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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark One
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended August 5, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-5400
FARAH INCORPORATED
(Exact name of registrant as specified in its charter)
Texas 74-1061146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8889 Gateway West, El Paso, Texas 79925
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (915) 593-4444
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 and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that 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 .
As of September 2, 1994 there were outstanding 10,045,038 shares
of the registrant's common stock, no par value, which is the
only class of common or voting stock of the registrant.
1
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Item 1. Financial Statements.
FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Quarter and Nine Months Ended August 5, 1994 and August 6, 1993
(Unaudited)
Quarter Ended
August 5, August 6,
1994 1993
(Thousands of dollars, except per share data)
Net sales $61,169 43,773
Cost of sales 42,690 32,264
Gross profit 18,479 11,509
Selling, general and
administrative expenses 14,553 12,483
Factory conversion expense - 4,000
Operating income (loss) 3,926 (4,974)
Other income (expense):
Interest expense (414) (571)
Interest income 179 178
Foreign currency
transaction gains (losses) 147 (42)
Other, net 24 248
(64) (187)
Income (loss) before provision
for income taxes 3,862 (5,161)
Provision for income taxes:
Current 1,558 18
Deferred (1,428) -
130 18
Net income (loss) 3,732 (5,179)
Retained earnings:
Beginning 9,237 5,457
Ending $12,969 278
Net income (loss) per share $0.37 (0.65)
Weighted average shares of common
stock (all periods) and common stock
equivalents (income periods only)
outstanding 10,191,141 7,939,768
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- - ----TABLE CONTINUED---
FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Quarter and Nine Months Ended August 5, 1994 and August 6, 1993
(Unaudited)
Nine Months Ended
August 5, August 6,
1994 1993
Net sales 178,609 120,837
Cost of sales 125,278 86,671
Gross profit 53,331 34,166
Selling, general and
administrative expenses 42,570 32,511
Factory conversion expense - 4,000
Operating income (loss) 10,761 (2,345)
Other income (expense):
Interest expense (1,956) (1,439)
Interest income 538 546
Foreign currency
transaction gains (losses) 259 (156)
Other, net 103 224
(1,056) (825)
Income (loss) before provision
for income taxes 9,705 (3,170)
Provision for income taxes:
Current 2,685 116
Deferred (2,253) -
432 116
Net income (loss) 9,273 (3,286)
Retained earnings:
Beginning 3,696 3,564
Ending 12,969 278
Net income (loss) per share 1.03 (0.43)
Weighted average shares of common
stock (all periods) and common stock
equivalents (income periods only)
outstanding 9,032,579 7,591,230
2
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FARAH INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 5, 1994 AND NOVEMBER 5, 1993
(Unaudited)
August 5, November 5,
1994 1993
(Thousands of dollars)
ASSETS
Current assets:
Cash $1,982 2,007
Trade receivables, net 33,969 32,458
Inventories:
Raw materials 10,416 10,628
Work in process 17,525 15,706
Finished goods 44,974 27,838
72,915 54,172
Other current assets 8,018 5,482
Total current assets 116,884 94,119
Notes receivable 6,057 6,267
Property, plant and equipment, net 17,983 14,426
Other non-current assets 5,592 4,079
$146,516 118,891
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $14,085 25,680
Current installments of
long-term debt 725 4,509
Trade payables 18,118 20,324
Other current liabilities 14,844 10,833
Total current
liabilities 47,772 61,346
Long-term debt, excluding
current installments 4,480 1,179
Other non-current liabilities 3,383 3,627
Deferred gain on sale of building 7,790 9,314
Shareholders' equity:
Common stock, no par value,
authorized 20,000,000 shares;
issued 10,064,538 in 1994 and
8,007,900 in 1993 46,017 44,369
Additional paid-in capital 27,988 -
Cumulative foreign currency
translation adjustment (1,724) (2,481)
Minimum pension liability
adjustment (2,050) (2,050)
Retained earnings 12,969 3,696
83,200 43,534
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Less: Treasury stock, 36,275
shares in 1994 and 1993,
at cost 109 109
Total shareholders'
equity 83,091 43,425
$146,516 118,891
3
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FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended August 5, 1994 and August 6, 1993
(Unaudited)
August 5, August 6,
1994 1993
(Thousands of Dollars)
Cash flows from (used in) operating
activities:
Net income (loss) $ 9,273 (3,286)
Adjustments to reconcile net
income (loss) to net cash from
(used in) operating activities:
Depreciation and amortization 2,861 1,791
Amortization of deferred gain
on building sale (1,524) (1,524)
Deferred income taxes (2,253) -
(Increase) decrease in:
Trade receivables (1,511) (1,485)
Inventories (18,743) (8,204)
Other current assets (1,815) (1,873)
Increase (decrease) in:
Trade payables (2,206) (1,932)
Income taxes payable 1,761 (778)
Other current liabilities 2,135 745
Net cash used in operating
activities (12,022) (16,546)
Cash flows used in investing activities:
Purchases of property, plant and
equipment (3,957) (4,047)
Cash flows from financing activities:
Net change in revolving credit
facilities (11,927) 15,709
Repayment of long-term debt (4,911) (513)
Proceeds from issuance of debt 2,640 186
Receipts from sales of treasury
and common stock 29,635 5,881
Other (241) 507
Net cash from financing
activities 15,196 21,770
Foreign currency translation
adjustment 758 (412)
Net increase (decrease) in cash flow (25) 765
Cash, beginning of year 2,007 1,634
Cash, end of quarter $ 1,982 2,399
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Supplemental cash flow disclosures:
Interest paid $ 2,023 2,895
Income taxes paid 395 915
Assets acquired through direct
financing or capital leases 2,120 292
4
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FARAH INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The attached condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. As a result, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The Company believes that the disclosures made are adequate to
make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes
included in the Company's 1993 Annual Report on Form 10-K.
2. The foregoing financial information reflects all adjustments
(which consist only of normal recurring adjustments) which are,
in the opinion of management, necessary to present a fair
statement of the financial position and the results of
operations and cash flows for the interim periods.
3. The income tax provision for the nine months ended August 5,
1994, in accordance with the interim financial reporting
guidelines of generally accepted accounting principles,
has been provided based upon the Company's 1994 estimated
annual effective tax rate. The estimated annual rate is
lower than the statutory tax rate of 34% due to the
recognition of previously unrecognized deferred tax assets,
resulting from the use of net operating loss carryforwards
and differences in the timing of recognition for tax purposes
of deferred gains and other accrued expenses. In addition,
due to the Company's positive earnings trend, the valuation
allowance related to deferred tax assets recognized in
accordance with Statement of Financial Standards No. 109
was reduced for the first nine months resulting in a
deferred tax benefit of $2,253,000.
4. In the second quarter of 1994 the Company completed the
offering of 2,990,000 shares of its common stock at a price of
$16.375 per share. Of the total shares offered, 1,790,000
shares were sold by the Company with the remaining 1,200,000
shares sold by Marciano Investments, Inc. Net proceeds from
the sales by the Company were approximately $27,200,000.
Substantially all of the proceeds from the equity sale
were allocated to Additional Paid-in Capital.
5
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FARAH INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Sales for the third quarter and first nine months of fiscal 1994
increased by $17,396,000 (39.7%) and $57,772,000 (47.8%),
respectively, over the same periods of 1993. Sales were up at all
divisions, with the largest increase at Farah U.S.A.
Farah U.S.A. sales for the third quarter of 1994 were $49,299,000
compared to $34,207,000 for the third quarter of 1993, a 44%
increase. For the first nine months sales were $143,578,000
compared to $91,613,000 in 1993, a 57% increase. The average price
per unit was up approximately 1% in the third quarter of 1994
compared to 1993 and was up approximately 2% for the first nine
months of 1994 compared to 1993. Unit sales increased by 43% for
the quarter and 53% for the first nine months. Savane products,
which are primarily no wrinkles casual slacks, showed the largest
percentage increase in sales. Sales of Savane products represented
66% of total sales for the third quarter of 1994 compared to 48%
in the third quarter of 1993. In the first nine months of 1994
Savane sales were 60% of total sales compared to 40% in the same
period of 1993.
Farah International sales in the third quarter of 1994 were
$7,729,000 compared to $5,665,000 in 1993, a 36% increase. For the
first nine months, sales were $23,406,000 compared to $19,050,000 in
1993, a 19% increase. In the third quarter unit sales increased
25% and the average price per unit increased 9% compared to 1993.
In the first nine months units sales were up 17% compared to 1993
and the average price per unit increased 5%. Sales increased
significantly in the third quarter of 1994 compared to 1993 in both
the United Kingdom and Australia. Sales in the United Kingdom,
which represented 68% of total international sales, were
up 32% while sales in Australia, which represented 23% of total
international sales, were up 52%. These increases were due to
improved economic conditions in the United Kingdom, an improved
product line and the introduction of no wrinkles products in these
countries.
Value Slacks sales were $4,141,000 in the third quarter of 1994
compared to $3,901,000 in the third quarter of 1993, a 6%
increase. For the first nine months, sales were $11,625,000
compared to $10,174,000 in 1993, a 14% increase. Sales in the U.S.
stores increased by 29% in the third quarter of 1994 compared to
1993, while sales in the Puerto Rican stores decreased by 28% in the
same period. For the nine months, U.S. store sales increased by 37%
while Puerto Rican store sales decreased by 17%. There were 8
Puerto Rican stores operating at the end of the third quarter of
1994 compared to 12 in 1993 and 24 U.S. stores in operation
compared to 17 in 1993.
6
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Gross profit increased by $6,970,000 (61%) in the third quarter of
1994 compared to 1993 and increased by $19,165,000 (56%) for the
first nine months. Gross profit as a percent of sales was up for
the quarter and first nine months at all divisions.
At Farah U.S.A., gross profit as a percent of sales increased from
24% in the third quarter of 1993 to 28% in 1994 and increased from
26% in the first nine months of 1993 to 27% in 1994. Increased
production output through Farah owned plants resulted in lower per
unit costs. Lower duties in Mexico as a result of the North
American Free Trade Agreement (NAFTA) also favorably impacted
margins for the period. At Farah International, gross profit as
a percent of sales increased from 31% in the third quarter of 1993
to 35% in the third quarter of 1994. For the first nine months
margins increased from 34% in 1993 to 36% in 1994. Production
levels in Ireland were up 20% in the third quarter and first nine
months of 1994 compared to the same periods in 1993 which resulted
in lower per unit costs. This, combined with higher average
selling prices in the U.K., resulted in overall higher margins.
Gross profit as a percent of sales at Value Slacks was 50% and
48% for the third quarter and first nine months of 1994 compared
to 43% and 41% in the same periods of 1993. The increased gross
profit was related to the higher percentage of U.S. store sales,
which carry a higher margin, combined with higher margins realized
on certain Savane products.
Selling, general and administrative expenses ("SG&A") as a percent
of sales decreased from 29% in the third quarter of 1993 to 24%
in the third quarter of 1994. For the nine month period SG&A as a
percent of sales decreased from 27% in 1993 to 24% in 1994. At
Farah U.S.A., SG&A decreased from 25% in the third quarter of 1993
to 20% in 1994 and from 23% to 21% for the first nine months. The
decrease at Farah U.S.A. was attributable to lower advertising
expenses in the third quarter as a result of a change in the timing
of certain magazine and television campaigns and lower other
advertising expenses as a percent of sales. There was also lower
sales compensation as a percent of sales and lower freight costs
due to a change in the Company's freight policies. At Farah
International, SG&A as a percent of sales decreased from 39% in the
third quarter of 1993 to 36% in the third quarter of 1994 and from
34% in the first nine months of 1993 to 32% in the same period of
1994. The decrease was mainly attributable to fixed costs that did
not increase in relation to the increased sales levels. At
Value Slacks, SG&A as a percent of sales increased from 42% in the
third quarter of 1993 to 47% in 1994 and from 44% in the first nine
months of 1993 to 48% in 1994. The increase for the quarter resulted
from higher travel and other related costs related to the opening
and closing of several stores. In addition advertising expenses
were higher for the quarter. The opening and closing of several
stores in the first nine months contributed to a higher SG&A
percentage year to date.
<PAGE>
Other expense, net, decreased by $123,000 in the third quarter
of 1994 compared to 1993. In the first nine months Other expense
increased by $231,000. Interest expense was lower in the third
quarter of 1994 due to lower usage of the Company's credit facility.
This combined with foreign currency transaction gains in the United
Kingdom, Australia and New Zealand resulted in overall lower net
expense for the quarter. In the first nine months interest expense
was higher in 1994 than in 1993 due to higher average borrowings in
the first half of the year. This expense was partially offset by
foreign currency transaction gains of $259,000 in 1994 compared
to a loss of $156,000 in 1993.
Income tax expense fluctuates as a result of a change in the mix
of the income (loss) in the countries in which the Company conducts
its business. In addition, the company has unrecognized deferred
tax assets, including net operating loss carryforwards, available
in both the United States and United Kingdom to offset income. See
discussion of income taxes in Note 3 to the condensed consolidated
financial statements.
7
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Financial Condition
The company's credit facility provides up to $40,000,000 of credit
through November 3, 1995. Farah U.S.A., Farah U.K. and Value
Slacks are parties to this facility. Availability under the
facility is determined by formulas derived from accounts receivable,
inventory and fixed assets. As of August 5, 1994, usage under the
facility was $14,523,000 and available credit was $25,477,000.
Net cash used in operating activities was approximately $12 million
in the third quarter of fiscal 1994. The primary use of cash in
operations was to fund the increase in inventories and receivables
resulting from the increase in the Company's sales. The Company
believes that its borrowing availability from its credit facility
and cash from operations will be adequate for fiscal 1994 anticipated
liquidity requirements.
Inventories increased by $18,743,000 at August 5, 1994 compared to
November 5, 1993. The increase is primarily attributable to
increased finished goods inventory levels to meet higher sales
and customer quick response needs and higher piece goods and
finished goods inventories at Farah International. In addition,
trade receivables increased by $1,511,000 due to higher sales
levels. Trade payables decreased by $2,206,000 compared to
November 5, 1993 due to lower Farah U.S.A. raw material inventories.
Short-term debt and current maturities of long-term debt decreased
by $15,379,000 from November 5, 1993 to August 5, 1994. The
decrease was due to the receipt of proceeds from the sale of
common stock in the second quarter of 1994, partially offset by
borrowings to finance the higher inventories and receivables
discussed above.
Capital expenditures through August 5, 1994 approximated $6,077,000.
The Company anticipates that capital expenditures will be higher
in the remainder of the year as manufacturing facilities are
added and expanded to meet expected demand. As of August 5, 1994
the Company had commitments for future capital expenditures of
approximately $4,300,000.
8
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FARAH INCORPORATED AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 10.51 Amended and Restated Employment
Agreement dated June 30, 1994.
Exhibit 10.52 Amended and Restated Employment
Agreement dated August 2, 1994.
Exhibit 10.53 Amendment No. 12 dated July 14,
1994 to Accounts Financing
Agreement dated August 2, 1990
Between Congress Financial
Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 11 Statement regarding computation
of net income (loss) per share.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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.
FARAH INCORPORATED
Date: September 14, 1994.
s/b/ James C. Swaim
James C. Swaim
Executive Vice President
Chief Financial Officer
9
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FARAH INCORPORATED AND SUBSIDIARIES
FORM 10-Q INDEX TO EXHIBITS
August 5, 1994
Number Description Page
Exhibit 10.51 Amended and Restated Employment 11
Agreement dated June 30, 1994.
Exhibit 10.52 Amended and Restated Employment 20
Agreement dated August 2, 1994.
Exhibit 10.53 Amendment No. 12 dated July 14, 27
1994 to Accounts Financing
Agreement dated August 2, 1990
Between Congress Financial
Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 11 Statement regarding computation 33
of net income (loss) per share.
Exhibit 27 Financial Data Schedule 34
10
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EXHIBIT 10.51
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement
entered into by and between Farah Incorporated (the
"Company") and Richard C. Allender (the "Executive").
In consideration of the following and mutual
covenants and agreements hereinafter set forth, the
Company and the Executive do hereby agree as follows:
1. Employment.
(a) The Company hereby employs the Executive and
the Executive hereby agrees to serve as an employee of
the Company or one or more of its subsidiaries on the
terms and conditions set forth herein.
(b) The employment term shall commence on the date
hereof and shall end on March 1, 1996 (the "Initial
Term"), unless extended as provided in this Section 1(b)
or terminated under the provisions of Section 4
hereunder. The term of this Agreement shall
automatically be extended for a period of one (1) year
from the date of the expiration of the Initial Term or
such additional term pursuant to this Section 1(b),
unless within ninety (90) days prior to the expiration of
such term the Company notifies the Executive of its
intent not to extend at which time the term of this
Agreement shall expire at the end of the Initial term or
additional term, as applicable.
(c) The Executive shall serve as President and
Chief Executive Officer of the Company or such other
offices as the Board of the Company or its subsidiaries
(the "Boards") shall assign and shall perform such duties
and responsibilities as may from time to time be
prescribed by the Boards, provided that such duties and
responsibilities are consistent with the Executive's
position. The Executive shall perform and discharge
faithfully, diligently and to the best of his ability
such duties and responsibilities and shall devote all of
his working time and efforts to the business and affairs
of the Company and its subsidiaries.
(d) In connection with his employment, the
Executive shall be based at the Company's El Paso office,
or such other location as may be agreeable to both the
Company and the Executive.
<PAGE>
2. Compensation.
(a) The Company and/or its subsidiaries shall pay
to the Executive a minimum annual salary of $325,000, or
such additional amounts as the Boards may approve (the
"Base Salary"), payable in monthly installments on the
last day of each month throughout the term of such
employment, subject to Section 4 hereof. The Board, upon
review of the Executive's performance and/or the
profitability of the Company and its subsidiaries, may
pay the Executive a bonus, as the Boards in their sole
discretion may determine to be appropriate.
(b) The Company and/or its subsidiaries shall pay
to the Executive such amounts as may be established under
any cash or equity incentive plans approved by the
Boards, based upon profit performance or stock values.
(c) During the term of his employment hereunder,
the Executive shall be entitled to participate in or
receive benefits under the Company's employee benefit
plans and arrangements which are available to senior
executive officers of the Company or its subsidiaries.
Nothing paid to the Executive under any such plans or
arrangements shall be deemed to be in lieu of
compensation to the Executive hereunder.
(d) The Company's agrees to pay the cost of
premiums for a split-dollar life insurance policy for the
Executive on such terms and conditions, and containing
such benefits for the Executive and the Company, as the
Company's Stock Option and Compensation Committee may
deem appropriate. The cost of premiums for such split-
dollar life insurance policy shall be not greater than
$121,000 per annum, unless otherwise agreed by the
Company. Except as otherwise provided in Section 4 of
this Agreement, the Company shall be obligated to pay a
miminum of five annual premium payments of $121,000, or
an aggregate amount of premiums of $605,000 (the "Minimum
Premium Commitment").
<PAGE>
3. Unauthorized Disclosure and Activity.
(a) While employed by the Company and for a period
of three (3) years after termination of employment, the
Executive shall not, without a written consent of the
Board or a person duly authorized thereby, disclose to
any person, other than a person to whom disclosure is
reasonably necessary or appropriate in connection with
the performance by the Executive of his duties as an
executive officer of the Company or its subsidiaries, any
material confidential information obtained by him while
in the employ of the Company or its subsidiaries with
respect to any of the products, improvements, license
agreements, formulas, designs, methods of manufacture,
vendors or customers, the disclosure of which he knows or
in the exercise of reasonable care should know, would be
damaging to the Company or its subsidiaries; provided,
however, that confidential information shall not include
any information known generally to the public (other than
as a result of unauthorized disclosure by the Executive)
or any information not otherwise considered by the Boards
to be confidential. The Executive shall not disclose any
confidential information of the type described above,
except as may be required by law in connection with any
judicial or administrative proceeding or inquiry.
(b) In addition, the Executive shall not either
during the term of this Agreement or within one (1) year
following termination of employment from any cause,
solicit any employee of the Company or its subsidiaries
to terminate his relationship with the Company or its
subsidiaries or to influence an employee to seek
employment with any competitor of the Company or its
subsidiaries.
In the event of violation of any of the foregoing,
the Company or its subsidiaries may seek such redress in
law or in equity to which it may be entitled; and
Executive agrees that no bond shall be required to obtain
any injunctive relief; and shall pay and indemnify the
Company or its subsidiaries for any costs and/or
reasonable attorney's fees if they are successful in such
action.
<PAGE>
4. Termination.
(a) The Executive's employment hereunder shall
terminate upon his death.
(b) The Company may terminate the Executive's
employment hereunder by giving written Notice of
Termination to the Executive in the event of the
Executive's incapacity due to physical or mental illness
which prevents the proper performance of his duties set
forth herein or established pursuant hereto for a
substantial portion of any six (6) month period of the
Executive's term of employment hereunder.
(c) The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice
of Termination to the Executive. For the purpose of this
Agreement, the Company shall have "Cause" to terminate
the Executive's employment hereunder upon the Executive's
(i) willful failure to materially perform and discharge
his duties and responsibilities hereunder or any breach
by the Executive of the provisions of Section 3 herein,
or (ii) misconduct that is materially injurious to the
Company or its subsidiaries, or (iii) conviction of a
felony involving the personal dishonesty of the Executive
or moral turpitude.
(d) Any termination by the Company pursuant to the
Sections 4(b) or (c) above shall be communicated by
written Notice of Termination to the Executive. For
purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination. The date of termination specified in the
Notice of Termination shall not be earlier than the date
such Notice is delivered or mailed to the Executive.
<PAGE>
(e) If the Executive's employment shall be
terminated by reason of death, his estate shall be paid
all sums otherwise payable to the Executive through the
end of the month in which his death occurred, and all
bonus or other incentive benefits accrued or accruable to
the Executive through the end of the month in which his
death occurred and the Company and its subsidiaries shall
have no further obligations to the Executive under this
Agreement. If the Executive's employment is terminated
by reason of incapacity, the Executive or person charged
with legal responsibility for the Executive's estate
shall be paid (i) all bonus or other benefits accrued or
accruable to the Executive through the date of
termination specified in the Notice of Termination, and
(ii) an amount equal to the annual Base Salary, to be
payable in monthly installments for thirty-six (36)
months. In addition to the payments in the immediately
preceding sentence, the Company shall continue to pay the
annual premiums for the split-dollar life insurance
policy described under Section 2(d) until the earlier to
occur of the date (i) of death of the Executive, except
to the extent of unpaid premiums as of the date of death,
(ii) no further premium payments are required under the
terms of such policy, or (iii) the Minimum Premium
Commitment has been paid. After such payments, the
Company or its subsidiaries shall have no further
obligations to the Executive under this Agreement. If
the Executive's employment shall be terminated for Cause,
the Company or its subsidiaries shall pay the Executive
his Base Salary through the date of termination specified
in the Notice of Termination, and the Company and its
subsidiaries shall have no further obligations to the
Executive under this Agreement, including, but not
limited to, any obligations in respect of the Minimum
Premium Commitment.
<PAGE>
(f) In the event of a change in control of the
Company, the Executive may terminate his employment (i)
at any time during the term of this Agreement, for Good
Reason, by giving written notice to the Company which
shall set forth in reasonable detail the facts and
circumstances constituting Good Reason, or (ii) on or
after the date of the change in control of the Company,
in his sole discretion, by providing written notice
thereof to the Company. The date of termination
specified in the notice shall be no earlier than the date
60 days after the date such notice is delivered or mailed
to the Company. For purposes of this Agreement:
(i) A "change in control" of the Company
shall mean a change in control of a nature that
would be required to be reported (assuming each
such event has not been "previously reported") in
response to Item 1(a) of the current Report on Form
8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), provided that,
without limitation, such a change in control shall
be deemed to have occurred at such time as (A) any
"person", as such term is used in Section 14(d) of
the Exchange Act, other than the Company, a
wholly-owned subsidiary of the Company or any
employee benefit plan of the Company, or its
subsidiaries, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30% (the "Relevant
Percentage") or more of the combined voting power
of the Company's common stock; provided, however,
the Relevant Percentage shall be 40% solely in
respect of any acquisitions of common stock by
Marciano Investments, Inc., of any of its
affiliates, or (B) individuals who constitute the
Board of Directors of the Company on the date
hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided
that any person becoming a director subsequent to
the date hereof whose election or nomination for
election by the Company's shareholders was approved
by a vote of at least three quarters of the
directors comprising the Incumbent Board (either by
a specific vote or by approval of the proxy
statement of the Company in which such person is
named as a nominee for director without objection
to such nomination) shall be, for purposes of this
clause (i), considered as though such person were a
member of the Incumbent Board. Notwithstanding
<PAGE>
anything in the foregoing to the contrary, no
change in control shall be deemed to have occurred
for purposes of this Agreement by virtue of any
transaction which results in the Executive, or a
group of persons which includes the Executive,
acquiring, directly or indirectly, 30% or more of
the combined voting power of the Company's common
stock.
(ii) "Good Reason" shall mean (A) a
substantial adverse change in the Executive's
status or position(s) as an executive officer of
the Company or its subsidiaries as in effect
immediately prior to the change in control,
including, without limitation, any adverse change
in the Executive's status or position(s) as a
result of a material diminution in duties or
responsibilities or the assignment to the Executive
of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent
with such status or position(s) or any removal of
the Executive from or any failure to reappoint or
reelect the Executive to such position(s) (except
in connection with the termination of the
Executive's employment for Cause or incapability,
as a result of Executive's death, or by Executive
other than for Good Reason); (B) a reduction by the
Company or its subsidiaries in the Executive's Base
Salary as in effect immediately prior to the change
in control; or (C) the Executive' s office is
moved, without his mutual consent, from the city
where the Executive's office is located immediately
prior to the change in control, except for required
travel on the Company's and it subsidiaries'
business to an extent substantially consistent with
the business travel obligations which the Executive
undertook on behalf of the Company or its
subsidiaries prior to the change in control.
(g) If the Executive's employment is terminated (i)
by the Company other than as specified in Sections 4(b)
or 4(c) above (or other than by reason of the Executive's
death), or (ii) by the Executive as specified in Section
4(f)(i) above, the Company and its subsidiaries shall
continue to pay monthly, Base Salary to Executive for 36
months after such termination. If the Executive's
employment is terminated by the Executive as specified in
Section 4(f)(ii) above, the Company and its subsidiaries
shall continue to pay monthly, Base Salary to Executive
for 18 months after such termination. In addition, the
Company shall maintain in full force and effect for the
Executive's benefit, for the same period for which
<PAGE>
severance payments are being made after such termination,
all health insurance, long-term disability, life
insurance (excluding the split-dollar policy described in
Section 2(d) and which benefits in respect thereof are
described below) and accidental death and disability
benefits (collectively, the "Benefits") in which the
Executive was entitled to participate immediately prior
to such termination; provided that such continued
participation is possible under the general terms and
provisions of such programs, plans and arrangements
providing for the Benefits; provided further that if the
Executive's participation in any such plan, program or
arrangement is barred, or any such plan, program or
arrangement is discontinued or the Benefits thereunder
materially reduced, the Company and its subsidiaries
shall arrange to provide the Executive with Benefits
substantially similar to those which the Executive was
entitled to receive under such plans, programs and
arrangements immediately prior to the date of the change
in control. The Company shall also make available to the
Executive federal group health plan continuation coverage
for the period following the period in which Benefits are
provided during the severance period. In addition to the
foregoing, if the Executive's employment is terminated by
the Executive as specified in Section 4(f), then in
addition to the other amounts payable by the Company
pursuant to this Section 4(g), the Company shall continue
to pay the annual premiums for the split-dollar life
insurance policy described under Section 2(d) until the
earlier to occur of the date (i) of death of the
Executive, except to the extent of unpaid premiums as of
the date of death, (ii) no further premium payments are
required under the terms of such policy, or (iii) the
Minimum Premium Commitment has been paid.
(h) If the Executive's employment is terminated by
the Company without cause or in the event the term of
this Agreement is not extended pursuant to Sections 1(b),
then in addition to any other obligations the Company may
have to the Exectuive pursuant to this Agreement, the
Company shall continue to pay the annual premiums for the
split-dollar life insurance policy described under
Section 2(d) until the earlier to occur of the date (i)
of death of the Executive, except to the extent of unpaid
premiums as of the date of death, (ii) no further premium
payments are required under the terms of such policy, or
(iii) the Minimum Premium Commitment has been paid.
5. Stock Options Upon Termination. To the extent
the Executive is an Optionee (as defined under the
Company's 1991 Stock Option and Restricted Stock Plan
(the "Plan")), if the Executive's employment is
<PAGE>
terminated without cause, the Executive may elect to
extend the period in which he may exercise his options
under the Plan to one (1) year after his termination;
provided, however, that if such options are exercised
after a period of ninety (90) days after his employment
is terminated, such options will become Nonstatutory
Options (as defined in the Plan).
6. Limitation on Payments.
If any payments made pursuant to the terms of
this Agreement (or any other agreement or arrangement
between the Company and the Executive), when aggregated
with any other payments made to the Executive, would
result in the imposition of an excise tax under Section
4999 of the Internal Revenue Code of 1986, as amended,
the Company shall pay to the Executive, in addition to
amounts otherwise payable under this Agreement, an amount
sufficient, after federal and state income taxes, to pay
the excise tax so payable and all directly related
interest and penalties such that the net amount to the
Executive would be the same as if no excise tax had been
imposed.
7. Notices. For the purpose of this Agreement,
notices and all other communications to either party
hereunder provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered in person or mailed by first-class mail or
airmail, postage prepaid, addressed:
in the case of the Company, to:
Farah Incorporated
8889 Gateway West
El Paso, Texas 79925
P.O. Box 9519
El Paso, Texas 79985
Attention: Corporate Secretary
in the case of the Executive, to:
Richard C. Allender
900 Broadmoor
El Paso, Texas 79912
or to such other address as either party shall designate
by giving written notice of such change to the other
party.
<PAGE>
8. Miscellaneous. No provision of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is approved by the Board of
Directors of the Company and agreed to in writing signed
by the Executive and such officer as may be specifically
authorized by the Board of Directors of the Company. No
waiver by either party hereto of any breach of this
Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions of this Agreement.
No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter
hereof have been made by either party which are not set
forth expressly in this Agreement.
9. Validity. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any
present or future law, such provision shall be fully
severable, this Agreement shall be construed and enforced
as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, the remaining
provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance
herefrom, and in lieu of such illegal, invalid or
unenforceable provision, there shall be added
automatically as a part of this Agreement a legal, valid
and enforceable provision as similar to the terms and
intent of such illegal, invalid or unenforceable
provision as may be possible.
10. Survival. The provisions of this Agreement
shall not survive the termination of the Executive's
employment hereunder, except that the provisions of
Sections 3, 4 and 6 hereof shall survive such termination
and shall be binding upon the Executive's personal or
legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees
and except that the provisions of Sections 2, 4, 5 and 6
hereof shall survive such termination and shall be
binding upon the Company and its subsidiaries.
<PAGE>
11. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
12. Entire Agreement. This Agreement, together
with any awards of stock options or stock awards under
the Company's stock option and restricted stock plans,
constitutes the full agreement and understanding of the
parties hereto regarding the employment of the Executive
with the Company and its subsidiaries and all prior
agreements or understandings are merged herein. This
Agreement amends and restates that certain Amended and
Restated Employment Agreement by and between the Company
and the Executive dated as of September 30, 1993.
13. Arbitration and Attorneys' Fees. Any dispute
arising in connection with this Agreement shall be
finally resolved by arbitration in El Paso, Texas,
conducted pursuant to and in accordance with the
commercial rules of arbitration of the American
Arbitration Association. Any party may request
arbitration by sending written notice to the other party.
In any such arbitration, the only issues to be considered
and determined by the arbitrators shall be issues
pertaining to rights and obligations of the parties under
this Agreement, and remedies appropriate thereto. The
decision and award of the arbitrator(s) shall be final
and may be entered in any court having jurisdiction
thereof, and application may be made to such court for
judicial acceptance and/or an order enforcing such
decision and/or award. In the event the arbitrator(s)
determine there is a prevailing party in the arbitration,
the prevailing party shall recover from the losing party
all costs of arbitration, including, but not limited to
arbitrator's fees and reasonable attorneys' fees incurred
by the prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement effective as of this 30th day of June,
1994.
FARAH INCORPORATED
By: s/b/ James C. Swaim
Title: Executive Vice President,
Chief Financial Officer
s/b/ Richard C. Allender
Richard C. Allender,
Executive
<PAGE>
EXHIBIT 10.52
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement
entered into by and between Farah Incorporated (the
"Company") and Michael R. Mitchell (the "Executive").
In consideration of the following and mutual
covenants and agreements hereinafter set forth, the
Company and the Executive do hereby agree as follows:
1. Employment.
(a) The Company hereby employs the Executive and
the Executive hereby agrees to serve as an employee of
the Company or one or more of its subsidiaries on the
terms and conditions set forth herein.
(b) The employment term shall commence on the date
hereof and shall end on March 1, 1996, unless mutually
extended in writing by both parties within ninety (90)
days prior to the expiration of such term or unless
terminated under the provisions of Section 4 hereunder.
(c) The Executive shall serve as President of Farah
U.S.A., Inc. or such other offices as the Board of the
Company or its subsidiaries (the "Boards") shall assign
and shall perform such duties and responsibilities as may
from time to time be prescribed by the Boards, provided
that such other duties and responsibilities are
consistent with the Executive's position. The Executive
shall perform and discharge faithfully, diligently and to
the best of his ability such duties and responsibilities
and shall devote all of his working time and efforts to
the business and affairs of the Company and its
subsidiaries.
(d) In connection with his employment, the
Executive shall be based at the Company's El Paso office,
or such other location as may be agreeable to both the
Company and the Executive.
2. Compensation.
(a) The Company and/or its subsidiaries shall pay
to the Executive a minimum annual salary of $225,000, or
such additional amounts as the Boards may approve (the
"Base Salary"), payable in monthly installments on the
last day of each month throughout the term of such
employment, subject to Section 4 hereof. The Board, upon
review of the Executive's performance and/or the
profitability of the Company and its subsidiaries, may
pay the Executive a bonus, as the Boards in their sole
discretion may determine to be appropriate.
<PAGE>
(b) The Company and/or its subsidiaries shall pay
to the Executive such amounts as may be established under
any cash or equity incentive plans approved by the
Boards, based upon profit performance or stock values.
(c) During the term of his employment hereunder,
the Executive shall be entitled to participate in or
receive benefits under the Company's employee benefit
plans and arrangements which are available to senior
executive officers of the Company or its subsidiaries.
Nothing paid to the Executive under any such plans or
arrangements shall be deemed to be in lieu of
compensation to the Executive hereunder.
(d) The Company's agrees to pay the cost of
premiums for a split-dollar life insurance policy for the
Executive on such terms and conditions, and containing
such benefits for the Executive and the Company, as the
Company's Stock Option and Compensation Committee may
deem appropriate. The cost of premiums for such split-
dollar life insurance policy shall be not greater than
$30,000 per annum, unless otherwise agreed by the
Company.
3. Unauthorized Disclosure and Activity.
(a) While employed by the Company and for a period
of three (3) years after termination of employment, the
Executive shall not, without a written consent of the
Board or a person duly authorized thereby, disclose to
any person, other than a person to whom disclosure is
reasonably necessary or appropriate in connection with
the performance by the Executive of his duties as an
executive officer of the Company or its subsidiaries, any
material confidential information obtained by him while
in the employ of the Company or its subsidiaries with
respect to any of the products, improvements, license
agreements, formulas, designs, methods of manufacture,
vendors or customers, the disclosure of which he knows or
in the exercise of reasonable care should know, would be
damaging to the Company or its subsidiaries; provided,
however, that confidential information shall not include
any information known generally to the public (other than
as a result of unauthorized disclosure by the Executive)
or any information not otherwise considered by the Boards
to be confidential. The Executive shall not disclose any
confidential information of the type described above,
except as may be required by law in connection with any
judicial or administrative proceeding or inquiry.
(b) In addition, the Executive shall not either
during the term of this Agreement or within one (1) year
following termination of employment from any cause,
solicit any employee of the Company or its subsidiaries
to terminate his relationship with the Company or its
subsidiaries or to influence an employee to seek
employment with any competitor of the Company or its
subsidiaries.
<PAGE>
In the event of violation of any of the foregoing,
the Company or its subsidiaries may seek such redress in
law or in equity to which it may be entitled; and
Executive agrees that no bond shall be required to obtain
any injunctive relief; and shall pay and indemnify the
Company or its subsidiaries for any costs and/or
reasonable attorney's fees if they are successful in such
action.
4. Termination.
(a) The Executive's employment hereunder shall
terminate upon his death.
(b) The Company may terminate the Executive's
employment hereunder by giving written Notice of
Termination to the Executive in the event of the
Executive's incapacity due to physical or mental illness
which prevents the proper performance of his duties set
forth herein or established pursuant hereto for a
substantial portion of any three (3) month period of the
Executive's term of employment hereunder.
(c) The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice
of Termination to the Executive. For the purpose of this
Agreement, the Company shall have "Cause" to terminate
the Executive's employment hereunder upon the Executive's
(i) willful failure to materially perform and discharge
his duties and responsibilities hereunder or any breach
by the Executive of the provisions of Section 3 herein,
or (ii) misconduct that is materially injurious to the
Company or its subsidiaries, or (iii) conviction of a
felony involving the personal dishonesty of the Executive
or moral turpitude.
(d) Any termination by the Company pursuant to the
subsections (b) or (c) above shall be communicated by
written Notice of Termination to the Executive. For
purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination. The date of termination specified in the
Notice of Termination shall not be earlier than the date
such Notice is delivered or mailed to the Executive.
<PAGE>
(e) If the Executive's employment shall be
terminated by reason of death, his estate shall be paid
all sums otherwise payable to the Executive through the
end of the month in which his death occurred, and all
bonus or other incentive benefits accrued or accruable to
the Executive through the end of the month in which his
death occurred and the Company and its subsidiaries shall
have no further obligations to the Executive under this
Agreement. If the Executive's employment is terminated
by reason of incapacity, the Executive or person charged
with legal responsibility for the Executive's estate
shall be paid all sums otherwise payable to the
Executive, including all bonus or other benefits accrued
or accruable to the Executive through the date of
termination specified in the Notice of Termination,
together with an amount equal to the annual base salary,
to be payable in monthly installments for twelve (12)
months, and the Company or its subsidiaries shall have no
further obligations to the Executive under this
Agreement. If the Executive's employment shall be
terminated for Cause, the Company or its subsidiaries
shall pay the Executive his Base Salary through the date
of termination specified in the Notice of Termination,
and the Company and its subsidiaries shall have no
further obligations to the Executive under this
Agreement.
(f) In the event of a change in control of the
Company, the Executive may terminate his employment
during the term of this Agreement, for Good Reason, by
giving written notice to the Company which shall set
forth in reasonable detail the facts and circumstances
constituting Good Reason. The date of termination
specified in the notice shall be no earlier than the date
such notice is delivered or mailed to the Company. For
purposes of this Agreement:
(i) A "change in control" of the Company
shall mean a change in control of a nature that
would be required to be reported (assuming each
such event has not been "previously reported") in
response to Item 1(a) of the current Report on Form
8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), provided that,
without limitation, such a change in control shall
be deemed to have occurred at such time as (A) any
<PAGE>
"person", as such term is used in Section 14(d) of
the Exchange Act, other than the Company, a
wholly-owned subsidiary of the Company or any
employee benefit plan of the Company, or its
subsidiaries, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30% (the "Relevant
Percentage") or more of the combined voting power
of the Company's common stock; provided, however,
the Relevant Percentage shall be 40% solely in
respect of any acquisitions of common stock by
Marciano Investments, Inc., of any of its
affiliates, or (B) individuals who constitute the
Board of Directors of the Company on the date
hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided
that any person becoming a director subsequent to
the date hereof whose election or nomination for
election by the Company's shareholders was approved
by a vote of at least three quarters of the
directors comprising the Incumbent Board (either by
a specific vote or by approval of the proxy
statement of the Company in which such person is
named as a nominee for the director without
objection to such nomination) shall be, for
purposes of this clause (i), considered as though
such person were a member of the Incumbent Board.
Notwithstanding anything in the foregoing to the
contrary, no change in control shall be deemed to
have occurred for purposes of this Agreement by
virtue of any transaction which results in the
Executive, or a group of persons which includes the
Executive, acquiring, directly or indirectly, 30%
or more of the combined voting power of the
Company's common stock.
(ii) "Good Reason" shall mean (A) a
substantial adverse change in the Executive's
status or position(s) as an executive officer of
the Company or its subsidiaries as in effect
immediately prior to the change in control,
including, without limitation, any adverse change
in the Executive's status or position(s) as a
result of a material diminution in duties or
responsibilities or the assignment to the Executive
of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent
with such status or position(s) or any removal of
the Executive from or any failure to reappoint or
reelect the Executive to such position(s) (except
in connection with the termination of the
Executive's employment for Cause or incapability,
<PAGE>
as a result of Executive's death, or by Executive
other than for Good Reason); (B) a reduction by the
Company or its subsidiaries in the Executive's Base
Salary as in effect immediately prior to the change
in control; or (C) the Executive' s office is
moved, without his mutual consent, from the city
where the Executive's office is located immediately
prior to the change in control, except for required
travel on the Company's and it subsidiaries'
business to an extent substantially consistent with
the business travel obligations which the Executive
undertook on behalf of the Company or its
subsidiaries prior to the change in control.
(g) If the Executive's employment is terminated (i)
by the Company other than as specified in subsections
4(b) or 4(c) above (or other than by reason of the
Executive's death), or (ii) by the Executive as specified
in subsection 4(f) above, the Company and its
subsidiaries shall continue to pay monthly, Base Salary
to Executive for 24 months from termination, and the
Company and its subsidiaries shall have no further
obligations to the Executive under this Agreement. In
addition, if the Executive's employment is terminated
after a change in control (i) by the Company other than
as specified in subsections 4(b) or 4(c) above (or other
than by reason of the Executive's death), or (ii) by the
Executive as specified in subsection 4(f) above, the
Company shall maintain in full force and effect for the
Executive's benefit, for the same period for which
severance payments are being made after such termination,
all health insurance, long-term disability, life
insurance (excluding the split-dollar policy described in
Section 2(d) and accidental death and disability
benefits (collectively, the "Benefits") in which the
Executive was entitled to participate immediately prior
to the date of the change in control; provided that such
continued participation is possible under the general
terms and provisions of such programs, plans and
arrangements providing for the Benefits; provided further
that if the Executive's participation in any such plan,
program or arrangement is barred, or any such plan,
program or arrangement is discontinued or the Benefits
thereunder materially reduced, the Company and its
subsidiaries shall arrange to provide the Executive with
Benefits substantially similar to those which the
Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the date
of the change in control. The Company shall also make
available to the Executive federal group health plan
continuation coverage for the period following the period
in which Benefits are provided during the severance
<PAGE>
period. In addition to the foregoing, if the Executive's
employment is terminated by the Executive as specified in
Section 4(f), then in addition to the other amounts
payable by the Company pursuant to this Section 4(g), the
Company shall pay one additional annual premium for the
split-dollar life insurance policy described under
Section 2(d) unless prior to the date such annual
payments is required under the terms of the split-dollar
life insurance policy no payment is required because of
(i) of death of the Executive, except to the extent of
unpaid premiums as of the date of death, or (ii) no
further premium payments are required under the terms of
such policy.
(h) If the Executive's employment is terminated by
the Company without cause, then in addition to any other
obligations the Company may have to the Executive
pursuant to this Agreement, the Company shall pay one
additional annual premium for the split-dollar life
insurance policy described under Section 2(d) unless
prior to the date such annual payments is required under
the terms of the split-dollar life insurance policy no
payment is required because of (i) of death of the
Executive, except to the extent of unpaid premiums as of
the date of death, or (ii) no further premium payments
are required under the terms of such policy.
5. Stock Options Upon Termination. To the extent
the Executive is an Optionee (as defined under the
Company's 1991 Stock Option and Restricted Stock Plan
(the "Plan")), if the Executive's employment is
terminated without cause, the Executive may elect to
extend the period in which he may exercise his options
under the Plan to one (1) year after his termination;
provided, however, that if such options are exercised
after a period of ninety (90) days after his employment
is terminated, such options will become Nonstatutory
Options (as defined in the Plan).
6. Notices. For the purpose of this Agreement,
notices and all other communications to either party
hereunder provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered in person or mailed by first-class mail or
airmail, postage prepaid, addressed:
in the case of the Company, to:
Farah Incorporated
8889 Gateway West
El Paso, Texas 79925
P.O. Box 9519
El Paso, Texas 79985
Attention: Corporate Secretary
in the case of the Executive, to:
<PAGE>
Michael R. Mitchell
738 Willow Glen Drive
El Paso, Texas 79922
or to such other address as either party shall designate
by giving written notice of such change to the other
party.
7. Miscellaneous. No provision of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is approved by the Board of
Directors of the Company and agreed to in writing signed
by the Executive and such officer as may be specifically
authorized by the Board of Directors of the Company. No
waiver by either party hereto of any breach of this
Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions of this Agreement.
No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter
hereof have been made by either party which are not set
forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability
of any provision or provisions of this Agreement shall
not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full
force and effect.
9. Survival. The provision of this Agreement
shall not survive the termination of the Executive's
employment hereunder, except that the provisions of
Sections 3 and 4 hereof shall survive such termination
and shall be binding upon the Executive's personal or
legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees
and except that the provisions of such Section 4 hereof
relating to payments and termination of the Executive's
employment hereunder shall survive such termination and
shall be binding upon the Company and its subsidiaries.
10. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
11. Entire Agreement. This Agreement constitutes
the full agreement and understanding of the parties
hereto regarding the employment of the Executive with the
Company and its subsidiaries and all prior agreements or
understandings are merged herein. This Agreement amends
and restates that certain Employment Agreement by and
between the Company and the Executive dated as of
September 30, 1993.
<PAGE>
12. Arbitration and Attorneys' Fees. Any dispute
arising in connection with this Agreement shall be
finally resolved by arbitration in El Paso, Texas,
conducted pursuant to and in accordance with the
commercial rules of arbitration of the American
Arbitration Association. Any party may request
arbitration by sending written notice to the other party.
In any such arbitration, the only issues to be considered
and determined by the arbitrators shall be issues
pertaining to rights and obligations of the parties under
this Agreement, and remedies appropriate thereto. The
decision and award of the arbitrator(s) shall be final
and may be entered in any court having jurisdiction
thereof, and application may be made to such court for
judicial acceptance and/or an order enforcing such
decision and/or award. In the event the arbitrator(s)
determine there is a prevailing party in the arbitration,
the prevailing party shall recover from the losing party
all costs of arbitration, including, but not limited to
arbitrator's fees and reasonable attorneys' fees incurred
by the prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement effective as of this 2nd day of August,
1994.
FARAH INCORPORATED
By: s/b/ Richard C. Allender
Title: Chairman
s/b/ Michael R. Mitchell
Michael R. Mitchell,
Executive
<PAGE>
EXHIBIT 10.53
AMENDMENT NO. 12 TO FINANCING AGREEMENTS
FARAH U.S.A., INC.
8889 Gateway West
El Paso, Texas 79925
July 14, 1994
Congress Financial Corporation (Southwest)
1201 Main Street, Suite 1625
Dallas, Texas 75250
Gentlemen:
Congress Financial Corporation (Southwest) ("Lender"),
Farah U.S.A., Inc. ("Farah USA"), Value Clothing Company,
Inc. ("Value Clothing"), Farah Manufacturing (U.K.) Limited
("Farah UK", and together with Farah USA and Value
Clothing, individually and collectively, "Borrowers") have
entered into financing arrangements pursuant to the
Accounts Financing Agreement [Security Agreement], dated as
of August 2, 1990, between Lender and Farah USA and various
supplements thereto, as amended pursuant to Amendment No.
1 to Financing Agreements, dated November 5, 1990,
Amendment No. 2 to Financing Agreements, dated February 11,
1991, Amendment No. 3 to Financing Agreements, dated
January 29, 1992, Amendment No. 4 to Financing Agreements
dated June 25, 1992, Amendment No. 5 to Financing
Agreements, dated August 31, 1992, Amendment No. 6 to
Financing Agreements, dated September 4, 1992, Amendment
No. 7 to Financing Agreements, dated September 16, 1992,
Amendment No. 8 to Financing Agreements, dated as of May 7,
1993, Amendment No. 9 to Financing Agreements, dated July
16, 1993, Amendment No. 10 to Financing Agreements, dated
November 3, 1993, Amendment No. 11 to Financing Agreements,
dated as of February 9, 1994 and as amended pursuant to the
letter agreement dated as of October 28, 1992
(collectively, as so amended and as amended hereby, the
"Accounts Agreement", and together with all supplements
thereto, including, but not limited to, the Covenant
Supplement to Accounts Financing Agreement [Security
Agreement] dated as of August 2, 1990 (the "Covenant
Supplement"), the Trade Financing Agreement Supplement to
Accounts Financing Agreement [Security Agreement] dated as
of August 2, 1990 (the "Trade Financing Supplement"), and
all other agreements, documents and instruments at any time
executed and/or delivered in connection with any of the
foregoing or related thereto, as the same now exist or may
hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, collectively, the "Financing
<PAGE>
Congress Financial Corporation (Southwest)
Page 2
July 14, 1994
Agreements"), which Financing Agreements include, inter
alia, the guarantees of all obligations of Borrowers, and
Value Clothing and Farah UK to Lender by each of Farah
Incorporated, Farah International, Inc., Value Slacks Inc.,
Farah Sales Corp., Farah Manufacturing Company, Inc., Farah
Manufacturing Company of New Mexico, Inc., Farah Clothing
Company, Inc., FTX, Inc., Radco Sportswear, Inc., Farah
Manufacturing Services, Inc., Farah Licensing Company and
Corporacion Farah-Costa Rica S.A. (individually and
collectively "Guarantors"), and the General Security
Agreement, dated August 2, 1990, by Farah Incorporated in
favor of Congress (the "Farah Inc. Security Agreement").
Borrowers and Guarantors have requested certain amendments
to the Financing Agreements and Lender is willing to agree
to such amendments subject to the terms and conditions set
forth herein. By this Agreement, Lender, Borrowers and
Guarantors desire and intend to set forth the terms of such
financing arrangements and evidence such amendments.
In consideration of the foregoing and the respective
agreements and covenants contained herein, the parties
hereto agree as follows:
1. Definitions. All capitalized terms used herein
shall have the meaning assigned thereto in the other
Financing Agreements, unless otherwise defined herein.
2. Amendment to Definition of "Annual Rate". All
references to the term "Annual Rate" in the Financing
Agreements shall be deemed and each such reference is
hereby amended to mean a rate equal to one percent (1%) per
annum in excess of the Index Rate.
3. Amendment to Inventory Loan Sublimit.
Notwithstanding anything to the contrary contained herein
or in any of the Financing Agreements, except in Lender's
discretion, (a) the aggregate unpaid principal amount of
the loans outstanding at any time based on the Eligible
Inventory of Farah USA, the Eligible Value Slacks Inventory
and the Eligible Farah UK Inventory shall not exceed
$25,000,000, (b) the aggregate unpaid amount of the loans
outstanding at any time based on the Value of the Eligible
Value Slacks Inventory shall not exceed $2,000,000 and (c)
the aggregate unpaid amount of the loans outstanding at any
time based on the Value of the Eligible Farah UK Inventory
shall not exceed $1,750,000.
4. Amendment to Borrowers Capital Expenditures.
Section 2.3 of the Covenant Supplement is hereby deleted in
its entirety and the following substituted therefor:
"2.3 Capital Expenditures. Borrowers will not,
and will not permit any subsidiary to, in the
aggregate for all of them, directly or indirectly,
<PAGE>
Congress Financial Corporation (Southwest)
Page 3
July 14, 1994
expend or commit to expend (through purchase, capital
leases or otherwise) fixed or capital assets, or incur
Indebtedness to finance the acquisition of fixed or
capital assets, on a non-cumulative basis (such that
expenditures not made or committed to be made in any
one fiscal year may not be made or committed to be
made in any following fiscal year) in excess of: (a)
$14,000,000 in the 1994 fiscal year of Borrowers; (b)
$13,000,000 in the 1995 fiscal year of Borrowers; and
(c) $5,000,000 in any fiscal year of Borrowers
thereafter."
5. Amendment to Farah Inc. Capital Expenditures.
Section 3(i) of the Farah Inc. Security Agreement is hereby
deleted in its entirety and the following substituted
therefor:
"(i) Guarantor will not, and will not permit any
subsidiary to, in the aggregate for all of them,
directly or indirectly, expend or commit to expend
(through purchase, capital leases or otherwise) fixed
or capital assets, or incur Indebtedness to finance
the acquisition of fixed or capital assets, on a
non-cumulative basis (such that expenditures not made
or committed to be made in any one fiscal year may not
be made or committed to be made in any following
fiscal year) in excess of: (A) $15,000,000 in the
1994 fiscal year of Guarantor; (B) $15,000,000 in the
1995 fiscal year of Guarantor; and (C) $6,500,000 in
any fiscal year of Guarantor thereafter."
6. Amendment to Credit Commissions. Section 1.8 of
the Trade Financing Supplement is hereby amended such that
a reference to "one-sixth percent (1/6%)" is substituted in
place of each reference to "one-quarter percent (1/4%)"
contained therein.
7. General Representations, Warranties and
Covenants. In addition to the continuing representations,
warranties and covenants heretofore or hereafter made by
Borrowers and Guarantors to Lender pursuant to the
Financing Agreements, each of Borrowers and Guarantors
hereby represents, warrants and covenants with and to
Lender as follows (which representations, warranties and
covenants are continuing and shall survive the execution
and delivery hereof and shall be incorporated into and made
a part of the Financing Agreements):
<PAGE>
Congress Financial Corporation (Southwest)
Page 4
July 14, 1994
(a) No Event of Default exists on the date of
this Amendment; and
(b) This Amendment has been duly executed and
delivered by Borrowers and Guarantors and is in full force
and effect as of the date hereof, and the agreements and
obligations of Borrowers and Guarantors contained herein
constitute legal, valid and binding obligations of
Borrowers and Guarantors enforceable against Borrowers and
Guarantors in accordance with their respective terms.
8. Consent to Certain Indebtedness and Purchase
Money Security Interests on Certain Assets Located in
Mexico and/or Costa Rica. Notwithstanding any provision in
Section 2.5 or Section 2.6 of the Covenant Supplement to
the contrary, but subject to all other provisions of the
Financing Agreements, Lender hereby consents to Borrowers
and/or Guarantors, and their subsidiaries, incurring
purchase money indebtedness or capital lease obligations
and granting purchase money security interests in respect
of hereafter acquired equipment and fixed assets located at
all times in Mexico and/or Costa Rica (and only such
equipment and fixed assets).
9. Conditions Precedent. The effectiveness of the
other terms and conditions contained herein against Lender
shall be subject to the satisfaction of each of the
following:
(a) receipt by Lender of each of the following,
in form and substance satisfactory to Lender and its
counsel:
(i) an original of this Amendment, duly
authorized, executed and delivered by Borrowers and
Guarantors; and
(ii) such agreements from participants as
may be required to effectuate the terms and provisions of
this Amendment; and
(b) all representations and warranties contained
herein, in the Accounts Agreement and in the other
Financing Agreements shall be true and correct in all
respects; and
(c) no Event of Default shall have occurred and
no event shall have occurred or condition be existing
<PAGE>
Congress Financial Corporation (Southwest)
Page 5
July 14, 1994
which, with notice or passage of time or both, would
constitute an Event of Default.
10. General.
(a) The parties hereto acknowledge, confirm, and
agree that the failure of any of Borrowers or any of
Guarantors, to comply with the covenants, conditions and
agreements contained herein or in any other agreement,
document or instrument by any of such parties at any time
executed in connection herewith shall constitute an Event
of Default under the Financing Agreements.
(b) Except as modified pursuant hereto, no other
changes to the Financing Agreements are intended or implied
and in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all
parties hereto as of the effective date hereof. To the
extent of conflict between the terms of this Agreement and
other Financing Agreements, the terms of this Agreement
shall control.
(c) The parties hereto shall execute and deliver
such additional documents and take such additional action
as may be necessary or desirable to effectuate the
provisions and purposes of this Agreement.
FARAH U.S.A., INC.
By: s/b/ James C. Swaim
James C. Swaim
Title: Treasurer
FARAH MANUFACTURING (U.K.) LIMITED
By: s/b/ Richard C. Allender
Richard C. Allender
Title: Director
ACKNOWLEDGED AND AGREED:
FARAH INCORPORATED
FARAH INTERNATIONAL, INC.
VALUE SLACKS, INC.
VALUE CLOTHING COMPANY, INC.
FARAH SALES CORP.
FARAH MANUFACTURING SERVICES, INC.
FARAH MANUFACTURING COMPANY, INC.
<PAGE>
Congress Financial Corporation (Southwest)
Page 6
July 14, 1994
FARAH MANUFACTURING COMPANY
OF NEW MEXICO, INC.
FARAH CLOTHING COMPANY, INC.
RADCO SPORTSWEAR, INC.
CORPORACION FARAH-COSTA RICA S.A.
FARAH LICENSING COMPANY
By: s/b/ James C. Swaim
James C. Swaim
Title: Treasurer
FTX, INC.
By: s/b/ Thomas H. Ludwick
Thomas H. Ludwick
Title: Treasurer
ACKNOWLEDGED AND AGREED:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By: s/b/ Edward Franco
Edward Franco
Title: Vice President
<PAGE>
EXHIBIT 11
FARAH INCORPORATED AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF NET INCOME
(LOSS) PER SHARE
Net income (loss) per share is based on weighted average
shares of common stock and common stock equivalents
outstanding. Stock options are included as common stock
equivalents under the treasury stock method, where dilutive.
Additional dilution from the Company's convertible subordinated
debentures, which are not common stock equivalents, is not
material. Loss per share is based only on weighted average
shares of common stock outstanding.
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
FARAH INCORPORATED AND SUBSIDIARIES
Financial Data Schedule for the Nine Months
Ended August 5, 1994
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-04-1994
<PERIOD-END> AUG-05-1994
<CASH> 1982
<SECURITIES> 0
<RECEIVABLES> 34627
<ALLOWANCES> 658
<INVENTORY> 72915
<CURRENT-ASSETS> 116884
<PP&E> 47457
<DEPRECIATION> 29474
<TOTAL-ASSETS> 146516
<CURRENT-LIABILITIES> 47772
<BONDS> 1663
<COMMON> 46017
0
0
<OTHER-SE> 37074
<TOTAL-LIABILITY-AND-EQUITY> 146516
<SALES> 178609
<TOTAL-REVENUES> 178609
<CGS> 125278
<TOTAL-COSTS> 125278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1956
<INCOME-PRETAX> 9705
<INCOME-TAX> 432
<INCOME-CONTINUING> 9273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9273
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
