<PAGE> 1
THIS DOCUMENT IS A COPY OF THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JULY 3, 1999 FILED ON AUGUST 18, 1999 PURSUANT TO A RULE 201 --
TEMPORARY HARDSHIP EXEMPTION.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 3, 1999
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ------------------------
Commission File Number 0-23161
---------------------------------------------------------
TROPICAL SPORTSWEAR INT'L CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-3424305
- ----------------------------------------- ---------------------------
(State or other jurisdiction of I.R.S.
incorporation or organization) Employer Identification No.
Registrant's telephone number, including area code (813) 249-4900
-----------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[x] Yes [ ] No
As of August 12, 1999 there were 7,618,695 shares of the registrant's Common
Stock outstanding.
1
<PAGE> 2
TROPICAL SPORTSWEAR INT'L CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I FINANCIAL INFORMATION PAGE NO.
--------
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures about Market Risk 14
PART II OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE> 3
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
TROPICAL SPORTSWEAR INT'L CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 110,544 $ 69,823 $ 315,439 $ 152,290
Cost of goods sold 80,921 51,874 227,007 114,570
--------- -------- --------- ---------
Gross profit 29,623 17,949 88,432 37,720
Selling, general and administrative expenses 18,760 10,776 58,011 22,136
--------- -------- --------- ---------
Operating income 10,863 7,173 30,421 15,584
Other expense:
Interest expense 4,556 1,435 13,884 2,238
Bridge loan funding fee -- 500 -- 500
Other, net 882 288 1,050 667
--------- -------- --------- ---------
5,438 2,223 14,934 3,405
Income before income taxes 5,425 4,950 15,487 12,179
Provision for income taxes 2,150 1,860 5,880 4,531
--------- -------- --------- ---------
Net income $ 3,275 $ 3,090 $ 9,607 $ 7,648
========= ======== ========= =========
Net income per common share:
Basic $ 0.43 $ 0.41 $ 1.26 $ 1.02
========= ======== ========= =========
Diluted $ 0.42 $ 0.40 $ 1.22 $ 1.02
========= ======== ========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
TROPICAL SPORTSWEAR INT'L CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 3, OCTOBER 3,
1999 1998
-------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 2,173 $ 2,097
Accounts receivable 80,551 72,355
Inventories 84,402 84,099
Prepaid expenses and other current assets 13,522 15,046
-------- --------
Total current assets 180,648 173,597
Property & equipment net - at cost 50,095 51,997
Intangible assets, including trademarks and goodwill 56,181 51,706
Other assets 21,312 20,176
-------- --------
Total assets $308,236 $297,476
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 52,923 $ 63,108
Current portion of long-term debt and capital
leases 2,549 3,092
-------- --------
Total current liabilities 55,472 66,200
Long-term debt and capital leases 187,767 171,494
Other non-current liabilities 3,824 8,818
Shareholders' Equity:
Preferred stock - -
Common stock 76 76
Additional Paid in Capital 17,490 17,270
Foreign currency translation 470 88
Retained earnings 43,137 33,530
-------- --------
Total shareholders' equity 61,173 50,964
-------- --------
Total liabilities and shareholders' equity $308,236 $297,476
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
TROPICAL SPORTSWEAR INT'L CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE FORTY
WEEKS ENDED WEEKS ENDED
JULY 3, JULY 4,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 9,607 $ 7,648
Adjustments to reconcile net income to net cash
Used in operating activities:
Depreciation and amortization 6,999 2,314
Deferred taxes (2,978) --
Other, net (317) (583)
Changes in operating assets and liabilities:
Accounts receivable (7,813) (12,818)
Inventories (303) (678)
Other, net (9,845) (6,698)
-------- --------
Net cash used in operating activities (4,650) $(10,815)
INVESTING ACTIVITIES
Capital expenditures (10,178) (3,766)
Acquisition of Farah Inc, net of cash acquired (1,182) (84,179)
Other, net 143 121
-------- --------
Net cash used by investing activities (11,217) $(87,824)
FINANCING ACTIVITIES:
Proceeds from sale of common stock 220 17,286
Retirement of preferred stock -- (3,863)
Net change in long-term debt and capital leases 15,000 95,078
Other, net 723 (5,127)
-------- --------
Net cash provided by financing activities 15,943 $103,374
-------- --------
Net increase in cash 76 4,735
Cash at beginning of period 2,097 116
-------- --------
Cash at end of period 2,173 $ 4,851
-------- --------
</TABLE>
See accompanying notes.
5
<PAGE> 6
TROPICAL SPORTSWEAR INT'L CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
July 3, 1999 and October 3, 1998
(In thousands, except share and per share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Tropical Sportswear Int'l Corporation (the "Company") include the accounts of
Tropical Sportswear Int'l Corporation and its subsidiaries except that the
accounts of Savane International Corp. ("Savane", formerly known as Farah
Incorporated) are only included for the periods following June 10, 1998, the
date it was acquired. These financial statements have been prepared in
accordance with the instructions for Form 10-Q and, therefore, do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. The unaudited condensed
consolidated financial statements should be read in conjunction with the
audited financial statements and notes included in the Company's Annual Report
on Form 10-K for the year ended October 3, 1998. In the opinion of management,
the unaudited condensed consolidated financial statements contain all necessary
adjustments (which include only normal, recurring adjustments) for a fair
presentation of the interim periods presented. Operating results for the
thirty-nine weeks ended July 3, 1999 are not necessarily indicative of results
that may be expected for the entire fiscal year ending October 2, 1999.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
July 3, October 3,
1999 1998
------- ----------
<S> <C> <C>
Raw materials $10,236 $11,340
Work in process 13,972 21,886
Finished goods 60,194 50,873
------- -------
$84,402 $84,099
======= =======
</TABLE>
3. DEBT AND CAPITAL LEASES
Long-term debt and capital leases consist of the following:
<TABLE>
<CAPTION>
July 3, October 3,
1999 1998
-------- ----------
<S> <C> <C>
Revolving credit line $ 72,494 $ 55,997
Real estate loan 10,354 9,520
Senior Subordinated Notes 100,000 100,000
Capital leases 6,247 7,416
Other 1,221 1,653
-------- --------
190,316 174,586
Less current maturities 2,549 3,092
-------- --------
$187,767 $171,494
======== ========
</TABLE>
The senior credit facility (the "Facility") provides for borrowings of up to
$110,000, subject to certain borrowing base limitations. Borrowings under the
Facility bear variable rates of interest (8.0% at July 3, 1999) and are secured
by substantially all of the Company's domestic assets. The Facility matures in
June 2003. As of July 3, 1999, excluding the impact of outstanding letters
of credit of $1,279, an additional $21,699 was available for borrowings under
the Facility.
6
<PAGE> 7
3. DEBT AND CAPITAL LEASES (continued)
On May 28, 1999, the Company entered into a construction loan ("Construction
Loan") agreement secured by the Company's distribution center, cutting
facility, and administrative offices in Tampa, Florida. The Construction Loan
was utilized to refinance $9.4 million outstanding on the Company's real estate
loan and to finance up to $6 million of an expansion to the Company's Tampa
distribution facility. In March 2000, the Construction Loan will be converted
to a term, similarly secured loan. Principal and interest are due monthly on
the refinanced amount. The Construction Loan requires monthly interest payments
through February 2000 with principal payments commencing in March 2000. The
principal payments are based on a 20-year amortization with all outstanding
principal due on or before May 15, 2008.
On the first $7 million of borrowings under the Construction Loan, interest is
payable at a fixed base rate plus an applicable margin and on the remainder of
the borrowings, interest is payable based on the 30 day LIBOR rate plus an
applicable margin. For June 1999, the annual effective interest rate on the
Construction Loan is approximately 8.9%.
The Construction Loan agreement contains certain covenants including: (i)
maintenance of consolidated senior debt and funded debt to EBITDA at specified
levels, (ii) maintenance of a fixed charge coverage ratio at specified levels,
(iii) maintenance of specified levels of tangible net worth, (iv) maintenance
of total liabilities to net worth at specified levels, and (v) limitations on
annual capital expenditures. The Company is in compliance with all such
covenants.
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Forty
Weeks ended Weeks ended Weeks ended Weeks ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator for basic and diluted
Earnings per share:
Net income $ 3,275 $ 3,090 $ 9,607 $ 7,648
Denominator for basic earnings per share:
Weighted average shares of common
stock outstanding 7,618,478 7,600,000 7,612,782 $7,465,000
Effect of dilutive stock options using the
treasury stock method 227,938 135,000 260,207 52,000
----------- ----------- ----------- -----------
Denominator for diluted earnings per share 7,846,416 7,735,000 7,872,988 7,517,000
----------- ----------- ----------- -----------
Net income per common share:
Basic $ 0.43 $ 0.41 $ 1.26 $ 1.02
----------- ----------- ----------- -----------
Diluted $ 0.42 $ 0.40 $ 1.22 $ 1.02
----------- ----------- ----------- -----------
</TABLE>
5. ACQUISITION OF SAVANE INTERNATIONAL
The Company completed the acquisition of Savane on June 10, 1998. The total
purchase price, including cash paid for common stock acquired, cash paid for
the fair value of outstanding stock options, and fees and expenses less cash
acquired amounted to $90.8 million.
The acquisition has been accounted for using the purchase method of accounting
and the Savane results of operations have been included in the consolidated
statements of income since the acquisition date. The fair value of identifiable
tangible and intangible net assets acquired is $57.5 million. The purchase
price in excess
7
<PAGE> 8
5. ACQUISITION OF SAVANE INTERNATIONAL (CONTINUED)
of net assets acquired of $42.6 million was allocated to goodwill. The goodwill
is being amortized over a period of 30 years.
Subsequent to the acquisition, the Company began performing a thorough analysis
of Savane's operations and developed a plan to exit certain activities and
terminate certain personnel. The major activities to date include, among other
things, elimination of redundant personnel, closure of two manufacturing
facilities in Costa Rica, closure of a manufacturing facility and an inventory
consolidation warehouse in Mexico, disposal of a chain of 32 retail stores,
closure of a storage facility in Texas, and the disposal of certain equipment
and other non-operating assets. As of July 3, 1999, the Company has accrued
approximately $7.4 million related to exit costs which primarily consist of
estimated lease termination costs and related expenses.
The unaudited pro forma results presented below include the effects of the
acquisition as if it has been consummated at the beginning of the year prior to
acquisition. The unaudited pro forma financial information below is not
necessarily indicative of either future results of operations or results that
might have been achieved had the acquisition been consummated at the beginning
of the year prior to acquisition.
<TABLE>
<CAPTION>
Forty Weeks ended
July 4, 1998
------------------
<S> <C>
Net sales $335,598
Net income (loss) (3,666)
Earnings (loss) per share (0.49)
</TABLE>
6. COMPREHENSIVE INCOME
Comprehensive income includes net income and all other changes in equity during
a period except those resulting from investments by and distributions to the
Company's shareholders. The Company's comprehensive income includes a currency
translation adjustment of $239 (net of tax benefit of $143) for the thirty-nine
weeks ended July 3, 1999 and none for the forty weeks ended July 4, 1998.
Comprehensive income totaled $9,846 and $7,648 for the thirty-nine weeks ended
July 3, 1999 and the forty weeks ended July 4, 1998, respectively.
7. SUPPLEMENTAL COMBINING CONDENSED FINANCIAL INFORMATION
The Company's Senior Subordinated Notes, due 2008 (the "Notes") are jointly and
severally guaranteed by Tropical's domestic subsidiaries. The wholly-owned
foreign subsidiaries are not guarantors with respect to the Notes and do not
have any credit arrangements senior to the Notes except for their local
overdraft facility and capital lease obligations.
The following is the supplemental combining condensed statement of income for
the thirteen weeks and thirty-nine weeks ended July 3, 1999 and the thirteen
weeks and forty-weeks ended July 4, 1998, the supplemental combining condensed
balance sheet as of July 3, 1999, and the supplemental combining condensed
statement of cash flows for the thirty-nine weeks ended July 3, 1999 and the
forty-weeks ended July 3, 1998. The only intercompany eliminations are the
normal intercompany sales, borrowings and investments in wholly-owned
subsidiaries. Separate complete financial statements of the guarantor
subsidiaries are not presented because management has determined that they are
not material to investors.
8
<PAGE> 9
7. SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED JULY 3, 1999
--------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF INCOME ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 49,025 $ 53,695 $ 9,427 $(1,603) $110,544
Gross profit 12,178 14,638 2,807 29,623
Operating income 5,932 4,792 139 10,863
Interest, income taxes and other, net 3,139 6,054 (1,553) (52) 7,588
Net income (loss) 2,793 (1,262) 1,692 52 3,275
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED JULY 4, 1998
--------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF INCOME ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 51,108 $ 16,577 $ 3,077 $ (939) $ 69,823
Gross profit 13,235 4,096 618 - 71,949
Operating income 6,980 301 (108) - 7,173
Interest, income taxes and other, net 3,247 944 (50) (58) 4,083
Net income (loss) 3,733 (643) (58) 58 3,090
</TABLE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED JULY 3, 1999
--------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF INCOME ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $129,539 $159,896 $ 30,691 $(4,687) $315,439
Gross profit 32,032 47,123 9,277 - 88,432
Operating income 13,913 15,682 826 - 30,421
Interest, income taxes and other, net 7,107 13,156 (1,215) 1,766 20,814
Net income (loss) 6,806 2,526 2,041 (1,766) 9,607
</TABLE>
<TABLE>
<CAPTION>
FORTY WEEKS ENDED JULY 4, 1998
--------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF INCOME ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $133,416 $ 16,860 $ 3,077 $(1,063) $152,290
Gross profit 32,937 4,166 617 - 37,720
Operating income 15,385 308 (109) - 15,584
Interest, income taxes and other, net 7,552 493 (51) (58) 7,936
Net income (loss) 7,833 (185) (58) 58 7,648
</TABLE>
9
<PAGE> 10
7. SUPPLEMENTAL COMBINING CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
AS OF JULY 3, 1999
-----------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
BALANCE SHEET ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 92 $ 26 $ 2,055 $ -- $ 2,173
Accounts receivable, net 41,005 34,700 5,569 (723) 80,551
Inventories 25,310 47,793 11,299 -- 84,402
Other current assets 1,673 11,251 998 -- 13,522
-------- -------- ------- ---------- --------
Total current assets 68,080 93,770 19,521 (723) 180,648
Property, plant and equipment, net 27,258 16,170 6,667 -- 50,095
Investment in subsidiaries and other assets 160,568 53,724 5,549 (142,348) 77,493
-------- -------- ------- ---------- --------
Total asset $255,906 $163,664 $31,737 $ (143,071) $308,236
======== ======== ======= ========== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 15,046 $ 31,500 $ 7,100 $ (723) $ 52,923
Current portion of long-term debt and capital leases 622 1,822 105 2,549
-------- -------- ------- ---------- --------
Total current liabilities 15,668 33,322 7,205 (723) 55,472
Long-term debt and noncurrent portion of capital leases 182,586 5,181 -- -- 187,767
Other noncurrent liabilities 452 3,287 85 -- 3,824
Stockholders' equity 57,200 121,874 24,447 (142,348) 61,173
-------- -------- ------- ---------- --------
Total liabilities and stockholders' equity $255,906 $163,664 $31,737 $ (143,071) $308,236
======== ======== ======= ========== ========
</TABLE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED JULY 3, 1999
-----------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF CASH FLOWS ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash used by operating activities $(11,905) $ 6,724 $ 531 -- $ (4,650)
Net cash used by investing activities (7,077) (4,029) (111) -- (11,217)
Net cash provided by financing activities 18,954 (3,259) 248 -- 15,943
Net increase (decrease) in cash (28) (564) 668 -- 76
Cash, beginning of period 120 748 1,229 -- 2,097
Cash, end of period 92 184 1,897 -- 2,173
</TABLE>
<TABLE>
<CAPTION>
FORTY WEEKS ENDED JULY 4, 1998
-----------------------------------------------------------------------
NON-
PARENT GUARANTOR GUARANTOR
STATEMENT OF CASH FLOWS ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash used by operating activities $ (1,098) $(8,818) $ (957) 58 $(10,815)
Net cash used by investing activities (97,018) 5,673 3,372 149 (87,824)
Net cash provided by financing activities 98,446 4,282 853 (207) 103,374
Net increase (decrease) in cash 330 1,137 3,268 -- 4,735
Cash, beginning of period 110 6 -- -- 116
Cash, end of period 440 1,143 3,268 -- 4,851
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected items in
the Company's consolidated statements of income expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Forty
Weeks ended Weeks ended Weeks ended Weeks ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 73.2 74.3 72.0 75.2
------ ------ ------ ------
Gross profit 26.8 25.7 28.0 24.8
Selling, general and administrative expenses 17.0 15.4 18.4 14.5
------ ------ ------ ------
Operating income 9.8 10.3 9.6 10.3
Interest expense, net 4.1 2.1 4.4 1.5
Bridge loan funding fee -- 0.7 -- 0.3
Other, net 0.8 0.4 0.3 0.5
------ ------ ------ ------
Income before income taxes 4.9 7.1 4.9 8.0
Provision for income taxes 1.9 2.7 1.9 3.0
------ ------ ------ ------
Net income 3.0 4.4 3.0 5.0
====== ====== ====== ======
</TABLE>
THIRTEEN WEEKS ENDED JULY 3, 1999 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 4,
1998
NET SALES. Net sales increased 58% to $110.5 million for the third
quarter of fiscal 1999 from $69.8 million in the comparable prior year
quarter. This increase was primarily due to an increase in units sold and
higher average selling prices caused primarily by the inclusion of Savane's
operating activity from June 10, 1998, the date of the acquisition. The
increase was partially offset by the negative impact of unanticipated
inefficiencies in executing customer orders by the Company's Tampa distribution
center. These inefficiencies led to the cancellation of approximately $6.5
million of orders and the deferral of approximately $4.5 million of other
orders. The inefficiencies principally resulted from disruptions caused by the
installation in May of an enhanced inventory management and customer order
fulfillment system and construction to expand the Tampa distribution center.
The Company expects that these inefficiencies and their ancillary effects will
negatively impact net sales into the fourth quarter of fiscal 1999. The
Company further expects that by September/October 1999, the new inventory
management system will be running efficiently and the construction will be
substantially complete.
GROSS PROFIT. Gross profit increased 65% to $29.6 million, or 26.8%
of net sales, for the third quarter of fiscal 1999 from $17.9 million, or 25.7%
of net sales, for the comparable prior-year quarter. The dollar increase was
due to the increase in sales volume caused primarily by the inclusion of
Savane's operating activities from the date of the acquisition. The increase in
the gross profit percentage was primarily due to a change in mix of products to
those yielding higher average selling prices and margins. Gross profit in the
third quarter of fiscal 1999 was negatively impacted by the lost sales caused
by inefficiencies at the Company's Tampa distribution center described above.
Additionally, because of the delays, special discounts were provided to
customers which lowered the gross profit as a percentage of sales. The Company
expects that these inefficiencies and their ancillary effects will negatively
impact gross profit in the fourth quarter of fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 74% to $18.8 million, or 17.0% of net sales,
for the third quarter of fiscal 1999 from $10.8 million, or 15.4% of net sales,
for the comparable prior year quarter. The dollar increase was primarily due to
an increase in overall volume as a result of including the operations of Savane
from the date of the acquisition. The increase in selling, general and
administrative expenses as a percentage of net sales was primarily due to higher
advertising and other brand support related expenses caused by the inclusion of
Savane's operations from the date of the acquisition. Selling, general and
administrative expenses were negatively impacted by the efficiencies at the
Company's Tampa distribution center as described above. The Company added a
higher cost third shift and incurred a substantial amount of non productive wage
expense as associates were learning the new system. Additionally, because of the
delays, the Company agreed, in certain cases, to pay to ship product via air
freight. The Company
11
<PAGE> 12
expects that these inefficiencies and their ancillary effects will negatively
impact selling, general and administrative expenses in the fourth quarter of
fiscal 1999.
INTEREST EXPENSE. Interest expense increased to $4.6 million for the
third quarter of fiscal 1999 from $1.4 million for the comparable prior year
quarter. The increase was due to the increase in average outstanding borrowings
caused by the acquisition of Savane, including Savane's outstanding borrowings
as of the date of acquisition and the Company's issuance of $100 million of
Senior Subordinated Notes, the proceeds from which were used to finance the
acquisition of Savane.
BRIDGE LOAN FUNDING FEE. In the prior year, a $500,000 fee was
incurred related to a $100 million bridge loan that was entered into related to
the Savane acquisition.
INCOME TAXES. The Company's effective income tax rate for the third
quarter of fiscal 1999 was 39.6% compared to 37.6% in the comparable prior year
quarter. These rates are based on the Company's expected effective annual tax
rate and is higher in fiscal 1999 due to an increase in non-deductible goodwill
amortization.
NET INCOME. As a result of the above factors, net income increased
6.0% to $3.3 million for the third quarter of fiscal 1999 from $3.1 million for
the comparable prior-year quarter.
THIRTY-NINE WEEKS ENDED JULY 3, 1999 COMPARED TO THE FORTY WEEKS ENDED JULY 4,
1998.
NET SALES. Net sales increased 107% to $315.4 million for the
thirty-nine weeks ended July 3, 1999 from $152.3 million in the comparable
prior year period. This increase was primarily due to an increase in units sold
and higher average selling prices caused primarily by the inclusion of Savane's
operating activity from the date of the acquisition. The increase was partially
offset by the negative impact of unanticipated inefficiencies in executing
customer orders by the Company's Tampa distribution center during the third
quarter of fiscal 1999. These inefficiencies led to the cancellation of
approximately $6.5 million of orders and the deferral of approximately $4.5
million of other orders. The inefficiencies principally resulted from
disruptions caused by the installation in May of an enhanced inventory
management and customer order fulfillment system and construction to expand the
Tampa distribution center. The Company expects that these inefficiencies and
their ancillary effects will negatively impact net sales into the fourth
quarter of fiscal 1999. The Company further expects that by September/October
1999, the new inventory management system will be running efficiently and the
construction will be substantially complete.
GROSS PROFIT. Gross profit increased 134% to $88.4 million, or 28.0%
of net sales, for the thirty-nine weeks ended July 3, 1999 from $37.7 million,
or 24.8% of net sales, for the comparable prior-year period. The dollar
increase was primarily due to the increase in sales volume caused primarily by
the inclusion of Savane's operating activities from the date of the acquisition.
The increase in the gross profit percentage was primarily due to a change in
mix of products to those yielding higher average selling prices and margins.
Gross profit in the third quarter of fiscal 1999 was negatively impacted by the
lost sales caused by inefficiencies at the Company's Tampa distribution center
described above. Additionally, because of the delays, special discounts were
provided to customers which lowered the gross profit as a percentage of sales.
The Company expects that these inefficiencies and their ancillary effects will
negatively impact gross profit in the fourth quarter of fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 162% to $58.0 million, or 18.4% of net sales,
for the thirty-nine weeks ended July 3, 1999 from $22.1 million, or 14.5% of
net sales, for the comparable prior year period. The dollar increase was
primarily due to an increase in overall volume as a result of including the
operations of Savane from the date of the acquisition. The increase in selling,
general and administrative expenses as a percentage of net sales was primarily
due to higher advertising and other brand support related expenses caused by
the inclusion of Savane's operations from the date of the acquisition. Selling,
general and administrative expenses were negatively impacted by the
inefficiencies at the Company's Tampa distribution center as described above.
The Company added a higher cost third shift and incurred a substantial amount
of non productive wage expense as associates were learning the new system.
Additionally, because of the delays, the Company agreed, in certain cases, to
pay to ship product via air freight. The Company expects that these
inefficiencies and their ancillary effects will negatively impact selling,
general and administrative expenses in the fourth quarter of fiscal 1999.
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<PAGE> 13
INTEREST EXPENSE. Interest expense increased to $13.9 million for the
thirty-nine weeks ended July 3, 1999 from $2.2 million for the comparable prior
year period. The increase was due to the increase in average outstanding
borrowings caused by the acquisition of Savane, including Savane's outstanding
borrowings as of the date of the acquisition and the Company's issuance of $100
million of Senior Subordinated Notes, the proceeds from which were used to
finance the acquisition of Savane.
BRIDGE LOAN FUNDING FEE. In the prior year, a $500,000 fee was incurred
related to a $100 million bridge loan that was entered into related to the
Savane acquisition.
INCOME TAXES. The Company's effective income tax rate for thirty-nine
weeks ended July 3, 1999 was 38.0% compared to 37.2% in the comparable prior
year period. These rates are based on the Company's expected effective annual
tax rate and is higher in fiscal 1999 due to an increase in non-deductible
goodwill amortization.
NET INCOME. As a result of the above factors, net income increased 25.6%
to $9.6 million for the thirty-nine weeks ended July 3, 1999 from $7.6 million
for the comparable prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's senior credit facility (the "Facility") provides for borrowings
of up to $110 million, subject to certain borrowing base limitations. The
Facility was obtained in conjunction with the Company's acquisition of Savane
and was used to refinance indebtedness then outstanding under the Company's
previous senior credit facility, to refinance indebtedness of Savane, to pay
fees incurred in connection with the acquisition of Savane and with the
Facility, and for general corporate purposes. Borrowings under the Facility
bear variable rates of interest (8.0% at July 3, 1999) and are secured by
substantially all of the Company's domestic assets. The Facility matures in
June 2003. As of July 3, 1999, excluding outstanding letters of credit of $1.3
million, an additional $21.7 million was available for borrowings under the
Facility.
During the thirty-nine weeks ended July 3, 1999, the Company used $4.7 million
of cash in its operating activities, primarily due to a decrease in accounts
payable and accrued expenses of $10.2 million resulting from the payment of
accrued incentives and interest on the Company's Senior Subordinated Notes, and
increases in accounts receivable of $7.8 million related to seasonal volume.
These uses were offset, in part, by net income of $9.6 million, which included
non-cash expenses of $7.0 million.
Capital expenditures totaled $10.2 million through the third quarter of fiscal
1999 and are expected to approximate $12.9 million of the entire fiscal year.
The expenditures to date and expenditures expected for the remainder of the
fiscal year primarily relate to the upgrade or replacement of the Company's
existing computer systems and equipment, as well as the expansion of its Tampa
distribution center.
The Company believes that its existing working capital, the Facility, and
internally generated funds are adequate for its working capital needs for the
remainder of the fiscal year.
IMPACT OF THE YEAR 2000 ISSUE
The Company believes that its computer programs and systems are Year 2000
compliant. Should there be any portions of the Company's information systems
that were overlooked in the remediation process, or become susceptible to The
Year 2000 Issue subsequent to such remediation as the result of interaction with
supplier or customer systems, or otherwise, the impact could be felt throughout
the Company's main operating system which includes subsystems related to
customer analysis, order processing, planning, procurement, production and
sales.
The Company has communicated with all significant suppliers and large customers
to determine the extent to which the Company is vulnerable to those third
parties' failure to remediate their own Year 2000 Issues. As of the date of the
report, substantially all of the Company's supplier and customers have informed
the Company that their systems are or will be Year 2000 compliant within the
next six months. If certain suppliers were not able to remediate their own Year
2000 issues, it could affect the Company's ability to order and receive raw
13
<PAGE> 14
materials shipments on a timely basis, which will have a direct and adverse
impact on the Company's production schedule. This could affect the Company's
ability to fill customer orders on a timely basis, the result of which may be a
loss of customer sales. In addition, if the Company's customers do not remediate
their systems, it could affect the Company's ability to receive order
information through EDI and receive POST inventory information, both of which
will also have a direct and adverse impact on the Company's sales.
For further discussion of this matter, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Impact of the Year 2000
Issue" and Business - Management Information Systems" in the Company's Annual
Report on Form 10-K for the year ended October 3, 1998.
SEASONALITY
Historically, the Company's business has been seasonal, with slightly higher
sales and income in the second and fourth fiscal quarters, just prior to and
during the two peak retail selling seasons for spring and fall
merchandise. 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.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTUS
This press release contains forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995.
Management cautions that these statements represent projections and estimates
of future performance and involve certain risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors including,
without limitation, the Company's integration of the operations of
Savane/Farah; the continued commitment to the Company's products by its major
customers; the financial strength of the Company's major customers; the
acceptance by the market of the Company's new womenswear products; the ability
of the Company to continue to use certain licensed trademarks and tradenames,
including John Henry(R), Bill Blass(R), Van Heusen(R), and Generra(R); general
economic conditions, including the price and availability of raw materials and
global manufacturing costs and restrictions; the ability of the Company's
information systems to respond to changing business needs and the ability of
those same systems to function in the Year 2000; the ability to complete the
construction of the addition to the Tampa distribution center on the projected
time schedule and on budget, the ability to successfully implement the Company's
enhanced inventory management and customer order fulfillment system as its
Tampa distribution center on a timely basis, and other risk factors listed from
time to time in the Company's SEC reports and announcements. In addition, the
estimated financial results for any period do not necessarily indicate the
results that may be expected for any future period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates, foreign
exchange rates and commodity prices. The Company does not use any hedging
transactions in order to modify the risk from foreign currency exchange rate or
commodity price fluctuations. As required under the terms of the Construction
Loan, the Company entered into an interest rate swap agreement whereby the
Company exchanged a variable interest rate for a fixed rate on a notional
amount of $7 million for the ten year term of the Construction Loan. The
Company does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Agreement and Plan of Merger dated May 1, 1998 among Tropical
Sportswear Int'l Corporation, Foxfire Acquisition Corp. and Farah
Incorporated (incorporated by reference to Exhibit (c)(1) to Tropical
Sportswear Int'l Corporation's Schedule 14D-1 filed May 8, 1998).
3.2 Amended and Restated Articles of Incorporation of Tropical Sportswear
Int'l Corporation (incorporated by reference to Exhibit 3.1 to
Tropical Sportswear Int'l Corporation's Annual Report on Form 10-K
filed January 4, 1999).
3.3 Amended and Restated By-Laws of Tropical Sportswear Int'l Corporation
(incorporated by reference to Exhibit 3.2 to Tropical Sportswear
Int'l Corporation's Registration Statement on Form S-1 filed August
15, 1997).
4.1 Specimen Certificate for the Common Stock of Tropical Sportswear
Int'l Corporation (incorporated by reference to Exhibit 4.1 to
Amendment No. 1 to Tropical Sportswear Int'l Corporation's
Registration Statement on Form S-1 filed October 2, 1997).
4.2 Shareholders' Agreement dated as of September 29, 1997 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.
(incorporated by reference to Exhibit 4.2 to Amendment No. 1 to
Tropical Sportswear Int'l Corporation's Registration Statement on
Form S-1 filed October 2, 1997).
4.3 Shareholder Protection Rights Agreement, dated as of November 13,
1998, between Tropical Sportswear Int'l Corporation and Firstar Bank
Milwaukee, N.A. (which includes as Exhibit B thereto the Form of
Right Certificate) (incorporated by reference to Exhibit 99.1 of
Tropical Sportswear Int'l Corporation's Form 8-K dated November 13,
1998).
15
<PAGE> 16
<TABLE>
<S> <C>
10.1 Loan Agreement between NationsBank N.A. and Tropical Sportswear Int'l Corporation dated May 28, 1999
10.2 Fifth Amendment to Loan and Security Agreement with Fleet Capital Corporation dated July 16, 1999.
10.3 First Amendment to Loan Agreement with NationsBank N.A. dated July 19, 1999.
27.1 Financial Data Schedule as of July 3, 1999 (filed for SEC purposes only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the thirteen week period ended July 3, 1999.
</TABLE>
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TROPICAL SPORTSWEAR INT'L CORPORATION
-------------------------------------
(Registrant)
/s/ Michael Kagan
-------------------------------------
Michael Kagan
Executive Vice President,
and Chief Financial Officer
(in the dual capacity of duly
authorized officer and principal
financial officer)
August 12, 1999
17
<PAGE> 1
LOAN AGREEMENT
This Loan Agreement is made as of the 28th day of May, 1999, between
TROPICAL SPORTSWEAR INT'L CORPORATION, a Florida corporation ("Borrower"), in
favor of NATIONSBANK, N.A., a national banking association ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has applied to Lender for a credit facility in the
amount of $15,500,000.00;
WHEREAS, Lender and Borrower have executed a commitment letter dated April
1, 1999, which was modified by letter dated May 19, 1999 (the "Commitment
Letter"), setting forth the general agreement between the parties relating to
the credit facility;
NOW, THEREFORE, and in consideration of the covenants herein contained,
the parties hereto agree as follows:
SECTION 1
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
following meanings: (When accounting terms used herein are not defined herein,
they shall have the meaning attributable to them under generally accepted
accounting principles or as are otherwise acceptable to Lender in its
reasonable discretion.)
1.1 Agreement. "Agreement" shall mean this Loan Agreement, as it may from
time to time be amended.
1.2 Business Day. "Business Day" shall mean any day not a Saturday,
Sunday or legal holiday in the State of Florida, on which commercial banks are
open for business in Tampa.
1.3 Capital Expenditures. "Capital Expenditures" shall mean all
expenditures of the Borrower and its Consolidated Subsidiaries which, in
accordance with GAAP, would be classified as capital expenditures.
1.4 Capital Leases. "Capital Leases" shall mean leases that are treated,
under GAAP, as installment purchases of capital assets rather than operating
leases.
1.5 Commitment Letter. "Commitment Letter" shall mean that certain letter
dated April 1, 1999, from the Lender to the Borrower relating to the Loan,
which letter was accepted by the Borrower on April 2, 1999, as modified by that
certain letter from the Lender to the Borrower dated May 19, 1999.
1.6 Compliance Certificate. "Compliance Certificate" shall mean a
certificate of the Borrower in the form attached as Exhibit "A" to this
Agreement.
1.7 Consolidated Cash Taxes. "Consolidated Cash Taxes" shall mean for any
fiscal period of the Borrower and its Consolidated Subsidiaries the income
taxes paid by the Borrower and its Consolidated Subsidiaries in accordance with
GAAP.
<PAGE> 2
1.8 Consolidated Distributions/Dividends. "Consolidated
Distribution/Dividends" shall mean, for any fiscal period the Borrower and its
Consolidated Subsidiaries, all cash dividends distributed by the Borrower and
its Consolidated Subsidiaries, as determined in accordance with GAAP.
1.9 Consolidated EBITDA. "Consolidated EBITDA" shall mean for any fiscal
period of the Borrower and its Consolidated Subsidiaries, (i) income (or loss)
before Interest Expense and taxes, plus (ii) to the extent deducted in
determining such income (or loss), depreciation, amortization and other similar
non-cash charges and reserves other than non-cash charges or credits resulting
from changes in prepaid assets or accrued liabilities in the ordinary course of
business. For purposes of this Agreement, Consolidated EBITDA shall be
calculated for the period of four (4) Fiscal Quarters ended on the last date of
the most recent Fiscal Quarter.
1.10 Consolidated Fixed Charge Coverage Ratio. "Consolidated Fixed Charge
Coverage Ratio" shall mean Consolidated EBITDA minus Consolidated Cash Taxes
divided by the sum of Consolidated Interest Expense, plus Consolidated
Distributions/Dividends, plus Consolidated Principal Payments.
1.11 Consolidated Funded Debt. "Consolidated Funded Debt" shall mean, for
any date, the Funded Debt of Borrower and its Consolidated Subsidiaries
outstanding on such date.
1.12 Consolidated Funded Debt/Consolidated EBITDA Ratio. "Consolidated
Funded Debt/Consolidated EBITDA Ratio" shall mean, for any date, the ratio of
(i) Consolidated Funded Debt outstanding on such date to (ii) Consolidated
EBITDA.
1.13 Consolidated Interest Expense. "Consolidated Interest Expense" shall
mean for any fiscal period of the Borrower and its Consolidated Subsidiaries,
all net interest expense, including the interest component under any Capital
Leases, of the Borrower and its Consolidated Subsidiaries, as determined in
accordance with GAAP.
1.14 Consolidated Net Worth. "Consolidated Net Worth" shall mean, for any
date, the Total Assets of Borrower and its Consolidated Subsidiaries on such
date, as determined in accordance with GAAP, minus the Total Liabilities of the
Borrower and its Consolidated Subsidiaries on such date, as determined in
accordance with GAAP.
1.15 Consolidated Net Worth/Consolidated Total Liabilities Ratio.
"Consolidated Net Worth/Consolidated Total Liabilities" shall mean, for any
date, the ratio of (i) Consolidated Net Worth on such Date to (ii) Consolidated
Total Liabilities on such date.
1.16 Consolidated Principal Payments. "Consolidated Principal Payments"
shall mean for any fiscal period of the Borrower and its Consolidated
Subsidiaries, as applicable, all net payments of principal, including the
principal component under any Capital Leases, made by the Borrower and its
Consolidated Subsidiaries, as determined in accordance with GAAP.
1.17 Consolidated Senior Debt. "Consolidated Senior Debt" shall mean, for
any date, the Consolidated Funded Debt outstanding on such day, other than the
indebtedness evidenced by the Senior Subordinated Notes.
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1.18 Consolidated Senior Debt/Consolidated EBITDA Ratio. "Consolidated
Senior Debt/Consolidated EBITDA Ratio" shall mean, for any date, the ratio of
(i) Consolidated Senior Debt outstanding on such date to (ii) Consolidated
EBITDA.
1.19 Consolidated Subsidiary. "Consolidated Subsidiary" shall mean at
any date any Subsidiary of the Borrower or other entity, the accounts of which
would be consolidated with those of the Borrower in its consolidated financial
statements as of such date.
1.20 Consolidated Tangible Net Worth - "Consolidated Tangible Net
Worth" shall mean, on any date of determination, the Consolidated Net Worth of
the Borrower and its Consolidated Subsidiaries on such date as determined in
accordance with GAAP, after adding thereto the outstanding principal amount of
the Senior Subordinated Notes and after deducting therefrom the amount of all
intangible items reflected therein, including all unamortized debt discount and
expense, unamortized research and development expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
unamortized excess cost of investment in Subsidiaries over equity at dates of
acquisition, and all similar items which should properly be treated as
intangibles in accordance with GAAP.
1.21 Consolidated Total Assets. "Consolidated Total Assets" shall
mean, for any date, all assets of the Borrower and its Consolidated
Subsidiaries, as applicable, on such date, as determined in accordance with
GAAP.
1.22 Consolidated Total Liabilities. "Consolidated Total Liabilities"
shall mean, for any date, all liabilities, including any subordinated debt, of
the Borrower and its Consolidated Subsidiaries, as applicable, on such date, as
determined in accordance with GAAP.
1.23 Construction Amount. "Construction Amount" shall mean the amount
funded by the Lender to the Borrower for the payment of the cost of construction
of improvement on the property pursuant to this Agreement.
1.24 Credit Facility Agreement. "Credit Facility Agreement" shall be
as defined in Section 4.1 of this Agreement.
1.25 Credit Facility Commitment Termination Date. "Credit Facility
Commitment Facility Termination Date" shall mean the "Commitment Termination
Date" as such term is defined in the Credit Facility Agreement.
1.26 Debt for Money Borrowed. "Debt for Money Borrowed" shall mean as
to any Person, (a) indebtedness arising from the lending of money by any other
Person to such Person; (b) indebtedness, whether or not in any such case arising
from the lending of money by another Person to such Person, (i) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (ii) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (iii) upon which interest charges are customarily
paid (other than accounts payable) or that was issued or assumed as full or
partial payment for property; (c) indebtedness that constitutes a Capital Lease
obligation; (d) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit; and (e) indebtedness of such person under any
guaranty of obligations that would constitute Debt for Money Borrowed under
clauses (a) through (c) hereof, if owed directly by such Person.
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<PAGE> 4
1.27 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and all rules and regulations from time to time
promulgated thereunder.
1.28 Event of Default: Default. "Event of Default" shall mean any of the
events specified herein provided that there has been satisfied any requirement
in connection with such event for the giving of notice, or the lapse of time,
or the happening of any further condition, event, or act; "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
1.29 Financial Statements. "Financial Statements" shall mean the financial
statements to be provided by the Borrower to the Lender in accordance with
Section 4.2, hereof.
1.30 Fiscal Quarter. "Fiscal Quarter" shall mean each consecutive period
of 13 weeks beginning on the first day of a Fiscal Year (and, in the case of
any Fiscal Year of 53 weeks, the 14-week period occurring during such period).
1.31 Fiscal Year. "Fiscal Year" shall mean the Fiscal Year of the Borrower
for accounting and tax purposes, which ends on the Saturday nearest September
30 of each year.
1.32 Funded Debt. "Funded Debt" shall mean all Debt for Money Borrowed
which would, in accordance with GAAP, constitute long term debt, including (a)
any Debt for Money Borrowed with a maturity more than one year after the
creation thereof and (b) and Debt for Money Borrowed which is renewable or
extendable at the option of the Borrower for a period of more than one year
from the date of creation of such Debt for Money Borrowed.
1.33 Guarantors. "Guarantors" shall mean Tropical Sportswear Company,
Inc., a Delaware corporation, Savane International Corp., a Texas corporation,
and Apparel Network Corporation, a Florida corporation, the guarantors of the
Loan pursuant to the terms of certain guaranty agreements dated of even date
herewith.
1.34 Indebtedness. "Indebtedness" shall mean all amounts or sums due from
Borrower to Lender under this Agreement, the Note, the Commitment Letter and
all other Loan Documents, and under any and all other notes, instruments, or
agreements between Borrower and the Lender whatsoever including, without
limitation, principal, interest, standby fees, costs of collection, attorneys'
fees and other expenses of the Lender which Borrower is obligated to pay and
amounts advanced by Lender in discharge of obligations of Borrower, whether
such amounts are now due or hereafter incurred, directly or indirectly, and
whether such amounts are from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred; provided however, the term
"Indebtedness" shall not include any obligations of the Borrower to the Lender
pursuant to (a) any factoring arrangements with the Lender or (b) the Credit
Facility Agreement or any notes issued pursuant thereto.
1.35 Leverage Ratio. "Leverage Ratio" shall mean, for any date,
Consolidated Funded Debt divided by Consolidated EBITDA.
1.36 Loan. "Loan" shall mean the loan of up to $15,500,000.00 (as
determined pursuant to Section 2.3, below) to be made by the Lender to the
Borrower pursuant to the terms of this Agreement.
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<PAGE> 5
1.37 Loan Documents. "Loan Documents" shall mean this Agreement, the Note,
the Mortgage, such Uniform Commercial Code Financing Statements as Lender deems
necessary, and any and all other documents contemplated hereby or thereby; all
other documents that evidence or secure such loan.
1.38 Maturity Date. "Maturity Date" shall mean May 15, 2008.
1.39 Mortgage. "Mortgage" shall mean that certain Modification of Real
Estate Mortgage, with attached Amended and Restated Real Estate Mortgage, date
of even date herewith executed by the Borrower and the Lender.
1.40 Mortgaged Property. "Mortgage Property" shall mean the real and
personal property encumbered by the Mortgage and the other Loan Documents.
1.41 Note. "Note" shall mean the Renewal and Replacement Promissory Note
in the consolidated principal amount of $15,500,000.00 of even date herewith.
1.42 Obligations. "Obligations" shall mean all obligations whether direct,
indirect or contingent to pay money, however arising, including, without
limitation, general accounts payable, payments under leases, installment
purchase contracts, Debts, and the like.
1.43 Permitted Liens. "Permitted Liens" shall mean (a) liens for taxes and
assessments not yet due and payable, mechanics and other statutory liens
arising in the ordinary course of business that secure obligations not
delinquent, (b) restrictions or rights granted to governmental authorities
under applicable law, and (c) liens, restrictions and easements on the Mortgage
Property.
1.44 Permitted Obligations. "Permitted Obligations" shall mean the
following: (i) the indebtedness; (ii) those Obligations giving rise to
Permitted Liens; and (iii) accounts payable and accrued payables arising in the
ordinary course of business which are not past due in accordance with their
terms.
1.45 Person. "Person" shall mean an individual, a partnership, a
corporation, an entity, an association, a trust, a joint venture, an
unincorporated organization, or any government or any department or agency or
authority thereof, of any natural or artificial person.
1.46 Plan. "Plan" shall mean an employee pension benefit plan now or
hereafter maintained for employees of the Borrower or any of its Consolidated
Subsidiaries that is covered by Title IV of ERISA.
1.47 Projections. "Projections" shall mean the Borrower's forecasted
consolidated and consolidating (a) balance sheets, (b) profit and loss
statements, (c) cash flow statements, and (d) capitalization statements, all
prepared on a consistent basis with the Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumption.
1.48 Senior Subordinated Notes. "Senior Subordinated Notes" shall mean the
Senior Subordinated Unsecured Notes issued by the Borrower in the aggregate
amount of $100,000,000, and payable in 2008.
1.49 Subsidiary. "Subsidiary" shall mean (i) any corporation of which more
than fifth percent (50%) of the outstanding shares of stock of each class
having ordinary voting power (other than stock having
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<PAGE> 6
such power only by reason of the happening of a contingency) is at the time
owned by the Borrower or by one or more of its Subsidiaries, or by the Borrower
and one or more of its Subsidiaries or (ii) any partnership in which the
Borrower or one or more if its Subsidiaries, or the Borrower and one or more if
its Subsidiaries own more than fifty percent (50%) of the capital or profits
interest thereof.
1.50 Swap Agreement. "Swap Agreement" shall mean that certain
International SWAP Dealers Association, Inc. Master Agreement (together with
all exhibits, schedules and addenda attached thereto), dated May 28, 1999,
executed by the Borrower and the Lender, and any additional such agreements
executed in the future by the Borrower and the Lender relating to the Loan.
SECTION 2.
DESCRIPTION OF LOAN
2.1 Renewal and Replacement Note. The Note evidences the Loan. A
$15,500,000.00 portion of the Loan has been or will be advanced to purchase and
refinance the Original Note (as defined in the Note) and the documents and
instruments securing the Original Note. The remaining portion of the Loan will
be disbursed by the Lender to the Borrower for the payment of costs related to
the expansion of the facility located on the Mortgaged Property. The Note shall
be secured by the Mortgage and certain other of the Loan Documents.
2.2 Future Disbursements Under the Note. Provided no Event of Default has
occurred under this Agreement, Lender shall make advances of the undisbursed
portion of the Loan within five (5) days after receipt of a written request
from the Borrower. Advances of the undisbursed portion of the Loan which may be
made by Lender from time to time under the Note shall be made available to
Borrower by crediting such proceeds to Borrower's operating account with
Lender.
2.3 Limitation on Future Disbursements. The Lender is in the process of
obtaining an "as-built" appraisal (to include the real property and all
existing and proposed improvements) of the fair market value of the Mortgaged
Property, which appraisal (the "Appraisal") must satisfy all of the applicable
regulations adopted by the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation and the Office of the Comptroller of
the Currency. In the event that the fair market value of the Mortgage Property
set forth in the Appraisal, as such fair market value may be adjusted by the
Lender, in its reasonable discretion, based a review by the Lender of the data,
assumptions and conclusions set forth in the Appraisal (the "Loan Value"), is
less than $19,375,000.00, then, notwithstanding the principal amount of the
Note, the maximum amount which the Lender shall be committed to fund, pursuant
to the terms of this Agreement under the Loan shall be eighty percent (80%) of
such Loan Value. In the event that the Loan Value is in excess of
$19,375,000.00, the Lender shall be committed to fund, pursuant to the terms of
this Agreement, the full amount set forth in the Note.
2.4 Calculation of Interest. Any interest due on the Note or any other
amount constituting Indebtedness hereunder, shall be calculated on the basis of
the actual number of days elapsed over a year containing 360 days. The interest
due on any date for payment of interest hereunder shall be that interest to the
extent accrued as of 2:00 p.m. on the interest payment date. Notwithstanding
anything herein or in any document contemplated hereby to the contrary, the
maximum amount of interest which Lender shall collect hereunder shall not
exceed that amount which when added to any other amount deemed interest under
applicable law equals the amount which would have been collected if interest
had been calculated on the
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<PAGE> 7
outstanding principal indebtedness at the maximum interest rate per annum
allowed by applicable law. In the event any interest is received or charged by
Lender in excess of that amount, Borrower shall be entitled to an immediate
refund of such excess.
2.5 Application of Payments. All payments received on the Note shall be
applied first to the reasonable costs and expenses required to be paid under
the terms of this Agreement, then to interest to the extent then accrued and
then to principal.
2.6 Place and Medium of Payment. Unless the Borrower is otherwise
notified by Lender, all payments of principal, interest, or other amounts
constituting Indebtedness shall be made at the office of the Lender specified
herein or at such other address as the Lender may designate.
2.7 Prepayment. The Borrower may prepay the Loan, in whole or in part, at
any time or times, without penalty and with interest payable only on the amount
of principal so prepaid to the date of such prepayment. Any prepayment shall be
applied in the inverse order of maturity or in such other manner as the Lender
may determine in its sole discretion. The foregoing right to prepay the Loan
shall not affect the Swap Agreement and that instrument shall be treated
separately and in accordance with its terms for purposes of prepayment or
termination.
SECTION 3.
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan hereunder (or to advance
funds under the Note from time to time) is subject to the following conditions
precedent and to no material adverse change (as determined solely by Lender in
its sole and absolute discretion) in the financial condition of Borrower having
occurred and to no pending or threatened material adverse litigation against
Borrower.
3.1 Financial Statements. Delivery to Lender of the Financial Statements
and financial information described herein.
3.2 Supporting Documents. Current, certified copy of Articles of
Incorporation of Borrower, copy of By-Laws, certified copy of Certificate of
Good Standing, resolutions authorizing the transactions contemplated hereby,
and incumbency certificates, all in form and substance satisfactory to Lender.
3.3 Documents Required for the Closing. Borrower shall have duly executed
and delivered to Lender, or provided to Lender prior to any further
disbursements of the loan (the "Closing") the following:
(i) the Renewal and Replacement Note;
(ii) Modification of Real Estate Mortgage;
(iii) the Commitment Letter;
(iv) this Agreement;
(v) Uniform Commercial Code Financing Statements;
(vi) the Closing Statements; and
(vii) such other documents and information as Lender's counsel reasonably
requires.
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<PAGE> 8
3.4 Default. No Event of Default is in existence.
SECTION 4.
FINANCIAL STATEMENTS - AFFIRMATIVE COVENANTS
Borrower covenants and agrees that from the date hereof and until the
Indebtedness is paid in full:
4.1 Financial Reporting under Credit Facility Agreement. The Borrower
will comply with all financial reporting requirements imposed on the Borrower
under that certain Loan and Security Agreement dated June 10, 1998 by and
between Borrower, Farah Incorporated, Tropical Sportswear Company, Inc., and
Apparel Network Corporation, as Borrowers and certain financial institutions
which are, from time to time, party thereto, as lenders, and Fleet Capital
Corporation, as Agent, dated June 10, 1998 (the "Credit Facility Agreement").
4.2 Books of Account. The Borrower will 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 to be furnished to the Lender the following (all to be
prepared in accordance with GAAP applied on a consistent basis, unless the
Borrower's certified public accountants concur in any change therein, such
change is disclosed to the Lender and is consistent with GAAP and, if required
by the Lender, the financial covenants set forth in Section 4.12 are amended in
a manner requested by the Lender to take into account the effects of such
change).
4.2.1 as soon as available, and in any event within 90 days after
the close of each Fiscal Year, unqualified audited Financial Statements of the
Borrower and its Subsidiaries as of the end of such Fiscal Year, on a
consolidated basis, certified without material qualification by a firm of
independent certified public accountants of recognized national standing
selected by the Borrower but reasonably acceptable to the Lender (except for a
qualification for a change in accounting principles with which the accountant
concurs), and setting forth in each case in comparative form the corresponding
consolidated figures for the preceding Fiscal Year;
4.2.2 as soon as available, and in any event within 45 days after
the end of each Fiscal Quarter hereafter (but within 60 days after the last
month in a Fiscal Year), including the last Fiscal Quarter of the Borrower's
Fiscal Year, unaudited interim Financial Statements of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and of the portion of
Borrower's Fiscal Year then elapsed, on a consolidated and consolidating basis,
certified by the principal financial officer or the Executive Vice President of
Finance and Administration of the Borrower as prepared in accordance with GAAP
and fairly presenting the consolidated financial position and results of
operations of Borrower and its Subsidiaries for each Fiscal Quarter and period
subject only to changes from audit and year-end adjustments and except that
such statements need not contain notes;
4.2.3 promptly after sending or filing thereof, as the case may
be, copies of any proxy statements, Financial Statements or reports which the
Borrower has made generally available to its shareholders and copies of any
regular, periodic and special reports or registration statements which the
Borrower files with the Securities and Exchange Commission or any governmental
authority which may be substantial therefor, or any national securities
exchange;
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<PAGE> 9
4.2.4 promptly after the filing thereof, copies of any annual
report to be filed in accordance with ERISA in connection with each Plan; and
4.2.5 such other data and information (financial and otherwise) as the
Lender, from time to time, may reasonably request, bearing upon or related to
the Mortgaged Property or the Borrower's and any of its Subsidiaries' financial
condition or results of operations.
Concurrently with the delivery of the Financial Statements described in
clause 4.2.1 of this Section 4.2, the Borrower shall deliver to the Lender a
copy of the accountants' letter to the Borrower's management that is prepared
in connection with such Financial Statements. Concurrently with the delivery of
the Financial Statements described in clauses 4.2.1 and 4.2.2 of this Section
4.2, or more frequently if requested by the Lender during any period that a
Default or Event of Default exists, Borrower shall cause to be prepared and
furnished to the Lender a Compliance Certificate executed by the chief
financial officer or the Executive Vice President of Finance and Administration
of the Borrower.
4.3 Projections. No later than 30 days prior to the end of each Fiscal
Year of the Borrower, the Borrower deliver to the Lender the Projections of the
Borrower for the forthcoming 3 years, year by year, and for the forthcoming
Fiscal Year, on a quarterly basis.
4.4 Right of Inspection. Whenever Lender, in its reasonable discretion,
deems it necessary, and upon five (5) Business Day's prior notice to the
Borrower, the Borrower will permit the Lender or any agent designated by the
Lender, at the Lender's expense unless an Event of Default exists, to visit and
inspect the Mortgaged Property and to inspect and make excerpts of Borrower's
accounting records, all at such reasonable times and as often as the Lender may
reasonably request.
4.5 Insurance. The Borrower will maintain all insurance coverages on
the Mortgaged Property required by the Mortgage. The Borrower will provide
Lender within thirty (30) days after closing (and annually thereafter), a
Certificate of Insurance naming Lender as the "loss payee," specifying the types
and amounts of insurance in force and the insurers of each risk covered by such
insurance, and maintain the same throughout the term of the loan.
4.6 Payment of Indebtedness, Taxes, etc. The Borrower will: (a) pay
and discharge all Indebtedness as and when due and payable; (b) pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income and profits, or upon the Mortgaged Property
and any of other property, real, personal or mixed, or upon any part thereof,
owned by the Borrower before the same shall become in default; and (c) pay and
discharge all lawful claims for labor, materials and supplies or otherwise
which, if unpaid, might become a lien or charge upon such properties or any
part thereof; provided, however, that the Borrower will not be required to pay
and discharge any such tax, assessment, charge, levy or claim referred to in
clauses (b) or (c) above so long as the validity thereof shall be diligently
and continuously contested in good faith by appropriate proceedings with
respect to any such tax, assessment, charge, levy or claim so contested.
4.7 Maintenance of Existence Rights. The Borrower will do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence, franchises, rights and privileges as a corporation under the laws of
Florida and will do or cause to be done all things necessary to preserve and
keep in full force and effect its right to own property and operate all aspects
of its business in a manner not less favorable to it than those now in
existence. Borrower will comply with all material requirements applicable to
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<PAGE> 10
it under the laws or regulations of the United States, of any state or states
and of any other governmental authority.
4.8 Use of Proceeds. The funds borrowed under the Note will be used only
for valid corporate purposes and specifically for the purposes herein set forth
and set forth in the Commitment Letter.
4.9 Further Assurances. If at any time the Lender reasonably believes
that any portion of the Indebtedness is not properly secured or will or may not
be properly secured by the Loan Documents as a first priority lien upon the
Mortgage Property to the Lender's satisfaction, then the Borrower shall, within
three (3) days after written notice of such request from the Lender, take all
actions and do all things and matters necessary to assure to the reasonable
satisfaction of the Lender that any part of the Indebtedness then existing or
thereafter to be created is properly secured or will be secured as contemplated
by this Agreement or any other Loan Document.
4.10 Maintenance of Mortgaged Property. The Borrower will maintain the
Mortgaged Property in good working order and make all normal and customary
repairs and replacements of the same.
4.11 Litigation Notice. The Borrower will deliver to the Lender prompt
written notice of any action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency which, if adversely
determined, would materially adversely affect the business, properties or
condition, financial or otherwise, of the Borrower.
4.12 Financial Covenants. The Borrower agrees to be in compliance with all
of the following financial covenants;
4.12.1 Consolidated Senior Debt/Consolidated EBITDA Ratio.
Maintain, as of the end of each Fiscal Quarter after March 31, 1999 (based upon
the immediately preceding 4 Fiscal Quarters), a Consolidated Senior
Debt/Consolidated EBITDA Ratio of not more than 2.50 to 1.00.
4.12.2 Consolidated Funded Debt/Consolidated EBITDA Ratio.
Maintain, as of the end of each Fiscal Quarter, a Consolidated Funded
Debt/Consolidated EBITDA Ratio of not more than the ratio shown below for the
applicable period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
July 1, 1998 through April 3, 1999 5.00 to 1.00
July 1, 1998 through July 3, 1999 4.50 to 1.00
October 3, 1998 through October 2, 1999 4.50 to 1.00
Each Fiscal Quarter after October 2, 1999 (based
upon the immediately preceding 4 Fiscal Quarters) 4.00 to 1.00
</TABLE>
4.12.3 Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio of 1.25 to 1.00. The Fixed Charge Coverage Ratio will be tested
starting with the end of Fiscal Year 1999 financial results and will be tested
on a rolling four quarters basis going forward.
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<PAGE> 11
4.12.4 Consolidated Tangible Net Worth. Until the Credit Facility
Commitment Termination Date, maintain, as of the end of each Fiscal Quarter,
Consolidated Tangible Net Worth of not less than the amount shown below for the
period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
- ------ ------
<S> <C>
Fiscal Quarter ending January 2, 1999 $95,000,000
Fiscal Quarter ending April 3, 1999 $99,000,000
Fiscal Quarter ending July 3, 1999 $103,000,000
Each Fiscal Quarter thereafter $103,000,000 plus $4,000,000
for each additional Fiscal
Quarter after October 1, 1999
</TABLE>
4.12.5 Consolidated Total Liabilities/Consolidated Net Worth Ratio.
From and after the Credit Facility Commitment Termination Date, maintain a
Consolidated Total Liabilities/Consolidated Net Worth Ratio of no more than 5.75
to 1.00 at all times.
SECTION 5.
NEGATIVE COVENANTS
Borrower covenants and agrees that from the date hereof until the
Indebtedness is paid in full:
5.1 Merger; Consolidation; Sale of Substantial Assets. The Borrower will
not sell, lease, transfer or otherwise dispose of all or a substantial part of
its properties, shares or assets to, or acquire all or a substantial part of
the properties, shares or assets of, any other Person, without the prior
written consent of the Lender.
5.2 Nature of Business. The Borrower will not change the nature of its
primary business from that of a manufacturer and wholesale distributor of
apparel.
5.3 Capital Expenditures. The Borrower will not make Capital
Expenditures (including, expenditures by way of Capital Leases) which in the
aggregate, as to the Borrower and its Subsidiaries, exceed $14,000,000 during
any fiscal year, provided that any amount not expended in a fiscal year may be
carried forward and expended in the immediately succeeding fiscal year.
SECTION 6.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants and so long as this Agreement is in
effect or any part of the Indebtedness remains unpaid, shall continue to
warrant at all times, that:
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<PAGE> 12
6.1 Borrower. The Borrower is a Florida corporation duly formed and
validly existing under and by virtue of the laws of the State of Florida. The
Borrower holds in full force and effect all material permits, licenses, and
franchises necessary for it to carry out its operations in conformity with all
applicable laws and regulations of the State of Florida.
6.2 Financial Statements. The Borrower has heretofore made available to
Lender its most recent Financial Statements and other pertinent financial
information. To the best of the Borrower's knowledge, all of those Financial
Statements fairly represent the financial condition of the Borrower and the
result of its operations as of the date of the Financial Statements.
6.3 Changes in Financial Condition. Since the date that the Borrower has
applied for the loan and/or the Commitment Letter was issued, there has been no
material adverse change in the assets or the financial condition of the
Borrower and the Guarantors, on a consolidated basis, from that set forth or
reflected in the Financial Statements as of that date or for the period then
ended.
6.4 Legal or Administrative. There are no actions, suits or proceedings
by any public or governmental body, agency or authority or litigation by any
Person, or by any public or governmental body, agency, or authority pending or
threatened in writing against the Borrower involving the possibility of any
judgment or liability not fully covered by insurance or by adequate reserves
set upon the books of the Borrower, which may result in any material adverse
change in the business or in the condition, financial or otherwise, of the
Borrower, and, to the best of the knowledge and belief of the Borrower, it has
materially complied with all applicable laws and requirements of governmental
authorities.
6.5 Assets. The Borrower has good, marketable title to the Mortgaged
Property and all of its other assets reflected in the Financial Statements,
except for assets held under Capital Leases, and such assets are free and clear
of all liens, charges and encumbrances except for Permitted Liens.
6.6 Loss. Since the date of the Financial Statements already delivered
to the Lender, no substantial loss, damage, destruction or taking of any of the
physical properties or assets of the Borrower has occurred which would result
in any material adverse change in the business or in the condition, financial
or otherwise, of the Borrower, which has not been fully restored or replaced,
or which is not fully covered by insurance. The Borrower is not aware of any
material adverse fact or likelihood concerning its condition or future
prospects which has not been fully disclosed in writing to the Lender.
6.7 Restrictions. The Borrower is not a party to any contract or subject
to any charter or other partnership restriction which would materially and
adversely affect its property or business, or its ability to perform its
obligations under the Loan Documents.
6.8 Tax Returns. The Borrower has filed all Federal, State and local tax
returns which are required to be filed, and has paid all taxes as shown on the
returns and all assessments received by it to the extent that the taxes have
become due other than taxes being contested in good faith.
6.9 Purpose of Borrowing. None of the proceeds of the Loan will be used
for the purpose of reducing or carrying any margin security or for the purpose
of reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin security or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
Regulation U, as now in effect or as it may hereafter be amended, and all such
proceeds shall be used for normal business purposes.
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<PAGE> 13
6.10 Authority. The Borrower has full authority to enter into the Loan
Documents and carry out all terms thereof and all required corporate action to
authorized the execution, delivery and performance of the Loan Documents has
been taken.
SECTION 7.
EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of one or more of the following
events shall constitute an event of default hereunder (an "Event of Default"):
7.1.1 Payment of Loan. The failure to pay (i) the outstanding
principal amount of the Note, plus unpaid accrued interest, on the Maturity
Date, (ii) any installment of principal and/or interest required by the Note
within ten (10) days after the date the same was due, without notice or demand,
or (iii) the failure to pay any other amounts due under the Note, this
Agreement or the other Loan Documents within ten (10) days after written demand
therefor from the Lender to the Borrower.
7.1.2 Covenants. The Borrower shall fail to observe or perform
any covenant contained in this Agreement for a period of 30 days after written
notice thereof has been given to the Borrower by the Lender, provided, however,
that (i) if the Borrower has commenced and diligently pursuing cure of such
failure, but reasonably cannot perform or comply with any such obligation
within such thirty (30) day period, and if, in the Lender's reasonable
judgment, the Lender's security will not be impaired, then the Borrower may
have such additional time to rectify such failure as the Borrower reasonably
may require, provided and for so long as the Borrower continuously proceeds to
cure such failure with due diligence; and (ii) if, in the Lender's reasonable
judgment, the Lender's security will be materially or adversely impaired if the
Borrower does not perform or comply with any such obligation in less than
thirty (30) days, then the Borrower will have only such period following demand
in which to rectify such failure as the Lender reasonably may specify.
7.1.3 Representation or Warranty. Any representation or warranty
made by the Borrower herein or in any writing furnished in connection with or
pursuant to this Agreement or any of the other Loan Documents shall be false or
misleading in any material respect on the date upon which made or deemed
reaffirmed.
7.1.4 Other Documents. The occurrence of any default as specified
in any of the other Loan Documents and such default shall not have been
remedied within the grace period, if any, provided in such Loan Document.
7.1.5 Default Under the Credit Facility Agreement. An "Event of
Default" (as defined in the Credit Facility Agreement") shall occur under the
Credit Facility Agreement.
7.1.6 Default Under the Swap Agreement or Other Indebtedness to
the Lender. An Event of Default shall occur under the Swap Agreement or any
other indebtedness owned to the Lender by the Borrower.
7.1.7 Liquidation; Dissolution; Voluntary Bankruptcy. The
liquidation or dissolution of the Borrower, or the filing by the Borrower of a
voluntary petition or an answer seeking reorganization,
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<PAGE> 14
arrangement, readjustment of its debts or for any other relief under the
Bankruptcy Code, as amended, or under any other insolvency act or law, state or
federal, now or hereafter existing, or any other action of the Borrower
indicating its consent to, approval of or acquiescence in, any such petition or
preceding; the application by the Borrower for, or the appointment by consent
or acquiescence of the Borrower of a receiver, a trustee or a custodian of the
Borrower for all or a substantial part of its property; the making by the
Borrower of any assignment for the benefit of creditors; the inability of the
Borrower or the admission by the Borrower in writing of its inability to pay its
debts as they mature; or the Borrower taking any corporate action to authorize
any of the foregoing.
7.1.8 Involuntary Bankruptcy. The filing of an involuntary
petition against the Borrower in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
Bankruptcy Code, as amended, or under any other insolvency act or law, state or
federal, now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of the Borrower for all or a substantial
part of its property; or the issuance of a warrant of attachment, execution or
similar process against any substantial part of the property of the Borrower,
and the continuance of any such events for sixty (60) days undismissed or
undischarged.
7.1.9 Adjudication of Bankruptcy. The adjudication of the
Borrower as bankrupt or insolvent.
7.1.10 Order of Dissolution. The entering of any order in any
proceedings against the Borrower decreeing the dissolution, divestiture or
split-up of the Borrower, and such order remains in effect for more than sixty
(60) days.
7.1.11 Reports and Certificates. Any report, certificate,
Financial Statement or other instrument delivered to the Lender by the
Borrower, or on behalf of the Borrower (provided the Borrower has actual
knowledge of the false or misleading nature of the document), pursuant to the
terms of this Agreement or the Loan Documents is false or misleading in any
material respect when made or delivered.
7.1.12 Illegality of Agreement or the Note. This Agreement or the
Note shall have been held by any court of competent jurisdiction, or by any
competent regulatory authority, to be illegal, invalid, prohibited or
unenforceable in whole or in material part.
7.1.13 Attachment. Except as expressly provided otherwise
hereunder, an attachment or any other lien (mechanic's or otherwise) against
the Mortgaged Property shall be issued or entered and shall remain undischarged
or unbonded for thirty (30) days after the filing thereof.
7.1.14 Levy Upon Property. Levy is made under any process on, or a
receiver be appointed for the Mortgaged Property or any other property, of the
Borrower.
7.2 Remedies
7.2.1 Acceleration and Set-off. Upon the occurrence of any Event
of Default, and at any time thereafter as long as the Event of Default is
continuing, the Lender may, upon five (5) days written notice, declare the
entire principal and all interest on the Advances and all obligations under the
Loan Documents, and all other indebtedness of the Borrower to the Lender,
whether the Borrower's liability for payment thereof is primary or secondary,
direct or indirect, sole, joint, several or joint and several, or whether the
indebtedness
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<PAGE> 15
is matured or unmatured, due or to become due, fixed, absolute or contingent,
to be immediately due and payable (without presentment, demand, protest or other
notice of any kind, all of which are expressly waived) and the Loan and all
such other indebtedness thereupon shall be and become immediately due and
payable, and the Lender may proceed to collect the same by foreclosure of the
Mortgage, pursuit of the Lender's remedies under the Uniform Commercial Code,
at law, or as otherwise provided in the Loan Documents and/or other instruments
or agreements signed by the Borrower.
7.2.2 Cumulative Remedies. All rights, remedies or recourse of
the Lender under this Agreement, the Note, or any other Loan Documents, at law,
in equity or otherwise, are cumulative, and exercisable concurrently, and may
be pursued singularly, successively or together and may be exercised as often
as occasion therefore shall arise. No act of commission or omission by the
Lender, including, but not limited to, any failure to exercise, or any delay,
forbearance or indulgence in the exercise of, any right, remedy or recourse
hereunder or under any other Loan Document shall be deemed a waiver, release or
modification of that or any other right, remedy or recourse, and no single or
partial exercise of any right, remedy or recourse shall preclude the Lender
from any other or future exercise of the right, remedy or recourse or the
exercise of any other right, remedy or recourse. No waiver or release of any
such rights, remedies and recourse shall be effective against the Lender unless
in writing and manually signed by an authorized officer on the Lender's behalf,
and then only to the extent recited therein. A waiver, release or modification
with reference to any one event shall not be construed as continuing or
constituting a course of dealing, nor shall it be construed as a bar to, or as
a waiver, release or modification of, any subsequent right, remedy or recourse
as to a subsequent event.
7.2.3 No Liability. Whether or not the Lender elects to employ
any or all remedies available to it in the event of an occurrence of a Default
or an Event of Default, the Lender shall not be liable for the payment of any
expenses incurred in connection with the exercise of any remedy available to
the Lender or for the performance or non-performance of any obligation of the
Borrower.
SECTION 8.
MISCELLANEOUS
8.1 Expenses. The Borrower agrees, whether or not the transaction hereby
contemplated shall be consummated, to pay, and save the Lender and any agent of
the Lender harmless against liability for the payment of all reasonable
expenses arising in connection with this transaction, including, without
limitation, any state documentary stamp taxes and intangible taxes or other
taxes (including interest and penalties, if any) which may be determined to be
payable in respect to the execution and delivery of any Loan Documents executed
in connection with this Agreement, (other than income or other taxes of the
Lender based upon receipt of interest income) and the reasonable fees and
expenses of Lender's counsel and counsel of any agent of the Lender, together
with all reasonable costs and expenses incurred by the Lender in connection
with the Lender's review, due diligence and closing of the Loan and in
connection with the negotiation and preparation of this Agreement and the Loan
Documents, the costs of any environmental investigation and audit, appraisal,
title insurance premiums, survey and inspection fees, whether or not the Loan
actually closes. If an Event of Default shall occur, the Borrower shall also
pay all the Lender's reasonable costs of collection and expenses incurred to
remedy such default, including, without limitation, the Lender's or any of its
agent's or employees' travel expenses, court costs and attorneys' fees and
legal assistants' fees, and disbursements whether incurred in connection with
collection efforts, trial or appeal.
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<PAGE> 16
8.2 Payments on Business Days. Whenever any payment to be made
hereunder or under any other Loan Document shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.
8.3 Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the borrower in connection
herewith shall survive the execution and delivery of the Loan Documents.
8.4 Successors and Assigns. All covenants and agreements in this
Agreement shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
8.5 Notices. All notices which are required or permitted hereunder
must be in writing and shall be deemed to have been given, delivered or made,
as the case may be, (notwithstanding lack of actual receipt by the addressee)
(i) when delivered by personal delivery, (ii) three (3) days after having been
deposited in the United States mail, certified or registered, return receipt
requested, sufficient postage affixed and prepaid, or (iii) one (1) day after
having been deposited with an expedited, overnight courier service (such as
Federal Express), addressed to the party to whom notice is intended to be given
at the address set forth below. Any party shall have the right to change such
party's address for notice hereunder to any other location within the
continental United States by giving of thirty (30) days' notice to all other
parties in the manner set forth herein.
If to Borrower: TROPICAL SPORTSWEAR INT'L CORPORATION
4902 W. Waters Avenue
Tampa, Florida 33634-1302
Attn: Mr. Larry McPherson, Executive Vice-
President/Treasurer
If to Lender: NATIONSBANK, N.A.
Post Office Box 31590
Tampa, Florida 33602
Attn: Mr. Mickey Millsap, Commercial
Banking Officer
8.6 Applicable Law. This Agreement is being delivered in the State of
Florida and shall be construed and enforced in accordance with the laws of the
State of Florida.
8.7 Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
8.8 Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
8.9 Remedies Cumulative. All rights and remedies of Lender hereunder
are cumulative and concurrent and in addition to any rights and remedies which
Lender may have under the laws of Florida or the
-16-
<PAGE> 17
laws of the United States, and the exercise of any one right or remedy by the
Lender against the Borrower will not deprive the Lender of any other right or
remedy against the Borrower.
8.10 Severability. If any portion of any Loan Document is declared void by
any court as illegal or against public policy the remainder of the Loan Document
in question shall continue in full effect.
8.11 Waiver. The Borrower waives presentment, notice of dishonor and
protest as to all obligations under the Note.
8.12 Waiver by the Lender. No delay or omission by the Lender in exercising
any right hereunder or under any Loan Document or with respect to the
Indebtedness shall operate as a waiver of that or any other right, and no single
or partial exercise of any right shall preclude the Lender from any other or
further exercise of any other right or remedy. The Lender may (but shall not be
obligated to) cure any Event of Default on account of the Borrower in any
reasonable manner without waiving the Event of Default so cured and without
waiving any other prior or subsequent Event of Default by the Borrower, and all
amounts and expenses incurred by the Lender in doing so shall bear interest at
the maximum rate of interest allowed by law. All rights and remedies of the
Lender under this Agreement and under the Uniform Commercial Code and other
applicable laws shall be deemed cumulative.
8.13 Stamp or Other Taxes. The Borrower agrees to pay any and all stamp,
documentary and intangible taxes now or hereafter payable in respect of this
Agreement, the Note, and the other Loan Documents, whether in connection with
the execution and delivery thereof, the making of any Advance previously or
hereafter made, any modification or renewal thereof, or otherwise, together with
any interest and penalties incident thereto. The Borrower agrees to and shall
indemnify and hold the Bank harmless from and against all loss, cost, expense
and attorneys' fees that may be incurred by the Bank in connection with any such
assessment, tax, levy or other charge, or any interest or penalty resulting
therefrom. The obligations of the Borrower under this Section 8.13 shall survive
the repayment of the Loan and the satisfaction by the Borrower of its other
obligations under this Agreement and the other Loan Documents.
8.14 Execution in Counterparts. This Agreement and the other Loan Documents
may be executed in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument.
8.15 Year 2000 Representations and Warranties. (1) Borrower and its
Subsidiaries are taking all necessary and appropriate steps to ascertain the
extent of, and to quantify and successfully address, business and financial
risks facing the Borrower and its Subsidiaries as a result of failure to become
Year 2000 compliant (that is, that computer applications, embedded microchips
and other systems will be able to perform date-sensitive functions prior to and
after December 31, 1999). (2) The Borrowers' and its Subsidiaries' material
computer applications will, on a timely basis, adequately address the Year 2000
problem in all material respects.
8.16 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENT, AGREEMENT OR
DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL
-17-
<PAGE> 18
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S.
ENDISPUTE OR ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET
FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL, JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT, OR DOCUMENT MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF
ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
8.16.1 SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
COUNTY OF ANY BORROWER'S DOMICILE, OR IF THERE IS REAL OR PERSONAL PROPERTY
COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AT
TIME OF EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND COMMENCEMENT OF SUCH HEARING FOR UP TO
AN ADDITIONAL 60 DAYS.
8.16.2 RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE BANK OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC 91 OR ANY SUBSTANTIALLY EQUIVALENT
STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF
HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST
ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
IN THE EVENT ANY LITIGATION IS BROUGHT NOTWITHSTANDING THE ARBITRATION
PROVISION, NEITHER BORROWER, LENDER, NOR ANY SUCCESSOR, HEIR OR PERSONAL
REPRESENTATIVE OF EITHER OF THEM, NOR ANY PARTIES CLAIMING UNDER THEM, OR ANY
SUCH OTHER PERSON OR ENTITY SHALL SEEK A JURY TRIAL IN ANY LAWSUIT PROCEEDING,
COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THE
MORTGAGE, OR ANY OF THE OTHER LOAN DOCUMENTS EVIDENCING AND/OR SECURING THE
INDEBTEDNESS EVIDENCED HEREBY.
-18-
<PAGE> 19
8.17 Notice of Final Agreement. By signing this document each party
represents and agrees that (A) the written loan agreement represents the final
agreement between the parties, (B) there are no unwritten oral agreements
between the parties, and (C) the written loan agreement may not be contradicted
by evidence of any prior, contemporaneous, or subsequent oral agreements or
understandings of the parties.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement as of the date first above written.
[EXECUTION APPEARS ON THE FOLLOWING PAGE]
-19-
<PAGE> 20
TROPICAL SPORTSWEAR INT'L
CORPORATION, a Florida corporation
/s/ Richard M. Bartholomae By: /s/ N. Larry McPherson
- ----------------------------- -----------------------------------
(Witness Signature Above) N. Larry McPherson,
Executive Vice President
/s/ Richard M. Bartholomae
- -----------------------------
(Print Witness Name Above) (CORPORATE SEAL)
/s/ Steven M. Raney
- -----------------------------
(Witness Signature Above)
/s/ Steven M. Raney
- -----------------------------
(Print Witness Name Above)
As to Borrower "Borrower"
NATIONSBANK, N.A., a national banking
association
/s/ Richard M. Bartholomae By: /s/ Michael H. Millsap, Jr.
- ----------------------------- -----------------------------------
(Witness Signature Above) Print Name: Michael H. Millsap, Jr.
---------------------------
Its: Commercial Banking Officer
----------------------------------
/s/ Richard M. Bartholomae
- -----------------------------
(Print Witness Name Above)
/s/ Steven M. Raney
- -----------------------------
(Witness Signature Above) (CORPORATE SEAL)
/s/ Steven M. Raney
- -----------------------------
(Print Witness Name Above)
As to Lender "Lender"
-20-
<PAGE> 21
EXHIBIT "A"
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________________, _____
NationsBank, N.A.
Post Office Box 31590
Tampa, Florida 33602
Attention: _______________________________
The undersigned, the chief financial officer of Tropical Sportswear Int'l
Corporation, a Florida corporation ("Borrower"), gives this certificate to
NationsBank, N.A. ("Lender") in accordance with the requirements of Section 4.2
of that certain Loan Agreement dated May ___, 1999, among Borrower and Lender
referenced therein ("Loan Agreement"). Capitalized terms used in this
Certificate, unless otherwise defined herein, shall have the meanings ascribed
to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements of income of
Borrower and its Consolidated Subsidiaries for the [Fiscal Year] [quarterly
period] ending ___________________, ______, copies of which are attached
hereto, I hereby certify that:
(a) The Consolidated Senior Debt/Consolidated EBITDA Ratio
is _______ to 1.0.
(b) The Consolidated Funded Debt/Consolidated EBITDA Ratio
is _______ to 1.0.
(c) Consolidated Total Liabilities/Consolidated Tangible Net Worth
Ratio is _______ to 1.0.
(d) The Fixed Charge Coverage Ratio is _______ to 1.0.
3. No Event of Default exists on the date hereof, other than
_____________________________________________ [if none, so state]; and
<PAGE> 22
4. As of the date hereof, no Default or Event of Default (as such terms
are defined in the Credit Facility Agreement) by Borrower or the Guarantors
exists under the Credit Facility Agreement.
Very truly yours,
------------------------------------------
(Chief Financial Officer or Executive Vice
President for Finance and Administration)
<PAGE> 1
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into this 16th day of July, 1999, by and between TROPICAL
SPORTSWEAR INT'L CORPORATION, a Florida corporation ("Tropical"), TROPICAL
SPORTSWEAR COMPANY, INC., a Delaware corporation ("TSCI"), SAVANE INTERNATIONAL
CORP., a Texas corporation (formerly known as Farah Incorporated) ("Savane"),
and APPAREL NETWORK CORPORATION, a Florida corporation ("Apparel") (Tropical,
TSCI, Savane and Apparel collectively referred to hereinafter as "Borrowers"
and individually as a "Borrower") each with its chief executive office and
principal place of business at 4902 West Waters Avenue, Tampa, Florida
33634-1302; the various financial institutions listed on the signature pages
hereof and their respective successors and permitted assigns which become
"Lenders" as provided in the Loan Agreement (as defined below); and FLEET
CAPITAL CORPORATION, a Rhode Island corporation, in its capacity as collateral
and administrative agent for the Lenders (together with its successors in such
capacity, "Agent") with an office at 300 Galleria parkway, N.W., Suite 800,
Atlanta, Georgia 30339.
Recitals:
Borrowers, Agent and Lenders, are parties to a certain Loan and Security
Agreement dated June 10, 1998, as amended by that certain First Amendment to
Loan and Security Agreement dated July 9, 1998, that certain Second Amendment to
Loan and Security Agreement dated August 27, 1998, that certain Third Amendment
to Loan and Security Agreement dated December 31, 1998, and that certain Fourth
Amendment to Loan and Security Agreement dated May 21, 1999 (as at any time
amended, the "Loan Agreement"), pursuant to which Lenders have made certain
revolving credit loans and letter of credit accommodations to Borrowers.
Borrower is currently in default under the Loan Agreement due to Borrowers
breach of the tangible net worth covenant. Borrowers have requested that Agent
and Lenders waive the existing default under the Loan Agreement and amend the
terms of the Loan Agreement to modify the tangible net worth covenant.
Agent and Lenders are willing to waive the default and amend the Loan
Agreement on the terms and conditions 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
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
<PAGE> 2
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 as
follows:
(a) By deleting the definition of "Bridge Lender" in Section 1 of the
Loan Agreement and by substituting the following definition in lieu thereof:
BRIDGE LENDER - Prudential Securities Credit Corporation.
(b) By deleting the reference to Section 7.4 in Section 7.3 of the Loan
Agreement and by substituting a reference to Section 7.3 in lieu thereof.
(c) By deleting the phrase "Except as set forth on Schedule 9.12 hereto
on the date thereof." in the first sentence of Section 9.1.12 of the Loan
Agreement.
(d) By deleting Section 10.3.1 of the Loan Agreement in its entirety and
by substituting the following new Section 10.3.1 in lieu thereof:
10.3.1. CONSOLIDATED TANGIBLE NET WORTH.
Maintain, as of the end of each Fiscal Quarter, Consolidated Tangible
Net Worth of not less than the amount shown below for the period
corresponding thereto:
PERIOD AMOUNT
------ ------
Fiscal Quarter ending $99,000,000
July 3, 1999
Fiscal Quarter ending $101,000,000
October 2, 1999
Each Fiscal Quarter thereafter $101,000,000 plus $4,000,000
for each additional Fiscal
Quarter after October 2, 1999
3. LIMITED WAIVER OF DEFAULT. An Event of Default has occurred and
currently exists under the Loan Agreement as a result of Borrowers' breach of
Sections 10.3.1 and 12.1.18 of the Loan Agreement (the "Designated Defaults").
The Designated Defaults exist because of (i) Borrowers' failure to maintain the
required Consolidated Tangible Net Worth set forth in Section 10.3.1 for
Borrower's Fiscal Quarter ended July 3, 1999 and (i) Borrower's default under
the
-2-
<PAGE> 3
NationsBank Loan Documents. Each Borrower represents and warrants that the
Designated Defaults are the only Defaults or Events of Default that exists under
the Loan Agreement and the other Loan Documents as of the date hereof. Agent and
Lenders hereby waive the Designated Defaults in existence on the date hereof. In
no event shall such waiver be deemed to constitute a waiver of (a) any Default
or Event of Default other than the Designated Defaults in existence on the date
of this Amendment or (b) each 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, each Borrower hereby agrees that
it shall be required strictly to comply with all of the terms of the Loan
Documents on and after the date hereof.
4. Acknowledgements and Stipulations. Each Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by such
Borrower are legal, valid and binding obligations of such Borrower that are
enforceable against such 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 each Borrower); the security interests
and liens granted by each Borrower in favor of Agent are duly perfected, first
priority security interests and liens.
5. Representations and Warranties. Each Borrower represents and
warrants to Agent and Lenders, to induce Agent and Lenders to enter into this
Amendment, that no Default or Event of Default exists on the date hereof (other
than the Designated Defaults); the execution, delivery and performance of this
Amendment have been duly authorized by all requisite corporate action on the
part of such Borrower and this Amendment has been duly executed and delivered
by such Borrowers; and all of the representations and warranties made by
Borrowers in the Loan Agreement are true and correct on and as of the date
hereof, except to the extent any representation or warranty specifically
relates to an earlier date.
6. Expenses of Agent. Borrowers jointly and severally agree to pay, on
demand, all costs and expenses incurred by Agent 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 reasonable costs
and fees of Agent's legal counsel and any taxes or expenses associated with or
incurred in connection with any instrument or agreement referred to herein or
contemplated hereby.
7. Effectiveness; Governing Law. This Amendment shall be effective upon
acceptance by Agent and Lenders in Atlanta, Georgia (notice of which acceptance
is hereby waived), whereupon the same shall be governed by and construed in
accordance with the internal laws of the State of Georgia.
-3-
<PAGE> 4
8. Successor 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.
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 as
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. Further Assurances. Each Borrower agrees to take such further actions
as Agent and Lenders shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any
of the transactions contemplated hereby.
12. Section Titles. Section titles and references used in this Amendment
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement among the parties hereto.
13. Release of Claims. To induce Agent and Lenders to enter into this
Amendment, each Borrower hereby release, acquits and forever discharges Agent
and Lenders, and all officers, directors, agents, employees, successors and
assigns of Agent and Lenders, 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 such Borrower now has or ever had against Agent and Lenders
arising under or in connection with any of the Loan Documents or otherwise.
[Remainder of page intentionally left blank]
-4-
<PAGE> 5
14. Waiver of Jury Trial. To the fullest extent permitted by
applicable law, the parties hereto each hereby waives the right to trial by
jury in any action, suit, comparison or preceding 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 firm written above.
BORROWERS:
ATTEST: TROPICAL SPORTSWEAR INT'L
CORPORATION
/s/ Regina M. Ifland By: /s/ N. Larry McPherson
- ----------------------------- -------------------------------------
Assistant Secretary
(CORPORATE SEAL) Title: EVP Finance and Administration
------------------------------
ATTEST: TROPICAL SPORTSWEAR COMPANY,
INC.
/s/ Regina M. Ifland By: /s/ N. Larry McPherson
- ----------------------------- -------------------------------------
Assistant Secretary
(CORPORATE SEAL) Title: EVP Finance and Administration
------------------------------
ATTEST: SAVANE INTERNATIONAL CORP.
(d/b/a Farah Incorporated)
/s/ Regina M. Ifland By: /s/ N. Larry McPherson
- ----------------------------- -------------------------------------
Secretary
(CORPORATE SEAL) Title: EVP Finance and Administration
------------------------------
[Signature is continued on the following page]
-5-
<PAGE> 6
ATTEST:
/s/ Regina M. Ifland
- -------------------------- APPAREL NETWORK CORPORATION
Assistant Secretary By: /s/ N. Larry McPherson
(CORPORATE SEAL) -----------------------------------------
Title: EVP Finance and Administration
--------------------------------------
LENDERS:
FLEET CAPITAL CORPORATION
By: /s/ Elizabeth L. Waller
-----------------------------------------
Title: SVP
--------------------------------------
NATIONSBANC COMMERCIAL CORPORATION
By: /s/ Andrea Jackson
-----------------------------------------
Title: VP
--------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ John T. Trainor
-----------------------------------------
Title: Vice President
--------------------------------------
DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Paula D. Patrick
-----------------------------------------
Title: Vice President
--------------------------------------
[Signatures continued on the following page]
-6-
<PAGE> 7
AGENT:
FLEET CAPITAL CORPORATION,
as Agent
By: /s/ Elizabeth L. Waller
-------------------------------
Title: SVP
----------------------------
-7-
<PAGE> 1
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered
into this 19th day of July, 1999, by and between TROPICAL SPORTSWEAR INT'L
CORPORATION, a Florida corporation ("Borrower"), in favor of BANK OF AMERICA,
N.A. d/b/a NATIONSBANK, N.A., a national banking association ("Lender").
Recitals:
Borrower and Lender, are parties to a certain Loan Agreement dated May 28,
1999, ("Loan Agreement"), pursuant to which Lender has made a certain Loan to
Borrower.
Borrower is currently in default under the Loan Agreement due to Borrower's
breach of the Consolidated Tangible Net Worth covenant in Section 4.12.4 and
the Default Under the Credit Facility Agreement in Section 7.1.5. Borrower has
requested that Lender waive the existing defaults under the Loan Agreement and
amend the terms of the Loan Agreement to modify the Consolidated Tangible Net
Worth covenant.
Lender is willing to waive the default and amend the Loan Agreement on the
terms and conditions 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
severally 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 Section 4.12.4 of the Loan Agreement in its entirety and
by substituting the following new Section 4.12.4 in lieu thereof:
4.12.4 Consolidated Tangible Net Worth. Until the Credit Facility
Commitment Termination Date, maintain, as of the end of each Fiscal
Quarter, Consolidated Tangible Net Worth of not less than the amount
shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal quarter ending July 3, 1999 $99,000,000
Fiscal quarter ending October 2, 1999 $101,000,000
Each Fiscal Quarter thereafter $103,000,000 plus
$4,000,000 for each
additional Fiscal Quarter
after October 2, 1999.
</TABLE>
<PAGE> 2
3. Limited Waiver of Default An Event of Default has occurred and currently
exists under the Loan Agreement as a result of Borrowers' breach of
Section 4.12.4 and Section 7.1.5 of the Loan Agreement (the "Designated
Defaults"). The Designated Defaults exist because of Borrowers' failure
to maintain the required Consolidated Tangible Net Worth set forth in
Section 4.12.4 for Borrower's Fiscal Quarter ended July 3, 1999. 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 the
Designated Defaults in existence on the date hereof. In no event shall
such waiver be deemed to constitute a waiver of (a) any Default or Event
of Default other than the Designated Defaults in existence on the date of
this Amendment or (b) each 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 hereby agrees that it shall be required strictly to
comply with all of the terms of the Loan Documents on and after the date
hereof.
4. Acknowledgements and Stipulations
Borrower acknowledges and stipulates that the Loan Agreement and the
other Loan Documents executed by such Borrower are legal, valid and
binding obligations of such Borrower that are enforceable against such
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 each Borrower); the security
interests and liens granted by Borrower in favor of Agent are duly
perfected, first priority security interests and liens.
5. Representations and Warrants
Borrower represents and warrants to Lender, to induce Lender to enter
into this Amendment, that no Default or Event of Default other than the
Designated Defaults, exists on the date hereof; the execution, delivery
and performance of this Amendment have been duly authorized by all
requisite corporate action of the part of such Borrower and this
Amendment has been duly executed and delivered by such Borrower; and all
of the representations and warranties made by Borrowers in the Loan
Agreement are true and correct on and as of the date hereof, except to
the extent any representation or warranty specifically relates to an
earlier date.
6. Expense 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 reasonable costs and fees of Lender's
legal counsel and any taxes or expenses associated with or incurred in
connection with any instrument or agreement referred to herein or
contemplated hereby.
7. Effectiveness Governing Law
<PAGE> 3
This Amendment shall be effective upon acceptance by Lender in Tampa,
Florida (notice of which acceptance is hereby waived), whereupon the same
shall be governed by and construed in accordance with the internal laws of
the State of Florida.
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.
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. Further Assurances
Borrower agrees to take such further actions as Lender shall reasonably
request from time to time in connection herewith to evidence or give
effect to the amendments set forth herein or any of the transactions
contemplated hereby.
12. Section Titles
Section titles and references used in this Amendment shall be without
substantive meaning or content of any kind whatsoever and are not a
part of the agreements among the parties hereto.
13. 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 by any), whether absolute or contingent, disputed
or undisputed, at law or in equity, or known or unknown, that such
Borrower now has or ever had against Lender arising under or in connection
with any of the Loan Documents or otherwise.
<PAGE> 4
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.
BORROWER:
TROPICAL SPORTSWEAR INT'L
CORPORATION, a Florida corporation
By: /s/ N. Larry McPherson Attest: /s/ Regina M. Ifland
-------------------------- -------------------------------
N. Larry McPherson Print Name: Regina M. Ifland
Executive Vice President ---------------------------
CONSENT OF GUARANTORS: The undersigned Guarantors do hereby consent to this
Amendment.
APPAREL NETWORK CORPORATION, a
Florida corporation
By: /s/ N. Larry McPherson Attest: /s/ Regina M. Ifland
-------------------------- -------------------------------
N. Larry McPherson Print Name: Regina M. Ifland
Executive Vice President ---------------------------
TROPICAL SPORTSWEAR COMPANY,
INC., a Delaware corporation
By: /s/ N. Larry McPherson Attest: /s/ Regina M. Ifland
-------------------------- -------------------------------
N. Larry McPherson Print Name: Regina M. Ifland
Executive Vice President ---------------------------
SAVANE INTERNATIONAL CORP., a
Texas corporation
By: /s/ N. Larry McPherson Attest: /s/ Regina M. Ifland
-------------------------- -------------------------------
N. Larry McPherson Print Name: Regina M. Ifland
Executive Vice President ---------------------------
LENDER:
NATIONSBANK, N.A., a national banking
Association
By: /s/ Michael H. Millsap, Jr. Attest: /s/ Martin D. Gavel
--------------------------- ------------------------------
Michael H. Millsap, Jr. Print Name: Martin D. Gavel
Commercial Banking Officer ---------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF TROPICAL SPORTSWEAR FOR THE THIRTY-NINE
WEEKS ENDED JULY 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> JUL-03-1999
<CASH> 2,173
<SECURITIES> 0
<RECEIVABLES> 80,551
<ALLOWANCES> 13,522
<INVENTORY> 84,402
<CURRENT-ASSETS> 180,648
<PP&E> 50,095
<DEPRECIATION> 0
<TOTAL-ASSETS> 308,236
<CURRENT-LIABILITIES> 55,472
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 61,097
<TOTAL-LIABILITY-AND-EQUITY> 308,236
<SALES> 315,439
<TOTAL-REVENUES> 315,439
<CGS> 227,007
<TOTAL-COSTS> 227,007
<OTHER-EXPENSES> 72,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,884
<INCOME-PRETAX> 15,487
<INCOME-TAX> 5,880
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,607
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.22
</TABLE>
