Southtrust Bank of Alabama Construction

SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION


CONSTRUCTION LOAN TO


TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION


$9,600,000.00


CONSTRUCTION AND TERM LOAN AGREEMENT


May 7, 1996


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CONSTRUCTION AND TERM LOAN AGREEMENT


This is a Construction Loan Agreement (this "Agreement") dated as of May 7, 1996, by TROPICAL SPORTSWEAR INTERNATIONAL CORPORATION ("Borrower"), 4902 West Waters Avenue, Tampa, Florida 33634, and SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION ("Bank"), with its principal office in Birmingham, Alabama. This Agreement has been executed by the parties to document their understandings relative to extensions of credit by Bank to Borrower. The parties agree as follows:


1. DEFINITIONS. As used in this Agreement, the capitalized terms defined below have the respective meanings ascribed to them:


"Accountants" mean any certified public accounting firm that Bank accepts in
writing.


"Advance" means any disbursement by Bank under the Note of a portion of the
proceeds of the Loan described in this Agreement.


"Affiliate" means a Person who, directly or indirectly, is controlled by, or
is under common control with, the spouse or any relative of, any officer,
director, or employee of, and any entity that is a member, officer,
director, employee, or a direct or indirect owner of any equity interest of
Borrower or Guarantor, including, without limitation, any subsidiary or
parent corporation.


"Agreement" means this Construction and Term Loan Agreement as originally
executed and as amended or supplemented from time to time in accordance with
its terms.


"Architect" means Smallwood, Reynolds, Stewart, Stewart & Associates of
Florida, Inc., or any other architect employed by Borrower and approved by
Bank in writing in connection with the design and construction of the
Improvements.


"Architect Agreement" means the architect agreement between Borrower and
Architect which must be in form and substance satisfactory to Bank.


"Bank" means SouthTrust Bank of Alabama, National Association, its
successors and assigns, a party to this Agreement.


"Bank's Consultant" jointly and severally means each contractor, architect,
engineer, or consultant


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employed, hired, or consulted by Bank to monitor the progress of the
Construction.


"Bank's Counsel" means the law firm of Glenn Rasmussen & Fogarty, P.A.


"Base Rate" means the interest rate set and published from time to time by
Bank as its "Base Lending Rate," which rate is an index rate for the
guidance of loan officers, but does not necessarily preclude the
application of a lesser rate for particular loans.


"Borrower" means Tropical Sportswear International Corporation, a Florida
corporation, a party to this Agreement.


"Borrower's Counsel" means the law firm of Smith, Williams & Bowles, P.A.


"Borrower's Counsel's Final Opinion" means an opinion in form and substance
satisfactory to Bank.


"Budget" means a statement satisfactory to Bank in the form of attached
Exhibit "A" describing the intended and authorized use of the Loan
proceeds. Borrower must use all proceeds from the Note described by
this Agreement in a manner consistent with this Budget, as the same may be
modified from time to time with the Bank's consent. The Budget attached as
Exhibit "A" shall be converted to the Bank's approved format, a copy of
which is attached as Exhibit "D" to this Agreement.


"Capitalized Lease Obligations" means any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.


"Closing Date" means May 7, 1996, unless otherwise agreed in writing by all
parties to this Agreement.


"Collateral" means the property described in the Security Documents and
pledged by Borrower to secure the prompt payment and performance of
Borrower's obligations under this Agreement and the Loan Documents.


"Collateral Assignment of Rents and Leases" means the Collateral Assignment
of Rents and Leases to be executed by Borrower in favor of Bank in form and


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substance satisfactory to Bank, as amended or supplemented from time to
time.


"Collateral Assignment of Construction Contracts and Other Rights" means the
Collateral Assignment of Construction Contracts and Other Rights executed by
Borrower in favor of Bank in form and substance satisfactory to Bank, as
amended or supplemented from time to time.


"Completion Date" means the earlier of May 7, 1997, or the date construction
of the Improvements has been completed in accordance with the Plans and
Specifications, as evidenced by a Certificate of Occupancy issued by the
appropriate local government entity having jurisdiction over the Project.


"Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in
the current period are comparable in all material respects to those applied
in the preceding period.


"Consolidated" means the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.


"Construction Contracts" means the Contractor Agreement, the Engineer's
Agreement, the Architect Agreement, and other agreements related to the
construction of the Improvements.


"Construction Costs" means all costs for labor, materials, fixtures and
furnishings, and other costs incurred and to be incurred in the development
of the Property, estimates of which are more particularly described in the
Budget.


"Construction Loan" means the loan (or the disbursements under the Note) to
be made by Bank to Borrower pursuant to this Agreement in connection with
the acquisition of the Land and existing Improvements and the construction
of additional Improvements commencing at the Loan Closing Date and
terminating 12 months thereafter or otherwise upon payoff or conversion to
the Term Loan as provided in this Agreement.


"Contractor Agreement" means the contractor agreement in form and substance
satisfactory to Bank to be executed by the General Contractor.


"Current Maturities of Capitalized Lease Obligations" means all payments in
respect of Capitalized


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Lease Obligations that are required to be made within one year from the date
of determination, whether or not the obligation to make such payment will
constitute a current liability of the obligor under GAAP.


"Current Maturities of Long Term Debt" means all payments in respect of
long-term debt that are required to be made within one year from the date of
determination, whether or not the obligation to make such payment will
constitute a current liability of the obligor under GAAP.


"Debt" means the sum of (i) indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) Capitalized Lease
Obligations, (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as at the date as of which Debt is to be determined.


"Debt Service Coverage" means a ratio in which the numerator is the sum of
the net income (after provision for federal and state taxes and excluding
any extraordinary income) calculated based upon the 12-month period
preceding the applicable date, plus the interest expenses for said period,
plus the sum of non-cash expenses or allowances for such period (including,
without limitation, amortization or write-down of intangible assets,
depreciation, depletion, and deferred taxes and expenses), less any
dividends or other distributions for such period, and the denominator is the
sum of the Current Maturities of Long Term Debt and Current Maturities of
Capitalized Lease Obligations as of the applicable date, plus the interest
expenses for the 12-month period preceding the applicable date.


"Default" means any event of default described in this Agreement.


"Engineer" means Mills & Associates, Inc., or any other engineer employed by
Borrower and approved in writing by Bank in connection with the design and
construction of the Improvements.


"Engineer's Agreement" means the engineer's agreement in form and substance
satisfactory to Bank to be executed by the Engineer.


"Environmental Regulations" means all federal, state, and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders, and
consent decrees relating to the environment or


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to public health, safety, and environmental matters, including, but not
limited to, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Toxic
Substances Control Act, the Clean Water Act, the Clean Air Act, the River
and Harbor Act, the Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, the DeepWater Port Act, the Safe Drinking
Water Act, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Insecticide, Fungicide and Rodenticide Act, the Mineral Lands and
Leasing Act, the Surface Mining Control and Reclamation Act, the Oil
Pollution Act of 1990, state and federal superlien and environmental cleanup
programs and laws, U.S. Department of Transportation regulations, laws
regulating hazardous, radioactive, and toxic materials and underground
petroleum products storage tanks, and all similar state, federal, and local
laws and regulations.


"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or supplemented from time to time.


"Escrow Account" means the interest bearing escrow account held in the name
of SouthTrust Bank of Alabama, National Association, for the Borrower at
SouthTrust Bank of Florida, N.A., in satisfaction of the escrow requirements
relating to Project equity contributions set forth in Section 3.3(A) of this
Agreement.


"Estimated Gross Earnings" means the estimated sum of (a) total net sales
value of production, (b) total net sales of merchandise, and (c) other
earnings derived from operation of the business, less the cost of (i) raw
stock from which such production is derived, (ii) supplies consisting of
materials consumed directly in the conversion of such raw stock into
finished stock or in supplying the services sold by the Borrower, (iii)
merchandise sold, including related packaging materials, and (iv) services
purchased from others (not employees of the Borrower) for resale that do not
continue under contract.


"Fixed Charge Coverage" means a fraction in which the numerator is the sum
of the net income (after provision for federal and state taxes) for the
12-month period preceding the applicable date, plus the interest, lease, and
rental expenses for said period, plus the sum of non-cash expenses or
allowances for such period (including, without limita-


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tion, amortization or write down of intangible assets, the net addition or
net decrease in the loan loss reserves for customer Accounts, depreciation,
depletion, and deferred taxes and expenses), less dividends and other
distributions for such period, and the denominator is the sum of the Current
Maturities of Long Term Debt as of the applicable date, plus the Current
Maturities of Capitalized Lease Obligations as of the applicable date, plus
any payment made of dividends on any shares of capital stock and cash
expenditures made for the redemption of any class of capital stock during
the 12-month period preceding the applicable date, plus the interest, lease,
and rental expenses for the 12-month period preceding the applicable date.


"General Contractor" means Ed Taylor Construction South, Inc., or any other
general contractor employed by Borrower and approved by Bank in writing in
connection with the construction of the Improvements.


"Generally Accepted Accounting Principles" or "GAAP" mean generally
accepted accounting principles in effect at the time any calculation is
required to be made under this Agreement or any financial statement or
report is prepared pursuant to it. However, Bank has the option to elect
in writing, at any time and from time to time, that generally accepted
accounting principles in effect as of the date of this Agreement be used
for the purposes of this Agreement, in any case in which the application of
accounting principles in effect at a later date would make the covenants
contained in this Agreement less restrictive.


"Governmental Authority" means any municipal, county, state or federal
governmental authority or other governmental authority (domestic or foreign)
having or claiming jurisdiction over the Land, the Improvements, Bank, or
Borrower.


"Guarantor" or "Guarantors" means jointly and severally each of the
following: Apparel International Group, Inc., and Tropical Acquisition
Corporation, both Delaware corporations.


"Guaranty" means the continuing and unconditional guaranty agreement in
form and substance satisfactory to Bank that has been or is to be executed
by Guarantor in favor of Bank.


"Hard Construction Costs" means the following line items listed in the
Budget: Building Construction,


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Signage, Ornamental Gates & Fence, Chain Link Fence, Vacuum Security,
Security System, Outside Associates Break Areas, Wall Hung Storage Racks 200
L/FT, Awnings, and Change orders 10%.


"Improvements" means the improvements existing on the Land as of the date of
this Agreement, consisting of, among other things, a 187,500 square foot
(MOL) office/warehouse facility, and the Improvements to be made to the
Land, consisting of the construction of a 111,000 square foot (MOL)
office/warehouse facility and all other improvements relating to such
buildings now existing or hereafter erected upon the Land, all of which are
more particularly described in the Plans.


"Land" means the real property described in the Mortgage and legally
described in attached Exhibit "C."


"Liabilities" means all liabilities, obligations, and indebtedness
(including interest thereon) of Borrower to Bank pursuant to this Agreement
and every promissory note, security agreement, mortgage, and other
instrument or agreement executed at any time pursuant to it, all loans and
advances now or in the future made by Bank to Borrower and all other
liabilities, obligations, and indebtedness of Borrower to Bank, however and
whenever incurred or contracted, whether primary, secondary, direct,
contingent, sole, joint, or several, whether now due or to become due, and
whether now existing or later acquired, advanced, or contracted and includes
without limitation the Note.


"Lien" or "Liens" means any restriction on the use or transferability of
property and a claim or charge on any interest in property securing an
obligation owed to, or claimed by, a person other than the owner of the
property, whether the claim or charge exists by reason of statute (including
any federal, state, or local tax statute or ordinance), contract, or common
law, and includes a lien or security interest arising from a mortgage,
indenture, security agreement, encumbrance, pledge, hypothecation,
conditional sale, trust receipt, or collateral assignment and a lease,
bailment, or consignment for security purposes.


"Loan" means both the Construction Loan and the Term Loan (or the
disbursements under the Note) to be made by Bank to Borrower pursuant to
this Agreement.


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"Loan Documents" means jointly and severally this Agreement and the
documents described in attached Exhibit "B," together with each other
document, agreement, or instrument required or executed in connection with
this Agreement.


"Mortgage" means the mortgage in form and substance satisfactory to Bank to
be executed by Borrower in favor of Bank, granting to Bank a first-priority
Lien on the Property.


"Note" means the $9,600,000 Real Estate Promissory Note in form and
substance satisfactory to Bank to be executed by Borrower in favor of Bank.


"Notice of Commencement" means a notice of commencement prepared and filed
by or on behalf of Borrower in the Public Records of Hillsborough County,
Florida, in accordance with Section 713.13(2), Florida Statutes (1995),
relating to the new Improvements to be constructed on the Land.


"Permitted Encumbrances" means the encumbrances affecting the Property and
expressly approved in writing by Bank, including those set forth in
Mortgagee Title Commitment No. 10188110000025 issued by Borrower's Counsel,
as agent for Chicago Title Insurance Company.


"Person" means an individual, partnership, corporation, joint stock company,
firm, land trust, business trust, unincorporated organization, or other
business entity, or a government or agency or political subdivision thereof.


"Plan" means an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.


"Plans" or "Plans and Specifications" means the plans and specifications
pertaining to the Construction of the Improvements and all related
documents.


"Project" means the construction of the new Improvements on the Land, and
refers jointly to the Land and the Improvements.


"Property" means the Land and all Improvements.


"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA.


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"Request for Advance" means a draw request in the form and substance
satisfactory to Bank.


"Security Documents" means the Note, Mortgage, and Guaranty executed by each
Guarantor, Hazardous Materials Certificate and Environmental Indemnity,
Assignment of Contract Rights, and UCC Financing Statements.


"Senior Debt" means all Debt of Borrower, excluding Subordinated Debt.


"Subordinated Debt" means (i) all the Debt of the Borrower owed to any
Affiliate that is not a Guarantor, all of which is fully subordinated to the
Loan (including principal, interest, and agreed charges) in a manner
satisfactory to the Bank (which may be either according to its terms or by
separate agreement) and which Debt arises from the Borrower's actual receipt
of cash and not from "in kind" or non-cash consideration, and (ii) all the
Debt of the Guarantor owed to the former shareholders of Borrower.


"Subsidiary" means any corporate entity or partnership, or other business
entity, controlling interest of which is owned by the Borrower.


"Tangible Net Worth" means the aggregate of the (a) par or stated value of
all outstanding capital stock; (b) capital surplus; and (c) retained
earnings; and (d) Subordinated Debt; less (t) amounts due from Affiliates
who are not Guarantors of the Loan, (u) any surplus resulting from any
write-up of assets subsequent to the date of this Agreement; (v) deferred
assets (excluding deferred income taxes, but including deferred development
costs other than prepaid insurance and prepaid taxes; (w) goodwill or other
amounts representing the excess of the purchase price of assets or stock
over the value assigned to them on the books of such Person; (x) the book
value of any patents, trademarks, trade names, copyrights, noncompete
agreements, franchises, experimental expenses, and other intangible assets;
(y) the amount paid for any treasury stock reflected as a reduction of the
capital surplus or retained earnings accounts; and (z) any other amounts
classified as intangible assets under GAAP. Notwithstanding subsection (t),
Bank may, in its sole discretion, include in Tangible Net Worth


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amounts due from Affiliates that are evidenced by a promissory note and in
its judgment adequately secured by collateral and the general credit of the
Affiliate.


"Term Loan" means the term loan being made upon completion of construction
of the Improvements, compliance with all conditions precedent contained in
this Agreement, and conversion of the Construction Loan to a term loan with
a maturity date of ten years from the loan closing date.


"Unavoidable Delays" means the delays due to strikes, blackouts, acts of
God, governmental restrictions, failure or inability to secure materials or
labor by reason of priority or similar regulation or order of any
governmental or regulatory body, enemy action, civil disturbance, fire, or
any other act beyond the reasonable control of Borrower.


2. FORM AND INTERPRETATION. Words of the masculine gender are to be construed to include correlative words of the feminine and neuter genders, and words of the neuter gender are to be construed to include correlative words of the masculine and feminine genders. Words in the singular number include words of the plural number, and words in the plural number include words of the singular number. The word "Person" includes a trust, corporation, partnership, joint venture, association, unincorporated organization, public body, government, and any governmental agency or department, as well as a natural person. Accounting terms used, but not otherwise defined, in this Agreement will have the meanings given to them under, and are to be construed in accordance with, Generally Accepted Accounting Principles. Whenever possible, each provision of this Agreement is to be construed and interpreted so that it is valid and enforceable under applicable law. The words "including" or "includes" are not limiting. The word "or" is not exclusive. The parties intend for this Agreement to be governed by and construed in accordance with the laws of the State of Florida.


3. THE LOAN, FEES, SECURITY, GUARANTY AND MISCELLANEOUS PROVISIONS. Subject to the terms and conditions of this Agreement, Bank shall make the following Loans to Borrower:


3.1 The Loan. When every condition specified in this Agreement has been either satisfied or waived in writing by Bank, Borrower may borrow a principal amount not to exceed $9,600,000 in accordance with the terms of this Agreement. To evidence the Loans, Borrower shall execute, issue, and deliver to Bank the Note payable to the order of Bank.


3.2 Loan Purpose. Borrower may use the Loan proceeds exclusively in connection with the acquisition of the Land and


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the existing Improvements, the Construction of additional Improvements, and related costs in a manner consistent with the Budget. The parties acknowledge that a portion of the Land being acquired is currently leased to Borrower and is being acquired through the exercise of a purchase option right in those leases.


3.3 Multiple Phase Construction Funding. The Construction Loan shall be funded in two or more phases as follows:


A. On the initial Loan Closing Date, Bank shall fund up to $6,178,490.04 for the acquisition of the Land and existing Improvements as Phase I of the Construction Loan funding. If on the Loan Closing Date Borrower is unable to close the purchase of all of the four parcels of real property comprising the Land, however, then the purchase of any parcel or parcels of real property that are not purchased on the initial Loan Closing Date shall be purchased no later than 15 business days following the initial Closing Date. In that event, on the initial Closing Date, Borrower shall pay to Bank the sum of Eight Hundred Thirty Thousand Two Hundred and Twenty-Eight and 04/100ths Dollars $830,228.04), which sum Bank shall hold in the Escrow Account to be disbursed in accordance with the Budget or, in the event all or part of the remaining portion of the Land is not purchased within the 15-business day period provided above, Bank may apply all or part of the $830,228.04 amount to reduce the total indebtedness of Borrower to Bank. Also, if one or more parcels of the Land is purchased after the Loan Closing Date as provided above, then the Security Documents shall initially relate only to the portion of the Land purchased on the Closing Date, but shall be extended by spreader agreement or other appropriate modification document acceptable to Bank, in its sole discretion, to the remaining portion of the Land on the date it is purchased by Borrower. The purchase of all parcels comprising the Land shall be an absolute condition precedent to Phase II funding as provided in Section 3.3(B). If all the Land is not purchased within 15 business days following the Closing Date, then on that date, the Loan shall mature and become immediately due and payable.


In addition to the foregoing requirements, within 45 days of the initial Loan Closing Date, Borrower must provide to Bank evidence satisfactory to Bank, in Bank's sole discretion, that all permits and approvals necessary for the construction of the Improvements in accordance with the Plans and Specifications approved by Bank have been properly obtained and must satisfy all other post-closing requirements set forth in Section 5.26. Within 60 days following the initial Loan Closing Date, Borrower must have (i) filed in the Public Records of Hillsborough County, Florida, the Notice of Commencement, in form and substance satisfactory to Bank, (ii) materially commenced site work on the Land in preparation for the construction of the new Improvements, and (iii) used its best efforts to obtain from or on behalf of each former shareholder


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of Borrower who is a creditor of Guarantor a signed subordination agreement, in form and substance acceptable to Bank, subo ...