EXHIBIT 10.13
NON RECOURSE PROMISSORY NOTE
$__________________ February 27, 1997
FOR VALUE RECEIVED, the undersigned, , an individual
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residing at ("Borrower"), promises to pay
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to the order of GFSI HOLDINGS, INC., a Delaware corporation ("Company"),
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or any successor thereof, the sum of Thousand Hundred and
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no/100 Dollars ($ ) with interest from the date hereof on the unpaid
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principal sum and any unpaid accrued interest from time to time outstanding
accruing at the rate of 8% per annum compounded annually on July 1 of each
year, commencing with July 1, 1997 (the "Non-Default Interest Rate"). One-half
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of interest accrued during the period from July 1st until June 30th of the
following year (or, in the case of the first year, from the date of this Note
until June 30, 1997) will be due and payable on June 30 of each year
commencing with June 30, 1997. Borrower shall have the right, but not the
obligation, to pay 100 percent of the interest accrued during such time period
on June 30. Any interest accrued, but not paid on June 30 shall continue to
accrue interest, compounded as described above. The principal amount of, and
all accrued and unpaid interest on, this Note will be due and payable on the
earlier of June 30, 2007 or within ninety (90) days after Borrower ceases to
be an employee (for any reason or no reason) of the Company or any of its
subsidiaries.
All payments of principal and interest on this Note are payable at
the Company's office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: President, or at such other place as the Company shall notify
Borrower in writing. Principal and interest shall be payable in United States
currency that at the time is legal tender for the payment of public and
private debt.
This Note is executed and delivered together with a certain Pledge
Agreement, dated as of even date herewith (the "Pledqe Aqreement"), between
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Borrower and the Company which, among other things, secures payment of this
Note. In the event of a Default (as hereinafter defined) under this Note, the
Company shall be entitled to enforce its rights against the Pledge Collateral
(as defined in the Pledge Agreement) with respect to the amount due under the
Note upon such Default.
So long as any amounts remain outstanding under this Note, or any
shares of Series A Common Stock of the Company, par value $0.01 per share,
Series A Preferred Stock of the Company, par value $0.01 per share, or any
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other capital stock of the Company (collectively, the "Stock"), owned by
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Borrower shall be subject to the Pledge Agreement, Borrower shall not sell or
transfer such Stock; provided, however, in the event that at any time Borrower
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shall, in violation of the terms of this Note, sell or transfer any
of the Stock, any interest in the Stock or other equity interest of
the Company of which he is the owner, Borrower shall apply, from time
to time, upon, and only to the extent of receipt, the net cash
proceeds of such sale or transfer (after allowance for any federal,
state and local income taxes payable with respect to such sale) to
the prepayment of this Note; such prepayment shall be charged first
against accrued interest and then against principal, and then against
any other obligations in respect of this Note, provided further, such
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prepayment shall not affect the Company's right to declare a Default
(as hereinafter defined) under this Note. In addition, this Note
shall be prepaid to the extent provided in the Pledge Agreement.
Borrower may prepay this Note in whole or in part, without penalty,
at any time, provided that at the time of any partial prepayment,
Borrower shall also pay all interest that has accrued on any unpaid
interest and all accrued interest on the amount of the principal sum
prepaid.
Upon the happening of any Default of Borrower of the type
specified in paragraph (a) below, the Company, at its option may
declare the entire unpaid balance of the amount owed by Borrower
under this Note, together with all accrued and unpaid interest, to be
due and payable 90 days after such declaration, and upon the
happening of any other Default, the Company, at its option may
declare the entire unpaid balance of the amount owed by Borrower
under this Note, together with all accrued and unpaid interest, to be
immediately due and payable.
Each of the following shall constitute a "Default" of
Borrower:
(a) failure to make any payment of principal or interest
within 10 business days of when due hereunder and the same shall have
not been cured within 45 days after written notice thereof has been
given to the Borrower;
(b) any representation of Borrower contained in the Pledge
Agreement shall prove to have been false or misleading in any
material respect as of the time made;
(c) Borrower shall default in the performance or observance
of any covenant or provision contained herein or in the Pledge
Agreement and the same shall not have been cured within sixty (60)
days after written notice thereof has been given to the Borrower;
(d) Borrower assigns any of his obligations under this Note
to any person or entity other than in connection with his death, or
by operation of law in connection with his death;
(e) Borrower (i) generally is not paying his debts as they
become due; (ii) shall admit in writing his inability
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to pay his debts generally; (iii) shall make a general assignment for
the benefit of creditors; or (iv) commences any proceeding relating to
him under any other bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution, liquidation or
similar law or statute of any jurisdiction, whether now or hereafter
in effect, or any other procedure for the relief of financially
distressed debtors;
(f) there is commenced by or against Borrower any proceeding
under any other applicable bankruptcy, insolvency, reorganization or
other similar law seeking to adjudicate Borrower bankrupt or
insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of Borrower
or his debts, or seeking the entry of an order for relief or the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator, agent or custodian (or other similar official) for him
or any substantial part of his property, and relief against him is
ordered in such proceeding or such proceeding remains undismissed for
a period of sixty (60) days or more,
(g) Borrower's employment by the Company or its subsidiaries
is terminated for any reason.
Upon the occurrence of any Default of Borrower, interest on
the outstanding amount of Borrower's debt to the Company hereunder
shall accrue, in lieu of the aforementioned rate, at a per annum rate
equal to two (2) percent over the Non-Default Interest Rate. All
payments received by the Company from Borrower on this Note after such
Default shall be applied by the Company to Borrower's debt hereunder
as follows: first, to accrued and unpaid interest; second, to the
reduction of principal; and third, to any other obligations in respect
to this Note.
EXCEPT AS PROVIDED IN THE IMMEDIATELY FOLLOWING PARAGRAPH
AND WITH REGARD TO THE PLEDGED COLLATERAL, THIS NOTE AND ALL
OBLIGATIONS OF BORROWER HEREUNDER SHALL BE NON-RECOURSE TO BORROWER
PERSONALLY, AND BORROWER SHALL NOT BE PERSONALLY OBLIGATED OR LIABLE
UNDER THIS NOTE OR FOR SUCH OBLIGATIONS, AND THE COMPANY'S SOLE AND
EXCLUSIVE RECOURSE UNDER THIS NOTE AND FOR SUCH OBLIGATIONS WILL BE
WITH REGARD TO THE PLEDGED COLLATERAL PURSUANT TO THIS NOTE AND THE
PLEDGE AGREEMENT.
In the event this Note is turned over to any attorney-at law
for collection after any Default of Borrower, in addition to principal
and interest, the Company shall be entitled to collect all costs of
collection, including, but not limited to, reasonable attorneys fees
and costs incurred in connection with any of the Company's collection
efforts, whether or not suit on this Note is filed, and all such cases
and expenses shall be payable by Borrower on demand and also shall be
secured by all other collateral at any
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time held by the Company as security for Borrower's obligations to the
Company, it being understood, without limiting the generality of the
foregoing, that Borrower shall have personal liability for an amount
equal to any such costs and expenses.
No failure on the part of the Company or other holder hereof
to exercise any right or remedy hereunder with respect to Borrower,
whether before or after the happening of a Default of Borrower, shall
constitute a waiver of any future Default or of any other Default of
Borrower. No failure to accelerate the debt of Borrower evidenced
hereby by reason of a Default of Borrower or indulgence granted from
time to time shall be construed to be a waiver of the right to institute6t
upon prompt payment thereafter, or shall be deemed to be a novation of
this Note or a reinstatement of such debt evidenced hereby or a waiver
of such right of acceleration or any other right, or be construed so
as to preclude the exercise of any right the Company may have, whether
by the laws of the state governing this Note, by agreement or
otherwise, and Borrower hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary
to or in conflict with the foregoing. This Note may not be modified
orally, but only by an agreement in writing signed by the party
against whom such agreement is sought to be enforced.
Borrower, for himself and his heirs, successors and assigns,
hereby waives presentment, protest, demand, diligence, notice of
dishonor and of nonpayment, and waives and renounces all rights to the
benefits of any statute of limitations or any moratorium,
appraisement, or exemption now provided, or that hereafter may be
provided, by any applicable federal or state statute, both as to
himself personally and as to all of his property, whether real or
personal against the enforcement and collection of the obligations
evidenced by this Note and any and all extensions, renewals, and
modifications hereof.
Each of the Company and Borrower intends that the
obligations evidenced by this Note conform strictly to the applicable
usury laws as are from time to time in force. All agreements between
Borrower and the Company, whether now existing or hereafter arising
and whether oral or written, hereby are expressly limited so that in
no contingency or event whatsoever, whether by acceleration of
maturity hereof or otherwise, shall the amount paid or agreed to be
paid to the Company or collected by the Company, by or on behalf of
Borrower for the use, forbearance or detention of the money to be
loaned to Borrower hereunder or otherwise; or for the payment or
performance of any covenant or obligation contained herein of Borrower
to the Company, or in any other document evidencing, securing or
pertaining to such indebtedness evidenced hereby, exceed the maximum
amount permissible under applicable usury law. If under any
circumstances whatsoever fulfillment of any provision hereof or any
other document, at the time performance of such provisions shall be
due,
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shall involve transcending the limit of validity prescribed by law,
then, the obligation to be fulfilled shall be reduced to the limit of
such validity; and if under any circumstances the Company shall ever
receive from or on behalf of Borrower an amount deemed interest, which
would exceed the highest lawful rate under applicable law, such amount
that would be excessive interest under applicable usury laws shall be
applied to the reduction of Borrower's principal amount owing
hereunder and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal and such other
indebtedness, the excess shall be deemed to have been a payment made
by mistake and shall be refunded to Borrower or to any other person
making such payment on Borrower's behalf.
This Note is binding upon Borrower's successors and heirs,
shall inure to the benefit of the Company, its sucessors and assigns
and shall be governed by and construed in accordance with the laws of
the State of New York without regard to the principles of conflicts of
laws. The Borrower hereby irrevocably submits on a non-exclusive basis
to the jurisdiction of the federal courts of the United States of
America, the courts OF New York and any courts competent to hear
appeals therefrom.
IN WITNESS WHEREOF, the undersigned has duly caused this
Note to be executed and delivered at the place specified above and as
of the date first written above.
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