GARAN, INCORPORATED
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
00000
January 15, 1997
Xx. Xxxxxx Xxxxx
Xxxxx 0, Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Dear Xxxxxx:
We are writing to amend and restate, effective as of October 1, 1996,
the agreement between you and Garan, Incorporated ("Garan") originally entered
into as of October l, 1988, and subsequently amended and restated (the
agreement as amended and now again restated, "Employment Agreement") with
respect to your continuing employment by Xxxxx. 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 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, 1998 ("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, 1997, and for each Fiscal Year thereafter, such amount shall be
not less than $175,000. [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, to pay to you an annual Fiscal Year bonus ("Annual Bonus").
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.
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. 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 cash severance equal to 2.99 times the sum of (a) the
average of your Base Compensation determined by the Board in accordance with
the provisions of Section 2.1 for each of the 5 Fiscal Years ending with the
Fiscal Year preceding the Fiscal Year in which the Change of Control Event
occurs plus (b) the average of your last 5 Annual Bonuses determined by the
Board in accordance with Section 2.1 prior to the Change of Control Event.
Such severance shall be payable to you on the next business day after the last
day you render services under this Employment Agreement. It is expressly
agreed that this Section 3.1 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.
3.2. 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 (a) terminates your employment prior to
October 1, 1998, or (b) fails to renew the term of this Employment Agreement
on substantially the same terms:
3.2.x. Xxxxx shall pay to you an amount equal to the
greater of (i) two times your Base Compensation plus two times your last
Annual Bonus as each was last determined by the Board pursuant to Section 2.1
prior to the date of such termination and (ii) three times your Base
Compensation as last determined by the Board pursuant to Section 2.1 prior to
the date of such termination. Such amount shall be payable in cash, one-third
within five business days of such termination, one-third on the first
anniversary of such termination, and one-third on the second anniversary of
such termination, and
3.2.x. Xxxxx shall continue to provide you with executive
employee benefits as provided in 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 termination of
your employment if such executive employee benefits were being provided to you
by Xxxxx immediately prior to the termination of your employment, for a period
equal to the lesser of (i) two years following the date of termination of your
employment or September 30, 1998, whichever comes later, or (ii) until you are
provided by another employer with benefits substantially comparable to the
benefits described in this Section 3.2.b.
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 Xxxxx to
dismiss you for Cause as defined in Annex I to this Employment Agreement.
Upon such termination for Cause, Xxxxx'x sole obligation shall be to pay you
any accrued but unpaid Base Compensation and executive employee benefits
described in Sections 2.1 and 2.2 as of the 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 beneficiaries, or if no beneficiaries are
designated, to your estate, any amounts under Sections 2 and 3 which are
unpaid and earned to the date of your death. In addition, Garan shall pay to
your designated beneficiaries, or if no beneficiaries are designated, to your
estate, an amount equal to 150% of the total of your then Base Compensation
and last Annual Bonus as each was last determined by the Board in accordance
with Section 2.1, 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 the
provisions of Section 2.1 and continue your executive employee benefits set
forth in Section 2.2.
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 Base Compensation
in effect at the date you incurred the Disability plus an amount equal to your
last Annual Bonus as each was determined by the Board pursuant to the
provisions of Section 2.1 prior to the date you incurred the Disability,
reduced by the gross amount payable as a result of such Disability under any
disability or salary continuation policy or plan, the cost of which is paid by
Xxxxx, and (ii) during the period set forth in Section 3.5.a(i), continue
your other executive employee benefits set forth in Section 2.2 as in effect
at the first day that you were unable to carry out your duties because of
psychological, emotional, or physical reasons which resulted in 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 this Section 3.5.
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. 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 Xxxxx'x books at
such time. Payment shall be made in cash on the 30th day after you make such
election.
3.7. Parachute Payments.
If any amounts payable pursuant to this Employment
Agreement which are deemed to constitute Parachute Payments, as defined in
Annex I to this Employment Agreement, when added to any other payments which
are deemed to constitute Parachute Payments, would result in the imposition on
you of an excise tax under Section 4999 of the Internal Revenue Code of l986,
as amended from time to time, the amounts payable under this Employment
Agreement shall be reduced by the smallest amount necessary to avoid the
imposition of such excise tax.
0.Xxxxx Secrets, 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, and/or sales 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 the execution of this Employment Agreement.
4.2. Non-Competition.
In recognition of the provisions of Section 4.1 and as
consideration for your continued employment by Xxxxx, the payment by Garan to
you of compensation, and Xxxxx providing you with 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 or merchandising plans, 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 Xxxxx, 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, or (ii) 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 at the last day that you render services to
Garan plus your Annual Bonus as each was last determined by the Board pursuant
to Section 2.1, or (y) the total of your average Base Compensation in the 24
month period ending on the last day that you render services to Garan plus the
average of your last two Annual Bonuses as each was determined by the Board
pursuant to 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 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 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.
The initial such notice shall be given together with the notice of termination
referred to in Section 3.2 or 3.3, as applicable, or 15 days prior to the end
of the term of this Employment Agreement, 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 one 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 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. The provisions of this Section 4.3 may not be invoked by Garan
if you terminate your employment pursuant to Section 3.1 or Garan terminates
your employment upon or 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 Sections 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 is, or the
Arbitrators appointed in accordance with the provisions of Section 5 are,
hereby authorized, requested, and instructed to reform such sections
consistent with the intent of Sections 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), (ii) and
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 Sections 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 sections, and such punitive and compensatory
damages as shall be awarded. Further, in the event of a violation of the
provisions of Sections 4.1, 4.2, 4.3, or 4.4, (i) the period of
non-disclosure, non-competition, employee non-interference, or
non-disparagement 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-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, or personally
delivered, to the addresses set forth below, and shall be deemed given when
sent.
The addresses referred to above are:
Your address: Xxxxx 0, Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Garan: 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: President
With a copy to: Xxxxxxxxxx Xxxxx & Xxxxxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, 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, etc.
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 Xxxxx 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; 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.a, 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 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:________________________
Xxxxxx Xxxxxx, President
ACCEPTED AND AGREED:
____________________
Xxxxxx Xxxxx
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
Xxxxx'x 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 Xxxxx'x
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 Xxxxx'x shareholders or by Xxxxx'x 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 Xxxxx'x
Board of Directors on October 1, 1996, 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.
"Parachute Payment" means any payment deemed to constitute
a "parachute payment" as defined in Section 280G of the Internal Revenue Code
of 1986 as amended from time to time.
