MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT ("Agreement"), is executed as of the
27th day of February, 1997, by and between TJC MANAGEMENT CORPORATION, a
Delaware corporation (the "Consultant"), and GFSI HOLDINGS, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Consultant has and/or has access to personnel who are highly
skilled in the field of rendering advice to business concerns such as the
Company; and
WHEREAS, the Company desires to retain the Consultant to provide business
and financial advice to the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. The Company hereby retains the Consultant, through the Consultant's own
personnel or through personnel available to the Consultant, to render consulting
services from time to time to the Company and its subsidiaries (whether now
existing or hereafter acquired) in connection with their financial and business
affairs, their relationships with their lenders, stockholders and other
third-party associates or affiliates and the expansion of their businesses. The
term of this Agreement shall commence on the date hereof and continue until
February 28, 2007 unless extended, or sooner terminated, as provided in Section
5 below. The Consultant's personnel shall be reasonably available to the
Company's managers, auditors and other personnel for consultation and advice,
subject to the Consultant's reasonable convenience and scheduling. Services may
be rendered at the Consultant's offices or at such other locations selected by
the Consultant as the Company and the Consultant shall from time to time agree.
2. During the term of this Agreement, the Company shall pay the Consultant:
(i) an annual fee equal to, (x) during the first two (2) years of this
Agreement, $500,000, (y) during the third, fourth and fifth years of this
Agreement, the greater of $500,000 or one and one-half percent (1.5%) of
the Company's earnings before extraordinary income or losses, interest
expense, interest income, other non-operating income and expense, income
taxes, and transaction-related amortization for the preceding fiscal year
("EBITA"), but in no event more than $750,000 in any year, and (z) after
the fifth anniversary of this Agreement, the greater of $500,000 or one and
one-half percent (1.5%) of the
Company's EBITA, but in no event more than $1,000,000 in any year, with
such fee being payable in quarterly installments each year commencing on
March 31, 1997;
(ii) an investment banking and sponsorship fee of up to two percent (2%) of the
aggregate consideration paid (including noncompetition and similar
payments) by the Company and/or its subsidiaries in connection with the
acquisition by the Company and/or its subsidiaries of all or substantially
all of the outstanding capital stock, warrants, options or other rights to
acquire capital stock, or all or substantially all of the assets of
another individual, corporation, partnership or other business entity; and
(iii) a financial consulting fee not to exceed one percent (1%) of the amount of
money obtained or made available pursuant to any financing (including,
without limitation, any refinancing) by the Company with the assistance of
the Consultant;
provided, however, if in connection with any transaction the Consultant has
earned a fee under clause (ii) above, the Consultant shall not be entitled to a
fee under clause (iii) for the same transaction. All fees and expenses payable
under clauses (ii) and (iii) above shall be subject to the approval of the
Company's Board of Directors. Notwithstanding the foregoing to the contrary, the
Company shall pay the Consultant a fee under clauses (ii) and (iii) above in the
aggregate amount of $3,250,000 in connection with the acquisition of all the
capital stock of Winning Ways, Inc., a Missouri corporation, such amount to be
paid to the Consultant on the date hereof.
3. Reasonable out-of-pocket expenses incurred by the Consultant and its
personnel in performing services hereunder to the Company and its subsidiaries
shall be promptly reimbursed to it by the Company upon the Consultant's
rendering of a statement therefor, together with such supporting data as the
Company shall reasonably require.
4. Notwithstanding the foregoing, the Company shall not be required to pay
the fees under Section 2 (without limiting the fees, reimbursements and payments
provided under Sections 3, 8 and 9 of this Agreement which shall be due and
payable in all events) (a) if and to the extent expressly prohibited by the
provisions of any credit, stock, financing or other agreements or instruments
binding upon the Company, its subsidiaries or properties, (b) if the Company has
not paid interest on any interest payment date or has postponed or not made any
principal payments with respect to any of its indebtedness on any scheduled
payment dates, or (c) if the Company has not paid dividends on any dividend
payment date as set forth in its certificate of incorporation (unless such
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dividends are accrued) or as declared by its Board of Directors, or has
postponed or not made any redemptions on any redemption date as set forth in its
certificate of incorporation or any certificate of designation with respect to
its preferred stock, if any. Any payments otherwise owed hereunder, which are
not made for any of the above-mentioned reasons, shall not be cancelled but
rather shall accrue, and shall be payable by the Company promptly when, and to
the extent that, the Company is no longer prohibited from making such payments,
the Company has become current with respect to such principal or interest
payments, the Company has become current with respect to such dividends and has
made such redemptions with respect to such preferred stock, if any. Any payment
required hereunder which is not paid when due shall bear interest at the rate of
six percent (6.0%) per annum.
5. This Agreement shall be automatically renewed for successive one-year
terms unless either party hereto, within sixty (60) days prior to the scheduled
renewal date, notifies the other party as to its election to terminate this
Agreement. Notwithstanding the foregoing, this Agreement may be terminated by
not less than ninety (90) days' prior written notice from the Company to the
Consultant at any time after (i) substantially all of the stock or substantially
all of the assets of the Company or all of its subsidiaries are sold, or (ii)
the Company is merged or consolidated into another entity unaffiliated with the
Consultant and/or a majority of the Company's stockholders immediately prior to
such merger and the Company is not the survivor of such transaction.
6. The Consultant shall have no liability to the Company on account of (i)
any advice which it renders to the Company, provided the Consultant believed in
good faith that such advice was useful or beneficial to the Company at the time
it was rendered, (ii) the Consultant's inability to obtain financing or achieve
other results desired by the Company or the Consultant's failure to render
services to the Company at any particular time or from time to time, or (iii)
the failure of any acquisition to meet the financial, operating or other
expectations of the Company.
7. Notwithstanding anything contained in this Agreement to the contrary,
the Company agrees and acknowledges that the Consultant and its shareholders,
employees, directors and affiliates intend to engage and participate in
acquisitions and business transactions outside the scope of the relationship
created by this Agreement and neither the Consultant nor any of its
shareholders, employees, directors or affiliates shall be under any obligation
whatsoever to make such acquisitions or business transactions through the
Company or offer such acquisitions or business transactions to the Company.
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8. The Company will, to the fullest extent permitted by applicable law,
indemnify and hold harmless the Consultant, its affiliates and associates, and
each of the respective owners, partners, officers, directors, employees and
agents of each of the foregoing, from and against any loss, liability, damage,
claim or expenses (including the fees and expenses of counsel) (collectively
"Damages") arising as a result of or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company and
its subsidiaries, unless such Damages resulted from Consultant's lack of good
faith at the time it rendered any advice to the Company.
9. a. This Agreement sets forth the entire understanding of the parties
with respect to the Consultant's rendering of services to the Company. This
Agreement may not be modified, waived, terminated or amended except expressly by
an instrument in writing signed by the Consultant and the Company.
b. This Agreement may not be assigned by either party without the
consent of the other party, but shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns upon
such permitted assignment.
c. In the event that any provision of this Agreement shall be held to
be void or unenforceable in whole or in part, the remaining provisions of
this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
d. Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended
at the principal executive offices of such party, or at such other address
as such party may hereinafter specify by written notice to the other party.
e. No waiver by either party of any breach of any provision of this
Agreement shall be deemed a continuing waiver or a waiver of any preceding
or succeeding breach of such provision or of any other provision herein
contained.
f. The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
g. This Agreement shall be governed by the internal laws (and not the
law of conflicts) of the state of New York.
(Signatures on next page)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSULTANT:
TJC MANAGEMENT CORPORATION, a Delaware
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
COMPANY:
GFSI HOLDINGS, INC., a Delaware
corporation
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
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A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Vice President
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