-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QyLkRQEMyjkka+Mkl3WdMizeX+QTrHZmny6w5hhV4uOhJBFphHolhNrFNDav6IdC 9Fb6t7GiORqhPUC/eKdGvg== 0001033525-01-500024.txt : 20010815 0001033525-01-500024.hdr.sgml : 20010815 ACCESSION NUMBER: 0001033525-01-500024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARAN INC CENTRAL INDEX KEY: 0000039917 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 135665557 STATE OF INCORPORATION: VA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04506 FILM NUMBER: 1712210 BUSINESS ADDRESS: STREET 1: 350 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10118 BUSINESS PHONE: 2125632000 MAIL ADDRESS: STREET 1: 350 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10118 10-Q 1 garq-601.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2001 Commission File No 1-4506 GARAN, INCORPORATED (Exact name of registrant as specified in its charter) VIRGINIA 13-5665557 (State of Incorporation) (I.R.S. Employer Identification No.) 350 Fifth Avenue, New York, NY 10118 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 563-2000 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 than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding June 30, 2001 Common Stock (no par value) 4,489,087 shares GARAN, INCORPORATED AND SUBSIDIARIES FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Page # Item 1. Consolidated Statements of Earnings Three Months Ended June 30, 2001 and 2000 3 Consolidated Statements of Earnings Nine Months Ended June 30, 2001 and 2000 4 Consolidated Balance Sheets June 30, 2001 and September 30, 2000 5 Consolidated Statements of Cash Flows Nine Months ended June 30, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Qualitative and Quantitative Disclosure about Market Risk 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 EXHIBITS 3.1 By-laws of the Company Amended and Restated as of August 13, 2001. 10.1 Employment and Consulting Agreement between the Company and Seymour Lichtenstein amended and restated as of May 1, 2001. 10.2 Employment Agreement between the Company and Jerald Kamiel amended and restated as of May 1, 2001. 10.3 Employment Agreement between the Company and William J. Wilson amended and restated as of May 1, 2001. 10.4 Employment Agreement between the Company and Rodney Faver amended and restated as of May 1, 2001. PART I. - FINANCIAL INFORMATION GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) THREE MONTHS ENDED 6/30/01 6/30/00 ----------- ----------- Net sales $55,176,000 $47,941,000 Cost of sales 39,259,000 35,900,000 ----------- ----------- Gross margin on sales 15,917,000 12,041,000 Selling and administrative expenses 8,206,000 7,258,000 Interest on capitalized leases 19,000 29,000 Interest income (539,000) (519,000) ----------- ----------- Earnings before provision for income taxes 8,231,000 5,273,000 Provision for income taxes 3,375,000 2,188,000 ----------- ----------- Net earnings $ 4,856,000 $ 3,085,000 =========== =========== Earnings per share data (see Note 2): Earnings per share - Basic $ 1.00 $ 0.60 - Diluted $ .98 $ 0.60 Average common shares outstanding - Basic 5,015,000 5,264,000 - Diluted 5,051,000 5,280,000 Dividends paid per share $ 0.25 $ 0.25 GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) NINE MONTHS ENDED 6/30/01 6/30/00 ----------- ----------- Net sales $166,914,000 $155,954,000 Cost of sales 121,028,000 119,108,000 ----------- ----------- Gross margin on sales 45,886,000 36,846,000 Selling and administrative expenses 22,986,000 21,228,000 Interest on capitalized leases 69,000 75,000 Interest income (1,697,000) (1,902,000) ----------- ----------- Earnings before provision for income taxes 24,528,000 17,445,000 Provision for income taxes 10,057,000 7,239,000 ----------- ----------- Net earnings $14,471,000 $10,206,000 =========== =========== Earnings per share data (see Note 2): Earnings per share - Basic $ 2.89 $ 1.94 - Diluted $ 2.86 $ 1.93 Average common shares outstanding- Basic 5,015,000 5,264,000 - Diluted 5,051,000 5,280,000 Dividends paid per share $ 1.55 $ 1.55 GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) 06/30/01 9/30/00 ASSETS ------------- ------------ Current Assets: Cash and cash equivalents $ 9,134,000 $ 14,580,000 U.S. Government securities - short-term 6,436,000 Accounts receivable, less estimated uncollectibles of $493,000 at 6/30/01 and $512,000 at 9/30/00 42,796,000 53,732,000 Inventories 66,115,000 47,757,000 Other current assets 6,188,000 6,475,000 ----------- ----------- Total current assets 124,233,000 128,980,000 U.S. Government Securities - Long-term 3,548,000 7,695,000 Property, plant and equipment, less accumulated depreciation and amortization 17,022,000 18,878,000 Other assets 8,234,000 8,039,000 ------------ ------------ TOTAL ASSETS $ 153,037,000 $ 163,592,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 11,483,000 $ 10,417,000 Accrued liabilities 17,763,000 21,263,000 Federal and state income taxes payable 4,367,000 4,369,000 Current portion of capitalized leases 220,000 240,000 ------------ ------------ Total current liabilities 33,833,000 36,289,000 ------------ ------------ Capitalized lease obligations, net of current portion 1,910,000 1,910,000 ------------ ------------ Deferred income taxes 1,802,000 1,903,000 ------------ ------------ Shareholders' Equity: Preferred stock ($10 par value) 500,000 shares authorized; none issued Common stock (no par value) 15,000,000 shares authorized; issued 4,489,087 at 6/30/01 and 5,072,337 at 9/30/00 2,245,000 2,536,000 Additional paid-in-capital 5,779,000 6,327,000 Unamortized value of restricted stock (3,073,000) Retained earnings 107,468,000 117,700,000 ------------ ------------ Total shareholders' equity 115,492,000 123,490,000 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 153,037,000 $ 163,592,000 ============= ============= GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED 6/30/01 6/30/00 Cash Flows From Operating Activities: ------------- ------------ Net earnings $ 14,471,000 $ 10,206,000 Adjustments to reconcile to net cash provided by operating activities: Deferred compensation 3,073,000 639,000 Depreciation and amortization 5,252,000 3,678,000 Deferred income taxes (101,000) (160,000) Changes in assets and liabilities: U.S. Government securities - Short-term 6,436,000 0 Accounts receivable 10,936,000 20,390,000 Inventories (18,358,000) (28,534,000) Other current assets 287,000 (251,000) Accounts payable 1,066,000 1,932,000 Accrued liabilities (3,500,000) (1,625,000) Income taxes payable (2,000) (4,475,000) Other assets (195,000) (1,052,000) Net Cash Provided by Operating ------------ ------------ Activities 19,365,000 748,000 ------------ ------------ Cash Flows From Investing Activities: Sale of U.S. Government securities - Long-term 7,710,000 17,926,000 Purchase of U.S. Government securities - Long-term (3,563,000) (13,129,000) Additions to property, plant, and Equipment (3,396,000) (3,478,000) ------------ ------------ Net Cash provided by Investing Activities 751,000 1,319,000 ------------ ------------ Cash Flows From Financing Activities: Stock Repurchase (17,887,000) (5,344,000) Payment of dividends (7,876,000) (8,185,000) Repayment of capitalized lease obligations (20,000) (20,000) Proceeds from exercised stock options 221,000 274,000 ------------ ------------ Net Cash used for Financing Activities (25,562,000) (13,275,000) ------------ ------------ Net decrease in Cash and Cash Equivalents (5,446,000) (11,208,000) Cash and Cash Equivalents At Beginning of Period 14,580,000 12,952,000 ------------ ------------ Cash and Cash Equivalents At End of Period $ 9,134,000 $ 1,744,000 ============ ============ Supplemental cash flow Disclosures Cash Paid During The Period For: Interest $ 69,000 $ 75,000 Income taxes 9,745,000 11,660,000 ============ ============ GARAN, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 (UNAUDITED) 1. In the opinion of management, all adjustments necessary for a fair statement of the results of operations have been reflected. 2. Basic and diluted earnings per share for the nine month periods ended June 30, 2001, and 2000 are calculated on the basis of the weighted average number of common shares outstanding during such nine month periods in accordance with the provisions of the Statements of Financial Accounting Standards No. 128 as follows: 2001 2000 ------------------------------ ------------------------------- Income Shares Per Share Income Shares Per Share Basic EPS $14,471,000 5,015,000 $ 2.89 $10,206,000 5,264,000 $1.94 ========= ========= Effect of dilutive options 36,000 16,000 --------------------- ---------------------- $14,471,000 5,051,000 $ 2.86 $10,206,000 5,280,000 $1.93 ============================== =============================== Basic and diluted earnings per share for the three month periods ended June 30, 2001, and 2000 are based on earnings per share for the nine month periods ended June 30, 2001, and 2000 less earnings per share for the six months ended March 31, 2001, and March 31, 2000, respectively. The weighted average number of common shares outstanding for the quarters ended June 30, 2001, and 2000 were 4,885,000 and 5,154,000 respectively. The difference in the weighted average number of common shares outstanding between the three and nine-month periods ended June 30, 2001, was due to the effect of the 596,250 share stock repurchase in June, 2001, and the difference in the weighted average number of common shares outstanding between the three and nine-month periods ended June 30, 2000, was due to the effect of a 250,000 share stock repurchase in April, 2000. 3. Inventories consist of the following: 06/30/01 09/30/00 ----------- ----------- Raw Materials $ 7,881,000 $ 8,338,000 Work in Process 9,772,000 8,817,000 Finished Goods 48,462,000 30,602,000 ----------- ----------- $66,115,000 $47,757,000 =========== =========== ITEM 2. GARAN, INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Some of the information presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve certain risks and uncertainties. Discussions containing such forward-looking statements may be found in the material set forth below and in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, which is incorporated by reference herein. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. The Company's actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors including, but not limited to, uncertainties regarding continued market acceptance of the Company's products, competition, the Company's relationship with its principal customer, and the consistent availability of raw materials and risks associated with the Company's Central American operations, as well as those identified in the incorporated report under the heading "Risk Factors". These forward-looking statements are made as of the date of the incorporated report or this report, as the case may be, and the Company assumes no obligation to update such forward-looking statements or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements. Results of Operations -- Three and Nine-Month Periods Ended June 30, 2001, and June 30, 2000: Net Sales Net sales for the three-month period ended June 30, 2001, were $55,176,000 compared to $47,941,000 for the same period last year. Net sales for the first nine months of fiscal 2001 were $166,914,000 compared to $155,954,000 for the same period last year. Net earnings for the three-month period were $4,856,000, or $1.00 per share, compared to $3,085,000, or $0.60 per share, for the prior year. Net earnings for the nine-month period were $14,471,000, or $2.89 per share, compared to $10,206,000, or $1.94 per share, for the prior year. The sales increase for the three and nine-month periods was a result of increased units shipped primarily in the Company's Childrenswear Division. Gross Margin Gross margin for the three months ended June 30, 2001, was $15,917,000, or 28.8% of net sales, compared to $12,041,000, or 25.1% of net sales, for the comparable period in fiscal 2000. Gross margin for the nine months ended June 30, 2001, was $45,886,000, or 27.5% of net sales, compared to $36,846,000, or 23.6% of net sales, for the comparable period last year. The gross margin increase in both periods was due to various factors including (a) duty savings as a result of lower effective duty rates on a portion of the Company's Caribbean Basin production, (b) lower costs of production as a result of shifting more production offshore, (c) lower costs associated with improved manufacturing efficiencies, and (d) product mix changes. The Company is a beneficiary of the Trade and Development Act of 2000 wherein a portion of its garments produced in the Caribbean Basin are imported free of duty subject to annual quotas. Selling and administrative expenses for the three months ended June 30, 2001, were $8,206,000, or 14.9% of net sales, as compared to $7,258,000, or 15.1% of net sales, for the comparable period last year. Selling and administrative expenses for the nine months ended June 30, 2001, were $22,986,000, or 13.8% of net sales, as compared to $21,228,000, or 13.6% of net sales, for the comparable period last year. The increase in selling and administrative expenses was related to the increase in net sales, the amortization of the compensation expense relating to the shares issued pursuant to the Restricted Stock Plan which vested in the third quarter, and the continued upgrade of computer systems. Interest income for the three months ended June 30, 2001, increased to $539,000 from $519,000 for the comparable period last year. Interest income for the nine months ended June 30, 2001, was $1,697,000 as compared to $1,902,000 for the comparable period last year. Interest income fluctuates with changes in rates of return and the Company's level of investment. Financial Position, Capital Resources, and Liquidity - June 30, 2001, and June 30, 2000: On April 30, 2001, the Company's Board of Directors authorized an offer to purchase up to 700,000 shares of Common Stock (including the associated Common Stock Purchase Rights) at a purchase price not in excess of $30 nor less than $26 per share. The tender offer commenced on May 4, 2001, and expired on June 6, 2001, and a total of 596,250 shares of Company Common Stock were tendered to and purchased by the Company. The purchase price was $30 per share, and the total purchase price of $17,887,500 was paid by the Company on June 11, 2001. On April 26, 2001, the Company ended the restriction period and fully vested the shares of Company Common Stock issued in May, 1999, pursuant to the 1999 Restricted Stock Plan. At June 30, 2001, working capital was $90,400,000, a decrease of $2,291,000 from working capital at September 30, 2000, of $92,691,000. The decrease reflects seasonal changes less the cash expended for the share repurchase referred to above offset by the Company's net income for the period. The effect of the repurchase on shareholders' equity, which declined to $115,492,000 at June 30, 2001, from $123,490,000 at September 30, 2000, was offset somewhat by amortization of the remaining unamortized value of the restricted stock which vested on April 26, 2001. Book value per share increased to $25.73 at June 30, 2001, from $24.34 at September 30, 2000. Accounts receivable were $42,796,000 at June 30, 2001, a decrease of $10,936,000 over the balance at September 30, 2000. Because the Company's business is seasonal, the receivable balance should be compared to the balance of $38,991,000 at June 30, 2000, rather than the September 30, 2000, year-end balance. The increase related to the increased sales volume. Inventory increased to $66,115,000 from $47,757,000 at September 30, 2000. Because the Company's business is seasonal, the inventory should be compared to the inventory of $65,867,000 at June 30, 2000, rather than the September 30, 2000, year-end balance. The Company generally builds its inventory levels during its third fiscal quarter in order to support anticipated demand in the last quarter of its fiscal year. Item 3. Qualitative and Quantitative Disclosure About Market Risk The Company does not believe it is exposed to market risks with respect to any of its investments; the Company does not utilize market rate sensitive instruments for trading or other purposes. The Company's investments consist primarily of U.S. Government securities with maturities of two years or less. PART II. - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders. None. ITEM 6. Exhibits and Reports on Form 8-K. a. Exhibits 3.1 By-laws of the Company Amended and Restated as of August 13, 2001. 10.1 Employment and Consulting Agreement between the Company and Seymour Lichtenstein amended and restated as of May 1, 2001. 10.2 Employment Agreement between the Company and Jerald Kamiel amended and restated as of May 1, 2001. 10.3 Employment Agreement between the Company and William J. Wilson amended and restated as of May 1, 2001. 10.4 Employment Agreement between the Company and Rodney Faver amended and restated as of May 1, 2001. b. Reports on Form 8-K No reports have been filed on Form 8-K during the quarter ended June 30, 2001. 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. GARAN, INCORPORATED BY: /S/ Seymour Lichtenstein Seymour Lichtenstein Principal Executive Officer BY: /S/ William J. Wilson William J. Wilson Principal Financial Officer DATE: August 13, 2001 EX-3 3 garq-ex31.txt EXHIBIT 3.1 Exhibit 3.1 BY-LAWS OF GARAN, INCORPORATED [AS AMENDED THROUGH AUGUST 13, 2001] SECTION I OFFICES 1.1. The principal office of the Corporation shall be in the City, County, and State of New York. 1.2. The Corporation shall have a registered office in the City of Richmond, Commonwealth of Virginia. 1.3. The Corporation may have such other offices as the Board of Directors from time to time may determine. SECTION II MEETINGS OF SHAREHOLDERS 2.1. All meetings of the shareholders of the Corporation shall be held at such place within or without the Commonwealth of Virginia as the Board of Directors shall select. 2.2. The annual meeting of the shareholders of the Corporation shall be held at a date and time fixed by the Board of Directors, at which time the shareholders shall elect directors of the Corporation and transact such other business as may properly come before the meeting. 2.3. Special meetings of the shareholders for any purpose or purposes may be called by resolution of the Board of Directors or by the Chairman of the Board or the President. Business transacted at all special meetings shall be confined to the purpose or purposes stated in the notice of meeting. 2.4. Written notice of every meeting of shareholders stating the date, time, and place where it is to be held and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder of record entitled to vote at such meeting not more than 60 nor less than 10 days before the meeting unless a different time period is prescribed by law. Notice of a shareholders' meeting to act on an amendment of the Articles of Incorporation, a plan of merger or share exchange, a proposed sale of all or substantially all of the Corporation's assets not in the usual and regular course of business, or the dissolution of the Corporation shall be given not less than 25 nor more than 60 days before the date of the meeting and shall be accompanied, as appropriate, by a copy of the proposed amendment, plan of merger or share exchange, or sale agreement. If mailed, such notice shall be directed to a shareholder at the shareholder's address as it shall appear on the books of the Corporation at the record date determined in accordance with Paragraph 8.1 unless the shareholder shall have filed with the Secretary of the Corporation a written request that notices intended for such shareholder be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice of all meetings may be waived by any shareholder by written waiver, either before or after the meeting, or by personal attendance at the meeting. A shareholder who attends a meeting shall be deemed to have (a) waived objection to lack of notice or defective notice of the meeting, unless at the beginning of the meeting he, she, or it objects to holding the meeting or transacting business at the meeting and (b) waived objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless he, she, or it objects to considering the matter when it is presented. 2.5. The holders of a majority of the shares issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall be required for and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute, the Articles of Incorporation, or these By-laws. 2.6. If a quorum is not present at a meeting, the shareholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present or represented. At such adjourned meeting, any business may be transacted that might have been transacted at the meeting originally called. 2.7. Where there is a quorum at any meeting, the vote of the holders of a majority of the shares having voting power, present in person or represented by proxy, and voting on the matter shall decide any question brought before such meeting, unless the question is one upon which by express provision of any applicable statute, the Articles of Incorporation, or these By-laws a different vote is required, in which case such express provision shall govern and control the decision on such question. 2.8. Each shareholder of record having the right to vote shall be entitled at a meeting of the shareholders of the Corporation to one vote for each share of stock standing in the name of such shareholder on the books of the Corporation and such votes may be cast either in person or by proxy. 2.9. A shareholder or a shareholder's duly authorized attorney- in-fact may execute a writing authorizing another person or persons to act for him, her, or it as proxy. Execution may be accomplished by the shareholder or such shareholder's duly authorized attorney-in-fact or authorized officer, director, employee, or agent signing such writing or causing such shareholder's signature to be affixed to such writing by any reasonable means including, but not limited to, facsimile signature. No proxy shall be valid after the expiration of 11 months from the date of its execution unless it shall have specified therein a different duration. The Secretary or any Vice President may approve procedures to enable a shareholder or a shareholder's duly authorized attorney-in-fact to authorize another person or persons to act for him, her, or it as proxy by transmitting or authorizing the transmission of a telegram, cablegram, internet transmission, telephone transmission, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization, or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such transmission must either set forth or be submitted with information from which the inspectors of election can determine that the transmission was authorized by the shareholder or the shareholder's duly authorized attorney-in-fact. If it is determined that such transmissions are valid, the inspectors of election shall specify the information upon which they relied. Any copy, facsimile telecommunication, or other reliable reproduction of the writing or transmission created pursuant to this Paragraph 2.9 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication, or other reproduction shall be a complete reproduction of the entire original writing or transmission. 2.10.A. Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders only (i) pursuant to the Corporation's notice of meeting (or any supplement thereto), (ii) by or at the direction of the Board of Directors, or (iii) by any shareholder of the Corporation who was a shareholder of record of the Corporation who is entitled to vote at the meeting at the time the notice provided for in Paragraph 2.10.B is delivered to the Secretary of the Corporation and who complies with the notice procedures set forth in that paragraph. 2.10.B. For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to Paragraph 2.10.A (iii), the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business other than the nominations of persons for election to the Board of Directors must constitute a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting, provided that in the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the shareholder must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period or extend any time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or is otherwise required in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended ("Exchange Act") and such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected, (ii) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-laws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting, and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made, and (iii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (a) the name and address of such shareholder and of such beneficial owner, as they appear on the Corporation's books, (b) the class and number of shares of capital stock of the Corporation that are owned beneficially and of record by such shareholder and such beneficial owner, (c) a representation that the shareholder is a holder of record of shares of the Corporation's capital stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (d) a representation whether the shareholder or the beneficial owner, if any, intends or is part of a group that intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (2) otherwise to solicit proxies from shareholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a shareholder if the shareholder has notified the Corporation of his intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such shareholder's proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation. 2.10.C. Notwithstanding anything in the second sentence of Paragraph 2.10.B to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by Paragraph 2.10.B also shall be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. 2.11. At a special meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. At a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting, nominations of persons for election to the Board of Directors may be made (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who is a shareholder of record at the time the notice provided for in this Paragraph 2.11 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election, and who complies with the notice procedures set forth in this Paragraph 2.11. In the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any shareholder entitled to vote in such election of directors may nominate a person or persons, as the case may be, for election as director(s) if the shareholder delivers a notice complying with the provisions of clauses (i) and (iii) of Paragraph 2.10.B to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period or extend any time period for giving of a shareholder's notice as described above. 2.12. Only such persons who are nominated in accordance with the procedures set forth in Paragraphs 2.10, 2.11, and 5.2 shall be eligible at an annual or special meeting of shareholders of the Corporation to be elected to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in Paragraphs 2.10 and 2.11. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in Paragraphs 2.10 and 2.11 (including whether the shareholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group that solicited) or did not so solicit, as the case may be, proxies in support of such shareholder's nominee or proposal in compliance with such shareholder's representation as required by Paragraph 2.10.B(iii)) and (b) if he determines that such nomination or proposal was not made or proposed in accordance with such procedures, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the provisions of Paragraphs 2.10 and 2.11, if the shareholder (or a designated representative of the shareholder) does not appear at the annual or special meeting of shareholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies with respect to such vote may have been received by the Corporation. 2.13. Notwithstanding the provisions of Paragraphs 2.10, 2.11, and 2.12, a shareholder also shall comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section II. Nothing in Paragraphs 2.10, 2.11, or 2.12 shall be deemed to affect any rights (a) of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any series of preferred stock to elect directors pursuant to any applicable provisions of the Articles of Incorporation. SECTION III DIRECTORS 3.1. The business of the Corporation shall be managed under the direction of its Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things as are not by statute, the Articles of Incorporation, or these By-laws required to be exercised or done by the shareholders. 3.2. The Board of Directors shall consist of nine directors of full age who need not be shareholders of the Corporation. The directors shall be divided into three classes, each of which shall consist of three directors. The directors in each class shall serve for a term of three years and until their successors are elected and qualify, provided that the current terms of each class expire at the annual meeting of shareholders listed below, upon their successors being elected and qualifying: Annual Meeting Class One 2002 Class Two 2003 Class Three 2004 At each annual meeting of shareholders, the number of directors to be elected shall be equal to the number of directors whose terms of office then expire. By amendment of these By-laws, the Board of Directors or the shareholders may increase or decrease the number of directors, provided that the Board of Directors may not increase or decrease the number of directors by more than 30% of the number of directors of all classes immediately following the most recent election of directors by the shareholders. 3.3. If the office of any director becomes vacant for any reason, including a vacancy resulting from an increase in the size of the Board of Directors, the directors in office may elect a director to fill such vacancy until the next annual meeting of shareholders. At each annual meeting of shareholders, the shareholders shall elect directors to fill any vacancy on the Board of Directors in any class for the remaining term of office of the other directors in that class. 3.4. Anything to the contrary in Paragraph 3.3 notwithstanding, the shareholders may fill any vacancy on the Board of Directors in any class for the remaining term of office the other of directors in that class. 3.5. No person shall be elected as a director of the Corporation unless nominated in accordance with the provisions of Paragraphs 2.10, 2.11, 2.12, 2.13, or 5.2. 3.6. Any director may be removed with or without cause, at any time, by vote of the shareholders at any meeting one of the purposes of which, as set forth in the notice of meeting, is the removal of such director. SECTION IV MEETINGS OF THE BOARD 4.1. The directors may hold their meetings at the principal office of the Corporation or at such other places, either within or without the Commonwealth of Virginia, as they from time to time may determine. 4.2. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by resolution of the Board of Directors. 4.3. Special meetings of the Board of Directors may be called by the Chairman of the Board, President, or Secretary and shall be called by the Chairman of the Board, President, or Secretary on the written request of two directors. Notice of such meeting, which need not specify the business to be transacted thereat, shall be given at least three business days before the day on which the meeting is to be held to each director either orally or in writing. 4.4. Whenever any notice is required to be given to a director of any meeting for any purpose under the provisions of law, the Articles of Incorporation, or these By-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, either before or after the time stated therein, shall be equivalent to the giving of such notice. A director's attendance at or participation in a meeting waives any required notice to him or her of the meeting unless at the beginning of the meeting or promptly upon the director's arrival he or she objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 4.5. At any meeting at which every member of the Board of Directors shall be present, though held without notice, any business may be transacted which might have been transacted if the meeting had been held with notice. 4.6. Meetings may be held with some or all of the directors participating by any means of communication by which all directors participating may simultaneously hear each other during the meeting. 4.7. At all meetings of the Board of Directors, including meetings held in accordance with Paragraph 4.6, a majority of the entire number of directors then in office shall be required for and constitute a quorum for the transaction of business. 4.8. Any act of a majority of the directors present at a meeting at which there is a quorum, including meetings held in accordance with Paragraph 4.6, shall be the act of the Board of Directors except as may be otherwise specifically provided by any applicable statute, the Articles of Incorporation, or these By-laws. 4.9. If a quorum is not present at any meeting of directors, including meetings held in accordance with Paragraph 4.6, the directors present may adjourn such meeting from time to time without notice other than an announcement at the meeting until a quorum shall be present. At such adjourned meeting, any business may be transacted that might have been transacted at the meeting originally called. SECTION V COMMITTEES OF THE BOARD OF DIRECTORS 5.1. The Board of Directors shall have the power to designate by resolution one or more Committees of the Board of Directors whose members shall serve at the pleasure of the Board of Directors. Subject to the power of the Board of Directors to override, modify, nullify, or change the action of any Committee, the actions of such Committee shall be the act of the Board of Directors with respect to the authority granted such Committee. Except for the Nominating Committee referred to in Paragraph 5.2 and the Audit Committee referred to in Paragraph 5.3, each such Committee shall consist of such number of directors, not less than two, as the Board of Directors from time to time may designate. One member of each Committee shall be designated by the Board of Directors as Chairman of such Committee. 5.2. The Board of Directors shall designate a Nominating Committee consisting of two directors of the Corporation, who shall select the management nominees for all directors to be elected pursuant to the provisions of Paragraphs 3.2 and 3.3. Nomination shall be made by the Nominating Committee only pursuant to the affirmative vote of both of its members. Except in the case of a nominee substituted by the Nominating Committee as a result of the death, incapacity, disqualification, or other inability to serve of a management nominee, the Nominating Committee shall deliver written nominations to the Secretary of the Corporation at least 60 days prior to the date of the annual meeting. Management nominees substituted as a result of the death, incapacity, disqualification, or other inability to serve of a management nominee shall be delivered to the Secretary as promptly as practicable. At the request of the Nominating Committee, any person nominated by the Nominating Committee for election as a director at an annual meeting shall furnish to the Secretary that information required to be set forth in a shareholder's notice of nomination that pertains to a nominee in accordance with the provisions of Paragraph 2.10. Provided that the Nominating Committee selects the management nominees, no nominees for director, except those made by the Nominating Committee, shall be voted upon at the annual meeting of shareholders unless other nominations are made in accordance with the provisions of Paragraph 2.10. Except in the case of a management nominee substituted as a result of the death, incapacity, disqualification, or other inability to serve of a management nominee, if the Nominating Committee shall fail or refuse to nominate a slate of directors at least 30 days prior to the date of the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon. 5.3.A. At least annually, the Board of Directors shall designate an Audit Committee which shall consist of three directors whose membership on the Audit Committee shall meet the requirements set forth in the rules of the American Stock Exchange, as amended from time to time. Vacancies in the Audit Committee shall be filled by the Board of Directors with directors meeting the requirements set forth above, giving consideration to continuity of the Audit Committee. Members of the Audit Committee shall be subject to removal by the Board of Directors at any time. 5.3.B. The primary function of the Audit Committee shall be to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing and overseeing (i) the financial reports and other financial information provided by the Corporation to any governmental body or the public, (ii) the Corporation's finance and accounting systems, (iii) the independence of the Corporation's outside auditors and the performance of the Corporation's internal and outside auditors, and (iv) the Corporation's auditing, accounting, and financial reporting processes generally, all as more specifically set forth in an Audit Committee Charter adopted by the Board of Directors as in effect from time to time. 5.3.C. Subject to the Audit Committee Charter, the Audit Committee may fix its own rules of procedure. The Audit Committee shall meet at least four times a year with both the Corporation's internal and outside auditors present. 5.4. Regular meetings of any Committee may be held at such places, at such times, in such manner (including holding meetings as set forth in Paragraph 4.6), with or without notice, as such Committee or the Board of Directors may determine by resolution. 5.5. The Chairman of any Committee and any officer authorized to call a meeting of the Board of Directors may call a Special Meeting of any Committee on three days notice. 5.6. At all meetings of any Committee, a majority of the Committee members then in office shall constitute a quorum required for the transaction of business. 5.7. If a quorum is not present at any meeting of a Committee, the members present may adjourn such meeting from time to time without notice other than an announcement at the meeting until a quorum shall be present. At such adjourned meeting any business may be transacted which might have been transacted at the meeting originally called. 5.8. The acts of a majority of the Committee members present at a meeting at which there is a quorum shall be the act of such Committee except as may be otherwise specifically provided by statute, the Articles of Incorporation, or these By-laws. SECTION VI OFFICERS 6.1. The officers of the Corporation shall be a Chairman of the Board, President, one or more Vice Presidents (any one or more of whom may be designated as Executive Vice President or Senior Vice President), Treasurer, and Secretary. Any officer may hold more than one office. 6.2. The Board of Directors, immediately after each annual meeting of shareholders, shall elect from their number the Chairman of the Board and also shall elect the President, Vice Presidents, Treasurer, Secretary, and such other officers as they shall deem necessary, none of whom need be members of the Board of Directors. 6.3. The salaries of the principal executive officers of the Corporation shall be fixed by the Board of Directors based upon advice of the Compensation Committee of the Board of Directors. 6.4. The officers of the Corporation shall hold office for one year and until their successors are elected and qualify. 6.5. Any corporate officer elected by the Board of Directors may be removed with or without cause at any time by the vote of a majority of the directors then in office. If the office of any corporate officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors, but the Board of Directors may determine that such vacancy need not be filled. 6.6. The Board of Directors, the Chairman of the Board, or the President may appoint other persons who shall hold titles as divisional or administrative "officers" for such terms as are designated by the Board of Directors, Chairman, or President but such "officers" as such shall not be deemed to be officers of the Corporation and as such shall not be deemed to be authorized to enter into contracts binding on the Corporation. Any divisional or administrative "officer" so appointed may be removed at any time by the Board of Directors, the Chairman, or the President. 6.7. The officers of the Corporation shall have such duties as generally pertain to their offices, as well as such powers and duties as are hereinafter provided and as from time to time may be conferred by the Board of Directors. The Board of Directors may require any officer to give such bond for the faithful performance of his or her duties as the Board of Directors may see fit. 6.8. Chairman of the Board. 6.8.A. The Chairman of the Board shall be the chief executive officer of the Corporation. He or she shall preside at all meetings of the Board of Directors, shall supervise the business of the Corporation and its officers, subject to the authority of the Board of Directors, shall have chief responsibility for planning for the operations, the long term goals, and the business of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall have the power to direct all employees of the Corporation, including all corporate officers, in the performance of their duties. He or she may represent the Board of Directors at all meetings of Board Committees. In the absence or disability of the President, he or she also shall perform the duties and exercise the powers of the President. 6.8.B. The Chairman of the Board shall have the power to appoint, remove, employ, discharge, assign the duties of, and fix the compensation of all divisional and administrative "officers," servants, agents, employees, and clerks of the Corporation other than the duly elected corporate officers. The Chairman of the Board may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts, or other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation or shall be required by law to be signed or executed otherwise. ` 6.8.C. The Chairman of the Board shall perform all duties incident to the office of the Chairman of the Board and such other duties as the Board of Directors from time to time may prescribe. 6.9. President. 6.9.A. The President shall be the chief operating officer of the Corporation. He or she shall have the general authority for day to day operations of the Corporation, provided that he or she shall report to the Chairman of the Board. In the absence or disability of the Chairman of the Board, he or she also shall perform the duties and exercise the powers of the Chairman of the Board. 6.9.B. Subject to the approval of the Chairman of the Board, the President shall have the power to appoint, remove, employ, discharge, assign the duties of, and fix the compensation of all divisional and administrative "officers," servants, agents, employees, and clerks of the Corporation other than the duly elected corporate officers. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts, or other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation or shall be required by law to be signed or executed otherwise. 6.9.C. The President shall perform all duties incident to the office of the President and such other duties as the Board of Directors or the Chairman of the Board from time to time may prescribe. 6.10. Vice Presidents. 6.10.A. The Board of Directors may designate one or more Vice Presidents as Executive Vice Presidents, Senior Vice Presidents, or as Vice Presidents with specific areas of responsibility such as manufacturing, finance, general counsel, or the like. 6.10.B. Each Vice President shall perform all duties incident to his or her office and such other duties as the Board of Directors, the Chairman of the Board, or the President from time to time may prescribe. Any Vice President of the Corporation may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts, and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation or shall be required by law to be signed or executed otherwise. 6.10.C. Any Vice President, in the absence or disability of the Chairman of the Board and the President, also shall perform the duties and exercise the powers of the Chairman of the Board and the President, provided that subject to the approval of the Board of Directors, the Chairman of the Board or the President from time to time may designate which Vice President shall perform such functions. 6.11. Chief Financial Officer. 6.11.A. The Board of Directors shall have the power to designate a corporate officer as Chief Financial Officer of the Corporation, subject to any statutory duties of the Treasurer. 6.11.B. Any officer so designated as Chief Financial Officer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He or she shall render to the Chairman of the Board, President, and directors at the regular meetings of the Board of Directors, or whenever they may require it, an account of all of the transactions and the financial condition of the Corporation. He or she shall perform all duties incident to the office of the Chief Financial Officer and such other duties as the Board of Directors, Chairman of the Board, or President with the concurrence of the Chairman of the Board from time to time may prescribe. 6.11.C. The Chief Financial Officer, if required by the Board of Directors, shall give to the Corporation, at the expense of the Corporation, a bond in such sum or sums and with such surety or sureties as shall be satisfactory to the Board of Directors conditioned upon the faithful performance of his or her duties and for the restoration to the Corporation in case of his or her death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. 6.12. Treasurer. 6.12.A. The Treasurer shall perform all duties required by law, and, if he or she is not the Chief Financial Officer, shall assist the Chief Financial Officer and perform his or her duties in the event of his or her absence or disability. 6.12.B. The Treasurer shall perform all duties incident to the office of the Treasurer and such other duties as the Board of Directors, Chairman of the Board, President with the concurrence of the Chairman of the Board, or Chief Financial Officer (if other than the Treasurer) from time to time may prescribe. 6.13. Secretary. 6.13.A. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He or she shall give or cause to be given notice of all meetings of shareholders and special meetings of the Board of Directors. He or she shall keep in safe custody the seal of the Corporation and affix or cause it to be affixed to any instrument when authorized by the Board of Directors. The Board of Directors may appoint one or more Assistant Secretaries to assist the Secretary and, in his or her absence or disability, perform his or her duties. 6.13.B. The Secretary shall perform all duties incident to the office of the Secretary and such other duties as the Board of Directors, Chairman of the Board, or President with the concurrence of the Chairman of the Board from time to time may prescribe. 6.14. Division and Administrative Officers. Divisional and administrative, or non corporate, "officers" shall have such duties as the Board of Directors, Chairman of the Board, or the President with the concurrence of the Chairman of the Board from time to time may prescribe. SECTION VII CERTIFICATES OF STOCK 7.1. The certificates of stock of the Corporation shall be numbered and entered in the stock books of the Corporation (which shall be maintained by the Corporation or by such Registrar or Transfer Agent as the Board of Directors may appoint) as they are issued. They shall exhibit the holder's name, the number of shares, and shall be signed by the President or any Vice President and by the Secretary or Assistant Secretary, or bear a facsimile of their signatures, and shall bear the corporate seal or a facsimile thereof. 7.2. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost or destroyed certificate or certificates, or his, her, or its legal representative, to advertise the same in such manner as the Board of Directors may require and/or give the Corporation a bond in such sum and with such surety or sureties as the Board of Directors may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. 7.3. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto and cancel the old certificate. Every record transfer of stock shall be entered on the stock books of the Corporation. 7.4. To the extent that any provision of the Amended and Restated Rights Agreement between the Corporation and Chemical Bank (now known as JP Morgan Chase Bank), as Rights Agent, dated April 21, 1993, is deemed to constitute a restriction on the transfer of any securities of the Corporation, including, without limitation, the Rights, as defined in the Rights Agreement, such restriction is hereby authorized. 7.5. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable statute. SECTION VIII RECORD DATE 8.1. The Board of Directors may fix in advance a date not more than 70 days preceding any meeting of shareholders, the payment of any dividend, the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, to receive payment of any such dividend or any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of capital stock and only such shareholders shall be entitled to such notice of and to vote at such meetings, or to receive payment of such dividend or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares of stock on the books of the Corporation after the record date so fixed. SECTION IX DIVIDENDS 9.1. Dividends upon the capital stock of the Corporation, subject to any applicable statutory provisions or provisions of the Articles of Incorporation, may be declared by the Board of Directors at any regular or special meeting. 9.2. Before payment of any dividend, there may be set aside out of the earned surplus or capital surplus of the Corporation available for dividends such sum or sums as the directors from time to time in their absolute discretion deem proper as a reserve fund to meet contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall deem conducive to the interests of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION X SEAL 10.1. The seal of the Corporation shall include: the name of the Corporation, 1957, and the words "Corporate Seal, Virginia." The seal may be used by causing it or a facsimile thereof to be reproduced upon or impressed directly on the instrument or writing to be sealed, or upon an adhesive substance to be affixed thereto. The seal on any corporate obligation for the payment of money may be printed, engraved, or a facsimile. SECTION XI CONTROL SHARE ACQUISITIONS 11.1. Article 14.1 of the Virginia Stock Corporation Act (Control Share Acquisitions) does not apply to any acquisition of shares of the Corporation. SECTION XII AMENDMENTS 12.1. Subject to the provisions of the Articles of Incorporation and applicable statutes, these By-laws may be amended, altered, added to, or repealed by the vote of the Board of Directors at any regular or special meeting of the Board of Directors, or by the shareholders at any annual or special meeting of the shareholders. EX-10 4 garq-ex101.txt EXHIBIT 10.1 Exhibit 10.1 GARAN, INCORPORATED 350 Fifth Avenue New York, New York 10118 May 1, 2001 Mr. Seymour Lichtenstein 791 Park Avenue New York, New York 10021 Dear Seymour: We are writing to amend and restate, effective as of May 1, 2001, the agreement between you and Garan, Incorporated ("Garan") with respect to your (i) continuing employment by Garan and (ii) retention by Garan as a consultant originally entered into as of October l, 1986, and subsequently amended and/or restated (the agreement as now again amended and restated, "Employment and Consulting Agreement"). We have agreed that: l. Position, Duties, and Period of Employment. 1.l. Position. Garan hereby continues to employ you, and you agree to accept continued employment, as Chairman and Chief Executive Officer. 1.2. Duties. During the period of your employment under this Employment and Consulting Agreement, except for vacations, holidays, and personal days, as each is authorized by and consistent with the practices of Garan, and absences due to psychological, emotional, or physical reasons, you shall devote your full business time, skill, and energy to the business and affairs of Garan, and you shall use your best efforts to promote the best interests of Garan. 1.3. Period of Employment. Your employment under this Employment and Consulting Agreement shall be for a term ("Employment Term") ending September 30, 2003 ("Term End"). 2. Base Compensation, Annual Bonus, and Executive Employee Benefits. 2.1. Base Compensation and Annual Bonus. During the Employment Term, Garan shall pay to you base compensation ("Base Compensation") in each 12 month period commencing October 1 and ending September 30 ("Fiscal Year") as determined from time to time by the Board of Directors of Garan ("Board"), but for the Fiscal Year ending September 30, 2001, including the period October 1, 2000 to April 30, 2001, and for each Fiscal Year thereafter, such amount shall be not less than $550,000. [References to Base Compensation in this Employment and Consulting Agreement shall not give effect to any salary reduction agreement.] In addition to payment of Base Compensation, the Board may determine, but is not obligated to, that Garan pay to you an annual bonus for a Fiscal Year ("Annual Bonus"), provided that an Annual Bonus may be payable to you as otherwise provided in this Employment Agreement. 2.2. Executive Employee Benefits. During the Employment Term, Garan shall provide you with employee benefits determined from time to time by the Board, which employee benefits shall be at least as favorable as those provided to other senior executives of Garan, and Garan shall maintain a life insurance policy on your life payable to your designated beneficiary or beneficiaries in the principal amount of not less than $1,000,000. 3. Termination of Employment. 3.1.a. Voluntary Termination After a Change of Control Event. If a Change of Control Event, as such term is defined in Annex I to this Employment and Consulting Agreement, occurs at any time during the Employment Term, within 6 months after such Change of Control Event you may give notice to Garan terminating your employment pursuant to this Section 3.1.a. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary ter- mination, Garan will pay to you severance equal to 2.99 times the average of the 3 highest of your combined Base Compensation and Annual Bonus determined by the Board in accordance with Section 2.1 for the 5 full Fiscal Years ending with the Fiscal Year preceding the Fiscal Year in which the Change of Control Event occurs. Such severance shall be paid to you not later than the next business day after the last day you render services as an employee under this Employment and Consulting Agreement. In addition to the amounts paid to you as severance in the event of your termination of employment after a Change of Control Event as provided in this Section 3.1.a, Garan shall pay to you at the same time (i) a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment, equal to the number of months after the Fiscal Year for which such Annual Bonus was determined to and including the month of termination divided 12, and (ii) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment. It is expressly agreed that this Section 3.1.a shall not apply if the Change of Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. 3.1.b. If all or a portion of any payments under this Employment Agreement, or under any other agreement with or plan of Garan qualify as "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as the same is and may be amended from time to time ("Code"), and are thereby subject to the excise tax described in Code Section 4999, Garan shall pay to you an additional "Gross-Up Payment." This Gross-Up Payment shall be an amount equal to your excise tax liability under Code Section 4999 (including excise tax liability with respect to the Gross-Up Payment), plus an additional amount to cover your Federal, state, and local income and employment taxes on the Gross-Up Payment. The Gross- Up Payment described in this Section 3.1.b shall be paid as soon as practicable following your termination of employment, but not later than 30 days following such termination of employment. If the Internal Revenue Service subsequently determines that your excise tax liability is greater than the amount of excise tax used by Garan in computing your Gross-Up Payment, Garan shall promptly make an additional payment to you equal to the amount necessary to make you whole on an after-tax basis, including the total amount of any underpaid excise tax, any related income or employment tax, and any related interest and/or penalties due to the Internal Revenue Service and/or other taxing authorities. 3.2. Termination by Garan Other Than for Cause. If Garan for any reason other than for Cause as defined in Annex I to this Employment and Consulting Agreement terminates your employment prior to October 1, 2003: 3.2.a. Garan shall pay to you (i) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the effective date of termination, within 5 business days of such date and (ii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which the effective date of such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination occurred, to and including the month in which the effective date of termination occurs divided by 12, payable at the same time any bonus is paid to any senior executive. 3.2.b. Garan shall pay to you an amount equal to (i) the greater of (x) 2 times your Base Compensation plus 2 times your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of such termination and (y) 3 times your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date of such termination and (ii) 3 times your Annual Consulting Payment as determined by the Board in accordance with Section 4.2 (assuming the Consulting Term commenced on the date of termination and you are receiving at least the minimum Annual Consulting Payment). Such amount shall be payable in cash, one-half within 5 business days of the effective date of termination or last day of the Employment Term and the balance, without interest, on the first anniversary of the initial payment. 3.2.c. Garan shall continue to provide you with executive employee benefits pursuant to Section 2.2, or alternatively, shall provide you with life insurance, medical reimbursement, disability, and accidental death and dismemberment benefit coverage at levels no less favorable than those in effect for you pursuant to Section 2.2 on the date of such termination if such executive employee benefits were being provided to you by Garan immediately prior to such termination, for a period equal to the sooner of (i) 2 years following the date of termination of your employment or September 30, 2003, whichever comes later, or (ii) until another employer provides you with benefits substantially comparable to the benefits provided pursuant to this Section 3.2.c. 3.3. Termination by Garan for Cause. Garan shall have the right to terminate your employment under this Employment and Consulting Agreement at any time upon a determination by Garan to dismiss you for Cause as defined in Annex I to this Employment and Consulting Agreement. Upon such termination for Cause, Garan's sole obligation shall be to pay you any Base Compensation and executive employee benefits provided pursuant to Section 2.2 which are earned and unpaid as of the effective date of the termination of your employment. 3.4. Death Upon your death during the term of this Employment and Consulting Agreement prior to your becoming Disabled (as defined in Section 3.5.e), this Employment and Consulting Agreement shall terminate, and all obligations of Garan under this Employment and Consulting Agreement shall terminate simultaneously therewith, except that Garan shall pay to your designated beneficiary or beneficiaries, or if no beneficiaries are designated, to your estate, (a) any earned and unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of your death, within 30 days of your death, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date of your death, within 30 days of your death, (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which your death occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which your death occurred to and including the month of the date of your death divided by 12, payable at the same time any such bonus is paid to any senior executive, and (d) an amount equal to 150% of the total of your Base Compensation and Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of your death, payable in 12 equal monthly installments commencing with the first day of the month following the date of your death. 3.5. Disability. 3.5.a. In the event you incur a Disability, until the earlier of the date of your death or the date you become Disabled (as such terms are defined in Section 3.5.e), Garan shall continue to pay to you your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date you incurred a Disability and continue your executive employee benefits provided pursuant to Section 2.2. In addition, in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you incurred a Disability unless otherwise payable in accordance with Section 3.5.b, Garan shall pay to you at the same time any bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you incurred a Disability to and including the months during which you are being paid Base Compensation pursuant to this Section 3.5.a, but not after the month of your death or in which you became Disabled if such event occurs in the Fiscal Year in which you incurred a Disability, divided by 12. 3.5.b. If you become Disabled, Garan shall (i) continue to pay you monthly, regardless of your death after you became Disabled, until the later of the Term End or 18 months from the date that you became Disabled, but for not more than 36 months, 1/12th of the total of your combined Base Compensation and Annual Bonus, as each was last determined by the Board in accordance with Section 2.1 prior to the date you incurred the Disability, (ii) beginning in the month after the payments pursuant to Section 3.5.a end, for a period of 60 months, pay you an amount equal to 1/12th of 50% of your Annual Consulting Payment determined by the Board in accordance with Section 4.2 (assuming the Consulting Period commenced on the date you incurred the Disability and you are receiving at least the minimum Annual Consulting Payment) reduced in either case by the gross amount paid by a third party as a result of such Disability under any disability or salary continuation policy or plan, the cost of which is paid by Garan, (iii) pay you any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date you became Disabled, within 5 business days of the date you became Disabled, (iv) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you became Disabled, pay you at the same time such bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you became Disabled to and including the month you became Disabled, not including any months for which you received a fractional part of your Annual Bonus pursuant to Section 3.5.a, divided by 12, and (v) during the periods set forth in Section 3.5.b(i), continue your other executive employee benefits provided pursuant to Section 2.2 as in effect on the first day that you incurred your Disability. 3.5.c. If you become Disabled, (i) Garan can remove you from the position that you then hold and (ii) the provisions of Sections 3.2 and 3.4 shall no longer apply, provided that neither Garan nor you shall be relieved of any other obligations under this Employment and Consulting Agreement. 3.5.d. If you die after incurring a Disability but prior to becoming Disabled, the provisions of Section 3.4 shall apply in lieu of the provisions of Section 3.5.b. 3.5.e. For purposes of this Section 3.5, Disability shall mean that you are unable to substantially carry out your obligations under this Employment and Consulting Agreement because of psychological, emotional, or physical reasons, and Disabled shall mean that your Disability has continued for a period of 90 consecutive days or for an aggregate of 120 days during any period of 360 consecutive days. 3.6. Voluntary Termination by You. You may give notice to Garan terminating your employment pursuant to this Section 3.6 at any time. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan shall pay to you (a) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of termination, within 5 business days of such date, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination, within 5 business days of such date, and (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination occurred to and including the month of your termination divided by 12, payable at the same time such bonus is paid to any senior executive. In addition, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 3.7. Automobile. Within 30 days following the last day that you render services as an employee or consultant to Garan under this Employment and Consulting Agreement, the date of your death, or the date on which you became Disabled, you or your estate shall have the right to elect to purchase from Garan the automobile then owned and supplied to you by Garan, if any, at the value thereof on Garan's books at such time. Payment shall be made in cash on or before the 30th day after you make such election. 4. Consulting Services. 4.1. Consulting Term. Commencing with the date after (a) any voluntary termination by you of your employment pursuant to Section 3.1.a or otherwise or (b) the Term End, and ending 5 years thereafter ("Consulting Term"), Garan shall retain you to render to it services of an advisory or consultative nature relating to your prior duties during your employment pursuant to this Employment and Consulting Agreement so that Garan may have the benefit of the experience, knowledge, and contacts gained by you as an officer and director of Garan. You agree to render to Garan such services if and when called upon in writing in advance by not less than 3 business days by Garan at such time or times as may be mutually agreed by Garan and you, by telephone, letter, or in person, provided that: (i) you are not temporarily more than 100 miles out of New York City at the date such notice is given to you at your New York City residence, (ii) you only shall be obliged to devote an aggregate of 20 hours in any monthly period during the period of your retention as a consultant under this Employment and Consulting Agreement to the rendering of such services, (iii) you are reimbursed for all reasonable expenses incurred in the performance of such services, including but not limited to, transportation, secretarial, and office expenses, (iv) you shall not be obliged to travel to render such services outside of the Metropolitan New York City area, and (v) your failure to render such services due to prior engagements, vacations, holidays or the like, or your inability to render such services due to psychological, emotional, or physical reasons, shall not affect your right to receive your Annual Consulting Payment under this Employment and Consulting Agreement. 4.2. Compensation. During the Consulting Term, Garan shall (i) pay to you compensation in each 12 month period ("Annual Consulting Payment") in an amount determined by the Board but not less than 66-2/3% of the greater of (x) the total of your Base Compensation plus your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the Consulting Term and (y) the total of your Base Compensation in the last Fiscal Year of Garan in which you were employed as an employee under this Employment and Consulting Agreement plus the average of your 2 Annual Bonuses as each was last determined by the Board in accordance with Section 2.1, (ii) continue to provide you with executive employee benefits pursuant to Section 2.2, or alternatively provide you with life insurance, medical reimbursement, disability, and accidental death and dismemberment benefit coverage at levels no less favorable than those in effect for you pursuant to Section 2.2 on the date of termination of your employment, and (iii) maintain a life insurance policy on your life payable to your designated beneficiary or beneficiaries in the principal amount of not less than $1,000,000. 4.3. Termination by Garan Other Than for Cause. If Garan terminates your consultancy prior to the expiration of the Consulting Term for any reason other than Cause as defined in Annex I to this Employment and Consulting Agreement, Garan shall pay you an amount equal to 3 times your Annual Consulting Payment as last determined by the Board in accordance with Section 4.2 prior to such termination. Such amount shall be payable in cash, one-half within 5 business days of the effective date of termination or last day of the Consulting Term and the balance, without interest, on the first anniversary of the initial payment. 4.4. Termination by Garan for Cause. Garan shall have the right to terminate your consultancy under this Employment and Consulting Agreement at any time upon a determination by Garan to dismiss you for Cause as defined in Annex I to this Employment and Consulting Agreement. Upon such termination for Cause, Garan's sole obligation shall be to pay you any Annual Consulting Payment and executive employee benefits provided pursuant to Section 4.2 which are earned and unpaid, as of the effective date of the termination of your consultancy. 4.5. Death. Upon your death during the Consulting Term, your consultancy under this Employment and Consulting Agreement shall terminate, and all obligations of Garan under this Employment and Consulting Agreement shall terminate simultaneously therewith, except that Garan shall pay to your designated beneficiary or beneficiaries, or if no beneficiaries are designated, then to your estate, (i) any Annual Consulting Payment and executive employee benefits pursuant to Section 4.2 earned and unpaid as of the date of your death, within 30 days of your death and (ii) an amount equal to 150% of your Annual Consulting Payment at the date of your death as last determined by the Board in accordance with Section 4.2 prior to the date of your death in 12 equal monthly installments commencing with the first day of the month following the date of your death. 4.6. Disability. 4.6.a. In the event of your Disability, as defined in Section 3.5.e, during the Consulting Term, except as otherwise provided in Section 4.6.b, Garan shall (i) continue to pay you monthly on and after the date you incurred the Disability, until the end of the Consulting Term, an amount equal to 1/12th of 50% of your Annual Consulting Payment as last determined by the Board in accordance with Section 4.2 prior to the date you incurred the Disability reduced by the gross amount paid by a third party as a result of such Disability under any disability policy or plan, the cost of which is paid by Garan, and (ii) during the period set forth in Section 4.6.(a)(i), continue your other executive employee benefits provided pursuant to Section 4.2 as in effect on the first day that you incurred your Disability. 4.6.b. If you die after incurring a Disability but prior to the end of the Consulting Term, the provisions of Section 4.5 shall apply in lieu of the provisions of this Section 4.6. 4.7 Voluntary Termination by You during Consulting Term. You may give notice to Garan terminating your consultancy pursuant to this Section 4.7 at any time during the Consulting Term. Such termination shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan shall pay to you any earned but unpaid Annual Consulting Payment and executive employee benefits provided pursuant to Section 4.2. In addition, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 5. Trade Secrets, Non-Disclosure, Non-Competition, Non- Interference, and Non-Disparagement. 5.1. Trade Secrets. You acknowledge that: (a) your employment by Garan throughout the term of this Employment and Consulting Agreement and prior thereto will bring and has brought you into close contact with many confidential affairs of Garan, (b) the business of Garan is conducted throughout the United States and abroad and competes with similar businesses of other organizations, (c) Garan carries on substantial promotional, marketing, sales and/or manufacturing activities throughout the United States and abroad, and (d) the covenants contained in Sections 5.2 and 5.3 of this Employment and Consulting Agreement are specific inducements by you to Garan in connection with its execution of this Employment and Consulting Agreement. 5.2. Non-Disclosure and Non-Competition. In recognition of the provisions of Section 5.1 and as consideration for your continued employment by Garan, the payment by Garan to you of compensation, and Garan providing you with employee benefits, you agree that: 5.2.a. While you are performing services for Garan pursuant to this Employment and Consulting Agreement, and at all times thereafter, you shall not disclose, communicate, or divulge to any person (other than to officers, directors, or employees of Garan and its subsidiaries whose duties require such knowledge) or use for your personal benefit or for the benefit of anyone other than Garan and its subsidiaries, any trade secrets, specifications, sales, merchandising, or manufacturing plans, manufacturing methods, programs, research, or other confidential information employed in or proposed to be employed in the business of Garan and its subsidiaries which comes to or came to your knowledge in the course of or by reason of your employment by Garan, or your performance under this Employment and Consulting Agreement. 5.2.b. In the event that (i) your employment or consultancy pursuant to this Employment and Consulting Agreement is terminated by Garan pursuant to Section 3.2, 3.3, 4.3, or 4.4, (ii) you terminate your employment or consultancy prior to the Term End pursuant to Section 3.6 or 4.7, or (iii) the term of this Employment and Consulting Agreement ends, for so long as Garan continues to pay you in accordance with its payroll practices, but for not more than the 12 month period beginning on the last day you render services to Garan, compensation if you were an employee at an annual rate equal to the greater of (x) the total of your Base Compensation in effect on the last day that you render services to Garan plus your Annual Bonus as each was last determined by the Board in accordance with Section 2.1, or (y) the total of 12 times your average monthly Base Compensation in the 24 month period ending on the last day that you render services to Garan plus the average of your 2 Annual Bonuses as each was last determined by the Board in accordance with Section 2.1, or compensation if you were a consultant at an annual rate equal to your Annual Consulting Payment, you shall not directly or indirectly, enter into or in any manner take part as an employee, agent, independent contractor, consultant, owner, sole proprietor, partner, joint venturer, member, officer, director, or shareholder or take part in any other capacity in, for, or with any person, firm, corporation, association, or business enter- prise, or in any manner render any assistance to any business or endeavor whose business activities are the same, similar to, or competitive with any part of the business which is conducted by Garan and its subsidiaries during the course of your employment by Garan prior to and pursuant to this Employment and Consulting Agreement in any state in the United States and in any territory, possession, or foreign country, provided that the provisions of this Section 5.2.b shall not preclude you from ownership, as an investor, of less than 5% of the stock of a publicly owned company which engages in such business activities. The provisions of this Section 5.2.b may not be invoked by Garan if Garan terminates your employment upon or within 12 months after a Change of Control Event unless the Change in Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. In the event Garan determines to pay you for part or all of the 12 month period referred to above, it shall do so for minimum periods of 3 months, and it shall give you notice that it is invoking the provisions of this Section 5.2.b and that it will compensate you accordingly. Such initial notice shall be given together with the notice of termination referred to in Section 3.2 or 3.3, or within 15 business days after receipt by Garan of your termination of employment pursuant to Section 3.6 or 4.7, or 15 days prior to the end of the term of this Employment and Consulting Agreement, and, thereafter, not later than 15 days prior to the beginning of each subsequent 3 month period. 5.3. Non-Interference. Upon the termination of your services for Garan under this Employment and Consulting Agreement, until the 1 year anniversary date of the last day that you render services pursuant to this Employment and Consulting Agreement, neither you nor any person, firm, corporation, association, or business enterprise with which you are affiliated as an employee, agent, independent contractor, consultant, partner, joint venturer, member, officer, director, or shareholder shall directly or indirectly induce or attempt to induce any employee of Garan or any of its subsidiaries to terminate or alter his or her employment relationship with Garan or any of its subsidiaries, or directly or indirectly hire any person who is or had been employed by Garan or any of its subsidiaries within 12 months of the last day you render services pursuant to this Employment and Consulting Agreement. The provisions of this Section 5.3 may not be invoked by Garan if you terminate your employment pursuant to Section 3.1.a or Garan terminates your employment or consultancy upon or within 12 months after a Change of Control Event. 5.4. Non-Disparagement. During the Employment Term, Consulting Term, and thereafter, (a) you shall not directly or indirectly, disparage the name, reputation, or products of Garan and (b) Garan shall not, directly or indirectly, disparage your name or reputation. 5.5. Additional Provisions. 5.5.a. In the event that the provisions of Section 5.2, 5.3, or 5.4 should be deemed unenforceable, invalid, or overbroad in whole or in part for any reason, any court of competent jurisdiction or the Arbitrator appointed in accordance with Section 6 is hereby authorized, requested, and instructed to reform such section consistent with the intent of Section 5.2, 5.3, or 5.4 to provide for the maximum restraints upon (i) your activities (including, but not limited to, time, geographic area, employee solicitation, and disparagement) and (ii) with respect to Section 5.4, Garan's activities, which may then be legal and valid. 5.5.b. You and Garan agree that violation by you of the provisions of Section 5.1, 5.2, 5.3, or 5.4 or by Garan of the provisions of Section 5.4 will cause irreparable injury to the other for which any remedy at law would be inadequate, and that the injured party shall be entitled in any court of law or equity or in any arbitration proceeding in accordance with Section 6, whichever forum is designated by the injured party, to temporary, preliminary, permanent, and other injunctive relief against any breach of the provisions contained in such section, and such punitive and compensatory damages as shall be awarded. Further, in the event of a violation by you of the provisions of Section 5.1, 5.2, or 5.3, (i) the period of non-disclosure, non-competition, and employee non-interference referred to therein shall be extended for a period of time equal to that period beginning on the date when such violation commenced and ending when the activities constituting that violation shall be finally terminated, and (ii) Garan shall have the right to suspend your compensation and benefits and payments made pursuant to Section 5.2.b until the activities constituting that violation shall be finally terminated. 6. Arbitration and Jurisdiction. 6.1. Arbitration. Except as otherwise alternatively provided in Section 5.5 relating to the reformation of the non-disclosure, non-competition, employee non-interference, and non-disparagement provisions and obtaining injunctive relief, any controversy or claim arising out of or relating to this Employment and Consulting Agreement, or the breach thereof, shall be settled by arbitration by one Arbitrator in New York, New York, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. 6.2. Consent to Jurisdiction. Each of you and Garan hereby consents to the jurisdiction of the Supreme Court of the State of New York for the County of New York and the United States District Court for the Southern District of New York for all purposes in connection with (a) the arbitration referred to in Section 6.1 and (b) this Employment and Consulting Agreement, and further consents that any process or notice of motion in connection therewith may be served by certified or registered mail or by personal service in accordance with the provisions of Section 7, within or without the State of New York, provided a reasonable time for appearance is allowed. 7. Notice. All notices provided for in this Employment and Consulting Agreement shall be in writing and shall be given by registered or certified mail, return receipt requested, and by regular mail, both with postage prepaid, to the addresses set forth below, or personally delivered, and shall be deemed given when sent. The addresses referred to above are: Your address: 791 Park Avenue New York, New York 10021 Garan: 350 Fifth Avenue New York, New York 10118 Attn: President With a copy to: Tannenbaum Dubin & Robinson, LLP 1140 Avenue of the Americas New York, New York 10036 Attn: Marvin S. Robinson, Esq. Either you or Garan at any time may give notice of another address in accordance with the provisions of this Section 7. 8. Governing Law, Amendment, and Binding Effect. 8.1 This Employment and Consulting Agreement (a) shall be governed by and construed in accordance with the laws of the State of New York as if it were an agreement made and to be performed entirely within such State, (b) may not be modified or amended except by a writing signed by each of Garan or its successors and you, (c) may not be assigned by Garan except as provided in Section 8.2 or by you, (d) shall be binding upon each of Garan and its successors and you and your distributees, per- sonal representatives, executors, and administrators, and (e) contains the entire agreement and understanding between Garan and you with respect to the subject matter hereof and supersedes all prior agreements, arrangements, and understandings, written or oral, between Garan and you with respect to the subject matter of this Employment and Consulting Agreement. 8.2 If Garan shall be merged into or consolidated with another entity, or another entity acquires substantially all of the assets of Garan, the provisions of this Employment and Consulting Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation or acquiring such assets. Garan will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of Garan, by an agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Employment and Consulting Agreement in the same manner and to the same extent that Garan would be required to perform it if no such succession had taken place. The provisions of the prior sentences also shall apply in the event of any subsequent mergers, consolidations, or transfers of assets. 9. Withholding and Mitigation of Damages. 9.1. Garan, to the extent permitted by law, shall have the right to deduct from any payment or benefit of any kind otherwise due to you under this Employment and Consulting Agreement, any Federal, state, or local taxes of any kind required to be withheld. 9.2. Except as provided in Sections 3.5.b and 4.6.a, all payments and benefits to which you are entitled under this Employment and Consulting Agreement shall be made and provided without offset, deduction, or mitigation on account of income you may receive from other employment or otherwise. 10. Litigation Expenses. Garan shall pay all of your costs and expenses, including attorneys' fees and disbursements, in connection with any legal proceedings (including, but not limited to, arbitration), whether or not instituted by Garan or you, relating to the interpretation or enforcement of any provision of this Employment and Consulting Agreement. If the foregoing correctly sets forth our agreement, please execute and return the enclosed copy of this letter. Sincerely, GARAN, INCORPORATED /S/ JERALD KAMIEL Jerald Kamiel, President ACCEPTED AND AGREED: /S/ SEYMOUR LICHTENSTEIN Seymour Lichtenstein ANNEX I CERTAIN DEFINITIONS As used in this Employment and Consulting Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Cause" means willful and gross misconduct on your part that is materially and demonstrably detrimental to Garan or the commission by you of one or more acts which constitute an indictable crime under Federal, state, or local law, as determined in good faith by a written resolution duly adopted by the affirmative vote of a majority of all of the directors then serving on Garan's Board of Directors at a meeting duly called and held for that purpose after reasonable notice to you and opportunity for you and your counsel to be heard. "Change of Control Event" means any one of the following: (a) Continuing Directors no longer constitute at least a majority of Garan's Board of Directors, (b) any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, become the beneficial owner, directly or indirectly, of at least 40% of Garan's then outstanding Common Stock, (c) the approval by Garan's shareholders of the merger or consolidation of Garan with any other corporation, the sale of substantially all of the assets of Garan or the liquidation or dissolution of Garan, unless, in the case of a merger or consolidation, the incumbent Continuing Directors in office immediately prior to such merger or consolidation will constitute at least a majority of the directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation, and such surviving corporation (and such parent, if any) shall have at least five directors, or (d) at least a majority of the incumbent Continuing Directors in office immediately prior to any other action proposed to be taken by Garan's shareholders or by Garan's Board of Directors determines that such proposed action, if taken, would constitute a Change of Control of Garan and such proposed action is thereafter taken. "Continuing Director" means any individual who is a member of Garan's Board of Directors on May 1, 2001, or who thereafter is designated (before such person's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. EX-10 5 garq-ex102.txt EXHIBIT 10.2 Exhibit 10.2 GARAN, INCORPORATED 350 Fifth Avenue New York, New York 10118 May 1, 2001 Mr. Jerald Kamiel 2 Sylvan Court Livingston, New Jersey 07039 Dear Jerry: We are writing to amend and restate, effective as of May 1, 2001, the agreement between you and Garan, Incorporated ("Garan") with respect to your continuing employment by Garan originally entered into as of October l, l986, and subsequently amended and/or restated (the agreement as now again amended and restated, "Employment Agreement"). We have agreed that: l. Position, Duties, and Period of Employment. 1.1. Position. Garan hereby continues to employ you, and you agree to accept continued employment, as President and Chief Operating Officer. 1.2. Duties. During the period of your employment under this Employment Agreement ("Employment Term"), except for vacations, holidays, and personal days, as each is authorized by and consistent with the practices of Garan, and absences due to psychological, emotional, or physical reasons, you shall devote your full business time, skill, and energy to the business and affairs of Garan, and you shall use your best efforts to promote the best interests of Garan. 1.3. Period of Employment. 1.3.a. Subject to Section 3, your employment under this Employment Agreement shall be for a term ("Base Term") ending, as at the effective date of the restatement of this Employment Agreement, on March 31, 2004. 1.3.b. The Base Term of this Employment Agreement shall be extended by six months each April l and October l during the term of this Employment Agreement commencing October 1, 2001, unless prior to such date either (i) you notify Garan that you elect to terminate this Employment Agreement at the end of the Base Term or the then extended term or (ii) Garan notifies you that Garan elects to terminate this Employment Agreement at the end of the Base Term or the then extended term. (The end of the Base Term or, if the term is extended, the extended term, is hereinafter referred to as the "Term End.") The intent of this Section 1.3.b is that, for example, if neither you nor Garan gives such notice of termination on or before September 30, 2001, the term of this Employment Agreement will be extended automatically to September 30, 2004, and if thereafter either you or Garan gives such notice of termination on or before March 31, 2002, the term of this Employment Agreement shall end on September 30, 2004. 1.3.c.1. In the event that Garan notifies you pursuant to the provisions of Section l.3.b that it elects to terminate this Employment Agreement at the Term End, Garan shall include in such notice either a request that you render services or a direction that you are not to render services under this Employment Agreement after a date not more than 30 days after such notice, solely at its option. In the event you notify Garan pursuant to the provisions of Section 1.3.b that you elect to terminate this Employment Agreement at the Term End, Garan shall have the right at any time thereafter to give notice to you that you are not to render services under this Employment Agreement after a date not more than 30 days after such notice. 1.3.c.2. If Garan requests you to render services and you do not give the notice referred to in Section 1.3.c.3, thereafter (unless and until you voluntarily terminate your employment in accordance with the provisions of Section 3.l.a) until the Term End Garan shall continue (a) to pay to you in accordance with its payroll practices compensation at an annual rate equal to the greater of (i) the total of your Base Compensation in effect at the date of such notice plus your Annual Bonus, as each was last determined by the Board of Directors of Garan ("Board") in accordance with Section 2.1, or (ii) the total of your average Base Compensation in the 12 month period ending on the date of the notice plus the average of your last 2 Annual Bonuses, as each was determined by the Board in accordance with Section 2.1, and (b) to provide you with your other executive employee benefits pursuant to Section 2.2 as in effect at the date of the notice or, at your option, as in effect 1 year prior to the date of the notice. 1.3.c.3. If Garan requests you to render services and, within 30 days after notice is given to you pursuant to Section 1.3.c.1, you notify Garan that you will not render further services under this Employment Agreement after a date set by you but not later than 30 days after your notice to Garan, or if Garan directs you in their notice not to render services, Garan shall (a) pay you an amount equal to 3 times your Base Compensation plus 3 times your Annual Bonus, as each was last determined by the Board in accordance with Section 2.1, and (b) continue to provide you until the Term End with your other executive employee benefits pursuant to Section 2.2 as in effect at the date of such notice or, at your option, as in effect 1 year prior to the date of such notice. The amount determined in accordance with (a) shall be paid in cash, one-half within 5 business days after the last day you render services under this Employment Agreement and the balance, without interest, on the first anniversary of the initial payment. If Garan requests you to render services and, within 30 days after the notice is given to you pursuant to Section 1.3.c.1, you notify Garan that you will not render further services under this Employment Agreement, or if Garan directs you in a notice pursuant to Section 1.3.c.1 not to render services under this Employment Agreement, you shall be relieved of your obligations pursuant to Sections 1.1 and 1.2 after the last day that you render services under this Employment Agreement, but neither you nor Garan shall be relieved of any other obligations under this Employment Agreement. If Garan directs you to render services and you continue to do so, the provisions of Section 3.1.a(i) shall no longer apply but neither you nor Garan shall be relieved of any other obligations under this Employment Agreement. In addition, if you notify Garan pursuant to the provisions of Section 1.3.b that you elect to terminate this Employment Agreement at the Term End, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 2. Base Compensation, Annual Bonus, and Executive Employee Benefits. 2.1. Base Compensation and Annual Bonus. During the Employment Term, Garan shall pay to you base compensation in each 12 month period commencing October 1 and ending September 30 ("Fiscal Year") as determined from time to time by the Board - ("Base Compensation"), but for the Fiscal Year ending September 30, 2001, including the period October 1, 2000 to April 30, 2001, and for each Fiscal Year thereafter, such amount shall be not less than $375,000. [References to Base Compensation in this Employment Agreement shall not give effect to any salary reduction agreement.] In addition to payment of Base Compensation, the Board may determine, but is not obligated to, that Garan pay to you an annual bonus for a Fiscal Year ("Annual Bonus"), provided that an Annual Bonus may be payable to you as otherwise provided in this Employment Agreement. 2.2. Executive Employee Benefits. During the Employment Term, Garan shall provide you with employee benefits determined from time to time by the Board, which employee benefits shall be at least as favorable as those provided to other senior executives of Garan, and Garan shall maintain a life insurance policy on your life payable to your designated beneficiary or beneficiaries in the principal amount of not less than $l,000,000. 3. Termination of Employment. 3.1.a. Voluntary Termination. If (i) Garan's present chief executive officer ceases to serve in such position for any reason and within 6 months of such event either (x) you are not given the opportunity to become chief executive officer of Garan on terms reasonably acceptable to you and Garan, or (y) Garan employs another chief executive officer, then within 30 days after the earlier of the expiration of such 6 month period or employment of another chief executive officer, you may give notice to Garan terminating your employment pursuant to this Section 3.1.a or (ii) a Change of Control Event, as such term is defined in Annex I to this Employment Agreement, occurs at any time during the Employment Term, within 6 months after such Change of Control Event you may give notice to Garan terminating your employment pursuant to this Section 3.1.a. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan will pay to you severance equal to 2.99 times the average of the 3 highest of your combined Base Compensation and Annual Bonus determined by the Board in accordance with Section 2.1 for the 5 full Fiscal Years ending with the Fiscal Year preceding the Fiscal Year in which the current chief executive officer ceases to serve in such position or a Change in Control Event occurs. Such severance shall be paid to you not later than the next business day after the last day you render services under this Employment Agreement. In addition to the amounts to be paid to you as severance in the event of your termination of employment as provided in this Section 3.1.a, Garan shall pay to you at the same time (x) a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment, equal to the number of months after the Fiscal Year for which such Annual Bonus was determined to and including the month of termination of employment divided by 12 and (y) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment. It is expressly agreed that the provisions of Section 3.1.a(ii) shall not apply if the Change of Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. 3.1.b. If all or a portion of any payments under this Employment Agreement, or under any other agreement with or plan of Garan qualify as "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as the same is and may be amended from time to time ("Code"), and are thereby subject to the excise tax described in Code Section 4999, Garan shall pay to you an additional "Gross-Up Payment." This Gross-Up Payment shall be an amount equal to your excise tax liability under Code Section 4999 (including excise tax liability with respect to the Gross-Up Payment), plus an additional amount to cover your Federal, state, and local income and employment taxes on the Gross-Up Payment. The Gross- Up Payment described in this Section 3.1.b shall be paid as soon as practicable following your termination of employment, but not later than 30 days following such termination of employment. If the Internal Revenue Service subsequently determines that your excise tax liability is greater than the amount of excise tax used by Garan in computing your Gross-Up Payment, Garan shall promptly make an additional payment to you equal to the amount necessary to make you whole on an after-tax basis, including the total amount of any underpaid excise tax, any related income or employment tax, and any related interest and/or penalties due to the Internal Revenue Service and/or other taxing authorities. 3.2. Termination by Garan Other Than for Cause. If Garan terminates your employment prior to or at the Term End for any reason other than for Cause as defined in Annex I to this Employment Agreement and the provisions of Section 1.3.c.3 do not apply: 3.2.a. Garan shall pay to you (i) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the effective date of the termination, within 5 business days of such date and (ii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which the effective date of such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which the effective date of such termination occurred, to and including the month in which the effective date of termination occurs divided by 12, payable at the same time any bonus is paid to any senior executive, 3.2.b. Garan shall pay to you an amount equal to 3 times your Base Compensation plus 3 times your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to such termination. Such amount shall be payable in cash, one-half within 5 business days of the effective date of termination or last day of the Employment Term and the balance, without interest, on the first anniversary of the initial payment. 3.2.c. Garan shall continue to provide you with executive employee benefits pursuant to Section 2.2, or alternatively, shall provide you with life insurance, medical reimbursement, disability, and accidental death and dismemberment benefit coverage at levels no less favorable than those in effect for you pursuant to Section 2.2 on the effective date of such termination if such executive employee benefits were being provided to you by Garan immediately prior to the termination of your employment, for a period equal to the sooner of (i) 2 years following the effective date of termination of your employment or until the date of the Term End, whichever comes later, or (ii) until another employer provides you with benefits substantially comparable to the benefits provided pursuant to this Section 3.2.c. 3.3. Termination by Garan for Cause. Garan shall have the right to terminate your employment under this Employment Agreement at any time upon a determination by Garan to dismiss you for Cause as defined in Annex I to this Employment Agreement. Upon such termination for Cause, Garan's sole obligation shall be to pay you any Base Compensation and provide executive employee benefits pursuant to Section 2.2 which are earned and unpaid as of the effective date of the termination of your employment. 3.4. Death. Upon your death during the term of this Employment Agreement prior to your becoming Disabled (as defined in Section 3.5.e), this Employment Agreement shall terminate, and all obligations of Garan under this Employment Agreement shall terminate simultaneously therewith, except that Garan shall pay to your designated beneficiary or beneficiaries, or if no beneficiaries are designated, to your estate, (a) any earned and unpaid Base Compensation and provide executive employee benefits pursuant to Section 2.2 as of the date of your death, within 30 days of your death, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date of your death, within 30 days of your death, (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which your death occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which your death occurred to and including the month of your death divided by 12, payable at the same time any such bonus is paid to any senior executive, and (d) an amount equal to 150% of the total of your Base Compensation and your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of your death, payable in 12 equal monthly installments commencing with the first day of the month following the date of your death. 3.5. Disability. 3.5.a. In the event you incur a Disability, until the earlier to occur of the date of your death or the date you become Disabled (as such terms are defined in Section 3.5.e), Garan shall continue to pay to you your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date you incurred a Disability, and continue your executive employee benefits provided pursuant to Section 2.2. In addition, in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you incurred a Disability unless otherwise payable in accordance with Section 3.5.b, Garan shall pay to you at the same time such bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you incurred a Disability to and including the months during which you are being paid Base Compensation pursuant to this Section 3.5.a, but not after the month of your death or in which you became Disabled if such event occurs in the Fiscal Year in which you incurred a Disability, divided by 12. 3.5.b. If you become Disabled, Garan shall (i) continue to pay you monthly, regardless of your death after you become Disabled, until the later of the Term End or 18 months from the date that you became Disabled, but for not more than 36 months, 1/12th of the total of your combined Base Compensation and Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date you incurred the Disability reduced by the gross amount paid by a third party as a result of such Disability under any disability or salary continuation policy or plan, the cost of which is paid by Garan, (ii) pay you any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date you became Disabled, within 5 business days of the date you become Disabled, (iii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you became Disabled, pay you at the same time such bonus is paid to any senior executive, a fractional part of your Annual Bonus last determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you became Disabled to and including the month you became Disabled, not including any months for which you receive a fractional part of your Annual Bonus pursuant to Section 3.5.a, divided by 12, and (iv) during the period set forth in Section 3.5.b(i), continue your other executive employee benefits provided pursuant to Section 2.2 as in effect on the first day that you incurred your Disability. 3.5.c. If you become Disabled, (i) Garan can remove you from the position that you then hold and (ii) the provisions of Sections 3.1.a(i), 3.2, and 3.4 shall no longer apply, provided that neither Garan nor you shall be relieved of any other obligations under this Employment Agreement. 3.5.d. If you die after incurring a Disability but prior to becoming Disabled, the provisions of Section 3.4 shall apply in lieu of the provisions of Section 3.5.b. 3.5.e. For purposes of this Section 3.5, Disability shall mean that you are unable to substantially carry out your obligations under this Employment Agreement because of psychological, emotional, or physical reasons, and Disabled shall mean that your Disability has continued for a period of 90 consecutive days or for an aggregate of 120 days during any period of 360 consecutive days. 3.6. Voluntary Termination by You. You may give notice to Garan terminating your employment pursuant to this Section 3.6 at any time. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan shall pay to you (a) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of termination, within 5 business days of such date, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination, within 5 business days of such date, and (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination occurred to and including the month of your termination divided by 12, payable at the same time such bonus is paid to any senior executive. In addition, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 3.7. Automobile. Within 30 days following the last day that you render services as an employee to Garan under this Employment Agreement, the date of your death, or the date on which you become Disabled, you or your estate shall have the right to elect to purchase from Garan the automobile then owned and supplied to you by Garan, if any, at the value thereof on Garan's books at such time. Payment shall be made in cash on or before the 30th day after you make such election. 4. Trade Secrets, Non-Disclosure, Non-Competition, Non- Interference, and Non-Disparagement. 4.1. Trade Secrets. You acknowledge that: (a) your employment by Garan throughout the term of this Employment Agreement and prior thereto will bring and has brought you into close contact with many confidential affairs of Garan, (b) the business of Garan is conducted throughout the United States and abroad and competes with similar businesses of other organizations, (c) Garan carries on substantial promotional, marketing, sales, and/or manufacturing activities throughout the United States and abroad, and (d) the covenants contained in Sections 4.2 and 4.3 of this Employment Agreement are specific inducements by you to Garan in connection with its execution of this Employment Agreement. 4.2. Non-Disclosure and Non-Competition. In recognition of the provisions of Section 4.1 and as consideration for your continued employment by Garan, the payment by Garan to you of compensation, and Garan providing you with employee benefits, you agree that: 4.2.a. While you are performing services for Garan pursuant to this Employment Agreement and at all times thereafter, you shall not disclose, communicate, or divulge to any person (other than to officers, directors, or employees of Garan and its subsidiaries whose duties require such knowledge) or use for your personal benefit or for the benefit of anyone other than Garan and its subsidiaries, any trade secrets, specifications, sales, merchandising, or manufacturing plans, manufacturing methods, programs, research, or other confidential information employed in or proposed to be employed in the business of Garan and its subsidiaries which comes to or came to your knowledge in the course of or by reason of your employment by Garan or your performance under this Employment Agreement. 4.2.b. In the event that (i)(w) Garan notifies you in accordance with the provisions of Section l.3.c.1 that you either (1) are requested to render services under this Employment Agreement and you then notify Garan pursuant to the provisions of Section 1.3.c.3 that you will not render further services or (2) are directed by Garan in its notice not to render services under this Employment Agreement, (x) your employment pursuant to this Employment Agreement is terminated by Garan pursuant to Section 3.2 or 3.3, (y) you terminate your employment prior to the Term End pursuant to Section 3.6, or (z) the term of this Employment Agreement ends and (ii) Garan notifies you that it invokes the provisions of this Section 4.2.b within 5 business days after its direction to you not to render services or after the date you give notice that you will not render further services, or not later than 5 business days prior to the Term End, or includes such notice in the notice of termination pursuant to Section 3.2 or 3.3, then Garan shall pay you monthly in advance for the 12 month period beginning on the last day you render services to Garan, compensation at an annual rate equal to the greater of (A) the total of your Base Compensation in effect on the last day that you render services to Garan plus your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the last day you render services to Garan or (B) the total of your average annual Base Compensation in the 24 month period ending on the last day that you render services to Garan plus the average of your last 2 Annual Bonuses as each was determined by the Board in accordance with Section 2.1, and you shall not directly or indirectly, enter into or in any manner take part as an employee, agent, independent contractor, consultant, owner, sole proprietor, partner, joint venturer, member, officer, director, or shareholder or take part in any other capacity in, for, or with any person, firm, corporation, association, or business enterprise, or in any manner render any assistance to any business or endeavor whose business activities are the same, similar to, or competitive with any part of the business which is conducted by Garan and its subsidiaries during the course of your employment by Garan prior to and pursuant to this Employment Agreement in any state in the United States and in any territory, possession, or foreign country, provided that the provisions of this Section 4.2.b shall not preclude you from ownership, as an investor, of less than 5% of the stock of a publicly owned company which engages in such business activities. The provisions of this Section 4.2.b may not be invoked by Garan if Garan terminates your employment upon or within 12 months after a Change of Control Event unless the Change in Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. 4.3. Non-Interference. Upon the termination of your services for Garan under this Employment Agreement, until the 1 year anniversary date of the last day that you render services pursuant to this Employment Agreement, neither you nor any person, firm, corporation, association, or business enterprise with which you are affiliated as an employee, agent, independent contractor, consultant, partner, joint venturer, officer, director, or shareholder shall directly or indirectly induce or attempt to induce any employee of Garan or any of its subsidiaries to terminate or alter his or her employment relationship with Garan or any of its subsidiaries, or directly or indirectly hire any person who is or had been employed by Garan or any of its subsidiaries within 12 months of the last day you render services pursuant to this Employment Agreement. The provisions of this Section 4.3 may not be invoked by Garan if you terminate your employment pursuant to Section 3.1.a or Garan terminates your employment upon or within 12 months after a Change of Control Event. 4.4. Non-Disparagement. During the Employment Term and thereafter, (a) you shall not directly or indirectly, disparage the name, reputation, or products of Garan and (b) Garan shall not, directly or indirectly, disparage your name or reputation. 4.5. Additional Provisions. 4.5.a. In the event that the provisions of Section 4.2, 4.3, or 4.4 should be deemed unenforceable, invalid, or overbroad in whole or in part for any reason, any court of competent jurisdiction or the Arbitrator appointed in accordance with Section 5 is hereby authorized, requested, and instructed to reform such section consistent with the intent of Section 4.2, 4.3, or 4.4 to provide for the maximum restraints upon (i) your activities (including, but not limited to, time, geographic area, employee solicitation, and disparagement) and (ii) with respect to Section 4.4, Garan's activities, which may then be legal and valid. 4.5.b. You and Garan agree that violation by you of the provisions of Section 4.1, 4.2, 4.3, or 4.4 or by Garan of the provisions of Section 4.4 will cause irreparable injury to the other for which any remedy at law would be inadequate, and that the injured party shall be entitled in any court of law or equity or in any arbitration proceeding in accordance with Section 5, whichever forum is designated by the injured party, to temporary, preliminary, permanent, and other injunctive relief against any breach of the provisions contained in such section, and such punitive and compensatory damages as shall be awarded. Further, in the event of a violation by you of the provisions of Section 4.1, 4.2, or 4.3, (i) the period of non-disclosure, non-competition, and employee non-interference referred to therein shall be extended for a period of time equal to that period beginning on the date when such violation commenced and ending when the activities constituting that violation shall be finally terminated and (ii) Garan shall have the right to suspend your compensation and benefits and payments made pursuant to Section 4.2.b until the activities constituting that violation shall be finally terminated. 5. Arbitration and Jurisdiction. 5.1. Arbitration. Except as otherwise alternatively provided in Section 4.5 relating to the reformation of the non-disclosure, non-competition, employee non-interference, and non-disparagement provisions and obtaining injunctive relief, any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by one Arbitrator in New York, New York, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. 5.2. Consent to Jurisdiction. Each of you and Garan hereby consents to the jurisdiction of the Supreme Court of the State of New York for the County of New York and the United States District Court for the Southern District of New York for all purposes in connection with (a) the arbitration referred to in Section 5.1 and (b) this Employment Agreement, and further consents that any process or notice of motion in connection therewith may be served by certified or registered mail or by personal service in accordance with the provisions of Section 6, within or without the State of New York, provided a reasonable time for appearance is allowed. 6. Notice. All notices provided for in this Employment Agreement shall be in writing and shall be given by registered or certified mail, return receipt requested, and by regular mail, both with postage prepaid, to the addresses set forth below, or personally delivered, and shall be deemed given when sent. The addresses referred to above are: Your address: 2 Sylvan Court Livingston, New Jersey 07039 Garan: 350 Fifth Avenue New York, New York 10118 Attn: Chairman With a copy to: Tannenbaum Dubin & Robinson, LLP 1140 Avenue of the Americas New York, New York 10036 Attn: Marvin S. Robinson, Esq. Either you or Garan at any time may give notice of another address in accordance with the provisions of this Section 6. 7. Governing Law, Amendment, and Binding Effect. 7.1 This Employment Agreement (a) shall be governed by and construed in accordance with the laws of the State of New York as if it were an agreement made and to be performed entirely within such State, (b) may not be modified or amended except by a writing signed by each of Garan or its successors and you, (c) may not be assigned by Garan except as pro- vided in Section 7.2 or by you, (d) shall be binding upon each of Garan and its successors and you and your distributees, personal representatives, executors, and administrators, and (e) contains the entire agreement and understanding between Garan and you with respect to the subject matter hereof and supersedes all prior agreements, arrangements, and understandings, written or oral, between Garan and you with respect to the subject matter of this Employment Agreement. 7.2 If Garan shall be merged into or consolidated with another entity, or another entity acquires substantially all of the assets of Garan, the provisions of this Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation or acquiring such assets. Garan will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of Garan, by an agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that Garan would be required to perform it if no such succession had taken place. The provisions of the prior sentences also shall apply in the event of any subsequent mergers, consolidations, or transfers of assets. 8. Withholding and Mitigation of Damages. 8.1. Garan, to the extent permitted by law, shall have the right to deduct from any payment or benefit of any kind otherwise due to you under this Employment Agreement, any Federal, state, or local taxes of any kind required to be withheld. 8.2. Except as provided in Section 3.5.b, all payments and benefits to which you are entitled under this Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income you may receive from other employment or otherwise. 9. Litigation Expenses. Garan shall pay all of your costs and expenses, including attorneys' fees and disbursements, in connection with any legal proceedings (including, but not limited to, arbitration), whether or not instituted by Garan or you, relating to the interpretation or enforcement by you of any provision of this Employment Agreement. If the foregoing correctly sets forth our agreement, please execute and return the enclosed copy of this letter. Sincerely, GARAN, INCORPORATED By: /S/ SEYMOUR LICHTENSTEIN Seymour Lichtenstein, Chairman ACCEPTED AND AGREED: /S/ JERALD KAMIEL Jerald Kamiel ANNEX I CERTAIN DEFINITIONS As used in this Employment Agreement, and unless the con- text requires a different meaning, the following terms have the meanings indicated: "Cause" means willful and gross misconduct on your part that is materially and demonstrably detrimental to Garan or the commission by you of one or more acts which constitute an indictable crime under Federal, state, or local law, as determined in good faith by a written resolution duly adopted by the affirmative vote of a majority of all of the directors then serving on Garan's Board of Directors at a meeting duly called and held for that purpose after reasonable notice to you and opportunity for you and your counsel to be heard. "Change of Control Event" means any one of the following: (a) Continuing Directors no longer constitute at least a majority of Garan's Board of Directors, (b) any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, become the beneficial owner, directly or indirectly, of at least 40% of Garan's then outstanding Common Stock, (c) the approval by Garan's shareholders of the merger or consolidation of Garan with any other corporation, the sale of substantially all of the assets of Garan, or the liquidation or dissolution of Garan, unless, in the case of a merger or consolidation, the incumbent Continuing Directors in office immediately prior to such merger or consolidation will constitute at least a majority of the directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation, and such surviving corporation (and such parent, if any) shall have at least five directors, or (d) at least a majority of the incumbent Continuing Directors in office immediately prior to any other action proposed to be taken by Garan's shareholders or by Garan's Board of Directors determines that such proposed action, if taken, would constitute a Change of Control of Garan and such proposed action is thereafter taken. "Continuing Director" means any individual who is a member of Garan's Board of Directors on May 1, 2001, or who thereafter is designated (before such person's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. EX-10 6 garq-ex103.txt EXHIBIT 10.3 Exhibit 10.3 GARAN, INCORPORATED 350 Fifth Avenue New York, New York 10118 May 1, 2001 Mr. William J. Wilson 500 Louisville Road Starkville, MS 39759 Dear Bill: We are writing to amend and restate, effective as of May 1, 2001, the agreement between you and Garan, Incorporated ("Garan") with respect to your continuing employment by Garan originally entered into as of October l, 1986, and subsequently amended and/or restated (the agreement as now again amended and restated, "Employment Agreement"). We have agreed that: 1. Position, Duties, and Period of Employment. 1.1. Position. Garan hereby continues to employ you, and you agree to accept continued employment, as Vice President - Finance and Administration. 1.2. Duties. During the period of your employment under this Employment Agreement ("Employment Term"), except for vacations, holidays, and personal days, as each is authorized by and consistent with the practices of Garan, and absences due to psychological, emotional, or physical reasons, you shall devote your full business time, skill, and energy to the business and affairs of Garan, and you shall use your best efforts to promote the best interests of Garan. 1.3. Period of Employment. Your employment under this Employment Agreement shall be for a term ending September 30, 2003 ("Term End"). 2. Base Compensation, Annual Bonus, and Executive Employee Benefits. 2.1. Base Compensation and Annual Bonus. During the Employment Term, Garan shall pay to you base compensation ("Base Compensation") in each 12 month period commencing October 1 and ending September 30 ("Fiscal Year") as determined from time to time by the Board of Directors of Garan ("Board"), but for the Fiscal Year ending September 30, 2001, including the period October 1, 2000 to April 30, 2001, and for each Fiscal Year thereafter, such amount shall be not less than $225,000. [References to Base Compensation in this Employment Agreement shall not give effect to any salary reduction agreement.] In addition to payment of Base Compensation, the Board may determine, but is not obligated to, that Garan pay to you an annual bonus for a Fiscal Year ("Annual Bonus"), provided that an Annual Bonus may be payable to you as otherwise provided in this Employment Agreement. 2.2. Executive Employee Benefits. During the Employment Term, Garan shall provide you with employee benefits determined from time to time by the Board, which employee benefits shall be at least as favorable as those provided to other senior executives of Garan, and Garan shall maintain a life insurance policy on your life payable to your designated beneficiary or beneficiaries in the principal amount of not less than $500,000. 3. Termination of Employment. 3.1. Voluntary Termination After a Change of Control Event. 3.1.a. If a Change of Control Event, as such term is defined in Annex I to this Employment Agreement, occurs at any time during the Employment Term, within 6 months after such Change of Control Event you may give notice to Garan terminating your employment pursuant to this Section 3.1.a. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan will pay to you severance equal to 2.99 times the average of the 3 highest of your combined Base Compensation and Annual Bonus determined by the Board in accordance with Section 2.1 for the 5 full Fiscal Years ending with the Fiscal Year preceding the Fiscal Year in which the Change of Control Event occurs. Such severance shall be paid to you not later than the next business day after the last day you render services under this Employment Agreement. In addition to the amounts to be paid to you as severance in the event of your termination of employment after a Change of Control Event as provided in this Section 3.1.a, Garan shall pay to you at the same time (i) a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment, equal to the number of months after the Fiscal Year for which such Annual Bonus was determined to and including the month of termination of employment divided by 12 and (ii) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment. It is expressly agreed that this Section 3.1.a shall not apply if the Change of Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. 3.1.b. If all or a portion of any payments under this Employment Agreement, or under any other agreement with or plan of Garan qualify as "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as the same is and may be amended from time to time ("Code"), and are thereby subject to the excise tax described in Code Section 4999, Garan shall pay to you an additional "Gross-Up Payment." This Gross-Up Payment shall be an amount equal to your excise tax liability under Code Section 4999 (including excise tax liability with respect to the Gross-Up Payment), plus an additional amount to cover your Federal, state, and local income and employment taxes on the Gross-Up Payment. The Gross- Up Payment described in this Section 3.1.b shall be paid as soon as practicable following your termination of employment, but not later than 30 days following such termination of employment. If the Internal Revenue Service subsequently determines that your excise tax liability is greater than the amount of excise tax used by Garan in computing your Gross-Up Payment, Garan shall promptly make an additional payment to you equal to the amount necessary to make you whole on an after-tax basis, including the total amount of any underpaid excise tax, any related income or employment tax, and any related interest and/or penalties due to the Internal Revenue Service and/or other taxing authorities. 3.2. Termination by Garan Other Than for Cause. If Garan for any reason other than for Cause as defined in Annex I to this Employment Agreement terminates your employment prior to October 1, 2003, or fails to renew the term of this Employment Agreement on substantially the same terms: 3.2.a. Garan shall pay to you (i) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the effective date of termination or last day of the Employment Term, within 5 business days of such date and (ii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which the effective date of such termination or Term End occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination or Term End occurred, to and including the month in which the effective date of termination occurs or Term End divided by 12, payable at the same time any bonus is paid to any senior executive. 3.2.b. Garan shall pay to you an amount equal to the greater of (i) 2 times your Base Compensation plus 2 times your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of such termination or Term End and (ii) 3 times your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date of such termination or Term End. Such amount shall be payable in cash, one-half within 5 business days of the effective date of termination or last day of the Employment Term and the balance, without interest, on the first anniversary of the initial payment. 3.2.c. Garan shall continue to provide you with executive employee benefits pursuant to Section 2.2, or alternatively, shall provide you with life insurance, medical reimbursement, disability, and accidental death and dismemberment benefit coverage at levels no less favorable than those in effect for you pursuant to Section 2.2 on the date of such termination or Term End if such executive employee benefits were being provided to you by Garan immediately prior to such termination or Term End, for a period equal to the sooner of (i) 2 years following the date of termination of your employment or September 30, 2003, whichever comes later, or (ii) until another employer provides you with benefits substantially comparable to the benefits pursuant to this Section 3.2.c. 3.3. Termination by Garan for Cause. Garan shall have the right to terminate your employment under this Employment Agreement at any time upon a determination by Garan to dismiss you for Cause as defined in Annex I to this Employment Agreement. Upon such termination for Cause, Garan's sole obligation shall be to pay you any Base Compensation and provide executive employee benefits pursuant to Section 2.2 which are earned and unpaid as of the effective date of the termination of your employment. 3.4. Death. Upon your death during the term of this Employment Agreement prior to your becoming Disabled (as defined in Section 3.5.e), this Employment Agreement shall terminate, and all obligations of Garan under this Employment Agreement shall terminate simultaneously therewith, except that Garan shall pay to your designated beneficiary or beneficiaries, or if no beneficiaries are designated, to your estate, (a) any earned and unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of your death, within 30 days of your death, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date of your death, within 30 days of your death, (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which your death occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which your death occurred to and including the month of your death divided by 12, payable at the same time any such bonus is paid to any senior executive, and (d) an amount equal to 150% of the total of your Base Compensation and Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of your death, payable in 12 equal monthly installments commencing with the first day of the month following the date of your death. 3.5. Disability. 3.5.a. In the event you incur a Disability, until the earlier to occur of the date of your death or the date you become Disabled (as such terms are defined in Section 3.5.e), Garan shall continue to pay to you your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date you incurred a Disability, and continue your executive employee benefits provided pursuant to Section 2.2. In addition, in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you incurred a Disability unless otherwise payable in accordance with Section 3.5.b, Garan shall pay to you at the same time any bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you incurred a Disability to and including the months during which you are being paid Base Compensation pursuant to this Section 3.5.a, but not after the month of your death or in which you became Disabled if such event occurs in the Fiscal Year in which you incurred a Disability, divided by 12. 3.5.b. If you become Disabled, Garan shall (i) continue to pay you monthly, regardless of your death after you become Disabled, until the later of the Term End or 18 months from the date that you became Disabled, but for not more than 36 months, 1/12th of the total of your combined Base Compensation and Annual Bonus, as each was last determined by the Board in accordance with Section 2.1 prior to the date you incurred the Disability, reduced by the gross amount paid by a third party as a result of such Disability under any disability or salary continuation policy or plan, the cost of which is paid by Garan, (ii) pay you any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date you became Disabled, within 5 business days of the date you become Disabled, (iii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you became Disabled, pay to you at the same time such bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you became Disabled to and including the month you became Disabled, not including any months for which you receive a fractional part of your Annual Bonus pursuant to Section 3.5.a, divided by 12, and (iv) during the period set forth in Section 3.5.b(i), continue your other executive employee benefits provided pursuant to Section 2.2 as in effect on the first day that you incurred your Disability. 3.5.c. If you become Disabled, (i) Garan can remove you from the position that you then hold and (ii) the provisions of Sections 3.2 and 3.4 shall no longer apply, provided that neither Garan nor you shall be relieved of any other obligations under this Employment Agreement. 3.5.d. If you die after incurring a Disability but prior to becoming Disabled, the provisions of Section 3.4 shall apply in lieu of the provisions of Section 3.5.b. 3.5.e. For purposes of this Section 3.5, Disability shall mean that you are unable to substantially carry out your obligations under this Employment Agreement because of psychological, emotional, or physical reasons, and Disabled shall mean that your Disability has continued for a period of 90 consecutive days or for an aggregate of 120 days during any period of 360 consecutive days. 3.6. Voluntary Termination by You. You may give notice to Garan terminating your employment pursuant to this Section 3.6 at any time. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan shall pay to you (a) any earned but unpaid Base Compensation and executive employee benefits pursuant to Section 2.2 as of the date of termination, within 5 business days of such date, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination, within 5 business days of such date, and (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination occurred to and including the month of your termination divided by 12, payable at the same time such bonus is paid to any senior executive. In addition, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 3.7. Automobile. Within 30 days following the last day that you render services as an employee to Garan under this Employment Agreement, the date of your death, or the date on which you became Disabled, you or your estate shall have the right to elect to purchase from Garan the automobile then owned and supplied to you by Garan, if any, at the value thereof on Garan's books at such time. Payment shall be made in cash on or before the 30th day after you make such election. 4. Trade Secrets, Non-Disclosure, Non-Competition, Non- Interference, and Non-Disparagement. 4.1. Trade Secrets. You acknowledge that: (a) your employment by Garan throughout the term of this Employment Agreement and prior thereto will bring and has brought you into close contact with many confidential affairs of Garan, (b) the business of Garan is conducted throughout the United States and abroad and competes with similar businesses of other organizations, (c) Garan carries on substantial promotional, marketing, sales, and/or manufacturing activities throughout the United States and abroad, and (d) the covenants contained in Sections 4.2 and 4.3 of this Employment Agreement are specific inducements by you to Garan in connection with its execution of this Employment Agreement. 4.2. Non-Disclosure and Non-Competition. In recognition of the provisions of Section 4.1 and as consideration for your continued employment by Garan, the payment by Garan to you of compensation, and Garan providing you with employee benefits, you agree that: 4.2.a. While you are performing services for Garan pursuant to this Employment Agreement and at all times thereafter, you shall not disclose, communicate, or divulge to any person (other than to officers, directors, or employees of Garan and its subsidiaries whose duties require such knowledge) or use for your personal benefit or for the benefit of anyone other than Garan and its subsidiaries, any trade secrets, specifications, sales, merchandising, or manufacturing plans, manufacturing methods, programs, research, or other confidential information employed in or proposed to be employed in the business of Garan and its subsidiaries which comes to or came to your knowledge in the course of or by reason of your employment by Garan or your performance under this Employment Agreement. 4.2.b. In the event that (i) your employment pursuant to this Employment Agreement is terminated by Garan pursuant to Section 3.2 or 3.3, (ii) you terminate your employment prior to the Term End pursuant to Section 3.6, or (iii) the term of this Employment Agreement ends, for so long as Garan continues to pay you in accordance with its payroll practices, but for not more than the 12 month period beginning on the last day you render services to Garan, compensation at an annual rate equal to the greater of (x) the total of your Base Compensation in effect on the last day that you render services to Garan plus your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 or (y) the total of 12 times your average monthly Base Compensation in the 24 month period ending on the last day that you render services to Garan plus the average of your 2 Annual Bonuses as each was last determined by the Board in accordance with Section 2.1, you shall not directly or indirectly, enter into or in any manner take part as an employee, agent, independent contractor, consultant, owner, sole proprietor, partner, joint venturer, member, officer, director, or shareholder or take part in any other capacity in, for, or with any person, firm, corporation, association, or business enterprise, or in any manner render any assistance to any business or endeavor whose business activities are the same, similar to, or competitive with any part of the business which is conducted by Garan and its subsidiaries during the course of your employment by Garan prior to and pursuant to this Employment Agreement in any state in the United States and in any territory, possession, or foreign country, provided that the provisions of this Section 4.2.b shall not preclude you from ownership, as an investor, of less than 5% of the stock of a publicly owned company which engages in such business activities. The provisions of this Section 4.2.b may not be invoked by Garan if Garan terminates your employment upon or within 12 months after a Change of Control Event unless the Change in Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. In the event Garan determines to pay you for part or all of the 12 month period referred to above, it shall do so for minimum periods of 3 months, and it shall give you notice that it is invoking the provisions of this Section 4.2.b and that it will compensate you accordingly. Such initial notice shall be given together with the notice of termination referred to in Section 3.2 or 3.3, or within 15 business days after receipt by Garan of your termination of employment pursuant to Section 3.6, or 15 days prior to the end of the Term End if the term is not renewed and, thereafter, not later than 15 days prior to the beginning of each subsequent 3 month period. 4.3. Non-Interference. Upon the termination of your services for Garan under this Employment Agreement, until the 1 year anniversary date of the last day that you render services pursuant to this Employment Agreement, neither you nor any person, firm, corporation, association, or business enterprise with which you are affiliated as an employee, agent, independent contractor, consultant, partner, joint venturer, member, officer, director, or share- holder shall directly or indirectly induce or attempt to induce any employee of Garan or any of its subsidiaries to terminate or alter his or her employment relationship with Garan or any of its subsidiaries, or directly or indirectly hire any person who is or had been employed by Garan or any of its subsidiaries within 12 months of the last day you render services pursuant to the Employment Agreement. The provisions of this Section 4.3 may not be invoked by Garan if you terminate your employment pursuant to Section 3.1.a or Garan terminates your employment upon or within 12 months after a Change of Control Event. 4.4. Non-Disparagement. During the Employment Term and thereafter, (a) you shall not directly or indirectly, disparage the name, reputation, or products of Garan and (b) Garan shall not, directly or indirectly, disparage your name or reputation. 4.5. Additional Provisions. 4.5.a. In the event that the provisions of Section 4.2, 4.3, or 4.4 should be deemed unenforceable, invalid, or overbroad in whole or in part for any reason, any court of competent jurisdiction or the Arbitrator appointed in accordance with Section 5 is hereby authorized, requested, and instructed to reform such section consistent with the intent of Section 4.2, 4.3, or 4.4 to provide for the maximum restraints upon (i) your activities (including, but not limited to, time, geographic area, employee solicitation, and disparagement) and (ii) with respect to Section 4.4, Garan's activities, which may then be legal and valid. 4.5.b. You and Garan agree that violation by you of the provisions of Section 4.1, 4.2, 4.3, or 4.4 or by Garan of the provisions of Section 4.4 will cause irreparable injury to the other for which any remedy at law would be inadequate, and that the injured party shall be entitled in any court of law or equity or in any arbitration proceeding in accordance with Section 5, whichever forum is designated by the injured party, to temporary, preliminary, permanent, and other injunctive relief against any breach of the provisions contained in such section, and such punitive and compensatory damages as shall be awarded. Further, in the event of a violation by you of the provisions of Section 4.1, 4.2, or 4.3, (i) the period of non-disclosure, non-competition, and employee non-interference referred to therein shall be extended for a period of time equal to that period beginning on the date when such violation commenced and ending when the activities constituting that violation shall be finally terminated and (ii) Garan shall have the right to suspend your compensation and benefits and payments made pursuant to Section 4.2.b until the activities constituting that violation shall be finally terminated. 5. Arbitration and Jurisdiction. 5.1. Arbitration. Except as otherwise alternatively provided in Section 4.5 relating to the reformation of the non-disclosure, non-competition, employee non-interference, and non-disparagement provisions and obtaining injunctive relief, any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by one Arbitrator in New York, New York, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. 5.2. Consent to Jurisdiction. Each of you and Garan hereby consents to the jurisdiction of the Supreme Court of the State of New York for the County of New York and the United States District Court for the Southern District of New York for all purposes in connection with (a) the arbitration referred to in Section 5.1 and (b) this Employment Agreement, and further consents that any process or notice of motion in connection therewith may be served by certified or registered mail or by personal service in accordance with the provisions of Section 6, within or without the State of New York, provided a reasonable time for appearance is allowed. 6. Notice. All notices provided for in this Employment Agreement shall be in writing and shall be given by registered or certified mail, return receipt requested, and by regular mail, both with postage prepaid, to the addresses set forth below, or personally delivered, and shall be deemed given when sent. The addresses referred to above are: Your address: 500 Louisville Road Starkville, MS 39759 and c/o Garan, Incorporated 350 Fifth Avenue New York, New York 10018 Garan: 350 Fifth Avenue New York, New York 10118 Attn: President With a copy to: Tannenbaum Dubin & Robinson, LLP 1140 Avenue of the Americas New York, New York 10036 Attn: Marvin S. Robinson, Esq. Either you or Garan at any time may give notice of another address in accordance with the provisions of this Section 6. 7. Governing Law, Amendment, and Binding Effect. 7.1 This Employment Agreement (a) shall be governed by and construed in accordance with the laws of the State of New York as if it were an agreement made and to be performed entirely within such State, (b) may not be modified or amended except by a writing signed by each of Garan or its successors and you, (c) may not be assigned by Garan except as provided in Section 7.2 or by you, (d) shall be binding upon each of Garan and its successors and you and your distributees, personal representatives, executors, and administrators, and (e) contains the entire agreement and understanding between Garan and you with respect to the subject matter hereof and supersedes all prior agreements, arrangements, and understandings, written or oral, between Garan and you with respect to the subject matter of this Employment Agreement. 7.2 If Garan shall be merged into or consolidated with another entity, or another entity acquires substantially all of the assets of Garan, the provisions of this Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation or acquiring such assets. Garan will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of Garan, by an agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that Garan would be required to perform it if no such succession had taken place. The provisions of the prior sentences also shall apply in the event of any subsequent mergers, consolidations, or transfers of assets. 8. Withholding and Mitigation of Damages. 8.1. Garan, to the extent permitted by law, shall have the right to deduct from any payment or benefit of any kind otherwise due to you under this Employment Agreement, any Federal, state, or local taxes of any kind required to be withheld. 8.2. Except as provided in Section 3.5.b, all payments and benefits to which you are entitled under this Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income you may receive from other employment or otherwise. 9. Litigation Expenses. Garan shall pay all of your costs and expenses, including attorneys' fees and disbursements, in connection with any legal proceedings (including, but not limited to, arbitration), whether or not instituted by Garan or you, relating to the interpretation or enforcement by you of any provision of this Employment Agreement. If the foregoing correctly sets forth our agreement, please execute and return the enclosed copy of this letter. Sincerely, GARAN, INCORPORATED By: /S/ JERALD KAMIEL Jerald Kamiel, President ACCEPTED AND AGREED: /S/ WILLIAM J. WILSON William J. Wilson ANNEX I CERTAIN DEFINITIONS As used in this Employment Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Cause" means willful and gross misconduct on your part that is materially and demonstrably detrimental to Garan or the commission by you of one or more acts which constitute an indictable crime under Federal, state, or local law, as determined in good faith by a written resolution duly adopted by the affirmative vote of a majority of all of the directors then serving on Garan's Board of Directors at a meeting duly called and held for that purpose after reasonable notice to you and opportunity for you and your counsel to be heard. "Change of Control Event" means any one of the following: (a) Continuing Directors no longer constitute at least a majority of Garan's Board of Directors, (b) any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, become the beneficial owner, directly or indirectly, of at least 40% of Garan's then outstanding Common Stock, (c) the approval by Garan's shareholders of the merger or consolidation of Garan with any other corporation, the sale of substantially all of the assets of Garan or the liquidation or dissolution of Garan, unless, in the case of a merger or consolidation, the incumbent Continuing Directors in office immediately prior to such merger or consolidation will constitute at least a majority of the directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation, and such surviving corporation (and such parent, if any) shall have at least five directors, or (d) at least a majority of the incumbent Continuing Directors in office immediately prior to any other action proposed to be taken by Garan's shareholders or by Garan's Board of Directors determines that such proposed action, if taken, would constitute a Change of Control of Garan and such proposed action is thereafter taken. "Continuing Director" means any individual who is a member of Garan's Board of Directors on May 1, 2001, or who thereafter is designated (before such person's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. EX-10 7 garq-ex104.txt EXHIBIT 10.4 Exhibit 10.4 GARAN, INCORPORATED 350 Fifth Avenue New York, New York 10118 May 1, 2001 Mr. Rodney Faver Route 1, Box 260 Starkville, Mississippi 39759 Dear Rodney: We are writing to amend and restate, effective as of May 1, 2001, the agreement between you and Garan, Incorporated ("Garan") with respect to your continuing employment by Garan originally entered into as of October l, 1988, and subsequently amended and/or restated (the agreement as now again amended and restated, "Employment Agreement"). We have agreed that: l. Position, Duties, and Period of Employment. 1.1. Position. Garan hereby continues to employ you, and you agree to accept continued employment, as a divisional officer with the title of Vice President - Manufacturing. 1.2. Duties. During the period of your employment under this Employment Agreement ("Employment Term"), except for vacations, holidays, and personal days, as each is authorized by and consistent with the practices of Garan, and absences due to psychological, emotional, or physical reasons, you shall devote your full business time, skill, and energy to the business and affairs of Garan, and you shall use your best efforts to promote the best interests of Garan. 1.3. Period of Employment. Your employment under this Employment Agreement shall be for a term ending September 30, 2003 ("Term End"). 2. Base Compensation, Annual Bonus, and Executive Employee Benefits. 2.1. Base Compensation and Annual Bonus. During the Employment Term, Garan shall pay to you base compensation ("Base Compensation") in each 12 month period commencing October 1 and ending September 30 ("Fiscal Year") as determined from time to time by the Board of Directors of Garan ("Board"), but for the Fiscal Year ending September 30, 2001, including the period October 1, 2000 to April 30, 2001, and for each Fiscal Year thereafter, such amount shall be not less than $190,000. [References to Base Compensation in this Employment Agreement shall not give effect to any salary reduction agreement.] In addition to payment of Base Compensation, the Board may determine, but is not obligated to, that Garan pay to you an annual bonus for a Fiscal Year ("Annual Bonus"), provided that an Annual Bonus may be payable to you as otherwise provided in this Employment Agreement. 2.2. Executive Employee Benefits. During the Employment Term, Garan shall provide you with employee benefits determined from time to time by the Board, which employee benefits shall be at least as favorable as those provided to other senior executives of Garan, and Garan shall maintain a life insurance policy on your life payable to your designated beneficiary or beneficiaries in the principal amount of not less than $500,000. 3. Termination of Employment. 3.1. Voluntary Termination After a Change of Control Event. 3.1.a. If a Change of Control Event, as such term is defined in Annex I to this Employment Agreement, occurs at any time during the Employment Term, within 6 months after such Change of Control Event you may give notice to Garan terminating your employment pursuant to this Section 3.1.a. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan will pay to you severance equal to 2.99 times the average of the 3 highest of your combined Base Compensation and Annual Bonus determined by the Board in accordance with Section 2.1 for the 5 full Fiscal Years ending with the Fiscal Year preceding the Fiscal Year in which the Change of Control Event occurs. Such severance shall be paid to you not later than the next business day after the last day you render services under this Employment Agreement. In addition to the amounts to be paid to you as severance in the event of your termination of employment after a Change in Control Event as provided in this Section 3.1.a, Garan shall pay to you at the same time (i) a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment, equal to the number of months after the Fiscal Year for which such Annual Bonus was determined to and including the month of termination of employment divided by 12 and (ii) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination of employment. It is expressly agreed that this Section 3.1.a shall not apply if the Change of Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. 3.1.b. If all or a portion of any payments under this Employment Agreement, or under any other agreement with or plan of Garan qualify as "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as the same is and may be amended from time to time ("Code"), and are thereby subject to the excise tax described in Code Section 4999, Garan shall pay to you an additional "Gross-Up Payment." This Gross-Up Payment shall be an amount equal to your excise tax liability under Code Section 4999 (including excise tax liability with respect to the Gross-Up Payment), plus an additional amount to cover your Federal, state, and local income and employment taxes on the Gross-Up Payment. The Gross- Up Payment described in this Section 3.1.b shall be paid as soon as practicable following your termination of employment, but not later than 30 days following such termination of employment. If the Internal Revenue Service subsequently determines that your excise tax liability is greater than the amount of excise tax used by Garan in computing your Gross-Up Payment, Garan shall promptly make an additional payment to you equal to the amount necessary to make you whole on an after-tax basis, including the total amount of any underpaid excise tax, any related income or employment tax, and any related interest and/or penalties due to the Internal Revenue Service and/or other taxing authorities. 3.2. Termination by Garan Other Than for Cause. If Garan for any reason other than for Cause as defined in Annex I to this Employment Agreement terminates your employment prior to October 1, 2003, or fails to renew the term of this Employment Agreement on substantially the same terms: 3.2.a Garan shall pay to you (i) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the effective date of termination or last day of the Employment Term, within 5 business days of such date and (ii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which the effective date of such termination or Term End occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination or Term End occurred, to and including the month in which the effective date of termination occurs or Term End divided by 12, payable at the same time any bonus is paid to any senior executive, 3.2.b. Garan shall pay to you an amount equal to the greater of (i) 2 times your Base Compensation plus 2 times your Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of such termination or Term End and (ii) 3 times your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date of such termination or Term End. Such amount shall be payable in cash, one-half within 5 business days of the effective date of termination or last day of the Employment Term and the balance, without interest, on the first anniversary of the initial payment. 3.2.c. Garan shall continue to provide you with executive employee benefits pursuant to Section 2.2, or alternatively, shall provide you with life insurance, medical reimbursement, disability, and accidental death and dismemberment benefit coverage at levels no less favorable than those in effect for you pursuant to Section 2.2 on the date of such termination or Term End if such executive employee benefits were being provided to you by Garan immediately prior to such termination or Term End, for a period equal to the sooner of (i) 2 years following the date of termination of your employment or September 30, 2003, whichever comes later, or (ii) until another employer provides you with benefits substantially comparable to the benefits provided pursuant to this Section 3.2.c. 3.3. Termination by Garan for Cause. Garan shall have the right to terminate your employment under this Employment Agreement at any time upon a determination by Garan to dismiss you for Cause as defined in Annex I to this Employment Agreement. Upon such termination for Cause, Garan's sole obligation shall be to pay you any Base Compensation and executive employee benefits provided pursuant to Section 2.2 which are earned and unpaid as of the effective date of the termination of your employment. 3.4. Death. Upon your death during the term of this Employment Agreement prior to your becoming Disabled (as defined in Section 3.5), this Employment Agreement shall terminate, and all obligations of Garan under this Employment Agreement shall terminate simultaneously therewith, except that Garan shall pay to your designated beneficiary or beneficiaries, or if no beneficiaries are designated, to your estate, (a) any earned and unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of your death, within 30 days of your death, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date of your death, within 30 days of your death, (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which your death occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which your death occurred to and including the month of your death divided by 12, payable at the same time any such bonus is paid to any senior executive, and (d) an amount equal to 150% of the total of your Base Compensation and Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date of your death, payable in 12 equal monthly installments commencing with the first day of the month following the date of your death. 3.5. Disability. 3.5.a. In the event you incur a Disability, until the earlier to occur of the date of your death or the date you become Disabled (as such terms are defined in Section 3.5.e), Garan shall continue to pay to you your Base Compensation as last determined by the Board in accordance with Section 2.1 prior to the date you incurred a Disability and continue your executive employee benefits provided pursuant to Section 2.2. In addition, in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you incurred a Disability unless otherwise payable in accordance with Section 3.5.b, Garan shall pay to you at the same time any bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you incurred a Disability to and including the months during which you are being paid Base Compensation pursuant to this Section 3.5.a, but not after the month of your death or in which you became Disabled if such event occurs in the Fiscal Year in which you incurred a Disability, divided by 12. 3.5.b. If you become Disabled, Garan shall (i) continue to pay you monthly, regardless of your death after you become Disabled, until the later of the Term End or 18 months from the date that you became Disabled, but for not more than 36 months, 1/12th of the total of your combined Base Compensation and Annual Bonus as each was last determined by the Board in accordance with Section 2.1 prior to the date you incurred the Disability reduced by the gross amount paid by a third party as a result of such Disability under any disability or salary continuation policy or plan, the cost of which is paid by Garan, (ii) pay you any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to the date you became Disabled, within 5 business days of the date you become Disabled, (iii) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which you became Disabled, pay to you at the same time such bonus is paid to any senior executive, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which you became Disabled to and including the month you became Disabled, not including any months for which you receive a fractional part of your Annual Bonus pursuant to Section 3.5.a, divided by 12, and (iv) during the period set forth in Section 3.5.b(i), continue your other executive employee benefits provided pursuant to Section 2.2 as in effect on the first day that you incurred your Disability. 3.5.c. If you become Disabled, (i) Garan can remove you from the position that you then hold and (ii) the provisions of Sections 3.2 and 3.4 shall no longer apply, provided that neither Garan nor you shall be relieved of any other obligations under this Employment Agreement. 3.5.d. If you die after incurring a Disability but prior to becoming Disabled, the provisions of Section 3.4 shall apply in lieu of the provisions of Section 3.5.b. 3.5.e. For purposes of this Section 3.5, Disability shall mean that you are unable to substantially carry out your obligations under this Employment Agreement because of psychological, emotional, or physical reasons, and Disabled shall mean that your Disability has continued for a period of 90 consecutive days or for an aggregate of 120 days during any period of 360 consecutive days. 3.6. Voluntary Termination by You. You may give notice to Garan terminating your employment pursuant to this Section 3.6 at any time. Such termination of employment shall be effective on a date set by you but not later than 30 days after you give notice of termination to Garan. In the event of such voluntary termination, Garan shall pay to you (a) any earned but unpaid Base Compensation and executive employee benefits provided pursuant to Section 2.2 as of the date of termination, within 5 business days of such date, (b) any unpaid Annual Bonus determined by the Board in accordance with Section 2.1 prior to your termination, within 5 business days of such date, and (c) in the event that Garan pays a bonus to any senior executive with respect to the Fiscal Year during which such termination occurs, a fractional part of your last Annual Bonus determined by the Board in accordance with Section 2.1, equal to the number of months in the Fiscal Year in which such termination occurred to and including the month of your termination divided by 12, payable at the same time such bonus is paid to any senior executive. In addition, Garan shall use its best efforts to provide to you and your dependents until your death major medical health insurance coverage substantially similar to the coverage it presently provides to its retired officers or directors who have completed 15 years or more of service. 3.7. Automobile. Within 30 days following the last day that you render services as an employee to Garan under this Employment Agreement, the date of your death, or the date on which you became Disabled, you or your estate shall have the right to elect to purchase from Garan the automobile then owned and supplied to you by Garan, if any, at the value thereof on Garan's books at such time. Payment shall be made in cash on or before the 30th day after you make such election. 4. Trade Secrets, Non-Disclosure, Non-Competition Non- Interference, and Non-Disparagement. 4.1. Trade Secrets. You acknowledge that: (a) your employment by Garan throughout the term of this Employment Agreement and prior thereto will bring and has brought you into close contact with many confidential affairs of Garan, (b) the business of Garan is conducted throughout the United States and abroad and competes with similar businesses of other organizations, (c) Garan carries on substantial promotional, marketing, sales, and/or manufacturing activities throughout the United States and abroad, and (d) the covenants contained in Sections 4.2 and 4.3 of this Employment Agreement are specific inducements by you to Garan in connection with its execution of this Employment Agreement. 4.2. Non-Disclosure and Non-Competition. In recognition of the provisions of Section 4.1 and as consideration for your continued employment by Garan, the payment by Garan to you of compensation, and Garan providing you with employee benefits, you agree that: 4.2.a.While you are performing services for Garan pursuant to this Employment Agreement and at all times thereafter, you shall not disclose, communicate, or divulge to any person (other than to officers, directors, or employees of Garan and its subsidiaries whose duties require such knowledge) or use for your personal benefit or for the benefit of anyone other than Garan and its subsidiaries, any trade secrets, specifications, sales, merchandising, or manufacturing plans, manufacturing methods, programs, research, or other confidential information employed in or proposed to be employed in the business of Garan and its subsidiaries which comes to or came to your knowledge in the course of or by reason of your employment by Garan or your performance under this Employment Agreement. 4.2.b.In the event that (i) your employment pursuant to this Employment Agreement is terminated by Garan pursuant to Section 3.2 or 3.3, (ii) you terminate your employment prior to the Term End pursuant to Section 3.6, or (iii) the term of this Employment Agreement ends, for so long as Garan continues to pay you in accordance with its payroll practices, but for not more than the 12 month period beginning on the last day you render services to Garan, compensation at an annual rate equal to the greater of (x) the total of your Base Compensation in effect on the last day that you render services to Garan plus your Annual Bonus as each was last determined by the Board in accordance with Section 2.1, or (y) the total of 12 times your average monthly Base Compensation in the 24 month period ending on the last day that you render services to Garan plus the average of your 2 Annual Bonuses as each was last determined by the Board in accordance with Section 2.1, you shall not directly or indirectly, enter into or in any manner take part as an employee, agent, independent contractor, consultant, owner, sole proprietor, partner, joint venturer, member, officer, director, or shareholder or take part in any other capacity in, for, or with any person, firm, corporation, association, or business enterprise, or in any manner render any assistance to any business or endeavor whose business activities are the same, similar to, or competitive with any part of the business which is conducted by Garan and its subsidiaries during the course of your employment by Garan prior to and pursuant to this Employment Agreement in any state in the United States and in any territory, possession, or foreign country, provided that the provisions of this Section 4.2.b shall not preclude you from ownership, as an investor, of less than 5% of the stock of a publicly owned company which engages in such business activities. The provisions of this Section 4.2.b may not be invoked by Garan if Garan terminates your employment upon or within 12 months after a Change of Control Event unless the Change in Control Event is a result of a completed "management buyout" of Garan in which you participate as an equity investor. In the event Garan determines to pay you for part or all of the 12 month period referred to above, it shall do so for minimum periods of 3 months, and it shall give you notice that it is invoking the provisions of this Section 4.2.b and that it will compensate you accordingly. Such initial notice shall be given together with the notice of termination referred to in Section 3.2 or 3.3, or within 15 business days after receipt by Garan of your termination of employment pursuant to Section 3.6, or 15 days prior to the end of the Term End if the term is not renewed, and, thereafter, not later than 15 days prior to the beginning of each subsequent 3 month period. 4.3. Non-Interference. Upon the termination of your services for Garan under this Employment Agreement, until the 1 year anniversary date of the last day that you render services pursuant to this Employment Agreement, neither you nor any person, firm, corporation, association, or business enterprise with which you are affiliated as an employee, agent, independent contractor, consultant, partner, joint venturer, member, officer, director, or share- holder shall directly or indirectly induce or attempt to induce any employee of Garan or any of its subsidiaries to terminate or alter his or her employment relationship with Garan or any of its subsidiaries, or directly or indirectly hire any person who is or had been employed by Garan or any of its subsidiaries within 12 months of the last day you render services pursuant to the Employment Agreement. The provisions of this Section 4.3 may not be invoked by Garan if you terminate your employment pursuant to Section 3.1.a or Garan terminates your employment upon or within 12 months after a Change of Control Event. 4.4. Non-Disparagement. During the Employment Term and thereafter, (a) you shall not directly or indirectly, disparage the name, reputation, or products of Garan and (b) Garan shall not, directly or indirectly, disparage your name or reputation. 4.5. Additional Provisions. 4.5.a. In the event that the provisions of Section 4.2, 4.3, or 4.4 should be deemed unenforceable, invalid, or overbroad in whole or in part for any reason, any court of competent jurisdiction or the Arbitrator appointed in accordance with Section 5 is hereby authorized, requested, and instructed to reform such section consistent with the intent of Section 4.2, 4.3, or 4.4 to provide for the maximum restraints upon (i) your activities (including, but not limited to, time, geographic area, employee solicitation, and disparagement) and (ii) with respect to Section 4.4, Garan's activities, which may then be legal and valid. 4.5.b. You and Garan agree that violation by you of the provisions of Section 4.1, 4.2, 4.3, or 4.4 or by Garan of the provisions of Section 4.4 will cause irreparable injury to the other for which any remedy at law would be inadequate, and that the injured party shall be entitled in any court of law or equity or in any arbitration proceeding in accordance with Section 5, whichever forum is designated by the injured party, to temporary, preliminary, permanent, and other injunctive relief against any breach of the provisions contained in such section, and such punitive and compensatory damages as shall be awarded. Further, in the event of a violation by you of the provisions of Section 4.1, 4.2, or 4.3 (i) the period of non-disclosure, non-competition, and employee non-interference referred to therein shall be extended for a period of time equal to that period beginning on the date when such violation commenced and ending when the activities constituting that violation shall be finally terminated and (ii) Garan shall have the right to suspend your compensation and benefits and payments made pursuant to Section 4.2.b until the activities constituting that violation shall be finally terminated. 5. Arbitration and Jurisdiction. 5.1. Arbitration. Except as otherwise alternatively provided in Section 4.5 relating to the reformation of the non-disclosure, non-competition, employee non-interference, and non-disparagement provisions and obtaining injunctive relief, any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by one Arbitrator in New York, New York, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. 5.2. Consent to Jurisdiction. Each of you and Garan hereby consents to the jurisdiction of the Supreme Court of the State of New York for the County of New York and the United States District Court for the Southern District of New York for all purposes in connection with (a) the arbitration referred to in Section 5.1 and (b) this Employment Agreement, and further consents that any process or notice of motion in connection therewith may be served by certified or registered mail or by personal service in accordance with the provisions of Section 6, within or without the State of New York, provided a reasonable time for appearance is allowed. 6. Notice. All notices provided for in this Employment Agreement shall be in writing and shall be given by registered or certified mail, return receipt requested, and by regular mail, both with postage prepaid, to the addresses set forth below, or personally delivered, and shall be deemed given when sent. The addresses referred to above are: Your address: Route 1, Box 260 Starkville, Mississippi 39759 Garan: 350 Fifth Avenue New York, New York 10118 Attn: President With a copy to: Tannenbaum Dubin & Robinson, LLP 1140 Avenue of the Americas New York, New York 10036 Attn: Marvin S. Robinson, Esq. Either you or Garan at any time may give notice of another address in accordance with the provisions of this Section 6. 7. Governing Law, Amendment, and Binding Effect. 7.1 This Employment Agreement (a) shall be governed by and construed in accordance with the laws of the State of New York as if it were an agreement made and to be performed entirely within such State, (b) may not be modified or amended except by a writing signed by each of Garan or its successors and you, (c) may not be assigned by Garan except as provided in Section 7.2 or by you, (d) shall be binding upon each of Garan and its successors and you and your distributees, personal representatives, executors, and administrators, and (e) contains the entire agreement and understanding between Garan and you with respect to the subject matter hereof and supersedes all prior agreements, arrangements, and understandings, written or oral, between Garan and you with respect to the subject matter of this Employment Agreement. 7.2 If Garan shall be merged into or consolidated with another entity, or another entity acquires substantially all of the assets of Garan, the provisions of this Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation or acquiring such assets. Garan will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of Garan, by an agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that Garan would be required to perform it if no such succession had taken place. The provisions of the prior sentences also shall apply in the event of any subsequent mergers, consolidations, or transfers of assets. 8. Withholding and Mitigation of Damages. 8.1. Garan, to the extent permitted by law, shall have the right to deduct from any payment or benefit of any kind otherwise due to you under this Employment Agreement, any Federal, state, or local taxes of any kind required to be withheld. 8.2. Except as provided in Section 3.5.b, all payments and benefits to which you are entitled under this Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income you may receive from other employment or otherwise. 9. Litigation Expenses. Garan shall pay all of your costs and expenses, including attorneys' fees and disbursements, in connection with any legal proceedings (including, but not limited to, arbitration), whether or not instituted by Garan or you, relating to the interpretation or enforcement by you of any provision of this Employment Agreement. If the foregoing correctly sets forth our agreement, please execute and return the enclosed copy of this letter. Sincerely, GARAN, INCORPORATED By: /S/ JERALD KAMIEL Jerald Kamiel, President ACCEPTED AND AGREED: /S/ RODNEY FAVER Rodney Faver ANNEX I CERTAIN DEFINITIONS As used in this Employment Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Cause" means willful and gross misconduct on your part that is materially and demonstrably detrimental to Garan or the commission by you of one or more acts which constitute an indictable crime under Federal, state, or local law, as determined in good faith by a written resolution duly adopted by the affirmative vote of a majority of all of the directors then serving on Garan's Board of Directors at a meeting duly called and held for that purpose after reasonable notice to you and opportunity for you and your counsel to be heard. "Change of Control Event" means any one of the following: (a) Continuing Directors no longer constitute at least a majority of Garan's Board of Directors, (b) any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, become the beneficial owner, directly or indirectly, of at least 40% of Garan's then outstanding Common Stock, (c) the approval by Garan's shareholders of the merger or consolidation of Garan with any other corporation, the sale of substantially all of the assets of Garan or the liquidation or dissolution of Garan, unless, in the case of a merger or consolidation, the incumbent Continuing Directors in office immediately prior to such merger or consolidation will constitute at least a majority of the directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation, and such surviving corporation (and such parent, if any) shall have at least five directors, or (d) at least a majority of the incumbent Continuing Directors in office immediately prior to any other action proposed to be taken by Garan's shareholders or by Garan's Board of Directors determines that such proposed action, if taken, would constitute a Change of Control of Garan and such proposed action is thereafter taken. "Continuing Director" means any individual who is a member of Garan's Board of Directors on May 1, 2001, or who thereafter is designated (before such person's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. -----END PRIVACY-ENHANCED MESSAGE-----