INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of February 27, 1997 ("this
Agreement"), is executed by and among GFSI HOLDINGS, INC., a Delaware
corporation ("Holdings"), GFSI, INC., a Delaware corporation ("GFSI"), and
_________________________ ("Indemnitee"). Collectively, GFSI and Holdings shall
be referred to from time to time as the "Companies."
WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation; and
WHEREAS, the current difficulties or virtual impossibility of obtaining
adequate insurance and uncertainties relating to indemnification have increased
the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of each of the Companies has determined
that the inability to attract and retain such persons is detrimental to the best
interests of each Company's stockholders and that the Companies should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for each of the Companies
to obligate themselves contractually to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to serve
each of the Companies free from undue concern that they will not be so
indemnified; and
WHEREAS, GFSI is the wholly-owned subsidiary of Holdings; and
WHEREAS, (i) the stockholders of Holdings have adopted the Amended and
Restated Certificate of Incorporation ("Holdings' Certificate") and Bylaws
("Holdings' Bylaws") providing for the indemnification of the directors,
officers, agents and employees of Holdings to the full extent permitted by the
General Corporation Law of the State of Delaware (the "Act") and (ii) Holdings'
Certificate, Holdings' Bylaws and the Act specifically provide that they are not
exclusive, and thereby contemplate that contracts may be entered into between
Holdings and the members of its Board of Directors and its executive officers
with respect to indemnification of such directors and executive officers; and
WHEREAS, (i) the stockholders of GFSI have adopted the Certificate of
Incorporation ("GFSI's Certificate") and Bylaws ("GFSI's Bylaws") providing for
the indemnification of the directors, officers, agents and employees of GFSI to
the full extent permitted by the Act and (ii) GFSI's Certificate, GFSI's Bylaws
and the Act specifically provide that they are not exclusive, and thereby
contemplate that contracts may be entered into between GFSI and the members of
its Board of Directors and its executive officers with respect to
indemnification of such directors and executive officers; and
WHEREAS, this Agreement is being entered into as part of Indemnitee's total
compensation for serving as a director and/or an executive officer of each of
the Companies, as the case may be; and
NOW THEREFORE, in consideration of the premises and the covenants contained
herein, the Companies and Indemnitee do hereby covenant and agree as follows:
SECTION 1. Service by Indemnitee.
Indemnitee agrees to serve as a director of each of the Companies and/or an
executive officer of each of the Companies if so appointed by its Board of
Directors, and agrees to the indemnification provisions provided for herein.
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of
law), in which event neither of the Companies shall have any obligation under
this Agreement to continue the employment of Indemnitee in any such position.
SECTION 2. Indemnification.
Each of the Companies shall indemnify Indemnitee to the fullest extent
permitted by applicable law in effect on the date hereof, notwithstanding that
such indemnification is not specifically authorized by this Agreement, Holdings'
Certificate, Holdings' Bylaws, GFSI's Certificate, GFSI's Bylaws, the Act or
otherwise. In the event of any change after the date of this Agreement in any
applicable law, statute or rule regarding the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, such changes, to the
extent that they would expand Indemnitee's rights hereunder, shall be within the
scope of Indemnitee's rights and each of the Company's obligations hereunder,
and, to the extent that they would narrow Indemnitee's rights hereunder, shall
be excluded from this Agreement; provided, however, that any change that is
required by applicable laws, statutes or rules to be applied to this Agreement
shall be so applied regardless of whether the effect of such change is to narrow
Indemnitee's rights hereunder. Without diminishing the scope of the
indemnification provided by this Section 2, the rights of indemnification of
Indemnitee provided hereunder shall include
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indemnification in respect of GFSI's proposed offering of $125 million of senior
subordinated debt securities to certain institutional investors pursuant to the
terms of an Offering Memorandum, dated February 20, 1997, except to the extent
expressly prohibited by applicable law.
SECTION 3. Action or Proceeding Other Than an Action By or In the Right of
the Companies.
Indemnitee shall be entitled to the indemnification rights provided in this
Section 3 if he is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, other than an action by or in the
right of either Company, by reason of the fact that he is or was a director,
officer, employee, agent or fiduciary of either Company or is or was serving at
the request of either Company as a director, officer, employee, agent, partner,
trustee or fiduciary of any other entity (a "Related Company") or by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
3, Indemnitee shall be indemnified against reasonable costs and expenses
(including, but not limited to, reasonable counsel fees, costs, judgments,
penalties, fines, ERISA excise taxes, and amounts paid in settlement)
(collectively, "Damages") actually and reasonably incurred by him in connection
with such action, suit or proceeding (including, but not limited to, the
investigation, defense or appeal thereof), if, in the case of conduct in his
official capacity with either Company, he acted in good faith and in the
respective Company's best interests, and in all other cases, he acted in good
faith and was at least not opposed to such Company's best interests, and with
respect to any criminal action or proceeding had no reasonable cause to believe
his conduct was unlawful, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudged to be liable for (i) negligence or misconduct in the
performance of his duty to either Company unless and only to the extent that the
court in which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for such expenses as such court shall deem
proper, or (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. Notwithstanding the
foregoing, each Company shall be required to indemnify its officers or directors
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board of Directors of
such Company or a committee thereof. No indemnity pursuant to this Agreement
shall be provided by either Company for Damages that have been paid directly to
Indemnitee by an insurance carrier under a policy of
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directors' and officers' liability insurance maintained by such Company.
SECTION 4. Actions By or In the Right of the Companies.
Indemnitee shall be entitled to the indemnification rights provided in this
Section 4 if he is or was made a party or is threatened to be made a party to
any threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative brought by or in the right of either
Company to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee, agent or fiduciary of either Company or is or
was serving at the request of either Company as a director, officer, employee,
agent, partner, trustee or fiduciary of any other entity by reason of anything
done or not done by him in any such capacity. Pursuant to this Section 4,
Indemnitee shall be indemnified against Damages (as defined in Section 3)
actually and reasonably incurred by him in connection with such action or suit
(including, but not limited to the investigation, defense, settlement or appeal
thereof) if, in the case of conduct in his official capacity with either
Company, he acted in good faith and in such Company's best interests, and in all
other cases, he acted in good faith and was at least not opposed to such
Company's best interests, except that no indemnification shall be made in
respect of any claim, issue or matter as to which (i) Indemnitee shall have been
finally adjudged to be liable for negligence or misconduct in the performance of
his duty to such Company unless and only to the extent that the court in which
such action or suit was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper or (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. Notwithstanding the
foregoing, each Company shall be required to indemnify its officers or directors
in connection with any action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by its Board of Directors or a
committee thereof. No indemnity pursuant to this Agreement shall be provided by
either Company for Damages that have been paid directly to Indemnitee by an
insurance carrier under a policy of directors' and officers' liability insurance
maintained by such Company.
SECTION 5. Indemnification for Costs, Charges and Expenses of Successful
Party.
Notwithstanding the other provisions of this Agreement, to the extent that
Indemnitee has served as a witness on behalf of either Company or has been
successful, on the merits or otherwise,
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including, without limitation, the dismissal of an action without prejudice, in
defense of any action, suit or proceeding referred to in Section 3 and Section 4
hereof, or in defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against all reasonable costs, charges, and expenses (including
counsel fees) actually and reasonably incurred by him or on his behalf in
connection therewith.
SECTION 6. Partial Indemnification.
If Indemnitee is only partially successful in the defense, investigation,
settlement or appeal of any action, suit, investigation or proceeding described
in Section 3 or Section 4 hereof, and as a result is not entitled under Section
5 hereof to indemnification by either Company for the total amount of reasonable
Damages actually and reasonably incurred by him, each Company, without
duplication of payment, shall nevertheless indemnify Indemnitee, as a matter of
right pursuant to Section 5 hereof, to the extent Indemnitee has been partially
successful.
SECTION 7. Determination of Entitlement to Indemnification.
Upon written request by Indemnitee for indemnification pursuant to Section
3 or Section 4 hereof, the entitlement of Indemnitee to indemnification pursuant
to the terms of this Agreement shall be determined by the following person or
persons who shall be empowered to make such determination: (a) the Board of
Directors of each Company by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined); or (b) if such a quorum is not
obtainable or, even if obtainable, if the Board of Directors by the majority
vote of Disinterested Directors so directs, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (c) by the stockholders, but shares
owned by or voted under the control of directors, including the Indemnitee, who
are at the time parties to the proceeding may not be voted on the determination.
Such Independent Counsel shall be selected by the Board of Directors and
reasonably approved by Indemnitee. Upon failure of either Company's Board of
Directors to so select such Independent Counsel or upon failure of Indemnitee to
so approve, such Independent Counsel shall be selected by the Chancellor of the
State of Delaware or such other person as the Chancellor shall designate to make
such selection. Such determination of entitlement to indemnification shall be
made no later than sixty (60) days after receipt by the respective Company of a
written request for indemnification. Such request shall include documentation or
information which is necessary for such determination and which is reasonably
available to Indemnitee. Any Damages incurred by Indemnitee in connection with
his request for indemnification hereunder shall be borne by such Company. Each
Company hereby jointly and severally indemnifies and agrees to hold
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Indemnitee harmless therefrom irrespective of the outcome of the determination
of Indemnitee's entitlement to indemnification. If the person making such
determination shall determine that Indemnitee is entitled to indemnification as
to part (but not all) of the application for indemnification, such person shall
reasonably prorate such partial indemnification among such claims, issues or
matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
The Secretary of each of the Companies shall, promptly, upon receipt of
Indemnitee's request for indemnification, advise in writing the Board of
Directors of such Company or such other person or persons empowered to make the
determination as provided in Section 7 that Indemnitee has made such request for
indemnification. Indemnitee shall be presumed to be entitled to indemnification
hereunder and each of the Companies shall have the burden of proof in the making
of any determination contrary to such presumption. If the person or persons so
empowered to make such determination shall have failed to make the requested
indemnification within 60 days after receipt by either Company of such request,
the requisite determination of entitlement to indemnification shall be deemed to
have been made and Indemnitee shall be absolutely entitled to such
indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 3 or Section 4 hereof by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself (a) create a presumption that Indemnitee did not act in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of such Company, and, with respect to any criminal action
or proceeding, that Indemnitee had reasonable cause to believe that his conduct
was unlawful or (b) otherwise adversely affect the rights of Indemnitee to
indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
All reasonable expenses and costs incurred by Indemnitee as a result of
being a party to any proceeding (including counsel fees, retainers and advances
of disbursements required of Indemnitee) (collectively, the "Expense Advance")
shall be paid by each Company in advance of the final disposition of such
action, suit or proceeding at the request of Indemnitee within twenty (20) days
after the receipt by either Company of a statement or statements from Indemnitee
requesting such advance or advances from time to time. Such statement or
statements shall reasonably evidence the expenses and costs incurred by him in
connection therewith. Each Company's obligation to provide an Expense Advance is
subject to the following conditions: (i) if the proceeding
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arose in connection with Indemnitee's service as a director and/or executive
officer of either Company (and not in any other capacity in which Indemnitee
rendered service, including service to any Related Company), then the Indemnitee
or his representative shall have executed and delivered to the Company an
undertaking, which need not be secured and shall be accepted without reference
to Indemnitee's financial ability to make repayment, by or on behalf of
Indemnitee to repay all Expense Advance if and to the extent that it shall
ultimately be determined by a final, unappealable decision rendered by a court
having jurisdiction over the parties and the question whether Indemnitee is
entitled to be indemnified for such Expense Advance under this Agreement or
otherwise; (ii) Indemnitee shall give the Company such information and
cooperation as it may reasonably request and as shall be within Indemnitee's
power; and (iii) Indemnitee shall furnish, upon request by the Company and if
required under applicable law, a written affirmation of Indemnitee's good faith
belief that any applicable standards of conduct have been met by Indemnitee.
Indemnitee's entitlement to an Expense Advance shall include those incurred in
connection with any proceeding by Indemnitee seeking an adjudication pursuant to
this Agreement. In the event that a claim for an Expense Advance is made
hereunder and is not paid in full by the Company receiving such claim within
twenty (20) days after its receipt of such claim, Indemnitee may, but need not,
at any time thereafter, bring suit against such Company to recover the unpaid
amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of Determination Not to
Indemnify or to Advance Expenses.
In the event that a determination is made that Indemnitee is not entitled
to indemnification hereunder or if payment has not been timely made following a
determination of entitlement to indemnification pursuant to Section 7 and 8, or
if expenses are not advanced pursuant to Section 9, Indemnitee shall be entitled
to a final adjudication in an appropriate court of the State of Delaware or any
other court of competent jurisdiction of his entitlement to such indemnification
or advance. Neither Company shall oppose Indemnitee's right to seek any such
adjudication or any other claim. Such judicial proceeding shall be made de novo
and Indemnitee shall not be prejudiced by reason of a determination (if so made)
that he is not entitled to indemnification. If a determination is made or deemed
to have been made pursuant to the terms of Section 7 or Section 8 hereof that
Indemnitee is entitled to indemnification, each Company shall be bound by such
determination and is precluded from asserting that such determination has not
been made or that the procedure by which such determination was made is not
valid, binding and enforceable. Each Company further agrees to stipulate in any
such court that such Company is bound by all the provisions of this Agreement
and is precluded from making any assertion to the contrary. If the court shall
determine that Indemnitee is entitled to any indemnification hereunder, each
Company shall be jointly and severally liable to
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pay all reasonable Damages actually incurred by Indemnitee in connection with
such adjudication (including, but not limited to, any appellate proceedings).
SECTION 11. Other Rights to Indemnification.
The indemnification and advancement of expenses (including counsel fees)
and costs provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may now or in the future be entitled under any
provision of Holdings' Certificate, Holdings's Bylaws, GFSI's Certificate,
GFSI's Bylaws, any vote of stockholders or Disinterested Directors, any
provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
In the event that Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee, if he prevails in
whole or in part in such action, shall be entitled to recover from the
Companies, and shall be jointly and severally indemnified by each Company
against, any reasonable expenses for counsel fees and disbursements actually and
reasonably incurred by him.
SECTION 13. Duration of Agreement.
This Agreement shall continue until and terminate upon the later of (a) 10
years after Indemnitee has ceased to occupy any of the positions or have any of
the relationships described in Section 3 or Section 4 of this Agreement or (b)
the final termination of all pending or threatened actions, suits, proceedings
or investigations with respect to Indemnitee. This Agreement shall be binding
upon each Company and its successors and assigns and shall inure to the benefit
of Indemnitee and his spouse, assigns, heirs, devisees, executors,
administrators and other legal representatives.
SECTION 14. Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of any
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paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
SECTION 15. Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original, but all of which together
shall constitute one and the same Agreement. Only one such counterpart signed by
the party against whom enforceability is sought needs to be produced to evidence
the existence of this Agreement.
SECTION 16. Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
SECTION 17. Definitions.
For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of Holdings or GFSI, as
the case may be, who is not or was not a party to the action, suit,
investigation or proceeding in respect of which indemnification is being sought
by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law firm
that neither is presently nor in the past five years has been retained to
represent (i) either Company or Indemnitee in any matter material to either such
party or (ii) any other party to the action, suit, investigation or proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either Company or Indemnitee in an
action to determine Indemnitee's right to indemnification under this Agreement.
SECTION 18. Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by all of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
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SECTION 19. Mutual Acknowledgment.
Holdings, GFSI and Indemnitee each acknowledges that, in certain instances,
federal law or public policy may override applicable state law and prohibit the
Companies from indemnifying Indemnitee under this Agreement or otherwise. For
example, the Companies and Indemnitee acknowledge that the United States
Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Furthermore, Indemnitee understands and acknowledges that each
Company has undertaken or may be required in the future to undertake with the
SEC to submit the question of indemnification to a court in certain
circumstances for a determination of such Company's obligation under public
policy to indemnify Indemnitee.
SECTION 20. NOTICE BY INDEMNITEE.
Indemnitee agrees to notify each Company promptly in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any matter which may be subject to indemnification
covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given (i) when delivered by
hand and receipted for by the party to whom said notice or other communication
shall have been directed or (ii) if mailed by certified or registered mail with
postage prepaid on the third business day after the date on which it is so
mailed, to the following addresses:
(a) to Indemnitee:
(b) to either Company:
GFSI Holdings, Inc.
9700 Commerce Parkway
Lenexa, Kansas 66219
Attention: President
with a copy to
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GFSI Holdings, Inc.
c/o The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
Attention: A. Richard Caputo, Jr.
or to such other address as may have been furnished to Indemnitee by either
Company or to either Company by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
This Agreement restates and supersedes, but does not limit or negate, any
indemnification, rights or interests of Indemnitee under any prior agreements
between either Company and Indemnitee.
SECTION 23. Governing Law.
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GFSI HOLDINGS, INC.
By: /s/ John Menghini
-------------------------------------
John Menghini
President
GFSI, INC.
By: /s/ John Menghini
-------------------------------------
John Menghini
President
INDEMNITEE:
/s/
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