GARAN, INCORPORATED
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
January 15, 1997
Xx. Xxxxxx Xxxxxx
0 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Dear Xxxxx:
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, l986, 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.
Xxxxx 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 ("Initial Term") ending, as at the
effective date of the restatement of this Employment Agreement, September 30,
1999.
1.3.b. The Initial 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 April l, l997, unless prior to such date
either (i) you notify Garan that you elect to terminate this Employment
Agreement at the end of the Initial Term or the then extended term, or (ii)
Garan notifies you that Garan elects to terminate this Employment Agreement at
the end of the Initial Term or the then extended term. (The end of the
Initial 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 March 31, l997, the term of this Employment Agreement will be extended
automatically to March 31, 2000, and if thereafter either you or Garan gives
such notice of termination on or before September 30, 1997, the term of this
Employment Agreement shall end on March 31, 2000.
1.3.c.1. In the event that Xxxxx 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.
1.3.c.2. If Garan requests you to render services and you
do not give the notice referred to in the next sentence, thereafter (unless
and until you voluntarily terminate your employment in accordance with the
provisions of Section 3.l) 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 last Annual Bonus, as each was last
determined by the Board of Directors of Garan ("Board") pursuant to 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 two
Annual Bonuses, as each was determined by the Board, and (b) Garan shall
continue to provide you with your other benefits as in effect at the date of
the notice or, at your option, as in effect one 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 such notice not to render services, (a)
Garan shall pay to you an amount equal to three times your Base Compensation
as last determined prior to the date of such notice by the Board pursuant to
Section 2.1 plus three times your last Annual Bonus determined by the Board,
and (b) Garan shall continue to provide you until the Term End with your other
benefits as in effect at the date of such notice or, at your option, as in
effect one year prior to the date of such notice. The amount determined in
accordance with (a) shall be payable in cash, one-third within five business
days after the last day you render services under this Employment Agreement,
one-third on the first anniversary of the last day you render services, and
one-third on the second anniversary of the last day you render services. 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 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 shall no longer apply but neither you nor
Garan shall be relieved of any other obligations under this Employment
Agreement.
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, 1997, and for each Fiscal Year
thereafter, such amount shall be not less than $345,000. [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 $l,000,000.
3. Termination of Employment.
3.1. Voluntary Termination.
If (a) Xxxxx'x present chief executive officer ceases to
serve in such position for any reason and within 6 months of such event either
(i) you are not given the opportunity to become chief executive officer of
Garan on terms reasonably acceptable to you and Garan, or (ii) 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, or (b) 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 (i) the average of your Base
Compensation determined by the Board in accordance with Section 2.1 for each
of the 5 Fiscal Years ending with the Fiscal Year preceding the Fiscal Year in
which either the current chief executive officer ceases to serve in such
position or a Change of Control Event occurs plus (ii) the average of your
last 5 Annual Bonuses determined by the Board in accordance with Section 2.1
prior to the commencement of the 6 month period after the current chief
executive officer ceases to serve in such position or 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 the provisions of Section 3.1.b 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 terminates your employment prior to the Term End
for any reason other than as provided in Section 1.3.c or for Cause as defined
in Annex I to this Employment Agreement:
3.2.x. Xxxxx shall pay to you an amount equal to three
times your Base Compensation plus three times your last Annual Bonus as each
was last determined prior to the date of such termination by the Board
pursuant to Section 2.1. 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 until the date of the Term End, 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 Emp
loyment 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 your 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 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 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 1986,
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.
4. Trade 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)(x) Garan notifies you in
accordance with the provisions of Section l.3.c.2 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 not to render services under this
Employment Agreement, or (y) your employment pursuant to this Employment
Agreement is terminated by Garan pursuant to Section 3.2 or 3.3, 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 five 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 five 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 at the last day that you render
services to Garan plus your last Annual Bonus as each was last determined by
the Board pursuant to Section 2.1, 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 two Annual Bonuses as
each was determined by the Board pursuant to 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 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 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, 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: 0 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Garan: 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chairman
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: ______________________________
Xxxxxxx Xxxxxxxxxxxx, Chairman
ACCEPTED AND AGREED:
____________________
Xxxxxx Xxxxxx
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.
