FARAH INC, S-3/A, 1994-04-19

FARAH INC
S-3/A, 1994-04-19
MEN'S & BOYS' FURNISHGS, WORK CLOTHG, & ALLIED GARMENTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 1994

REGISTRATION NO. 33-52811

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FARAH INCORPORATED
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
TEXAS 74-1061146
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
</TABLE>

FARAH INCORPORATED
8889 GATEWAY WEST
EL PASO, TEXAS 79925
(915) 593-4444
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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JAMES C. SWAIM
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FARAH INCORPORATED
8889 GATEWAY WEST
EL PASO, TEXAS 79925
(915) 593-4444
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

With copies to:

<TABLE>
<S> <C>
DANIEL W. RABUN, ESQ. LARRY L. SCHOENBRUN, ESQ.
BAKER & MCKENZIE GARDERE & WYNNE, L.L.P.
2001 ROSS AVENUE 1601 ELM STREET
SUITE 4500 3000 THANKSGIVING TOWER
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value.......... 2,990,000(1) $20.56(2) $61,474,400 $21,198
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</TABLE>

(1) Includes 390,000 shares as to which the Company has granted the Underwriters
an option to cover over-allotments.

(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(c) on the basis of the average of the high
and low sales prices of the common stock on the New York Stock Exchange on
March 23, 1994.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, APRIL 19, 1994

PROSPECTUS
2,600,000 SHARES

FARAH INCORPORATED
COMMON STOCK

Of the 2,600,000 shares of Common Stock offered hereby, 1,400,000 shares
are being sold by the Company and 1,200,000 shares are being sold by the Selling
Shareholder. See "Principal and Selling Shareholders." The Company will not
receive any proceeds from the sale of the shares of Common Stock by the Selling
Shareholder. See "Use of Proceeds."

The Common Stock of the Company is listed on the New York Stock Exchange
under the symbol "FRA." On April 18, 1994, the closing sale price of the Common
Stock was $ per share. See "Price Range of Common Stock."

FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED PRIOR
TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, SEE "INVESTMENT
CONSIDERATIONS."
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) SHAREHOLDER
<S> <C> <C> <C> <C>
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Per Share...................... $ $ $ $
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Total(3)....................... $ $ $ $
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</TABLE>

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses of the offering payable by the Company estimated
at $350,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
390,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------------

The shares of Common Stock are being offered severally by the Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to withdraw, cancel or modify said offer and to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made against payment therefor on or about April , 1994 at the offices
of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167.
------------------------------
BEAR, STEARNS & CO. INC.

THE DATE OF THIS PROSPECTUS IS APRIL , 1994.
<PAGE> 3

(INSERT PHOTOS)

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at Seven World Trade Center, 13th Floor, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Common Stock is listed on the New York Stock
Exchange; reports, proxy statements and other information described above can be
inspected and copied at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus, which constitutes a
part of that Registration Statement, does not contain all the information set
forth in that Registration Statement and the exhibits relating thereto.
Statements contained herein concerning the provisions of documents are
necessarily summaries of those documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. The Registration Statement and any amendments thereto, including
exhibits filed as a part thereof, are available for inspection and copying as
set forth above.
------------------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company hereby incorporates in this Prospectus by reference the
following documents which have been filed with the Commission pursuant to the
Exchange Act:

(a) The Company's Annual Report on Form 10-K for the fiscal year ended
November 5, 1993;

(b) The Company's Quarterly Report on Form 10-Q for the three months
ended February 4, 1994; and

(c) The description of the Company's Common Stock as contained in the
Company's Registration Statement on Form 8-A, as amended.

Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference into
this Prospectus and to be made a part hereof from the date of filing of such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The Company will furnish without charge, upon written or oral request, to
each person, including any beneficial owner, to whom this Prospectus is
delivered, a copy of any or all of the documents incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to Farah Incorporated, 8889 Gateway West, El Paso, Texas
79925, telephone number (915) 593-4444, Attn: Corporate Secretary.

3
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere or incorporated by reference in this Prospectus. Except as
otherwise specified, all information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised. See "Underwriting."

THE COMPANY

Farah Incorporated (the "Company"), founded in 1920, is a leading
manufacturer and marketer of apparel for men and boys. The Company's principal
products are casual and dress slacks, suit separates, sportcoats and shorts. The
Company sells its products under the labels Savane(R), Farah(R), Farah Clothing
Company(R) and John Henry(R), and under private labels. The Company has
developed product lines targeted to a wide range of retailers, including better
department stores and, to a lesser extent, national chains and mass merchants.
The Company also manufactures and sells its products in certain markets outside
of the United States, primarily the United Kingdom and Australia. Largely as a
result of recent growth in its wrinkle resistant casual slacks business, the
Company's operating results have improved significantly.

The Company was the first to use wrinkle resistant technologies in the
production and marketing of men's 100% cotton slacks when it introduced "no
wrinkles" slacks under its Savane label in 1989. The Company is a leader in that
market. Sales of Savane products have increased from $3.6 million in fiscal 1990
to $60.4 million in fiscal 1993, as the Company's no wrinkles process has gained
increased acceptance with consumers and retailers. The Savane product line of
slacks is sold primarily in better department stores and is targeted principally
at the casual wear segment of the men's and boy's apparel market. Most Savane
casual slacks use 100% cotton fabrics and are treated with PROCESS 2000(R).
PROCESS 2000 is the Company's trademark for the no wrinkles technologies used in
its Savane products. As a result of its experience with no wrinkles
technologies, the Company believes it currently offers a broader no wrinkles
product line than its competitors.

Key components of the Company's business strategy include:

- Continuing to expand the offerings of the Savane line of casual slacks by
developing no wrinkles products in additional styles, fabrics and
finishes. In addition, the Company is introducing new lines of men's
dress slacks and slacks for the casual workplace market under the Savane
label.

- Continuing to market and distribute its Savane products primarily to
better departments stores. As a result, the Company believes that it may
be able to maintain a more consistent margin than other similar products
which are sold through several channels of distribution.

- Introducing new product offerings under the Farah/Farah Clothing Company
and John Henry labels using no wrinkles technologies and stain resistant
treatments to stimulate sales of these product lines.

- Licensing third parties to manufacture and market apparel using the
Savane trademark, including outerwear, shirts, belts, socks and shoes.
The Company entered into its first license agreement in December 1993
with Oxford Industries, Inc. to manufacture and market shirts carrying
the Savane and PROCESS 2000 trademarks.

- Expanding its national media advertising for its Savane products. The
Company began its first national television advertising campaign for its
Savane products in May 1993 and another campaign was completed in
December 1993.

- Manufacturing the majority of its products for U.S. sales using sources
in Mexico and Costa Rica, where labor rates have been below the rates in
the United States and where favorable tariff provisions exist.

- Identifying new foreign markets for the Company's products. The Company
is currently reviewing opportunities to expand the Savane line of
products in the Continental European market in fiscal 1994.

The Company is a Texas corporation. Its principal executive offices are
located at 8889 Gateway West, El Paso, Texas 79925, and its telephone number is
(915) 593-4444.

4
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THE OFFERING

Common Stock offered by:

The Company.............. 1,400,000 shares

Selling Shareholder...... 1,200,000 shares

Common Stock
outstanding(1):

Prior to the offering.... 8,206,236 shares

After the offering....... 9,606,236 shares

Use of Proceeds............ To make capital expenditures estimated to be
approximately $8.0 million, with the balance
being used to reduce indebtedness under the
Company's revolving credit agreement, which
amount will then be available for general
corporate purposes. See "Use of Proceeds."

NYSE Symbol................ FRA

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(1) As of March 15, 1994 and excludes (a) 109,138 shares of Common Stock
issuable upon conversion of the $1,663,000 in principal amount of
outstanding 8.5% convertible subordinated debentures due February 1, 2004
("Convertible Debentures"), and (b) 407,282 shares of Common Stock issuable
upon exercise of outstanding stock options or subject to restricted stock
awards. See Note 5 of Notes to Consolidated Financial Statements.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED
------------------------ FISCAL YEASR ENDED
FEBRUARY 4, FEBRUARY 5, --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989(1)
---------- ---------- --------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 51,270 $ 35,316 $ 180,114 $151,990 $151,202 $139,616 $239,047
Gross profit....................... 15,384 10,640 53,094 38,481 38,894 24,148 55,619
Factory conversion expenses(2)..... -- -- 4,000 -- -- -- --
Operating income (loss)............ 2,496 835 1,722 (3,434) (2,793) (17,346) (11,992)
Provision for Generra
bankruptcy(3).................... -- -- -- (6,146) -- -- --
Net income (loss).................. 2,011 604 132 (9,589) (5,508) (6,597) (13,691)
Net income (loss) per share(4)..... 0.25 0.08 0.02 (1.52) (0.93) (1.06) (2.19)
Weighted average shares
outstanding...................... 8,204 7,318 7,781 6,308 5,927 6,238 6,243
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 4, 1994
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ACTUAL AS ADJUSTED(5)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................................................... $ 37,140 $
Total assets............................................................................ 125,048
Short-term debt, including current maturities of long-term debt......................... 32,245
Long-term debt, excluding current maturities............................................ 2,885
Shareholders' equity.................................................................... 46,971
</TABLE>

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(1) Operations in the first seven months of fiscal 1989 include Generra
Sportswear Company, Inc. ("Generra"), a former subsidiary of the Company
sold in fiscal 1989.

(2) The Company incurred approximately $4,000,000 of expenses in fiscal 1993 for
conversion of certain sew lines from production of dress to casual products.
See Note 1 of Notes to Consolidated Financial Statements.

(3) A $6,146,000 provision for the loss on the Company's investment in Generra
was recorded in fiscal 1992 as a result of the bankruptcy of Generra. See
Note 1 of Notes to Consolidated Financial Statements.

(4) For information concerning the calculation of net income (loss) per share,
see Note 1 of Notes to Consolidated Financial Statements.

(5) Adjusted to give effect to the sale by the Company of 1,400,000 shares of
Common Stock offered hereby and the application of the net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

5
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INVESTMENT CONSIDERATIONS

Prior to making an investment decision, prospective investors should
consider carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the following investment considerations.

HISTORY OF SIGNIFICANT LOSSES

The Company incurred aggregate net losses of approximately $39,500,000 for
the six fiscal years preceding fiscal 1993. However, the Company has reported
net income of $2,011,000 for the three months ended February 4, 1994 and
$132,000 for fiscal year 1993, including fourth quarter 1993 net income of
$3,418,000. The Company's history of net losses was due in large part to the
loss of customers resulting from the failure to deliver products in a timely
manner. The failure to deliver products resulted primarily from certain
strategic decisions made by the Company in the 1980s, including the transition
of production from United States factories to offshore factories and a
significant increase in the size and complexity of the Company's product line.
The Company also lost customers as a result of certain marketing decisions. The
Company installed a new management team in the late 1980s which gained full
management control of the Company following a proxy contest in 1990. This new
management team has addressed the problems with production and refocused the
Company's marketing efforts. The Company believes that these problems have been
resolved and that it has regained the confidence of its customers. However,
there can be no assurance that the Company will be profitable in the future or
that the Company will not experience problems in delivering products in a timely
manner. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

COMPETITION

Competition in the men's and boy's sectors of the apparel industry is
intense. The Company competes with many other apparel companies, some of which
are larger and have greater financial and other resources than the Company. The
Company believes that in order to be successful in its industry, it must be able
to evaluate and respond to changing consumer demand and tastes and remain
competitive in the areas of style, quality and price while operating within the
significant domestic and foreign production and delivery constraints of the
industry.

Several of the Company's competitors have only recently entered the wrinkle
resistant casual slacks market. Levi Strauss & Co. ("Levi's"), one of the
largest manufacturers of men's casual slacks, has recently introduced a
Dockers(R) labelled all cotton wrinkle resistant product line and the Company
anticipates that Levi's will devote substantial financial resources to develop
and market this new product line. Levi's and certain other competitors have
larger financial and marketing resources than the Company and therefore will
offer significant competition to the Company's Savane line of products. Such
competition could adversely affect the price of the Savane products and result
in a reduction of the Company's share of the wrinkle resistant slacks market.
This adverse effect may, however, be offset by the expansion of the market
caused by increased awareness of wrinkle resistant products. Accordingly, the
Company is unable to determine the ultimate effect of this additional
competition in this segment of the casual slacks market.

DEPENDENCE ON KEY CUSTOMERS

The number of major apparel retailers has decreased in recent years, and
the retail apparel industry continues to undergo substantial consolidation. The
Company could lose a retailer as a customer in the event the retailer is
acquired in a consolidation and is required by the acquiring company to change
vendors. The Company's ten largest customers accounted for approximately 48% and
56% of the Company's consolidated revenues during the fiscal years 1992 and
1993, respectively. The Company's largest customer, The May Department Stores
Company, accounted for approximately 14% and 12% of the Company's consolidated
revenues during fiscal years 1992 and 1993, respectively. The loss of the
business of one or more of the Company's largest customers could have a material
adverse effect on the Company's results of operations. The

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Company has no long-term commitments or contracts with any of its customers. See
"Business -- Customers."

RELIANCE ON CERTAIN PRODUCTS

The Company's operating performance is highly dependent on the success of
its no wrinkles products. The Company and its competitors are developing new
methods of applying wrinkle resistant technologies to garments. The Company
could be adversely affected in the event its competitors are able to develop new
wrinkle resistant technologies which permit lower cost production of wrinkle
resistant garments or which produce products that are preferred by retail
customers. The Company could also be adversely affected in the event customers
change their acceptance of wrinkle resistant products.

APPAREL INDUSTRY

The Company, like many of its competitors, sells to major retailers, some
of which have engaged in leveraged buyouts or transactions in which such
retailers incurred significant amounts of debt, and some of which are currently
operating under, or have recently emerged from, the protection of the federal
bankruptcy laws. The Company cannot predict to what extent, if any, the current
financial condition of such retailers will affect the Company. See
"Business -- Customers."

CONSUMER TRENDS

The Company believes that its success depends, in part, on its ability to
anticipate, gauge and respond to changing consumer demands and fashion trends in
a timely manner. While the Company believes that a large portion of its recent
success is due to its ability to bring more innovative products to the market
than its competitors, there can be no assurance that it will be successful in
this regard in the future. The Company attempts to minimize the risk of changing
consumer trends and product acceptance by producing basic, year-round core
products as opposed to more seasonal products. However, the Company's operating
results could be adversely affected if the Company misjudges the market for a
number of products or if consumers significantly shift their preference for
certain types of products. See "Business -- Business Strategy."

FOREIGN OPERATIONS

Substantially all of the Company's products are manufactured outside of the
United States, either in its foreign manufacturing factories or through
arrangements with independent foreign contractors. As a result, the Company's
operations may be adversely affected by political instability resulting in the
disruption of trade with foreign countries in which the Company's factories or
contractors are located, the imposition of additional regulations relating to
imports or duties, taxes and other charges on imports, any significant
fluctuation of the value of the dollar against foreign currencies and
restrictions on the transfer of funds. In addition, the Company's import
operations are subject to constraints imposed by bilateral textile agreements
between the United States and certain foreign countries. These agreements impose
quotas on the amount and type of goods which can be imported into the United
States from some of these countries. See "Business -- Regulation."

QUARTERLY EARNINGS FLUCTUATIONS

As is the case with many companies in the apparel industry, the Company's
operating results are affected by the seasonal nature of the apparel industry.
Accordingly, the Company's operating results may fluctuate from quarter to
quarter. See Note 10 of Notes to Consolidated Financial Statements and
"Business -- Seasonality."

POSSIBLE VOLATILITY OF STOCK PRICE

The market price for shares of the Common Stock has varied significantly
and may be volatile depending on news announcements and changes in general
market conditions. See "Price Range of Common Stock." In particular, news
announcements regarding quarterly or annual results of operations or competitive
developments impacting the Company may cause significant fluctuations in the
market price of the Common Stock.

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SIGNIFICANT SHAREHOLDERS

After this offering, Georges Marciano and Paul Marciano, and their
respective affiliates, will beneficially own 10.1% and 2.6%, respectively, and
12.7% in the aggregate (12.2% in the aggregate if the over-allotment option is
exercised in full) of the outstanding Common Stock. As a result, such
shareholders may be in a position to influence the outcome of matters requiring
a vote of shareholders, including electing directors and acting with respect to
any sale of assets, merger or consolidation. See "Principal and Selling
Shareholders."

RELIANCE ON KEY PERSONNEL

The Company believes that its continued success will depend to a
significant extent upon the abilities and continued effort of certain key
management employees. Each of these management employees is an integral part of
the management of the Company. The loss of the services of any of these
individuals could have a material adverse effect upon the Company. See
"Management." The Company's continued success is also dependent upon its ability
to attract and retain other qualified employees.

NO DIVIDENDS

The Company has not paid dividends on its Common Stock since 1986 and does
not plan to pay any dividends on its Common Stock for the foreseeable future.
The Company's revolving credit agreement prohibits the payment of dividends. See
"Dividend Policy."

USE OF PROCEEDS

The net proceeds to the Company from the sale of Common Stock offered
hereby are estimated to be approximately $ million ($ million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated expenses of the offering
payable by the Company. An estimated $8.0 million of such proceeds will be used
to fund capital expenditures in order to expand and enhance production
facilities. Expected capital expenditures include the purchase of additional
laundry and pressing facilities for the Company's no wrinkles process and
additional sewing equipment. The balance of the proceeds will be used to reduce
the indebtedness under the Company's $40.0 million revolving credit agreement
(the "Credit Agreement"). After such repayment, the undrawn balance under the
Credit Agreement will then be available for general corporate purposes. Usage
under the Credit Agreement at February 4, 1994, was $32.7 million, which amount
was incurred primarily to fund the Company's working capital requirements and
capital expenditures. Interest is payable under the Credit Agreement at prime
(6% at February 4, 1994) plus 2 1/4%. The portion of the net proceeds of the
offering to be used to fund capital expenditures will initially be applied to
reduce borrowings under the Credit Agreement pending the funding of the capital
expenditures. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and Note 3 of
Notes to Consolidated Financial Statements.

The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Shareholder.

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PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "FRA." The following table sets forth the high and low sale prices of
the Common Stock on the New York Stock Exchange for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
----- ----
<S> <C> <C>
FISCAL YEAR ENDED NOVEMBER 6, 1992:
First Quarter....................................................... $8 7/8 $5 3/4
Second Quarter...................................................... 8 1/8 5 3/4
Third Quarter....................................................... 7 1/8 4 3/8
Fourth Quarter...................................................... 6 1/8 5
FISCAL YEAR ENDED NOVEMBER 5, 1993:
First Quarter....................................................... 9 7/8 5 1/2
Second Quarter...................................................... 10 1/4 6 1/2
Third Quarter....................................................... 8 6 1/8
Fourth Quarter...................................................... 10 7/8 6 7/8
FISCAL YEAR ENDED NOVEMBER 4, 1994:
First Quarter....................................................... 14 3/4 8 3/4
Second Quarter (through April 18, 1994)............................. 21 7/8 12 5/8
</TABLE>

As of April 18, 1994, the last reported sale price of the Company's Common
Stock on the New York Stock Exchange was $ per share. As of March 15, 1994,
there were approximately 2,650 holders of record of the Company's Common Stock.

DIVIDEND POLICY

The Company has not paid cash dividends on its Common Stock since 1986. The
Company presently intends to retain earnings to finance the expansion of its
business and, therefore, does not expect to pay any cash dividends in the
foreseeable future. Any determination as to the payment of cash dividends will
depend upon the Company's earnings, general financial condition, capital needs
and other factors deemed pertinent by the Company's board of directors, as well
as any limitations imposed by lenders under credit facilities. The Company's
Credit Agreement prohibits the payment of dividends by the Company.

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CAPITALIZATION

The following table sets forth the actual capitalization of the Company at
February 4, 1994, and as adjusted to give effect to the sale by the Company of
1,400,000 shares of Common Stock offered hereby after deducting underwriting
discounts and commissions and estimated expenses payable by the Company, and the
application of a portion of the net proceeds therefrom as described under "Use
of Proceeds." This table should be read in conjunction with the Company's
consolidated financial statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FEBRUARY 4, 1994
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current maturities of long-term debt............... $32,245 $
------- -----------
------- -----------
Long-term debt, excluding current maturities(1)........................ 2,885
Shareholders' equity:
Common stock, no par value; authorized, 20,000,000 shares;
issued, 8,179,504 shares, and 9,579,504 shares, as adjusted(2).... 45,516
Additional paid-in capital........................................... --
Cumulative foreign currency translation adjustment................... (2,093)
Minimum pension liability adjustment................................. (2,050)
Retained earnings.................................................... 5,707
Less: 36,275 treasury shares at cost.............................. (109)
------- -----------
Total shareholders' equity...................................... 46,971
------- -----------
Total capitalization......................................... $49,856 $
------- -----------
------- -----------
</TABLE>

- ---------------

(1) See Note 3 of Notes to Consolidated Financial Statements for a description
of the long-term debt.

(2) Excludes (a) 109,795 shares of Common Stock issuable upon conversion of the
$1,673,000 in principal amount of outstanding Convertible Debentures, and
(b) 459,133 shares of Common Stock issuable upon exercise of outstanding
stock options or subject to restricted stock awards. See Note 5 of Notes to
Consolidated Financial Statements.

10
<PAGE> 12

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data has been derived from,
and should be read in conjunction with, the consolidated financial statements,
related notes and other financial information included elsewhere in this
Prospectus. The selected consolidated financial statements of the Company for
each of the five fiscal years in the period ended November 5, 1993 are derived
from the consolidated financial statements of the Company which are included
elsewhere in this Prospectus. The selected consolidated financial data for the
three month periods ended February 4, 1994 and February 5, 1993 are unaudited,
but in the opinion of management such financial statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position and results of operations. The
results of operations for the three months ended February 4, 1994 may not be
indicative of the results to be expected for the full fiscal year. Effective in
the first quarter of fiscal 1992, the Company adopted a 52/53 week fiscal year
ending on the first Friday following October 31. Prior to that time, October 31
was the last day of the fiscal year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------- FISCAL YEAR ENDED
FEBRUARY 4, FEBRUARY 5, ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989(1)
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................... $ 51,270 $35,316 $180,114 $151,990 $151,202 $139,616 $239,047
Cost of sales..................... 35,886 24,676 127,020 113,509 112,308 115,468 183,428
----------- ----------- -------- -------- -------- -------- --------
Gross profit...................... 15,384 10,640 53,094 38,481 38,894 24,148 55,619
Selling, general and
administrative expenses......... 12,888 9,805 47,372 41,915 41,687 41,494 67,611
Factory conversion expenses(2).... -- -- 4,000 -- -- -- --
----------- ----------- -------- -------- -------- -------- --------
Operating income (loss)........... 2,496 835 1,722 (3,434) (2,793) (17,346) (11,992)
Other income (expense):
Interest expense, net........... (507) (217) (1,452) (960) (1,145) (1,199) (4,618)
Foreign currency transaction
gains (losses)................ 75 (20) (151) 1,460 (832) 851 (775)
Gains on sales of assets........ -- -- 320 9 127 9,697 2,419
Loss on sale of Generra......... -- -- -- -- -- -- (1,071)
Provision for Generra
bankruptcy(3)................. -- -- -- (6,146) -- -- --
Other, net...................... 3 3 (3) (149) (559) 1,568 800
----------- ----------- -------- -------- -------- -------- --------
Income (loss) before income
taxes........................... 2,067 601 436 (9,220) (5,202) (6,429) (15,237)
Provision (benefit) for income
taxes........................... 56 (3) 304 369 306 168 (1,546)
----------- ----------- -------- -------- -------- -------- --------
Net income (loss)................. $ 2,011 $ 604 $ 132 $ (9,589) $ (5,508) $ (6,597) $(13,691)
----------- ----------- -------- -------- -------- -------- --------
----------- ----------- -------- -------- -------- -------- --------
Net income (loss) per share(4).... $ 0.25 $ 0.08 $ 0.02 $ (1.52) $ (0.93) $ (1.06) $ (2.19)
Weighted average shares
outstanding..................... 8,204 7,318 7,781 6,308 5,927 6,238 6,243
BALANCE SHEET DATA:
Working capital................... $ 37,140 $31,013 $ 32,773 $ 36,825 $ 41,225 $ 47,297 $ 54,752
Total assets...................... 125,048 90,177 118,891 93,137 106,827 119,566 129,333
Short-term debt, including current
maturities...................... 32,245 17,484 30,189 10,293 15,849 18,549 13,686
Long-term debt, excluding current
maturities...................... 2,885 603 1,179 4,452 5,192 6,176 10,636
Shareholders' equity.............. 46,971 39,155 43,425 39,010 45,853 51,867 60,226
</TABLE>

- ---------------

(1) Operations in the first seven months of fiscal 1989 include Generra, a
former subsidiary of the Company sold in fiscal 1989.

(4) For information concerning the calculation of net income (loss) per share,
see Note 1 of Notes to Consolidated Financial Statements.

11
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

The Company incurred substantial losses from fiscal 1986 through fiscal
1992 as a result of several factors. For several selling seasons in the
mid-1980s, the Company experienced significant delays in delivering products due
to its shift in production from U.S. factories to offshore factories and a
concurrent large increase in the size and complexity of its product lines. As a
result of late deliveries, the Company lost customers. To compensate for this
loss, the Company widened distribution of certain of its brands, which further
alienated many of its better department store customers. A new management team
was installed in the late 1980s and gained full management control as a result
of a proxy contest during 1990. The new management team has taken steps to
correct delivery problems, re-establish relationships with better department
stores and focus the Company on developing its successful lines of no wrinkles
products.

The Company's principal products are casual and dress slacks, suit
separates, sportcoats and shorts. The Company sells its products under the
labels Savane(R), Farah(R), Farah Clothing Company(R) and John Henry(R), and
under private labels. The Company also manufactures and sells its products in
certain markets outside of the United States, primarily the United Kingdom and
Australia.

The Company is organized as three distinct operating divisions. Farah
U.S.A. manufactures and sells a variety of casual and dress apparel lines to
retailers throughout the United States. Farah International manufactures and
sells apparel in several countries in Europe, Australia and Asia. Value Slacks
operates retail stores which sell apparel manufactured by the Company for these
stores, close-outs and seconds from Farah U.S.A., and a limited amount of
merchandise purchased from third parties.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
financial data as percentages of net sales:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------- FISCAL YEAR ENDED
FEB. 4, FEB. 5, -------------------------
1994 1993 1993 1992 1991
------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales:
Farah U.S.A........................... 80.6% 73.1% 75.9% 67.1% 62.5%
Farah International................... 11.0 15.7 16.2 23.7 27.5
Value Slacks.......................... 8.4 11.2 7.9 9.2 10.0
------- ------- ----- ----- -----
Total net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 70.0 69.9 70.5 74.7 74.3
------- ------- ----- ----- -----
Gross profit.......................... 30.0 30.1 29.5 25.3 25.7
Selling, general and administrative
expenses.............................. 25.1 27.7 26.3 27.6 27.6
Factory conversion expenses............. -- -- 2.2 -- --
------- ------- ----- ----- -----
Operating income (loss)............... 4.9 2.4 1.0 (2.3) (1.9)
Other income (expense), net............. (.9) (.7) (.7) .2 (1.6)
Provision for Generra bankruptcy........ -- -- -- (4.0) --
------- ------- ----- ----- -----
Income (loss) before income taxes..... 4.0 1.7 .3 (6.1) (3.5)
Provision for income taxes.............. (.1) -- (.2) (.2) (.2)
------- ------- ----- ----- -----
Net income (loss)..................... 3.9% 1.7% .1% (6.3)% (3.7)%
------- ------- ----- ----- -----
------- ------- ----- ----- -----
</TABLE>

Three Months Ended February 4, 1994 compared to Three Months Ended February 5,
1993

Net Sales. Sales for the first quarter of fiscal 1994 increased by
$15,954,000 (45.2%) over the first quarter of fiscal 1993. Sales were up at all
divisions, with the largest increase at Farah U.S.A. where sales increased by
60%. Sales increased by 2% at Farah International and by 9% at Value Slacks.

12
<PAGE> 14

Farah U.S.A. sales for the first quarter of fiscal 1994 were $41,310,000
compared to $25,806,000 in the first quarter of fiscal 1993. Unit volume
increased by 55% while the average unit sales price increased by 3%. The Company
continued to experience considerable growth in sales of Savane products, with a
196% increase in Savane sales over the first quarter of fiscal 1993. As a
percent of sales, Savane represented 55% of Farah U.S.A. sales in the first
quarter of fiscal 1994 compared to 30% during the same period in fiscal 1993.
Sales of private label products also increased by 225% in the first quarter of
fiscal 1994 compared to the first quarter of fiscal 1993. The first quarter of
fiscal 1993 represented the first full quarter of private label sales. Private
label sales were 9% of total Farah U.S.A. sales in the first quarter of fiscal
1994 compared to 4% in the first quarter of fiscal 1993.

Farah International sales were $5,655,000 for the first quarter of fiscal
1994 compared to $5,554,000 in the first quarter of fiscal 1993. Unit volume was
up 2% while the average unit sales price was comparable in both quarters. Sales
were comparable in the first quarter of fiscal 1994 to 1993 at Farah
Manufacturing (U.K.) Limited ("Farah U.K.") and Farah Australia Pty, Ltd.
("Farah Australia") while Farah (New Zealand) Limited ("Farah New Zealand")
reported a 32% increase in unit sales for the period. Farah New Zealand, which
began operations in fiscal 1990, is continuing to increase its customer base,
contributing to its overall sales increase.

Value Slacks sales were $4,305,000 in the first quarter of fiscal 1994
compared to $3,956,000 in the first quarter of fiscal 1993. Sales in Puerto Rico
decreased 12% while sales in the U.S. increased 30%. U.S. store sales
represented 59% of total Value Slacks sales in the first quarter of fiscal 1994
compared to 50% in the first quarter of fiscal 1993. There were 11 Puerto Rican
stores in operation in the first quarter of fiscal 1994 compared to 15 stores in
the first quarter of fiscal 1993. The number of U.S. stores increased to 21
stores in the first quarter of fiscal 1994 from 14 in the first quarter of
fiscal 1993. The Company plans to increase the number of U.S. stores in the
remainder of fiscal 1994 and close certain Puerto Rican stores.

Gross Profit. Gross profit increased by $4,744,000 (44.6%) in the first
quarter of fiscal 1994 compared to the first quarter of fiscal 1993. As a
percent of sales, consolidated gross profit was comparable at approximately 30%
in both periods.

At Farah U.S.A. gross profit as a percent of sales was comparable in both
quarters. The gross profit at Farah U.S.A. in the first quarter of fiscal 1994
was favorably impacted by higher production volumes which decreased per unit
production cost and, to a lesser extent, by the impact of lower duties as a
result of the North American Free Trade Agreement ("NAFTA") which became
effective January 1, 1994. These favorable impacts were offset by higher costs
of contractor production. At Farah International the gross profit percentage
increased from 35% in the first quarter of fiscal 1993 to 38% in the first
quarter of fiscal 1994. Production in the Company's Irish factories was up
approximately 11% resulting in higher efficiency levels and an overall decrease
in cost per unit produced. Gross profit as a percent of sales also increased at
Value Slacks from 39% in fiscal 1993 to 45% in fiscal 1994. This increase is
mainly due to an increase in U.S. store sales, which carry a higher gross profit
percentage. Value Slacks has also been able to achieve a higher markup due to
increased sales of higher margin Savane products.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") as a percent of sales decreased from 28% in the
first quarter of fiscal 1993 to 25% in the first quarter of fiscal 1994. At
Farah U.S.A. SG&A decreased from 25% in the first quarter of fiscal 1993 to 22%
in the first quarter of fiscal 1994. This decrease was mainly attributable to a
revised sales compensation structure, lower shipping charges due to a new
freight policy, and fixed costs that did not increase in relation to increased
sales levels. At Farah International SG&A as a percent of sales remained
comparable in the first quarter of fiscal 1993 and the first quarter of fiscal
1994. At Value Slacks SG&A as a percent of sales increased from 37% in the first
quarter of fiscal 1993 to 44% in the first quarter of fiscal 1994. This increase
in SG&A was related to fixed selling costs, including rent, payrolls and
advertising, that were incurred in the first quarter in stores in the eastern
United States where sales suffered due to severe weather conditions, limiting
the number of operating days during the month of January.

Other Income (Expense). Interest expense increased by $285,000 in the first
quarter of fiscal 1994 over the first quarter of fiscal 1993 due to increased
usage of the Company's Credit Agreement to finance higher

13
<PAGE> 15

inventory levels. This increase was partially offset by foreign currency
transaction gains of $75,000 in the first quarter of fiscal 1994 compared to
foreign currency transaction losses of $20,000 in the first quarter of fiscal
1993.

Provision (Benefit) for Income Taxes. Income taxes fluctuate as a result of
a change in the mix of the income (loss) among the countries in which the
Company conducts its business and the effect of operating loss carryforwards.
See Note 2 of Notes to Unaudited Consolidated Quarterly Financial Statements.

Fiscal 1993 compared to Fiscal 1992

Net Sales. Sales increased from $151,990,000 in fiscal 1992 to $180,114,000
in fiscal 1993, a $28,124,000 (18.5%) increase. Farah U.S.A. sales increased
from $101,981,000 in fiscal 1992 to $136,767,000 in 1993, a 34.1% increase.
Sales at Farah International declined from $35,959,000 in fiscal 1992 to
$29,097,000 in fiscal 1993, a 19.1% decrease. Sales at Value Slacks increased
from $14,050,000 in fiscal 1992 to $14,250,000 in fiscal 1993, a 1.4% increase.

Farah U.S.A. accounted for 67% of the Company's consolidated sales in
fiscal 1992 compared to 76% in fiscal 1993. Leading the increase in sales at
Farah U.S.A. was its Savane brand of casual cotton no wrinkles slacks. Savane
had sales of $17,230,000 in fiscal 1992 compared to $60,387,000 in fiscal 1993,
a 250% increase. This large increase is due to a number of factors, including
the shift in consumer preferences toward a more casual lifestyle and the ease of
care that no wrinkles products offer. In addition, the Company believes that its
policy of selling Savane products primarily to better department stores and a
national television advertising campaign in fiscal 1993 stimulated sales during
the year. Sales of Farah and Farah Clothing Company branded products decreased
from $64,239,000 in fiscal 1992 to $52,949,000 in fiscal 1993. Sales of these
brands consisted primarily of dress products. The Company believes the sales
decrease was caused mainly by the shift of consumer preference from dress to
casual products. Sales of the Company's John Henry products decreased from
$18,300,000 in fiscal 1992 to $14,739,000 in fiscal 1993. Most of the John Henry
products sold in fiscal 1993 were in the dress category and the decrease in John
Henry sales was also due to the consumer shift toward casual products. The final
significant component of Farah U.S.A.'s sales in fiscal 1993 was its private
label division where sales increased from $1,104,000 in fiscal 1992 to
$7,516,000 in fiscal 1993. Fiscal 1993 was the first full year of sales in the
private label division. Overall, the Farah U.S.A. average unit sales price was
comparable between years, with the higher average unit sales price from Savane
sales being offset by a lower private label average unit sales price.

Farah International accounted for 16% of the Company's consolidated sales
in fiscal 1993 and 24% in fiscal 1992. Farah International's largest
international subsidiary in fiscal 1993 was Farah U.K. with sales of
$19,227,000, followed by Farah Australia and Farah New Zealand with combined
sales of $9,028,000. Sales at Farah U.K. decreased by $6,276,000 in fiscal 1993,
a 25% decrease. Unit sales decreased by 15% while the average unit sales price
declined by 12%. The decrease in units was due to lower sales of certain
seasonal products and lower closeout sales in fiscal 1993 compared to fiscal
1992. While the average unit sales price in British Pound Sterling increased by
6%, the average unit sales price in equivalent U.S. Dollars decreased due to the
strengthening of the U.S. Dollar compared to the British Pound Sterling. The
average exchange rate in fiscal 1993 was $1.51 per Pound compared to $1.81 in
fiscal 1992. Sales at Farah Australia and Farah New Zealand decreased by
$302,000, primarily due to sales price reductions resulting from lower import
duty levels imposed in Australia which were, in turn, passed through to the
customer as lower sales prices. In addition, the U.S. Dollar strengthened by
over 9% compared to the Australian Dollar in fiscal 1993 which contributed to
the lower average unit sales price in U.S. Dollar terms. Unit sales at Farah
Australia and Farah New Zealand increased by 7% due to greater market
penetration in New Zealand where unit sales increased 52%.

Value Slacks accounted for 8% of the Company's consolidated sales in fiscal
1993 and 9% in fiscal 1992. As of the end of fiscal 1993, Value Slacks operated
20 U.S. stores and 11 Puerto Rican stores compared to 14 U.S. stores and 15
Puerto Rican stores at the end of fiscal 1992. Sales in Value Slacks' U.S.
stores increased by 14% in fiscal 1993 while Puerto Rican store sales decreased
by 13%. Overall, the average unit sales price increased by 10% in fiscal 1993
and unit sales decreased by 8%. The average unit sales price increase was due to
the opening of more U.S. stores where the mix of products sold consisted of more
first quality merchandise and Savane products in fiscal 1993. Savane carries a
higher selling price than other Farah products. The unit

14
<PAGE> 16

decrease occurred in the Puerto Rican stores where there were fewer stores
operating and the general economic conditions were not favorable for the type of
merchandise that Value Slacks sold.

Gross Profit. Gross profit as a percent of sales was 29.5% in fiscal 1993
compared to 25.3% in fiscal 1992. Gross profit in fiscal 1993 was 27% at Farah
U.S.A., 37% at Farah International and 42% at Value Slacks, compared to fiscal
1992 gross profit of 20% at Farah U.S.A., 35% at Farah International and 37% at
Value Slacks.

The improvement in gross profit as a percent of sales at Farah U.S.A. was
primarily due to higher sales of Savane products which carried a higher gross
profit percent than other Farah brands. In addition, Farah U.S.A. more fully
utilized its factories in fiscal 1993 than it did in fiscal 1992. In fiscal
1992, production levels were increased in the first part of the year to meet
projected sales levels of dress products. While sales did increase in the first
half of fiscal 1992, they did not reach the expected levels due to lower sales
of dress products at retail. As a result, production was reduced in the second
and third quarters to levels below plan. This resulted in decreased plant
efficiencies and lower gross profit percents in fiscal 1992. With the large
shift in sales from dress products to casual products in fiscal 1993, Farah
U.S.A. was able to improve the utilization of its factories. However, since its
factories were configured primarily for dress production, late in the second
quarter of fiscal 1993 a decision was made to convert portions of the sew lines
in Costa Rican and Mexican factories from the production of dress to casual
products. The impact of such conversion resulted in approximately $4,000,000 of
factory conversion expenses. See Note 1 of Notes to Consolidated Financial
Statements.

The improvement in gross profit percent at Farah International was due to
lower closeout sales at Farah U.K., as well as lower markdowns in general at
Farah U.K. In addition, the Company was able to more fully utilize its Irish
factories in fiscal 1993 which also contributed to the improvement.

The increase in gross profit percent at Value Slacks was primarily due to
favorable results at its U.S. stores. The gross profit percent in the U.S.
stores was 47% in fiscal 1993 compared to 40% in fiscal 1992 and the gross
profit percent in the Puerto Rican stores was 35% in fiscal 1993 compared to 34%
in fiscal 1992. The increase in both instances was due to fewer markdowns and
higher Savane sales. Savane products carry a higher gross profit percent than
other Farah brands.

Selling, General and Administrative Expenses. SG&A as a percent of sales
was 26.3% in fiscal 1993 compared to 27.6% in fiscal 1992. SG&A was 23% of sales
at Farah U.S.A. compared to 22% in fiscal 1992, 33% at Farah International
compared to 35% in fiscal 1992 and 45% at Value Slacks compared to 48% in fiscal
1992.

The increase in SG&A as a percent of sales at Farah U.S.A. was primarily
due to increased advertising in fiscal 1993 with the introduction of a national
television advertising campaign for Father's Day 1993 to promote its Savane
products. Advertising costs increased approximately $4,600,000 at Farah U.S.A.
in fiscal 1993 as compared to fiscal 1992, or an additional 2.1% of Farah U.S.A.
sales. Partially offsetting this higher expense were certain fixed costs which
did not increase in proportion to the increase in sales.

The decrease in SG&A as a percent of sales at Farah International occurred
at Farah U.K. where the number of retail outlets maintained in customers' stores
decreased. In addition, certain other cost cutting measures at Farah U.K.
reduced its SG&A percent.

SG&A at Value Slacks as a percent of sales was lower in fiscal 1993
compared to fiscal 1992. The higher percentage in fiscal 1992 resulted from
higher costs associated with the closure of certain Puerto Rican stores and
higher occupancy, advertising and labor costs as a percent of sales in the
Puerto Rican stores.

Other Income (Expense). Net interest expense in fiscal 1993 increased due
to larger borrowings as a result of higher receivable and inventory levels at
Farah U.S.A. in support of the sales growth of Savane, offset in part by lower
costs of borrowing. Foreign currency transaction gains (losses) were ($151,000)
and $1,460,000 in fiscal 1993 and fiscal 1992, respectively. Foreign currency
transaction gains and losses are primarily related to the fluctuations in the
value of the U.S. Dollar compared to the British Pound Sterling. See Note 1 of
Notes to Consolidated Financial Statements. Included in fiscal 1992 is an
$841,000 currency gain which was recognized upon the closure of Farah Japan
Limited ("Farah Japan").

15
<PAGE> 17

Excluding net interest expense and foreign currency transaction gains
(losses), there was $317,000 of other income in fiscal 1993 and $6,286,000 of
other expense in fiscal 1992. In conjunction with the 1989 sale of Generra, the
Company retained a 5% ownership interest in Generra and received a $5,000,000
note receivable. Included in fiscal 1992 was a provision of $6,146,000 related
to the bankruptcy of Generra which filed for protection under Chapter 11 of the
federal bankruptcy laws during the second half of fiscal 1992.

Provision (Benefit) for Income Taxes. Income taxes fluctuate from year to
year depending on the mix of income or loss in countries in which the Company
conducts its business. In addition, there was a limitation in fiscal 1992 and
fiscal 1993 on recognition of deferred tax benefits on U.S. losses in accordance
with Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes." See Note 6 of Notes to Consolidated Financial Statements.

Fiscal 1992 compared to Fiscal 1991

Net Sales. Sales increased from $151,202,000 in fiscal 1991 to $151,990,000
in fiscal 1992, a $788,000 (.5%) increase. Farah U.S.A. sales increased from
$94,492,000 in fiscal 1991 to $101,981,000 in fiscal 1992, a 7.9% increase.
Sales at Farah International declined from $41,572,000 in fiscal 1991 to
$35,959,000 in fiscal 1992, a 13.5% decrease. Sales at Value Slacks decreased
from $15,138,000 in fiscal 1991 to $14,050,000 in fiscal 1992, a 7.2% decrease.

Farah U.S.A. accounted for 67% of the Company's consolidated sales in
fiscal 1992 compared to 62% in fiscal 1991. The largest category of sales in
fiscal 1992 was Farah and Farah Clothing Co. branded products which accounted
for $64,239,000 of sales in fiscal 1992 and $68,383,000 of sales in fiscal 1991.
The majority of sales under these brands were men's dress products, followed by
boy's dress products. Sales of Savane casual products were made entirely in
men's departments in fiscal 1992 and amounted to $17,230,000 compared to
$5,526,000 in fiscal 1991. The increase in Savane sales and decrease in sales of
the other Farah brands reflected the shift in consumer preference from dress
products to casual products. John Henry sales were $18,300,000 in fiscal 1992
compared to $18,590,000 in fiscal 1991.

Farah International accounted for 24% of the Company's consolidated sales
in fiscal 1992 and 28% in fiscal 1991. There was an 11% decrease in unit volume
and a 2% decrease in the average unit sales price in fiscal 1992. The decrease
in sales occurred mainly at Farah U.K. where sales decreased from $30,125,000 in
fiscal 1991 to $25,503,000 in fiscal 1992. Farah U.K. unit sales were down 16%
due to soft economic conditions, a decrease in the number of retail outlets in
customer stores and declining sales of certain key products. Combined sales of
Farah Australia and New Zealand were $9,330,000 in fiscal 1992 compared to
$9,000,000 in fiscal 1991. The Company closed Farah Japan during the second half
of 1992. In conjunction with the closing, the Company sold substantially all of
its Japanese inventory at reduced prices. This, in turn, accounted for the
decrease in the average unit sales price at Farah International. Excluding Farah
Japan, the average unit sales price was comparable in fiscal 1992 and fiscal
1991.

Value Slacks accounted for 9% of the Company's consolidated sales in fiscal
1992 and 10% in fiscal 1991. As of the end of fiscal 1992, Value Slacks operated
14 U.S. stores and 15 Puerto Rican stores compared to 14 U.S. stores and 16
Puerto Rican stores at the end of fiscal 1991. The sales decrease in fiscal 1992
was comprised of a 15% decrease in unit volume partially offset by an increase
in the average unit sales price of 9%. Sales were flat in the U.S. stores and
decreased by 14% in the Puerto Rican stores.

Gross Profit. Gross profit as a percent of sales was 25.3% in fiscal 1992
compared to 25.7% in fiscal 1991. Gross profit in fiscal 1992 was 20% at Farah
U.S.A., 35% at Farah International and 37% at Value Slacks, compared to a fiscal
1991 gross profit of 21% at Farah U.S.A., 35% at Farah International and 29% at
Value Slacks.

In the early part of fiscal 1992 Farah U.S.A. increased its production
levels to meet projected sales levels. Although sales levels did increase in the
first half of fiscal 1992, they did not reach expected levels which resulted in
excess inventory quantities. In order to bring inventory levels in line with
anticipated sales levels, production was reduced in the second and third
quarters, resulting in lower plant efficiencies. This resulted in

16
<PAGE> 18

higher costs per unit than planned and the sale of certain inventory below
standard selling prices to reduce inventory. Accordingly, the gross profit
percent at Farah U.S.A. was lower in fiscal 1992 than in fiscal 1991.

While Farah International's gross profit percent was comparable in both
fiscal 1992 and fiscal 1991, the gross profit percent at Farah U.K. was down by
approximately 6%, offset by an increased gross profit percent at Farah Australia
and Farah New Zealand. The gross profit percent was lower in the first half of
fiscal 1992 as a result of inventory closeouts at Farah U.K. and Farah Japan and
lower production volumes in Ireland. Production levels were increased in the
third quarter of fiscal 1992, decreasing unit costs and improving the gross
profit percent in both the third and fourth quarter.

The improvement in Value Slacks' gross profit percent in fiscal 1992 was
due to the implementation of new merchandising strategies in late fiscal 1991.
These strategies improved the average unit sales price by over $1.00 in fiscal
1992, thus improving the gross profit percent. In addition, approximately
$1,800,000 of markdowns were taken in late fiscal 1991 in an effort to dispose
of older store inventory.

Selling, General and Administrative Expenses. SG&A as a percent of sales
was 27.6% in both fiscal 1992 and fiscal 1991. SG&A was 22% in fiscal 1992 at
Farah U.S.A. compared to 21% in fiscal 1991, 35% in both years at Farah
International and 48% in fiscal 1992 at Value Slacks compared to 45% in fiscal
1991.

The increase in SG&A as a percent of sales at Farah U.S.A. was primarily
due to a 59% increase in advertising in fiscal 1992 compared to fiscal 1991,
partially offset by a lower per unit shipping cost.

While Farah International's SG&A as a percent of sales was comparable
between years, there was a decrease at Farah U.K. of approximately 2%. This was
the result of non-recurring expenses incurred in fiscal 1991 related to
severance payments, higher occupancy costs associated with the move to a new
warehouse and office facility and increased legal fees. This decrease was offset
by an increase in fiscal 1992 in Farah Japan for costs related to closure of the
Japanese operations and increased expenses at Farah Australia for setup costs of
a new computer system.

The increase during fiscal 1992 in SG&A as a percent of sales at Value
Slacks was the result of higher advertising and certain store operating costs
that did not decrease in proportion to the decrease in sales.

Other Income (Expense). The decrease in fiscal 1992 from fiscal 1991 was
due to lower interest rates and borrowings on lower inventory levels. Foreign
currency transaction gains (losses) were $1,460,000 and ($832,000) in fiscal
1992 and 1991, respectively. Foreign currency transaction gains and losses are
primarily related to the fluctuations in the value of the U.S. Dollar compared
to the British Pound Sterling. See Note 1 of Notes to Consolidated Financial
Statements. Included in fiscal 1992 was an $841,000 currency gain which was
recognized upon the closure of Farah Japan.

Excluding net interest expense and foreign currency transaction gains
(losses), there was $6,286,000 and $432,000 of other expense in fiscal 1992 and
fiscal 1991, respectively. Included in fiscal 1992 was a provision of $6,146,000
related to the bankruptcy of Generra.

Provision (Benefit) for Income Taxes. Income taxes fluctuate from year to
year depending on the mix of income or loss in countries in which the Company
conducts its business. In addition, there was a limitation in fiscal 1991 and
1992 on recognition of deferred tax benefits on U.S. losses in accordance with
Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes." See Note 6 of Notes to Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company's Credit Agreement provides up to $40,000,000 of credit through
November 3, 1995. Availability under the facility is limited by formulas derived
from accounts receivable, inventory and fixed assets. As of February 4, 1994,
usage under the Credit Agreement was $32,669,000 and available credit was
$6,897,000. See Note 3 of Notes to Consolidated Financial Statements. A portion
of the net proceeds from this offering will be used to reduce the indebtedness
under the Credit Agreement. See "Use of Proceeds."

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<PAGE> 19

Net cash used in operating activities was $3.7 million in the first quarter
of fiscal 1994 and $16.0 million in fiscal 1993. 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 Agreement and cash from operations will
be adequate for fiscal 1994 anticipated liquidity requirements. In addition, the
Company believes it will be able to replace the Credit Agreement when it expires
in November 1995 with other financing on similar terms. In fiscal 1994, major
liquidity requirements will be the financing of anticipated growth and capital
expenditures.

Inventories increased by $9,404,000 at February 4, 1994 compared to
November 5, 1993 and by $21,891,000 compared to February 5, 1993. The increase
is primarily attributable to higher sales at Farah U.S.A. and, to a lesser
extent, an increase in Farah U.S.A. inventories needed to satisfy customers'
quick response needs.

Trade payables were comparable at February 4, 1994 and November 5, 1993 and
increased $9,355,000 at February 4, 1994 compared to February 5, 1993. The
increase since February 5, 1993 was due to higher production levels at Farah
U.S.A. to service higher sales.

Short-term debt and current maturities of long-term debt increased by
$2,056,000 from November 5, 1993 to February 4, 1994 and by $14,761,000 from
February 5, 1993 to February 4, 1994. The increase from November 5, 1993 was
primarily due to higher borrowings at Farah U.S.A. to finance higher inventory
levels described above and capital expenditures. The increase from February 5,
1993 was primarily due to higher borrowings at Farah U.S.A. to finance higher
trade receivables from higher sales, higher inventories and capital
expenditures.

Effective February 1, 1994 the Company issued $1,673,000 of Convertible
Debentures in exchange for a like principal amount of its 5% convertible
subordinated debentures. The Convertible Debentures are convertible into Common
Stock at $15.2375 per share. The remaining 5% convertible subordinated
debentures totalling $2,252,000 were paid on February 1, 1994.

Capital expenditures for fiscal years 1993, 1992 and 1991 were $6.8
million, $1.5 million and $1.8 million, respectively. Capital expenditures
through February 4, 1994 approximated $1.3 million and were primarily for
manufacturing equipment and information systems. Approximately $8.0 million of
the net proceeds from this offering will be used for capital expenditures. See
"Use of Proceeds."

Most of Farah U.S.A.'s major fabric suppliers provide 60-day terms, subject
to certain limits. During fiscal 1993, the maximum outstanding balance at any
month-end under these credit terms was $9,179,000.

Inflation did not materially impact the Company in fiscal 1993, 1992 or
1991.

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<PAGE> 20

BUSINESS
GENERAL

The Company, founded in 1920, is a leading manufacturer and marketer of
apparel for men and boys. The Company's principal products are casual and dress
slacks, suit separates, sportcoats and shorts. The Company sells its products
under the labels Savane(R), Farah(R), Farah Clothing Company(R) and John
Henry(R), and under private labels. The Company has developed product lines
targeted to a wide range of retailers, including better department stores and,
to a lesser extent, national chains and mass merchants. The Company also
manufactures and sells its products in certain markets outside of the United
States, primarily the United Kingdom and Australia. Largely as a result of
recent growth in its wrinkle resistant casual slacks business, the Company's
operating results have improved significantly.

The Company was the first to use wrinkle resistant technologies in the
production and marketing of men's 100% cotton slacks when it introduced no
wrinkles slacks under its Savane label in 1989. The Company is a leader in that
market. Sales of Savane products have increased from $3.6 million in fiscal 1990
to $60.4 million in fiscal 1993, as the Company's no wrinkles process has gained
increased acceptance with consumers and retailers. The Savane product line of
slacks is sold primarily in better department stores and is targeted principally
at the casual wear segment of the men's and boy's apparel market. Most Savane
casual slacks use 100% cotton fabrics and are treated with PROCESS 2000(R).
PROCESS 2000 is the Company's trademark for the no wrinkles technologies used in
its Savane products. As a result of its experience with no wrinkles
technologies, the Company believes it currently offers a broader no wrinkles
product line than its competitors. See "Business -- Technology and Trademarks."

According to independent marketing research organizations, the men's slacks
market is an industry with annual retail sales in excess of $3.0 billion. The
main channels of distribution in the industry are department stores, national
chains (such as Sears) and discounters.

The following table shows the sales (in thousands) of Farah U.S.A. products
by label for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------- FISCAL YEAR
FEB. 4, FEB. 5, ---------------------------------
1994 1993 1993 1992 1991
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Savane......................... $22,633 $ 7,636 $ 60,387 $ 17,230 $ 5,526
Farah/Farah Clothing Company... 11,134 13,544 52,949 64,239 68,383
John Henry..................... 3,917 3,719 14,739 18,300 18,590
Private label and other........ 3,626 907 8,692 2,212 1,994
------- ------- -------- -------- -------
Total................ $41,310 $25,806 $136,767 $101,981 $94,493
------- ------- -------- -------- -------
------- ------- -------- -------- -------
</TABLE>

The Company is organized as three distinct operating divisions. Farah
U.S.A. (76% of consolidated revenue for fiscal 1993) manufactures and sells a
variety of casual and dress apparel lines to retailers throughout the United
States. Farah U.S.A.'s apparel is produced either at Farah U.S.A. factories in
Mexico and Costa Rica or by third party contractors. Farah International (16% of
consolidated revenue for fiscal 1993) manufactures and sells apparel in several
countries in Europe, Australia and Asia. Farah International's primary markets
are the United Kingdom and Australia. Value Slacks (8% of consolidated revenue
for fiscal 1993) operates retail stores which sell apparel manufactured by the
Company for these stores, close-outs and seconds from Farah U.S.A., and a
limited amount of merchandise purchased from third parties. As of March 1, 1994,
Value Slacks had 32 retail stores, 21 in the United States and 11 in Puerto
Rico.

The Company was incorporated in Texas in 1947 as Farah Manufacturing
Company, Inc. The name of the Company was changed to Farah Incorporated in 1987.

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<PAGE> 21

BUSINESS STRATEGY

Management has implemented a strategy that has led to recent improvements
in the Company's operating results and that management believes will position
the Company to continue to be competitive. Key components of the Company's
growth and operating strategies are summarized below.

Growth Strategy

- Expand Savane Line. The Company intends to expand the Savane line of
products as the Company's no wrinkles process continues to gain acceptance
and recognition with consumers and retailers. The Company believes that it
currently manufactures a wider variety of wrinkle resistant products than
are offered by its competitors and intends to continue to develop and
manufacture new styles, colors and fabrications of slacks to further
enhance its market position. In fiscal 1994, the Company is introducing a
new line of products, known as Savane Fridaywear(TM), that is directed to
the casual workplace market, and a line of Savane dress slacks. In
addition, the Company is developing additional Savane lines that it plans
to introduce in fiscal 1995.

- Product Innovation. The Company believes it has developed a reputation
among retailers for product innovation. In fiscal 1989, the Company was
the first to introduce the no wrinkles technology to the men's slacks
market and is a leader in that market. The Company intends to continue its
research and development efforts to develop new and innovative products.
In fiscal 1994, the Company will begin marketing new products which couple
no wrinkles technology with stain resistant finishes which utilize Teflon
(a registered trademark of E.I. DuPont de Nemours and Company) and
Scotchguard (a registered trademark of Minnesota Mining and Manufacturing
Company).

- New Products under Other Farah Labels. The Company intends to introduce
new product offerings under the Farah/Farah Clothing Company and John
Henry labels using no wrinkles technologies, stain resistant finishes and
new fabrics to stimulate sales of these product lines. The Company plans
to take advantage of the recent success of the Savane label with retailers
to expand the market share of these labels.

- License Savane Trademark. Management plans to license third parties to
manufacture and market apparel using the Savane trademark, including
outerwear, shirts, belts, socks and shoes. The Company plans to coordinate
the marketing of these products through its existing distribution
channels. In December 1993 the Company licensed Oxford Industries, Inc., a
major shirt manufacturer, to manufacture and market shirts under the
Savane and PROCESS 2000 trademarks. The license agreement provides for the
payment of royalties to the Company based on the amount of sales of Savane
shirts. Management believes that licensing the Savane trademark, in
addition to generating revenues for the Company, could enhance sales of
the Company's Savane slacks.

- Foreign Market Opportunities. The Company is in the process of
identifying new foreign markets for the Company's Savane products. The
Company is currently reviewing opportunities to enter into marketing
partnerships for the expansion of the Savane product line in Continental
Europe in fiscal 1994.

Operating Strategy

- Position Savane as High Quality Product. The Company has positioned the
Savane product as a high quality product by using better fabrics, such as
heavy weight twill and combed and brushed cottons, and finer workmanship
in the production of the garment. The Company markets and distributes its
Savane products in the United States primarily to better department
stores, such as Belk Department Stores, Dillard Department Stores,
Federated Department Stores (including Abraham & Straus, Burdines and
Rich's) and The May Department Stores Company (including Hecht Co.,
Foley's and Robinson-May). The Company does not intend to sell the Savane
line to discounters or mass merchants, other than close-outs in certain
circumstances. The Company believes by selling the

20
<PAGE> 22

Savane line primarily to better department stores it may be able to
maintain a more consistent margin than other similar products which are
sold through multiple channels of distribution.

- Focus on Core Products. A majority of the Company's apparel lines
consists of basic, recurring styles that the Company believes are less
susceptible to fashion obsolescence than higher fashion apparel lines.
While the Company attempts to offer updated fashions and styles, its major
product lines change relatively little from season to season. The Company
believes that by maintaining basic recurring styles it limits markdowns
due to fashion obsolescence and allows for longer production runs and more
efficient factory operations.

- Experience with Wrinkle Resistant Technology. The Company has
considerable experience with wet process wrinkle resistant technology. The
major difference between the wet process and the post-cured process is
that with the wet process the wrinkle resistant finish is applied to the
garment after it is sewn and with the post-cured process it is applied to
the fabric by the mills. Because the Company is not dependent on the
limited number of wrinkle resistant fabrics currently offered by the
mills, it manufactures no wrinkles products in a wider range of colors,
fabrics and finishes. See "Business -- Technology and Trademarks."

- Advertising. The Company plans to expand its national media campaign to
further enhance public awareness of no wrinkles products and the Savane
product line. In fiscal 1993, the Company undertook its first national
television advertising campaign for the Savane product line. These
advertisements ran on major networks and cable television.

- Production Expansion and Improvements. The Company plans to expand and
enhance its manufacturing facilities. The Company has reconfigured its
factories to meet the increase in sales of Savane products. This
reconfiguration included changing certain sew lines from dress to casual
production and increasing pressing and laundering capacity to facilitate
the PROCESS 2000 technology. The Company incurred $4,000,000 of expenses
in the third quarter of fiscal 1993 representing the cost to convert
certain sew lines. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Management believes that it can
further increase manufacturing capacity and efficiency and reduce
production costs through selected capital investment projects, including
additional laundry and pressing facilities and sewing equipment. See "Use
of Proceeds."

- Offshore Manufacturing. The Company was among the first U.S. apparel
companies to use Mexico and Costa Rica as a production base and believes
it has a manufacturing advantage over other companies who have only
recently entered these countries. These offshore manufacturing facilities
have labor rates which are below the rates in the United States. In
addition, factories in Mexico operate under favorable tariff provisions as
a result of NAFTA. Goods shipped from these factories require much shorter
transportation periods than goods produced in the Far East.

PRODUCTS

The Company manufactures high quality, medium priced apparel for men and
boys. The Company's products include casual slacks, dress slacks, suit separates
(matching pants and sportcoats which may be mixed and matched to accommodate
retail customer size preferences), sportcoats and shorts. The Company's products
are sold under four primary labels: Savane, Farah Clothing Company, Farah and
John Henry. In addition, the Company manufactures and sells private label
products for certain mass merchants such as Wal-Mart Stores.

The Company's apparel products are manufactured with an array of fabrics
that emphasize comfort, fit and performance. The Company is known for its use of
"performance fabrics" that maintain a fresh, neat appearance. The Company's
product lines primarily use 100% cotton fiber and blended fabrics
(cotton/polyester or wool/polyester). Most of the Company's Savane products are
offered with PROCESS 2000. PROCESS 2000 is the Company's trademark, first
introduced by the Company in late fiscal 1989, which is used to describe the
wrinkle resistant features of the Savane garments. PROCESS 2000 fabrics are
soft, wrinkle and shrink resistant and behave like "permanent press." The
Company has also recently introduced

21
<PAGE> 23

products under the Farah/Farah Clothing Company and John Henry labels using
wrinkle resistant technologies. See "Business -- Technology and Trademarks."

Additional information with respect to the Company's significant labels is
as follows:

Savane -- This label is used primarily for casual slacks and shorts
that are made from 100% cotton fabrics and are treated with PROCESS 2000.
The Savane product line is targeted to the growing men's casual wear
segment and has gained acceptance with consumers and retailers. The Savane
product line is sold primarily to better department stores. The Company has
positioned the Savane product as a high quality garment using better
fabrics and finer workmanship. In addition to men's slacks, the Company
offers slacks for boys and shorts under the Savane label. See
"Business -- Business Strategy."

Farah/Farah Clothing Company -- These labels are used primarily for
dress slacks and suit separates made from blended fibers. The Company has
introduced a line of casual slacks with these labels which are made from
100% cotton. Some casual slacks with these labels are fabricated using a
wrinkle resistant technology. Farah/Farah Clothing Company are the
Company's primary dress labels sold to department stores and national
chains. See "Business -- Business Strategy."

John Henry -- This label is used for higher fashion dress slacks and
suit separates produced from blended fabrics. The John Henry line is sold
to better department stores and certain of the products use a wrinkle
resistant technology. See "Business -- Business Strategy."

FARAH U.S.A.

General. Farah U.S.A. produces and sells a variety of casual and dress
clothing lines to retailers throughout the United States. Substantially all of
Farah U.S.A.'s apparel is produced at Farah U.S.A. factories in Mexico or Costa
Rica or by third party contractors. Farah U.S.A.'s products are directed to the
men's and boy's segments of the apparel industry, with approximately 79% of
branded sales in fiscal 1993 in the men's segment. Farah U.S.A. also offers its
products to the young men's segment of the apparel industry, but this area has
not traditionally been an area of high volume because of the fashion orientation
in this segment of the industry. The Savane casual products have recently gained
acceptance among retailers in the boy's segment of the apparel industry, and the
Company believes this area offers important growth opportunities.

In fiscal 1992, Farah U.S.A. established a private label division to
manufacture and sell private label products for certain mass merchants,
primarily Wal-Mart Stores. The total sales of private label products in fiscal
1993 was approximately $7.5 million. The Company intends to continue to service
its existing private label customers and review selected opportunities to expand
its private label business in the future.

Manufacturing, Sourcing and Distribution. The men's apparel industry in the
United States has two primary selling seasons. The Spring selling season extends
from December to April, and the Fall selling season extends from May to
November. Farah U.S.A.'s operations follow this seasonal pattern. The various
steps in the manufacturing cycle are timed so that Farah U.S.A. begins to
manufacture products for a given season two to three months before the retail
season officially begins.

Farah U.S.A. purchases its fabric and trim requirements, such as pocketing,
linings, belts, buttons, zippers and thread, from several domestic and foreign
sources. No single supplier of raw materials is critical to Farah U.S.A.'s
long-term production needs. Although the Company believes that alternative
sources of supply exist in the event Farah U.S.A. needs to seek additional or
replacement suppliers, short-term disruptions could occur in the event certain
suppliers cease to serve as sources of supply. The order lead time for fabrics
is approximately two to six months. Payment terms are generally 60 days. All
fabrics are delivered to one of the Company's facilities in El Paso, Texas.
Quality control procedures are in place to test each shipment for flaws,
coloring, stretch, shrinkage and other characteristics.

Farah U.S.A. utilizes one of the Company's facilities in El Paso to store
and cut fabrics. Cut fabrics are then inspected, batched and packed for shipment
to one of Farah U.S.A.'s offshore manufacturing plants or to third party
contractors. Farah U.S.A. uses company-owned factories in Mexico and Costa Rica
or third party

22
<PAGE> 24

contractors to sew and finish substantially all of its products. The Company
anticipates that in fiscal 1994 approximately 60% of Farah U.S.A.'s total
production will be manufactured in its own factories, with the balance to be
manufactured by independent contractors. Farah U.S.A. performs most sewing and
finishing offshore in order to keep production costs low; however, the finishing
of garments sewn by third party contractors is conducted primarily in the El
Paso facility. The offshore plants pack the finished garments and ship them back
to El Paso for distribution to Farah U.S.A.'s customers.

Orders from retailers are filled from inventory at the Company's facility
in El Paso. Shipments to retailers are sent directly to certain of the
retailers' stores or to independent distribution centers. Certain retailers pick
up their goods at the El Paso facility.

Marketing and Sales. Retailers are requiring increased quality of service
from their suppliers and greater flexibility in managing their inventories as
the retailers frequently change orders based upon updated consumer demand
patterns. Many of Farah U.S.A.'s major customers participate in an inventory
replenishment program referred to as "Quick Response." "Quick Response" has
evolved in the apparel industry to assist retailers in minimizing their
inventories by requiring the apparel manufacturers to maintain enough finished
goods inventory on hand to meet the retailer's demand on short notice. Most
"Quick Response" orders are shipped within 72 hours of receipt of the order from
the retailer. The Company has implemented an electronic data interchange ("EDI")
system with selected large retailers in order to respond to their demands to
provide better service and facilitate the "Quick Response" program. EDI systems
allow retailers to electronically transmit orders for certain items on a
frequent basis, typically weekly. The retailers also transmit detailed sales
data from their store locations. The Company uses the sales data to anticipate
demand from the retailers, update sales forecasts and plan and monitor
production and inventory levels.

The Company also has developed a computer system which was first
implemented in fiscal 1990 as part of a company-wide program to increase quality
and customer service. The system runs on laptop computers that the Farah U.S.A.
sales force carries with them as they contact retailers. This system maintains
timely, accurate data on style numbers, prices and size charts (size charts
describe the distribution of sizes that a retailer typically sells). The system
also provides up-to-date, easily accessible data on inventories, customer orders
and production backlogs. With the system, the sales force can execute orders
more efficiently and assist the retailer in attaining higher margins by reducing
inventory imbalances.

Farah U.S.A. has four regional corporate account executives who are
directly responsible for certain major retail accounts. Management believes that
the corporate account executive strategy, along with the direct involvement of
senior corporate executives in the marketing process, enhances the level of
service to the retailer. Farah U.S.A. employs a field sales force of
approximately 35 salespersons who each report to one of the corporate account
executives and are responsible for the primary relationship with smaller
retailers.

In addition, Farah U.S.A. employs merchandise coordinators who visit retail
store accounts and provide services, such as training and education of in-store
sales personnel about the Savane products; straightening slacks and ensuring
that displays are neat and orderly; responding to customer questions and
comments; and ensuring that the stores are satisfied with their level of
service. These individuals report to members of the sales force.

Advertising. Farah U.S.A.'s advertising program is comprised of national
media advertising and participation in cooperative advertising programs with
retailers. In fiscal 1993, Farah U.S.A. undertook its first national television
advertising campaign for the Savane product line. A second campaign ran in
December 1993. These advertisements ran on major networks and cable television.
The Company intends to continue national media advertising in the future. In
cooperative advertising programs, the Company and individual retailers combine
their efforts and share the costs of local television, radio and newspaper
advertisements and in-store advertising and promotional events featuring the
Company's branded products. Farah U.S.A. has used in-store marketing techniques,
such as providing retailers with attractive tables for the display of Savane
pants. Management believes this approach has gained valuable "shelf space" in
many retail stores and helped boost sales and consumer awareness of its Savane
products.

Competition. The apparel industry is highly competitive due to its fashion
orientation, its mix of large and small producers, the flow of imported
merchandise and a wide variety of retailing methods. The principal elements of
competition in the apparel industry include style, quality, price, comfort,
brand loyalty, customer

23
<PAGE> 25

service and advertising. Competition has been exacerbated by the recent
consolidations and closing of major department store groups. The men's slacks
segment of the men's apparel industry is characterized by a large number of
participants. The Company believes its largest competitors in the United States
are Levi's and Haggar Corp. The Company believes Farah U.S.A. is among the top
ten sellers of men's slacks in the United States.

The men's casual wear market for slacks began to experience significant
growth in the mid-1980s with the introduction from Levi's of its Dockers(R)
casual products. Several of the Company's competitors have only recently entered
the wrinkle resistant casual slacks market. Levi's has recently introduced a
Dockers(R) labelled wrinkle resistant product and the Company anticipates that
Levi's will devote substantial financial resources to develop and market this
new product. Levi's and certain of the other competitors have larger financial
and marketing resources than the Company and therefore will offer significant
competition to the Company's Savane line of products. Such competition could
adversely affect the price of the Savane products and result in a reduction of
the Company's share of the wrinkle resistant slacks market. This adverse effect
may, however, be offset by the expansion of the market caused by increased
awareness of wrinkle resistant products. Accordingly, the Company is unable to
determine the ultimate effect of this additional competition in this segment of
the casual slacks market.

FARAH INTERNATIONAL

Farah International sells apparel in several countries in Europe, Australia
and Asia. The primary markets for Farah International are the United Kingdom,
Australia and New Zealand. Farah International produces most of its products in
two locations, and third party contractors produce the remainder. A wholly-owned
plant in Ireland supplies the United Kingdom market, and two factories in Fiji
operated by a 50% joint venture supply the markets in Australia and New Zealand.
The Company products are sold internationally primarily under the Farah and
Savane labels.

The United Kingdom is Farah International's principal market and in fiscal
1993 accounted for approximately 66% of its sales. Distribution channels in the
United Kingdom are significantly different from those in the United States in
that retailers carry more private label brands than branded products. Farah
International's primary distribution channels in the United Kingdom are large
retail outlets and independent menswear stores.

Farah International products primarily include dress and casual slacks, and
shirts and sweaters manufactured by third parties. Farah International's
products are designed for the specific styles and tastes of the markets in which
they are sold and differ from Farah U.S.A. apparel. During fiscal 1993 the
majority of Farah International's products were made from polyester fabrics or
blended fabrics with a high polyester content, as opposed to natural fibers
which are more popular in the United States. The Company is currently reviewing
opportunities to expand the offering of the Savane line of products in the
Continental European market in fiscal 1994.

Farah Australia and Farah New Zealand accounted for approximately 31% of
Farah International's sales in fiscal 1993. Farah New Zealand was opened in
fiscal 1990 under the same management as Farah Australia.

For information regarding the net sales, operating profits and assets of
the Company in each of the geographic segments in which the Company operates,
see Note 9 of Notes to Consolidated Financial Statements.

VALUE SLACKS

Value Slacks stores offer Farah U.S.A.'s seconds, irregulars and excess
merchandise, combined with some merchandise manufactured specifically for Value
Slacks. Value Slacks began with one outlet store in downtown El Paso in 1968 and
has added locations as the Company's production has grown. Value Slacks

24
<PAGE> 26

operated 32 retail outlet stores as of March 1, 1994, 21 of which were located
in the United States and 11 in Puerto Rico. The stores are generally 2,000 to
5,000 square feet and are located in suburban outlet malls or strip centers.

As the factory outlet store concept has gained acceptance in the United
States, Value Slacks has de-emphasized operations in Puerto Rico and expanded in
the United States. During fiscal 1992 and fiscal 1993 the Company closed an
aggregate of five stores in Puerto Rico and opened an aggregate of six stores in
the United States.

CUSTOMERS

The Company's primary customers are department stores. The Company's ten
largest customers accounted for approximately 56% of the Company's consolidated
revenues during fiscal 1993. In fiscal 1993, the Company's largest customer, The
May Department Stores Company, accounted for approximately 12% of the Company's
consolidated revenues.

TECHNOLOGY AND TRADEMARKS

The Company and several of its competitors use wrinkle resistant
technologies in the manufacturing of men's slacks. Management believes there are
two primary types of wrinkle resistant technologies which are used in the
manufacturing process. In the post-cured process, fabrics are treated by the
mills with a wrinkle resistant finish. The fabrics are sewn into garments,
pressed and then cured in ovens. The other method is the wet process which
involves the application of the wrinkle resistant finish after the sewing
process. Sewn garments are placed in washers or submerged in tanks that contain
wrinkle resistant resins. The garments are then dried, pressed and cured in
ovens. Both technologies, together with other technologies, are available to the
Company's competitors.

The Company uses both methods of wrinkle resistant technologies. The
Company uses its wet process on 100% cotton Savane products. The Company uses
the post-cured method primarily on Farah/Farah Clothing Company labelled
products.

The post-cured method limits a manufacturer to the fabrics and finishes
which are offered by the mills. Because the Company is not dependent on the
limited number of wrinkle resistant fabrics currently offered by the mills, it
manufactures its wrinkle resistant Savane products in a wider range of colors,
fabrics and finishes. The Company also believes that the wet processed garments
retain their wrinkle resistant features longer than garments treated with the
post-cured process.

The Company believes it was the first to develop and market slacks using
the wet process and is a leader in the use of this process of treating garments.
The Company believes its experience in the use of this technology enables the
Company to offer more products to retailers.

The Company owns many U.S. and foreign trademark registrations, including
Savane, PROCESS 2000, Farah and Farah Clothing Company, and has several other
trademark applications pending in the United States and foreign countries. The
John Henry trademark is licensed from Zodiac International Trading Corporation,
an affiliate of Salant Corporation. The John Henry license is renewable by the
Company through 2038.

BACKLOG

A substantial portion of the Company's sales is based on "Quick Response"
orders. See "Business -- Farah U.S.A. -- Marketing and Sales." Accordingly,
backlog is not necessarily indicative of future sales.

SEASONALITY

The Company's products are primarily marketed for the Spring and Fall
retail selling seasons each year, with interim lines introduced periodically to
complement the two primary selling seasons. Sales volume for the first quarter
is generally the lowest of the year while the fourth quarter is the highest.
Farah U.S.A. closes

25
<PAGE> 27

some of its factories in the first quarter for approximately two weeks at
Christmas time. However, with the Company's introduction of more year-round
basic products, the seasonality has been diminished somewhat. See Note 10 of
Notes to Consolidated Financial Statements.

LEGAL PROCEEDINGS

The Company is a defendant in several legal actions. In the opinion of the
Company's management, based upon the advice of the respective attorneys handling
such actions, the aggregate of expected fees, expenses, possible settlements and
liability will not have a material adverse effect on the financial performance
of the Company.

REGULATION

Substantially all of the Company's total production is manufactured abroad,
either in its foreign factories or through arrangements with independent foreign
contractors. As a result, the Company's operations may be adversely affected by
political instability resulting in the disruption of trade from foreign
countries in which the Company's facilities or contractors are located, the
imposition of additional regulations relating to imports or duties, taxes and
other charges on imports, any significant fluctuation of the value of the dollar
against foreign currencies and restrictions on the transfer of funds. In
addition, the Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and certain foreign
countries. These agreements impose quotas on the amount and type of goods which
can be imported into the United States from these countries. However, the
Company closely monitors import quotas and can, in most cases, shift production
to contractors located in other countries with available quotas or to domestic
factories. The existence of import quotas has not had a material effect on the
Company's business to date. The Company's apparel products that are imported
from its factories in Mexico and Costa Rica are eligible for certain duty-
advantaged programs commonly known as "807 Programs."

The primary impact of NAFTA on the Company's operations was to eliminate
duties paid to the United States Customs Service on goods manufactured in Mexico
effective January 1, 1994. The actual savings the Company may realize from the
reduction of duties may be offset to an extent by higher wages and other costs
of doing business in Mexico which are not currently determinable.

EMPLOYEES

As of February 28, 1994, the Company had approximately 5,900 employees. As
of that date, Farah U.S.A., Farah International and Value Slacks had
approximately 5,150, 500 and 250 employees, respectively. Of these employees,
approximately 400 were either salaried or paid based on sales commissions earned
and the remainder were paid on an hourly basis or on the basis of production.
Approximately 200 of Farah U.S.A.'s United States employees are members of the
Amalgamated Clothing and Textile Union and approximately 1,650 of its employees
are members of various unions in Mexico. The collective bargaining agreement
with the Company's United States employees expires in February 1995. The
collective bargaining agreements for the Company's employees in Mexico expire in
December 1994 and January 1995. The Company considers its relations with its
employees to be good.

26
<PAGE> 28

PROPERTIES

The Company's principal executive offices and United States distribution
facility are located in El Paso, Texas. The Company considers both its domestic
and international facilities to be suitable, adequate and with sufficient
productive capacity for current operations.

The following table reflects the general location, use and approximate size
of the Company's significant real properties currently in use:

<TABLE>
<CAPTION>
APPROXIMATE OWNED/
LOCATION USE SQUARE FOOTAGE LEASED(1)
- ----------------------- -------------------------------- -------------- ---------
<S> <C> <C> <C>
El Paso, Texas Manufacturing plant 116,000 Owned(2)
Chihuahua, Mexico Manufacturing plant 54,000 Owned
San Jose, Costa Rica Two manufacturing plants 168,000 Owned
Galway & Kiltimagh, Two manufacturing plants 59,000 Owned
Ireland
Manufacturing plant, warehouse 1,033,000 Leased(3)
El Paso, Texas and
office facility
Piedras Negras, Mexico Four manufacturing plants 98,000 Leased
Ballyhaunis, Ireland Manufacturing plant 24,000 Leased
Sydney, Australia Office/warehouse facility 15,000 Leased
Suva, Fiji Two manufacturing plants 35,000 Leased(4)
Witham, United Office/warehouse facility 57,000 Leased
Kingdom
Auckland, New Zealand Office/warehouse facility 6,000 Leased
Retail locations in the 32 Retail stores 118,000 Leased
United States and
Puerto Rico
</TABLE>

- ---------------

(1) See Note 8 of Notes to Consolidated Financial Statements for a discussion of
lease terms.

(2) Underlying land is leased through February 2002.

(3) Originally owned by the Company and sold and leased back in 1988. Initial
lease term is ten years ending in 1998. In fiscal 1992, approximately 45% of
the Company's El Paso building was subleased to a third party for a term
approximating six and a half years.

(4) By a 50% joint venture.

27
<PAGE> 29

MANAGEMENT

The following table sets forth certain information about the executive
officers and directors of the Company. All directors of the Company hold office
until the next annual meeting of shareholders or until their successors have
been elected and qualified. Executive officers are elected by the Company's
board of directors to hold office until their respective successors are elected
and qualified.

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY
- ------------------------------------- --- ----------------------------------------
<S> <C> <C>
Richard C. Allender.................. 48 Chairman of the Board, President and
Chief Executive Officer
Michael R. Mitchell.................. 40 President of Farah U.S.A. and Director
James C. Swaim....................... 41 Executive Vice President, Chief
Financial Officer, Secretary, Treasurer
and Director
Clark L. Bullock..................... 45 Director
Christopher L. Carameros............. 40 Director
Sylvan Landau........................ 68 Director
Edward J. Monahan.................... 60 Director
Timothy B. Page...................... 41 Director
Charles J. Smith..................... 67 Director
Thomas G. Wyman...................... 70 Director
</TABLE>

Richard C. Allender has been a director and executive officer of the
Company since June 1988. Mr. Allender has served the Company in various
capacities since March 1985. Mr. Allender has been President and Chief Executive
Officer of the Company since July 1990 and Chairman of the Board since March
1993.

Michael R. Mitchell has been a director of the Company since March 1994.
Mr. Mitchell has been employed by the Company for 12 years and has served in
various sales and marketing capacities. Mr. Mitchell was appointed President of
Farah U.S.A. in March 1994.

James C. Swaim has been a director of the Company since March 1993. Mr.
Swaim has been the Company's Treasurer since September 1987, Chief Financial
Officer since September 1990 and Executive Vice President since November 1991.
Mr. Swaim was appointed Secretary in March 1994.

Clark L. Bullock has been a director of the Company since March 1994. For
the last five years, Mr. Bullock has been Chairman and Chief Executive Officer
of Shelter Rock Investors Services Corporation, a financial services and
investment company. Mr. Bullock also serves as Chairman of the Board of several
of Shelter Rock's portfolio companies, including Almedica Services Corp. and
Almedica Corp. (pharmaceutical clinical supplies and services), SR Metals Inc.
(metal plate processing) and George Glove Company (dermatological glove
products). Mr. Bullock also serves as director for the Fundamental Family of
Funds.

Christopher L. Carameros has been a director of the Company since August
1987. Mr. Carameros served as Senior Vice President -- Finance and Chief
Financial Officer of the Company from April 1987 and Executive Vice President of
the Company from January 1990 until his resignation in September 1990. Since
September 1990, Mr. Carameros has been a business consultant and in private
practice as a certified public accountant. Mr. Carameros is a director of Helen
of Troy Limited, a manufacturer of hair care appliances.

Sylvan Landau has been a director of the Company since January 1987. Prior
to 1987, Mr. Landau was employed by Haggar Corp. for 39 years in various
capacities, including President of Haggar International and President of the
Reed St. James division. Mr. Landau served as Vice Chairman of Corporate
Marketing of the Company from January 1987 to February 1988 and as a consultant
of the Company since 1988. Mr. Landau has served the Dallas Market Center in
various capacities since 1988, most recently as Executive Vice
President -- Retail Development. The Dallas Market Center is a corporation which
operates various real properties in Dallas, Texas, and which provides markets
for the wholesale trade.

28
<PAGE> 30

Edward J. Monahan has been a director of the Company since March 1991. Mr.
Monahan has served as a manufacturing consultant since 1988. From January 1989
to August 1989, Mr. Monahan also served as Vice President of Manufacturing for
L.G. Balfour Company, a manufacturer of class rings and recognition products.

Timothy B. Page has been a director of the Company since September 1989.
For five years prior to November 1992, Mr. Page served as a director, Executive
Vice President, Chief Financial Officer, Secretary and Treasurer of Tri-Gas,
Inc., an industrial gas manufacturing company. Since November 1992, Mr. Page has
been a business consultant and managed his personal investments.

Charles J. Smith has been a director of the Company since March 1994. For
more than five years prior to his retirement in 1993, Mr. Smith served in
various capacities with Crystal Brands, Inc., an apparel manufacturer and
marketer, most recently as an Executive Vice President. Since 1993, Mr. Smith
has been a consultant to Crystal Brands, Inc. In January 1994, Crystal Brands,
Inc. filed a petition for protection from creditors under Chapter 11 of the
Federal Bankruptcy Code.

Thomas G. Wyman has been a director of the Company since December 1989 and
served as Chairman of the Board of the Company from April 1990 until March 1993.
From 1984 through 1988 Mr. Wyman served as Chairman of the Board of L.G. Balfour
Company and he currently serves as a director of Brubaker Tool Corporation, a
manufacturer of metal cutting tools. For more than the past five years, Mr.
Wyman has been engaged in farming operations in Easton, Maryland. Mr. Wyman is
currently a private investor.

29
<PAGE> 31

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock, as of the close of business on March 15,
1994, and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, by each person who is known to the Company to be a beneficial owner of
5% or more of the Common Stock, each of the Company's directors and all of the
Company's directors and executive officers as a group. The shares offered hereby
include an aggregate of 1,200,000 shares of Common Stock to be sold by Marciano
Investments, Inc. (the "Selling Shareholder"). Unless otherwise indicated, each
person has sole voting and investment power with respect to the shares
attributable to such shareholder.

SHARES
SHARES BENEFICIALLY SUBJECT TO NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR OPTIONS AND SHARES OWNED AFTER
TO THE OFFERING AWARDS(1) OFFERED THE OFFERING
------------------------ ----------- --------- --------------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ----------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Allender.......... 74,700 * 61,900 -- 74,700 *
Clark L. Bullock............. 1,500 * 1,500 -- 1,500 *
Christopher L. Carameros..... 1,500 * 1,500 -- 1,500 *
Sylvan Landau................ 10,500 * 10,500 -- 10,500 *
Michael R. Mitchell.......... 23,045 * 20,545 -- 23,045 *
Edward J. Monahan............ 1,500 * 1,500 -- 1,500 *
Timothy B. Page.............. 1,500 * 1,500 -- 1,500 *
Charles J. Smith............. 1,500 * 1,500 -- 1,500 *
James C. Swaim............... 67,175 * 67,175 -- 67,175 *
Thomas G. Wyman.............. 95,000(2) 1.2% 7,500 -- 95,000(2) 1.0%
All executive officers and
directors as a group
(10 persons)............... 277,920 3.0% 175,120 -- 277,920 2.9%
Georges Marciano
Marciano Investments, Inc.
Georges Marciano Trust....... 2,174,300(3)(4) 26.5% -- 1,200,000(5) 974,300 10.1%
9756 Wilshire Blvd.
Beverly Hills, California
90212
Paul Marciano
Paul Marciano Trust.......... 247,600(4)(6) 3.0% -- -- 247,600 2.6 %
1444 South Alameda Street
Los Angeles, California
90021
Columbia Funds Management
Company.................... 500,000(7) 6.1% -- -- 500,000 5.2%
1300 S.W. South Avenue
P.O. Box 1350
Portland, Oregon 97207
</TABLE>

- ---------------

* Less than 1%

(1) Represents shares of Common Stock which are either subject to options which
are exercisable within 60 days or subject to restricted stock awards which
vest within 60 days. The Common Stock covered by such options and awards are
also included in the columns entitled "Shares Beneficially Owned Prior to
the Offering" and "Shares Owned Beneficially After the Offering."

(2) 87,500 of these shares are owned by TGW Limited Partnership ("TGW"). Mr.
Wyman is the sole general partner of TGW and has sole voting and dispositive
power with respect to the shares of Common Stock owned by TGW.

30
<PAGE> 32

(3) According to Amendment No. 12 to Schedule 13D dated March 25, 1994 (the
"Marciano Schedule 13D"), Marciano Investments, Inc. owns 1,200,000 shares
of Common Stock. The Georges Marciano Trust has sole voting and dispositive
power with respect to 927,300 shares of Common Stock owned by it and the
1,200,000 shares of Common Stock owned by Marciano Investments, Inc. by
virtue of its 60% ownership of Marciano Investments, Inc. Georges Marciano
may be deemed to be the beneficial owner of the 2,127,300 shares of Common
Stock deemed to be beneficially owned by the Georges Marciano Trust and of
47,000 shares of Common Stock owned by various trusts of which Mr. Marciano
is the sole trustee.

(4) According to the Marciano Schedule 13D, George Marciano and Paul Marciano
and certain of their respective affiliates made a single, joint filing
because they may be deemed to constitute a "group" within the meaning of
Section 13(d) of the Exchange Act, although neither the fact of such filing
nor anything contained therein shall be deemed to be an admission by such
beneficial owners that a group exists.

(5) Shares of Common Stock being offered for sale by Marciano Investments, Inc.

(6) According to Schedule 13D dated March 25, 1994, Paul Marciano is the sole
trustee of the Paul Marciano Trust which owns 247,600 shares of Common Stock
and therefore may be deemed the beneficial owner of these 247,600 shares.
The Paul Marciano Trust also owns 40% of Marciano Investments, Inc.

(7) According to a Schedule 13G dated January 31, 1994.

31
<PAGE> 33

DESCRIPTION OF CAPITAL STOCK

The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
Articles of Incorporation of the Company and the Bylaws of the Company that are
included as exhibits to the Registration Statement of which this Prospectus
forms a part and by provisions of applicable law.

COMMON STOCK

The Company has authorized capital stock consisting of 20,000,000 shares of
Common Stock, no par value per share. Each share of Common Stock entitles the
holder thereof to one vote on all matters on which holders are permitted to
vote. Cumulative voting in the election of directors is prohibited. No
shareholder has any preemptive right or other similar right to purchase or
subscribe for any additional securities issued by the Company, and no
shareholder has any right to convert Common Stock into other securities. Shares
of Common Stock are not redeemable or subject to any sinking fund provisions.
All of the outstanding shares of Common Stock are, and all shares of Common
Stock offered hereby will be, when issued and paid for, fully paid and
nonassessable.

The holders of shares of Common Stock are entitled to dividends when, as
and if declared by the Company's board of directors from funds legally available
therefor and, upon liquidation, to a pro rata share in any distribution to
shareholders. See "Dividend Policy."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Society National
Bank.

UNDERWRITING

The Underwriters of the offering of the Common Stock (the "Underwriters"),
for whom Bear, Stearns & Co. Inc. is acting as Representative, have severally
agreed, subject to the terms and conditions contained in the Underwriting
Agreement (the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part), to purchase from the Company and
the Selling Shareholder the aggregate number of shares of Common Stock set forth
opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc...........................................................
---------
Total................................................................... 2,600,000
---------
---------
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that, if any of the
foregoing shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares must be so purchased. The Company
and the Selling Shareholder have agreed to indemnify the Underwriters against
certain liabilities, including

32
<PAGE> 34

liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.

The Company has been advised that the Underwriters propose to offer the
shares of Common Stock to the public initially at the public offering price set
forth on the cover page of this Prospectus and to certain selected dealers (who
may include the Underwriters) at such public offering price less a concession
not to exceed $. per share. The selected dealers may reallow a concession to
certain other dealers not to exceed $. per share. After the initial offering to
the public, the public offering price, the concession to selected dealers and
the reallowance to other dealers may be changed by the Representative.

The Company has granted to the Underwriters an option to purchase up to
390,000 additional shares of Common Stock at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus, solely to
cover over-allotments, if any. Such option may be exercised at any time until 30
days after the date of this Prospectus. If the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of additional shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

In connection with the offering, the directors of the Company, and the
Company and certain of the Selling Shareholder's affiliates, have agreed that
they will not sell any shares of capital stock of the Company for a period of 90
and 180 days, respectively, without the prior written consent of the
Representative, except for the shares offered hereby and issuances by the
Company upon the exercise of employee stock options or vesting of restricted
stock awards.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon by
Baker & McKenzie. Certain legal matters in connection with the offering will be
passed upon for the Underwriters by Gardere & Wynne, L.L.P.

EXPERTS

The consolidated financial statements of the Company and subsidiaries for
and as of the fiscal years ended November 5, 1993, November 6, 1992 and October
31, 1991 included in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their reports with respect thereto, which are included herein in
reliance upon the authority of that firm as experts in giving such reports.

33
<PAGE> 35

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets of the Company as of February 4, 1994 (unaudited),
November 5, 1993 and November 6, 1992............................................... F-3
Consolidated Statements of Operations of the Company for the three months ended
(unaudited) February 4, 1994 and February 5, 1993 and the years ended November 5,
1993, November 6, 1992 and October 31, 1991......................................... F-4
Consolidated Statements of Shareholders' Equity of the Company for the three months
ended (unaudited) February 4, 1994 and the years ended November 5, 1993, November 6,
1992 and October 31, 1991........................................................... F-5
Consolidated Statements of Cash Flows of the Company for the three months ended
(unaudited) February 4, 1994 and February 5, 1993 and the years ended November 5,
1993, November 6, 1992 and October 31, 1991......................................... F-6
Notes to Consolidated Financial Statements November 5, 1993, November 6, 1992 and
October 31, 1991.................................................................... F-7
Notes to Unaudited Consolidated Quarterly Financial Statements February 4, 1994 and
February 5, 1993.................................................................... F-18
</TABLE>

F-1
<PAGE> 36

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Farah Incorporated:

We have audited the accompanying consolidated balance sheets of Farah
Incorporated (a Texas corporation) and subsidiaries as of November 5, 1993, and
November 6, 1992, and the related statements of operations, shareholders'
equity, and cash flows for each of the years ended November 5, 1993, November 6,
1992, and October 31, 1991. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Farah Incorporated and
subsidiaries as of November 5, 1993, and November 6, 1992, and the results of
their operations and their cash flows for each of the years ended November 5,
1993, November 6, 1992, and October 31, 1991, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN & CO.

Dallas, Texas,
December 15, 1993

F-2
<PAGE> 37

FARAH INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
FEBRUARY 4, 1994 (UNAUDITED), NOVEMBER 5, 1993, AND NOVEMBER 6, 1992
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
FEBRUARY 4, NOVEMBER 5, NOVEMBER 6,
1994 1993 1992
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash.................................................. $ 2,336 $ 2,007 $ 1,634
Trade receivables, net of allowance of $826 in 1994
(unaudited), $805 in 1993 and $637 in 1992......... 27,311 32,458 25,200
Inventories --
Raw materials...................................... 12,409 10,628 9,430
Work-in-process.................................... 19,330 15,706 9,736
Finished goods..................................... 31,837 27,838 21,123
----------- ----------- -----------
Total inventories............................. 63,576 54,172 40,289
Other current assets.................................. 6,705 5,482 4,685
----------- ----------- -----------
Total current assets.......................... 99,928 94,119 71,808
Notes receivable........................................ 6,199 6,267 7,025
Property, plant, and equipment, net..................... 14,980 14,426 10,376
Other noncurrent assets................................. 3,941 4,079 3,928
----------- ----------- -----------
$ 125,048 $ 118,891 $93,137
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt....................................... $ 31,605 $ 25,680 $10,007
Current maturities of long-term debt.................. 640 4,509 286
Trade payables........................................ 20,225 20,324 14,588
Accrued compensation.................................. 2,085 3,630 2,801
Other current liabilities............................. 8,233 7,203 7,301
----------- ----------- -----------
Total current liabilities..................... 62,788 61,346 34,983
Long-term debt, excluding current maturities............ 2,885 1,179 4,452
Other noncurrent liabilities............................ 3,598 3,627 3,346
Commitments and contingencies (Note 8)
Deferred gain on sale of building....................... 8,806 9,314 11,346
Shareholders' equity:
Common stock, no par value in 1994 and 1993, $4 par
value in 1992; authorized, 20,000,000 shares;
issued, 8,179,504 in 1994 (unaudited), 8,007,900 in
1993 and 7,921,917 in 1992......................... 45,516 44,369 31,688
Additional paid-in capital............................ -- -- 20,265
Cumulative foreign currency translation adjustment.... (2,093) (2,481) (1,892)
Minimum pension liability adjustment.................. (2,050) (2,050) (524)
Retained earnings..................................... 5,707 3,696 3,564
----------- ----------- -----------
47,080 43,534 53,101
Less -- Treasury stock, 36,275 shares in 1994
(unaudited) and 1993 and 655,275 in 1992, at
cost.......................................... 109 109 14,091
----------- ----------- -----------
Total shareholders' equity.................... 46,971 43,425 39,010
----------- ----------- -----------
$ 125,048 $ 118,891 $93,137
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 38

FARAH INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED (UNAUDITED) FEBRUARY 4, 1994, AND FEBRUARY 5, 1993,
AND THE YEARS ENDED NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991
(IN THOUSANDS, EXCEPT SHARE DATA)

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 39

FARAH INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED FEBRUARY 4, 1994 (UNAUDITED),
AND THE YEARS ENDED NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN MINIMUM
COMMON STOCK ADDITIONAL CURRENCY PENSION TREASURY STOCK
------------------- PAID-IN TRANSLATION LIABILITY RETAINED --------------------
SHARES AMOUNT CAPITAL ADJUSTMENT ADJUSTMENT EARNINGS SHARES AMOUNT
--------- ------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1990...... 6,819,942 $27,280 $ 24,326 $ 1,292 $ -- $ 18,661 869,374 $ 19,692
Net loss..................... -- -- -- -- -- (5,508) -- --
Foreign currency translation
adjustment................ -- -- -- (575) -- -- -- --
Exercise of stock options.... 42,250 168 1 -- -- -- -- --
Shares returned to repay
loan...................... -- -- -- -- -- -- 35,029 100
--------- ------- ---------- ---------- ---------- -------- -------- --------
Balance, October 31, 1991...... 6,862,192 27,448 24,327 717 -- 13,153 904,403 19,792
Net loss..................... -- -- -- -- -- (9,589) -- --
Foreign currency translation
adjustment................ -- -- -- (1,768) -- -- -- --
Minimum pension liability
adjustment................ -- -- -- -- (524) -- -- --
Transfer of cumulative
translation adjustment to
currency transaction gain
on closure of Farah
Japan..................... -- -- -- (841) -- -- -- --
Exercise of stock options and
other..................... 109,725 440 15 -- -- -- 872 6
Sale of common stock......... 950,000 3,800 (4,077) -- -- -- (250,000) (5,707)
--------- ------- ---------- ---------- ---------- -------- -------- --------
Balance, November 6, 1992...... 7,921,917 31,688 20,265 (1,892) (524) 3,564 655,275 14,091
Net income................... -- -- -- -- -- 132 -- --
Foreign currency translation
adjustment................ -- -- -- (589) -- -- -- --
Minimum pension liability
adjustment................ -- -- -- -- (1,526) -- -- --
Exercise of stock options and
other..................... 85,983 509 24 -- -- -- -- --
Sale of treasury shares...... -- -- (8,117) -- -- -- (619,000) (13,982)
Reclassification upon change
to no par common stock.... -- 12,172 (12,172) -- -- -- -- --
--------- ------- ---------- ---------- ---------- -------- -------- --------
Balance, November 5, 1993...... 8,007,900 44,369 -- (2,481) (2,050) 3,696 36,275 109
Net income (unaudited)....... -- -- -- -- -- 2,011 -- --
Foreign currency translation
adjustment (unaudited).... -- -- -- 388 -- -- -- --
Exercise of stock options and
other (unaudited)......... 171,604 1,147 -- -- -- -- -- --
--------- ------- ---------- ---------- ---------- -------- -------- --------
Balance, February 4, 1994
(unaudited).................. 8,179,504 $45,516 $ -- $ (2,093) $ (2,050) $ 5,707 36,275 $ 109
--------- ------- ---------- ---------- ---------- -------- -------- --------
--------- ------- ---------- ---------- ---------- -------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 40

FARAH INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED (UNAUDITED) FEBRUARY 4, 1994, AND FEBRUARY 5, 1993,
AND THE YEARS ENDED NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
-------------------------- -----------------------------------------
FEBRUARY 4, FEBRUARY 5, NOVEMBER 5, NOVEMBER 6, OCTOBER 31,
1994 1993 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from (used in) operating
activities:
Net income (loss)........................ $ 2,011 $ 604 $ 132 $(9,589) $(5,508)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities --
Depreciation and amortization....... 874 552 2,686 2,446 2,445
Amortization of deferred gain on
building sale.................... (508) (508) (2,032) (2,032) (2,033)
Gains on sales of assets............ -- -- (320) (9) (127)
Provision for Generra bankruptcy.... -- -- -- 6,146 --
Decrease (increase) in --
Trade receivables, net.............. 5,147 5,277 (7,258) 2,593 (319)
Inventories......................... (9,404) (1,396) (13,883) 4,406 1,532
Income tax refunds and benefits..... -- -- -- -- 4,074
Other current assets................ (1,223) (295) (797) (165) 1,376
Increase (decrease) in --
Trade payables...................... (99) (3,718) 5,736 2,131 280
Other............................... (515) (2,231) (294) (1,117) (21)
----------- ----------- ----------- ----------- -----------
Net cash from (used in) operating
activities..................... (3,717) (1,715) (16,030) 4,810 1,699
----------- ----------- ----------- ----------- -----------
Cash flows from (used in) investing
activities:
Purchases of property, plant, and
equipment............................. (1,287) (1,276) (6,803) (1,520) (1,811)
Proceeds from disposition of property,
plant, and equipment.................. -- -- 436 177 242
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities..................... (1,287) (1,276) (6,367) (1,343) (1,569)
----------- ----------- ----------- ----------- -----------
Cash flows from (used in) financing
activities:
Net increase (decrease) in short-term
debt.................................. 5,981 3,475 15,673 (5,202) (2,508)
Proceeds from issuance of long-term
debt.................................. 1,897 202 1,456 436 628
Repayment of long-term debt.............. (4,117) (316) (487) (1,530) (1,804)
Proceeds from sale of common stock and
exercise of stock options............. 1,055 34 5,881 5,879 169
Proceeds from collection of accrued
interest on Generra note receivable... -- -- -- -- 1,350
Other.................................... 129 2 836 (804) (86)
----------- ----------- ----------- ----------- -----------
Net cash from (used in) financing
activities..................... 4,945 3,397 23,359 (1,221) (2,251)
----------- ----------- ----------- ----------- -----------
Foreign currency translation adjustment.... 388 (490) (589) (2,609) (575)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash............ 329 (84) 373 (363) (2,696)
Cash, beginning of year.................... 2,007 1,634 1,634 1,997 4,693
----------- ----------- ----------- ----------- -----------
Cash, end of year.......................... $ 2,336 $ 1,550 $ 2,007 $ 1,634 $ 1,997
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental cash flow disclosures:
Interest paid............................ $ 763 $ 464 $ 3,636 $ 2,036 $ 2,600
Income taxes paid........................ 272 867 878 1,043 265
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 41

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of Farah
Incorporated (the "Parent Company") and its subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform with the 1993
presentation. The Parent Company's assets consist of investments in and advances
to subsidiaries. The Parent Company does not have any significant amount of
separate debt, credit facilities, or other liabilities, except for the 5%
convertible subordinated debentures discussed in Note 3. (See the accompanying
notes to the unaudited consolidated quarterly financial statements as of
February 4, 1994, and February 5, 1993, at F-18.)

Inventories

Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and include purchased materials and manufacturing labor and overhead.
Market is based upon estimated selling price less costs to sell.

Property, Plant, and Equipment

Property, plant and equipment are recorded at cost. Depreciation is
provided by the straight-line method over the estimated useful lives (Note 2) of
the related classes of assets.

Maintenance and repairs are charged to expense as incurred, and renewals
and betterments are capitalized. The cost and accumulated depreciation of assets
retired or otherwise disposed of are removed from the accounts and the resulting
gains and losses are included in operations. Gains on assets sold and leased
back are recognized over the initial lease terms, net of any obligations
required by the lease agreements. See Note 8 for further discussion.

Intangible Assets

At November 5, 1993 and November 6, 1992, intangible assets were $1,610,000
and $1,664,000, respectively, and consisted primarily of goodwill and intangible
pension assets. Intangible assets, excluding intangible pension assets, are
amortized on a straight-line basis over their estimated useful lives ranging
from 2 to 30 years. Amortization approximated $200,000 in 1993, $489,000 in 1992
and $592,000 in 1991, including amortization of debt issuance costs of
approximately $58,000, $361,000 and $454,000 in 1993, 1992, and 1991,
respectively.

Revenue Recognition

Revenues are recognized upon shipment of product.

Foreign Currencies

The Company translates its asset and liability accounts at the exchange
rates in effect at the end of the fiscal year. Income and expense accounts are
translated at average rates. Net foreign currency "translation" gains and losses
are not included in operations, but are reflected as a separate item in the
shareholders' equity section of the Consolidated Balance Sheets. Foreign
currency "transaction" gains and losses are included in the Consolidated
Statements of Operations. Also included in foreign currency transaction gains
and losses for 1992 is a gain of $841,000 upon the substantial liquidation of
one of the Company's foreign subsidiaries.

F-7
<PAGE> 42

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

Income Taxes

Income taxes are provided pursuant to the provisions of Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes" (SFAS 96).
Under this statement, deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. These deferred taxes are measured by
applying currently enacted tax laws. The Company has not yet adopted the
provisions of SFAS 109, "Accounting for Income Taxes", which was issued in
February 1992. This statement will be adopted in the first quarter of 1994. The
Company does not believe that the adoption of this statement will have a
material effect on the financial statements.

Income (Loss) Per Share

Income per share is based on the weighted average number of shares and
common stock equivalents outstanding (7,781,193 in 1993). Loss per share is
based on weighted average number of shares outstanding (6,308,392 in 1992 and
5,926,885 in 1991). Stock options are included as common stock equivalents under
the treasury stock method, where dilutive. Additional dilution from the 5%
convertible subordinated debentures (Note 3), which are not common stock
equivalents, is not material.

Generra Bankruptcy

During the second half of 1992, a former subsidiary of the Company, Generra
Sportswear Company, Inc., filed for protection under Chapter 11 of the federal
bankruptcy laws. In conjunction with a 1989 sale of Generra, the Company
retained a 5% ownership interest in Generra, as well as a $5,000,000 note
receivable. A $6,146,000 provision for the loss on this investment and note was
made in 1992.

Change in Fiscal Reporting Periods

Effective in the first quarter of fiscal 1992, the Company adopted a 52/53
week fiscal year. The 1992 financial statements contained 53 weeks. This change
was implemented in an effort to conform the Company's accounting periods to that
of many of its customers and to minimize heavy overtime and air freight
resulting from calendar month-end deadlines that did not match customer
deadlines. The change did not have a significant impact on results for 1992.

Concentrations of Credit Risk

Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards No. 105, consist primarily of trade accounts receivable. The Company's
customers are not concentrated in any specific geographic region but are
concentrated in the retail industry. One customer accounted for $22,407,000
(12%), $21,721,000 (14%) and $21,905,000 (15%) of the Company's consolidated
sales during the years ended November 5, 1993, November 6, 1992, and October 31,
1991, respectively. The Company performs ongoing credit evaluations of its
customers' financial condition. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends, and other information.

Change in Par Value

In the second quarter of 1993 the Company's shareholders approved a change
in the par value of the Company's common stock from $4.00 per share to no par
value. As a result, the Company's additional paid-in capital account was
reclassified to the common stock account during the second quarter of 1993.

F-8
<PAGE> 43

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

Factory Conversion Expense

In response to the success of the Company's Savane casual product line, the
Company converted portions of the sew lines in its Costa Rican and Mexican
factories from dress to casual production in the third quarter of 1993. Such
conversion actions were the rearrangement, modification, or re-engineering of
certain existing equipment, as well as the installation of new equipment.
Certain costs were incurred as a result of the conversion. These included labor
costs of maintaining the work force during the conversion primarily due to
regulations or local statutes, U.S. import duties on costs incurred during the
conversion, cost of testing and set-up of equipment, and additional costs
resulting from customs and practices in the countries where the Company
operates. Total costs associated with the factory conversion were approximately
$4,000,000 and such amount is reported in the caption "Factory conversion
expenses" in the Consolidated Statements of Operations. A substantial portion of
this cost was incurred in the third quarter with the remainder being incurred in
the first part of the fourth quarter.

2. PROPERTY, PLANT, AND EQUIPMENT:

Property, plant, and equipment is comprised of the following (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES (YEARS) 1993 1992
------------- ------- -------
<S> <C> <C> <C>
Factory machinery and equipment....................... 9-12 $22,243 $19,919
Buildings............................................. 20-50 3,375 3,415
Building improvements................................. 3-20 4,196 3,738
Other fixtures and equipment.......................... 3-10 10,640 7,880
Land.................................................. 528 528
Construction in progress.............................. 171 159
------- -------
Total property, plant, and equipment........ 41,153 35,639
Less -- Accumulated depreciation...................... 26,727 25,263
------- -------
Net property, plant, and equipment.......... $14,426 $10,376
------- -------
------- -------
</TABLE>

Depreciation expense approximated $2,486,000 in 1993, $1,957,000 in 1992,
and $1,853,000 in 1991.

3. DEBT:

Short-Term Debt

As of November 5, 1993 the Company had two primary credit facilities. The
Company's U.S. credit facility prohibits the payment of dividends by the Company
and, except for debt service of the Company's 5% convertible subordinated
debentures, the credit facilities restrict the subsidiaries from transferring
substantially all net assets to the Parent Company through intercompany loans,
advances, or dividends.

The first credit facility, for Farah U.S.A., provides up to $40,000,000 of
credit through November 3, 1995 for the Company's United States operations for
either borrowings or letters of credit. Availability under the facility is
limited by formulas derived from accounts receivable, inventory, and fixed
assets. The facility is secured by substantially all assets of Farah U.S.A. and
is guaranteed by the Parent Company and each of Farah U.S.A.'s domestic
affiliates. Such guarantees are secured by substantially all of the assets of
the related affiliates. The interest rate is prime (6% at November 5, 1993) plus
2 1/4% for borrowings and 1/4% per month for letters of credit. An unused
credit line fee of 1/2% per annum is charged on the unused portion of the line
when borrowings decrease below $17,500,000. The credit facility provides for a
termination fee of 2% of the total facility amount if such facility is
terminated prior to November 1994 and a 1% fee if terminated prior to

F-9
<PAGE> 44

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

November 1995. As of November 5, 1993 usage under the facility was $27,246,000
(including letters of credit of $1,440,000) and the excess credit line available
was $12,754,000. The credit facility restricts indebtedness and requires the
maintenance of minimum net worth (as defined), minimum working capital, and
maximum capital expenditures. There are also quarterly and annual pre-tax profit
requirements for Farah U.S.A.

The second credit facility provides up to L3,000,000 of credit through
December 31, 1993, for use in the United Kingdom and Ireland. It also provides a
L200,000 U.K. Customs Bond, and a $1,000,000 letter of credit to the Company's
U.S. lender. Availability under the facility is limited by formulas derived from
accounts receivable and inventory. The facility is secured by substantially all
of the Company's assets in the U.K. and Ireland. The interest rate is prime plus
2% for borrowings, 2% for the Customs Bond and letter of credit to the Company's
U.S. lender and standard tariff for other letters of credit. As of November 5,
1993 usage under the facility, all in the form of letters of credit and
guarantees, was $1,235,000 and the excess credit line available was $4,545,000.
The agreement requires a net worth minimum and minimum working capital ratio for
the Company's U.K. and Irish subsidiaries. The Company's U.S. lender has
indicated that they will provide financing for the Company's U.K. operations
after the current facility expires.

The following table reflects short-term debt balances and interest rates in
1993, 1992, and 1991 (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Average outstanding balance........................... $22,868 $16,839 $18,189
Maximum month-end balance outstanding................. 25,680 21,785 19,084
Weighted average interest rate:
During year...................................... 8.7% 9.7% 12.3%
Year-end......................................... 8.3% 9.0% 11.2%
</TABLE>

Long-Term Debt

Long-term debt at year-end is as follows (in thousands):

<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
5% convertible subordinated debentures, due February 1, 1994...... $3,925 $3,925
Term note secured by fixed assets, due the earlier of expiration
of the short-term credit facility or August 2, 1995, bearing
interest at prime plus 2 1/4%, due in monthly installments...... 182 322
Secured loans for equipment purchases, bearing interest at 8.01%
and 7.90%, due in monthly installments thru January 1997........ 253 --
Obligations under capital leases.................................. 1,328 491
------ ------
Total long-term debt.................................... 5,688 4,738
Less -- Current installments...................................... 4,509 286
------ ------
Net long-term debt...................................... $1,179 $4,452
------ ------
------ ------
</TABLE>

The 5% convertible subordinated debentures are convertible into the
Company's common stock at $37.62 per share, subject to adjustment under certain
anti-dilution provisions. On December 3, 1993 the Company announced an offer to
issue 8.5% convertible subordinated debentures due February 1, 2004 in exchange
for these debentures, due February 1, 1994.

F-10
<PAGE> 45

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

Installments of long-term debt are as follows (in thousands):

During 1993 a related party to the Company purchased a junior participation
of $2,000,000 in the Company's U.S. credit facility. Such participation was
repaid on November 5, 1993.

4. SHAREHOLDERS' EQUITY:

In the fourth quarter of 1992 and second quarter of 1993, the Company sold
1,200,000 and 619,000 shares, respectively, of its common stock to Marciano
Investments, Inc. and affiliated persons ("Marciano"). Proceeds from the sales,
net of expenses, were approximately $5,430,000 in 1992 and $5,958,000 in 1993.
The shares acquired in these transactions, together with separately acquired
shares, gave Marciano and the related parties approximately 32% of the Company's
total outstanding common stock as of November 5, 1993. The definitive agreement
executed in connection with the 1993 sale contains a provision which restricts
Marciano from owning more than 40% of the Company's common stock for 18 months
from March, 1993 without the consent of the Company. The agreement also contains
restrictions on the Company's ability to sell certain equity securities for 18
months from March, 1993 without the consent of Marciano.

5. EMPLOYEE, EXECUTIVE, AND DIRECTOR STOCK OPTIONS AND AWARDS:

The Company has granted options to certain employees and directors pursuant
to employee and non-employee director stock option plans to purchase the
Company's common stock at amounts not less than the market price on the date of
the grant.

During 1993, 80,000 shares of the Company's common stock were awarded to
certain officers and directors pursuant to the stock option and restricted stock
plans. The awards vest over varying periods beginning in 1993 and ending in 1996
of which 12,500 shares vested and were issued in 1993. The Company is
recognizing the expense related to these awards over the period of service
called for by the vesting provision of the awards.

F-11
<PAGE> 46

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

The following table summarizes activity for such options and awards for the
years ended November 5, 1993, November 6, 1992, and October 31, 1991:

<TABLE>
<CAPTION>
OPTIONS AND AWARDS
SHARES OUTSTANDING
AVAILABLE ---------------------------
FOR GRANT SHARES PRICE PER SHARE
---------- -------- ---------------
<S> <C> <C> <C>
Balance, October 31, 1990.......................... 185,251 420,570 $ 4.00-10.00
New shares approved.............................. 300,000 -- --
Granted.......................................... (343,500) 343,500 4.00-6.875
Exercised........................................ -- (42,250) 4.00-7.50
Cancelled or terminated.......................... 43,839 (43,839) 4.00-5.75
---------- --------
Balance, October 31, 1991.......................... 185,590 677,981 $ 4.00-10.00
Granted.......................................... (38,500) 38,500 6.625-6.875
Exercised........................................ -- (109,725) 4.00-5.75
Cancelled or terminated.......................... 24,912 (24,912) 5.75-10.00
---------- --------
Balance, November 6, 1992.......................... 172,002 581,844 4.00-10.00
New shares authorized............................ 75,000 -- 6.875
Granted.......................................... (187,000) 187,000 0-10.00
Exercised........................................ -- (85,983) 0-10.00
Cancelled or terminated.......................... 42,500 (44,924) 6.00-10.00
---------- --------
Balance, November 5, 1993 (480,437 exercisable).... 102,502 637,937 $ 0-10.00
---------- --------
---------- --------
Options included above expire as follows:
Five years after date of grant................... 22,950
Ten years after date of grant.................... 547,487
</TABLE>

6. INCOME TAXES:

Income (loss) before taxes and income taxes in 1993, 1992, and 1991 are
shown below (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic operations................................ $(1,682) $(11,489) $(4,097)
Foreign operations................................. 2,118 2,269 (1,105)
------- -------- -------
Total consolidated......................... $ 436 $ (9,220) $(5,202)
------- -------- -------
------- -------- -------
Income taxes:
Domestic operations................................ $ -- $ -- $ --
Foreign operations --
Current......................................... 304 369 306
Deferred........................................ -- -- --
------- -------- -------
Total foreign.............................. 304 369 306
------- -------- -------
Total consolidated......................... $ 304 $ 369 $ 306
------- -------- -------
------- -------- -------
</TABLE>

F-12
<PAGE> 47

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

The effective tax rate differs from the statutory U.S. federal tax rate as
summarized below (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------ ------- -------
<S> <C> <C> <C>
Expected income taxes at U.S. statutory rate............. $ 148 $(3,135) $(1,769)
Effect of differing tax rates in foreign countries....... 79 38 (153)
U.S. taxes on earnings of foreign subsidiaries........... -- 232 85
Unrecognized deferred tax benefits....................... -- 2,264 2,143
U.S. taxes on dividends from foreign countries........... 1,100 1,020 --
Recognition of unrecognized deferred tax benefits........ (981) -- --
Other.................................................... (42) (50) --
------ ------- -------
Income taxes, as reported...................... $ 304 $ 369 $ 306
------ ------- -------
------ ------- -------
</TABLE>

At November 5, 1993, the Company had net operating loss carryforwards for
financial reporting purposes of approximately $15,700,000, most of which can be
carried forward for substantial periods. For tax purposes, there were net
operating loss carryforwards at November 5, 1993 available to offset future
taxable income of approximately $4,000,000, of which $3,500,000 and $500,000
expire in 2007 and 2008, respectively. In addition, there were foreign tax
credit carryforwards at November 5, 1993 available to offset limited classes of
future taxable income of approximately $1,700,000, which expire beginning in
1994, with all expiring by 1996.

Certain of the Company's foreign subsidiaries had undistributed retained
earnings of approximately $21,200,000 at November 5, 1993. No U.S. tax has been
provided on the undistributed earnings because management intends to
indefinitely reinvest such earnings in the foreign operations. The amount of the
unrecognized deferred tax liability for these undistributed earnings is
approximately $5,900,000 at November 5, 1993.

During 1993 the Internal Revenue Service completed its examination of the
Company's U.S. tax returns for the years 1989 thru 1991. The examination
resulted in no additional tax payments.

7. EMPLOYEE BENEFIT PLANS:

The Company has two retirement plans. The first is a defined benefit plan
which covers substantially all bargaining unit employees and retirees and the
second is a defined contribution plan established pursuant to Section 401(k) of
the Internal Revenue Code which covers all non-union U.S. and Puerto Rican
employees.

Under the defined benefit plan the basic monthly pension payable to a
participant upon normal retirement equals the product of the participant's
deferred monthly retirement income amount times the number of years of credited
service. Assets of the defined benefit plan are invested primarily in U.S.
government obligations, corporate bonds, and equity securities.

Under the defined contribution plan, each participant may contribute from
1% to 13% of his/her compensation. The Company matches contributions up to 3% of
the participant's compensation. In 1993, 1992, and 1991 the Company's
contribution to the plan was approximately $334,000, $311,000, and $315,000,
respectively.

F-13
<PAGE> 48

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

The Company's policy is to fund accrued pension cost when such costs are
deductible for tax purposes. Net periodic pension cost for the years ended
November 5, 1993, November 6, 1992, and October 31, 1991 included the following
components (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Service cost-benefits earned during the period................ $ 35 $ 39 $ 130
Interest cost on projected benefit obligation................. 511 494 504
Actual return on plan assets.................................. (381) (71) (965)
Net amortization and deferral................................. (39) (370) 494
----- ----- -----
Net periodic pension cost.............................. $ 126 $ 92 $ 163
----- ----- -----
----- ----- -----
</TABLE>

The following table sets forth the funded status at November 5, 1993 and
November 6, 1992 of the defined benefit plan (in thousands):

<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation....................................... $(7,150) $(5,734)
Non-vested benefit obligation................................... (110) (21)
------- -------
Accumulated benefit obligation.................................. (7,260) (5,755)
Projected benefit obligation...................................... (7,260) (5,755)
Plan assets at market value....................................... 5,338 5,286
------- -------
Projected benefit obligation in excess of plan assets............. (1,922) (469)
Unrecognized transition liability being recognized over average
future service of plan participants............................. 601 667
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions................... 2,050 524
Adjustment required to recognize minimum liability................ (2,651) (1,191)
------- -------
Accrued pension expense................................. $(1,922) $ (469)
------- -------
------- -------
</TABLE>

In determining the benefit obligations and service cost of the Company's
defined benefit plan, weighted average discount rates of 7.50% and 9.25% were
used in 1993 and 1992, respectively. The expected long-term rate of return on
plan assets was 9.5% in both years.

In 1993, as required by Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions", the Company adjusted its additional
pension liability to $2,651,000 to reflect the increased excess of the
accumulated benefits over the fair value of plan assets. The adjusted additional
pension liability, which had no effect on 1993 operations, was offset by an
intangible asset of $601,000 and a decrease to shareholders' equity of
$2,050,000.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 106, "Employer's Accounting for Post-retirement
Benefits Other Than Pensions". The Company generally does not offer any
post-retirement benefits; therefore, the statement will have no impact on the
Company.

In November 1992, Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Post Employment Benefits," was issued. Adoption is
required for fiscal years beginning after December 15,

F-14
<PAGE> 49

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

1993. The Company does not believe that the adoption of this statement will have
a significant impact on the Company.

8. LEASES:

During 1988 the Company consummated a sale and leaseback of its main El
Paso, Texas manufacturing and office facility. A portion of the sale was paid by
delivery of a $7,500,000 promissory note to the Company, secured by a second
mortgage on the property. The balance of the note receivable at November 5, 1993
and November 6, 1992 was $6,450,000 and $6,686,000, respectively. The promissory
note bears interest at 9.25% with principal and interest payable in monthly
installments through February 2007. In connection with the sale, the Company
entered into a ten year operating lease of the facility which is extendible for
an additional ten years at the Company's option. The Company has pledged a
$2,500,000 certificate of deposit as security for this lease. The gain on the
sale was deferred. As of November 5, 1993, $9,314,000 remained to be recognized
over the term of the initial lease.

The Company and its subsidiaries occupy certain facilities and use certain
equipment under operating leases which expire at various dates from fiscal 1994
to 2016. The following is a summary by year of the non-cancellable portion of
future minimum lease payments under operating leases (in thousands):

<TABLE>
<S> <C>
1994................................................................ $ 7,398
1995................................................................ 6,627
1996................................................................ 5,848
1997................................................................ 5,706
1998................................................................ 3,140
Later years......................................................... 1,199
-------
Lease payments *.................................................... $29,918
-------
-------
</TABLE>

- ---------------

* Minimum payments have not been reduced by minimum sub-lease rental income of
$4,703,000 due in the future under non-cancellable sub-leases.

During 1992 the Company entered into a 6 1/2 year operating sub-lease
agreement for approximately one-half of its El Paso manufacturing facility. The
following is a summary by year of the non-cancellable portion of future minimum
rental income (in thousands):

<TABLE>
<S> <C>
1994................................................................. $ 881
1995................................................................. 1,028
1996................................................................. 1,028
1997................................................................. 1,028
1998................................................................. 738
------
Total................................................................ $4,703
------
------
</TABLE>

Rental expense for all operating leases for 1993, 1992, and 1991 was
$6,860,000, $6,837,000 and $6,570,000, respectively, (net of sub-lease income of
approximately $881,000 in 1993 and $575,000 in 1992).

F-15
<PAGE> 50

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

9. GEOGRAPHIC SEGMENT INFORMATION:

The Company is engaged in one business segment. This includes the design,
manufacture, distribution and sale of men's, young men's and boys' apparel in
the United States and certain foreign countries, principally in Europe and the
South Pacific. The following tabulation presents information regarding
geographic segments for the years ended 1993, 1992, and 1991. Transfers between
the United States and foreign areas are recorded at normal selling prices.
Operating profit is total revenue less operating expenses. In computing
operating profit, general corporate expenses, interest expense, and income taxes
have been excluded (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States to unaffiliated customers............. $151,017 $116,031 $109,630
Transfers between areas............................. 480 109 280
-------- -------- --------
Total United States............................ 151,497 116,140 109,910
Europe.............................................. 20,069 26,140 31,415
South Pacific....................................... 9,028 9,819 10,157
Adjustments and eliminations........................ (480) (109) (280)
-------- -------- --------
Total.......................................... $180,114 $151,990 $151,202
-------- -------- --------
-------- -------- --------
Operating profit (loss):
United States....................................... $ 1,274 $ (9,494) $ (2,224)
Europe.............................................. 602 671 (840)
South Pacific....................................... 1,565 2,097 247
Adjustments and eliminations........................ (66) (65) (67)
-------- -------- --------
Total.......................................... 3,375 (6,791) (2,884)
Net gain on sale of assets............................ 323 9 127
General corporate expenses............................ (1,810) (1,478) (1,300)
Interest expense, net................................. (1,452) (960) (1,145)
-------- -------- --------
Income (loss) before income taxes.............. $ 436 $ (9,220) $ (5,202)
-------- -------- --------
-------- -------- --------
Identifiable assets:
United States....................................... $ 97,811 $ 70,328 $ 70,382
Europe.............................................. 11,813 12,997 21,480
Far East and the South Pacific...................... 11,842 11,400 19,553
Adjustments and eliminations........................ (2,575) (1,588) (4,588)
-------- -------- --------
Total.......................................... $118,891 $ 93,137 $106,827
-------- -------- --------
-------- -------- --------
</TABLE>

F-16
<PAGE> 51

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 5, 1993, NOVEMBER 6, 1992, AND OCTOBER 31, 1991

10. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED):

Quarterly unaudited information for fiscal 1993 compared to fiscal 1992 is
as follows (in thousands, except share data):

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1993
Net sales................................. $ 35,316 $ 41,748 $ 43,773 $ 59,277
Gross profit.............................. 10,640 12,017 11,509 18,928
Net income (loss)......................... 604 1,289 (5,179) 3,418
Net income (loss) per share............... 0.08 0.17 (0.65) 0.42
Weighted average shares of common stock
and common stock equivalents
outstanding.............................7,318,463 7,742,098 7,939,768 8,124,443
1992
Net sales................................. $ 34,102 $ 37,753 $ 37,104 $ 43,031
Gross profit.............................. 8,862 8,999 8,233 12,387
Net income (loss)......................... (425) (2,258) (8,109) 1,203
Net income (loss) per share............... (0.07) (0.37) (1.34) .17
Weighted average shares of common stock
and common stock equivalents
outstanding............................. 5,967,616 6,043,062 6,065,142 7,212,596
</TABLE>

The third quarter of 1993 includes $4,000,000 of factory conversion
expenses (see Note 1).

The third quarter of 1992 includes a provision for loss on Generra
bankruptcy of $6,146,000 (see Note 1).

For loss quarters, common stock equivalents are excluded from "weighted
average shares of common stock and common stock equivalents outstanding."

F-17
<PAGE> 52

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED QUARTERLY
FINANCIAL STATEMENTS
FEBRUARY 4, 1994, AND FEBRUARY 5, 1993

1. BASIS OF PRESENTATION:

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 Consolidated Financial Statements.

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. The results of operations
for the three months ended February 4, 1994, may not be indicative of the
results to be expected for the full fiscal year.

2. CHANGE IN ACCOUNTING PRINCIPLES -- ACCOUNTING FOR INCOME TAXES:

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires the recognition of deferred tax assets, net of
applicable reserves, related to net operating loss carryforwards and certain
temporary differences.

The adoption of SFAS 109 had no significant impact on the consolidated
quarterly financial statements for the three months ended February 4, 1994, as
compared to the Company's prior method of accounting under Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes".

The Company adopted SFAS 109 effective November 6, 1993, resulting in a
deferred tax asset at November 6, 1993, of $8,580,000, less a valuation
allowance of the same amount, as follows:

<TABLE>
<S> <C>
Deferred tax assets:
U.S. federal NOL carryforwards................................ $1,352,000
Foreign NOL carryforwards..................................... 1,045,000
Gain on sale of building fully recognized for tax............. 3,167,000
Unrecognized capital loss..................................... 459,000
Foreign tax credit carryforwards.............................. 1,710,000
Other accrued expenses and reserves........................... 1,840,000
Other deferred tax assets..................................... 273,000
----------
Total deferred tax assets............................. 9,846,000
----------
Deferred tax liabilities:
Tax over book depreciation and amortization................... 862,000
Other deferred tax liabilities................................ 404,000
----------
Total deferred tax liabilities........................ 1,266,000
----------
Net deferred tax asset................................ 8,580,000
Valuation allowance............................................. (8,580,000)
----------
Net deferred tax asset, net of valuation allowance.............. $ --
----------
----------
</TABLE>

F-18
<PAGE> 53

FARAH INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED QUARTERLY
FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 4, 1994, AND FEBRUARY 5, 1993

Pursuant to the requirements of SFAS 109, a valuation allowance must be
provided when it is more likely than not that the deferred tax asset will not be
realized. The Company has provided a valuation allowance against the entire
November 6, 1993, net deferred tax asset. In subsequent periods, the Company may
reduce the valuation allowance, provided that utilization of the deferred tax
asset is more likely than not as defined by SFAS 109.

At November 6, 1993, the Company's U.S. subsidiary had approximately
$3,977,000 of tax net operating loss carryforwards available to offset future
taxable income. Approximately $3,515,000 of this carryforward expires in 2007
and $462,000 in 2008. The Company's United Kingdom and Ireland subsidiaries had
approximately $3,078,000 and $296,000, respectively, of net operating loss
carryforwards available to offset future taxable income in those countries.
Carryforwards in these countries are available until used, for an indefinite
future period. In addition, there were foreign tax credit carryforwards at
November 6, 1993, available to offset limited classes of future taxable income
of approximately $1,710,000, which expire beginning in 1994, with all expiring
by 1996.

F-19
<PAGE> 54

{PHOTOS}
<PAGE> 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO
CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO
THIS PROSPECTUS CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 3
Incorporation of Certain Documents by
Reference............................ 3
Prospectus Summary..................... 4
Investment Considerations.............. 6
Use of Proceeds........................ 8
Price Range of Common Stock............ 9
Dividend Policy........................ 9
Capitalization......................... 10
Selected Consolidated Financial Data... 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 12
Business............................... 19
Management............................. 28
Principal and Selling Shareholders..... 30
Description of Capital Stock........... 32
Underwriting........................... 32
Legal Matters.......................... 33
Experts................................ 33
Index to Financial Statements.......... F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

2,600,000 SHARES

FARAH INCORPORATED

COMMON STOCK
(NO PAR VALUE)

{FARAH LOGO}

---------------------
PROSPECTUS
---------------------

BEAR, STEARNS & CO. INC.

APRIL , 1994

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE> 56

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The table below sets forth the estimated expenses expected to be incurred
in connection with the issuance and distribution of the Common Stock to be
registered and offered hereby:

<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 21,198
NASD Filing Fee................................................... 6,647
NYSE Listing Fee.................................................. 6,265
"Blue Sky" Fees and Expenses...................................... 4,000
Printing and Engraving Expenses................................... 35,000
Legal Fees and Expenses (other than Blue Sky)..................... 125,000
Accounting Fees and Expenses...................................... 90,000
Transfer Agent and Registrar Fees................................. 2,500
Miscellaneous..................................................... 59,390
--------
Total................................................... $350,000
--------
--------
</TABLE>

- ---------------

* To be supplied by amendment.

Under contractual arrangements, the Company is paying all expenses of the
Selling Shareholder, other than underwriting discounts and commissions.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The bylaws of the Company provide that directors and officers may be
indemnified to the maximum extent permitted by the Texas Business Corporation
Act (the "TBCA"). The TBCA permits, and in some cases requires, corporations to
indemnify officers, directors, agents and employees who are or have been a party
to or are threatened to be made a party to litigation against judgments,
penalties (including excise and similar taxes), fines, settlements and
reasonable expenses under certain circumstances.

The Company has adopted provisions in its Articles of Incorporation that
limit the liability of its directors to the fullest extent permitted by the
corporation laws of the State of Texas. Under the Company's Articles of
Incorporation, and as permitted by the corporation laws of the State of Texas, a
director is not liable to the Company or its shareholders for monetary damages
for an act or omission in the director's capacity as a director of the Company.
Such limitation of liability does not affect a director's liability for a breach
of a director's duty of loyalty to the Company, an act or omission not in good
faith or that involves intentional misconduct or a knowing violation of the law,
a transaction from which a director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the director's
office, an act or omission for which the liability of a director is expressly
provided by statute, or an act related to an unlawful stock repurchase or
dividend payment. Such limitation of liability also does not affect the
availability of equitable remedies such as injunctive relief or rescission.

In addition, the Company and certain other persons may be entitled, under
the form of Underwriting Agreement filed as Exhibit 1, to indemnification by the
Underwriters and the Selling Shareholder against certain liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments which the Company or such persons may be required to make in respect
thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers, directors, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

II-1
<PAGE> 57

The Company has entered into indemnification agreements with each of its
directors and executive officers and with two of its officers who are not
executive officers. Each of these agreements, among other things, contractually
obligates the Company to, under certain circumstances, indemnify the officer or
director against certain expenses and liabilities arising out of legal
proceedings which may be brought against such officer or director by reason of
his status or service as a director or officer.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------------------------
<S> <C>
*1.1 -- Form of Underwriting Agreement.
**3.1 -- Restated Articles of Incorporation dated March 29, 1988.
**3.2 -- Articles of Amendment to Articles of Incorporation of Farah
Incorporated dated March 26, 1993.
3.3 -- Amended and Restated Bylaws dated as of September 1, 1993
(incorporated by reference from Exhibit 3.2 to Form 10-K as of
November 5, 1993).
4.1 -- Indenture dated as of February 1, 1994 (incorporated by reference
from Exhibit 9(c)(1) to Schedule 13E-4 dated December 3, 1993).
**5.1 -- Opinion of Baker & McKenzie.
22 -- Subsidiaries of the Company (incorporated by reference from Exhibit
22 to Form 10-K as of November 5, 1993).
*23.1 -- Consent of Arthur Andersen & Co.
**23.2 -- Consent of Baker & McKenzie (included in Exhibit 5.1).
**24 -- Power of Attorney (see signature pages of Registration Statement).
</TABLE>

- ---------------

* Filed herewith.

** Previously filed with the Registration Statement.

ITEM 17. UNDERTAKINGS

1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

2. The undersigned registrant hereby undertakes that:

A. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of the registration statement as of the time it was declared effective.

B. For the purpose of determining any liability under the Securities
Act of 1933, each posteffective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such

II-2
<PAGE> 58

indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-3
<PAGE> 59

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of El Paso, State of Texas, on this 18th day of April, 1994.

FARAH INCORPORATED

By: /s/ RICHARD C. ALLENDER

Richard C. Allender
Chairman of the Board,
President and Chief Executive
Officer

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ RICHARD C. ALLENDER Chairman of the Board, April 18, 1994
Richard C. Allender President and Chief Executive
Officer (Principal Executive
Officer)
/s/ JAMES C. SWAIM Executive Vice President, Chief April 18, 1994
James C. Swaim Financial Officer, Treasurer
and Director (Principal
Financial and Accounting
Officer)
* Director April 18, 1994
Clark L. Bullock
* Director April 18, 1994
Christopher L. Carameros
* Director April 18, 1994
Sylvan Landau
* Director April 18, 1994
Michael R. Mitchell
* Director April 18, 1994
Edward J. Monahan
* Director April 18, 1994
Timothy B. Page
* Director April 18, 1994
Charles J. Smith
* Director April 18, 1994
Thomas G. Wyman

*By: /s/ RICHARD C. ALLENDER
Richard C. Allender
Attorney-in-fact
</TABLE>

II-4
<PAGE> 60

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement.
**3.1 -- Restated Articles of Incorporation dated March 29, 1988.
**3.2 -- Articles of Amendment to Articles of Incorporation of Farah
Incorporated dated March 26, 1993.
3.3 -- Amended and Restated Bylaws dated as of September 1, 1993 (incorporated
by reference from Exhibit 3.2 to Form 10-K as of November 5, 1993).
4.1 -- Indenture dated as of February 1, 1994 (incorporated by reference from
Exhibit 9(c)(1) to Schedule 13E-4 dated December 3, 1993).
**5.1 -- Opinion of Baker & McKenzie.
22 -- Subsidiaries of the Company (incorporated by reference from Exhibit 22
to Form 10-K as of November 5, 1993).
*23.1 -- Consent of Arthur Andersen & Co.
**23.2 -- Consent of Baker & McKenzie (included in Exhibit 5.1).
**24 -- Power of Attorney (see signature pages of Registration Statement).
</TABLE>

- ---------------

* Filed herewith.

** Previously filed with the Registration Statement.

<PAGE> 1
EXHIBIT 1.1

2,600,000 Shares of Common Stock

FARAH INCORPORATED

UNDERWRITING AGREEMENT

____________, 1994

BEAR, STEARNS & CO. INC.
As Representative of the
several Underwriters named in
Schedule I attached hereto
245 Park Avenue
New York, N.Y. 10167

Ladies and Gentlemen:

Farah Incorporated, a Texas corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") 1,400,000 shares of common stock, no par value, of the Company
(the "Common Stock"), and the undersigned selling shareholder of the Company
named in Schedule II hereto (the "Selling Shareholder") proposes to sell to the
Underwriters an additional 1,200,000 shares of Common Stock, which aggregate of
2,600,000 shares of Common Stock is herein referred to as the "Firm Shares."
In addition, for the sole purpose of over-allotments in connection with the
sale of the Firm Shares, the Company proposes to sell to the Underwriters, at
the option of the Underwriters, up to an additional 390,000 shares of Common
Stock (the "Additional Shares"). The Firm Shares and any Additional Shares
purchased by the Underwriters are herein referred to as the "Shares."

The Shares are more fully described in the Registration Statement referred to
below.

1. Representations and Warranties of the Company.

A. The Company represents and warrants to, and
agrees with, each of the several Underwriters and the Selling Shareholder that:

(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and
an amendment or amendments thereto, on Form

<PAGE> 2

S-3 (Registration No. 33-52811), for the registration of the Shares
under the Securities Act of 1933, as amended (the "Securities Act").
Such registration statement, including the prospectus, financial
statements, exhibits and all other documents filed as a part thereof,
when it shall become effective, is herein called the "Registration
Statement" and the prospectus, in the form first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations of the
Commission (the "Regulations"), is herein called the "Prospectus."
The term "Preliminary Prospectus" as used herein means any preliminary
prospectus relating to the Shares as described in Rule 430 of the
Regulations. Reference made herein to the Registration Statement, the
Preliminary Prospectus or the Prospectus shall include all documents
incorporated by reference therein and shall be deemed to refer to and
include any documents filed after the date of such Registration
Statement, Preliminary Prospectus or Prospectus, as the case may be,
and so incorporated by reference, under the Securities Exchange Act of
1934, as amended (the "Exchange Act").

(b) Neither the Commission nor the Blue Sky or securities
authority of any jurisdiction has issued a stop order suspending the
effectiveness of the Registration Statement, preventing or suspending
the use of the Preliminary Prospectus, the Prospectus, the
Registration Statement, or any amendment or supplement thereto,
refusing to permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Shares, nor, to
the Company's knowledge, has any of such authorities instituted or
threatened to institute any proceedings with respect to a stop order.

(c) When the Registration Statement shall become
effective, when any amendment to the Registration Statement becomes
effective, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission, and up to
and at the Closing Date (and the Additional Closing Date, if any) (as
hereinafter respectively defined), the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto will
comply in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the Regulations and will not
contain an untrue statement of a material fact and will not omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. At the time of the first
filing of the Preliminary Prospectus with the Commission (whether
filed as part of the Registration Statement for the registration of
the Shares or any amendment thereto or pursuant to Rule 424(a) of the
Regulations) and when any amendment thereof or supplement thereto was
first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied in all material
respects with the applicable provisions of the Securities Act, the
Exchange Act and the Regulations and did not contain an untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading. No representation and warranty is
made in this subsection (c), however, with respect to any information
contained in or omitted from the Registration Statement or the
Prospectus or the Preliminary Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through you as herein stated expressly for use in connection with the
preparation thereof.

-2-
<PAGE> 3
(d) The documents which are incorporated by reference in
the Preliminary Prospectus, the Prospectus or the Registration
Statement or from which information is so incorporated by reference,
when they became effective or were first filed with the Commission, as
the case may be, complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable,
and the Regulations, and, when read together with the other
information in the Prospectus, at the time the Registration Statement
shall become effective and at the Closing Date, will not contain an
untrue statement of a material fact and will not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. Any documents which are filed
and incorporated by reference subsequent to the effective date of the
Registration Statement shall, when they are filed with the Commission,
conform in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and the
Regulations, and, when read together with the other information in the
Prospectus, at the time the Registration Statement shall become
effective and at the Closing Date, will not contain an untrue
statement of a material fact and will not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.

(e) Arthur Andersen & Co., who have audited the
consolidated financial statements, together with the related schedules
and notes, of the Company that were or will be filed with the
Commission as part of the Registration Statement and whose report is
filed with the Commission as a part of the Registration Statement, are
independent public accountants with regard to the Company as required
by the Securities Act and the Regulations.

(f) Each of the Company, Farah U.S.A., Inc., a Texas
corporation ("Farah U.S.A."), Farah International, Inc., a Texas
corporation ("International"), and Value Slacks, Inc., a Texas
corporation (with Farah U.S.A. and International, the "U.S.
Subsidiaries"), has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. Each of Farah Manufacturing (U.K.) Limited, an English
corporation, Farah Australia Pty, Ltd., an Australian corporation, and
Farah (New Zealand) Limited, a New Zealand corporation (the "Foreign
Subsidiaries" and, together with the U.S. Subsidiaries, the
"Subsidiaries"), is a company duly incorporated and existing in its
jurisdiction of incorporation and no order or resolution for the
winding up of, and no interim or final administrative order in
relation to, and no notice of the appointment of a receiver,
administrative receiver or administrator in relation to, any of the
Foreign Subsidiaries has been made in, or presented to, the Registry
of such jurisdiction. Farah (Fiji) Limited (the "Fiji J.V.") is a
company duly incorporated and existing in the Fiji Islands and no
order or resolution for the winding up of, and no interim or final,
administrative order in relation to, and no notice of the appointment
of a receiver, administrative receiver or administrator in relation
to, the Fiji J.V. has been made in, or presented to, the Registry of
such jurisdiction. Each of the Company, the Subsidiaries and the Fiji
J.V. is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its
business makes such qualification necessary. Each of the Company, the
Subsidiaries and the Fiji J.V. has all requisite power and authority,
and all consents, approvals, authorizations, orders, registrations,

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<PAGE> 4
qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, necessary to own,
lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus. No such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially
burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus.

(g) All of the outstanding shares of Common Stock are
duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of or subject to any
preemptive rights. As of the date of this Agreement, the Company had
an authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. The Shares to be purchased
from the Company have been duly authorized for issuance. Except as
set forth in the Registration Statement, no holders of Common Stock or
other securities of the Company have registration rights with respect
to any securities of the Company, and all holders of securities of the
Company, other than the Selling Shareholder with respect to the shares
of Common Stock being sold hereby, having rights to registration of
shares of Common Stock, or other securities, as a result of the filing
of the Registration Statement have, with respect to the offering
contemplated thereby, waived such rights. The Shares, when delivered
and sold in accordance with this Agreement, will be duly and validly
issued and outstanding, fully paid and nonassessable. No preemptive
right, co-sale right, right of first refusal or other similar right of
shareholders exists with respect to any of the Shares or the issue or
sale thereof. The Common Stock, including the Firm Shares and the
Additional Shares, conforms to the descriptions thereof contained in
the Registration Statement and the Prospectus.

(h) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
the subsidiaries listed on Schedule 22 to the Company's Annual Report
on Form 10-K for the year ended November 5, 1993. All the outstanding
capital stock of each of the Subsidiaries is duly and validly issued,
fully paid and nonassessable and is owned, with respect to the U.S.
Subsidiaries, by the Company and, with respect to the Foreign
Subsidiaries, by International, free and clear of any liens, pledges,
encumbrances, claims, security interests and other defects in title
whatsoever, other than the pledge of such capital stock pursuant to
those certain financing arrangements pursuant to that certain Accounts
Financing Agreement (Security Agreement), dated as of August 2, 1990,
between Congress Financial Corp. (Southwest) and Farah U.S.A.

(i) Neither the Company nor the Subsidiaries is, or with
the giving of notice or lapse of time, or both, would be, with respect
to the Company and the U.S. Subsidiaries, in violation of its charter
or bylaws, and, with respect to the Foreign Subsidiaries, in violation
of its memorandum or articles of association, and neither the Company
nor the Subsidiaries is, or with the giving of notice or lapse of
time, or both, would be, in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any
material contract, indenture, mortgage, deed of trust, loan agreement,
lease, joint venture or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of their
properties may be bound which default could reasonably be expected to
have a material adverse effect on the Company or any of the
Subsidiaries, or in violation of any law, order,

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<PAGE> 5
rule, regulation, writ, injunction, judgment or decree of any court or
governmental agency or body, the violation of which could reasonably
be expected to have a material adverse effect on the Company or any of
the Subsidiaries.

(j) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent rights to indemnity
hereunder may be limited by federal or state securities laws or the
public policy underlying such laws and except to the extent the
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by equitable principles.

(k) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not (i) conflict with or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) or
require consent under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any of the Subsidiaries, pursuant to the terms of any agreement,
instrument, franchise, license or permit to which the Company or any
of the Subsidiaries is a party or by which any of such corporations or
their respective properties or assets may be bound, or (ii) violate or
conflict with any provision of the articles or certificate of
incorporation or bylaws of the Company or any of the U.S.
Subsidiaries, any provision of the memorandum or articles of
association of any of the Foreign Subsidiaries, or any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their respective
properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
their respective properties or assets, and no further approval or
authorization of any shareholder, the Board of Directors of the
Company or others, is required for the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including the issuance, sale and delivery of the
Shares to be issued, sold and delivered by the Company hereunder,
except the registration of the Shares under the Act and such consents,
approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state
securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Shares.

(l) The consolidated financial statements of the Company,
together with the related schedules and notes, forming part of the
Registration Statement and Prospectus, fairly present the consolidated
financial position and results of operations of the Company and the
Subsidiaries at the respective dates and for the respective periods to
which they apply. All consolidated financial statements of the
Company, together with the related schedules and notes, filed with the
Commission as part of the Registration Statement have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved. The selected and summary
financial and statistical data included in the

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<PAGE> 6
Registration Statement present fairly the information shown therein
and have been compiled on a basis substantially consistent with the
financial statements presented therein.

(m) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as set forth in the Registration Statement and the Prospectus,
there has not been (i) any material adverse change in the business,
prospects, properties, operations, condition (financial or otherwise)
or results of operations of the Company or any of the Subsidiaries,
whether or not arising from transactions in the ordinary course of
business, (ii) any transaction that is material to the Company or any
of the Subsidiaries, except transactions in the ordinary course of
business, (iii) any obligation or liability, direct or contingent,
incurred by the Company or any of the Subsidiaries that is material to
the Company or any of the Subsidiaries, except obligations and
liabilities incurred or undertaken in the ordinary course of business,
(iv) other than the Company's issuance of Common Stock upon exercise
of stock options under the Company's employee stock option plan in
effect on the date hereof, any change in the capital stock of the
Company or any of the Subsidiaries, or (v) any dividend or
distribution of any kind declared, paid or made on the capital stock
of the Company or any of the Subsidiaries.

(n) Except as described in the Prospectus, there is not
pending or, to the Company's knowledge, threatened any action, suit,
claim or proceeding against the Company, any of the Subsidiaries or
any of their respective officers or any of their properties, assets or
rights before any court or governmental agency or body that might
result in any material adverse change or any development involving a
material adverse change in the business, prospects, properties,
operations, condition (financial or other) or results of operations of
the Company or any of the Subsidiaries or prevent the consummation of
the transactions contemplated herein. There are no contracts or
documents of the Company or any of the Subsidiaries that are required
to be described in all material respects in the Prospectus or to be
filed as exhibits to the Registration Statement by the Securities Act
or the Regulations that have not been accurately described in the
Prospectus or filed as exhibits to the Registration Statement.

(o) The Shares have been approved for listing on the New
York Stock Exchange (the "NYSE").

(p) The conditions for use of Form S-3, set forth in the
General Instructions thereto, have been satisfied.

(q) The Company has not taken and will not take, directly
or indirectly, any action which constituted or which was designed to
constitute or which might be reasonably expected to cause or result in
stabilization or manipulation of the price of the shares of Common
Stock.

B. The Selling Shareholder represents and warrants to,
and agrees with, each of the several Underwriters that:

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<PAGE> 7

(a) The Selling Shareholder has (i) caused a certificate
or certificates for the number of Shares to be sold by the Selling
Shareholder hereunder to be delivered to James C. Swaim, endorsed in
blank or with blank stock powers duly executed, with signatures
appropriately guaranteed, such certificate or certificates to be held
in the custody of James C. Swaim, in accordance with the terms of a
custody agreement in the form heretofore delivered to you, for
delivery pursuant to the provisions hereof on the Closing Date (the
custody agreement executed by the Selling Shareholder being
hereinafter referred to as the "Custody Agreement").

(b) The execution, delivery and performance of this
Agreement and the Custody Agreement by or on behalf of the Selling
Shareholder and the consummation of the transactions contemplated
hereby and thereby will not (i) conflict with or result in the breach
of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a
default) or require consent under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Selling Shareholder pursuant to the terms of any
agreement, trust agreement, instrument, franchise, license or permit
to which the Selling Shareholder is a party or by which the Selling
Shareholder or any of the Selling Shareholder's property or assets may
be bound, or (ii) violate or conflict with the Certificate of
Incorporation or By-laws of the Selling Shareholder or any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Selling Shareholder or the Selling Shareholder's properties or assets.

(c) The Selling Shareholder has, and at the time of
delivery of the Shares to be sold by the Selling Shareholder will
have, full legal right, power, authority and capacity, and, except as
required under the Securities Act and state securities and Blue Sky
laws, all necessary consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits of and
from all public, regulatory or governmental agencies and bodies, as
are required for the execution, delivery and performance of this
Agreement and the Custody Agreement and the consummation of the
transactions contemplated hereby and thereby, including the sale,
assignment, transfer and delivery of the Shares to be sold, assigned,
transferred and delivered by the Selling Shareholder hereunder.

(d) Each of this Agreement and the Custody Agreement has
been duly authorized and duly and validly executed and delivered by or
on behalf of the Selling Shareholder and is a valid and binding
obligation of the Selling Shareholder, enforceable against the Selling
Shareholder in accordance with its terms, except to the extent that
rights to indemnity hereunder may be limited by applicable federal or
state securities laws or the public policy underlying such laws and
except to the extent the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by
equitable principles.

(e) The Selling Shareholder has good, valid and
marketable title to the Shares to be sold by the Selling Shareholder
pursuant to this Agreement, free and clear of all liens, pledges,
encumbrances, claims, security interests, shareholders' agreements,
voting trusts, other defects in title whatsoever and restrictions on
transfer (other than those restrictions on

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<PAGE> 8
transfer imposed by the Securities Act and the securities or Blue Sky
laws of certain jurisdictions), with full power to deliver such Shares
hereunder, and, upon the delivery of and payment for such Shares as
herein contemplated, each of the Underwriters will acquire good, valid
and marketable title to the Shares purchased by it from the Selling
Shareholder, free and clear of all liens, pledges, encumbrances,
claims, security interests, shareholders agreements, voting trusts,
other defects in title whatsoever and restrictions on transfer (other
than those restrictions on transfer imposed by the Securities Act and
the securities or Blue Sky laws of certain jurisdictions).

(f) The Selling Shareholder has not taken and will not
take, directly or indirectly, any action which constituted or which
was designed to constitute or which might be reasonably expected to
cause or result in stabilization or manipulation of the price of the
shares of Common Stock in violation of federal or state securities
laws.

(g) When the Registration Statement shall become
effective, when any amendment to the Registration Statement becomes
effective, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) of the Regulations, when any amendment of or
supplement to the Prospectus is filed with the Commission and at the
Closing Date and the Additional Closing Date, if any, such parts of
the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto as they relate to the Selling
Shareholder and are based upon information furnished to the Company by
or on behalf of the Selling Shareholder expressly for use therein will
not contain an untrue statement of a material fact and will not omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
in which they were made, not misleading. When the Preliminary
Prospectus was first filed with the Commission (whether filed as part
of the Registration Statement for the registration of the Shares or
any amendment thereto or pursuant to Rule 424(a) of the Regulations)
and when any amendment thereof or supplement thereto was first filed
with the Commission, such parts of the Preliminary Prospectus and any
amendments thereof and supplements thereto as they relate to the
Selling Shareholder and are based on information furnished to the
Company by or on behalf of the Selling Shareholder expressly for use
therein did not contain an untrue statement of a material fact and did
not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.

(h) The Selling Shareholder (i) does not have any
preemptive right, co-sale right or right of first refusal or other
similar right to purchase any of the Shares that are to be sold by the
Company to the Underwriters pursuant to this Agreement, and (ii) does
not own any warrants, options or similar rights to acquire, and does
not have any right or arrangement to acquire, any capital stock,
rights, warrants, options or other securities from the Company.

(i) The Selling Shareholder does not possess any
registration rights with respect to any securities of the Company,
other than as set forth in that certain Amended and Restated Stock
Purchase Agreement, dated as of March 12, 1993, among the Company, the
Selling Shareholder and certain affiliates of the Selling Shareholder
and that certain

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<PAGE> 9
(Registration Rights Agreement, dated as of April __, 1994, among the
Company and certain affiliates of the Selling Shareholder).

2. Purchase, Sale and Delivery of the Shares. On the basis of
the representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company agrees to
issue and sell to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company, at a price of
$________ per share, the number of Firm Shares set forth opposite the
respective names of the Underwriters in Column (1) of Schedule I hereto, and
(ii) the Selling Shareholder agrees to sell to the several Underwriters, and
each of the Underwriters, severally and not jointly, agrees to purchase from
the Selling Shareholder, at $__________ per share, the number of Firm Shares
set forth opposite the respective names of the Underwriters in Column (2) of
Schedule I hereto.

Delivery of certificates, and payment of the purchase price, for the
Firm Shares shall be made at the offices of Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 10:00 a.m., New York
time, on the fifth full business day following the date the Registration
Statement becomes effective (unless such time and date are postponed in
accordance with the provisions of Section 9 hereof), or at such other time as
shall be agreed upon by you, the Selling Shareholder and the Company. The time
and date of such delivery and payment are herein called the "Closing Date."
Delivery of the certificates for the Firm Shares shall be made to you for the
respective accounts of the several Underwriters against payment by the several
Underwriters through the Representative of the purchase price for the Firm
Shares, to the order of the Company and the Selling Shareholder by certified or
official bank checks in New York Clearing House funds.

Certificates for the Firm Shares shall be registered in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to the Closing Date. The Company and the
Selling Shareholder will permit you to examine and package such certificates
for delivery at least one full business day prior to the Closing Date.

In addition, the Company hereby grants to the several Underwriters the
option to purchase up to 390,000 shares of Additional Shares at the same
purchase price per share to be paid by the several Underwriters to the Company
for the Firm Shares as set forth in this Section 2, for the sole purpose of
covering over-allotments in the sale of Firm Shares by the several
Underwriters. This option may be exercised at any time (but not more than
once) on or before the 30th day following the effective date of the
Registration Statement, by written notice by you to the Company. Such notice
shall set forth the aggregate number of Additional Shares as to which the
option is being exercised and the date and time, as reasonably determined by
you, when the Additional Shares are to be delivered (such date and time being
herein sometimes referred to as the "Additional Closing Date"); provided,
however, that the Additional Closing Date shall not be earlier than the Closing
Date or earlier than the second full business day after the date on which the
option shall have been exercised nor later than the eighth full business day
after the date on which the option shall have been exercised (unless such time
and date are postponed in accordance with the provisions of Section 9 hereof).
Certificates for the Additional Shares shall be registered in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to

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<PAGE> 10
the Additional Closing Date. The Company will permit you to examine and
package such certificates for delivery at least one full business day prior to
the Additional Closing Date.

The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Column (1) of Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares, subject, however, to such adjustments to eliminate any fractional
shares as you in your sole discretion shall make.

Payment for the Additional Shares shall be made by the several
Underwriters through the Representative to the order of the Company by
certified or official bank check in New York Clearing House funds at the
offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167, or such other location as may be mutually acceptable, upon delivery of
the certificates for the Additional Shares to you for the respective accounts
of the Underwriters.

3. Offering. It is understood that after the Registration
Statement becomes effective the several Underwriters propose to offer the
Shares for sale to the public as set forth in the Prospectus.

4. Covenants of the Company and the Selling Shareholder.

A. The Company covenants and agrees with the several
Underwriters that:

(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof to become effective
as promptly as possible and will notify you immediately (i) when the
Registration Statement and any amendments thereto become effective,
(ii) of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for any
additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or any post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (iv) of the receipt of any
comments from the Commission, and (v) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose. If the Commission
shall propose or enter a stop order at any time, the Company will make
every reasonable effort to prevent the issuance of any such stop order
and, if issued, to obtain the lifting of such order as soon as
possible.

(b) The Company will not file at any time, whether before
or after the effective date of the Registration Statement, any
amendment to the Registration Statement or any amendment of or
supplement to the Prospectus, or file any document under the Exchange
Act before termination of the offering of the Shares by the
Underwriters if such document would be deemed to be incorporated by
reference into the Prospectus, unless (i) you shall have been provided
a copy of such proposed amendment, supplement or document within a
reasonable time before the proposed filing, (ii) such proposed
amendment, supplement or document complies in all material respects
with the Securities Act or Exchange Act, as

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<PAGE> 11
applicable, and the Regulations, and (iii) you shall have provided
your consent to such proposed filing, which consent shall not be
unreasonably withheld.

(c) If at any time when a prospectus relating to the
Shares is required to be delivered under the Securities Act, any event
shall have occurred as a result of which the Prospectus as then
amended or supplemented includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary at any time to amend or supplement the Prospectus
or Registration Statement to comply with the Securities Act or the
Regulations or to file under the Exchange Act any document which would
be deemed incorporated by reference in the Prospectus in order to
comply with the Securities Act or the Exchange Act, the Company will
notify you promptly and prepare and file with the Commission an
appropriate amendment or supplement or file such document (in form and
substance satisfactory to you) which will correct such statement or
omission or effect such compliance and will use its best efforts to
have any amendment to the Registration Statement declared effective as
soon as possible.

(d) The Company will promptly deliver to you two signed
copies of the Registration Statement, including exhibits and all
documents incorporated by reference therein and all amendments
thereto, and the Company will promptly deliver to each of the several
Underwriters such number of copies of any Preliminary Prospectus, the
Prospectus, the Registration Statement and all amendments of and
supplements to such documents (including any document filed under the
Exchange Act and deemed to be incorporated by reference therein), if
any, as you may reasonably request.

(e) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time the Registration
Statement becomes effective, to qualify the Shares for offering and
sale under the securities laws relating to the offering or sale of the
Shares of such jurisdictions as you may designate and to maintain such
qualification in effect for so long as required for the distribution
thereof; provided, however, the Company shall not be obligated under
this subsection (e) to qualify as a foreign corporation to do business
under the laws of any jurisdiction in which it is not qualified as of
the date of this Agreement.

(f) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to
you as soon as practicable, but not later than 45 days after the end
of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings
statement (which need not be audited, but which shall satisfy the
provisions of Section 11(a) of the Securities Act) covering a period
of at least twelve consecutive months beginning after the effective
date of the Registration Statement.

(g) During a period of 180 days from the effective date
of the Registration Statement, the Company will not, without your
prior written consent, issue, sell, offer or agree to sell, or
otherwise dispose of, directly or indirectly, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for
Common Stock), and the Company will obtain the undertaking of each of
its directors not to engage in any of the aforementioned

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<PAGE> 12
transactions on the Company's behalf, other than (i) the sale of
Shares hereunder and the Company's issuance of Common Stock upon the
exercise of presently outstanding stock options, and (ii) issuances of
options to purchase Common Stock under the Company's employee stock
option plan in effect on the date hereof, provided such options are
not exercisable within such 180-day period. In addition,
notwithstanding anything to the contrary contained herein, during the
period of 180 days from the effective date of the Registration
Statement, the Company will not agree, without your prior written
consent, with any holder of options to purchase Common Stock to amend
or modify any such options, or take any other actions, to provide for
such options to become exercisable within such 180-day period.

(h) During a period of three years from the effective
date of the Registration Statement, the Company will furnish to the
Representative copies of (i) all reports to its shareholders, and (ii)
all reports, financial statements and proxy or information statements
filed by the Company with the Commission, any national securities
exchange or the National Association of Securities Dealers, Inc.
("NASD").

(i) The Company will apply the net proceeds available to
it from the sale of the Shares as set forth under "Use of Proceeds" in
the Prospectus.

B. The Selling Shareholder covenants and agrees with the
several Underwriters that the Selling Shareholder will cooperate with the
Company in endeavoring to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as you may designate and will make such applications, file such
documents, and furnish such information as may be reasonably required for that
purpose.

5. Payment of Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company agrees to pay all costs and expenses incident to the performance of
the obligations of the Company and the Selling Shareholder hereunder, including
those in connection with (i) preparing, printing, duplicating, filing and
distributing the Registration Statement, as originally filed and all amendments
thereof (including all exhibits thereto), any Preliminary Prospectus, the
Prospectus and any amendments thereof or supplements thereto, the underwriting
documents (including this Agreement) and all other documents related to the
public offering of the Shares (including those supplied to the Underwriters in
quantities as hereinabove stated), (ii) the issuance, transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iii) the qualification of the Shares under state or foreign
securities or Blue Sky laws, including the costs of printing and mailing a
preliminary and final "Blue Sky Survey" and the fees of counsel for the
Underwriters and such counsel's disbursements in relation thereto, (iv) listing
of the Shares on the NYSE and (v) the filing fees for the review of the terms
of the public offering of the Shares by the NASD.

6. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Firm Shares and the
Additional Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholder
herein contained, as of the date hereof and as of the Closing Date (or in the
case of the Additional Shares, as of the Additional Closing Date), to the
absence from any certificates, opinions, written statements or letters
furnished to you or to Gardere & Wynne, L.L.P. ("Underwriters'

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<PAGE> 13
Counsel"), pursuant to this Section 6 of any misstatement or omission, to the
performance by the Company and the Selling Shareholder of their respective
obligations hereunder, and to the following additional conditions:

(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later time and date as shall have been consented
to in writing by you, and, at or prior to the Closing Date or the
Additional Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement or any post-effective
amendment thereof shall have been issued and no proceedings therefor
shall have been initiated or threatened by the Commission.

(b) At the Closing Date and the Additional Closing Date,
if any, you shall have received the opinion of Baker & McKenzie,
counsel for the Company, dated the Closing Date or the Additional
Closing Date, as the case may be, addressed to the Underwriters and
the Selling Shareholder and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:

(i) Each of the Company and the U.S. Subsidiaries
is organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation.
Each of the Foreign Subsidiaries (other than Farah (New
Zealand) Limited, as to which no opinion need be rendered) is
a company duly incorporated and existing in its jurisdiction
of incorporation and, to the knowledge of such counsel, no
order or resolution for the winding up of, and no interim or
final administrative order in relation to and no notice of the
appointment of a receiver, administrative receiver or
administrator in relation to, any of the Foreign Subsidiaries
(other than Farah (New Zealand) Limited) has been made in, or
presented to, the Registry of such jurisdiction. Each of the
Company and the Subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of business makes
such qualification necessary. Each of the Company and the
Subsidiaries (other than Farah (New Zealand) Limited) has all
requisite corporate power and authority to own, lease and
license its respective properties and conduct its business and
as described in the Registration Statement and the Prospectus.

(ii) All of the issued and outstanding shares of
capital stock of each of the Subsidiaries other than Farah New
Zealand have been duly and validly issued and are fully paid
and nonassessable and free of statutory preemptive rights and,
to the knowledge of such counsel, are free of any other
preemptive rights and are owned, with respect to the U.S.
Subsidiaries, by the Company and, with respect to the Foreign
Subsidiaries, by International, free and clear of any lien,
encumbrance, claim, security interest, restriction on
transfer, shareholders' agreement, voting trust or other
defect of title whatsoever, other than the pledge of such
capital stock pursuant to that certain Accounts Financing
Agreement (Security Agreement), dated as of August 2, 1990,
between Congress Financial Corp. (Southwest) and Farah U.S.A.,
and, to the knowledge of such counsel, there are no
outstanding options, warrants, or other rights

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<PAGE> 14

to purchase, or securities convertible into or exchangeable
for, shares of capital stock of any of the Subsidiaries.

(iii) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus
under the caption "Description of Capital Stock" as of the
date stated therein. All of the outstanding shares of Common
Stock have been duly and validly authorized and issued, are
fully paid and nonassessable and are not in violation of any
statutory preemptive rights, and, to the knowledge of such
counsel, any other preemptive right, co-sale right, right of
first refusal or other similar right.

(iv) The Shares to be issued and sold by the
Company to the Underwriters pursuant to this Agreement have
been duly and validly authorized and, upon issuance and
delivery against payment therefor in accordance with this
Agreement, will be duly and validly issued, fully paid and
nonassessable and will not have been issued in violation of
any statutory preemptive rights, and, to the knowledge of such
counsel, any other preemptive right, co-sale right, right of
first refusal or other similar right.

(v) The form of certificate used to evidence the
Common Stock complies with all statutory requirements under
the laws of the State of Texas.

(vi) The terms and provisions of the capital stock
of the Company conform in all material respects to the
description thereof contained in the Registration Statement
and the Prospectus.

(vii) The information in the Prospectus under the
caption "Description of Capital Stock," to the extent it
constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct in all material
respects.

(viii) The descriptions in the Registration
Statement and the Prospectus of provisions of the charter and
bylaws of the Company and of statutes, regulations, legal or
governmental proceedings, contracts and other documents are
accurate in all material respects and fairly present the
information required to be shown.

(ix) This Agreement has been duly and validly
authorized, executed and delivered by the Company and is a
valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to
the extent that rights to indemnity hereunder may be limited
by federal or state securities laws or the public policy
underlying such laws and except to the extent the enforcement
hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by equitable
principles.

(x) The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby by the Company will not (1)

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<PAGE> 15
conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default)
or require consent under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries
pursuant to the terms of any agreement or instrument filed as
an exhibit to the Registration Statement or any other material
agreement, instrument, franchise, license or permit known to
such counsel to which the Company or any of the Subsidiaries
is a party or by which any of such corporations or their
respective properties or assets may be bound, or (2) violate
any provision of the articles or certificate of incorporation
or bylaws of the Company or any of the U.S. Subsidiaries, or
the memorandum or articles of association of the Foreign
Subsidiaries, or, to the knowledge of such counsel, any
judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of the
Subsidiaries or any of their respective properties or assets;
provided, however, that no opinion need be rendered concerning
state securities or Blue Sky laws.

(xi) No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of
the Subsidiaries or any of their respective properties or
assets is required for the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby, except for (1) such as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters
(as to which such counsel need express no opinion), and (2)
such as have been made or obtained under the Securities Act.

(xii) To the knowledge of such counsel, there is no
litigation or governmental or other action, suit, proceeding
or investigation before any court or before or by any public,
regulatory or governmental agency or body pending or
threatened against, or involving the properties or business
of, the Company or any of the Subsidiaries, which is of a
character required to be disclosed in the Registration
Statement and the Prospectus and which has not been properly
disclosed therein.

(xiii) To the knowledge of such counsel, except as
set forth in the Registration Statement and the Prospectus, no
holders of Common Stock or other securities of the Company
have registration rights with respect to the securities of the
Company and all holders of securities of the Company, other
than the Selling Shareholder with respect to the shares of
Common Stock being sold hereby, having rights to registration
of shares of Common Stock, or other securities, as a result of
the filing of the Registration Statement have, with respect to
the offering contemplated thereby, waived such rights.

(xiv) The Company is not in violation of its
corporate charter or bylaws which violation would have a
material adverse effect on the Company or any of the
Subsidiaries and, to the knowledge of such counsel, neither
the Company nor any of

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<PAGE> 16

the Subsidiaries is in default under (and no event has
occurred which with notice, lapse of time, or both, would
constitute a breach of, or a default under), any agreement,
license, mortgage, deed of trust, bank loan, credit agreement,
indenture or instrument filed as an exhibit to the
Registration Statement, which violation or default would have
a material adverse effect on the Company or any of the
Subsidiaries.

(xv) To the knowledge of such counsel, there are
no agreements, contracts, leases or documents of a character
required to be described or referred to in the Registration
Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that are not described or referred
to therein or filed as required.

(xvi) The Registration Statement and the Prospectus
and any amendments thereof or supplements thereto (other than
the financial statements and schedules and other financial and
statistical data included or incorporated by reference
therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the
Securities Act and the Regulations. The documents filed under
the Exchange Act and incorporated by reference in the
Registration Statement and the Prospectus and in any amendment
thereof or supplement thereto (other than the financial
statements and schedules and other financial and statistical
data included or incorporated by reference therein, as to
which no opinion need be rendered) comply as to form in all
material respects with the Exchange Act and the Regulations.

(xvii) The Registration Statement has become
effective under the Act, and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof
has been issued and no proceedings therefor have been
initiated or threatened by the Commission and all filings
required by Rule 424(b) of the Regulations have been made.

(xviii) The conditions for use of Form S-3, set forth
in the General Instructions thereto, have been satisfied.

In addition, such counsel shall state that, although they
assume no responsibility for the accuracy or completeness of the
statements in the Registration Statement and the Prospectus, they have
participated in the preparation of the Registration Statement and
Prospectus and in conferences with officers and other representatives
of the Company, Underwriters' Counsel, representatives of the
independent public accountants for the Company and your
representatives at which the contents of the Registration Statement
and Prospectus were discussed, and that no facts have come to the
attention of such counsel that lead them to believe (1) that the
Registration Statement (or any amendment thereof made prior to the
Closing Date or Additional Closing Date, as the case may be, as of the
date of such amendment or any document filed under the Exchange Act
and deemed to be incorporated by reference into the Prospectus)
contained at the time it became effective, or contains at the Closing
Date or the Additional Closing Date, as the case may be, an untrue
statement of a material fact or omitted to state any material fact
required to be stated therein

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<PAGE> 17
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (2) that
the Prospectus (or any amendment thereof or supplement thereto made
prior to the Closing Date or the Additional Closing Date, as the case
may be, as of the date of such amendment or supplement or any document
filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus) contained as of the date thereof, or
contains at the Closing Date or the Additional Closing Date, as the
case may be, an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Such counsel need express no belief
or opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration
Statement and the Prospectus.

In rendering its opinion hereunder, such counsel may rely as
to matters of fact, on certificates of responsible officers of the
Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents
regarding the corporate existence or good standing of the Company and
the Subsidiaries provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel. The opinion
shall also state that as used therein, the qualification "to the
knowledge of such counsel" does not indicate or imply that counsel
rendering the opinion have not conducted such review as they, in their
professional judgment, have deemed necessary or appropriate to render
such opinion, but does indicate that such counsel have relied upon
factual certificates, representations and information from the Company
and its representatives having such scope and form as counsel have
deemed appropriate.

(c) At the Closing Date, you shall have received the
favorable opinion of Donahue, Mesereau & Wells, counsel for the
Selling Shareholder, dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:

(i) This Agreement and the Custody Agreement have
been duly executed and delivered by or on behalf of the
Selling Shareholder and are valid and binding obligations of
the Selling Shareholder, enforceable against the Selling
Shareholder in accordance with their terms, except to the
extent that rights to indemnity hereunder may be limited by
applicable federal or state securities laws or the public
policy underlying such laws and except to the extent the
enforcement hereof and thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by
equitable principles.

(ii) The Selling Shareholder has the requisite
power and authority to enter into and to perform its
obligations under this Agreement and the Custody Agreement and
to sell, transfer, assign and deliver the Shares to be sold by
the Selling Shareholder pursuant hereto.

(iii) No consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses or
permits are required for the execution, delivery and
performance of this Agreement and the Custody Agreement, and
the consummation

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<PAGE> 18
of the transactions contemplated hereby and thereby by the
Selling Shareholder, except for (1) such as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters
(as to which such counsel need express no opinion), and (2)
such as have been made or obtained under the Securities Act.

(iv) Upon the delivery of and payment for the
Shares to be sold by the Selling Shareholder pursuant to this
Agreement as herein contemplated, and assuming each
Underwriter takes delivery without knowledge of any adverse
claims, such Underwriter will be a bona fide purchaser with
respect to such shares within the meaning of Article VIII of
the UCC and will acquire all rights of the Selling Shareholder
in such Shares, free and clear of all adverse claims.

(v) Nothing has come to such counsel's attention
that the statements in the Prospectus under the caption
"Principal and Selling Shareholders," insofar as such
statements disclose matters with respect to the Selling
Shareholder, are inaccurate in any material respect.

In rendering its opinion hereunder, such counsel may rely as
to matters of fact, on certificates of the Selling Shareholder,
provided that copies of any such certificates shall be delivered to
Underwriters' Counsel.

(d) At the Closing Date and Additional Closing Date, if
any, you and the Selling Shareholder shall have received a certificate
of the President and the Chief Financial Officer of the Company, dated
the Closing Date or Additional Closing Date, as the case may be, to
the effect that the condition set forth in subsection (a) of this
Section 6 has been satisfied, that as of the date hereof and as of the
Closing Date or Additional Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 1
hereof are accurate, and that as of the Closing Date or the Additional
Closing Date, as the case may be, the obligations of the Company to be
performed hereunder on or prior thereto have been duly performed.

(e) At the Closing Date and Additional Closing Date, if
any, you shall have received a certificate executed by the Selling
Shareholder, dated the Closing Date or Additional Closing Date, as the
case may be, to the effect that the representations and warranties of
the Selling Shareholder set forth in Section 1 hereof are accurate,
and that as of the Closing Date, the obligations of the Selling
Shareholder to be performed hereunder on or prior thereto have been
duly performed.

(f) At the time this Agreement is executed and at the
Closing Date and Additional Closing Date, if any, you shall have
received a letter from Arthur Andersen & Co., independent public
accountants for the Company, dated as of the date of this Agreement
and as of the Closing Date or Additional Closing Date, as the case may
be, addressed to the Underwriters and the Selling Shareholder and in
form and substance satisfactory to you, to the effect that: (i) they
are independent certified public accountants with respect to the
Company within the meaning of the Securities Act and the applicable
published rules and

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<PAGE> 19

regulations of the Commission thereunder and stating that the answer
to Item 10 of the Registration Statement is correct insofar as it
relates to them; (ii) in their opinion, the financial statements and
schedules of the Company included in the Registration Statement and
the Prospectus or incorporated therein by reference and covered by
their opinion therein comply as to form in all material respects with
the applicable accounting requirements of the Securities Act and the
Exchange Act and the applicable published rules and regulations of the
Commission thereunder; (iii) on the basis of procedures (but not an
examination made in accordance with generally accepted auditing
standards) consisting of a reading of the latest available unaudited
interim consolidated financial statements of the Company and the
Subsidiaries, a reading of the minutes of meetings and consents of the
shareholders and boards of directors of the Company and the
Subsidiaries and the committees of such boards subsequent to November
4, 1993, inquiries of officers and other employees of the Company and
the Subsidiary who have responsibility for financial and accounting
matters of the Company and the Subsidiaries with respect to
transactions and events subsequent to November 4, 1993, and other
specified procedures and inquiries to a date not more than five days
prior to the date of such letter, nothing has come to their attention
that would cause them to believe that: (A) the unaudited consolidated
financial statements and schedules of the Company included in the
Registration Statement and the Prospectus and incorporated therein by
reference do not comply as to form in all material respects with the
accounting requirements of the Securities Act and the Exchange Act and
the Regulations or that such unaudited consolidated financial
statements are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements
included in the Registration Statement and the Prospectus and
incorporated therein by reference; (B) with respect to the period
subsequent to February 4, 1994, there were, as of the date of the most
recent available monthly consolidated financial statements of the
Company and the Subsidiaries, if any, and as of a specified date not
more than five days prior to the date of such letter, any changes in
the capital stock or long-term indebtedness of the Company or any
decrease in the net current assets or stockholders' equity of the
Company, in each case as compared with the amounts shown in the most
recent balance sheet included in or incorporated by reference into the
Registration Statement and the Prospectus, except for changes or
decreases which the Registration Statement and the Prospectus disclose
have occurred or may occur or which are set forth in such letter; or
(C) that during the period from February 5, 1994 to the date of the
most recent available monthly consolidated financial statements of the
Company and the Subsidiaries, if any, and to a specified date not more
than five days prior to the date of such letter, there was any
decrease, as compared with the corresponding period in the prior
fiscal year, in total revenues, or total or per share net income,
except for decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur or which are set forth
in such letter; and (iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to the Company
and the Subsidiary set forth in or incorporated by reference into the
Registration Statement and the Prospectus, which have been specified
by you prior to the date of this Agreement, to the extent that such
amounts, numbers, percentages and information may be derived from the
general accounting and financial records of the Company and the
Subsidiaries or from schedules furnished by the Company, and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures specified by you

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<PAGE> 20

(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in such letter, and
found them to be in agreement. In addition, you shall have received
from Arthur Andersen & Co. a letter addressed to the Company and made
available to you for use of the Underwriters stating that their review
of the Company's system of internal accounting controls, to the extent
they deemed necessary in establishing the scope of their examination
of the Company's consolidated financial statements for the fiscal year
ended November 5, 1993, did not disclose any weaknesses in internal
controls that they considered to be material weaknesses.

(g) All proceedings taken in connection with the sale of
the Firm Shares and the Additional Shares as herein contemplated shall
be satisfactory in form and substance to you and to Underwriters'
Counsel, and the Underwriters shall have received from said
Underwriters' Counsel a favorable opinion, dated as of the Closing
Date and the Additional Closing Date, as the case may be, with respect
to the issuance and sale of the Shares, the Registration Statement and
the Prospectus and such other related matters, as you may reasonably
require, and the Company and the Selling Shareholders shall have
furnished to Underwriters' Counsel such documents as they request for
the purpose of enabling them to pass upon such matters.

(h) At the time this Agreement is executed, you shall
have received the agreement of each of the Georges Marciano Trust, a
California Trust, the Paul Marciano Trust, a California Trust, Georges
Marciano and Paul Marciano to the effect that during a period of 180
days from the effective date of the Registration Statement, each will
not, without your prior written consent, sell, offer or agree to sell,
or otherwise dispose of, directly or indirectly, any Common Stock
other than in accordance with the terms of this Agreement and agreeing
and consenting to the entry of stop transfer instructions with the
Company's Common Stock held by them during such 180-day period without
your prior written consent.

(i) Prior to the Closing Date and the Additional Closing
Date, the Company and the Selling Shareholder shall have furnished to
you such further information, certificates and documents as you may
reasonably request.

If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
cancelled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company and the Selling
Shareholder in writing, or by telephone, telex or telegraph, confirmed in
writing.

7. Indemnification.

(a) The Company agrees to indemnify and hold harmless
each Underwriter and the Selling Shareholder, each person, if any, who
controls any Underwriter or the Selling

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<PAGE> 21

Shareholder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each shareholder of the Selling
Shareholder and trustee of such shareholder, against any and all
losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof,
or any Preliminary Prospectus or the Prospectus, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading;provided, however, that the Company will not be liable in
any such case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter through you (or by or on behalf of the Selling
Shareholder insofar as it relates to the Selling Shareholder)
expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have,
including under this Agreement.

(b) Each Underwriter severally, but not jointly, agrees
to indemnify and hold harmless the Company and the Selling
Shareholder, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration
Statement, each other person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act and each shareholder of the Selling Shareholder and
trustee of such shareholder, against any losses, liabilities, claims,
damages and expenses whatsoever (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof,
or any Preliminary Prospectus or the Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein. This
indemnity will be in addition to any liability which any Underwriter
may otherwise have, including under this Agreement. The Company and
the Selling Shareholder acknowledge that the statements set forth in
the last paragraph of the cover page and in the

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<PAGE> 22

first three paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing by or
on behalf of any Underwriter expressly for use in the Registration
Statement, as originally filed or in any amendment thereof, any
Preliminary Prospectus or the Prospectus or in any amendment thereof
or supplement thereto, as the case may be.

(c) The Selling Shareholder agrees to indemnify and hold
harmless each Underwriter, the Company, each of the directors of the
Company, each of the officers of the Company who shall have signed the
Registration Statement and each person, if any, who controls the
Company or any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, against any
losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof,
or any Preliminary Prospectus or the Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information relating to the Selling
Shareholder furnished to the Company by the Selling Shareholder,
directly or through the Selling Shareholder's representative,
expressly for use therein. This indemnity will be in addition to any
liability which any such Selling Shareholder may otherwise have,
including under this Agreement.

(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been
prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume
the defense thereof with counsel satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, in
which case such indemnifying party only shall be responsible for such
fees and

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<PAGE> 23
expenses, (ii) the indemnifying parties shall not have employed
counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from
or additional to those available to one or all of the indemnifying
parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the
indemnified party or parties with respect to such defenses), in any of
which events such fees and expenses shall be borne by the indemnifying
parties;provided, however, that the indemnifying parties shall, in
connection with any one such action or separate actions substantially
similar or related actions arising out of the same general allegations
or circumstances, be liable for the fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any
time for all such indemnified parties, which firm, in the case of the
Underwriters and controlling persons, shall be designated on behalf of
the Underwriters by Bear, Stearns & Co. Inc. and, in the case of the
Company and the Selling Shareholder, shall be designated by the
Company. Anything in this subsection to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any
claim or action effected without its written consent;provided,
however, that such consent was not unreasonably withheld.

8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7(a) and (c)
hereof is for any reason held to be unavailable from the Company or the Selling
Shareholder or is insufficient to hold harmless a party indemnified thereunder,
the Company, the Selling Shareholder and the Underwriters shall contribute to
the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provisions (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company and any Selling Shareholder any contribution received
by the Company or the Selling Shareholder from persons, other than the
Underwriters, who may also be liable for contribution, including persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) to which the Company, the
Selling Shareholder and one or more of the Underwriters may be subject, in such
proportions as is appropriate to reflect the relative benefits received by the
Company, the Selling Shareholder and the Underwriters from the offering of the
Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as
is appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company, the Selling Shareholder and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Shareholder and the Underwriters shall be deemed to be in
the same proportion as (x) the total proceeds from the offering (net of
underwriting discounts and commissions, but before deducting expenses) received
by the Company and (y) the total proceeds from the offering (net of
underwriting discounts and commissions, but before deducting expenses) received
by the Selling Shareholder and (z) the underwriting discounts and commissions
received by the Underwriters, respectively, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company,
the Selling Shareholder and of the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement

-23-
<PAGE> 24

of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Shareholder or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Shareholder and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8, (i) in no case shall any Underwriter (except as may be
provided in the Agreement Among Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of the immediately preceding sentence of this Section 8. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 8, notify such party or parties from whom contribution may
be sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have under this Section 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
withheld.

9. Default by an Underwriter.

(a) If any Underwriter or Underwriters shall default in
its or their obligation to purchase Firm Shares or Additional Shares
hereunder, and if the Firm Shares or Additional Shares with respect to
which such default relates do not (after giving effect to
arrangements, if any, made by you pursuant to subsection (b) below)
exceed in the aggregate 10% of the number of shares of Firm Shares or
Additional Shares, as the case may be, which all Underwriters have
agreed to purchase hereunder, then such Firm Shares or Additional
Shares to which the default relates shall be purchased by the non-
defaulting Underwriters in proportion to the respective proportions
which the numbers of Firm Shares set forth opposite their respective
names in Column (1) of Schedule I hereto bear to the aggregate number
of Firm Shares set forth opposite the names of the non-defaulting
Underwriters.

(b) In the event that such default relates to more than
10% of the Firm Shares or Additional Shares, as the case may be, you
may in your discretion arrange for yourself or for another party or
parties (including any non-defaulting Underwriter or Underwriters who
so agree) to purchase such Firm Shares or Additional Shares, as the
case may be, to which such default relates on the terms contained
herein. In the event that within 5 calendar days after such a default
you do not arrange for the purchase of the Firm Shares or Additional
Shares, as the case may be, to which such default relates as provided
in this Section 9, this

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<PAGE> 25
Agreement or, in the case of a default with respect to the Additional
Shares, the obligations of the Underwriters to purchase and of the
Company to sell the Additional Shares, shall thereupon terminate,
without liability on the part of the Company or the Selling
Shareholder with respect thereto (except in each case as provided in
Sections 5, 7(a) and (c) and 8 hereof) or the several Underwriters,
but nothing in this Agreement shall relieve a defaulting Underwriter
or Underwriters of its or their liability, if any, to the other
several Underwriters, the Company and the Selling Shareholder for
damages occasioned by its or their default hereunder.

(c) In the event that the Firm Shares or Additional
Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party
or parties as aforesaid, you or the Company shall have the right to
postpone the Closing Date or Additional Closing Date, as the case may
be, for a period, not exceeding five business days, in order to effect
whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in
the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 9 with like effect as
if it had originally been a party to this Agreement with respect to
such Firm Shares and Additional Shares.

10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters,
the Selling Shareholder and the Company contained in this Agreement, including
the agreements contained in Section 5, the indemnity agreements contained in
Section 7 and the contribution agreements contained in Section 8, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter or any controlling person thereof or by or on
behalf of the Company, any of its officers and directors or the Selling
Shareholder, and shall survive delivery of and payment for the Shares to and by
the several Underwriters. The representations contained in Section 1 and the
agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the
termination of this Agreement including pursuant to Sections 9 or 11 hereof.

11. Effective Date of Agreement; Termination.

(a) This Agreement shall become effective at such time
after notification of the effectiveness of the Registration Statement
as you, the Company and the Selling Shareholder shall agree upon the
initial public offering price and the purchase price per Share. If
either the initial public offering price or the purchase price per
Share has not been agreed upon prior to 5:00 p.m., New York time, on
the seventh full business day after the Registration Statement shall
have become effective, this Agreement shall thereupon terminate
without liability to the Company, the Selling Shareholder or the
Underwriters except as herein expressly provided. Until this
Agreement becomes effective as aforesaid, it may be terminated by the
Company by notifying you and the Selling Shareholder or by the Selling
Shareholder by notifying the Company and you or by you notifying the
Company and the Selling Shareholder. Notwithstanding the foregoing,
the provisions of this Section 11 and of Sections 1, 5, 7 and 8 hereof
shall at all times be in full force and effect.

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<PAGE> 26
(b) You shall have the right to terminate this Agreement
at any time prior to the Closing Date or the obligations of the
Underwriters to purchase the Additional Shares at any time prior to
the Additional Closing Date, as the case may be, if any domestic or
international event or act or occurrence has materially disrupted, or
in your opinion will in the immediate future materially disrupt,
securities markets; or if trading on the New York or American Stock
Exchanges shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, on the New York or American Stock
Exchanges by the New York or American Stock Exchanges or by order of
the Commission or any other governmental authority having
jurisdiction; or if the United States shall have become involved in a
war or major hostilities; or if a banking moratorium has been declared
by a state or federal authority, or if a moratorium in foreign
exchange trading by major international banks or persons has been
declared; or if any new restriction materially adversely affecting the
distribution of the Firm Shares or the Additional Shares, as the case
may be, shall have become effective; or if there shall have been such
change in the market for the Company's securities or securities in
general or in political, financial or economic conditions as in your
judgment makes it inadvisable to proceed with the offering, sale and
delivery of the Firm Shares, or the Additional Shares, as the case may
be, on the terms contemplated by the Prospectus.

(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex or telegraph, confirmed in writing by
letter.

(d) If this Agreement shall be terminated pursuant to any
of the provisions hereof (otherwise than pursuant to (i) notification
by you as provided in Section 11(a) hereof or (ii) Sections 9(b) or
11(b) hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the several
Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company or the
Selling Shareholder to perform any agreement herein or comply with any
provision hereof, the Company agrees, subject to demand by you, to
reimburse the Underwriters for all out-of-pocket expenses (including
the fees and expenses of their counsel), incurred by the several
Underwriters in connection herewith.

12. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and
confirmed in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245
Park Avenue, New York, N.Y. 10167, Attention: Corporate Finance; if sent to
the Company, shall be mailed, delivered or telegraphed and confirmed in
writing, to the Company, 8889 Gateway West, El Paso, Texas 79925, Attention:
James C. Swaim; if sent to the Selling Shareholder, shall be mailed, delivered
or telegraphed and confirmed in writing, to the Selling Shareholder, 9756
Wilshire Blvd., Beverly Hills, California 90021, Attention: Georges Marciano,
with a copy, which shall not constitute notice, to Donahue, Mesereau & Wells,
1900 Avenue of the Stars, Suite 2700, Los Angeles, California 90067;
Attention: Michael D. Donahue.

13. Parties. You represent that you are authorized to act on
behalf of the several Underwriters named in Schedule I hereto, and the Company
and the Selling Shareholder shall be entitled to act and rely on any request,
notice, consent, waiver or agreement purportedly given on

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<PAGE> 27
behalf of the Underwriters when the same shall have been given by you on such
behalf. This Agreement shall inure solely to the benefit of, and shall be
binding upon, the several Underwriters, the Selling Shareholder and the Company
and the controlling persons referred to in Sections 7 and 8, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its
capacity as such, of Shares from any of the Underwriters.

14. Construction. This Agreement shall be construed in accordance
with the internal laws of the State of New York, without giving effect to the
rules governing conflicts of laws.

(THE IMMEDIATELY FOLLOWING PAGE IS THE SIGNATURE PAGE.)

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<PAGE> 28
If the foregoing correctly sets forth the understanding among you, the
Company and the Selling Shareholder, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.

Very truly yours,

FARAH INCORPORATED

By:____________________________________
James C. Swaim
Executive Vice President
and Chief Financial Officer

MARCIANO INVESTMENTS, INC.

By:____________________________________
Its:___________________________________

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<PAGE> 29
Accepted as of the date first above written.

BEAR, STEARNS & CO. INC.

By:___________________________________________________
Its:__________________________________________________

On behalf of itself and the other several
Underwriters named in Schedule I hereto.

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<PAGE> 30
SCHEDULE I

<TABLE>
<CAPTION>
(1) (2)
Number of Firm Number of Firm
Shares to be Shares to be
Purchased from Purchased from
Name of Underwriter the Company the Selling Shareholder
- ------------------- -------------- -----------------------
<S> <C> <C>
Bear, Stearns & Co. Inc.

----------- -----------
Total........ 1,400,000 1,200,000
=========== ===========
</TABLE>

<PAGE> 31
SCHEDULE II

<TABLE>
<CAPTION>
Number of
Firm Shares
Name of Selling Shareholder to Be Sold
- --------------------------- -----------
<S> <C>
Marciano Investments, Inc. 1,200,000
---------

Total 1,200,000
=========
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Farah Incorporated:

As independent public accountants, we hereby consent to the use and the
incorporation by reference of our reports dated December 15, 1993, on Farah
Incorporated and subsidiaries' consolidated financial statements as of November
5, 1993, and November 6, 1992, and for each of the years ended November 5, 1993,
November 6, 1992, and October 31, 1991, and the Supplemental Schedules II and X
included in Farah Incorporated and Subsidiaries Form 10-K and all references to
our firm included in or made a part of this registration statement.

ARTHUR ANDERSEN & CO.

Dallas, Texas,

April 19, 1994