides for a specific date of grant which is subsequent
to the date of such approval.
5. TERMS OF STOCK OPTIONS
Subject to Section 3 hereof, the terms of Options granted under this
Plan shall be as follows:
(a) The exercise price of each Share subject to an Option
shall be fixed by the Committee.
(b) Options shall not be assignable or transferable by the
Optionee other than by will or by the laws of descent and distribution
except that the Optionee may, with the consent of the Committee,
transfer without consideration Options to the Optionee's spouse,
children or grandchildren (or to one or more trusts for the benefit of
any such family members or to one or more partnerships in which any
such family members are the only partners).
2
<PAGE> 5
(c) Each Option shall expire and all rights thereunder shall
end at the expiration of such period (which shall not be more than ten
(10) years) after the date on which it was granted as shall be fixed by
the Committee, subject in all cases to earlier expiration as provided
in subsections (d) and (e) of this Section 5.
(d) During the life of an Optionee, an Option shall be
exercisable only by such Optionee (or Optionee's permitted assignee)
and only within one (1) month after the termination of the Optionee's
employment with the Company or a Subsidiary, other than by reason of
the Optionee's death, permanent disability or retirement with the
consent of the Company or a Subsidiary as provided in subsection (e) of
this Section 5, but only if and to the extent the Option was
exercisable immediately prior to such termination, and subject to the
provisions of subsection (c) of this Section 5. If the Optionee's
employment is terminated for cause, or the Optionee terminates his
employment with the Company, all Options granted to date by the Company
to the Optionee (including any Options that have become exercisable)
shall terminate immediately on the date of termination of employment.
Cause shall have the meaning set forth in any employment agreement then
in effect between the Optionee and the Company or any of its
Subsidiaries, or if the Optionee does not have any employment
agreement, cause shall mean (i) if the Optionee engages in conduct
which has caused, or is reasonably likely to cause, demonstrable and
serious injury to the Company, or (ii) if the Optionee is convicted of
a felony, as evidenced by a binding and final judgment, order or decree
of a court of competent jurisdiction, which, in the opinion of the
Board, substantially impairs the Optionee's ability to perform his or
her duties to the Company.
(e) If an Optionee: (i) dies while employed by the Company or
a Subsidiary or within the period when an Option could have otherwise
been exercised by the Optionee; (ii) terminates employment with the
Company or a Subsidiary by reason of the "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) of
such Optionee; or (iii) terminates employment with the Company or a
Subsidiary as a result of such Optionee's retirement, provided that the
Company or such Subsidiary has consented in writing to such Optionee's
retirement, then, in each such case, such Optionee, or the duly
authorized representatives of such Optionee (or Optionee's permitted
assignee), shall have the right, at any time within three (3) months
after the death, disability or retirement of the Optionee, as the case
may be, and prior to the termination of the Option pursuant to
subsection (c) of this Section 5, to exercise any Option to the extent
such Option was exercisable by the Optionee immediately prior to such
Optionee's death, disability or retirement. In the discretion of the
Committee, the three-month period referenced in the immediately
preceding sentence may be extended for a period of up to one year.
(f) Subject to the foregoing terms and to such additional
terms regarding the exercise of an Option as the Committee may fix at
the time of grant, an Option may be exercised in whole at one time or
in part from time to time.
3
<PAGE> 6
(g) Options granted pursuant to the Plan shall be evidenced by
an agreement in writing setting forth the material terms and conditions
of the grant, including, but not limited to, the number of Shares
subject to options. Option agreements covering Options need not contain
similar provisions; provided, however, that all such option agreements
shall comply with the terms of the Plan.
(h) The Committee is authorized to modify, amend or waive any
conditions or other restrictions with respect to Options, including
conditions regarding the exercise of Options.
6. EFFECT OF CHANGES IN CAPITALIZATION
(a) If the number of outstanding Shares is increased or
decreased or changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares,
exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company, a proportionate and
appropriate adjustment shall be made by the Committee in (i) the
aggregate number of Shares subject to the Plan, (ii) the maximum number
of Shares for which Options may be granted to any Employee during any
calendar year, and (iii) the number and kind of shares for which
Options are outstanding, so that the proportionate interest of the
Optionee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate option
price payable with respect to Shares subject to the unexercised portion
of the Options outstanding but shall include a corresponding
proportionate adjustment in the option price per Share.
(b) Subject to Section 6. (c) hereof, if the Company shall be
the surviving corporation in any reorganization, merger, share exchange
or consolidation of the Company with one or more other corporations or
other entities, any Option theretofore granted shall pertain to and
apply to the securities to which a holder of the number of Shares
subject to such Option would have been entitled immediately following
such reorganization, merger, share exchange or consolidation, with a
corresponding proportionate adjustment of the option price per Share so
that the aggregate option price thereafter shall be the same as the
aggregate option price of the Shares remaining subject to the Option
immediately prior to such reorganization, merger, share exchange or
consolidation.
4
<PAGE> 7
(c) In the event of: (i) the adoption of a plan of
reorganization, merger, share exchange or consolidation of the Company
with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive less than
fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the
adoption of a plan of liquidation or the approval of the dissolution of
the Company; (iii) the approval by the Board of an agreement providing
for the sale or transfer (other than as a security for obligations of
the Company or any Subsidiary) of substantially all of the assets of
the Company; or (iv) the acquisition of more than twenty percent (20%)
of the outstanding Shares by any person within the meaning of Rule
13(d)(3) under the Securities Exchange Act of 1934, as amended, if such
acquisition is not preceded by a prior expression of approval by the
Board, then, in each such case, any Option granted hereunder shall
become immediately exercisable in full, subject to any appropriate
adjustments in the number of Shares subject to such Option and the
option price, regardless of any provision contained in the Plan or any
stock option agreement with respect thereto limiting the exercisability
of the Option for any length of time. Notwithstanding the foregoing, if
a successor corporation or other entity as contemplated in clause (i)
or (iii) of the preceding sentence agrees to assume the outstanding
Options or to substitute substantially equivalent options, then the
outstanding Options issued hereunder shall not be immediately
exercisable, but shall remain exercisable in accordance with the terms
of the Plan and the applicable stock option agreements.
(d) Adjustments under this Section 6 relating to Shares or
securities of the Company shall be made by the Committee, whose
determination in that respect shall be final and conclusive. Options
subject to grant or previously granted under the Plan at the time of
any event described in this Section 6 shall be subject to only such
adjustments as shall be necessary to maintain the proportionate
interest of the options and preserve, without exceeding, the value of
such options. No fractional Shares or units of other securities shall
be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding
upward to the nearest whole Share or unit.
(e) The grant of an Option pursuant to the Plan shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or
assets.
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS
(a) No Shares shall be delivered upon the exercise of an
Option until the option price for the Shares acquired has been paid in
full. No Shares shall be issued or transferred under the Plan unless
and until all legal requirements applicable to the issuance or transfer
of such Shares have been complied with to the satisfaction of the
Committee and adequate provision has been made by the Optionee for
satisfying any
5
<PAGE> 8
applicable federal, state or local income or other taxes incurred by
reason of the exercise of the Option. Any Shares issued by the Company
to an Optionee upon exercise of an Option may be made only in strict
compliance with and in accordance with applicable state and federal
securities laws.
(b) Payment of the option price for the Shares purchased
pursuant to the exercise of an Option and of any applicable withholding
taxes shall be made, as determined by the Committee and set forth in
the option agreement pertaining to such Option: (i) in cash or by check
payable to the order of the Company; (ii) through the tender to the
Company of Shares, which Shares shall be valued, for purposes of
determining the extent to which the option price has been paid thereby,
at their Fair Market Value on the date of exercise; or (iii) by a
combination of the methods described in (a) and (b) hereof; provided,
however, that the Committee may in its discretion impose and set forth
in the option agreement pertaining to an Option such limitations or
prohibitions on the use of Shares to exercise Options as it deems
appropriate. The Committee also may authorize payment in accordance
with a cashless exercise program under which, if so instructed by the
Optionee, Shares may be issued directly to the Optionee's broker upon
receipt of the option price in cash from the broker.
(c) To the extent that the payment of the exercise price for
the Shares purchased pursuant to the exercise of an Option is made with
Shares as provided in Section 7. (b) hereof, then, at the discretion of
the Committee, the Optionee may be granted a replacement Option under
the Plan to purchase a number of Shares equal to the number of Shares
tendered as permitted in Section 7. (b) hereof, with an exercise price
per Share equal to the Fair Market Value on the date of grant of such
replacement Option and with a term extending to the expiration date of
the original Option.
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or option agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Company or any Subsidiary,
or to interfere in any way with the right and authority of the Company or any
Subsidiary either to increase or decrease the compensation of any individual at
any time, or to terminate any employment or other relationship between any
individual and the Company or any Subsidiary. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
Optionee or beneficiary under the terms of the Plan. An Optionee shall have none
of the rights of a shareholder of the Company until all or some of the Shares
covered by an Option are fully paid and issued to such Optionee.
6
<PAGE> 9
9. ADMINISTRATION
(a) The Plan is intended to comply with Rule 16b-3. Subject to
the provisions of subsection (b) of this Section 9, the Plan shall be
administered by the Committee which shall interpret the Plan and make
all other determinations necessary or advisable for its administration,
including such rules and regulations and procedures as it deems
appropriate. The Committee shall consist of not fewer than two members
of the Board each of whom shall qualify (at the time of appointment to
the Committee and during all periods of service on the Committee) in
all respects as a "disinterested person" as defined in Rule 16b-3 and
as an outside director as defined in Section 162(m) of the Code and
regulations thereunder. In the event no Committee has been appointed,
the Board shall serve as the Committee. Subject to the provisions of
subsection (b) of this Section 9, in the event of a disagreement as to
the interpretation of the Plan or any amendment hereto or any rule,
regulation or procedure hereunder or as to any right or obligation
arising from or related to the Plan, the decision of the Committee
shall be final and binding upon all persons in interest, including the
Company, the Optionee and the Company's shareholders.
(b) Notwithstanding any provision of the Plan to the contrary,
if any determination or interpretation to be made by the Committee with
regard to any question arising under the Plan or any option agreement
entered into hereunder is not required to be made by the Committee
under Rule 16b-3, such determination or interpretation may be made by
the Board, and shall be final and binding upon all persons in interest,
including the Company, the Optionee and the Company's shareholders;
provided, however, that the Board shall not make any such determination
or interpretation that would result in the Plan's noncompliance with
Rule 16b-3.
(c) No member of the Committee or the Board shall be liable
for any action taken or decision made, or any failure to take any
action, in good faith with respect to the Plan or any Option granted or
option agreement entered into hereunder.
10. NO RESERVATION OF SHARES
The Company shall be under no obligation to reserve or to retain in its
treasury any particular number of Shares in connection with its obligations
hereunder.
11. AMENDMENT OF PLAN
The Board, without further action by the shareholders, may amend this
Plan from time to time as it deems desirable; provided, however, that no
amendment shall be made without shareholder approval if such approval would be
required to comply with Rule 16b-3 or the Code.
7
<PAGE> 10
12. TERMINATION OF PLAN
This Plan shall terminate ten (10) years from the Effective Date. The
Board may, in its discretion, suspend or terminate the Plan at any time prior to
such date, but such termination or suspension shall not adversely affect any
right or obligation with respect to any outstanding Option.
13. EFFECTIVE DATE
The Plan shall become effective on the Effective Date and Options
hereunder may be granted at any time on or after that date.
8
<PAGE> 1
EXHIBIT 11.1
Statement re: Computation of Per Share Earnings
TROPICAL SPORTSWEAR INT'L CORPORATION
(In Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------------- --------------------------
OCTOBER 1 SEPTEMBER 30 SEPTEMBER 28 JUNE 29 JUNE 28
1994 1995 1996 1996 1997
--------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
PRIMARY INCOME PER SHARE:
Weighted average shares of Common
Stock Outstanding 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Net effect of dilutive stock options,
based on the treasury stock method 15,000 15,000 15,000 15,000 15,000
--------- --------- --------- --------- ---------
Total shares used in computation 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000
========= ========= ========= ========= =========
Net income $4,978 $2,160 $5,171 $3,527 $6,167
========= ========= ========= ========= =========
Net income per share $0.83 $0.36 $0.86 $0.59 $1.03
========= ========= ========= ========= =========
FULLY DILUTED INCOME
PER SHARE:
Weighted average shares of Common
Stock Outstanding 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Net effect of dilutive stock options,
based on the treasury stock method 15,000 15,000 15,000 15,000 15,000
--------- --------- --------- --------- ---------
Total shares used in computation 6,015,000 6,015,000 6,015,000 6,015,000 6,015,000
========= ========= ========= ========= =========
Net income $4,978 $2,160 $5,171 $3,527 $6,167
========= ========= ========= ========= =========
Net income per share $0.83 $0.36 $0.86 $0.59 $1.03
========= ========= ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF
TROPICAL SPORTSWEAR INT'L CORPORATION*
Name of Entity State of Incorporation
- -------------- -----------------------
Apparel Network Corporation Florida
(dba The Store)
- -----------
* Upon consummation of the tax-free restructuring of the Company to be
effected prior to the completion of the Offering.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements dated November 27,
1996, except as to the third paragraph of Note 13, as to which the date is
August __, 1997 and our report on financial statement schedule dated August __,
1997, in the Registration Statement (Form S-1) and related Prospectus of
Tropical Sportswear Int'l Corporation for the registration of 4,000,000 shares
of its common stock.
Ernst & Young LLP
Tampa, Florida
August __, 1997
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion of
the restatement of capital accounts described in Note 13 to the financial
statements.
/s/ Ernst & Young LLP
Tampa, Florida
August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-28-1996
<CASH> 261
<SECURITIES> 0
<RECEIVABLES> 20,197
<ALLOWANCES> 524
<INVENTORY> 23,282
<CURRENT-ASSETS> 45,988
<PP&E> 20,145
<DEPRECIATION> 3,475
<TOTAL-ASSETS> 63,415
<CURRENT-LIABILITIES> 20,505
<BONDS> 26,772
0
3,863
<COMMON> 60
<OTHER-SE> 14,459
<TOTAL-LIABILITY-AND-EQUITY> 63,415
<SALES> 117,355
<TOTAL-REVENUES> 117,355
<CGS> 91,132
<TOTAL-COSTS> 91,132
<OTHER-EXPENSES> 18,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,498
<INCOME-PRETAX> 7,916
<INCOME-TAX> 2,745
<INCOME-CONTINUING> 5,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,171
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.86
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.2
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTY NINE WEEKS ENDED JUNE 28,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> JUN-28-1997
<CASH> 502
<SECURITIES> 0
<RECEIVABLES> 28,294
<ALLOWANCES> 1,075
<INVENTORY> 19,546
<CURRENT-ASSETS> 50,614
<PP&E> 24,600
<DEPRECIATION> 4,424
<TOTAL-ASSETS> 71,412
<CURRENT-LIABILITIES> 16,710
<BONDS> 31,251
0
3,863
<COMMON> 60
<OTHER-SE> 20,626
<TOTAL-LIABILITY-AND-EQUITY> 71,412
<SALES> 115,608
<TOTAL-REVENUES> 115,608
<CGS> 88,327
<TOTAL-COSTS> 88,327
<OTHER-EXPENSES> 15,333
<LOSS-PROVISION> 331
<INTEREST-EXPENSE> 2,263
<INCOME-PRETAX> 9,685
<INCOME-TAX> 3,518
<INCOME-CONTINUING> 6,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,167
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
